Ameren Corporation

Greetings and welcome to the Ameren Corporation third quarter 2024 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, please press star zero on your cell phone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Andrew Kirk. Director of Investor Relations and Corporate Modeling for Ameren Corporation. Mr. Kirk, please proceed.

Thank you, and good morning. On the call with me today are Marty Lyons, our Chairman, 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 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. Thank you for joining us today as we cover our third quarter 2024 earnings results. I'll begin today on page four. We're focused on delivering strong long-term value for our customers, communities, shareholders, and the environment. By investing in rate-regulated infrastructure, enhancing regulatory frameworks, and advocating for responsible energy policies, We are positioning ourselves to take advantage of future opportunities to benefit all of our stakeholders. And through a disciplined approach to optimizing our operating performance, we have been able to keep our customer rates low in comparison to the national average as we transform the energy grid to enhance reliability and provide cleaner energy to our communities. We remain excited for the future, and we see strong growth opportunities unfolding over the next decade. Turning to page five. Yesterday we announced third quarter 2024 adjusted earnings of $1.87 per share compared to earnings of $1.87 per share in the third quarter of 2023. These comparable adjusted earnings results were in line with our expectations. The third quarter and year-to-date 2024 adjusted results exclude two charges related to separate proceedings that had been ongoing for over a decade. The first related to an agreement in principle to settle the rush Island energy center, new source review and clean air act proceeding. And the second for customer refunds required by the federal energy regulatory commissions first October, 2024 order, which established a new base return on equity within the mid continent independent system operator or MISO that was applied retroactively to certain periods extending back to 2013. Key earnings drivers are highlighted on this page. Mike will discuss the factors driving the quarterly results in more detail in a moment. Our strong investment pipeline continues to drive earnings growth, and I'm excited about the significant economic growth opportunities in the communities we serve. The greater St. Louis region is experiencing some of the highest employment growth we've seen in the better part of three decades. In August, the region was ranked fourth among large metro areas in the country for employment growth. And we're seeing this strength in our region reflected in strong weather normalized retail sales growth year to date across all customer classes in Missouri. Turning now to page six. Thanks to our team's execution of our strategy over the course of this year, we have a strong foundation as we head into the final months of 2024. We expect to deliver 2024 earnings within our adjusted guidance range of $4.55 per share and $4.69 per share. and we expect our 2025 earnings per share to be in the range of $4.85 and $5.05 with the midpoint representing a 7.1% increase over the midpoint of our 2024 adjusted guidance range. While our historical practice has been to provide initial earnings guidance on our fourth quarter earnings call in February, we're issuing this 2025 guidance now to reinforce our confidence in our ability to deliver on our six to 8% earnings per share growth guidance expectations. We expect to provide our long-term earnings growth guidance and capital and financing plans on our year-end call in February. On page seven, we highlight the latest advancements across Ameren as we execute our strategic objectives for the year. Our infrastructure investment plan is designed to improve the reliability, resiliency, safety, and efficiency of our system as we remain focused on a reliable clean energy transition. Year to date, we've invested $3 billion to replace aging infrastructure and also build the new infrastructure needed to meet our customers' growing demands with a diverse mix of energy resources. Just last week, we announced that we have now closed on three solar energy centers this year, totaling 500 megawatts of new generation, which are undergoing final testing and are expected to be in service by the end of the year. On the regulatory front, MISO's long-range transmission planning process is progressing toward approval of the Tranche 2.1 portfolio by the end of the year. In September, MISO released additional Tranche 2.1 project details, which included approximately $3.6 billion of transmission investment needed in our Missouri and Illinois service territories to support reliability for the region. At AMRA Missouri, we're working to bring more dispatchable generation onto the grid. In October, the Missouri Public Service Commission, or Missouri PSC, approved a certificate of convenience and necessity, or CCN, and