Ameren Corporation 2021 Form 10-K Summary
Business context and reporting period
Combined annual report for Ameren Corporation, Union Electric Company (Ameren Missouri), and Ameren Illinois Company for the fiscal year ended December 31, 2021, filed February 22, 2022. Ameren is a regulated utility holding company serving Missouri and Illinois through electric generation, transmission, distribution, and natural gas distribution businesses. Its four reporting segments are Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission.
Key financial metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total operating revenues | $6.394 billion | $5.794 billion | +10% |
| Operating income | $1.333 billion | $1.300 billion | +3% |
| Net income attributable to common shareholders | $990 million | $871 million | +14% |
| Diluted EPS | $3.84 | $3.50 | +$0.34 |
| Operating margin | 20.8% | 22.4% | Down |
| Net margin | 15.5% | 15.0% | Up |
| Electric margins | $4.110 billion | $3.908 billion | +5% |
| Natural gas margins | $655 million | $611 million | +7% |
| Cash from operating activities | $1.661 billion | $1.727 billion | -$66 million |
| Capital expenditures and wind generation expenditures | $3.479 billion | $3.233 billion | +$246 million |
| Net debt, including current maturities | Approximately $13.1 billion | Approximately $11.6 billion | Higher |
Ameren’s 2021 earnings benefited from infrastructure and renewable investments, increased Ameren Missouri electric sales, higher Ameren Illinois rates and recognized returns, and favorable weather. These benefits were partly offset by higher operations and maintenance, depreciation, financing, and maintenance-outage-related costs, dilution from share issuance, and the absence of a favorable 2020 FERC transmission ruling.
- Ameren Missouri generated $518 million of common-shareholder net income, compared with $436 million in 2020.
- Ameren Illinois Electric Distribution generated $165 million, compared with $143 million.
- Ameren Illinois Natural Gas generated $108 million, compared with $99 million.
- Ameren Transmission generated $230 million, compared with $216 million.
Liquidity, debt, and capital structure
At December 31, 2021, consolidated net available liquidity was approximately $1.761 billion, consisting of $1.753 billion available under $2.3 billion of revolving credit agreements and $8 million of cash. The credit agreements mature in December 2025. Consolidated long-term debt, net, was $12.562 billion, with $505 million of current maturities and $545 million of short-term debt. Contractual long-term debt maturities totaled $505 million in 2022 and $340 million in 2023.
Ameren issued $1.997 billion of long-term debt and received $308 million from common-stock issuances during 2021. Common dividends paid were $565 million, or $2.20 per share. The board increased the quarterly dividend to $0.59 per share in February 2022, or an annualized $2.36 per share. Management expects approximately $300 million of annual equity issuance from 2022 through 2026, in addition to approximately $100 million annually through employee and dividend-reinvestment plans.
Material changes versus the prior comparable period
- Revenue increased primarily from higher electric and natural gas pass-through revenues, rate increases, infrastructure investment, higher electric sales, and weather-related demand.
- Electric margins increased $202 million, while natural gas margins increased $44 million.
- Operating cash flow declined despite higher earnings, mainly because of deferred payroll taxes, higher natural gas inventory costs, collateral movements, interest payments, storm costs, and regulatory timing.
- Capital expenditures increased to $3.479 billion from $3.233 billion, including $525 million for wind generation investments.
- Property, plant, and equipment, net, increased to $29.261 billion from $26.807 billion; consolidated rate base increased to approximately $21.6 billion from $19.4 billion.
- Ameren completed the acquisition and placed in service the 300-MW Atchison Renewable Energy Center in 2021, following the 2020 acquisition of the 400-MW High Prairie Renewable Energy Center.
- Ameren’s pension and postretirement plans became overfunded by $717 million at year-end 2021, compared with $249 million at year-end 2020.
