Ameren Corporation

Greetings, and welcome to the Ameren Corporation's second quarter 2020 earnings conference call. At this time, all participants are in the listen-only mode. A brief 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce 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 Main, our Executive Vice President and Chief Financial Officer, as well as other members of the Ameren management team joining 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 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, strategies, 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 yesterday and the forward-looking statements and risk factors section in the 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 Warner, who will start on page four of the presentation. Thanks, Andrew.

Good morning, everyone, and thank you for joining us. Before I jump into our presentation, I'll start by saying that I hope you, your families, and colleagues are safe and healthy during this challenging time. This morning, I will begin our presentation by providing a COVID-19 update and, in particular, highlight the actions we have taken to support our customers, communities, and coworkers. I will then touch on our second quarter results and 2020 earnings guidance and finish with a discussion of several key elements of our strategy that we continue to execute very well, which will position us to continue delivering strong long-term value for our customers and shareholders. Turning now to slide four in COVID-19. Our strong commitment to the safety of our coworkers, customers, and communities remains constant. So too is our strong focus on delivering safe, reliable, and affordable electric and natural gas service during this unprecedented time. We recognize that millions of customers in Missouri and Illinois are depending on us. I can't express enough appreciation to my coworkers who have shown great agility, innovation, determination, and a keen focus on safety and delivering on our mission to power the quality of life. While we are focused on delivering safe, reliable, and affordable service, we also recognize that our mission goes beyond this during this challenging time. We recognize that our customers and communities have significant needs. That is why we are working directly with our customers on special payment plans for their utility bills. We are also working closely with many dedicated community partners and have contributed approximately $15 million for energy assistance and COVID-19 support to our customers in Missouri and Illinois. And I'm very pleased to tell you that our coworkers and board of directors are directly engaged in this effort through our Ammon Cares Power of Giving program for COVID-19. Together, these programs are helping our residential, small business, and not-for-profit customers meet their needs. In addition, we are tirelessly working with our customers to help them gain access to a host of federal support programs, including low-income energy assistance funds. Our customers are at the center of our strategy, and we will continue to take steps to help them during this unprecedented time. Throughout this challenging period, I'm also pleased to say that we have been effectively executing our strategy across all of our businesses. A key element of our strategy is to invest in energy infrastructure to benefit our customers. and in so doing, provide important jobs that support the local economy as well as local suppliers at a time when they are needed most. Looking ahead, we recognize that we will need to be managing the impacts of COVID-19 for some time. With safety and delivering on our mission and strategy at the top of our minds, we plan to continue managing our business under our current COVID-19 protocols, which includes having a significant portion of our workforce working remotely through at least the end of this year. We also continue to carefully monitor the impact of COVID-19 on our electric sales, liquidity, and supply chain. To date, these impacts have been manageable and in line with our expectations. At the same time, we will remain focused on exercising financial discipline to mitigate the potential impacts of COVID-19, while capitalizing on some key opportunities that we have identified during this crisis. including benefits we are realizing from our digital transformation investments and streamlined operating practices. Turning now to page 5 for an update on second quarter results and 2020 earnings guidance. Yesterday, we announced second quarter 2020 earnings of $0.98 per share compared to $0.72 per share earned in 2019. A summary of the key drivers of the year-over-year increase of $0.26 per share is provided on this page, which Mike will discuss in more detail in a moment. The strong execution of our strategic plan drove strong quarterly earnings results and enabled us to affirm our 2020 earnings guidance range of $3.40 per share to $3.60 per share. Moving to page six, here we reiterate our strategic plan, which as I just mentioned, we've been executing very well throughout the year. We expect our plan to continue delivering significant value for our customers and strong long-term earnings growth for our shareholders. 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 customers in all of our jurisdictions. As you can see on the right side of this page, during the first half of this year, we invested significant capital in each of our business segments to better serve our customers, most notably at Amram Transmission, where we effectively managed a nearly 25% increase in infrastructure investment compared to the first half of 2019. These investments are delivering value to our customers and community. Our energy grid is becoming more reliable, resilient, and secure, and our digital investments are enhancing our customers' experience. Of course, we're not done. Looking ahead, we continue to see the need for robust energy infrastructure investments to meet our customers' energy needs and exceed their expectations of keeping rates affordable. Our electric rates in both Missouri and Illinois continue to be well below the Midwest and national averages. As we discussed in our first quarter earnings call, new electric rates went into effect on April 1st of this year as a result of a constructive settlement in Ameren, Missouri's electric rate review. The settlement included a $32 million annual revenue decrease, which marks the second consecutive decrease since 2018. Since Ameren, Missouri's last electric rate review in 2017, its customer rates have decreased by 7%. While at the same time, we have continued to make significant investments in energy infrastructure to benefit our customers. As Michael will cover in more detail later, we have also been very busy managing our electric and natural gas regulatory proceedings in Illinois. We expect a final decision in the electric proceeding by December of this year and a final decision in the gas proceeding by January of next year. Finally, another important element of the first pillar of our strategy has been and remains a relentless focus on continuous improvements and disciplined cost management to keep rates affordable. Moving to the second pillar of our strategy, which includes enhancing regulatory frameworks for the benefit of all stakeholders. As you know, we continue to support the proposed Downstate Clean Energy Affordability Act in Illinois. This important legislation would allow Ameren Illinois to make significant investments