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Rating Action:

MOODY'S PLACES THE DEBT RATINGS OF AMEREN CORPORATION ON REVIEW FOR POSSIBLE DOWNGRADE AND CONFIRMS THE DEBT RATINGS OF AMERENUE, AMERENCIPS, AMEREN ENERGY GENERATING, CILCORP AND CILCO.

29 Apr 2002

Approximately $650 Million of Debt Securities Affected

New York, April 29, 2002 -- Moody's Investors Service has placed the debt ratings of Ameren Corporation under review for possible downgrade. This action follows today's announcement that Ameren has signed a definitive agreement to purchase CILCORP, Inc., the parent company of Central Illinois Light Co. (CILCO), from The AES Corporation. Ratings under review include Ameren's A2 senior unsecured and issuer ratings and P-1 commercial paper rating.

Moody's also confirms the debt ratings of AmerenUE (Aa3 senior secured - negative outlook), AmerenCIPS (A1 senior secured - stable outlook), Ameren Energy Generating (A3/Baa2 5/10 yr. senior unsecured notes - stable outlook), CILCORP (Baa2 senior unsecured - stable outlook), and CILCO (A2 senior secured - stable outlook).

Ameren announced that it will pay $1.4 billion for CILCORP which will include the assumption of all of CILCORP's outstanding debt and preferred stock (approximately $915 million at time of closing) with the remaining portion (approximately $500 million) to be paid in cash. A significant amount of the cash portion will be financed with common stock issuances between now and the closing date, which is expected to occur within one year.

Moody's had the opportunity to review this transaction in advance and has determined that, as presently envisioned, the acquisition of CILCORP by Ameren would likely result in a one notch downgrade of Ameren's issuer and senior unsecured debt rating to A3 from A2 and a one notch downgrade of Ameren's commercial paper rating to P-2 from P-1. In arriving at this conclusion, Moody's has taken into consideration CILCORP's comparatively high leverage and low consolidated coverage ratios, which will weaken the quality of cash flow upstreamed to the parent company Ameren. Although CILCORP is being acquired by a higher rated parent company, Moody's does not believe there is sufficient free cash flow available either at Ameren or any of Ameren's other subsidiaries to provide substantial support to CILCORP.

The confirmation of the CILCORP and CILCO ratings makes the key assumption that the acquisition by Ameren will occur as planned and that Ameren will succeed in improving the financial performance of CILCORP, which has deteriorated somewhat in recent years. Ameren expects to generate significant synergies through coal purchasing efficiencies, generation improvements, and the elimination of duplicate corporate and administrative services. If the acquisition either does not occur or if the financial performance of CILCORP does not improve as anticipated, the CILCORP and CILCO ratings could be placed under review at that time.

In addition to the impact of the CILCORP acquisition on Ameren, Moody's remains concerned with the Missouri Public Service Commission Staff's recent recommendation that would reduce AmerenUE's base revenues between $246 and $285 million. Moody's believes a rate reduction at or near the magnitude of the Staff's recommendation would significantly curtail the ability of AmerenUE, Ameren's largest subsidiary, to upstream dividends to Ameren. Although the MPSC is under no obligation to accept the Staff's recommendation, because of the uncertainty surrounding the ultimate outcome of the rate case, the outlook for AmerenUE's credit ratings remains negative.

Under review are Ameren Corporation's senior unsecured and issuer rating, both rated A2, and commercial paper, rated P-1.

Ratings confirmed are:

AmerenUE's senior secured debt, rated Aa3; issuer rating, A1; subordinated debt, rated A2; preferred stock, rated A3; commercial paper, rated P-1, and Gateway Fuel Company's commercial paper, rated P-1.

AmerenCIPS' senior secured debt, rated A1; issuer rating, A2; preferred stock, rated Baa1; and commercial paper, rated P-1.

Ameren Energy Generating Company's five year senior unsecured notes, rated A3, and ten year senior unsecured notes, rated Baa2.

CILCORP's senior unsecured debt, rated Baa2.

Central Illinois Light Company's senior secured debt, rated A2; issuer rating, A3; preferred stock, rated Baa2; and commercial paper, rated P-1.

Ameren Corporation is a public utility holding company headquartered in St. Louis, Missouri. Its utility subsidiaries AmerenUE is headquartered in St. Louis and AmerenCIPS is headquartered in Springfield, Illinois. Its nonregulated electric generating subsidiary Ameren Energy Generating Company is headquartered in St. Louis. CILCORP, Inc. is a public utility holding company headquartered in Peoria, Illinois. Its utility subsidiary CILCO is also headquartered in Peoria.

New York
John Diaz
Managing Director
Corporate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Michael G. Haggarty
Vice President - Senior Analyst
Corporate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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