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Ameren Energy in the Right Place at the Right Time

Ameren Energy in the Right Place at the Right Time

Ameren Energy started its electric and gas trading business off on the right foot this summer, getting into the market just in time to make a small killing when electric prices spiked in the Midwest during the last week in June. The company started out with just a fraction of the personnel it expects to have on board by the end of the year.

"We expected to make $1,000 in July. Instead we made $10,000," said Ameren Energy President Shannon Burchett. The company had opened its brand new 23,000 square foot trading floor in St. Louis June 3, just three weeks before the infamous June 25 electric market. "We had the good fortune to be selling into that market. We were dealt a good hand. We've got highly reliable assets that operate at low cost." Burchett would reveal only that the company had sold some power in the "multiple thousands" per MWh, during a time when some utilities and marketers were paying as much as $7,000 per MWh.

Ameren Energy is the unregulated trading arm of the newly merged Ameren Corp., which is now the parent of AmerenUE, the former Union Electric of St. Louis and AmerenCIPS, formerly known as Central Illinois Public Service. The merger was completed Jan. 1, 1998 forming the nation's tenth largest utility with generating power of 11,500 MW. Burchett, who had been senior vice president with Duke/Louis Dreyfus, was made president of the new independent marketing arm within days of the merger.

With the announcement earlier this month of five new account managers, Ameren Energy now has a staff of 75, with a target of 100 by the end of this year and 200 by the end of 1999. Burchett said he currently is interviewing potential employees from LG&ampE and CNG, both of which recently dropped out of the marketing business after experiencing large losses. The company also is investigating getting into coal trading, he added. The target market is large customers in states across the country with deregulated electric markets.

"The idea is to optimize our assets," he said, by putting Ameren's low cost power on the market to maximize revenues. While they expect to make money in the business, the June 25 spike "was an aberration. It's something we're not going to see with any frequency although the likelihood is the volatility of the electric market is going to remain extremely high. I expect to see 100% to 150% volatility on an annualized basis." That's above the 50% to 70% annualized volatility in the natural gas market, which had been labeled the most volatile commodities market until electricity made the scene.

"We have very aggressive goals. We've invested heavily and we are expecting high returns."

Ameren Energy's business is about 80% electric and 20% gas. "We'd like to have revenues from the two about equal," Burchett said, indicating it would mean some focus on the gas side. "We need additional alliances." While the company is very strong in the Midwest, Burchett is looking to pick up strength in other areas. He said he is looking for merger and acquisition specialist personnel right now, among others.

Ellen Beswick

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