Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We use

various methods to determine fair value, including market, income, and cost approaches. With these approaches, we adopt certain assumptions that market participants would use in pricing the asset or liability, including assumptions about market risk or the risks inherent in the inputs to the valuation. Inputs to valuation can be readily observable, market-corroborated, or unobservable. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Authoritative accounting guidance established a fair value hierarchy that prioritizes the inputs used to measure fair value. All financial assets and liabilities carried at fair value are classified and disclosed in one of the following three hierarchy levels:

Level 1 (quoted prices in active markets for identical assets or liabilities): Inputs based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities are primarily exchange-traded derivatives, cash and cash equivalents, and listed equity securities.

The market approach is used to measure the fair value of equity securities held in Ameren Missouri’s nuclear decommissioning trust fund. Equity securities in this fund are representative of the S&P 500 index, excluding securities of Ameren Corporation, owners and/or operators of nuclear power plants, and the trustee and investment managers. The S&P 500 index comprises stocks of large-capitalization companies.

Level 2 (significant other observable inputs): Market-based inputs corroborated by third-party brokers or exchanges based on transacted market data. Level 2 assets and liabilities include certain assets held in Ameren Missouri’s nuclear decommissioning trust fund, including United States Treasury and agency securities, corporate bonds and other fixed-income securities, and certain over-the-counter derivative instruments, including natural gas and financial power transactions.

Fixed income securities are valued by using prices from independent industry-recognized data vendors who provide values that are either exchange-based or matrix-based. The fair value measurements of fixed-income securities classified as Level 2 are based on inputs other than quoted prices that are observable for the asset or liability. Examples are matrix pricing, market corroborated pricing, and inputs such as yield curves and indices.

Derivative instruments classified as Level 2 are valued by corroborated observable inputs, such as pricing services or prices from similar instruments that trade in liquid markets. Our development and corroboration process entails obtaining multiple quotes or prices from outside sources. To derive our forward view to price our derivative instruments at fair value, we average the bid/ask spreads to the midpoints. To validate forward prices obtained from outside parties, we compare the pricing to recently settled market transactions. Additionally, a review of all sources is performed to identify any anomalies or potential errors. Further, we consider the volume of transactions on certain trading platforms in our reasonableness assessment of the averaged midpoints. The value of natural gas derivative contracts is based upon exchange closing prices without significant unobservable adjustments. The value of power derivative contracts is based upon exchange closing prices or the use of multiple forward prices provided by third parties. The prices are averaged and shaped to a monthly profile when needed without significant unobservable adjustments.

Level 3 (significant other unobservable inputs): Unobservable inputs that are not corroborated by market data. Level 3 assets and liabilities are valued by internally developed models and assumptions or methodologies that use significant unobservable inputs. Level 3 assets and liabilities include derivative instruments that trade in less liquid markets, where pricing is largely unobservable. We value Level 3 instruments by using pricing models with inputs that are often unobservable in the market, such as certain internal assumptions, quotes or prices from outside sources not supported by a liquid market, or trend rates. Our development and corroboration process entails reasonableness reviews and an evaluation of all sources to identify any anomalies or potential errors.

We perform an analysis each quarter to determine the appropriate hierarchy level of the assets and liabilities subject to fair value measurements. Financial assets and liabilities are classified in their entirety according to the lowest level of input that is significant to the fair value measurement. All assets and liabilities whose fair value measurement is based on significant unobservable inputs are classified as Level 3.

We consider nonperformance risk in our valuation of derivative instruments by analyzing our own credit standing and the credit standing of our counterparties, and by considering any credit enhancements (e.g., collateral). Included in our valuation, and based on current market conditions, is a valuation adjustment for counterparty default derived from market data such as the price of credit default swaps, bond yields, and credit ratings. No material gains or losses related to valuation adjustments for counterparty default risk were recorded at Ameren, Ameren Missouri, or Ameren Illinois in 2019, 2018, or 2017. At December 31, 2019 and 2018, the counterparty default risk valuation adjustment related to derivative contracts was immaterial for Ameren, Ameren Missouri, and Ameren Illinois.

