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spk08: Greetings and welcome to Ameren Corporation's third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. It is now my pleasure to introduce our host, Andrew Kirk, Director of Investor Relations for Ameren Corporation. Thank you, Mr. Kirk. You may begin.
spk03: Thank you, and good morning. On the call with me today are Warner Baxter, our chairman, president, chief executive officer, Michael Main, our executive vice president and chief financial officer, and Marty Lyons, president of Ameren Missouri, 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 emirateinvestors.com homepage that will be referenced by our speakers. As noted on page two of the 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 our news release we issued yesterday 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. Now here's a Warner who will start on page four of our presentation.
spk02: Thanks, Andrew. Good morning, everyone, and thank you for joining us. To begin, I am pleased to report that our team continues to effectively execute our strategic plan across all of our businesses, which includes making significant investments in our energy infrastructure to enhance the reliability and resiliency of the energy grid, as well as transition to a cleaner energy future in a responsible fashion. These investments, coupled with our continued focus on disciplined cost management, are delivering significant value to our customers, communities, and shareholders. We will now do our third quarter earnings results. Yesterday, we announced third quarter 2021 earnings of $1.65 per share. Our earnings were up 18 cents per share from the same time period in 2020. This slide highlights the key drivers of our strong performance. Michael will discuss the key drivers of our third quarter earnings results a bit later. Due to the continued strong execution of our strategy, I am also pleased to report that we raised our 2021 earnings guidance. Our 2021 earnings guidance range is now $3.75 per share to $3.95 per share, compared to our original guidance range of $3.65 per share to $3.85 per share. Turning now to page five, where 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 multi-year focus on investing in energy infrastructure for the long-term benefit of our customers. As a result, and as you can see on the right side of this page, during the first nine months of this year, we invested significant capital in each of our business segments. These investments are delivering value to our customers. As I said before, our energy grid is stronger, more resilient, and more secure because of the investments we are making in all four business segments. As we head into the winter months, I'd like to highlight some of the value these investments have created in our Ammon, Illinois and Ammon, Missouri natural gas businesses. Our natural gas transmission and distribution investments are focused on upgrading and modernizing gas main and equipment infrastructure. all the strength and safety and reliability of our system for our customers. Being mindful of the gas distribution issues experienced in the industry in the past, I will note that our Ameren Illinois and Ameren Missouri natural gas distribution systems are comprised almost entirely of plastic and protected coated steel pipelines. There is no cast iron pipe in our systems, and we expect to eliminate all unprotected steel pipe by the end of this year. These investments are just another example of how we are putting our customers at the center of our strategy. Moving now to regulatory matters, in late March, Amity, Missouri filed a request for a $299 million increase in annual electric service revenues and a $9 million increase in annual natural gas service revenues with the Missouri Public Service Commission. In our Illinois electric business, we've requested a $59 million base rate increase in our required annual electric distribution rate filing. These proceedings are moving along on schedule. Michael will provide more information on these proceedings a bit later. Finally, we've remained relentlessly focused on continuous improvement and disciplined cost management, including retaining many of the cost savings that we realized in 2020 due to the actions we took to mitigate the impacts of COVID-19. Moving to page six and the second pillar of our strategy, enhancing regulatory frameworks and advocating for responsible energy and economic policies. Over the years, we have been successful in executing this element of our strategy by delivering value to our customers through our investments in energy infrastructure and through extensive collaborations with key stakeholders in all of our regulatory jurisdictions. I am very pleased to report that these efforts paid off again in the third quarter when the Illinois legislature passed the Climate and Equitable Jobs Act, or CEJA, which was later signed by Governor Pritzker. CEJA is a constructive piece of legislation that addresses the key objectives that we felt were important for our customers and the communities we serve. It will enable us to continue to make important infrastructure investments to enhance the reliability and resiliency of the energy grid through a new forward-thinking regulatory framework. It will also give us the ability to earn fair returns on those investments, as well as enable us to invest in two solar and or battery storage pilot projects. CJ allows for an electric utility to opt in to a multi-year rate plan effective for four years beginning in 2024. We are currently working with key stakeholders and will continue to over the course of 2022 to establish specific procedures, including performance metrics, to implement this legislation. Subject to finalizing key aspects of this rate-making framework, we anticipate filing a multi-year rate plan by mid-January 2023. Michael will discuss this constructive piece of legislation in more detail in a moment. Shifting now to the federal level, where important energy legislation continues to be discussed. Needless to say, the situation around federal legislation remains fluid and ever-changing. One thing that remains constant is our strong support for clean energy transition tax incentives, including wind and solar production tax credits, transmission and storage investment tax credits, as well as direct pay and normalization opt-out provisions. We also continue to strongly support significant funding for research, design, and development for new clean energy technologies, electrification of the transportation sector, and grid resiliency. We support these important legislative initiatives because we strongly believe they will deliver significant long-term benefits to our customers, communities, and country. We will continue to work with key stakeholders, along with our industry colleagues, to advance constructive federal energy and economic policies that will help us transition to a cleaner energy future in a responsible fashion. Speaking of our transition to a cleaner energy future, please turn to page 7 in the discussion of future transmission investment needs. As we have discussed with you in the past, MISO completed a study outlining the potential roadmap of transmission projects through 2039, taking into consideration the rapidly evolving generation mix that includes significant additions of renewable generation based on announced utility integrated resource plans, state mandates, and goals for clean energy or carbon emission reductions, among other things. In a MISO's future one scenario, which is the scenario that resulted in an approximate 60% carbon emissions reduction below 2005 levels by 2039, MISO estimates approximately $30 billion of future transmission investment would be necessary in the MISO footprint. Under its Future 3 scenario, which resulted in an 80% reduction in carbon emissions below 2005 levels by 2039, MISO estimates approximately $100 billion of transmission investment in the MISO footprint would be needed. It is clear that investment in transmission is going to play