Ameren Corporation

Greetings and welcome to Ameren Corporation's third quarter 2023 earnings 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, 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 Chairman, President, Chief Executive Officer, and Michael Main, our Senior Executive Vice President and Chief Financial Officer, as well as other members of the AMRA 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 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 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 section in the news release we issued yesterday as well as our SEC filings for more information about the 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. Good morning everyone and thank you for joining us today. We had a strong quarter and we're excited to share an update with you on recent developments. But before I begin our quarterly update, I would like to take the opportunity to congratulate Warner Baxter, who retired as Executive Chairman on November 2nd. Over his 28-year career with the company, Warner has had a significant positive impact on our industry, company, and community, and frankly, each of us here this morning. Under Warner's leadership, Ameren has successfully executed a strategy focused on robust energy infrastructure investments supported by constructive energy policies driving strong value for Ameren's customers, communities, and shareholders. And consistent with his focus on sustainability, he leaves behind a strong team dedicated to maintaining that focus and continuously improving. Congratulations, Warner, and I wish you well in your retirement. Moving now to page five and our quarterly update. Our dedicated team continues to execute our strategic plan across all of our business segments, which entails investing in energy infrastructure to deliver safe, reliable, clean, and affordable electric and natural gas services to our customers. Turning to page six, our strategic plan integrates our strong sustainability value proposition. balancing the four pillars of environmental stewardship positive social impact strong governance and sustainable growth here we summarize some of the many things we are doing for our customers communities co-workers and shareholders and today we published our updated sustainability investor presentation called leading the way to a sustainable energy future available at amaraninvestors.com which more fully details how we have been effectively integrating our sustainability values and practices into our corporate strategy. Importantly, it highlights Ameren, Missouri's new integrated resource plan filed with the Missouri PSC in late September. In terms of governance, in October, the CPA Zicklin Index once again named Ameren one of the top three companies in the utility industry for corporate political disclosures and accountability. additionally i'd like to recognize our team's strong commitment to the communities we serve in october more than 600 amaran team members and community leaders came together in person and virtually for our seventh diversity equity and inclusion leadership summit featuring nationally recognized leaders and speakers another example of our team's commitment to our communities is our recently concluded 2023 company-wide united way employee campaign which raised nearly $1.7 million, funds which will go towards supporting more than 60 United Way organizations across our service territory. This is in addition to the United Way contribution being made by Ameren. Again, thank you for all you do. Our coworkers really do care about making our community better. I encourage you to take some time to read more about our strong sustainability value proposition. Moving to page seven. Yesterday, we announced third quarter 2023 earnings of $1.87 per share compared to earnings of $1.74 per share in the third quarter of 2022. The key drivers of our third quarter results are outlined on this slide. As a result of our strong execution, we narrowed our 2023 earnings guidance to a range of $4.30 to $4.45 per share. This compares to our initial guidance range of $4.25 to $4.45 per share. Turning to page eight. On our call in February, I highlighted some of our key strategic business objectives for 2023. We continue to make great progress as a result of our team's dedication. Outlined on page nine are a few key accomplishments this quarter. As you can see on the right side of this page, we have invested significant capital in each of our business segments during the first nine months of this year, increasing spending approximately 6% compared to the year-ago period. These investments will continue to improve the reliability, resilience, safety, and efficiency of our system as we make a clean energy transition for the benefit of our customers. During the first nine months of this year, Ameren Missouri installed over 270,000 smart meters and 230 smart switches, upgraded 55 underground cable miles, hardened 32 sub-transmission miles, and energized eight upgraded substations. Over 80% of our Ameren Missouri electric customers now have smart meters, allowing for better understanding of their energy usage and choice among several time-of-use rates offered. The storms this summer in the Ameren, Missouri service area were among the most impactful compared to the last 10 years. However, we saw the benefits of the smart energy plan investments we have been making. During the July and August storms, over 55,000 customer outages were prevented due to rapid detection, rerouting, and restoration of power by automated switches across our system, and over 27 million minutes of customer outages were avoided due to these investments. Investments made to harden the systems withstood over 50 mile per hour winds and experienced minimal damage. Under the Smart Energy Plan, we have hardened over 200 miles of lines across our system to mitigate the risks of severe weather events. Looking forward, I'm pleased to say that in October, the U.S. Department of Energy awarded Ameren Missouri approximately $50 million to provide half the funding needed to accelerate infrastructure upgrades to support reliability for customers in rural and disadvantaged communities statewide. At our Ameren Illinois electric distribution segment, during the first nine months of 2023, 4,872 poles were replaced as a result of inspections or storm damage remediation. 