Guidance, outlook, commentary, and unusual items
- Ameren expects 2022–2026 capital expenditures of $16.6 billion to $18.0 billion, with Ameren Missouri representing $8.5 billion to $9.2 billion, Ameren Illinois Electric Distribution $3.0 billion to $3.3 billion, Ameren Illinois Natural Gas $1.7 billion to $1.8 billion, and Ameren Transmission $3.4 billion to $3.7 billion.
- Planned capital spending assumes continued constructive regulation and MoPSC approval to extend Ameren Missouri’s PISA mechanism beyond December 2023 through December 2028.
- Ameren expects weather-normalized sales to return to 2019 levels by mid-2022, with growth primarily in the second half of 2022. Residential demand remained stronger while commercial and industrial demand continued to reflect pandemic-related changes.
- Ameren Missouri’s December 2021 rate orders increased annual electric and natural gas revenue requirements by $220 million and $5 million, respectively, effective February 28, 2022.
- Ameren Illinois expects to use its existing performance-based formula ratemaking framework through 2023 and, subject to regulatory outcomes, intends to file a four-year multi-year rate plan for rates beginning in 2024.
- Ameren targets net-zero carbon emissions by 2050, with targeted reductions of 50% by 2030 and 85% by 2040 from 2005 levels. Its resource plan includes 3,100 MW of renewable generation by 2030 and 5,400 MW by 2040.
- The Callaway nuclear plant experienced a generator-related outage from late December 2020 through early August 2021. Repair costs were approximately $60 million, largely capitalized, and a significant portion was covered by insurance.
- Ameren Missouri plans to retire the Rush Island Energy Center earlier than previously planned rather than install required pollution-control equipment. The facility had approximately $0.6 billion of net plant and $0.4 billion of rate base at year-end 2021. Recovery, securitization, reliability upgrades, and regulatory approval remain uncertain.
- Extremely cold February 2021 weather produced under-recovered purchased-gas and purchased-power costs, including $53 million of Ameren Missouri PGA under-recovery, $50 million of Ameren Missouri FAC under-recovery, and $221 million of Ameren Illinois PGA under-recovery. These amounts are being collected over extended periods.
Principal risks and contingencies
- Regulatory decisions could change allowed returns, rate caps, cost-recovery mechanisms, prudence findings, or the timing of recovery.
- Ameren Missouri’s PISA and 2.85% customer-rate limitation expire after December 2023 unless extended by the MoPSC.
- The Rush Island Clean Air Act litigation and planned retirement could result in material costs, asset recovery shortfalls, reliability investments, or abandonment losses.
- Environmental compliance, coal-ash closure, carbon and emissions rules, and Illinois emission standards could increase capital and operating costs or accelerate generation retirements.
- COVID-19 effects, customer collections, bad debt, supply-chain disruption, labor availability, inflation, and construction delays could affect cash flow and planned rate-base growth.
- Ameren remains exposed to fuel, purchased-power, natural-gas, weather, nuclear-outage, cybersecurity, reliability, counterparty, and capital-market risks.
- Ameren had approximately $1.6 billion of regulatory assets and $6.0 billion of regulatory liabilities at year-end 2021; recoverability and refund timing depend on regulatory outcomes.
Facts investors should verify
- Reconcile 2021 earnings growth with the decline in operating margin and the impact of higher O&M, depreciation, financing, and dilution costs.
- Review the maturity schedule and funding plan for the $16.6 billion to $18.0 billion capital program, including expected debt and equity issuance.
- Monitor MoPSC decisions regarding PISA extension, Rush Island retirement and securitization, and recovery of the related net plant balance.
- Track Ameren Illinois’ performance metrics, Treasury-linked allowed ROE, and its anticipated 2024 multi-year rate-plan filing.
- Assess the effects of environmental rules, coal-ash compliance, Illinois emissions limits, and required transmission upgrades on capital needs and asset lives.
- Confirm customer collection trends, recovery of February 2021 commodity under-recoveries, and any continuing pandemic-related impacts.
- Evaluate the scale and timing of regulatory assets and liabilities, since changes in expected recovery or refund could materially affect earnings and cash flow.