Ameren Corporation's Second Quarter 2023 Earnings Call was introduced by Andrew Kirk, Director of Investor Relations. Marty Lyons, President and Chief Executive Officer, and Michael Moehn, Senior Executive Vice President and Chief Financial Officer, were also present. The call contains time-sensitive data and forward-looking statements. Marty Lyons discussed major storm events that occurred in late June and July which disrupted power to a significant number of their electric customers across Illinois and Missouri.

Ameren thanked their customers for their patience and praised their team for their hard work. They discussed their strategic plan and sustainability value proposition, and announced their second quarter 2023 earnings of $0.90 per share, which puts them on track to deliver within their 2023 earnings guidance range of $4.25 to $4.45 per share. They also published an updated sustainability investor presentation for investors to read.

Ameren Missouri and Illinois have made significant investments in their business segments in the first half of the year, increasing spending by 20%. This includes the installation of over 175,000 smart meters, 147 smart switches, 32 underground cable miles, 8 upgraded substations, 3,700 new or reinforced electric poles, 91 new smart switches, and 117 transmission projects. These investments are intended to improve the reliability, resiliency, safety, and efficiency of the system, as well as to support the economic delivery of renewable energy resources for customers.

Ameren has been working hard this year to deliver value for customers, including the approval of a $140 million annual revenue increase in Missouri. They continue to make progress on the clean energy transition through the addition of solar to their generation portfolio and have also been working diligently with key stakeholders in electric distribution and natural gas rate reviews. In June, an updated beneficial electrification plan was approved by the commission which includes $65 million through 2025 to encourage electric vehicle adoption and infrastructure development.

Ameren supported the passage of House Bill 3445 in May, which would provide them with the right of first refusal to build MISO long-range transmission planning projects. This bill is expected to benefit customers and communities in the MISO region, and Ameren plans to competitively bid each component of their projects and use local suppliers and contractors. They also have long-term relationships with key stakeholders in the region and work closely with landowners and communities when citing transmission lines.

The MISO long-range transmission projects have been approved and are expected to begin construction in 2026. Ameren Illinois has submitted bids for the Tranche 1 competitive projects, with two more bids due in October and November of this year. MISO is analyzing potential projects for Tranche 2 which is expected to be approved in the first-half of 2024. An independent review was completed in July at the request of the ICC which compared the benefits of Ameren Illinois' continued participation in MISO to the PJM Interconnection regional transmission organization.

The independent consultant determined that Ameren Illinois staying in MISO would benefit customers and Illinois residents. In May, the Illinois Power Agency set energy and capacity prices that resulted in a 25% decrease in Ameren Illinois' Basic Generation Service rate. In June, Ameren Illinois filed for four additional CCNs totaling 550 megawatts of new solar generation across their service territory. These projects would bring 900 new construction jobs, additional tax revenues, and other payments to the area, and are expected to go in service between 2024 and 2026.

Ameren Missouri is in the process of finalizing its next IRP, which will be filed with the Missouri PSC by the end of September. The plan includes a balanced approach to adding renewables and focuses on reliability. The company has a robust pipeline of investments totaling $48 billion that will create thousands of jobs and result in a 6-8% compound annual earnings growth rate. Ameren Missouri is confident in its ability to execute its investment plans and strategies.

Ameren reported second quarter 2023 earnings of $0.90 per share, compared to $0.80 per share for the year-ago quarter. Weather-normalized kilowatt-hour sales to Missouri residential and industrial customers decreased by 1% and 2.5% respectively, while commercial customers increased by 0.5%. In Illinois, sales have declined by 3.5%. Boeing announced a $2 billion expansion of its aerospace program in Missouri, which would create 500 new jobs.

The ICL Group plans to expand their lithium battery material manufacturing plant in St. Louis, which will create an additional 165 jobs and help support the production of EV batteries. The Manner Polymers and the Prysmian Group have also announced plans to build facilities manufacturing electric vehicle components and renewable energy cable, creating nearly 150 jobs in Illinois. Ameren Missouri has received a $140 million annual revenue increase in their electric rate review and new electric service rates were effective July 9th. Ameren has also filed a 60-day notice with the Missouri PSC for the securitization on costs associated with the Rush Island Energy Center.