190 smart switches were added to improve system reliability, and a total of 100 miles of underground cable were added for new business, relocations, and replacement of aging cable. Similar to Missouri, The investments made to harden the system substantially withstood a derecho where winds exceeded 95 miles per hour. These experiences underscore the value of our ongoing grid investments as customers' reliability expectations continue to rise. The integrity of the Ameren Illinois natural gas system also continues to improve. During the first nine months of 2023, The Ameren Illinois natural gas distribution segment completed the replacement of 43 miles of mechanically coupled gas distribution mains and 2,111 mechanically coupled gas service lines. And our transmission segment has been focused on executing projects including line rebuilds, new transmission circuits, transformer replacements, generator interconnections, and other upgrades to aging infrastructure, supporting the economic delivery of renewable energy resources for our customers, as well as the overall reliability and resiliency of the transmission system. I'd like to express my appreciation for the Ameren team's dedication, hard work, and collaboration so far this year to deliver value for our customers. Moving on to regulatory matters. In July, as a result of our constructive Ameren Missouri Electric rate review settlement, New customer rates became effective, representing an increase in customer rates of approximately 2% compounded annually since April 1, 2017, prior to Ameren Missouri adopting Plant and Service Accounting, or PISA. In September, Ameren Missouri filed its updated Integrated Resource Plan, which I will cover in more detail on the next page. Also in September, we were pleased with the District Court's decision to extend the retirement date of the Rush Island Energy Center from March 30, 2024 to October 15, 2024. This allows Ameren Missouri sufficient time to complete the transmission upgrades needed to ensure system reliability before the Energy Center is retired. We will seek to finance the costs associated with the retirement, including the remaining net book value of the Rush Island Energy Center through securitization. We expect to file our petition seeking commission approval of the securitization by the end of this year. Once filed, the regulatory proceeding is expected to take approximately seven months to complete. Moving to Ameren, Illinois. In September and October, we received the administrative law judge's proposed orders in the natural gas and electric rate reviews, respectively. With respect to the electric multi-year rate plan, we are disappointed with the ALJ recommendation of 9.24% allowed ROE, 50% common equity layer, and no return on an overfunded post-employment benefit plan asset. We are also disappointed by the ALJ recommendation to scale back or eliminate certain reliability-driven investments like Ameren Illinois' storm hardening programs and grid protection microprocessor relay upgrades. Our filing aligns with the policy goals of the State of Illinois Climate and Equitable Jobs Act. Last Thursday, We filed briefs detailing our concerns with the ALJ proposed electric order, and we will see if the Illinois Commerce Commission, or ICC, will take a different approach before issuing a final decision in mid-December. Moving now to Ameren Transmission. Open houses started in August for the Central Illinois Grid Transformation Program. This program consists of projects that were signed to Ameren by MISO as part of their LRTP Tranche 1 portfolio. The projects are targeted for completion by 2030. Open houses are held to engage with and gather feedback from communities and stakeholders before filing route plans early next year. We're committed to working to build transmission lines affordably with robust input from our neighbors and communities impacted by these projects. ATXI and Ameren Illinois will work together to build approximately 380 miles of new or upgraded transmission lines across Central Illinois, with nearly 85% of the lines slated to be rebuilt in our existing rights of way. Moving on to operational matters. Earlier this week, the Callaway Energy Center was brought back online following a planned refueling and maintenance outage, which was completed safely. Finally, we remain focused on keeping customer bills as low as possible through disciplined cost management, continuous improvement, and optimizing our operating performance as we transform our business through investment to ensure we sustainably provide safe, reliable, and cleaner energy for our customers. Turning to page 10. As I mentioned, integrated resource plan, or IRP, outlining our least cost approach to reliably meet customer energy needs in an environmentally responsible manner. The IRP thoughtfully integrates a new diverse mix of generation resources while maintaining the availability of our existing energy centers through retirement, which is essential for a reliable and affordable clean energy future. The plan calls for investment in new dispatchable energy sources, including an on-demand 800-megawatt gas simple cycle energy center by 2027 to ensure the long-term stability of the energy grid during the deployment of renewable energy generation. This energy center represents an investment opportunity of $800 million and is expected to provide backup power at times of peak winter and summer demand. The plan also moves back the previously announced addition of a 1,200 megawatt combined cycle energy center to 2033 from 2031 to align with the retirement of the Sioux Energy Center in 2032. The combined cycle energy center represents an investment opportunity of $1.7 billion. The IRP also includes planned renewable energy additions of 4,700 megawatts by 2036, representing a total investment opportunity of approximately $9.5 billion. This maintains the previously planned goal of 2,800 megawatts of renewables by 2030, an investment opportunity of $5.3 billion. Further, we expect to add 400 megawatts of battery storage by 2030 and an incremental 400 megawatts by 2035, representing investment opportunities of $600 million and $700 million, respectively. Finally, the IRP includes the addition of 1,200 megawatts of clean, dispatchable energy in 2040 and an additional 1,200 megawatts by 2043. The exact type of resource deployed will be dependent upon cost-effective advancements in innovative clean energy technologies in the coming years. Overall, we believe the plan includes a balanced path to achieving net-zero carbon emissions by 2045 and interim reductions of 60% and 85% below 2005 levels by 2030 and 2040, respectively. It is also