AMEREN CORP annual report, FY2022

Ameren Corporation 2022 Form 10-K Summary

Business context and reporting period

Ameren Corporation is a regulated utility holding company serving Missouri and Illinois through Ameren Missouri, Ameren Illinois, and Ameren Transmission. The filing covers the fiscal year ended December 31, 2022, with comparisons to 2021 and 2020. The filing is a combined Form 10-K for Ameren Corporation, Union Electric Company, and Ameren Illinois Company.

Segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission.
Primary businesses are regulated electric generation, transmission and distribution, natural gas distribution, and transmission infrastructure.
Rate base increased to $23.6 billion at year-end 2022 from $21.6 billion in 2021.

Financial performance and key metrics

Metric	2022	2021	Change
Total operating revenues	$7.957 billion	$6.394 billion	+$1.563 billion
Operating income	$1.515 billion	$1.333 billion	+$182 million
Net income	$1.079 billion	$995 million	+$84 million
Net income attributable to common shareholders	$1.074 billion	$990 million	+$84 million
Diluted EPS	$4.14	$3.84	+$0.30
Cash flow from operating activities	$2.263 billion	$1.661 billion	+$602 million
Capital expenditures	$3.351 billion	$3.479 billion	-$128 million
Dividends paid	$610 million	$565 million	+$45 million

Electric revenues were $6.581 billion, up from $5.297 billion; natural gas revenues were $1.376 billion, up from $1.097 billion.
Electric margins increased 11% to $4.561 billion, while natural gas margins increased 10% to $719 million.
Operating margin was approximately 19.0%, compared with approximately 20.9% in 2021. The decline reflects higher pass-through commodity costs and operating expenses.
Other operations and maintenance expense increased $163 million, depreciation and amortization increased $143 million, and interest charges increased $103 million.
Ameren Missouri contributed $562 million of common-shareholder earnings; Ameren Illinois Electric Distribution contributed $202 million; Ameren Illinois Natural Gas contributed $123 million; and Ameren Transmission contributed $263 million.

Liquidity, debt, and capital structure

Year-end cash and cash equivalents were $10 million on Ameren’s consolidated balance sheet; total cash, cash equivalents, and restricted cash were $216 million.
Net available liquidity was approximately $1.538 billion, consisting principally of $2.6 billion of revolving credit capacity less commercial paper and letters of credit, plus cash.
Short-term debt was $1.070 billion and long-term debt, net, was $13.685 billion at December 31, 2022.
Consolidated long-term debt maturities, including current maturities, totaled $340 million in 2023, $849 million in 2024, $300 million in 2025, $350 million in 2026, and $950 million in 2027.
Ameren issued $1.467 billion of long-term debt and $333 million of common stock during 2022, while repaying or maturing $505 million of long-term debt.
Ameren expects equity to represent approximately 45% of total capitalization through December 31, 2027, and plans approximately $500 million of equity issuance annually from 2024 through 2027, in addition to employee and dividend reinvestment issuances.
The company was in compliance with its debt covenants. Credit agreement leverage ratios were 59% for Ameren, 49% for Ameren Missouri, and 46% for Ameren Illinois, below the 65% covenant limit.
Ameren paid $2.36 per share in dividends during 2022 and increased the annualized dividend to $2.52 per share in February 2023.

Material changes versus the prior comparable period

Net income attributable to common shareholders increased 8.5%, primarily from infrastructure investment, higher Ameren Illinois recognized returns, favorable weather, higher Ameren Missouri base rates, and stronger capacity-related results.
Ameren Missouri electric margins increased $295 million, driven by the December 2021 rate order, favorable weather, higher sales, MEEIA incentives, and capacity revenues.
Ameren Illinois Electric Distribution margins increased $99 million, primarily from higher recoverable expenses, rate base growth, higher Treasury yields affecting the allowed ROE, and energy-efficiency investment recovery.
Ameren Illinois Natural Gas margins increased $52 million, mainly from qualifying infrastructure investment under the QIP and other recovery mechanisms.
Ameren Transmission margins increased $53 million, reflecting rate base growth, higher recoverable expenses, and the absence of a prior FERC-related revenue reduction.
Purchased power expense increased $941 million and natural gas purchased for resale increased $215 million, largely due to higher energy, capacity, and commodity prices. Most of these costs are recovered through regulatory mechanisms and do not materially affect earnings for the applicable businesses.
Cash flow from operations improved substantially because of higher customer collections and lower cash requirements under purchased-gas and other recovery mechanisms, including the normalization of costs associated with the severe February 2021 weather event.
Capital expenditures declined modestly in 2022, principally because of lower wind-generation spending, partially offset by higher electric delivery and transmission investment.

