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Executives

Martin Lyons - Executive Vice President and Chief Financial Officer

Maureen Borkowski - President and Chief Executive Officer, Ameren Transmission Company

Jack Thayer - Executive Vice President and Chief Financial Officer, Exelon Corporation

Analysts

Steve Fleishman - Wolfe Research

Ameren Corporation (AEE) Wolfe Research Power and Gas Leaders Conference Call September 25, 2013 3:00 PM ET

Steve Fleishman - Wolfe Research

So final panel, we have Ameren and Exelon. We have two speakers from Ameren. First we’ll have Martin Lyons, and Marty is the CFO of Ameren and we also have Maureen Borkowski and Maureen is the Head of the Ameren’s Transmission business. So let me turn it over to Marty to kick us off. Thanks.

Martin Lyons - Executive Vice President and Chief Financial Officer

Thanks, Steve and good afternoon everybody. Thanks for sticking around for this final presentation today. I am as Steve said Marty Lyons. I am Executive Vice President and Chief Financial Officer of Ameren Corporation. This afternoon I am going to provide you with an overview of our company discuss our business strategy and then elaborate on execution of that strategy. Then Maureen Borkowski, as Steve mentioned, who is the Head of our Transmission business and officially President and CEO of Ameren Transmission Company will discuss our plans for significant new investments in FERC regulated transmission projects.

Before I proceed, I do need to mention that our comments do contain time-sensitive data that is accurate only as of the date of today’s presentation or the date noted on a respective slide. Further remind you that we will be making some forward-looking statements and there are many reasons why actual results could differ from those statements. I will refer you to the forward-looking statements discussion on the slide and in our SEC filings for a list of those reasons.

With that covered, let’s go ahead and begin with an overview of our company. Ameren is a St. Louis based holding company with diversified regional rate regulated electric and gas utility operations across Missouri and Illinois. Ameren Missouri provides vertically integrated electric generation transmission and delivery service for 1.2 million customers as well as natural gas delivery service to 127,000 customers in Eastern and Central Missouri. Ameren Illinois is an electric and natural gas delivery utility serving 1.2 million electric and 811,000 natural gas customers in Central and Southern Illinois. This subsidiary also owns 4,500 circuit miles of electric transmission that is regulated by FERC. Finally, Ameren Transmission Company of Illinois or ATXI, which is expected to grow rapidly as it makes significant investments in multi-value regional electric transmission projects.

As shown on the slide, we expect to complete divestiture of our merchant generation operations later this year. And as a fully rate regulated utility company, we expect the rate base growth will drive future earnings and dividend growth. Our expected rate base growth of approximately 7% compounded annually over the 2013 through 2017 period and our current dividend yield of approximately 4.6% are both above peer regulated averages and/or attractive investment features of Ameren shares.

This slide outlines some of our key strategic objectives at Slide 5. Our first objective is to reduce our business risk by completing the divestiture of our merchant generation business. The resulting shift to an all-grade regulated business is expected to substantially improve the predictability of future earnings and cash flows. In March of this year, we reached an agreement to divest this business to an affiliate of Dynegy. We and Dynegy are working diligently to obtain regulatory approvals necessary to complete the transaction and we continue to anticipate a fourth quarter 2013 closing.

With regard to our rate regulated operations, a key strategic objective is to invest and to operate our business in a manner consistent with existing regulatory frameworks. We do this because healthy financial performance is critical to our ability to undertake the significant operating and capital spending needed to meet customers’ energy needs and expectations. This has been requesting and obtaining rate increases as needed. This has also entailed aligning operating and capital spending with regulatory outcomes and existing frameworks, including workforce reductions in 2009 and 2011 as well as reductions in other planned spending not supported by regulatory frameworks or outcomes. These efforts however have also led to allocating significant and growing amounts of discretionary capital to our Illinois electric and gas delivery utilities and FERC regulated electric transmission businesses, because these operate under modern constructive regulatory frameworks.

As a result of these and other operational initiatives, our electric rates remained low. Delivery system reliability has improved. Energy center availability has remained strong. And our earned returns have improved. To position our utilities to continue these trends and meet our customers’ future energy needs and expectations, we have also been aggressively working to enhance regulatory frameworks, which is our third strategic objective listed here. Significant progress has been made on this front for our Illinois energy delivery business.

