Company: AILIM
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0001002910-25-000055
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Company: Ameren Illinois Co
Filing Date: 2025-02-18
Form: 10-K
Item: Item 7A
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Table of Contents

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of changes in value of a physical asset or a financial instrument, derivative or nonderivative, caused by fluctuations in market variables such as interest rates, commodity prices, and equity security prices. A derivative is a contract whose value is dependent on, or derived from, the value of some underlying asset or index. The following discussion of our risk management activities includes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. We handle market risks in accordance with established policies, which may include entering into various derivative transactions. In the normal course of business, we also face risks that are either nonfinancial or nonquantifiable. Such risks, principally business, legal, and operational risks, are not part of the following discussion.

Our risk management objectives are to optimize our physical generating assets and to pursue market opportunities within prudent risk parameters. Our risk management policies are set by the risk management steering committee, which is composed of senior-level Ameren officers, with Ameren board of directors’ oversight.

Interest Rate Risk

We are exposed to market risk through changes in interest rates associated with:

•short-term variable-rate debt;

•fixed-rate debt;

•United States Treasury bonds; and

•the discount rate applicable to AROs, goodwill, and defined pension and postretirement benefit plans.

We manage our interest rate exposure by controlling the amount of debt instruments within our total capitalization portfolio, by monitoring the effects of market changes on interest rates, and by entering into interest rate swaps to hedge a portion of our interest rate risk on cash flows related to forecasted debt issuances. For defined pension and postretirement benefit plans, we control the duration and the portfolio mix of our plan assets. See Note 1 – Summary of Significant Accounting Policies and Note 10 – Retirement Benefits under Part II, Item 8, of this report for additional information related to AROs, goodwill, and the defined pension and postretirement benefit plans.

The estimated increase in our annual interest expense and decrease in net income if interest rates were to increase by 100 basis points on variable-rate debt outstanding at December 31, 2024 is immaterial.

The allowed ROE under Ameren Illinois’ electric energy-efficiency investments formula ratemaking recovery mechanisms is based on the annual average of the monthly yields of the 30-year United States Treasury