Ameren Q2 2022 Earnings Call Transcript

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Provided by Quartr
August 4, 2022

Key Takeaways

  • Amarin reported Q2 2022 earnings of $0.80 per share, flat year-over-year, and reaffirmed its full-year guidance of $3.95–$4.15 per share.
  • The company highlighted a $48 billion investment pipeline over the next decade, targeting 4,700 MW of renewable energy by 2040 and aiming for net-zero carbon emissions by 2045.
  • Ameren Missouri filed for a $316 million annual electric rate increase and Ameren Illinois requested an $84 million increase, with regulatory decisions due mid-2023 and December 2022 respectively.
  • Under MISO’s Long Range Transmission Plan, Ameren has been assigned $1.8 billion of Tranche 1 projects and may compete for an additional $0.7 billion, with capital deployment beginning in 2025.
  • The planned retirement of the Rush Island Energy Center requires $100–150 million in transmission upgrades and imposes interim operational limits pending a court order, introducing compliance and timing risks.
AI Generated. May Contain Errors.
Earnings Conference Call
Ameren Q2 2022
00:00 / 00:00

There are 10 speakers on the call.

Operator

Greetings, and welcome to Amarin Corporation's Second Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to your host, Megan McPhail, Manager of Investor Relations.

Operator

Thank you. You may begin.

Speaker 1

Thank you, and good morning. On the call with me today are Marty Lyons, our President and Chief Executive Officer and Michael Main, our Executive Vice President and Chief Financial Officer as well as other members of the Amarin management team joining us remotely. Marty and Michael will discuss our earnings results and guidance as well as provide a business update. Then we will open the call for questions. Before we begin, let me cover a few administrative details.

Speaker 1

This call contains time sensitive data that is accurate only as of the date of today's live broadcast and redistribution of this broadcast is prohibited. To assist with our call this morning, we have posted a presentation on the amereninvestors.com homepage that will be referenced by our speakers. As noted on Page 2 of the presentation, comments made during this conference call may contain statements that are commonly referred to as forward looking statements. Such statements include those about future expectations, beliefs, Plans, projections, strategies, targets, estimates, objectives, events, Conditions and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated.

Speaker 1

For additional information concerning these factors, please read the forward looking statements section in our news release we issued yesterday in the forward looking statements and risk factors sections in our filings with the SEC. Lastly, all per share earnings amounts Discussed during today's presentation, including earnings guidance, are presented on a diluted basis unless otherwise noted. Now here's Marty, who will start on Page 4.

Speaker 2

Thanks, Megan. Good morning, everyone, and thank you for joining us. We had a solid quarter and we're excited to share an update today on a number of recent developments. As always, our team continues to work to execute our strategic plan across all of our business segments, allowing us to deliver significant value to our customers and shareholders. Yesterday, we announced Q2 2022 earnings of $0.80 per share compared to earnings of $0.80 per share in the Q2 of 2021.

Speaker 2

The year over year results reflected increased infrastructure investments across all our business segments that will drive significant long term benefits for our customers. The key drivers of our 2nd quarter results are outlined on this slide. I am pleased to report that we remain on track to deliver solid earnings growth in 2022 and are reaffirming our 2022 earnings guidance range of $3.95 per share to $4.15 per share. Michael will discuss our 2nd quarter earnings, 2022 earnings guidance and other related items in more detail later. Moving to Slide 5, you will find our strategic plan reiterated.

Speaker 2

We continue to invest in and operate our utilities In a manner consistent with existing regulatory frameworks, enhance regulatory frameworks and advocate for responsible energy and economic policies and create and capitalize on opportunities for investment for the benefit of our customers, shareholders and the environment. Turning now to Page 6, which highlights our commitment to the first pillar of our strategy, investing in and operating our utilities in a manner consistent with existing regulatory frameworks. Our strong long term earnings growth guidance is primarily driven by our infrastructure investment and rate based growth plans, which are supported by constructive regulatory frameworks. You can see on the right side of this page, we continue to strategically invest significant capital in each of our business segments in order to maintain safe and reliable operations as we transition to a cleaner energy grid. Regarding regulatory matters, earlier this week, Ameren Missouri filed an electric rate review with the Missouri Public Service Commission, Requesting a $316,000,000 annual revenue increase.

Speaker 2

This request reflects significant modernization upgrades To the electric grid for system reliability, resiliency and safety as well as investments to support the transition to cleaner energy for the benefit of our customers and local communities. In our Illinois Electric business, we recently requested an $84,000,000 revenue increase in our required annual electric distribution rate filing. Again, key drivers for this rate increase include significant investments to enhance the grid for our customers and communities, which will deliver long term benefits. Michael will cover these in more detail a bit later, and we will provide updates on these proceedings as they develop later this year. As we invest to build a safer, stronger, smarter and cleaner energy grid for our customers, We also continue to work diligently to manage our costs, leverage our investments and optimize our performance.

Speaker 2

Moving now to Page 7 and the 2nd pillar of our strategy, enhancing regulatory frameworks and advocating for responsible energy and economic policies. Without question, energy policy at the federal and state levels and constructive regulatory frameworks that incentivize meaningful and needed infrastructure investments Have never been more important as we look to reliably and securely transition to a cleaner energy future as affordably as possible. As you know, late last week, it was announced that Senators Schumer and Manchin reached agreement on proposed legislation that would, among other things, Extend significant incentives for clean energy development and deployment. Given the clean energy transition underway in Illinois and Missouri, As highlighted by our recent change to the Ameren Missouri Integrated Resource Plan filed with the Missouri PSC in June And our goal of reaching net zero carbon emissions by 2,045, we are very excited about the potential benefits of this legislation. Specifically, the credits proposed for wind, solar, storage, nuclear, carbon capture utilization and storage or CCUS And hydrogen will align very well with the significant investments proposed in the Missouri IRP.