a critical role in the clean energy transition, and we are well positioned to plan and execute potential projects in the future for the benefit of our customers and country. We continue to work with MISO and other key stakeholders and believe certain projects outlined in Future 1 are likely going to be included in this year's MISO transmission planning process, which is expected to be completed in early 2022. Moving now to page 8 and an update on litigation regarding Amherst, Missouri's past compliance with the new source review provisions of the Clean Air Act. As you may recall, this litigation dates back to 2011. And the Department of Justice, on behalf of the EPA, filed a complaint against Amna, Missouri, alleging that in performing certain projects at the Rush Island Energy Center, we violated the new source review provisions of the Clean Air Act. In 2017, the district court issued a liability ruling and, in September 2019, ordered the installation of pollution control equipment at the Rush Island Energy Center as well as at the Labadee Energy Center. In September of this year, the U.S. Court of Appeals affirmed the District Court's 2019 order that requires us to install a scrubber at our West Island Energy Center, but denied the order to install additional pollution control equipment at Lannaty. Last month, we filed a request for rehearing with the U.S. Court of Appeals. While we wait for a final decision from the courts, we continue to assess several alternatives to effectively address the Court of Appeals' decision including legal, operational, and regulatory measures. In reviewing these options, we are also carefully assessing the impact on customer costs, as well as generation or transmission investments needed to maintain system reliability. And we are certainly mindful of the policies that are being considered at the federal level to help address climate change. Should our decision result in a material change to our integrated resource plan, we will file an updated plan with the Missouri PSC. Turning to page nine, we remain focused on delivering a sustainable energy future for our customers, communities, and our country. This page summarizes our strong sustainability value proposition for environmental, social, and governance matters, and is consistent with our vision, leading the way to a sustainable energy future. Beginning with environmental stewardship, last September, Airman announced this transformational plan to achieve net zero carbon emissions by 2050 across all of our operations in Missouri and Illinois. This plan includes interim carbon emission reduction targets of 50% and 85% below 2005 levels in 2030 and 2040, respectively, and is consistent with the objectives of the Paris Agreement in limiting global temperature rise to 1.5 degrees Celsius. We also have a strong long-term commitment to our customers and communities to be socially responsible and economically impactful. This slide highlights the many things we are doing for our customers and communities, including being an industry leader in diversity, equity, and inclusion. Further, our strong corporate governance is led by a diverse board of directors focused on strong oversight that's aligned with ESG matters. And our executive compensation practices include performance metrics that are tied to sustainable long-term performance, diversity, equity, inclusion, and progress towards a cleaner, sustainable energy future. Finally, this slide highlights our very strong sustainable growth proposition, which is among the best in the industry. Turning to page 10, we will drill down further on this key element. Our strong sustainable growth proposition is driven by a robust pipeline of investment opportunities of over $40 billion over the next decade that will deliver significant value to all of our stakeholders in making our energy grid stronger, smarter, and cleaner. Importantly, these investment opportunities exclude any new regionally beneficial transmission projects, including the potential roadmap of MISL transmission projects I discussed earlier, all of which would increase the reliability and resiliency of the energy grid, as well as help to enable our country's transition to a cleaner energy future. In addition, we expect to see greater focus on infrastructure investments to support the electrification of the transportation sector in the future. Our outlook to 2030 does not include significant infrastructure investments for electrification at this time. Maintaining constructive energy policies that support robust investment in energy infrastructure and a transition to a cleaner energy 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 11. Another key element of our sustainable growth proposition is the five-year earnings per share growth guidance we issued in February, which included a six to eight percent compound annual earnings per share growth rate from 2021 to 2025. This earnings growth is primarily driven by strong rate-based growth and compares very favorably with our regulated utility peers. Importantly, our five-year earnings and rate-based growth projections do not include 1,200 megawatts of incremental renewable investment opportunities outlined in Ammon, Missouri's Integrated Resource Plan. Our team continues to assess several renewable generation proposals from developers. We expect to file with Missouri PSC for approval of a portion of these planned renewable investments this year. I am confident in our ability to execute our investment plans and strategies across all four of our business segments. That fact, coupled with our sustained past execution of our strategy on many fronts, has positioned us well for future success. Further, our shares continue to offer investors a strong 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 outlooks result in a very attractive total return opportunity for shareholders. Finally, turning to page 12, I will wrap up a few comments about the organizational changes we announced a few weeks ago. Over the past eight years, I have had the great privilege to serve as Chairman, President, and Chief Executive Officer of Ameren. During this time, I have been very fortunate to lead a team that has done an excellent job in executing our strategy and delivering strong value to our customers, communities, and shareholders. Last month, I was humbled and honored that the Board of Directors elected me to serve as Executive Chairman, effective January 1, 2022. At the same time, and consistent with our robust succession planning process, I was very pleased that the Board of Directors also elected Marty Lyons to serve as President and Chief Executive Officer, as well as to join the Board of Directors on January 1st. Marty is an outstanding leader and is exceptionally qualified to lead our company as CEO during this transformational time in our industry. Of course, many of you know Marty very well, as he spent a decade as the company's Chief Financial Officer. And during the past 20 years, Marty has demonstrated strong operational, financial, regulatory, and strategic acumen. I must say that I'm very excited about our new forward-thinking leadership structure. Working closely with Marty and our strong leadership team, I will remain actively engaged in overseeing important strategic matters impacting the company, including our transition to a cleaner energy future. I will also remain focused on key energy and economic policy matters, especially in my leadership roles at the Edison Electric Institute and the Electric Power Research Institute, as well as engaging with key stakeholders. Marty will take on the significant duties of the CEO, which includes leading all aspects of Ameren's strategy development and execution, as well as the day-to-day operational, financial, regulatory, legal, and workforce matters impacting the company. I, along with our board of directors, are very confident that Marty is clearly ready to lead Ameren as its new CEO. With that, I'll congratulate Marty once again for his promotion to CEO and turn it over to him to say a few words.
