Ameren Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

There are 10 speakers on the call.

Operator

Greetings, and welcome to Amarin Corporation's Third Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andrew Kirk, Director of Investor Relations for Amarin Corporation.

Operator

Thank you, Mr. Kirk. You may begin.

Speaker 1

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 the other members of the Ameren management team. This call contains time sensitive data that is accurate only as of the date Today's live broadcast and redistribution of this broadcast is prohibited. 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 about future expectations, Plans, projections, financial performance and similar matters, which are commonly referred to as forward looking statements.

Speaker 1

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,

Operator

who will start on Page 4.

Speaker 2

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.

Speaker 2

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 5 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.

Speaker 2

Turning to Page 6, Our strategic plan integrates our strong sustainability value proposition, balancing the 4 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 And today, we published our updated sustainability investor presentation called leading the way to a sustainable energy future, available at amereninvestors.com, which more fully details How we have been effectively integrating our sustainability values and practices into our corporate strategy. Importantly, it highlights Amarin Missouri's new integrated resource plan filed with the Missouri PSC in late September. In terms of governance, in October, The CPA Ziclin Index once again named Amarin 1 of the top 3 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.

Speaker 2

In October, More than 600 Ameren team members and community leaders came together in person and virtually for our 7th 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 $1,700,000 Funds, which will go towards supporting more than 60 United Way Organizations across our service territory. This is in addition to the United Way 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.

Speaker 2

Moving to Page 7. Yesterday, we announced Q3 2023 earnings of $1.87 per share compared to earnings of $1.74 per share in the Q3 of 2022. The key drivers of our Q3 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.

Speaker 2

Turning to Page 8. 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 9 are a few key accomplishments this quarter. As you can see on the right side of this page, We've invested significant capital in each of our business segments during the 1st 9 months of this year, increasing spending approximately 6% compared to the year ago period.

Speaker 2

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 1st 9 months of this year, Ameren Missouri over 270,000 smart meters and 230 smart switches, upgraded 55 underground cable miles, Harton's 32 sub transmission miles and energized 8 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.

Speaker 2

During the July 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 27,000,000 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.

Speaker 2

Department of Energy awarded Ameren Missouri approximately $50,000,000 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 1st 9 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 and as customers' reliability expectations continue to rise. The integrity of the Ameren Illinois Natural Gas System Also continues to improve.

Speaker 2

During the 1st 9 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 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 Flatten 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.

Speaker 2

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 this securitization by the end of this year. Once filed, The regulatory proceeding is expected to take approximately 7 months to complete.

Speaker 2

Moving to Ameren Illinois. In September October, we received the administrative law judge's proposed orders in the natural gas and electric rate reviews respectively. With respect to the electric multiyear rate plan, we are disappointed with the ALJ recommendation of 9.2 4% 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.

Speaker 2

Last Thursday, We filed briefs detailing our concerns with the ALJ proposed electric order,

Speaker 3

and we

Speaker 2

will see if the Illinois Commerce Commission or ICC We'll 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 2,030.

Speaker 2

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.

Speaker 2

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, in September, Ameren Missouri filed its updated 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.

Speaker 2

This energy center represents an investment opportunity of $800,000,000 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 1200 Megawatt combined cycle energy center to 2,030 3 from 2,031 to align with the retirement of the Sioux Energy Center in 2,032. The combined cycle energy center represents an investment opportunity of $1,700,000,000 The IRP also includes planned renewable energy additions of 4,700 Megawatts by 2,036, representing a total investment opportunity of approximately $9,500,000,000 This maintains the previously planned goal of 2,800 Megawatts of Renewables by 2,030 and investment opportunity of $5,300,000,000 Further, we expect to add 400 megawatts of battery storage by 2,030 and an incremental 400 megawatts by 2,035, representing investment opportunities of $600,000,000 $700,000,000 respectively. Finally, The IRP includes the addition of 1200 megawatts of clean, dispatchable energy in 2,040 and additional 1200 megawatts by 2,043. The exact type of resource deployed will be dependent upon cost effective advancements in innovative clean energy technologies in the coming years.