post-construction cost deferral for the 800 megawatt simple cycle natural gas energy center, Castle Bluff. This $900 million investment in dispatchable generation will support energy reliability in our region and will also create hundreds of construction jobs, several new permanent jobs, and additional tax revenue for the region. In addition, in November, we reached an agreement in principle with the U.S. Department of Justice to settle the Rush Island Energy Center New Source Review and Clean Air Act proceeding. I'll cover the details of the agreement in a moment. And finally, at Ameren, Illinois, in October, the Administrative Law Judge, or ALJ, issued a proposed order regarding our revised 2024 through 2027 electric distribution multi-year rate plan. Importantly, the ALJ proposed order supports 99% of our requested rate base when excluding the impacts of other post-employment benefits or OPEG. Following our team's extensive engagement with key stakeholders, all intervenors support the Illinois Commerce Commission's or ICC's approval of a revised grid plan with limited adjustments. We look forward to an ICC decision by the end of this year, which we expect to be consistent with the multi-year capital plans we issued in February. Last, operational performance across our company remains strong, with a focus on delivering safer, more reliable, and affordable energy through grid hardening, enhanced automation, optimization, and standardization. Turning to page 8 for an update on Ameren Missouri's new generation projects. We continue to execute our Ameren Missouri Integrated Resource Plan, or IRP, Which focuses on maintaining and building a diverse cleaner generation portfolio portfolio to ensure a reliable and low cost mix of energy resources to serve our customers needs. As I mentioned, we have three solar projects in the later stages of commissioning and testing and that are expected to be in service by the end of this year. We're also working toward the successful construction of another 400 megawatts of solar generation across three additional projects, which we expect will be ready to serve customers in late 2025 and 2026. Further, as I mentioned, in October, the Missouri PSC approved the CCN for the dispatchable 800 megawatt simple cycle natural gas energy center, Castle Bluff, following a constructive settlement with the commission staff and other interveners. The order also includes post-construction cost deferral to reduce unrecovered costs by allowing us to defer and recover the depreciation expense from the Castle Bluff Energy Center and an adjusted weighted average cost of capital return on the investment from the time it is placed in service to when it is incorporated into base rates. As solar energy predictably rises and then falls every day, it is vital to have Castle Bluff Energy Center to bolster grid reliability for our customers. Prep work has begun on Castle Bluff, which will be located on the site of our retired Merrimack Energy Center, allowing us to cost-effectively expedite the construction by leveraging an existing site with infrastructure in place. The Energy Center is expected to be in service for our customers by the end of 2027. We look forward to continuing to work with key stakeholders to bring additional generation online as quickly as possible to meet the needs of all customers, including businesses looking to relocate or expand in Missouri. Moving now to page nine for an update on the MISO long range transmission projects. In September, MISO provided additional detail and individual project cost estimates underlying the almost $22 billion tranche 2.1 portfolio, which is expected to drive significant reliability and capacity benefits for the region. The portfolio includes three projects in our Missouri and Illinois service territories that collectively represent an investment opportunity of approximately $3.6 billion. We await MISO's determination of which projects will be directly assigned or which will go through a competitive bidding process. MISO expects to approve the Tranche 2.1 projects by the end of this year. Once approved, MISO plans to commence work in 2025 on the Tranche 2.2 portfolio to address further transmission needs in the North and Midwest regions. As we continue to see substantial load growth across the country, MISO and its transmission owners will continue to assess whether the current long-range transmission future scenarios will be sufficient to support our region's energy needs in the years ahead. Moving now to page 10 for an update on our expanding customer growth opportunities. Our service territories have a broad-based, diverse economy which continues to expand across a variety of manufacturing sectors including aerospace, agriculture, and food processing, to name a few. So far this year, we've received expansion commitments or executed new contracts for approximately 350 megawatts of new load from data centers, manufacturing, and other industries, 90% of which is located in Missouri. These projects are expected to create more than 2200 jobs. We expect these new and