Ameren Corp Q1 FY2021 Earnings Call

Greetings and welcome to Ameren Corporation's First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. The operator will provide instructions. It is now my pleasure to turn the conference over to your host, Andrew Kirk, Director of Investor Relations for Ameren Corporation. Thank you, Mr. Kirk. You may begin.

Thank you and good morning. On the call with me today are Warner Baxter, our Chairman, President, and Chief Executive Officer; and Michael Moehn, our Executive Vice President and Chief Financial Officer, as well as other members of the Ameren management team joining us remotely. Warner and Michael will discuss our earnings results and guidance, as well as provide a business update, then we will open the call for questions. Before we begin, let me cover a few administrative details. This call contains time-sensitive data that is accurate only as of the date of today's live broadcast, and redistribution of this broadcast is prohibited. To assist with our call this morning, we have posted a presentation on the amereninvestors.com homepage that will be referenced by our speakers. As noted on Page 2 of this presentation, comments made during this conference call may contain statements that are commonly referred to as forward-looking statements. Such statements include those about future expectations, beliefs, plans, projections, strategies, targets, estimates, objectives, events, conditions, and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated. For additional information concerning these factors, please read the forward-looking statements section in the news release we issued today and the forward-looking statements and risk factors sections in our filings with the SEC. Lastly, all per share earnings amounts discussed during today's presentation including earnings guidance are presented on a diluted basis unless otherwise noted. And here’s Warner.

