Ameren Corporation

Greetings and welcome to Ameren Corporation's fourth quarter 2020 earnings conference call. At this time, all participants are on 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Andrew Kirk, Director of Investor Relations. Thank you. 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. Lorna 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 Amerindustries.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 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. Before I begin our discussion of year-end results and other key business matters, I'll start with a few comments on COVID-19, as well as the steps we have taken to deliver safe and reliable electric and natural gas service to our customers during the recent period of extremely cold weather in our region. To begin, I hope you, your families, and colleagues are safe and healthy. While COVID-19 has driven a great deal of change, I can assure you that one thing that remains constant in Ameren is our strong commitment to the safety of our coworkers, customers, and communities. So too is our strong focus on delivering safe, reliable, cleaner, 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 while delivering on our mission to power the quality of life. And while we're focused on addressing the challenges associated with the pandemic and achieving our mission each day, we never lose sight of our vision, leading the way to a sustainable energy future. Despite the significant challenges presented by COVID-19, I look to the future with optimism, not just because vaccines are now being distributed to millions around the world, but also because of how our coworkers stepped up and addressed a multitude of challenges and capitalized on opportunities in 2020 that will clearly help us achieve our vision. Speaking of stepping up to challenges to ensure that we continue to deliver on our mission and vision, our team has been tirelessly working over the last week to ensure that we continue to deliver safe, reliable electric and natural gas services to millions of people in our service territory, despite the extremely cold weather that we are experiencing in our region. As you know, the extremely cold weather has created significant challenges to maintain the safety and reliability of the energy grid in several areas of the country. Understandably, the cold weather has driven a significant increase in customer demand for electric and natural gas service. At the same time, The extreme weather has resulted in natural gas supply disruptions and limitations, operational issues at power plants, and transmission constraints. Combined, these extraordinary circumstances led several regional transmission organizations to implement emergency operations protocols, which included controlled interruptions of service to customers in several states, most notably in Texas. Not surprisingly, these same set of conditions result in significant increases in power and natural gas prices in the energy markets. To date, we have not experienced any significant reliability issues in our Missouri or Illinois businesses as past investments in energy infrastructure have paid off. In addition, the strong operation of our gas storage fields in Illinois and coal-fired energy centers in Missouri, as well as our robust interconnections with gas pipeline suppliers and the power markets have played a major role as well. Rest assured, we will continue to actively manage this challenging situation for our customers. Turning now to page four, before I jump into the details of our accomplishments and strategic areas of focus, I want to reiterate the strategy that has been delivering significant long-term value to all of our stakeholders. Specifically, our strategy is to invest in a robust pipeline of regulated energy infrastructure, continuously improve operating performance, and advocate for responsible energy and economic policies to deliver superior value to our customers and shareholders. As always, our customers continue to be at the center of our strategy. I am pleased to say that our actions and performance in 2020, as well as our strategic areas of focus for the future, are strongly aligned with our customers' and shareholders' expectations to lead the way to a sustainable energy future, which brings me to a discussion about 2020 performance. As I said earlier, we delivered strong financial and operational performance in 2020. Yesterday, we announced 2020 earnings of $3.50 per share, compared to earnings of $3.35 per share earned in 2019. Excluding the impact from weather, 2020 normalized earnings increased to $3.54 per share, or approximately 6.6% of 2019's weather normalized earnings of $3.32 per share. With our customers' and shareholders' expectations in mind, we made significant investments in energy infrastructure in 2020 that resulted in a more reliable, resilient, secure, and cleaner energy grid, as well as contributed to strong rate-based growth in all of our business segments. Consistent with these objectives and despite COVID-19 challenges, we successfully executed on a robust pipeline of investments across all of our businesses. In 2020, as outlined on this page, we also achieved constructive outcomes in several regulatory proceedings that will help drive additional infrastructure investments that will benefit customers and shareholders while keeping our customers' rates affordable. The bottom line is that we successfully executed our strategy in 2020, which will drive significant long-term value for all of our stakeholders. Turn into page five. Here, we highlight the significant progress we made in an area that has and will continue to be a significant area of focus, sustainability. Last September, we announced a transformational clean energy transition plan that