Speaker 2

Importantly, the benefits of these tax incentives will ultimately lower the cost of the clean energy transition for our customers in Missouri and Illinois over time. These potential tax credits, when coupled with the significant clean energy funding made available through the Infrastructure Investment and Jobs Act passed earlier this year, We'll drive significant long term benefits for our customers, communities and the country. I will also note that the proposed legislation includes a minimum Corporate income tax for public companies with pretax book earnings above $1,000,000,000 At the state level, as part of Ameren Missouri's Smart Energy Plan, A multiyear effort to strengthen the grid, our customers are benefiting from stronger poles, more resilient power lines, smart equipment including modern substations And upgraded circuits to better withstand severe weather events and restore power more quickly. As we mentioned on our Q1 earnings call, Missouri Senate Bill 745, which enhances and extends the Smart Energy Plan, passed earlier this year with strong majority support in the General Assembly. The bill was later signed by Governor Parson.

Speaker 2

We believe extending Missouri's Smart Energy Plan will continue to benefit our customers and communities as we transform the energy grid of today to build a brighter energy future for generations to come and while creating significant economic development and jobs in the state. Moving to Page 8 for Illinois legislative matters. We continue to make progress working towards the implementation of the Illinois Energy transition legislation enacted last year, including the performance metrics required by the legislation. Ameren Illinois has proposed 8 performance metrics, each worth 3 basis points of incentives for a total of 24 basis points of symmetric Equity return upside or downside potential. The ICC staff is mostly aligned with Ameren Illinois on the performance metrics and has proposed a range of 20 to 24 total basis points of increased or decreased return opportunities.

Speaker 2

We expect a final order from the ICC by late September in the performance metrics docket. We look forward to the ICC's order and filing our 1st multiyear rate plan next year as we believe this legislation will support important Energy grid investments and deliver value to customers. Turning to Page 9 for an update on our plan to accelerate the retirement of the Rush Last month, in response to our notification to MISO of our intention to retire the energy center, MISO issued its final Attachment Y report designating the generating units at the Rush Island Energy Center as system support resources. MISO also concluded that certain mitigation measures, including transmission upgrades, should occur to ensure reliability before the energy center is retired. Those transmission upgrade projects have been approved by the MISO and we have started the design and procurement process associated with the upgrades, which we expect to complete by late 2025.

Speaker 2

In the interim, until Rush Island can be retired, Ameren Missouri has Proposed limiting operations at the Energy Center. The district court is under no obligation or deadline to issue a rule its remedy order to reflect the MISO SSR designation or proposed interim operating parameters. The original March 31, 2024 compliance date remains in effect unless extended by the court. We expect a decision in the near term. Turning now to Page 10 for an update on changes to our 2020 Ameren Missouri Integrated Resource Plan, which we filed in June.

Speaker 2

Our IRP is a 20 year energy plan created to ensure reliability for our customers for years to come. I'm excited to share with you that these changes to the plan accelerate our clean energy additions, reduce carbon emissions even further in the short term, and accelerate the company's net zero carbon emissions goal by 5 years. Specifically, the plan targets a 60% reduction in carbon emissions below 2,005 levels by 2,030 and an 85% reduction by 2,040. And by 2,045, our goal is to achieve net zero carbon emissions across all of Ameren. The new goals include both Scope 1 and Scope 2 emissions, including other greenhouse gas emissions of methane, nitrous oxide and sulfur hexafluoride.

Speaker 2

We plan to achieve these goals by making significant in renewable energy, including 2,800 megawatts of renewable energy by 2,030, representing an investment opportunity of $4,300,000,000 This is an increase of $1,000,000,000 from our 2022 or excuse me, our 2020 IRP. By 2,040, in total, The plan includes 4,700 Megawatts of Renewable Generation for a total investment opportunity of $7,500,000,000 The plan also includes 1200 Megawatts of Gas combined cycle generation by 2,031, Investment opportunity of $1,700,000,000 which will allow us to safely and reliably advance the net retirement timeline of our fossil generation, including the accelerated retirement of the Rush Island Energy Center. Further, the plan includes 800 megawatts So battery storage by 2,040 representing an investment opportunity of $650,000,000 We expect to add 1200 megawatts of a clean dispatchable resource by 2,040 2 and to also seek an extension of the operating license of our carbon free Callaway Nuclear Energy Center beyond the current expiration date of 2,044. These changes to the 2020 IRP We'll drive our ability to meet customers' rising needs and expectations for reliable, affordable and clean energy sources. Achieving these goals is dependent upon a variety of factors, including cost effective advancements in innovative clean energy technologies and constructive federal and state energy and economic policies.

Speaker 2

We have issued a request for proposal to solicit solar and wind projects that will allow us to take the next steps and deliver the best value for our customers. One thing is clear, our IRP includes significant incremental And we're very excited as we continue to execute our clean energy transition plan. Turning now to Page 11. Speaking of executing our clean energy transition plan, in July, we filed certificates of convenience and necessity or CCNs With the Missouri Public Service Commission for 2 solar project acquisitions BoomTown, a 150 Megawatt Solar Energy Center located in Southern Illinois is expected to be in service by the Q4 of 2024. HUCFIN, a 200 Megawatt Solar Energy Center located in Eastern Missouri, would be Ameren's largest solar project to date, generating more than 25 times the amount of energy of Missouri's largest existing solar facility.