Thanks, Andrew. Good morning, everyone, and thank you for joining us. I hope you, your families and colleagues are safe and healthy. Before I begin my discussion about first quarter results and related business matters, I want to begin with a few words on COVID-19. It is hard to believe that we have now been addressing the challenges associated with this pandemic for over a year now. Needless to say, much has changed. However, one thing that has not changed is our relentless focus on delivering safe, reliable, cleaner and affordable electric and natural gas service for the millions of people in Missouri and Illinois that are depending on us. As I said during our year-end conference call in February, despite the significant challenges presented by COVID-19, I look to the future with optimism. In part, this was due to the aggressive distribution of vaccines throughout our country. I'm pleased to say that we are beginning to see the fruits of the incredible efforts by so many in the health care, government, public and private sectors. COVID-19 cases are down significantly from earlier in the year and restrictions have lessened. As a result, we are clearly seeing signs that the economy is improving in our service territory and across the country. Optimism was also driven by how our co-workers have consistently stepped up and addressed a multitude of challenges and capitalized on opportunities and the strong execution of our strategy that is delivering value to our customers, communities and shareholders. Together, these factors contributed to our ability to get off to a strong start in 2021, which brings me to a discussion of our first quarter results starting on Page 4. Yesterday, we announced first quarter 2021 earnings of $0.91 per share compared to earnings of $0.59 per share in the first quarter of 2020. The year-over-year increase of $0.32 per share reflected increased infrastructure investments across all of our business segments that will drive significant long-term benefits for our customers. The key drivers of first quarter results are outlined on this slide. I'm also pleased to report that we continue to effectively execute our strategic plan and remain on track to deliver within our 2021 earnings guidance range of $3.65 per share to $3.85 per share. Michael will discuss our first quarter earnings, 2021 earnings guidance and other related items in more detail later. Moving to Page 5, here we reiterate our strategic plan. The first pillar of our strategy stresses investing in and operating our utilities in a manner consistent with existing regulatory frameworks. This has driven our multiyear focus on investing in energy infrastructure for the long-term benefit of customers. As a result, and as you can see on the right side of this page, during the first three months of this year we invested significant capital in each of our business segments including our investment in wind generation. Regarding regulatory matters, in late March Ameren Missouri filed a request for a $299 million increase in annual electric service revenues with the Missouri Public Service Commission. In addition, Ameren Missouri filed a request for a $9 million increase in annual natural gas revenue with the PSC. While Michael will discuss the details of the request in a moment, I'd like to briefly touch on some of the key benefits our electric and natural gas customers in Missouri are seeing as a result of the investments reflected in these rate requests. We are now in the third year of Ameren Missouri’s Smart Energy Plan, which is focused on strengthening the grid, infrastructure upgrades, adding more renewable generation and creating programs to stimulate economic growth for communities across the state. Our grid modernization investments incorporate smart technology including outage detection and restoration switches as well as smart meters, which allow customers to take advantage of new rate options. These investments are delivering results to improve reliability and resiliency. For example, on circuits with smart technology upgrades, we have seen up to a 40% improvement in reliability. Of course, we also remain committed to a clean energy transition for our customers and state. This is demonstrated through our recent acquisitions of two wind generation facilities located in northern Missouri totaling 700 megawatts. In addition, our investments are stimulating economic growth for communities across the state. I’m pleased to say that 57% of Ameren Missouri suppliers in 2020 were Missouri-based and 32% of its capital spend was with Missouri-based suppliers. And we're doing all of these things while keeping our customers' electric rates approximately 20% below the average in other Midwest states and across the country. At the same time, we remain very disciplined in managing our costs. As a result, if approved, the new electric rate requests represent a total increase of 5.4% over an almost five-year period, a yearly average of approximately 1%. We will remain disciplined in managing our costs while we build a stronger, smarter and cleaner energy system for our customers now and in the future. Moving now to Ameren Illinois regulatory matters. In January, we received a constructive rate order from the ICC that resulted in a $76 million annual increase in gas distribution revenue. New rates went into effect in late January. In our Illinois Electric business, we made our required annual electric distribution rate filing requesting a $64 million base rate increase. This filing is only the second requested increase in delivery service rates in six years. While Michael will touch on the details of our filing a bit later, I think it is important to note that for years, our Illinois customers have realized the benefits of our significant investments in energy infrastructure. This performance-based rate making began in 2012. Reliability has improved by 20% and over 1,400 jobs have been created. At the same time, electric rates are among the lowest in the country and the Midwest—approximately 3% below 2012 levels. This performance-based framework has been a win-win for our customers and the state of Illinois. That is why we continue to strongly advocate for a performance-based regulatory framework in the Illinois legislature, which brings me to our discussion of the second pillar of our strategy, enhancing regulatory frameworks and advocating for responsible energy and economic policies on Page 6. As I discussed in our conference call in February, an enhanced version of the Downstate Clean Energy Affordability Act legislation was filed earlier this year which, if passed, would apply to both the Ameren Illinois Electric and Natural Gas distribution businesses. This legislation would allow Ameren Illinois to make significant investments in solar energy, battery storage, and electric and gas infrastructure to continue to enhance safety and reliability as well as in transportation electrification in order to benefit customers and the economy across central and southern Illinois. This important piece of