The following table sets forth, by level within the fair value hierarchy, our assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018:

		December 31, 2019									December 31, 2018
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:
Ameren	Derivative assets – commodity contracts:
	Fuel oils	$	—	$	—	$	6	$	6		$	1	$	—	$	7	$	8
	Natural gas	—		1		3		4			—		2		1		3
	Power	—		2		14		16			—		1		3		4
	Total derivative assets – commodity contracts	$	—	$	3	$	23	$	26		$	1	$	3	$	11	$	15
	Nuclear decommissioning trust fund:
	Equity securities:
	U.S. large capitalization	$	569	$	—	$	—	$	569		$	427	$	—	$	—	$	427
	Debt securities:
	U.S. Treasury and agency securities	—		107		—		107			—		148		—		148
	Corporate bonds	—		93		—		93			—		72		—		72
	Other	—		73		—		73			—		32		—		32
	Total nuclear decommissioning trust fund	$	569	$	273	$	—	$	842	(a)	$	427	$	252	$	—	$	679	(a)
	Total Ameren	$	569	$	276	$	23	$	868		$	428	$	255	$	11	$	694
Ameren Missouri	Derivative assets – commodity contracts:
	Fuel oils	$	—	$	—	$	6	$	6		$	1	$	—	$	7	$	8
	Power	—		2		14		16			—		1		3		4
	Total derivative assets – commodity contracts	$	—	$	2	$	20	$	22		$	1	$	1	$	10	$	12
	Nuclear decommissioning trust fund:
	Equity securities:
	U.S. large capitalization	$	569	$	—	$	—	$	569		$	427	$	—	$	—	$	427
	Debt securities:
	U.S. Treasury and agency securities	—		107		—		107			—		148		—		148
	Corporate bonds	—		93		—		93			—		72		—		72
	Other	—		73		—		73			—		32		—		32
	Total nuclear decommissioning trust fund	$	569	$	273	$	—	$	842	(a)	$	427	$	252	$	—	$	679	(a)
	Total Ameren Missouri	$	569	$	275	$	20	$	864		$	428	$	253	$	10	$	691
Ameren Illinois	Derivative assets – commodity contracts:
	Natural gas	$	—	$	1	$	3	$	4		$	—	$	2	$	1	$	3
Liabilities:
Ameren	Derivative liabilities – commodity contracts:
	Fuel oils	$	1	$	—	$	6	$	7		$	2	$	—	$	11	$	13
	Natural gas	3		14		3		20			—		15		4		19
	Power	—		2		225		227			—		1		186		187
	Uranium	—		—		1		1			—		—		—		—
	Total Ameren	$	4	$	16	$	235	$	255		$	2	$	16	$	201	$	219
Ameren Missouri	Derivative liabilities – commodity contracts:
	Fuel oils	$	1	$	—	$	6	$	7		$	2	$	—	$	11	$	13
	Natural gas	—		2		—		2			—		5		—		5
	Power	—		2		1		3			—		1		3		4
	Uranium	—		—		1		1			—		—		—		—
	Total Ameren Missouri	$	1	$	4	$	8	$	13		$	2	$	6	$	14	$	22
Ameren Illinois	Derivative liabilities – commodity contracts:
	Natural gas	$	3	$	12	$	3	$	18		$	—	$	10	$	4	$	14
	Power	—		—		224		224			—		—		183		183
	Total Ameren Illinois	$	3	$	12	$	227	$	242		$	—	$	10	$	187	$	197

(a) Balance excludes $5 million and $5 million of cash and cash equivalents, receivables, payables, and accrued income, net for December 31, 2019 and 2018, respectively.

See Note 10 – Retirement Benefits for tables that set forth, by level within the fair value hierarchy, Ameren’s pension and postretirement plan assets as of December 31, 2019 and 2018.

Level 3 fuel oils, natural gas and uranium derivative contract assets and liabilities measured at fair value on a recurring basis were immaterial for all periods presented. The following table presents the fair value reconciliation of Level 3 power derivative contract assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2019 and 2018:

	2019									2018
	Ameren Missouri			Ameren Illinois			Ameren			Ameren Missouri			Ameren Illinois			Ameren
Beginning balance at January 1	$	—		$	(183	)	$	(183	)	$	7		$	(195	)	$	(188	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities	23			(56		)	(33		)	(6		)	—			(6		)
Purchases	—			—			—			5			—			5
Settlements	(7		)	15			8			(5		)	12			7
Transfers out of Level 3	(3		)	—			(3		)	(1		)	—			(1		)
Ending balance at December 31	$	13		$	(224	)	$	(211	)	$	—		$	(183	)	$	(183	)
Change in unrealized gains (losses) related to assets/liabilities held at December 31	$	12		$	(54	)	$	(42	)	$	(1	)	$	(2	)	$	(3	)

For the years ended December 31, 2019 and 2018, there were no material transfers between fair value hierarchy levels.

