Ameren Corporation 2022 Q3 Form 10-Q Summary
Business context and reporting period
Ameren Corporation is a regulated utility holding company serving Missouri and Illinois through Ameren Missouri, Ameren Illinois, and transmission operations. This combined Form 10-Q covers the three and nine months ended September 30, 2022, compared with the corresponding 2021 periods. Amounts are in millions unless otherwise stated.
Key financial metrics
| Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 |
|---|---|---|---|---|
| Operating revenues | $2,306 | $1,811 | $5,911 | $4,849 |
| Operating income | $599 | $534 | $1,239 | $1,136 |
| Net income attributable to Ameren common shareholders | $452 | $425 | $911 | $865 |
| Diluted EPS | $1.74 | $1.65 | $3.51 | $3.36 |
| Net cash provided by operating activities | Not provided for the quarter | Not provided for the quarter | $1,599 | $1,192 |
| Capital expenditures | Not separately presented in the income statement | Not separately presented in the income statement | $2,437 | $2,613 |
- Q3 revenue increased 27%, while year-to-date revenue increased 22%. Revenue growth primarily reflected higher regulated rates, customer usage, weather, transmission investment, and pass-through energy costs.
- Operating margin was approximately 26.0% in Q3 2022 versus 29.5% in Q3 2021; year-to-date operating margin was approximately 21.0% versus 23.4%. The lower margins reflect substantially higher purchased power, natural gas, depreciation, and other operating costs.
- Net margin was approximately 19.6% in Q3 2022 versus 23.5% in Q3 2021; year-to-date net margin was approximately 15.4% versus 17.9%.
- Ameren Missouri contributed $397 million of Q3 common earnings and $547 million year to date. Ameren Illinois contributed $103 million in Q3 and $375 million year to date, while non-segment activity produced a $70 million Q3 loss and a $68 million year-to-date loss.
Material changes versus the prior comparable period
- Q3 common earnings increased $27 million, or 6%, and year-to-date earnings increased $46 million, or 5%.
- Electric margins increased $135 million in Q3 and $330 million year to date. Natural gas margins increased $10 million in Q3 and $43 million year to date.
- Ameren Missouri electric margins increased $102 million in Q3 and $206 million year to date, supported by the December 2021 rate order, weather, higher capacity revenues, and retail sales. The company also faced higher energy costs and purchased power expenses.
- Ameren Illinois electric distribution margins increased $20 million in Q3 and $78 million year to date, primarily from higher recognized returns, rate base growth, and recoverable expenses. Ameren Illinois natural gas margins increased $9 million and $38 million, respectively, mainly from QIP investment and rate-related recovery.
- Other operations and maintenance expense increased $18 million in Q3 and $138 million year to date. Drivers included unfavorable COLI market performance, higher labor and project costs, expired refined-coal tax-credit contracts, and timing of capitalized work.
- Depreciation and amortization increased $60 million in Q3 and $109 million year to date due primarily to additional utility investments and rate changes.
- Interest charges increased $32 million in Q3 and $66 million year to date because of higher debt balances, debt issuances, and lower regulatory deferrals.
- Ameren’s effective tax rate increased to 15% in Q3 and 14% year to date, compared with 14% and 13%, respectively, in 2021, primarily reflecting changes in COLI value.
Cash flow, debt, liquidity, and capital structure
- Year-to-date operating cash flow was $1.599 billion, up $407 million from 2021, primarily due to customer collections and regulatory recovery timing.
- Year-to-date investing cash use was $2.458 billion, including $2.437 billion of capital expenditures, compared with $2.646 billion and $2.613 billion, respectively, in 2021.
- Year-to-date financing cash flow was $884 million, compared with $1.298 billion in 2021. Ameren issued $1.118 billion of long-term debt, issued $675 million net commercial paper, paid $457 million of common dividends, and repaid $450 million of long-term debt maturities.
- At September 30, 2022, Ameren had $1.221 billion of short-term debt and $13.577 billion of long-term debt, net. Total debt, including current portions and short-term debt, was approximately $14.953 billion based on the balance sheet presentation.