consistent with the objectives of the Paris Agreement to limit global temperature rise to 1.5 degrees Celsius. We remain focused on affordability and reliability as we continue to execute our clean energy transition. Collectively, this IRP provides incremental investment opportunities of approximately $1.5 billion over those included in our current five-year plan. We will update and roll forward our overall five-year capital plan next February. Moving to page 11. As laid out in the IRP, we are taking a thoughtful and measured approach to investing in new generation as our older energy centers near retirement. In support of this transition, we were pleased with the Missouri PSC approvals of Certificates of Convenience and Necessity, or CCNs, for the Huck Finn Solar Project and Boomtown Solar Project earlier this year. Construction is now well underway for both projects. In June, we filed with the Missouri PSE for four additional CCNs, totaling 550 megawatts of new solar generation across our service territory. In October, the PSE staff filed a recommendation against CCN approval of the 550 megawatts, citing a lack of need for the additional generation. We believe these projects are needed as a part of our lease cost plan for meeting customers' energy needs as we systematically invest to create a diverse mix of generation resources that preserves reliability as we retire our existing coal fleet over the next 20 years. Importantly, the renewable energy tax credits included in the Inflation Reduction Act will reduce the cost of these projects to our customers. In addition, these projects will bring over 900 new construction jobs and additional tax revenues and other payments to the area. Subject to approval, these solar projects are expected to go in service between 2024 and 2026. While the Missouri PSC is under no deadline to issue an order on these CCN filings, we expect decisions in the first quarter of 2024. We look forward to continuing to engage with stakeholders regarding our future generation needs and clean energy transition. Turning to page 12. As we've discussed in the past, MISO completed a study outlining a proposed roadmap of transmission projects through 2039. Detailed project planning, design work, and procurement for the Tranche 1 projects assigned to Ameren is underway, and we expect construction to begin in 2026. MISO requests for proposal for its estimated $700 million of Tranche 1 competitive projects in our territory have been issued. We submitted our first bid related to the Orient Denny Fairport project in May and were pleased to be awarded the project late last month. MISO noted our sound route design, engineering, and cost containment plan, and innovative approach working with stakeholders as key factors in the winning bid. This is indicative of how we plan and develop all transmission projects. We believe our collaborative, customer-centric, and community-respectful approach to building and maintaining low-cost projects is why we should be directly assigned these projects in the future in both Missouri or Illinois. For the remaining two competitive projects, we recently submitted a bid for the Skunk River to Ipeva project in October, and the remaining bid is due later this month. The evaluation process for these competitive projects is expected to take place over the remainder of this year and into mid-2024. Last, we continue to expect MISO to approve a set of Tranche 2 projects by June 30, 2024. Moving to page 13. In May, the Illinois General Assembly passed House Bill 3445, or the Transmission Efficiency and Cooperation Law. which, if enacted, would provide incumbent utilities, including Ameren, a right of first refusal to build MISO long-range transmission planning projects in their respective service territories for projects approved by year-end 2024. HB 3445 would support the clean energy transition benefiting our Illinois customers and communities and the broader MISO region. As a local utility, we believe we are well positioned to efficiently build, operate, and maintain these transmission assets over time. The right of first refusal would allow for the construction process to begin sooner and the resulting customer benefits to be realized more quickly. Importantly, we competitively bid each component of our projects and utilize local suppliers and contractors who support the local economy. In addition, we have long-term relationships with key stakeholders in the region and work closely with landowners and communities when siting transmission lines. Such legislation would support the timely and cost-effective construction of the MISO long-range transmission planning projects and other needed transmission investments. Unfortunately, the legislation was vetoed by the governor in August. It was not ultimately brought to a vote during the veto session. We will continue to work with key stakeholders to support this important piece of legislation in the spring legislative session. On page 14, we look ahead to the next decade. We have a robust pipeline of investment opportunities, totaling more than $48 billion that will deliver significant value to all our stakeholders by making our energy grid stronger, smarter, and cleaner. The $48 billion does not reflect the incremental investment opportunities included in the recently filed integrated resource plan. We will provide an updated number on our call next February, along with the new five-year capital plan. Of course, our investments create thousands of jobs for our local economies. Maintaining constructive energy policies that support robust investment in energy infrastructure and to transition to a cleaner future in a responsible fashion will be critical to meeting our country's energy needs and delivering on our customers' expectations. Turning now to page 15. In February, we updated our five-year growth plan, which included our expectation of a 6% to 8% compound annual earnings growth rate from 2023 through 2027. This earnings growth is primarily driven by strong compound annual rate-based growth of 8.4%, supported by strategic allocation of infrastructure investment to each of our operating segments based on their constructive regulatory frameworks. Combined, we expect to deliver strong long-term earnings and dividend growth, resulting in an attractive total return that compares favorably with our regulated utility peers. I'm 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. Again, thank you all for joining us today, and I will now turn the call over to Michael.