legislation would also require diverse supplier spend reporting for all electric renewable energy providers. Another key component of the Downstate Clean Energy Affordability Act is that it would allow for performance-based rate making for Ameren Illinois’ natural gas and electric distribution businesses to 2032. The proposed performance metrics will ensure investments are aligned with and are contributing to the safety and reliability of the energy grid and natural gas systems, as well as the state's vision for the transition to clean energy. Further, this legislation would modify the allowed return on equity methodology in each business to align with the average returns being earned by other gas and electric utilities across the nation. And as I noted a moment ago, this legislation builds on Ameren Illinois' efforts to invest in critical energy infrastructure under a transparent and stable regulatory framework that has supported significant investment, improved safety and reliability, and created significant new jobs, all while keeping electric rates well below the Midwest and national averages. This bill would also move the State of Illinois closer to reaching its goal of 100% clean energy by 2050. With all of these benefits in mind, we are focused on working with key stakeholders to get this important legislation passed. To date, the Downstate Clean Energy Affordability Act has received strong bipartisan support from members of the Senate and House. Currently, House Bill 1734 has 49 sponsors, and Senate Bill 311 has 21 sponsors. As I'm sure you know, there are also several other energy-related bills being considered by the legislature. We will continue to be actively engaged with key stakeholders throughout the legislative session on these important energy policy matters. The spring session is currently set to end May 31. Turning to Page 7 for an update on FERC regulatory matters, in April, FERC issued a supplemental notice of proposed rulemaking on the electric transmission return on equity incentive adder for participation in a Regional Transmission Organization or RTO. In the supplemental notice, the firm proposes to limit the duration of the 50 basis point ROE incentive adder for companies that join an RTO to three years. FERC also proposes to eliminate the adder for utilities that have been part of an RTO for three years or more, which would include Ameren Illinois and ATXI. Without this incentive adder Ameren Illinois and ATXI would earn the current allowed base ROE of 10.02%. For perspective, every 50 basis point change in our FERC ROE affects annual earnings per share by approximately $0.04. Needless to say, we are disappointed with the direction the FERC has taken in the supplemental notice and strongly oppose the removal of the adder. From our perspective, our job participation adder is needed to compensate companies for assuming risk associated with turning over operational control of assets to the RTO. The proposals are also inconsistent with the stated policy goals and the intent of existing amounts to encourage RTO participation. We will continue to advocate for the RTO incentive adder and other project incentive adders proposed in the March 2020 NOPR. We will file comments on the supplemental NOPR by the May 26 deadline. Of course we are unable to predict the ultimate outcome or timing of this matter as FERC has no timeline to issue a decision. Moving now to Page 8, policy matters are important because transmission investment is going to play a critical role in our country's clean energy transition. As we have discussed before, myself and other key stakeholders including Ameren have been carefully assessing the transmission needs in the MISO footprint to ensure the overall reliability and resiliency of the energy grid is maintained as our companies execute their clean energy transition plans. Recently, MISO published several reports that outline some of the preliminary thoughts on MISO’s transmission needs in the future. This page summarizes a recent study that outlines a potential road map of transmission projects to 2039, taking into consideration the rapidly evolving generation mix that includes significant levels of renewable generation based on announced utility integrated resource plans, state mandates, and goals for clean energy and carbon emission reductions, among other things. I would also note that MISO and the Southwest Power Pool are also working together to develop a similar evaluation of transmission needed to support the transition across both regions. The bottom line is that significant regional and local transmission investments will be needed for the clean energy transition over the next 10 to 20 years. For example, under MISO’s Future 1 scenario, which results in an approximate 60% carbon emission reduction below 2005 levels by 2039, MISO estimates future transmission investment could amount to an estimated $30 billion in the MISO footprint. Further, Future 3 results in an approximate 80% reduction in carbon emission levels below 2005 levels by 2039. MISO has estimated Future 3 could result in an estimated $100 billion of transmission investment in the MISO footprint. We provide some context to this. During MISO’s last regional transmission planning process, approximately $6.5 billion of multivalue project investments were made over the last 10 years or so. In light of the continued focus on the clean energy transition in our country, we are actively working with MISO and other key stakeholders to move the assessment and project approval process along, with an appropriate sense of urgency to ensure we maintain a safe, reliable, and resilient energy grid and do so in an affordable fashion. Given our past success in executing large regional transmission projects, we believe we are well positioned to plan and execute potential projects in the future for the benefit of our customers and country. We believe certain projects outlined in Future 1 will be included in this year's MISO transmission planning process, which is scheduled to be completed in the fourth quarter of 2021. We look forward to working with MISO and key stakeholders on this important planning process. Speaking of clean energy transitions, let's move now to Page 9 for an update on our $1.1 billion wind generation investment planned to achieve compliance with Missouri's renewable energy standard through the acquisition of 700 megawatts of new wind generation at two sites in Missouri. Ameren Missouri closed on the acquisition of its first wind energy center, a 400-megawatt project in northeast Missouri in December. In January, Ameren Missouri acquired its second wind generation project, the 300-megawatt Atchison Renewable Energy Center located in northwest Missouri. Approximately half the megawatts of the Atchison Renewable Energy Center are in service. We expect the remaining megawatts to be placed in service by September 30. Turning now to Page 10 and an update on Ameren Missouri's Callaway Energy Center. During its return to full power as part of its 24th refueling and maintenance