Ameren Corporation

Greetings and welcome to Ameren Corporation's first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone would require operator assistance during the conference, please press star zero on your telephone keypad. It is now my pleasure to turn the conference over to your host, Andrew Kirk, Director of Investor Relations for Ameren Corporation. Thank you, Mr. Kirk. You may begin.

Thank you and good morning. On the call with me today are Warner Baxter, our chairman, president, 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 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 at 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 amarininvestors.com homepage that will be referenced by our speakers. As noted on page two of this presentation, comments made during this conference call may contain statements that are commonly referred to as forward-looking statements, Such statements include those about future expectations, beliefs, plans, projections, strategies, targets, estimates, objectives, events, conditions, and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated. For additional information concerning these factors, please read the forward-looking statement section in the news release we issued today and the forward-looking statements and risk factor sections in our filings with the SEC. Lastly, all per share earnings amounts discussed during today's presentation include earnings guidance are presented on a diluted basis unless otherwise noted. Now, here's Warner. Thanks, Andrew.

Good morning, everyone, and thank you for joining us. I hope you, your families, and colleagues are safe and healthy. Before I begin my discussion about first quarter results and related business matters, I want to begin with a few comments on COVID-19. It is hard to believe that we have now been addressing the challenges associated with this pandemic for over a year now. Needless to say, much has changed. However, one thing that has not changed is a relentless focus on delivering safe, reliable, cleaner, and affordable electric and natural gas service for the millions of people in Missouri and Illinois that are depending on us. As I said during our year-end conference call in February, Despite the significant challenges presented by COVID-19, I look to the future with optimism. In part, this is due to the aggressive distribution of vaccines throughout our country. I am pleased to say that we are beginning to see the fruits of the incredible efforts by so many in the healthcare, government, public, and private sectors. COVID-19 cases are down significantly from earlier in the year, and restrictions have lessened. As a result, we are clearly seeing signs that the economy is improving on our service territory and across the country. My optimism was also driven by how our coworkers have consistently stepped up and addressed a multitude of challenges and capitalized on opportunities and the strong execution of our strategy that is delivering value to our customers, communities, and shareholders. Together, these factors contributed to our ability to get off to a strong start in 2021. Which brings me to a discussion of our first quarter results, starting on page four. Yesterday, we announced first quarter 2021 earnings of $0.91 per share, compared to earnings of $0.59 per share in the first quarter of 2020. The year-over-year increase of $0.32 per share reflected increased infrastructure investments across all of our business segments that will drive significant long-term benefits for our customers. The key drivers of first quarter results are outlined on this slide. I'm also pleased to report that we continue to effectively execute our strategic plan and remain on track to deliver within our 2021 earnings guidance range of $3.65 per share to $3.85 per share. Michael will discuss our first quarter earnings, 2021 earnings guidance, and other related items in more detail later. Moving to page five here, we reiterate our strategic plan. The first pillar of our strategy stresses investing in and operating our utilities in a manner consistent with existing regulatory frameworks. This has driven our multi-year focus on investing in energy infrastructure for the long-term benefit of customers. As a result, and as you can see on the right side of this page, during the first three months of this year, we invested significant capital in each of our business segments, including our investment in wind generation. Regarding regulatory matters, in late March, Amateur Missouri filed a request for a $299 million increase in annual electric service revenue with the Missouri Public Service Commission. In addition, Inland Missouri filed a request for a $9 million increase in annual natural gas revenue with the PSC. While Michael will discuss the details of the request in a moment, I'd like to briefly touch on some of the key benefits our electric and natural gas customers in Missouri are seeing as a result of the investments reflected in these rate requests. We are now in the third year of Inland Missouri's Smart Energy Plan. which is focused on strengthening the grid through infrastructure upgrades, adding more renewable generation, and creating programs to stimulate economic growth for communities across the state. Our grid monetization investments incorporate smart technology, including knowledge detection and restoration switches, as well as smart meters, which allow customers to take advantage of new rate options. These investments are delivering