Guidance, outlook, commentary, risks, and unusual items

Ameren projects 2023–2027 capital expenditures of $18.9 billion to $20.5 billion, including up to $10.8 billion at Ameren Missouri and $9.5 billion at Ameren Illinois. The plan includes approximately $2.5 billion of renewable-generation investment and approximately $0.8 billion for MISO long-range transmission projects.
Management expects cash used for planned capital expenditures and dividends to exceed operating cash flow for the next several years, requiring debt and equity financing.
Ameren Missouri filed for a $316 million annual electric revenue increase. MoPSC staff recommended a $199 million increase; a final decision was expected by June 2023, with rates potentially effective in July 2023.
Ameren Illinois filed a 2024–2027 multi-year rate plan requesting revenue requirements of $1.282 billion, $1.373 billion, $1.477 billion, and $1.556 billion, respectively, with a requested 10.5% ROE. The filing proposes deferring 50% of the requested $175 million 2024 rate increase to 2026. ICC approval was required by December 2023.
Ameren Illinois also requested a $160 million annual natural gas delivery revenue increase. The QIP recovery mechanism is scheduled to expire after December 2023 without legislative action.
Ameren is targeting a 60% reduction in carbon emissions by 2030, an 85% reduction by 2040, and net-zero carbon emissions by 2045, based on 2005 levels.
Ameren Missouri’s plan includes 2,800 MW of renewable generation by 2030, 4,700 MW by 2040, up to 800 MW of battery storage by 2040, additional combined-cycle generation, and accelerated retirements of coal and natural-gas facilities.
The Rush Island Energy Center is targeted for retirement by 2025 following Clean Air Act litigation. Its net plant balance was approximately $0.6 billion and rate base approximately $0.4 billion at year-end. Recovery through rates or securitization remains uncertain; an adverse resolution could materially affect results, liquidity, and financial position.
The Callaway nuclear facility experienced a 2022 refueling and maintenance outage. The next refueling outage is scheduled for fall 2023. The operating license currently expires in 2044.
Coal inventories at the Labadie and Sioux facilities were below target because of transportation delays. Ameren also faces fuel-supply concentration, including substantial reliance on Powder River Basin coal and a single NRC-licensed supplier for Callaway fuel assemblies.
Key risks include regulatory disallowances and lag, higher interest rates and inflation, supply-chain disruption, commodity price volatility, environmental compliance, cyberattacks, severe weather, nuclear operations, coal and gas facility retirements, and access to capital markets.
Ameren recorded approximately $1.8 billion of regulatory assets and $5.4 billion of regulatory liabilities at year-end. The accounting depends on the continued probability of recovery or refund through customer rates.
Ameren recorded a $0.6 billion net plant balance for Rush Island as plant to be abandoned but had not recognized an abandonment loss at year-end because full recovery remained considered probable.
Pension and postretirement plans were overfunded by $377 million at year-end. Management expected no material pension contributions in 2023–2025 and aggregate contributions of approximately $170 million in 2026–2027, subject to market and actuarial changes.
The independent auditor issued unqualified opinions on Ameren’s consolidated financial statements and internal controls. Accounting for the effects of regulation was identified as a critical audit matter.

Most important facts for an investor to verify

Final outcomes of the Ameren Missouri electric rate case and Ameren Illinois electric and natural gas rate proceedings.
Whether the Rush Island retirement, securitization, and remaining plant recovery receive required court and regulatory approvals.
Actual capital spending, financing needs, equity issuance, leverage, and dividend coverage as the $18.9–$20.5 billion investment program proceeds.
Expiration or modification of the Illinois QIP and the terms of the Ameren Illinois multi-year rate plan.
FERC proceedings concerning the MISO transmission ROE, potential refunds, and the 50-basis-point RTO incentive.
Progress, cost, and regulatory approval of the Boomtown and Huck Finn solar projects and other clean-energy investments.
Exposure to coal transportation, nuclear fuel, power-market capacity pricing, environmental compliance, and solar-panel supply constraints.
Recoverability of regulatory assets and the potential customer-rate impact of the $5.4 billion regulatory-liability balance.
Current credit ratings, debt maturities, liquidity availability, and collateral requirements under commodity contracts.