Our electric delivery business is now operating under provisions of the Illinois Energy Infrastructure Modernization Act and clarifying legislation. These laws establish performance-based formula ratemaking that nearly eliminates regulatory lag. Earnings reflect year end rate base and a formula return on equity that is tied to 30-year treasury balance. The regulatory framework for Illinois gas delivery business has also improved. Our gas rates are established using a future test year and legislation enacted this year allows implementation of rate surcharges for qualifying gas delivery infrastructure investments made between rate cases. Together, these measures significantly reduce regulatory lag in our gas delivery business. These improvements to the Illinois regulatory framework support energy delivery system modernization and job creation.

While challenges remain in Missouri, we have seen improvements in the state’s regulatory framework. We have a fuel adjustment cause in effect that provides for timely recovery of fuel cost and a number of significant and volatile expenses are subject to cost trackers. Since we have Maureen with us today, she will discuss the regulatory framework for FERC regulated businesses and/or transmission investment plans. I will touch then on the final strategic objective we will discuss today, which is developing additional rate regulated opportunities for investment.

Over the last few years we have identified in advance several new attractive opportunities, including our Modernization Action Plan, or MAP, which is accelerating improvements to Ameren Illinois’ electric and natural gas delivery systems and new FERC rate regulated transmission projects designed to improve reliability and efficiency. As a result of choosing to participate in Illinois’ performance-based formula ratemaking for electric delivery service, Ameren Illinois is committed to a 10-year plan of $640 million of incremental capital investments for things such as advanced electric meters, modernization of substations and replacement of aging polls and other infrastructure. Similarly, we are developing new investment opportunities in our Illinois gas delivery business in conjunction with our planned participation beginning in 2014 or 2015 in the gas delivery infrastructure surcharge framework. We planned to invest incremental capital of $330 million over 10 years in our gas delivery system. We expect successful execution of our strategy to result in meeting our customers’ future energy needs and expectations, earnings and dividend growth and earning fair returns on investments.

Turning to Slide 6, as I mentioned execution of our strategy has produced notable successes. As you can see in the top of the slide, our residential electric rates are well below the national average. At bottom left, you see that our electric distribution system reliability has steadily improved over the last several years and in 2012 was the best ever measure at both Ameren Missouri and Ameren Illinois. Last at bottom right, you see that our generating plant performance as measured by equivalent availability for Ameren Missouri’s baseload coal and nuclear energy centers has remained strong.

On Slide 7, you see that in addition to these factors, our discipline around investing and operating our rate regulated businesses in a matter consistent with the existing regulatory frameworks and our success in enhancing those frameworks has contributed to steady and sustained improvement in financial performance as measured by return on equity. The combined Ameren Missouri and Ameren Illinois ROE as measured by weather adjusted normalized earnings improved from approximately 5.6% in 2008 to approximately 9% in 2012.

Turning to Slide 8 then, including opportunities provided by the Modernization Action Plan at our Illinois electric and gas delivery businesses and FERC regulated transmission projects, we plan to invest approximately $8.1 billion in our regulated utilities over the 5 years ending in 2017. These plans translate into expected rate base growth of approximately 7% compounded annually over 2013 through 2017. A solid list of identified and largely regulatorily approved transmission projects are expected to increase our FERC regulated transmission rate base by 37% annually over this period. In addition, our MAP investments contribute to projected Illinois electric and gas delivery rate base growth of 8% and 5% respectively. Our Missouri rate base is expected to grow at a slower 2% annual rate. However, further enhancement in the regulatory framework in that state would allow us to increase the discretionary investment we make in our aging Missouri infrastructure.

As a fully regulated utility company we expect that our rate base growth will drive future earnings and dividend growth further and expected improvement in or blended allowed return on rate base is an additional anticipated driver of earnings growth. The expected improvement in our blended allowed return reflects growth in our FERC regulated piece of the rate base pie from 6% at year end 2013 to 17% by year end 2017. Finally, we expect fully 46% of our rate base to be invested in Illinois regulated electric and gas delivery services and FERC regulated transmission by year end 2017.

On that note I am going to turn the presentation over to Maureen who will briefly discuss our transmission business.