expanding customers to be fully ramped up by 2028. We're excited about these opportunities and see tremendous additional opportunities for growth over the next five to seven years, which will bring jobs and additional tax base to benefit our state and local communities. Through ongoing collaboration with a variety of state and local stakeholders, we continue to attract new business and data center interest. Over the last few months, our economic development pipeline of potential additional demand has doubled in size. and we are making meaningful progress with several potential customers. These customers, representing several gigawatts of interest, have completed transmission engineering studies and, over the coming months, each will further evaluate the site locations and determine whether they will move forward with construction agreements. We're pleased to offer reliable service and competitive rates, as well as the people, resources, expertise, and partnerships needed to deliver for these customers. The ultimate net financial impact of any incremental load will be dependent upon a variety of factors, including customer ramp-up time, additional generation or grid investments needed, timing of rate reviews, and tariff structures. To that end, we are in the process of carefully evaluating potential load growth opportunities and our associated generation portfolio needs and would expect to update our IRP by February of 2025. This is an exciting time in our industry, we look forward to finding solutions for the significant potential new customers turning then to page 11. After almost 50 years of providing cost effective energy to our customers, a rush island energy Center was safely retired on October 15. We are grateful to our co workers who made this plant a reliable and low cost energy source for our customers for many decades. Careful planning over several years enabled us to ensure that every employee impacted by the retirement of Rush Island had an opportunity with the company as we continue to thoughtfully transition our generation resources while retaining our talented workforce. The Missouri PSC has authorized recovery of approximately $470 million of costs related to retirement of Rush Island through the issuance of securitized utility tariff bonds and we are working through the next steps to execute that issuance. In addition, in November, Ameren Missouri and the U.S. Department of Justice reached a settlement agreement in principle requiring Ameren Missouri to fund two mitigation relief programs in addition to retiring the energy center. The cost of these programs, which will provide for the electrification of school buses over a three-year period and air purifiers for eligible Ameren Missouri residential customers over 12 months, Tad Piper- total $64 million and the charges recorded this year related to this agreement are excluded from our adjusted earnings results. Tad Piper- The agreement between the do J and amber Missouri is subject to approval by the US district court for the eastern district of Missouri, which is expected by the end of the year. Tad Piper- Moving to page 12. Looking ahead over the coming decade, we have a robust pipeline of investment opportunities of more than $55 billion that will continue to deliver significant value to our stakeholders, create thousands of jobs, generate tax revenue for our local economies, and support economic growth in our region. Importantly, our 10-year investment pipeline does not reflect possible additional generation as we evaluate our needs to serve potential additional load growth. Any such changes to our 10-year investment pipeline will be reflected in our February earnings call update. Moving to page 13. Our five-year growth plan released last February included our expectation of a 6% to 8% compound annual earnings growth rate from 2024 through 2028. This earnings growth is driven by strong compound annual rate-based growth of 8.2% and strategic allocation of infrastructure investment to each of our business segments based on their regulatory frameworks. Investment in Ameren presents an attractive opportunity for those seeking a high-quality utility growth story. Combined, our strong long-term 6% to 8% earnings growth and an attractive and growing dividend, which today yields 3.1%, result in a compelling total return story. We have a strong track record of execution, a strong balance sheet, and an experienced management team. I'm confident in our ability to execute our investment plans and other elements of our strategy across all four of our business segments. Again, thank you all for joining us today, and I'll now turn the call over to Michael. Thanks, Marty, and good morning, everyone. I'll begin on page 15 of our presentation with an earnings reconciliation for the two earnings adjustments that Marty mentioned earlier. Yesterday, we reported third quarter 2024 gap earnings of $1.70 per share. which included a charge for additional mitigation relief related to the Rush Island Energy Center and a charge for the October 2024 FERC order on MISO's allowed base