spk04: Thank you, Warner. I'm truly grateful for and humbled by the opportunity to lead Ameren during these exciting times for our company and for our industry. I'm also honored to follow in your footsteps, Warner. You've led our team to execute on a strategy that has delivered significant value to our customers and shareholders. Working with this outstanding leadership team and my dedicated coworkers at Ameren, we will remain focused on successfully executing this strategy in the future. I look forward to engaging with all of you joining us on the call today and in the weeks and months ahead. With that, I'll turn it back over to you, Warner. Thank you, Marty.
spk02: I look forward to continuing to work closely with you in your new role. Together, we remain firmly convinced that the continued execution of our strategy in the future will deliver superior value to our customers, communities, shareholders, and the environment. Thank you all for joining us today. I'll now turn the call over to Michael.
spk04: Thanks, Warner, and good morning, everyone. Turning now to page 14 of our presentation, Yesterday, we reported third quarter 2021 earnings of $1.65 per share, compared to $1.47 per share for the year-ago quarter. Earnings and reserves, our largest segment, increased $0.27 per share, driven primarily by a change in seasonal electric rate design, resulting from the March 2020 rate order, which provided for lower winter rates in May and higher summer rates in September, rather than the blended rates used in both months in 2020. Higher electric retail sales also increased earnings by approximately $0.10 per share, largely due to continued economic recovery in this year's third quarter compared to the unfavorable impacts of COVID-19 in the year-ago period, as well as higher electric retail sales driven by warmer-than-normal summer temperatures in the period compared to near-normal summer temperatures in the year-ago period. We've included on this page the year-over-year weather normalized sales variances for the quarter. Total weather normalized sales year-to-date, shown on page 27 of our presentation, are largely consistent with our expectations outlined in our column in February, as we still expect total sales to be up approximately 2% in 2021 compared to 2020. That said, we've seen a net benefit in margins due to residential and commercial sales coming in higher than expected and industrial sales slightly lower than expected. Increased investments in infrastructure and wind generation, eligible for plant and service accounting, and a renewable energy standard rate adjustment mechanism, or RESRAM, positively impacted earnings by $0.07 per share. The timing of tax expense, which is not expected to materially impact full-year results, increased earnings by $0.03 per share. Higher operations and maintenance expense decreased earnings by $0.04 per share in 2021 compared to the third quarter of 2020, which was affected by COVID-19 and remained flat year-to-date, driven by disciplined cost management. Finally, the amortization of deferred income taxes related to the fall 2021 20 Callaway Energy Center scheduled refueling and maintenance outage also decreased earnings $0.02 per share. Moving to other segments, Ameren transmission earnings increased $0.03 per share year-over-year, reflecting increased infrastructure investment. Ameren Illinois electric distribution earnings per share were comparable, which reflected increased infrastructure and energy efficiency investment and a higher allowed ROE under performance-based rate making, partially offset by dilution. Earnings for Aminola and natural gas decreased $0.04 per share. Increased delivery service rates that became effective in late January 2021 were more than offset by a change in rate design during the quarter, which is not expected to impact full-year results. Ameren Parent and other results decreased $0.08 per share compared to the third quarter of 2020, primarily due to the timing of income tax expense, which is not expected to materially impact full-year results. Finally, 2021 earnings per share reflected higher weighted average shares outstanding. Before moving on, I'll touch on year-to-date sales trends for Ameren Illinois electric distribution. Weather normalized kilowatt-hour sales to Illinois residential customers decreased a half percent. And weather normalized kilowatt-hour sales to Illinois commercial and industrial customers increased 2.5 percent and 1.5 percent, 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 15, now we'd like to briefly touch on key drivers impacting our 2021 earnings guidance. We have remained very focused on maintaining disciplined cost management and will continue that focus. As Warner noted, due to the solid execution of our strategy, we now expect 2021 diluted earnings to be in the range of $3.75 per share to $3.95 per share, an increase from our original guidance range of $3.65 per share to $3.85 per share. Select earning considerations for the balance of the year are listed on this page and are supplemental to the key drivers and assumptions discussed on our earnings call in February. Moving to page 16 for an update on regulatory matters. On March 31st, we filed for a $299 million electric revenue increase with the Missouri Public Service Commission. The request includes a 9.9% return on equity, a 51.9% equity ratio, and a September 30th, 2021 estimated rate base of $10 billion. In October, Missouri Public Service Commission staff and other intervenors filed rebuttal testimony. Missouri PSE staff recommended a $188 million revenue increase, including a return equity range of 9.25% to 9.75% and an equity ratio of 50% based on AMRA Missouri's capital structure at June 30th, 2021, which will be updated to use the capital structure as of September 30th, 2021. The October staff recommendation was lower primarily due to lower recommended depreciation expense, which would not be expected to impact earnings. Turning to page 17. In addition to the electric filing, on March 31st, we filed for a $9 million natural gas revenue increase with the Missouri PSC. The request includes a 9.8% return on equity, a 51.9% equity ratio, and a September 30th, 2021 estimated rate base of $310 million. Missouri PSE staff recommended a $4 million revenue increase, including return on equity range of 9.25% to 9.75%, and an equity ratio of 50.32% based on Air Missouri's capital structure at June 30th, 2021, which will be updated using the capital structure as of September 30th, 2021. Other parties, including the Missouri Office of Public Counsel, have also made recommended adjustments to our Missouri electric and gas rate request. Evidentiary hearings are scheduled to begin in late November, and the Missouri PSE decisions for both rate reviews are expected by early February, with new rates expected to be effected by late February. Moving to page 18, an eminently regulatory matters. In April, we made our required annual electric distribution rate update filing. Under Illinois performance-based rate making, these annual rate updates systematically adjust