Ameren Corporation 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 Ameren Transmission. The filing covers the three and six months ended June 30, 2022, and was filed August 5, 2022. Dollar amounts are in millions unless otherwise stated.
Key Financial Metrics
| Metric | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 |
|---|---|---|---|---|
| Operating revenues | $1,726 | $1,472 | $3,605 | $3,038 |
| Operating income | $309 | $286 | $640 | $602 |
| Net income attributable to Ameren common shareholders | $207 | $207 | $459 | $440 |
| Diluted EPS | $0.80 | $0.80 | $1.77 | $1.71 |
| Net cash provided by operating activities | Not separately provided | Not separately provided | $872 | $436 |
| Capital expenditures | Not separately provided | Not separately provided | $1,538 | $1,763 |
- Six-month operating revenues increased 19%, while operating income increased 6%.
- Six-month electric margins increased $195 million, or 10%, and natural-gas margins increased $33 million, or 9%.
- Six-month operating cash flow doubled year over year, primarily reflecting improved collections and regulatory recovery timing following the extreme February 2021 weather event.
- Ameren reported a 15% effective income tax rate for the quarter and 13% for the six-month period.
- At June 30, 2022, Ameren had total assets of $37.1 billion, long-term debt net of current maturities of $13.0 billion, short-term debt of $1.0 billion, and shareholders’ equity of $9.9 billion.
- Consolidated indebtedness to total capitalization was 59% for Ameren, 51% for Ameren Missouri, and 44% for Ameren Illinois under credit-agreement calculations.
- Net available liquidity was approximately $1.3 billion, including $7 million of cash and available credit capacity. The companies were in compliance with credit covenants.
- Ameren paid $305 million of common dividends during the first six months and reported a quarterly dividend of $0.59 per share.
Material Changes Versus the Prior Comparable Period
- Revenue growth was driven by higher base rates, rate-base investment, weather-related demand, cost-recovery mechanisms, higher transmission revenues, and increased natural-gas revenues.
- Ameren Missouri electric margins increased $80 million in the quarter and $104 million year to date, aided by the December 2021 Missouri rate order and favorable weather. Higher energy costs and the absence of 2021 Callaway outage insurance recoveries partially offset the benefit.
- Ameren Illinois electric-distribution margins increased $33 million in the quarter and $58 million year to date, primarily from higher recognized ROE, rate-base growth, and recoverable operating expenses.
- Ameren Transmission margins increased $14 million in the quarter and $30 million year to date, reflecting rate-base growth, higher recoverable expenses, and the absence of a 2021 FERC-related revenue reduction.
- Other operations and maintenance expense increased $79 million in the quarter and $120 million year to date. Drivers included unfavorable changes in company-owned life-insurance cash surrender values, higher transmission and distribution expenses, higher labor and benefit costs, and the expiration of refined-coal tax-credit contracts.
- Interest expense increased $30 million in the quarter and $34 million year to date because of higher debt balances, recent debt issuances, and reduced regulatory deferrals.
- Capital expenditures declined $225 million year to date, mainly because of lower wind-generation spending at Ameren Missouri, although transmission and distribution investment increased.
- Shares outstanding increased, with weighted-average basic shares rising to 258.0 million from 255.2 million year to date, limiting EPS growth relative to net income growth.
Guidance, Outlook, Risks, and Unusual Items
- Ameren expects approximately $18.0 billion of capital expenditures from 2022 through 2026, including up to $9.2 billion at Ameren Missouri, $8.6 billion at Ameren Illinois, and $0.2 billion at ATXI. Management expects equity issuance of approximately $300 million annually through 2026, in addition to approximately $100 million annually from employee and dividend reinvestment plans.
- Ameren Missouri expects approximately $23 million of higher earnings in the third quarter of 2022 compared with the third quarter of 2021, primarily due to the December 2021 rate order and seasonal demand.
- Ameren expects its common-dividend payout ratio to remain between 55% and 70% of annual earnings.
- Ameren Missouri filed an August 2022 electric rate request seeking a $316 million annual revenue increase, based on a 10.2% requested ROE and an $11.6 billion rate base. A decision was expected by June 2023, with rates potentially effective in July 2023; the ultimate approved increase was uncertain.
- Ameren Missouri’s Smart Energy Plan contemplates approximately $8.4 billion of investment from 2022 through 2026. Its updated resource plan targets net-zero carbon emissions by 2045, 2,800 MW of additional renewable generation by 2030, and accelerated retirements of certain fossil-fuel facilities.
- Rush Island Energy Center remains a significant contingency. Ameren Missouri proposed accelerated retirement rather than installation of required pollution controls. The facility had approximately $0.6 billion of net plant balance and approximately $0.5 billion of rate base at June 30, 2022. Court, MoPSC, MISO, and FERC actions could materially affect recovery, reliability, timing, and liquidity.
- Ameren Missouri expects to seek securitized utility tariff bonds to finance Rush Island retirement costs, including the remaining unrecovered plant balance.
- Ameren Missouri entered into agreements for 150 MW and 200 MW solar facilities. The projects require regulatory, transmission-interconnection, and FERC approvals and may be delayed or become more costly because of solar-panel supply and trade issues.
- Ameren Illinois requested an $84 million increase in 2023 electric-distribution rates; ICC staff recommended a $60 million increase. Ameren Illinois also requested a $17 million energy-efficiency rate increase, with decisions expected by December 2022.
- Ameren Illinois expects 2022 purchased-power costs to increase approximately $400 million versus 2021, largely because of higher capacity and power prices. These costs are generally recovered through riders and are not expected to materially affect net income.
- Inflation, higher interest rates, supply-chain disruptions, coal-delivery constraints, commodity-price volatility, cyberattacks, weather, environmental regulation, COVID-19 effects, and capital-market access remain material risks.
- Ameren estimates $125 million to $175 million of environmental-compliance capital expenditures from 2022 through 2026. Ameren Illinois estimated remaining obligations for former manufactured-gas plant sites at $78 million to $147 million and recorded a $78 million liability.
- Ameren Missouri had sufficient non-Russian uranium inventory and contracts to meet requirements through at least the 2026 Callaway refueling, while reviewing alternatives to reduce exposure to Russian-sourced uranium.
Most Important Facts for Investors to Verify
- Outcome and timing of the Rush Island litigation, planned retirement, reliability requirements, securitization request, and potential recovery of the approximately $0.6 billion net plant balance.
- Final decisions on Ameren Missouri’s $316 million rate request and Ameren Illinois’ 2023 electric-distribution and energy-efficiency rate proceedings.
- Actual 2022 and 2023 MISO capacity prices, purchased-power costs, and the extent to which related costs are recovered through regulatory mechanisms.
- Execution, approval status, cost, and timing of the 150-MW and 200-MW solar projects and the broader $18.0 billion capital program.
- Changes in debt funding, equity issuance, interest rates, liquidity, and the company’s ability to maintain approximately 45% equity capitalization through 2026.
- Whether COVID-19-related demand effects, customer-class shifts, coal-delivery disruptions, inflation, and supply-chain constraints alter operating cash flow or capital spending.
- Future environmental-compliance costs, coal-ash obligations, emissions restrictions, and potential asset retirements or regulatory disallowances.