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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
( ) Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ______to _______.
COMMISSION FILE NUMBER 1-2967
UNION ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Missouri 43-0559760
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1901 Chouteau Avenue, St. Louis, Missouri 63103
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (314) 621-3222
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Preferred Stock, without par value
(entitled to cumulative dividends):
Stated value $100 per share - }
$4.56 Series }
$4.50 Series } New York Stock Exchange
$4.00 Series }
$3.50 Series }
Securities Registered Pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ( X ). No ( ).
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( ).
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ( ). No (X).
As of June 28, 2002, Ameren Corporation held all 102,123,834 outstanding
shares of common stock, $5 par value, of Union Electric Company. The aggregate
market value of the voting preferred stock, without par value, held by
non-affiliates of Union Electric Company at June 28, 2002, based on the last
reported sale price on the New York Stock Exchange composite tape on that date
(excluding Preferred Stock for which quotes are not publicly available) was
$47,998,478.
Shares of Common Stock, $5 par value, outstanding as of March 21, 2003:
102,123,834 shares (all owned by Ameren Corporation).
Documents incorporated by references.
Portions of the registrant's definitive proxy statement for the 2003 annual
meeting are incorporated by reference into Part III.
TABLE OF CONTENTS
Page
----
PART I
Item 1 Business
General........................................................... 1
Capital Program and Financing..................................... 2
Rates and Regulation.............................................. 3
Fuel Supply for Electric Generating Facilities.................... 4
Industry Issues................................................... 5
Available Information............................................. 5
Item 2 Properties ....................................................... 6
Item 3 Legal Proceedings................................................. 8
Item 4 Submission of Matters to a Vote of Security Holders............... 9
Executive Officers of the Registrant (Item 401(b) of Regulation S-K)....... 9
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder
Matters......................................................11
Item 6 Selected Financial Data..........................................12
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................13
Item 7A Quantitative and Qualitative Disclosures About Market Risk.......30
Item 8 Financial Statements and Supplementary Data......................31
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.....................................61
PART III
Item 10 Directors and Executive Officers of the Registrant...............61
Item 11 Executive Compensation...........................................61
Item 12 Security Ownership of Certain Beneficial Owners and Management...61
Item 13 Certain Relationships and Related Transactions...................61
Item 14 Controls and Procedures..........................................61
PART IV
Item 15 Exhibits, Financial Statement Schedules and Reports on Form 8-K..62
SIGNATURES..................................................................67
CERTIFICATIONS..............................................................67
EXHIBIT INDEX...............................................................70
This Form 10-K contains "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements should be read with the cautionary statements and important factors
included in this Form 10-K at pages 8 and 30 under the heading Forward-Looking
Statements. Forward-looking statements are all statements other than statements
of historical fact, including those statements that are identified by the use of
the words "anticipates," "estimates," "expects," "intends," "plans," "predicts,"
"projects" and similar expressions.
PART I
ITEM 1. BUSINESS.
GENERAL
Union Electric Company, headquartered in St. Louis, Missouri, is a
wholly-owned subsidiary of Ameren Corporation (Ameren) and operates as AmerenUE.
We operate a rate-regulated electric generation, transmission and distribution
business and a rate-regulated natural gas distribution business in Missouri and
Illinois. We were incorporated in Missouri in 1922 and are successor to a number
of companies, the oldest of which was organized in 1881. We are the largest
electric utility in the State of Missouri and supply electric and gas service in
parts of central and eastern Missouri and west central Illinois having an
estimated population of 2.6 million within an area of approximately 24,500
square miles, including the greater St. Louis area. In addition, our retail gas
utility service is supplied in 90 Missouri communities and in the City of Alton,
Illinois and vicinity. We supply electric service to about 1.2 million customers
and natural gas service to about 130,000 customers.
When we refer to AmerenUE, our, we or us, we are referring to Union
Electric Company and in some cases our agents, AmerenEnergy Inc. and
AmerenEnergy Fuels and Services Company.
Ameren was incorporated in Missouri on August 7, 1995 and is a public
utility holding company registered with the Securities and Exchange Commission
(SEC) under the Public Utility Holding Company Act of 1935 (PUHCA). Ameren is
headquartered in St. Louis, Missouri. On December 31, 1997, following the
receipt of all required approvals, we and CIPSCO Incorporated (CIPSCO) combined
with the result that our common shareholders and the common shareholders of
CIPSCO became the common shareholders of Ameren, and Ameren became the owner of
100% of our common stock and the common stock of CIPSCO's operating
subsidiaries: Central Illinois Public Service Company and CIPSCO Investment
Company. Ameren completed its acquisition of CILCORP Inc. (CILCORP) on January
31, 2003 and of AES Medina Valley Cogen (No. 4), LLC on February 4, 2003 from
The AES Corporation (AES). See CILCORP Acquisition below for further
information. In addition to us, Ameren's primary subsidiaries and our affiliates
are as follows:
o Central Illinois Public Service Company, which operates a rate-regulated
electric and natural gas transmission and distribution business in Illinois
as AmerenCIPS. AmerenCIPS was incorporated in Illinois in 1902. It supplies
electric and gas utility service to portions of central and southern
Illinois having an estimated population of 820,000 within an area of
approximately 20,000 square miles. AmerenCIPS supplies electric service to
about 325,000 customers and natural gas service to about 170,000 customers.
o Central Illinois Light Company, a subsidiary of CILCORP, which operates a
rate-regulated transmission and distribution business, an electric
generation business, and a rate-regulated natural gas distribution business
in Illinois as AmerenCILCO. AmerenCILCO was incorporated in Illinois in
1913. It supplies electric and gas utility service to territories in
central and east central Illinois in an area of approximately 3,700 and
4,500 square miles, respectively. AmerenCILCO supplies electric service to
about 200,000 customers and natural gas service to about 205,000 customers.
See CILCORP Acquisition below for further information.
o AmerenEnergy Resources Company (Resources Company), which consists of non
rate-regulated operations. Subsidiaries include AmerenEnergy Generating
Company (Generating Company) that operates non rate-regulated electric
generation in Missouri and Illinois, AmerenEnergy Marketing Company
(Marketing Company), which markets power for periods over one year,
AmerenEnergy Fuels and Services Company, which procures fuel and manages
the related risks for our affiliated companies and AmerenEnergy Medina
Valley Cogen (No. 4), LLC, which indirectly owns a 40 megawatt, gas-fired
electric co-generation plant. On February 4, 2003, Ameren completed its
acquisition of AES Medina Valley Cogen (No. 4), LLC from AES and renamed it
AmerenEnergy Medina Valley Cogen (No. 4), LLC. See CILCORP Acquisition
below for further information. Generating Company was incorporated in
Illinois in March 2000 in conjunction with the Illinois Electric Service
Customer Choice and Rate Relief Law of 1997 (the Illinois Law). This
Illinois Law provides for electric utility restructuring and introduces
competition into the retail supply of electric energy in Illinois.
Generating Company commenced operations on May 1, 2000 when AmerenCIPS
transferred to Generating Company all of the following: its generating
assets, consisting of the generating facilities described below under Item
2. Properties; all related fuel, supply, transportation, maintenance and
labor agreements; approximately 45% of AmerenCIPS' employees; and some
other related rights, assets and liabilities.
o Ameren Services Company (Ameren Services), incorporated in Missouri, which
provides administrative, accounting, legal, engineering, executive and
other support services to Ameren and all of its subsidiaries;
o AmerenEnergy, Inc., which serves as a power marketing and risk management
agent for us and Generating Company for transactions of primarily less than
one year;
1
o Electric Energy, Inc. (EEI), which operates electric generation and
transmission facilities in Illinois that supply electric power primarily to
a uranium enrichment plant located in Paducah, Kentucky. We have a 40%
ownership interest in EEI and have accounted for it under the equity method
of accounting. Resources Company also owns a 20% interest in EEI. On April
30, 2002, AmerenCIPS transferred its 20% common stock interest in EEI to
Ameren in the form of a non-cash dividend of common stock in EEI.
Subsequently, Ameren contributed such stock to Resources Company. The
transfer completed the process of achieving a full divestiture of all
electric generating capacity that had been owned directly or indirectly by
AmerenCIPS. The remaining 40% of the common stock of EEI is held 20% each
by Kentucky Utilities Company and Illinova Generating Company.
For additional information regarding the acquisition of CILCORP and AES
Medina Valley Cogen (No. 4) LLC, see Recent Developments in Management's
Discussion and Analysis of Financial Condition and Results of Operations under
Item 7 and Notes 1 and 17 to our Financial Statements under Item 8.
For the year 2002, 95% (2001 - 95%; 2000 - 95%) of our total operating
revenues were derived from the sale of electric energy and 5% (2001 - 5%; 2000 -
5%) from the sale of natural gas.
We employed 4,304 persons at December 31, 2002. For information on a
voluntary retirement program offered in December 2002 and on labor agreements
and other labor matters, see Outlook - Labor Agreements in Management's
Discussion and Analysis of Financial Condition and Results of Operations under
Item 7 and Notes 10 and 14, respectively, to our Financial Statements under Item
8.
CILCORP Acquisition
On January 31, 2003, after receipt of the necessary regulatory agency
approvals and clearance from the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act, Ameren completed its acquisition
of all of the outstanding common stock of CILCORP from AES. CILCORP is the
parent company of Peoria, Illinois-based Central Illinois Light Company, which
operated as CILCO. With the acquisition, CILCO became an Ameren subsidiary, but
remains a separate utility company, operating as AmerenCILCO. On February 4,
2003, Ameren also completed its acquisition of AES Medina Valley Cogen (No. 4),
LLC (Medina Valley), which indirectly owns a 40 megawatt, gas-fired electric
co-generation plant. With the acquisition, Medina Valley became a wholly-owned
subsidiary of Resources Company and was renamed AmerenEnergy Medina Valley Cogen
(No. 4), LLC. The CILCORP and AmerenEnergy Medina Valley Cogen (No. 4), LLC
financial statements will be included in Ameren's consolidated financial
statements effective with the January and February 2003 acquisition dates.
Ameren acquired CILCORP to complement its existing Illinois electric and
gas operations. The purchase included CILCO's rate-regulated electric and
natural gas businesses in Illinois serving approximately 200,000 and 205,000
customers, respectively, of which approximately 150,000 are combination electric
and gas customers. CILCO's service territory is contiguous to Ameren's service
territory. CILCO also has a non rate-regulated electric and gas marketing
business principally focused in the Chicago, Illinois region. Finally, the
purchase includes approximately 1,200 megawatts of largely coal-fired generating
capacity, most of which is expected to become non rate-regulated in 2003.
The total purchase price was approximately $1.4 billion and included the
assumption of CILCORP and Medina Valley debt and preferred stock at closing of
approximately $900 million, with the balance of the purchase price of
approximately $500 million paid with cash on hand. The purchase price is subject
to certain adjustments for working capital and other changes pending the
finalization of CILCORP's closing balance sheet. The cash component of the
purchase price came from Ameren's issuances in September 2002 of 8.05 million
common shares and in early 2003 of 6.325 million common shares.
For additional information regarding our business operations, see
Management's Discussion and Analysis of Financial Condition and Results of
Operations under Item 7 and Note 1 to our Financial Statements under Item 8.
CAPITAL PROGRAM AND FINANCING
For information on our capital program and financial needs, see Liquidity
and Capital Resources in Management's Discussion and Analysis of Financial
Condition and Results of Operations under Item 7 and Notes 6, 7, 8, 9 and 14 to
our Financial Statements under Item 8.
2
RATES AND REGULATION
Rates
Rates that we are allowed to charge for our services are the single most
important item influencing our financial position, results of operations and
liquidity. We are highly regulated. The rates we charge our customers are
determined by governmental organizations. Decisions by these organizations are
influenced by many factors, including our recent cost of providing service, our
quality of service, regulatory staff knowledge and experience, economic
conditions and social and political views. Decisions made by these organizations
regarding our rates could have a material impact on our financial position,
results of operations and liquidity.
For the year 2002, approximately 86% of our electric operating revenues
were based on rates regulated by the Missouri Public Service Commission (MoPSC),
6% by the Illinois Commerce Commission (ICC), and 8% by the Federal Energy
Regulatory Commission (FERC). For information on rate matters in these
jurisdictions, including our recent Missouri electric rate case, see Results of
Operations and Regulatory Matters in Management's Discussion and Analysis of
Financial Condition and Results of Operations under Item 7 and Note 2 to our
Financial Statements under Item 8.
General Regulatory Matters
As a subsidiary of Ameren, a holding company registered with the SEC under
the PUHCA, we are subject to the regulatory provisions of the PUHCA, including
provisions relating to the issuance of securities, sales and acquisitions of
securities and utility assets, affiliate transactions, financial reporting
requirements, and the services performed by Ameren Services and AmerenEnergy
Fuels and Services Company. Issuance of short-term and long-term debt and other
securities by Ameren and issuance of debt having a maturity of twelve months or
less by AmerenCIPS, AmerenUE and AmerenCILCO are subject to approval by the SEC
under the PUHCA.
We are subject to regulation, as applicable, by the ICC and the MoPSC as to
rates, service, issuance of equity securities, issuance of debt having a
maturity of more than twelve months, mergers, and various other matters.
We are also subject to regulation by the FERC as to rates and charges in
connection with the wholesale sale of energy and transmission in interstate
commerce, mergers, affiliate transactions, and certain other matters
Operation of our Callaway nuclear plant is subject to regulation by the
Nuclear Regulatory Commission. Our Facility Operating License for our Callaway
plant expires on October 18, 2024. Our Osage hydroelectric plant and Taum Sauk
pumped-storage hydro plant, as licensed projects under the Federal Power Act,
are subject to FERC regulations affecting, among other things, the general
operation and maintenance of the projects. The license for the Osage Plant
expires on February 28, 2006, and the license for the Taum Sauk Plant expires on
June 30, 2010. We are currently seeking renewal of our Osage Plant license. Our
Keokuk Plant and dam located in the Mississippi River between Hamilton, Illinois
and Keokuk, Iowa, are operated under authority, unlimited in time, granted by an
Act of Congress in 1905.
For information on regulatory matters in these jurisdictions, including the
current status of electric transmission matters pending before the FERC, see
Regulatory Matters in Management's Discussion and Analysis of Financial
Condition and Results of Operations under Item 7 and Note 2 to our Financial
Statements under Item 8.
Environmental Matters
Certain of our operations are subject to federal, state and local
environmental regulations relating to the safety and health of personnel, the
public and the environment, including the identification, generation, storage,
handling, transportation, disposal, record keeping, labeling, reporting of and
emergency response in connection with hazardous and toxic materials, safety and
health standards, and environmental protection requirements, including standards
and limitations relating to the discharge of air and water pollutants. Failure
to comply with those statutes or regulations could have material adverse effects
on us, including the imposition of criminal or civil liability by regulatory
agencies or civil fines and liability to private parties, and the required
expenditure of funds to bring us into compliance. We believe we are in material
compliance with existing regulations.
For additional discussion of environmental matters, see Liquidity and
Capital Resources in Management's Discussion and Analysis of Financial Condition
and Results of Operations under Item 7 and Note 14 to our Financial Statements
under Item 8.
3
FUEL SUPPLY FOR ELECTRIC GENERATING FACILITIES
Cost of Fuels Year
------------------------------------------------------------------------------
(Per Million BTU) 2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Coal 91.352(cent) 98.228(cent) 96.004(cent) 100.685(cent) 100.015(cent)
Nuclear 38.051(cent) 37.184(cent) 40.269(cent) 46.552(cent) 48.803(cent)
Natural Gas (a) 340.689(cent) 402.546(cent) 429.354(cent) 243.315(cent) 226.572(cent)
Average - all fuels (b) 81.325(cent) 86.696(cent) 84.213(cent) 89.833(cent) 90.378(cent)
(a) The fuel cost for natural gas represents the actual cost of
natural gas and variable costs for transportation, storage, balancing
and fuel losses for delivery to the plant. In addition, the fixed
costs for firm transportation and firm storage capacity are included
to calculate a "fully-loaded" fuel cost for the generating facilities.
(b) Represents all fuels utilized in our electric generating
facilities, including coal, nuclear, natural gas, oil, propane, tire
chips, and handling.
Coal
We have a policy of maintaining coal inventory consistent with our
historical usage. We may adjust levels based on uncertainties of supply due
to potential work stoppages, delays in coal deliveries, equipment
breakdowns and other factors. As of December 31, 2002, approximately 63
days supply (2001 - 55 days supply) of coal was in inventory. For the year
ended December 31, 2002, coal represented approximately 77% of our fuel
supply.
Nuclear
The components of the nuclear fuel cycle required for nuclear generating
units are as follows:
o uranium;
o conversion of uranium into uranium hexafluoride;
o enrichment of uranium hexafluoride;
o conversion of enriched uranium hexafluoride into uranium dioxide and
the fabrication into nuclear fuel assemblies; and
o disposal and/or reprocessing of spent nuclear fuel.
We have agreements and/or inventories to fulfill our Callaway nuclear plant
needs for uranium, conversion, enrichment and fabrication services. Such needs
are satisfied through 2004, with the exception of enrichment services. A supply
of enrichment services for unfulfilled needs after 2004 is being pursued.
Additional contracts will be entered into in order to supply nuclear fuel during
the remainder of the life of the plant, at prices which cannot now be accurately
predicted. Our Callaway plant normally requires refueling at 18-month intervals,
and the next refueling is scheduled for the spring of 2004. Our Callaway plant
is out of service for approximately one month during a refueling.
For the year ended December 31, 2002 nuclear represented approximately 20%
of our fuel supply. See Note 15 to our Financial Statements under Item 8 for
additional information.
Natural Gas
The combustion turbine generator equipment (CTs), which we placed into
commercial operation in 2002 and 2000, are fueled by natural gas or have the
capability to use natural gas or oil. We use natural gas to supply our
generating facilities during peak generating periods. Our natural gas
procurement strategy is designed to ensure reliable and immediate delivery of
natural gas by optimizing transportation, storage, and balancing options and
minimizing cost and price risk by structuring various supply agreements to
maintain access to multiple gas pools and supply basins and reducing the impact
of price volatility. For additional information on CTs and related fuel matters,
see Liquidity and Capital Resources and Quantitative and Qualitative Disclosures
About Market Risk in Management's Discussion and Analysis of Financial Condition
and Results of Operations under Item 7 and Note 14 to our Financial Statements
under Item 8.
4
Oil
The actual and prospective use of oil is minimal, and we have not
experienced and do not expect to experience difficulty in obtaining adequate
supplies. For the year ended December 31, 2002, oil represented approximately 3%
of our fuel supply.
For additional information on our fuel supply, see Results of Operations,
Liquidity and Capital Resources, Effects of Inflation and Changing Prices and
Quantitative and Qualitative Disclosures About Market Risk in Management's
Discussion and Analysis of Financial Condition and Results of Operations under
Item 7 and Notes 1, 4, 14 and 15 to our Financial Statements under Item 8.
INDUSTRY ISSUES
We are facing issues common to the electric and gas utility industries.
These issues include:
o the potential for more intense competition;
o the potential for changes in the structure of regulation;
o changes in the structure of the industry as a result of changes in
federal and state laws, including the formation of unregulated
generating entities and regional transmission organizations;
o weak power prices due to overbuilt capacity and a weak economy;
o numerous troubled companies within the energy sector and their
impact on energy marketing and access to the capital markets;
o on-going consideration of additional changes of the industry by
federal and state authorities;
o continually developing environmental laws, regulations and issues,
including proposed new air quality standards;
o public concern about the siting of new facilities;
o proposals for demand-side management programs;
o public concerns about nuclear decommissioning and the disposal of
nuclear wastes; and
o global climate issues.
We are monitoring these issues and are unable to predict at this time what
impact, if any, these issues will have on our operations, financial condition or
liquidity. For additional information, see Outlook and Regulatory Matters in
Management's Discussion and Analysis of Financial Condition and Results of
Operations under Item 7 and Notes 2 and 14 to our Financial Statements under
Item 8.
AVAILABLE INFORMATION
We make available free of charge through Ameren's Internet website
(http://www.ameren.com) our annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and any amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 as soon as reasonably practicable after we electronically file such
reports with, or furnish it to, the SEC. This information, for our affiliates,
Ameren, AmerenCIPS, CILCORP, AmerenCILCO and Generating Company, is also
available through Ameren's Internet website.
We also make available free of charge through Ameren's Internet website the
code of business conduct for directors, officers and employees of Ameren and its
subsidiaries, including us, referred to as Ameren's Corporate Compliance Policy.
This document is also available in print upon written request to Secretary, P.O.
Box 66149, St. Louis, Missouri 63166-6149.
5
ITEM 2. PROPERTIES.
For information on our principal properties, planned additions or
replacements and transfers, see the generating facilities table below and
Liquidity and Capital Resources and Regulatory Matters in Management's
Discussion and Analysis of Financial Condition and Results of Operations under
Item 7 and Notes 2 and 14 to our Financial Statements under Item 8. Future plans
regarding additional electric generating facilities referred to in this report
are subject to change, including increasing or decreasing planned or installed
future generating capacity, based on market conditions, regulatory approvals for
additions, our results of operations and financial condition, availability of
financing and other factors determined by management.
We are a member of MAIN (Mid-America Interconnected Network), which is one
of the ten regional electric reliability councils organized for coordinating the
planning and operation of the nation's bulk power supply. MAIN operates
primarily in Wisconsin, Michigan, Illinois and Missouri.
Ameren's bulk power system is operated as an Ameren-wide control area and
transmission system under the FERC-approved amended joint dispatch agreement
between AmerenUE and our affiliates, Generating Company and AmerenCIPS. The
amended joint dispatch agreement provides a basis upon which we and Generating
Company can participate in the coordinated operation of AmerenCIPS's and our
transmission facilities with Generating Company's and our generating facilities
in order to achieve economies consistent with the provision of reliable electric
service and an equitable sharing of the benefits and costs of that coordinated
operation. Ameren, in 2002, had more than 30 interconnections for transmission
service and the exchange of electric energy, directly and through the facilities
of others. Our other Illinois-based affiliate, AmerenCILCO, is currently
expected to continue to operate as a separate control area. As such, its
generating plants will not be jointly dispatched with the generating plants
owned by Generating Company and us. AmerenCILCO is a transmission owning member
of the Midwest Independent System Operating (Midwest ISO) and has transferred
functional control of its system to the Midwest ISO. Transmission service on the
AmerenCILCO transmission system is provided pursuant to the terms of the Midwest
ISO open access transmission tariff on file with the FERC. For information on
AmerenCIPS' and AmerenUE's participation in the Midwest ISO, see Note 2 to our
Financial Statements under Item 8.
The following table sets forth information with respect to our generating
facilities and capability at the time of our expected 2003 peak summer
electrical demand:
AmerenUE Generating Facilities
------------------------------
Primary
Fuel Name of Net Kilowatt Net
Source Plant Location Capability(a) Heat Rate(f)
- ------ ------- -------- ------------- -----------
Coal Labadie Franklin County, MO 2,400,000 10,210
Rush Island Jefferson County, MO 1,187,000 10,580
Sioux St. Charles County, MO 959,000 9,700
Meramec St. Louis County, MO 816,000 11,206
---------
Total Coal 5,362,000
Nuclear Callaway Callaway County, MO 1,136,000 10,494
Hydro Osage Lakeside, MO 226,000 N/A
Keokuk Keokuk, IA 134,000 N/A
---------
Total Hydro 360,000
Pumped-
storage Taum Sauk Reynolds County, MO 440,000 N/A
Oil Venice CT(b) 1 Venice, IL 25,000 14,380
Howard Bend CT St. Louis County, MO 43,000 11,899
Fairgrounds CT Jefferson City, MO 55,000 11,100
Mexico CT Mexico, MO 55,000 11,100
Moberly CT Moberly, MO 55,000 11,100
6
AmerenUE Generating Facilities
------------------------------
Primary
Fuel Name of Net Kilowatt Net
Source Plant Location Capability(a) Heat Rate(f)
- ------ ---- -------- ------------- -----------
Moreau CT Jefferson City, MO 55,000 11,100
Meramec CT 1 St. Louis County, MO 55,000 11,100
-------
Total Oil 343,000
Natural Kirksville CT Kirksville, MO 13,000 18,811
Gas Viaduct CT Cape Girardeau, MO 25,000 15,137
Meramec CT 2(c) St. Louis County, MO 53,000 12,031
Venice CT 2 Venice, IL 48,000 9,800
Peno Creek CTs 1
through 4(d) Bowling Green, MO 188,000 10,878
-------
Total Natural Gas 327,000
TOTAL 7,968,000(e)
Electric Energy, Inc. Generating Facilities(g)
----------------------------------------------
Primary
Fuel Name of Net Kilowatt Net
Source Plant Location Capability(a) Heat Rate(f)
- ------ ----- -------- ------------ ---------
Coal Joppa Generating Station Joppa, IL 240,000 10,347
Natural Joppa (Units 4-5) Joppa, IL 18,000 12,200
Gas
TOTAL 258,000
(a) "Net Kilowatt Capability" represents generating capacity available for
dispatch from the facility into the electric transmission grid.
(b) The abbreviation "CT" represents combustion turbine generating unit.
(c) CT has the capability of operating on either oil or natural gas (dual
fuel).
(d) For information regarding a lease arrangement applicable to these CTs,
see Note 9 to our Financial Statements under Item 8.
(e) Approximately 550 megawatts of generating capacity (Pinckneyville CTs 1
through 8 and Kinmundy CTs 1 and 2) is proposed to be transferred from
Generating Company to AmerenUE subject to receipt of necessary
regulatory approvals.
(f) "Net Heat Rate" represents the amount of energy to produce a given
unit of output and is expressed as BTU per kilowatthour.
(g) We own a 40% interest in EEI.
As of December 31, 2002, we owned approximately 3,200 circuit miles of
electric transmission lines. We operate three propane-air plants and 2,900 miles
of gas mains. Our other properties include distribution lines, underground
cable, office buildings, warehouses, garages and repair shops.
We have fee title to all principal plants and other important units of
property, or to the real property on which such facilities are located (subject
to a mortgage lien securing our outstanding first mortgage bond indebtedness and
to permitted liens and judgment liens, as defined), except that:
o a portion of the Osage Plant reservoir, certain facilities at the
Sioux Plant, most of our Peno Creek combustion turbine generating
facility, certain of our substations and most of our transmission and
distribution lines and gas mains are situated on lands occupied under
leases, easements, franchises, licenses or permits;
o the United States and/or the State of Missouri own, or have or may
have, paramount rights to certain lands lying in the bed of the Osage
River or located between the inner and outer harbor lines of the
Mississippi River, on which certain of our generating and other
properties are located; and
7
o the United States and/or State of Illinois and/or State of Iowa and/or
City of Keokuk, Iowa own, or have or may have, paramount rights with
respect to, certain lands lying in the bed of the Mississippi River on
which a portion of our Keokuk Plant is located.
Substantially all of our property and plant are subject to the direct first
lien of the indenture securing our first mortgage bonds.
In December 2002, for the purpose of achieving property tax savings, we
conveyed most of our Peno Creek combustion turbine generating facility to the
City of Bowling Green, Missouri, and leased back the facility from the City for
a 20 year term. As part of the transaction, most of our Peno Creek property and
plant was released from the lien of the indenture securing our first mortgage
bonds. Under the terms of the lease, we retain all operation and maintenance
responsibilities for the facility and ownership of the facility is returned to
us at the expiration of the lease. When ownership of the Peno Creek facility is
returned to us by the City, the property and plant will again become encumbered
by the direct first lien of our outstanding first mortgage bond indenture.
ITEM 3. LEGAL PROCEEDINGS.
We are involved in legal and administrative proceedings before various
courts and agencies with respect to matters arising in the ordinary course of
business, some of which involve substantial amounts. We believe that the final
disposition of these proceedings, except as otherwise noted in this report, will
not have a material adverse effect on our financial position, results of
operations or liquidity.
For additional information on legal and administrative proceedings, see
Rates and Regulation under Item 1 and Liquidity and Capital Resources and
Regulatory Matters in Management's Discussion and Analysis of Financial
Condition and Results of Operations under Item 7 and Notes 2 and 14 to our
Financial Statements under Item 8.
FORWARD-LOOKING STATEMENTS
Statements made in this report which are not based on historical facts, are
"forward-looking" and, accordingly, involve risks and uncertainties that could
cause actual results to differ materially from those discussed. Although such
"forward-looking" statements have been made in good faith and are based on
reasonable assumptions, there is no assurance that the expected results will be
achieved. These statements include (without limitation) statements as to future
expectations, beliefs, plans, strategies, objectives, events, conditions and
financial performance. In connection with the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we are providing this
cautionary statement to identify some important factors that could cause actual
results to differ materially from those anticipated. The following factors, in
addition to those discussed elsewhere in this report and in subsequent
securities filings, could cause results to differ materially from management
expectations as suggested by such "forward-looking" statements:
o the effects of the stipulation and agreement relating to our Missouri
electric excess earnings complaint case and other regulatory actions,
including changes in regulatory policy;
o changes in laws and other governmental actions, including monetary and
fiscal policies;
o the impact on us of current regulations related to the opportunity for
customers to choose alternative energy suppliers in Illinois;
o the effects of increased competition in the future due to, among other
things, deregulation of certain aspects of our business at both the state
and federal levels;
o the effects of participation in a FERC-approved Regional Transmission
Organization, including activities associated with the Midwest ISO;
o availability and future market prices for fuel and purchased power,
electricity and natural gas, including the use of financial and derivative
instruments and volatility of changes in market prices;
o the cost of commodities, such as natural gas, used in the production of
electricity and our ability to
recover such increased cost;
o average rates for electricity in the Midwest;
o business and economic conditions;
o the impact of the adoption of new accounting standards on the application
of appropriate technical accounting rules and guidance;
o interest rates and the availability of capital;
8
o actions of rating agencies and the effects of such actions;
o weather conditions;
o generation plant construction, installation and performance;
o operation of nuclear power facilities and decommissioning costs;
o the effects of strategic initiatives, including acquisitions and
divestitures;
o the impact of current environmental regulations on utilities and generating
companies and the expectation that more stringent requirements will be
introduced over time, which could potentially have a negative financial
effect;
o future wages and employee benefit costs, including changes in returns of
benefit plan assets;
o disruptions of the capital markets or other events making Ameren's or our
access to necessary capital more difficult or costly;
o competition from other generating facilities, including new facilities that
may be developed in the future;
o cost and availability of transmission capacity for the energy generated by
our generating facilities or required to satisfy our energy sales; and
o legal and administrative proceedings.
Given these uncertainties, undue reliance should not be placed on these
forward-looking statements. Except to the extent required by the federal
securities laws, we undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 2002.
INFORMATION REGARDING EXECUTIVE OFFICERS REQUIRED BY ITEM 401(b) OF
REGULATION S-K:
Age At Present Position Date First Elected
Name 12/31/02 and Business Experience or Appointed
---- ------- ----------------------- ------------
Charles W. Mueller 64 Chairman, 8/30/01
Chief Executive Officer 1/1/94
and Director 6/11/93
Mr. Mueller began his career with AmerenUE in 1961 as an engineer. He was named
Treasurer in 1978, Vice President-Finance in 1983, Senior Vice President -
Administrative Services in 1988, President in 1993 and Chief Executive Officer
in 1994. Mr. Mueller was elected Chairman of AmerenUE in 2001. He relinquished
his position as President of Ameren and AmerenUE in 2001. Mr. Mueller is also an
officer at various of our other affiliates including Chairman and Chief
Executive Officer of Ameren.
Gary L. Rainwater 56 President,
Chief Operating Officer 8/30/01
and Director 4/28/98
Mr. Rainwater began his career with AmerenUE in 1979 as an engineer. He was
named General Manager - Corporate Planning in 1988 and Vice President in 1993.
Mr. Rainwater was elected Executive Vice President of AmerenCIPS in January 1997
and was named to his present position as President and Chief Operating Officer
of AmerenCIPS in December 1997. He was elected President and Chief Operating
Officer of AmerenUE in 2001. Mr. Rainwater is also an officer at various of our
other affiliates including President and Chief Operating Officer of Ameren.
Paul A. Agathen 55 Senior Vice President 10/12/01
and Director 4/28/98
Mr. Agathen was employed by AmerenUE in 1975 as an attorney. He was named
General Attorney of AmerenUE in 1982, Vice President, Environmental and Safety
in 1994 and Senior Vice President in 2001. Mr. Agathen is also an officer of
various of our other affiliates.
9
Warner L. Baxter 41 Senior Vice President 8/30/01
and Director (Principal
Financial Officer) 4/22/99
From 1983 to 1995, Mr. Baxter was employed by Price Waterhouse (now
PricewaterhouseCoopers LLP). Mr. Baxter joined AmerenUE in 1995 as Assistant
Controller. He was promoted to Controller of AmerenUE in 1996 and was elected
Vice President and Controller of AmerenUE in 1998. He was elected Vice President
and Controller of AmerenCIPS in 1999. Mr. Baxter was elected to Senior Vice
President - Finance at AmerenUE in 2001. Mr. Baxter is also an officer at
various of our other affiliates including Senior Vice President - Finance of
Ameren.
Daniel F. Cole 49 Senior Vice President 7/12/99
Mr. Cole is a Senior Vice President of AmerenUE. AmerenUE employed Mr. Cole in
1976 as an engineer. He was named AmerenUE's Manager-Resource Planning in 1996
and General Manager-Corporate Planning in 1997. In 1998, Mr. Cole was elected as
Vice President of Corporate Planning of Ameren Services. Mr. Cole was elected to
his present position at AmerenUE in 1999. Mr. Cole is also an officer at various
of our other affiliates.
Garry L. Randolph 54 Senior Vice President 10/16/00
Mr. Randolph was employed by AmerenUE in 1977 as an engineer and elected Vice
President, Nuclear Operations in 1992, Vice President and Chief Nuclear Officer
in 1997, Senior Vice President and Chief Nuclear Officer in 2000, and Senior
Vice President - Generation and Chief Nuclear Officer in 2001. Mr. Randolph is
also an officer at various of our other affiliates.
Thomas R. Voss 55 Senior Vice President 6/1/99
and Director 10/25/01
Mr. Voss began his career with AmerenUE in 1969 as an engineer. After four years
of military service, he returned to AmerenUE and from 1975 to 1988, held various
positions including district manager and distribution operating manager. Mr.
Voss was elected Vice President of AmerenCIPS in 1998. Mr. Voss was elected to
his present position at AmerenUE in 1999. Mr. Voss is also an officer at various
of our other affiliates.
David A. Whiteley 46 Senior Vice President 8/30/01
Mr. Whiteley began his career with AmerenUE in 1978 as an engineer and in 1993
was named manager of transmission planning and later manager of electrical
engineering and transmission planning. In 2000, Mr. Whiteley was elected Vice
President of Ameren Services responsible for engineering and construction and
later energy delivery technical services. He was elected to his present position
at AmerenUE in 2001. He is also an officer at various of our other affiliates.
Ronald D. Affolter 49 Vice President 10/16/00
Mr. Affolter joined AmerenUE in 1981 as a systems engineer at our Callaway
Nuclear Plant. He later held the positions of Superintendant - Systems
Engineering and Manager-Callaway Plant. He was elected Vice President - Nuclear
in 2000.
Jerre E. Birdsong 48 Vice President 10/12/01
and Treasurer 7/01/93
Mr. Birdsong joined AmerenUE in 1977 as an economist. He was promoted to
Assistant Treasurer in 1984, Manager of Finance in 1989 and in 1993 was
appointed Treasurer. In addition to being Treasurer, he was elected to the
position of Vice President in 2001. Mr. Birdsong is also an officer at various
of our other affilites including Vice President and Treasurer of Ameren.
10
Martin J. Lyons 36 Vice President 2/14/03
and Controller 10/22/01
(Principal Accounting Officer)
Mr. Lyons was appointed as Controller of AmerenUE in October 2001. In addition
to being Controller, he was elected to the position of Vice President in 2003.
He was previously employed by PricewaterhouseCoopers LLP for 13 years, most
recently as partner. Mr. Lyons is also an officer at various of our other
affilites including Vice President and Controller of Ameren.
Michael J. Montana* 56 Vice President 7/1/88
Mr. Montana joined AmerenUE as an engineer in 1971 and had also served as
Purchasing Department Buyer from 1973 to 1976, executive assistant from 1976 to
1984, manager of Industrial Relations from 1984 to 1988 and Vice President of
Industrial Relations from 1988 to 1995. He was elected Vice President of Ameren
Services in 1997 and Vice President of AmerenCIPS in 1998. Mr. Montana was
elected as an officer of Generating Company in November 2000.
Charles D. Naslund 50 Vice President 2/1/99
Mr. Naslund joined AmerenUE in 1974 as an assistant engineer in Engineering and
Construction. He became manager, Nuclear Operations Support in 1986 and in 1991
was named manager, Nuclear Engineering. He was elected to Vice President Power
Operations at AmerenUE in 1999.
William C. Shores* 64 Vice President 7/1/88
Mr. Shores joined AmerenUE in 1963 and was named district manager in 1971 and
general manager, Metropolitan Distribution in 1981. In 1988, Mr. Shores was
named Vice President - Regional East area and assumed his position of Vice
President - Customer Services, Metropolitan Distribution for AmerenUE in 1995.
Steven R. Sullivan 42 Vice President Regulatory
Policy, General Counsel 7/1/98
and Secretary 9/1/98
Mr. Sullivan was elected Vice President, General Counsel and Secretary of
AmerenUE in 1998. He was previously employed by Anheuser Busch Companies, Inc.
as an attorney from 1995 to 1998. Mr. Sullivan is also an officer at various of
our other affiliates including Vice President Regulatory Policy, General Counsel
and Secretary of Ameren.
Ronald C. Zdellar 58 Vice President 9/1/02
Mr. Zdellar joined AmerenUE in 1971 as Assistant Engineer. In 1988, he became
Vice President, Transmission and Distribution and in 1995 he became Vice
President, Customer Services - Ameren UE. In 1999, Mr. Zdellar assumed the
position of Vice President, Customer Services/AmerenUE and Ameren Services.
_________________
* These individuals retired in 2003.
All officers are elected or appointed annually by the Board of Directors
following the election of such Board at the annual meeting of stockholders.
Except for Steven R. Sullivan and Martin J. Lyons, each of the above-named
executive officers has been employed by us or an affiliate for more than five
years in executive or management positions. Mr. Sullivan was previously employed
as an attorney by Anheuser Busch Companies, Inc. and Mr. Lyons was previously
employed as an accountant by PricewaterhouseCoopers LLP.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no market for our Common Stock since all shares are owned by our
parent, Ameren.
11
ITEM 6. SELECTED FINANCIAL DATA.
- --------------------------------------------------------------------------------
For the Years Ended December 31
(in millions) 2002(a) 2001(a) 2000 1999 1998
- --------------------------------------------------------------------------------
Operating Revenues $2,650 $2,786 $2,720 $2,534 $2,383
Operating Income 448 457 452 443 428
Net Income 344 374 353 349 320
Preferred stock dividends 8 9 9 9 9
Net income after preferred
stock dividends 336 365 344 340 311
Common Stock dividends 299 283 207 329 260
As of December 31,
Total assets $7,575 $7,288 $7,116 $7,044 $6,830
Long-term debt 1,687 1,599 1,760 1,883 1,674
Total common stockholder's
equity 2,632 2,654 2,571 2,434 2,424
- --------------------------------------------------------------------------------
(a) Revenues were netted with costs upon adoption of EITF 02-3 and the
rescission of EITF 98-10. See Note 1 to our financial statements under Item
8 for further information. The amounts were netted as follows: 2002 - $458
million; 2001 - $392 million.
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Union Electric Company, headquartered in St. Louis, Missouri, is a
wholly-owned subsidiary of Ameren Corporation (Ameren) and operates as AmerenUE.
Our principal business is the rate-regulated generation, transmission and
distribution of electricity, and the rate-regulated distribution of natural gas
to residential, commercial, industrial and wholesale users in Missouri and
Illinois. Ameren is a public utility holding company registered with the
Securities and Exchange Commission (SEC) under the Public Utility Holding
Company Act of 1935 (PUHCA) and is also headquartered in St. Louis, Missouri.
Ameren's principal business is the generation, transmission and distribution of
electricity, and the distribution of natural gas to residential, commercial,
industrial and wholesale users in the central United States. In addition to us,
Ameren's principal subsidiaries and our affiliates are as follows:
o Central Illinois Public Service Company, which operates a rate-regulated
electric and natural gas transmission and distribution business in Illinois
as AmerenCIPS.
o Central Illinois Light Company is a subsidiary of CILCORP Inc. (CILCORP),
which operates a rate-regulated transmission and distribution business, an
electric generation business, and a rate-regulated natural gas distribution
business in Illinois as AmerenCILCO. Ameren completed its acquisition of
CILCORP on January 31, 2003 from The AES Corporation (AES). See Recent
Developments for further information.
o AmerenEnergy Resources Company (Resources Company), which consists of non
rate-regulated operations. Subsidiaries include AmerenEnergy Generating
Company (Generating Company) that operates non rate-regulated electric
generation in Missouri and Illinois, AmerenEnergy Marketing Company
(Marketing Company), which markets power for periods over one year,
AmerenEnergy Fuels and Services Company, which procures fuel and manages
the related risks for Ameren affiliated companies and AmerenEnergy Medina
Valley Cogen (No. 4), LLC, which indirectly owns a 40 megawatt, gas-fired
electric co-generation plant. On February 4, 2003, Ameren completed its
acquisition of AES Medina Valley Cogen (No. 4), LLC (Medina Valley) from
AES and renamed it AmerenEnergy Medina Valley Cogen (No. 4), LLC. See
Recent Developments for further information.
o AmerenEnergy, Inc. (AmerenEnergy), which serves as a power marketing and
risk management agent for Ameren affiliated companies for transactions of
primarily less than one year.
o Electric Energy, Inc. (EEI), which operates electric generation and
transmission facilities in Illinois. We have a 40% ownership interest in
EEI and have accounted for it under the equity method of accounting.
Resources Company also owns a 20% interest in EEI.
o Ameren Services Company (Ameren Services), which provides shared support
services to Ameren and its subsidiaries, including us. Charges are based
upon the actual costs incurred by Ameren Services, as required by the
PUHCA.
When we refer to AmerenUE, our, we or us, we are referring to Union
Electric Company and in some cases our agents, AmerenEnergy and AmerenEnergy
Fuels and Services Company. All tabular dollar amounts are in millions, unless
otherwise indicated.
Our results of operations and financial position are impacted by many
factors, including both controllable and uncontrollable factors. Weather,
economic conditions and the actions of key customers or competitors can
significantly impact the demand for our services. Our results are also impacted
by seasonal fluctuations caused by winter heating and summer cooling demand.
With nearly all of our revenues directly subject to regulation by various state
and federal agencies, decisions by regulators can have a material impact on the
price we charge for our services. We principally utilize coal, nuclear fuel,
natural gas and oil in our operations. The prices for these commodities can
fluctuate significantly due to the world economic and political environment,
weather, production levels and many other factors. We do not have fuel recovery
mechanisms in Missouri or Illinois for our electric utility businesses, but we
do have gas cost recovery mechanisms in each state for our gas utility
businesses. In addition, our electric rates in Missouri and Illinois are largely
set through 2006. We employ various risk management strategies in order to try
to reduce our exposure to commodity risks and other risks inherent in our
business. The reliability of our power plants, and transmission and distribution
systems, and the level of operating and administrative costs, and capital
investment are key factors that we seek to control in order to optimize our
results of operations, cash flows and financial position.
13
RESULTS OF OPERATIONS
Earnings Summary
Our net income for 2002, 2001 and 2000 was $344 million, $374 million and
$353 million, respectively. Net income in 2002 included voluntary retirement and
other restructuring charges ($41 million, net of taxes), which consisted of a
voluntary retirement program and the retirement of our Venice, Illinois plant.
In 2001, net income was reduced by the adoption of Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ($5 million). See Other Operating Expenses - Restructuring
Charges below and Note 1 - Summary of Significant Accounting Policies to our
Financial Statements for further information.
The following table reconciles our net income to net income excluding
voluntary retirement and other restructuring charges and SFAS 133 adoption for
the years ending December 31, 2002, 2001 and 2000:
- --------------------------------------------------------------------------------
2002 2001 2000
- --------------------------------------------------------------------------------
Net income $344 $374 $353
- --------------------------------------------------------------------------------
Voluntary retirement and other restructuring
charges, net of taxes 41 - -
SFAS 133 adoption, net of taxes - 5 -
- --------------------------------------------------------------------------------
Net income excluding restructuring charges and
SFAS 133 adoption $ 385 $ 379 $ 353
- --------------------------------------------------------------------------------
Excluding the charges discussed above, our net income in 2002 increased $6
million from the prior year, primarily due to favorable weather conditions ($27
million, net of taxes) and lower fuel and purchased power costs ($44 million,
net of taxes). These increases were partially offset by the impact of the
settlement of our Missouri electric rate case ($37 million, net of taxes),
increased costs of employee benefits ($15 million, net of taxes) and other
operations and maintenance expenses ($8 million, net of taxes), higher
depreciation ($10 million, net of taxes, excluding the effect of the Missouri
electric rate case settlement) and a decline in industrial sales due to the
continued soft economy.
Excluding the charges discussed above, our net income in 2001 increased $26
million from 2000, primarily due to a reduction in estimated credits to Missouri
electric customers ($47 million, net of taxes), lower interest expense ($8
million, net of taxes) and organic growth. These increases were partially offset
by increased costs of employee benefits ($12 million, net of taxes), higher
depreciation ($6 million, net of taxes) and a refueling outage at our Callaway
nuclear plant. There was not a refueling at Callaway in 2000.
Recent Developments
CILCORP Acquisition
On January 31, 2003, after receipt of the necessary regulatory agency
approvals and clearance from the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act, Ameren completed its acquisition
of all of the outstanding common stock of CILCORP from AES. CILCORP is the
parent company of Peoria, Illinois-based Central Illinois Light Company, which
operated as CILCO. With the acquisition, CILCO became an Ameren subsidiary, but
remains a separate utility company, operating as AmerenCILCO. On February 4,
2003, Ameren also completed its acquisition of AES Medina Valley Cogen (No. 4),
LLC, which indirectly owns a 40 megawatt, gas-fired electric co-generation
plant. With the acquisition, Medina Valley became a wholly-owned subsidiary of
Resources Company and was renamed AmerenEnergy Medina Valley Cogen (No. 4), LLC.
The CILCORP and AmerenEnergy Medina Valley Cogen (No. 4), LLC financial
statements will be included in Ameren's consolidated financial statements
effective with the January and February 2003 acquisition dates.
Ameren acquired CILCORP to complement its existing Illinois electric and
gas operations. The purchase included CILCO's rate-regulated electric and
natural gas businesses in Illinois serving approximately 200,000 and 205,000
customers, respectively, of which approximately 150,000 are combination electric
and gas customers. CILCO's service territory is contiguous to Ameren's service
territory. CILCO also has a non rate-regulated electric and gas marketing
business principally focused in the Chicago, Illinois region. Finally, the
purchase includes approximately 1,200 megawatts of largely coal-fired generating
capacity, most of which is expected to become non rate-regulated in 2003.
The total purchase price was approximately $1.4 billion and included the
assumption of CILCORP and Medina Valley debt and preferred stock at closing of
approximately $900 million, with the balance of the purchase price of
14
approximately $500 million paid with cash on hand. The purchase price is subject
to certain adjustments for working capital and other changes pending the
finalization of CILCORP's closing balance sheet. The cash component of the
purchase price came from Ameren's issuances in September 2002 of 8.05 million
common shares and in early 2003 of 6.325 million common shares.
Credit Ratings
In April 2002, as a result of our then pending Missouri electric earnings
complaint case and the CILCORP transaction and related assumption of debt,
credit rating agencies placed Ameren's and its subsidiaries' debt under review.
Following the completion of the acquisition of CILCORP in January 2003, Standard
& Poor's lowered the ratings of Ameren, AmerenUE and AmerenCIPS and increased
the ratings of Generating Company. At the same time, Standard & Poor's changed
the outlook assigned to all of Ameren's and its subsidiaries' ratings to stable.
Moody's also lowered Ameren's and AmerenUE's ratings subsequent to the
acquisition and changed the outlook on these ratings to stable. These actions
were consistent with the actions the rating agencies disclosed they were
considering following the announcement of the CILCORP acquisition.
As of February 2003, the ratings by Moody's and Standard & Poor's were as
follows:
- --------------------------------------------------------------------------------
Moody's Standard & Poor's
- --------------------------------------------------------------------------------
Ameren Corporation:
Issuer/Corporate credit rating A3 A-
Unsecured debt A3 BBB+
Commercial paper P-2 A-2
AmerenUE:
Secured debt A1 A-
Unsecured debt A2 BBB+
Commercial paper P-1 A-2
AmerenCIPS:
Secured debt A1 A-
Unsecured debt A2 BBB+
Generating Company:
Unsecured debt A3/Baa2 A-
- --------------------------------------------------------------------------------
Standard & Poor's increased the ratings of CILCORP and CILCO subsequent to
the acquisition of these entities by Ameren. As of February 2003, the unsecured
debt ratings of CILCORP were BBB+ and Baa2 from Standard & Poor's and Moody's,
respectively. The secured debt ratings of AmerenCILCO were A- and A2 from
Standard & Poor's and Moody's, respectively. Standard & Poor's assigned stable
outlooks to the ratings. Moody's also assigned a stable outlook to the ratings
for CILCORP and AmerenCILCO.
Any adverse change in our ratings or Ameren's ratings may reduce our access
to capital and/or increase the costs of borrowings resulting in a negative
impact on earnings. A credit rating is not a recommendation to buy, sell or hold
securities and should be evaluated independently of any other rating. Ratings
are subject to revision or withdrawal at any time by the assigning rating
organization.
15
Electric Operations
The following table represents the favorable (unfavorable) impact on
electric margin versus the prior periods for the years ended December 31, 2002
and 2001:
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
Operating Revenues:
Effect of abnormal weather (estimate) $ 62 $ 4
Growth and other (estimate) (7) 31
2002 Missouri rate settlement (47) -
Credit to customers (10) 75
Interchange revenues (117) (60)
- --------------------------------------------------------------------------------
Total variation in electric operating revenues (119) 50
Fuel and Purchased Power:
Fuel:
Generation (9) 10
Price 21 (11)
Generation efficiencies and other - 6
Purchased power 177 (15)
- --------------------------------------------------------------------------------
Total variation in fuel and purchased power 189 (10)
- --------------------------------------------------------------------------------
Change in electric margin $ 70 $ 40
- --------------------------------------------------------------------------------
Electric margin increased $70 million for the year ended December 31, 2002
compared to 2001. Increases in electric margin in 2002 were primarily
attributable to more favorable weather conditions and lower fuel and purchased
power costs. Weather-sensitive residential electric kilowatthour sales in 2002
increased 7% and commercial electric kilowatthour sales increased 4%. However,
industrial kilowatthour sales were approximately 9% lower in 2002 as compared to
2001 due primarily to the impact of the soft economy. Revenues were also reduced
by $47 million in 2002 due to the settlement of the Missouri electric rate case.
Interchange revenues decreased due to lower energy prices and less low-cost
generation available for sale, resulting primarily from increased demand for
generation from native load customers. Fuel and purchased power was reduced in
2002 due primarily to lower energy prices, partially offset by increased
kilowatthour sales and unscheduled plant outages. We expect that revenues will
continue to be negatively affected by the settlement of our Missouri rate case
reached in 2002, which requires the phase-in of $30 million of electric rate
reductions effective April 1, 2003 and $30 million effective April 1, 2004. In
addition, we expect power prices in the energy markets to remain generally soft,
which will impact the margins we can generate by marketing our power into the
interchange markets.
During 2002, we adopted the provisions of Emerging Issues Task Force (EITF)
Issue No. 02-3,"Issues Involved in Accounting for Derivative Contracts Held for
Trading Purposes and Contracts Involved in Energy Trading and Risk Management
Activities," that required revenues and costs associated with certain energy
contracts to be shown on a net basis in the income statement. Prior to adopting
EITF 02-3 and the rescission of EITF Issue No. 98-10, "Accounting for Contracts
Involved in Energy Trading and Risk Management Activities," our accounting
practice was to present all settled energy purchase or sale contracts within our
power risk management program on a gross basis in Operating Revenue - Electric
and in Operating Expenses - Fuel and Purchased Power. This meant that revenues
were recorded for the notional amount of the power sale contracts with a
corresponding charge to income for the costs of the energy that was generated or
for the notional amount of a purchased power contract. Upon adoption, EITF 02-3
requires that prior periods also be netted to conform to the current year
presentation. Adoption of EITF 02-3 did not have any impact on operating or net
income for any period or stockholder's equity. The operating revenues and costs
netted for the year ended December 31, 2002 were $458 million (2001 - $392
million), which reduced interchange revenues and purchased power costs by equal
amounts. SFAS 133 was adopted on January 1, 2001 and therefore, no netting was
required for the year ended December 31, 2000.
Electric margin increased $40 million for the year ended December 31, 2001
compared to 2000, primarily due to a $75 million reduction in the estimated
credits to Missouri electric customers and increased sales of emissions credits.
During the year ended December 31, 2001, we reduced the estimated credit to
Missouri electric customers previously recorded for an earnings sharing plan for
the plan year ended June 30, 2001 by $10 million, compared to estimated credits
of $65 million recorded in 2000. These increases were partially offset by a 17%
decrease in interchange sales. Our residential, commercial and industrial sales
were comparable to the prior year. The $10 million increase in fuel and
purchased power costs for 2001, compared to 2000, was primarily driven by
increased
16
purchased power, resulting from the Spring 2001 refueling outage at our Callaway
nuclear plant, in addition to higher blended fuel costs.
Gas Operations
Our gas margin decreased $6 million in 2002 as compared to 2001 with gas
revenues decreasing $17 million and costs decreasing by $11 million. The
decrease in margin was primarily due to warmer winter weather early in 2002,
partially offset by increased gas sales due to colder than normal temperatures
in late 2002.