effectively balances environmental stewardship with reliability and affordability. In particular, we established a clean energy goal of net zero carbon emissions by 2050 across all of our operations in Missouri and Illinois. We also established strong interim carbon reduction goals of 50% by 2030 and 85% by 2040, based on 2005 levels. In addition, our plan includes robust investments in new wind and solar generation while being mindful of reliability. Notably, we are targeting adding 5,400 megawatts of new renewable wind and solar generation resources to our generation portfolio by 2040. Our plan also includes advancing the retirement of two coal-fired energy centers, extending the life of our carbon-free Callaway Nuclear Energy Center to 80 years, and partnering with the Electric Power Research Institute in assessing advanced clean energy technologies for the future. We have already executed key elements of this plan. In particular, a significant milestone toward accomplishing our net zero carbon emissions goal was reached with the acquisition of the 400 megawatt High Prairie Renewable Energy Center in December. This was our first wind generation addition and is the largest wind facility in the state of Missouri. Early this year, we also acquired our second wind generation investment, the Atchison Renewable Energy Center, which when completed is expected to be a 300 megawatt facility. We also have a strong, long-term commitment to our customers and communities to be socially responsible and economically impactful. There has never been a more important time than now to be a leader in this area, and we are leaning forward. In terms of COVID-19 relief, we've been continuously working to help our customers in need, including implementing disconnection moratoriums, providing special bill payment plans and providing over $23 million of critical funds for energy assistance and other basic needs. We held a virtual diversity, equity, and inclusion leadership summit in June 2020 that included over 600 community leaders and coworkers. During that summit, Erin made a commitment of $10 million over the next five years to nonprofit organizations focused on DE&I. And we spent over $800 million with diverse suppliers in 2020, a 24% increase over 2019. From a governance perspective, our board of directors' oversight of sustainability risks was enhanced. In addition, we named our first chief renewable development officer to lead our continued efforts to transition to a cleaner and more diverse generation portfolio. Further, the Board of Directors strengthened our executive compensation program by adding a 10% long-term incentive based on implementing our clean energy transition plans. And just last week, the Board approved the addition of workforce and supply diversity metrics to our short-term incentive plan for 2021. All of these efforts are consistent with our vision, leading the way to a sustainable energy future and our mission to power the quality of life. Turning to page 6. As you can see on this page, our laser focus on executing our strategy for the last several years has delivered strong results. From our customer standpoints, our investments in infrastructure have driven our reliability to top quartile performance, while at the same time, our disciplined cost management has kept our electric rates among the lowest in the country. The combination of these factors has helped drive significantly higher customer satisfaction scores. We have also delivered superior value to our shareholders, as you can see on page 7. Our weather normalized core earnings per share has risen 70% or at an approximately 8% compound annual growth rate since we exited our unregulated generation business in 2013, while our dividend rate has increased 25% over the same time period. This has resulted in a significant reduction in our weather normalized dividend payout ratio from over 77% in 2013 to 56% in 2020, near the bottom of our 55% to 70% targeted dividend payout range, positioning us well for continued strong infrastructure investments and rate-based growth, as well as future dividend growth. Speaking of dividend growth, I am pleased to report that last week, Amherst Board of Directors approved a quarterly dividend increase of approximately 7%, resulting in an annualized dividend rate of $2.20 per share. This increase, coupled with the dividend increase of 4% in October 2020, reflects confidence by Airman's Board of Directors in the outlook for our businesses and management's ability to execute its strategy for the long-term benefit of our customers and shareholders. While I'm very pleased with our past performance, we are not sitting back and taking a deep breath. We remain focused on accelerating and enhancing our performance in 2021 and in the years ahead, so we can continue to deliver superior value to our customers, communities, and shareholders. Which brings me to page eight. Yesterday afternoon, we also announced that we expect our 2021 earnings to be in the range of $3.65 to $3.85 per share. Michael will provide you with more details on our 2021 guidance a bit later. Building on the strong execution of our strategy and our robust earnings growth over the past several years, we continue to expect to deliver long-term earnings growth that is among the best in the industry. We expect to deliver 6% to 8% compound annual earnings per share growth from 2021 to 2025, using the midpoint of our 2021 guidance, $3.75 per share, as the base. Our long-term earnings growth will be driven by continued execution of our strategy, including investing in infrastructure for the benefit of our customers while keeping rates affordable. Another important element of our strong total shareholder return story is our dividend. Looking ahead, Ammon expects future