AMEREN CORP annual report, FY2020

Ameren Corporation 2020 Form 10-K Summary

Business context and reporting period

Ameren Corporation is a regulated utility holding company headquartered in St. Louis, Missouri. Its principal businesses are Ameren Missouri, Ameren Illinois, and Ameren Transmission, serving electric and natural gas customers in Missouri and Illinois. The filing is a combined Form 10-K for the fiscal year ended December 31, 2020, filed February 22, 2021. The source identifies a full-year 2020 filing rather than a separate quarterly filing.

Ameren reported four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission. Substantially all revenues are subject to regulation by the MoPSC, ICC, or FERC.

Key financial metrics

Metric	2020	2019	Change
Total operating revenues	$5.794 billion	$5.910 billion	Down $116 million
Operating income	$1.300 billion	$1.267 billion	Up $33 million
Net income	$877 million	$834 million	Up $43 million
Net income attributable to common shareholders	$871 million	$828 million	Up $43 million
Diluted EPS	$3.50	$3.35	Up $0.15
Cash flow from operating activities	$1.727 billion	$2.170 billion	Down $443 million
Capital expenditures and wind acquisition expenditures	$3.233 billion	$2.411 billion	Up $822 million
Long-term debt, net	$11.078 billion	$8.915 billion	Up $2.163 billion

Electric revenues were $4.911 billion, compared with $4.981 billion in 2019. Natural gas revenues were $883 million, compared with $929 million. Electric margins increased $18 million to $3.908 billion, while natural gas margins increased $13 million to $611 million. Other operations and maintenance expense declined $84 million, partly offset by an $80 million increase in depreciation and amortization and a $38 million increase in interest expense.

At December 31, 2020, Ameren had total assets of $32.030 billion, cash and cash equivalents of $139 million, current liabilities of $2.180 billion, and total equity of $9.080 billion. Regulatory assets totaled $1.209 billion and regulatory liabilities totaled $5.403 billion. The filing identifies regulatory accounting as a critical audit matter because recovery and refund assessments require significant management judgment.

Liquidity, debt, dividends, and cash flow

Net available liquidity was approximately $1.945 billion, consisting of $139 million of cash and $1.806 billion available under credit agreements after commercial paper and letters of credit.
The two credit agreements provide aggregate commitments of $2.3 billion and mature in December 2024, subject to extension provisions.
Ameren issued $2.183 billion of long-term debt in 2020 and repaid $442 million of long-term debt. Consolidated long-term debt maturities total $11.190 billion, including $505 million due in 2022 and $850 million due in 2024.
Operating cash flow fell primarily because of reduced customer collections, higher receivables, regulatory recovery timing, pension contributions, and asset-retirement-obligation payments.
Ameren paid $494 million of common dividends, or $2.00 per share, in 2020. The board subsequently increased the quarterly dividend to $0.55 per share, or $2.20 annualized, and management expects a payout ratio of 55% to 70% of earnings over the next several years.
Ameren expects cash used for currently planned capital expenditures and dividends to exceed operating cash flow over the next several years, requiring debt, equity issuance, subsidiary dividends, and parent capital contributions.

Material changes versus the prior comparable period

Common-shareholder earnings increased 5.2% to $871 million, supported by transmission and infrastructure investment, the March 2020 Ameren Missouri rate order, lower outage-related operating costs, and the May 2020 FERC transmission ROE order.
Ameren Missouri electric margins declined $58 million because of lower commercial and industrial sales, milder weather, reduced MEEIA performance incentives, and suspended customer late fees. The decline was partly offset by the March 2020 rate order and lower net energy costs.
Ameren Transmission electric margins increased $59 million, primarily from rate-base growth and the higher allowed FERC transmission ROE.
Ameren Illinois Electric Distribution margins increased $17 million, but earnings were pressured by a lower recognized ROE resulting from lower 30-year Treasury yields.
Ameren Illinois Natural Gas margins increased $12 million, mainly from higher QIP recoveries.
Ameren acquired and placed in service the 400-MW High Prairie Renewable Energy Center for approximately $615 million, including $564 million of cash expenditures. In January 2021, it acquired an additional wind project of up to 300 MW for approximately $200 million.
Ameren issued 5.9 million shares under a forward sale agreement for $425 million in December 2020 and issued the remaining 1.6 million shares for $113 million in February 2021. Proceeds supported Ameren Missouri’s wind investments.
Past-due or deferred-payment customer receivables increased to 29% of Ameren’s customer trade receivables, or $133 million, versus 18%, or $75 million, at December 31, 2019.