Maureen Borkowski - President and Chief Executive Officer, Ameren Transmission Company

Thanks Marty. Good afternoon everyone. I appreciate this opportunity to discuss our rapidly growing electric transmission businesses. Marty mentioned that one of our strategic objectives is to enhance our regulatory frameworks. In addition to the improvements at the state level, we have also obtained enhancements for our FERC regulated transmission businesses in recent years. Ameren Illinois and Ameren Transmission Company of Illinois or ATXI requested and were granted FERC approval to update transmission rates each year based on a forward looking rate calculation.

This rate making also includes an annual reconciliation based on actually incurred costs nearly eliminating regulatory lag. ATXI also requested and FERC granted constructive rate treatment for three MISO approved multi-value transmission projects including the Illinois Rivers project. This constructive treatment authorizes inclusion of construction work in progress and rate base among other things. The final transmission related regulatory improvement I would like to mention involves Illinois legislation that we supported and that was enacted in 2010. That law establishes the design timeframe for ICC decisions on utility requests for certificates of public convenience and necessity for transmission projects.

Because of constructive rate making and an attractive allowed return on equity, FERC regulated electric transmission projects are the most substantial investment opportunity Ameren has under development. In fact we plan to invest the total of approximately $2.2 billion in such projects over the 2013 through 2017 time period with Ameren Illinois and Ameren Transmission Company of Illinois. Ameren Illinois projects are focused on local transmission needs of that utility’s electric delivery customers. We expect to invest approximately $1 billion in Ameren Illinois transmission infrastructure over that period. The majority of this investment does not require regulatory approvals because it is upgrading or replacing existing facilities.

Further all of the new Ameren Illinois projects that did need ICC certificates of public convenience and necessity have now received such certificates. While Ameren Illinois is addressing local needs, ATXI is addressing regional needs developing multi-value projects initially within Illinois and Missouri. ATXI plans to invest approximately $1.2 billion in such projects from 2013 through 2017.

Ameren’s single largest planned investment is ATXI is approximately $1.1 billion Illinois Rivers transmission project. This MISO approved multi-value project is nearly 400 miles long and consists of a new 345,000 volt transmission line across the Mississippi river near Quincy, Illinois and to continuing is to cross Illinois to be Indiana border. Last month the ICC approved the need for the Illinois Rivers project and granted a certificate of public convenience and necessity for seven of the proposed nine line segments of the route and three of the nine proposed substations. The ICC noted that the remaining two segments and the substations were not approved due to a lack of time and evidence to determine the most cost effective route and substation locations. On September 18th we filed with the ICC requesting a rehearing to determine the appropriate routing of the two remaining segments and the locations of the substations that were not approved.

The ICC must decide whether to grant the rehearing within 20 days of our filing and based on their August order we expect our request to be granted. Meanwhile ATXI is moving forward on the approved portions of the project and we have begun to acquire rights-of-way for the transmission line. A full range of construction activities is expected beginning in 2014 with the first segments placed in service in 2016 and project completion expected by 2019. Marty will now summarize our remarks.

Martin Lyons - Executive Vice President and Chief Financial Officer

Yes, so just in summary I want to remind you that we are on target to become a fully rate regulated utility business later this year. We expect the divestiture of the merchant business to be completed in the fourth quarter. To remind you again our expected rate base growth were approximately 7% compounded annually over that period of 2013 to 2017 is above the peer group average for regulated utilities and as we look for this rate base growth to drive future earnings and dividend growth.

In addition, our 2013 earnings guidance incorporates approximately $0.20 per share of parent company and other costs including certain costs that were previously allocated to the merchant generation business. We expect to reduce this $0.20 of cost down to $0.10 to $0.15 in 2014 and to reduce them further in 2015. Earnings in 2014 and 2015 are expected to benefit from this factor as well as the rate base growth and enhanced regulatory frameworks we discussed. Finally just want to remind everybody that Ameren shares provide investors with $1.60 per share annualized dividend rate that is well covered by our 2013 earnings from continuing operations and provides an above peer group average yield of approximately 4.6. So again thanks for your being here today and your interest in Ameren and I will turn it over to Jack.