in solar energy and battery storage to improve reliability, as well as to make investments in transportation electrification in order to benefit customers and the economy across central and southern Illinois. In addition, it would help address depressing energy policy challenges facing the state, including the need for additional renewable sources and better electric vehicle charging infrastructure. This bill would help address these challenges and move the state of Illinois closer to reaching its goal of 100% clean energy by 2050. In addition, this legislation would modify the allowed return on equity formula to increase the basis point adder to the average 30-year Treasury rate from 580 to 680 and would also extend the electric performance-based rate-making framework through 2032. Importantly, this legislation builds on Ameren Illinois' efforts to modernize the energy grid under a transparent and stable regulatory framework that has supported significant investment to modernize the energy grid while improving reliability and creating approximately 1,400 jobs, all while keeping rates well below the Midwest and national averages. In fact, all in residential rates in 2020 are down 1% compared to 2012. The first year of performance-based rates. Simply put, the performance-based grid modernization legislation that was passed in 2011 and extended twice by the Illinois legislature under different administrations has been an overwhelming success for Illinois. With all these benefits in mind, we remain focused on working with key stakeholders to get this important legislation passed. Turning now to page 7, I'll provide an update on FERC regulatory matters. In May, the FERC issued an order on the hearing request related to its November 2019 order addressing two complaint cases that reduced MISO's base return on equity. The order established a new base return on equity methodology using three models, the risk premium model, capital asset pricing model, and the discounted cash flow model. The revised order sets a base return on equity of 10.02% for transmission projects for the first complaint case period and effective as of September 28, 2016. This results in a return on equity of 10.52% for airman transmission, including the 50 basis point adder for being a part of MISO. The FERC also dismissed the second complaint case. We are pleased with the order and believe it to be constructive as the new three-model methodology expands the range of reasonableness used to assess whether current returns on equity are just and reasonable. The FERC also issued a notice of proposed rulemaking in March. Overall, we believe that the policies outlined in the proposed rulemaking are constructive. As a result, we, along with the other MISO transmission owners, filed comments in June in support of the proposed increase to the RTO adder, reliability and benefit-based incentives, and the ROE cap. We are unable to predict the ultimate timing or impact of these matters, as the FERC is under no timeline to issue a decision. Moving now to page 8 for an update on the third pillar of our strategy, creating and capitalizing on opportunities for investment, for the benefit of our customers, shareholders, and the environment. Here, we provide an update on our $1.2 billion wind generation investment plan to achieve compliance with Missouri's renewable energy standard through the acquisition of 700 megawatts of new wind generation at two sites in Missouri. In short, there's been no significant change to the project schedules from what we discussed on our first quarter call in May. Construction is well underway at both facilities. We are working closely with the developers for both projects to monitor the timing of manufacturing, shipment, and installation of facility components. We continue to expect the 400-megawatt facility to be in service by the end of 2020. Regarding the 300-megawatt facility, we expect it to be substantially in service by the end of 2020. However, as a result of certain delays we discussed on our first quarter earnings call in May, We expect a portion of the project, representing approximately $100 million of investment, to be placed in service in the first quarter of 2021. We expect no reduction in production tax credits because of the recent rule changes made by the U.S. Department of the Treasury to extend the in-service criteria by one year to December 31, 2021. Furthermore, we will continue to explore additional renewable energy investment opportunities that will drive long-term value for our customers and shareholders. Right now, Ammon, Missouri is in the process of finalizing its next integrated resource plan. For several months, we have been working closely with key stakeholders in developing our plan. We are carefully looking at several approaches to best meet our customers' future energy needs and effectively transition our generation to a cleaner, more diverse portfolio in a responsible fashion. We will be finalizing our plan over the next 45 days and plan to file our IRP with the Missouri PSC by September 30th. We are excited about the benefits that our current mid-generation projects will deliver to all stakeholders. as well as the prospects for additional renewable generation resources to meet our customers' energy needs in the future. Moving to page nine, looking ahead through the end of this decade, we have a robust pipeline of investment opportunities of over $36 billion that will deliver significant value to all of our stakeholders by making our energy grid stronger, smarter, and cleaner. These investment opportunities exclude any potential new renewable generation from the Missouri Integrated Resource Plan, as well as any potential new multivalue transmission projects that would increase the reliability and resiliency of the energy grid, as well as enable additional renewable generation projects. Of course, our investment opportunities will 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 local economies. Maintaining constructive energy policies that support robust investment in energy infrastructure will be critical to meeting our country's future energy needs and delivering on our customers' expectations. Moving to page 10, to sum up our value proposition, the consistent execution of our strategy over many years and on many fronts has positioned us well for future success. we remain firmly convinced that the execution of this strategy in 2020 and beyond will deliver superior value to our customers, shareholders, and the environment. In May, we affirmed our five-year growth plan, which included our expectation of 6% to 8% compound annual earnings per share growth for the 2020 through 2024 period, using the 2020 EPS guidance range midpoint as the base. This earnings growth is primarily driven by our approximate 9% compound annual rate-based growth in 2019 through 2024 and compares very favorably with our regulated utility peers. 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. Further, our shares continue to offer investors a solid dividend. Our strong earnings growth expectations position us well for future dividend growth. Of course, future dividend decisions will be driven by earnings growth in addition to cash flows and other business conditions. Together, we believe our strong earnings growth outlook, combined with our solid dividend, results in a very attractive total return opportunity for shareholders. Again, thank you all for joining us today. Now I'll turn the call over to Michael.