Speaker 2

This solar project is also While the Missouri PSC is under no deadline to issue an order on the CCN filings, We expect decisions by March April 2023 for the 200 Megawatt and the 150 Megawatt facilities, respectively. Looking ahead, we expect to announce further agreements for the acquisition of renewables between now and the first half of twenty twenty three. Turning to Page 12, in the 3rd pillar of our strategy, creating and capitalizing on opportunities for investment for the benefit of our customers, shareholders and the environment. This page provides an update on the MISO long range transmission planning process. As we have discussed with you in the past, MISO completed a study outlining a potential roadmap of transmission investments through 2,039, Taking into consideration the rapidly evolving generation mix that includes significant additions of renewable generation based on announced utility integrated resource plans, State mandates and goals for clean energy or carbon emission reductions as well as electrification of the transportation sector among other things.

Speaker 2

In July, MISO approved Tranche 1, a set of projects located in MISO North, which it estimated to cost more than $10,000,000,000 Of these projects, approximately $1,800,000,000 represent projects in our service territory that have been assigned to Amarin. We expect to refine the scope, cost estimates and time line for these projects over the remainder of this year. In addition to the assigned projects, MISO approved approximately $700,000,000 of competitive projects that cross through our Missouri service territory, which provide additional potential investment opportunities. We are well positioned to compete for and successfully execute on these projects given the location of the projects and our expertise constructing large regional transmission projects. Later this month, MISO is expected to post a schedule Outlining the RFP process for competitive bidding with the 1st RFP expected to be issued by late September.

Speaker 2

The competitive bidding process is expected to take 12 to 24 months. For the projects assigned to Amarin, we expect the capital expenditures to begin in 2025 with the completion dates expected near the end of this decade. MISO has also begun work on 3 additional tranches It is indicated that an initial set of tranche 2 projects also located in MISO North is expected to be approved in the second half of twenty twenty three. Projects included in tranche 3 are expected to be located in MISO South with approval scheduled by the end of 2024, while projects identified in tranche 4 are expected to improve transfer capability between MISO North and MISO South and will be studied upon approval of tranche 3. Turning then to Page 13.

Speaker 2

Looking ahead over the next decade, we have a robust pipeline of investment opportunities We will deliver significant value to all of our stakeholders by making our energy grid stronger, smarter and cleaner. We have updated the investment opportunities to reflect the additional renewable and combined cycle generation included in the change to the IRP filed in June. We now expect over $48,000,000,000 of investment opportunities over the next decade. Maintaining constructive energy policies that support robust 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 14.

Speaker 2

We are focused on delivering a sustainable energy futures for our customers, communities and our country. This slide summarizes our strong sustainability value proposition and focus on environmental, Social, governance and sustainable growth goals. The change to the Ameren Missouri IRP filed in June supports our goal of net zero carbon emissions By 2,045, it is also consistent with the objectives of the Paris Agreement and limiting global temperature rise to 1.5 degrees Celsius. We also remain focused on supporting our communities, including our very robust supplier diversity program. Our strong sustainable growth proposition remains among the best in the industry.

Speaker 2

We have a robust pipeline of future investments that will continue to modernize the grid and enable a transition to a cleaner energy future. I encourage you to take some time to read more about our strong sustainability value proposition. You can find all of our ESG related reports at amereninvestors.com. Turning to Page 15. To sum up our value proposition, we remain firmly convinced that the execution of our strategy in 2022 and beyond We'll deliver superior value to our customers, shareholders and the environment.

Speaker 2

In February, we issued our 5 year growth plan, which included our expectation of a 6 to 8% compound annual earnings growth rate from 2022 through 2026. This earnings growth is primarily driven by strong rate based growth supported by strategic allocation of infrastructure investment to each of our operating segments based on their constructive regulatory frameworks. We expect Amarin'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 to deliver strong long term earnings and dividend growth, which resulted in attractive total turn 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.

Speaker 2

Finally, turning to Page 16. I would like to take the opportunity to congratulate Richard Mark on his retirement and extend my gratitude for his many Contributions made to Amarin and our communities. Richard served in several leadership positions during his 20 year career at Amarin and was influential in the advancement of the electric and natural gas distribution grids throughout Southern and Central Illinois, including installing advanced Technologies, improving reliability and creating thousands of jobs in addition to a strong community engagement. Thank you, Richard, and I wish you well in your retirement. I would also like to introduce to you Ameren Illinois' new President, Lenny Singh.

Speaker 2

Lenny brings more than 30 years of utility experience serving in both electric and natural gas operations, most recently as Senior Vice President of Consolidated Edison Company of New York. Over the course of his career, Lenny has focused on operational excellence and value creation, prioritizing safety, customer satisfaction, continuous improvement, action and accountability. I look forward to working with Lenny as he builds on Ameren Illinois' success as we work to safely, reliably and securely drive the clean energy transition in the state of Illinois. Again, thank you all for joining us today, and

Speaker 3

I will now turn the Call over to Michael. Thanks, Marty, and good morning, everyone. Yesterday, we reported Q2 2022 earnings of $0.80 per share compared to $0.80 per share for the year ago quarter. Slide 18 summarizes key drivers impacting earnings at each segment. I'd like to take a moment to highlight a few key variances for the quarter.