ROE. Both of these charges related to matters outstanding for the last decade. Excluding these two charges, AMER reported third quarter adjusted earnings of $1.87 per share compared to earnings of $1.87 per share for the year-ago quarter. The total after-tax charge of 17 cents per share in 2024 related to our Rush Island Energy Center reflects the estimated cost of the mitigation relief programs agreed to with the U.S. Department of Justice. This includes the 4 cents per share charge recorded in the first quarter of 2024. Subject to approval by the district court, we expect this settlement agreement to resolve the proceeding related to the new source review provisions of the Clean Air Act. Turning to the charge for the FERC order, recall, since November 2013, the allowed base ROE for FERC regulated transmission rate base within the MISO has been subject to review. In FERC's October 2024 order, it established a new base ROE of 9.98% for the periods of November 2013 through February 2015 and September 2016 forward, which decreased the allowed base ROE from 10.02% and will require refunds with interest for these periods, pulling an after-tax impact of 4 cents per share. The return on equity from MISO projects is now 10.48%, including the 50 basis point adder, and we do not expect a four basis point decrease in ROE to have a material impact on earnings expectations going forward. Turn to page 16 for detailed earnings results for the third quarter. Our adjusted earning performance during the quarter was driven primarily by strategic infrastructure investment and disciplined cost management, offset by changes in return on equity for Ameren Illinois electric distribution and rate design at Ameren Illinois Natural Gas. Additional factors that contributed to the year-over-year earnings per share results are highlighted on this page. Year-to-date results are outlined on page 26 of today's presentation. Before moving on, I'll touch on sales trends for Air and Missouri and Air and Illinois electric distribution. While model of weather this quarter compared to the year ago period created some earnings drag, our third quarter weather normalized retail sales remained strong at an overall increase of approximately 1.5% compared to the year ago period. Year to date weather normalized kilowatt hour sales to Missouri residential, commercial, and industrial customers increased approximately 2%, 1%, and 3% respectively compared to last year. Year-to-date increase in industrial sales reflect production growth driven by new industrial plant additions and additional shift work in our service territory. Year-to-date weather normalized kilowatt hour sales to Illinois customers were flat compared to last year. Recall that changes in electric, Illinois electric sales, no matter the cost, do not affect earnings since we have full revenue to cover. On page 17, we summarize select earnings considerations for the balance of the year. We expect our 2024 adjusted earnings to be in the range of $4.55 to $4.69 per share. Notably, we expect a positive year-over-year earnings impact in the fourth quarter driven primarily by strategic infrastructure investments, strong cost management programs, and lower charitable trust contributions compared to the year-ago period. I encourage you to take the supplementary earnings drivers noted on the slide into consideration as you develop your earnings expectations for the remainder of the year. Turning to page 18, where we provide detail on our expectations for 2025 earnings per share. As we head into 2025, we feel confident that strong execution of our strategic plan this year will position us to deliver on our expected long-term earnings growth. With that in mind, we expect 2025 earnings per share to be in the range of $4.85 and $5.05. This midpoint of this range represents a little above 7% earnings per share growth compared to the midpoint of our 2024 adjusted earnings guidance range. Expected 2025 earnings detail by segment as compared to our 2024 expectations are highlighted on this page. Beginning with Aaron Missouri, earnings are expected to benefit from new electric service rates effective by June 2025 and higher investment eligible for plant and service accounting. Earnings are also expected to benefit from higher weather normalized retail sales, primarily to Missouri's commercial and industrial customers, which are expected to increase by 1% and 2% respectively, driven primarily by the expansion and growth from our existing customers. We expect to update our long-term sales forecast in February. Further, we expect higher interest expense in Ameren Missouri and Ameren parent. Earnings in Ameren transmission and Ameren Illinois electric distribution are expected to rise driven by higher infrastructure investment. Earnings in Ameren Illinois natural gas are expected to be lower due to cost recovery impacts between rate reviews. In Ameren wide, we expect increased weighted average common shares outstanding to unfavorably impact earnings per share. Robust infrastructure investment in economic growth opportunities coupled