Gas margin in 2001 increased $13 million compared to 2000, primarily due to
higher gas costs recovered through purchased gas adjustment clauses, partially
offset by lower total sales of 14% resulting from unusually warm winter weather.
Other Operating Expenses
Other Operations and Maintenance
Other operations and maintenance expenses increased $31 million in 2002
compared to 2001, primarily due to higher employee benefit costs ($24 million)
related to increasing healthcare costs and the investment performance of
employee benefit plan assets, higher wages, and higher plant maintenance
expenses. See also Equity Price Risk below for a discussion of our expectations
and plans regarding trends in employee benefit costs.
Other operations and maintenance expenses increased $38 million in 2001
compared to 2000, primarily due to higher employee benefits costs in 2001 ($20
million), resulting from increasing healthcare costs and the investment
performance of employee benefit plan assets, a refueling outage at Callaway in
2001 versus no refueling in 2000 and increased costs of professional services.
In 2000, we recorded a $17 million charge to earnings related to our withdrawal
from the Midwest Independent System Operator (Midwest ISO). The charge reduced
earnings $10 million, net of taxes. See Note 2 - Rate and Regulatory Matters to
our Financial Statements for further information regarding the Midwest ISO.
Ameren Services and AmerenEnergy provided services to us, including wages,
employee benefits and professional services that were included in other
operations and maintenance expenses. See Note 3 - Related Party Transactions to
our Financial Statements for further information.
Restructuring Charges
Voluntary retirement and other restructuring charges of $65 million in 2002
consisted primarily of a charge related to Ameren's voluntary retirement program
of $51 million based on voluntary retirements of approximately 230 of our
employees and additional employees providing support functions to us through
Ameren Services. These costs consisted primarily of special termination benefits
associated with our pension and post-retirement benefit plans. Most of the
employees who voluntarily retired will leave Ameren by March 2003. In addition,
in December 2002, Ameren announced its plans to retire 343 megawatts of
rate-regulated capacity at our Venice, Illinois plant, which resulted in a total
charge of approximately $14 million. See Note 10 - Voluntary Retirement and
Other Restructuring Charges to our Financial Statements for more information.
Depreciation and Amortization
Depreciation and amortization expenses increased $1 million in 2002 and $9
million in 2001 compared to the prior years. These net increases were primarily
due to our investment in combustion turbine electric generating plants,
coal-fired power plants and distribution plant. The increase in 2002 was
significantly offset by a reduction of depreciation rates ($15 million) based on
an updated analysis of asset values, service lives and accumulated depreciation
levels that was included in our 2002 Missouri electric rate case settlement.
Income Taxes
Income tax expense decreased $37 million in 2002 compared to 2001,
primarily due to the lower pretax income and a lower effective tax rate. Income
tax expense increased $6 million in 2001 compared to 2000, due to higher pretax
income, offset by a lower effective tax rate.
17
Other Taxes
Other tax expense increased $4 million in 2002 compared to 2001, primarily
due to higher gross receipts taxes resulting from increased residential and
commercial electric sales and higher payroll taxes resulting from increased
wages. Other tax expense increased $4 million in 2001 compared to 2000,
primarily due to a change in the property tax assessment in the state of
Missouri.
Other Income and Deductions
Other income and deductions (excluding income taxes) decreased $40 million
in 2002, compared to the prior year. The decrease was primarily due to the cost
of economic development and energy assistance programs included in the
settlement of the Missouri electric rate case ($26 million), lower intercompany
interest earned in 2002 on funds loaned to the utility money pool resulting from
lower average intercompany notes receivable balances ($7 million), and decreased
gains on energy trading contracts. These decreases were partially offset by an
increase in earnings from our ownership interest in EEI primarily resulting from
its sale of emission credits ($10 million). Other income and deductions
(excluding income taxes) increased $17 million in 2001, compared to 2000,
primarily due to gains on energy trading contracts ($8 million), decreased
charitable contributions ($5 million), contributions in aid of construction ($3
million) and life insurance proceeds. These increases were partially offset by
lower interest earned on short-term cash investments ($4 million) and lower
intercompany interest earned on funds loaned to the utility money pool resulting
from lower average intercompany notes receivable balances ($3 million). See Note
11 - Miscellaneous, Net to our Financial Statements for further information.
Interest
Interest expense decreased $8 million in 2002 compared to 2001, primarily
due to lower interest rates on our variable rate environmental debt obligations
and lower interest expense associated with a decreased balance under our nuclear
fuel lease, partially offset by increased short-term intercompany interest as a
result of our borrowings from the utility money pool in the current year.
Interest expense decreased $13 million in 2001 compared to 2000, primarily due
to lower interest expense associated with our nuclear fuel lease and a decrease
in interest expense associated with our variable rate environmental debt
obligations resulting from lower interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Operating
Our cash flows provided by operating activities totaled $696 million for
2002, compared to $590 million for 2001 and $669 million for 2000. Cash provided
by operations increased in 2002, primarily as a result of higher cash earnings
resulting from favorable weather. This increase was partially offset by payments
of Missouri electric customer sharing credits under our now expired electric
alternative regulation plan ($40 million) and the timing of payments on accounts
payable and accrued taxes. Cash flow from operations decreased in 2001,
principally due to the timing of credits provided to our Missouri electric
customers and the changes in working capital requirements, partially offset by
increased earnings.
Our tariff-based gross margins continue to be our principal source of cash
from operating activities. Our diversified retail customer mix of residential,
commercial and industrial classes and a commodity mix of gas and electric
service provide a reasonably predictable source of cash flows. In addition, we
plan to utilize short-term debt to support normal operations and other temporary
capital requirements.
Pension Funding
Ameren made cash contributions totaling $31 million to Ameren's defined
benefit retirement plan during 2002. Our share of the cash contribution was
approximately $23 million, which includes our portion related to Ameren
Services. At December 31, 2002, Ameren recorded a minimum pension liability of
$102 million, net of taxes, which resulted in a charge to Accumulated Other
Comprehensive Income (OCI) and a reduction to stockholders' equity. Our share of
the minimum pension liability was approximately $62 million, net of taxes.
Based on the performance of plan assets through December 31, 2002, Ameren
expects to be required under the Employee Retirement Income Security Act of 1974
(ERISA) to fund approximately $150 million to $175 million annually, including
CILCORP, in 2005, 2006 and 2007 in order to maintain minimum funding levels for
its pension
18
plans. In addition, Ameren estimates the pension funding for CILCORP to be less
than $1 million in 2003 and approximately $5 million in 2004. We expect our
share of the annual funding in 2005, 2006 and 2007 to be between approximately
$110 million to $128 million, which includes our share related to employees of
Ameren Services. These amounts are estimates and may change based on actual
stock market performance, changes in interest rates and any pertinent changes in
government regulations. At December 31, 2002, Ameren's Net Benefit Obligation
was $1,587 million and its Fair Value of Plan Assets was $1,059 million. See
Benefit Plan Accounting under Accounting Matters - Critical Accounting Policies
below.
Investing
Our net cash used in investing activities was $454 million in 2002 compared
to $419 million in 2001 and $414 million in 2000. In 2002, construction
expenditures were $520 million (2001 - $587 million; 2000 - $316 million)
primarily related to various upgrades at our coal power plants and further
construction of combustion turbine generating units. In 2002, we placed into
service 240 megawatts (approximately $135 million) of combustion turbine
electric generation capacity at Bowling Green, Missouri.
For the five-year period 2003 through 2007, our construction expenditures
are estimated to approximate $2.0 billion to $2.5 billion, of which
approximately $700 million is expected in 2003. This estimate includes capital
expenditures related to the construction and acquisition from an affiliate of
combustion turbine generating facilities and the replacement of steam generators
at our Callaway nuclear plant. In addition, this estimate includes capital
expenditures for transmission, distribution and other generation-related
activities, as well as for compliance with new NOx (nitrogen oxide) control
regulations, as discussed in Environmental below.
As a part of the settlement of the Missouri electric rate case in 2002 (see
Regulatory Matters below), we committed to making $2.25 billion to $2.75 billion
in infrastructure investments from January 1, 2002 through June 30, 2006. These
investments include, among other things, the addition of more than 700 megawatts
of new generation capacity and the replacement of steam generators at our
Callaway nuclear plant. The requirements for 700 megawatts of new generation is
expected to be satisfied by the 240 megawatts added in 2002 as discussed above
and the proposed transfer at net book value (December 31, 2002 - approximately
$260 million) of approximately 550 megawatts of generation assets from
Generating Company, which is subject to receipt of necessary regulatory
approvals and is expected to be completed in 2003.
We intend to add 117 megawatts of capacity by 2005 and at least 330
megawatts of capacity by 2006. Total costs expected to be incurred for these
units approximate $175 million of which approximately $100 million was committed
as of December 31, 2002.
We continually review our generation portfolio and expected electrical
needs and, as a result, we could modify our plan for generation asset purchases,
which could include the timing of when certain assets will be added to, or
removed from our portfolio, the type of generation asset technology that will be
employed, or whether capacity may be purchased, among other things. Any changes
that we may plan to make for future generating needs could result in significant
capital expenditures or losses being incurred, which could be material.
Environmental
We are subject to various environmental regulations by federal, state and
local authorities. From the beginning phases of siting and development, to the
ongoing operation of existing or new electric generating, transmission and
distribution facilities, our activities involve compliance with diverse laws and
regulations that address emissions and impacts to air and water, special,
protected and cultural resources (such as wetlands, endangered species and
archeological/historical resources), chemical and waste handling and noise
impacts. Our activities require complex and often lengthy processes to obtain
approvals, permits, or licenses for new, existing, or modified facilities.
Additionally, the use and handling of various chemicals or hazardous materials
(including wastes) requires preparation of release prevention plans and
emergency response procedures. As new laws or regulations are promulgated, we
assess their applicability and implement the necessary modifications to our
facilities or their operations, as required.
The U.S. Environmental Protection Agency (EPA) issued a rule in October
1998 requiring 22 Eastern states and the District of Columbia to reduce
emissions of NOx in order to reduce ozone in the Eastern United States. Among
other things, the EPA's rule establishes an ozone season, which runs from May
through September and a NOx emission budget for each state, including Illinois.
The EPA rule requires states to implement controls sufficient to meet their NOx
budget by May 31, 2004.
19
In February 2002, the EPA proposed similar rules for Missouri where the
majority of our facilities are located. Assuming the Missouri rules are
ultimately finalized, we estimate spending approximately $170 million to comply
with these rules for NOx control on our generating system by 2006. This estimate
includes the assumption that the regulations will require the installation of
Selective Catalytic Reduction technology on some of our units, as well as
additional controls.
See Note 14 - Commitments and Contingencies to our Financial Statements for
further discussion of environmental matters and Note 15 - Callaway Nuclear Plant
to our Financial Statements for a discussion of Callaway nuclear plant
decommissioning costs.
Financing
Our cash flows used in financing activities totaled $248 million in 2002,
compared to $176 million in 2001 and $352 million in 2000. Our principal
financing activities for the three year period included the redemptions of
long-term debt and preferred stock and the payment of dividends, partially
offset by the issuance of long-term and short-term debt and intercompany notes
payable.
We are authorized by the SEC under the PUHCA to have up to $1 billion of
short-term unsecured debt instruments outstanding at any time.
Short-Term Debt and Liquidity
Short-term debt consists of commercial paper, intercompany borrowings
through Ameren's utility money pool and bank loans (maturities generally within
1 to 45 days). At December 31, 2002, Ameren and its subsidiaries had committed
credit facilities, expiring at various dates between 2003 and 2005, totaling
$695 million, excluding EEI facilities of $45 million and our nuclear fuel lease
facilities of $120 million. This amount includes $80 million of our committed
credit facilities and $615 million of committed credit facilities at Ameren and
AmerenCIPS. We access these combined facilities through Ameren's utility money
pool arrangement. AmerenCIPS and Ameren Services may also borrow under this
arrangement. These committed credit facilities are used to support our
commercial paper program under which $250 million was outstanding at December
31, 2002. Based on commercial paper outstanding at December 31, 2002, $445
million was unused and available under these committed credit facilities and
available to us through the utility money pool.
Subject to the receipt of regulatory approval, which is being pursued,
AmerenCILCO will participate in Ameren's utility money pool arrangement. At
December 31, 2002, CILCO had committed credit facilities, expiring at various
dates during 2003, totaling $60 million.
In July 2002, Ameren entered into new committed credit agreements for $400
million in revolving credit facilities to be used for general corporate
purposes, including support of commercial paper programs. We may access these
new credit facilities through the utility money pool. The $400 million in new
facilities includes a $270 million 364-day revolving credit facility and a $130
million 3-year revolving credit facility. The 3-year facility has a $50 million
sub-limit for the issuance of letters of credit. These new credit facilities
replaced our former $300 million revolving credit facility. These amounts are
included in the total committed credit facilities of $695 million mentioned
above.
Ameren had a $200 million committed credit facility which matured in
December 2002. Ameren expects to replace this bank credit agreement with two new
credit facilities and expects to extend or replace its other committed credit
facilities upon their respective maturities. These credit facilities make
borrowings available at various interest rates based on LIBOR, agreed rates and
other options.
In addition to committed credit facilities, a further source of liquidity
for Ameren is available cash and cash equivalents. At December 31, 2002, Ameren
had $628 million of cash, all of which was available for borrowings by us under
the utility money pool. In early 2003, Ameren paid a total of approximately $500
million of cash on hand to acquire CILCORP and Medina Valley.
EEI also has two bank credit agreements totaling $45 million that expire in
2003. At December 31, 2002, $27 million was unused and available under these
committed credit facilities.
We also have a lease agreement that provides for the financing of nuclear
fuel. At December 31, 2002, the maximum amount that could be financed under the
agreement was $120 million. At December 31, 2002, $113 million was financed
under the lease.
20
We rely on access to short-term and long-term capital markets as a
significant source of funding for capital requirements not satisfied by our
operating cash flows. The inability by us to raise capital on favorable terms,
particularly during times of uncertainty in the capital markets, could
negatively impact our ability to maintain and grow our businesses. Based on our
current credit ratings, we believe that we will continue to have access to the
capital markets. However, events beyond our control may create uncertainty in
the capital markets such that our cost of capital would increase or our ability
to access the capital markets would be adversely affected.
The following table summarizes available borrowing capacity under our
committed lines of credit and credit agreements as of December 31, 2002:
Amount of commitment expiration per period
- -----------------------------------------------------------------------------------------
Total Less than 1 - 3 4 - 5 After 5
committed 1 year years years years
- -----------------------------------------------------------------------------------------
Lines of credit and credit agreements (a) $200 $ 80 $120 $ - $ -
Other commercial commitments (b) 615 485 130 - -
- -----------------------------------------------------------------------------------------
Total $815 $565 $250 $ - $ -
- -----------------------------------------------------------------------------------------
(a) Includes $120 million Gateway Fuel Company facility due February 2004 which
supports our nuclear fuel lease.
(b) Available through utility money pool borrowings.
The following table summarizes our contractual obligations as of December
31, 2002:
- ----------------------------------------------------------------------------------------------------
Less than 1 - 3 4 - 5 After 5
Total 1 year years years years
- ----------------------------------------------------------------------------------------------------
Long-term debt and capital lease obligations (a) $ 1,821 $ 130 $ 342 $ 31 $ 1,318
Short-term debt 250 250 - - -
Operating leases (b) 130 10 19 18 83
Other long-term obligations (c) 1,161 384 522 143 112
- ----------------------------------------------------------------------------------------------------
Total cash contractual obligations $ 3,362 $ 774 $ 883 $192 $ 1,513
- ----------------------------------------------------------------------------------------------------
(a) Amounts include our contractual obligation for fabricated nuclear fuel for
the years 2003 through 2006.
(b) Amounts related to certain real estate leases and railroad licenses have
indefinite payment periods. The $1 million annual obligation for these
items is included in the less than 1 year, 1-3 years and 4-5 years. Amounts
for after 5 years are not included in the total amount due to the
indefinite periods.
(c) Represents purchase contracts for coal, natural gas, nuclear fuel
(including our contractual obligation for fabricated nuclear fuel for the
years 2007 through 2012) and electric capacity.
Credit Agreement Provisions and Covenants
Our financial agreements include customary default provisions that could
impact the continued availability of credit or result in the acceleration of
repayment. Many of Ameren's and its subsidiaries' committed credit facilities
require the borrower to represent, in connection with any borrowing under the
facility, that no material adverse change has occurred since certain dates. None
of our, AmerenCIPS' or Ameren's financing arrangements contains credit rating
triggers, with the exception of certain ratings triggers within AmerenCILCO's
financing arrangements.
Covenants in Ameren's committed credit facilities require the maintenance
of the percentage of total debt to total capital of 60% or less for Ameren,
AmerenCIPS and us. One of our committed credit facilities contains a covenant
that requires us to maintain this ratio at 65% or less. As of December 31, 2002,
this ratio was approximately 50%, 50% and 43% for Ameren, AmerenCIPS and us,
respectively. Ameren's committed credit facilities also include indebtedness
cross default provisions that could trigger a default under these facilities in
the event any subsidiary of Ameren (subject to definition in the underlying
credit agreements), other than certain project finance subsidiaries, defaults on
indebtedness in excess of $50 million.
Most of Ameren's and its subsidiaries' committed credit facilities include
provisions related to the funded status of Ameren's pension plan. These
provisions either require Ameren to meet minimum ERISA funding requirements or
limit the unfunded liability status of the plan. Under the most restrictive of
these provisions impacting Ameren facilities totaling $400 million, an event of
default will result if the unfunded liability status (as defined in the
underlying credit agreements) of Ameren's pension plan exceeds $300 million in
the aggregate. Based on the most recent valuation report available to Ameren at
December 31, 2002, which was based on January 2002 asset and liability
valuations, the unfunded liability status (as defined) was $31 million. While an
updated valuation report will not be available until the second half of 2003,
Ameren believes that the unfunded liability status of our pension plans (as
defined) could exceed $300 million based on the investment performance of the
pension plan assets and interest rate changes since January 1, 2002. As a
result, Ameren may need to renegotiate the facility provisions,
terminate or replace the affected facilities, or fund any unfunded liability
shortfall. Should Ameren elect to terminate these facilities, we believe we
would otherwise have sufficient liquidity to manage our short-term funding
requirements.
At December 31, 2002, Ameren and its subsidiaries were in compliance with
their credit agreement provisions and covenants.
Off-Balance Sheet Arrangements
At December 31, 2002, neither Ameren, nor any of its subsidiaries,
including us, had any off-balance sheet financing arrangements, other than
operating leases entered into in the ordinary course of business. We do not
expect to engage in any significant off-balance sheet financing arrangements in
the near future.
Long-Term Debt
The following table summarizes our issuances and redemptions of long-term
debt for the years ended 2002, 2001 and 2000. For additional information related
to the terms and uses of these issuances and the sources of funds and terms for
redemptions, see Note 9 - Long-Term Debt and Capitalization to our Financial
Statements.
- ----------------------------------------------------------------------------------------
Month
Issuances - Issued/Redeemed 2002 2001 2000
- ----------------------------------------------------------------------------------------
Long-term debt
5.25% Senior secured notes, due 2012 August $173 $ - $ -
Environ. improvement revenue bonds March - - 187
- ----------------------------------------------------------------------------------------
Total long-term debt issuances $173 $ - $187
- ----------------------------------------------------------------------------------------
Redemptions -
Long-term debt
8.33% First mortgage bonds December $ 75 $ - $ -
8.75% First mortgage bonds September 125 - -
Environ. improvement bonds, 7.40% Series May - - 60
Environ. improvement bonds, 1985 Series April - - 127
Commercial paper, net Various - 19 133
- ----------------------------------------------------------------------------------------
Total long-term debt redemptions $200 $19 $320
- ----------------------------------------------------------------------------------------
In August 2002, a shelf registration statement filed by us with the SEC on
Form S-3 was declared effective. This statement authorized the offering from
time to time of up to $750 million of various forms of long-term debt and trust
preferred securities to refinance existing debt and preferred stock, and for
general corporate purposes, including the repayment of short-term debt incurred
to finance construction expenditures and other working capital needs. In 2002,
we issued $173 million under the shelf registration statement.
On March 10, 2003, we issued $184 million of 5.50% senior secured notes due
March 15, 2034 under the shelf registration statement. We expect to use the net
proceeds from this issuance of approximately $180 million along with other funds
to redeem prior to maturity $104 million principal amount of outstanding 8.25%
first mortgage bonds due October 15, 2022, at a redemption price of 103.61% of
par, plus accrued interest, and to repay short-term debt incurred to pay at
maturity $75 million principal amount of 8.33% first mortgage bonds that were
due in December 2002. At March 10, 2003, the amount remaining under the shelf
registration statement was $393 million.
We expect to fund maturities of long-term debt and contractual obligations
through a combination of cash flow from operations and external financing.
To issue first mortgage bonds and preferred stock, we must comply with
earnings tests contained in our respective mortgage indenture and Articles of
Incorporation. For the issuance of additional first mortgage bonds, generally,
earnings coverage of twice the annual interest charges on first mortgage bonds
outstanding and to be issued is required. Generally, for the issuance of
additional preferred stock, earnings coverage of at least two and one-half times
the annual dividend on preferred stock outstanding and to be issued is required
under our Articles of Incorporation. The ability to issue such securities in the
future will depend on coverage at that time. At December 31, 2002, we had and
expect to continue to have adequate coverage ratios for anticipated
requirements.
22
OUTLOOK
We believe there will be challenges to earnings in 2003 and beyond due to
industry-wide trends and company-specific issues. The following are expected to
put pressure on earnings in 2003 and beyond:
o Weak economic conditions, which impacts native load demand,
o Generally soft power prices in the Midwest are expected to limit the amount
of revenues we can generate by
marketing our excess power into the interchange markets,
o Our revenues will be reduced by a rate settlement approved in 2002 by the
Missouri Public Service Commission (MoPSC) that requires the phase-in of
$110 million of electric rate reductions from 2002 through 2004,
o The adverse effects of rising employee benefit costs, higher insurance
costs and increased security costs associated with additional measures we
have taken, or may have to take, at our Callaway nuclear plant related to
world events, and
o An assumed return to more normal weather patterns.
In late 2002, we and Ameren announced the following actions to mitigate the
effect of these challenges:
o A voluntary retirement program that was accepted by approximately 550
Ameren employees, including approximately 230 of our employees and
additional employees providing support functions to us through Ameren
Services,
o Modifications to retiree employee benefit plans to increase co-payments and
limit our overall cost,
o A wage freeze in 2003 for all management employees,
o Suspension of operations at two 1940's-era generating plants, including our
Venice plant, to reduce operating costs, and
o Reductions of 2003 expected capital expenditures.
We are pursuing a gas rate increase of approximately $4 million annually in
Illinois and are considering a filing in 2003 of a gas rate increase request in
Missouri. Ameren is also considering additional actions, including modifications
to active employee benefits, further staffing reductions and other initiatives.
In the ordinary course of business, we evaluate strategies to enhance our
financial position, results of operations and liquidity. These strategies may
include potential acquisitions, divestitures, opportunities to reduce costs or
increase revenues and other strategic initiatives in order to increase Ameren's
shareholder value. We are unable to predict which, if any, of these initiatives
will be executed, as well as the impact these initiatives may have on our future
financial position, results of operations or liquidity.
Labor Agreements
Certain employees of AmerenUE are represented by the International
Brotherhood of Electrical Workers (IBEW) and the International Union of
Operating Engineers (IUOE). These employees comprise approximately 75% of our
workforce. Labor agreements covering 10% of employees extend through 2006. Labor
agreements covering the remaining employees represented by IBEW and IUOE expire
by June 2003. We cannot predict what issues may be raised by the collective
bargaining units and, if raised, whether negotiations concerning such issues
will be successfully concluded.
REGULATORY MATTERS
Missouri
From July 1, 1995 through June 30, 2001, we operated under experimental
alternative regulation plans in Missouri that provided for the sharing of
earnings with customers if our regulatory return on equity exceeded defined
threshold levels. After our experimental alternative regulation plan for our
Missouri retail electric customers expired, the MoPSC Staff and others sought to
reduce our annual Missouri electric revenues by over $300 million. The MoPSC
Staff's recommendation was based on a return to traditional cost of service
ratemaking, a lowered return on equity, a reduction in our depreciation rates
and other cost of service adjustments.
23
In August 2002, a stipulation and agreement resolving this case became
effective following agreement by all parties to the case and approval by the
MoPSC. The stipulation and agreement includes the following principal features:
o The phase-in of $110 million of electric rate reductions through April
2004, $50 million of which was retroactively effective as of April 1, 2002,
$30 million of which will become effective on April 1, 2003 and $30 million
of which will become effective on April 1, 2004.
o A rate moratorium providing for no changes in rates before June 30, 2006,
subject to certain statutory and other exceptions.
o A commitment to contribute $14 million to programs for low income energy
assistance and weatherization, promotion of energy efficiency and economic
development in our service territory in 2002, with additional payments of
$3 million made annually on June 30, 2003 through June 30, 2006. This
obligation was expensed in 2002.
o A commitment to make $2.25 billion to $2.75 billion in critical energy
infrastructure investments from January 1, 2002 through June 30, 2006,
including, among other things, the addition of more than 700 megawatts of
new generation capacity and the replacement of steam generators at our
Callaway nuclear plant. The 700 megawatts of new generation is expected to
be satisfied by 240 megawatts that were added by us in 2002 and the
proposed transfer at net book value to us of approximately 550 megawatts of
generation assets from Generating Company, which is subject to receipt of
necessary regulatory approvals.
o An annual reduction in our depreciation rates by $20 million, retroactive
to April 1, 2002, based on an updated analysis of asset values, service
lives and accumulated depreciation levels.
o A one-time credit of $40 million which was accrued during the plan period.
The entire amount was paid to our Missouri retail electric customers in
2002 for the settlement of the final sharing period under the alternative
regulation plan that expired June 30, 2001.
See Note 2 - Rate and Regulatory Matters to our Financial Statements.
Illinois
See Note 2 - Rate and Regulatory Matters to our Financial Statements.
Federal - Electric Transmission
See Note 2 - Rate and Regulatory Matters to our Financial Statements.
ACCOUNTING MATTERS
Critical Accounting Policies
Preparation of the financial statements and related disclosures in
compliance with generally accepted accounting principles requires the
application of appropriate technical accounting rules and guidance, as well as
the use of estimates. Our application of these policies involves judgments
regarding many factors, which, in and of themselves, could materially impact the
financial statements and disclosures. A future change in the assumptions or
judgments applied in determining the following matters, among others, could have
a material impact on future financial results. In the table below, we have
outlined those accounting policies that we believe are most difficult,
subjective or complex:
Accounting Policy Uncertainties Affecting Application
- ----------------- -----------------------------------
Regulatory Mechanisms and Cost Recovery
o Regulatory environment, external regulatory
We defer costs as regulatory assets in decisions and requirements
accordance with SFAS 71 and make investments o Anticipated future regulatory decisions and
that we assume we will be able to collect in their impact
future rates. o Impact of deregulation and competition on
ratemaking process and ability to recover costs
24
Basis for Judgment
We determine that costs are recoverable based on previous rulings by state
regulatory authorities in jurisdictions where we operate or other factors
that lead us to believe that cost recovery is probable.
Nuclear Plant Decommissioning Costs
In our rates and earnings we assume the o Estimates of future decommissioning costs
Department of Energy will develop a permanent o Availability of facilities for waste disposal
storage site for spent nuclear fuel, the o Approved methods for waste disposal and
Callaway nuclear plant will have a useful decommissioning
life of 40 years and estimated costs of o Useful lives of nuclear power plants
approximately $515 million to dismantle the
plant are accurate. See Note 15 - Callaway
Nuclear Plant to our Financial Statements.
Basis for Judgment
We determine that decommissioning costs are reasonable, or require
adjustment, based on third party decommissioning studies that are completed
every three years, the evaluation of our facilities by our engineers and
the monitoring of industry trends.
Environmental Costs
We accrue for all known environmental o Extent of contamination
contamination where remediation can be o Responsible party determination
reasonably estimated, but some of our o Approved methods for cleanup
operations have existed for over 100 years o Present and future legislation and governmental
and previous contamination may be unknown to regulations and standards
us. o Results of ongoing research and development
regarding environmental impacts
Basis for Judgment
We determine the proper amounts to accrue for environmental contamination
based on internal and third party estimates of clean-up costs in the
context of current remediation standards and available technology.
Unbilled Revenue
At the end of each period, we estimate, based o Projecting customer energy usage
on expected usage, the amount of revenue to o Estimating impacts of weather and other
record for services that have been provided usage-affecting factors for the unbilled period
to customers, but not billed. This period
can be up to one month.
Basis for Judgment
We determine the proper amount of unbilled revenue to accrue each period
based on the volume of energy delivered as valued by a model of billing
cycles and historical usage rates and growth by customer class for our
service area, as adjusted for the modeled impact of seasonal and weather
variations based on historical results.
Benefit Plan Accounting
Based on actuarial calculations, we accrue o Future rate of return on pension and other plan
costs of providing future employee benefits assets
in accordance with SFAS 87, 106 and 112. See o Interest rates used in valuing benefit
Note 13 - Retirement Benefits to our obligations
Financial Statements. o Healthcare cost trend rates
o Timing of employee retirements
25
Basis for Judgment
We utilize a third party consultant to assist us in evaluating and
recording the proper amount for future employee benefits. Our ultimate
selection of the discount rate, healthcare trend rate and expected rate of
return on pension assets is based on our review of available current,
historical and projected rates, as applicable.
Derivative Financial Instruments
o Market conditions in the energy industry,
We record all derivatives at their fair especially the effects of price volatility on
market value in accordance with SFAS 133. contractual commodity commitments
The identification and classification of a o Regulatory and political environments and
derivative and the fair value of such requirements
derivative must be determined. See Note 4 - o Fair value estimations on longer term contracts
Derivative Financial Instruments to our o Complexity of financial instruments and
Financial Statements. accounting rules
o Effectiveness of our derivatives that have been
designated as hedges
Basis for Judgment
We determine whether a transaction is a derivative versus a normal purchase
or sale based on historical practice and our intention at the time we enter
a transaction. We utilize actively quoted prices, prices provided by
external sources and prices based on internal models and other valuation
methods to determine the fair market value of derivative financial
instruments.
Impact of Future Accounting Pronouncements
See Note 1 - Summary of Significant Accounting Policies to our Financial
Statements.
EFFECTS OF INFLATION AND CHANGING PRICES
Our rates for retail electric and gas utility service are generally
regulated by the MoPSC and the Illinois Commerce Commission. Non-retail electric
rates are regulated by the Federal Energy Regulatory Commission (FERC). Our
Missouri electric rates have been set through June 30, 2006, as part of the
settlement of our Missouri rate case and our Illinois electric rates are
legislatively fixed through January 1, 2007. Inflation affects our operations,
earnings, stockholder's equity and financial performance.
The current replacement cost of our utility plant substantially exceeds our
recorded historical cost. Under existing regulatory practice, only the
historical cost of plant is recoverable from customers. As a result, cash flows
designed to provide recovery of historical costs through depreciation might not
be adequate to replace plant in future years.
In our retail electric utility jurisdictions, there are no provisions for
adjusting for changes in the cost of fuel for electric generation. In our retail
gas utility jurisdictions, changes in gas costs are generally reflected in
billings to gas customers through purchased gas adjustment clauses. We are
impacted by changes in market prices for natural gas to the extent we must
purchase natural gas to run our combustion turbine electric generators. We have
structured various supply agreements to maintain access to multiple gas pools
and supply basins to minimize the impact to the financial statements. See
discussion below under Commodity Price Risk for further information.
26
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of changes in value of a physical asset or
financial instrument, derivative or non-derivative, caused by fluctuations in
market variables (e.g. interest rates, etc.). The following discussion of
Ameren's, including AmerenUE's, risk management activities includes
"forward-looking" statements that involve risks and uncertainties. Actual
results could differ materially from those projected in the "forward-looking"
statements. Ameren handles market risks in accordance with established policies,
which may include entering into various derivative transactions. In the normal
course of business, Ameren and AmerenUE also face risks that are either
non-financial or non-quantifiable. Such risks principally include business,
legal and operational risks and are not represented in the following discussion.
Ameren's risk management objective is to optimize its physical generating
assets within prudent risk parameters. Our risk management policies are set by a
Risk Management Steering Committee, which is comprised of senior-level Ameren
officers.
Interest Rate Risk
We are exposed to market risk through changes in interest rates associated
with both long-term and short-term variable-rate debt and fixed-rate debt. We
manage our interest rate exposure by controlling the amount of these instruments
we hold within our total capitalization portfolio and by monitoring the effects
of market changes in interest rates.
Utilizing our debt outstanding at December 31, 2002, if interest rates
increase by 1%, our annual interest expense would increase by approximately $8
million and net income would decrease by approximately $5 million. The model
does not consider the effects of the reduced level of potential overall economic
activity that would exist in such an environment. In the event of a significant
change in interest rates, management would likely take actions to further
mitigate our exposure to this market risk. However, due to the uncertainty of
the specific actions that would be taken and their possible effects, the
sensitivity analysis assumes no change in our financial structure.
Credit Risk
Credit risk represents the loss that would be recognized if counterparties
fail to perform as contracted. New York Mercantile Exchange (NYMEX) traded
futures contracts are supported by the financial and credit quality of the
clearing members of the NYMEX and have nominal credit risk. On all other
transactions, we are exposed to credit risk in the event of nonperformance by
the counterparties in the transaction.
Our physical and financial instruments are subject to credit risk
consisting of trade accounts receivables and executory contracts with market
risk exposures. The risk associated with trade receivables is mitigated by the
large number of customers in a broad range of industry groups comprising our
customer base. No customer represents greater than 10% of our accounts
receivable. Our revenues are primarily derived from sales of electricity and
natural gas to customers in Missouri and Illinois. We analyze each
counterparty's financial condition prior to entering into sales, forwards,
swaps, futures or option contracts. We also establish credit limits for these
counterparties and monitor the appropriateness of these limits on an ongoing
basis through a credit risk management program which involves daily exposure
reporting to senior management, master trading and netting agreements, and
credit support management such as letters of credit and parental guarantees.
Commodity Price Risk
We are exposed to changes in market prices for natural gas, fuel and
electricity. We utilize several techniques to mitigate risk, including utilizing
derivative financial instruments. A derivative is a contract whose value is
dependent on, or derived from, the value of some underlying asset. The
derivative financial instruments that we use (primarily forward contracts,
futures contracts, option contracts and financial swap contracts) are dictated
by risk management policies.
With regard to our natural gas utility business, our exposure to changing
market prices is in large part mitigated by the fact that we have gas cost
recovery mechanisms in place in both Missouri and Illinois. These gas cost
recovery mechanisms allow us to pass on to our retail customers our prudently
incurred costs of natural gas.
AmerenEnergy Fuels and Services Company is responsible for providing fuel
procurement and gas supply services on behalf of Ameren's operating subsidiaries
and for managing fuel and natural gas price risks. Fixed price forward
contracts, as well as futures, options and financial swaps are all instruments,
which may be used to manage
27
these risks. The majority of our fuel supply contracts are physical forward
contracts. Since we do not have a provision similar to the purchased gas
adjustment clauses for our electric operations, we have entered into several
long-term contracts with various suppliers to purchase coal and nuclear fuel in
order to manage our exposure to fuel prices. See Note 14 - Commitments and
Contingencies to our Financial Statements for further information. We have
satisfied 77%, 20% and 3% of our 2002 power supply needs through coal, nuclear
and hydro, respectively. Approximately 97% of the required 2003 supply and
approximately 79% of the required 2004 supply of coal for our coal-fired power
plants has been acquired at fixed prices. As such, we have minimal coal price
risk for the remainder of 2003 and 2004. At December 31, 2002, approximately 22%
of our coal requirements for 2005 through 2007 were covered by contracts. In
addition, we are exposed to changes in market prices for natural gas to the
extent we must purchase natural gas to run our combustion turbine generators.
Our natural gas procurement strategy is designed to ensure reliable and
immediate delivery of natural gas to our peaking units by optimizing
transportation and storage options and minimizing cost and price risk by
structuring various supply agreements to maintain access to multiple gas pools
and supply basins and reducing the impact of price volatility. At December 31,
2002, approximately 33% of our 2003 natural gas requirements for generation were
covered by contracts.
Although we cannot completely eliminate the effects of gas price
volatility, our strategy is designed to minimize the effect of market conditions
on our results of operations. Our gas procurement strategy includes procuring
natural gas under a portfolio of agreements with price structures, including
fixed price, indexed price and embedded price hedges such as caps and collars.
Our strategy also utilizes physical assets through storage, operator and
balancing agreements to minimize price volatility. Our electric marketing
strategy is to extract additional value from our generation facilities by
selling energy in excess of needs into the long-term and short-term markets for
term sales, and purchasing energy when the market price is less than the cost of
generation. Our primary use of derivatives has involved transactions that are
expected to reduce price risk exposure for us.
With regard to our exposure to commodity price risk for purchased power and
excess electricity sales, Ameren has a subsidiary, AmerenEnergy whose primary
responsibility includes managing market risks associated with changing market
prices for electricity purchased and sold on behalf of AmerenUE and our
affiliate, Generating Company.
Equity Price Risk
We, along with other subsidiaries of Ameren, are a participant in Ameren's
defined benefit plans and postretirement benefit plans and are responsible for
our proportional share of the costs. Ameren's costs of providing
non-contributory defined benefit retirement and postretirement benefit plans are
dependent upon a number of factors, such as the rates of return on plan assets,
discount rate, the rate of increase in health care costs and contributions made
to the plans. The market value of Ameren's plan assets has been affected by
declines in the equity market since 2000 for the pension and postretirement
plans. As a result, at December 31, 2002, we recognized an additional minimum
pension liability as prescribed by SFAS No. 87, "Employers' Accounting for
Pensions." The liability resulted in a reduction to OCI of $62 million, net of
taxes. The amount of the liability was the result of asset returns experienced
through 2002, interest rates and Ameren's contributions to the plan during 2002.
In future years, the liability recorded, the costs reflected in net income or
OCI, or cash contributions to the plans could increase materially without a
recovery in equity markets in excess of our assumed return on plan assets. If
the fair value of the plan assets were to grow and exceed the accumulated
benefit obligations in the future, then the recorded liability would be reduced
and a corresponding amount of equity would be restored in the Balance Sheet. See
Liquidity and Capital Resources - Operating.
We also maintain trust funds, as required by the Nuclear Regulatory
Commission and Missouri and Illinois state laws, to fund certain costs of
nuclear decommissioning. See Note 15 - Callaway Nuclear Plant to our Financial
Statements for further information. As of December 31, 2002, these funds were
invested primarily in domestic equity securities (62%), debt securities (35%)
and cash and cash equivalents (3%) and totaled $172 million at fair value. By
maintaining a portfolio that includes long-term equity investments, we seek to
maximize the returns to be utilized to fund nuclear decommissioning costs.
However, the equity securities included in our portfolio are exposed to price
fluctuations in equity markets and the fixed-rate, fixed-income securities are
exposed to changes in interest rates. We actively monitor our portfolio by
benchmarking the performance of our investments against certain indices and by
maintaining, and periodically reviewing, established target allocation
percentages of the assets of our trusts to various investment options. Our
exposure to equity price market risk is, in large part, mitigated due to the
fact that we are currently allowed to recover decommissioning costs in our
rates.
28
Fair Value of Contracts
We utilize derivatives principally to manage the risk of changes in market
prices for natural gas, fuel, electricity and emission credits. Price
fluctuations in natural gas, fuel and electricity cause:
o an unrealized appreciation or depreciation of our firm commitments to
purchase or sell when purchase or sales prices under the firm commitment
are compared with current commodity prices;
o market values of fuel and natural gas inventories or purchased power to
differ from the cost of those commodities under the firm commitment; and
o actual cash outlays for the purchase of these commodities to differ from
anticipated cash outlays.
The derivatives that we use to hedge these risks are dictated by risk
management policies and include forward contracts, futures contracts, options
and swaps. We continually assess our supply and delivery commitment positions
against forward market prices and internally forecast forward prices and modify
our exposure to market, credit and operational risk by entering into various
offsetting transactions. In general, we believe these transactions serve to
reduce our price risk. See Note 4 - Derivative Financial Instruments to our
Financial Statements for further information.
The following summarizes the favorable (unfavorable) changes in the fair
value of all contracts marked to market during 2002 and 2001:
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
Fair value of contracts at beginning of period, net $ (2) $ (21)
Contracts which were realized or otherwise settled during
the period (5) 21
Changes in fair values attributable to changes in valuation
techniques and assumptions - -
Fair value of new contracts entered into during the period - 3
Other changes in fair value 13 (5)
- --------------------------------------------------------------------------------
Fair value of contracts outstanding at end of period, net $ 6 $ (2)
- --------------------------------------------------------------------------------
Maturities of contracts as of December 31, 2002 were as follows:
- -------------------------------------------------------------------------------------------------------------
Maturity Maturity
less than Maturity Maturity in excess Total fair
Sources of fair value 1 year 1-3 years 4-5 years of 5 years value (a)
- --------------------------------------------------------------------------------------------------------------
Prices actively quoted $ - $ - $ - $ - $ -
Prices provided by other external sources (b) 2 - - - 2
Prices based on models and other valuation
methods (c) 3 1 - - 4
- --------------------------------------------------------------------------------------------------------------
Total $ 5 $ 1 $ - $ - $ 6
- --------------------------------------------------------------------------------------------------------------
(a) Contracts of approximately 7% of the absolute fair value were with
non-investment-grade rated counterparties.
(b) Principally power forward values based on NYMEX prices for over-the-counter
contracts and natural gas swaps based on Inside FERC prices.
c) Principally coal and sulfur dioxide options valued based on a Black-Scholes
model that includes information from external sources and our estimates.
29
FORWARD-LOOKING STATEMENTS
Statements made in this report which are not based on historical facts are
"forward-looking" and, accordingly, involve risks and uncertainties that could
cause actual results to differ materially from those discussed. Although such
"forward-looking" statements have been made in good faith and are based on
reasonable assumptions, there is no assurance that the expected results will be
achieved. These statements include (without limitation) statements as to future
expectations, beliefs, plans, strategies, objectives, events, conditions and
financial performance. In connection with the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we are providing this
cautionary statement to identify some important factors that could cause actual
results to differ materially from those anticipated. The following factors, in
addition to those discussed elsewhere in this report and in subsequent
securities filings, could cause results to differ materially from management
expectations as suggested by such "forward-looking" statements:
o the effects of the stipulation and agreement relating to our Missouri
electric excess earnings complaint case and other regulatory actions,
including changes in regulatory policy;
o changes in laws and other governmental actions, including monetary and
fiscal policies;
o the impact on us of current regulations related to the opportunity for
customers to choose alternative energy suppliers in Illinois;
o the effects of increased competition in the future due to, among other
things, deregulation of certain aspects of our business at both the state
and federal levels;
o the effects of participation in a FERC-approved Regional Transmission
Organization, including activities associated with the Midwest ISO;
o availability and future market prices for fuel and purchased power,
electricity and natural gas, including the use of financial and derivative
instruments and volatility of changes in market prices;
o the cost of commodities, such as natural gas, used in the production of
electricity and our ability to recover such increased cost;
o average rates for electricity in the Midwest;
o business and economic conditions;
o the impact of the adoption of new accounting standards on the application
of appropriate technical accounting rules and guidance;
o interest rates and the availability of capital;
o actions of rating agencies and the effects of such actions;
o weather conditions;
o generation plant construction, installation and performance;
o operation of nuclear power facilities and decommissioning costs;
o the effects of strategic initiatives, including acquisitions and
divestitures;
o the impact of current environmental regulations on utilities and generating
companies and the expectation that more stringent requirements will be
introduced over time, which could potentially have a negative financial
effect;
o future wages and employee benefit costs, including changes in returns of
benefit plan assets;
o disruptions of the capital markets or other events making Ameren's or our
access to necessary capital more difficult or costly;
o competition from other generating facilities, including new facilities that
may be developed in the future;
o cost and availability of transmission capacity for the energy generated by
our generating facilities or required to satisfy our energy sales; and
o legal and administrative proceedings.
Given these uncertainties, undue reliance should not be placed on these
forward-looking statements. Except to the extent required by the federal
securities laws, we undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information required to be reported by this item is included under
Quantitative and Qualitative Disclosures About Market Risk in Management's
Discussion and Analysis of Financial Conditions and Results of Operations under
Item 7 and Note 4 and 16 to our Financial Statements under Item 8.
30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders
of Union Electric Company:
In our opinion, the financial statements listed in the index appearing under
Item 15(A)(1) on Page 62 present fairly, in all material respects, the financial
position of Union Electric Company at December 31, 2002 and 2001, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the index appearing under Item
15(A)(2) on Page 62 presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related financial
statements. These financial statements and the financial statement schedule are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements and the financial statement schedule
based on our audits. We conducted our audits of these statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
St. Louis, Missouri
February 13, 2003
31
UNION ELECTRIC COMPANY
BALANCE SHEET
(In millions, except per share amounts)
December 31, December 31,
2002 2001
----------- ------------
ASSETS:
Property and plant, net (Note 5) $ 6,036 $ 5,710
Investments and other assets:
Nuclear decommissioning trust fund 172 187
Other assets 190 75
------- -------
Total investments and other assets 362 262
------- -------
Current assets:
Cash and cash equivalents 9 15
Accounts receivable - trade (less allowance for
doubtful accounts of $6 and $7,
respectively) 171 144
Unbilled revenue 101 90
Miscellaneous accounts and notes receivable (Note 3) 49 73
Intercompany notes receivable (Note 3) - 84
Materials and supplies, at average cost 162 156
Other current assets 26 16
------- -------
Total current assets 518 578
------- -------
Regulatory assets 659 738
------- -------
Total Assets $ 7,575 $ 7,288
======= =======
CAPITAL AND LIABILITIES:
Capitalization:
Common stock, $5 par value, 150.0 shares
authorized - 102.1 shares outstanding $ 511 $ 511
Other paid-in capital, principally premium on
common stock 702 702
Retained earnings 1,477 1,440
Accumulated other comprehensive income (58) 1
------- -------
Total common stockholder's equity 2,632 2,654
------- -------
Preferred stock not subject to mandatory
redemption (Note 7) 113 155
Long-term debt, net (Note 9) 1,687 1,599
------- -------
Total capitalization 4,432 4,408
------- -------
Current liabilities:
Current maturities of long-term debt (Note 9) 130 92
Short-term debt (Note 8) 250 186
Intercompany notes payable (Note 3) 15 -
Accounts and wages payable (Note 3) 348 305
Accumulated deferred income taxes 2 35
Taxes accrued 118 104
Other current liabilities 94 128
------- -------
Total current liabilities 957 850
------- -------
Commitments and contingencies (Notes 1, 2, 14,
and 15)
Accumulated deferred income taxes 1,344 1,326
Accumulated deferred investment tax credits 121 129
Regulatory liabilities 121 137
Accrued pension liabilities 252 85
Other deferred credits and liabilities 348 353
------- -------
Total Capital and Liabilities $ 7,575 $ 7,288
======= =======
See Notes to Financial Statements.
32
UNION ELECTRIC COMPANY
STATEMENT OF INCOME
(In millions)
Year Ended December 31,
------------------------
2002 2001 2000
---- ---- ----
OPERATING REVENUES:
Electric (Note 3) $ 2,521 $ 2,640 $ 2,590
Gas 129 146 130
------- ------- -------
Total operating revenues 2,650 2,786 2,720
------- ------- -------
OPERATING EXPENSES:
Fuel and purchased power (Note 3) 550 739 729
Gas 73 84 81
Other operations and maintenance (Note 3) 819 788 750
Voluntary retirement and other
restructuring charges (Note 10) 65 - -
Depreciation and amortization 281 280 271
Income taxes 196 224 227
Other taxes 218 214 210
------- ------- -------
Total operating expenses 2,202 2,329 2,268
------- ------- -------
OPERATING INCOME 448 457 452
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during
construction 5 13 5
Miscellaneous, net -
Miscellaneous income (Note 11) 26 31 26
Miscellaneous expense (Note 11) (35) (8) (12)
Income taxes 3 (6) 3
------- ------- -------
Total other income and (deductions) (1) 30 22
------- ------- -------
INTEREST CHARGES:
Interest 108 116 129
Allowance for borrowed funds used during
construction (5) (8) (8)
------- ------- -------
Net interest charges 103 108 121
------- ------- -------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 344 379 353
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF INCOME TAXES - (5) -
------- ------- -------
NET INCOME 344 374 353
PREFERRED STOCK DIVIDENDS 8 9 9
------- ------- -------
NET INCOME AFTER PREFERRED STOCK DIVIDENDS $ 336 $ 365 $ 344
======= ======= =======
See Notes to Financial Statements.
33
UNION ELECTRIC COMPANY
STATEMENT OF CASH FLOWS
(In millions)
Year Ended December 31,
-----------------------
2002 2001 2000
---- ---- ----
Cash Flows From Operating:
Net income $ 344 $ 374 $ 353
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in
accounting principle - 5 -
Depreciation and amortization 281 280 271
Amortization of nuclear fuel 30 29 37
Amortization of debt issuance costs and
premium/discounts 4 3 3
Allowance for funds used during construction (10) (21) (13)
Deferred income taxes, net 29 15 1
Deferred investment tax credits, net (8) (4) (6)
Voluntary retirement and other
restructuring charges 65 - -
Other 3 2 -
Changes in assets and liabilities:
Receivables, net (14) (1) (57)
Materials and supplies (6) (22) 22
Accounts and wages payable (16) 11 59
Taxes accrued 68 18 (33)
Assets, other (20) (22) (19)
Liabilities, other (54) (77) 51
----- ----- -----
Net cash provided by operating activities 696 590 669
----- ----- -----
Cash Flows From Investing:
Construction expenditures (520) (587) (316)
Allowance for funds used during
construction 10 21 13
Nuclear fuel expenditures (28) (24) (21)
Intercompany notes receivable 84 171 (90)
----- ----- -----
Net cash used in investing activities (454) (419) (414)
----- ----- -----
Cash Flows From Financing:
Dividends on common stock (299) (283) (207)
Dividends on preferred stock (8) (9) (9)
Capital issuance costs (1) - (1)
Redemptions:
Nuclear fuel lease - (64) (11)
Long-term debt (200) (19) (320)
Preferred stock (42) - -
Issuances:
Nuclear fuel lease 50 13 9
Short-term debt 64 186 -
Long-term debt 173 - 187
Intercompany notes payable 15 - -
----- ----- -----
Net cash used in financing activities (248) (176) (352)
----- ----- -----
Net change in cash and cash equivalents (6) (5) (97)
Cash and cash equivalents at beginning of year 15 20 117
----- ----- -----
Cash and cash equivalents at end of year $ 9 $ 15 $ 20
===== ===== =====
Cash paid during the periods:
Interest $ 95 $ 104 $ 114
Income taxes, net 106 192 231
See Notes to Financial Statements.
34
UNION ELECTRIC COMPANY
STATEMENT OF COMMON STOCKHOLDER'S EQUITY
(In millions)
December 31, December 31, December 31,
2002 2001 2000
----------- ----------- -----------
Common stock $ 511 $ 511 $ 511
Other paid-in capital 702 702 702
Retained earnings (a)
Beginning balance 1,440 1,358 1,221
Net income 344 374 353
Common stock dividends (299) (283) (207)
Preferred stock dividends (8) (9) (9)
------- ------- -------
1,477 1,440 1,358
------- ------- -------
Accumulated other comprehensive income
Beginning balance - derivative financial
instruments 1 - -
Change in derivative financial instruments
in current period 3 1 -
------- ------- -------
4 1 -
------- ------- -------
Beginning balance - minimum pension liability - - -
Change in minimum pension liability
in current period (62) - -
------- ------- -------
(62) - -
------- ------- -------
(58) 1 -
------- ------- -------
Total common stockholder's equity $ 2,632 $ 2,654 $ 2,571
======= ======= =======
Comprehensive income, net of taxes
Net income $ 344 $ 374 $ 353
Unrealized net gain/(loss) on derivative
hedging instruments, net of income
taxes of $3, $1, and $-, respectively 4 1 -
Reclassification adjustments for gains/(losses)
included in net income, net of income
taxes of $(1), $5, and $-, respectively (1) 8 -
Cumulative effect of accounting change, net
of income taxes of $-, $(5), and $-,
respectively - (8) -
Minimum pension liability adjustment, net
of income taxes of $(37), $-, and $-,
respectively (62) - -
------- ------- -------
Total comprehensive income, net of taxes $ 285 $ 375 $ 353
======= ======= =======
(a) Under a mortgage indenture, as amended, $31 of total retained earnings was
restricted against payment of common dividends - except those payable in
common stock, leaving $1,446 of free and unrestricted retained earnings at
December 31, 2002.
See Notes to Financial Statements.
35
UNION ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
NOTE 1 - Summary of Significant Accounting Policies
General
Union Electric Company, headquartered in St. Louis, Missouri, is a
wholly-owned subsidiary of Ameren Corporation (Ameren) and operates as AmerenUE.
Our principal business is the rate-regulated generation, transmission and
distribution of electricity, and the rate-regulated distribution of natural gas
to residential, commercial, industrial and wholesale users in Missouri and
Illinois. Ameren is a public utility holding company registered with the
Securities and Exchange Commission (SEC) under the Public Utility Holding
Company Act of 1935 (PUHCA) and is also headquartered in St. Louis, Missouri.