Speaker 3

Earnings in Ameren Missouri, our largest segment, benefited from higher electric retail sales, driven by warmer early summer temperatures during the quarter compared to near normal temperatures in the year ago period and higher electric rates. The positive factors impacting earnings in Ameren Missouri were more than offset by, among other things, higher operations and maintenance expenses. The higher O and M reflected unfavorable market returns in 2022 on company owned life insurance investments compared to favorable market returns in the year ago period. In addition, the higher O and M expenses were driven by the absence of refined coal credits in 2022, which had been a benefit to our coal fired energy centers in 2021 prior years and the increased transmission and distribution expenses, including storm costs. The reduction in refined coal credits was anticipated and reflected in the new electric service rates effective earlier this year.

Speaker 3

In fact, year to date on M costs excluding COLI are largely in line with what we expected when we provided guidance in February. We remain focused on disciplined cost management for the second half of the year. Before moving on, I'll touch on sales trends for Ameren Missouri and Ameren Illinois distribution year to date. Weather normalized kilowatt hour sales to Missouri residential and commercial customers increased about 0.5% and 1.5 Percent respectively. Our weather normalized kilowatt hour sales to Missouri industrial customers decreased about 0.5%.

Speaker 3

Weather normalized kilowatt hour sales to Illinois residential and commercial customers increased about 1.5% each year to date. And weather normalized kilowatt hour sales to Illinois industrial customers increased about 0.5%. Recall that changes in electric sales in Illinois, no matter drivers impacting our 2022 earnings guidance. We've delivered solid earnings in the first half of twenty twenty two and are well positioned to finish the year strong. As Marty stated, we continue to expect 2022 diluted earnings to be in the range of $3.95 to $4.15 per share.

Speaker 3

Select earnings considerations for the balance of the year are listed on this page and are supplemental to the key drivers and assumptions discussed on our earnings call in February. As we reflect on our earnings for the full year results, the benefits we've seen from weather during the first half of the year and from the higher expected 30 year treasury rates are offset in part by unfavorable market returns on company owned life insurance as well as higher than expected short term and long term borrowing rates. I encourage you to take these into consideration as you develop your expectations for the Q3 and full year earnings results. Turning now to Page 20 for an update on regulatory matters, starting with Ameren Missouri. Earlier this week, we filed for a $316,000,000 Electric revenue increased with the Missouri Public Service Commission.

Speaker 3

The request includes a 10.2% return on equity, A 51.9 percent equity ratio and a December 31, 2022 estimated rate base of $11,600,000,000 Drivers of the requested increase are investments under the Smart Energy Plan, including increased cost of capital and depreciation expense, as well as increased net fuel expense due to reduced off system sales driven by expected reduced operations at Rush Island. As Marty noted earlier, customers are benefiting from investments made under the Smart Energy plan to strengthen the grid, including infrastructure upgrades bolstering reliability and resiliency, Installation of smart meters and an improvement in reliability of up to 40% on circuits with new smart technology upgrades. We expect the Missouri PSC decision by June 2023 and new rates to be affected by July 1, 2023. We look forward to working with all key stakeholders on this request. Moving to Page 21, in Ameren Illinois regulatory matters.

Speaker 3

In April, we made our required annual electric distribution rate update filing. Under Illinois performance based rate making, These annual rate updates systematically adjust cash flows over time for changes in cost of service and true up of any prior period over or under Recovery of such cost. In late June, the ICC staff recommended a $60,000,000 base rate increase compared to our updated request of an $84,000,000 base rate increase. The $24,000,000 variance is primarily driven by a difference in the common equity ratio as we proposed 54% compared to the ICC staff's recommended 50%.

Speaker 2

For perspective, the order received from

Speaker 3

the ICC last December included a common equity ratio of 51%. An ICC decision is expected in December with new rates Expected to be effective in January 2023. On Page 22, we provide a financing update. We continue to feel very good about our financial position. On April 1, Ameren Missouri issued $525,000,000 of 3.9 percent Green First Mortgage Bonds due 2,052.

Speaker 3

Proceeds of the offering are used to fund capital expenditures and refinance short term debt. In order to maintain a strong balance While we fund our robust infrastructure plan consistent with the guidance in February, this year we expect to issue approximately $300,000,000 of common equity under our aftermarket equity program. We have fulfilled all of our 'twenty two equity needs through the forward sales agreement entered into as April 1st and we expect to issue 3,400,000 common shares by the end of this year upon settlement. Further, as of July 12, approximately 2.25 of $300,000,000 of equity outlined in 2023 has been sold forward under that program. Finally, turning to Page 23.

Speaker 3

We have had a solid first half and we expect to deliver strong earnings growth in 2022 as we continue to successfully execute our strategy. Today, we've outlined significant and exciting investment opportunities over the back half of our current capital plan and beyond that are not reflected in our 2022 to 2026 Capital plan. Consistent with our approach in the past, we will step back and take a comprehensive look at our investment opportunities and provide our Fidr capital plan for 2023 through 2027 during our year end conference call in February. As we look to the longer term, we continue to expect strong earnings per share growth driven by robust rate base growth and disciplined cost management. Further, we believe this growth will compare favorably with the growth of our regulated utility peers.

Speaker 3

The bottom line is that we are well positioned to continue executing our current plan. And Ameren shares continue to offer investors an attractive dividend. In total, we have an attractive total shareholder returns to where that compares very favorably to our peers. That concludes our prepared remarks. We now invite your questions.