Steve Fleishman - Wolfe Research

So just maybe then kick us off on the questions Marty maybe you could first talk about the transition out of the generation business into a pure utility, what do you see as some of that kind of benefits for the company from that in terms of difference on how it’s been run or financed? Going forward and then Jack I guess on the same side it’s kind of do you feel like the model both together makes sense for you guys for the long-term and how much if you looked at whether it makes more of a pure play model? So Marty first.

Martin Lyons - Executive Vice President and Chief Financial Officer

Sure, Steve. First of all, in terms of the merchant divestitures I mentioned in the prepared remarks, we expect that, that transaction will close later this year in the fourth quarter. Right now, we are seeking regulatory approvals of both FERC and from the transfer of an air variance that Pollution Control Board in Illinois again expect to be in a position to close that transaction later this year and then transition to be in a equally rate regulated operation. For us, I think as I stated in the call are the prepared remarks the transition away from the merchant operations for us it has been a smaller part of our business and in terms of earnings contributions as power prices have declined became a smaller and smaller contributor. We believe that through the divestiture of that business it will greatly improve the predictability of our earnings and cash flows going forward.

As I hope you saw in the slide deck I think we have an ambitious rate base growth plan ahead of us and with it hope to produce predictable growth in booked earnings and cash flows. And put ourselves in a business position to be able to increase the dividend prospectively as that rate base can grow – now turn into earnings growth. I think the divestiture of the merchant business provides investors greater visibility, predictability in terms of those earnings and cash flows and in greater certainty in terms of the outcome of that rate base growth strategy. Certainly for us the announced divestiture and the move towards closing I think has allowed investors to refocus on not only the rate base growth plans we have but some of the improvement that has occurred in our regulatory jurisdictions and I think folks are finding that to be attractive.

Jack Thayer - Executive Vice President and Chief Financial Officer, Exelon Corporation

So as Marty mentioned, clearly we are the product of the assets that we own. In Ameren’s case, the merchant was a smaller part of their business. With respect to Exelon and the larger nuclear fleets as well as the ownership of the constellation business, that is and has been a meaningful part of the story at Exelon. And from a scale perspective, I think would make it challenging to give it to a purely regulated model. That said we do see real value in this integrated model. We think it creates roughly $2.5 billion of value in part because embedding our constellation business as part of an integrated utility affords us balance sheet and investment grade rating that will be challenging to procure on a purely merchant standalone basis. You merry that up with the importance of investment grade rating when you are operating the largest nuclear fleet, and we think that, that collectively is a strong argument for the structure certainly that we have, that we appreciate why others within different circumstances may pursue a purely merchant or a purely regulated model.

I would say that there is a measure of counter-cyclicality to each of these businesses, and most importantly the opportunity to redeploy free cash flow from either business, where we see incremental opportunities. So as I mentioned in my prepared remarks, we will be taking $13.5 billion of free cash flow and investments proceeds from our merchant business and redeploying that into the regulated side of our business meaningfully rebalancing the earnings and contribution that we see. That said to the extent that after this investment phase as the utility is generating significant cash flow, there maybe the opportunity to redeploy that into growth at the merchant and in effect we just go balance our investment where we see the best and highest return. And that’s been a very good model for us despite the economic headwinds that have come with the shale gas revolution.

Steve Fleishman - Wolfe Research

Question for Maureen, maybe you could give us a little bit of sense, first on the Illinois Rivers projects and maybe all your projects multi-value, I assume that means reliability maybe renewables power market benefits, just maybe give a little flavor of what the lines will do to the region? And also a little bit on resolving the missing pieces on Illinois Rivers just is the risk that we get stuck with missing pieces and that issue can’t be resolved?

Maureen Borkowski - President and Chief Executive Officer, Ameren Transmission Company

Okay, thanks. With regard to the multi-value project, I mean that’s actually a term that’s defined by the Midwest ISO in their tariff. And it does involve meeting the renewable portfolio standards across the MISO footprint as well as addressing reliability needs and congestion release, it increases import capability. There is a whole host of benefits that these multi-value projects offer. Specific to Illinois Rivers, we definitely will see local benefits as well as the regional benefits on which these projects were approved. Though the benefit to the State of Illinois include helping them meet their renewable portfolio standards, supporting some of the renewable development that’s already going on in Illinois, but there are also significant reliability benefits to these projects, in part that’s why we have so many substations associated with the Illinois Rivers project. It’s 400 miles line in 10 substations. And that really is what allows you to get those local reliability benefits.