Ameren's principal business is the generation, transmission and distribution of
electricity, and the distribution of natural gas to residential, commercial,
industrial and wholesale users in the central United States. In addition to us,
Ameren's principal subsidiaries and our affiliates are as follows:
o Central Illinois Public Service Company, which operates a rate-regulated
electric and natural gas transmission and distribution business in Illinois
as AmerenCIPS.
o Central Illinois Light Company is a subsidiary of CILCORP Inc. (CILCORP),
which operates a rate-regulated electric generation, transmission and
distribution business, an electric generation business, and a
rate-regulated natural gas distribution business in Illinois as
AmerenCILCO. Ameren completed its acquisition of CILCORP on January 31,
2003 from The AES Corporation (AES). See Note 17 - Subsequent Event for
further information.
o AmerenEnergy Resources Company (Resources Company), which consists of non
rate-regulated operations. Subsidiaries include AmerenEnergy Generating
Company (Generating Company) that operates non rate-regulated electric
generation in Missouri and Illinois, AmerenEnergy Marketing Company
(Marketing Company), which markets power for periods over one year,
AmerenEnergy Fuels and Services Company, which procures fuel and manages
the related risks for Ameren affiliated companies and AmerenEnergy Medina
Valley Cogen (No. 4), LLC, which indirectly owns a 40 megawatt, gas-fired
electric co-generation plant. On February 4, 2003, Ameren completed its
acquisition of AES Medina Valley Cogen (No. 4), LLC (Medina Valley) from
AES and renamed it AmerenEnergy Medina Valley Cogen (No. 4), LLC. See Note
17 - Subsequent Event for further information.
o AmerenEnergy, Inc. (AmerenEnergy), which serves as a power marketing and
risk management agent for Ameren affiliated companies for transactions of
primarily less than one year.
o Electric Energy, Inc. (EEI), which operates electric generation and
transmission facilities in Illinois. We have a 40% ownership interest in
EEI and have accounted for it under the equity method of accounting.
Resources Company also owns a 20% interest in EEI.
o Ameren Services Company (Ameren Services), which provides shared support
services to Ameren and its subsidiaries, including us. Charges are based
upon the actual costs incurred by Ameren Services, as required by the
PUHCA.
When we refer to AmerenUE, our, we or us, we are referring to Union
Electric Company and in some cases our agents, AmerenEnergy and Ameren Energy
Fuels and Services Company. All tabular dollar amounts are in millions, unless
otherwise indicated.
The accounting policies of AmerenUE conform to generally accepted
accounting principles in the United States (GAAP). Our financial statements
reflect all adjustments (which include normal, recurring adjustments) necessary,
in our opinion, for a fair presentation of our results. The preparation of
financial statements in conformity with GAAP requires management to make certain
estimates and assumptions. Such estimates and assumptions affect reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates. Certain reclassifications have been made to prior years'
financial statements to conform to 2002 reporting.
Regulation
We are regulated by the Missouri Public Service Commission (MoPSC),
Illinois Commerce Commission (ICC), Nuclear Regulatory Commission (NRC), the
Federal Energy Regulatory Commission (FERC) and the SEC. See Note 2 - Rate and
Regulatory Matters for further information.
36
In accordance with Statement of Financial Accounting Standards (SFAS) No.
71, "Accounting for the Effects of Certain Types of Regulation," we defer
certain costs pursuant to actions of our regulators and are currently recovering
such costs in rates charged to customers.
At December 31, 2002 and 2001, we had recorded the following regulatory
assets and regulatory liabilities:
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
Regulatory assets:
Income taxes (a)(f) $526 $604
Callaway costs (b) 81 84
Unamortized loss on reacquired debt (c)(f) 27 23
Other (d)(f) 25 27
- --------------------------------------------------------------------------------
Regulatory assets $659 $738
- --------------------------------------------------------------------------------
Regulatory liabilities:
Income taxes (e) $121 $137
- --------------------------------------------------------------------------------
(a) See Note 12 - Income Taxes for amortization period. Amount represents SFAS
109 deferred tax asset.
(b) Represents Callaway nuclear plant operations and maintenance expenses,
property taxes and carrying costs incurred between the plant in-service
date and the date the plant was reflected in rates. These costs are being
amortized over the remaining life of the plant's current operating license
through 2024.
(c) Represents losses related to refunded debt. These amounts are being
amortized over the lives of the related new debt issues or the remaining
lives of the old debt issues if no new debt was issued.
(d) Represents Y2K expenses being amortized over 6 years starting in 2002 in
conjunction with the settlement of our Missouri electric rate case and a
Department of Energy Decommissioning assessment being amortized over 14
years through 2007. In addition, amount includes the portion of
merger-related expenses applicable to the Missouri retail jurisdiction
which are being amortized through 2008 based on a MoPSC order.
(e) See Note 12 - Income Taxes for amortization period. Represents unamortized
portion of investment tax credit and federal excess taxes.
(f) These assets do not earn a return.
We continually assess the recoverability of our regulatory assets. Under
current accounting standards, regulatory assets are written off to earnings when
it is no longer probable that such amounts will be recovered through future
revenues. Electric industry restructuring legislation may impact the
recoverability of regulatory assets in the future.
Property and Plant
The cost of additions to and betterments of units of property and plant is
capitalized. Cost includes labor, material, applicable taxes and overheads. An
allowance for funds used during construction is also added for our
rate-regulated assets. Maintenance expenditures and the renewal of items not
considered units of property are charged to income as incurred. When units of
depreciable property are retired, the original cost and removal cost, less
salvage value, are charged to accumulated depreciation. See Accounting Changes
and Other Matters relating to SFAS No. 143, "Accounting for Asset Retirement
Obligations," and Note 5 - Property and Plant, Net for further information.
Depreciation
Depreciation is provided over the estimated lives of the various classes of
depreciable property by applying composite rates on a straight-line basis. The
provision for depreciation in 2002, 2001 and 2000 was approximately 3% of the
average depreciable cost.
Allowance for Funds Used During Construction
Allowance for funds used during construction (AFC) is a utility industry
accounting practice whereby the cost of borrowed funds and the cost of equity
funds (preferred and common stockholders' equity) applicable to rate-regulated
construction expenditures are capitalized as a cost of construction. AFC does
not represent a current source of cash funds. This accounting practice offsets
the effect on earnings of the cost of financing current construction, and treats
such financing costs in the same manner as construction charges for labor and
materials.
Under accepted ratemaking practice, cash recovery of AFC, as well as other
construction costs, occurs when completed projects are placed in service and
reflected in customer rates. The AFC rates were 5% during 2002 and 10% during
both 2001 and 2000.
37
Impairment of Long-Lived Assets
We evaluate long-lived assets for impairment when events or changes in
circumstances indicate that the carrying value of such assets may not be
recoverable. The determination of whether impairment has occurred is based on an
estimate of undiscounted cash flows attributable to the assets, as compared with
the carrying value of the assets. If impairment has occurred, the amount of the
impairment recognized is determined by estimating the fair value of the assets
and recording a provision for loss if the carrying value is greater than the
fair value. See Accounting Changes and Other Matters relating to SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets."
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and temporary investments
purchased with an original maturity of three months or less.
Unamortized Debt Discount, Premium and Expense
Discount, premium and expense associated with long-term debt are amortized
over the lives of the related issues.
Revenue
We accrue an estimate of electric and gas revenues for service rendered,
but unbilled, at the end of each accounting period.
Interchange revenues included in Operating Revenues - Electric were $258
million for the year ended December 31, 2002 (2001 - $375 million; 2000 - $435
million). See Emerging Issues Task Force (EITF) Issue 02-3, "Issues Involved in
Accounting for Derivative Contracts Held for Trading Purposes and Contracts
Involved in Energy Trading and Risk Management Activities," discussion under
Accounting Changes and Other Matters for further information.
Purchased Power
Purchased power included in Operating Expenses - Fuel and Purchased Power
was $206 million for the year ended December 31, 2002 (2001 - $383 million; 2000
- - $368 million). See EITF 02-3 discussion under Accounting Changes and Other
Matters for further information.
Fuel and Gas Costs
In our retail electric utility jurisdictions, there are no provisions for
adjusting rates for changes in the cost of fuel for electric generation. In our
retail gas utility jurisdictions, changes in gas costs are generally reflected
in billings to gas customers through purchased gas adjustment clauses.
The cost of nuclear fuel is amortized to fuel expense on a
unit-of-production basis. Spent fuel disposal cost is charged to expense based
on net kilowatthours generated and sold.
Excise Taxes
Excise taxes on Missouri electric and gas, and Illinois gas customer bills
are imposed on us and are recorded gross in Operating Revenues and Other Taxes.
Excise taxes recorded in Operating Revenues and Other Taxes for 2002 were $103
million (2001- $101 million; 2000 - $102 million). Excise taxes applicable to
Illinois electric customer bills are imposed on the consumer and are recorded as
tax collections payable and included in Taxes Accrued on the Balance Sheet.
Income Taxes
We are included in the consolidated federal income tax return filed by
Ameren. As a subsidiary of Ameren, we could be considered jointly and severably
liable for assessments of additional tax on the consolidated group. Income taxes
are allocated to the Ameren subsidiaries based on their respective taxable
income or loss. Our provision for income taxes has been presented based on
federal and state taxes we would have presented on a stand-alone
38
company basis. Deferred tax assets and liabilities are recognized for the tax
consequences of transactions that have been treated differently for financial
reporting and tax return purposes, measured using statutory tax rates.
Investment tax credits utilized in prior years were deferred and are being
amortized over the useful lives of the related properties.
Accounting Changes and Other Matters
In January 2001, we adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The impact of that adoption resulted in a
cumulative effect charge of $5 million, net of taxes, to the income statement,
and a cumulative effect adjustment of $8 million, net of taxes, to Accumulated
Other Comprehensive Income (OCI), which reduced common stockholder's equity. See
Note 4 - Derivative Financial Instruments for further information.
In January 2002, we adopted SFAS No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS 141 requires business
combinations to be accounted for under the purchase method of accounting, which
requires one party in the transaction to be identified as the acquiring
enterprise and for that party to allocate the purchase price to the assets and
liabilities of the acquired enterprise based on fair market value. SFAS 142
requires goodwill and indefinite-lived intangible assets recorded in the
financial statements to be tested for impairment at least annually, rather than
amortized over a fixed period, with impairment losses recorded in the income
statement. SFAS 141 and SFAS 142 did not have any effect on our financial
position, results of operations or liquidity upon adoption. SFAS 141 and SFAS
142 were utilized for Ameren's acquisition of CILCORP Inc. and AES Medina Valley
Cogen (No. 4), LLC. See Note 17 - Subsequent Event for further information.
We are adopting SFAS 143 in the first quarter of 2003. SFAS 143 provides
the accounting requirements for asset retirement obligations associated with
tangible, long-lived assets. SFAS 143 requires us to record the estimated fair
value of legal obligations associated with the retirement of tangible long-lived
assets in the period in which the liabilities are incurred and to capitalize a
corresponding amount as part of the book value of the related long-lived asset.
In subsequent periods, we are required to adjust asset retirement obligations
based on changes in estimated fair value, and the corresponding increases in
asset book values are depreciated over the useful life of the related asset.
Uncertainties as to the probability, timing or cash flows associated with an
asset retirement obligation affect our estimate of fair value.
Upon adoption of this standard, we expect to recognize additional asset
retirement obligations of approximately $215 million and a net increase in net
property and plant of approximately $75 million related primarily to the
Callaway nuclear decommissioning costs and also to retirement costs for a river
structure. These asset retirement obligations are in addition to liabilities we
have previously recorded related to our future obligation to decommission the
Callaway nuclear plant.
The difference between the net asset and the liability recorded upon
adoption of SFAS 143 related to rate-regulated assets will be recorded as an
additional regulatory asset because we expect to continue to recover the cost of
Callaway nuclear decommissioning and other costs of removal in electric rates.
In addition to these obligations, we have determined that certain other
asset retirement obligations exist. However, we are unable to estimate the fair
value of those obligations because the probability, timing or cash flows
associated with the obligations are indeterminable. We do not believe that these
obligations, when incurred, will have a material adverse impact on our financial
position, results of operations or liquidity.
SFAS 143 also may require a change in the depreciation methodology we have
historically utilized for our rate-regulated operations. Historically, we have
included an estimated cost of dismantling and removing plant from service upon
retirement. This practice is currently required by regulators in the
jurisdictions in which we operate. As a result, though we are still assessing
the impact of SFAS 143 on our rate-regulated depreciation methodology, we do not
believe any such impact will affect our results of operations. However, if we
are required to remove accrued dismantling and removal costs from accumulated
depreciation, where they are currently embedded, our asset and liability
balances could be materially increased.
On January 1, 2002, we adopted SFAS 144. SFAS 144 addresses the financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." SFAS 144 retains the guidance related
to calculating and recording impairment losses, but adds guidance on the
accounting for discontinued operations, previously accounted for under
Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations
39
- - Reporting the Effects of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions." SFAS 144 did not have any
effect on our financial position, results of operations or liquidity in 2002.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS 146 requires an entity to
recognize and measure at fair value a liability for a cost associated with an
exit or disposal activity in the period in which the liability is incurred and
nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)." SFAS 146 is effective for exit or disposal
activities that are initiated after December 31, 2002.
During 2002, we adopted the provisions of EITF 02-3 that required revenues
and costs associated with certain energy contracts to be shown on a net basis in
the income statement. Prior to adopting EITF 02-3 and the rescission of EITF
Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities," our accounting practice was to present all settled
energy purchase or sale contracts within our power risk management program on a
gross basis in Operating Revenues - Electric and in Operating Expenses - Fuel
and Purchased Power. This meant that revenues were recorded for the notional
amount of the power sale contracts with a corresponding charge to income for the
costs of the energy that was generated, or for the notional amount of a
purchased power contract.
In October 2002, the EITF reached a consensus to rescind EITF 98-10. The
effective date for the full rescission of Issue 98-10 was for fiscal periods
beginning after December 15, 2002, with early adoption permitted. In addition,
the EITF reached a consensus in October 2002 that all SFAS 133 trading
derivatives (subsequent to the rescission of Issue EITF 98-10) should be shown
net in the income statement, whether or not physically settled. This consensus
applies to all energy and non-energy related trading derivatives that meet the
definition of a derivative pursuant to SFAS 133. We have adopted and applied
this guidance to 2002 and 2001, which had no impact on previously reported
earnings or stockholder's equity. The adoption of EITF 02-3, the rescission of
EITF 98-10 and the related transition guidance resulted in netting of energy
contracts and lowered our reported revenues and costs with no impact on
earnings. The following table summarizes the impact of energy contract netting
for the years ended December 31, 2001 and 2000:
- --------------------------------------------------------------------------------
2001 2000
- --------------------------------------------------------------------------------
Previously reported gross operating revenues $3,178 $2,720
Revenues and costs netted (a) 392 -
- --------------------------------------------------------------------------------
Net operating revenues reported $2,786 $2,720
- --------------------------------------------------------------------------------
(a) Revenues and costs netted for the year ended December 31, 2002 were $458
million. SFAS 133 was adopted on January 1, 2001 and therefore, no netting
was required for the year ended December 31, 2000.
NOTE 2 - Rate and Regulatory Matters
Missouri Electric
MoPSC Rate Case
From July 1, 1995 through June 30, 2001, we operated under experimental
alternative regulation plans in Missouri that provided for the sharing of
earnings with customers if our regulatory return on equity exceeded defined
threshold levels. After our experimental alternative regulation plan for our
Missouri retail electric customers expired, the MoPSC Staff and others sought to
reduce our annual Missouri electric revenues by over $300 million. The MoPSC
Staff's recommendation was based on a return to traditional cost of service
ratemaking, a lowered return on equity, a reduction in our depreciation rates
and other cost of service adjustments
In August 2002, a stipulation and agreement resolving this case became
effective following agreement by all parties to the case and approval by the
MoPSC. The stipulation and agreement includes the following principal features:
o The phase-in of $110 million of electric rate reductions through April
2004, $50 million of which was retroactively effective as of April 1, 2002,
$30 million of which will become effective on April 1, 2003, and $30
million of which will become effective on April 1, 2004.
o A rate moratorium providing for no changes in rates before June 30, 2006,
subject to certain statutory and other exceptions.
40
o A commitment to contribute $14 million to programs for low income energy
assistance and weatherization, promotion of energy efficiency and economic
development in our service territory in 2002, with additional payments of
$3 million made annually on June 30, 2003 through June 30, 2006. This
obligation was expensed in 2002.
o A commitment to make $2.25 billion to $2.75 billion in critical energy
infrastructure investments from January 1, 2002 through June 30, 2006,
including, among other things, the addition of more than 700 megawatts of
new generation capacity and the replacement of steam generators at our
Callaway nuclear plant. The 700 megawatts of new generation is expected to
be satisfied by 240 megawatts that were added by us in 2002 and the
proposed transfer at net book value (December 31, 2002 - approximately $260
million) to us of approximately 550 megawatts of generation assets from
Generating Company, which is subject to receipt of necessary regulatory
approvals and is expected to be completed in 2003.
o An annual reduction in our depreciation rates by $20 million, retroactive
to April 1, 2002, based on an updated analysis of asset values, service
lives and accumulated depreciation levels.
o A one-time credit of $40 million, which was accrued during the plan period.
The entire amount was paid to our Missouri retail electric customers in
2002 for the settlement of the final sharing period under the alternative
regulation plan that expired June 30, 2001.
Marketing Company - AmerenUE Power Supply Agreements
In order to satisfy our regulatory load requirements for 2001 and 2002, we
purchased, under a one-year contract 450 megawatts of capacity and energy (the
2001 Marketing Company - AmerenUE agreement) and 200 megawatts of capacity and
energy (the 2002 Marketing Company - AmerenUE agreement) from Marketing Company.
These agreements were entered into through a competitive bidding process and
reflected market-based rates. Generating Company supplied the power for these
agreements under its power supply agreement with Marketing Company.
The FERC accepted the 2001 Marketing Company - AmerenUE agreement as filed.
The 2002 Marketing Company - AmerenUE agreement was set for hearing to determine
that the contract terms were just and reasonable. On March 12, 2003, a
settlement between Marketing Company and the FERC Staff was approved by the FERC
effectively resolving all issues concering the 2002 Marketing Company - AmerenUE
agreement set for hearing. While the FERC order contains a standard refund
report requirement, no refunds are due under the settlement as approved.
In May 2001 and May 2002, the MoPSC filed complaints with SEC relating to
these agreements. While the complaints were pending, the MoPSC and AmerenUE
reached an agreement for resolving these disputes. The agreement requires us to
not enter into any new contracts to purchase wholesale electric energy from any
Ameren affiliate that is an exempt wholesale generator without first obtaining,
on a timely basis, the determinations required of the MoPSC that are specified
in Section 32(k) of PUHCA. However, this commitment did not prevent us from
completing the purchases contemplated by the 2001 and 2002 Marketing Company -
AmerenUE agreements and does not prevent us from making short term energy
purchases (less than 90 days) from an Ameren affiliate, without prior MoPSC
determination, to prevent or alleviate system emergencies. As part of this
agreement, the MoPSC has agreed to terminate its SEC complaints.
Illinois Electric
In 2002, all of our Illinois residential, commercial and industrial
customers had choice in electric suppliers.
As a provision of the legislation related to the restructuring of the
Illinois electric industry (the Illinois Law), a rate freeze is in effect
through January 1, 2007.
In October 2002, we and AmerenCIPS filed with the ICC a proposal to suspend
collection of transition charges associated with the Illinois Law for the period
commencing June 2003 until at least June 2005. The Illinois Law allows a utility
to collect transition charges from customers that elect to move from bundled
retail rates to market-based rates. Utilities have the right to collect
transition charges throughout the transition period that ends January 1, 2007.
The suspension of collection of transition charges is not expected to have a
material impact on either us or AmerenCIPS.
Under the Illinois Law, we were subject to a residential electric rate
decrease of up to 5% in 2002 to the extent our rates exceeded the Midwest
utility average. In 2002, 2001 and 2000, our Illinois electric rates were below
the Midwest utility average.
41
The Illinois Law also contains a provision requiring that one-half of
excess earnings from the Illinois jurisdiction for the years 1998 through 2006
be refunded to our Illinois customers. Excess earnings are defined as the
portion of the two-year average annual rate of return on common equity in excess
of 1.5% of the two-year average of an Index, as defined in the Illinois Law. The
Index is defined as the sum of the average for the twelve months ended September
30 of the average monthly yields of the 30-year U.S. Treasury bonds, plus
prescribed percentages ranging from 4% to 7%. Our Illinois average rate of
return on common equity for the two year average at December 31, 2002 was 13% as
compared to the average index of 12.6%. No refunds are expected to be required
for the period of April 1, 2002 through March 31, 2003. For the twelve months
ended December 31, 1999, we made excess earnings refunds of $2.1 million from
April 1, 2000 through March 31, 2001. For the twelve months ended December 31,
2000, we made excess earnings refunds of $1.5 million from April 1, 2001 through
May 31, 2002. These refunds were recorded as a reduction to Operating Revenues -
Electric.
Federal - Electric Transmission
Regional Transmission Organization
In December 1999, the FERC issued Order 2000, requiring all utilities,
subject to FERC jurisdiction, to state their intentions for joining a regional
transmission organization (RTO). RTOs are independent organizations that will
functionally control the transmission assets of utilities and are designed to
improve the wholesale power market. Beginning in January 2001, we and
AmerenCIPS, along with several other utilities, sought approval from the FERC to
participate in an RTO known as the Alliance RTO. We had previously been a member
of the Midwest Independent System Operator (Midwest ISO) and recorded a pretax
charge to earnings in 2000 of $17 million ($10 million, net of taxes) for an
exit fee and other costs when we left that organization. We believed that the
for-profit Alliance RTO business model was superior to the not-for-profit
Midwest ISO business model and provided us with a more equitable return on our
transmission assets.
In late 2001, the FERC issued an order that rejected the formation of the
Alliance RTO and ordered the Alliance RTO companies and the Midwest ISO to
discuss how the Alliance RTO business model could be accommodated within the
Midwest ISO. In April 2002, after the Alliance RTO and Midwest ISO failed to
reach an agreement, and after a series of filings by the two parties with the
FERC, the FERC issued a declaratory order setting forth the division of
responsibilities between the Midwest ISO and National Grid (the managing member
of the transmission company formed by the Alliance companies) and approved the
rate design and the revenue distribution methodology proposed by the Alliance
companies. However, the FERC denied a request by the Alliance companies and the
National Grid to purchase certain services from the Midwest ISO at incremental
cost rather than Midwest ISO's full tariff rates. The FERC also ordered the
Midwest ISO to return the exit fees paid by us and AmerenCIPS to leave the
Midwest ISO, provided we and AmerenCIPS return to the Midwest ISO and agree to
pay our proportional share of the startup and ongoing operational expenses of
the Midwest ISO. Moreover, the FERC required the Alliance companies to select
the RTO in which they will participate within thirty days of the order.
Following the April 2002 FERC order, we and AmerenCIPS have made filings
with the FERC indicating that we would return to the Midwest ISO through a new
independent transmission company, GridAmerica LLC, that was agreed to be formed
by us and AmerenCIPS, along with subsidiaries of FirstEnergy Corporation and
NiSource Inc. Upon receipt of final FERC approval of the definitive agreements
establishing GridAmerica, a subsidiary of National Grid will serve as the
managing member of GridAmerica and will manage the transmission assets of the
three companies and participate in the Midwest ISO on behalf of GridAmerica.
Other Alliance RTO companies announced their intentions to join the PJM
Interconnection LLC (PJM) RTO. On July 25, 2002, we and AmerenCIPS filed a
motion with the FERC requesting that it condition the approval of the choices of
other Illinois utilities to join the PJM RTO on Midwest ISO and PJM entering
into an agreement addressing important reliability and rate-barrier issues. On
July 31, 2002, the FERC issued an order accepting the formation of GridAmerica
as an independent transmission company under the Midwest ISO subject to further
compliance filings ordered by the FERC. The FERC also issued an order accepting
the elections made by the other Illinois utilities to join the PJM RTO on the
condition PJM and Midwest ISO immediately begin a process to address the
reliability and rate-barrier issues raised by us and other market participants
in previous filings.
The compliance filing to facilitate the formation and operation of
GridAmerica as an independent transmission company within the Midwest ISO, as
contemplated in the July 31, 2002 order of the FERC, was conditionally accepted
by the FERC in an order issued December 19, 2002. In the order, the FERC
approved the return of the $13 million exit fee paid by us to leave the Midwest
ISO with interest once GridAmerica becomes operational. The FERC also approved,
subject to further filings, reimbursement of $36 million to the GridAmerica
Companies for expenses incurred to form the Alliance RTO. GridAmerica is
scheduled to become operational in Spring 2003. Our
42
participation in GridAmerica remains subject to MoPSC approval. An order from
the MoPSC is expected during the third quarter of 2003.
Until the reliability and rate-barrier issues are resolved as ordered by
the FERC, and the tariffs and other material terms of our participation in
GridAmerica, and GridAmerica's participation in the Midwest ISO, are finalized
and approved by the FERC, we are unable to predict the impact that on-going RTO
developments will have on our financial position, results of operations or
liquidity.
Standard Market Design Notice of Proposed Rulemaking (NOPR)
On July 31, 2002, the FERC issued a Standard Market Design NOPR. The NOPR
proposes a number of changes to the way the current wholesale transmission
service and energy markets are operated. Specifically, the NOPR calls for all
jurisdictional transmission facilities to be placed under the control of an
independent transmission provider (similar to an RTO), proposes a new
transmission service tariff that provides a single form of transmission service
for all users of the transmission system including bundled retail load, and
proposes a new energy market and congestion management system that uses
locational marginal pricing as its basis. On November 15, 2002, we filed our
initial comments on the NOPR with the FERC expressing our concern with the
potential impact of the proposed rules in their current form on the cost and
reliability of service to retail customers. We also proposed that certain
modifications be made to the proposed rules in order to protect transmission
owners from the possibility of trapped transmission costs that might not be
recoverable from ratepayers as a result of inconsistent regulatory policies. We
filed additional comments on the remaining sections of the NOPR during the first
quarter of 2003. Until the FERC issues a final rule, we are unable to predict
the ultimate impact on our future financial position, results of operations or
liquidity.
Illinois Gas
In November 2002, we filed a request with the ICC to increase annual rates
for natural gas services by approximately $4 million. The ICC has until October
2003 to render a decision on this request.
NOTE 3 - Related Party Transactions
We have transactions in the normal course of business with our parent,
Ameren, and its other subsidiaries. These transactions are primarily comprised
of power purchases and sales, as well as other services received or rendered.
Intercompany power purchases from joint dispatch and other agreements were
approximately $108 million for 2002 (2001 - $134 million; 2000 - $98 million).
Intercompany power sales totaled $84 million for 2002 (2001 - $82 million; 2000
- - $80 million).
Support services provided by our affiliates, Ameren Services and
AmerenEnergy, including wages, employee benefits and professional services are
based on actual costs incurred. For the year ended December 31, 2002, support
services provided by Ameren Services and AmerenEnergy included in Operating
Expenses - Other Operations and Maintenance totaled $196 million (2001 - $170
million; 2000 - $154 million).
As of December 31, 2002, intercompany receivables included in Miscellaneous
Accounts and Notes Receivable were approximately $25 million (2001 - $38
million). As of December 31, 2002, intercompany payables included in Accounts
and Wages Payable totaled approximately $103 million (2001 - $70 million).
We have the ability to borrow from Ameren and AmerenCIPS through a utility
money pool agreement. Ameren Services administers the utility money pool and
tracks internal and external funds separately. Internal funds are surplus funds
contributed to the utility money pool from participants. The primary source of
external funds for the utility money pool at December 31, 2002 was our
commercial paper program. Through the utility money pool we can access committed
credit facilities at Ameren and AmerenCIPS which totaled $615 million at
December 31, 2002. These facilities are in addition to our own $80 million in
committed credit facilities. The total amount available to us at any given time
from the utility money pool is reduced by the amount of borrowings by our
affiliates, but increased to the extent Ameren, AmerenCIPS or Ameren Services
have surplus funds and the availability of other external borrowing sources.
Surplus funds providing additional liquidity available to us through the utility
money pool totaled $628 million at December 31, 2002, of which approximately
$500 million was used to acquire CILCORP and Medina Valley in early 2003. The
availability of funds is also determined by funding requirement limits
established by the PUHCA. We, along with AmerenCIPS and Ameren Services, rely on
the utility money pool to coordinate and provide for certain short-term cash and
working capital requirements. Borrowers receiving a loan under the utility money
pool agreement must repay the principal amount of such loan, together with
accrued interest. Interest is calculated at varying rates of interest depending
on the composition of
43
internal and external funds in the utility money pool. For the year ended
December 31, 2002, the average interest rate for the utility money pool was
1.68% (2001 - 3.95%). Based on outstanding commercial paper as of December 31,
2002, we had the ability to borrow up to $445 million through the utility money
pool, which was in addition to amounts available through cash balances at
Ameren. At December 31, 2002, we had outstanding intercompany payables of $15
million, sourced by internal funds through the utility money pool. At December
31, 2001, we had outstanding intercompany receivables of $84 million through the
utility money pool.
Subject to the receipt of regulatory approval, which is being pursued,
AmerenCILCO will participate in Ameren's utility money pool arrangement. At
December 31, 2002, CILCO had committed credit facilities, expiring at various
dates during 2003, totaling $60 million.
NOTE 4 - Derivative Financial Instruments
We utilize derivatives principally to manage the risk of changes in market
prices for natural gas, fuel, electricity and emission credits. Price
fluctuations in natural gas, fuel and electricity cause:
o an unrealized appreciation or depreciation in the value of our firm
commitments to purchase or sell when purchase or sales prices under the
firm commitment are compared with current commodity prices;
o market values of fuel and natural gas inventories or purchased power to
differ from the cost of those commodities in inventory or under the firm
commitment; and
o actual cash outlays for the purchase of these commodities, in certain
circumstances, to differ from anticipated cash outlays.
The derivatives that we use to hedge these risks are dictated by risk
management policies and include forward contracts, futures contracts, options
and swaps. We continually assess our supply and delivery commitment positions
against forward market prices and internal forecasts of forward prices. We
actively manage our exposure to power price risk through our power risk
management program carried out under our risk management guidelines to modify
our exposure to market, credit and operational risk by entering into various
offsetting transactions. In general, we believe these transactions serve to
reduce price risk for us.
In addition, we may purchase additional power, again within risk management
guidelines, in anticipation of power requirements and future price changes.
Certain derivative contracts we enter into on a regular basis as part of our
power risk management program do not qualify for hedge accounting or the normal
purchase and sale exceptions under SFAS 133. Accordingly, these contracts are
recorded at fair value with changes in the fair value charged or credited to the
income statement in the period in which the change occurred. Contracts we enter
into as part of our power risk management program may be settled by either
physical delivery or net settled with the counterparty. See also Note 1 -
Summary of Significant Accounting Policies for further information.
As of December 31, 2002, we recorded the fair value of derivative financial
instrument assets of $7 million in Other Assets and the fair value of derivative
financial instrument liabilities of $1 million in Other Deferred Credits and
Liabilities.
Cash Flow Hedges
We routinely enter into forward purchase and sales contracts for
electricity based on forecasted levels of economic generation and customer
requirements. The relative balance between customer requirements and economic
generation varies throughout the year. The contracts typically cover a period of
twelve months or less. The purpose of these contracts is to hedge against
possible price fluctuations in the spot market for the period covered under the
contracts. We formally document all relationships between hedging instruments
and hedged items, as well as our risk management objective and strategy for
undertaking various hedge transactions. The mark-to-market value of cash flow
hedges will continue to fluctuate with changes in market prices up to contract
expiration.
The pretax net loss on power forward derivative instruments, which
represented the impact of discontinued cash flow hedges, the ineffective portion
of cash flow hedges, as well as the reversal of amounts previously recorded in
OCI due to transactions going to delivery or settlement, was approximately $2
million for the year ended December 31, 2002 (2001 - $10 million pretax net
gain).
44
As of December 31, 2002, we had hedged a portion of the electricity price
exposure for the upcoming twelve-month period. The mark-to-market value
accumulated in OCI for the effective portion of hedges of electricity price
exposure was a net gain of approximately $0.6 million ($0.4 million, net of
taxes).
As of December 31, 2002, a gain of approximately $0.5 million ($0.3
million, net of taxes) associated with natural gas swaps was included in OCI.
The swaps were a partial hedge of our index priced, baseload gas supply for the
period of December 2002 through March 2003. The swaps effectively fix the price
on a portion of our gas supply for that time period.
We also held three call options for coal with two suppliers. These options
to purchase coal expire October 2003, July 2004 and July 2005. As of December
31, 2002, a mark-to-market gain of approximately $6 million ($4 million, net of
taxes) associated with these options was included in OCI. The final value of the
options will be recognized as a reduction in fuel costs as the hedged coal is
burned.
Other Derivatives
We enter into option transactions to manage our positions in sulfur dioxide
allowances, coal, heating oil and electricity. Most of these transactions are
treated as non-hedge transactions under SFAS 133. The net change in the market
value of sulfur dioxide, coal, heating oil and electricity options is recorded
as Other Income and Deductions in the income statement. The net change in the
market values of sulfur dioxide, coal, heating oil, and electricity options was
a gain of $5 million ($3 million net of taxes) for the year ended December 31,
2002 (2001 - $3 million loss or $2 million, net of taxes).
NOTE 5 - Property and Plant, Net
At December 31, 2002 and 2001, property and plant, net consisted of the
following:
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
Property and plant, at original cost:
Electric $10,294 $ 9,827
Gas 268 253
Other 81 37
-----------------
10,643 10,117
Less accumulated depreciation and amortization 4,968 4,802
-----------------
5,675 5,315
Construction work in progress:
Nuclear fuel in process 81 97
Other 280 298
-----------------
Property and plant, net $ 6,036 $ 5,710
- --------------------------------------------------------------------------------
NOTE 6 - Nuclear Fuel Lease
We have a lease agreement, expiring on August 31, 2031, that provides for
the financing of a portion of our nuclear fuel that is being processed for use
or being consumed in our Callaway nuclear plant. The lease agreement has
variable interest rates based on short-term commercial paper interest rates. At
December 31, 2002, the maximum amount that could be financed under the agreement
was $120 million, of which $113 million was utilized. The lessor, Gateway Fuel
Company, maintains a $120 million committed credit facility which supports the
financing of fuel under the lease. We consider available lease capacity, future
purchase commitments and upcoming in-service fuel requirements when determining
whether to utilize leased nuclear fuel. We are not required to pay the lessor,
an unrelated third party, unless nuclear fuel is removed from the lease,
consumed at our nuclear plant or the lease is terminated. Pursuant to the terms
of the lease, we assign to the lessor certain contracts for purchase of nuclear
fuel. The lessor obtains, through the issuance of commercial paper or from
direct loans under a committed revolving credit agreement from commercial banks,
the necessary funds to purchase the fuel and make interest payments when due.
We are obligated to reimburse the lessor for expenditures for nuclear fuel,
interest and related costs under the lease. As any leased nuclear fuel is
consumed at our Callaway nuclear plant, obligations under this lease become due.
No leased nuclear fuel was consumed in 2001. Therefore, no reimbursements for
amounts consumed under the lease occurred in 2001. Leased nuclear fuel
consumption re-commenced in the fourth quarter of 2002. The
45
corresponding reimbursement will occur in the first quarter of 2003. We
reimbursed $13 million during 2000 for amounts consumed under the lease.
We have capitalized the cost of the leased nuclear fuel incurred by the
lessor, plus certain interest costs, and have recorded the related lease
obligation. Total interest charges under the lease were $2 million in 2002, $4
million in 2001, and $8 million in 2000. Interest charges for these years were
based on average interest rates of approximately 2% for 2002, 5% for 2001 and 7%
for 2000. Interest charges of $2 million in 2002, $4 million in 2001, and $6
million in 2000 were capitalized.
NOTE 7 - Preferred Stock
Outstanding preferred stock is entitled to cumulative dividends and is
redeemable, at the option of the issuer, at the prices shown in the following
table as of December 31, 2002 and 2001:
- -----------------------------------------------------------------------------------------
Preferred stock not subject to
mandatory redemption: (a)
Redemption price
Shares (per share) 2002 2001
- -----------------------------------------------------------------------------------------
Without par value and stated value of $100 per
share, 25 million shares authorized
$7.64 Series 330,000 $103.82(b) $ 33 $ 33
$5.50 Series A 14,000 110.00 1 1
$4.75 Series 20,000 102.176 2 2
$4.56 Series 200,000 102.47 20 20
$4.50 Series 213,595 110.00(c) 21 21
$4.30 Series 40,000 105.00 4 4
$4.00 Series 150,000 105.625 15 15
$3.70 Series 40,000 104.75 4 4
$3.50 Series 130,000 110.00 13 13
Without par value and stated value of $25 per
share
$1.735 Series 1,657,500 25.00 - 42
- -----------------------------------------------------------------------------------------
Total preferred stock not
subject to mandatory redemption $113 $155
- -----------------------------------------------------------------------------------------
(a) Generally, for the issuance of additional preferred stock, earnings coverage
of at least two and one-half times the annual dividend on preferred stock
outstanding and to be issued is required under our Articles of Incorporation.
The ability to issue such securities in the future will depend on coverage at
that time. At December 31, 2002, we had and expect to continue to have adequate
coverage ratios for anticipated requirements.
(b) Beginning February 15, 2003, declining to $100 per share in 2012.
(c) In the event of voluntary liquidation, $105.50.
NOTE 8 - Short-Term Borrowings
Our short-term borrowings consist of commercial paper and bank loans
(maturities generally within 1-45 days) and may also include utility money pool
advances. At December 31, 2002, we had $250 million (2001 - $186 million) of
commercial paper outstanding and $15 million borrowed under the utility money
pool. The weighted average interest rate on short-term borrowings outstanding at
December 31, 2002 was 1.4% (2001 - 1.8%).
At December 31, 2002, Ameren and its subsidiaries had committed credit
facilities, expiring at various dates between 2003 and 2005, totaling $695
million, excluding EEI facilities of $45 million and our nuclear fuel lease
facilities of $120 million. This amount includes $80 million of our committed
credit facilities and $615 million of committed credit facilities at Ameren and
AmerenCIPS. We access these facilities through Ameren's utility money pool
arrangement. AmerenCIPS and Ameren Services may also borrow under this
arrangement. These committed credit facilities are used to support our
commercial paper program under which $250 million was outstanding at December
31, 2002. Based on commercial paper outstanding at December 31, 2002, $445
million was unused and available under these committed credit facilities and
available to us through the utility money pool.
Subject to the receipt of regulatory approval, which is being pursued,
AmerenCILCO will participate in Ameren's utility money pool arrangement. At
December 31, 2002, CILCO had committed credit facilities, expiring at various
dates during 2003, totaling $60 million. See Note 3 - Related Party Transactions
for further information about the utility money pool.
46
EEI also has two bank credit agreements totaling $45 million that expire in
2003. At December 31, 2002, $27 million was unused and available under these
committed credit facilities.
Certain of our and Ameren's financing arrangements contain provisions
which, among other things, limit our ability to encumber or sell assets, merge
with other entities or permit to exist restrictions on's credit agreements
contain a covenant which requires Ameren, AmerenCIPS and us to maintain a ratio
of total indebtedness to total capital of 60% or less. One of our credit
agreements contains a similar provision which restricts the ratio to 65% or
less. Certain of these arrangements contain material adverse change clauses
which could limit our ability to borrow under such facilities or to access
borrowing under these facilities through the utility money pool. In addition,
Ameren's credit agreements contain indebtedness cross default provisions which
could trigger a default under these facilities in the event any subsidiary of
Ameren (subject to definition in the underlying credit agreements) other than
certain project finance subsidiaries defaults in indebtedness in excess of $50
million. None of our, AmerenCIPS' or Ameren's financing arrangements contains
credit rating triggers, with the exception of certain ratings triggers within
AmerenCILCO's financing arrangements.
Most of Ameren's committed credit facilities include provisions related to
the funded status of Ameren's pension plan. These provisions either require
Ameren to meet minimum ERISA funding requirements or limit the unfunded
liability status of the plan. Under the most restrictive of these provisions
impacting Ameren facilities totaling $400 million, an event of default will
result if the unfunded liability status (as defined in the underlying credit
agreements) of Ameren's pension plan exceeds $300 million in the aggregate.
Based on the most recent valuation report available to Ameren at December 31,
2002, which was based on January 2002 asset and liability valuations, the
unfunded liability status (as defined) was $31 million. While an updated
valuation report will not be available until the second half of 2003, Ameren
believes that the unfunded liability status of our pension plans (as defined)
could exceed $300 million based on the investment performance of the pension
plan assets and interest rate changes since January 1, 2002. As a result, Ameren
may need to renegotiate the facility provisions, terminate or replace the
affected facilities, or fund any unfunded liability shortfall. Should Ameren
elect to terminate these facilities, we believe we would otherwise have
sufficient liquidity to manage our short-term funding requirements.
At December 31, 2002, Ameren and its subsidiaries, including us, were in
compliance with all such provisions.
NOTE 9 - Long-Term Debt and Capitalization
The following table summarizes our long-term debt outstanding at December
31, 2002 and 2001:
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
First mortgage bonds (a)
- --------------------------------------------------------------------------------
8.33% Series paid in 2002 $ - $ 75
8 3/4% Series paid in 2002 - 125
7.65% Series due 2003 100 100
6 7/8% Series due 2004 188 188
7 3/8% Series due 2004 85 85
6 3/4% Series due 2008 148 148
5.25% Series due 2012 173 -
8 1/4% Series due 2022 104 104
8% Series due 2022 85 85
7.15% Series due 2023 75 75
7% Series due 2024 100 100
5.45% Series due 2028 (b) 44 44
- --------------------------------------------------------------------------------
1,102 1,129
- --------------------------------------------------------------------------------
Environmental improvement bonds (c)
- --------------------------------------------------------------------------------
1991 Series due 2020 43 43
1992 Series due 2022 47 47
1998 Series A due 2033 60 60
1998 Series B due 2033 50 50
47
1998 Series C due 2033 50 50
2000 Series A due 2035 64 64
2000 Series B due 2035 63 63
2000 Series C due 2035 60 60
- --------------------------------------------------------------------------------
437 437
- --------------------------------------------------------------------------------
Subordinated deferrable interest debentures
- --------------------------------------------------------------------------------
7.69% Series A due 2036 (d) 66 66
- --------------------------------------------------------------------------------
Capital lease obligations
- --------------------------------------------------------------------------------
Nuclear fuel lease 113 63
City of Bowling Green Lease 103 -
- --------------------------------------------------------------------------------
216 63
- --------------------------------------------------------------------------------
Unamortized discount and premium on debt (4) (4)
- --------------------------------------------------------------------------------
Maturities due within one year (130) (92)
- --------------------------------------------------------------------------------
Total long-term debt $1,687 $1,599
- --------------------------------------------------------------------------------
(a) At December 31, 2002, a majority of property and plant was mortgaged under,
and subject to lien of, the indenture pursuant to which the bonds were
issued. Our first mortgage bond indenture contains provisions that restrict
the issuance of additional bonds. These provisions restrict future first
mortgage bond issuance to 60% of unused net bondable property and
previously retired bonds. In addition, net earnings must be at least twice
that of first mortgage bond interest to be able to issue bonds under the
indenture. At December 31, 2002, we were in compliance with all such
provisions.
(b) Environmental Improvement Series backed by first mortgage bonds.
(c) Interest rates, and the periods during which such rates apply, vary
depending on our selection of certain defined rate modes. The average
interest rates for the year 2002 were as follows: `
1991 Series 1.64%
1992 Series 1.60%
1998 Series A 1.53%
1998 Series B 1.53%
1998 Series C 1.53%
2000 Series A 1.56%
2000 Series B 1.52%
2000 Series C 1.56%
(d) During the terms of the debentures, we may, under certain circumstances,
defer the payment of interest for up to five years. Upon election to defer
interest payments, dividend payments to Ameren are prohibited.
The following table summarizes the maturities of long-term debt at December 31,
2002:
- --------------------------------
2003 $130
2004 306
2005 36
2006 27
2007 4
Thereafter 1,318
- ---------------------------------
Total $1,821
- ---------------------------------
In July 2002, Ameren entered into new committed credit agreements for $400
million in revolving credit facilities to be used for general corporate
purposes, including support of commercial paper programs. We may access these
new credit facilities through the utility money pool. The $400 million in new
facilities includes a $270 million 364-day revolving credit facility and a $130
million 3-year revolving credit facility. The 3-year facility has a $50 million
sub-limit for the issuance of letters of credit. These new credit facilities
replaced our former $300 million revolving credit facility.
In August 2002, a shelf registration statement filed by us with the SEC on
Form S-3 was declared effective. This statement authorized the offering from
time to time of up to $750 million of various forms of long-term debt and trust
preferred securities to refinance existing debt and preferred stock and for
general corporate purposes, including the repayment of short-term debt incurred
to finance construction expenditures and other working capital needs.
In August 2002, we issued, pursuant to the shelf registration statement,
$173 million of 5.25% Senior Secured Notes due September 1, 2012. Interest is
payable semi-annually on March 1 and September 1 of each year, beginning March
1, 2003. Net proceeds were $172 million, after debt discount and fees. These
senior secured notes are secured by a related series of our first mortgage bonds
until the release date as described in the senior secured note indenture.
Proceeds were used to redeem, in September 2002, our $125 million principal
amount 8.75% first mortgage bonds due December 1, 2021 at a 4.38% premium and
our $42 million $1.735 series preferred stock at par.
48
In December 2002, upon receipt of all the necessary federal and state
regulatory approvals, we, pursuant to Missouri economic development statutes,
conveyed most of our Peno Creek combustion turbine generating facility to the
City of Bowling Green, Missouri in exchange for the issuance by the City of a
taxable industrial development revenue bond in the amount of $103.4 million.
Concurrently, the City leased back the facility to us for a term of 20 years.
The lease term is the same as the final maturity of the bond we purchased.
Although the lease is a capital lease, no capital was raised in the transaction.
We are responsible for making rental payments under the lease in an amount
sufficient to pay the debt service of the bond. The City's ownership of the
facility during the term of the bond and the lease is expected to result in
property tax savings to us. Under the terms of the lease, we retain all
operation and maintenance responsibilities of the facility and ownership of the
facility is returned to us at the expiration of the lease.
We expect to fund maturities of long-term debt and contractual obligations
through a combination of cash flow from operations and external financing.
At December 31, 2002, neither Ameren, nor any of its subsidiaries,
including us, had any off-balance sheet financing arrangements, other than
operating leases entered into in the ordinary course of business. We do not
expect to engage in any significant off-balance sheet financing arrangements in
the near future.
Amortization of debt issuance costs and any premium or discounts for the
year ended December 31, 2002 of $4 million (2001 - $3 million; 2000 - $3
million) were included in interest expense in the income statement.
NOTE 10 - Voluntary Retirement and Other Restructuring Charges
Voluntary retirement and other restructuring charges were $65 million in
2002 or $41 million, net of taxes.
In December 2002, approximately 550 Ameren employees, which includes
approximately 230 of our employees and additional employees providing support
functions to us through Ameren Services, accepted a voluntary retirement program
that was offered to approximately 1,000 of Ameren's 7,400 employees. Eligible
employees had to be age 50 or over, regular, full-time employees and have at
least 10 years of service with Ameren. While we expect to realize significant
long-term savings as a result of this program, we incurred a charge of $51
million ($32 million, net of taxes) in December 2002 related to the voluntary
retirement program. These costs consisted primarily of special termination
benefits associated with Ameren's pension and post-retirement benefit plans.
In December 2002, we also retired 343 megawatts of rate-regulated capacity
at our Venice, Illinois plant. This capacity reduction and related severance
resulted in a charge of $14 million ($9 million, net of taxes) in December 2002.
NOTE 11 - Miscellaneous, Net
Miscellaneous, net for the years ended December 31, 2002, 2001 and 2000
consisted of the following:
- --------------------------------------------------------------------------------
2002 2001 2000
- --------------------------------------------------------------------------------
Miscellaneous income:
Interest and dividend income $ 2 $ 8 $ 17
Equity in earnings of subsidiaries 14 4 4
Gain on disposition of property 3 2 1
Contribution in aid of construction - 3 -
Other 7 14 4
- --------------------------------------------------------------------------------
Total miscellaneous income $ 26 $ 31 $ 26
- --------------------------------------------------------------------------------
Miscellaneous expense:
Plant acquisition amortization $ (2) $ (2) $ (2)
Donations, including 2002 rate settlement (26) (1) (6)
Other (7) (5) (4)
- --------------------------------------------------------------------------------
Total miscellaneous expense $(35) $ (8) $(12)
- --------------------------------------------------------------------------------
49
NOTE 12 - Income Taxes
Total income tax expense for 2002 resulted in an effective tax rate of 36%
on earnings before income taxes (38% in 2001 and 39% in 2000).
Principal reasons such rates differ from the statutory federal rate for the
years ended December 31, 2002, 2001 and 2000 were as follows:
- --------------------------------------------------------------------------------
2002 2001 2000
- --------------------------------------------------------------------------------
Statutory federal income tax rate: 35% 35% 35%
Increases (decreases) from:
Depreciation differences 2 2 2
State tax 3 3 3
Other (4) (2) (1)
- --------------------------------------------------------------------------------
Effective income tax rate 36% 38% 39%
- --------------------------------------------------------------------------------
Components of income tax expense for the years ended December 31, 2002,
2001 and 2000 were as follows:
- --------------------------------------------------------------------------------
2002 2001 2000
- --------------------------------------------------------------------------------
Taxes currently payable (principally federal):
Included in operating expenses $174 $219 $231
Included in other income (3) 2 (3)
- --------------------------------------------------------------------------------
171 221 228
Deferred taxes (principally federal):
Included in operating expenses:
Depreciation differences 35 5 5
Other (7) 6 (4)
Included in other income - 4 -
- --------------------------------------------------------------------------------
28 15 1
Deferred investment tax credits, amortization:
Included in operating expenses (6) (6) (5)
- --------------------------------------------------------------------------------
Total income tax expense $193 $230 $224
- --------------------------------------------------------------------------------
In accordance with SFAS No. 109, "Accounting for Income Taxes," a
regulatory asset, representing the probable recovery from customers of future
income taxes, which is expected to occur when temporary differences reverse, was
recorded along with a corresponding deferred tax liability. Also, a regulatory
liability, recognizing the lower expected revenue resulting from reduced income
taxes associated with amortizing accumulated deferred investment tax credits,
was recorded. Investment tax credits have been deferred and will continue to be
credited to income over the lives of the related property.
We adjust our deferred tax liabilities for changes enacted in tax laws or
rates. Recognizing that regulators will probably reduce future revenues for
deferred tax liabilities initially recorded at rates in excess of the current
statutory rate, reductions in the deferred tax liability were credited to the
regulatory liability.
Temporary differences gave rise to the following deferred tax assets and
deferred tax liabilities at December 31, 2002 and 2001:
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
Accumulated deferred income taxes:
Depreciation $ 887 $ 840
Regulatory assets, net 424 482
Capitalized taxes and expenses 147 105
Deferred benefit costs (75) (66)
Accumulated other comprehensive income (37) -
- --------------------------------------------------------------------------------
Total net accumulated deferred income tax liabilities $1,346 $1,361
- --------------------------------------------------------------------------------
50
NOTE 13 - Retirement Benefits
Pension
Ameren has defined benefit retirement plans covering substantially all of
our employees. Benefits are based on the employees' years of service and
compensation. Ameren's plans are funded in compliance with income tax
regulations and federal funding requirements. AmerenUE, along with other
subsidiaries of Ameren, is a participant in Ameren's plans and is responsible
for its proportional share of the costs. Our share of the pension costs for 2002
was $12 million (2001 - $3 million; 2000 - $2 million) of which approximately
16% (2001 - 16%; 2000 - 20%) was charged to construction accounts.
Ameren made cash contributions totaling $31 million to Ameren's defined
benefit retirement plan during 2002. Our share of the cash contribution was
approximately $23 million, which includes our portion related to Ameren
Services. At December 31, 2002, Ameren recorded a minimum pension liability of
$102 million, net of taxes, which resulted in a charge to OCI and a reduction to
stockholders' equity. Our share of the minimum pension liability was
approximately $62 million, net of taxes. Based on the performance of plan assets
through December 31, 2002, Ameren expects to be required under the Employee
Retirement Income Security Act of 1974 to fund annually $150 million to $175
million in 2005, 2006 and 2007 in order to maintain minimum funding levels. In
addition, Ameren estimates the pension funding for CILCORP to be less than $1
million in 2003 and approximately $5 million in 2004. We expect our share of the
annual funding in 2005, 2006 and 2007 to be between $110 million to $128
million, which includes our share related to employees of Ameren Services. These
amounts are estimates and may change based on actual stock market performance,
changes in interest rates and any changes in government regulations. At December
31, 2002, Ameren's Net Benefit Obligation was $1,587 million and its Fair Value
of Plan Assets was $1,059 million.
Ameren's assumptions for actuarial present value of projected benefit
obligations during 2002, 2001 and 2000 were as follows:
- --------------------------------------------------------------------------------
2002 2001 2000
- --------------------------------------------------------------------------------
Discount rate at measurement date 6.75% 7.25% 7.50%
Expected return on plan assets 8.50% 8.50% 8.50%
Increase in future compensation 3.75% 4.25% 4.50%
- --------------------------------------------------------------------------------
Post-retirement
Ameren's funding policy for post-retirement benefits is to annually fund
the Voluntary Employee Beneficiary Association trusts (VEBA) with the lesser of
the net periodic cost or the amount deductible for federal income tax purposes.
We, along with other subsidiaries of Ameren, are a participant in the VEBA,
which covers substantially all of our employees, and are responsible for our
proportional share of the costs. Our share of the postretirement benefit costs
for 2002 was $57 million (2001 - $51 million; 2000 - $46 million) of which
approximately 16% (2001 - 18%; 2000 - 17%) were charged to construction
accounts. The MoPSC and the ICC allow the recovery of postretirement benefit
costs in rates to the extent that such costs are funded.