Ameren Illinois has filed its first multi-year rate plan with the ICC, designed to provide safe and reliable energy to customers, deploy capital in a way that achieves Climate and Equitable Jobs Act objectives, and prepare the system for more renewables and electric vehicles. Ameren Illinois has requested a cumulative increase of $448 million in revenues, which includes a return on equity of 10.5% and an equity ratio of 54%. The ICC staff has recommended a cumulative increase of $317 million, including a return on equity of 8.9% and an equity ratio of 50%. An ICC decision is expected by December 2023, with new rates effective by January 2024.

Ameren Illinois filed for an electric distribution annual rate reconciliation and a natural gas distribution rate increase with the ICC. For the electric rate increase, the ICC staff recommended a $109 million base rate increase, while Ameren Illinois requested a $125 million base rate increase. For the natural gas rate increase, the ICC staff recommended a $128 million increase, while Ameren Illinois requested a $148 million increase. Ameren Illinois also issued $500 million of 4.95% first mortgage bonds and expects to issue approximately $300 million of common equity by the end of the year.

Michael Moehn explains that the book value of Rush Island is estimated to be $550 million and that this will be a year from now. He also states that there will be roughly $500 million in depreciation and other costs associated with the project. Additionally, the company has begun to enter into forward sales agreements to support their 2024 equity needs and they expect to deliver strong earnings growth in 2023.

Michael discussed the $500 million that needs to be put back into infrastructure and how they are being thoughtful about the retirement date to avoid any earnings hit. Julien asked about HB 3445, the securitization filing, and the timing for Tranche 2. Marty responded by talking about how they planned out their capital expenditures for the five years and were thoughtful about the timing and amount of the Rush Island closure and securitization filing.

Rush Island has already timed some of its capital expenditures to ensure that its rate base and earnings growth are not affected. HB 3445 was passed in May and is now on the Governor's desk for signature. If it is signed, it would mean Tranche 1 and Tranche 2 projects in 2024 would come to Rush Island as the incumbent transmission owner. The Governor has expressed some concerns, so it is unclear what action he will take. MISO is evaluating what projects might come out of Tranche 2.

Marty Lyons and Michael Moehn responded to Julien Dumoulin-Smith's question regarding the Renewable Obligation Fee Rights (ROFR) in Texas. They discussed the potential implications of the Supreme Court and Fifth Circuit decision regarding the ROFR in the country. They acknowledged that the actions taken in various states appear to be particular to the way the legislation was passed and they will continue to pursue it.

Marty Lyons and Michael Moehn from ComEd are discussing the potential implications of the recently passed law in Illinois and how it could affect the electric rate case. They believe that the law could help them achieve the policy goals set by the CEJA and that they are working constructively with stakeholders to reach a positive outcome.

Marty and Michael discussed the ICC staff's initial recommendation of 56% of the overall ask, which has increased to 70%, but there is still a difference of $131 million over four years. Most of this difference is due to the ROE and cap structure, with the staff recommending the EMIA formula of 580 basis points plus the 30-year treasury, while the commission believes the cost of equity should be determined by the laws of the state. The team is working collaboratively to find the best answer for customers and to meet the policy objectives of CEJA.

Michael Moehn explains that Ameren and the staff have been able to close the gap from $700 million to $350 million, which has been a result of good work on both sides. He also states that the post-retirement issue is still being argued for, as customers are benefiting from the overfunded plan which is reducing rates.

Marty Lyons discusses the legal argument for why the old formula should be used in the new framework of the Illinois situation. He believes that the cost of equity should be determined consistently with commission practice and law, which includes the use of traditional methods like capital asset pricing model, discounted cash flow analysis, and IEIMA.

Marty Lyons explains that when building solar projects in Missouri, they take into account a variety of factors, such as tax credits and procurement strategies, in order to maximize the value of the projects and provide low cost and reliable energy for their customers.

Marty Lyons states that there is no legislation currently percolating for the upcoming year in Illinois, and their focus is on the Illinois multiyear rate plan for electric and a constructive resolution of the pending Illinois gas case. He also mentions that in the past, there was some discussion around QIP, but it is expiring at the end of the year.

Marty Lyons reported that the company is doing well in Illinois with their gas business and is pleased with the orders they have received from the commission for their projects in Missouri. He also mentioned that they have an IRP that they plan to file in September, and that the projects are consistent with the path laid out in the 2022 IRP. He concluded by thanking everyone for joining and said they look forward to seeing many of them at conferences in the coming months.

This summary was generated with AI and may contain some inaccuracies.