outage in late December 2020, Callaway experienced a non-nuclear operating issue related to its generator. An investigation of this matter was conducted, and the decision was made to rewind the generator stator and rotor in order to safely and sustainably return the energy center to service. The project is going well and we continue to expect the capital project to cost approximately $65 million. I am also pleased to report that the insurance claims within the capital project and replacement power have been accepted by the insurance carrier, which will mitigate the impacts of this outage for our customers. We expect the Callaway Energy Center to return to service in July. As we have said previously, we would not expect this matter to have a significant impact on Ameren financial results. Turning to Page 11, we are focused on delivering a sustainable energy future for our customers, communities, and our country. This page summarizes a strong sustainability value proposition for environmental, social and governance matters and is consistent with our vision: leading the way to a sustainable energy future. I have discussed several elements of our strong sustainability value proposition with you in the past. So, in the interest of time, I will not go through all of these points again this morning. Having said that and moving to Page 12, you should know that we have already made significant progress in our sustainability efforts in 2021. Here, we highlight several key achievements to date this year. Beginning with environmental stewardship, last September, Ameren announced its transformational plan to achieve net zero carbon emissions by 2050 across all of our operations in Missouri and Illinois. This plan includes strong interim carbon emission reduction targets of 50% and 85% below 2005 levels in 2030 and 2040 respectively. This plan is also at the heart of our updated climate risk report, which is based on the recommendations of the Task Force on Climate-related Financial Disclosures which were issued last week. I am pleased to report our plan is consistent with the objectives of the Paris Agreement and limiting global temperature rise to 1.5 degrees Celsius. In terms of social impact, I am very excited to say that our efforts in this area continue to be recognized by leading organizations. Last week, Diversity,Inc. announced Ameren is once again named number one on the top utilities list for diversity and inclusion, which we have been proudly a part of since 2009. Diversity,Inc. also ranked Ameren second on the top 10 regional companies and as a top company for ESG among all industries. In addition, for the fifth year overall, we've been certified by Great Place to Work. And finally, we are recognized as the best place to work for LGBTQ by the Human Rights Campaign. Moving to governance, our board and management have established governance structures that enable a focus on the ESG matters that drive Ameren strategy, mission, and vision, including the addition of ESG metrics to drive executive compensation programs. In particular, our board of directors refined our executive compensation program by adding workforce and supplier diversity metrics to our short-term incentive plan for 2021. In addition, we recently issued several social impact policies. Since our call in February, we've also issued several reports reflecting our sustainability efforts and advances. Just last week we posted our 2021 Sustainability Report, which expands on ESG and sustainability topics and posted the 2020 ESG sustainability template. And for the first time, we published information using the Sustainability Accounting Standards Board reporting framework and mapped our business activities to the United Nations Sustainable Development Goals. I encourage you to take some time to read more about our strong sustainability value proposition. You can find all of our ESG related reports at amereninvestors.com. Turning now to Page 13. Environmental stewardship, social impact and governance are three pillars of our strong sustainability value proposition. Our final pillar is sustainable growth. Looking ahead, we have a strong sustainable growth proposition which will be driven by a robust pipeline of investment opportunities of over $40 billion over the next decade. It will deliver significant value to all of our stakeholders and make our energy grid stronger, smarter and cleaner. Importantly, these investment opportunities exclude any new regionally beneficial transmission projects that I described earlier, all of which would increase the reliability and resiliency of the energy grid as well as enable additional renewable generation projects. In addition, we expect to see greater focus from a policy perspective on infrastructure investments to support the electrification of the transportation sector. Our outlook to 2030 does not include significant infrastructure investments for electrification at this time either. Of course our investment opportunities do not only create a stronger and cleaner energy grid to meet our customers’ needs and exceed their expectations but they will also create thousands of jobs for our local economies. Maintaining constructive energy policies that support robust investment in energy infrastructure and a transition to a cleaner future in a safe, reliable and affordable fashion will be critical to meeting our country's future energy needs and delivering on our customers’ expectations. Moving to Page 14. To sum up our value proposition, we remain firmly convinced that the execution of our strategy in 2021 and beyond will deliver superior value to our customers, shareholders and the environment. In February, we issued our five year growth plan, which included our expectation of a 6% to 8% compound annual earnings growth rate from 2021 to 2025. This earnings growth is primarily driven by strong rate base growth and compares very favorably with our regulated utility peers. Importantly, our five year earnings and rate base growth projections do not include 1,200 megawatts of incremental renewable investment opportunities outlined in Ameren Missouri's integrated resource plan. Our team continues to assess several renewable generation proposals from developers. We expect to file this year with the Missouri PSC for certificates of convenience and necessity for a portion of these planned renewable investments. I am confident in our ability to execute our investment plans and strategies across all four of our business segments as we have an experienced and dedicated team to get it done. That fact, coupled with our sustained past execution of our strategy on many fronts, positions us well for future success. Further, our shares continue to offer investors a solid dividend, which we expect to grow in line with our long-term earnings per share growth guidance. Simply put, we believe our strong earnings and dividend growth outlook results in a very attractive total return opportunity for shareholders. Again, thank you all for joining us today. Now we’ll turn the call over to Michael.

