The CIPSCO Incorporated merger and the two acquisitions we’ve completed in recent years have helped us manage costs. They allowed us to reduce administrative overhead and combine the purchasing power of four utilities. In 2004, we further leveraged this purchasing power through “strategic sourcing”– a systematic process to drive down the cost of the materials and services we purchase. With roughly $1 billion of annual purchasing, we believe we can significantly reduce annual spending. Led by Dan Cole, the first year of this effort produced $15 million in cash savings, and in 2005 we expect to do even better.

In our power generation business, low cost and high production are equally important. In 2004, we made significant improvements in both. Under the leadership of Alan Kelley and Chuck Naslund, our coal and nuclear plants achieved an all-time company low total generating cost of $25.07 per megawatthour, placing us among the lowest cost generators in the U.S. Our plants also achieved an all-time record capacity factor of 76 percent and an all-time production record of 75 million megawatthours, all while continuing to reduce emissions. For example, our coal-fired generating plants have some of the lowest nitrogen oxide emitting units in the U.S., according to the U.S. Environmental Protection Agency.

These improvements position us to succeed in increasingly competitive markets, and in markets where price is driven primarily by the cost of natural gas. However, as good as our performance in 2004 was, we are not about to slow down. Tom Voss, our chief operating officer, has challenged Alan and Chuck to continue to drive down capital and maintenance costs, to further improve our capacity factors and plant availability and to reduce emissions to even lower levels.