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Ameren To Divest Merchant Generation Business; Focus On Rate-Regulated Operations

Stocks in this article: AEE DYN

ST. LOUIS, March 14, 2013 /PRNewswire/ -- Ameren Corporation (Ameren) (NYSE:AEE) today announced that it has entered into a definitive agreement to divest its merchant generation business, Ameren Energy Resources Company (AER), to an affiliate of Dynegy Inc. (NYSE:DYN). AER consists primarily of Ameren Energy Generating Company (Genco), including Genco's 80 percent ownership interest in Electric Energy, Inc.; AmerenEnergy Resources Generating Company (AERG); and Ameren Energy Marketing Company.

"Divestiture of the merchant generation business will position Ameren as a company focused exclusively on its rate-regulated electric, natural gas and transmission operations, clarifying our strategic direction and value proposition to investors," said Thomas R. Voss, chairman, president and CEO of Ameren Corporation. "We expect that this transaction will reduce business risk and improve the predictability of our future earnings and cash flows, which is expected to strengthen Ameren's credit profile and support Ameren's dividend."

The divestiture will not impact the electric and natural gas utility service provided by Ameren's rate-regulated businesses, Ameren Illinois and Ameren Missouri.

Total value benefits associated with the divestiture are estimated to be approximately $900 million for Ameren. This includes removal of the $825 million principal amount of Genco senior notes from Ameren's consolidated balance sheet and an estimated $180 million, at present value, of tax benefits expected to be substantially realized in 2015. These benefits are partially offset by transaction-related costs and liabilities retained by Ameren. These liabilities include retention of certain employee retirement obligations. In addition, Ameren will retain Genco's Meredosia and Hutsonville energy centers, which are no longer in operation, and related obligations. Further, Ameren will provide guarantees and collateral support, secured by AER assets and a $25 million Dynegy Inc. guarantee, for up to 24 months for certain existing contracts. Ameren will receive no cash proceeds as a result of this transaction.

Genco's existing senior notes will remain outstanding after the transaction closes and will continue to be solely obligations of Genco.

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