With regard to the ITC order and our request for rehearing, first and foremost, the ITC approved the need for the project. They completely understand that the only way you are going to get the benefits from that project is to have a continuous path across the State of Illinois of 345,000-volt mine and have those substations in place because as the substations that connect to the existing system that allow you to get the local benefits. So really the issues are more about routing and location. Specifically with regard to the two line segments that were not approved, there was some back and forth in the case about whether the line should be routed through the substation that we proposed or if it might be better to rout the line through a different substation, because it appeared that, that might result in fewer miles of line in total, marginally fewer, but the objective of the commission is to approve the most cost effective solution that gets you the benefits you want. So it’s a part of the rehearing process and we do expect that the ITC will grant our rehearing request. We will put additional evidence on the record of stating why we believe that the solution we proposed is technically the best solution to get the benefits for the customers.

The issue with regard to the substations was really about whether or not Ameren Transmission Company of Illinois was making adequate use of the existing footprint of the existing Ameren Illinois company substations. So our new 345 kV substations will connect to the existing substations that Ameren Illinois Company already owns and the commission I think was hoping that we were being conservative in making the best use of the real estate that Ameren Illinois Company already owned. And again what we have planned to do is to put additional evidence on the record demonstrating the actual layout of facilities with regard to both Ameren Illinois Company existing sub and the additional adjoining property that we intend to purchase. So that really is what the issue is. It’s all about location and routing and real estate. So we expect those issues to be resolved and the commission will rule on the rehearing request in March of next year.

Steve Fleishman - Wolfe Research

Just one clarification, you mentioned reliability in the RPS, but on the congestion benefit, Dynegy for example talking about difficulty getting power to any hubs from Southern Illinois, is this something that will meaningfully change that or it doesn’t really do much for that?

Maureen Borkowski - President and Chief Executive Officer, Ameren Transmission Company

The Illinois Rivers project will definitely help with some congestion issues. There are additional projects that Ameren has proposed to the Midwest ISO that are specifically targeted at reducing congestion in Southern Illinois. Those projects are still working their way through the Midwest ISO transmission expansion plan, but certainly that would provide additional opportunity for investment over and above the investment we have already identified.

Steve Fleishman - Wolfe Research

Jack and maybe Marty as well, one thing I know you talked a little bit about some pressure on nuclear economics at least like the smaller single unit type plants we have (indiscernible) to get announced I think probably since you last talked. What’s your sense on the ability for these single unit plants to make it or nuclear as a whole is in the big plants are going to still be very economic, but maybe just thoughts there?

Jack Thayer - Executive Vice President and Chief Financial Officer, Exelon Corporation

It’s very asset and markets. So Steve, as you mentioned on the asset side, aging smaller single site news are coming under significant cost pressures depending on the market that they are in. So of these within our fleets, we have pre-existing agreements in New Jersey to shutdown Oyster Creek in 2019. Others that are single site and small are plants like our (indiscernible) asset that has EPA that concludes in the middle of 2014. And New York, particularly upstate New York in the absence of a meaningful capacity market and with a low power price regime makes the viability of that asset something we have to explore. Depending on the market, you can have some unexpected challenge to assets as well.

If you look at our well around the topic of Southern Illinois, if you look at our Clinton asset which is a very large, one of our most modern nuclear reactors, one of our best operating in fact last time, it ran breaker-to-breaker. It’s about 1,100 megawatts. It’s in Southern Illinois. It’s in the MISO market without a meaningful capacity market and it’s competing against wind overnight, which is printing negative prices for healthy parts of the year, such that we are effectively paying to run at certain times of the day. Our asset runs 95% of the time. It’s being displaced by assets that we are on at most 30% to 40% of the time. And so our hope is that as we discuss the economics of viability of these assets that the important role that they play in the ISOs in which they participate start to be FERC recognized as well as compensated. But in the absence of that we are getting to the point where we are having to make some hard choices. Clinton, we have gone to annual repealing to more efficient way to burn the plant, but it means it running less frequently. We are taking other actions but Colin has got the branch of subsidized generation and shale gas, nuclear is next. I think nuclear but for some slight emphasis to need to play an important role but it likely requires us to rethink how we are being compensated for the reliability we combined.