with identified business process optimization opportunities and continued strong strategic focus give us confidence in our ability to grow in 2025 and the years ahead. Bring to page 19 for a brief update on the Missouri regulatory matters. In August, the Missouri PSC set the procedural schedule for our ongoing Air Missouri electric rate review. Interveneer testimony is due in early December, and we expect a decision by the Commission by May 2025 with newer rates affected by June. Recall that approximately 90% of this request is driven by investment center and Missouri Smart Energy Plan, including major upgrades to the electric system and investments in generation. If approved as requested, new electric service rates would remain well below the national and Midwest averages. Turning to Ameren Illinois regulatory matters on page 20. Under Illinois formula rate making, which expired at the end of 2023, Ameren Illinois was required to file annual rate updates to systematically adjust cash flows over time for changes in the cost of service and to true up any prior period over or under recovery of such costs. For the final electric distribution reconciliation of 2023's revenue requirements, in August, the ICC staff recommended approval of our proposed $158 million reconciliation adjustment. The full amount would be collected from customers in 2025, replacing the prior reconciliation adjustment of $110 million that is being collected during 2024. This will result in a net increase in cash flow of $48 million or approximately 1.5% increase in total average residential customer bill. An ICC decision is expected by December with new rates effective in 2025. Turning to page 21 for an update on the multi-year rate plan covering 2024 through 2027. In October, the ALJ recommended a cumulative revenue increase of $315 million based on an average rate base of $4.9 billion by 2027. Excluding the OPEB issue, the ALJ's proposed order supports 99% of the rate base that were requested in a revised multi-year rate plan. This would allow us to invest in the energy grid to maintain safety, reliability in the day-to-day operations of our system, while also making progress towards an affordable, equitable, clean energy transition. Following constructive engagement with the interveners to narrow the remaining issues, their latest proposals will reflect a multi-year grid plan that is largely consistent with our guidance laid out in February. We expect an ICC decision by December, with new rates effective January 1st, 2025. Under the multi-year rate plan framework, annual revenues will be based on actual recoverable costs, year-end rate base, and a return on equity provided they do not exceed 105% of the approved revenue requirements after certain exclusions. Moving to page 22, we provide a financing update. We continue to feel very good about our financial position. Our annual parent long-term issuer credit ratings of BAA1 and BBB plus at Moody's and S&P respectively compare favorably to the peer average providing us with financial flexibility. 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 in total in 2024. By the end of 2023, we sold for approximately $230 million of the expected 300 million through the at the market or ATM program consisting of approximately 2.9 million shares, which we expect to settle by the end of this year. Together with the issuance under our 401 and DRIP Plus programs, our ATM equity program is expected to fulfill our 2024 equity needs. Additionally, as of September 30th, we've entered into forward sales agreements under our ATM program for approximately $155 million to support our 2025 equity needs, with an average initial forward sales price of approximately $82 per share. As always, we continue to be thoughtful about strategically financing our robust capital plan. Going to page 23, we remain confident in our long-term strategy, which we expect to continue to drive consistent, superior value for all of our stakeholders. As highlighted today, we have made significant progress towards resolving several regulatory and legal proceedings. We have strong infrastructure investment opportunities to benefit our customers and attract new businesses. And we continue to see signs of an attractive regional economy, including solid retail sales growth, strong employment growth in the St. Louis region, moderating interest rates and inflation, and a robust economic development pipeline that will allow us to deliver strong earnings growth in 2025. Looking beyond, we expect consistent strong earnings per share growth driven by robust rate-based growth, disciplined cost management, and a robust customer growth pipeline. As we've said before, we have the right strategy, team, and culture to capitalize on opportunities to create value for our customers and shareholders. We believe this growth will compare favorably with the growth of our peers. And shares continue to offer investors an attractive dividend. In total, we have an attractive total shareholder return story. That concludes our prepared remarks. We now invite your questions.