The operator introduces the Ameren Corporation's Fourth Quarter 2023 Earnings Call and reminds participants that the conference is being recorded. The host, Andrew Kirk, introduces the speakers and mentions that a presentation has been posted on the company's website. He also cautions that statements made during the call may contain forward-looking statements and refers listeners to the news release and SEC filings for more information. Marty Lyons, the Chairman and CEO, begins the presentation by discussing the company's strategic plan and its focus on providing safe, reliable, and sustainable energy.

In order to keep rates affordable, we invest in rate-regulated infrastructure, enhance regulatory frameworks, and advocate for responsible energy policies. Our strong 2023 operating and financial results reflect our commitment to these objectives and will continue to create value for our customers, communities, shareholders, and the environment. Our investments in the energy grid have made it safer, smarter, cleaner, and more reliable, supporting thousands of jobs and economic growth in Missouri and Illinois. We also prioritize working with local, small, and diverse businesses, contributing to thriving communities. Our top quartile reliability performance and below-average customer rates demonstrate the positive impact of our investments. Our updated sustainability investor presentation, "Leading the Way to a Sustainable Energy Future," is available for more information.

In 2023, Ameren made progress in their three strategic pillars, but did not meet expectations in their Illinois gas and electric regulatory proceedings. They invested $3.6 billion in infrastructure to improve service for customers and were recognized for their emergency response efforts during a major storm. The company is also working towards supporting the state's energy transition goals and has filed plans with the ICC for future investments in infrastructure.

The ICC decisions in the electric and natural gas rate reviews were disappointing and delayed necessary investments in energy infrastructure. The company will continue to work towards approval of a multiyear rate plan and improved regulatory environment. Ameren, Missouri filed a petition for securitization, which is expected to result in savings for customers. The company is focused on optimizing operating performance and has seen a decline in operations and maintenance expenses. Through automation and efficiency measures, customer rates have only increased slightly since the implementation of the smart energy plan legislation.

The company has announced strong earnings for 2023, with a 10% increase year-over-year. They have consistently delivered value to shareholders over the past decade, with a 7.8% compound annual growth rate in earnings and a 58% increase in dividends paid per share. This has resulted in a total return of 173% for shareholders, significantly above the industry average. The company plans to continue investing in strategic infrastructure and reducing operating costs while improving regulatory environments. They expect to invest $4.4 billion in electric, natural gas, and transmission infrastructure, including $1 billion in new generation, to support safety, reliability, resiliency, and the clean energy transition. These investments are aligned with regulatory outcomes and expectations for each business segment.

In the upcoming year, Ameren plans to file for updated rates and investment plans in Illinois and obtain approval for securitization and new energy resources in Missouri. They also plan to work with stakeholders to advocate for regulatory frameworks that support the state's energy transition goals. They will file for air permit and CCN approval for a new energy center in Missouri, which will help keep costs down, create jobs, and provide tax revenue for the region.

In addition to supporting potential transmission projects in the Midwest region, the company is advocating for improved regulatory treatment for generation investments and Right of First Refusal legislation in Missouri and Illinois. They are also focused on maintaining cost management and have announced expected earnings growth of 6.2% for 2024. The company expects to continue delivering compound annual earnings growth of 6-8% from 2024 to 2028, but this may be impacted by the current outlook in Illinois.

Ameren has a strong portfolio of investment opportunities and a solid balance sheet, which will contribute to potential earnings growth. The company's dividend has been increased for the 11th consecutive year, and future growth is expected to be in line with long-term earnings growth expectations. Ameren's five-year investment plan shows a projected rate base growth of 8.2% annually from 2023 to 2028, representing a $2.2 billion increase from the previous plan. This growth is driven by strategic investments in energy infrastructure under favorable regulatory frameworks.

The plan includes investments in renewables and simple cycle gas generation, with a reduced capital plan for Ameren Illinois due to ICC's orders. The company believes a higher level of investment would be in the best interest of customers and communities. The five-year plan is designed to position Ameren for success in the future, with a focus on maintaining reliability and transitioning to cleaner energy sources. The company's investment plan also includes significant renewable and dispatchable resources, as outlined in their Ameren Missouri IRP.

In 2023, Missouri PSC approved CCNs for two solar projects and reached a stipulation for four more projects totaling 550 megawatts. These projects will support a gradual transition away from coal and are expected to go into service between 2024 and 2026. MISO awarded Ameren two competitive transmission projects and expects to award the third by June 2024. MISO noted Ameren's sound route design, engineering, and cost containment plan, as well as their collaborative and customer-centric approach, as key factors in winning the bids. Ameren believes this approach should make them the top choice for future projects in both Missouri and Illinois.