Steve Fleishman - Wolfe Research

Any thoughts Callaway is obviously regulated but is it – any of those issues have implications with Callaway?

Martin Lyons - Executive Vice President and Chief Financial Officer

I think that you are absolutely right Steve and we actually have one nuclear plant frankly in Exelon operator now we currently been over to life it’s just been a very well run single unit plant. And so we certainly have that going for as commission mentioned its rate regulated. So we certainly have been in the merchant business. We are very confident of the factors that Jack just spoke to you around the challenging economics on a plant by plant basis imposed by both energy and capacity market conditions while our Callaway planned is rate regulated as we look around certainly keeps us laser focused on cost control at that unit and making sure we do everything that we can to continue to operate in an excellent fashion and to make sure we do so in an efficient way.

Steve Fleishman - Wolfe Research

A lot of questions from the audience, mic?

Question-and-Answer Session

Unidentified Analyst

Thank you. Two related questions from Ameren Illinois Rivers project, is it possible to break that out into smaller parts if you do not get full rights of way for the whole project. And secondly do you – if the FERC return discussions that we have in New England and seen in California goes to your territories and there is a wish to 12% we do have the flexibility to draw back on some of your transmission investments and has there been some discussions even now about maybe 12% is too high etcetera?

Maureen Borkowski

With regard to the first question about Illinois Rivers, we are actually moving out currently building the segments that have already been approved. While the first stage of that is acquiring right-of-way to do that which is we are in the progress of doing we expect a full range of construction activities in 2014. In the event first of all I think it’s highly unlikely that we won’t have a contiguous 345,000 pass across the state of Illinois because the commission in their discussion that immediately proceeded their vote on the August 20th order made it very clear that they understand that the only way to receive the full benefits from the project is to complete the project. So I think there is a clear understanding of that. But in any event we certainly are able to put segments of the project in service without having the entire thing in service. Our plan is actually to stage the in service states of the line segments and the substations so that some will be put in service in 2016, some in 2017 and so on.

With regard to the question about the ROE, we are certainly following the case at FERC about the Northeast closely. There has not at this point in time been any movement and it wouldn’t just be the state of Illinois, it would really be within the Midwest ISO because the 12.38 return on equity that we earned on our transmission projects is the umbrella rate that’s granted under the Midwest ISO tariff. So in our likelihood they would have to be a movement of someone to complain that that rate was too high which would trigger a regulatory proceeding. The regulatory proceeding in the Northeast has gone on for sometime and they are not really expecting a final ruling until next year.

I actually saw some encouraging news in the administrative law judges proposed order at FERC. I think the message that he was sending to the commissioners was I am held hostage by President. As an administrative law judge I can’t deviate from commission president, but he saw some merit to the arguments that experts in that case had made that maybe the artificial depression at interest rate isn’t really working under this DCS analysis and you may want to consider other options. Actually that’s what I read into it. That being said in the event that there was some successful challenge to my MICO’s 12.38 return on equity, we did not – when we went forward with seeking rate incentives from FERC for the Illinois Rivers project and our other projects Mark Twain and Spoon River we didn’t request any kickers to the return on equity, we were satisfied with the 12.38 to the extent that base rate was lowered we would be eligible to go back and seek additional incentives on the ROE at FERC.

Unidentified Analyst

Given the recent difficulty that (Ron Bins) had before the rational community of its appointment that it has with FERC, I wonder if any of the issues raised by the people who opposed them affects the transmission rulings that you all and the rest of the industry seem to be building a case for and in terms of what presentations to investors wonderful it is to put FERC regulators staying ahead of the state regulators?

Maureen Borkowski

I don’t know that I can speak to exactly what the objections were, but I do believe that both among the existing FERC commissioner and among congress they all understand that transmission is absolutely essential to having a cohesive energy policy in the United States. And that in fact with everything that’s going on in the natural gas markets and with environmental restrictions that more transmission just gives you more resilience and more opportunity to have vibrant competitive electric markets. So my sense is that no matter who ultimately ends up being the next FERC commissioner and or chairman that inherent policy I really do believe as I believe that they are shared that they need to establish policies that promote continued transmission investments.

Unidentified Analyst

In fact the ROEs are among those policies?

Maureen Borkowski

Yes, that’s one of the options that’s still out there and available.