Thanks, Marty, and good morning, everyone. Turning now to page 17 of our presentation, yesterday we reported third quarter 2023 earnings of $1.87 per share, compared to $1.74 per share for the year-ago quarter. This page summarizes key drivers impacting earnings at each segment. Under our constructive regulatory frameworks, we experience earnings growth driven by increased investments in infrastructure in all of our business segments. As you can see, the key quarterly drivers are largely consistent with the guidance considerations laid out in February and the supplemental considerations provided on the first and second quarter earnings calls. We were able to deliver strong earnings performance during the quarter as a result of our diverse business mix and disciplined cost management. Before moving on, I'll touch on sales trends for Amarillo, Missouri and Amarillo, Illinois electric distribution. Year-to-date weather normalized kilowatt-hour sales to Missouri residential, commercial, and industrial customers decreased 2%, 0.5%, and 2.5% respectively compared to last year. The year-to-date decrease in residential sales reflects anticipated transition back to the office for many people. In addition, energy demand was lower as a result of the impacts from severe weather experience in our service territory this quarter. That said, our residential sales remain a little over 3% higher than pre-COVID 2019 levels. For industrial, we expect the year-to-date decline to moderate over the remaining course of the year, as the UAW strike ends, coupled with increased demand, including from a General Motors plant expansion and a new graphics processing company. Year-to-date weather normalized kilowatt-hour sales to Illinois customers have declined about 3% on average compared to last year. Recall that changes in the Illinois electric sales, no matter the cause, do not affect our earnings, since we have full revenue to cover. Moving to page 18, I would now like to briefly touch on our 2023 earnings guidance. We delivered strong earnings in the first nine months of 2023 and are well positioned to finish the year strong. As Marty stated, we have narrowed our 2023 earnings guidance to be in the range of $4.30 to $4.45 per share. This is a comparison to our original guidance range of $4.25 to $4.45 per share. On this page, we've highlighted select considerations impacting our 2023 earnings guidance for the remainder of the year. These are supplemental to the key drivers and assumptions discussed on our earnings call in February. I encourage you to take these into consideration as you develop your expectations for the fourth quarter earnings results. Turning now to page 19, in January, Ameren Illinois Electric Distribution filed its first multi-year rate plan, or MYRP, with the ICC. Our MYRP is designed to run three key elements, providing safe and reliable energy to our customers, deploying capital in a way that achieves the Climate and Equitable Jobs Act objectives, as included in our performance metrics, and facilitating the clean energy transition by preparing our system to accept more renewables and electric vehicles over time. The MYRP details a grid modernization plan that includes our planned electric distribution investments and supports our annual revenue increase request for the next four years. In September, the ICC staff filed a brief recommending a cumulative increase of $322 million in revenue for 2024 through 2027. This includes a return on equity of 8.9%, reflecting the 2022 average 30-year treasury rate plus 580 basis points. It also includes a 50% equity ratio. Also in September, Ameren Illinois updated its request to reflect a cumulative increase of $444 million in revenues, which reflects a return on equity of 10.5% and an equity ratio of 54%. In October, the administrative law judges recommended a cumulative increase of $338 million in revenues, incorporating a 9.24% return on equity and a 50% equity ratio. Our brief on exceptions filed last Thursday calls for a return on equity of 9.85%, and an equity ratio of 52%. We expect an ICC decision by mid-December with new rates affected by January 2024. Turning to page 20, in April, we followed our electric distribution annual rate reconciliation to reconcile the 2022 revenue requirements to actual cost. In August, the ICC staff updated their recommended reconciliation adjustment to $110 million base rate increase, compared to our updated request of $117 million base rate increase. The $7 million variance is driven by a difference in the common equity ratio, as we have proposed a 52% compared to the ICC staff's recommended 50%. An ICC decision is required by December 2023, and the full amount would be collected from customers in 2024. Earlier this year, we also filed with the ICC for an annual increase in Amarillo, Illinois natural gas distribution rates using a 2024 future test year. In October, we filed an updated request for a $140 million increase based on a 10.22% ROE and a 52% common equity ratio and a $2.9 billion rate base. In October, the ICC staff recommended a $127 million increase based on a 9.89% return on equity and a 50% common equity ratio, which is consistent with the ALJ proposed order issued in September. We expect an ICC decision by mid-November, with rates expected to be effective in early December of this year. On page 21, provide a financing update. We continue to feel very good about our financial position. We were able to successfully execute two debt issuances earlier this year, which is outlined on this page. Further, in order to maintain our credit ratings and strong balance sheet while we fund our robust infrastructure plan, we expect to issue approximately $300 million of common equity. consisting of 3.2 million shares by the end of this year. These shares were previously sold forward under an ATM program with an average initial forward sales price of approximately $93 per share. Additionally, on September 30th, we've entered into forward sales agreements under an ATM program for approximately $92 million to support our 2024 equity needs with an average initial forward sales price of approximately $86 per share. Together with the issuance under our 401K and DRIP Plus programs, our ATM equity program is expected to support our equity needs in 2024 and beyond. We continue to be strategic and thoughtful about our financing our robust capital plan. Turning to page 22, I'd like to briefly touch on our natural gas business as we head into the winter months. Both Airman, Illinois and Airman, Missouri natural gas commodity prices are approximately 91% price edge based on normal seasonal sales. and 100% volumetrically hedged based on maximum seasonal sales. I'm pleased to say in light of the drop in natural gas prices, residential natural gas customers in Illinois and Missouri are expected to see total bill decreases of approximately 13% and 23%, respectively, compared to the 2022-2023 winter season. Turning to page 23, we plan to provide 2024 earnings guidance when we release fourth quarter results in February next year. Using our 2023 guidance as a reference point, we've listed on this page select items to consider when you think about earnings outlook for next year. Beginning with Missouri, earnings are expected to be higher in 2024 when compared to 2023 due to new electric service rates effective in July 2023. We also expect increased investments in infrastructure eligible for plant and service accounting to positively impact earnings. A return to normal weather in 2024 would increase Amer-Missouri earnings by approximately two cents compared to 2023 results today, assuming normal weather in the last quarter of the year. Next, earnings from our FERC regulated electric transmission activities are expected to benefit from additional investments in Amer-Illinois projects made under forward-looking formula rate making. For Amer-Illinois electric distribution, earnings are expected to benefit in 2024 compared to 2023 from additional infrastructure investments. The allowed ROE under the new multi-year rate plan, effective at the beginning of 2024, will be determined by the ICC as part of the pending rate review compared to the average 2023 30-year treasury yield plus 5.8%, which is currently in place. Ameren Illinois natural gas earnings are expected to benefit from higher delivery service rates based on a 2024 future test year. Moving now to Ameren-wide considerations, we expect increased common shares outstanding and higher interest expense at Ameren-Parrott to unfavorably impact earnings in 2024 compared to 2023. Finally, I would note consistent with past practice, our 2024 earnings guidance will include no expectation of COLE gains or losses. And turning to page 24, we're well-positioned to continue executing our plan. We expect to deliver strong earnings growth in 2023 and over the long term, driven by robust rate-based growth and disciplined cost management. Further, we believe this growth will compare favorably with the growth of our peers. Ameren shares continue to offer investors an attractive dividend and total shareholder return story. That concludes our prepared remarks. We now invite your questions.

Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. We ask that you please limit to one question and one follow up as necessary. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Nicholas Campanella with Barclays. Please proceed with your question.

Hey, everybody. It's Nathan Richardson on for Nick.

Hey, good morning, Nathan. This is Marty Lyons. Hey, before you get to your question, you may not have experienced this, but I think many of our participants that were participating on the webcast missed a portion of our prepared remarks because of a a systems issue, but just want to reassure everybody we will post our replay of the entire conference call as soon as possible following the end of the Q&A session. So with that, please carry on with your question.

Gotcha. And I just want to talk about equity needs first. I'm sorry if I missed this, but in the September slide, you talked about $500 million of equity needs per year from 2024 to 2027. And would this still be the case? And would you mind maybe talking about how you're thinking about ATM versus block needs and what you would be open to?

Yeah, perfect. Good morning. This is Michael. Yeah, our equity needs are really unchanged from where they were at the beginning of the year. You know, when we issued our five-year guidance, we talked about $300 million of equity that we needed to do in 23 and then $500 million per year beginning in, you know, 24 through the balance of 27. You know, happy to report, I think we've said this before, you know, we've taken care of those equity needs for 23. Those have been done under an ATM forward sale, so we'll bring those down here at the end of the year. We've sold forward about 100 million of the 500 million need for 25 through some forward sales. You know, as we sit here today, you know, we continue to find the ATM to be very effective, efficient. You know, we'll continue to evaluate our needs. I'd Our capital comes in pretty radibly, so the ATM works well from that perspective. But, you know, we're always open to if there are better mechanisms to continue to take advantage of.

Gotcha. Thank you. And then one last one. So sticking with financing, you have a robust IRP with a lot of renewables. Can you help me think about your position on transferability cash flow and whether that is something you would utilize and maybe a timeline for that?

Yeah, you bet. I mean, it looks like, you know, the transferability market continues to evolve here nicely, continue to see some deals starting to get done there, which is great. You know, I mean, as we kind of step back and think about it, it's certainly something we could avail ourselves of, you know, over time, just because we don't have necessarily the tax appetite to use all those when we need to. And so, you know, as we think about from a financing perspective, I mean, there could be a slight positive, right, just over time. I mean, ultimately, you're going to end up providing those back to customers, which is great because it ends up lowering the cost of those renewables, which is what we all want. But there could be some positive, you know, temporary regulatory lag that we may experience from time to time. But not, you know, not a huge, I think, replacement in any sort of financing needs going forward, if that makes sense.

Got it. Makes sense. Thank you very much.

You bet. Thank you.

Our next question comes from Char Perez with Guggenheim Partners. Please proceed with your question.

Hey, guys. Good morning.

Hey, Char. Good morning.

Good morning. Let me just, starting with Illinois, I mean, can you just maybe talk a little bit about the outlook for the balance of the process here on the multi-year? I mean, obviously your neighbor in Chicago was very dissatisfied with the ALJ. You have briefs out there. I guess, what's your expectation for the ICC to depart from the ALJ at this point? And what's the next step, right? So would you consider filing for a rehearing if the ALJ stands as is? Would you look to defer and redeploy CapEx? I'm just kind of curious what the next step could be if you get an adverse decision.

Yeah, look, Char, I think great questions overall. You know, first of all, as you mentioned, you know, referred to. We filed our reply brief in September, and we believe that, you know, what we filed there really best supports achievement of the state of Illinois' goals as captured in the Clean Energy and Jobs Act. And so, you know, if you look at that, you know, that's where, you know, we really believe that, you know, the state would be best served and the customers of the state. So, you know, look, I would say as I think about the process to date, you know, we've been pleased the, both the staff and frankly, now that the, and the ALJ as well, you know, they've supported nearly 95% of our planned capital investments over the next four years. So I think that's a positive that's occurred through this process. Uh, you know, we, uh, as we stated in our prepared remarks, you know, are disappointed with the recommended return on equity and capital structure, uh, that came from the ALJ as well as the treatment of this OPEB, uh, asset. but the case isn't over um like i said last week we filed our brief on exceptions we articulated our concerns and the reason uh reasons for seeking a better outcome from the commission and i'd say that's really where you know you get to the to the next steps reply briefs on exceptions are due on november 14th and then we'll expect a commission decision by by mid-december You know, as we said in our, again, in our prepared remarks, we continue to support our initial asks of a 10.5% ROE and 54% equity in the cap structure. But we did in our reply brief suggest an alternative that the commission could arrive at, you know, a 9.85% ROE or an alternative equity structure of 52% equity. And you know, in coming up with those, you know, we looked at alternative data in the record, looked at the averages of comparable utilities as it related to cap structure. So, again, I'd refer you to our filing for further details on those. But, you know, we remain hopeful at this point that the commission will meet, you know, is going to reach a more constructive and fair outcome than came from the ALJ. And then, you know, at this point, I wouldn't comment on, you know, what action we may take, you know, post a commission ruling. Michael, you want to make a comment?

Yeah, I agree with all his comments. And just to remind you, I think you know this. I mean, it's about 18% of our rate base today. And again, as we sort of step back and just look at our overall capital plan, we got the $19.7 billion out there over the next five years and $48 billion over the next 10. I think we have really constructive jurisdictions to continue to allocate that capital, continue to be thoughtful about that. As Marty said, I think You know, where we are from a rate-based and capital addition standpoint in that rate review process is a positive, you know, 95% or so. But we have some flexibility to pivot if needed.

And then just to confirm, just the equity ratio growing into it, no block equity. So just how do we think about juicing that up?

Yeah, I mean, again, I think as we sit here today, really just kind of stand by the comment I just made about the ATM itself. I think it provides us a great deal of flexibility. It's cost-effective. It's not to say that we wouldn't entertain something if we needed to, but, again, just the way that capital is being laid in over time, it's been a pretty effective way to do it. Okay.