Thanks, Warner and good morning, everyone. Turning now to Page 16 of our presentation. Yesterday, we reported first quarter 2021 earnings of $0.91 per share compared to $0.59 per share for the year-ago quarter. Earnings at Ameren Missouri, our largest segment, increased $0.22 per share due to several favorable factors. The earnings comparison reflected new electric service rates effective April 1, 2020 which increased earnings by $0.10 per share. In addition, earnings benefited from lower operations and maintenance expenses which increased earnings $0.07 per share. This was primarily driven by the absence of an unfavorable market return that occurred in 2020 on the cash surrender value of our company-owned life insurance as well as disciplined cost management. Earnings also benefited by approximately $0.04 per share from higher electric retail sales driven by near-normal winter temperatures compared to milder-than-normal winter temperatures in the year-ago period. We have included on this page the year-over-year weather normalized sales variances for the quarter that showed total sales to be comparable with Q1 2020, which was largely unaffected by COVID-19. We continue to see improvements in sales as schools and businesses reopen and begin to increase their levels of operation. Earnings were positively impacted by the timing of income tax expense, which we do not expect to impact full-year results, as well as the absence of charitable donations that were made pursuant to the Missouri rate review settlement in March 2020. And finally, these favorable factors were partially offset by the amortization of deferred expenses related to the fall 2020 Callaway Energy Center’s scheduled refueling and maintenance outage. Moving to other segments, earnings for Ameren Illinois natural gas were up $0.08 reflecting higher delivery service rates that were effective January 25, 2021, incorporating a change in rate design as well as the increased infrastructure investments and a lower allowed ROE. The first quarter of 2021 benefit from the change in rate design is not expected to impact full-year results. Ameren Illinois electric distribution earnings increased $0.03 per share which reflected increased infrastructure investments and a higher allowed ROE on a performance-based rate-making of approximately 8.15% compared to 7.45% for the year-ago quarter. Ameren Transmission earnings were comparable year-over-year which reflected increased infrastructure investments that were offset by an unfavorable $0.03 impact of a March 2021 FERC order. This order related to an intervenor challenge regarding the historical recoveries of material and supplies inventories and rates and will have no impact on the current formula rate calculation prospectively. And finally, Ameren Parent and Other results were down $0.01 per share compared to the first quarter of 2020 due to increased interest expense resulting from higher long-term debt outstanding offset by the timing of income tax expense, which is not expected to impact full-year results. Finally, 2021 earnings per share reflected higher weighted average shares outstanding. Before moving on, I'll touch on sales trends in Illinois electric distribution in the quarter. Weather-normalized kilowatt hour sales to Illinois residential customers increased 1.5%. And weather-normalized kilowatt hour sales to Illinois commercial and industrial customers decreased 1.5% and 2.5%, respectively. Recall that changes in electric sales in Illinois, no matter the cause, do not affect our earnings since we have full revenue decoupling. Turning to Page 17, I would now like to briefly touch on key drivers impacting our 2021 earnings guidance. We're off to a strong start in 2021 as Warner stated; we continue to expect 2021 diluted earnings to be in the range of $3.65 to $3.85 per share. Select earnings considerations for the balance of the year are listed on this page and are supplemental to the key drivers and assumptions discussed in our earnings call in February. I'll note that our second quarter earnings comparison will be negatively impacted due to a seasonal rate design change effective for 2021 in Ameren Missouri as part of the March 2020 electric rate order. This order called for winter rates in May and summer rates in September rather than the blended rates used in both months in 2020. The second quarter results will also be negatively impacted by the absence of the impact of the 2020 FERC order approving the MyCelx-allowed base ROE at Ameren Transmission. Together, these two items are expected to reduce second quarter earnings by approximately $0.25 year-over-year. I encourage you to take this into consideration as you develop your expectations for our second quarter earnings results. Turning now to Page 18, here, we outline in more detail our recently filed Missouri electric rate review that Warner mentioned earlier. This reflects many benefits including major upgrades to the electric system reliability and resiliency for customers as well as investments to support the transition to a cleaner generation portfolio for the benefit of customers and local communities. Now, let me take a moment to go through the details of this filing. The request includes a 9.9% return on equity, a 51.9% equity ratio and a September 30, 2021 estimated rate base of $10 billion. This includes a test year ended December 31, 2020 with certain pro-forma adjustments through September 30, 2021. The requests include a continuation of the existing FAC and other regulatory mechanisms along with a request to recover certain costs associated with the Meramec Energy Center which is expected to retire in 2022 over a five-year period from the date the new rates become effective. As outlined on this page, the key drivers of our $299 million annual rate increase include increased infrastructure investments made under Ameren Missouri Smart Energy Plan, impact of the transition to a cleaner generation portfolio, decreased weather-normalized customer sales volumes and higher pension, OPEB, and tax harmonization expenses, partially offset by lower operation and maintenance expenses. Moving to Page 19 for an update on other Ameren Missouri regulatory matters. In March 2021, we also filed a natural gas rate review. The details for the $9 million annual revenue increase request are outlined on this page. We expect the Missouri PSC decision in both our electric and natural gas rate reviews by February 2022 with new rates expected to be effective by March. Further, last October, we filed a request with the Missouri PSC to track and defer in a regulatory asset certain COVID-related costs incurred net of any COVID-related cost savings. In March 2021, the Missouri PSC approved this request. $9 million of net costs were incurred through March 31, 2021. We recognized $5 million in the first quarter of this year and expect the remaining portion relating to late fees to be recognized when realized and in rates beginning in early 2022. The timing to recover these costs will be determined as part of our pending electric and gas rate reviews. Moving now to Page 20 for an update on Ameren Illinois regulatory matters. Last month, we made our required annual electric distribution performance-based rate update filing requesting a $64 million base rate increase. Under Illinois performance-based rate making, Ameren Illinois is required to make annual rate updates to systematically adjust cash flows over time for changes in costs of service and to true up any prior period over- or under-recoveries of such costs. Since this constructive framework began, Ameren Illinois has made prudent investments to strengthen the grid and reduce outages and continues to do so. Major investments include the installation of outage avoidance and detection technology; integration of storm-hardening equipment; adoption of clean energy technologies; and the implementation of new energy efficiency measures, including mobile-enhanced communications and assessment capabilities for electric field workers. The ICC will review our request in the months ahead, with a decision expected in December of this year and new rates effective in January of next year. Turning to Page 21 for a financing and liquidity update, we continue to feel very good about our liquidity and financial position. In February, Ameren Corporation issued $450 million of 1.75% senior unsecured notes due in 2028. The proceeds were used for general corporate purposes, including to repay short-term debt. We also expect both Ameren Missouri and Ameren Illinois to issue long-term debt in 2021. In addition, as we mentioned on the call in February, during the quarter, we physically settled the remaining shares under our forward equity sales agreement to generate approximately $115 million. In order for us to maintain our credit ratings and a strong balance sheet while we fund our robust infrastructure plan, we expect to issue approximately $150 million of additional common equity during the balance of 2021 which is consistent with the guidance we provided in February. To that end, in May, we expect to establish an at-the-market or ATM equity program to support our equity needs through 2023. This future equity issuance will enable us to maintain a consolidated capital structure consisting of approximately 45% equity over time. The incremental natural gas and power purchases incurred due to the extreme cold in mid-February this year did not have a significant impact on our liquidity or ability to fund our future operations and investment. Ameren’s available liquidity as of April 30 was approximately $1.3 billion, which includes $2.3 billion of combined credit facility capacity net of approximately $1 billion of commercial paper borrowings at the end of the month. Finally, turning to Page 22, we're well positioned to continue executing our plan. We're off to a solid start and we expect to deliver strong earnings growth in 2021 as we continue to successfully execute our strategy. As we look to the longer term, we continue to expect strong earnings per share growth driven by robust rate base growth and disciplined cost management. Further, we believe this growth will compare favorably with the growth of our regulated utility peers. And Ameren shares continue to offer investors an attractive dividend. In total, we have an attractive total shareholder return story that compares very favorably to our peers. That concludes our prepared remarks. We now invite your questions.