dividend growth to be in line with its long-term earnings per share growth expectations and within a payout ratio range of 55% to 70%. In addition to earnings growth considerations, future dividend decisions will be driven by cash flow, investment requirements, and other business conditions. Turning to page nine, the first pillar of our strategy stresses investing in and operating our utilities in a manner consistent with existing regulatory frameworks. The strong long-term earnings growth I just discussed is primarily driven by our rate-based growth plan. Today, we are rolling forward our five-year investment plan and, as you can see, we expect to grow our rate base in an approximately 8% compound annual rate for the 2020 through 2025 period. This growth is driven by our robust capital plan of approximately $17 billion over the next five years that will deliver significant value to our customers and the communities we serve. Our plan includes strategically allocating capital to all four of our business segments – Importantly, our five-year earnings and rate-based growth projections do not include 1,200 megawatts of incremental renewable investment opportunities proposed in Amherst, Missouri's Integrated Resource Plan. Our team continues to assess several renewable generation proposals from developers. We expect to file for certificates of convenience and necessity for some renewable generation projects in 2021 with the Missouri PSC. We expect to add these investments to our multi-year rate-based outlook as we finalize pending negotiations with renewable energy developers and move further along in the regulatory approval process in Missouri. Finally, we remain focused on disciplined cost management to earn as close to our lab returns as possible in all of our businesses. Speaking of disciplined cost management, let's now turn to page 10. Over the last several years, we have worked hard to enhance the regulatory frameworks in both Missouri and Illinois to help drive additional infrastructure investments that will benefit customers and shareholders. At the same time, we have been very focused on disciplined cost management to keep rates affordable. Our efforts are paying off. As outlined on this page, residential rates have decreased since opting into these enhanced regulatory frameworks for all of our Missouri electric and Illinois electric and natural gas distribution businesses. So to be clear, since these constructive frameworks have been put in place, significant investments have been made, reliability has improved, rates have gone down, and thousands of jobs have been created. While this is a great win for our customers and communities, we are not done. Turning to page 11, as you can see from this chart, our operating expenses have decreased 14% since 2015. We will remain relentlessly focused on disciplined cost management as we look forward to the next five years and beyond. This will not only include the robust cost management initiatives undertaken to manage through COVID-19, but also several other customer affordability initiatives. These initiatives include the automation and optimization of our processes, including leveraging the benefits from significant past and future investments in digital technologies and grid modernization. In addition, as part of the Ammon, Missouri Integrated Resource Plan, we will work to responsibly retire our coal-fired energy centers over time, which includes thoughtfully managing workforce changes through attrition, transfers to other facilities, and retraining for other positions in the company. Turning now to page 12, next I want to cover the second pillar of our strategy, enhancing regulatory frameworks and advocating for responsible energy and economic policies. An enhanced version of the Downstate Clean Energy Affordability Act legislation was filed in the past week, which in the past 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 gas infrastructure to improve 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 Air Energy Affordability Act is that it would allow for performance-based rate-making for Amarillo, Illinois' natural gas and electric distribution businesses through 2032. The proposed performance metric would ensure investments are aligned with and are contributing to the reliability of the energy grid, as well as to transition to the clean energy vision of the state. Further, this legislation would modify the allowed return on equity methodology in each business to align with returns being earned by other gas and electric utilities across the nation. This legislation builds on Airman Illinois' efforts to invest in critical energy infrastructure under a transparent and stable regulatory framework that has supported significant investment, improved safety and reliability, as well as created over 1,400 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. By providing for performance-based rate-making for both electric and gas distribution businesses, we believe the proposed legislation would further align the energy goals of Amarillo, Illinois and the state of Illinois for the benefit of our customers, the communities we serve, and the environment. With all these benefits in mind, we are focused on working with key stakeholders to get this important legislation passed this year. Moving now to page 13 for an update on our $1.1 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. As I mentioned earlier, AMRA Missouri closed on the acquisition of our first wind energy center a 400 megawatt project in northeast Missouri in December. Last month, we acquired our second wind generation project, the 300 megawatt Atchison Renewable Energy Center, located in northwest Missouri. Approximately 120 megawatts are already in service. We expect a total of 150 megawatts to be