Operator

Thank you. At this time, we'll be conducting a question and answer You may press star 2 if you'd like to remove your question from the queue. One moment please while we poll for questions. Our first question comes from Shahriar Pourreza with Guggenheim Partners. Please proceed with your question.

Speaker 4

Hey, good morning, Marty.

Speaker 2

Good morning, Shar. How are you today?

Speaker 5

Not too bad.

Speaker 2

Not too bad. It's Friday.

Speaker 5

Very good.

Operator

Marty, let me ask you just thank you

Speaker 5

for the visibility obviously on the Tranche Janice, but just a 2 part question here. What's your, I guess, confidence level on the competitive slice? Or How should we be thinking about maybe your ability to capture that? Is there a technical or cost of capital facet to your advantage? And then Does this how does this sort of interact with your prior CapEx and sort of rate base guide?

Speaker 5

I mean, some of the projects do break ground in 2025. So Could these be accretive to your 6% to 8%? Thanks.

Speaker 2

Yes, you bet, Shar. Good questions. And you're right, I hope you have a good Friday and a good weekend. But Back to your questions. In terms of the competitive projects coming out of Tranche 1, as we highlighted, a little over $700,000,000 of those.

Speaker 2

And as As we mentioned in our prepared remarks that we do believe we're well positioned to compete for and successfully execute those. And I think the bottom line is We believe we're really well positioned to efficiently build, operate and maintain those assets over time. The projects that are competitive Within our footprint, there are places where we have strong relationships with local communities, regulators, suppliers, contractors, etcetera. And we've been operating in this area for many years. So we know the land, we know the environmental conditions and issues.

Speaker 2

And I'd tell you too that we've been working for several years now. As you know, we've developed 1,000,000,000 of dollars' worth of transmission projects, and we've been working over time with Suppliers and contractors to really bring down the costs of construction. And because these projects, these competitor projects Are contiguous with other assets that we own and operate. We think we're really well positioned to operate and maintain these assets At a low cost over time. So those are some of the reasons that we believe at the end of the day, we're well positioned to compete and So we look forward to participating in that competitive process over time.

Speaker 2

And then your second question, really got to some of the incremental capital into our And I'll let Michael comment on that. But you're right, in terms of the $1,800,000,000 worth of projects that were assigned to us, we do again Expect to begin those in 2025 and those cash flows and capital expenditures to We incurred over between 2025 the end of the decade. Michael, any comments in terms of the added CapEx?

Speaker 3

Yes. Hey, good morning, Shar. I think Marty said it well. In terms of the capital plan itself, Shar, and we've talked about this. I mean, I think that It's great to start getting some clarity here around these different projects.

Speaker 3

And as Marty said, I think some of this could Even benefit the 5 year plan. As we have indicated, we're going to step back and what we typically do with our cadence is We'll update all of this in the February timeframe. And my sense is, this has got the ability to be accretive to our 5 year capital plan as well as just additive to the overall runway as we talk about the growth story. I think as we if you kind of remember, if you reflect back on the $48,000,000,000 that we have there now, That number used to be $40,000,000 We captured about $5,000,000,000 associated with transmission projects. That was broadly to try to look at these TP projects over the next 10 years.

Speaker 3

So I think we got it in there. Now it's a matter of where it just ends up by year, if that makes sense.

Speaker 5

Sorry. I'm sorry, Mike.

Speaker 2

This is Marty. And I think Michael touched on a good thing. As we started the year, we looked ahead to Q2. And we noted that there were going to be some Important updates in Q2 and I think that's exactly what came through. In terms of the integrated resource plan in Missouri, That indicated about $2,700,000,000 of incremental spend between now and 2,031.

Speaker 2

And then as Michael said, the LRTP adding Another $1,800,000,000 of expenditures that we have assigned to us as well as this Potential for $700,000,000 of additional competitive projects. So as Michael said, all those things gave us confidence to add that $8,000,000,000 to that long term capital expenditure outlook.

Speaker 5

Perfect. And then just I know you just probably touched on it a little bit on just the Inflation Reduction Act. I mean, Cinema proposed some changes. I think we go to a vote on Saturday. Can you just touch a little bit on the tax side?

Speaker 5

I mean, some of the utilities have talked about A technical fix with the 50% AMT, are you in sort of EEI lobbying against it? Could you get a carve out? And then If there is an enactment of that AMT, how do we sort of think about the cash flows and rate based growth impact and the recovery timing? Thanks.

Operator

Well, Shar, there was a there's a lot there.

Speaker 2

And as you noted, even based on the reports this morning, there seems to be some moving pieces As it relates to the corporate minimum tax. Let me just say this overall about the legislation. We're excited about the potential tax Credits in the legislation, especially the wind and the solar, given the 4,700 megawatts of renewables that we looked at In Missouri, by 2,040 based on our integrated resource plan. So that's all pretty exciting. And even net of CMT impact, we think the legislation is good for Ameren for our customers in both Missouri and Illinois because it really should lower the cost So the clean energy transition in both states.

Speaker 2

And that's not even mentioning some of the other positives in there, whether it's the credits for nuclear, storage, CCUS, hydrogen, things we talked about on the call, all of which align with our long term resource plan. That's all really good. The things you're aware of, things like the PTC for solar is a positive versus the prior ITC and transferability provisions, which are things that we really For ABILITY provisions, which are things that we really think could help us to pass the value associated with some of these tax credits to our customers more swiftly. So like I said, net, we think that the legislation overall is good and will help facilitate a lower cost Transition to this clean energy. As it relates to the CMT, it is applicable to us, given that we have Pre tax book income of greater than $1,000,000,000 but probably premature to speculate on exactly what that impact Given, as you mentioned, some of the moving pieces that aren't even really clear to us at this particular time.