cash flows over time for changes in cost of service and true up in any prior period over or under recovery of such cost. In August, the ICC staff recommended a $58 million base rate increase compared to our request of $59 million base rate increase. An ICC decision expected in December with new rates expected to be effective in January 2022. Turning now to page 19, as Warner mentioned, in September, constructive energy legislation was enacted in the state of Illinois. This allows Ameren Illinois the option to file a four-year rate plan in January 2023 for rates effective beginning in 2024. The return on equity, which will be determined by the Illinois Commerce Commission, may be impacted by plus or minus 20 to 60 basis points based on the utility's ability to meet certain performance metrics related to items such as reliability, customer service, and supplier diversity. The plan also allows for the use of year-end rate base and an equity ratio up to 50% with a higher equity ratio subject to approval by the ICC. In addition, it calls for revenue decoupling and an annual reconciliation of costs and revenues for each annual period approved in the multi-year rate plan. There's a cap on the TRUP, which may not exceed 105% of the revenue requirement and excludes variation from certain forecasted costs. The exclusions include costs associated with major storms, change in timing of expenditure or investment that move the expenditure or investment into or out of the applicable calendar year, and changes in income taxes, among other things. The true-up cap also excludes costs recovered through riders, such as purchased power, transmission, and bad debts. Rate impacts to customers may also be mitigated through the ability to phase in rates. The legislation also allows for two utility-owned solar and or battery storage pilot projects to be located near Peoria and East St. Louis at a cost not to exceed $20 million each. It also provides for programs that encourage transportation electrification in the state. We believe this framework will improve our ability to make significant investments in the state of Illinois and earn a fair return on equity. Looking ahead, we have the ability to opt into the multi-year rate plan or use the future test year traditional rate making framework, both of which include a return equity determined by the ICC and revenue decoupling. Should we choose to opt into the new multi-year rate plan, our four-year plan must be filed by January 20th, 2023. We anticipate continuing to use the performance-based rate making until we proceed with a multi-year rate plan filing or choose to move ahead with using the traditional framework. Moving to page 20 for a financing update. We continue to feel very good about our financial position. We were able to successfully actually get on several debt issuances earlier this year, which we have outlined on this page. In order for us to maintain our credit ratings and a strong balance sheet while we fund our robust infrastructure plan and consistent with prior guidance as of August 15th, we have completed the issuance of approximately $150 million of common equity through our at-the-market or ATM program that was established in May. Further, approximately $30 million of equity outlined for 2022 have been sold year-to-date under the program's forward sales agreement. Together with the issuance under our 401 and DRIP Plus program, our $750 million ATM equity program is expected to support equity needs through 2023. Moving out of page 21, I'd like to briefly touch on the recent increase in natural gas prices around the country and the potential impact it may have on customer bills this coming winter. Beginning with our natural gas business, Heading into the winter season, Amarillo is approximately 75% hedged and Amarillo, Missouri is approximately 85% hedged based on normal seasonal sales. Approximately 60% of Amarillo winter supply of natural gas was bought this summer at lower prices and is being stored in the company's 12 underground storage fields. Both companies are 100% volumetrically hedged based on maximum seasonal sales. Regarding the electric business in Missouri, we are currently long generation and any margin made through offices and sales flow back to customers as a benefit on the bill through the fuel adjustment clause. Given our low cost of generation, rising natural gas and power prices have the potential to benefit our electric customers in Missouri. Turn to page 22. We plan to provide 2022 earnings guidance when we release fourth quarter results in February next year. Using our 2021 guidance as a reference point, we have listed on this page select items to consider as you think about our earnings outlook for next year. Beginning with Missouri, we expect new electric service rates to be effective in 2022 as a result of our pending rate review. These rates are expected to reflect recovery of and return on new infrastructure and wind generation investments, which are expected to increase earnings when compared to 2021. Prior to new electric service rates taking effect in late February, we expect increased investments in infrastructure and wind generation eligible for plant and service accounting and the RESRAM to positively impact earnings. Next, I would note we expect to recognize earnings related to energy efficiency performance incentives from both 2021 and 2022 plan years in 2022. As a result, we expect energy efficiency performance incentives to be approximately 4 cents per share higher than 2021. Further, our return to normal weather in 2022 would decrease AMRA Missouri earnings by approximately 4 cents compared to 2021 results to date, assuming normal weather in the last quarter of the year. Next, earnings from our FERC-related electric transition activities are expected to benefit from additional investments in Airman Illinois projects made under forward-looking formula rate making. For Airman Illinois electric distribution, earnings are expected to benefit in 2022 compared to 2021 from additional infrastructure investments made under Illinois formula rate making. The allowed ROE under the formula will be the average 2022 30-year treasury yield plus 5.8%. For Ameren Illinois Natural Gas, earnings are expected to benefit from new delivery service rates, effective late January 2021, as well as an increase in infrastructure investments qualifying for rider treatment that will earn the current allowed RWE of 9.67%. Lastly, turning to page 23, we're well positioned to continue executing our plan, continue to expect to deliver strong earnings growth in 2021 as we successfully execute our strategy. As we look to the longer term, we expect strong earnings per share growth driven by robust rate-based growth and disciplined cost management. Further, we believe this growth will compare favorably with the growth of our regulated utility peers. And Airman shares continue to offer investors an attractive dividend. In summary, we have a total share of return story that compares very favorably to our peers. That concludes our prepared remarks. We now invite your questions.