Speaker 2

Overall, we believe the plan includes a balanced path to achieving net zero carbon emissions by 2,045 and interim reductions of 60% 85% below 2,005 levels by 2,030 and 2,040 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 $1,500,000,000 over those included in our current 5 year plan. We will update and roll forward our overall 5 year capital plan next February.

Speaker 2

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 PSC for 4 additional CCNs, totaling 550 Megawatts of new solar generation across our service territory.

Speaker 2

In October, the PSC staff filed a recommendation against CCN approval of the 5 50 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.

Speaker 2

While the Missouri PSC is under no deadline to issue an order on these CCN filings, we expect decisions in the Q1 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 2,039. 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.

Speaker 2

MISO requests for proposal for its estimated $700,000,000 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 we're 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.

Speaker 2

For the remaining 2 competitive projects, We recently submitted a bid for the Skunk River to Ipava 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-twenty 24. 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 3,445 or the Transmission Efficiency and Cooperation Law, which if enacted We 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.

Speaker 2

HB 3,445 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 citing transmission lines.

Speaker 2

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.

Speaker 2

We have a robust pipeline of investment opportunities, totaling more than $48,000,000,000 that will deliver significant value to all our stakeholders by making our energy grid stronger, smarter and cleaner. The $48,000,000,000 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 5 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.

Speaker 2

Turning now to Page 15. In February, we updated our 5 year growth plan, which include 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 base 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.

Speaker 2

Again, Thank you all for joining us today, and I will now turn the call over to Michael.

Speaker 3

Thanks, Marty, and good morning, everyone. Turning now to Page 17 of our presentation. Yesterday, we reported Q3 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 experienced earnings growth driven by increased investments in infrastructure in all of our business segments.

Speaker 3

As you can see, the key quarterly drivers are largely consistent with the guidance considerations laid out in February and the supplemental considerations 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 Ameren Missouri And Ameren 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 an anticipated transition back to the office for many people. In addition, energy demand was lower as a result of the impacts from severe weather experienced in our service territory this quarter.

Speaker 3

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 declined about 3% on average compared to last year. Recall that changes in electrical The Illinois Electric sales, no matter the cause, do not affect our earnings since we have full revenue to cut 1. Moving to Page 18, I would now like to briefly touch on our 2023 earnings guidance.

Speaker 3

We delivered strong earnings in the 1st 9 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 in 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.

Speaker 3

I encourage you to take these into consideration as you develop your expectations for the Q4 earnings results. Turning now to Page 19, in January, Ameren Illinois Electric Distribution filed its 1st multiyear rate plan or MYRP with the ICC. Our MYRP is designed around 3 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 4 years. In September, the ICC staff filed a brief recommending a cumulative increase of $322,000,000 in revenue 2024 through 2027.

Speaker 3

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 percent equity ratio. Also in September, Ameren Illinois updated its request to reflect Cumulative increase of $444,000,000 in revenues, which reflect a return on equity of 10.5% and an equity ratio of 54%. In October, the administrative law judges recommended a cumulative increase of $338,000,000 in revenues incorporating a 9.24% return on equity and a 50% equity ratio. Our brief on exceptions filed last Thursday, calls for return on equity of 9.85% and an equity ratio of 52%.

Speaker 3

We expect an ICC decision by mid December with new rates affected by January 2024. Turning to Page 20, In April, we filed our electric distribution annual rate reconciliation to reconcile the 2022 revenue requirements to actual cost. In August, the ICC staff updated the recommended reconciliation adjustment to $110,000,000 base rate increase compared to our updated request of $117,000,000 base rate increase. The $7,000,000 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.

Speaker 3

Earlier this year, we also filed with the ICC for an annual increase in Ameren Illinois In October, we filed an updated request for $140,000,000 increase based on a 10.22 percent ROE and a 52% common equity ratio and a $2,900,000,000 rate base. In October, the ICC staff recommended $127,000,000 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 this year. On Page 21, we'll provide a financing update. We continue to feel very good about our financial position.

Speaker 3

We were able to successfully execute 2 debt issuances Earlier this year, which is outlined on this page further in order to maintain our credit ratings and balance sheet while we fund our robust infrastructure plan, we expect to issue approximately $300,000,000 of common equity, consisting of 3,200,000 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 30, we've entered into forward sales agreements under an ATM program for approximately $92,000,000 to support our 2024 equity needs, With an average initial forward sales price of approximately $86 per share, together with the issuance under our 401 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.