results to improve reliability and resiliency. For example, on circuits with new smart technology upgrades, we have seen up to a 40% improvement in the liability. Of course, we also remain committed to a clean energy transition for our customers and state. This is demonstrated through our recent acquisitions of two wind generation facilities located in northern Missouri, totaling 700 megawatts. In addition, our investments are stimulating economic growth for communities across the state. I'm pleased to say that 57% of every Missouri suppliers in 2020 were Missouri-based, and 32% of its sourceable capital spend was with diverse suppliers. And we're doing all of these things while keeping our customers' electric rates approximately 20% below the average in other Midwest states and across the country. At the same time, we remain very disciplined in managing our costs. As a result, if approved, the new electric rate request will represent a 5.4% total increase over an almost five-year period, a yearly average of approximately 1%. We will remain disciplined in managing our costs while we build a stronger, smarter, and cleaner energy system for our customers now and in the future. Moving now to Amarillo, Illinois regulatory matters. In January, we received a constructive rate order from the ICC that resulted in a $76 million annual increase in gas distribution rates. New rates went into effect in late January. In our Illinois electric business, we made our required annual electric distribution rate filing requesting a $64 million base rate increase. This filing is only the second requested increase in delivery service rates in six years. While Michael will touch on the details of our find a bit later, I think it is important to note that for years, our Illinois customers have realized the benefits of our significant investments in energy infrastructure. Since performance-based rate-making began in 2012, reliability has improved by 20% and over 1,400 jobs have been created. At the same time, electric rates are among the lowest in the country and Midwest and are approximately 3% below 2012 levels. This performance-based framework has been a win-win for our customers and the state of Illinois. That is why we continue to strongly advocate for a performance-based regulatory framework in the Illinois legislature. This brings me to our discussion of the second pillar of our strategy, enhancing regulatory frameworks and advocating for responsible energy and economic policies on page six. As I discussed in our conference call in February, an enhanced version of the Downstate Clean Energy Affordability Act legislation was filed earlier this year, which, 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 electric and gas infrastructure to continue to enhance safety and reliability, as well as in transportation electrification. in order to benefit customers in the economy across Central and Southern Illinois. This important piece of legislation will also require diverse supplier spin reporting for all electric renewable energy providers. Another key component of the Downstate Clean Energy Affordability Act is that it will allow for performance-based rate making for Ammon, Illinois' natural gas and electric distribution businesses through 2032. The proposed performance metrics will ensure investments are aligned with and are contributing to the safety and reliability of the energy grid and natural gas systems, as well as the state's vision for the transition to clean energy. Further, this legislation will modify the allowed return on equity methodology in each business to align with the average returns being earned by other gas and electric utilities across the nation. And, as I noted a moment ago, this legislation builds on Ameren Illinois' efforts to invest in critical energy infrastructure under a transparent and stable regulatory framework that has supported significant investment, improved safety and reliability, and created significant new jobs, all while keeping electric rates well below the Midwest and national averages. This bill would also move the state of Illinois closer to reaching its goal of 100% clean energy by 2050. With all these benefits in mind, we are focused on working with key stakeholders to get this important legislation passed. To date, the Downstate Clean Energy Affordability Act has received strong bipartisan support from members of the Senate and House. Currently, House Bill 1734 has 49 sponsors, and Senate Bill 311 has 21 sponsors. As I'm sure you know, there are also several other energy-related bills being considered by the legislature. we will continue to be actively engaged with key stakeholders throughout the legislative session on these important energy policy matters. The spring session is currently set to end May 31st. Turn into page 7 for an update on FERC regulatory matters. In April, FERC issued a supplemental notice of proposed rulemaking on the Elected Transmission Return on Equity Incentivator for participation in the Regional Transmission Organization, or RTO. In the supplemental notice, the FERC proposes to limit the duration of the 50 basis point ROE incentivator for companies that join an RTO to three years. The FERC also proposes to eliminate the adder for utilities that have been part of an RTO for three years or more, which would include Airman Illinois and ATXI. Without this incentivator, Airman Illinois and ATXI would earn the current allowed base ROE of 10.02%. For perspective, every 50 basis