Speaker 2

But at the end of the day, we do think based on what we have seen, we do believe that the cash flow impacts would be manageable. And as would Michael can comment on this better, but also the impacts on credit metrics and credit ratings. That's I guess where we stand on things. Shar, hopefully I answered all of your questions, Michael. Yes.

Speaker 2

I mean, Marty, I think at

Speaker 3

a high level You gave it good justice there. I mean, I think overall, we do see it as being manageable. There are a lot of moving pieces here. So I think that's why we're Trying to stay away from the specifics. But as we look at it and model it out, we do think, as Marty said, both from a cash flow as well as any sort of impact, Yes, Shar, on our FFO to debt metrics, but it definitely is something that's manageable.

Speaker 3

And I think the important thing to remember is just the net benefit to customers just From an overall credit standpoint, certainly on the Missouri side as you think about this clean energy transition that we're about to go through.

Speaker 5

Fantastic guys. Listen, have a great weekend. Appreciate the disclosures.

Speaker 2

You too, Shar.

Operator

Our next question comes from Jeremy Tonet with JPMorgan. Please proceed with your question.

Speaker 4

Hi, good morning.

Speaker 2

Good morning, Jeremy.

Speaker 4

Just wanted to round out the MISO Tranche 1 conversation a little bit more. And would Ameren entertain the notion of pursuing competitive processes beyond the $700,000,000 identified? Or is that The extent of what you would consider. And also, we've heard about there being kind of some incremental upside to these projects, maybe 10% to 15% of CapEx additionally for kind of ancillary components to these projects. And just wondering if you had any thoughts along those lines.

Speaker 2

Yes. Jeremy, good questions. You certainly will look to compete for these 700,000,000 That are competitive, certainly we'll take a look at those as well. We're not limited to these. But of course, as you know, in many of the surrounding States, you have entities with rights of first refusal.

Speaker 2

So, look, we feel good about The ones that have been assigned to us, I can't emphasize that enough. This $1,800,000,000 we feel great about and we'll go The $700,000,000 if we see other opportunities, we'll certainly look to compete in those as well. I wouldn't speculate right now, Jeremy, in terms of any incremental investment beyond these, these are the estimates that really came from MISO. And as we indicated in our Call, prepared remarks, we'll certainly be looking to next steps is really work on more refined design, Procurement, the regulatory approvals, etcetera, and give updates on what we think the overall value of these projects are, Perhaps when we get around to February and update our overall plans. But for now, we think these are the best estimates to be able to provide.

Speaker 4

Got it. That's helpful. Thanks. And then just as it relates to Rush Island here, if you could provide any incremental thoughts with regards to Transmission upgrade opportunity here, any could you provide any estimates on what these upgrades could look like? I know it's bigger than a bread box, but trying to kind of Scope out what that might look like?

Speaker 2

Yes. Good question. Look, we again gave a pretty good update in our prepared remarks on Rush Island. We did Indicate that design and procurement is underway with respect to the upgrade projects that MISO would approve. I I mean, I think our best estimate today, and this is a bit of a broad range, probably in the $100,000,000 to $150,000,000 range.

Speaker 2

And, but like I said, we'll be able to refine that further as we go through the design and procurement activities.

Speaker 4

Got it. That's very helpful. I'll leave it there. Thanks.

Operator

Thanks, Jeremy. Our next question is from Julien Dumoulin Smith with Bank of America. Please proceed with your question.

Speaker 6

Hey, good morning team. Thanks for the time and the opportunity. Hope you guys are well.

Speaker 2

Hey, Julian. Hope you're well also.

Speaker 6

Thank you. Thank you, sir. So maybe I want to come back to the Russian situation. I know you mentioned 25 here, for instance, on retirement here. But I want to talk about these other CSA, PR regulations and NOx.

Speaker 6

I'm just trying to understand how that I know that there's some proposals out there for 2026 and obviously you've got a couple of other plans, Labadee and Sue. How do you see this playing out? Because obviously, there's EPA regs in sort of the hypothetical ether and then there's sort of reality Of them lining up against your portfolio in a pretty meaningful way. I just wanted to understand

Operator

sort of the specifics as to

Speaker 6

I mean, obviously, it's subject to litigation, How do you see this playing out more specifically for your portfolio? And as you see to try to balance things?

Speaker 2

Yes. So as it relates To the CS APR rules, look, it's something we're not only monitoring, but engaging with EPA in terms of providing comment. Of course, Meramec is retiring this year. Rush Island is, as you mentioned, looks like it's going Tire in the 2024 to 2025 time frame. Again, we don't expect the transmission investments

Operator

to be fully

Speaker 2

completed until 2025. As we noted, we to be fully completed until 2025. As we noted, we have proposed some limited operations Between now and then, between now and when the plant would ultimately retire, all subject to the court's ruling in terms of Operating parameters as well as the ultimate closure date, but certainly going to significantly reduce NOx emissions as we ramp down towards Closure of that facility. So I think the focus really becomes, Julian, then on NOx controls at LabIDI and SUE. And I would remind you there that we've made significant investments over time in terms of NOx controls and we're more than complying with all the current standards that are out there.