Speaker 3

I'd like to briefly touch on our natural gas business as we head into the winter months. Both Ameren Illinois and Ameren Missouri natural gas commodity prices are approximately 91% price hedged 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% 23%, respectively, compared to the 2022, 2023 winter season. Turning to Page 23. We plan to provide 2024 earnings guidance when we release Q4 results in February next year.

Speaker 3

Using our 2023 guidance as a reference point, We've listed on this page select items to consider when you think about our 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 service Accounting to positively impact earnings. Our rents earned to normal weather in 2024 would increase Ameren Missouri earnings by approximately $0.02 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 Ameren Illinois Projects made under forward looking formula rate making.

Speaker 3

For Ameren 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 We 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 Y considerations, we expect increased common shares outstanding and higher interest expense at Amerentera 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 on COLI gains or losses.

Speaker 3

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.

Speaker 3

We now invite your questions.

Operator

Thank you. We will now be conducting a question and answer A confirmation tone will indicate your line is in the question from the queue. We ask that you please limit to one question and one follow-up as 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.

Operator

Please proceed with your question.

Speaker 4

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

Speaker 2

Hey, good morning, Nathan. This is Marty Lyons. Hey, before you get to your question, I just 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 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 and A session. So with that, please carry on with your question.

Speaker 4

Got you. 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 $500,000,000 of equity needs per year from 24 to 27. 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?

Speaker 3

Yes, perfect. Good morning. This is Michael. Yes, our equity needs are really unchanged from where they were at the beginning of the year. When we issued Our 5 year guidance, we talked about $300,000,000 of equity that we needed to do in 'twenty three and then $500,000,000 Per year beginning in 2024 through the balance of 27.

Speaker 3

Have you reported, I think we've said this before, we've taken care of those equity needs For 'twenty three, 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 $100,000,000 of the $500,000,000 Or 25 through some forward sales. As we sit here today, we continue to find the ATM to be very effective, efficient. We'll continue to evaluate our needs. Our capital comes in pretty ratably, so the ATM works well from that perspective.

Speaker 3

And so But we're always open to if there are better mechanisms to continue to take advantage of.

Speaker 4

Got 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?

Speaker 3

Yes, you bet. I mean, it looks like the transit really market continues to evolve here nicely. We continue to see some deals get starting to get done there, which is great. I mean, as we kind of step back and think about it, it's certainly something we could avail ourselves of over time just because we don't have necessarily the tax appetite to use all those when we need And so 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.

Speaker 3

But there could be some positive temporary regulatory lag that we may experience from time to time, but not a huge, I think, Replacement any sort of financing needs going forward, if that makes sense.

Speaker 4

Got it. Makes sense. Thank you very much.

Speaker 2

You bet. Thank you.

Operator

Our next question comes from Shar Pourreza with Guggenheim Partners. Please proceed with your question.

Speaker 2

Hey, guys. Good morning. Hey, Sharter. Good morning.

Speaker 5

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.

Speaker 5

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 deferred, redeploy CapEx, I'm just kind of curious what the next step could be if you get an adverse decision.

Speaker 2

Yes. Look, sure. I think great questions overall. First of all, as you referred to, we filed A reply brief in September and we believe that what we filed there really best supports achievement of the state of Illinois goals It's captured in the Clean Energy and Jobs Act. And so if you look at that, that's where we really believe that The state would be best served and the customers of the state.

Speaker 2

So look, I would say as I think about the process to date, we've been pleased Both the staff and frankly now that the ALJ as well, they've supported nearly 95% of our planned capital investments Over the next 4 years, I think that's a positive that's occurred through this process. We, as we stated in our prepared remarks, You know, are disappointed with the recommended return on equity and capital structure, that came from the ALJ as well as the treatment of this OPEB, asset. But the case isn't over. Like I said, last week, we filed our brief on exceptions. We articulated our concerns and the Reasons for seeking a better outcome from the commission.

Speaker 2

And I'd say that's really where you get to the next steps. Reply briefs on exceptions are due on November 14th, and then we'll expect a commission decision by mid December. 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 9.85 percent ROE or an alternative equity structure of 52% equity. And In coming up with those, we looked at alternative data in the record, looked at the averages of comparable utilities as it related to cap structure.

