Ameren Corp. 2019 Form 10-K Summary
Business context and reporting period
This combined Form 10-K covers Ameren Corporation, Union Electric Company doing business as Ameren Missouri, and Ameren Illinois Company for the fiscal year ended December 31, 2019. Ameren is a regulated utility holding company serving Missouri and Illinois through electric generation, transmission and distribution, natural gas distribution, and FERC-regulated transmission businesses. The filing was signed February 28, 2020.
Ameren reported four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission. Substantially all utility revenues are subject to regulation by the MoPSC, ICC, or FERC.
Financial performance and key metrics
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Operating revenues | $5.910 billion | $6.291 billion | Down $381 million |
| Operating income | $1.267 billion | $1.357 billion | Down $90 million |
| Net income | $834 million | $821 million | Up $13 million |
| Net income attributable to common shareholders | $828 million | $815 million | Up $13 million |
| Diluted EPS | $3.35 | $3.32 | Up $0.03 |
| Cash from operating activities | $2.170 billion | $2.170 billion | Flat |
| Capital expenditures | $2.411 billion | $2.286 billion | Up $125 million |
- Electric revenues were $4.981 billion, compared with $5.339 billion in 2018; natural gas revenues were $929 million, compared with $952 million.
- Electric margins decreased $99 million to $3.890 billion, primarily because of lower Ameren Missouri margins. Natural gas margins increased $20 million to $598 million.
- The effective consolidated income tax rate was 18% versus 22% in 2018. The decrease primarily reflected amortization of excess deferred income taxes, the absence of a 2018 TCJA-related deferred-tax revaluation charge, and higher stock-based compensation tax benefits.
- Year-end total assets were $28.933 billion and Ameren shareholders’ equity was $8.059 billion. Long-term debt, excluding current maturities, was $8.915 billion; current maturities were $442 million and short-term debt was $440 million.
- Ameren had $16 million of cash and $1.873 billion of net available liquidity at December 31, 2019, supported by $2.3 billion of revolving credit facilities that mature in December 2024.
- Ameren paid $472 million of common dividends, or $1.9200 per share, and increased its quarterly dividend to $0.495 per share, equivalent to an annualized $1.98.
Material changes versus the prior comparable period
- Ameren Missouri net income available to common shareholders declined to $426 million from $478 million. Milder summer and winter weather reduced electric margins by an estimated $97 million, while the Callaway nuclear refueling outage increased maintenance expense by $28 million. Higher property taxes and lower off-system sales also weighed on results.
- Ameren Illinois net income available to common shareholders increased to $343 million from $304 million. Ameren Illinois Electric Distribution benefited from rate-base and energy-efficiency investment growth, while Ameren Illinois Natural Gas benefited from higher base rates, QIP recovery, and a software licensing transaction.
- Ameren Transmission earnings increased to $185 million from $164 million, supported by a 12% increase in rate base and additional transmission investment.
- Operating cash flow at Ameren Missouri fell $193 million to $1.067 billion, while Ameren Illinois operating cash flow rose $303 million to $962 million.
- Ameren issued $1.527 billion of long-term debt and repaid $580 million of long-term debt. Consolidated long-term debt increased from $7.859 billion to $8.915 billion.
- Regulatory assets declined to $1.061 billion from $1.261 billion, while regulatory liabilities increased to $5.051 billion from $4.786 billion.
Outlook, management commentary, risks, and unusual items
- Ameren projects cumulative capital expenditures of $15.4 billion to $16.6 billion from 2020 through 2024, including up to $8.4 billion at Ameren Missouri and $8.0 billion at Ameren Illinois. Management expects these investments to support grid modernization, reliability, renewable generation, transmission, and environmental compliance.
- Ameren Missouri expects approximately $1.2 billion of investment in two wind facilities, each expected to be completed by the end of 2020. COVID-19-related supply-chain disruptions could delay construction, affect contracted megawatts, and jeopardize federal production tax credits.
- Ameren Missouri’s PISA and 2.85% electric customer rate-growth cap are effective through December 2023 unless extended by the MoPSC. The cap could limit recovery if capital or operating costs increase materially.
- Ameren Missouri’s pending electric rate case included a proposed $32 million annual revenue decrease in a February 2020 nonunanimous stipulation, subject to MoPSC approval. Ameren Illinois filed for a $102 million annual natural gas delivery revenue increase, subject to ICC review.
- FERC’s November 2019 order reduced the MISO transmission base ROE to 9.88% and required refunds. Ameren recorded a $40 million liability and Ameren Illinois recorded a $23 million liability for expected refunds. A 50-basis-point reduction in the FERC-allowed ROE could reduce annual net income by an estimated $10 million for Ameren and $6 million for Ameren Illinois.
- Ameren Illinois’ electric distribution formula-ratemaking framework expires at the end of 2022 unless extended. Its allowed ROE is linked to 30-year U.S. Treasury yields; a 50-basis-point change in those yields is estimated to change annual net income by approximately $9 million.
- Rush Island Clean Air Act litigation could require approximately $1 billion of flue-gas-desulfurization capital expenditures and $30 million to $50 million of annual operating and maintenance expense. Implementation was largely stayed pending appeal.
- Other significant risks include environmental compliance, coal supply and transportation, nuclear operations and decommissioning, regulatory cost disallowances, cybersecurity, severe weather, aging infrastructure, commodity prices, pension obligations, access to capital, and changing energy demand.
- The filing reports no material unresolved staff comments, no significant off-balance-sheet financing arrangements beyond disclosed items, and effective disclosure controls and internal control over financial reporting for Ameren.
Important facts for investors to verify
- Verify the final outcomes and effective dates of Ameren Missouri’s electric rate case and Ameren Illinois’ natural gas rate case.
- Track the FERC rehearing process, transmission ROE refunds, and any future changes to the allowed transmission ROE.
- Assess the outcome and potential cost recovery of the Rush Island and Labadie environmental litigation.
- Monitor completion, costs, contracted capacity, and tax-credit eligibility of the two Missouri wind projects.
- Reconcile the $15.4 billion to $16.6 billion capital program with operating cash flow, debt issuance, equity issuance, and dividend requirements.
- Review the 2022 expiration of Illinois formula ratemaking and the 2023 expiration or potential extension of Missouri’s PISA and rate cap.
- Evaluate the sustainability of regulatory assets and liabilities, including the $5.051 billion regulatory-liability balance, and the probability and timing of customer recovery or refunds.