Ameren's assumptions for the post-retirement benefit plan obligation
measurements for the years ended December 31, 2002, 2001 and 2000 were as
follows:
- --------------------------------------------------------------------------------
2002 2001 2000
- --------------------------------------------------------------------------------
Discount rate at measurement date 6.75% 7.25% 7.50%
Expected return on plan assets 8.50% 8.50% 8.50%
Medical cost trend rate (initial) 10.00% 5.25% 5.00%
Medical cost trend rate (ultimate) 5.25% 5.25% 5.00%
- --------------------------------------------------------------------------------
NOTE 14 - Commitments and Contingencies
As a result of issues generated in the course of daily business, we are
involved in legal, tax and regulatory proceedings before various courts,
regulatory commissions and governmental agencies, some of which involve
substantial amounts of money. We believe that the final disposition of these
proceedings, except as otherwise disclosed in this report and in the Notes to
our Financial Statements, will not have an adverse material effect on our
financial position, results of operations or liquidity.
51
Capital Expenditures
We estimate our capital expenditures over the next five years will be
approximately $2.0 billion to $2.5 billion, including allowance for funds used
during construction and capitalized interest. This estimate includes capital
expenditures for the construction and acquisition from an affiliate of
combustion turbine generating facilities and the replacement of steam generators
at our Callaway nuclear plant. In addition, this estimate includes capital
expenditures for transmission, distribution and other generation related
activities, as well as for compliance with new NOx (nitrogen oxide) control
regulations, as discussed later in this Note. Commitments of $2.25 billion to
$2.75 billion were agreed upon in relation to our recent Missouri electric rate
case settlement and to meet future rate-regulated generating capacity needs from
January 1, 2002 through June 30, 2006.
Our capital program is subject to periodic review and revision, and actual
capital costs may vary from the above estimate because of numerous factors.
These factors include changes in business conditions, acquisition of additional
generating assets, revised load growth estimates, changes in environmental
regulations, changes in our existing nuclear plant to meet new regulatory
requirements, increasing costs of labor, equipment and materials, and cost of
capital.
Subject to the receipt of required regulatory agency approvals, we intend
to purchase at net book value approximately 550 megawatts (approximately $260
million) of generating capacity from our non rate-regulated affiliate,
Generating Company, to comply with our recent Missouri electric rate case
settlement and to meet future rate-regulated generating capacity needs. In
addition, we intend to replace our retired 343 megawatts of rate-regulated
capacity at our Venice, Illinois plant (see Note 10 - Voluntary Retirement and
Other Restructuring Charges for further information) with the addition of 117
megawatts of capacity by 2005 and at least 330 megawatts of capacity by 2006 at
Venice. Total costs expected to be incurred for these units approximate $175
million of which approximately $100 million was committed as of December 31,
2002.
Fuel Purchase Commitments
To supply a portion of the fuel requirements of our generating plants, we
have entered into various long-term commitments for the procurement of fossil
and nuclear fuel. In addition, we have entered into various long-term
commitments for the purchase of electricity. Total estimated fuel purchase
commitments at December 31, 2002 were as follows:
- --------------------------------------------------------------------------------
Coal Gas Nuclear Electric Capacity
- --------------------------------------------------------------------------------
2003 $332 $30 $9 $22
2004 288 20 1 22
2005 151 19 9 22
2006 66 7 9 22
2007 24 1 1 22
Thereafter 70 - 20 22
- --------------------------------------------------------------------------------
Total $931 $77 $49 $132
- --------------------------------------------------------------------------------
52
Nuclear Plant Insurance Coverage
Our insurance coverage at our Callaway nuclear plant at December 31, 2002
was as follows:
- --------------------------------------------------------------------------------
Maximum
Assessments
Type and Source of Coverage Maximum For Single
Coverages Incidents
- --------------------------------------------------------------------------------
Public Liability:
American Nuclear Insurers $ 200 $ -
Pool Participation 9,250 88(a)
- --------------------------------------------------------------------------------
$9,450(b) $ 88
- --------------------------------------------------------------------------------
Nuclear Worker Liability:
American Nuclear Insurers $ 300(c) $ 4
- --------------------------------------------------------------------------------
Property Damage:
Nuclear Electric Insurance Ltd. $2,750(d) $ 21
- --------------------------------------------------------------------------------
Replacement Power:
Nuclear Electric Insurance Ltd. $ 490(e) $ 7
- --------------------------------------------------------------------------------
(a) Retrospective premium under the Price-Anderson liability provisions of the
Atomic Energy Act of 1954, as amended (Price-Anderson). This is subject to
retrospective assessment with respect to loss from an incident at any U.S.
reactor, payable at $10 million per year. Price-Anderson expired in August
2002 and renewal legislation is pending before Congress. Until
Price-Anderson is extended, its provisions continue to apply to existing
nuclear plants.
(b) Limit of liability for each incident under Price-Anderson.
(c) Industry limit for potential liability from workers claiming exposure to
the hazard of nuclear radiation.
(d) Includes premature decommissioning costs.
(e) Weekly indemnity of $3.5 million for 52 weeks which commences after the
first 8 weeks of an outage, plus $2.8 million per week for 110 weeks
thereafter.
- --------------------------------------------------------------------------------
Price-Anderson limits the liability for claims from an incident involving
any licensed U.S. nuclear facility. The limit is based on the number of licensed
reactors and is adjusted at least every five years based on the Consumer Price
Index. Utilities owning a nuclear reactor cover this exposure through a
combination of private insurance and mandatory participation in a financial
protection pool, as established by Price-Anderson.
If losses from a nuclear incident at Callaway exceed the limits of, or are
not subject to, insurance, or if coverage is not available, we will self-insure
the risk. Although we have no reason to anticipate a serious nuclear incident,
if one did occur, it could have a material, but indeterminable, adverse effect
on our financial position, results of operations or liquidity.
Leases
The following table summarizes our lease obligations at December 31, 2002:
- --------------------------------------------------------------------------------
Total Less than 1 - 3 4 - 5 After 5
1 year years years years
- --------------------------------------------------------------------------------
Capital leases (a) $ 216 $ 31 $ 70 $ 30 $ 85
Operating leases (b) 130 10 19 18 83
- --------------------------------------------------------------------------------
Total lease obligations $ 346 $ 41 $ 89 $ 48 $ 168
- --------------------------------------------------------------------------------
(a) See Note 6 - Nuclear Fuel Lease and Note 9 - Long-Term Debt and
Capitalization for further discussion.
(b) Amounts related to certain real estate leases and railroad licenses have
indefinite payment periods. The amounts for these items are included in the
less than 1 year, 1-3 years and 4-5 years. Amounts for after 5 years are
not included in the total amount due to the indefinite periods. The
estimated obligation for after 5 years is $1 million annually for both the
real estate leases and the railroad licenses.
We lease various facilities, office equipment, plant equipment and railcars
under operating leases. We also have capital leases relating to nuclear fuel
and combustion turbine generators As of December 31, 2002, rental expense,
included in other operations expenses, totaled approximately $24 million (2001 -
$19 million; 2000 - $23 million). See Note 6 - Nuclear Fuel Lease and Note 9 -
Long-Term Debt and Capitalization for further information.
53
Environmental Matters
We are subject to various environmental regulations by federal, state, and
local authorities. From the beginning phases of siting and development, to the
ongoing operation of existing or new electric generating, transmission, and
distribution facilities, our activities involve compliance with diverse laws and
regulations that address emissions and impacts to air and water, special,
protected, and cultural resources (such as wetlands, endangered species, and
archeological/historical resources), chemical and waste handling, and noise
impacts. Our activities require complex and often lengthy processes to obtain
approvals, permits, or licenses for new, existing, or modified facilities.
Additionally, the use and handling of various chemicals or hazardous materials
(including wastes) requires preparation of release prevention plans and
emergency response procedures. As new laws or regulations are promulgated, we
assess their applicability and implement the necessary modifications to our
facilities or their operations, as required. The more significant matters are
discussed below.
Clean Air Act
The Clean Air Act affects both existing generating facilities and new
projects. The Clean Air Act and many state laws require significant reductions
in SO2 (sulfur dioxide) and NOx emissions that result from burning fossil fuels.
The Clean Air Act also contains other provisions that could materially affect
some of our projects. Various provisions require permits, inspections, or
installation of additional pollution control technology or may require the
purchase of emission allowances. Certain of these provisions are described in
more detail below.
The Clean Air Act creates a marketable commodity called an SO2 "allowance."
All generating facilities over 25 megawatts that emit SO2 must obtain allowances
in order to operate after 1999. Each allowance gives the owner the right to emit
one ton of SO2. All existing facilities have been allocated allowances based on
a facility's past production and the statutory emission reduction goals. If
additional allowances are needed for new generating facilities, they can be
purchased from facilities having excess allowances or from SO2 allowance banks.
Our generating facilities comply with the SO2 allowance caps through the
purchase of allowances or use of low sulfur fuels. The additional costs of
obtaining allowances needed for future generation projects should not materially
affect our ability to build, acquire, and operate them.
The U.S. Environmental Protection Agency (EPA) issued a rule in October
1988 requiring 22 Eastern states and the District of Columbia to reduce
emissions of NOx in order to reduce ozone in the Eastern United States. Among
other things, the EPA's rule establishes an ozone season, which runs from May
through September, and a NOx emission budget for each state, including Illinois.
The EPA rule requires states to implement controls sufficient to meet their NOx
budget by May 31, 2004.
In February 2002, the EPA proposed similar rules for Missouri, where the
majority of our facilities are located. Assuming the Missouri rules are
ultimately finalized, we estimate approximately $170 million to comply with
these rules for NOx control on our generating system by 2006. This estimate
includes the assumption that the regulations will require the installation of
Selective Catalytic Reduction technology on some of our units, as well as
additional controls.
Under the Missouri regulatory program, we have applied for Early Reduction
NOx credits which would allow us to manage compliance strategies by either
purchasing NOx control equipment or utilizing credits. We are eligible for such
credits due to the current low NOx emission rates achieved on some of our
boilers due to past NOx control efforts.
On December 31, 2002, the EPA published in the Federal Register revisions
to the New Source Review (NSR) programs under the Clean Air Act, including
changes to the routine maintenance, repair and replacement exclusions. Various
Northeastern states have filed a petition with the United States District Court
for the District of Columbia challenging the legality of the revisions to the
NSR programs. It is likely that various industries and environmental groups will
seek to intervene in that challenge. At this time, we are unable to predict the
impact of this challenge on our future financial position, results of operation
or liquidity.
54
National Ambient Air Quality Standards
In July 1997, the EPA issued regulations revising the National Ambient Air
Quality Standards for ozone and particulate matter. The standards were
challenged by industry and some states, and arguments were eventually heard by
the U.S. Supreme Court. In February 2001, the Supreme Court upheld the standards
in large part, but remanded a number of significant implementation issues back
to the EPA for resolution. The EPA is currently working on a new rulemaking to
address the issues raised by the Supreme Court. New ambient standards may
require significant additional reductions in SO2 and NOx emissions from our
power plants by 2008. At this time, we are unable to predict the ultimate impact
of these revised air quality standards on our future financial condition,
results of operations or liquidity.
Mercury and Regional Haze Regulations
In December 1999, the EPA issued a decision to regulate mercury emissions
from coal-fired power plants by 2008. The EPA is scheduled to propose
regulations by 2004. These regulations have the potential to add significant
capital and/or operating costs to our generating systems after 2005. The EPA is
scheduled to issue Best Available Retrofit Technology (BART) guidelines to
address visibility impairment (so called "Regional Haze") across the United
States from sources of air pollution, including coal-fired power plants. The
guidelines are to be used by states to mandate pollution control measures for
SO2 and NOx emissions. These rules could also add significant pollution control
costs to our generating systems between 2008 and 2012.
Multi-Pollutant Legislation
The United States Congress has been working on legislation to consolidate
the numerous air pollution regulations facing the utility industry. This
"multi-pollutant" legislation is expected to be deliberated in Congress in 2003.
While the cost to comply with such legislation, if enacted, could be
significant, it is anticipated that the costs would be less than the combined
impact of the new National Ambient Air Quality Standards, mercury and Regional
Haze regulations, discussed above. Pollution control costs under such
legislation are expected to be incurred in phases from 2007 through 2015. At
this time, we are unable to predict the ultimate impact of the above expected
regulations and this legislation on our future financial condition, results of
operations, or liquidity; however, the impact could be material.
Future initiatives regarding greenhouse gas emissions and global warming
continue to be the subject of much debate. The related Kyoto Protocol was signed
by the United States but has since been rejected by the President, who instead
has asked for an 18% decrease in carbon intensity on a voluntary basis. Future
initiatives on this issue and the ultimate effects of the Kyoto Protocol and the
President's initiatives on us are unknown. As a result of our diverse fuel
portfolio, our contribution to greenhouse gases varies. Coal-fired power plants,
however, are significant sources of carbon dioxide emissions, a principal
greenhouse gas. Therefore, our compliance costs with any mandated federal
greenhouse gas reductions in the future could be material.
Clean Water Act
In April 2002, the EPA proposed rules under the Clean Water Act that
require that cooling water intake structures reflect the best technology
available for minimizing adverse environmental impacts. These rules pertain to
existing generating facilities that currently employ a cooling water intake
structure whose flow exceeds 50 million gallons per day. A final action on the
proposed rules is expected by August 2003. The proposed rule may require us to
install additional intake screens or other protective measures, as well as
extensive site specific study and monitoring requirements. There is also the
possibility that the proposed rules may lead to the installation of cooling
towers on some of our facilities. Our compliance costs associated with the final
rules are unknown, but could be material.
55
Remediation
We are involved in a number of remediation actions to clean up hazardous
waste sites as required by federal and state law. Such statutes require that
responsible parties fund remediation actions regardless of fault, legality of
original disposal, or ownership of a disposal site. We have been identified by
the federal or state governments as a potentially responsible party (PRP) at
several contaminated sites.
We own or are otherwise responsible for one former manufactured gas plant
(MGP) site in Illinois, 10 sites in Missouri and one site in Iowa. The ICC
permits the recovery of remediation and litigation costs associated with our
former MGP site located in Illinois from our Illinois electric and natural gas
utility customers through environmental adjustment clause rate riders. To be
recoverable, such costs must be prudently and properly incurred and are subject
to annual reconciliation review by the ICC. Unlike Illinois, we do not have in
effect in Missouri a rate rider mechanism which permits remediation costs
associated with MGP sites to be recovered from utility customers, and we do not
have any retail utility operations in Iowa. Because of the unknown and unique
characteristics of each site (such as amount and type of residues present,
physical characteristics of the site and the environmental risk), and uncertain
regulatory requirements, we are not able to determine the maximum liability for
the remediation of these sites. However, we have estimated that the liability is
at a minimum $13 million. Therefore, in accordance with generally accepted
accounting principles, we have recorded a liability of $13 million. At this
time, we are unable to determine what portion of these costs, if any, will be
eligible for recovery from insurance carriers.
In June 2000, the EPA notified us and numerous other companies that former
landfills and lagoons in Sauget, Illinois, may contain soil and groundwater
contamination. These sites are known as Sauget Area 1 and Sauget Area 2. From
approximately 1926 until 1976, we operated a power generating facility adjacent
to Sauget Area 2 and currently own and operate electric transmission and
distribution facilities in or near Sauget Areas 1 and 2.
In September 2000, the United States Department of Justice was granted
leave by the United States District Court - Southern District of Illinois to add
numerous additional parties, including us, to a preexisting lawsuit between the
government and others. The government seeks recovery of response costs under the
Comprehensive Environmental Response Compensation Liability Act of 1980 (CERCLA
or Superfund), incurred in connection with the remediation of Sauget Area 1. We
believe the final resolution of this lawsuit and the remediation of Sauget Area
1 will not have a material adverse effect on our financial position, results of
operations or liquidity.
In September 2001, the EPA proposed in the Federal Register that Sauget
Area 1 and Sauget Area 2 be listed on the National Priorities List (NPL). The
inclusion of a site on the NPL allows the EPA to access Superfund trust monies
to fund site remediations. With respect to Sauget Area 2, we have joined with
other PRPs to evaluate the extent of potential contamination. We are unable to
predict the ultimate impact of the Sauget Area 2 site on our financial position,
results of operations or liquidity.
In October 2002, we were included in a Unilateral Administrative Order
(UAO) list of potentially liable parties for groundwater contamination for a
portion of the Sauget Area 2 site. The UAO encompasses the groundwater
contamination releasing to the Mississippi River adjacent to a chemical
company's former chemical waste landfill and the resulting impact area in the
Mississippi River. We are being asked to participate in response activities that
involve the installation of a barrier wall with three recovery wells. The
projected cost for this remedy method is $26 million. In November 2002, we sent
a letter to the EPA asserting our defenses to the UAO and requested our removal
from the list of potentially responsible parties under the UAO.
In addition, our operations, or that of our predecessor companies, involve
the use, disposal and, in appropriate circumstances, the cleanup of substances
regulated under environmental protection laws. We are unable to determine the
impact these actions may have on our financial position, results of operations
or liquidity.
Labor Agreements
Certain employees of AmerenUE are represented by the International
Brotherhood of Electrical Workers (IBEW) and the International Union of
Operating Engineers (IUOE). These employees comprise approximately 75% of our
workforce. Labor agreements covering 10% of employees extend through 2006. Labor
agreements covering the remaining employees represented by IBEW and IUOE expire
by June 2003. We cannot predict what issues may be raised by the collective
bargaining units and, if raised, whether negotiations concerning such issues
will be successfully concluded.
56
Asbestos-Related Litigation
We, along with Ameren and AmerenCIPS, have been named, along with numerous
other parties, in a number of lawsuits which have been filed by certain
plaintiffs claiming varying degrees of injury from asbestos exposure. Most have
been filed in the Circuit Court of Madison County, Illinois. The number of total
defendants named in each case is significant with as many as 110 parties named
in a case to as few as six. However, the average number of parties is 54 in the
cases that are currently pending.
The claims filed against the Ameren companies allege injury from asbestos
exposure during the plaintiffs' activities at the Ameren companies' electric
generating plants (in the case of AmerenCIPS, its former plants are now owned by
Generating Company). In each lawsuit, the plaintiff seeks unspecified damages in
excess of $50,000, which typically would be shared among the named defendants. A
total of 121 such lawsuits have been filed against the Ameren companies of which
45 are pending, 14 have been settled and 62 have been dismissed.
Regulation
Regulatory changes enacted and being considered at the federal and state
levels continue to change the structure of the utility industry and utility
regulation, as well as encourage increased competition. At this time, we are
unable to predict the impact of these changes on our future financial condition,
results of operations or liquidity. See Note 2 - Rate and Regulatory Matters for
further information.
NOTE 15 - Callaway Nuclear Plant
Under the Nuclear Waste Policy Act of 1982, the Department of Energy (DOE)
is responsible for the permanent storage and disposal of spent nuclear fuel. The
DOE currently charges one mill, or 1/10 of one cent, per nuclear-generated
kilowatthour sold for future disposal of spent fuel. Pursuant to this Act, we
collect one mill from our customers for each kilowatthour of electricity that we
generate from Callaway. Electric utility rates charged to customers provide for
recovery of such costs. The DOE is not expected to have its permanent storage
facility for spent fuel available until at least 2015. We have sufficient
storage capacity at Callaway until 2020 and have the capability for additional
storage capacity through the licensed life of the plant. The delayed
availability of the DOE's disposal facility is not expected to adversely affect
the continued operation of Callaway through its currently licensed life.
Electric utility rates charged to customers provide for recovery of
Callaway decommissioning costs over the life of the plant, based on an assumed
40-year life, ending with expiration of the plant's operating license in 2024.
The Callaway site is assumed to be decommissioned based on immediate
dismantlement method and removal from service. Decommissioning costs, including
decontamination, dismantling and site restoration, are estimated to be $515
million in current year dollars and are expected to escalate approximately 4%
per year through the end of decommissioning activity in 2033. Decommissioning
costs are charged to depreciation expense over Callaway's service life and
amounted to approximately $7 million in each of the years 2002, 2001 and 2000.
Every three years, the MoPSC and ICC require us to file updated cost studies for
decommissioning Callaway, and electric rates may be adjusted at such times to
reflect changed estimates. The latest studies were filed in 2002. Costs
collected from customers are deposited in an external trust fund to provide for
Callaway's decommissioning. Fund earnings are expected to average approximately
9.5% annually through the date of decommissioning. If the assumed return on
trust assets is not earned, we believe it is probable that any such earnings
deficiency will be recovered in rates. Trust fund earnings, net of expenses,
appear on the balance sheet as increases in the nuclear decommissioning trust
fund and in the accumulated provision for nuclear decommissioning.
The FASB issued SFAS 143 (see Note 1 - Summary of Significant Accounting
Policies for further information), which will result in a change to our
recognition, measurement, and classification of nuclear decommissioning costs.
57
NOTE 16 - Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and Temporary Investments/Short-Term Borrowings
The carrying amounts approximate fair value because of the short-term
maturity of these instruments.
Nuclear Decommissioning Trust Fund
The fair value is estimated based on quoted market prices for securities.
Preferred Stock
The fair value is estimated based on the quoted market prices for the same
or similar issues.
Long-Term Debt
The fair value is estimated based on the quoted market prices for same or
similar issues or on the current rates offered to AmerenUE for debt of
comparable maturities.
Derivative Financial Instruments
Market prices used to determine fair value are based on management's
estimates, which take into consideration factors like closing exchange prices,
over-the-counter prices, and time value of money and volatility factors. All
derivative financial instruments are carried at fair value on the balance sheet.
Carrying amounts and estimated fair values of our financial instruments at
December 31, 2002 and 2001 were as follows:
2002 2001
- --------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- --------------------------------------------------------------------------------
Long-term debt (including current portion) $1,817 $1,878 $1,691 $1,727
Preferred stock 113 98 155 138
- --------------------------------------------------------------------------------
We have investments in debt and equity securities that are held in trust
funds for the purpose of funding the nuclear decommissioning of our Callaway
site. See Note 15 - Callaway Nuclear Plant for further information. We have
classified these investments in debt and equity securities as available for sale
and have recorded all such investments at their fair market value at December
31, 2002 and 2001. Investments by the nuclear decommissioning trust funds are
allocated 60% to 65% to equity securities with the balance invested in fixed
income securities. Fixed income investments are limited to U.S. government or
agency securities, municipal bonds or investment-grade corporate securities. The
proceeds from the sale of investments were $141 million in 2002 (2001 - $230
million; 2000 - $61 million). Using the specific identification method to
determine cost, the gross realized gains on those sales were approximately $35
million for 2002 (2001 - $4 million; 2000 - $1 million). Net realized and
unrealized gains and losses are reflected in the accumulated provision for
nuclear decommissioning on the balance sheet, which is consistent with the
method we use to account for the decommissioning costs recovered in rates. Gains
or losses on assets in the trusts could result in lower or higher funding
requirements for decommissioning costs, which we believe would be reflected in
electric rates paid by customers.
Costs and fair values of investments in debt and equity securities in the
nuclear decommissioning trust fund at December 31, 2002 and 2001 were as
follows:
- --------------------------------------------------------------------------------
2002 Gross Unrealized Gross Unrealized
Security Type Cost Gain (Loss) Fair Value
- --------------------------------------------------------------------------------
Debt securities $ 57 $ 4 $ - $ 61
Equity securities 89 17 - 106
Cash equivalents 5 - 5
- --------------------------------------------------------------------------------
$ 151 $ 21 $ - $ 172
- --------------------------------------------------------------------------------
58
- --------------------------------------------------------------------------------
2001 Gross Unrealized Gross Unrealized
Security Type Cost Gain (Loss) Fair Value
- --------------------------------------------------------------------------------
Debt securities $ 57 $ 2 $ - $ 59
Equity securities 78 44 - 122
Cash equivalents 6 - - 6
- --------------------------------------------------------------------------------
$141 $ 46 $ - $ 187
- --------------------------------------------------------------------------------
The contractual maturities of investments in debt securities at December
31, 2002, were as follows:
- --------------------------------------------------------------------------------
Cost Fair Value
- --------------------------------------------------------------------------------
Less than 5 years $22 $23
5 years to 10 years 20 21
Due after 10 years 15 17
- --------------------------------------------------------------------------------
$57 $61
- --------------------------------------------------------------------------------
NOTE 17 - Subsequent Events
CILCORP Acquisition
On January 31, 2003, after receipt of the necessary regulatory agency
approvals and clearance from the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act, Ameren completed its acquisition
of all of the outstanding common stock of CILCORP from AES. CILCORP is the
parent company of Peoria, Illinois-based Central Illinois Light Company, which
operated as CILCO. With the acquisition, CILCO became an Ameren subsidiary, but
remains a separate utility company, operating as AmerenCILCO. On February 4,
2003, Ameren also completed its acquisition of AES Medina Valley Cogen (No. 4),
LLC, which indirectly owns a 40 megawatt, gas-fired electric co-generation
plant. With the acquisition, Medina Valley became a wholly-owned subsidiary of
Resources Company and was renamed as AmerenEnergy Medina Valley Cogen (No. 4),
LLC. The CILCORP and AmerenEnergy Medina Valley Cogen (No. 4), LLC financial
statements will be included in Ameren's consolidated financial statements
effective with the January and February 2003 acquisition dates.
Ameren acquired CILCORP to complement its existing Illinois gas and
electric operations. The purchase includes CILCO's rate-regulated electric and
natural gas businesses in Illinois serving approximately 200,000 and 205,000
customers, respectively, of which approximately 150,000 are combination electric
and gas customers. CILCO's service territory is contiguous to Ameren's service
territory. CILCO also has a non rate-regulated electric and gas marketing
business principally focused in the Chicago, Illinois region. Finally, the
purchase includes approximately 1,200 megawatts of largely coal-fired generating
capacity, most of which is expected to be non rate-regulated in 2003.
The total purchase price was approximately $1.4 billion and included the
assumption of CILCORP and Medina Valley debt and preferred stock at closing of
approximately $900 million, with the balance of the purchase price of
approximately $500 million paid with cash on hand. The purchase price is subject
to certain adjustments for working capital and other changes pending the
finalization of CILCORP's closing balance sheet. The cash component of the
purchase price came from Ameren's issuances in September 2002 of 8.05 million
common shares and in early 2003 of 6.325 million common shares.
Debt Financing
In August 2002, a shelf registration statement filed by us with the SEC on
Form S-3 was declared effective. This statement authorized the offering from
time to time of up to $750 million of various forms of long-term debt and trust
preferred securities to refinance existing debt and preferred stock and for
general corporate purposes, including the repayment of short-term debt incurred
to finance construction expenditures and other working capital needs. On March
10, 2003, we issued, pursuant to the shelf registration referred to above, $184
million of 5.50% Senior Secured Notes due March 15, 2034. We expect to use the
net proceeds of the issuance of approximately $180 million, along with other
funds to redeem prior to maturity $104 million principal amount of outstanding
8.25% first mortgage bonds due October 15, 2022, at a redemption price of
103.61% of par, plus accrued interest, and to repay short-term debt incurred to
pay at maturity $75 million principal amount of 8.33% first mortgage bonds that
were due in December 2002. We may sell all, or a portion of, the remaining
registered securities under the shelf registration statement if warranted by
market conditions and our capital requirements. Any offer and sale will be
59
made only by means of a prospectus meeting the requirements of the Securities
Act of 1933 and the rules and regulations thereunder. At March 10, 2003, the
amount remaining on the shelf registration statement was $393 million.
SELECTED QUARTERLY INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
Net Income
Available to
Quarter Ended Operating Operating Net Common
Revenues (a) Income Income Shareholder
- --------------------------------------------------------------------------------
March 31, 2002 $ 584 $ 72 $ 51 $ 49
March 31, 2001 610 63 38 36
June 30, 2002 672 136 107 105
June 30, 2001 703 106 82 80
September 30, 2002 853 231 206 204
September 30, 2001 920 221 204 201
December 31, 2002 (b) 541 9 (20) (22)
December 31, 2001 553 67 50 48
- --------------------------------------------------------------------------------
(a) Revenues were netted with costs upon adoption of EITF 02-3 and the
rescission of EITF 98-10. See Note 1 - Summary of Significant Accounting
Policies for further information. The amount netted for each quarter is as
follows: 2002 - $150 in first quarter, $78 in second quarter, $117 in third
quarter, and $113 in fourth quarter (2001 - $56 in first quarter, $80 in
second quarter, $134 in third quarter, and $122 in fourth quarter).
(b) Amounts include Voluntary Retirement and Other Restructuring Charges of $65
million ($41 million, net of taxes). See Note 10 - Voluntary Retirement and
Other Restructuring Charges for further information.
Other impacts to quarterly earnings are due to the effect of weather on sales
and other factors, including the 2002 Missouri rate order, that are
characteristic of public utility operations.
60
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning directors required to be reported by this item is
included under Item (1): Election of Directors in our 2003 definitive proxy
statement filed pursuant to Regulation 14A and is incorporated herein by
reference.
Information concerning executive officers required by this item is reported
in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Information required to be reported by this item is included under
Executive Compensation in our 2003 definitive proxy statement filed pursuant to
Regulation 14A and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required to be reported by this item is included under Security
Ownership in our 2003 definitive proxy statement filed pursuant to Regulation
14A and is incorporated herein by reference.
We do not have any equity compensation plans under which our equity
securities are authorized for issuance.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required to be reported by this item is included under Item
(1): Election of Directors in our 2003 definitive proxy statement filed pursuant
to Regulation 14A and is incorporated herein by reference.
ITEM 14. CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as
amended. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective in timely alerting them to material information relating to AmerenUE,
which is required to be included in our periodic SEC filings.
There have been no significant changes in our internal controls or in other
factors which could significantly affect internal controls subsequent to the
date we carried out our evaluation.
61
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) Financial Statements:
(1) Financial Statements of Union Electric Company which are required to be
filed by Item 8 of this report.
Pages Herein
------------
Report of Independent Accountants................................ 31
Balance Sheet - December 31, 2002 and 2001....................... 32
Statement of Income - Years Ended December 31, 2002, 2001, and
2000.......................................................... 33
Statement of Cash Flows - Years Ended December 31, 2002, 2001,
and 2000...................................................... 34
Statement of Common Stockholder's Equity
- Years Ended December 31, 2002, 2001, 2000...................... 35
Notes to Financial Statements.................................... 36
(2) Financial Statement Schedule
The following schedule, for the years ended December 31, 2002,
2001 and 2000, should be read in conjunction with the aforementioned
financial state- ments (schedules not included have been omitted
because they are not applicable or the required data is shown in the
aforementioned financial statements).
Pages Herein
------------
Report of Independent Accountants on Financial
Statement Schedule.............................................. 31
Valuation and Qualifying Accounts (Schedule II).................. 66
(3) Exhibits filed with this report are listed on the Exhibit Index:
(B) Reports on Form 8-K.
We filed no reports on Form 8-K during
the fourth quarter of 2002.
(C)Exhibits.
Exhibit No. Description
----------- -----------
3.1(i) Restated Articles of Incorporation of Union Electric Company
d/b/a AmerenUE (AmerenUE), as filed with the Secretary of
State of the State of Missouri (1993 Form 10-K, Exhibit
3(i)).
3.2(ii) By-Laws of AmerenUE as amended to August 23, 2001 (September
30, 2001 Form 10-Q, Exhibit 3(ii)).
4.2 Order of the Securities and Exchange Commission dated
October 16, 1945 in File No. 70-1154 permitting the issue of
Preferred Stock, $3.70 Series (File No. 2-27474, Exhibit
3-E).
4.3 Order of the Securities and Exchange Commission dated April
30, 1946 in File No. 70-1259 permitting the issue of
Preferred Stock, $3.50 Series (File No. 2-27474, Exhibit
3-F).
4.4 Order of the Securities and Exchange Commission dated
October 20, 1949 in File No. 70-2227 permitting the issue of
Preferred Stock, $4.00 Series (File No. 2-27474, Exhibit
3-G).
62
Exhibit No. Description
----------- -----------
4.5 Indenture of Mortgage and Deed of Trust of AmerenUE dated
June 15, 1937 (AmerenUE Mortgage), as amended May 1,
1941, and Second Supplemental Indenture dated May1, 1941
(File No. 2-4940, Exhibit B-1).
4.6 Supplemental Indentures to the AmerenUE Mortgage
Dated as of File Reference Exhibit No.
----------- -------------- ----------
April 1, 1971 Form 8-K, April 1971 6
February 1, 1974 Form 8-K, February 1974 3
July 7, 1980 2-69821 4.6
December 1, 1991 33-45008 4.4
December 4, 1991 33-45008 4.5
January 1, 1992 Form 10-K, 1991 4.6
October 1, 1992 Form 10-K, 1992 4.6
December 1, 1992 Form 10-K, 1992 4.7
February 1, 1993 Form 10-K, 1992 4.8
May 1, 1993 Form 10-K, 1993 4.6
August 1, 1993 Form 10-K, 1993 4.7
October 1, 1993 Form 10-K, 1993 4.8
January 1, 1994 Form 10-K, 1993 4.9
February 1, 2000 Form 10-K, 2000 4.1
August 15, 2002 Form 8-K, August 22, 2002 4.3
March 5, 2003 Form 8-K, March 10, 2003 4.4
4.7 Indenture (for unsecured subordinated debt securities) of
AmerenUE dated as of December 1, 1996 (1996 Form 10-K,
Exhibit 4.36).
4.8 Loan Agreement dated as of December 1, 1991 between the
State Environmental Improvement and Energy Resources
Authority and AmerenUE, together with Indenture of Trust
dated as of December 1, 1991 between the Authority and
UMB Bank, N.A. as successor trustee (1992 Form 10-K, Exhibit
4.37).
4.9 Loan Agreement dated as of December 1, 1992, between the
State Environmental Improvement and Energy Resources
Authority and AmerenUE, together with Indenture of Trust
dated as of December 1, 1992 between the Authority and
UMB Bank, N.A. as successor trustee (1992 Form 10-K, Exhibit
4.38).
4.10 Fuel Lease dated as of February 24, 1981 between AmerenUE,
as lessee, and Gateway Fuel Company, as lessor, covering
nuclear fuel (1980 Form 10-K, Exhibit 10.20).
4.11 Amendments to Fuel Lease dated as of May 8, 1984 and October
15, 1984, respectively, between AmerenUE, as lessee, and
Gateway Fuel Company, as lessor, covering nuclear fuel
(Registration No. 2-96198, Exhibit 4.28).
4.12 Amendment to Fuel Lease dated as of October 15, 1986 between
AmerenUE, as lessee, and Gateway Fuel Company, as lessor,
covering nuclear fuel (September 30, 1986 Form 10-Q, Exhibit
4.3).
4.13 Series 1998A Loan Agreement dated as of September 1, 1998
between The State Environmental Improvement and Energy
Resources Authority of the State of Missouri and AmerenUE
(September 30, 1998 Form 10-Q, Exhibit 4.28).
4.14 Series 1998B Loan Agreement dated as of September 1, 1998
between The State Environmental Improvement and Energy
Resources Authority of the State of Missouri and AmerenUE
(September 30, 1998 Form 10-Q, Exhibit 4.29).
4.15 Series 1998C Loan Agreement dated as of September 1, 1998
between The State Environmental Improvement and Energy
Resources Authority of the State of Missouri and AmerenUE
(September 30, 1998 Form 10-Q, Exhibit 4.30).
63
Exhibit No. Description
----------- -----------
4.16 Indenture dated as of August 15, 2002, from AmerenUE to The
Bank of New York, as Trustee, relating to senior secured
debt securities (including the forms of senior secured debt
securities as exhibits) (Form 8-K dated August 22, 2002,
Exhibit 4.1).
4.17 AmerenUE company order dated August 22, 2002 establishing
the 5.25% Senior Secured Notes due 2012 (Form 8-K dated
August 22, 2002, Exhibit 4.2).
4.18 AmerenUE company order dated March 10, 2003 establishing the
5.50% Senior Secured Notes due 2034 (Form 8-K dated March
10, 2003, Exhibit 4.2).
10.1 * Ameren Corporation (Ameren) Long-Term Incentive Plan of 1998
(Ameren' 1998 Form 10-K, Exhibit 10.1).
10.2 * Ameren Change of Control Severance Plan (Ameren's 1998 Form
10-K, Exhibit 10.2).
10.3 * Ameren Deferred Compensation Plan for Members of the Ameren
Leadership Team as amended and restated effective January 1,
2001 (Ameren's 2000 Form 10-K, Exhibit 10.1).
10.4 * Ameren Deferred Compensation Plan for Members of the Board
of Directors (Ameren's 1998 Form 10-K, Exhibit 10.4).
10.5 * Ameren Executive Incentive Compensation Program Elective
Deferral Provisions for Members of the Ameren Leadership
Team as amended and restated effective January 1, 2001
(Ameren's 2000 Form 10-K, Exhibit 10.2).
10.6 Amended Joint Dispatch Agreement among AmerenUE,
AmerenEnergy Generating Company (Generating Company) and
Central Illinois Public Service Company d/b/a AmerenCIPS
(File No. 333-56594, Exhibit 10.4).
10.7 Power Sales Agreement between AmerenEnergy Marketing Company
(Marketing Company) and AmerenUE (September 30, 2001
Generating Company Form 10-Q, Exhibit 10.1).
10.8 Power Sales Agreement between Marketing Company and AmerenUE
(March 31, 2002 Generating Company Form 10-Q, Exhibit 10.1).
10.9 ** Lease Agreement dated as of December 1, 2002 between the
City of Bowling Green, Missouri, as Lessor, and AmerenUE, as
Lessee.
10.10 ** Trust Indenture dated as of December 1, 2002 between the
City of Bowling Green, Missouri and Commerce Bank, N.A. as
Trustee.
10.11 ** Bond Purchase Agreement dated as of December 20, 2002
between the City of Bowling Green, Missouri and AmerenUE as
purchaser.
10.12 Amended and Restated Appendix I ITC Agreement dated
February 14, 2003 between the Midwest Independent
Transmission System Operator, Inc. (Midwest ISO) and
GridAmerica LLC (GridAmerica) (Ameren 2002 Form 10-K,
Exhibit 10.17).
10.13 Amended and Restated Limited Liability Company Agreement of
GridAmerica dated February 14, 2003 (Ameren 2002 Form 10-K,
Exhibit 10.18).
10.14 Amended and Restated Master Agreement by and among
GridAmerica, GridAmerica Holdings Inc., GridAmerica
Companies and National Grid USA dated February 14, 2003
(Ameren 2002 Form 10-K, Exhibit 10.9).
10.15 Amended and Restated Operation Agreement by and among
AmerenUE, Central Illinois Public Service Company d/b/a
AmerenCIPS, American Transmission Systems, Inc., Northern
Indiana Public Service Company and GridAmerica dated
February 14, 2003 (Ameren 2002 Form 10-K, Exhibit 10.10).
64
Exhibit No. Description
---------- -----------
12.1 ** Statement of Computation of Ratio of Earnings to Fixed
Charges and Preferred Stock Dividend Requirements.
23.1 ** Consent of Independent Accountants
99.1 Stipulation and Agreement dated July 15, 2002 in Missouri
Public Service Commission (as No. EC-2002-1 (earnings
complaint case against AmerenUE) File Nos. 333-87506 and
333-87506-01, Exhibit 99.1).
99.2 ** Certificate of Chief Executive Officer required by Section
906 of the Sarbanes-Oxley Act of 2002.
99.3 ** Certificate of Chief Financial Officer required by Section
906 of the Sarbanes-Oxley Act of 2002.
__________________
* Management compensatory plan or arrangement
** Filed herewith.
Exhibits Available Upon Request
-------------------------------
The following instrument defining the rights of holders of certain
unregistered long-term debt of AmerenUE has not been filed with the SEC but will
be furnished upon request.
- Loan Agreement dated as of March 1, 2000, between AmerenUE and
the State Environmental Improvement and Energy Resources
Authority of the State of Missouri (EIERA) in connection with the
EIERA's $186,500,000 Environmental Improvement Revenue Refunding
Bonds (AmerenUE Project) ($63,500,000 Series 2000A, $63,000,000
Series 2000B, and $60,000,000 Series 2000C) due March 1, 2035.
Note: Reports of Ameren Corporation on Forms 8-K, 10-Q and 10-K are on file
with the SEC under File Number 1-14756.
Reports of Central Illinois Public Service Company on Forms 8-K, 10-Q
and 10-K are on file with the SEC under File Number 1-3672.
Reports of AmerenEnergy Generating Company on Forms 8-K, 10-Q and 10-K
are on file with the SEC under File Number 333-56594.
Reports of CILCORP Inc. on Forms 8-K, 10-Q and 10-K are on file with
the SEC under File Number 1-8946.
Reports of Central Illinois Light Company on Forms 8-K, 10-Q and 10-K
are on file with the SEC under File Number 1-2732.
65
UNION ELECTRIC COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
Col. A Col. B Col. C Col. D Col. E
------ ------ ----- ------ ------
Additions
---------------------------
(1) (2)
Balance at Charged to Balance at
beginning costs and Charged to end of
of period expenses other accounts Deductions period
--------- -------- -------------- ---------- ------
Description (Note)
-----------
Year ended December 31, 2002
Reserves deducted in the balance sheet from
assets to which they apply:
Allowance for doubtful accounts $7,286,214 $14,506,000 $15,702,485 $6,089,729
========== =========== =========== ==========
Year ended December 31, 2001
Reserves deducted in the balance sheet from
assets to which they apply:
Allowance for doubtful accounts $6,251,242 $17,509,000 $16,474,028 $7,286,214
========== =========== =========== ==========
Year ended December 31, 2000
Reserves deducted in the balance sheet from
assets to which they apply:
Allowance for doubtful accounts $5,308,463 $8,440,000 $7,497,221 $6,251,242
========== ========== ========== ==========
Note: Uncollectible accounts charged off, less recoveries.
66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNION ELECTRIC COMPANY
(Registrant)
/s/ Charles W. Mueller
Date March 24, 2003 By -------------------------
Charles W. Mueller
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Charles W. Mueller
- ------------------------------ Chairman, Chief Executive March 24, 2003
Charles W. Mueller Officer and Director
(Principal Executive Officer)
/s/ Gary L. Rainwater
- ------------------------------ President, Chief Operating March 24, 2003
Gary L. Rainwater Officer and Director
/s/ Warner L. Baxter
- ------------------------------ Senior Vice President and March 24, 2003
Warner L. Baxter Director
(Principal Financial Officer)
/s/ Martin J. Lyons
- ------------------------------ Vice President and Controller March 24, 2003
Martin J. Lyons (Principal Accounting Officer)
/s/ Paul A. Agathen
- ------------------------------ Senior Vice President and March 24, 2003
Paul A. Agathen Director
/s/ Thomas R. Voss
- ------------------------------ Senior Vice President and March 24, 2003
Thomas R. Voss Director
CERTIFICATIONS
I, Charles W. Mueller, certify that:
1. I have reviewed this annual report on Form 10-K of Union Electric
Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
67
CERTIFICATIONS (CONTINUED)
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 24, 2003 /s/ Charles W. Mueller
-----------------------------
Charles W. Mueller
Chief Executive Officer
I, Warner L. Baxter, certify that:
1. I have reviewed this annual report on Form 10-K of Union Electric
Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
68
CERTIFICATIONS (CONTINUED)
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 24, 2003 /s/ Warner L. Baxter
-----------------------------
Warner L. Baxter
Chief Financial Officer
69
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3.1(i) Restated Articles of Incorporation of Union Electric
Company d/b/a AmerenUE (AmerenUE), as filed with the
Secretary of State of the State of Missouri (1993 Form
10-K, Exhibit 3(i)).
3.2(ii) By-Laws of AmerenUE as amended to August 23, 2001
(September
30, 2001 Form 10-Q, Exhibit 3(ii)).
4.2 Order of the Securities and Exchange Commission dated
October 16, 1945 in File No. 70-1154 permitting the issue
of Preferred Stock, $3.70 Series (File No. 2-27474, Exhibit
3-E).
4.3 Order of the Securities and Exchange Commission dated April
30, 1946 in File No. 70-1259 permitting the issue of
Preferred Stock, $3.50 Series (File No. 2-27474, Exhibit
3-F).
4.4 Order of the Securities and Exchange Commission dated
October 20, 1949 in File No. 70-2227 permitting the issue
of Preferred Stock, $4.00 Series (File No. 2-27474, Exhibit
3-G).
4.5 Indenture of Mortgage and Deed of Trust of AmerenUE dated
June 15, 1937 (AmerenUE Mortgage), as amended May 1, 1941,
and Second Supplemental Indenture dated May 1, 1941 (File
No. 2-4940, Exhibit B-1).
4.6 Supplemental Indentures to the AmerenUE Mortgage
Dated as of File Reference Exhibit No.
----------- -------------- -----------
April 1, 1971 Form 8-K, April 1971 6
February 1, 1974 Form 8-K, February 1974 3
July 7, 1980 2-69821 4.6
December 1, 1991 33-45008 4.4
December 4, 1991 33-45008 4.5
January 1, 1992 Form 10-K, 1991 4.6
October 1, 1992 Form 10-K, 1992 4.6
December 1, 1992 Form 10-K, 1992 4.7
February 1, 1993 Form 10-K, 1992 4.8
May 1, 1993 Form 10-K, 1993 4.6
August 1, 1993 Form 10-K, 1993 4.7
October 1, 1993 Form 10-K, 1993 4.8
January 1, 1994 Form 10-K, 1993 4.9
February 1, 2000 Form 10-K, 2000 4.1
August 15, 2002 Form 8-K, August 22, 2002 4.3
March 5, 2003 Form 8-K, March 10, 2003 4.4
4.7 Indenture (for unsecured subordinated debt securities) of
AmerenUE dated as of December 1, 1996 (1996 Form 10-K,
Exhibit 4.36).
4.8 Loan Agreement dated as of December 1, 1991 between the
State Environmental Improvement and Energy Resources
Authority and AmerenUE, together with Indenture of Trust
dated as of December 1, 1991 between the Authority and
UMB Bank, N.A. as successor trustee (1992 Form 10-K, Exhibit
4.37).
4.9 Loan Agreement dated as of December 1, 1992, between the
State Environmental Improvement and Energy Resources
Authority and AmerenUE, together with Indenture of Trust
dated as of December 1, 1992 between the Authority and
UMB Bank, N.A. as successor trustee (1992 Form 10-K, Exhibit
4.38).
4.10 Fuel Lease dated as of February 24, 1981 between AmerenUE,
as lessee, and Gateway Fuel Company, as lessor, covering
nuclear fuel (1980 Form 10-K, Exhibit 10.20).
70
Exhibit No. Description
---------- -----------
4.11 Amendments to Fuel Lease dated as of May 8, 1984 and October
15, 1984, respectively, between AmerenUE, as lessee, and
Gateway Fuel Company, as lessor, covering nuclear fuel
(Registration No. 2-96198, Exhibit 4.28).
4.12 Amendment to Fuel Lease dated as of October 15, 1986 between
AmerenUE, as lessee, and Gateway Fuel Company, as lessor,
covering nuclear fuel (September 30, 1986 Form 10-Q,
Exhibit 4.3).
4.13 Series 1998A Loan Agreement dated as of September 1, 1998
between The State Environmental Improvement and Energy
Resources Authority of the State of Missouri and AmerenUE
(September 30, 1998 Form 10-Q, Exhibit 4.28).
4.14 Series 1998B Loan Agreement dated as of September 1, 1998
between The State Environmental Improvement and Energy
Resources Authority of the State of Missouri and AmerenUE
(September 30, 1998 Form 10-Q, Exhibit 4.29).
4.15 Series 1998C Loan Agreement dated as of September 1, 1998
between The State Environmental Improvement and Energy
Resources Authority of the State of Missouri and AmerenUE
(September 30, 1998 Form 10-Q, Exhibit 4.30).
4.16 Indenture dated as of August 15, 2002, from AmerenUE to The
Bank of New York, as Trustee, relating to senior secured
debt securities (including the forms of senior secured
debt securities as exhibits) (Form 8-K dated August 22,
2002, Exhibit 4.1).
4.17 AmerenUE company order dated August 22, 2002 establishing
the 5.25% Senior Secured Notes due 2012 (Form 8-K dated
August 22, 2002, Exhibit 4.2).
4.18 AmerenUE company order dated March 10, 2003 establishing the
5.50% Senior Secured Notes due 2034 (Form 8-K dated March
10, 2003, Exhibit 4.2).
10.1 * Ameren Corporation (Ameren) Long-Term Incentive Plan of 1998
(Ameren's 1998 Form 10-K, Exhibit 10.1).
10.2 * Ameren Change of Control Severance Plan (Ameren's 1998 Form
10-K, Exhibit 10.2).
10.3 * Ameren Deferred Compensation Plan for Members of the Ameren
Leadership Team as amended and restated effective January 1,
2001 (Ameren's 2000 Form 10-K, Exhibit 10.1).
10.4 * Ameren Deferred Compensation Plan for Members of the Board
of Directors (Ameren's 1998 Form 10-K, Exhibit 10.4).
10.5 * Ameren Executive Incentive Compensation Program Elective
Deferral Provisions for Members of the Ameren Leadership
Team as amended and restated effective January 1, 2001
(Ameren's 2000 Form 10-K, Exhibit 10.2).
10.6 Amended Joint Dispatch Agreement among AmerenUE,
AmerenEnergy Generating Company (Generating Company) and
Central Illinois Public Service Company d/b/a AmerenCIPS
(File No. 333-56594, Exhibit 10.4).
10.7 Power Sales Agreement between AmerenEnergy Marketing Company
(Marketing Company) and AmerenUE (September 30, 2001
Generating Company Form 10-Q, Exhibit 10.1).
10.8 Power Sales Agreement between Marketing Company and AmerenUE
(March 31, 2002 Generating Company Form 10-Q, Exhibit 10.1).
10.9 ** Lease Agreement dated as of December 1, 2002 between the
City of Bowling Green, Missouri, as Lessor, and AmerenUE, as
Lessee.
71
Exhibit No. Description
----------- -----------
10.10 ** Trust Indenture dated as of December 1, 2002 between the
City of Bowling Green, Missouri and Commerce Bank, N.A. as
Trustee.
10.11 ** Bond Purchase Agreement dated as of December 20, 2002
between the City of Bowling Green, Missouri and AmerenUE as
purchaser.
10.12 Amended and Restated Appendix I ITC Agreement dated
February 14, 2003 between the Midwest Independent
Transmission System Operator, Inc. (Midwest ISO) and
GridAmerica LLC (GridAmerica) (Ameren 2002 Form 10-K,
Exhibit 10.17).
10.13 Amended and Restated Limited Liability Company Agreement of
GridAmerica dated February 14, 2003 (Ameren 2002 Form 10-K,
Exhibit 10.18).
10.14 Amended and Restated Master Agreement by and among
GridAmerica, GridAmerica Holdings Inc., GridAmerica
Companies and National Grid USA dated February 14, 2003
(Ameren 2002 Form 10-K, Exhibit 10.9).
10.15 Amended and Restated Operation Agreement by and among
AmerenUE, Central Illinois Public Service Company d/b/a
AmerenCIPS, American Transmission Systems, Inc., Northern
Indiana Public Service Company and GridAmerica dated
February 14, 2003 (Ameren 2002 Form10-K, Exhibit 10.10).
12.1 ** Statement of Computation of Ratio of Earnings to Fixed
Charges and Preferred Stock Dividend Requirements.
23.1 ** Consent of Independent Accountants
99.1 Stipulation and Agreement dated July 15, 2002 in Missouri
Public Service Commission (as No. EC-2002-1 (earnings
complaint case against AmerenUE) File Nos. 333-87506 and
333-87506-01, Exhibit 99.1).
99.2 ** Certificate of Chief Executive Officer required by Section
906 of the Sarbanes-Oxley Act of 2002.
99.3 ** Certificate of Chief Financial Officer required by Section
906 of the Sarbanes-Oxley Act of 2002.
__________________
* Management compensatory plan or arrangement
** Filed herewith.
Exhibits Available Upon Request
--------------------------------
The following instrument defining the rights of holders of certain
unregistered long-term debt of AmerenUE has not been filed with the SEC but will
be furnished upon request.
- Loan Agreement dated as of March 1, 2000, between AmerenUE and
the State Environmental Improvement and Energy Resources
Authority of the State of Missouri (EIERA) in connection with the
EIERA's $186,500,000 Environmental Improvement Revenue Refunding
Bonds (AmerenUE Project) ($63,500,000 Series 2000A, $63,000,000
Series 2000B, and $60,000,000 Series 2000C) due March 1, 2035.
Note: Reports of Ameren Corporation on Forms 8-K, 10-Q and 10-K are on file
with the SEC under File Number 1-14756.
Reports of Central Illinois Public Service Company on Forms 8-K, 10-Q
and 10-K are on file with the SEC under File Number 1-3672.
72
Reports of AmerenEnergy Generating Company on Forms 8-K, 10-Q and 10-K
are on file with the SEC under File Number 333-56594.
Reports of CILCORP Inc. on Forms 8-K, 10-Q and 10-K are on file with
the SEC under File Number 1-8946.
Reports of Central Illinois Light Company on Forms 8-K, 10-Q and 10-K
are on file with the SEC under File Number 1-2732.
73
EXHIBIT 10.9
================================================================================
_______________
LEASE AGREEMENT
Dated as of December 1, 2002
_______________
Between
CITY OF BOWLING GREEN, MISSOURI,
As Lessor,
AND
UNION ELECTRIC COMPANY d/b/a
AMERENUE
As Lessee
Relating to:
$125,000,000
(Aggregate Maximum Principal Amount)
City of Bowling Green, Missouri
Taxable Industrial Revenue Bond
(AmerenUE Project)
Series 2002
================================================================================
The interest of certain rights of the City of Bowling Green, Missouri (the
"City"), in this Lease Agreement has been pledged and assigned to Commerce Bank,
N.A., St. Louis, Missouri, as Trustee under the Trust Indenture dated as of
December 1, 2002, between the City and the Trustee.
