Ameren Corporation

Greetings and welcome to Ameren Corporation's fourth quarter 2022 earnings conference call. At this time, all participants are on a 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 for today's call, 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 Marty Lyons, our President and Chief Executive Officer, and Michael Main, our Senior Executive Vice President and Chief Financial Officer, as well as other members of the Ameren management team. 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. We have posted a presentation on the amarininvestors.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 about future expectations, plans, projections, financial performance, and similar matters, which are commonly referred to as forward-looking statements. Please refer to the forward-looking statements sections in the news release we issued yesterday as well as our SEC filings for more information about various factors that could cause actual results to differ materially from those anticipated. Now, here's Marty, who will start on page four.

Thanks, Andrew, and welcome back. We're thrilled that you're healthy again and here with us for this call and ready to fully engage with our investors and the analysts. Good morning, everyone, and thank you for joining us today as we reflect on our 2022 performance. and look ahead to 2023 and beyond. I'd like to start by expressing appreciation for the Ameren team's dedication and hard work over the last year. In 2022, we continue to successfully execute our long-term strategy as shown on page four, which is delivering strong results today while laying a strong foundation for the future. Showed on page five are some exciting strategic achievements from the past year for Ameren, our customers, shareholders, the environment, and the industry as a whole. Let me touch on a few key accomplishments. We made $3.4 billion of infrastructure investments in 2022 that resulted in a more reliable, resilient, secure, and cleaner energy grid, as well as contributed to strong growth at all of our business segments. For example, as part of our Amron, Missouri smart energy plan, over 400 smart switches were installed to reduce outages from hours to minutes and even seconds, and 34 substations were upgraded or built new to better serve communities. In addition, over 300,000 smart meters were installed for our Missouri customers, enabling better visibility into their energy usage. In Illinois, our customers are benefiting from the replacement of more than 3000 electric poles, 64 miles of coupled steel distribution pipelines, and 24 miles of gas transmission pipelines. Further, our transmission business placed in service 19 new or upgraded transmission substations and approximately 200 miles of new or upgraded transmission lines. These are just a few of the many projects completed in 2022. As a result of these and similar investments, I'm proud to say that Ameren's most recent system average interruption frequency reliability scores have ranked in the top quartile of our industry. We also had several achievements on the regulatory and legislative front. In February, new Ameren Missouri electric service rates took effect as a result of our 2021 rate review, which was constructively settled. In June, we filed a change to our integrated resource plan. accelerating our planned clean energy investments, carbon emission reduction goals, and our plan to achieve net zero by 2045, while thoughtfully considering customer affordability and energy grid reliability. In July, our pipeline of investments was significantly enhanced when the Mid-Continent Independent System Operator, or MISO, approved a portfolio of long-range transmission projects, including significant projects in our operating footprint. And in August, Senate Bill 745 was enacted in Missouri, extending the constructive smart energy plan legislation that became law in 2018 out through 2028 with possible extension to 2033. I am pleased to say that as a result of these developments, in 2022, we were able to increase our 10-year investment opportunity pipeline from $40 billion to $48 billion. Further, in our Ameren Illinois electric distribution business, in September, the Illinois Commerce Commission, or ICC, approved constructive performance metrics which paved the way for our multi-year rate plan filing this January. And finally, at the federal level, passage of the Inflation Reduction Act will support the clean energy transition, reducing the cost of related infrastructure investments for both our customers in both Missouri and Illinois. I would like to express appreciation for all the hard work of the entire Ameren team to advance these important achievements. At the same time, across Ameren, we are all working to keep customer bills as low as possible while investing to ensure we provide safe, reliable, and cleaner energy for our customers. We remain laser focused on disciplined cost management, practicing continuous improvement, and optimizing our operating performance as we transform our business. In 2022, we continued our transition to a cleaner energy generation portfolio, and as planned in December, we retired our oldest and least efficient coal-fired plant, the Merrimack Energy Center. Thank you to all of our coworkers who have worked at Merrimack providing reliable energy over the past several decades. We recognize that our customers depend on us every day to supply the energy that supports their daily lives, and as such, we have kept them at the center of our strategy. We are honored that in 2022 and for the third consecutive year, our residential customers have recognized Ameren with a top quartile overall customer satisfaction ranking among large electric utility providers in the Midwest. In addition, Ameren Missouri ranked number one in business customer satisfaction. And finally, for our shareholders, yesterday we announced 2022 earnings of $4.14 per share. compared to earnings of $3.84 per share in 2021. This result was at the high end of our earnings per share guidance range. The strong execution of our strategy in 2022 reflects strategic alignment across all of our business segments. We are staying focused on optimizing our operations and safely completing billions of dollars of value adding projects to deliver significant value to our customers, communities, shareholders, and the environment. Turning now to page six. Here you