Our first question comes from Jeremy Tonet with JPMorgan. Please proceed with your question.

Thanks for all the color today, very helpful. Maybe just starting off with regards to the Illinois legislative session here, do you have any sense for the relative priority of utility issues within the overall clean energy legislation discussions? And do you see any potential for kind of a grand bargain here to be reached on energy?

Yes, thanks, Jeremy. A couple of things there. One, I do think clean energy legislation is a focus for the legislature. I think just by the fact that you see so many bills that are being discussed out there—and rightfully so—the clean energy transition is obviously very important not just for Illinois, but across the country. Certainly, as I said in my prepared remarks, there's no doubt that there are several bills that are being considered. Whether there's a grand bargain, if you will, or whether these bills are put together, it's just too early to say. The only thing I can say is this: we are at the table with key stakeholders trying to find a solution and to advocate for the Downstate Clean Energy Affordability Act. Because, as you heard me say many times, those provisions that use a performance-based rate making approach have really delivered significant benefits for our customers and the entire state of Illinois. We have until the end of the month to try and get something across the finish line. Richard Mark and his team have been working tirelessly at that. Our tireless work and the work that we've been doing for many years has already elicited strong bipartisan support. So, we're hopeful to get the proper provisions in a final piece of legislation.

Got it, that's very helpful. Thanks.

Sure.

Maybe pivoting over to transmission, it seems like an exciting time for transmission. Do you have any sense of the magnitude of specific projects that could be identified by MISO before year-end or in the not-too-distant future? And what do you see separately as the potential for large-scale HVDC transmission opportunities outside or beyond the MISO process? And then finally, with transmission trying to scale the opportunity set here, could you help us think through roughly how much CapEx did Ameren deploy over the years when MISO brought renewable penetration from very little to the high levels that it is today? Is there any rule of thumb—like $10 billion to accommodate 10%—just trying to scale the opportunity set here?

Jeremy, lots to unpack there. Let me see if I can respond to those things, and Michael and Andrew will help me if I haven’t hit a point, but certainly come back on anything. Let me answer your last question perhaps first. As I said in my prepared remarks, there's about $6.5 billion of regional transmission projects that were deployed across the MISO footprint over the last decade. We did about $2 billion of that. Now that doesn't mean the same scale will repeat exactly, but we did roughly 25% to 30% of those projects because of our location in the MISO footprint. That's just number one. Two, what you said at the outset—I agree with—you are right; it is a very exciting time to be in the transmission business, and especially one in the MISO footprint. When you're sitting in the center of the country, what MISO does with its transmission is integral to the clean energy transition for our country. What you're seeing today is obviously a preliminary list of projects that were informed by stakeholder conversations, integrated resource plans and state energy policies, among many other things. It's hard to say exactly what will ultimately come out of the transmission plan that will be filed later this year. But the way we look at it—and we look at that Future 1 which we showed on that slide—we think that there are a lot of projects contained in that that are 'no regrets' types of projects. It's premature to put a definitive number on which projects will go. What MISO has done is put out a road map and is now looking for input from stakeholders. You can expect throughout 2021 stakeholders will be providing input into that road map. With that input, MISO will ultimately prepare their long-range plan—the MTEP—and we expect that to be filed in the fourth quarter. Ultimately, there's more stakeholder input and then the MISO Board of Directors will vote on it, hopefully approving it by year-end. So it's not too far away, but Future 1 is just the first step. As you look beyond that, as we said in Future 3, investments continue to grow over time, and as we said they range from $30 billion to $100 billion. Those are MISO’s preliminary estimates that will continue to be refined. So hopefully that gives you some of the sense. I'm not sure if I missed anything, but I think that covers your questions broadly.

I think that’s very helpful. But maybe just to follow up, anything on that HVDC front where Ameren might have a bit more leverage?

It's a little premature to say. These are things we look at. Obviously, there are some opportunities that we're evaluating, even in connection with the Missouri Integrated Resource Plan. So a little early to be making those kind of judgment calls, but stay tuned.

And if I could just do one quick last one, as far as what's coming out of the Biden infrastructure plan—early stages here—are there specific things you are focused on? Do you see investment upside or benefits from lower ratepayer cost or anything else that could really get things moving with the transmission permitting or planning processes?

Sure. One thing we are encouraged by is the Biden administration's focus on providing significant funding for new clean energy technologies, which we think is going to be very important for our industry and our country to get to a net zero carbon future by 2050. You're seeing proposals with incentives to invest in clean energy technologies—tax credits, tax normalization policies, opt-out provisions, and tax credits for transmission. We look favorably at provisions that build on that. That bill will have a direct impact on the overall cost to our customers, so we're obviously very encouraged and engaged. We're at the table working with stakeholders, and we are hopeful we will continue to see progress and incentives for clean energy technologies in the coming months.

Our next question is from Shar Pourreza with Guggenheim Partners. Please proceed with your question.

Just a quick follow-up on Illinois: if something doesn't pass in the next couple of weeks, Warner, do you intend to push over the summer? What are your thoughts on getting something done during the veto session? I know there are obviously a lot of competing interests and many legislators are new, so there's a question mark whether energy is even a priority right now. How should we think about timing if something doesn't get done by the end of May?