LEASE AGREEMENT
TABLE OF CONTENTS
Page
----
Parties.....................................................1
Recitals ...................................................1
ARTICLE I
DEFINITIONS
Section 1.1. Definitions of Words and Terms .............................1
Section 1.2. Rules of Interpretation ....................................2
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations by the City ................................3
Section 2.2. Representations by the Company .............................4
ARTICLE III
GRANTING PROVISIONS
Section 3.1. Granting of Leasehold Estate ...............................4
Section 3.2. Lease Term .................................................5
Section 3.3. Possession and Use of the Project ..........................5
ARTICLE IV
PURCHASE, CONSTRUCTION AND
EQUIPPING OF THE PROJECT
Section 4.1. Issuance of the Bonds ......................................5
Section 4.2. Purchase of the Project ....................................6
Section 4.3. Project Property of City....................................6
Section 4.4. Non-Project Improvements, Machinery and Equipment Property
of the Company .............................................7
(i)
ARTICLE V
RENT PROVISIONS
Section 5.1. Basic Rent .................................................7
Section 5.2. Additional Rent ............................................7
Section 5.3. Obligations of Company Absolute and Unconditional ..........8
Section 5.4. Prepayment of Basic Rent ...................................8
Section 5.5. Redemption of Bonds ........................................8
ARTICLE VI
MAINTENANCE, TAXES AND UTILITIES
Section 6.1. Maintenance and Repairs ....................................9
Section 6.2. Taxes, Assessments and Other Governmental Charges ..........9
Section 6.3. Utilities ..................................................9
Section 6.4. Property Tax Exemption ....................................10
ARTICLE VII
INSURANCE
Section 7.1. Title Insurance............................................10
Section 7.2. Casualty Insurance ........................................10
Section 7.3. Public Liability Insurance ................................10
Section 7.4. Blanket Insurance Policies ................................11
Section 7.5. Worker's Compensation......................................11
ARTICLE VIII
ALTERATION OF THE PROJECT
Section 8.1. Additions, Modifications and Improvements of the Project ..11
Section 8.2. Removal of Project Equipment ..............................11
Section 8.3. Additional Improvements on the Project Site ...............12
Section 8.4. Permits and Authorizations ................................12
Section 8.5. Mechanics' Liens ..........................................12
Section 8.6. Option to Purchase Unimproved Portions of the Project Site.13
ARTICLE IX
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 9.1. Damage or Destruction .....................................14
Section 9.2. Condemnation ..............................................15
Section 9.3. Bondowner Approval.........................................16
(ii)
ARTICLE X
SPECIAL COVENANTS
Section 10.1. No Warranty of Condition or Suitability by the City;
Exculpation and Indemnification ...........................16
Section 10.2. Surrender of Possession ...................................16
Section 10.3. Right of Access to the Project ............................17
Section 10.4. Granting of Easements; Leasehold Mortgages and Financing
Arrangements ..............................................17
Section 10.5. Indemnification of City and Trustee .......................19
Section 10.6. Depreciation, Investment Tax Credit and Other Tax Benefits.19
Section 10.7. Company to Maintain its Existence .........................19
Section 10.8. Security Interests ........................................20
Section 10.9. Environmental Matters, Warranties, Covenants and Indemnities
Regarding Environmental Matters............................20
ARTICLE XI
OPTION AND OBLIGATION TO PURCHASE THE PROJECT
Section 11.1. Option to Purchase the Project ............................22
Section 11.2. Conveyance of the Project .................................22
Section 11.3. Relative Position of Option and Indenture .................23
Section 11.4. Obligation to Purchase the Project ........................23
ARTICLE XII
DEFAULTS AND REMEDIES
Section 12.1. Events of Default .........................................23
Section 12.2. Remedies on Default .......................................24
Section 12.3. Survival of Obligations ...................................25
Section 12.4. Rights and Remedies Cumulative ............................25
Section 12.5. Waiver of Breach ..........................................25
Section 12.6. Opportunity of Company to Cure Defaults ...................25
Section 12.7. Trustee's Exercise of the City's Remedies .................26
ARTICLE XIII
ASSIGNMENT AND SUBLEASE
Section 13.1. Assignment; Sublease ......................................26
Section 13.2. Assignment of Revenues by City ............................27
Section 13.3. Prohibition Against Fee Mortgage of Project ...............27
Section 13.4. Restrictions on Sale or Encumbrance of Project by City ....27
(iii)
ARTICLE XIV
AMENDMENTS, CHANGES AND MODIFICATIONS
Section 14.1. Amendments, Changes and Modifications .....................27
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.1. Notices ...................................................27
Section 15.2. City Shall Not Unreasonably Withhold Consents and
Approvals .................................................28
Section 15.3. Net Lease .................................................28
Section 15.4. No Pecuniary Liability ....................................29
Section 15.5. Governing Law .............................................29
Section 15.6. Binding Effect ............................................29
Section 15.7. Severability ..............................................29
Section 15.8. Execution in Counterparts .................................29
Section 15.9. Effective Date of Bond Documents...........................29
Signatures and Seals .....................................S-1
Acknowledgments ..........................................S-3
Exhibit A - Project Site
Exhibit B - Project Improvements
Exhibit C - Project Equipment
(iv)
LEASE AGREEMENT
THIS LEASE AGREEMENT, dated as of December 1, 2002 (the "Lease"), between
CITY OF BOWLING GREEN, MISSOURI, a fourth class city organized and existing
under the laws of the State of Missouri (the "City"), as lessor, and UNION
ELECTRIC COMPANY d/b/a AMERENUE, a Missouri corporation (the "Company"), as
lessee;
WITNESSETH:
WHEREAS, the City is authorized under Sections 100.010 through 100.200 of
the Revised Statutes of Missouri, as amended and Article VI Section 27(b) of the
Missouri Constitution, as amended (the "Act"), to issue revenue bonds to provide
funds for the carrying out of a project under the Act and to sell, lease or
mortgage to private persons, partnerships or corporations the facilities
purchased, constructed, extended or improved by the City for manufacturing,
commercial, warehousing and industrial development purposes pursuant to the Act;
and
WHEREAS, pursuant to the Act, the governing body of the City passed an
Ordinance on July 15, 2002 (the "Bond Ordinance"), authorizing the City to issue
its Taxable Industrial Revenue Bond (AmerenUE Project) Series 2002, in the
maximum principal amount of $125,000,000 (the "Series 2002 Bond"), for the
purpose of purchasing a project described on Exhibit A hereto (the "Project
Improvements") on the real estate described on Exhibit B hereto (the "Project
Site") including the equipment described on Exhibit C hereto (the "Project
Equipment"), and authorizing the City to lease the Project Site, the Project
Improvements and the Project Equipment (collectively, the "Project") to the
Company;
WHEREAS, pursuant to such Ordinance, the City is authorized to enter into a
Trust Indenture of even date herewith (the "Indenture"), with Commerce Bank,
N.A., as Trustee (the "Trustee"), for the purpose of issuing and securing the
Bonds, as therein provided, and to enter into this Lease with the Company under
which the City will purchase the Project and will lease the Project to the
Company in consideration of rental payments by the Company which will be
sufficient to pay the principal of and interest on the Bonds; and
WHEREAS, pursuant to the foregoing, the City desires to lease the Project
to the Company and the Company desires to lease the Project from the City, for
the rentals and upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, covenants and agreements herein contained, the City and the
Company do hereby represent, covenant and agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions of Words and Terms. In addition to any words and
terms defined elsewhere in this Lease and the words and terms defined in Section
101 of the Indenture which definitions are hereby incorporated herein by
reference, the following words and terms as used in this Lease shall have the
following meanings:
"Additional Rent" means the additional rental described in Section 5.2 of
this Lease.
"Basic Rent" means the rental payments described in Section 5.1 of this
Lease.
"Full Insurable Value" means the reasonable replacement cost of the Project
less physical depreciation and exclusive of land, excavations, footings,
foundation and parking lots as determined in accordance with Section 7.2(a)
hereof.
"Grant Agreement" means the Pre-Annexation and Development Agreement dated
as of November 9, 2001, between the City and the Company.
"Leasehold Mortgage" means any leasehold mortgage, leasehold deed of trust,
assignment of rents and leases, security agreement or other agreement relating
to the Project permitted pursuant to the provisions of Section 10.4 hereof.
"Lease Term" means the period from the effective date of this Lease until
the expiration thereof pursuant to Section 3.2 of this Lease.
"Net Proceeds" means, when used with respect to any insurance or
condemnation award with respect to the Project, the gross proceeds from the
insurance or condemnation award with respect to which that term is used
remaining after payment of all expenses (including attorneys' fees, trustee's
fees and any extraordinary expenses of the City and the Trustee) incurred in the
collection of such gross proceeds.
"Permitted Encumbrances" means, as of any particular time (a) liens for ad
valorem taxes and special assessments not then delinquent, (b) the Indenture,
this Lease, the Deed of Trust, any Leasehold Mortgage or any Financing Document,
(c) utility, access and other easements and rights-of-way, mineral rights,
restrictions, exceptions and encumbrances that will not materially interfere
with or impair the operations being conducted on the Project Site or easements
granted to the City, (d) such minor defects, irregularities, encumbrances,
easements, mechanic's liens, rights-of-way and clouds on title as normally exist
with respect to properties similar in character to the Project and as do not in
the aggregate materially impair the property affected thereby for the purpose
for which it was acquired or is held by the City, (e) any other liens,
encumbrances, leases, easements, restrictions or covenants consented to in
writing by the Owner of 100% of the principal amount of the Bonds, (f) any
exceptions to the title of the Project Site which are contained in the title
insurance policy provided in Section 7.1 herein, and (g) liens or security
interests granted pursuant to any Financing Documents.
"Plans and Specifications" means the plans and specifications prepared for
and showing the Project, as amended by the Company from time to time, the same
being on file at the principal office of the Company in St. Louis, Missouri and
which shall be available for reasonable inspection during normal business hours
and upon not less than five business days' prior notice by the City, the Trustee
and their duly appointed representatives.
Section 1.2. Rules of Interpretation.
(a) Words of the masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders.
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(b) Unless the context shall otherwise indicate, words importing the
singular number shall include the plural and vice versa, and words importing
persons shall include firms, associations and corporations, including
governmental entities, as well as natural persons.
(c) Wherever in this Lease it is provided that either party shall or will
make any payment or perform or refrain from performing any act or obligation,
each such provision shall, even though not so expressed, be construed as an
express covenant to make such payment or to perform, or not to perform, as the
case may be, such act or obligation.
(d) All references in this instrument to designated "Articles," "Sections"
and other subdivisions are, unless otherwise specified, to the designated
Articles, Sections and subdivisions of this instrument as originally executed.
The words "herein," "hereof," "hereunder" and other words of similar import
refer to this Lease as a whole and not to any particular Article, Section or
other subdivision.
(e) The Table of Contents and the Article and Section headings of this
Lease shall not be treated as a part of this Lease or as affecting the true
meaning of the provisions hereof.
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations by the City. The City makes the following
representations as the basis for the undertakings on its part herein contained:
(a) The City is a fourth class city duly organized and validly existing
under the laws of the State of Missouri. Under the provisions of the Act, the
City has lawful power and authority to enter into the transactions contemplated
by this Lease and to carry out its obligations hereunder. By proper action of
its governing body, the City has been duly authorized to execute and deliver
this Lease, and all other documents and agreements related to the transactions
contemplated herein, acting by and through its duly authorized officers.
(b) The City has acquired the Project Site, subject to Permitted
Encumbrances, and proposes to purchase the Project pursuant to the terms of this
Lease. The City proposes to lease the Project to the Company and sell the
Project to the Company if the Company exercises its option to purchase the
Project, all for the purpose of furthering the public purposes of the Act, and
the governing body of the City has found and determined that the purchase of the
Project will further the public purposes of the Act.
(c) To finance the purchase of the Project, the City proposes to issue the
Series 2002 Bond which will be scheduled to mature as set forth in Article II of
the Indenture and will be subject to redemption prior to maturity in accordance
with the provisions of Article III of the Indenture.
(d) The Series 2002 Bond are to be issued under and secured by the
Indenture and the Deed of Trust, pursuant to which the Project and the net
earnings therefrom, consisting of all rents, revenues and receipts to be derived
by the City from the leasing or sale of the Project, will be pledged and
assigned to the Trustee as security for payment of the principal of and interest
on the Bonds and the amounts owing pursuant to this Lease.
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(e) The City will not mortgage, grant any interest in or otherwise encumber
the Project or pledge the revenues derived therefrom or hereunder for any bonds
or other obligations other than the Bonds except with the written consent of the
Authorized Company Representative and the Owners of 100% of the principal amount
of the Bonds.
(f) The City shall have no authority to operate the Project as a business
or in any other manner except as the lessor thereof or subsequent to an Event of
Default hereunder.
(g) No member of the governing body of the City or any other officer of the
City has any significant or conflicting interest, financial, employment or
otherwise, in the Company or in the transactions contemplated hereby.
Section 2.2. Representations by the Company. The Company makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Company is a corporation, validly existing and in good standing
under the laws of the State of Missouri and is authorized to conduct business in
the State of Missouri.
(b) The Company has lawful power and authority to enter into this Lease and
to carry out its obligations hereunder and the Company has been duly authorized
to execute and deliver this Lease, acting by and through its duly authorized
officers and representatives.
(c) The execution and delivery of this Lease, the consummation of the
transactions contemplated hereby, and the performance of or compliance with the
terms and conditions of this Lease by the Company will not conflict with or
result in a breach of any of the terms, conditions or provisions of, or
constitute a default under, any mortgage, deed of trust, lease or any other
restrictions or any agreement or instrument to which the Company is a party or
by which it or any of its property is bound, or the Company's organizational
documents, or any order, rule or regulation applicable to the Company or any of
its property of any court or governmental body, or constitute a default under
any of the foregoing, or result in the creation or imposition of any prohibited
lien, charge or encumbrance of any nature whatsoever upon any of the property or
assets of the Company under the terms of any instrument or agreement to which
the Company is a party.
(d) The design of the Project is in accordance with sound engineering
principles.
(e) To the best knowledge of the Company, the Project will comply in all
material respects with all presently applicable building and zoning, health,
environmental and safety ordinances and laws and all other applicable laws,
rules and regulations.
(f) The Project is located wholly within the City.
ARTICLE III
GRANTING PROVISIONS
Section 3.1. Granting of Leasehold Estate. The City hereby rents, leases
and lets the Project to the Company, and the Company hereby rents, leases and
hires the Project from the City, subject to Permitted Encumbrances, for the
rentals and upon and subject to the terms and conditions herein contained.
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Section 3.2. Lease Term. This Lease shall become effective upon execution
and delivery, and subject to earlier termination pursuant to the provisions of
this Lease, shall have an initial term commencing as of the date of this Lease
and terminating on December 31, 2023 (the "Stated Expiration Date").
Section 3.3. Possession and Use of the Project.
(a) The City covenants and agrees that as long as neither the City nor the
Trustee has exercised any of the remedies set forth in Section 12.2(c) following
the occurrence and continuance of an Event of Default, the Company shall have
sole and exclusive possession of the Project (subject to Permitted Encumbrances
and the City's and the Trustee's right of access pursuant to Section 10.3
hereof) and shall and may peaceably and quietly have, hold and enjoy the Project
during the Lease Term. The City covenants and agrees that it will not take any
action, other than expressly pursuant to Article XII of this Lease, to prevent
the Company from having quiet and peaceable possession and enjoyment of the
Project during the Lease Term and will, at the request and expense of the
Company, cooperate with the Company in order that the Company may have quiet and
peaceable possession and enjoyment of the Project and will defend the Company's
enjoyment and possession thereof against all parties.
(b) Subject to the provisions of this Section, the Company shall have the
right to use the Project for any lawful purpose contemplated by the Act and
consistent with the terms of the Grant Agreement. The Company shall use its
reasonable best efforts to comply with all material statutes, laws, ordinances,
orders, judgments, decrees, regulations, directions and requirements of all
federal, state, local and other governments or governmental authorities, now or
hereafter applicable to the Project or to any adjoining public ways, as to the
manner of use or the condition of the Project or of adjoining public ways. The
Company shall also comply with the mandatory requirements, rules and regulations
of all insurers under the policies carried under the provisions of Article VII
hereof. The Company shall pay all costs, expenses, claims, fines, penalties and
damages that may in any manner arise out of, or be imposed as a result of, the
failure of the Company to comply with the provisions of this Section.
Notwithstanding any provision contained in this Section, however, the Company
shall have the right, at its own cost and expense, to contest or review by legal
or other appropriate procedures the validity or legality of any such
governmental statute, law, ordinance, order, judgment, decree, regulation,
direction or requirement, or any such requirement, rule or regulation of an
insurer, and during such contest or review the Company may refrain from
complying therewith.
ARTICLE IV
PURCHASE OF THE PROJECT
Section 4.1. Issuance of the Bonds.
(a) In order to provide funds for the purchase of the Project, the City
agrees that it will issue, sell and cause to be delivered to the purchaser
thereof the Series 2002 Bond in accordance with the provisions of the Indenture
and the Bond Purchase Agreement. The proceeds of the sale of the Series 2002
Bond, when and if received, shall be paid over to the Trustee for the account of
the City. The Trustee shall promptly deposit such proceeds, when and if
received, as provided in the Indenture, to be used and applied as hereinafter
provided in this Article and in the Indenture.
(b) The City may authorize the issuance of Additional Bonds from time to
time upon the terms and conditions provided in Section 209 of the Indenture.
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(c) If the Company is not in default hereunder, the City will, at the
request of the Company, from time to time, use its best efforts to issue the
amount of Additional Bonds specified by the Company; provided that the terms of
such Additional Bonds, the purchase price to be paid therefor and the manner in
which the proceeds therefrom are to be disbursed shall have been approved in
writing by the Company; provided further that the Company and the City shall
have entered into an amendment to this Lease to provide for rent in an amount at
least sufficient to pay principal and interest on the Additional Bonds when due,
an amendment to the Grant Agreement acceptable to the City including, without
limitation, any additional grant payments, and the Deed of Trust related to any
improvements to the Project, and the City shall have otherwise complied with the
provisions of the Indenture with respect to the issuance of such Additional
Bonds.
Section 4.2. Purchase of the Project. The City and the Company agree that
the City will and the Company as the agent of the City shall purchase the
Project as follows:
(a) The City will acquire the Project Site and any Project Improvements and
Project Equipment located thereon at the execution hereof and which the Company
desires to convey to the City in exchange for the issuance of the Series 2002
Bond in an amount equal to the value of property transferred to the City.
Concurrently with the execution of this Lease (1) a deed and any other necessary
instruments of transfer will be delivered to the City, (2) said deed will be
placed of record, and (3) the title insurance policies required by Article VII
hereof or commitments to issue such policies will be delivered to the Trustee.
(b) The Company, or any entity controlled by, under common control with or
controlling the Company has constructed the Project Improvements on the Project
Site and otherwise improved the Project Site in accordance with the Plans and
Specifications. The Company agrees that the Project is suitable for use by the
Company for its purposes, and that all real and personal property described in
the Plans and Specifications is desirable and appropriate in connection with the
Project.
(c) The Company has installed the Project Equipment in the Project
Improvements or on the Project Site in accordance with the Plans and
Specifications. The City and the Company recognize that the Project Equipment is
subject to change pursuant to the provisions of this Lease, and agree that the
definitive list of the Project Equipment shall be the list maintained by the
Trustee pursuant to Section 10.8 of this Lease. So long as no Event of Default
shall have occurred and be continuing, the City will assign to the Company all
rights or interests in the warranties and guaranties of all contractors,
subcontractors, suppliers, architects and engineers for the furnishing of labor,
materials or equipment or supervision or design in connection with the Project
and any rights or causes of action arising from or against any of the foregoing,
and the City will cooperate in the enforcement of such warranties and guaranties
in the manner reasonably requested by the Company.
(d) The Company agrees that it will, on behalf of the City, comply with the
provisions of Section 107.170 of the Revised Statutes of Missouri to the extent
applicable to the purchase of the Project.
Section 4.3. Project Property of City. The Project Site and all Project
Improvements and Project Equipment located thereon at the execution hereof and
which the Company desires to convey to the City, and all additions or
enlargements thereto or thereof, the Project as fully completed, anything under
this Lease which becomes, is deemed to be, or constitutes a part of the Project,
and the Project as repaired, rebuilt, rearranged, restored or replaced by the
Company under the provisions of this Lease, except as
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otherwise specifically provided herein, shall immediately become the absolute
property of the City, subject only to this Lease, the Indenture, the Deed of
Trust, any Leasehold Mortgage, and any Financing Document.
Section 4.4. Non-Project Improvements, Machinery and Equipment Property of
the Company. Any improvements or item of machinery or equipment which do not
constitute part of the Project Improvements or Project Equipment and the entire
purchase price of which is paid for by the Company with the Company's own funds,
and no part of the purchase price of which is paid from proceeds of the Bonds,
shall be the property of the Company and shall not constitute a part of the
Project for purposes of Section 6.4.
ARTICLE V
RENT PROVISIONS
Section 5.1. Basic Rent. The Company covenants and agrees to pay to the
Trustee in same day funds for the account of the City during the Lease Term, for
deposit in the Bond Fund on or before 11:00 a.m., Trustee's local time, on the
appropriate dates and in the appropriate amounts, the amount of principal of and
the amount of interest on the Bonds in accordance with the provisions of the
Indenture and the Bonds, as Basic Rent for the Project, in a total amount which,
when added to any collected funds then on deposit in the Bond Fund and available
for the payment of principal on the Bonds and the interest thereon on such
payment date, shall be equal to the amount payable on such payment date as
principal of the Bonds and the interest thereon as provided in the Indenture.
All payments of Basic Rent provided for in this Section shall be paid directly
to the Trustee and shall be deposited in accordance with the provisions of the
Indenture into the Bond Fund and shall be used and applied by the Trustee in the
manner and for the purposes set forth in this Lease and the Indenture. At its
option, the Company may deliver to the Trustee for cancellation Bonds not
previously paid and the Company shall receive a credit against the Basic Rent
payable by the Company in an amount equal to the principal amount of the Bonds
so tendered for cancellation plus accrued interest thereon.
Section 5.2. Additional Rent. The Company shall pay as Additional Rent,
within 15 days after receiving an invoice therefor, the following amounts:
(a) all reasonable fees, charges and expenses, including agent and counsel
fees and expenses, of the City, the Trustee and the Paying Agent incurred
pursuant to the Indenture, this Lease, the Deed of Trust, the Grant Agreement,
any Leasehold Mortgage or any Financing Document as and when the same become
due;
(b) all costs incident to the issuance of the Bonds and the payment of the
principal of and interest on the Bonds as the same become due and payable,
including all costs and expenses in connection with the call, redemption and
payment of all Outstanding Bonds;
(c) all expenses reasonably incurred in connection with the reasonable and
necessary enforcement of any rights under this Lease, the Deed of Trust or the
Indenture by the City, the Trustee or the Bondowners;
(d) an amount sufficient to reimburse the City for extraordinary expenses
reasonably incurred by the City hereunder, with the prior written consent of the
Company, in connection with the performance of its obligations under this Lease,
the Indenture, the Deed of Trust, any Leasehold Mortgage, any Financing Document
or the Grant Agreement;
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(e) all amounts payable under the Grant Agreement; and
(f) all other payments of whatever nature which the Company has agreed in
writing to pay or assume under the provisions of this Lease.
Section 5.3. Obligations of Company Absolute and Unconditional.
(a) The obligations of the Company under this Lease to make payments of
Basic Rent and Additional Rent on or before the date the same become due, and to
perform all of its other obligations, covenants and agreements hereunder shall
be absolute and unconditional, without notice or demand, and without abatement,
deduction, set-off, counterclaim, recoupment or defense or any right of
termination or cancellation arising from any circumstance whatsoever, whether
now existing or hereafter arising, irrespective of whether the City's title to
the Project or to any part thereof is defective or nonexistent, and
notwithstanding any damage to, loss, theft or destruction of, the Project or any
part thereof, any failure of consideration or frustration of commercial purpose,
the taking by eminent domain of title to or of the right of temporary use of all
or any part of the Project, legal curtailment of the Company's use thereof, the
eviction or constructive eviction of the Company, any change in the tax or other
laws of the United States of America, the State of Missouri or any political
subdivision thereof, any change in the City's legal organization or status, or
any default of the City hereunder, and regardless of the invalidity of any
action of the City, and regardless of the invalidity of any portion of this
Lease.
(b) Nothing in this Lease shall be construed to release the City from the
performance of any agreement on its part herein contained or as a waiver by the
Company of any rights or claims the Company may have against the City under this
Lease or otherwise, but any recovery upon such rights and claims shall be had
from the City separately, it being the intent of this Lease that the Company
shall be unconditionally and absolutely obligated to perform fully all of its
obligations, agreements and covenants under this Lease (including the obligation
to pay Basic Rent and Additional Rent) for the benefit of the Bondowners and the
City. The Company may, however, at its own cost and expense and in its own name
or in the name of the City, prosecute or defend any action or proceeding or take
any other action involving third persons which the Company deems reasonably
necessary in order to secure or protect its right of possession, occupancy and
use hereunder, and in such event the City hereby agrees to cooperate fully with
the Company and to take all action necessary to effect the substitution of the
Company for the City in any such action or proceeding if the Company shall so
request.
Section 5.4. Prepayment of Basic Rent. The Company may at any time and from
time to time prepay all or any part of the Basic Rent provided for hereunder
without penalty. During such times as the amount held by the Trustee in the Bond
Fund shall be sufficient to pay, at the time required, the principal of and
interest on all the Bonds then remaining unpaid, the Company shall be entitled
to credit against payments of Basic Rent or Additional Rent under the provisions
of this Lease.
Section 5.5. Redemption of Bonds. The City and the Trustee, at the written
direction of the Company, at any time the aggregate moneys in the Bond Fund are
sufficient for such purposes, shall (a) if the same are then redeemable under
the provisions of Article III of the Indenture, use their best efforts to effect
the redemption of all or such part of the then Outstanding Bonds as may be
specified by the Company, on such redemption date as may be specified by the
Company, or (b) cause such moneys in the Bond Fund or such part thereof as the
Company shall direct, to be applied by the Trustee for the purchase of Bonds in
the open market for the purpose of cancellation at prices not exceeding the
principal amount thereof, or (c) a combination of (a) and (b) as provided in
such direction. At its option, the Company may
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deliver to the Trustee for redemption Bonds not previously paid and the Company
shall receive a credit against the Basic Rent or other amounts payable by the
Company for the redemption of such Bonds in an amount equal to the principal
amount of the Bonds so tendered for redemption plus accrued interest.
ARTICLE VI
MAINTENANCE, TAXES AND UTILITIES
Section 6.1. Maintenance and Repairs. Throughout the Lease Term the Company
shall, at its own expense, keep the Project in reasonably safe operating
condition and keep the Project in good repair, reasonable wear, tear,
depreciation and obsolesence excepted, making from time to time all repairs
thereto and renewals and replacements thereof it determines to be necessary.
Section 6.2. Taxes, Assessments and Other Governmental Charges.
(a) The Company shall promptly pay and discharge, as the same become due,
all taxes and assessments, general and special, and other governmental charges
of any kind whatsoever that may be lawfully taxed, charged, levied, assessed or
imposed upon or against or be payable for or in respect of the Project, or any
part thereof or interest therein or any buildings, improvements, machinery and
equipment at any time installed thereon by the Company, or the income therefrom
or Basic Rent and other amounts payable under this Lease, including any new
taxes and assessments not of the kind enumerated above to the extent that the
same are lawfully made, levied or assessed in lieu of or in addition to taxes or
assessments now customarily levied against real or personal property, and
further including all utility charges, assessments and other general
governmental charges and impositions whatsoever, foreseen or unforeseen, which
if not paid when due would impair the security of the Bonds or encumber the
City's title to the Project; provided that with respect to any special
assessments or other governmental charges that are lawfully levied and assessed
which may be paid in installments, the Company shall be obligated to pay only
such installments thereof as become due and payable during the Lease Term.
(b) The Company shall have the right, in its own name or in the City's
name, to contest the validity or amount of any tax, assessment or other
governmental charge which the Company is required to bear, pay and discharge
pursuant to the terms of this Article by appropriate legal proceedings
instituted at least 10 days before the tax, assessment or other governmental
charge complained of becomes delinquent if and provided (1) the Company, before
instituting any such contest, gives the City written notice of its intention so
to do, (2) the Company diligently prosecutes any such contest, at all times
effectively stays or prevents any official or judicial sale therefor, under
execution or otherwise, and (3) the Company promptly pays any final judgment
enforcing the tax, assessment or other governmental charge so contested and
thereafter promptly procures record release or satisfaction thereof. The City
agrees to cooperate fully with the Company in connection with any and all
administrative or judicial proceedings related to any tax, assessment or other
governmental charge. The Company shall indemnify, defend and hold the City whole
and harmless from any costs and expenses the City may incur related to any of
the above.
Section 6.3. Utilities. All utilities and utility services used by the
Company in, on or about the Project shall be paid by the Company and shall be
contracted by the Company in the Company's own name, and the Company shall, at
its sole cost and expense, procure any and all permits, licenses or
authorizations necessary in connection therewith.
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Section 6.4. Property Tax Exemption. The City and the Company expect that
while the Project is owned by the City and is subject to the Lease, the Project
will be exempt from all ad valorem property taxes by reason of such ownership,
and the City agrees that it will cooperate with the Company to defend, at the
sole expense of the Company, such exemption against all parties. The City and
the Company further acknowledge and agree that the City's obligations hereunder
are contingent upon the Company making those payments as set forth in Section
5.04 of the Grant Agreement during the term of this Lease. The terms and
conditions of the Grant Agreement are incorporated herein as if fully set forth
herein.
ARTICLE VII
INSURANCE
Section 7.1. Title Insurance. The Company will purchase, on behalf of the
City and the Trustee, at its expense, from a company duly qualified to issue
such insurance in the State of Missouri, an owner's policy of title insurance in
the amount of not less than $1,290,910, subject only to Permitted Encumbrances.
Copies of said policy will be delivered to the Trustee by the Company not later
than 90 days after the date of issuance of the Bonds.
Section 7.2. Property Insurance.
(a) The Company shall at its sole cost and expense obtain and shall
maintain throughout the Lease Term, a policy or policies of insurance
(including, if appropriate, builder's risk insurance) to keep the Project
constantly insured against loss or damage by fire, lightning and all other risks
covered by the extended coverage insurance endorsement then in use in the State
of Missouri in an amount equal to the Full Insurable Value thereof (subject to
reasonable loss deductible provisions). The insurance required pursuant to this
Section shall be maintained at the Company's sole cost and expense, shall be
maintained with a generally recognized responsible insurance company or
companies authorized to do business in the State of Missouri or generally
recognized international insurers or reinsurers with an A.M. Best rating of "A-"
or the equivalent thereof as may be selected by the Company. Copies of the
insurance policies required under this Section, or originals or certificates
thereof shall be delivered by the Company upon request to the City and the
Trustee. All such policies of insurance pursuant to this Section, and all
renewals thereof, shall name the City, the Company and the Trustee as additional
insureds as their respective interests may appear, and shall contain a provision
that such insurance may not be canceled by the issuer thereof without at least
10 days' advance written notice to the City, the Company and the Trustee.
(b) In the event of loss or damage to the Project, the Net Proceeds of
property insurance carried pursuant to this Section shall be paid and applied as
provided in Article IX of this Lease, or as may be directed by, or on behalf of,
the Owners of 100% in principal amount of the Bonds outstanding.
Section 7.3. Public Liability Insurance.
(a) The Company shall at its sole cost and expense maintain or cause to be
maintained at all times during the Lease Term general accident and public
liability insurance (including but not limited to coverage for all losses
whatsoever arising from the ownership, maintenance, operation or use of any
automobile, truck or other motor vehicle), under which the City and the Trustee
shall be named as additional insureds, properly protecting and indemnifying the
City and the Trustee, in an amount not less than the limitation on awards for
liability in effect from time to time under R.S. Mo. Section 537.610 for bodily
injury (including death) and property damage combined single limit each
occurrence (with excess coverage
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in an amount not less than $6,000,000 and each subject to reasonable loss
deductible clauses not to exceed the amounts normally or generally carried by
the Company or its affiliates). The policies of said insurance shall contain a
provision that such insurance may not be canceled by the issuer thereof without
at least 10 days' advance written notice to the City, the Company and the
Trustee. Such policies or copies or certificates thereof shall be furnished to
the Trustee upon request.
(b) In the event of a public liability occurrence, the Net Proceeds of
liability insurance carried pursuant to this Section shall be applied toward the
extinguishment or satisfaction of the liability with respect to which such
proceeds have been paid.
Section 7.4. Blanket Insurance Policies. The Company may satisfy any of the
insurance requirements set forth in this Article by using blanket policies of
insurance, provided each and all of the requirements and specifications of this
Article respecting insurance are complied with.
Section 7.5. Worker's Compensation. The Company agrees throughout the Lease
Term to maintain or cause to be maintained the Worker's Compensation coverage or
the approval to self insure as required by the laws of the State of Missouri.
ARTICLE VIII
ALTERATION OF THE PROJECT
Section 8.1. Additions, Modifications and Improvements of the Project.
(a) The Company shall have and is hereby given the right, at its sole cost
and expense, to make such additions, modifications and improvements in and to
any part of the Project as the Company from time to time may deem necessary or
desirable for its business purposes. All additions, modifications and
improvements made by the Company pursuant to the authority of this Section shall
(i) be made in a good and workmanlike manner and in material compliance with all
material laws and ordinances applicable thereto, (ii) when commenced, be
prosecuted to completion with due diligence, and (iii) when completed, be deemed
a part of the Project; provided, however, that additions of machinery and
equipment installed in the Project by the Company not purchased or acquired from
funds deposited with the Trustee hereunder shall remain the property of the
Company and may be removed by the Company, and are not part of the Project;
provided, further, that prior to the Company making improvements which are to
become part of the Project, the City and the Company shall agree upon additional
grant payments, the issuance of Additional Bonds and other matters related to
the improvements of the Project and amend or supplement the Grant Agreement, if
necessary, and the Indenture, if necessary, regardless of the improvements being
made pursuant to this Section 8.1 or pursuant to Section 8.3 hereof.
(b) Notwithstanding anything herein to the contrary, any repairs and
maintenance of the Project Equipment or pursuant to the provisions of Article IX
of this Lease shall be deemed to be part of the Project regardless of whether
the same is paid for from funds deposited with the Trustee, and the Company
shall not be obligated to make additional grant payments or otherwise amend the
Grant Agreement in respect thereof.
Section 8.2. Removal of Project Equipment. The Company shall have the
right, provided the Company is not in default in the payment of Basic Rent or
Additional Rent hereunder, to remove from the Project and (on behalf of the
City) sell, exchange or otherwise dispose of, without responsibility or
accountability to the City or the Trustee with respect thereto, any items of the
Project Equipment which (a)
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the Company shall certify to the Trustee have become inadequate, obsolete, worn
out, unsuitable, undesirable or unnecessary or are otherwise no longer useful to
the Company in its operations conducted on or in the Project, or (b) the Company
shall certify to the Trustee have a value of less than $1,000,000. The Trustee
shall amend the list of Project Equipment maintained by it pursuant to Section
10.8 hereof upon receipt of such certificates.
In all cases, the Company shall pay all the costs and expenses of any such
removal and shall promptly repair at its expense all damage to the Project
caused thereby in a good and workmanlike manner.
Section 8.3. Additional Improvements on the Project Site. The Company shall
have and is hereby given the right, at its sole cost and expense, to construct
on portions of the Project Site not theretofore occupied by buildings or
improvements such additional buildings and improvements as the Company from time
to time may deem necessary or desirable for its business purposes. All
additional buildings and improvements constructed on the Project Site by the
Company pursuant to the authority of this Section shall, during the life of this
Lease, remain the property of the Company and may be added to, altered or razed
and removed by the Company at any time. All additional buildings and
improvements shall be made in a good and workmanlike manner and in material
compliance with all material laws and ordinances applicable thereto and when
commenced be prosecuted to completion with due diligence. The Company covenants
and agrees (a) to make any repairs and restorations required to be made to the
Project because of the construction of, addition to, alteration or removal of
said additional buildings or improvements, and (b) to promptly and with due
diligence either raze and remove or repair, replace or restore any of said
additional buildings and improvements as may from time to time be damaged by
fire or other casualty. The Company shall pay all ad valorem taxes and
assessments payable with respect to such additional buildings and improvements
which remain the property of the Company.
Section 8.4. Permits and Authorizations. The Company shall not do or permit
others under its control to do any work on the Project related to any repair,
rebuilding, restoration, replacement, modification or addition to the Project,
or any part thereof, unless all requisite municipal and other governmental
permits and authorizations shall have been first procured. The City agrees to
act promptly on all requests for such municipal permits and authorizations;
provided that nothing in this Lease shall obligate the City to grant any
permits, authorizations or approvals other than those which the City would grant
in the course of and pursuant to its normal review procedures and standards for
such matters. All such work shall be done in a good and workmanlike manner and
in material compliance with all applicable material building and zoning laws and
governmental regulations and requirements, and in accordance with the
requirements, rules and regulations of all insurers under the policies required
to be carried under the provisions of Article VII hereof.
Section 8.5. Mechanics' Liens.
(a) The Company will not directly or indirectly create, incur, assume or
suffer to exist any lien on or with respect to the Project, except Permitted
Encumbrances, and the Company shall promptly, at its own expense, take such
action as may be necessary to fully discharge or release any such lien. Whenever
and as often as any mechanics' or other similar lien is filed against the
Project, or any part thereof, purporting to be for or on account of any labor
done or materials or services furnished in connection with any work in or about
the Project, the Company shall discharge the same of record. Notice is hereby
given that the City shall not be liable for any labor or materials furnished the
Company or anyone claiming by, through or under the Company upon credit, and
that no mechanics' or other similar lien for any such labor, services or
materials shall attach to or affect the reversionary or other estate of the City
in and to the Project or any part thereof.
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(b) Notwithstanding paragraph (a) above, the Company shall have the right
to contest any such mechanics' or other similar lien if it notifies the City and
the Trustee in writing of its intention so to do, and ovided the Company
diligently prosecutes such contest, at all times effectively stays or prevents
any official or judicial sale of the Project, or any part thereof or interest
therein, under execution or otherwise, and pays or otherwise satisfies any final
judgment enforcing such contested lien claim and thereafter promptly procures
record release or satisfaction thereof. The Company shall hold the City whole
and harmless from any loss, costs or expenses the City may incur related to any
such contest. The City shall cooperate fully with the Company in any such
contest.
Section 8.6. Option to Purchase Unimproved Portions of the Project Site.
The City hereby grants to the Company the right at any time and from time to
time to purchase any unimproved portion or portions of the Project Site. For the
purposes of this Section "unimproved" shall mean real property upon which no
Project Improvements are located, but excluding improvements relating to
streets, sidewalks, bridges, storm water, grading, utility, parking or other
similar improvements. As conditions to such purchase, the City and the Trustee
shall receive from the Company at least 30 days prior to the proposed date for
completing the purchase the following (a) a written certificate from the Company
to the effect (i) that the Company desires to purchase an unimproved portion of
the Project Site, (ii) the proposed date for completing the purchase, and (iii)
that the Company is not in material default under any of the provisions of this
Lease Agreement, (b) an adequate legal description of that portion (together
with the interest in such portion) of the property to be purchased, (c) a
certificate of an independent engineer or surveyor, dated not more than 30 days
prior to the date of the request stating that, in the opinion of the person
signing such certificate; (i) the unimproved portion of the Project Site is
unimproved within the definition contained in this Section, (ii) the unimproved
portion of the Project Site so proposed to be purchased is not needed for the
operation of the Project, and (iii) the proposed purchase will not impair the
usefulness of the Project for its intended purposes and will not destroy the
means of ingress thereto and egress therefrom, and (d) the written consent of
the Owners of all of the Bonds.
The purchase price for such unimproved portion of the Project Site shall be
its fair market value as determined by the Owners of all of the Bonds and shall
be received in writing by the City and the Trustee at least 10 days prior to the
proposed date for completing the purchase. Such purchase price shall be paid to
the Trustee at the time the City executes and delivers a special warranty deed
conveying the property which is to be purchased to the Company. The Trustee
shall deposit such amount (if any) into the Bond Fund. If such amount is more
than $1,000, such amount shall be used by the Trustee to redeem Bonds in
accordance with Section 302(a) of the Indenture. If such amount is $1,000 or
less the Trustee shall apply such amount to the next interest payment on the
Bonds.
Upon the City's receipt of written notice from the Trustee that the Trustee
has received all of the items required by this Section, the Mayor and City Clerk
of the City shall execute a special warranty deed conveying such property to the
Company and shall deliver such deed to the Company. Such special warranty deed
shall be subject to the following: (a) those liens and encumbrances, if any, to
which title to that portion of the Project Site was subject when conveyed to the
City; (b) those liens and encumbrances created by the Company or to the creation
or suffering of which the Company consented; (c) those liens and encumbrances
resulting from the failure of the Company to perform or observe any agreement on
its part contained in this Lease; (d) Permitted Encumbrances other than the
Indenture, this Lease and the Deed of Trust; and (e) if the unimproved portion
of the Project Site or any part thereof is being condemned, the rights and title
of any condemning authority.
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ARTICLE IX
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 9.1. Damage or Destruction.
(a) If the Project shall be damaged or destroyed by fire or any other
casualty, whether or not covered by insurance, the Company, as promptly as
practicable, shall either (i) make the determination described in subsection (f)
below, or (ii) repair, restore, replace or rebuild the same so that upon
completion of such repairs, restoration, replacement or rebuilding such Project
shall be of a value not less than the value thereof immediately prior to the
occurrence of such damage or destruction or, at the Company's option, shall
construct upon the Project Site new buildings and improvements thereafter
together with all new machinery, equipment and fixtures which are either to be
attached to or are to be used in connection with the operation or maintenance
thereof, provided that (A) the value thereof shall not be less than the value of
such destroyed or damaged Project Improvements and/or Project Equipment
immediately prior to the occurrence of such damage or destruction and (B) the
nature of such new buildings, improvements, machinery, equipment and fixtures
will not impair the character of the Project as an enterprise permitted by the
Act.
If the Company shall elect to construct any such new buildings and
improvements, for all purposes of this Lease, any reference to the words
"Project Improvements" shall be deemed to also include any such new buildings
and improvements and all additions thereto and all replacements and alterations
thereof and any reference to the words "Project Equipment" shall be deemed to
include any such new machinery, equipment and fixtures which are either attached
to or are used in connection with the operation or maintenance of such new
buildings and improvements and all additions or replacements thereof.
Unless the Company makes the determination described in subsection (f)
below, the Net Proceeds of casualty insurance required by Article VII hereof
received with respect to such damage or loss to the Project shall be used to pay
the cost of repairing, restoring, replacing or rebuilding the Project or any
part thereof. Insurance monies in an amount less than $5,000,000 may be paid to
or retained by the Company to be paid for such costs. Insurance monies in an
amount of $5,000,000 or more shall be paid to the Trustee to be used as provided
herein. If the Company makes the determination described in subsection (f)
below, the Net Proceeds shall be deposited with the Trustee and used to redeem
Bonds as provided in subsection (f).
(b) If any of the insurance monies paid by the insurance company as
hereinabove provided shall remain after the completion of such repairs,
restoration, replacement or rebuilding, and this Lease shall not have
terminated, the excess shall be deposited in the Bond Fund, subject to the
rights pursuant to any Leasehold Mortgage or Financing Document. If the Net
Proceeds shall be insufficient to pay the entire cost of such repairs,
restoration, replacement or rebuilding, the Company shall pay the deficiency.
(c) Except as otherwise provided in this Lease, in the event of any such
damage by fire or any other casualty, the provisions of this Lease shall be
unaffected and the Company shall remain and continue liable for the payment of
all Basic Rent and Additional Rental and all other charges required hereunder to
be paid by the Company, as though no damage by fire or any other casualty has
occurred.
(d) The City and the Company agree that they will cooperate with each
other, to such extent as such other party may reasonably require, in connection
with the prosecution or defense, at the expense of the Company, of any action or
proceeding arising out of, or for the collection of any insurance monies that
may be due in the event of, any loss or damage, and that they will execute and
deliver to such other parties such instruments as may be required to facilitate
the recovery of any insurance monies.
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(e) The Company agrees to give prompt notice to the City, the Trustee, the
mortgagee under the Leasehold Mortgage (if any) and the Financing Party under
the Financing Document (if any) with respect to all fires and any other
casualties occurring in, on, at or about the Project.
(f) If the Company shall determine that rebuilding, repairing, restoring or
replacing the Project is not practicable and desirable, any Net Proceeds of
casualty insurance required by Article VII hereof received with respect to such
damage or loss shall, after payment of all Additional Rent then due and payable,
be paid into the Bond Fund and shall be used, at the option of the Company, to
redeem Bonds on the earliest practicable redemption date or to pay the principal
of any Bonds as the same become due, all subject to rights of the mortgagee
under the Leasehold Mortgage (if any) and the Financing Party under the
Financing Documents (if any). The Company agrees to be reasonable in exercising
its judgment pursuant to this subsection (f).
(g) The Company shall not, by reason of its inability to use all or any
part of the Project during any period in which the Project is damaged or
destroyed or is being repaired, rebuilt, restored or replaced, nor by reason of
the payment of the costs of such rebuilding, repairing, restoring or replacing,
be entitled to any reimbursement from the City, the Trustee or the Bondowners or
to any abatement or diminution of the rentals payable by the Company under this
Lease or of any other obligations of the Company under this Lease except as
expressly provided in this Section.
Section 9.2. Condemnation.
(a) If during the Lease Term, title to, or the temporary use of, all or any
part of the Project shall be condemned by or sold under threat of condemnation
to any authority possessing the power of eminent domain, to such extent that the
claim or loss resulting from such condemnation is greater than $5,000,000, the
Company shall, within 90 days after the date of entry of a final order in any
eminent domain proceedings granting condemnation or the date of sale under
threat of condemnation, notify the City, the Trustee, the mortgagee under the
Leasehold Mortgage (if any) and the Financing Party under the Financing Document
(if any) in writing as to the nature and extent of such condemnation or loss of
title and whether it is practicable and desirable to acquire or construct
substitute improvements.
(b) If the Company shall determine that such substitution is practicable
and desirable, the Company shall proceed promptly with and complete with
reasonable dispatch the acquisition or construction of such substitute
improvements, so as to place the Project in substantially the same condition as
existed prior to the exercise of the said power of eminent domain, including the
acquisition or construction of other improvements suitable for the Company's
operations at the Project (which improvements will be deemed a part of the
Project and available for use and occupancy by the Company without the payment
of any rent other than herein provided, to the same extent as if such other
improvements were specifically described herein and demised hereby); provided,
that such improvements will be acquired by the City subject to no liens,
security interests or encumbrances prior to the lien and/or security interest
afforded by the Indenture, this Lease and the Deed of Trust other than Permitted
Encumbrances. In such case, any Net Proceeds received from any award or awards
with respect to the Project or any part thereof made in such condemnation or
eminent domain proceedings, or of the sale proceeds, shall be applied in the
same manner as provided in Section 9.1 hereof (with respect to the receipt of
casualty insurance proceeds).
(c) If the Company shall determine that it is not practicable and desirable
to acquire or construct substitute improvements, any Net Proceeds of
condemnation awards received by the Company
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shall, after payment of all Additional Rent then due and payable, be paid into
the Bond Fund and shall be used, at the option of the Company, to redeem Bonds
on the earliest practicable redemption date or to pay the principal of any Bonds
as the same becomes due and payable, all subject to the rights of the mortgagee
under the Leasehold Mortgage (if any) and Financing Party under the Financing
Documents (if any).
(d) The Company shall not, by reason of its inability to use all or any
part of the Project during any such period of restoration or acquisition nor by
reason of the payment of the costs of such restoration or acquisition, be
entitled to any reimbursement from the City, the Trustee or the Bondowners or to
any abatement or diminution of the rentals payable by the Company under this
Lease nor of any other obligations hereunder except as expressly provided in
this Section.
(e) The City shall cooperate fully with the Company in the handling and
conduct of any prospective or pending condemnation proceedings with respect to
the Project or any part thereof, and shall, to the extent it may lawfully do so,
permit the Company to litigate in any such proceeding in the name and on behalf
of the City. The Company shall hold the City whole and harmless from any loss,
costs or expenses the City may incur related to any such proceeding. In no event
will the City voluntarily settle or consent to the settlement of any prospective
or pending condemnation proceedings with respect to the Project or any part
thereof without the prior written consent of the Company.
Section 9.3. Bondowner Approval. Notwithstanding anything to the contrary
contained in this Article IX, the proceeds of any insurance received subsequent
to a casualty or of any condemnation proceedings (or threats thereof) may be
applied as directed by the Owners of 100% of the principal amount of Bonds
outstanding, subject and subordinate to the rights of the City and the Trustee
pursuant to the Indenture, this Lease or the Grant Agreement.
ARTICLE X
SPECIAL COVENANTS
Section 10.1. No Warranty of Condition or Suitability by the City;
Exculpation and Indemnification. The City makes no warranty, either express or
implied, as to the condition of the Project or that it will be suitable for the
Company's purposes or needs. The Company releases the City from, agrees that the
City shall not be liable for and agrees to hold the City harmless against, any
loss or damage to property or any injury to or death of any person that may be
occasioned by any cause whatsoever pertaining to the Project or the use thereof;
unless such loss is the result of the City's gross negligence or willful
misconduct.
Section 10.2. Surrender of Possession. Upon accrual of the City's right of
re-entry because of the Company's default hereunder or upon the cancellation or
termination of this Lease for any reason other than the Company's purchase of
the Project pursuant to Article XI hereof, the Company shall peacefully
surrender possession of the Project to the City; provided, however, the Company
shall have the right within 90 days (or such later date as the City may agree
to) after the termination of this Lease to remove from the Project Site any
buildings, improvements, furniture, trade fixtures, machinery and equipment
owned by the Company and not constituting part of the Project. All repairs to
and restorations of the Project required to be made because of such removal
shall be made by and at the sole cost and expense of the Company, and during
said 90-day (or extended) period the Company shall bear the sole responsibility
for and bear the sole risk of loss for said buildings, improvements, furniture,
trade fixtures, machinery and equipment. All buildings, improvements, furniture,
trade fixtures, machinery and equipment owned by the Company and
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which are not so removed from the Project prior to the expiration of said period
shall be the separate and absolute property of the City.
Section 10.3. Right of Access to the Project. The Company agrees that the
City and the Trustee and their duly authorized agents shall have the right at
reasonable times during normal business hours and, except in the event of
emergencies, upon not less than one business day's prior notice, subject to the
Company's usual safety and security requirements, to enter upon the Project Site
(a) to examine and inspect the Project without interference or prejudice to the
Company's operations, (b) performing such work in and about the Project made
necessary by reason of the Company's default under any of the provisions of this
Lease, and (c) exhibiting the Project to prospective purchasers, lessees or
trustees subsequent to an Event of Default.
Section 10.4. Granting of Easements; Leasehold Mortgages and Financing
Arrangements.
(a) Subject to Section 10.4(c) and (d), if no Event of Default under this
Lease shall have happened and be continuing, the Company may at any time or
times (i) grant subleases (as permitted in Section 13.1(b) hereof), easements,
licenses, rights-of-way (including the dedication of public highways) and other
rights or privileges in the nature of easements that are for the direct use of
the Project, or part thereof, by the grantee, (ii) release or terminate existing
subleases, easements, licenses, rights-of-way and other rights or privileges,
all with or without consideration and upon such terms and conditions as the
Company shall determine, or (iii) incur Permitted Encumbrances. The Company may
take such actions and may execute any applicable documents in the Company's own
name. No separate signature of or authorization from the City shall be required
for the execution and delivery of any such document, although the City agrees to
execute and deliver such confirming documents as are described below, under the
procedures described below, if the Company chooses to make such a request. All
third parties entering into agreements with the Company or receiving delivery of
or the benefit of such agreements or documents shall be entitled to rely upon
the same as having been executed and delivered by the Company, unless such third
party has actual notice that the agency herein granted by the City to the
Company has been terminated by the City because of an uncured Event of Default
hereunder. The City agrees that it will execute and deliver and will cause and
direct the Trustee to execute and deliver any instrument necessary or
appropriate to confirm and grant, release or terminate any such sublease,
easement, license, right-of-way or other right or privilege or any such
agreement or other arrangement, upon receipt by the City and the Trustee of:
(x) a copy of the instrument of grant, release or termination or of the
agreement or other arrangement, (y) a written application signed by an
Authorized Company Representative requesting such instrument, and (z) a
certificate executed by an Authorized Company Representative stating that such
grant or release is not detrimental to the proper conduct of the business of the
Company, will not impair the effective use or interfere with the efficient and
economical operation of the Project, will not materially adversely affect the
security intended to be given by or under the Indenture and will be a Permitted
Encumbrance. If no Event of Default shall have happened and be continuing beyond
any applicable grace period, any payments or other consideration received by the
Company for any such grant or with respect to or under any such agreement or
other arrangement shall be and remain the property of the Company, but, subject
to Sections 10.4(c) and (d), in the event of the termination of this Lease or
Event of Default by the Company, all rights then existing of the Company with
respect to or under such grant shall inure to the benefit of and be exercisable
by the City and the Trustee.
(b) The Company may mortgage the leasehold estate created by this Lease,
without the City's consent, provided and upon condition that:
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(i) a duplicate original or certified copy or photostatic copy of each
such mortgage, and the note or other obligation secured thereby, is
delivered to the City within thirty (30) days after the execution thereof;
and
(ii) such mortgage shall contain a covenant to the effect that the net
proceeds of all insurance policies and the condemnation award shall be
held, used and applied for the purposes and in the manner provided for in
this Lease.
