DOW JONES NEWSWIRES 
 

Ameren Corp.'s (AEE) second-quarter profit dropped 20% on prior-year hedging gains, but core earnings beat expectations thanks to higher utility rates.

Chief Executive Thomas R. Voss also said the energy holding company has found $2 billion of potential cost cuts to reduce capital spending for the next four years. The company is "carefully evaluating projects that may be eliminated or deferred to help our customers manage their costs in these tough economic times and further strengthen our financial profile," Voss said.

But he promised Ameren would not cut costs to "a level that would prevent us from providing safe and reliable service."

The company also is "looking carefully at planned" operational spending, especially at back-office and merchant-generation operations. Voss said the company aims to make next year's non-fuel operations and maintenance costs in merchant generation "significantly lower" than the 2008 level. Merchant-power prices are tied to natural gas, the low price of which has pummeled the business.

Ameran, which operates electric and gas utilities in Missouri and Illinois, reported a profit of $165 million, or 77 cents a share, down from $206 million, or 98 cents a share, a year earlier.

Excluding hedging and other effects, earnings rose to 75 cents from 67 cents. Analysts polled by Thomson Reuters most recently were looking for earnings of 67 cents.

Revenue dropped 5.9% to $1.68 billion, falling 2.1% at the company's electric segment and 31% at its gas business amid lower natural-gas prices.

Electricity sales dipped 0.8%, a smaller decline that what many power companies have been reporting, while generation declined 4.2%. Natural-gas sales slid 12%.

Shares of Ameren, which also reaffirmed its 2009 earnings outlook, closed at $25.76 on Wednesday and didn't trade premarket. The stock is 23% this year.

-By Tess Stynes and Mike Barris, Dow Jones Newswires; 212-416-2481; tess.stynes@dowjones.com