Sure, Shar. One thing to know about the Illinois veto session is that it isn't only used to address bills that have been vetoed; it can also be used to address bills presented during the regular session. To be clear, we are very focused on trying to get something across the finish line for the benefit of our customers in Illinois by May 31. But if it doesn't happen in the next several weeks, it could be brought up in the veto session. Our approach would be much the same: we will continue to strongly advocate for the Downstate Clean Energy Affordability Act. The reason we will continue to advocate for it is because it has strong bipartisan support across the state. We believe it's the best policy going forward for the state of Illinois because it has been delivering results for almost a decade now. We will continue to push for it. While lawmakers have other priorities, I do believe energy policy remains one of them.

And just lastly, shifting to Missouri securitization—while it's not a major priority for your current growth plan, what are your thoughts on the securitization legislation as it moves through the chambers? Any expectations as we get to the homestretch?

We are in the homestretch in the state of Missouri at the end of this week. Marty Lyons and his team have been working hard on this. I will turn it over to Marty to give the latest update.

Sure, Warner. You're absolutely right. Securitization isn't something that we see as required to carry out our integrated resource plan, but we do think it would be a good tool to have in the toolbox of the commission, especially as crafted in Missouri. There have been versions going through the House and the Senate that are very, very similar at this point. Last night, the Senate passed the House securitization bill, HB 734, and they made some slight modifications. Now it goes back to the House fiscal review committee and we'll see whether that can then be voted on in the House. We may see action as early as today. In any event, the language needs to be conformed between the Senate bill and the House bill over the remainder of the week and ultimately needs to be passed by the end of the week. As Warner indicated, the legislative session ends on May 14th this Friday. So we're very close. I can't predict whether it'll actually get done, but it's positioned pretty well for success. We'll keep our fingers crossed for the remainder of this week.

Assuming you get securitization, there's no change to the integrated resource plan but could securitization enable acceleration of the IRP or provide opportunities to accelerate the plan?

No, there's really no change to the integrated resource plan. When we filed that last September, we filed it believing that it was the most affordable and most reliable process for transitioning our fleet over time. We still believe the preferred plan that we filed is the appropriate path. Of course, conditions may change over time and that could cause us to modify the IRP. If securitization passes, there would not be any immediate impact on the integrated resource plan. But again, conditions change through time and we do believe having securitization in the commission's toolkit would be a good thing to have.

Our next question comes from Julien Dumoulin-Smith with Bank of America. Please proceed with your question.

You guys have a lot on your plate and congrats on continued success in de-risking. I would ask—Warner, you made some interesting comments on transmission earlier. How would you characterize this current MISO effort as best you see it coming together against some of those bigger projects? How much should we be expecting initially considering the longer-term larger scenarios?

Julien, a couple comments. It's premature to say exactly which of those projects will ultimately show up in the MTEP. The study gives us an opportunity to weigh in and keep our finger on the pulse of the many things going on around the country. There is a sense of urgency among stakeholders to address transmission needs because the clean energy transition is coming and transmission is critical to its success. The fourth quarter is when we expect to see what will be recommended. Some of these projects take time to plan, approve and execute. We think many of the transmission opportunities would come toward the back end of our five-year capital expenditure plan, especially in the second half of this decade. As I’ve said before, we're well positioned to execute on many of those projects and we're looking forward to it.

Fair enough. How do you see the potential of moving into June versus the end of May on the Illinois legislation? Also, do you need a grand bargain to address the sunset issue, or could that be carved out separately?

Julien, I'm not sure we caught your whole question, but regarding moving beyond the May 31 end of the spring session into a special session, we certainly can't predict whether a special session would be called. We're focused on the spring session through May 31 and should that not bear fruit we'll see what the next steps are, including the veto session. It's premature to speculate whether a special session would be called.

You don't need to get a grand deal done right now to address the sunset, correct?

No. To be clear, the current framework expires in 2022, so it does not have to be done this year. The overall regulatory framework we have today has several solid elements—forward test year, decoupling, bad debt riders and return on equity that will be handled by the Illinois Commerce Commission in the normal course. We strongly believe the Downstate Clean Energy Affordability Act and its provisions are in the best interest of our Illinois customers and we will continue to advocate for it. But it doesn't have to be done in the next week or by the veto session. Having certainty and sustainability is the right way to go, which is why we're pushing for it.

Our next question comes from Durgesh Chopra with Evercore ISI. Please proceed with your question.

Just Michael, quick clarification on the equity: in Q4 you said $300 million a year to 2025 and the ATM goes through 2023. Is $300 million per year still a good number to model through 2025?

Yes, Durgesh, if you go back to our February guidance, the same assumptions still stand today: $150 million in additional common equity in 2021 and then $300 million per year from 2022 through 2025. The ATM we expect to establish will allow us to execute against that plan.

Understood. And on the Missouri securitization: you assume it doesn't impact your IRP. Could securitization accelerate retirements of coal plants or otherwise change the rate base growth profile? Any color would be great. Thank you.

Thanks, Durgesh. I'll have Marty weigh in briefly. As we've said before, we have a strong baseload coal fleet that runs a lot and provides value today. We laid out our integrated resource plan and are retiring coal plants over time because we believe it's in customers' best interest for reliability and affordability. Securitization is a good tool to have, but it won't drive us to do anything different absent policy changes. Our coal plants remain valuable assets today and we don't see near-term changes to how we plan on operating them. Marty, anything to add?