You know, Shard, you know, Yeah, and Char, just to, you know, build on sort of the answers that I gave and that Michael gave, I think, you know, as it relates to our overall plan, and Michael mentioned this, I mean, we obviously have a robust portfolio of capital expenditures that we can make across, you know, all of our segments. And, you know, we really feel very confident as we sit here today in our continued ability to, you know, grow at 6% to 8% in terms of our EPS CAGRs. You know, as we've laid out before, we've got 48 plus billion of infrastructure pipeline out through 2032. And, you know, we remain very confident in our overall ability to execute as a company.

Perfect. Thanks very much, guys. And big congrats to Warner. But I have a sense that he's going to be as busy as ever anyway, even in phase two.

Appreciate it, guys. You're probably right. Thanks.

Our next question comes from Julian Dumoulin-Smith with Bank of America. Please proceed with your question.

Hey guys, good morning. This is Darius on for Julian. Appreciate you taking the question. Maybe just to start with you, you alluded to this and I appreciate that you don't have formal 24 guidance out there, but with the drivers and the visibility that you have now and the known of the ALJ recs in both the Illinois cases, can you comment on maybe just how you see that six to eight shaping up on a year over year basis? Does the ALJ sort of give you a basis to still hit that range in 24?

Hey, Darius said, Michael here, thanks again for that question. You know, look, again, as we sit here today and we, you know, updated and provided guidance in February, we feel good about that 68%, you know, thinking about that midpoint of 435. You know, we gave you some select drivers here, right, in terms of what we see sort of impacting us kind of year over year. But again, you know, feel good about the situation that we're in. We can, again, feel good about the 8.4% rate-based growth that we have. You know, we've had, obviously, the updated IRP that we released in September. We talked about, you know, incremental $1.5 billion of capital that, you know, could come into the plan over time there. So, again, as we sit here today, I feel very good about that 68% earnings per share growth.

Okay, excellent. Thank you for the detail. And maybe if I can ask one on the competitive transmission projects, just looking at your updated slide, it looks like the, and I appreciate these are MISOs estimates, but it looks like the overall competitive opportunity is unchanged at a little bit under a billion. But there was maybe within that the content, including Orient, any Fairport, was slightly lower than in your previous or in the previous estimates. So just curious if you guys can comment on maybe the other project within that set of competitive opportunities. Do you see anything moving up or down as the estimates get for the refined?

Yeah, happy to answer that question. This is Marty again. So, you know, again, with respect to the projects that were assigned to us in Tranche 1, the $1.8 billion, you know, we're getting underway with those, which is fantastic. And then there were about $700 million of competitive projects. And the first one that we bid on was the Orient Denny Fairport project. And we're very pleased that we were selected, you know, as the winning bidder on that project. As you mentioned, the ultimate price that we bid was lower than the MISO's original planning estimate. And I think, you know, our bid's indicative of the kind of work we do to partner with others, whether those be, you know, co-ops and munis in the area or vendors to really deliver a low-cost project. And as I mentioned, you know, MISO's numbers are planning estimates and don't necessarily have the rigor that goes into the formal bids that we provide. But I wouldn't read, you know, too much into where that project came out relative to MISO's estimates. You know, each project is going to be different. Each project has its own routing issues, land acquisition requirements, partnering opportunities, et cetera. So, you know, you really can't extrapolate that outcome to the entirety. But, again, I think we're very pleased. Well, we are. We are very pleased that we were selected as the winning bidder on that project. And we submitted another bid on another project, the Denny to Zachary Thomas Hill Maywood project. And we've got one more that we plan to bid on as well, the Skunk River Ipeva.

Great.

Thank you very much for the call. I appreciate it.

Our next question is from Jeremy Tenet with J.P. Morgan. Please proceed with your question.

Hi. Good morning.

Good morning.

Just wanted to come back to Illinois Electric, if I could, realize questions have been asked, but maybe just to put a finer point on some of the questions here. You know, why do you think the ALJ's ROEs came out so different than your proposal, or are there any specifics in the ALJ filing that you see that justifies this difference, or why they view the electric ROEs less than the gas ROEs, as you see kind of justifying this delta?

You know, I can't really, this is Marty again, I really can't comment on why, if you will, they got to that. You know, they used some discounted cash flow and... capital asset pricing model kind of calculations that used some data that was in the record. But again, in our reply briefs, you know, we note, you know, certain data that alternatively should be used in our view in those calculations if they were used. And of course, you know, staff used similar calculations and came up with a little over 10%. So, again, I can't say why, but we, again, feel like, you know, inappropriate data points were used in those calculations, which, again, in our reply briefs we addressed, and I'd refer you there in terms of our thoughts in terms of those calculations.

Got it. Understood. Maybe pivoting towards Missouri here and the IRP, what What has been the reaction to the proposed Missouri IRP here? How have conversations with stakeholders been trending over time?

Yeah, I think the conversation that's been had within the state is very much a balanced one. You know, I think that some of the things that we put into this IRP as opposed to our prior one was the addition of 800 megawatts of gas simple cycle in 2027. We made a couple of adjustments to, you know, first of all, the timing of one coal-fired energy center to push that out for a couple of years, and with it, push out a 1,200-megawatt planned combined cycle plant. You know, and then I can say we also moved forward some of the battery storage technology we had planned by about five years. And I think the conversation has been balanced because in doing this, what we're really doing is putting, stressing the fact that our integrated resource plan is really represents what we believe to be the lowest cost approach to transitioning our portfolio of energy centers over time and maintaining, importantly, the reliability that our customers expect. And as we do that, making sure that we're being good environmental stewards. you know, we're able to add those resources to bolster reliability while still hitting carbon emission reduction targets that we've discussed previously, 60% by 2030, 85% by 2040, and ultimately that net zero. So, you know, again, I believe the conversation has been really balanced because of that, our focus on affordability, our focus on reliability, you know, while still hitting our targets in terms of environmental stewardship.