can see we have delivered consistent superior value to our shareholders for nearly a decade. Since 2013, our weather normalized core earnings per share have risen 92% at an approximate 7.5% compound annual growth rate, while our annual dividends paid per share have increased approximately 48% over the same time period. This drove a strong total return of nearly 226% for our shareholders from 2013 to 2022, which was significantly above our utility peer average. While I am very pleased with our track record of strong and consistent performance, rest assured that we are not letting up. Our team will remain focused on enhancing performance in 2023 and in the years ahead so that we can continue to deliver superior value to our customers, communities, and shareholders. Turning to page seven. This page summarizes our strong sustainability value proposition and focus on environmental, social, governance, and sustainable growth goals and reflects the way we integrate our sustainability values into our normal course of business. Beginning with environmental stewardship, last June, we announced an acceleration of our transformational generation resource plan, now aiming to achieve net zero scope one and two carbon emissions by 2045 across all of our operations in Missouri and Illinois. which is consistent with the objectives of the Paris Agreement in limiting global temperature rise to 1.5 degrees Celsius. This plan also advances our interim greenhouse gas emission reduction targets to 60% and 85% below 2005 levels by 2030 and 2040, respectively. As mentioned, in 2022, we were assigned certain projects as part of the Tranche 1 project portfolio to prospectively build and operate significant transmission investments in the MISO territory. These, as well as other transmission investments, will provide our region access to a diverse mix of energy resources and are an important step forward to support a smooth clean energy transition. We also have a strong long-term commitment to our customers and communities to be socially responsible and economically impactful. One example is our effort to drive inclusive economic growth at Ameren and in our communities. In 2022, we spent approximately $1.1 billion with diverse suppliers, including minority, women, and veteran-owned businesses, a 22% increase over 2021. Because of actions like this, in May we were honored to be recognized again by Diversity, Inc. as number one on the nation's top utilities list for diversity, equity, and inclusion. This is the 14th consecutive year we have been named to this distinguished list. I am also very pleased to say that Ameren was named a top company for ESG for the third consecutive year. In addition, we continue to support many nonprofit organizations in the communities we serve, including programs focused on DE&I, to which we have made a $10 million contribution commitment by 2025. Moving to governance, Our strong corporate governance is led by a diverse board of directors focused on strong oversight of our sustainability efforts. In 2022, we named our first combined chief sustainability, diversity, and philanthropy officer to further optimize our initiatives. And our executive compensation practices include performance metrics that are tied to diversity, equity, inclusion, and progress toward a clean energy future for all. Finally, This slide summarizes our very strong sustainable growth proposition, which we believe remains among the best in the industry. Today, we published our updated sustainability investor presentation called Leading the Way to a Sustainable Energy Future, which is available at amarininvestors.com. It demonstrates how we have been effectively integrating our sustainability values and practices into our corporate strategy. I encourage you to take some time to read more about our strong sustainability value proposition. Moving to page eight, we turn our focus to the current year. We expect 2023 to be another busy year, and we are excited about a number of strategic objectives. Notably, we will maintain our focus on significant infrastructure investment for the benefit of our customers. We expect to invest approximately $3.5 billion in electric, natural gas, and transmission infrastructure to bolster safety, security, reliability, resiliency, and further the clean energy transition in a responsible fashion. And as the nation's clean energy transition continues, we plan to help develop the needed transmission investment by submitting bids for the MISO Tranche 1 competitive long-range transmission projects, as well as support analysis of potential Tranche 2 projects. We have an active regulatory calendar this year. We look to constructively conclude our Ameren Missouri Electric Rate Review, Ameren Illinois Electric Multi-Year Rate Plan, and Ameren Illinois Natural Gas Rate Review. We will also work to successfully advocate for certificates of convenience and necessity for future renewable generation at Ameren Missouri. And our next Ameren Missouri Integrated Resource Plan will be filed in September, which will include a comprehensive update of assumptions including changes driven by the Inflation Reduction Act enacted last year. Finally, we are focused on maintaining disciplined cost management with the expectation of holding operations and maintenance expenses flat in 2023 relative to 2022. Moving now to page nine. Yesterday afternoon, we announced that we expect our 2023 earnings to be in a range of $4.25 to $4.45 per share. Based on the midpoint of the range, this represents 7% earnings per share growth compared to the midpoint of our original 2022 guidance range of $4.05 per share. Michael will provide you with more details on our 2023 guidance a bit later. Building on the strong execution of our strategy and our robust earnings growth over the past several years, we expect to deliver 6% to 8% compound annual earnings per share growth from 2023 through 2027, using the midpoint of our 2023 guidance, $4.35 per share, as the base. Our dividend is another important element of our strong total shareholder return proposition. Last week, Ameren's board of directors approved a quarterly dividend increase of approximately 7%, resulting in an annualized dividend rate of $2.52 per share. This represents our third consecutive year of approximately 7% dividend growth, and the increase reflects confidence by Ameren's Board of Directors in our business outlook