Unidentified Analyst

This question is for Marty regarding the approval process for the (indiscernible) transaction, has there been any issues raised by MISO or other E-ons around FERC around market power issues had also thought that’s an ongoing process but have you seen these playing out and one sort of raised any flags or anything do you see regarding that?

Martin Lyons

No, I haven’t seen any risen on market power you may recall that back in July FERC did request that we provide some supplemental analysis to run our market power study which we provided within a week. And really it did not change the overall conclusions that the market power analysis that was originally supplied since that time we’ve heard no real noise around that subject.

Unidentified Analyst

Also MISO I guess we’ve had a couple of panels talked about how spiked to generation situation at the beginning in MISO in a couple of years and to sort of wondering I guess Exelon obviously you have got sort of your own little island in the middle of MISO that could be impacted indirectly and then aimed at you’re selling assets when people are saying in a couple of years it’s going to be really tight just sort of a reactions that sort of upcoming situations?

Jack Thayer

From our point of view I think it will get back over time and you look at some of the investor presentations we’ve made it – we don’t disagree that over time we expect the market tightening but for us the timing and the amount of that tightening and importantly the impact on energy capacity prices is somewhat uncertain. As I said it earlier well that’s expected we expect that to occur I think like many in the merchant generation space. For us, strategically we believe it’s time to move on it was to be honest with you with smaller part of our business as I mentioned before. And I think a distraction from our regulated investment and growth story. And for us strategically, it was certainly time to development.

Jack Thayer

And I guess from our perspective, clearly where we believe in capacity markets one of the elements that’s adding to the potential reserve margin issue within MISO is that certain of its assets are bidding into PJM auctions and earning economic rents if they can otherwise earn in MISO. So I think there is probably from – to my earlier comments about our Clinton asset as well as others in there and then the behavior of certain participants in MISO and their participation in the PJM auction process, there is probably an opportunity to improve the compensation for that capacity that keeps that those megawatts where they reside and keeps those assets on.

Unidentified Analyst

Just a question for Ameren, the transmission projects that you have after Illinois Rivers are those Ameren’s for sure or are those susceptible to Order 1000 process?

Maureen Borkowski

The Spoon River and Mark Twain projects which are Ameren Transmission Company of Illinois as well as I think we have in the past listed five different reliability projects in Illinois that are Ameren Illinois Company projects. Those are all ran bothered in under Order 1000.

Unidentified Analyst

Just a question for Jack, here is something I want to clarify whether if I understood you correctly, you said that under the integrated model, we see $2.5 billion revenue to the extent?

Jack Thayer

Sure. So your question is around the importance of the regulated part of our business in sustaining our investment grade. As you think about the extent that we did not have that, did not have that meaningful component of our business that was regulated, we will be held to higher FFO to debt standards. And I say that as a proxy for our CFO to debt and others that are used by other agencies. And to the extent that we had and you may recall that we have roughly $6 billion worth of credit lines, where we would try and go secure that in the market, where we would try to use an asset-backed financial structure to support growth, whether you require by both our constellation business, but also our nuclear assts. We think the price of all those, the value destruction equates to a $2.5 billion positive that we see from this integrated model. And hence our strong belief in the mutually reinforcing nature of the two parts of our business given the collective scale of both not only would it be unwieldy for us to try and separate them, but economically it wouldn’t be of interest.

Unidentified Analyst

Jack, just on the PJM, the speaker yesterday mentioned some of the things that PJM is reviewing on fixing the auction for next year, things like both are changes imports, things like that, what’s your sense on the likelihood that these will get done and implemented for the auction next year?

Jack Thayer

So I would like in our experience with the capacity market, PJM is a bit akin to the game of Whac-a-Mole and they have investors, of the moles that we have had to whack back in their holes. First was demand response. We have worked to refine the definition around what qualified as well as the quantity such that it is being paid for the service it’s providing. Subsequent to that on the (indiscernible) and subsidized generation that has been a big issue, we had a large stakeholder process last year to refine that and that was done within a 12-month timeframe and mitigated some of the subsidized jobs related contracting behaviors of certain of the states or at least made it to factor in how the auction cleared. I think as you mentioned imports have been I think you are at roughly 8,000 megawatts of imports cleared in this recent auction, imports has been a huge issue as well as in effect the free optionality of new builds bidding in and then having the ability to acquire in subsequent options the capacity they bid in and even in fact profit from that.