Got it. Makes sense. Very helpful. I'll leave it there. Thank you.

Thank you.

Thanks, Jeremy.

Our next question comes from David O'Carroll with Morgan Stanley. Please proceed with your question.

Hey, good morning. Thanks so much for taking my question. I'm wondering if you could just speak a little bit related to the CCNs and renewables in Missouri. How competitive are renewables currently and just what's your latest in terms of how you're positioned to compete for company-owned generation versus contracting?

With respect to the Missouri renewables, earlier this year, the Missouri Public Service Commission approved two solar projects that we had proposed, both the Huck Finn and the Bloomtown solar projects. Together, they're about 350 megawatts of investment. And, you know, those are projects that will be constructed and that we will own. And we expect the closing date on those to be Q4 of 2024. So, you know, a good step forward in terms of commission approval of projects consistent with our IRP and our ownership. We also filed for CCNs this year for an additional 550 megawatts of solar projects, four projects in total. And that's going to be proceeding. We expect a commission decision on that early next year. And again, we do believe it's in the best interest of our customers and communities long-term for these projects to be constructed for our ownership. You know, in our integrated resource plan, we didn't change the amount of our anticipated and planned overall renewables versus our prior IRP. We did include an expectation that the costs associated with those renewables would increase. However, you know, those costs are being offset by the impact of the higher production tax credits and investment tax credits that are available under the Inflation Reduction Act. So, you know, when we go to, when you look at the IRP, which, you know, we laid out a the timeline on slide 10 that we provided, what you see there is a really good balance of the growth in renewable projects, but also investments in assets that will preserve reliability. As I mentioned a second ago, both the gas simple cycle, the gas combined cycle, some of the battery storage technology that's really going to ensure that we continue to have a reliable system. But the important thing is that this combination of resources, along with the continued investment, ensuring the reliability of our existing dispatchable assets, both our Callaway nuclear plant, as well as our coal assets through retirement, We really believe that this represents a lease cost plan for providing energy to our customers in Missouri and preserving, again, the reliability that they expect. So, you know, again, the CCNs that we're proposing for the renewables really fit with, you know, with execution of this IRP. And then with respect to your last question, while you can't rule out the possibility of PPAs. You know, what we've really demonstrated over time, if you look at some of the renewable projects that we've put into our portfolio and have had approved by the commission, is that we really do believe in the long term that our ownership and operation of these assets provides the long-term lowest cost for our customers.

Great. Thanks for all that color. Very helpful. And I was wondering if you could also touch on your expectations here for load growth going forward. We've seen weather normal loads still trending down for most of the year. I'm wondering if you could give your perspective on when that might settle down and outlook for industrial sales too within that.

Yeah, you bet. Good morning, Dave. This is Michael. Yeah, you know, this year's obviously been a little interesting. You see some of the decreases in residential. You know, I think we attribute that to a couple of things. We had some significant storms, a number of them over the summer that certainly contributed a bit to that. And then also, you know, still just working through, I think, this going back from working at home into the office. And so you're certainly seeing that transition as well. And it continues to throw the number around a bit. You know, we've obviously, we've had some extreme weather here and there, which always, you know, factors into kind of how you think about this on a normalized basis, but you try to get it as close as, as close as possible. I do think it is beginning to level out as we kind of look forward. And I mean, again, I think I, I pointed out, you know, if you look at our residential side of things, I mean, you're seeing, um, about 3% growth, you know, relative to where we were kind of, uh, pre pandemic. And the other positive is we actually have customer growth, you know, year to day too. So ultimately you believe that's going to continue to transition into some sales growth. I think, you know, on the commercial side, you know, we continue to see some positives. I mean, the industrial and noted that obviously we are impacted by, you know, the, um, The strike at GM that was going on for some period of time, that obviously seems to be concluding. There's actually an expansion that has occurred there, so we should see that. It'd be a positive element going into the remainder of the fourth quarter. And then I think there's some positive developments that we're seeing just broadly on the industrial side as well that are adding some load growth. So, I mean, as we look out in the future, I think we still stick by this about half percent kind of load growth over time. I think that has the ability, hopefully, to move up as some of this industrial continues to evolve. But that's where we are today, David.

Okay, great. Thanks so much. See you soon. You bet.

Our next question is from Paul Patterson with Glenrock Associates. Please proceed with your question. Hey, good morning, guys.

Good morning, Paul.

Just wanted to – I apologize if I missed this because I did have some tech problems. But Darius was asking about the competitive bid, and I was wondering, do you guys have any data that you guys provided or can provide on –

kind of uh what kind of returns you're seeing and in the competitive transmission versus um you know just in general yeah paul first of all i do apologize again for the technical difficulties you and others experienced um apologize for that and the inconvenience. You know, I don't think we have anything that we could point to in terms of return. I would say this, I mean, when we bid on these projects, you know, we're very cognizant of, you know, what we think our cost of capital is and, you know, what, you know, what appropriate return expectations are for these projects. So, you know, that's certainly taken into consideration when, you know, when making any bids. So, I think the assumption should be that as a winning bidder of this project that we expect to earn a fair return on the project.

Sure. Okay. But I guess maybe it's competitive to tell us what that might be. Is that right? Or can you?

Yeah, I think so. I mean, we'll give some consideration post the call to whether there's anything we can point to. But yeah, I think that probably not something that I think we could point to today. Okay.

