1. Presented by Alex Ring April 25, 2006
Ameren Corp (AEE)
Presented by Alex Ring
April 25, 2006

2. Outline Company Background & Structure Regulation and Operations
Stock market prospects
DCF Analysis
Overall Portfolio Fit
Recommendation

3. Company Background Ameren Corp is an electric utility holding company
Headquartered in St. Louis, Missouri
Formed by the merger of Union Electric Company and the Central Illinois Public Service Company (CIPSCO)
Began trading on the NYSE on January 2, 1998
Headed by Chairman & CEO, Gary Rainwater since January 1, 2004
Has held numerous executive positions with the company and its subsidiaries since 1979 when he joined Union Electric as an engineer

4. Company Background Market Cap: $10.28 Billion
2005 Net Income: $606 million
Stock Price: $50.60
Beta: 0.62
2005 ROE: 9.52%
2005 ROA: 3.34%
Debt/Equity: 46%

5. Company Operations Ameren is a Midwest public utility holding company
Its electric and gas utilities operate in much of downstate Illinois as well as Missouri
Provides both natural gas and electricity to 3.4 million customers

6. Ownership Structure

7. Ameren Subsidiaries
Union Electric Company represents the company’s rate-regulated natural gas and electric operations in Missouri
CIPS operates Illinois rate-regulated electricity and natural gas distribution business under the AmerenCIPS name
Genco, or Ameren Energy Generating Company, is responsible for generating non-rate-regulated electricity in Illinois and Missouri

8. Subsidiaries continued
Central Illinois Light Company (CILCO) is an Illinois based subsidiary that distributes rate-regulated electricity and natural gas, and also generates non-rate-regulated electricity through Ameren Energy Resources Generating Company (AERG)
Illinois Power (IP) was acquired in 2004 and operates rate-regulated natural gas and distribution networks in Illinois under the AmerenIP name

9. Outline Company Background & Structure Regulation and Operations
Stock market prospects
DCF Analysis
Overall Portfolio Fit
Recommendation

10. Regulation The public utility sector is highly regulated.
Greatest overall variable determining the company’s profitability
In most markets, there hasn’t been a rate increase in years
A rate freeze in Illinois was placed
in 1997 and will expire at the end of
this year, meaning electricity rates
will go up

11. Significance of Regulation
“Rates that UE, CIPS, CILCO and IP are allowed to charge for their services are the single most important influence upon their and Ameren’s consolidated results of operations, financial position, and liquidity.”

12. Regulation Continued
Illinois based subsidiaries (CIPS, CILCO, IP) are regulated by the Illinois Commerce Commission (ICC)
Missouri based subsidiary Union Electric are regulated by the Missouri Public Service Commission (MoPSC)
MoPSC
ICC
Electric
Gas
Ameren
40%
13%
45%
87% UE
80%
95% 1% 5%
CIPS 0%
100%
CILCORP
93%
CILCO IP

13. Regulation Continued
In the past, Ameren’s results have been constrained by its inability to recover investments and other costs through electricity and natural gas rates
But much progress has been made:
Proposals have been made to the ICC to increase electricity delivery service rates by $200 million dollars, with a decision expected in late 2006
Under certain criteria, rates charged by UE, CIPS, CILCO, and IP can be adjusted without a rate proceeding
PGA clauses allow the costs to purchase natural gas to be passed on to customers in Missouri and Illinois, but not yet in effect
A new law passed in Missouri would allow the company to recover costs associated with fuel, purchased power, and the environment
Much of this progress has just recently came about and could be a source of additional profitability in the coming 3-5 years

14. Commodity Price Risk
Ameren uses long-term purchase and sales contracts, derivatives including forward contracts, futures contracts, options, and swaps to manage price risk associated with purchasing these commodities

15. Sources of Electricity
Source of Electricity Generation
Coal
Nuclear
Natural Gas
Hydroelectric
Oil
Ameren:
2005
86%
10% 1% 2%
2004
2003
85%
13%
<1%
Cost per Mbtu
$1.160
$0.421
$9.044
Peak electricity demand in 2005 was 17,563 megawatts vs. capacity of 20,567 megawatts
Nuclear energy is produced from its Callaway Plant in Callaway County, Missouri
2005 coal costs were approximately 11% higher 2004 and 2003, due to a disruption in rail supply

16. Recent Performance 5 Year Compound Annual Growth Rates
Electricity Revenue 9.14%
Gas Revenue %
Total Revenues %
Net Income %
Stock Price %
Good buying opportunity

17. Recent Acquisitions - CILCORP
On January 31, 2003, Ameren purchased CILCORP, the parent of CILCO, from AES Corp (AES) for $1.4 billion

18. Recent Acquisitions - IP
Purchase Illinois Power (IP) on September 30, 2004 from Dynegy (DYN)
Ameren paid $2.3 billion for the company, financed by issuing 30 million shares of Ameren Corp in February and July 2004.
The acquisition increased the number of electric customers by 625,000 and the number of gas customers by 425,000
Increased 2005 revenues by $1.3 billion
IP consists primarily of electric and gas transmission and distribution, and has no significant generation facilities
Therefore, most of electricity is purchased under short and long-term purchase agreements

19. Outline Company Background & Structure Regulation and Operations
Stock market prospects
DCF Analysis
Overall Portfolio Fit
Recommendation