Speaker 2

So with respect to the proposed additional rules, I think we'll wait to comment on Specifically, what the impacts will be at Labadee and SUE over time, until we get the final rules, which we expect to come out next March. But I will tell you that what we'll be doing and we are, we're analyzing strategies for compliance and making sure that We get the full benefit of the controls that we do have in place today at LabIDI and SUE.

Speaker 6

Understood. Excellent. Thank you. And then if I can, just jumping in on the inflation conversation, obviously, You filed your latest iteration of a rate case. But how are you seeing sort of cost inflation manifest itself across your portfolio?

Speaker 6

And how do you think about balancing that given the test you're embedded in the current rate case and any other leverage you might have?

Speaker 3

Yes. Thanks, Julien. This is Michael. Look, inflation, certainly, we're in a little different environment today. But I mean, I think as we've talked historically and we've Showed you a couple of times even had a slot I think that went through 2016 through 2021 and our overall operating costs were down about 3%.

Speaker 3

And so Look, we remain focused on it. You referenced this Missouri rate review that we just filed here. I would tell you that Really predicated on a lot of capital investment within the Smart Energy Plan. We outlined, I think, the benefits that customers are getting associated with those investments. And obviously, it's also being impacted by what we just talked about with respect to Rush Island and the net fuel costs and operating that plant in a more limited Fashion as well.

Speaker 3

So when you really cut through what's going on in the case, it's really not about O and M costs, which

Speaker 2

I think is a testament

Speaker 3

to what this team has been doing in terms of Looking for ways to continue to hold down costs wherever possible. So in the present environment, I think we're managing well As we noted on the call, we had some O and M was up, but it was really driven by some one time things between the COLI performance Well, some storm costs and when you cut through it, it certainly lines up with where our expectations were on the February timeframe we released guidance.

Speaker 6

Got it. And just prospectively here, just if I can push a little bit further, obviously, you've done a good job sort of to date, if you will. If you look Whether that's related to the cadence of labor relation negotiations, etcetera. I mean, do you what kind of trajectory Sure. You know what inflation are you seeing sort of in real time more prospectively here, if you can comment

Speaker 4

a little bit more? Yes. Sure.

Speaker 3

Yes, absolutely. And I'll keep my comments consistent with where we've been in the past. And Marty and I and the rest of the team are Focused on these costs and doing all that we can to control what we can control. And look, we aspire to keep these O and M costs. I think we said this 4, really flat over the 5 year horizon, if at all possible.

Speaker 3

It's obviously it's a bit more challenging in this environment. But Again, as we look to our capital plan, we look to the investments that we're making in automation and digital and smart meters. I mean, we're using All of those things to increase productivity, lower costs where we can and we're going to stay focused on it and just do absolutely all that we can because we know again What it means to our customers, we understand, we talked about this from a capital perspective, for every dollar of O and M, We've reduced, we can spend equivalent $7 of capital and so it is certainly top of mind and continuous everyday focus here.

Speaker 6

Excellent. Thank you, team. Have a good weekend. Speak soon.

Speaker 2

Thank you. You too, Julien.

Operator

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

Speaker 7

So, just on Rush Island, just sort of technically speaking, if you don't get the I mean, if the courts Don't completely go your way. The plan has to shut down. What would actually happen? Or do we have an idea about What was that?

Speaker 4

Yes. I guess, I don't want

Speaker 2

to speculate that, Paul. I think that it's obviously a process that we're still working through with The with the court and the court proceedings. And so, we laid out for you on Slide 9, the facts as they stand today. And Certainly wouldn't speculate if we get to that crossroads. I would point you on Slide 9.

Speaker 2

We said that with respect to the court, the March 31, 2024 compliance day remains in effect unless extended by the court. So the court's got that ability and certainly don't want to speculate as to what the court will or won't do and We'll let these proceedings play out.

Speaker 7

Okay. Fair enough. I don't want to push that, I guess. It's all hypothetical, I guess, to a certain degree. So With respect to wind curtailments that we've been seeing in the area, I was wondering if you could tell us what you've been seeing, not just in Ameren, but the greater Ameren neighborhood, so to speak, as well as how Tranche 1 and other sort of Activity occurring like I guess Greenbelt is talking about a 25%, I think, increase among other things.

Speaker 7

And as there's just there are a lot of moving pieces, I guess, so I put it right. So I'm just sort of wondering what if you could just sort of comment about What you're seeing there in terms of additions of generation, plants, traditional plants shutting down and transmission, what you see sort of The current situation with wind curtailments is generically speaking in your general region and what TransOne and other things might do with respect to the issue.

Speaker 2

Yes. Paul, I guess I don't have a Specific comment on wind curtailments and something we can follow-up on you follow-up with you That said, what I have seen recently is a map of these tranche 1 projects overlaid against where we're seeing congestion Jen, across MISO. And I will tell you there's tremendous alignment there, meaning these planned projects in tranche Really align well with where we're seeing congestion across the footprint, really promise to alleviate some of that congestion. And I think that's why if you go back a year or so ago, Warner made a comment about these being, I forget the word he used, But kind of no brainer projects or something like that and no regrets projects. And I think what he really meant by those is that Whether we proceed towards future 1, 2 or 3 in MISO, these projects Are very foundational no matter where you go and they're needed today to address some of the congestion that we're already seeing within the MISO footprint.