MISO expects to approve a set of long-range transmission projects in 2024, which will address energy needs in the Midwest region. Over the next decade, Ameren has a pipeline of investment opportunities worth $55 billion that will create jobs and strengthen the energy grid. Maintaining supportive energy policies will be crucial for meeting the country's energy needs and meeting customer expectations. Ameren is committed to disciplined cost management and customer affordability, targeting flat expenses through 2028. The company's value proposition is expected to deliver superior value to customers, shareholders, and the environment, with a projected 6-8% annual earnings growth from 2024 to 2028. Ameren's experienced team and strong balance sheet position them for future dividend growth.

In the paragraph, Michael Moehn discusses the key drivers impacting earnings in each segment for Ameren. He also mentions the filing for securitization of costs associated with the Rush Island Energy Center and the approval of a base rate increase for natural gas delivery service by the ICC. He also mentions the filing for a rehearing of this order, which was denied.

Ameren Illinois has appealed the ICC's decision to the Illinois Fifth District Appellate Court regarding the return on equity and certain plant disallowances. The court has no deadline to address this appeal. In December, the ICC issued an order for Ameren Illinois to refile and provide additional justification for their grid plan, resulting in a cumulative increase in revenues from 2024 to 2027. Ameren Illinois has filed for a rehearing and expects a decision by the end of June. They have also filed an appeal to address remaining items. Despite these challenges, Ameren Illinois remains focused on providing safe and adequate service for their customers and has a strong pipeline of investment opportunities.

Ameren Transmission Missouri is benefiting from investments and reliable regulation, with a planned capital expenditure of $21.9 billion from 2024 to 2028. The company is strategically investing to replace aging infrastructure and is ahead of schedule in installing smart meters. The Smart Energy Plan outlines the allocation of investments. The company expects to fund these investments through cash from operations, tax deferrals, and issuing long-term debt.

The company has entered into forward sales agreements for $230 million of common stock issuances to fund their infrastructure investment plan and expects to sell them by the end of the year. They also plan to issue additional equity for dividend reinvestment and employee benefit plans in 2024. The company expects 2024 earnings per share to be between $4.52 and $4.72, with growth in Ameren Missouri driven by higher investments and increased sales to residential and commercial customers.

Ameren is expecting an increase in earnings in 2024 due to customer growth and General Motors resuming full production levels. This will be offset by higher interest expense and a return to normal weather. The company's FERC regulated electric transmission activities are also expected to contribute to earnings. However, the lower allowed ROE approved by the ICC in the multi-year rate plan will impact earnings for Ameren Illinois electric distribution. Ameren Illinois natural gas will see higher earnings from delivery service rates, but this will be partially offset by a lower allowed ROE and common equity ratio. Overall, higher interest rates and increased debt balances will also have an impact on earnings for Ameren parent.

In 2024, the company plans to manage all of its businesses to earn close to its allowed returns by implementing cost-saving initiatives such as a hiring freeze and reducing contractor and consultant workforce. They expect sales growth in their service territory due to strong economic development, with a projected increase in weather normalized kilowatt hour sales of approximately 0.5% annually over a five-year plan. In Illinois, sales are expected to remain flat or decrease slightly due to increases in energy efficiency and solar adoption, but this will not affect earnings due to full revenue decoupling. The company has a strong team and a history of successful execution.

Ameren had strong earnings growth in 2023 and expects to continue with 6-8% compound earnings per share growth over the next five years. They believe this growth will compare favorably with their peers and offer an attractive dividend. The company has throttled back on Illinois electric spend due to recent ICC orders, but they have embedded a prudent level of capital expenditures in their 2.3% five-year CAGR. They believe a higher amount of investment would be appropriate in the future to meet the state's energy goals.

The company expects that the level of investment reflected in their plan will ultimately be approved by the commission through the rehearing process and upcoming filings. The company is being conservative in their approach and has the ability to recover expenditures in future years. There may be opportunities to allocate more capital in the future. It is still expected that Tranche 2 will exceed Tranche 1.

The company expects Tranche 2 investments to be larger than Tranche 1 and to be approved by the middle of the year. They have not included Tranche 2 investments in their five-year plan, but have accounted for them in the $55 billion pipeline. They expect to be below the midpoint of their 6-8% growth range, but are anticipating potential upsides from transmission spending and approval of their proposed CapEx for the Illinois distribution segment. Investors should watch for these factors to potentially get the company back to the midpoint of their growth range.

Michael Moehn and Marty Lyons discuss the company's expected rate-based growth for the future, which is projected to be slightly below the midpoint. They explain that historically, the company has seen a 6.4-6.5% rate-based growth after accounting for dilution, but recent improvements have pushed it above 7%. Moving forward, they expect the rate-based growth to be around 6.7%, with potential for further improvement through capital projects and strategic allocation of resources.