(c) The City acknowledges and agrees that the Company may finance and
refinance its rights and interests in the Project, this Lease and the leasehold
estate created hereby and, in connection therewith, the Company may execute
Financing Documents with one or more Financing Parties. Notwithstanding anything
contained to the contrary in this Lease, the Company shall have the right, at
any time and from time to time, to execute one or more Financing Documents
without the consent of the City upon the terms contained in this Section 10.4.
Notwithstanding anything contained to the contrary in this Lease (including
without limitation Section 13.1(a)), the Company shall have the further right to
sublease or assign this Lease, the leasehold estate, any sublease and rights in
connection therewith, and/or grant liens or security interests therein, to any
Financing Party (or to the designee, nominee, assignee or transferee of such
Financing Party), without the consent of the City.
(d) Upon notice by the Company to the City in writing that it has executed
one or more Financing Documents under which it has granted rights in this Lease
to a Financing Party, which includes the name and address of such Financing
Party, then the following provisions shall apply in respect of each such
Financing Party:
(i) there shall be no merger of this Lease or of the leasehold estate
created hereby with the fee title to the Project, notwithstanding that this
Lease or said leasehold estate and said fee title shall be owned by the
same person or persons, without the prior written consent of such Financing
Party;
(ii) the City shall serve upon each such Financing Party (at the
address, if any, provided to the City) a copy of each notice of the
occurrence of an Event of Default and each notice of termination given to
the Company under this Lease, at the same time as such notice is served
upon the Company. No such notice to the Company shall be effective unless a
copy thereof is thus served upon each Financing Party;
(iii) each Financing Party shall have the same period of time which
the Company has, after the service of any required notice upon it, within
which to remedy or cause to be remedied any payment default under this
Lease which is the basis of the notice plus thirty (30) days, and the City
shall accept performance by such Financing Party as timely performance by
the Company;
(iv) the City may exercise any of its rights or remedies with respect
to any other Event of Default by the Company, subject to the rights of the
Financing Parties under this Section 10.4(d) as to such other events of
default;
(v) in case of the occurrence and continuance of an Event of Default
by the Company under this Lease, other than a default in the payment of
money, the City shall take no action to effect a termination of this Lease
by service of a notice or otherwise, without first giving notice thereof to
each such Financing Party and permitting such Financing Party (or its
designee, nominee, assignee or transferee) a reasonable time within which
to remedy such default in the case of an
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Event of Default which is susceptible of being cured (provided that the
period to remedy such event of default shall continue beyond any period set
forth in the Lease to effect said cure so long as the Financing Party (or
its designee, nominee, assignee or transferee) is diligently prosecuting
such cure); provided that the Financing Party (or its designee, nominee,
assignee or transferee) shall pay or cause to be paid to the City and the
Trustee all expenses, including reasonable counsel fees, court costs and
disbursements incurred by the City or the Trustee in connection with any
such default; and
(vi) the Financing Parties (and their designees, nominees, assignees
or transferees) shall have the right to enter, possess and use the Project
at such reasonable times and manner as are necessary or desirable to
effectuate the remedies and enforce their respective rights under the
Financing Documents.
(e) In connection with the execution of one or more Financing Documents,
upon the request of the Company, the City agrees to execute such documents as
shall be reasonably requested by a Financing Party and which are usual and
customary in connection with the closing of the financing or refinancing
pursuant to the Financing Documents. The Company agrees to indemnify the City
for any and all costs and expenses incurred by the City, including reasonable
attorneys' fees and expenses, as a result of such request.
Section 10.5. Indemnification of City and Trustee. The Company shall
indemnify and save the City and the Trustee and their governing body members,
officers, agents, servants, employees, and independent contractors harmless from
and against all claims, demands, costs, liabilities, damages or expenses,
including attorneys' fees, by or on behalf of any person, firm or corporation
arising from the conduct or management of, or from any work or thing done in, on
or about, the Project during the Lease Term, and against and from all claims,
demands, costs, liabilities, damages or expenses, including attorneys' fees,
arising during the Lease Term from (a) any condition of the Project, (b) any
breach or default on the part of the Company in the performance of any of its
obligations under this Lease, or any action requested of the City by the Company
related to this Lease, (c) any contract entered into in connection with the
purchase or improvement of the Project, (d) any act of negligence of the Company
or of any of its agents, contractors, servants, employees or licensees, (e) any
act of negligence of any assignee or sublessee of the Company, or of any agents,
contractors, servants, employees or licensees of any assignee or sublessee of
the Company, (f) obtaining any applicable state and local sales and use tax
exemptions for materials or goods that become part of the Project, and (g) any
violation of Section 107.170 of the Revised Statutes of Missouri, as amended;
provided, however, the indemnification contained in this Section 10.5 shall not
extend to the City or Trustee if such claims, demands, costs, liabilities,
damages or expenses, including attorneys' fees, are (i) the result of work being
performed at the Project by employees or agents of the City, or (ii) the result
of the City's gross negligence or willful misconduct. Upon notice from the City
or the Trustee, the Company shall defend them or either of them in any such
action or proceeding to which they are entitled to indemnification as provided
herein. This Section 10.5 shall survive any termination of this Lease.
Section 10.6. Depreciation, Investment Tax Credit and Other Tax Benefits.
The City agrees that any depreciation, investment tax credit or any other tax
benefits with respect to the Project or any part thereof shall be made available
to the Company, and the City will fully cooperate with the Company in any effort
by the Company to avail itself of any such depreciation, investment tax credit
or other tax benefits.
Section 10.7. Company to Maintain its Existence. The Company agrees that
until the Bonds are paid or payment is provided for in accordance with the terms
of the Indenture, it will maintain its existence, and will not dissolve or
otherwise dispose of all or substantially all of its assets; provided, however,
that the Company may, without violating the agreement contained in this Section,
consolidate with
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or merge into another Person or permit one or more other Persons to consolidate
with or merge into it, or may sell or otherwise transfer to another Person all
or substantially all of its assets as an entirety and thereafter dissolve,
provided, the surviving, resulting or transferee Person (a) expressly assumes in
writing all the obligations of the Company contained in this Lease, and (b) (i)
the senior long term debt of such Person or the senior long term debt of an
entity controlled by, under common control with or controlling such Person, is
rated at least Baa3 by Moody's Investors Service, Inc. (or any successor agency)
or BBB- by Standard & Poors Rating Service (or any successor agency), or (ii)
such Person is controlled by, under common control with or controls the Company.
Section 10.8. Security Interests. At the written request of the Owners of
all of the Bonds, the City and the Company agree to enter into all instruments
(including financing statements and statements of continuation) necessary for
perfection of and continuance of the perfection of the security interests of the
City and the Trustee in the Project. Upon the written instructions of the Owner
of the Bonds, the Trustee shall file all instruments the Owner of the Bonds
shall deem necessary to be filed and shall continue or cause to be continued
such instruments for so long as the Bonds shall be Outstanding. The City and the
Company shall cooperate with the Trustee in this regard by executing such
continuation statements and providing such information as the Trustee may
require to renew such statements. The Trustee shall maintain a file showing a
description of all Project Equipment, said file to be compiled from the
certificates furnished to the Trustee pursuant to Section 4.4 and Section 8.2
hereof.
Section 10.9. Environmental Matters, Warranties, Covenants and Indemnities
Regarding Environmental Matters.
(a) As used in this Section, the following terms have the following
meanings:
"Environmental Laws" means any now-existing or hereafter enacted or
promulgated federal, state, local, or other law, statute, ordinance, rule,
regulation or court order pertaining to (i) environmental protection,
regulation, contamination or clean-up, (ii) toxic waste, (iii) underground
storage tanks, (iv) asbestos or asbestos-containing materials, or (v) the
handling, treatment, storage, use or disposal of Hazardous Substances, including
without limitation the Comprehensive Environmental Response, Compensation and
Liability Act and the Resource Conservation and Recovery Act, all as amended
from time to time.
"Hazardous Substances" means all (i) "hazardous substances" (as defined in
42 U.S.C. Sec. 9601(14)), (ii) "chemicals" subject to regulation under Title III
of the Superfund Amendments and Reauthorization Act of 1986, as amended from
time to time (iii) natural gas liquids, liquefied natural gas or synthetic gas,
(iv) any petroleum, petroleum-based products or crude oil, or (v) any other
hazardous or toxic substances, wastes or materials, pollutants, contaminants or
any other substances or materials which are included under or regulated by any
Environmental Law.
(b) The Company warrants and represents to the City and the Trustee that to
the knowledge of the Company there are no conditions on the Project Site which
are materially violative of any applicable Environmental Laws and no claims or
demands have been asserted or made by any third parties arising out of, relating
to or in connection with any Hazardous Substances on, or allegedly on, the
Project Site for any injuries suffered or incurred, or allegedly suffered or
incurred, by reason of the foregoing.
(c) The Company will provide the City and the Trustee with copies of any
notifications of releases of Hazardous Substances or of any environmental
hazards or potential hazards which are given by or on behalf of the Company to
any federal, state or local or other agencies or authorities or which are
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received by the Company from any federal, state or local or other agencies or
authorities with respect to the Project Site. Such copies shall be sent to the
City and the Trustee concurrently with their being mailed or delivered to the
governmental agencies or authorities or within ten days after they are made or
received by the Company. The Company will provide to the City for review only,
any environmental assessment ("Assessments(s)") and reports regarding the
correction or remediation of environmental issues addressed in the Assessment
("Report(s)") concerning the Project Site and the Project Improvements; upon the
completion of the City's review of the Assessments and the Reports, the City
shall immediately return to the Company all originals and copies of the
Assessments and Reports.
(d) The Company warrants and represents that the Company has provided the
City and the Trustee with copies of all emergency and hazardous chemical
inventory forms (hereinafter "Environmental Notices") that relate to the Project
Site previously given, as of the date hereof, by the Company to any federal,
state or local governmental authority or agency as required pursuant to the
Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.A. Sec.
11001 et seq., or any other applicable Environmental Laws. The Company will
provide the City and the Trustee with copies of all Environmental Notices that
relate to the Project Site subsequently sent to any such governmental authority
or agency as required pursuant to the Emergency Planning and Community
Right-to-Know Act of 1986 or any other applicable Environmental Laws. Such
copies of subsequent Environmental Notices shall be sent to the City and the
Trustee concurrently with their being mailed to any such governmental authority
or agency.
(e) The Company will use its reasonable best efforts to comply with and
operate and at all times use, keep and maintain the Project and every part
thereof (whether or not such property constitutes a facility, as defined in 42
U.S.C. Sec. 9601 et. seq.) in material conformance with all applicable
Environmental Laws. Without limiting the generality of the foregoing, the
Company will not use, generate, treat, store, dispose of or otherwise introduce
any Hazardous Substance into or on the Project or any part thereof nor cause,
suffer, allow or permit anyone else to do so except in the ordinary course of
the operation of the Company's business and in compliance with all applicable
Environmental Laws.
(f) The Company agrees to indemnify, defend, protect and hold harmless the
City and the Trustee from and against any and all claims, demands, costs,
liabilities, damages or expenses, including reasonable attorneys' fees, arising
from (i) any release (as defined in 42 U.S.C. Sec. 9601 (22)) or threat of a
release, actual or alleged, of any Hazardous Substances, upon the Project or
respecting any products or materials previously, now or thereafter located upon,
delivered to or in transit to or from the Project, regardless of whether such
release or threat of release or alleged release or threat of release has
occurred prior to the date hereof or hereafter occurs and regardless of whether
such release occurs as a result of any act, omission, negligence or misconduct
of the Company or any third party or otherwise (except to the extent such
release occurs as a result of any grossly negligent act or omission or willful
misconduct of the City), (ii) (A) any violation now existing or hereafter
arising (actual or alleged) of, or any other liability under or in connection
with, any applicable Environmental Laws relating to or affecting the Project, or
(B) any violation now existing or hereafter arising, actual or alleged, or any
other liability, under or in connection with, any applicable Environmental Laws
relating to any products or materials previously, now or hereafter located upon,
delivered to or in transit to or from the Project, regardless of whether such
violation or alleged violation or other liability is asserted or has occurred or
arisen prior to the date hereof or hereafter is asserted or occurs or arises and
regardless of whether such violation or alleged violation or other liability
occurs or arises, as the result of any act, omission, negligence or misconduct
of the Company or any third party or otherwise (except to the extent such
release occurs as a result of any negligent act or omission or misconduct of the
City), (iii) any assertion by any third party of any claims or demands for any
loss or injury arising out of, relating to or in connection with any Hazardous
Substances on or allegedly on the Project Site, or (iv) any breach, falsity or
failure of any of the representations, warranties, covenants and agreements
contained in this Section. This subsection (f) shall survive any termination of
this Lease.
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ARTICLE XI
OPTION AND OBLIGATION TO PURCHASE THE PROJECT
Section 11.1. Option to Purchase the Project. The Company shall have, and
is hereby granted, the option to purchase the Project at any time, prior to the
expiration of the Lease Term upon payment in full of all Bonds then outstanding
or provision for their payment having been made pursuant to Article XIII of the
Indenture. To exercise such option the Company shall give written notice to the
City and to the Trustee, if any of the Bonds shall then be unpaid or provision
for their payment shall not have been made in accordance with the provisions of
the Indenture, and shall specify therein the date of closing such purchase,
which date shall be not less than 30 nor more than 90 days from the date such
notice is mailed, and in case of a redemption of the Bonds in accordance with
the provisions of the Indenture the Company shall make arrangements satisfactory
to the Trustee for the giving of the required notice of redemption. The purchase
price payable by the Company in the event of its exercise of the option granted
in this Section shall be the sum of the following:
(a) an amount of money which, when added to the amount then on deposit
in the Bond Fund, will be sufficient to redeem all the then outstanding
Bonds on the earliest redemption date next succeeding the closing date,
including, without limitation, principal and interest to accrue to said
redemption date and redemption expense; plus
(b) an amount of money equal to the Trustee's and the Paying Agent's
agreed to and reasonable fees and expenses under the Indenture accrued and
to accrue until such redemption of the Bonds; plus
(c) an amount of money equal to all Grant payments due and payable
pursuant to the Grant Agreement which shall have accrued as of the date of
purchase; plus
(d) the sum of $1,000.
At its option, to be exercised at least 5 Business Days prior to the date
of closing such purchase, the Company may deliver to the Trustee for
cancellation Bonds not previously paid, and the Company shall receive a credit
against the purchase price payable by the Company in an amount equal to 100% of
the principal amount of the Bonds so delivered for cancellation, plus the
accrued interest thereon.
Section 11.2. Conveyance of the Project. At the closing of the purchase of
the Project pursuant to this Article, the City will upon receipt of the purchase
price deliver, or cause to be delivered, to the Company the following:
(a) If the Indenture shall not at the time have been satisfied in
full, a release from the Trustee of the Project from the lien and/or
security interest of the Indenture, the Deed of Trust and this Lease.
(b) Documents, including without limitation a special warranty deed,
conveying to the Company legal title to the Project, as it then exists,
subject to the following: (i) those liens and encumbrances, if any, to
which title to the Project was subject when conveyed to the City;
(ii) those liens and encumbrances created by the Company or to the creation
or suffering of which the
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Company consented; (iii) those liens and encumbrances resulting from the
failure of the Company to perform or observe any of the agreements on its
part contained in this Lease; (iv) Permitted Encumbrances other than the
Indenture, this Lease and the Deed of Trust; and (v) if the Project or any
part thereof is being condemned, the rights and title of any condemning
authority.
Section 11.3. Relative Position of Option and Indenture. The options and
obligation to purchase the Project granted to the Company in this Article shall
be and remain prior and superior to the Indenture and may be exercised whether
or not the Company is in default under this Lease, provided that such default
will not result in nonfulfillment of any condition to the exercise of any such
option and further provided that all options herein granted shall terminate upon
the termination of this Lease.
Section 11.4. Obligation to Purchase the Project. The Company hereby agrees
to purchase, and the City hereby agrees to sell, the Project (a) for the sum of
$1,000 at the expiration of the Lease Term following full payment of the Bonds
or provision for payment thereof having been made in accordance with the
provisions of the Indenture, and (b) at least 30 days and not more than 90 days
subsequent to the early termination of the Grant Agreement, in an amount
sufficient to redeem all the then Outstanding Bonds, plus accrued interest, the
reasonable fees and expenses of the Trustee and the sum of $1,000.
ARTICLE XII
DEFAULTS AND REMEDIES
Section 12.1. Events of Default. If any one or more of the following events
shall occur and be continuing, it is hereby defined as and declared to be and to
constitute an "Event of Default" or "default" under this Lease:
(a) Default in the due and punctual payment of Basic Rent or
Additional Rent, and such default shall continue for 10 days after the City
or the Trustee has given the Company written notice specifying such default
(or such longer period as shall be reasonably required to cure such
default; provided that (i) the Company has commenced such cure within said
10-day period, and (ii) the Company diligently prosecutes such cure to
completion); or
(b) Default in the due observance or performance of any other
covenant, agreement, obligation or provision of this Lease on the Company's
part to be observed or performed, and such default shall continue for 60
days after the City or the Trustee has given the Company written notice
specifying such default (or such longer period as shall be reasonably
required to cure such default; provided that (i) the Company has commenced
such cure within said 60-day period, and (ii) the Company diligently
prosecutes such cure to completion); or
(c) The Company shall: (i) admit in writing its inability to pay its
debts as they become due; or (ii) file a petition in bankruptcy or for
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the United States bankruptcy code as
now or in the future amended or any other similar present or future federal
or state statute or regulation, or file a pleading asking for such relief;
or (iii) make an assignment for the benefit of creditors; or (iv) consent
to the appointment of a trustee, receiver or liquidator for all or a major
portion of its property or shall fail to have the appointment of any
trustee, receiver or liquidator made without the Company's consent or
acquiescence, vacated or set aside; or (v) be finally adjudicated as
bankrupt or insolvent under any federal or state law; or (vi) be subject to
any
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proceeding, or suffer the entry of a final and non-appealable court
order, under any federal or state law appointing a trustee, receiver
or liquidator for all or a major part of its property or ordering the
winding-up or liquidation of its affairs, or approving a petition
filed against it under the United States bankruptcy code, as now or in
the future amended, which order or proceeding, if not consented to by
it, shall not be dismissed, vacated, denied, set aside or stayed
within 90 days after the day of entry or commencement; or (vii) suffer
a writ or warrant of attachment or any similar process to be issued by
any court against all or any substantial portion of its property, and
such writ or warrant of attachment or any similar process is not
contested, stayed, or is not released within 60 days after the final
entry, or levy or after any contest is finally adjudicated or any stay
is vacated or set aside; or
(d) The Company shall vacate or abandon the Project, or shall have
been ejected from the Project or any material portion thereof by reason of
a defect in title to the Project, and the same shall remain uncared for and
unoccupied for a period of 90 days; or
(e) The Company shall fail to (i) pay amounts due under the Grant
Agreement or (ii) comply with the other material terms of the Grant
Agreement, and such default shall continue for sixty (60) days after the
City, the Trustee or any other party to the Grant Agreement has given the
Company written notice specifying such default (or such longer period as
shall be reasonably required to cure such default; provided that (A) the
Company has commenced such cure within such sixty (60) day period, and (B)
the Company diligently prosecutes such cure to completion.
Section 12.2. Remedies on Default. If any Event of Default referred to in
Section 12.1 hereof shall have occurred and be continuing, then the City may at
the City's election (subject, however, to any restrictions against acceleration
of the maturity of the Bonds or termination of this Lease in the Indenture),
then or at any time thereafter, and while such default shall continue, take any
one or more of the following actions:
(a) cause all amounts payable with respect to the Bonds for the remainder
of the term of this Lease to become due and payable, as provided in the
Indenture;
(b) give the Company written notice of intention to terminate this Lease on
a date specified therein, which date shall not be earlier than 60 days after
such notice is given, and if all defaults have not then been cured, on the date
so specified, the Company's rights to possession of the Project shall cease and
this Lease shall thereupon be terminated, and the City may re-enter and take
possession of the Project; or
(c) without terminating this Lease, re-enter the Project to take possession
thereof pursuant to legal proceedings or pursuant to any notice provided for by
law, and having elected to re-enter or take possession of the Project without
terminating this Lease, the City shall use reasonable diligence to relet the
Project, or parts thereof, for such term or terms and at such rental and upon
such other terms and conditions as the City may deem advisable, with the right
to make alterations and repairs to the Project, and no such re-entry or taking
of possession of the Project by the City shall be construed as an election on
the City's part to terminate this Lease, and no such re-entry or taking of
possession by the City shall relieve the Company of its obligation to pay Basic
Rent or Additional Rent (at the time or times provided herein), or any of its
other obligations under this Lease, all of which shall survive such re-entry or
taking of possession, and the Company shall continue to pay the Basic Rent and
Additional Rent provided for in this Lease until the end of this Lease Term,
whether or not the Project shall have been relet, less the Net Proceeds, if any,
of any reletting of the Project after deducting all of the City's reasonable
expenses in or in connection with such reletting, including without limitation
all repossession costs, brokerage commissions, legal expenses,
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expenses of employees, expenses for title reports, commitments or policies,
alteration costs and expenses of preparation for reletting. Said Net Proceeds of
any reletting shall be deposited in the Bond Fund. Having elected to re-enter or
take possession of the Project without terminating this Lease, the City may
(subject, however, to any restrictions against termination of this Lease in the
Indenture), by notice to the Company given at any time thereafter while the
Company is in default in the payment of Basic Rent or Additional Rent or in the
performance of any other obligation under this Lease, elect to terminate this
Lease on a date to be specified in such notice, which date shall be not earlier
than 30 days after re-entry under (c) above, and if all defaults shall not have
then been cured, on the date so specified this Lease shall thereupon be
terminated. If in accordance with any of the foregoing provisions of this
Article the City shall have the right to elect to re-enter and take possession
of the Project, the City may enter and expel the Company and those claiming
through or under the Company and remove the property and effects of both or
either without being guilty of any manner of trespass and without prejudice to
any remedies for arrears of rent or preceding breach of covenant. The City may
take whatever action at law or in equity which may appear necessary or desirable
to collect rent then due and thereafter to become due, or to enforce performance
and observance of any obligation, agreement or covenant of the Company under
this Lease.
Section 12.3. Survival of Obligations. The Company covenants and agrees
with the City and Bondowners that its obligations under this Lease shall survive
the cancellation and termination of this Lease, for any cause, and that the
Company shall continue to pay the Basic Rent and Additional Rent and perform all
other obligations provided for in this Lease, all at the time or times provided
in this Lease; provided, however, that upon the payment of all Basic Rent and
Additional Rent required under Article V hereof, and upon the satisfaction and
discharge of the Indenture under Section 1301 thereof, the Company's obligation
under this Lease shall thereupon cease and terminate in full.
Section 12.4. Rights and Remedies Cumulative. The rights and remedies
reserved by the City and the Company hereunder and those provided by law shall
be construed as cumulative and continuing rights. No one of them shall be
exhausted by the exercise thereof on one or more occasions. The City and the
Company shall each be entitled to specific performance and injunctive or other
equitable relief for any breach or threatened breach of any of the provisions of
this Lease, notwithstanding availability of an adequate remedy at law, and each
party hereby waives the right to raise such defense in any proceeding in equity.
The City agrees that neither the City nor the Trustee shall enforce any right or
obligation hereunder (except for the City's or the Trustee's right to receive
payments for their own account under the Indenture, the Lease, the Grant
Agreement or any other agreement related to the Bonds or for their rights of
indemnification or to be protected from liabilities by insurance policies
required by this Lease) if so directed in writing by the Owners of 100% of the
Outstanding Bonds.
Section 12.5. Waiver of Breach. No waiver of any breach of any covenant or
agreement herein contained shall operate as a waiver of any subsequent breach of
the same covenant or agreement or as a waiver of any breach of any other
covenant or agreement, and in case of a breach by the Company of any covenant,
agreement or undertaking by the Company, the City may nevertheless accept from
the Company any payment or payments hereunder without in any way waiving City's
right to exercise any of its rights and remedies provided for herein with
respect to any such default or defaults of the Company which were in existence
at the time such payment or payments were accepted by the City.
Section 12.6. Opportunity of Company to Cure Defaults. With regard to any
alleged default concerning which notice is given to the Company under the
provisions of this Article, the City hereby grants the Company full authority
for account of the City to perform any covenant or obligation, the
nonperformance of which is alleged in said notice to constitute a default, in
the name and stead of the City,
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with full power to do any and all things and acts to the same extent that the
City could do and perform any such things and acts in order to remedy such
default.
Section 12.7. Trustee's Exercise of the City's Remedies. Whenever any event
of default shall have occurred and be continuing, the Trustee may, but except as
otherwise provided in the Indenture shall not be obliged to, exercise any or all
of the rights of the City under this Article, upon notice as required of the
City unless the City has already given the required notice. In addition, the
Trustee shall have available to it all of the remedies prescribed by the
Indenture.
ARTICLE XIII
ASSIGNMENT AND SUBLEASE
Section 13.1. Assignment; Sublease.
(a) Subject to Sections 10.4(c) and (d), the Company shall have the right
to assign, transfer, encumber or dispose of this Lease or any interest therein
or part thereof for any lawful purpose under the Act. With respect to any
assignment, the Company shall comply with the following conditions:
(1) Such assignment shall be in writing, duly executed and
acknowledged by the assignor and in proper form for recording;
(2) Such assignment shall include the entire then unexpired term of
this Lease; and
(3) A duplicate original of such assignment shall be delivered to the
City and the Trustee within ten (10) days after the execution thereof,
together with an assumption agreement, duly executed and acknowledged by
the assignee in proper form for recording, by which the assignee shall
assume all of the terms, covenants and conditions of this Lease on the part
of the Company to be performed and observed.
(b) The Company shall have the right to sublet all or any part of the
Project to one or more than one entity for any lawful purpose under the Act. The
Company shall, within 10 days after the delivery thereof, furnish or cause to be
furnished to the City and the Trustee a true and correct copy of each such
sublease. Any sublease may provide, at the Company's option, that the City's
consent shall not be required in respect of any further subletting thereunder if
such further subletting is for a similar purpose as the original sublease and is
for a purpose permissible under the Act.
(c) Notwithstanding the foregoing, the right of the Company to assign or
sublease any interests in this Lease without the prior consent of the City shall
only be made (i) to any Person whose senior long term debt, or the senior long
term debt of an entity controlled by, under common control with or controlling
such Person is rated at least Baa3 by Moody's Investors Service, Inc. (or any
successor agency) or BBB- by Standard & Poors Rating Service (or any successor
agency); (ii) so long as the Company shall remain secondarily liable, to any
Person, or (iii) to an entity controlled by or under common control with or
controlling the Company. Any assignee of all the rights of the Company shall
agree to be bound by the terms of this Lease, the Grant Agreement and any other
documents related to the issuance of the Bonds. Upon such assignment of all the
rights of the Company and agreement by the assignee to be bound by the terms of
this Lease, the Grant Agreement and any other documents related to the Bonds,
the Company shall
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be released from and have no further obligations under this Lease, the Grant
Agreement or any agreement related to the issuance of the Bonds.
Section 13.2. Assignment of Revenues by City. The City shall assign and
pledge any rents, revenues and receipts receivable under this Lease, to the
Trustee pursuant to the Indenture as security for payment of the principal of,
interest and premium, if any, on the Bonds and the Company hereby consents to
such pledge and assignment.
Section 13.3. Prohibition Against Fee Mortgage of Project. Except pursuant
to the Deed of Trust, the City shall not mortgage its fee interest in the
Project, but may assign its interest in and pledge any moneys receivable under
this Lease to the Trustee pursuant to the Indenture as security for payment of
the principal of and interest on the Bonds.
Section 13.4. Restrictions on Sale or Encumbrance of Project by City.
During this Lease Term, the City agrees that, except to secure the Bonds to be
issued pursuant to the Indenture, it will not sell, assign, encumber, mortgage,
transfer or convey the Project or any interest therein.
ARTICLE XIV
AMENDMENTS, CHANGES AND MODIFICATIONS
Section 14.1. Amendments, Changes and Modifications. Except as otherwise
provided in this Lease or in the Indenture, subsequent to the issuance of Bonds
and prior to the payment in full of the Bonds (or provision for the payment
thereof having been made in accordance with the provisions of the Indenture),
this Lease may not be effectively amended, changed, modified, altered or
terminated without the prior written consent of the Trustee, given in accordance
with the provisions of the Indenture, which consent, however, shall not be
unreasonably withheld.
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.1. Notices. All notices, certificates or other communications
required or desired to be given hereunder shall be in writing and shall be
deemed duly given when (a) mailed by registered or certified mail, postage
prepaid, or (b) sent by overnight delivery or other delivery service which
requires written acknowledgment of receipt by the addressee, addressed as
follows:
(i) To the City:
City of Bowling Green, Missouri
16 West Church
Bowling Green, MO 63334
ATTN: Mayor
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(ii) To the Company:
Union Electric Company d/b/a AmerenUE
One Ameren Plaza
1901 Chouteau Avenue
St. Louis, MO 63103
ATTN: Treasurer
with a copy to:
Union Electric Company d/b/a AmerenUE
One Ameren Plaza
1901 Chouteau Avenue
St. Louis, MO 63103
ATTN: General Counsel
(iii) To the Trustee:
Commerce Bank, N.A.
1000 Walnut, 6th Floor
Kansas City, MO 64106
ATTN: Corporate Trust Department
All notices given by certified or registered mail as aforesaid shall be
deemed fully given as of the date they are so mailed. A duplicate copy of each
notice, certificate or other communication given hereunder by either the City or
the Company to the other shall also be given to the Trustee. The City, the
Company and the Trustee may from time to time designate, by notice given
hereunder to the others of such parties, such other address to which subsequent
notices, certificates or other communications shall be sent.
Section 15.2. City Shall Not Unreasonably Withhold Consents and Approvals.
Wherever in this Lease it is provided that the City shall, may or must give its
approval or consent, or execute supplemental agreements or schedules, the City
shall not unreasonably, arbitrarily or unnecessarily withhold or refuse to give
such approvals or consents or refuse to execute such supplemental agreements or
schedules; provided, however, that nothing in this Lease shall be interpreted to
affect the City's authority to approve or deny any matter within or without the
Project which is subject to zoning, building permit or other regulatory
approvals by the City.
Section 15.3. Net Lease. The parties hereto agree (a) that this Lease shall
be deemed and construed to be a net lease, (b) that the payments of Basic Rent
are designed to provide the City and the Trustee funds adequate in amount to pay
all principal of and interest accruing on the Bonds as the same become due and
payable, (c) that to the extent that the payments of Basic Rent are not
sufficient to provide the City and the Trustee with funds sufficient for the
purposes aforesaid, the Company shall be obligated to pay, and it does hereby
covenant and agree to pay, upon demand therefor, as Additional Rent, such
further sums of money, in cash, as may from time to time be required for such
purposes, and (d) that if after the principal of and interest on the Bonds and
all costs incident to the payment of the Bonds (including the fees and expenses
of the City and the Trustee) have been paid in full the Trustee or the City
holds unexpended funds received in accordance with the terms hereof such
unexpended funds shall, after payment therefrom of all sums then due and owing
by the Company under the terms of this Lease, and except as otherwise provided
in this Lease and the Indenture, become the absolute property of and be paid
over forthwith to the Company.
-28-
Section 15.4. No Pecuniary Liability. No provision, covenant or agreement
contained in this Lease, the Indenture or the Bonds, or any obligation herein or
therein imposed upon the City, or the breach thereof, shall constitute or give
rise to or impose upon the City a pecuniary liability or a charge upon the
general credit or taxing powers of the city of Bowling Green or the State of
Missouri. Such limitation shall not apply to any liability or charge directly
resulting from the City's breach of any provision, covenant or agreement
contained herein.
Section 15.5. Governing Law. This Lease shall be construed in accordance
with and governed by the laws of Missouri.
Section 15.6. Binding Effect. This Lease shall be binding upon and shall
inure to the benefit of the City and the Company and their respective successors
and assigns.
Section 15.7. Severability. If for any reason any provision of this Lease
shall be determined to be invalid or unenforceable, the validity and
enforceability of the other provisions hereof shall not be affected thereby.
Section 15.8. Execution in Counterparts. This Lease may be executed in
several counterparts, each of which shall be deemed to be an original and all of
which shall constitute but one and the same instrument.
Section 15.9. Effective Date of Bond Documents. Notwithstanding anything to
the contrary in the Lease, the Indenture, the Deed of Trust, the Bond Purchase
Agreement, the Grant Agreement or any other document relating to the issuance of
the Bonds or the transfer of the Project or Project Site to the City
(collectively, the "Bond Documents"), unless waived in writing by the Company,
none of the Bond Documents (except for the provisions in the Grant Agreement
related to the improvements to the water system of the City which became
effective immediately) shall be effective until the Company receives an order by
the Missouri Public Service Commission and the Illinois Commerce Commission
approving the transactions contemplated by the Bond Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed in their respective names by their duly authorized signatories, all as
of the date first above written.
CITY OF BOWLING GREEN, MISSOURI
By: /s/ Boyd A. Haddock
------------------------------
Mayor
(Seal)
ATTEST:
/s/ Barbara Allison
- ------------------------
City Clerk
AmerenUE Project
Lease Agreement
S-1
UNION ELECTRIC COMPANY
d/b/a AMERENUE
By: /s/ Jerre E. Birdsong
-------------------------------
Name: Jerre E. Birdsong
Title: Vice President & Treasurer
(Seal)
ATTEST:
By: /s/ G. L. Waters
---------------------
Name: G. L. Waters
Title: Asst. Secretary
AmerenUE Project
Lease Agreement
S-2
ACKNOWLEDGMENTS
STATE OF MISSOURI )
) SS.
COUNTY OF PIKE )
BE IT REMEMBERED that on this 16 day of December, 2002, before me, the
undersigned, a notary public in and for said county and state, came BOYD
HADDOCK, Mayor of the CITY OF BOWLING GREEN, MISSOURI, a fourth class city duly
authorized, incorporated and existing under and by virtue of the Constitution
and laws of the State of Missouri, and BARBARA ALLISON, City Clerk, who are
personally known to me to be the same persons who executed, as such officers,
the within instrument on behalf of said City, and such persons duly acknowledged
the execution of the same to be the act and deed of said City.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year last above written.
/s/ Jennifer D. Robinson
-----------------------------
Notary Public
My Appointment Expires: My Commission Expires
August 6, 2006
----------------------
AmerenUE Project
Lease Agreement
S-3
STATE OF MISSOURI )
) SS.
CITY OF ST. LOUIS )
BE IT REMEMBERED, that on this 17th day of December, 2002, before me the
undersigned, a Notary Public in and for the County and State aforesaid, came
Jerre E. Birdsong, a Vice President & Treasurer of UNION ELECTRIC COMPANY d/b/a
AMERENUE, a Missouri corporation, who is personally known to me to be such
officer, and who is personally known to me to be the same person who executed
the within instrument on behalf of said corporation, and duly acknowledged the
execution of the same to be the act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year last above written.
/s/ Carol A. Head
-----------------------------
Notary Public
My Appointment Expires: 9-23-2006
-------------
AmerenUE Project
Lease Agreement
S-4
EXHIBIT 10.10
================================================================================
________________
TRUST INDENTURE
Dated as of December 1, 2002
________________
Between
CITY OF BOWLING GREEN, MISSOURI
AND
COMMERCE BANK, N.A.,
As Trustee
Relating to:
$125,000,000
(Aggregate Maximum Principal Amount)
City of Bowling Green, Missouri
Taxable Industrial Revenue Bond
(AmerenUE Project)
Series 2002
================================================================================
TRUST INDENTURE
TABLE OF CONTENTS
Page
Parties ......................................................1
Recitals .....................................................1
Granting Clauses .............................................1
ARTICLE I
DEFINITIONS
Section 101. Definitions of Words and Terms ...............................3
Section 102. Rules of Interpretation ......................................7
ARTICLE II
THE BOND
Section 201. Title and Amount of Bonds ....................................7
Section 202. Nature of Obligation .........................................8
Section 203. Denomination, Number and Dating of Bonds .....................8
Section 204. Method and Place of Payment of Bonds..........................8
Section 205. Execution and Authentication of Bonds ........................9
Section 206. Registration, Transfer and Exchange of Bonds .................9
Section 207. Persons Deemed Owners of Bonds ..............................10
Section 208. Authorization of the Bonds ..................................10
Section 209. Authorization of Additional Bonds ...........................11
Section 210. Mutilated, Lost, Stolen or Destroyed Bonds ..................12
Section 211. Cancellation and Destruction of Bonds Upon Payment ..........12
ARTICLE III
REDEMPTION OF BONDS
Section 301. Redemption of Bonds Generally ...............................13
Section 302. Redemption of Bonds .........................................13
Section 303. Effect of Call for Redemption ...............................13
Section 304. Notice of Redemption ........................................13
-i-
ARTICLE IV
FORM OF BONDS
Section 401. Form Generally ..............................................14
Section 402. Form of Bonds................................................14
Section 403. Form of Certificate of Authentication .......................20
ARTICLE V
CUSTODY AND APPLICATION OF BOND PROCEEDS
Section 501. Creation of Construction Fund ...............................20
Section 502. Deposits into the Construction Fund .........................20
Section 503. Disbursements from the Construction Fund ....................20
Section 504. Completion of the Project ...................................21
Section 505. Disposition Upon Acceleration ...............................21
ARTICLE VI
REVENUES AND FUNDS
Section 601. Creation of the Bond Fund ...................................21
Section 602. Deposits into the Bond Fund .................................21
Section 603. Application of Moneys in the Bond Fund ......................21
Section 604. Payments Due on Saturdays, Sundays and Holidays .............22
Section 605. Nonpresentment of Bonds .....................................22
Section 606. Repayment to the Company from the Bond Fund .................22
ARTICLE VII
SECURITY FOR DEPOSITS AND INVESTMENT OF FUNDS
Section 701. Moneys to be Held in Trust ..................................23
Section 702. Investment of Moneys in Construction Fund and Bond Fund .....23
Section 703. Record Keeping ..............................................23
ARTICLE VIII
GENERAL COVENANTS AND PROVISIONS
Section 801. Payment of Principal and Interest ...........................23
Section 802. Authority to Execute Indenture and Issue Bonds ..............24
Section 803. Performance of Covenants ....................................24
Section 804. Instruments of Further Assurance ............................24
Section 805. Recordings and Filings ......................................24
Section 806. Inspection of Project Books .................................24
Section 807. Enforcement of Rights Under the Lease .......................24
-ii-
ARTICLE IX
DEFAULT AND REMEDIES
Section 901. Events of Default; Notice; Opportunity to Cure ..............25
Section 902. Acceleration of Maturity in Event of Default ................25
Section 903. Surrender of Possession of Trust Estate; Rights and Duties
of Trustee in Possession ..................................25
Section 904. Appointment of Receivers in Event of Default ................26
Section 905. Exercise of Remedies by the Trustee .........................26
Section 906. Limitation on Exercise of Remedies by Bondowners ............26
Section 907. Right of Bondowners to Direct Proceedings ...................27
Section 908. Application of Moneys in Event of Default ...................27
Section 909. Remedies Cumulative .........................................28
Section 910. Waivers of Events of Default ................................28
ARTICLE X
THE TRUSTEE
Section 1001. Acceptance of the Trusts ....................................29
Section 1002. Fees, Charges and Expenses of the Trustee ...................31
Section 1003. Notice to Bondowners if Default Occurs ......................31
Section 1004. Intervention by the Trustee .................................31
Section 1005. Successor Trustee Upon Merger, Consolidation or Sale ........31
Section 1006. Resignation of Trustee ......................................31
Section 1007. Removal of Trustee ..........................................32
Section 1008. Appointment of Successor Trustee ............................32
Section 1009. Vesting of Trusts in Successor Trustee ......................32
Section 1010. Right of Trustee to Pay Taxes and Other Charges .............32
Section 1011. Trust Estate May be Vested in Co-trustee ....................33
Section 1012. Accounting ..................................................33
Section 1013. Performance of Duties under the Lease .......................33
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 1101. Supplemental Indentures Not Requiring Consent of Bondowners .34
Section 1102. Supplemental Indentures Requiring Consent of Bondowners .....34
Section 1103. Company's Consent to Supplemental Indentures ................35
ARTICLE XII
SUPPLEMENTAL LEASES
Section 1201. Supplemental Leases Not Requiring Consent of Bondowners .....35
Section 1202. Supplemental Leases Requiring Consent of Bondowners .........35
-iii-
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 1301. Satisfaction and Discharge of this Indenture ................35
Section 1302. Bonds Deemed to be Paid .....................................36
ARTICLE XIV
MISCELLANEOUS PROVISIONS
Section 1401. Consents and Other Instruments by Bondowners ................37
Section 1402. Limitation of Rights Under this Indenture ...................37
Section 1403. Notices .....................................................37
Section 1404. Severability ................................................38
Section 1405. Execution in Counterparts ...................................38
Section 1406. Governing Law ...............................................38
Signatures and Seals .......................................S-1
Acknowledgments ............................................S-3
Exhibit A - Project Improvements
Exhibit B - Project Site
Exhibit C - Project Equipment
-iv-
TRUST INDENTURE
THIS TRUST INDENTURE dated as of December 1, 2002, between CITY OF BOWLING
GREEN, MISSOURI, a fourth class city organized and existing under the laws of
the State of Missouri (the "City"), and COMMERCE BANK, N.A., a national banking
association duly organized and existing and authorized to accept and execute
trusts of the character herein set forth under the laws of the United States of
America, as Trustee (the "Trustee");
WITNESSETH:
WHEREAS, the City is authorized under Sections 100.010 through 100.200 of
the Revised Statutes of Missouri, as amended and Article VI Section 27(b) of the
Missouri Constitution (the "Act"), to issue revenue bonds to provide funds for
the carrying out of a project under the Act and to sell, lease or mortgage to
private persons, partnerships or corporations the facilities purchased,
constructed or extended by the City for manufacturing, commercial, warehousing
and industrial development purposes; and
WHEREAS, pursuant to the Act, the governing body of the City adopted an
Ordinance on July 15, 2002 (the "Bond Ordinance"), expressing the intent of the
City to issue its industrial development revenue bond in a principal amount not
to exceed $125,000,000 (the "Bond"), for the purpose of acquiring a project
described on Exhibit A hereto (the "Project") located on the real property
described on Exhibit B hereto, including land, buildings, structures,
improvements, fixtures, machinery and equipment as hereinafter more fully
described, and authorizing the City to lease the Project to Union Electric
Company d/b/a AmerenUE, a Missouri corporation (the "Company");
WHEREAS, pursuant to the Bond Ordinance and the Act, the City is authorized
to execute and deliver this Trust Indenture (the "Indenture") for the purpose of
issuing and securing the Bond, and to enter into the Lease Agreement of even
date herewith (the "Lease"), with the Company under which the City, as Lessor,
will lease the Project to the Company, as Lessee, in consideration of rentals
which will be sufficient to pay the principal of and interest on the Bond;
WHEREAS, all things necessary to make the Bond, when authenticated by the
Trustee and issued as in this Indenture provided, the valid and legally binding
obligations of the City, and to constitute this Indenture a valid and legally
binding pledge and assignment of the Trust Estate herein made for the security
of the payment of the principal of and interest on the Bond, have been done and
performed, and the execution and delivery of this Indenture and the execution
and issuance of the Bond, subject to the terms hereof, have in all respects been
duly authorized;
NOW, THEREFORE, THIS TRUST INDENTURE WITNESSETH:
GRANTING CLAUSES
That the City, in consideration of the premises, the acceptance by the
Trustee of the trusts hereby created, the purchase and acceptance of the Bond by
the Owners thereof, and of other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and in order to secure the
payment of the principal of and interest on the Bond issued and outstanding
under this Indenture from time to time according to its tenor and effect, and to
secure the performance and observance by the City of all the covenants,
agreements and conditions herein and in the Bond contained, does hereby pledge
and assign to
the Trustee and its successors and assigns forever, the property described in
paragraphs (a), (b) and (c) below (said property being herein referred to as the
"Trust Estate"), to-wit:
(a) All right, title and interest in and to the Project (defined herein)
together with the tenements, hereditaments, appurtenances, rights, privileges
and immunities thereunto belonging or appertaining;
(b) All right, title and interest of the City in, to and under the Lease
(excluding the City's right to receive moneys for its own account and the City's
rights to indemnification or to be protected from liabilities by insurance
policies required by the Lease, as provided therein or herein), and all rents,
revenues and receipts derived by the City from the Project including, without
limitation, all rentals and other amounts to be received by the City and paid by
the Company under and pursuant to and subject to the provisions of the Lease;
(c) All moneys and securities from time to time held by the Trustee under
the terms of this Indenture, and any and all other real or personal property of
every kind and nature from time to time hereafter, by delivery or by writing of
any kind, pledged, assigned or transferred as and for additional security
hereunder by the City or by anyone in its behalf, or with its written consent,
to the Trustee, which is hereby authorized to receive any and all such property
at any and all times and to hold and apply the same subject to the terms hereof.
TO HAVE AND TO HOLD, all and singular, the Trust Estate with all rights and
privileges hereby pledged and assigned or agreed or intended so to be, to the
Trustee and its successors and assigns forever;
IN TRUST NEVERTHELESS, upon the terms and subject to the conditions herein
set forth, for the equal and proportionate benefit, protection and security of
all Owners from time to time of the Bond outstanding under this Indenture,
without preference, priority or distinction as to lien or otherwise of the Bond
over any other of the Bond except as expressly provided in or permitted by this
Indenture;
PROVIDED, HOWEVER, that if the City shall well and truly pay, or cause to
be paid, the principal of and interest on the Bond, at the time and in the
manner mentioned in the Bond, according to the true intent and meaning thereof,
or shall provide for the payment thereof (as provided in Article XIII hereof),
and shall pay or cause to be paid to the Trustee all other sums of money due or
to become due to it in accordance with the terms and provisions hereof, then
upon such final payments this Indenture and the rights thereby granted shall
cease, determine and be void; otherwise, this Indenture shall be and remain in
full force and effect.
THIS INDENTURE FURTHER WITNESSETH, and it is hereby expressly declared,
covenanted and agreed by and between the parties hereto, that the Bond issued
and secured hereunder is to be issued, authenticated and delivered and that all
the Trust Estate is to be held and applied under, upon and subject to the terms,
conditions, stipulations, covenants, agreements, trusts, uses and purposes as
hereinafter expressed, and the City does hereby agree and covenant with the
Trustee and with the respective Owners from time to time of the Bond, as
follows:
-2-
ARTICLE I
DEFINITIONS
Section 101. Definitions of Words and Terms. In addition to words and terms
defined in Section 1.1 of the Lease, which definitions shall be deemed to be
incorporated herein, and terms defined elsewhere in this Indenture, the
following words and terms as used in this Indenture shall have the following
meanings, unless some other meaning is plainly intended:
"Act" means Sections 100.010 through 100.200 of the Revised Statutes of
Missouri, as amended and Article VI Section 27(b) of the Missouri Constitution,
as amended.
"Additional Bond" means any Bond issued pursuant to Section 209 of this
Indenture.
"Authorized City Representative" means the Mayor or such other person at
the time designated to act on behalf of the City as evidenced by a written
certificate furnished to the Company and the Trustee containing the specimen
signature of such person and signed on behalf of the City by its Mayor. Such
certificate may designate an alternate or alternates each of whom shall be
entitled to perform all duties of the Authorized City Representative.
"Authorized Company Representative" means the Vice President, Manager
Generation Development, Manager Corporate Development, Manager Economic
Development or such other person at the time designated to act on behalf of the
Company as evidenced by a written certificate furnished to the City and the
Trustee containing the specimen signature of such person and signed on behalf of
the Company by authorized officers or employees. Such certificate may designate
an alternate or alternates each of whom shall be entitled to perform all duties
of the Authorized Company Representative.
"Bond" or "Bonds" means the Taxable Industrial Revenue Bond (AmerenUE
Project) Series 2002 in the maximum principal amount of $125,000,000, issued
pursuant to Section 208 of this Indenture and any Additional Bond, authenticated
and delivered under and pursuant to this Indenture.
"Bond Fund" means "City of Bowling Green, Missouri, Taxable Industrial
Revenue Bond Fund -- AmerenUE Project" created in Section 601 of this Indenture.
"Bondowner" means the registered owner of any Bond.
"Bond Purchase Agreement" means the agreement by that name with respect to
the Bond by and between the City and the purchaser identified therein.
"City" means City of Bowling Green, Missouri, a fourth class city organized
and existing under the laws of the State of Missouri, and its successors and
assigns.
"Company" means Union Electric Company d/b/a AmerenUE, a Missouri
corporation organized and existing under Chapter 351 of the Revised Statutes of
Missouri, as amended, and its successors or assigns.
"Completion Date" means the date of execution of the certificate required
pursuant to Section 504 hereof.
-3-
"Construction Fund" means "City of Bowling Green, Missouri, Construction
Fund -- AmerenUE Project" created in Section 501 of this Indenture.
"Cumulative Outstanding Principal Amount" means the aggregate principal
amount of the Bond issued in accordance with the provisions of this Indenture,
as reflected in the records maintained by the Trustee as provided in the Bond
and this Indenture.
"Deed of Trust" means the Deed of Trust and Security Agreement granted by
the City to secure payment of the Bond.
"Event of Default" means, with respect to this Indenture, any Event of
Default as defined in Section 901 hereof and, with respect to the Lease, means
any Event of Default as described in Section 12.1 of the Lease.
"Financing Document" means any loan agreement, credit agreement, security
agreement, mortgage, participation agreement, lease agreement, sublease, hedging
agreement or other document executed by or on behalf of a Financing Party.
"Financing Party" means any Person providing debt, lease or equity
financing (including equity contributions or commitments) or hedging
arrangements, or any renewal, extension or refinancing of any such financing or
hedging arrangements, or any guarantee, insurance, letters of credit or credit
support for or in connection with such financing or hedging arrangements, in
connection with the development, construction, ownership, lease, operation or
maintenance of the Project or interests or rights in the Lease, or any part
thereof, including any trustee or agent acting on any such Person's behalf.
"Government Securities" means direct obligations of, or obligations the
payment of principal of and interest on which are unconditionally guaranteed by,
the United States of America.
"Grant Agreement" means the Pre-Annexation and Development Agreement dated
November 9, 2001 by and between the City and the Company.
"Indenture" means this Trust Indenture, as from time to time amended and
supplemented by Supplemental
Indentures in accordance with the provisions of Article XI hereof.
"Investment Securities" means any of the following securities:
(a) any bonds or other obligations which as to principal and interest
constitute direct obligations of, or are unconditionally guaranteed by, the
United States of America, including obligations of any of the federal
agencies set forth in clause (b) below to the extent they are
unconditionally guaranteed by the United States of America;
(b) obligations of Fannie Mae, the Government National Mortgage
Association, the Federal Financing Bank, the Federal Intermediate Credit
Corporation, Federal Banks for Cooperatives, Federal Land Banks, Federal
Home Loan Banks, Farmers Home Administration and Federal Home Loan Mortgage
Corporation;
(c) direct and general obligations of any state of the United States
of America, to the payment of the principal of and interest on which the
full faith and credit of such state is pledged, provided that at the time
of their purchase under this Indenture such obligations are rated in either
of the two highest rating categories by a nationally-recognized bond rating
agency;
-4-
(d) certificates of deposit, whether negotiable or nonnegotiable,
issued by any bank or trust company organized under the laws of any state
of the United States of America or any national banking association
(including the Trustee), provided that such certificates of deposit shall
be either (1) continuously and fully insured by the Federal Deposit
Insurance Corporation, or (2) continuously and fully secured by such
securities as are described above in clauses (a) through (c), inclusive,
which shall have a market value at all times at least equal to the
principal amount of such certificates of deposit and shall be deposited
with the Trustee or a custodian bank, trust company or national banking
association. The bank, trust company or national banking association
holding each such certificate of deposit required to be so secured shall
furnish the Trustee written evidence satisfactory to it that the aggregate
market value of all such obligations securing each such certificate of
deposit will at all times be an amount at least equal to the principal
amount of each such certificate of deposit and the Trustee shall be
entitled to rely on each such undertaking.
(e) Shares of a fund registered under the Investment Company Act of
1940, as amended, whose shares are registered under the Securities Act of
1933, as amended, having assets of at least $100,000,000, and which shares,
at the time of purchase, are rated by Standard & Poor's and Moody's in one
of the two highest rating categories (without regard to any refinements or
gradation of rating category by numerical modifier or otherwise) assigned
by such rating agencies for obligations of that nature.
(f) Any other investment approved in writing by the Owners of the
Outstanding Bond.
"Lease" means the Lease Agreement dated as of December 20, 2002 between the
City, as lessor, and the Company, as lessee, as from time to time amended and
supplemented by Supplemental Leases in accordance with the provisions thereof
and of Article XII of this Indenture.
"Mayor" means the duly elected and acting mayor of the City:
"Outstanding," when used with reference to Bond, means, as of a particular
date, any Bond theretofore authenticated and delivered, except:
(a) any Bond theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(b) any Bond deemed to be paid in accordance with the provisions of
Section 1302 hereof; and
(c) any Bond in exchange for or in lieu of which another Bond has been
authenticated and delivered pursuant to this Indenture.
"Owner" shall have the same meaning as Bondowner.
"Paying Agent" means the Trustee and any other bank or trust company
designated by this Indenture as paying agent for the Bond at which the principal
of or interest on the Bond shall be payable.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, limited liability company, bank, insurance company,
unincorporated association, joint venture or other entity of whatever nature.
-5-
"Project" means the project referred to in the recitals of this Indenture,
including the Project Site, the Project Improvements and the Project Equipment,
and all additions, modifications, improvements, replacements and substitutions
made to the Project pursuant to the Lease as they may at any time exist.
