Ameren Corporation

Greetings. Welcome to Ameren Corporation's second 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 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 Airman 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 cautioned 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 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 Warner, who will start on page four of our presentation. Thanks, Andrew.

Good morning, everyone, and thank you for joining us. This morning, I'll begin with a statement that I've been making for quite some time now. Simply put, 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. Moving now to our second quarter earnings results, yesterday we announced second quarter 2021 earnings of $0.80 per share. our earnings were down 18 cents per share from the same time period in 2020, primarily due to a change in the seasonal electric rate design at AM Missouri that reduced earnings 19 cents per share. The impact of this change in rate design will reverse in the third quarter of 2021 and is not expected to impact full-year results. Michael will discuss the other key drivers of our second quarter earnings results a bit later. Due to the continued strong execution of our strategy, I am pleased to report that we remain on track to deliver within our 2021 earnings guidance range of $3.65 per share to $3.85 per share. Speaking of the execution of our strategy, let's move 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 six months of this year, we invested significant capital in each of our business segments, including wind generation in Ameren, Missouri, which I'll discuss later. 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. Consistent with the Missouri Smart Energy Plan, we have made significant investments to harden the energy grid, which has reduced outages, and installed nearly 300,000 electric smart meters for customers. These smart meters will help customers better manage their usage and control their overall energy costs. In Illinois, we continue to execute on our electric distribution and gas modernization action plans. The plans include investments to strengthen electric power poles, replace gas transmission pipelines and compression-coupled steel mains, as well as to implement new efficiency measures, including mobile enhanced communications and assessment capabilities for our crews. These improvements, along with our investments in outage detection technology, are resulting in improvements in system reliability and millions of dollars in savings for customers. Moving now to regulatory matters. In late March, Missouri filed a request for a $299 million increase in annual electric service revenues and a $9 million increase in annual natural gas revenues with the Missouri Public Service Commission. In our Illinois electric business, we requested a $60 million base rate increase in our required annual electric distribution rate filing. These proceedings are all moving along on schedule. We will be able to provide you information on these proceedings as they develop later this summer and into the fall. Finally, we have 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. Starting in Missouri, in May, the Missouri Legislature passed a bill allowing for securitization in the state. This constructive legislation, which was signed by Governor Parson in July, gives us another important regulatory tool to facilitate a transition to a cleaner energy future in a cost-effective manner for our customers. However, as we have stated in the past, a robust integrated resource plan does not rely on securitization to be successful. Our flexible and responsible plan, which includes approximately $8 billion of investments in renewable energy through 2040, the retirement of all of our coal-fired energy centers, and extending the life of our carbon-free Callaway Nuclear Energy Center, focuses on getting the energy we provide to our customers as clean as we can, as fast as we can, without compromising on reliability, customer affordability, and the evolution of new clean energy technologies. And as I will touch on later, I am pleased to say that we are already taking steps to implement this important plan for our customers, the state of Missouri, and our country. Moving now to Illinois, Last month, the Illinois Commerce Commission approved Ammon, Illinois' electric vehicle charging program. Under this program, we're able to support the development of a network of charging infrastructure in central and southern Illinois, as well as implement special time-based delivery service rates and other incentives to help encourage the use of electric vehicles. We are excited about this new program because it will drive greater electrification of the transportation sector, as well as help the state of Illinois move towards its clean energy goals. Moving to Illinois legislative efforts, as many of you know, we have been working to enhance the regulatory framework for our Illinois electric business. The performance-based regulatory framework in place today has delivered strong value for customers and shareholders over the years. However, the framework is scheduled to sunset in 2022. As a result, we have been working with key stakeholders to develop constructive long-term regulatory policies that support important investments in energy infrastructure while enabling us to earn fair returns on those investments. As you know, throughout the regular legislative session, which ended late May, we advocated for the Downstate Clean Energy Affordability Act, which would have largely extended the existing framework until 2032, while putting in place provisions that would set the Ammon, Illinois electric distribution, ROE, at the national average. At the same time, many other energy-related legislative proposals from other stakeholders were proposed during the legislative session, including proposals from Governor Pritzker, labor, and environmental groups to address the potential closure of nuclear plants in the states, Illinois' clean energy transition, and the electric distribution framework going forward. For months, stakeholders have been in discussions seeking to find an appropriate compromise to all