20. AEE ILA EXC GXP Industry
DIRECT COMPETITOR COMPARISON
AEE
ILA
EXC
GXP
Industry
Market Cap:
10.29B
1.58B
36.24B
2.12B
3.00B
Employ­ees:
7,177
3,204
17,200
2,382
4.55K
Qtrly Rev Growth (yoy):
15.50%
43.00%
15.90%
8.60%
18.20%
Revenue (ttm):
6.62B
1.31B
15.36B
2.60B
3.46B
Gross Margin (ttm):
34.45%
34.28%
39.03%
33.67%
30.81%
EBITDA (ttm):
1.90B
142.00M
5.31B
463.31M
612.68M
Oper Margins (ttm):
19.39%
-0.53%
25.60%
11.01%
10.08%
Net Income (ttm):
628.00M M
951.00M
162.56M
136.80M
EPS (ttm):
3.018
-0.598
1.365
2.154
1.51
P/E (ttm):
16.66
N/A
39.79
13.15
17.11
PEG (5 yr expected):
3.92
1.79
6.77
2.71
P/S (ttm):
1.55
1.21
2.32
0.82
ILA = Aquila Inc.
EXC = Exelon Corp.
GXP = Great Plains Energy Inc.

21. DuPont Analysis Dupont Analysis 2001 2002 2003 2004 2005 Profit Margin
12.16%
9.95%
11.46%
10.32%
8.94%
Total Asset Turnover
0.37
0.32
0.29
Equity Multiplier
3.11
3.16
3.27
3.01
2.85
Return on Equity
14.00%
9.94%
12.03%
9.14%
9.52%
ROE = PM * TAT * EM
Where:
PM = Profit Margin (NI/Sales)
TAT = Total Asset Turnover (Sales/TA)
EM = Equity Multiplier (TA/TE)

22. Stock Performance vs. Competitors

23. Outline Company Background & Structure Regulation and Operations
Stock market prospects
DCF Analysis
Overall Portfolio Fit
Recommendation

24. DCF Analysis assumptions
Total Revenues will increase by 11% per year from
Net income will increase by 10% per year for next four years, then level off for the terminal value
WACC of 7.0%, conservative relative to Bloomberg estimate of 6.6%
Reasonable sustainable growth rate of 3%

25. DCF Results DCF Value per share: $65 Intrinsic value range of $58-$71
Weighted Average Cost of Capital
Adjusted Beta
0.75
Risk Free Rate
5.00%
Market Risk Premium
CAPM Required Rate of Return of Equity
8.75%
Weighted Average Cost of Debt
6.50%
Debt/(Debt + Equity)
46.00%
Equity/(Debt + Equity)
54.00%
WACC
6.97%
Sustainable Growth Rate
3.00%
DCF Value per share: $65
Intrinsic value range of $58-$71

26. Sensitivity Analysis 64 WACC/Sustainable Growth Rate 6.0% 6.5% 7.0%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
2.0% $ 60 54 49 45 42 39
2.5% 75 66 58 53 48 44 41
3.0% 85 73 64 57 52 47 43
3.5%
100 83 72 63 56 51 46
4.0%
121 97 81 70 62 55 50
4.5%
157
119 95 80 69
5.0%
230
154
116 93 78 67 59
5.5%
446
224
150
113 91 76

27. Outline Company Background & Structure Regulation and Operations
Stock market prospects
DCF Analysis
Overall Portfolio Fit
Recommendation

28. Correlation Matrix AEE AEOS CPRT FR JKHY JPM KMB MS MVSN SRCL WAG
AEE
AEOS
CPRT FR
JKHY
JPM
KMB MS
MVSN
SRCL
WAG
Portfolio
1.0000
0.0276
0.2157
0.2124
0.1762
0.1895
0.4220
0.0863
0.2493
0.3189
0.1310
0.1874
0.3408
0.4069
0.3565
0.2812
0.0284
0.0549
0.3972
0.2443
0.2040
0.3155
0.0884
0.2658
0.2704
0.2303
0.3241
0.5686
0.2592
0.1099
0.2345
0.1727
0.1254
0.2017
0.2886
0.0959
0.2906
0.1212
0.0234
0.0912
0.0992
0.0977
0.0612
0.0329
0.0381
0.2213
0.2714
0.1337
0.2472
0.2741
0.2609
0.2481
0.0349
0.2519
Portfolio*
0.1764
0.6042
0.6570
0.4824
0.5502
0.6759
0.4449
0.6092
0.5632
0.2894
0.4752
*assumes equal-weighted portfolio

29. Overall Portfolio Issues
Great diversification with existing portfolio
Excellent dividend yield of 5.10% versus S&P 500 dividend yield of 1.78%, representing a payout ratio of 84%.
Should provide a source of consistent growth and will be a staple holding of our portfolio
Great time to get into a solid company, stock has been flat over past year, and P/E suggests company is slightly undervalued relative to peers and the market as a whole
Stock performance need not be spectacular to generate great returns
5% per year CAGR in stock price will result in total return of 10% assuming constant dividend yield—greater than should be required given the level of risk embodied in beta

30. Outline Company Background & Structure Regulation and Operations
Stock market prospects
DCF Analysis
Overall Portfolio Fit
Recommendation

31. Recommendation
I recommend we purchase 400 Shares of Ameren Corp (ticker: AEE) at the market.
Approximate cost of position $20,200
Total number of holdings to 11 securities, with AEE representing 6.4% of overall portfolio upon purchase

32. Sources
2005 Ameren Corporation Annual Report,
2003 Ameren Corp 10-K Filing
2004 Ameren Corp 10-K Filing
2005 Ameren Corp 10-K Filing
Yahoo Finance <