All gains or losses related to our Level 3 derivative commodity contracts are expected to be recovered or returned through customer rates; therefore, there is no impact to net income resulting from changes in the fair value of these instruments.

The following table describes the valuation techniques and significant unobservable inputs utilized for the fair value of our Level 3 power derivative contract assets and liabilities as of December 31, 2019 and 2018:

		Fair Value								Weighted Average(b)
	Commodity	Assets		Liabilities			Valuation Technique(s)	Unobservable Input(a)	Range
2019	Power(c)	$	14	$	(225	)	Discounted cash flow	Average forward peak and off-peak pricing – forwards/swaps($/MWh)	22 – 34	25
								Nodal basis($/MWh)	(6) – 0	(2)
								Trend rate(%)	(1) – 0	0
2018	Power(d)	$	3	$	(186	)	Discounted cash flow	Average forward peak and off-peak pricing – forwards/swaps($/MWh)	23 – 39	28
								Nodal basis($/MWh)	(9) – 0	(2)
							Fundamental energy production model	Estimated future natural gas prices($/mmbtu)	3 – 4	3

(a) Generally, significant increases (decreases) in these inputs in isolation would result in a significantly higher (lower) fair value measurement.

(b) Unobservable inputs were weighted by relative fair value.

(c) Valuations through 2028 use visible forward prices adjusted for nodal-to-hub basis differentials. Valuations beyond 2028 use a trend rate factor and are similarly adjusted for nodal-to-hub basis differentials.

(d) Valuations through 2022 use visible forward prices adjusted for nodal-to-hub basis differentials. Valuations beyond 2022 use a fundamental energy production model incorporating estimated future natural gas prices.

The following table sets forth, by level within the fair value hierarchy, the carrying amount and fair value of financial assets and liabilities disclosed, but not carried, at fair value as of December 31, 2019 and 2018:

	Carrying Amount			Fair Value
				Level 1		Level 2		Level 3			Total
Ameren:	December 31, 2019
Cash, cash equivalents, and restricted cash	$	176		$	176	$	—	$	—		$	176
Investments in industrial development revenue bonds(a)	263			—		263		—			263
Short-term debt	440			—		440		—			440
Long-term debt (including current portion)(a)	9,357		(b)	—		9,957		484		(c)	10,441
Ameren Missouri:
Cash, cash equivalents, and restricted cash	$	39		$	39	$	—	$	—		$	39
Investments in industrial development revenue bonds(a)	263			—		263		—			263
Short-term debt	234			—		234		—			234
Long-term debt (including current portion)(a)	4,190		(b)	—		4,772		—			4,772
Ameren Illinois:
Cash, cash equivalents, and restricted cash	$	125		$	125	$	—	$	—		$	125
Short-term debt	53			—		53		—			53
Long-term debt (including current portion)	3,575		(b)	—		4,019		—			4,019
	December 31, 2018
Ameren:
Cash, cash equivalents, and restricted cash	$	107		$	107	$	—	$	—		$	107
Investments in industrial development revenue bonds(a)	270			—		270		—			270
Short-term debt	597			—		597		—			597
Long-term debt (including current portion)(a)	8,439		(b)	—		8,240		429		(c)	8,669
Ameren Missouri:
Cash, cash equivalents, and restricted cash	$	8		$	8	$	—	$	—		$	8
Investments in industrial development revenue bonds(a)	270			—		270		—			270
Short-term debt	55			—		55		—			55
Long-term debt (including current portion)(a)	3,998		(b)	—		4,156		—			4,156
Ameren Illinois:
Cash, cash equivalents, and restricted cash	$	80		$	80	$	—	$	—		$	80
Short-term debt	72			—		72		—			72
Long-term debt (including current portion)	3,296		(b)	—		3,391		—			3,391

(a) Ameren and Ameren Missouri have investments in industrial development revenue bonds, classified as held-to-maturity and recorded in “Other Assets,” that are equal to the finance obligations for the Peno Creek and Audrain CT energy centers. As of December 31, 2019 and 2018, the carrying amount of both the investments in industrial development revenue bonds and the finance obligations approximated fair value.

(b) Included unamortized debt issuance costs, which were excluded from the fair value measurement, of $72 million, $30 million, and $34 million for Ameren, Ameren Missouri, and Ameren Illinois, respectively, as of December 31, 2019. Included unamortized debt issuance costs, which were excluded from the fair value measurement, of $58 million, $22 million, and $31 million for Ameren, Ameren Missouri, and Ameren Illinois, respectively, as of December 31, 2018.

(c)

The Level 3 fair value amount consists of ATXI’s senior unsecured notes.