spk08: Thank you. And ladies and gentlemen, at this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press the star key followed by the number 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Jeremy Tunnett with J.P. Morgan. Please state your question.
spk02: Jeremy Tunnett Good morning, Jeremy. Jeremy Tunnett Hi.
spk06: Good morning.
spk05: Jeremy Tunnett Good morning.
spk06: Jeremy Tunnett Good morning. Thanks. Thanks for all the detail there. And I just want to pick up on the MISO-MTEPS side. You know, I was just wondering if you might be able to provide any more color for your expectations there in the process. And what could this specifically mean for Ameren over time? I realize we might be getting a little bit ahead of ourselves here, but just wanted to know if there's any way you could frame, I guess, what you think could be possible for Ameren CapEx here.
spk02: Yeah, thanks, Jimmy, for the question. Number one, let me just start with this. You know, we're very excited about the opportunity that we have for the transmission investment. Number one, We're absolutely convinced that transmission is going to play an integral role, but not just for our company, for our country, in really executing this clean energy transition. And we're right in the middle of it. We have been before, and we are going to continue to be. And so, look, it's premature to put, I would say, a specific number. As you heard us in our prepared remarks yesterday, You know, MISO has identified $30 billion to $100 billion of investment opportunities of potential projects. And I will tell you, you know, where the country is going is closer to that scenario three, which is closer to the $100 billion number. So, what we're doing, what MISO is doing, what stakeholders are doing, look, we're working together to try and make sure that we put together a good set of projects, you That will start us on this path towards this clean energy transition. And as we look at it, if you look at that scenario one that's highlighted out there, we really think the focus will be on more no regrets types of projects as we start putting our toes in the water, if you will, maybe getting up to our knees. And then from there, I think we'll see it continue to get progressively bigger over time. We think there'll be some no-regress projects. And in terms of timing, look, I think our group and many stakeholders are working collaboratively to try and figure out the best projects. as well as cost allocation things. These things are all things that are, you know, you typically go through in this process. And so at the end of the day, we think that MISO will propose early in 2022, these projects to the board of directors. It will be well informed. And then what we believe will be, hopefully will be an approval process that'll get done in early 2022. So when you look at then our overall plans, as we've said before, And you might see some of these projects in our current five-year plan start coming into play towards the back end of that five-year plan. But certainly in the second half of this decade, I think you're going to see a significant emphasis and need for transmission projects. So that's really what I can tell you today. But I'll finish the way I started there. We're excited about the opportunity because we think it's significant and important.
spk06: Got it. That's helpful. We eagerly await there. We do as well. Maybe just pivoting over to the Missouri IRP here, just wondering if you could share with us thoughts on next steps and I guess how Rush Island plays into it, what we should be thinking about there.
spk02: Yeah, thanks, Jeremy. Marty Lyons has been in the middle of all those things. I'm going to turn it over to him to respond to your questions. Marty, go ahead.
spk04: Yeah, thanks, Jeremy. Hey, how are you today? Appreciate the question. Yeah, as it relates to the integrated resource plan, obviously we filed last fall, and as Warner said earlier in the prepared remarks, we continue to work with multiple developers with respect to several projects that would fit within that 1,200 megawatts of clean energy that we plan to deliver over the next several years consistent with that integrated resource plan. So, you know, we're continuing to work on those, and we still expect to file with the Commission still this year for approval of a portion of those projects. So, you know, that work is going on. And then, you know, you mentioned, you know, the Rush Island Energy Center. And so, as you saw in our slides today, In August, the Court of Appeals affirmed the district court's September 19th order. As we said in our slides and prepared remarks, we did file for a rehearing of that decision on October 18th. So we do expect to hear back from the court, and quite likely by the end of this year, we expect in terms of that rehearing. So It's really premature to say what action we will take with respect to Rush Island at this point. We'll wait to see whether there's a rehearing. But if that rehearing is denied and ultimately we're faced with that decision, obviously it may entail scrubbers at Rush Island or the accelerated retirement of that plant. which might also include then utilization of the securitization legislation that was passed earlier this year. So those are some of the things we're looking at. Considerations as we think about those alternatives are things like customer rate impacts, replacement generation needs. and importantly, reliability and investments that may be required in terms of transmission to the extent that Rush Island were to be prematurely retired. So those are some of the considerations. I'll tell you this, if ultimately a decision is made to retire Rush Island prematurely versus the date we had in our prior integrated resource plan, that will require then that we file an updated integrated resource plan with the Missouri Public Service Commission. So, you know, stay tuned on that. Like I said, it's premature to say, you know, how all of that will turn out, but that gives you a little bit of color on the potential paths forward.
spk06: Got it. That's helpful. Thank you for that. And just one last quick one, if I could. Just wondering if you might be able to comment on your generation position, and do you see any potential customer benefits under current market conditions right now?
spk04: Hey, Jeremy, it's Michael. Yeah, I think, you know, we indicated, you know, in the prepared remarks in the slide that, you know, we historically have been long, you know, in the Missouri side. And so, obviously, to the extent that we're able to take advantage of that in the marketplace, you know, it's also some sales that flow back to customers through the fuel adjustment clause. So, you know, certainly given where natural gas prices are, which is what the impact it's having on power prices, it's definitely, you know, a bit of a tailwind from a customer affordability standpoint.
spk06: Got it. I'll leave it there. Thank you. Thanks, Jeremy. See you next week. See you then.
spk08: Our next question comes from Julian Dumoulin-Smith with Bank of America. Please state your question.