Speaker 2

And As I look ahead to tranche 2, 3 and 4, especially based on what we're seeing coming out of this IRA legislation, I think is really going to push us beyond that future 1 to more of like a closer to a future 2 kind of outlook. And my sense is that some of that will end up getting baked into the The projects that are approved in future tranches, including tranche 2, which is still expected to be approved by late next year. So again, don't have a specific comment on your question about what we're seeing currently. But to your question about these transmission projects And the need to alleviate congestion issues we're seeing, absolutely, they align very well.

Speaker 7

Okay. Awesome. Thanks so much and have a great weekend. You too.

Operator

Our next question comes from Anthony Chorodel with Mizuho. Please proceed with your question.

Speaker 8

Hey, good morning, Mike. Good morning, Marty. Thanks for taking my questions.

Speaker 2

You bet. Good morning.

Speaker 8

I guess first, on the Missouri rate filing, just if I think about, you filed in 2021, you're filing again in 2022. We have the PISA Legislation passed. Just what's now that you maybe have more clarity on the forward looking CapEx plan, What kind of frequency of rate filings you're expecting in Missouri for the next 2 to 3 years?

Speaker 3

Andy, we haven't actually said. I mean, you're right. We've been on kind of a 2 year cycle here at this point. And look, I mean, We want to continue to stretch these out as much as we possibly can. But just given the pace that we've been on from a capital standpoint, 2 years has been sort of what the required pace is needed to be.

Speaker 3

I think the only other thing to just keep in mind is We are required to file every 4 years just because of the fuel adjustment clause. But otherwise, we do want to try to stretch them out as long as we can.

Speaker 8

Great. And then I guess, lastly, this may be harder or may not be a great question. If I think about the Futures won projects that the company will bid on. Do the incumbent utilities or you guys operate in that jurisdiction, It seems that maybe the incumbent utilities are more likely to submit a proposal for a more robust like infrastructure Because it's in your jurisdiction, you're looking at Kevin at asset be active for 50 years, 60 years or something like that, whereas a competitor coming in there May just meet the bare minimal of a design spec and it makes it more affordable and wins the competitive process. Is that possible or is the design specs are the same for everyone?

Speaker 2

I really think MISO is going to do their best to make sure that there are very clear scope and design and construction expectations and attributes such that you can really get apples to apples comparisons in these bids. And I gave a fairly extensive answer to a question earlier. At the end of the day, I just want to reinforce, I mean, we really do believe that we're well positioned to Efficiently build, operate and maintain these assets over time. But it is our expectation that there'll be Every effort made to ensure there's apples to apples comparisons.

Speaker 8

Great. Thanks so much and have a wonderful weekend.

Speaker 7

You too. Thank you, Anthony.

Operator

Our next question is from Neil Kaltin with Wells Fargo Securities. Please proceed with your question.

Speaker 9

Hi, guys. How are you?

Speaker 3

Good morning, Al. Good morning.

Speaker 9

Yes. So I know it's not your project. Grain Belt Express, though, there's been some recent developments. The capacity, as Paul mentioned, is going up on the project. And I would imagine IRA probably has some Positive implications for the economics and prospects, I would love your latest thoughts on that project, if you will.

Speaker 2

Hey, Neil. It's Marty. Absolutely. We laid out in this updated integrated resource plan some pretty significant ambitions in terms of addition of renewables. We're talking about 2,800 megawatts through 2,030, 4,300 megawatts by 2,035.

Speaker 2

And we've filed a couple of CCNs related to that, as you know, the BoomTown project, Huck Finn project, a couple of projects we outlined on this call. But there's a long way to go in terms of the addition of renewables. So we have issued a request for proposal and are evaluating the best options for our customers. As we've discussed with you and others over time, grain belt remains a project that is of interest primarily because of the opportunity to bring wind energy from the West, the Kansas region, for example, into Missouri for the benefit of our Our Missouri customers and in fact, in our integrated resource plan had highlighted the potential to utilize that line to bring in as much Just a 1,000 megawatts of wind energy. So it is something that we continue to evaluate and we'll evaluate As we look at the opportunities for renewables that come out of this RFP, ultimately, as you know, we want to Make sure we pick the right projects for our customers from the standpoint of affordability and A good mix of assets to meet their needs over time.

Speaker 9

Great. Thanks. And then One other question. I think in your prepared remarks, you mentioned hydrogen as being a you sort of mentioned as part of the Can you elaborate a bit more on sort of how you're thinking about hydrogen? Is this sort of a nearer term opportunity?

Speaker 9

Or Any thoughts on that as well, please?

Speaker 2

Yes, Neil. So in our updated integrated resource plan that we filed in June, we Actually added a 1200 Megawatt combined cycle plant by 2,031. And the idea there is to get to our net zero ambitions By 2,045, the idea would be to construct that with an eye towards transitioning to hydrogen or hydrogen blend with carbon capture Trofit by as early as the 2,040 timeframe. So it's with regard to that project specifically that we think about that.

Speaker 9

Okay, great. Thank you.

Speaker 3

Yes. Take care. We have reached the end

Operator

of the question and answer session. I'd now like to Turn the call back over to Marty Lyons for closing comments.

Speaker 2

Great. Hey, thank you all for joining us today. I hope what you heard is that we had a very strong start to 2022. We're looking to finish strong for the remainder of this We remain focused on continuing to deliver significant long term value to our customers, the communities that we serve and to our And so anyway, we look forward to seeing many of you at conferences over the next couple of months. And we again appreciate you joining us.

Speaker 2

Have a great day.

Operator

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

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