"Project Costs" means all costs of purchase, construction, extending and
improving of the Project, including the following:
(a) all costs and expenses necessary or incident to the acquisition of
the Project Site and any Project Improvements and Project Equipment located
thereon at the execution of the Lease and which the Company conveys to the
City;
(b) fees and expenses of architects, appraisers, surveyors and
engineers for estimates, surveys, soil borings and soil tests and other
preliminary investigations and items necessary to the commencement of
construction, preparation of plans, drawings and specifications and
supervision of construction, as well as for the performance of all other
duties of architects, appraisers, surveyors and engineers in relation to
the purchase, construction, extending and improving of the Project or the
issuance of the Bond;
(c) all costs and expenses of every nature incurred in purchasing and
constructing the Project Improvements and otherwise improving the Project
Site and purchasing and installing the Project Equipment, including the
actual cost of labor, materials, machinery, furnishings and equipment as
payable to contractors, builders and materialmen in connection with the
purchase, construction, extending and improving of the Project;
(d) interest accruing on the Bond during the construction period of
the Project;
(e) the cost of title insurance policies and the cost of any other
insurance maintained during the Construction Period in accordance with
Article VII of the Lease;
(f) reasonable expenses of administration, supervision and inspection
properly chargeable to the Project, underwriting expenses, legal fees and
expenses, fees and expenses of accountants and other consultants,
publication and printing expenses, and initial fees and expenses of the
Trustee to the extent that said fees and expenses are necessary or incident
to the issuance and sale of the Bond or the purchasing, construction,
extending and improving of the Project;
(g) all other items of expense not elsewhere specified in this
definition as may be necessary or incident to: (1) the authorization,
issuance and sale of the Bond; (2) the purchase of the Project; and (3) the
financing thereof.
"Project Equipment" means all items of machinery, equipment or other
personal property acquired or installed or acquired for installation in the
Project Improvements or elsewhere on the Project Site related to the Project and
paid for in whole or in part from the proceeds of the Bond, as described in
Exhibit C attached hereto and by this reference made a part hereof, and all
replacements thereof and substitutions therefor made pursuant to the Lease.
"Project Improvements" means all buildings, structures, improvements and
fixtures located on or to be purchased, constructed and otherwise improved on
the Project Site related to the Project and paid for in whole or in part from
the proceeds of the Bond, as described in Exhibit A attached hereto and by this
reference made a part hereof, and all additions, alterations, modifications and
improvements thereof made pursuant to the Lease.
-6-
"Project Site" means all of the real estate described in Exhibit B attached
hereto and by this reference made a part hereof, as the same may be further
refined by the substitution of definitive legal descriptions upon completion by
the Company of surveys of the Project Site.
"Series 2002 Bond" means the Taxable Industrial Revenue Bond (AmerenUE
Project), Series 2002 authorized under this Indenture.
"Supplemental Indenture" means any indenture supplemental or amendatory to
this Indenture entered into by the City and the Trustee pursuant to Article XI
hereof.
"Supplemental Lease" means any supplement or amendment to the Lease entered
into pursuant to Article XII hereof.
"Trust Estate" means the Trust Estate described in the Granting Clauses of
this Indenture.
"Trustee" means Commerce Bank, N.A., in Kansas City, Missouri, a national
banking association duly organized and existing under the laws of the United
States of America, and its successor or successors and any other corporation
which at the time may be substituted in its place pursuant to and at the time
serving as Trustee under this Indenture.
Section 102. Rules of Interpretation.
(a) Unless the context shall otherwise indicate, the words importing the
singular number shall include the plural and vice versa, and words importing
persons shall include firms, associations and corporations, including public
bodies, as well as natural persons.
(b) Wherever in this Indenture it is provided that either party shall or
will make any payment or perform or refrain from performing any act or
obligation, each such provision shall, even though not so expressed, be
construed as an express covenant to make such payment or to perform, or not to
perform, as the case may be, such act or obligation.
(c) All references in this instrument to designated "Articles," "Sections"
and other subdivisions are, unless otherwise specified, to the designated
Articles, Sections and subdivisions of this instrument as originally executed.
The words "herein," "hereof," "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or
subdivision.
(d) The Table of Contents and the Article and Section headings of this
Indenture shall not be treated as a part of this Indenture or as affecting the
true meaning of the provisions hereof.
ARTICLE II
THE BOND
Section 201. Title and Amount of Bond. No Bond may be issued under this
Indenture except in accordance with the provisions of this Article. The Bond
authorized to be issued under this Indenture shall be designated as "City of
Bowling Green, Missouri Taxable Industrial Revenue Bond (AmerenUE Project)
Series 2002." The maximum total principal amount of the Series 2002 Bond that
may be issued hereunder is hereby expressly limited to $125,000,000.
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Section 202. Nature of Obligation. The Bonds and the interest thereon shall
be special obligations of the City payable solely out of the rents, revenues and
receipts derived by the City from the Project and the Lease, and not from any
other fund or source of the City, and are secured by a pledge and assignment of
the Trust Estate to the Trustee in favor of the Owners of the Bonds, as provided
in this Indenture and the Deed of Trust. The Bonds and the interest thereon
shall not constitute general obligations of the City or the State of Missouri,
and neither the City nor said State shall be liable thereon, and the Bonds shall
not constitute an indebtedness within the meaning of any constitutional or
statutory debt limitation or restriction, and are not payable in any manner by
taxation.
Section 203. Denomination, Number and Dating of Bond.
(a) The Series 2002 Bond may be issuable in the form of one fully
registered Bond without coupons in the maximum principal denomination of
$125,000,000 or in denominations of $10,000,000 or integral multiples of $1.00
in excess thereof. The Bond shall be substantially in the form hereinafter set
forth in Article IV of this Indenture.
(b) The Series 2002 Bond shall be dated by the Trustee as of the date of
initial delivery thereof as provided herein. If the Series 2002 Bond is at any
time thereafter transferred, any Series 2002 Bond replacing such Bond shall be
dated as of the date of authentication thereof.
Section 204. Method and Place of Payment of Bonds.
(a) The principal of and interest on the Bonds shall be payable in any coin
or currency of the United States of America which on the respective dates of
payment thereof is legal tender for payment of public and private debts.
(b) Payment of the principal of the Bonds shall be made upon the
presentation and surrender of such Bond at the principal payment office of any
Paying Agent; provided, that so long as the Company or any entity controlled by,
under common control with or controlling the Company is the sole Bondowner, the
Trustee is authorized to make payments of principal on such Bond by internal
bank transfer or by wire transfer to an account at a commercial bank or savings
institution designated by such Bondowner and located in the continental United
States; provided, further, that upon such payment by internal bank transfer or
by wire transfer of principal on such Bond, the Trustee shall record the amount
of such principal payment on the registration books for the Bond maintained by
the Trustee on behalf of the City. If any Bond is presented to the Trustee
together with such payment, or for such payment, the Trustee shall enter the
amount of such principal payment on the Table of Cumulative Outstanding
Principal Amount on the Bond in the manner provided by Section 402 hereof.
Notwithstanding the foregoing, the registration books maintained by the Trustee
shall be the official record of the Cumulative Outstanding Principal Amount on
the Bond at any time, and the Bondowner is not required to present the Bond for
action by the Trustee, as bond registrar, with each payment of principal on the
Bond. Payment of the interest on the Bonds shall be made by the Trustee on each
interest payment date to the person appearing on the registration books of the
City hereinafter provided for as the registered owner thereof on the fifteenth
day (whether or not a business day) of the calendar month next preceding such
interest payment date by check or draft mailed by the Trustee to such registered
owner at such owner's address as it appears on such registration books. The
Trustee is authorized to make interest payments on any Bond by internal bank
transfer or by wire transfer to an account at a commercial bank or savings
institution designated by such Bondowner and located in the continental United
States.
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Section 205. Execution and Authentication of Bonds.
(a) The Bonds shall be executed on behalf of the City by the manual or
facsimile signature of its Mayor and attested by the manual or facsimile
signature of its City Clerk, and shall have the corporate seal of the City
affixed thereto or imprinted thereon. In case any officer whose signature or
facsimile thereof appears on the Bonds shall cease to be such officer before the
delivery of such Bond, such signature or facsimile thereof shall nevertheless be
valid and sufficient for all purposes, the same as if such person had remained
in office until delivery. Any Bond may be signed by such persons as at the
actual time of the execution of such Bond shall be the proper officers to sign
such Bond although at the date of such Bond such persons may not have been such
officers.
(b) The Bonds shall have endorsed thereon a Certificate of Authentication
substantially in the form set forth in Section 403 hereof, which shall be
manually executed by the Trustee. No Bond shall be entitled to any security or
benefit under this Indenture or shall be valid or obligatory for any purposes
unless and until such Certificate of Authentication shall have been duly
executed by the Trustee. Such executed Certificate of Authentication upon any
Bond shall be conclusive evidence that such Bond have been duly authenticated
and delivered under this Indenture. The Certificate of Authentication on any
Bond shall be deemed to have been duly executed if signed by any authorized
officer or signatory of the Trustee.
Section 206. Registration, Transfer and Exchange of Bonds.
(a) The Trustee shall keep books for the registration and for the transfer
of Bonds as provided in this Indenture.
(b) The Bonds may be transferred only upon the books kept for the
registration and transfer of Bonds upon surrender thereof to the Trustee duly
endorsed for transfer or accompanied by an assignment duly executed by the
registered owner or such owner's attorney or legal representative in such form
as shall be satisfactory to the Trustee. The Series 2002 Bond has not been
registered under the Securities Act of 1933, as amended, or any state securities
law, and the Series 2002 Bond may not be transferred unless the City and the
Trustee are furnished a written legal opinion from counsel acceptable to the
City, the Trustee and the Company, to the effect that such transfer is exempt
from the registration requirements of the Securities Act of 1933, as amended,
and any applicable state securities law. The Series 2002 Bond may be transferred
to any entity controlled by, under common control with or controlling the
Company without the necessity of obtaining such an opinion. In connection with
any such transfer of the Series 2002 Bond, the City and the Trustee shall
receive an executed representation letter signed by the proposed assignee
containing substantially the same representations contained in the
representation letter delivered to the Trustee from the Owner upon the initial
issuance of the Bond. Upon any such transfer, the City shall execute and the
Trustee shall authenticate and deliver in exchange for such Series 2002 Bond a
new fully registered Bond, registered in the name of the transferee, of any
denomination or denominations authorized by this Indenture, in an aggregate
principal amount equal to the outstanding principal amount of such Bond, of the
same maturity and bearing interest at the same rate.
(c) In all cases in which Bonds shall be exchanged or transferred hereunder
the provisions of any legend restrictions on the Bonds shall be complied with
and the City shall execute and the Trustee shall authenticate and deliver at the
earliest practicable time Bonds in accordance with the provisions of this
Indenture. All Bonds surrendered in any such exchange or transfer shall
forthwith be cancelled by the Trustee. The City or the Trustee may make a
reasonable charge for every such exchange or transfer of Bonds sufficient to
reimburse it for any tax, fee or other governmental charge required to be paid
with respect to such exchange or transfer, and such charge shall be paid before
any such new Bonds shall be delivered. Neither the City nor the Trustee shall be
required to make any such exchange or transfer of
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Bonds during the 15 days immediately preceding an interest payment date on the
Bonds or, in the case of any proposed redemption of Bonds, during the 15 days
immediately preceding the selection of Bonds for such redemption or after such
Bonds or any portion thereof has been selected for redemption.
Section 207. Persons Deemed Owners of Bonds. As to any Bond, the person in
whose name the same shall be registered as shown on the bond registration books
required by Section 206 hereof shall be deemed and regarded as the absolute
owner thereof for all purposes, and payment of or on account of the principal of
and interest on any such Bond shall be made only to or upon the order of the
registered owner thereof or a legal representative thereof. All such payments
shall be valid and effectual to satisfy and discharge the liability upon such
Bond, including the interest thereon, to the extent of the sum or sums so paid.
Section 208. Authorization of the Series 2002 Bond.
(a) There shall be issued and secured by this Indenture a series of Bonds
in the aggregate maximum principal amount of $125,000,000 for the purpose of
providing funds for paying the costs of the Project, which Bond shall be
designated "City of Bowling Green, Missouri Taxable Industrial Revenue Bond
(AmerenUE Project) Series 2002." The Series 2002 Bond shall be dated as provided
in Section 203(b) hereof, shall become due on December 1, 2023 (subject to prior
redemption as hereinafter provided in Article III) and shall bear interest as
specified in Section 2.08(e) hereof, payable on the dates specified in Section
2.08(e) hereof.
(b) The Trustee is hereby designated as the City's Paying Agent for the
payment of the principal of and interest on the Bonds.
(c) The Series 2002 Bond shall be executed without material variance from
the form and in the manner set forth in Article IV hereof and delivered to the
Trustee for authentication, but prior to or simultaneously with the
authentication and delivery of the Series 2002 Bond by the Trustee, there shall
be filed with the Trustee the following:
(1) An original or certified copy of the ordinance passed by the
governing body of the City authorizing the issuance of the Series 2002 Bond
and the execution of this Indenture, the Lease, the Deed of Trust and the
Bond Purchase Agreement;
(2) An original executed counterpart of this Indenture, the Lease, the
Deed of Trust and the Bond Purchase Agreement;
(3) A representation letter from the purchaser of the Series 2002 Bond
in form and substance satisfactory to the City and the Trustee;
(4) A request and authorization to the Trustee on behalf of the City,
executed by the Authorized City Representative, to authenticate the Series
2002 Bond and deliver the same to the purchaser identified in the Bond
Purchase Agreement upon payment to the Trustee, for the account of the
City, of the purchase price thereof specified in the Bond Purchase
Agreement. The Trustee shall be entitled to conclusively rely upon such
request and authorization as to names of the purchaser and the amount of
such purchase price;
(5) An opinion of counsel nationally recognized on the subject of
municipal bonds to the effect that the Series 2002 Bond constitutes a valid
and legally binding limited and special revenue obligations of the City;
and
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(6) Such other certificates, statements, receipts and documents as the
City, the Trustee or the Company shall reasonably require for the delivery
of the Series 2002 Bond.
(d) When the documents specified in subsection (c) of this Section shall
have been filed with the Trustee, and when the Series 2002 Bond shall have been
executed and authenticated as required by this Indenture, the Trustee shall
deliver the Series 2002 Bond to or upon the order of the purchaser thereof, but
only upon payment to the Trustee of the purchase price of the Series 2002 Bond,
or acknowledgement from the City of the value of property transferred to the
City, as specified in the Bond Purchase Agreement.
(e) The Series 2002 Bond shall bear interest at the rate of 5.15% per annum
on the Cumulative Outstanding Principal Amount of the Bond, and such interest
shall be payable in arrears on each December 1 commencing on December 1, 2003,
and continuing thereafter until the said Cumulative Outstanding Principal Amount
is paid in full; provided that the aggregate maximum principal amount shall not
exceed $125,000,000 and further provided that the Series 2002 Bond shall be paid
in full no later than December 1, 2023. Interest shall be calculated on the
basis of a year of 360 days consisting of twelve months of 30 days each.
The Trustee shall keep and maintain a record of the amounts deposited into
the Construction Fund pursuant to the terms of the Indenture, or the value of
property transferred to the City in exchange for the issuance of additional
principal amount of the Bonds, as "Principal Amount Issued" and shall enter the
aggregate principal amount of the Bonds then outstanding on its records as the
"Cumulative Outstanding Principal Amount" on its records maintained for the
Bond. On each date upon which a portion of the Cumulative Outstanding Principal
Amount is paid to the registered owner thereof, pursuant to the redemption
provisions of the Indenture, the Trustee shall enter on its records the
principal amount paid on the Bond as "Principal Amount Paid Pursuant to
Redemption Provisions," and shall enter the then outstanding principal amount of
this Bond as "Cumulative Outstanding Principal Amount" on its records. The
registered owner may from time to time enter the respective amounts deposited
into the Construction Fund pursuant to the terms of the Indenture, or the value
of property transferred to the City in exchange for the issuance of additional
principal amount of the Bonds, under the column headed "Principal Amount Issued"
on the Table of Cumulative Outstanding Principal Amount on the Bond (the
"Table") and may enter the aggregate principal amount of the Bonds then
outstanding under the column headed "Cumulative Outstanding Principal Amount" on
the Table. On each date upon which a portion of the Cumulative Outstanding
Principal Amount is paid to the registered owner thereof pursuant to the
redemption provisions of the Indenture, the registered owner may enter the
principal amount paid on the Bonds under the column headed "Principal Amount
Paid Pursuant to Optional Redemption Provisions" on the Table and may enter the
then outstanding principal amount of the Bonds under the column headed
"Cumulative Outstanding Principal Amount" on the Table. However, the records
maintained by the Trustee as to principal amount issued or principal amounts
paid on the Bonds shall be the official records of the Cumulative Outstanding
Principal Amount for all purposes.
Section 209. Authorization of Additional Bonds.
(a) If permitted by law and upon written agreement by the City and the
Company as to all applicable terms, including without limitation any additional
grant payments, payments under the Lease and other matters, Additional Bonds may
be issued under and equally and ratably secured by this Indenture on a parity
with the Series 2002 Bond, and any other Additional Bonds which remain
Outstanding after the issuance of such Additional Bonds, at any time or from
time to time, upon compliance with the conditions hereinafter provided in this
Section, for the purpose of (i) providing funds to pay the cost of completing
the Project or the making of additional improvements to the Project or the
acquisition and installation of
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additional Project Equipment or (ii) providing funds for refunding all or part
of the Bonds then Outstanding of any series, including the payment of any
premium thereon and interest to accrue to the designated redemption date and any
expenses in connection with such refunding. Additional Bonds may be issued only
with the written consent of the Company.
(b) Before any Additional Bonds shall be issued under the provisions of
this Section, the City shall pass an ordinance authorizing the issuance of such
Additional Bond, fixing the amount thereof and describing the Bonds, if any, to
be refunded, authorizing the City to enter into a Supplemental Indenture for the
purpose of issuing such Additional Bond and, if required, authorizing the City
to enter into a Supplemental Lease with the Company.
(c) Such Additional Bonds shall be dated, shall be stated to mature in such
year or years, shall bear interest at such rate or rates not exceeding the
maximum rate then permitted by law, and shall be redeemable at such times and
prices, all as may be provided by the Supplemental Indenture authorizing the
issuance of such Additional Bonds. Except as to any difference in the date, the
maturity or maturities, the rate or rates of interest or the provisions for
redemptions, such Additional Bonds shall be on a parity with and shall be
entitled to the same benefit and security of this Indenture as the Series 2002
Bond, and any other Additional Bonds which remain Outstanding after the issuance
of such Additional Bonds.
(d) The proceeds, excluding accrued interest, of all Additional Bonds shall
be deposited in accordance with the terms of the ordinance authorizing their
issuance, after payment or making provision for payment of all expenses incident
to such financing to be used for the sole and exclusive purposes provided in the
Supplemental Indenture authorizing the issuance of such Additional Bonds.
Section 210. Mutilated, Lost, Stolen or Destroyed Bonds. In the event any
Bonds shall become mutilated, or be lost, stolen or destroyed, the City shall
execute and the Trustee shall authenticate and deliver new Bonds of like series,
date and tenor as the Bonds mutilated lost, stolen or destroyed; provided that,
in the case of any mutilated Bonds, such mutilated Bond shall first be
surrendered to the Trustee, and in the case of any lost, stolen or destroyed
Bonds, there shall be first furnished to the City and the Trustee evidence of
such loss, theft or destruction satisfactory to the City and the Trustee,
together with indemnity satisfactory to them. In the event any such Bonds shall
have matured, instead of issuing a substitute Bond, the City may pay or
authorize the payment of the same without surrender thereof. Upon the issuance
of any substitute Bond, the City and the Trustee may require the payment of an
amount sufficient to reimburse the City and the Trustee for any tax or other
governmental charge that may be imposed in relation thereto and any other
reasonable fees and expenses incurred in connection therewith.
Section 211. Cancellation and Destruction of Bonds Upon Payment.
(a) All Bonds which have been paid or redeemed or which the Trustee has
purchased or which have otherwise been surrendered to the Trustee under this
Indenture, either at or before maturity shall be cancelled by the Trustee
immediately upon the payment, redemption or purchase of such Bond and the
surrender thereof to the Trustee.
(b) All Bonds cancelled under any of the provisions of this Indenture shall
be destroyed by the Trustee. The Trustee shall execute a certificate describing
the Bonds so destroyed, and shall file executed counterparts of such certificate
with the City and the Company.
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ARTICLE III
REDEMPTION OF BONDS
Section 301. Redemption of Bonds Generally. The Series 2002 Bond shall be
subject to redemption prior to maturity in accordance with the terms and
provisions set forth in this Article. Additional Bonds shall be subject to
redemption prior to maturity in accordance with the terms and provisions
contained in this Article and as may be specified in the Supplemental Indenture
authorizing such Additional Bonds.
Section 302. Redemption of Series 2002 Bond. The Series 2002 Bond shall be
subject to redemption and payment in whole or in part, as follows:
(a) At any time prior to the stated maturity thereof, at the option of the
City, upon instructions from the Company, at a price equal to the par value
thereof being redeemed, plus accrued interest thereon, without premium or
penalty, to the date of payment.
(b) At any time prior to the stated maturity thereof, to the extent amounts
are deposited into the Bond Fund in accordance with clauses (c) through (g) of
Section 602 hereof, at a price equal to the par value thereof being redeemed,
plus accrued interest thereon, without premium or penalty, to the date of
payment.
(c) Upon the payment of all of the Grants (as defined in the Grant
Agreement) under the Grant Agreement, the Series 2002 Bond shall be subject to
mandatory redemption at a price equal to the par value thereof being redeemed,
plus accrued interest thereon, without premium or penalty, to the date of
payment.
Section 303. Effect of Call for Redemption. Prior to or on the date fixed
for redemption, funds or Government Securities shall be placed with the Trustee
which are sufficient to pay the Bonds called for redemption and accrued interest
thereon, if any, to the redemption date. Upon the happening of the above
conditions and appropriate written notice having been given, the Bonds or the
portions of the principal amount of Bonds thus called for redemption shall cease
to bear interest on the specified redemption date, and shall no longer be
entitled to the protection, benefit or security of this Indenture and shall not
be deemed to be Outstanding under the provisions of this Indenture. If the Bonds
are fully redeemed prior to maturity and an amount of money equal to the
Trustee's and the Paying Agent's agreed to and reasonable fees and expenses
hereunder accrued and to accrue in connection with such redemption is paid or
provided for, the City shall, at the Company's direction, deliver to the Company
the items described in Section 11.2 of the Lease. At its option, the Company may
deliver to the Trustee for redemption Bonds not previously paid and the Company
shall receive a credit against the Basic Rent or other amounts payable by the
Company for the redemption of such Bonds in an amount equal to the principal
amount of the Bonds so tendered for redemption plus accrued interest.
Section 304. Notice of Redemption. In the event the Bonds are to be called
for redemption as provided in Section 302 (a) or (b) hereof, the Company shall
deliver written notice to the City and the Trustee of the principal amount of
Bonds that it has elected to redeem and whether the Bonds are to be redeemed in
accordance with Section 302(a) or (b) hereof, such notice to be delivered at
least 40 days (10 days if the Company, or any entity controlled by, under common
control with or controlling the Company, is the Bondowner) prior to the
scheduled redemption date. The Trustee shall then deliver written notice to the
Owner at least 30 days (five days if the Company, any entity controlled by,
under common control with or controlling the Company, is the Bondowner) prior to
the scheduled redemption date by first class mail stating the principal amount
of the Bonds to be redeemed and the date upon which the Bonds will be
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redeemed and paid. The Bonds are subject to redemption pursuant to Section
302(c) without any request or notice from the Company.
ARTICLE IV
FORM OF BONDS
Section 401. Form Generally. The Series 2002 Bond and the Trustee's
Certificate of Authentication to be endorsed thereon shall be issued in
substantially the forms set forth in this article. Additional Bonds and the
Trustee's Certificate of Authentication to be endorsed thereon shall be in
substantially the form set forth in this Article, with such necessary or
appropriate variations, omissions and insertions as are permitted or required by
this Indenture or any Supplemental Indenture. The Bonds may have endorsed
thereon such legends or text as may be necessary or appropriate to conform to
any applicable rules and regulations of any governmental authority or any
custom, usage or requirements of law with respect thereto.
Section 402. Form of Bonds.
(FORM OF BOND)
This Bond has not been registered under the Securities Act of 1933, as amended,
or any state securities laws, and this Bond may not be transferred unless the
City, the Trustee and the Company are furnished a written legal opinion from
counsel acceptable to the City, the Trustee and the Company, to the effect that
such transfer is exempt from the registration requirements of the Securities Act
of 1933, as amended, and any applicable state securities laws. This Bond may be
transferred to any entity controlled by, under common control with, or
controlling the Company, without the necessity of obtaining such an opinion.
UNITED STATES OF AMERICA
STATE OF MISSOURI
CITY OF BOWLING GREEN, MISSOURI
TAXABLE INDUSTRIAL REVENUE BOND
(AMERENUE PROJECT)
SERIES 2002
CITY OF BOWLING GREEN, MISSOURI, a fourth class city organized and existing
under the laws of the State of Missouri (the "City"), for value received,
promises to pay, but solely from the source hereinafter referred to, to
UNION ELECTRIC COMPANY d/b/a AMERENUE
or registered assigns, on December 1, 2023, the principal amount of
ONE HUNDRED TWENTY-FIVE MILLION DOLLARS
or such lesser amount as may be outstanding hereunder as reflected on the Table
of Cumulative Outstanding Principal Amount attached hereto and recorded as
provided in the Indenture (defined herein). The City agrees to pay such
principal amount to the registered owner in any coin or currency of the United
States of America which on the date of payment thereof is legal tender for the
payment of public and private debts,
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and in like manner to pay to the registered owner hereof, either by check or
draft mailed to the registered owner at a stated address as it appears on the
bond registration books of the City kept by the Trustee under the within
mentioned Indenture or, in certain situations authorized in the Indenture, by
internal bank transfer or by wire transfer to an account in a commercial bank or
savings institution located in the continental United States, interest on the
Cumulative Outstanding Principal Amount (as hereinafter defined) at the rate of
5.15% per annum payable in arrears on each December 1 commencing on December 1,
2003, and continuing thereafter until the said Cumulative Outstanding Principal
Amount is paid in full. Interest shall be computed on the basis of a year of 360
days consisting of 12 months of 30 days each. Principal on this Bond shall be
payable in full on December 1, 2023.
The registered owner may from time to time enter the respective amounts
deposited into the Construction Fund pursuant to the terms of the Indenture, or
the value of property transferred to the City in exchange for the issuance of
additional principal amount of the Bonds, under the column headed "Principal
Amount Issued" on the attached Table of Cumulative Outstanding Principal Amount
(the "Table") and may enter the aggregate principal amount of this Bond then
outstanding under the column headed "Cumulative Outstanding Principal Amount" on
the attached Table. On each date upon which a portion of the Cumulative
Outstanding Principal Amount is paid to the registered owner hereof pursuant to
the redemption provisions of the Indenture, the registered owner may enter the
principal amount paid on this Bond under the column headed "Principal Amount
Paid Pursuant to Redemption Provisions" on the Table and may enter the then
outstanding principal amount of this Bond under the column headed "Cumulative
Outstanding Principal Amount" on the Table. However, the records maintained by
the Trustee as to the principal amount issued or principal amounts paid on this
Bond shall be the official records of the Cumulative Outstanding Principal
Amount for all purposes.
THIS BOND is a duly authorized Bond of the City designated "City of Bowling
Green, Missouri Taxable Industrial Revenue Bond (AmerenUE Project) Series 2002,"
in the maximum aggregate principal amount of $125,000,000 (the "Bond"), to be
issued for the purpose of providing funds to pay the cost of purchasing the
Project, to be leased to the Company, under the terms of a Lease Agreement dated
as of December 20, 2002 (said Lease Agreement, as amended and supplemented from
time to time in accordance with the provisions thereof, being herein called the
"Lease"), between the City and the Company, all pursuant to the authority of and
in full compliance with the provisions, restrictions and limitations and
Constitution and statutes of the State of Missouri, including particularly the
Act, and pursuant to proceedings duly had by the governing body of the City.
THE BOND is issued under and is equally and ratably secured and entitled to
the protection given by a Trust Indenture, dated as of December 1, 2002 (said
Trust Indenture, as amended and supplemented from time to time in accordance
with the provisions thereof, being herein called the "Indenture"), between the
City and Commerce Bank, N.A. (the "Trustee"). Capitalized terms not defined
herein shall have the meanings set forth in the Indenture.
Subject to the terms and conditions set forth therein, the Indenture
permits the City to issue Additional Bonds (as defined therein) secured by the
Indenture on a parity with the Bond. Reference is hereby made to the Indenture
for a description of the provisions, among others, with respect to the nature
and extent of the security for the Bond, the rights, duties and obligations of
the City, the Trustee and the owners of the Bond, and the terms upon which the
Bond are issued and secured.
THIS BOND shall be subject to redemption and payment in whole or in part,
as follows:
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(a) At any time prior to the stated maturity thereof, at the option of the
City, upon instructions from the Company, at a price equal to the par value
thereof being redeemed, plus accrued interest thereon, without premium or
penalty, to the date of payment.
(b) At any time prior to the stated maturity thereof, to the extent amounts
are deposited into the Bond Fund, at a price equal to the par value thereof
being redeemed, plus accrued interest thereon, without premium or penalty, to
the date of payment.
(c) Upon the payment of all of the Grants (as defined in the Grant
Agreement) under the Grant Agreement, the Bond shall be subject to mandatory
redemption at a price equal to the par value thereof being redeemed, plus
accrued interest thereon, without premium or penalty, to the date of payment.
In the event the Bond is to be called for redemption as provided in
paragraphs (a) or (b) above, the Company shall deliver written notice to the
City and the Trustee that it has elected to redeem all or a portion of the Bond
in accordance with paragraph (a) or (b) above at least 40 days (10 days if the
Company, or any entity controlled by, under common control with or controlling
the Company, is the Bondowner) prior to the scheduled redemption date. The Bond
is subject to redemption pursuant to (c) above without any request or notice
from the Company. The Trustee shall then deliver written notice to the Owner of
this Bond at least thirty days (five days if the Company, or any entity
controlled by, under common control with or controlling the Company, is the
Bondowner) prior to the scheduled redemption date by first class mail stating
the date upon which the Bond will be redeemed and paid.
THE BOND, including interest thereon, is a special obligation of the City
and is payable solely out of the rents, revenues and receipts derived by the
City from the Project and the Lease and not from any other fund or source of the
City, and is secured by a pledge and assignment of the Project and of such
rents, revenues and receipts, including all rentals and other amounts to be
received by the City under and pursuant to the Lease, all as provided in the
Indenture. The Bond does not constitute a general obligation of the City or the
State of Missouri, and neither the City nor said State shall be liable thereon,
and the Bond shall not constitute an indebtedness within the meaning of any
constitutional or statutory debt limitation or restriction, and is not payable
in any manner by taxation. Pursuant to the provisions of the Lease, rental
payments sufficient for the prompt payment when due of the principal of and
interest on the Bond are to be paid by the Company directly to the Trustee for
the account of the City and deposited in a special account created by the City
and designated the "City of Bowling Green, Missouri, Taxable Industrial Revenue
Bond Fund -- AmerenUE Project."
THE OWNER of this Bond shall have no right to enforce the provision of the
Indenture or to institute action to enforce the covenants therein, or to take
any action with respect to any event of default under the Indenture, or to
institute, appear in or defend any suit or other proceedings with respect
thereto, except as provided in the Indenture. In certain events, on the
conditions, in the manner and with the effect set forth in the Indenture, the
principal of the Bond issued under the Indenture and then Outstanding may become
or may be declared due and payable before the stated maturity thereof, together
with interest accrued thereon. Modifications or alterations of this Bond or the
Indenture may be made only to the extent and in the circumstances permitted by
the Indenture.
THIS BOND is transferable, as provided in the Indenture, only upon the
books of the City kept for that purpose at the above-mentioned office of the
Trustee by the registered owner hereof in person or by such person's duly
authorized attorney, upon surrender of this Bond together with a written
instrument of transfer satisfactory to the Trustee duly executed by the
registered owner or such person's duly authorized attorney, and thereupon a new
fully registered Bond, without coupons, and in the same aggregate principal
amounts, shall be issued to the transferee in exchange therefor as provided in
the Indenture, and upon
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payment of the charges therein prescribed. The City, the Trustee and any Paying
Agent may deem and treat the person in whose name this Bond is registered as the
absolute owner hereof for the purpose of receiving payment of, or on account of,
the principal or redemption price hereof and interest due hereon and for all
other purposes.
THE BOND may be issuable in denominations authorized under the Indenture.
THIS BOND shall not be valid or become obligatory for any purposes or be
entitled to any security or benefit under the Indenture until the Certificate of
Authentication hereon shall have been executed by the Trustee.
IT IS HEREBY CERTIFIED AND DECLARED that all acts, conditions and things
required to exist, happen and be performed precedent to and in the execution and
delivery of the Indenture and the issuance of this Bond do exist, have happened
and have been performed in due time, form and manner as required by the
Constitution and laws of the State of Missouri.
IN WITNESS WHEREOF, City of Bowling Green, Missouri, has caused this Bond
to be executed in its name by the manual or facsimile signature of its Mayor,
attested by the manual or facsimile signature of its City Clerk and its
corporate seal to be affixed hereto or imprinted hereon, and has caused this
Bond to be dated as of _________ __, 2002.
CITY OF BOWLING GREEN, MISSOURI
By _____________________________
Mayor
(SEAL)
ATTEST:
By ________________________________
City Clerk
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================================================================================
TABLE OF CUMULATIVE OUTSTANDING PRINCIPAL AMOUNT
Principal Amount Cumulative
Principal Paid Pursuant to Outstanding Notation
Amount Redemption Principal Made
Date Issued Provisions Amount By
---- ------ ---------- ------ --
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================================================================================
(FORM OF ASSIGNMENT)
(NOTE RESTRICTIONS ON TRANSFERS)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
Print or Typewrite Name, Address and Social Security or
other Taxpayer Identification Number of Transferee
the within Bond and all rights thereunder, and hereby irrevocably constitutes
and appoints _____________________________ attorney to transfer the within Bond
on the books kept by the Trustee for the registration and transfer of Bond, with
full power of substitution in the premises.
Dated: ___________.
_______________________________________________
NOTICE: The signature to this assignment must
correspond with the name as it appears upon the
face of the within Bond in every particular.
Signature Guaranteed By:
______________________________________________
(Name of Eligible Guarantor Institution as
defined by SEC Rule 17 Ad-15 (17 CFR 240.17
Ad-15))
By: ______________________________________
Title: _______________________________________
================================================================================
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Section 403. Form of Certificate of Authentication.
(FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
================================================================================
CERTIFICATE OF AUTHENTICATION
This Bond is the Taxable Industrial Revenue Bond (AmerenUE Project),
described in the Trust Indenture. The effective date of registration of this
Bond is set forth below.
COMMERCE BANK, N.A.
________________________ By ____________________________
Date Name: _________________________
Title: ________________________
================================================================================
ARTICLE V
CUSTODY AND APPLICATION OF BOND PROCEEDS
Section 501. Creation of Construction Fund. There is hereby created and
ordered to be established in the custody of the Trustee a special trust fund in
the name of the City to be designated the "City of Bowling Green, Missouri,
Construction Fund -- AmerenUE Project" (herein called the "Construction Fund").
Section 502. Deposits into the Construction Fund. The proceeds of the sale
of any Additional Bond when received, excluding such amounts required to be paid
into the Bond Fund pursuant to Section 602 hereof, shall be deposited by the
Trustee into the Construction Fund. Any money received by the Trustee from any
other source for the purpose of acquisition, construction, extension or
improvement of improvements to the Project or for other projects authorized
hereunder shall also be deposited into the Construction Fund.
Section 503. Disbursements from the Construction Fund.
(a) The moneys in the Construction Fund shall be disbursed by the Trustee
for the payment of, or reimbursement to the Company for payment of, Project
Costs upon receipt of requisition certificates signed by the Company in
accordance with the provisions of Article IV of the Lease, and the Trustee
hereby covenants and agrees to disburse such moneys in accordance with such
provisions. In paying any requisition under this Section, the Trustee may rely
as to the completeness and accuracy of all statements in such requisition
certificate if such requisition certificate is signed by the Authorized Company
Representative. If the City so requests in writing, a copy of each requisition
certificate submitted to the Trustee for payment under this Section shall be
promptly provided by the Trustee to the City.
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(b) The City hereby authorizes and directs the Trustee to make
disbursements in the manner and as provided for by the aforesaid provisions of
the Lease.
(c) The Trustee shall keep and maintain adequate records pertaining to the
Construction Fund and all disbursements therefrom, and shall provide a statement
of receipts and disbursements with respect thereto to the Company on a monthly
basis. After the Project has been completed and a certificate of payment of all
costs filed as provided in Section 504 hereof, the Trustee, to the extent it has
not already done so pursuant to this Section or Section 1012 hereof, shall file
a final statement of receipts and disbursements with respect thereto with the
City and the Company.
Section 504. Completion of the Project. The completion of the Project and
payment of all costs and expenses incident thereto shall be evidenced by the
filing with the Trustee and the City of the certificate required by the
provisions of Section 4.5 of the Lease. As soon as practicable any balance
remaining in the Construction Fund shall without further authorization be
deposited in the Bond Fund.
Section 505. Disposition Upon Acceleration. If the principal of the Bonds
shall have become due and payable pursuant to Section 902 of this Indenture,
upon the date of payment by the Trustee of any moneys due as hereinafter
provided in Article IX provided, any balance remaining in the Construction Fund
shall without further authorization be deposited in the Bond Fund by the Trustee
with advice to the City and to the Company of such action.
ARTICLE VI
REVENUES AND FUNDS
Section 601. Creation of the Bond Fund. There is hereby created and ordered
established in the custody of the Trustee a special trust fund in the name of
the City to be designated the "City of Bowling Green, Missouri, Taxable
Industrial Revenue Bond Fund -- AmerenUE Project" (herein called the "Bond
Fund").
Section 602. Deposits Into the Bond Fund. The Trustee shall deposit into
the Bond Fund, as and when received, (a) all accrued interest on the Bonds, if
any, paid by the purchaser of the Bonds; (b) all rent payments payable by the
Company to the City specified in Section 5.1 of the Lease and amounts due under
Section 5.2 of the Lease for deposit in the Bond Fund; (c) any amount in the
Construction Fund to be transferred to the Bond Fund pursuant to Section 504
hereof upon completion of the Project; (d) the balance of any Net Proceeds (as
defined in the Lease) of condemnation awards or insurance received by the
Trustee pursuant to Article IX of the Lease; (e) the amounts to be deposited in
the Bond Fund pursuant to Sections 9.1 and 9.2 of the Lease; (f) all interest
and other income derived from investments of Bond Fund moneys as provided in
Section 702 hereof; and (g) all other moneys received by the Trustee under and
pursuant to any of the provisions of the Lease when accompanied by directions
from the person depositing such moneys that such moneys are to be paid into the
Bond Fund.
Section 603. Application of Moneys in the Bond Fund.
(a) Except as provided in Section 606 and Section 908 hereof or in Section
4.6(a) of the Lease, moneys in the Bond Fund shall be expended solely for the
payment of the principal of and the interest on the Bonds as the same mature and
become due or upon the redemption thereof prior to maturity; provided, however,
that any amounts received by the Trustee as Additional Rent under Section 5.2 of
the Lease and deposited to the Bond Fund as provided in Section 602 above, shall
be expended by the Trustee for such items of Additional Rent as they are
received or due without further authorization from the City.
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(b) The City hereby authorizes and directs the Trustee to withdraw
sufficient funds from the Bond Fund to pay the principal of and the interest on
the Bonds as the same become due and payable and to make said funds so withdrawn
available to the Paying Agent for the purpose of paying said principal and
interest.
(c) Whenever the amount in the Bond Fund from any source whatsoever is
sufficient to redeem all of the Bonds Outstanding and to pay interest to accrue
thereon prior to such redemption, the City covenants and agrees, upon request of
the Company, to take and cause to be taken the necessary steps to redeem all
such Bonds on the next succeeding redemption date for which the required
redemption notice may be given or on such later redemption date as may be
specified by the Company. The Trustee may use any moneys in the Bond Fund to
redeem a part of the Bond Outstanding in accordance with and to the extent
permitted by Article III hereof so long as the Company is not in default with
respect to any payments under the Lease and to the extent said moneys are in
excess of the amount required for payment of Bonds theretofore matured or called
for redemption and past due interest, if any, in all cases when such Bond have
not been presented for payment.
Section 604. Payments Due on Saturdays, Sundays and Holidays. In any case
where the date of maturity of principal of or interest, if any, on the Bonds or
the date fixed for redemption of any Bond shall be a Saturday, a Sunday or a
legal holiday or a day on which banking institutions in the city of payment are
authorized by law to close, then payment of principal or interest, if any, need
not be made on such date but may be made on the next succeeding business day not
a Saturday, a Sunday or a legal holiday or a day upon which banking institutions
are authorized by law to close with the same force and effect as if made on the
date of maturity or the date fixed for redemption, and no interest, if any,
shall continue to accrue for the period after such date.
Section 605. Nonpresentment of Bonds. In the event any Bond shall not be
presented for payment when the principal thereof becomes due, either at maturity
or otherwise, or at the date fixed for redemption thereof, if funds sufficient
to pay such Bond shall have been made available to the Trustee, all liability of
the City to the Owner thereof for the payment of such Bond shall forthwith
cease, determine and be completely discharged, and thereupon it shall be the
duty of the Trustee to hold such fund or funds, without liability for interest
thereon, for the benefit of the Owner of such Bond who shall thereafter be
restricted exclusively to such fund or funds for any claim of whatever nature on
his part under this Indenture or on, or with respect to, said Bond. If any Bond
shall not be presented for payment within four years following the date when
such Bond become due, whether by maturity or otherwise, the Trustee shall repay
to the Company the funds theretofore held by it for payment of such Bond, and
such Bond shall, subject to the defense of any applicable statute of limitation,
thereafter be an unsecured obligation of the Company, and the Owner thereof
shall be entitled to look only to the Company for payment, and then only to the
extent of the amount so repaid, and the Company shall not be liable for any
interest thereon and shall not be regarded as a trustee of such money.
Section 606. Repayment to the Company from the Bond Fund. After payment in
full of the principal of and interest, if any, on the Bonds (or provision has
been made for the payment thereof) as provided in this Indenture, and the fees,
charges and expenses of the Trustee, the City and any Paying Agent and any other
amounts required to be paid under this Indenture and the Lease (including
without limitation any amounts payable under the Grant Agreement), all amounts
remaining in the Bond Fund shall be paid to the Company upon the expiration or
sooner termination of the Lease.
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ARTICLE VII
SECURITY FOR DEPOSITS AND INVESTMENT OF FUNDS
Section 701. Moneys to be Held in Trust. All moneys deposited with or paid
to the Trustee for account of the Bond Fund or the Construction Fund under any
provision of this Indenture, and all moneys deposited with or paid to any Paying
Agent under any provision of this Indenture, shall be held by the Trustee or
Paying Agent in trust and shall be applied only in accordance with the
provisions of this Indenture and the Lease, and, until used or applied as herein
provided, shall constitute part of the Trust Estate and be subject to the lien
hereof. Neither the Trustee nor any Paying Agent shall be under any liability
for interest or any moneys received hereunder except such as may be agreed upon.
Section 702. Investment of Moneys in Construction Fund and Bond Fund.
Moneys held in the Construction Fund and the Bond Fund shall, pursuant to
written direction of the Company, signed by the Authorized Company
Representative, be separately invested and reinvested by the Trustee in
Investment Securities which mature or are subject to redemption by the owner
prior to the date such funds will be needed. In the event the Company fails to
provide written directions concerning investment of moneys held in the
Construction Fund and the Bond Fund, the Trustee may invest in such Investment
Securities specified in paragraph (e) of the definition of Investment
Securities, provided they mature or are subject to redemption prior to the date
such funds will be needed. Any such Investment Securities shall be held by or
under the control of the Trustee and shall be deemed at all times a part of the
fund in which such moneys are originally held, and the interest accruing thereon
and any profit realized from such Investment Securities shall be credited to
such fund, and any loss resulting from such Investment Securities shall be
charged to such fund. After the Trustee has notice pursuant to Section 1001(h)
of this Indenture of the existence of an Event of Default, the Trustee shall
direct the investment of moneys in the Bond Fund and the Construction Fund. The
Trustee shall sell and reduce to cash a sufficient amount of such Investment
Securities whenever the cash balance in any Fund is insufficient for the
purposes of such Fund. In determining the balance in any Fund, investments in
such Fund shall be valued at the lower of their original cost or their fair
market value as of the most recent Payment Date. The Trustee may make any and
all investments permitted by the provisions of this Section through its own bond
department or any affiliate or short-term investment department.
Section 703. Record Keeping. The Trustee shall maintain records designed to
show compliance with the provisions of this Article and with the provisions of
Article VI for at least six years after the payment of all of the Outstanding
Bonds.
ARTICLE VIII
GENERAL COVENANTS AND PROVISIONS
Section 801. Payment of Principal and Interest. The City covenants and
agrees that it will, but solely from the rents, revenues and receipts derived
from the Project and the Lease as described herein, deposit or cause to be
deposited in the Bond Fund sufficient sums payable under the Lease promptly to
meet and pay the principal of and the interest on the Bonds as they become due
and payable at the place, on the dates and in the manner provided herein and in
the Bonds according to the true intent and meaning thereof. The City covenants
and agrees that it will use its best efforts to cause the Project to be
continuously and sufficiently leased as a revenue and income providing
undertaking. Should there be a default under the Lease with the result that the
right of possession of the Project is returned to the City, the City shall fully
cooperate with the Trustee and with the Bondowners to the end of fully
protecting the rights and security of
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the Bondowners and shall diligently proceed in good faith and use its best
efforts to secure another tenant for the Project to the end that at all times
sufficient rents, revenues and receipts will be derived from the Project
promptly to meet and pay the principal of and the interest on the Bonds as they
become due and payable. Nothing herein shall be construed as requiring the City
to operate the Project as a business other than as lessor or to use any funds or
revenues from any source other than funds and revenues derived from the Project.
Section 802. Authority to Execute Indenture and Issue Bond. The City
covenants that it is duly authorized under the Constitution and laws of the
State of Missouri to execute this Indenture, to issue the Series 2002 Bond and
to pledge and assign the Trust Estate in the manner and to the extent herein set
forth; that all action on its part for the execution and delivery of this
Indenture and the issuance of the Series 2002 Bond has been duly and effectively
taken; that the Series 2002 Bond in the hands of the Owners thereof are and will
be valid and enforceable obligations of the City according to the import
thereof.
Section 803. Performance of Covenants. The City covenants that it will
faithfully perform at all times any and all covenants, undertakings,
stipulations and provisions contained in this Indenture, in the Bonds and in all
proceedings of its governing body pertaining thereto. The Trustee may take such
action as it deems appropriate to enforce all such covenants, undertakings,
stipulations and provisions of the City hereunder.
Section 804. Instruments of Further Assurance. The City covenants that it
will do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, such Supplemental Indentures and such further acts,
instruments, financing statements and other documents as the Trustee may
reasonably require for the better pledging and assigning unto the Trustee the
property and revenues herein described to the payment of the principal of and
interest, if any, on the Bonds. The City covenants and agrees that, except as
herein and in the Lease provided, it will not sell, convey, mortgage, encumber
or otherwise dispose of any part of the Project or the rents, revenues and
receipts derived therefrom or from the Lease, or of its rights under the Lease.
Section 805. Recordings and Filings. Upon request of the Owner of the Bonds
or the Trustee, the City will cooperate in causing this Indenture and all
Supplemental Indentures, the Lease and all Supplemental Leases and all
appropriate financing and continuation statements and other security instruments
to be recorded and filed in such manner and in such places as may be required by
law in order to fully preserve and protect the security of the Owners of the
Bonds and the rights of the Trustee hereunder.
Section 806. Inspection of Project Books. The City covenants and agrees
that all books and documents in its possession relating to the Project and the
rents, revenues and receipts derived from the Project shall at all times be open
to inspection by such accountants or other agencies as the Trustee may from time
to time designate.
Section 807. Enforcement of Rights Under the Lease. The City covenants and
agrees that it shall enforce all of its rights and all of the obligations of the
Company (at the expense of the Company) under the Lease to the extent necessary
to preserve the Project in good repair and reasonably safe operating condition,
and to protect the rights of the Trustee and the Bondowners hereunder with
respect to the pledge and assignment of the rents, revenues and receipts coming
due under the Lease; provided that, the City and the Trustee, as its assignee,
shall refrain from enforcing any such right or obligation (except for the rights
of the City or the Trustee to receive payments owing to either of them for their
own account under the Indenture, the Lease, the Grant Agreement or any other
agreement related to the Bonds or for their rights of indemnification or to be
protected from liabilities by insurance policies required by the Lease) if so
directed in writing by the Owners of 100% of the Outstanding Bonds. The City
agrees that the Trustee, as assignee
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of the rentals and other amounts to be received by the City and paid by the
Company under the Lease, or in its name or in the name of the City, may enforce
all rights of the City to receive such rentals and other amounts and all
obligations of the Company to pay such rentals and other amounts under and
pursuant to the Lease for and on behalf of the Bondowners, whether or not the
City is in default hereunder. So long as not otherwise provided in this
Indenture, the Company shall be permitted to possess, use and enjoy the Project
and appurtenances so as to carry out its obligations under the Lease.
ARTICLE IX
DEFAULT AND REMEDIES
Section 901. Events of Default; Notice; Opportunity to Cure. If any of the
following events occur, it is hereby defined as and declared to be and to
constitute an "Event of Default":
(a) Default in the due and punctual payment of the principal on any
Bond, whether at the stated maturity or accelerated maturity thereof, or at
the date fixed for redemption thereof;
(b) Default in the due and punctual payment of the interest on any
Bond, whether at the stated maturity or accelerated maturity thereof, or at
the date fixed for redemption thereof;
(c) Default as specified in Section 12.1 of the Lease shall have
occurred.
Anything herein to the contrary notwithstanding, no default specified above
shall constitute an Event of Default until actual notice of such default by
registered or certified mail shall be given by the City, the Trustee or by the
Owners of 25% in aggregate principal amount of all Bonds Outstanding to the
Company and the Company shall have had 30 days after receipt of such notice to
correct said default or cause said default to be corrected, and shall not have
corrected said default or caused said default to be corrected within such
period; provided, however, if any such default (other than a default in the
payment of any money) shall be such that it cannot be corrected within such
period, it shall not constitute an Event of Default if corrective action is
instituted by the Company within such period and diligently pursued until the
default is corrected.
Section 902. Acceleration of Maturity in Event of Default. If an Event of
Default shall have occurred and be continuing, the Trustee may, and upon the
written request of the Owners of not less than 25% in aggregate principal amount
of Bonds then Outstanding, shall, by notice in writing delivered to the City and
the Company, declare the principal of all Bonds then Outstanding and the
interest accrued thereon immediately due and payable, and such principal and
interest shall thereupon become and be immediately due and payable.
Section 903. Surrender of Possession of Trust Estate; Rights and Duties of
Trustee in Possession. If an Event of Default shall have occurred and be
continuing, the City, upon demand of the Trustee, shall forthwith surrender the
possession of, and it shall be lawful for the Trustee, by such officer or agent
as it may appoint, to take possession of all or any part of the Trust Estate,
together with the books, papers and accounts of the City pertaining thereto, and
including the rights and the position of the City under the Lease, and to hold,
operate and manage the same, and from time to time make all needful repairs and
improvements; the Trustee may lease the Project or any part thereof, in the name
and for account of the City, and collect, receive and sequester the rents,
revenues and receipts therefrom, and out of the same and any moneys received
from any receiver of any part thereof pay, and set up proper reserves for the
payment of all proper costs and expenses of so taking, holding and managing the
same, including without limitation
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(a) reasonable compensation to the Trustee, his agents and counsel, (b) any
reasonable charges of the Trustee hereunder, (c)any taxes and assessments and
other charges prior to the lien of this Indenture, (d) all expenses of such
repairs and improvements, and (e) any amounts payable under the Grant Agreement,
and the Trustee shall apply the remainder of the moneys so received in
accordance with the provisions of Section 908 hereof. Whenever all that is due
upon the Bond shall have been paid and all defaults made good, the Trustee shall
surrender possession of the Trust Estate to the City, its successors or assigns,
the same right of entry, however, to exist upon any subsequent Event of Default.
While in possession of such property, the Trustee shall render annually to the
City and the Company a summarized statement of receipts and expenditures in
connection therewith.
Section 904. Appointment of Receivers in Event of Default. If an Event of
Default shall have occurred and be continuing, and upon the filing of a suit or
other commencement of judicial proceedings to enforce the rights of the Trustee
and of the Bondowners under this Indenture, the Trustee shall be entitled, as a
matter of right, to the appointment of a receiver or receivers of the Trust
Estate or any part thereof, pending such proceedings, with such powers as the
court making such appointment shall confer.
Section 905. Exercise of Remedies by the Trustee.
(a) Upon the occurrence of an Event of Default, the Trustee may pursue any
available remedy at law or in equity by suit, action, mandamus or other
proceeding to enforce the payment of the principal of and interest on the Bond
then Outstanding, and to enforce and compel the performance of the duties and
obligations of the City or the Company as herein set forth or as set forth in
the Lease and the Deed of Trust, respectively.
(b) If an Event of Default shall have occurred and be continuing, and if
requested to do so by the Owners of 25% in aggregate principal amount of Bonds
then Outstanding and indemnified as provided in subsection (l) of Section 1001
hereof, the Trustee shall be obligated to exercise such one or more of the
rights and powers conferred by this Article as the Trustee, being advised by
counsel, shall deem most expedient and in the interests of the Bondowners.