spk05: Good morning, Julian. How are you doing? Hey, good morning. This is Darius for Julian, actually. Thank you for taking my question. Can you just clarify? It was a little unclear from the opening remark. Do you intend or are you still evaluating whether or not you'll file under a multi-year rate plan in Illinois in or before January 23rd?
spk02: This is Warner. Let me just summarize what we've said. Clearly, as I said and as Michael said, we think this is a forward-thinking, constructive regulatory structure. Not only is it constructive, that enables us to make investments that we think are important for customers, but also gives us the opportunity to earn a fair return on those investments. Now, what we said, too, is that the structure's out there, but there's still some work to be done, meaning that there are workshops that have to be taken care of next year, as you might have with any specific and comprehensive piece of legislation. And we're going to work through those workshops. Now, we believe those workshops were at the table, and we expect them to be constructive outcomes. And so as a result, as we said, too, we anticipate filing for a multi-year rate plan in 2023. But there's still some work to be done. And so we're not trying to hedge or be cute. We're just sort of telling it like it is. But at the same time, as I said, we think it's a constructive piece of legislation that we think will bring benefits to our customers, the state of Illinois, and certainly to our shareholders. Michael, you have anything you want to add?
spk04: Well, you said it all correctly. I mean, I think these workshops will continue on through 2022. And, you know, I think we'll have a conclusion of them by, you know, the fall. So we'll have even better clarity. But as Werner said, The benefits clearly seem to be pretty significant here in terms of just the overall framework itself.
spk02: And just to give you a perspective, these workshops, as you know, we talk about performance metrics. There's a performance-based rate-making perspective and concept incorporated in this legislation. So the performance metrics have to be determined, how you work through some of the details of the multi-year rate plan. These are things that stakeholders have to come to the table, and we look forward to working collaboratively with all of them next year.
spk05: Okay, thank you. That's very helpful color. And if I can pivot maybe to federal legislation, if I can. Have you quantified at all or thought about the potential upside impact on your credit metrics from direct pay if that were included in final legislation?
spk02: Yeah, thanks. Needless to say, that is a very fluid situation just in the bigger picture. And so, to say that we've quantified, in particular, the specific impacts, that would be premature. I will say, there are elements of the clean energy tax incentives, which I think are very good, very good for customers and could be good for cash flows, especially when you look at the direct pay portions around certainly the ITCs and the PTCs that you have for wind and solar is really up the entire tax incentives. You know, Michael, I know that you and your team have been looking at it, but we haven't put a specific finger on it, but do you want to add a little more color to that?
spk04: Yeah, I mean, at a high level, that's correct, Warner. I mean, we are digging into it. I think there are some positive aspects. There are also some things that, you know, we've got to just get our hands around, head around with respect to, like, this minimum tax liability, which seems to run counter to some of those credits as well. Those are just some different aspects that we're really trying to balance at the end of the day. But, you know, hopefully over the course of the next, you know, quarter or so, we'll have a much better feel for where this is going.
spk02: One thing you can rest assured is that me and my industry colleagues, you know, we're at the table to try and make sure that we get a constructive piece of federal legislation down across the board that will enable us to continue to move forward thoughtfully and effectively with the clean energy transition.
spk05: Great. Thank you very much. I'll pass it on from here. You bet. Thank you.
spk08: Our next question comes from Insu Kim with Goldman Sachs. Please state your question.
spk01: Good morning, Insu.
spk07: How are you doing? Morning, Werner. How are you? My first question is on the question on the Rush Island and the long-term generation plan, if the appeal process is unsuccessful. First of all, is it by the end of 23 that you need to either put the scrubbers on or retire, or is it 24? And then my The related question to that is, as you think about potential changes to a plan, if this had to shut early, given that long generation position, how do we think about some of the opportunities on the replacement side of things?
spk02: Marty, why don't you jump on in and address that one, please?
spk04: Yeah, thanks, Insu, and good to talk to you again. With respect to moving forward with the scrubber, I think the expectation is that we would, if we went that route, move as expeditiously as possible to put the scrubbers in place at Rush Island. Not sure that there's an exact timeline. Obviously, the acquisition, design, construction would take some time to get that put in place. And then, with respect to the other route that you described, the retirement route, I think there we'd be looking at how long Rush Island would continue to operate, obviously, given the things I talked about before, replacement generation needs, importantly, reliability issues around the system in the event of a premature retirement, which, again, may necessitate some transmission investments in order to maintain reliability. So all of those things would be taken into consideration. And ultimately, to the extent that incremental generation was required or some acceleration of the clean energy transition that we've got laid out in our IRP, that would all be laid out in that updated integrated resource plan. So again, if we don't move forward with the scrubber, if we do decide that the Rush Island needs to be shut down, earlier than the date in our IRP which was 2039 you know then we would move forward with an update to the integrated resource plan again into that would assess all of the potential adjustments to generation need and timing that were laid out in that prior September integrated resource plan filing got it thanks for the color Marty um on the second question
spk07: is on the good 2021 guidance, raising that by 10 cents. And as we think about the 22, I know some of the weather benefit helped this year as well. But how do we think about some of the moving pieces that helped 21 that could potentially carry into 22? And in that considerations slide, I didn't see a specific mention to year-over-year low growth. Just curious on your base assumption there.