point change in our FERC ROE impacts annual earnings per share by approximately $0.04. Needless to say, we are disappointed with the direction that FERC has taken in the supplemental notice and strongly oppose the removal of the adder. From our perspective, the RTO participation adder is needed to compensate companies for assuming risk associated with turning over operational control of assets to the RTO. The proposal is also inconsistent with the FERC stated policy goals and the intent of existing model to encourage RTO participation. We will continue to advocate for the RTO incentivator and other project incentivators proposed in the March 2020 NOPR. We will file comments on the supplemental NOPR by the May 26 deadline. Of course, we are unable to predict the ultimate outcome or timing of this matter as the FERC is under no timeline to issue a decision. Moving now to page eight. Front policy matters are important because transmission investment is going to play a critical role in our country's clean energy transition. As we have discussed before, MISO and other key stakeholders, including Ameren, have been carefully assessing the transmission needs in the MISO footprint to ensure the overall reliability and resiliency of the energy grid is maintained while companies execute their clean energy transition plans. Recently, MISEL published several reports that outlined some of the preliminary thoughts on MISEL's transmission needs in the future. This page summarizes a recent study that outlines a potential roadmap for transmission projects through 2039, taking into consideration the rapidly evolving generation mix based on announced utility integrated resource plans, state mandates, and goals for clean energy and or carbon emission reduction reductions, among other things. I would also note that MISO and the Southwest Power Pole are also working together to develop a similar evaluation of transmission needed to support the transition across both regions. The bottom line is that significant regional and local transmission investments will be needed for the clean energy transition over the next 10 to 20 years. For example, under MISO's Future One scenario, which is a scenario that resulted in an approximate 60% carbon emission reduction below 2005 levels by 2039, MISO estimates future transmission investment could amount to an estimated $30 billion in the MISO footprint. Further, Future 3 resulted in an approximate 80% reduction in carbon emission levels below 2005 levels by 2039. MISO's estimated Future 3 could result in an estimated $100 billion in transmission investment in the MISO footprint. To provide some context to this, during MISO's last regional transmission planning process, approximately $6.5 billion of multivalued project investments were made over the last 10 years or so. in light of the continued focus on the clean energy transition in our country. We are actively working with MISO and other key stakeholders to move the assessment and project approval process along with an appropriate sense of urgency to ensure we maintain a safe, reliable, and resilient energy grid and do so in an affordable fashion. Given our past success in executing large regional transmission projects, we believe we are well positioned to plan and execute potential projects in the future for the benefit of our customers and country. We believe certain projects outlined in future one will be included in this year's MISO transmission planning process, which is scheduled to be completed in the fourth quarter of 2021. We look forward to working with MISO and key stakeholders on this important planning process. Speaking of clean energy transitions, let's move now to page nine 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 new wind generation at two sites in Missouri. Air Missouri closed on the acquisition of its first wind energy center, a 400 megawatt project in northeast Missouri in December. In January, Ammon, Missouri acquired its second wind generation project, the 300 megawatt Atchison Renewable Energy Center, located in northwest Missouri. Approximately half the megawatts of the Atchison Renewable Energy Center are in service. We expect the remaining megawatts to be placed in service by September 30th. Turning now to page 10 and an update on Ammon, Missouri's Callaway Energy Center. During its return to full power as part of its 24th refueling and maintenance outage in late December 2020, Callaway experienced a non-nuclear operating issue related to its generator. A thorough investigation of this matter was conducted, and the decision was made to rewind the generator's data and rotor in order to safely and sustainably return the energy center to service. The project is going well, and we continue to expect the capital project to cost approximately $65 million. I am also pleased to report that the insurance claims for the capital project and replacement power have been accepted by our insurance carrier, which will mitigate the impacts of this outage for our customers. We expect the Callaway Energy Center to return to service in July. As we have said previously, we do not expect this manager to have a significant impact on Ameren's financial results. Turning to page 11, We are focused on delivering a sustainable energy future for our customers, communities, and our country. This page summarizes our strong sustainability value proposition for environmental, social, and governance matters, and it's consistent with our vision leading the way to a