Speaker 2

So Again, I'd refer you to our filing for further details on those. But we remain hopeful at this point that the commission will meet It's going to reach a more constructive and fair outcome than came from the ALJ. And then at this point, I wouldn't comment on what action we may take post the commission ruling. Michael, you want to make a comment?

Speaker 3

Yes, Mike, I agree with all his comments. And just Sure. I'll 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 $19,700,000,000 out there over the next 5 years and $48,000,000,000 over the next 10, I think we have really Due jurisdictions to continue to allocate that capital, we'll continue to be thoughtful about that.

Speaker 3

As Marty said, I think where we are from a rate base and capital addition standpoint and that rate review process It's a positive, 95% or so. But we have some flexibility to pivot if needed.

Speaker 5

And then just to confirm, just the equity ratio growing to a no block equity side. Just I guess how do we think about juicing of that up?

Speaker 3

Yes. I mean, again, as 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 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 It's been a pretty effective way to do it.

Speaker 6

Okay. Yes.

Speaker 2

And Shar, just to build on sort of the answers that I gave and Michael gave, I think as it relates to our overall plan and Michael mentioned this, I mean, we obviously have robust portfolio of capital expenditures that we can make across All of our segments. And we really feel very confident as we sit here today in our continued ability Grow at 6% to 8% in terms of our EPS CAGR. As we've laid out before, we've got 48 Structure pipeline out through 2,032 and remain very confident in our overall ability to execute as a company.

Speaker 5

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 2.

Operator

Appreciate it guys. Bravo, you're probably right. Thanks. Our next question comes from Julien Dumoulin Smith with Bank of America. Please proceed with your question.

Speaker 6

Hey, guys. Good morning. This is Darius on for Julian. Appreciate you taking the question. Maybe just to start with, you alluded And I appreciate that you don't have formal 20 24 guidance out there, but with the drivers and the visibility that you have now, and the known Of the ALJ REX in both the Illinois cases, can you comment on maybe just how you see that 6 to 8 shaping up on a year over year basis?

Speaker 6

Does the ALJ sort of give you a basis to still hit that range in 2024?

Speaker 3

Hey, Darius, Sid. Michael here. Thanks again for Good question. Look, again, as we sit here today and we updated and provided guidance in February that we feel good about that 60%, thinking about that midpoint of 435%. We gave you some select drivers here, right, in terms of what we see sort of impacting us kind of year over year.

Speaker 3

But again, feel good about the situation that we're in. We again feel good about the 8.4% rate base growth that we have. We've Had obviously the updated IRP that we released in September, we talked about incremental $2,500,000,000 of capital that could come into plan over time there. So again, as we sit here today, feel very good about that 6% to 8% Earnings per share and growth.

Speaker 6

Okay, excellent. Thank you for the detail. And maybe if I can ask one on Competitive transmission projects, just looking at your updated slide, it looks like the and I appreciate these are MISO's estimates, but it looks like the Overall competitive opportunity is unchanged at a little bit under $1,000,000,000 but there was maybe within that the contents 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 projects within that set of competitive opportunities. Do you see Anything moving up or down as the estimates get for the refined?

Speaker 2

Yes, happy to answer that question. This is Marty again. So again, with respect to the projects that were assigned to us in tranche 1, the $1,800,000,000 as we We're getting underway with those, which is fantastic. And then there were about $700,000,000 of competitive projects. And the first one that we bid on was the Oregon to Denny Fairport project.

Speaker 2

And we're very pleased that we were selected 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 our bids indicative of the kind of work we do to partner with others, Whether those be co ops and munis in the area or vendors to really deliver a low cost project. And as I mentioned, 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 too much into where that project came out relative to MISO's estimates.

Speaker 2

Each project is going to be different. Each project has its own routing issues, land acquisition requirements, partnering opportunities, etcetera. You really can't extrapolate that outcome to the entirety. But again, I think we're very pleased where we are. We are Very pleased that we were selected as the winning bidder on that project.

Speaker 2

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 as Skunk River, Ipaiva.

Speaker 6

Great. Thank you very much for the color. Appreciate it.