spk04: There's a lot in that question. Let me give you a couple of pieces. Just in terms of the growth itself, year-to-date, we put in there from a residential standpoint, we're up 1.5%, commercial 3.5%, and industrial 1%, so about 2%. That's really what we guided to. at the beginning of the year in February. Now, the mix is a little bit different. So, you know, we're seeing some improvement in margin there, which is a driver of that, you know, increase in the midpoint that you talked about in addition to weather. You know, so the plan remains on track with respect to that sales piece. You know, that 2%, we see that sort of guiding in at the same point towards the end of the year. You know, as we talked about at the beginning of the year, that'll get us close to being back to 2019, but not quite. So I think the recovery continues. And, you know, we're optimistic about it. We continue to see things open up here in both of our service territories in Missouri and Illinois. You know, with respect to the guidance itself, I just remind you again, you know, we released, you know, in February of last year, that 68% guidance was off of that midpoint. Obviously, at 375, that original midpoint at 375. We certainly have given you some select items to think about here in 22. And then, obviously, you know, in February, we'll roll all this forward to give you, you know, another look at capital as well as give you just more specifics about, obviously, where our range will be in our earnings guidance for 22 at that point in time. So hopefully that gives you a little bit of the color you're looking for.
spk07: Got it. Guys, thank you, and congrats, Marty and Warner, both of you, and see you soon.
spk02: Thanks, N2. We'll see you next week.
spk08: Our next question comes from Durgesh Chopra with Evercore ISI. Please state your question.
spk01: Good morning, Durgesh. Hey, good morning, Warner. Congratulations. Thank you. And thank you as well, Marty. I look forward to working with you. Maybe just can you talk about the 1.2 gigawatts in Missouri IRP? Just kind of what of that, what, how many, What portion of that capacity are you going to file for with the commission or get approvals for this year or early next year? Just as you're thinking about your CapEx plan being extended another year, I'm thinking about how much of that 1.2 gigawatt might be layered in.
spk02: So you bet, Marty. Why don't you come on in and address that from an operational perspective, and maybe, Michael, you can talk about how we think about guidance in terms of capital expenditures and those types of things. Sure.
spk04: That sounds great, Warner. Dagesh, I appreciate the question. I think Michael will get into this and expand on it. None of that 1,200 megawatts is really included today in the rate-based growth earnings guidance we have. They said earlier we continue to work with multiple developers with respect to multiple projects that would go towards filling out that 1,200 megawatts. At this point, as we negotiate through those, it's important to understand that those negotiations take time. There's diligence involved. Again, multiple developers we're working with really to get the best results. deals we can for our customers, ultimately. There are multiple contracts that need to be negotiated with each one of the developers. We continue to work, again, with multiple of them on multiple projects. At this point, I'd say, again, we're expecting to file for approval for a portion of that 1,200 megawatts. I expect that, you know, that'll happen this year still, but also then even further into next year. So, you know, stay tuned. I think it's premature to say exactly, you know, which project or projects we'll announce this year or early next, but we're working actively on several. So that's where we stand today. Thanks, Marty. Just a couple of other small points. On that $17 billion plan that we have out there, as Marty pointed out, there's very, very little in there with respect to any of these renewable projects. Now, we did indicate in that 10-year plan, that $40 billion plus, there is $3 billion of potential projects, which is what Marty is referring to. So, as we get more clarity on that timing. Obviously, you know, typically what we do in February is we'll roll forward that capital plan, be able to give you a bit more transparency about what the timing of that to the extent that we feel better about it and know it. So that's just a little bit more color on exactly what's there from a capital standpoint.
spk01: I appreciate that detail. Then just shifting gears to Illinois, obviously now under the new framework, you know, the ROE goes back to the ICC and they kind of come back with an ROE number. Just any early thoughts on how might they be calculating that? I mean, we as an investor have talked about sort of your gas assets there and the ROEs they're getting in nine plus percent range. Just, you know, any, from your seat, just any early color into what that ROE might look like or how might that be calculated? I appreciate that. Thank you. Sure.
spk02: You know, and this is Warren. You know, look, it's certainly been a filing is going to be sometime in 2023, and it's a multi-year filing. But what we can point to is, obviously, you know, the 580 basis points, puts a 30-year treasury, what that yields today. What we can point to is that in our gas business that we did at the beginning of this year, put in place the rate review results, that was a 9.67% return on equity for our gas business. It's not the electric business, but it's the gas business. It is just a data point. But how that will ultimately look and what the request will be for a multi-year rate plan, a lot of facts and circumstances will go into that. But we do see an opportunity for improvement, clearly, from our existing return on equity going forward.
spk04: Yeah, I mean, you know, just think about that 9.67 as kind of traditional cost of capital kind of calculations. There's nothing that's sort of unique about it from a regulatory perspective. So, you know, it's obviously different than moving away from this formulaic piece that we have.
spk02: Exactly. And we would expect, you know, the overall process in looking at that return on equity in terms of sort of a traditional look would be very similar. But obviously with the multi-year rate plan, there may be some other factors that will come into it. So stay tuned. All right. We'll leave it at that. Thanks, guys. You bet. Thank you.
spk08: Our next question comes from Paul Patterson with Glenrock Associates. Please state your question.
spk00: Good morning, Paul. Good morning. How are you doing? I'm good. How are you? Okay. So what I wanted to – first of all, I wanted to congratulate you guys. Is this your last call, Werner?
spk02: Well, number one, thank you. I'm truly excited about the new leadership structure and certainly the new roles that Marty and I are taking. And in terms of the last call, gosh, we're taking it one step at a time. We're not saying this is my last call or anything like that. We'll take that one step at a time. But you can count on me being in the EI next week, that's for sure.
spk00: Okay, well, congratulations. Thank you. And so just some, most of my questions have been answered, but A couple quick ones for you, and I apologize for not knowing this, but what are no-regrets projects? I just don't see it. That drew a blank. What does that mean?