I agree. When you look at the IRP we filed, we have four coal-fired energy centers. We laid out retirement timing: Meramec is expected to retire in 2022 and we expect that recovery to be addressed. We proposed accelerated closures of Sioux and Rush Island—Sioux in 2028 and Rush Island in 2039—and Labadie in two stages in 2036 and 2042. Those accelerations and the recovery of those are reflected in the rate review filing we made in March. So we're looking to accelerate recovery of certain plants and the rates are positively impacted by the expectation of Meramec closing. Those things are reflected in the filings. Securitization would not change the IRP immediately. Conditions could change through time, and securitization would be a helpful tool in the toolbox if that occurs.

Understood. Appreciate the color. It sounds like it's more of an opportunity than a risk for you guys. Thanks for taking my question.

You bet. Thank you.

Next question comes from Stephen Byrd with Morgan Stanley. Please proceed with your question.

Lots has been covered in Q&A. Stepping back and thinking about key areas of growth upside for you all over time—beyond your already impressive growth plan—especially incremental renewables, elements of your IRP and other dynamics, could you step way back and comment on the key categories of additional growth upside?

You bet. There are several areas. One is transmission: we showed $40 billion-plus of investment opportunities to 2030 and that number excludes regional transmission projects, so transmission could be a meaningful upside. Second is electrification, particularly transportation electrification; our long-term plan today does not include significant infrastructure for transportation electrification, so that could be a sizable opportunity as policies and the market evolve and automakers and others lean in. Third, continued grid modernization and investments to enable greater levels of renewable generation over time. Those items together represent meaningful upside beyond our current plan. We didn't put a specific number on them today, but they are sizable and we see our robust infrastructure plan continuing for some time.

Really helpful. One follow-up on FERC: FERC has objectives to eliminate barriers to executing on transmission. How do you see that factoring into RTO processes? Could FERC action materially affect transmission growth?

It's a little early to say to what extent FERC will become more engaged in the RTO processes, which have been well defined historically. What I will say is the clean energy transition and transmission needs are important issues that FERC is focused on. I think you'll continue to see greater attention at FERC on things they can do to accelerate safe, reliable and affordable transmission build around the country. We'll continue to engage with FERC and stakeholders on policy matters.

Our next question comes from Paul Patterson with Glenrock Associates. Please proceed with your question.

A quick technical question for Marty on the Missouri securitization bill: the Senate passed the House bill with slight modifications and it now goes back to the House. If the House passes it without changes, does it go straight to the governor, or must it go back to the Senate?

If there are no changes made in the House, then it will go to the governor. The Senate voted it out last night, and if the House makes no changes and votes it out, it will be done and off to the governor.

Okay, that would be nice. On Illinois, I know this isn't specifically about you, but the PGM auction is coming up sooner than the end of the month. Do you think that could play a role in timing for the legislation?

Paul, I simply can't predict that. It's not something directly correlated to our filings, though we watch all developments that could have an impact. It wouldn't be appropriate for me to speculate further.

One last question: on the MISO issue and the ROE adder for being part of an RTO—if FERC removes the 50 basis point adder or otherwise reduces ROE, how should we think about potential outcomes for Ameren? Any guidance on how material that could be?

Paul, we raised it in the presentation because we believe the potential direction FERC is taking is inconsistent with its policy goals and the intent of the incentive. The 50-basis-point adder is appropriate because we've given up operational control of assets to the RTO; that compensation is needed to assume that risk. For perspective, every 50 basis point change in our FERC ROE affects annual EPS by approximately $0.04. We will file comments and work to advocate for the incentive adder between now and the deadline.

Our next question comes from Insoo Kim with Goldman Sachs. Please proceed with your question.

Just one question: I wanted an update on the clean air litigation regarding Rush Island and Labadie. I think you expected a ruling from the appeals court sometime this year. Is that still your expectation? And if there is an adverse outcome on appeal, how would you think about next steps related to timing of potential CapEx or plan changes?

A couple of things to refresh: our argument was heard in December and the case is now before the appellate court. We previously indicated we expected a decision this year, but the appellate court has no timeline to issue a decision, so we simply don't know. We believe we presented a strong case. If there were an unfavorable ruling, we would step back and assess what actions would be appropriate at that time. It would be premature to speculate on specific actions or impacts to our overall plan. If and when that occurs, we'll address it in due course.

Got it. In relation to securitization, could that provide an avenue to help navigate this matter if it goes against you?

Certainly securitization is a tool, as Marty said earlier. Whether it would apply in this circumstance is something we'd have to evaluate. First things first: we're focused on the appeal and continuing to execute the plan we filed with the Missouri PSC and the IRP.

We have reached the end of the question-and-answer session. At this time I'd like to turn the call back over to Andrew Kirk for closing comments.

Thank you for participating in this call. A replay of this call will be available for one year on our website. If you have any questions, you may call the contacts listed on our earnings release. Financial analyst inquiries should be directed to me, Andrew Kirk. Media should call Tony Paraino. Again, thank you for your interest in Ameren. Have a great day.

This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.