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 transmission operations. This combined Form 10-Q covers the three and six months ended June 30, 2021, and was filed August 6, 2021. Dollar amounts are in millions unless otherwise stated.
Key financial metrics
| Metric | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 |
|---|---|---|---|---|
| Operating revenues | $1,472 | $1,398 | $3,038 | $2,838 |
| Operating income | $286 | $354 | $602 | $595 |
| Net income attributable to Ameren common shareholders | $207 | $243 | $440 | $389 |
| Diluted EPS | $0.80 | $0.98 | $1.71 | $1.57 |
| Cash flow from operating activities | Not separately provided | Not separately provided | $436 | $694 |
| Capital expenditures and wind generation expenditures | Not separately provided | Not separately provided | $1,763 | $1,228 |
Q2 revenue increased 5%, while common-shareholder net income declined 15% and diluted EPS declined 18%. Year-to-date revenue increased 7%, net income increased 13%, and diluted EPS increased 9%. The filing does not provide a single consolidated GAAP operating margin measure; operating income as a percentage of revenue was approximately 19.4% in Q2 2021 versus 25.3% in Q2 2020, and 19.8% year-to-date versus 21.0% in the prior-year period.
- Electric revenue was $1,284 in Q2 and $2,440 year-to-date, compared with $1,237 and $2,357, respectively, in the prior-year periods.
- Natural gas revenue was $188 in Q2 and $598 year-to-date, compared with $161 and $481, respectively.
- Interest charges were $96 in Q2 and $196 year-to-date, compared with $108 and $201, respectively.
- The effective income tax rate was 13% in Q2 and 12% year-to-date, compared with 17% and 15% in the prior-year periods, primarily reflecting renewable-energy tax credits and other tax items.
- At June 30, 2021, total assets were $33,916, long-term debt was $12,492, short-term debt was $431, and shareholders’ equity was $9,353.
- Cash, cash equivalents, and restricted cash totaled $267 at June 30, 2021, compared with $301 at December 31, 2020.
- Net available liquidity was approximately $1,965, supported by $2.3 billion of aggregate credit agreements, cash, and available borrowing capacity. The companies were in compliance with applicable credit covenants.
- Common dividends paid were $282 year-to-date, compared with $244 in the prior-year period; the quarterly dividend was $0.550 per share versus $0.495.
Material changes versus the prior comparable period
- Q2 earnings declined primarily because Ameren Missouri electric margins fell $49, largely due to a rate-design change that shifted revenue from May to September, the absence of prior-year FERC transmission benefits, and higher Callaway-related maintenance costs.
- Year-to-date earnings increased primarily from Ameren Illinois rate-base growth and higher recognized return on equity, increased infrastructure investment, improved Ameren Missouri sales, colder winter weather, lower selected operating costs, and higher Ameren Illinois natural-gas rates.
- Ameren’s electric margins decreased $27 in Q2 but increased $27 year-to-date. Natural-gas margins increased $4 in Q2 and $36 year-to-date.
- Operating cash flow declined $258 year-to-date, driven by higher commodity purchases during the February 2021 extreme cold weather event, regulatory timing, storm costs, collateral activity, and higher interest payments.
- Investing cash outflows increased $445 year-to-date, primarily because of the $417 acquisition of the Atchison wind project and higher capital expenditures.
- Financing cash inflows increased $682 year-to-date, reflecting $1,423 of long-term debt issuances and $258 of common-stock proceeds, partially offset by dividends and debt-related costs.
- Ameren Missouri acquired and placed the approximately 300-MW Atchison Renewable Energy Center in service; the purchase price was approximately $500.
Guidance, outlook, risks, contingencies, and unusual items
- Management expects gradual improvement in 2021 sales volumes compared with 2020, excluding weather and energy-efficiency effects, but customer receivables past due or under deferred-payment arrangements remain above historical levels.
- Ameren Missouri’s five-year Smart Energy Plan contemplates approximately $8.4 billion of investment from 2021 through 2025. Consolidated planned capital expenditures are estimated at up to $17.8 billion over the same period.
- Ameren expects to issue approximately $30 million of equity in the second half of 2021 and approximately $300 million annually from 2022 through 2025, in addition to approximately $100 million annually through employee and dividend reinvestment programs. Management targets an equity-to-total-capitalization ratio of approximately 45% through 2025.
- Ameren Missouri filed requests for annual revenue increases of $299 for electric service and $9 for natural-gas delivery service. Decisions were expected by February 2022, but the ultimate approved amounts were uncertain.
- Ameren Illinois filed for a $60 annual revenue increase for electric distribution service; an ICC decision was expected by December 2021, with rates effective January 2022. The ICC staff had recommended a $54 increase.
- The Callaway Energy Center experienced a generator-related, non-nuclear outage. Repairs cost approximately $60, largely capital expenditures, and the plant returned to service on August 4, 2021, after the reporting date. Insurance was expected to cover a significant portion of repair costs and lost sales; an insurance receivable of $36 was recorded at June 30.
- February 2021 extreme cold weather created commodity under-recoveries of approximately $53 for Ameren Missouri’s PGA, $50 for its FAC, and $221 for Ameren Illinois’ PGA. Recovery was scheduled over future customer billing periods.
- Material risks include COVID-19 impacts, regulatory and rate-case outcomes, FERC transmission ROE and refund proceedings, environmental compliance, coal-ash and carbon regulation, the Rush Island Clean Air Act litigation, fuel and power costs, capital-market access, cyberattacks, weather, supply-chain disruptions, and Callaway operating performance.
- The Rush Island litigation could require approximately $1 billion of capital expenditures and $30 to $50 annually of additional operating costs if the district court order is ultimately upheld. Ameren stated that the outcome remains uncertain.
- Ameren and Ameren Illinois estimated remaining obligations for former manufactured-gas-plant remediation at $85 to $150; a liability of $85 was recorded.
- Ameren targets net-zero carbon emissions by 2050, a 50% reduction in CO2 emissions by 2030, and an 85% reduction by 2040 from 2005 levels, subject to regulatory, project, technology, and market conditions.
Most important facts for an investor to verify
- Final outcomes and timing of Ameren Missouri’s electric and natural-gas rate cases and Ameren Illinois’ electric distribution rate proceeding.
- Whether the Callaway insurance recoveries cover the expected repair and lost-sales costs and whether additional operating issues arise after the August 4, 2021 return to service.
- Cash-flow conversion, commodity-cost recovery, and the collection timing of the February 2021 PGA and FAC under-recoveries.
- Execution, regulatory approval, and financing of the planned $17.8 billion 2021–2025 capital program and the associated equity issuance requirements.
- Resolution of the Rush Island Clean Air Act litigation, FERC transmission ROE/refund proceedings, and other environmental contingencies.
- Changes in overdue customer receivables, bad-debt expense, deferred-payment arrangements, and the continuing effects of COVID-19.