and management's ability to execute our strategy. Looking ahead, we expect Ameren's future dividend growth to be in line with our long-term earnings per share growth expectations and within a payout ratio range of 55% to 70%. We expect our weather normalized dividend payout ratio in 2023 to be approximately 58%. I have full confidence in our team as we look ahead. Turning to page 10. The strong long-term earnings growth I just discussed is primarily the result of rate-based growth driven by investment in energy infrastructure under constructive regulatory frameworks. Today, we are rolling forward our five-year investment plan, and as you can see, we expect to grow our rate base at an approximate 8% compound annual rate for the 2022 through 2027 period. Our robust capital plan of approximately $19.7 billion over the next five years 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 and importantly, includes investment in assigned MISO long-range transmission planning projects of approximately $800 million, and renewable energy projects of approximately $2.5 billion through 2027. Finally, we remain focused on disciplined cost management to keep customer bills as low as possible and improve earned returns in all of our businesses. Moving to page 11. As we look to the future, our five-year plan is not only focused on delivering strong results through 2027, but is also designed to position Ameren for success over the next decade and beyond. 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 81% of our rate base by the end of 2027. Incorporating renewable investment opportunities from our latest IRP We expect our rate base from renewable generation to grow to 11% and for coal-fired generation to decline to just 3% of rate base by the end of 2027. In light of the Rush Island and Sioux Energy Centers approaching retirement by 2025 and 2030, respectively, only approximately 3.5% of the capital expenditures in our five-year plan are expected to be spent on coal-related projects. focusing on investments needed for safety, reliability, and environmental compliance. The bottom line is that we are taking steps today across the board to position Ameren to provide safe, reliable, affordable, and cleaner energy for the long term. Turning now to page 12. Looking ahead over the next decade, we have a robust pipeline of investment opportunities of $48 billion that will deliver significant value to all of our stakeholders by making our energy grid stronger, smarter, and cleaner. Of course, our investment opportunities 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 energy needs in the future and delivering on our customers' expectations. Moving now to page 13. Our investment plans released today incorporate our intentions to invest in significant renewable resources as we execute the clean energy transition laid out in our Ameren Missouri Integrated Resource Plan. Our IRP lays out the most prudent approach to systematically invest in renewable energy generation to complement existing and planned dispatchable resources building a diverse, reliable, resilient, and affordable system for our customers. We continue to work in earnest with developers to acquire renewable generation projects and expect to announce further agreements over the course of this year. We are pleased to say that last week the Missouri PSE approved our Certificate of Convenience and Necessity for the 200 megawatt Huck Finn solar project. Construction of this facility is expected to create approximately 250 jobs and, once in operation, produce enough energy to power approximately 40,000 homes. We expect a Missouri PSC decision on a remaining pending certificate of convenience and necessity for the 150 megawatt Boomtown solar project by April, though the Commission is under no deadline to issue a decision. We look forward to continuing to engage with stakeholders regarding our future generation needs and clean energy transition. Moving to slide 14. As we've discussed in the past, MISO completed a study outlining a potential roadmap of transmission projects through 2039. In July, MISO approved the first set of projects, which includes $1.8 billion assigned to Ameren. Detailed design work and project planning for the assigned Trotch 1 projects are underway. MISO requests for proposal on the remaining competitive projects have begun to be issued, and we expect the proposal and evaluation process to take place over the course of 2023 and 2024. Looking ahead to Tranche 2, analysis of potential projects is underway and will continue for the remainder of the year. MISO anticipates the Tranche 2 portfolio of projects will be approved in the first half of 2024. Moving to page 15. As noted earlier, we will remain relentlessly focused on continuous improvement and disciplined cost management. Ongoing initiatives include the automation and optimization of numerous processes, leveraging the benefits from significant past and future investments in digital technologies and grid modernization. Additionally, in 2022, we extended most of our collective bargaining unit labor agreements out through mid to late 2026 for nearly all Ameren Union represented employees, which will provide predictability in our labor costs in the coming years. In 2023, we expect our operations and maintenance expenses to be flat with 2022, and we are targeting flat operations and maintenance expenses through 2027. Moving to page 16. To sum up our value proposition, we remain firmly convinced that the execution of our strategy in 2023 and beyond will continue to deliver superior value to our customers, shareholders, and the environment. We believe our expectation of 6% to 8% compound annual earnings growth from 2023 through 2027, driven by strong rate-based growth, compares very favorably with our regulated utility peers. I am confident in our ability to execute our strategy and investment plans across all four of our business segments, as we have an experienced and dedicated team with a track record of execution that has positioned us well for future success. Further, our shares continue to offer investors an attractive dividend, and the strong earnings growth expectations we outlined today position us well for future dividend growth. Simply put, we believe this results in a very attractive total return opportunity for shareholders. Again, thank you all for joining us today, and I will now turn the call over to Michael.