Business Context and Reporting Period
Ameren Corporation is a regulated utility holding company with electric generation, transmission and distribution, and natural-gas distribution operations conducted primarily through Ameren Missouri, Ameren Illinois, and ATXI. This unaudited combined Form 10-Q covers the three and six months ended June 30, 2023, compared with the corresponding 2022 periods. All dollar amounts are in millions unless otherwise stated.
Key Financial Metrics
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total operating revenues | $1,760 | $1,726 | $3,822 | $3,605 |
| Operating income | $329 | $309 | $680 | $640 |
| Net income attributable to Ameren common shareholders | $237 | $207 | $501 | $459 |
| Diluted EPS | $0.90 | $0.80 | $1.90 | $1.77 |
| Operating margin | 18.7% | 17.9% | 17.8% | 17.8% |
| Net margin attributable to common shareholders | 13.5% | 12.0% | 13.1% | 12.7% |
| Net cash provided by operating activities | — | — | $1,111 | $872 |
| Capital expenditures | — | — | $1,822 | $1,538 |
| Common dividends paid | — | — | $330 | $305 |
Q2 revenue increased 2%, while six-month revenue increased 6%. Six-month electric revenue rose to $3,175 from $2,831, partly offset by lower natural-gas revenue of $647 versus $774. Ameren reported six-month operating cash flow of $1.1 billion, but capital expenditures exceeded operating cash flow by approximately $711 million before financing and dividends.
At June 30, 2023, Ameren had $7 of unrestricted cash and $246 of cash, cash equivalents, and restricted cash. Consolidated short-term debt was $1,329, and long-term debt including current maturities was $14,678. Net available liquidity under credit agreements and cash was approximately $1.3 billion. Ameren's consolidated indebtedness-to-total-capitalization ratio under its credit agreements was 60%; the ratios were 51% for Ameren Missouri and 45% for Ameren Illinois.
Ameren's common equity was approximately $10.7 billion, with total assets of $38.9 billion. The company paid a common dividend of $0.63 per share in Q2 and $1.26 per share in the first half, compared with $0.59 and $1.18, respectively, in 2022.
Material Changes Versus the Prior Comparable Period
- Six-month net income attributable to common shareholders increased $42, or 9%, and diluted EPS increased $0.13, driven primarily by rate-base investment growth, higher recognized ROE at Ameren Illinois Electric Distribution, lower non-formula O&M expenses, and higher non-service pension income.
- Ameren Illinois contributed materially to earnings growth: six-month net income available to common shareholders increased to $327 from $272. Ameren Missouri declined to $130 from $150, primarily because of unfavorable weather and higher financing costs.
- Ameren's electric margins increased $10 for the first half but declined $7 in Q2. Ameren Missouri electric margins declined $17 in Q2 and $9 year to date, with weather estimated to reduce margins by $20 and $46, respectively.
- Transmission margins increased $11 in Q2 and $28 year to date, reflecting higher recoverable expenses and capital investment. Ameren Illinois electric-distribution margins were flat in Q2 and declined $5 year to date.
- O&M expense declined $41 in Q2 and $54 year to date, while depreciation and amortization increased $19 and $40, respectively, primarily due to expanded property, plant, and equipment investments.
- Interest expense increased $8 in Q2 and $31 year to date because of higher interest rates, increased short-term borrowings, and additional long-term debt, partly offset by termination of the Audrain County financing obligation.
- Operating cash flow increased $239 year to date, helped by lower collateral postings, higher customer collections, lower natural-gas inventory costs, and reduced Callaway outage payments. Investing cash use increased $337 because of higher capital expenditures.
Guidance, Outlook, Risks, and Unusual Items
- In June 2023, the Missouri Public Service Commission approved a $140 annual revenue-requirement increase for Ameren Missouri electric service, effective July 9, 2023. Management estimated an approximately $44 increase to 2023 earnings from the order, including $11 in Q2, $23 in Q3, and $10 in Q4.
- Ameren Missouri expects approximately $9.9 billion of Smart Energy Plan investment from 2023 through 2027 and up to $10.8 billion of total capital expenditures over that period. Across Ameren, Ameren Missouri, Ameren Illinois, and ATXI, planned 2023-2027 capital expenditures are up to $20.5 billion.
- Ameren expects cash used for planned capital expenditures and dividends to exceed operating cash flow over the next several years. It expects approximately $100 annually of equity issuance through employee and dividend-reinvestment plans, approximately $500 annually of additional equity issuance from 2024 through 2027, and approximately $300 of forward-sale settlement by December 31, 2023.
- Ameren Illinois requested 2024-2027 electric-distribution revenue requirements of $1,291, $1,387, $1,484, and $1,560, respectively, with a requested 10.5% ROE. ICC staff recommended lower revenue requirements and an estimated 8.9% ROE. Decisions were required by December 2023, with new rates beginning in January 2024.
- Ameren Illinois requested a $148 annual increase in natural-gas delivery revenues; ICC staff recommended $128. A decision was expected in late November 2023, with rates expected to begin in December 2023. The filing text does not provide the ultimate approved amounts.
- Ameren Missouri expects approximately $40 of maintenance expenditures for the fall 2023 Callaway refueling outage. Outage-related purchased power and off-system sales effects are generally subject to the fuel-adjustment mechanism but may affect operating cash flow and timing.
- The planned Rush Island Energy Center retirement remains subject to federal court, MISO, FERC, and Missouri regulatory actions. Rush Island had approximately $550 of net plant balance and approximately $500 of rate base at June 30, 2023. Ameren Missouri proposed an October 15, 2024 retirement date and expected to seek securitization approval; the ultimate outcome could materially affect results, financial position, and liquidity.
- Key risks include regulatory recovery and prudence disallowances, higher interest rates and financing costs, inflation, environmental compliance, coal and natural-gas plant retirements, supply-chain constraints for solar projects, commodity prices, weather, cyberattacks, and access to capital markets.
- Ameren estimated $90 to $120 of environmental capital expenditures from 2023 through 2027. Ameren Illinois estimated remaining obligations for former manufactured-gas plant sites at $61 to $112 and recorded a $61 liability.
- Ameren stated that it had no material changes to previously disclosed risk factors and that disclosure controls were effective as of June 30, 2023.
Most Important Facts for Investors to Verify
- Final Missouri and Illinois regulatory decisions, including Ameren Illinois' electric MYRP, natural-gas rate case, and $125 requested 2022 electric-distribution reconciliation adjustment.
- The outcome and timing of the Rush Island litigation, retirement approval, potential securitization, and any prudence-related rate-base disallowance.
- Actual 2023 capital expenditures, financing needs, forward-sale settlements, and progress toward the $20.5 billion 2023-2027 investment program.
- Callaway's fall 2023 outage performance, costs, and effects on purchased power and cash flow.
- Interest-rate, credit-rating, and commodity-price effects on debt costs, liquidity, collateral requirements, and regulatory recovery.
- Whether environmental rules, solar supply constraints, and required transmission upgrades alter project timing, costs, or recoverability.