spk02: Well, you know, it's probably a Warner term of art, right? So, you know, really, when you look at all these projects, and some you can sit there and say, gosh, you know, when we had to get – when we were having these congestion areas, when we had to get from point A to point B, and we have these projects that are in the queue – There are certain of these regional projects which really satisfy a lot of those transmission, or excuse me, renewable energy projects that are in the queue. And you do the analysis and you sit there and say, gosh, no one could, no one, I shouldn't say that. You know, it would be hard for people to argue that this isn't a project that isn't going to be significantly beneficial to the MISO footprint, frankly, to our country. So I kind of put those as no regrets. Low risk, let's call them that way. Lower risk projects, relatively speaking, compared to some that may have more complications. And so when you look at that scenario one, we think from our perspective, right, you know, beauty is in the eyes of the beholder, but from our perspective. And we think there are several of those in there that need to move forward. So that's what I mean. We haven't outlined which of those that we believe are there. And this is part of the collaborative process that we go through with MISO and other key stakeholders. But that's how we think. Really, lower risk is probably a better term to characterize those projects as.
spk00: Okay. Fair enough. And then sort of a technical question. There was this discovery dispute in the Missouri rate case on the smart energy plan. And it looked to me like basically they didn't address it in their testimony or rebuttal or what have you. And I just wanted to make sure. It has not really been resolved. It just wasn't clear to me from what they were saying. They didn't really seem to address it. And, you know, the revenue requirement and everything didn't seem to penalize you or anything for it, you know, the recommendation. So my question is, has that issue been taken care of? Paul, it's Marty.
spk04: I can't say whether it's been fully taken care of to everybody's satisfaction. I will tell you this, we do look to work constructively with all the parties in these rate reviews to get everybody the information they need in a timely basis to make decisions. To your point, I do not believe it's an active issue in terms of a quantified difference between our position and the positions of others in the case. Hopefully we have resolved that issue fully, but like you said, it's not manifesting itself today in any kind of difference between the parties.
spk00: Okay, great. And then finally, back to the 2024 question. I realize it's very early, but it does seem like a big opportunity with respect to the Illinois legislation, and I'm just wondering when you guys might incorporate the potential outlook with it into your long-term guidance. I mean, it doesn't sound like it'll be anything immediate, but I was wondering, could it be a year from now or so that you guys would feel more comfortable talking about its potential benefit, you know, impact to the long-term growth outlook, or would you be basically waiting until I guess, whenever the 2023 decision was made, so to speak.
spk02: Sure. Yeah, Paul, this is Warren. I know it's a fair question. You know, we'll provide a lot more guidance, right, on that specific question and others when we come with our, you know, our longer-term guidance in February. And we'll give you, you know, our view, right, on, you know, how we think about the guidance that we submit and how we think about regulatory frameworks and all those types of things. So, as we sit here today, you know, obviously nothing to change, nothing to talk about other than, as we've said, we think it's a constructive piece of legislation that we anticipate and assuming that things go well in the workshops, that we would file for a multi-way plan. How we embed that into our long-term guidance in early 2022, stay tuned. We'll be able to provide more detail on that.
spk00: Okay, awesome. Well, thanks so much, and congratulations again, and have a great one.
spk02: Thanks, Paul. You do the same.
spk08: Thanks, and our next question comes from David Paz with Wolf. Please state your question.
spk05: Hello, David. How are you doing?
spk04: Hey, Warner, how you doing? Congratulations on both you and Marty. Thank you. Thanks, David. Thank you. I just want to follow up on a couple quick questions. Just following up on the 1,200 megawatts in Missouri question, I understand the spend is not in your stated outlook, financial outlook, but is any of the equity for that investment in your financing plan? Yeah. Hey, David, this is Mike. plan, again, out there. You know, the equity that we talked about back in February really supports that $17 billion plan. It's, again, sort of there by default. Debt wind's not in there. There's no equity in there for it. Got it. And then in an earlier question, Mike, did you say that you would be rolling forward your growth rate off of 2022 guidance or the 2021 actuals when you were talking about the February update? Yeah, I was just referring to last February, David, you know, when we gave the 68% earnings per share growth guidance, you know, it was off of that midpoint of 375. And so, you know, that's where people should continue to stay focused. We obviously gave you some 22 select items here to think about here in the third quarter, and then we'll obviously roll forward stuff and give you a specific guidance in February of 22. I see. Okay, great. And maybe just last question, thanks, Marty. Can you provide an update maybe on just how the settlement talks are going in the rate case or whether they're still going? Yeah, thanks, David. You know, the settlement talks really get going here over the next couple of weeks. We actually have, as we laid out in the slide, a surrebuttal testimony that's actually due Friday, so I think all the parties are focused on that. And then, you know, soon after that, the parties will be pulling together reconciliations of, you know, the differences between, you know, our case and the updated positions of staff in particular, but also other parties. And then, you know, settlement discussions will get underway. As you know, again, as our, you know, right now, the evidentiary hearings are really scheduled to begin right after Thanksgiving on November 29th. So, you know, my expectation is that, you know, starting next week and all the way through that time period, there'll be, you know, settlement discussions, hopefully to narrow the issues, and if possible to, you know, resolve the entire case. Obviously, we have been successful in settling a number of cases that we've had over the past several years, including the last rate review. So, you know, we certainly expect to work towards that goal. And like I said, those discussions will really be happening between now and likely the beginning of those evidentiary hearings. Great. Thank you so much.
spk02: Thanks, David.
spk08: See you next week. Thank you. And we have reached the end of the question and answer session, so I'll now turn the call back over to Andrew Kirk for closing remarks.
spk03: Thank you for participating in this call. A replay of this call will be available for one year on our website. If you have questions, you may call the contacts listed on our earnings release. Financial inquiries should be directed to me, Andrew Kirk. Media should call Tony Perrino. Again, thank you for your interest in Ameren, and looking forward to seeing many of you next week at EI. Thanks.
spk08: Thank you. This concludes today's conference. All parties may disconnect. Have a good day.
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