(c) All rights of action under this Indenture or under any of the Bonds may
be enforced by the Trustee without the possession of any of the Bonds or the
production thereof in any trial or other proceedings relating thereto, and any
such suit or proceeding instituted by the Trustee shall be brought in its name
as Trustee without necessity of joining as plaintiffs or defendants any Owners
of the Bonds, and any recovery of judgment shall, subject to the provisions of
Section 908 hereof, be for the equal benefit of all the Owners of the
Outstanding Bonds.
Section 906. Limitation on Exercise of Remedies by Bondowners. No Owner of
any Bond shall have any right to institute any suit, action or proceeding in
equity or at law for the enforcement of this Indenture or for the execution of
any trust hereunder or for the appointment of a receiver or any other remedy
hereunder, unless (a) a default has occurred of which the Trustee has been
notified as provided in subsection (h) of Section 1001 or of which by said
subsection the Trustee is deemed to have notice, (b) such default shall have
become an Event of Default, (c) the Owners of 25% in aggregate principal amount
of Bonds then Outstanding shall have made written request to the Trustee, shall
have offered it reasonable opportunity either to proceed and to exercise the
powers hereinbefore granted or to institute such action, suit or proceeding in
its own name, and shall have offered to the Trustee indemnity as provided in
subsection (l) of Section 1001, and (d) the Trustee shall thereafter fail or
refuse to exercise the powers herein granted or to institute such action, suit
or proceeding in its own name; such notification, request and offer of indemnity
are hereby declared in every case, at the option of the Trustee, to be
conditions precedent to the execution of the powers and trusts of this
Indenture, and to any action or cause of action for the enforcement of this
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Indenture, or for the appointment of a receiver or for any other remedy
hereunder, it being understood and intended that no one or more Owners of the
Bond shall have any right in any manner whatsoever to affect, disturb or
prejudice this Indenture by their action or to enforce any right hereunder
except in the manner herein provided, and that all proceedings at law or equity
shall be instituted, had and maintained in the manner herein provided and for
the equal benefit of the Owners of all Bonds then Outstanding. Nothing in this
Indenture contained shall, however, affect or impair the right of any Bondowner
to payment of the principal of and interest on any Bond at and after the
maturity thereof or the obligation of the City to pay the principal of and
interest on each of the Bonds issued hereunder to the respective Owners thereof
at the time, place, from the source and in the manner herein and in the Bonds
expressed.
Section 907. Right of Bondowners to Direct Proceedings.
(a) Anything in this Indenture to the contrary notwithstanding, the Owners
of a majority in aggregate principal amount of Bonds then Outstanding shall have
the right, at any time, by an instrument or instruments in writing executed and
delivered to the Trustee, to direct the time, method and place of conducting all
proceedings to be taken in connection with the enforcement of the terms and
conditions of this Indenture, or for the appointment of a receiver or any other
proceedings hereunder; provided that such direction shall not be otherwise than
in accordance with the provisions of law and of this Indenture, including
Section 1001(l) hereof.
(b) Notwithstanding any provision in this Indenture to the contrary, the
Owners of the Bonds shall not have the right to control or direct any remedies
hereunder in the event of a default pursuant to Section 12.1(e) of the Lease
Agreement or in the event the City or the Trustee are enforcing rights (a) to
collect moneys for their own account, or (b) to indemnification or to be
protected from liabilities by insurance policies required by the Lease.
Section 908. Application of Moneys in Event of Default.
(a) All moneys received by the Trustee pursuant to any right given or
action taken under the provisions of this Article shall, after payment of the
cost and expenses of the proceedings resulting in the collection of such moneys
and of the fees, expenses, liabilities and advances incurred or made by the
Trustee (including any attorneys fees and expenses) or to be paid pursuant to
Section 903 hereof, be deposited in the Bond Fund and all moneys so deposited in
the Bond Fund shall be applied as follows:
(1) Unless the principal of all the Bonds shall have become or shall
have been declared due and payable, all such moneys shall be applied:
FIRST -- To the payment to the persons entitled thereto of all
installments of interest, if any, then due and payable on the Bonds, in the
order in which such installments of interest became due and payable, and,
if the amount available shall not be sufficient to pay in full any
particular installment, then to the payment ratably, according to the
amounts due on such installment, to the persons entitled thereto, without
any discrimination or privilege;
SECOND -- To the payment to the persons entitled thereof of the unpaid
principal of any of the Bonds which shall have become due and payable
(other than Bonds called for redemption for the payment of which moneys are
held pursuant to the provisions of this Indenture), in the order of their
due dates, and, if the amount available shall not be sufficient to pay in
full Bonds due on any particular date, together with such interest, then to
the payment, ratably, according to the amount of principal due on such
date, to the persons entitled thereto without any discrimination or
privilege.
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(2) If the principal of all the Bonds shall have become due or shall
have been declared due and payable, all such moneys shall be applied to the
payment of the principal and interest, if any, then due and unpaid on all
of the Bonds, without preference or priority of principal over interest or
of interest over principal or of any installment of interest over any other
installment of interest or of any Bond over any other Bond, ratably,
according to the amounts due respectively for principal and interest, to
the person entitled thereto, without any discrimination or privilege.
(3) If the principal of all the Bonds shall have been declared due and
payable, and if such declaration shall thereafter have been rescinded and
annulled under the provisions of Section 910, then, subject to the
provisions of subsection (2) of this Section in the event that the
principal of all the Bonds shall later become due or be declared due and
payable, the moneys shall be applied in accordance with the provisions of
subsection (1) of this Section.
(b) Whenever moneys are to be applied pursuant to the provisions of this
Section, such moneys shall be applied at such times and from time to time as the
Trustee shall determine, having due regard to the amount of such moneys
available and which may become available for such application in the future.
Whenever the Trustee shall apply such moneys, it shall fix the date (which shall
be an interest payment date unless it shall deem another date more suitable)
upon which such application is to be made and upon such date interest on the
amounts of principal to be paid on such dates shall cease to accrue.
(c) Whenever all of the Bonds and interest thereon, if any, have been paid
under the provisions of this Section, and all fees, expenses and charges of the
City and the Trustee have been paid (including any amounts payable under the
Grant Agreement), any balance remaining in the Bond Fund shall be paid to the
Company as provided in Section 606 hereof.
Section 909. Remedies Cumulative. No remedy by the terms of this Indenture
conferred upon or reserved to the Trustee or to the Bondowners is intended to be
exclusive of any other remedy, but each and every such remedy shall be
cumulative and shall be in addition to any other remedy given to the Trustee or
to the Bondowners hereunder or now or hereafter existing at law or in equity or
by statute. No delay or omission to exercise any right, power or remedy accruing
upon any Event of Default shall impair any such right, power or remedy or shall
be construed to be a waiver of any such Event of Default or acquiescence
therein; every such right, power or remedy may be exercised from time to time
and as often as may be deemed expedient. In case the Trustee shall have
proceeded to enforce any right under this Indenture by the appointment of a
receiver, by entry, or otherwise, and such proceedings have been discontinued or
abandoned for any reason, or shall have been determined adversely, then and in
every such case the City, the Company, the Trustee and the Bondowners shall be
restored to their former positions and rights hereunder, and all rights,
remedies and powers of the Trustee shall continue as if no such proceedings had
been taken.
Section 910. Waivers of Events of Default. The Trustee may in its
discretion waive any Event of Default hereunder and its consequences and rescind
any declaration of maturity of principal of and interest, if any, on the Bonds,
and shall do so upon the written request of the Owners of at least 50% in
aggregate principal amount of all the Bonds then Outstanding (except for any
Event of Default hereunder as a result of any Event of Default under Section
12.1(e) of the Lease which may only be waived by the City), provided, however,
that there shall not be waived without the consent of the Owners of all the
Bonds Outstanding (a) any Event of Default in the payment of the principal of
any Outstanding Bonds when due (whether at the date of maturity or redemption
specified therein), or (b) any Event of Default in the payment when due of the
interest on any such Bond, unless prior to such waiver or rescission, all
arrears of interest, or all arrears of payments of principal when due, as the
case may be, and all reasonable expenses of the Trustee (including attorneys
fees and expenses), in connection with such default, shall have been paid or
provided for. In case of any such waiver or rescission, or in case any
proceeding taken by the Trustee on
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account of any such default shall have been discontinued or abandoned or
determined adversely, then and in every such case the City, the Company, the
Trustee and the Bondowners shall be restored to their former positions, rights
and obligations hereunder, respectively, but no such waiver or rescission shall
extend to any subsequent or other default, or impair any right consequent
thereon.
ARTICLE X
THE TRUSTEE
Section 1001. Acceptance of the Trusts. The Trustee hereby accepts the
trusts imposed upon it by this Indenture, but only upon and subject to the
following express terms and conditions, and no implied covenants or obligations
shall be read into this Indenture against the Trustee:
(a) The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically
set forth in this Indenture. If any Event of Default shall have occurred
and be continuing, subject to Section 1001(l) below, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and
shall use the same degree of care and skill in their exercise, as a prudent
corporate trust department would exercise or use under the circumstances in
the conduct of its own affairs.
(b) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or through agents, attorneys
or receivers and shall not be responsible for any misconduct or negligence
on the part of any agent, attorney or receiver appointed or chosen by it
with due care, and the Trustee shall be entitled to act upon the opinion or
advice of counsel, who may be counsel to the City or to the Company,
concerning all matters of trust hereof and the duties hereunder, and may in
all cases pay such reasonable compensation to all such agents, attorneys
and receivers as may reasonably be employed in connection with the trusts
hereof. The Trustee shall not be responsible for any loss or damage
resulting from any action or nonaction by it taken or omitted to be taken
in good faith in reliance upon such opinion or advice of counsel addressed
to the City and the Trustee.
(c) Except as provided in the Lease and particularly Section 10.8
thereof, the Trustee shall not be responsible for any recital herein or in
the Bond (except with respect to the Certificate of Authentication of the
Trustee endorsed on the Bond), or for the recording or rerecording, filing
or refiling of this Indenture or any security agreement in connection
therewith, or for insuring the Project or collecting any insurance moneys,
or for the validity of the execution by the City of this Indenture or of
any Supplemental Indentures or instruments of further assurance, or for the
sufficiency of the security of the Bonds. The Trustee shall not be
responsible or liable for any loss suffered in connection with any
investment of funds made by it in accordance with Article VII hereof.
(d) The Trustee shall not be accountable for the use of any Bonds
authenticated and delivered hereunder. The Trustee, in its individual or
any other capacity, may become the owner or pledgee of Bonds with the same
rights which it would have if it were not Trustee.
(e) The Trustee may rely and shall be protected in acting or
refraining from acting upon any ordinance, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
affidavit, letter, telegram or other paper or document provided for under
this Indenture believed by it to be genuine and correct and to have been
signed, presented or sent by the
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proper person or persons. Any action taken by the Trustee pursuant to this
Indenture upon the request or authority or consent of any person who, at
the time of making such request or giving such authority or consent is the
Owner of any Bond, shall be conclusive and binding upon all future Owners
of the same Bond and upon Bonds issued in exchange therefor or upon
transfer or in place thereof.
(f) As to the existence or nonexistence of any fact or as to the
sufficiency or validity of any instrument, paper or proceeding, or whenever
in the administration of this Indenture the Trustee shall deem it desirable
that a matter be proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee shall be entitled to rely upon a
certificate signed by the Authorized City Representative or an Authorized
Company Representative as sufficient evidence of the facts therein
contained, and prior to the occurrence of a default of which the Trustee
has been notified as provided in subsection (h) of this Section or of which
by said subsection it is deemed to have notice, the Trustee shall also be
at liberty to accept a similar certificate to the effect that any
particular dealing, transaction or action is necessary or expedient, but
may at its discretion secure such further evidence deemed necessary or
advisable, but shall in no case be bound to secure the same.
(g) The permissive right of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty, and the Trustee shall not
be answerable for other than its negligence or willful misconduct.
(h) The Trustee shall not be required to take notice or be deemed to
have notice of any default hereunder except failure by the City to cause to
be made any of the payments to the Trustee required to be made in Article
VI hereof, unless the Trustee shall be specifically notified in writing of
such default by the City or by the Owners of at least 25% in aggregate
principal amount of all Bonds then Outstanding.
(i) At any and all reasonable times and subject to the Company's
reasonable and standard security procedures, the Trustee and its duly
authorized agents, attorneys, experts, engineers, accountants and
representatives shall have the right, but shall not be required, to inspect
any and all of the Project, and all books, papers and records of the City
pertaining to the Project and the Bonds, and to take such memoranda from
and in regard thereto as may be desired. The Trustee shall treat all
proprietary information of the Company as confidential.
(j) The Trustee shall not be required to give any bond or surety in
respect to the execution of its trusts and powers hereunder or otherwise in
respect of the Project.
(k) The Trustee shall have the right, but shall not be required, to
demand, in respect of the authentication of any Bond, the withdrawal of any
cash, the release of any property, or any action whatsoever within the
purview of this Indenture, any showings, certificates, opinions, appraisals
or other information, or corporate action or evidence thereof, in addition
to that by the terms hereof required, as a condition of such action by the
Trustee deemed desirable for the purpose of establishing the right of the
City to the authentication of any Bond, the withdrawal of any cash, or the
taking of any other action by the Trustee.
(l) Before taking any action under this Indenture other than the
payments from moneys on deposit in the Construction Fund or the Bond Fund,
as provided herein, the Trustee may require that satisfactory indemnity be
furnished to it for the reimbursement of all costs and expenses to which it
may be put and to protect it against all liability which it may incur in or
by reason of
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such action, except liability which is adjudicated to have resulted from
its negligence or willful misconduct by reason of any action so taken.
Section 1002. Fees, Charges and Expenses of the Trustee. The Trustee shall
be entitled to payment of and/or reimbursement for reasonable fees for its
ordinary services rendered hereunder and all advances, agent and counsel fees
and other ordinary expenses reasonably made or incurred by the Trustee in
connection with such ordinary services and, in the event that it should become
necessary that the Trustee perform extraordinary services, it shall be entitled
to reasonable extra compensation therefor and to reimbursement for reasonable
extraordinary expenses in connection therewith; provided that if such
extraordinary services or extraordinary expenses are occasioned by the neglect
or willful misconduct of the Trustee, it shall not be entitled to compensation
or reimbursement therefor. The Trustee shall be entitled to payment and
reimbursement for the reasonable fees and charges of the Trustee as Paying Agent
for the Bonds. Pursuant to the provisions of Section 5.2 of the Lease, the
Company has agreed to pay to the Trustee all reasonable fees, charges and
expenses of the Trustee under this Indenture. The Trustee agrees that the City
shall have no liability for any reasonable fees, charges and expenses of the
Trustee, and the Trustee agrees to look only to the Company for the payment of
all reasonable fees, charges and expenses of the Trustee and any Paying Agent as
provided in the Lease. Upon the occurrence of an Event of Default and during its
continuance, the Trustee shall have a lien with right of payment prior to
payment on account of principal of or interest on any Bond, upon all moneys in
its possession under any provisions hereof for the foregoing reasonable
advances, fees, costs and expenses incurred.
Section 1003. Notice to Bondowners if Default Occurs. If a default occurs
of which the Trustee is by subsection (h) of Section 1001 hereof required to
take notice or if notice of default be given as in said subsection (h) provided,
then the Trustee shall give written notice thereof to the last known Owners of
all Bonds then Outstanding as shown by the bond registration books required by
Section 206 to be kept at the corporate trust office of the Trustee.
Section 1004. Intervention by the Trustee. In any judicial proceeding to
which the City is a party and which, in the opinion of the Trustee and its
counsel, has a substantial bearing on the interests of Owners of the Bonds, the
Trustee may intervene on behalf of Bondowners and, subject to the provisions of
Section 1001(l) hereof, shall do so if requested in writing by the Owners of at
least 25% of the aggregate principal amount of Bonds then Outstanding.
Section 1005. Successor Trustee Upon Merger, Consolidation or Sale. With
the prior written consent of the Company, any corporation or association into
which the Trustee may be merged or converted or with or into which it may be
consolidated, or to which it may sell or transfer its corporate trust business
and assets as a whole or substantially as a whole, or any corporation or
association resulting from any merger, conversion, sale, consolidation or
transfer to which it is a party, shall be and become successor Trustee hereunder
and shall be vested with all the trusts, powers, rights, obligations, duties,
remedies, immunities and privileges hereunder as was its predecessor, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto.
Section 1006. Resignation of Trustee. The Trustee and any successor Trustee
may at any time resign from the trusts hereby created by giving 30 days' written
notice to the City, the Company and the Bondowners, and such resignation shall
take effect at the end of such 30 days, or upon the earlier appointment of a
successor Trustee by the Bondowners or by the City. The Trustee shall resign at
any time it determines that it has a conflict of interest (as defined in the
Trust Indenture Act of 1939), and shall, within 90 days after ascertaining that
it has a conflict of interest, or within 30 days after receiving written notice
from the City or the Company (so long as the Company is not in default under the
Lease Agreement)
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that it has a conflict of interest, either eliminate such conflicting
interest or resign in the manner and with the effect specified in this
Indenture.
Section 1007. Removal of Trustee. The Trustee may be removed at any time,
with or without cause, by an instrument or concurrent instruments in writing (a)
delivered to the Trustee, the City and the Company and signed by the Owners of a
majority in aggregate principal amount of Bonds then Outstanding, or (b) so long
as no Event of Default under this Indenture or the Lease shall have occurred and
be continuing, delivered to the Trustee, the City and the Owners of the Bonds
and signed by the Company.
Section 1008. Appointment of Successor Trustee. In case the Trustee
hereunder shall resign or be removed, or shall otherwise become incapable of
acting hereunder, or in case it shall be taken under the control of any public
officer or officers or of a receiver appointed by a court, a successor Trustee
(a) reasonably acceptable to the City may be appointed by the Company (so long
as no Event of Default shall have occurred and be continuing), or (b) reasonably
acceptable to the City and the Company may be appointed by the Owners of a
majority in aggregate principal amount of Bonds then Outstanding, by an
instrument or concurrent instruments in writing; provided, nevertheless, that in
case of such vacancy, the City, by an instrument executed and signed by its
Mayor and attested by its City Clerk under its seal, may appoint a temporary
Trustee to fill such vacancy until a successor Trustee shall be appointed in the
manner above provided. Any such temporary Trustee so appointed by the City shall
hold such appointment no longer than 90 days without Company approval (so long
as no Event of Default shall have occurred and be continuing) and shall
immediately and without further acts be superseded by the successor Trustee so
appointed as provided above. Every such Trustee appointed pursuant to the
provisions of this Section shall be a trust company or bank in good standing and
qualified to accept such trust having, or whose obligations are guaranteed by a
financial institution having, a reported capital, surplus and undivided profits
of not less than $50,000,000.
Section 1009. Vesting of Trusts in Successor Trustee. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to its
predecessor and also to the City and the Company an instrument in writing
accepting such appointment hereunder, and thereupon such successor shall,
without any further act, deed or conveyance, become fully vested with all the
trusts, powers, rights, obligations, duties, remedies, immunities and privileges
of its predecessor; but such predecessor shall, nevertheless, on the written
request of the City, execute and deliver an instrument transferring to such
successor Trustee all the trusts, powers, rights, obligations, duties, remedies,
immunities and privileges of such predecessor hereunder; every predecessor
Trustee shall deliver all securities and moneys held by it as Trustee hereunder
to its successor. Should any instrument in writing from the City be required by
any successor Trustee for more fully and certainly vesting in such successor the
trusts, powers, rights, obligations, duties, remedies, immunities and privileges
hereby vested in the predecessor, any and all such instruments in writing shall,
on request, be executed, acknowledged and delivered by the City.
Section 1010. Right of Trustee to Pay Taxes and Other Charges. In case any
tax, assessment or governmental or other charge upon, or insurance premium with
respect to, any part of the Project is not paid as required herein or in the
Lease, the Trustee may pay such tax, assessment or governmental charge or
insurance premium, without prejudice, however, to any rights of the Trustee or
the Bondowners hereunder arising in consequence of such failure; any amount at
any time so paid under this Section, with interest thereon from the date of
payment at the rate of 10% per annum, shall become an additional obligation
secured by this Indenture, and the same shall be given a preference in payment
over any payment of principal of or interest on the Bonds, and shall be paid out
of the proceeds of rents, revenues and receipts collected from the Project, if
not otherwise caused to be paid; but the Trustee shall be under no obligation to
make any such payment unless it shall have been requested to do so by the Owners
of at least 25% of the
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aggregate principal amount of Bonds then Outstanding and shall have been
provided adequate funds for the purpose of such payment.
Section 1011. Trust Estate May be Vested in Co-trustee.
(a) It is the purpose of this Indenture that there shall be no
violation of any law of any jurisdiction (including particularly the State
of Missouri) denying or restricting the right of banking corporations or
associations to transact business as trustee in such jurisdiction. It is
recognized that in case of litigation under this Indenture or the Lease,
and in particular in case of the enforcement of either on default or in
case the Trustee deems that by reason of any present or future law of any
jurisdiction it may not exercise any of the powers, rights or remedies
herein granted to the Trustee, or take any other action which may be
desirable or necessary in connection therewith, it may be necessary or
desirable that the Trustee appoint an additional individual or institution
as a co-trustee or separate trustee, and the Trustee is hereby authorized
to appoint such co-trustee or separate trustee.
(b) In the event that the Trustee appoints an additional individual or
institution as a co-trustee or separate trustee (which appointment shall be
subject to the approval of the Company), each and every remedy, power,
right, claim, demand, cause of action, immunity, title, interest and lien
expressed or intended by this Indenture to be exercised by the Trustee with
respect thereto shall be exercisable by such co-trustee or separate trustee
but only to the extent necessary to enable such co-trustee or separate
trustee to exercise such powers, rights and remedies, and every covenant
and obligation necessary to the exercise thereof by such co-trustee or
separate trustee shall run to and be enforceable by either of them.
(c) Should any deed, conveyance or instrument in writing from the City
be required by the co-trustee or separate trustee so appointed by the
Trustee for more fully and certainly vesting in and confirming to such
co-trustee such properties, rights, powers, trusts, duties and obligations,
any and all such deeds, conveyances and instruments in writing shall, on
request, be executed, acknowledged and delivered by the City.
(d) In case any co-trustee or separate trustee shall die, become
incapable of acting, resign or be removed, all the properties, rights,
powers, trusts, duties and obligations of such co-trustee or separate
trustee, so far as permitted by law, shall vest in and be exercised by the
Trustee until the appointment of a successor to such co-trustee or separate
trustee.
Section 1012. Accounting. The Trustee shall render an annual accounting for
the period ending December 31 of each year to the City, the Company and to any
Bondowner requesting the same and, upon the request of the Company or the
Bondowner, a monthly accounting to the Company and the Bondowner, showing in
reasonable detail all financial transactions relating to the Trust Estate during
the accounting period and the balance in any funds or accounts created by this
Indenture as of the beginning and close of such accounting period.
Section 1013. Performance of Duties Under the Lease. The Trustee hereby
accepts and agrees to perform all duties and obligations assigned to it under
the Lease.
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ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 1101. Supplemental Indentures Not Requiring Consent of Bondowners.
The City and the Trustee may from time to time, without the consent of or notice
to any of the Bondowners, enter into such Supplemental Indenture or Supplemental
Indentures as shall not be inconsistent with the terms and provisions hereof,
for any one or more of the following purposes:
(a) To cure any ambiguity or formal defect or omission in this Indenture,
or to make any other change not materially adverse to the security for the
Bondowners;
(b) To grant to or confer upon the Trustee for the benefit of the
Bondowners any additional rights, remedies, powers or authority that may
lawfully be granted to or conferred upon the Bondowners or the Trustee or either
of them;
(c) To more precisely identify the Project or the Project Site or to add
additional property thereto;
(d) To conform the Indenture to amendments to the Lease made by the City
and the Company;
(e) To subject to this Indenture additional revenues, properties or
collateral; or
(f) To issue Additional Bonds as provided in Section 209 hereof.
Section 1102. Supplemental Indentures Requiring Consent of Bondowners.
(a) Exclusive of Supplemental Indentures covered by Section 1101 hereof and
subject to the terms and provisions contained in this Section, and not
otherwise, the Owners of not less than a majority in aggregate principal amount
of the Bonds then Outstanding shall have the right, from time to time, anything
contained in this Indenture to the contrary notwithstanding, to consent to and
approve the execution by the City and the Trustee of such other Supplemental
Indenture or Supplemental Indentures as shall be deemed necessary and desirable
by the City for the purpose of modifying, amending, adding to or rescinding, in
any particular, any of the terms or provisions contained in this Indenture or in
any Supplemental Indenture; provided, however, that without the consent of the
Owners of 100% of the principal amount of the Bonds then Outstanding, nothing in
this Section contained shall permit or be construed as permitting (1) an
extension of the maturity or a shortening of the redemption date of the
principal of or the interest, if any, on any Bond issued hereunder, or (2) a
reduction in the principal amount of any Bond or the rate of interest thereon,
if any, or (3) a privilege or priority of any Bond or Bond over any other Bond
or Bond, or (4) a reduction in the aggregate principal amount of Bonds the
Owners of which are required for consent to any such Supplemental Indenture.
(b) If at the time the City shall request the Trustee to enter into any
such Supplemental Indenture for any of the purposes of this Section, the Trustee
shall cause notice of the proposed execution of such Supplemental Indenture to
be mailed to each Bondowner as shown on the bond registration books required by
Section 206 hereof. Such notice shall briefly set forth the nature of the
proposed Supplemental Indenture and shall state that copies thereof are on file
at the principal corporate trust office of the Trustee for inspection by all
Bondowners. If within 60 days or such longer period as may be prescribed by the
City following the mailing and final publication of such notice, the Owners of
not less than a majority in aggregate principal amount of the Bonds Outstanding
at the time of the execution of any such Supplemental
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Indenture shall have consented to and approved the execution thereof as herein
provided, no Owner of any Bond shall have any right to object to any of the
terms and provisions contained therein, or the operation thereof, or in any
manner to question the propriety of the execution thereof, or to enjoin or
restrain the Trustee or the City from executing the same or from taking any
action pursuant to the provisions thereof.
Section 1103. Company's Consent to Supplemental Indentures. Anything herein
to the contrary notwithstanding, a Supplemental Indenture under this Article
which affects any rights of the Company shall not become effective unless and
until the Company shall have consented in writing to the execution and delivery
of such Supplemental Indenture, provided that receipt by the Trustee of a
Supplemental Lease executed by the Company in connection with the issuance of
Additional Bonds under Section 209 hereof shall be deemed to be the consent of
the Company to the execution of a Supplemental Indenture pursuant to Section 209
hereof, respectively. In this regard, the Trustee shall cause notice of the
proposed execution and delivery of any such Supplemental Indenture (other than a
Supplemental Indenture proposed to be executed and delivered pursuant to Section
209 hereof) together with a copy of the proposed Supplemental Indenture to be
mailed to the Company at least 30 days prior to the proposed date of execution
and delivery of any such Supplemental Indenture.
ARTICLE XII
SUPPLEMENTAL LEASES
Section 1201. Supplemental Leases Not Requiring Consent of Bondowners. The
City and the Trustee shall, without the consent of or notice to the Bondowners,
consent to the execution of any Supplemental Lease or Supplemental Leases by the
City and the Company as may be required (a) by the provisions of the Lease and
this Indenture, (b) for the purpose of curing any ambiguity or formal defect or
omission in the Lease, (c) so as to more precisely identify the Project or add
additional property thereto, (d) in connection with the issuance of Additional
Bonds under Section 209 hereof, (e) in connection with any other change therein
which, in the judgment of the Trustee, does not materially and adversely affect
the Trustee or security for the Bondowners.
Section 1202. Supplemental Leases Requiring Consent of Bondowners. Except
for Supplemental Leases as provided for in Section 1201 hereof, neither the City
nor the Trustee shall consent to the execution of any Supplemental Lease or
Supplemental Leases by the City or the Company without the mailing of notice and
the obtaining of the written approval or consent of the Owners of not less than
a majority in aggregate principal amount of the Bonds at the time Outstanding
given and obtained as provided in Section 1102 hereof. If at any time the City
and the Company shall request the consent of the Trustee to any such proposed
Supplemental Lease, the Trustee shall cause notice of such proposed Supplemental
Lease to be mailed in the same manner as provided in Section 1102 hereof with
respect to Supplemental Indentures. Such notice shall briefly set forth the
nature of such proposed Supplemental Lease and shall state that copies of the
same are on file in the principal corporate trust office of the Trustee for
inspection by all Bondowners.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 1301. Satisfaction and Discharge of this Indenture.
(a) When the principal of and interest on all the Bonds shall have been
paid in accordance with their terms or provision has been made for such payment,
as provided in Section 1302 hereof, and provision
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shall also be made for paying all other sums payable hereunder and under the
Lease, including the reasonable fees and expenses of the Trustee, the City and
Paying Agent to the date of retirement of the Bonds, then the right, title and
interest of the Trustee in respect hereof shall thereupon cease, determine and
be void, and thereupon the Trustee shall cancel, discharge and release this
Indenture and shall execute, acknowledge and deliver to the City such
instruments of satisfaction and discharge or release as shall be requisite to
evidence such release and the satisfaction and discharge of this Indenture, and
shall assign and deliver to the City any property at the time subject to this
Indenture which may then be in its possession, except amounts in the Bond Fund
required to be paid to the Company under Section 606 hereof and except funds or
securities in which such funds are invested held by the Trustee for the payment
of the principal of and interest on the Bonds.
(b) The City is hereby authorized to accept a certificate by the Trustee
that the whole amount of the principal and interest, if any, so due and payable
upon all of the Bonds or coupons then Outstanding has been paid or such payment
provided for in accordance with Section 1302 hereof as evidence of satisfaction
of this Indenture, and upon receipt thereof shall cancel and erase the
inscription of this Indenture from its records.
Section 1302. Bonds Deemed to be Paid.
(a) Bonds shall be deemed to be paid within the meaning of this Article
when payment of the principal of and interest thereon to the due date thereof
(whether such due date be by reason of maturity or upon redemption as provided
in this Indenture, or otherwise), either (1) shall have been made or caused to
be made in accordance with the terms thereof, or (2) shall have been provided
for by depositing with the Trustee in trust and irrevocably set aside
exclusively for such payment (i) moneys sufficient to make such payment or
(ii) Government Securities maturing as to principal and interest in such amount
and at such times as will insure the availability of sufficient moneys to make
such payment, or (3) shall have been provided for by surrendering the Bonds to
the Trustee for cancellation. At such time as Bonds shall be deemed to be paid
hereunder, as aforesaid, it shall no longer be secured by or entitled to the
benefits of this Indenture, except for the purposes of such payment from such
moneys or Government Securities.
(b) Notwithstanding the foregoing, in the case of Bonds which by their
terms may be redeemed prior to the stated maturities thereof, no deposit under
clause (2) of the immediately preceding paragraph shall be deemed a payment of
such Bonds as aforesaid until, as to all such Bonds which are to be redeemed
prior to their respective stated maturities, proper notice of such redemption
shall have been given in accordance with Article III of this Indenture or
irrevocable instructions shall have been given to the Trustee to give such
notice.
(c) Notwithstanding any provision of any other section of this Indenture
which may be contrary to the provisions of this Section, all moneys or
Government Securities set aside and held in trust pursuant to the provisions of
this Section for the payment of Bonds shall be applied to and used solely for
the payment of the particular Bond, with respect to which such moneys and
Government Securities have been so set aside in trust.
(d) At its option, the Company may deliver to the Trustee for cancellation
Bonds not previously paid, and the Company shall receive a credit against the
Basic Rent or other amounts payable by the Company for the redemption or
defeasance of the Bonds in an amount equal to 100% of the principal amount of
the Bonds so delivered for cancellation, plus the accrued interest thereon.
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ARTICLE XIV
MISCELLANEOUS PROVISIONS
Section 1401. Consents and Other Instruments by Bondowners.
(a) Any consent, request, direction, approval, objection or other
instrument required by this Indenture to be signed and executed by the
Bondowners may be in any number of concurrent writings of similar tenor and may
be signed or executed by such Bondowners in person or by agent appointed in
writing. Proof of the execution of any such in-strument or of the writing
appointing any such agent and of the ownership of Bonds, if made in the
following manner, shall be sufficient for any of the purposes of this Indenture,
and shall be conclusive in favor of the Trustee with regard to any action taken,
suffered or omitted under any such instrument, namely:
(1) The fact and date of the execution by any person of any such
instrument may be proved by the certificate of any officer in any
jurisdiction who by law has power to take acknowledgements within such
jurisdiction that the person signing such instrument acknowledged before
him the execution thereof, or by affidavit of any witness to such
execution.
(2) The fact of ownership of Bonds and the amount or amounts, numbers
and other identification of such Bonds, and the date of holding the same
shall be proved by the registration books of the City maintained by the
Trustee pursuant to Section 206 hereof.
Section 1402. Limitation of Rights Under this Indenture. With the exception
of rights herein expressly conferred, nothing expressed or mentioned in or to be
implied from this Indenture or the Bonds is intended or shall be construed to
give any person other than the parties hereto, and the Owners of the Bonds, if
any, any right, remedy or claim under or in respect to this Indenture, this
Indenture and all of the covenants, conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and the Owners of the Bonds, as herein provided.
Section 1403. Notices. It shall be sufficient service of any notice,
request, complaint, demand or other paper required by this Indenture to be given
or filed with the City, the Trustee, the Company or Bondowners if the same shall
be duly mailed by registered or certified mail addressed:
(a) To the City: City of Bowling Green, Missouri
16 West Church
Bowling Green, MO 63334
ATTN: Mayor
(b) To the Trustee: Commerce Bank, N.A.
1000 Walnut, 6th Floor
Kansas City, MO 64106
ATTN: Corporate Trust Department
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(c) To the Company: Union Electric Company d/b/a
AmerenUE
One Ameren Plaza
1901 Chouteau Avenue
St. Louis, MO 63103
ATTN: Treasurer
with a copy to: Union Electric Company d/b/a
AmerenUE
One Ameren Plaza
1901 Chouteau Avenue
St. Louis, MO 63103
ATTN: General Counsel
(d) To the Bondowners if the same shall be duly mailed by first
class, registered or certified mail addressed to each of the Owners of
Bonds at the time Outstanding as shown by the bond registration books
required by Section 206 hereof to be kept at the principal corporate trust
office of the Trustee.
Section 1404. Severability. If any provision of this Indenture shall be
held or deemed to be invalid, inoperative or unenforceable as applied in any
particular case in any jurisdiction or jurisdictions or in all jurisdictions, or
in all cases because it conflicts with any other provision or provisions hereof
or any constitution or statute or rule of public policy, or for any other
reason, such circumstances shall not have the effect of rendering the provision
in question inoperative or unenforceable in any other case or circumstance, or
of rendering any other provision or provisions herein contained invalid,
inoperative or unenforceable to any extent whatever.
Section 1405. Execution in Counterparts. This Indenture may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 1406. Governing Law. This Indenture shall be governed exclusively
by and construed in accordance with the applicable laws of the State of
Missouri.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, City of Bowling Green, Missouri, has caused this
Indenture to be signed in its name and behalf by its Mayor and the seal of the
City to be hereunto affixed and attested by its City Clerk, and to evidence its
acceptance of the trusts hereby created, Commerce Bank, N.A. has caused this
Indenture to be signed in its name and behalf by its duly authorized President
or Vice-President or Trust Officer and its official seal to be hereunto affixed
and attested by its Secretary or Assistant Secretary, all as of the date first
above written.
CITY OF BOWLING GREEN, MISSOURI
By /s/ Boyd A. Haddock
-----------------------------
Mayor
[SEAL]
ATTEST:
By /s/ Barbara Allison
---------------------
City Clerk
AmerenUE Project
Trust Indenture
S-1
COMMERCE BANK, N.A.,
as Trustee
By /s/ William Ekey
---------------------
Name: William Ekey
Title: Vice President
[SEAL]
ATTEST:
By /s/ Vinetta A. Garnett
-------------------------
Name: Vinetta A. Garnett
Title: Assistant Secretary
AmerenUE Project
Trust Indenture
S-2
ACKNOWLEDGEMENTS
STATE OF MISSOURI )
) SS.
CITY OF PIKE )
On this 16 day of December, 2002, before me, the undersigned, a Notary
Public in and for said State, personally appeared BOYD HADDOCK, and BARBARA
ALLISON, who acknowledged themselves to be the Mayor and City Clerk of CITY OF
BOWLING GREEN, MISSOURI, a fourth class city organized and existing under the
laws of the State of Missouri, and that they, as such Mayor and City Clerk are
authorized to do so, executed the foregoing instrument for the purposes therein
contained by signing the name of the City by themselves as Mayor and City Clerk.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ Jennifer D. Robinson
------------------------------
Notary Public
My commission expires:
My Commission Expires
August 6, 2006
- ----------------------
AmerenUE Project
Trust Indenture
S-3
STATE OF MISSOURI )
) SS.
COUNTY OF Jackson )
On this 16th day of December, 2002, before me, the undersigned, a Notary
Public in and for said State, personally appeared William Ekey, who acknowledged
himself to be Vice President of COMMERCE BANK, N.A., Kansas City, Missouri, a
national banking association duly organized and existing under the laws of the
United States of America, and that he as such officer being authorized so to do
executed the foregoing instrument for the purposes therein contained by signing
the name of the association by himself as an officer.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ C. Guein
------------------------------
Notary Public
My commission expires:
/seal/
- -----------------------
AmerenUE Project
Trust Indenture
S-4
EXHIBIT 10.11
$125,000,000
(Aggregate Maximum Principal Amount)
CITY OF BOWLING GREEN, MISSOURI
TAXABLE INDUSTRIAL REVENUE BOND
(AMERENUE PROJECT)
SERIES 2002
Dated as of December 20, 2002
BOND PURCHASE AGREEMENT
City of Bowling Green, Missouri
16 West Church
Bowling Green, MO 63334
On the basis of the representations, and covenants and upon the terms and
conditions contained in this Bond Purchase Agreement, Union Electric Company
d/b/a AmerenUE, a Missouri corporation (the "Purchaser"), offers to purchase
from the City of Bowling Green, Missouri (the "City"), the above-referenced
Taxable Industrial Revenue Bond (AmerenUE Project) Series 2002, dated as
provided in the Indenture (hereinafter defined), in the maximum aggregate
principal amount of $125,000,000 (the "Series 2002 Bond"), to be issued by the
City, under and pursuant to an Ordinance adopted by the governing body of the
City on July 15, 2002 (the "Ordinance") and a Trust Indenture, dated as of
December 1, 2002 (the "Indenture") by and between the City and Commerce Bank,
N.A., Kansas City, Missouri (the "Trustee"). Capitalized terms not otherwise
defined herein shall have the meanings set forth in the Indenture.
SECTION 1. REPRESENTATIONS AND AGREEMENTS
(a) By the City's acceptance hereof the City hereby represents to the
Purchaser that:
(1) The City is a fourth class city duly organized and validly
existing under the laws of the State of Missouri. The City is authorized
pursuant to the Constitution and laws of the State of Missouri, and the
laws and ordinances of the City, and all necessary action has been taken to
authorize, issue and deliver the Series 2002 Bond and to consummate all
transactions contemplated by this Bond Purchase Agreement, the Ordinance,
the Indenture, the Lease, the Grant Agreement and any and all other
Financing Documents relating thereto. The proceeds of the Series 2002 Bond
shall be used to finance the Project as defined in the Indenture and to pay
for the costs incurred in connection with the issuance of the Series 2002
Bond.
(2) There is no controversy, suit or other proceeding of any kind
pending or, to the knowledge of the City, threatened questioning, disputing
or affecting in any way the legal organization of the City, or the right or
title of any of its officers to their respective offices, or the legality
of any official act leading up to the issuance of the Series 2002 Bond or
the constitutionality or validity of the obligations represented by the
Series 2002 Bond or the validity of the Series 2002 Bond, the Lease, the
Indenture or the Grant Agreement.
(b) The Purchaser represents as follows:
(1) The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Missouri. The Purchaser
has all necessary licenses and permits required in order to carry on its
business as currently conducted and has or will obtain all necessary
licenses and permits in connection with the purchase, construction and
operation of the Project. Except as may be disclosed in any filings which
have been made by the Purchaser with the Securities and Exchange
Commission, the Purchaser is not in violation of and has not received any
notice of an alleged violation of or liability under any zoning, land use,
environmental, pollution control, hazardous waste or similar laws or
regulations that would have a material adverse effect on its operations or
financial condition and has full right, power and authority to authorize,
approve, enter into, execute and deliver the Lease, the Grant Agreement and
this Bond Purchase Agreement (collectively, the "Company Documents") and to
perform such other acts and things as are provided in the Company
Documents.
(2) No Conflict or Breach. The execution, delivery, performance (where
applicable) and approval by the Purchaser of the Company Documents, and
full compliance by it with the provisions of the Company Documents, have
been duly authorized by all necessary action of the Purchaser and do not
and will not conflict with or result in the breach of any of the terms,
conditions or provisions of, or constitute a default under, its
organizational documents, any law, court or administrative regulation,
decree or order applicable to or binding upon Purchaser, or any agreement,
indenture, mortgage, lease or instrument to which the Purchaser is a party
or by which it is bound.
(3) Approvals. The Purchaser has duly authorized all necessary action
to be taken by it for: (i) the issuance and sale of the Series 2002 Bond by
the City upon the terms and conditions set forth herein and in the
Indenture, and (ii) the execution, delivery and performance (where
applicable) of the Company Documents and any and all such other agreements
and documents as may be required to be executed, delivered and performed by
it in order to carry out, effectuate and consummate the transactions
contemplated hereby and by such Company Documents.
(4) No Litigation. Except as may be disclosed in any filings which
have been made by the Purchaser with the Securities and Exchange
Commission, there is no action, suit, proceeding, inquiry or investigation
at law or in equity or before or by any court, public board or body pending
or, to the knowledge of the Purchaser, threatened against or affecting the
Purchaser or to the knowledge of the Purchaser, any meritorious basis
therefor, wherein an unfavorable decision, ruling or finding could have a
material and adverse effect on the financial condition of the Purchaser or
the operation by the Purchaser of its property or of the transactions
contemplated by the Company Documents or on the validity or enforceability
in accordance with their respective terms of the Company Documents or any
other agreement or instrument to which Purchaser is a party or by which it
is or may be bound or would in any way contest the existence or powers of
Purchaser.
-2-
(5) Documents Legal, Valid and Binding. The Purchaser shall, on or
before the Closing Date, execute and deliver the Company Documents. When
executed and delivered by the Purchaser, the Company Documents will be
legal, valid and binding obligations, enforceable in accordance with their
respective terms, subject, as to enforcement, to any applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and further subject to the
availability of equitable remedies.
(6) Purchaser's Certificates. Any certificate signed by an authorized
officer or agent of the Purchaser and delivered to the City shall be deemed
a representation and warranty by Purchaser to such parties as to the
statements made therein.
(7) No Default Under Company Documents. No event has occurred and is
continuing which with the lapse of time or the giving of notice, or both,
would constitute a breach of or an event of default by Purchaser under the
Company Documents.
(8) Title. The Purchaser has good and marketable fee simple title in
the Project Site which it will transfer to the City at Closing Date, and
has good and marketable title to its other property, in each case free and
clear of all liens, except encumbrances which do not materially adversely
affect the Purchaser or its operations.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SERIES 2002 BOND
On the basis of the representations and covenants contained herein and in
the other agreements referred to herein, and subject to the terms and conditions
herein set forth and in the Indenture, the Purchaser agrees to purchase from the
City and the City agrees to sell to the Purchaser the Series 2002 Bond on the
terms and conditions set forth herein.
The Series 2002 Bond shall be sold to the Purchaser by the City on the
Closing Date (hereinafter defined) upon payment of an amount equal to the
Closing Price (hereinafter defined), which amount shall be applied as provided
in the Indenture and the Lease. From time to time after the Closing Date, the
Purchaser shall make additional payments with respect to the Series 2002 Bond
("Additional Payments") to Commerce Bank, N.A., as Trustee under the Indenture,
which Additional Payments shall be applied to the payment of Project Costs or as
provided in the Indenture and the Lease; provided that the sum of the Closing
Price and all such Additional Payments shall not, in the aggregate, exceed
$125,000,000.
As used herein, the term "Closing Date" shall mean December 20, 2002, or
such other date as shall be mutually agreed upon by the City and the Purchaser;
the term "Closing Price" shall mean that certain amount specified in writing by
the Purchaser and agreed to by the City as the amount required to pay for the
initial issuance of the Series 2002 Bond on the Closing Date.
The Series 2002 Bond shall be issued under and secured as provided in the
Ordinance, the Indenture, the Lease and the Deed of Trust authorized thereby and
the Series 2002 Bond shall have the maturity, interest rate and shall be subject
to redemption as set forth therein. The delivery of the Series 2002 Bond shall
be made in definitive form as a fully registered bond in the maximum aggregate
principal denomination of $125,000,000; provided, that the principal amount of
the Series 2002 Bond outstanding at any time shall be that amount recorded in
the records of the Trustee and further provided that interest shall be payable
on the Series 2002 Bond only on the outstanding principal amount of the Series
2002 Bond, as more fully provided in the Indenture. Any certificate signed by an
authorized
-3-
officer or agent of the Purchaser and delivered to the City shall be deemed a
representation and warranty by Purchaser to such parties as to the statements
made therein.
The Purchaser agrees to indemnify and hold harmless the City, the Trustee
or any member, officer, official or employee of the City or of the Trustee,
within the meaning of Section 15 of the Securities Act of 1933, as amended
(collectively, the "Indemnified Parties"), against any and all losses, claims,
damages, liabilities or expenses whatsoever caused by any violation or failure
to comply with any federal or state securities laws in connection with the
Series 2002 Bond.
In case any action shall be brought against one or more of the Indemnified
Parties based upon the foregoing indemnification and in respect of which
indemnity may be sought against the Purchaser, the Indemnified Parties shall
promptly notify the Purchaser in writing and the Purchaser shall promptly assume
the defense thereof, including the employment of counsel, the payment of all
expenses and the right to negotiate and consent to settlement. Any one or more
of the Indemnified Parties shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Indemnified Parties unless employment of such counsel has been specifically
authorized by the Purchaser or there is a conflict of interest that would
prevent counsel for the Purchaser from adequately representing both the
Purchaser and the Indemnified Party. The Purchaser shall not be liable for any
settlement of any such action effected without its consent by any of the
Indemnified Parties, but if settled with the consent of the Purchaser or if
there be a final judgment for the plaintiff in any such action against the
Purchaser or any of the Indemnified Parties, with or without the consent of the
Purchaser, the Purchaser agrees to indemnify and hold harmless the Indemnified
Parties to the extent provided herein.
SECTION 3. CONDITIONS TO THE OBLIGATIONS
The obligations hereunder shall be subject to the due performance by the
parties of the obligations and agreements to be performed hereunder on or prior
to the Closing Date and to the accuracy of and compliance with the
representations contained herein, as of the date hereof and as of the Closing
Date, and are also subject to the following conditions:
(a) There shall be delivered to the Purchaser on or prior to the
Closing Date a duly executed copy of the Ordinance, the Trust Indenture,
the Lease and the Deed of Trust, and any other instrument contemplated
thereby shall be in full force and effect and shall not have been modified
or changed except as may have been agreed to in writing by the Purchaser.
(b) The City shall confirm on the Closing Date by a certificate that
at and as of the Closing Date the City has taken all action necessary to
issue the Series 2002 Bond and that there is no controversy, suit or other
proceeding of any kind pending or, to the knowledge of the City, threatened
wherein any question is raised affecting in any way the legal organization
of the City or the legality of any official act shown to have been done in
the transcript of proceedings leading up to the issuance of the Series 2002
Bond, or the constitutionality or validity of the obligations represented
by the Series 2002 Bond or the validity of the Series 2002 Bond or any
proceedings in relation to the issuance or sale thereof.
(c) A certificate of the Purchaser, dated the Closing Date, to the
effect that (i) except as may be disclosed in any filings which have been
made by the Purchaser with the Securities and Exchange Commission, no
litigation, proceeding or investigation is pending against the Purchaser or
its affiliates or, to the knowledge of the Purchaser, threatened which
would (A) contest, affect, restrain or enjoin the issuance, validity,
execution, delivery or performance of the
-4-
Company Documents, or (B) in any way contest the existence or powers of the
Purchaser or its affiliates, (ii) except as may be disclosed in any filings
which have been made by the Purchaser with the Securities and Exchange
Commission, no litigation, proceeding or investigation is pending or, to
the knowledge of the Purchaser, threatened against the Purchaser or its
affiliates except litigation, proceedings or investigations in which the
probable ultimate recoveries and the estimated costs and expenses of
defense, in the opinion of counsel to the Purchaser (A) will be entirely
within applicable self-insurance program funding and insurance policy
limits (including primary and excess insurance policies and subject to
applicable deductibles) or (B) will not have a material adverse effect on
the operations or condition, financial or otherwise, of the Purchaser and
its affiliates, (iii) the representations and warranties of the Purchaser
herein and in the Company Documents were and are true and correct in all
material respects and not misleading as of the date made and as of the
Closing Date, (iv) at the Closing Date, no event of default has occurred
and is continuing and no event has occurred and is continuing which with
the lapse of time or the giving of notice, or both, would constitute a
breach of or an event of default under the Company Documents, and (v) such
other matters as are reasonably requested by the other parties in
connection with the issuance of the Series 2002 Bond.
SECTION 4. THE PURCHASER'S RIGHT TO CANCEL
The Purchaser shall have the right to cancel its obligation hereunder to
purchase the Series 2002 Bond by notifying the City in writing or by telegraph
of its election to make such cancellation at any time prior to the Closing Date.
SECTION 5. CONDITIONS OF OBLIGATIONS
The obligations of the parties hereto are subject to the receipt of the
approving opinion of Gilmore & Bell, P.C., Bond Counsel, with respect to the
validity of the authorization and issuance of the Series 2002 Bond.
SECTION 6. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY
The representations and warranties of each party are made only as of the
date hereof and the Closing Date. All of the representations and agreements by
either party shall survive delivery of the Series 2002 Bond to the Purchaser.
SECTION 7. NOTICE
Any notice or other communication to be given to the City under this
Agreement may be given by mailing or delivering the same in writing to the City
of Bowling Green, City Hall, 16 West Church, Bowling Green, Missouri 63334,
Attention: Mayor; and any notice or other communication to be given to the
Purchaser under this Agreement may be given by delivering the same in writing to
Union Electric Company d/b/a AmerenUE, One Ameren Plaza, 1901 Chouteau Avenue,
St. Louis, Missouri 63103, Attention: Treasurer with a copy to Union Electric
Company d/b/a AmerenUE, One Ameren Plaza, 1901 Chouteau Avenue, St. Louis,
Missouri 63103, Attention: General Counsel.
SECTION 8. PAYMENT OF EXPENSES
The Purchaser shall pay all reasonable expenses and costs of the parties to
effect the authorization, preparation, issuance, delivery and sale of the Series
2002 Bond from proceeds of the Series 2002 Bond or otherwise to the extent
contemplated in the Grant Agreement.
-5-
SECTION 9. APPLICABLE LAW; ASSIGNABILITY
This Bond Purchase Agreement shall be governed by the laws of the State of
Missouri and may be assigned by the Purchaser to (i) any entity controlled by,
under common control with or controlling the Purchaser, or (ii) any third party
which operates an electric generation facility or has material experience in
operating an electric generation facility and whose senior long-term debt, or
the senior long-term debt of an entity controlled by, under common control with
or controlling such third party, is rated at least Baa3 by Moody's Investors
Service, Inc. (or any successor agency) or BBB- by Standard & Poors Rating
Service (or any successor agency). Any such assignee shall agree to be bound by
the terms of this Bond Purchase Agreement. Upon such assignment, the Purchaser
shall be released from and have no further obligations under this Bond Purchase
Agreement.
SECTION 10. EXECUTION OF COUNTERPARTS
This Bond Purchase Agreement may be executed in several counterparts, each
of which shall be regarded as an original and all of which shall constitute one
and the same document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-6-
Very truly yours,
UNION ELECTRIC COMPANY d/b/a
AMERENUE, as Purchaser
DATE OF EXECUTION: By: /s/ Jerre E. Birdsong
---------------------------
December 20, 2002 Name: Jerre E. Birdsong
- ----------------- Title: Vice President & Treasurer
Bond Purchase Agreement
AMERENUE PROJECT
S-1
Accepted and Agreed to this 20 day of December, 2002.
CITY OF BOWLING GREEN, MISSOURI
By: /s/ Boyd A. Haddock
----------------------------
Name: Boyd Haddock
Title: Mayor
S-2
Bond Purchase Agreement
AMERENUE PROJECT
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Nos. 333-87506 and 333-87506-01) of Union Electric
Company of our report dated February 13, 2003 relating to the financial
statements and financial statement schedule, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
St. Louis, Missouri
March 24, 2003
EXHIBIT 99.2
CERTIFICATE
furnished under
Section 906 of the Sarbanes-Oxley Act of 2002
I, Charles W. Mueller, chief executive officer of Union Electric Company,
hereby certify that to the best of my knowledge, the accompanying Report of
Union Electric Company on Form 10-K for the fiscal year ended December 31, 2002
fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that information contained in such Report fairly
presents, in all material respects, the financial condition and results of
operations of Union Electric Company.
/s/ Charles W. Mueller
--------------------------
Charles W. Mueller
Chief Executive Officer
Date: March 24, 2003
EXHIBIT 99.3
CERTIFICATE
furnished under
Section 906 of the Sarbanes-Oxley Act of 2002
I, Warner L. Baxter, chief financial officer of Union Electric Company,
hereby certify that to the best of my knowledge, the accompanying Report of
Union Electric Company on Form 10-K for the fiscal year ended December 31, 2002
fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that information contained in such Report fairly
presents, in all material respects, the financial condition and results of
operations of Union Electric Company.
/s/ Warner L. Baxter
--------------------------
Warner L. Baxter
Chief Financial Officer
Date: March 24, 2003