- Consolidated net available liquidity was approximately $1.1 billion, including $1.077 billion of unused credit capacity and $7 million of cash and cash equivalents. Credit agreements provide $2.3 billion of aggregate capacity through December 2025.
- Debt-to-total-capitalization ratios under credit agreement definitions were 59% for Ameren, 49% for Ameren Missouri, and 45% for Ameren Illinois. The companies were in compliance with credit, indenture, and other debt covenants.
- Ameren expects its common equity ratio to remain approximately 45% through 2026. It expects approximately $300 million of equity issuance annually from 2022 through 2026, in addition to employee and dividend reinvestment plan issuances.
- Ameren had outstanding forward sale agreements covering 6.6 million shares, potentially generating approximately $587 million of proceeds upon physical settlement. Management expected to settle approximately $300 million by December 31, 2022 and another $300 million by December 31, 2023.
Guidance, outlook, management commentary, and risks
- Ameren expects capital expenditures of up to $18.0 billion from 2022 through 2026: up to $9.2 billion at Ameren Missouri, $8.6 billion at Ameren Illinois, and $0.2 billion at ATXI.
- Ameren Missouri’s Smart Energy Plan contemplates approximately $8.4 billion of investment from 2022 through 2026. The company targets net-zero carbon emissions by 2045 and plans substantial additions of renewable generation and battery storage.
- Ameren Missouri requested a $316 million annual electric revenue increase. A MoPSC decision was expected by June 2023, with new rates potentially effective in July 2023; the ultimate approved increase and recovery mechanisms were uncertain.
- Ameren Illinois requested an $84 million 2023 electric distribution revenue increase, while ICC staff recommended $61 million. The company also requested a $17 million energy-efficiency rate increase, with ICC staff recommending $15 million.
- The MISO capacity auction increased the central-region capacity price from $5 per MW-day to $237 per MW-day. Ameren Illinois estimated 2022 purchased power costs would increase approximately $450 million versus 2021, with recovery through regulatory mechanisms expected to limit earnings impact. Ameren Missouri estimated approximately $375 million of higher capacity revenues and purchased power costs for 2022 versus 2021.
- Ameren Missouri’s planned accelerated retirement of the Rush Island Energy Center remains subject to court, MoPSC, MISO, and FERC developments. Rush Island had approximately $0.6 billion of net plant balance and approximately $0.5 billion of rate base at September 30, 2022. The ultimate resolution could materially affect results, financial position, or liquidity.
- Ameren Missouri expects to seek securitized utility tariff financing for costs associated with the Rush Island retirement. MISO designated the facility as a system support resource, and transmission upgrades are expected to be completed by late 2025.
- Inflation, higher interest rates, coal transportation disruptions, supply-chain constraints, solar-panel availability, fuel prices, environmental regulation, cyber risk, weather, credit-market access, and regulatory recovery are key risks.
- The Inflation Reduction Act extends and expands clean-energy tax credits. Ameren was evaluating the law and did not expect to be subject to its 15% corporate alternative minimum tax in 2023.
- Ameren Missouri’s next Callaway nuclear refueling and maintenance outage is scheduled for fall 2023. The company reported sufficient non-Russian uranium supplies and contracts to meet requirements at least through the 2026 refueling.
Most important facts for investors to verify
- Final MoPSC resolution of Ameren Missouri’s $316 million rate request, including treatment of Rush Island costs and PISA-related recovery.
- Final court, FERC, MISO, and MoPSC outcomes affecting Rush Island’s retirement, operation, reliability upgrades, and securitization.
- Actual 2023 MISO capacity prices and the effect of purchased power and capacity costs on Ameren Missouri and Ameren Illinois.
- Ameren Illinois’ 2023 rate decisions and its planned election of a multiyear rate plan for 2024–2027.
- Execution of the $18.0 billion 2022–2026 capital program, associated financing needs, equity issuance, and resulting leverage.
- Recovery of environmental, fuel, purchased power, pension, bad-debt, and other costs through regulatory riders, trackers, and formula mechanisms.
- Potential effects of inflation, interest rates, supply-chain constraints, coal transportation disruptions, environmental rules, and solar-panel sourcing on project costs and timing.