Okay, cool. The second question I have is on the ROFA legislation, which you guys plan on pursuing perhaps in the spring, it seems, according to the slides and stuff. I'm wondering about the Lake v. Neat. I think that's the case of the Supreme Court. That's that ROFA case in Texas that the Supreme Court may or may not. If it doesn't get certiorari, I'm sure you guys are following the case, what does that mean with respect to the roefer situation, generally speaking? I mean, how should we think about that?

Well, you know, I think, Paul, you know, as it relates to, you know, the court cases is, you know, we watch court case around the country, both in Texas as well as a couple of other states. You know, we've seen You know, we've seen them run into problems in Texas. We've seen, you know, the ropers upheld in other states. So we're going to continue to watch the developments across all of these cases and then make sure that whatever we bring forward, which we do plan to bring forward next year, you know, these these rights of first refusal, both in Illinois and Missouri. uh that we make appropriate adjustments to um you know the the proposed legislation to uh ensure that you know they're able to uh you know withstand legal challenges and and hold up uh if for some reason through the the process of of these things going through the courts you know we don't believe that they'd be lawful obviously that would affect whether we move forward with uh seeking uh these rights of first refusal or not but as we sit here today We do believe, both in Missouri and Illinois, that these rights of first refusal really are very beneficial to our customers and communities. I think we just talked about this project that we won, which was this oriented Denny Fairport project. And I think it just goes to show that we are a low-cost constructor. We are a low-cost operator. And we do believe that these projects have very good value for customers. And when MISO puts these forward, Tranche 1, what's to come in Tranche 2, these projects have very good benefit-to-cost ratios. And by not assigning those to the incumbent transmission operator, by putting them out for bid. You're delaying those benefits to customers by two years or so. And again, we've certainly demonstrated we're a low-cost provider. So we do think that these rights of first refusal are in the best interests of our customers, the citizens of both the states of Illinois and Missouri. And we look forward to working with stakeholders as we move towards the next legislative session to really build a stronger coalition and make sure people really understand the value. And we'll work with all stakeholders to put forward legislation that we think not only can pass and should pass, but can withstand any court challenges. So back to your question, Paul, we'll continue to monitor these cases as we have and adjust as needed.

Okay. And absolutely, I hear you on your ability to demonstrate your competitiveness and stuff. But just, I guess what I'm saying, I guess what I'm asking about is the Supreme Court, I guess what I'm wondering is, would that invalidate rofers? Do you follow what I'm saying? I mean, across the country, or do you see this as being specific to, I guess what I'm saying, what I don't understand is a massive industry question, if you follow me. I'm trying to figure out for my own edification, sort of like, what what happens if it isn't granted certiorari? I guess that would mean the fifth circuit would stand. And if that is the case, what, how do we think about the rope for people where I'm coming from?

Well, I, I do. And I guess we'd have to see, you know, how the Supreme court rules, what they say. But you know, when night, we talked about this a little bit on the last call, when we looked at Texas, we thought it was really more applicable to the situation in Texas. Whereas when we looked at crafting the rights of first refusal, we've been putting forward, you know, more aligned with states where the rovers have been upheld in the courts. So I think we'd ultimately have to look at the ultimate, you know, the Supreme Court decision and its applicability. But, you know, I guess I can't really comment further at this time, Paul.

I gotcha. I appreciate it. Thanks so much. And thanks. Thanks a lot.

You bet. Thank you. See you soon.

Our final question comes from Anthony Crowdell with Mizuho. Please proceed with your question.

Hey, good morning. Thanks for squeezing me in. Just hopefully an easy one. You talked a lot about the financing plan. It seems like it's intact. A lot of capital opportunities, rate-based opportunities. I'm just wondering, what do you think is the most challenging part of the plan that you have?

Yeah, hey, it's Michael. You know, look, I think it's just about continued execution around all these projects, right? I mean, I think we got some robust rate-based growth, 8.4%, as you just noted, $20 billion of capital plans. We got to continue to execute these well, get them into service, make sure we realize all the benefits associated with them. I mean, obviously, you know, we're in a different financing environment today than we were a couple of years ago. So that creates, you know, some headwinds you got to continue to work through. But I mean, ultimately, I think we've talked about this in the past. We've got a number of mechanisms to recover those financing costs, you know, pretty rapidly through. But on the Illinois side, you know, we can always accelerate some rate reviews if we needed to on the Missouri side. But at the end of the day, I think it's really this comes back down to just an affordability opportunity, just making sure that we keep costs as low as we possibly can for customers as we work through this incredibly important plant energy transition. Marty, anything to add to that?

No, I think that's well covered. Anthony, any other questions?

No, I'm good. Thanks so much. I'll catch you guys up in Phoenix.

Look forward to seeing you. See you next week.

Mr. Lyons, there are no further questions at this time. I'd like to turn the floor back over to you for closing comments.

Well, thank you all for joining us today. Once again, I'll apologize for the technical difficulties some of you experienced, and as I mentioned, we'll make sure that we post a replay of this call as quickly as possible. I think what you heard today is we have really had a strong start to 2023. We've gotten through these important summer months, and with just a couple months left, we may remain very confident in our ability to achieve our earnings per share growth goals for this year and earnings per share range that we've outlined today. We make sure that we're focused on continuing to deliver strong value, both for our customers, our communities, as well as for our shareholders. As we underscored today, we continue to expect 68% earnings per share growth for 23 to 27. It's supported by strong investment in rate-regulated infrastructure and rate-based growth of 8.4% compound annually from 2022 to 2027. So feel very good about our execution of our plan, and I thank you all for joining us, and we look forward to seeing you all soon. Have a great day.

This concludes today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.