So in this stakeholder process, we are working to both define what’s actually, what is PJM actually capable of importing. How do we take the profit incentive out of the bidding behavior? And how do we weave in performance elements whether its transmission construction to support imports or new build construction as well as certain credit requirements to improve delivery of in effect what exactly is RPM designed to do is designed to promote reliability. And we have seen with meaningful coal retirements and expected coal retirements as well as we have seen a replacement of baseload iron in the ground with the contractual right to turn someone off or the prospect of new build generation that may or may not be there. And we will see the impact of this on the back of 2015 with the requirements. And I think PJM as stakeholders appreciate the importance reliability is this equation. And so my sense is that there is a fairly good chance that the stakeholder process works its way through the time for the next auction.

Steve Fleishman - Wolfe Research

Hello. Questions from the audience? One last question.

Unidentified Analyst

This is for Jack. So Jack, when you look at you said that you want to invest as much money in your utilities as possible, I imagine there is a certain limit to that, that you can just do, but you have free cash flow, you guys have been paying down debt and stuff that has been freed up from other auctions. What’s kind of the next step on that? And when do you sort of look to give a plan?

Jack Thayer

So let me address that clearly we are very mindful, I liked Marty’s slide of showing where Ameren’s rates are relative to others. And clearly, we are mindful of where our rates are relative to others. I think in part that’s what’s driving the significant investments in ComEd. We have very advantage customer rates there. There is an important place increasingly so because of cell phones and the role we play in our lives on reliability. There is opportunity around smart bridge improve the operations of the utility as well as to reduce cost. And so you see us spending meaningful dollars at ComEd. You see us that BGE spending meaningful dollars in part because of the age of those assets. We had depreciated those assets. That was in the form of rates. So if you compare our PICO rates to either ComEd or to BGE, even post all of the spend that’s going into both, that will still be lower than PICO’s rates, but some of which that fee in an absolute basis, it’s the absolute increase that people are focused on. You have to blend it in over time. And most importantly, people focus on the total bill and power prices have come down meaningfully, which we believe merried up with the importance of reliability that our customers are expressing to their various stakeholders that represent them presents a real opportunity for us meaningfully invest. And as we get through this 5-year period, will there be subsequent significant investment on the scale I have played, but we feel good about that.

Unidentified Analyst

Very good. Take one more question, but on retail, you guys talked about competition has increased dramatically, and I think you often say like we need a hurricane to come in and kind of get rid of?

Jack Thayer

Well, to record state I never advocate a hurricane coming.

Unidentified Analyst

I think it will be interesting if it can be mobilized, but…

Jack Thayer

That would be a Six Sigma event really.

Unidentified Analyst

But just we have recently seen like PJM have these sort of spiky load days, you saw demand response kick in whatnot, has that done anything to sort of takeaway or hurt any of the sort of slide by net retailers?

Jack Thayer

I would say two things that two meaningful elements are challenging that retail business. Number one is from a well at its core the absence of volatility, the volatility that you highlighted with the $1000 Brent in PJM during the summer. We just haven’t seen a lot of that. So that’s inducing our customers who this is really an insurance product against energy volatility have learned that when their bills come due, there is a better price and they get to save money on the next one. And then that’s now happened for say the last 3 to 5 years. Well we are at the bottom or at least I hope we are at the bottom. So they are waiting for a lower price that’s not going to come, but there is not that volatility that’s inducing them to see the value of locking in a fixed price for an extended period of time. The flipside of that is the market participants have been able in this low volatility environment to not fully cost the risk they are ensuring. I believe and it’s our fundamental view that with the retirement of the coal assets that you are going to see volatility has to go up. You are going to see more of those high price days. You are going to be calling demand response more frequently, so that it’s not a free option. And we think all of that will be good for retail margins returning back to say the $2 to $4 megawatt hour which would be an improvement from where we are today.

Steve Fleishman - Wolfe Research

Good. I think that ends our panel. Thank you very much.

Jack Thayer - Executive Vice President and Chief Financial Officer, Exelon Corporation

Thank you.

Maureen Borkowski - President and Chief Executive Officer, Ameren Transmission Company

Thank you.

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