these proposals. While progress is made in these issues, the regular legislative session ended on May 31st, with no energy legislation being put before the Senate or House of Representatives for a vote. A special session was called in mid-June to further discuss draft energy legislation, but no bill was filed nor action taken. Needless to say, we will continue to work with key stakeholders to find a constructive solution to this important matter. Turn into page 7 for an update on FERC regulatory matters. In April, FERC issued a Supplemental Notice of Proposed Rulemaking, or NOPR, on the Electric Transmission Return on Equity Incentive Adder for participation in the Regional Transmission Organization, or RTO. As you may recall, under the NOPR, the RTO incentive adder would be removed for utilities that have been members of an RTO for three years or more, like Cameron, Illinois, and ATXI. we have been very clear that we disagree with FERC's proposed recommendation in this matter for a number of reasons, and recently filed comments strongly opposing the removal of the adder. 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. In addition, in June, the FERC issued an order establishing a joint federal-state task force on electric transmission. This order establishes a first-of-its-kind task force to explore with state commissions transmission-related issues, including how to plan and pay for transmission facilities, recognizing that federal and state regulators share authority over different aspects of these transmission-related issues. The task force will be comprised of the FERC commissioners and representatives nominated by the National Association of Regulatory Utility Commissioners from 10 state commissions. The first public meeting is expected to be held this fall. Also last month, the FERC issued an advance notice of proposed rulemaking related to regional transmission planning and cost allocation processes, including critical long-term planning for anticipated future generation needs. We continue to assess the matters raised in the advance number and expect to file comments with the FERC this fall. Again, we are unable to predict the ultimate timing or outcome of this matter as FERC is under no timeline to issue a decision. Speaking of planning for future transmission needs, please turn to page 8. As I discussed in the call in May, MISO completed a study outlining a potential roadmap of transmission projects for 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. Under MISO's Future One scenario, which is the scenario that resulted in an approximate 60% carbon emission reduction below 2005 levels by 2039, MISO estimates approximately $30 billion of future transmission investment in the MISO footprint. Further, MISO's Future 3 scenario resulted in an 80% reduction in carbon emissions below 2005 levels by 2039. Under this scenario, 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 One are likely to be included in this year's MISO's transmission planning process. which is currently scheduled to be completed in the fourth quarter of 2021. However, it is possible the process could go into the first quarter of 2022. Moving now to page nine for an update on our $1.1 billion wind generation investment related to the acquisition of 700 megawatts of new wind generation at two sites in Missouri. Air Missouri closed on the acquisition of its first wind energy center In January, Airman Missouri acquired a second wind generation project, the 300-megawatt Atchison Renewable Energy Center, located in northwest Missouri. I am pleased to report that as of the end of the second quarter, the Atchison Renewable Energy Center is now in service. With both facilities now operating, it marks a key milestone as we continue to transition our energy portfolio towards a cleaner energy future. Turning now to page 10 and an update on Air Missouri's Calaway Energy Center. As we previously discussed, during its return to full power as part of its 24th refueling and maintenance outage in late December 2020, Calaway 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 stator and rotor in order to safely and sustainably return the energy center to service. I am pleased to report that the generated project was executed very well and that the Energy Center returned to service on August 4th. The completion of this project positions Callaway for a sustainable, long-term future. The cost of the capital project was approximately $60 million. As we have said previously, 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. In addition, we do not expect this matter to have a significant impact on Amherst's financial results. Turning to page 11, 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 it's consistent with our vision leading the way to a sustainable energy future. Beginning with environmental stewardship last September, Ameren 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 it's 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. Finally, 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, and inclusion, and progress towards a cleaner, sustainable energy future. 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 AmmonInvestors.com. Turning now to page 12, 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 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 MISO transmission projects I discussed earlier, all of which would increase the reliability and resiliency of the energy grid, as well as enable our country's transition to a cleaner energy future. 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 event structure investments for electrification at this time. Of course, our investment opportunities will not only create stronger and cleaner energy grid to meet our customers' needs and exceed their expectations, but they would 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 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 13, 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 outlook, which included 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 Amer 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 POC for certificates that convenes a 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.