Operator

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

Speaker 7

Hi, good morning.

Speaker 2

Good morning.

Speaker 7

Just wanted to come back to Illinois Electric, if I could, realize questions have been asked. But maybe just to put Finer point on some of the questions here. Why do you think the ALJ's ROEs came out so different than your proposal? Or are there any specifics and 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?

Speaker 2

I can't really it's Marty again. I really can't comment on Why, if you will, they got to that? 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, we note certain data that Alternatively, it should be used in our view in those calculations if they were used. And of course, staff used similar And came up with a little over 10%.

Speaker 2

So again, I can't say why, but we again feel like inappropriate data points 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.

Speaker 7

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

Speaker 2

Yes, I think the conversation that's been had within the state It's very much a balanced one. I think that some of the things that we put into this IRP as opposed to our prior one With the addition of 800 Megawatts of Gas Simple Cycle in 2027, we made a couple of adjustments to, first The timing of 1 coal fired energy center to push that out for a couple of years and with it push out a 1200 Megawatt planned combined cycle plan. And then I can say we also move forward some of the battery storage technology we had planned by about 5 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 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 So we're being good environmental stewards. We're able to add those resources to bolster reliability, While still hitting carbon emission reduction targets that we've discussed previously, 60% by 2,030, 85% by 2,040 and ultimately that net 0.

Speaker 2

So again, I believe the conversation has been really balanced because of that, our focus on affordability, our focus on reliability, While still hitting our targets in terms of environmental stewardship.

Speaker 7

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

Speaker 2

Thank you. Thanks, Jeremy.

Operator

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

Speaker 8

Hey, good morning. Thanks so much for taking my question. Wondering if you could just speak a little bit to 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?

Speaker 2

Yes. With respect to the Missouri Renewables, Earlier this year, the Missouri Public Service Commission approved 2 solar projects that we had proposed, both the Huck Finn and the Boomtown Solar Projects, together they're about 3 50 megawatts of investment and Those are projects that we will be constructed and that we will own and we expect the closing date on those This to be Q4 of 2024. So 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 5 50 megawatts of Solar projects, 4 projects in total. And that's going to be proceeding.

Speaker 2

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. 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, 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.

Speaker 2

So when we go to the when you look at the IRP, which we laid out 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 is really going to ensure that we continue to have a reliable system. But the important thing is that this combination of sources 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 least cost plan for providing energy to our customers in Missouri and preserving again the reliability that they expect. Again, the CCNs that we're proposing for the renewables really fit with execution of this IRP. And then with respect to your last question, while you can't rule out the possibility of PPAs, 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, 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.

Speaker 8

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 whether normal load still trending down through most of the year.

Speaker 8

I'm wondering if you could Give your perspective on when that might settle down and outlook for industrial sales too within that?

Speaker 3

Yes, you bet. Good morning, Dave. This is Michael. Yes, this year has obviously been a little interesting. You see some of the decreases in residential.

Speaker 3

I think we attribute that 2, 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, we're still just working through, I think, 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. Obviously, we've had some extreme weather here and there, which always factors into kind of how you think about this on a normalized basis, But you try to get it as close as possible.

Speaker 3

I do think it is beginning to level out as we kind of look forward. And I mean, again, I think I pointed out, if you look at our residential side of things, I mean, you're seeing about 3% growth relative to where we were kind of pre pandemic. And the other positive is we actually have customer growth Year to date too. So ultimately, you believe that's going to continue to transition into some sales growth. I think on the commercial So we continue to see some positives.

Speaker 3

I mean, the industrial one noted that obviously we are impacted by 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 Q4. 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 more growth.

Speaker 3

So I mean, as we look Out in the future, I think we still stick by this about 0.5% 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.

Speaker 8

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

Speaker 2

You bet.

Operator

Our next question is from Paul Patterson with Glenrock Associates, please proceed with your question.

Speaker 9

Hey, good morning guys.

Speaker 2

Good morning, Paul.

