Business Context and Reporting Period
Ameren Corporation is a regulated utility holding company headquartered in St. Louis, Missouri. Its principal subsidiaries are Ameren Missouri, which operates regulated electric generation, transmission, distribution, and natural-gas businesses in Missouri, and Ameren Illinois, which operates regulated electric transmission and distribution and natural-gas distribution businesses in Illinois. The combined Form 10-Q also covers Union Electric Company and Ameren Illinois Company as separate registrants.
This filing reports unaudited results for the three and nine months ended September 30, 2023, compared with the corresponding 2022 periods. All dollar amounts are in millions unless otherwise stated.
Financial Performance and Key Metrics
| Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 |
|---|---|---|---|---|
| Total operating revenues | $2,060 | $2,306 | $5,882 | $5,911 |
| Operating income | $614 | $599 | $1,294 | $1,239 |
| Net income attributable to Ameren common shareholders | $493 | $452 | $994 | $911 |
| Diluted EPS | $1.87 | $1.74 | $3.78 | $3.51 |
| Operating margin | 29.8% | 26.0% | 22.0% | 21.0% |
| Net margin | 24.0% | 19.6% | 16.9% | 15.4% |
| Net cash provided by operating activities | — | — | $2,031 | $1,599 |
| Capital expenditures | — | — | $2,571 | $2,437 |
Revenue declined 11% in the third quarter, primarily because of lower electric and natural-gas pass-through revenues, lower capacity prices, lower market power prices, and lower sales volumes. Year-to-date revenue was broadly stable, down approximately 0.5%.
Operating income increased 3% in the quarter and 4% year to date. Net income attributable to common shareholders increased 9% in both periods. Earnings benefited from rate-base investment, Ameren Missouri's July 2023 rate increase, higher recognized returns at Ameren Illinois Electric Distribution, lower income-tax expense, and lower certain operating and maintenance costs. These benefits were partly offset by milder weather, lower Ameren Missouri electric sales, higher financing costs, increased depreciation, and higher weighted-average shares.
- Ameren Missouri net income available to common shareholders was $411 million in Q3 2023 versus $397 million and $541 million year to date versus $547 million.
- Ameren Illinois net income available to common shareholders was $125 million in Q3 2023 versus $103 million and $452 million year to date versus $375 million.
- Ameren Transmission margins increased $19 million in Q3 and $47 million year to date, reflecting higher recoverable expenses and transmission rate-base investment.
- Ameren's electric margin increased $31 million in Q3 and $41 million year to date; natural-gas margin was flat in Q3 and declined $3 million year to date.
Cash Flow, Balance Sheet, Debt, and Liquidity
- Year-to-date operating cash flow increased $432 million to $2,031 million, primarily from higher customer collections, lower counterparty collateral postings, lower natural-gas inventory costs, and lower Callaway outage payments.
- Investing cash use increased to $2,656 million from $2,458 million, including $2,571 million of capital expenditures and $63 million of nuclear-fuel expenditures.
- Financing cash flow was $655 million, compared with $884 million in the prior-year period. Ameren issued $997 million of long-term debt, paid $496 million of common dividends, and increased net short-term debt by $272 million.
- At September 30, 2023, Ameren had $8 million of unrestricted cash and $246 million of cash, cash equivalents, and restricted cash. Net available liquidity under its credit agreements was approximately $1.3 billion, supported by aggregate credit commitments of $2.6 billion through December 2027.
- Consolidated short-term debt was $1,340 million, compared with $1,070 million at December 31, 2022. Long-term debt, including current maturities, was approximately $14.7 billion, compared with $14.0 billion at year-end 2022.
- Ameren's consolidated indebtedness-to-total-capitalization ratio under its credit agreements was 59%; the comparable ratios were 49% for Ameren Missouri and 45% for Ameren Illinois. The companies were in compliance with applicable debt covenants.
- Ameren issued $500 million of 5.45% first-mortgage bonds due 2053, and Ameren Illinois issued $500 million of 4.95% first-mortgage bonds due 2033.
- Management expects capital expenditures and dividends to exceed operating cash flow over the next several years. Planned funding includes debt, approximately $100 million of annual equity issuance through DRPlus and employee plans, and approximately $500 million of equity issuance annually from 2024 through 2027.
Material Changes Versus the Prior Comparable Period
- The June 2023 Missouri electric rate order increased Ameren Missouri's annual electric revenue requirement by $140 million, effective July 9, 2023. The order also increased the annualized base level of net energy costs by approximately $40 million and changed depreciation, regulatory-amortization, and tracker amounts.