sustainable energy future. I've discussed several elements of our strong sustainability value proposition with you in the past. So in the interest of time, I'm going to go through all of these points again this morning. Having said that, and moving to page 12, you should know that we have already made significant progress in our sustainability efforts in 2021. Here, we highlight several key achievements to date this year. Beginning with environmental stewardship last September, Amron announced its transformational plan to achieve net zero carbon emissions by 2050 across all of our operations in Missouri and Illinois. This plan includes strong interim carbon emission reduction targets at 50% and 85% below 2005 levels in 2013 and 2014, respectively. This plan is also at the heart of our updated climate risk report, which is based on the recommendations of the Task Force on Climate-Related Financial Disclosures, which we issued last week. I am pleased to report our plan is consistent with the objectives of the Paris Agreement and limiting global temperature rise to 1.5 degrees Celsius. In terms of social impact, I am very excited to say that our efforts in this area continue to be recognized by leading organizations. Last week, Diversity, Inc. announced Ameren is once again named number one on the top utilities list for diversity and inclusion, a list we have been proudly a part of since 2009. Diversity, Inc. also ranked Amherst second on the top 10 regional companies and is a top company for ESG among all industries. In addition, for the fifth year in a row, we've been certified by a great place to work. And finally, we were recognized as a best place to work for LGTBQ by the Human Rights Campaign. Moving to governance, our board and management have established governance structures that enable a focus on the ESG matters that drive Airman's strategy, mission, and vision, including the addition of ESG metrics into our executive compensation programs. In particular, our board of directors refined our executive compensation program by adding workforce and supply diversity metrics to our short-term incentive plan for 2021. In addition, we recently issued several social impact policies. Since our call in February, we have also issued several reports reflecting our sustainability efforts and advances. Just last week, we posted our 2021 sustainability report, which expands on many ESG and sustainability topics, and posted the 2020 ESG sustainability template. And for the first time, we published information using the Sustainability Accountant Standards Board reporting framework and mapped our business activities to the United Nations Sustainable Development Goals. I encourage you to take some time to read more about our strong sustainability value proposition. You can find all of our ESG-related reports at amarinvestors.com. Turning now to page 13. Environmental stewardship, social impact, and governance are three pillars of our strong sustainability value proposition. Our final pillar is sustainable growth. Looking ahead, we have a strong sustainable growth proposition, which will be driven by a robust pipeline of investment opportunities of over $40 billion over the next decade that will deliver significant value to all of our stakeholders by making our energy goods stronger, smarter, and cleaner. Importantly, these investment opportunities exclude any new regionally beneficial transmission projects that I described earlier, all of which would increase the reliability and resiliency of the energy grid, as well as enable additional renewable generation projects. In addition, we expect to see greater focus from a policy perspective on infrastructure investments to support the electrification of the transportation sector. Our outlook through 2030 does not include significant infrastructure investments for electrification at this time either. 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 safe, reliable, and affordable fashion will be critical to meeting our country's future energy needs and delivering on our customers' expectations. Moving to page 14, to sum up our value proposition, we remain firmly convinced that the execution of our strategy in 2021 and beyond will deliver superior value to our customers, shareholders, and the environment. In February, we issued our five-year growth plan, which included our expectation of a 6% to 8% compound annual earnings growth rate from 2021 to 2025. This earnings growth is primarily driven by strong rate-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 Air Missouri's Integrated Resource Plan. Our team continues to assess several renewable generation proposals from developers. We expect to file this year with the Missouri PSE for certificates of convenience and necessity for a portion of these planned renewable investments. I am confident in our ability to execute our investment plans and strategies across all four of our business segments, as we have an experienced and dedicated team to get it done. That fact, coupled with our sustained past execution of our strategy on many fronts, has positioned us well for future success. Further, our shares continue to offer investors a solid dividend, which we expect to grow in line with our long-term earnings per share growth guidance. Simply put, we believe our strong earnings and dividend growth outlook results in a very attractive total return opportunity for shareholders. Again, thank you all for joining us today. Now, I'll turn the call over to Michael.