Speaker 9

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 what kind of returns you're seeing in the competitive transmission versus

Speaker 2

Yes, Paul, first of all, I do apologize again for the Technical difficulties you and others experienced, I apologize for that and the inconvenience. I don't think we have anything that we could Point 2 in terms of return, I would say this, I mean, when we bid on these projects, we're very cognizant of What we think our cost of capital is and what appropriate return expectations are for these projects. That's certainly taken into consideration when making any bid. So the assumption should be that As a winning bidder of this project that we expect to earn a fair return on the project.

Speaker 9

Sure. Okay. But you can't I guess, maybe it's competitive to tell us what that might be. Is that right? Or Can you?

Speaker 2

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

Speaker 9

Okay, cool. The second question I have is on the ROFR legislation, What you guys plan on pursuing perhaps in the spring, it seems according to the slides and stuff. I'm wondering about the Lake being neat. I think that's the case at the Supreme Court. That's that Roper case in Texas that But the Supreme Court may or may not.

Speaker 9

If it doesn't get certiorari, I'm sure you guys are following the case. What does that mean with respect to the ROFR situation, Generally speaking, I mean, how should we think about that?

Speaker 2

Well, I think, Paul, as it relates to the court cases, as we watch court cases around the Country, both in Texas as well as a couple of other states. We've seen them run into problems in Texas. We've seen the ROFRs upheld in other 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 these rights of first refusal both in Illinois and Missouri That we make appropriate adjustments to the proposed legislation to Ensure that they're able to withstand legal challenges and hold up. If for some reason through the process Of these things going through the courts, we don't believe that they'd be lawful. Obviously, that would affect whether we move forward with seeking these rights of first refusal or not.

Speaker 2

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 I checked 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 in tranche 1 and what's to come in tranche 2, these projects have very good benefit to cost ratios.

Speaker 2

And By not assigning those to the incumbent transmission operator by putting them out for bid, you're delaying those benefits to customers by 2 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 interest 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.

Speaker 9

Okay. And absolutely, I hear you on your ability to demonstrate your competitiveness and stuff. But just I guess what I'm saying is, I guess what I'm About is the Supreme Court, I guess what I'm wondering is, would that invalidate ROFRs? Do you follow what I'm saying? I mean, across the country or mean or do you see this as being specific I guess what I'm saying, what I don't understand is the math of an industry question, if you follow me, to sort of I'm trying to figure out from my own edifications or like What happens if it isn't granted to Rory?

Speaker 9

I guess that would mean the 5th Circuit would stand. And if that is the case, what how do we think about The Roper, do you follow where I'm coming from?

Speaker 2

Well, I do. And I guess we'd have to see How the Supreme Court rules, what they say, but when 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 The rights of first refusal we've been putting forward more aligned with states where the ROFRs have been upheld in the courts. So I think we'd ultimately have to look at the ultimate the Supreme Court decision and its applicability. But I guess I can't really comment further at this time, Paul.

Speaker 9

I got you. I appreciate it. Thanks so much. And thanks. Good luck.

Speaker 2

You bet. Thank you. See you soon.

Operator

Our final question comes from Hassaneh Croedel with Mizuho. Please proceed with your question.

Speaker 5

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.

Speaker 5

A lot of capital opportunities, rate base opportunities. I'm just wondering what do you think is the most challenging part of

Operator

the plan that you have?

Speaker 3

Yes. Hey, Anthony, it's Michael. Look, I think it's just about continued execution around all these projects, right? I mean, I think we got some robust The rate base growth 8.4 percent, as you just noted, dollars 20,000,000,000 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.

Speaker 3

Obviously, we're in a different financing environment today than we were a couple of years ago. So that creates Some headwinds you got to continue to work through. But I mean, ultimately, I think we've talked about this in the past, we got a number of mechanisms to recover those Financing cost pretty rapidly through on the Illinois side, 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 is 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?

Speaker 2

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

Speaker 5

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

Speaker 3

Look forward to seeing you next week.

Operator

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

Speaker 2

Well, thank you all for joining us today. Once again, I apologize for the technical difficulties some of you experienced. And as I mentioned, we'll make sure that we oppose 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 just with just a couple of months left, we 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.

Speaker 2

As we underscore today, we continue to expect 6% to 8% earnings per share growth For 2023 to 2027, it's supported by strong investment in rate regulated infrastructure And rate based growth of 8.4 percent 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.

Operator

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

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Earnings Conference Call
Ameren Q3 2023
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