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 months ended March 31, 2021, compared with the same period in 2020. The financial statements are unaudited and presented in millions unless otherwise indicated.
Key Financial Metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Operating revenues | $1,566 | $1,440 | +$126, or 9% |
| Operating income | $316 | $241 | +$75, or 31% |
| Net income | $235 | $148 | +$87, or 59% |
| Net income attributable to Ameren common shareholders | $233 | $146 | +$87, or 60% |
| Diluted EPS | $0.91 | $0.59 | +$0.32, or 54% |
| Operating margin | 20.2% | 16.7% | +3.5 percentage points |
| Net margin attributable to common shareholders | 14.9% | 10.1% | +4.8 percentage points |
| Net cash from operating activities | $(35) | $290 | $(325) |
| Capital expenditures and wind generation expenditures | $887 | $636 | +$251 |
| Short-term debt | $889 | $490 | +$399 |
| Long-term debt, net | $11,527 | $11,078 at Dec. 31, 2020 | +$449 |
Revenue and Earnings Drivers
- Electric revenue increased to $1,156 from $1,120; natural gas revenue increased to $410 from $320.
- Electric margins increased $54 million, or 6%, to $900 million. Natural gas margins increased $32 million, or 15%, to $245 million.
- Ameren Missouri contributed $47 million of common-shareholder earnings versus a $10 million loss in the prior-year quarter. Ameren Illinois contributed $149 million versus $120 million.
- Key favorable factors included the March 2020 Missouri electric rate order, infrastructure-related rate-base growth, colder winter weather, lower operations and maintenance costs, and higher Ameren Illinois natural gas rates and seasonal rate-design effects.
- Other income increased $25 million, primarily from higher non-service pension income and the absence of certain 2020 charitable donations.
- Income taxes were $27 million, with a 10% effective tax rate versus 12% in the prior-year quarter. Ameren Missouri reported a 4% effective tax benefit rate, compared with an 8% tax rate in Q1 2020.
Cash Flow, Debt, and Liquidity
- Operating cash flow was negative $35 million, compared with $290 million provided in Q1 2020. The decline reflected higher natural gas and purchased-power costs during the February cold weather event, lower customer collections, increased storm restoration costs, and regulatory working-capital movements.
- Investing cash outflow was $889 million, including $694 million of capital expenditures and $193 million for wind generation expenditures.
- Financing cash inflow was $795 million, supported by $399 million of net commercial paper issuance, $450 million of senior notes issued by Ameren, and $125 million of common-stock proceeds. Common dividends paid were $140 million.
- Ameren issued $450 million of 1.75% senior unsecured notes due 2028 and received approximately $447 million of net proceeds. It also issued 1.6 million shares under a forward sale agreement for $113 million.
- At March 31, 2021, consolidated cash, cash equivalents, and restricted cash totaled $172 million, including only $6 million of unrestricted cash and cash equivalents.
- Net available liquidity for Ameren, Ameren Missouri, and Ameren Illinois was approximately $1.4 billion, including $1.2 billion of unused credit-agreement capacity and $6 million of cash. The companies were in compliance with applicable debt covenants.
- Consolidated indebtedness-to-total-capitalization ratios under the credit agreements were 57% for Ameren, 49% for Ameren Missouri, and 46% for Ameren Illinois.
Material Changes Versus the Prior Comparable Period
- Ameren common-shareholder earnings increased substantially, with diluted EPS rising from $0.59 to $0.91.
- Revenue growth was driven primarily by natural gas pricing and recovery mechanisms, higher regulated rates, and infrastructure investment; commodity-cost recovery mechanisms generally offset corresponding fuel, purchased-power, and gas costs.
- Operations and maintenance expense decreased $18 million, while depreciation and amortization increased $26 million due to additional utility investment.
- Cash generation deteriorated despite higher earnings because of working-capital requirements, lower collections, higher commodity purchases, and increased regulatory assets.
- Capital investment accelerated, including the acquisition and construction of the up-to-300-MW Atchison wind project. Approximately half of the project was in service at filing, with the remainder expected by September 2021.
- Ameren Illinois redeemed $13 million of preferred stock. Ameren Missouri received $113 million and Ameren Illinois received $40 million of parent capital contributions.
Guidance, Outlook, Risks, and Unusual Items
- Management expects gradual improvement in 2021 sales volumes compared with 2020, but customer collections remain pressured by COVID-19. At March 31, 2021, customer receivables at least 30 days past due or under deferred payment arrangements represented 27% of Ameren trade receivables, or $137 million.
- Ameren Missouri expects to invest approximately $8.4 billion under its Smart Energy Plan from 2021 through 2025. Across Ameren, planned capital expenditures are up to $17.8 billion through 2025, subject to regulatory approvals and other conditions.
- Ameren Missouri requested annual electric and natural gas revenue increases of $299 million and $9 million, respectively. Decisions are expected by February 2022, with rates potentially effective in March 2022; approval levels are uncertain.
- Ameren Illinois requested a $64 million electric distribution rate increase, with a decision expected by December 2021 and rates potentially effective in January 2022. It also proposed energy-efficiency investments of up to approximately $100 million annually from 2022 through 2025.
- The Callaway Energy Center remained out of service because of generator repairs. Repairs are estimated at approximately $65 million, with return to service expected in July 2021. Insurance is expected to cover a significant portion of repair and replacement-power costs, including up to $4.5 million per week of replacement-power costs after March 17, 2021.
- Ameren Missouri reported February under-recovered commodity costs of $53 million under its gas adjustment clause and $50 million under its fuel adjustment clause. Ameren Illinois reported a $221 million gas adjustment under-recovery. Recovery is scheduled over several months beginning in 2021, although collection periods may change.
- Material risks include regulatory recovery and rate decisions, COVID-19 effects, customer nonpayment, capital-market access, environmental compliance, coal-plant litigation, commodity prices, supply-chain disruptions, cyberattacks, severe weather, and nuclear-plant operations.
- The Rush Island Clean Air Act litigation could require approximately $1 billion of capital expenditures and $30 million to $50 million of annual operating costs if the district court order is ultimately enforced. The outcome remains uncertain.
- Ameren expects cash used for planned capital expenditures and dividends to exceed operating cash flow over the next several years and anticipates additional equity issuance of approximately $150 million in 2021 and approximately $300 million annually from 2022 through 2025.
Important Facts for Investors to Verify
- Whether Missouri and Illinois regulators approve the requested rate increases and regulatory recovery mechanisms, and the timing of implementation.
- Actual customer collections, bad-debt trends, deferred-payment balances, and the duration of pandemic-related credit pressures.
- Callaway’s repair schedule, final repair costs, insurance recoveries, replacement-power costs, and regulatory treatment.
- Cash-flow conversion as the company executes its large capital program and funds dividends through debt and equity issuance.
- The outcome and potential cost of Rush Island and other environmental proceedings, including the recoverability of compliance expenditures through rates.
- Progress on the Atchison wind project and the broader renewable-generation and carbon-reduction investment plan.
- Future FERC decisions and litigation concerning transmission return on equity, refunds, and formula-rate calculations.