Ameren to exit US merchant generation business

• 11 years ago (2012-12-22)
• David Flin

North America 1021

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Ameren Corporation has announced that it plans to get out of the US merchant power generation business, which produces power for the competitive wholesale electricity market, citing weak power prices and the increasing cost of environmental compliance. As a result, Ameren will incur a non-cash charge ranging from $1.5-2 billion in the fourth quarter.

The utility’s stock price rose nearly 4 per cent on the news. Andy Smith, a Senior Analyst with the investment advisors Edward Jones, said: “It’s the ongoing low pricing environment. They’re not generating enough money for what it costs them.”

The merchant generation business represented only about 15 per cent of Ameren’s $5.3 billion of revenue in the first nine months of the year. The remainder of Ameren’s business is derived from the regulated utilities Ameren Missouri and Ameren Illinois.

Ameren said in a regulatory filing that the merchant generation business has experienced decreasing earnings and cash flows for several years. It also cited environmental regulations that have resulted in significant investment requirements. Brian Bretcsch, spokesman for Ameren, said that a timeline for exiting the business had not yet been set, and the announcement has “no immediate impact on Ameren Energy Resources’ operations ... or facilities.”

Genco, a subsidiary of AER, is expected to sell at least one of its three natural gas-fired power plants to improve liquidity, according to the filing. The three Illinois plants are in Elgin, Gibson City, and Grand Tower.