Ameren Corporation, Springfield, Illinois, U.S., received Federal Energy Regulatory Commission (FERC) approval of its application to acquire Illinois Power Company (IP) and a 20% interest in Electric Energy, Inc. (EEI) from Dynegy Inc. and approval of the transfer of two generating plants from a non rate-regulated entity to a rate- regulated entity. These actions were taken at the FERC's July 28 agenda session.

Ameren announced on Feb. 3 the proposed US$2.3 billion purchase of the stock of Decatur, Illinois-based IP and Dynegy's 20% interest in EEI, owner of a Joppa, Illinois, coal-fired power plant.

With its July 28 order, the FERC also approved a power supply contract for the annual purchase by IP of up to 2800 MW of electricity from a subsidiary of Dynegy. That power supply contract would extend through 2006 and is expected to supply about 70% of IP's electric customer requirements.

The FERC order also granted approval for IP to join the Midwest Independent Transmission System Operator Inc. (MISO)--an approval that will pave the way for Ameren to bring all of its operating companies' transmission systems into MISO. This regional transmission system organization acts as an agent to provide transmission service on behalf of its members, who continue to own the transmission assets. Ameren's March 25 FERC application for approval of the IP acquisition confirmed Ameren's plans to join MISO, and on May 1, Ameren transferred functional control of the AmerenUE and AmerenCIPS transmission systems to MISO through a contractual agreement with a for-profit independent transmission company, GridAmerica LLC.

In a separate July 28 order, the FERC also approved the transfer from Ameren's non rate-regulated AmerenEnergy Generating Company to the company's Missouri-based rate-regulated utility, AmerenUE, of approximately 550 MW of Illinois-based combustion turbine generating facilities. The facilities' approximate book value is $250 million.

This generating asset transfer is subject to the approval of the Securities and Exchange Commission (SEC) and will occur after the completion of the transfer of AmerenUE's Illinois-based electric and natural gas businesses and personnel to AmerenCIPS--a transfer that is subject to state and federal regulatory approvals.

"We are pleased with the FERC's timely action on the IP acquisition filing and their thoughtful approach to the generating asset transfer," says Gary L. Rainwater, chairman, president and chief executive officer, Ameren Corporation. "Ameren's acquisition of IP and the resulting electric delivery system upgrades we plan to make will benefit general reliability and access to markets for IP and other customers. We believe this acquisition is a natural fit with our core energy growth strategy and will provide benefits to customers, employees, communities and our investors."

The acquisition is subject not only to the approval of the FERC, but also to the approval of the Illinois Commerce Commission (ICC), the SEC and the Federal Communications Commission (FCC). In April, the FCC consented to the transfer of control of FCC licenses held by IP to Ameren. Ameren and Dynegy have already completed the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. No approval is required from shareholders of Ameren. Ameren expects to receive all remaining regulatory approvals within the next several months and to complete the acquisition by year-end 2004.

With assets of $14.7 billion, Ameren serves 1.7 million electric customers and 500,000 natural gas customers in a 49,000-square-mile area of Missouri and Illinois. With this acquisition, Ameren will rank as Illinois' second largest electric utility, based on the number of customers, total assets and operating revenues, and the third largest distributor of natural gas in the state.

Illinois Power, based in Decatur, Illinois, serves 600,000 electric and 415,000 natural gas customers in a 15,000 square-mile territory across Illinois. The company was founded more than 75 years ago and its parent company--Illinova--was purchased in 2000 by Houston, Texas-based Dynegy Inc.