in service by the end of the first quarter, which will remain expected later in 2021 upon the replacement of certain turbine blades. We financed these projects through a combination of green first mortgage bonds and common stock issued under our forward equity sale agreement. We do not expect a construction delay on our Atchison Wind Facility to have significant economic consequences or reduce the production tax credits for this project because of the rule change made by the U.S. Department of Treasury last year to extend the end service criteria by one year to December 31, 2021. Turning now to page 14 and an update on our Callaway Energy Center. During its return to full power as part of its 24th refueling and maintenance outage in late December 2020, Air Missouri's Callaway Energy Center experienced a non-nuclear operating issue related to its generator. A thorough investigation of this matter was conducted and the decision was made to replace certain key components of the generator in order to safely and sustainably return the Energy Center to service. Work is already underway on this capital project, which we expect will cost approximately $65 million. We are also pursuing the recovery of costs through applicable warranties and insurance. Due to the long lead time for the manufacturing, repair, and installation of these components, the Energy Center is expected to return to service in late June or early July. And as announced previously, we do not expect this manager to have a significant impact on Ameren's financial results. Turning now to page 15, as we look to the future, the successful execution of our five-year plan is not only focused on delivering strong results for 2025, but is also designed to position Ameren for success over the next decade and beyond. We believe that a safe, reliable, resilient, secure, and cleaner energy grid will be increasingly important and bring even greater value to our customers, our communities, and shareholders. With this long-term view in mind, we are making investments that will position Ameren to meet our customers' future energy needs and rising expectations, support our transition to a cleaner energy future, and provide safe, reliable natural gas services. The right side of this page shows that our allocation of capital is expected to grow our electric and natural gas energy delivery investments to be 82% of our rate base by the end of 2025. As a result of Amherst, Missouri's investment in 700 megawatts of wind generation, combined with the scheduled retirement of the Merrimack Coal Fire Energy Center in 2022, we expect coal fire generation to decline to just 7% of rate base and our renewable generation to increase to 6% of rate base by year end 2025. As noted previously, our current five-year plan does not include 1,200 megawatts of incremental renewable generation included in Air Missouri's Integrated Resource Plan by 2025. These actions are just further examples of the steps we are taking to address our customers' and shareholders' focus on ESG matters and achieve our net zero carbon emissions goal by 2050. The bottom line is that we're taking steps today across the board to position Ameren for success in 2021 and beyond. Moving to page 16, looking ahead through the end of this decade, we have a robust pipeline of investment opportunities, over $40 billion that will deliver significant value to all of our stakeholders by making our energy grid stronger, smarter, and cleaner. Importantly, these investment opportunities exclude any new regionally beneficial 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 our local economies. Maintaining constructive energy policies that support robust investment in energy infrastructure and a transition to a cleaner future in a responsible fashion will be critical to meeting our country's future energy needs and delivering on our customers' expectations. Moving to page 17. As we have outlined in our presentation today, we are focused on delivering a sustainable energy future for our customers, communities, and our country. Consistent with that focus, yesterday we issued our updated ESG investor presentation called Leading the Way to a Sustainable Energy Future. This presentation demonstrates how we have been effectively integrating our focus on environmental, social, governance, and sustainability matters into our corporate strategy. This slide summarizes our strong sustainability value proposition for environmental, social, and governance matters. Throughout the course of my discussion this morning, I've already covered many of these topics. A few other notable points include the fact that we were honored to again be recognized by Diversity, Inc. as one of the top utilities in the country for diversity, equity, and inclusion, as well as be rated in the top 25 of all companies for ESG in their inaugural list. Finally, our strong corporate governance is led by a very talented and diverse board of directors focused on strong oversight of ESG matters. I encourage you to take some time to read more about our sustainability value proposition. You can find this presentation at amarininvestors.com. Moving to page 18. 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. We believe our expectation of a 6% to 8% compound annual earnings growth from 2021 to 2025, driven by strong rate-based growth, 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. 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 solid dividend. Our strong earnings growth expectations outlined today position us well for future dividend growth. Simply put, we believe our strong earnings and dividend growth outlooks results in a very attractive total return opportunity for shareholders. Again, thank you all for joining us today. I'll now turn the call over to Michael.