- Ameren Missouri's earnings benefited from the rate order but were pressured by milder spring and early-summer weather, warmer winter weather, lower retail sales, lower MEEIA performance incentives, and higher financing costs.
- Ameren Illinois Electric Distribution benefited from higher recognized ROE, increased rate base, and energy-efficiency investment recovery. Ameren Illinois Transmission benefited from higher rate base and recoverable expenses.
- Operating and maintenance expense declined $5 million in Q3 and $59 million year to date, while depreciation and amortization increased $19 million in Q3 and $59 million year to date because of additional utility investment.
- Interest expense increased $26 million in Q3 and $57 million year to date, driven by higher interest rates, increased debt balances, and reduced regulatory deferrals.
- Weighted-average basic shares increased to 262.8 million in Q3 and 262.5 million year to date, compared with 258.4 million and 258.2 million, respectively, in 2022.
- Ameren implemented new enterprise resource planning and performance-management systems during the quarter and modified certain internal control processes. Management concluded that disclosure controls remained effective.
Guidance, Outlook, Risks, and Unusual Items
- Management expects Ameren Missouri's June 2023 rate order to increase 2023 earnings versus 2022 by approximately $46 million and 2024 earnings versus 2023 by approximately $19 million. This is a subsidiary-specific estimate rather than consolidated EPS guidance.
- Ameren expects up to $20.5 billion of capital expenditures from 2023 through 2027, including up to $10.8 billion at Ameren Missouri, $9.5 billion at Ameren Illinois, and $0.2 billion at ATXI. The plan includes approximately $2.5 billion of renewable-generation investment.
- Ameren Missouri's 2023 Integrated Resource Plan targets 2,800 MW of additional renewable generation by 2030, 400 MW of battery storage by 2030, continued coal-plant retirements, and net-zero carbon emissions by 2045. Execution depends on regulatory approvals, project costs, supply-chain availability, tax credits, interconnection, and reliability requirements.
- Four Ameren Missouri solar projects totaling 550 MW were awaiting MoPSC certificate approvals. MoPSC staff recommended denial of those requests; decisions were expected in the first quarter of 2024.
- Ameren Illinois had several material regulatory proceedings pending, including its 2024–2027 electric distribution multiyear rate plan, a $117 million 2022 electric distribution reconciliation request, and a $140 million natural-gas delivery-rate request. Outcomes and approved rates remained uncertain.
- Ameren Missouri expects to retire the Rush Island Energy Center by October 15, 2024, under a modified Clean Air Act remedy order. The facility had approximately $550 million of net plant balance at September 30, 2023. The MoPSC was reviewing prudence and cost-recovery issues, creating potential for a material adverse impact.
- Environmental compliance, coal-ash closure, emissions rules, cooling-water requirements, former manufactured-gas-plant remediation, and potential changes in federal environmental policy could increase costs, capital requirements, or retirement obligations.
- The Callaway nuclear refueling and maintenance outage began in October 2023 and was completed in November 2023. Ameren Missouri reported adequate uranium inventory and non-Russian supply contracts through the 2026 refueling reload.
- Ameren's dividend policy targets a payout ratio of 55% to 70% of annual earnings. The company paid $496 million of common dividends during the first nine months of 2023.
- Key continuing risks include inflation, higher interest rates, capital-market access, regulatory cost recovery, weather, commodity prices, cyberattacks, system reliability, supply-chain disruption, legal proceedings, and the ability to maintain investment-grade credit ratings.
Most Important Facts for Investors to Verify
- Whether Ameren Illinois receives favorable decisions on its electric multiyear rate plan, $117 million reconciliation request, energy-efficiency rate filing, and natural-gas rate case.
- Whether the MoPSC permits recovery and securitization of Rush Island's remaining investment and retirement costs, and whether additional mitigation or prudence disallowances arise.
- The timing, approval, and final cost of Ameren Missouri's solar, natural-gas, storage, transmission, and environmental projects.
- Whether the planned $20.5 billion capital program can be funded without materially weakening credit metrics or increasing financing costs.
- The effect of higher interest rates, weather normalization, lower MISO capacity prices, customer usage, and commodity-market conditions on future earnings and cash flow.
- Ameren's settlement of approximately $300 million of forward equity sale agreements, expected to involve physical delivery of approximately 3.2 million shares by December 31, 2023, and the resulting dilution.
- Potential refunds or rate changes from pending FERC proceedings concerning the MISO transmission ROE.