Guidance, outlook, risks, contingencies, and unusual items

Management expects gradual improvement in economic activity in 2021. Ameren Missouri estimates 2021 electric sales volumes will increase approximately 2%, excluding weather and energy-efficiency effects, after a 2.2% decline in 2020.
Ameren expects $16.4 billion to $17.8 billion of capital expenditures from 2021 through 2025, including up to $9.3 billion at Ameren Missouri, $8.2 billion at Ameren Illinois, and $0.2 billion at ATXI. The plan assumes continued constructive regulatory frameworks and an extension of the Missouri PISA mechanism through 2028.
Ameren Missouri’s 2020 integrated resource plan targets net-zero carbon emissions by 2050, a 50% CO₂ reduction by 2030 and an 85% reduction by 2040 from 2005 levels. It includes 3,100 MW of additional renewable generation by 2030 and 5,400 MW by 2040.
The Callaway nuclear facility experienced a generator-related, non-nuclear outage after its December 2020 refueling. Repairs are estimated at $65 million, largely capital expenditures, and the facility was expected to return to service in late June or early July 2021. Increased purchased power and reduced off-system sales were expected to be recovered through the fuel adjustment clause.
Ameren Illinois’ electric distribution performance-based formula ratemaking framework expires at the end of 2022 unless extended. Its allowed ROE is tied to 30-year Treasury yields; a 50-basis-point change was estimated to affect annual net income by approximately $10 million.
Ameren Illinois’ natural-gas QIP mechanism is scheduled to expire after December 2023 without legislative action. The January 2021 rate order increased annual natural-gas delivery revenues by $76 million and reset QIP rate base to zero.
The 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. The matter remained on appeal, and the ultimate outcome was uncertain.
Environmental compliance capital expenditures were estimated at $175 million to $225 million from 2021 through 2025, excluding possible costs from the Rush Island litigation. Ameren Illinois estimated remaining former manufactured-gas-plant remediation obligations of $94 million to $157 million and recorded a $94 million liability.
Mid-February 2021 extreme cold weather caused estimated additional natural-gas costs of approximately $200 million for Ameren Illinois and $50 million for Ameren Missouri. Management expected recovery through riders and no significant effect on financial results or liquidity, but the estimates were preliminary.
Key continuing risks include regulatory disallowances or delays, expiration of recovery mechanisms, COVID-19-related customer nonpayment, capital-market access, rising debt and financing costs, coal supply, nuclear operations, environmental compliance, cyberattacks, severe weather, and construction or supply-chain delays.

Most important facts for an investor to verify

Whether Ameren Missouri obtains approval to extend PISA beyond December 2023 and whether planned capital investment remains recoverable under applicable rate mechanisms.
The outcome and financial consequences of the Rush Island Clean Air Act appeal, including potential capital and operating costs.
The duration and cost of the Callaway outage, insurance recovery, replacement-power costs, and any effect on generation margins.
Whether Ameren Illinois’ formula ratemaking framework is extended beyond 2022 and how Treasury yields affect its allowed ROE.
Progress toward the $16.4 billion to $17.8 billion 2021–2025 capital program, associated debt and equity issuance, and rate-base growth.
Customer collection trends, bad-debt expense, deferred-payment balances, and regulatory recovery of COVID-19-related costs.
Actual 2021 renewable project completion, production-tax-credit utilization, and compliance with Missouri and Illinois renewable and zero-emission requirements.
Future FERC transmission ROE decisions, refund obligations, and the effect of any changes to transmission incentives.