The speaker discusses the upsides of maintaining a 6-8% growth rate, citing a strong pipeline of potential investments worth $55 billion over the next 10 years. They also mention the potential for additional investments through competitive proposals and Tranche 2 projects. The speaker also highlights the opportunity to improve their balance sheet and increase returns in Illinois, and to engage in a dialogue with stakeholders about aligning investments with state policy goals. The investments not only improve energy infrastructure but also create jobs and economic expansion.

The speaker discusses the importance of financial discipline and constructive regulation in Illinois, and how it will benefit customers, communities, and the economy. They also mention a 4% decrease in O&M and the focus on customer affordability, with plans to maintain flat O&M over the next five years. They are also taking a closer look at 2024 and considering different strategies to maintain financial discipline.

The company is currently implementing cost-saving measures such as a hiring freeze and reducing discretionary spending in response to the current economic environment. They are also strategically reviewing rates and investments in their digital platform to ensure long-term sustainability. The timing of their next rate case in Missouri has not been decided yet, but they typically file one every 18-24 months.

In response to a question about the impact of capital reallocation on Missouri bills, Marty Lyons, the CEO of Ameren, stated that the company will work to keep bill impacts manageable by managing operating costs and only requesting rate increases for necessary capital additions. He also mentioned that the company plans to keep operating costs flat and increase productivity. In terms of specific projects, Lyons noted that the capital expenditure plans for Missouri over the next five years primarily focus on renewable energy, as outlined in their integrated resource plan.

The company has a capital spend of $3.3 billion for renewable energy projects, with over half already approved and four more pending. They also plan to invest in dispatchable energy resources, including a 800 megawatt simple cycle gas plant. About 25% of the $13 billion allocated to Missouri will go towards renewables, with significant benefits for customers due to PTC and ITC. The team is focused on keeping bills low. In Illinois, there may be potential legislative or legal responses to the state orders, and the company is having ongoing conversations with stakeholders.

In this paragraph, Michael Moehn discusses the company's plans to work constructively with stakeholders in order to achieve a more favorable environment for investment. He mentions their upcoming rehearing filing and grid plan update, and their efforts to address deficiencies and gain approval. He also mentions the need for engagement with stakeholders to achieve their goal of a more constructive environment for investment, which they believe is in the best interest of customers, communities, and the state's policy goals. The next question comes from David Arcaro of Morgan Stanley.

David Arcaro asks about the conservative outlook for normal load growth and whether there is potential for acceleration from manufacturing or data center activity. Michael Moehn and Marty Lyons discuss the positive economic conditions in their service territory and potential opportunities for growth, but emphasize that they do not currently factor this into their projections. They express optimism for potential future growth.

The speaker is optimistic about the economic development efforts in the St. Louis region and believes that the community is unified in pursuing inclusive growth. They have seen some positive results and are being conservative in their growth projections. They also mention the importance of energy efficiency. When asked about FFO to debt levels, the speaker states that they have not given targets in the past but are comfortable with their current ratings and expect to maintain them over the next five years. They plan to raise $300 million in equity for 2024 and have already raised $230 million through their ATM program.

In the remaining balance of their DRIP 401k, the company plans to spend $600 million, consistent with previous years. This supports their credit ratings. The five-year CapEx plan is up 10%, but the company is still conservative in terms of their balance sheet and feels good about their FFO to debt ratio. The four solar projects in Missouri are included in the plan, and any potential upside would come from the Missouri IRP results and MISO planning transmission project awards.

The company has included projects that have already been approved in their five-year plan, along with additional projects for renewable energy. They have not factored in any potential upside for additional transmission projects. The company's balance sheet is strong and they have a cushion above the required metrics for credit ratings. The company has been disciplined in issuing equity to meet their needs.

The speaker believes that the company's balance sheet is strong and they plan to maintain a 17% threshold over the next five years. They will have frequent conversations with the rating agency to discuss their plans. The speaker also mentions a filing in Missouri where they lay out their planned capital expenditures and justify them. They will align their investments with their IRP from last fall.

The company plans to invest in an 800 megawatt simple cycle plant, continue investing in dispatchable resources such as coal-fired energy centers and nuclear facilities, and make planned investments in renewables and battery storage. They have received positive orders from the commission for some of their projects and have others pending. The remainder of their investment will go towards improving distribution infrastructure, resulting in reduced frequency of outages and improved safety measures.

The speaker discusses the benefits of investing in infrastructure and mentions that there is still a lot of investment needed to modernize it. They refer to a recent filing in Missouri that outlines their plans and justifications for these investments. The speaker thanks everyone for their participation and expresses their commitment to providing reliable, safe, and affordable energy.

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