Q3 2021 Ameren Corp Earnings Call
Our speakers.
As noted on page two of the presentation comments made during this conference call may contain statements that are commonly referred to as forward looking statements.
Such statements include those about future expectations.
<unk> plans projections strategy targets estimates objective events conditions and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated.
For additional information concerning these factors. Please read the forward looking statements sections in our news release, we issued yesterday and the forward looking statements and risk factors sections in our filings with the SEC.
Lastly, all per share earnings amounts discussed during today's presentation, including earnings guidance are presented on a diluted basis, unless otherwise noted now here's Warner who will start on page four of our presentation. Thanks, Andrew Good morning, everyone and thank you for joining us to begin I am pleased to report that our team continues to effectively execute.
Strategic plan across all of our businesses, which includes making significant investments and our energy infrastructure to enhance the reliability and resiliency with the energy grid as well as transition to a cleaner energy future in a responsible fashion.
These investments coupled with our continued focus on disciplined cost management and delivering significant value to our customers communities and shareholders.
Now to our third quarter earnings results yesterday, we announced third quarter 2021 earnings of $1 65 per share.
Our earnings were up 18 per share from the same time period in 2020.
This slide highlights the key drivers of our strong performance Michael.
Michael will discuss the key drivers of our third quarter earnings results a bit later.
Due to the continued strong execution of our strategy I am also pleased to report that we have raised our 2021 earnings guidance.
Our 2020 earnings guidance range is now $3 75 per share to $3 95 per share.
Compared to our original guidance range of $2 65 per share to $3 85 per share.
Turning now to page five where we reiterate our strategic plan.
The first pillar of our strategy stresses investing in and operating our utilities in a manner consistent with existing regulatory frameworks.
This has driven our multiyear focus on investing in energy infrastructure for the long term benefit of our customers.
As a result, and as you can see on the right side of this page during the first nine months of this year, we invested significant capital in each of our business segments. These investments are delivering value to our customers.
As I said before our energy grid stronger more resilient and more secure because of the investments we are making all four business segments.
As we head into the winter months I'd like to highlight some of the value. These investments have created Ameren, Illinois, and Ameren, Missouri natural gas businesses.
Our natural gas transmission and distribution investments are focused on upgrading and modernizing gas main and equipment infrastructure all the strength in safety and reliability of our system our customers.
Being mindful of the gas distribution issues experienced in the industry in the past I will note that our Ameren, Illinois, and Ameren, Missouri natural gas distribution systems are comprised almost entirely of plastic and <unk>.
<unk> coated steel pipelines.
There is no cast iron pipe in our systems.
We expect to eliminate all unprotected steel pipe by the end of this year.
These investments are just another example, how we're putting our customers at <unk>.
Center of our strategy.
Moving now to regulatory matters in late March Ameren, Missouri filed a request for a $299 million increase in annual electric service revenues and <unk>.
$9 million increase in annual natural gas service revenues with the Missouri Public Service Commission.
And our Illinois electric business, we've requested a $59 million base rate increase and a required annual electric distribution may filing these.
These proceedings are moving along on schedule.
Michael will provide more information on these proceedings a bit later.
Finally, we remain relentlessly focused on continuous improvement and disciplined cost management, including retaining many of the cost savings can be realized in 2020 due to the actions we took to mitigate the impacts of COVID-19.
Moving to page six in the second pillar of our strategy enhancing Megatron frameworks and advocating for responsible energy and economic policies.
Over the years, we have been successful in executing this element of our strategy are delivering value to our customers through our investments in energy infrastructure and through extensive collaboration with key stakeholders in all of our regulatory jurisdictions.
I am very pleased to report that these efforts paid off again in the third quarter.
Illinois legislature passed the climate and equitable jobs Act or <unk>, which was later signed by Governor Pritzker.
<unk> is a constructive piece of legislation that addresses the key objectives that we felt were important for our customers and the communities we serve.
It will enable us to continue to make important infrastructure investments to enhance the reliability and resiliency of the energy grid to a new forward thinking regulatory framework.
It will also give us the ability to earn fair returns on those investments as well as enable us to invest in two solar and or battery storage pilot projects.
C. J allows for an electric utility to opt in to a multiyear rate plan effective for four years beginning in 2024.
We are currently working with key stakeholders and we'll continue to over the course of 2022 to establish specific procedures, including performance metrics to implement this legislation.
Subject to finalizing key aspects of this ratemaking framework, we anticipate filing a multiyear rate plan by mid January 2023.
Michael will discuss this constructive piece of legislation in more detail in a moment.
Shifting now to the federal level for important energy legislation continues to be discussed.
Needless to say situation around federal legislation remains fluid and ever changing.
One thing that remains constant is our strong support for clean energy transition tax incentives, including wind and solar production tax credits transmission and storage investment tax credits as well as direct pay and normalization opt out provisions.
We also continued to strongly support significant funding for research design and development for new clean energy technologies electrification of the transportation sector and grid resiliency.
We support these important legislative initiatives, because we strongly believe it will deliver significant long term benefits to our customers.
<unk> and country.
We will continue to work with key stakeholders, along with our industry colleagues to advance constructive federal energy and economic policies that will help us transition to a cleaner energy future and responsible fashion.
Speaking of our transition to a cleaner energy future. Please turn to page seven and the discussion of future transmission investment needs.
As we have discussed with you in the past micro completed a study outlining the potential roadmap transmission projects through 2039.
Take into consideration that rapidly evolving generation mix that includes significant additions of renewable generation based on announced utility integrated resource plans state mandates and goals for clean energy, our carbon emission reductions among other things.
MISO future, one scenario, which is the scenario that resulted in an approximate 60% carbon emissions reduction below 2005 levels by 2039.
So estimates approximately $30 billion.
The future transmission investment would be necessary in the MISO footprint.
I know you appreciate three scenario, which resulted in an 80% reduction in carbon emissions below 2005 levels by 2039.
<unk> estimates of approximately $100 billion of transmission investment in the MISO footprint would be needed.
It is clear that investment in transmission is going to play a critical role in the clean energy transition and we are well positioned to plan and execute the potential projects in the future, but the benefit of our customers and country.
We continue to work with MISO and other key stakeholders and believe certain projects outlining future. One are likely going to be included in this year's MISO transmission planning process, which is expected to be completed in early 2022.
Moving now to page eight and an update on litigation regarding Ameren, Missouri, Paas compliance with the new source review provisions on the clean Air Act.
As you May recall this litigation dates back to 2011.
And the department of Justice on behalf of the EPA filed a complaint against Ameren, Missouri, alleging that and performing certain projects at the Buzztime and energy center be violated the new source review provisions of the clean Air Act.
In 2017, the district Court issued a liability really and September 2019, or the installation of push control equipment at the restaurant and the energy Center.
Well as at the <unk> Energy Center.
September of this year U S Court of Appeals affirmed the district Court's 2019 order requires us to install scrubber at our Rush Island Energy Center, but denied the order to install additional pollution control equipment at <unk>.
Last month, we filed a request for rehearing with U S Court of Appeals.
We wait for a final decision from the courts, we continue to assess several alternatives to effectively address according appeals decision, including legal operational and regulatory measures.
In reviewing these options. We are also carefully assessing the impact on customer costs as well as generation or transmission investments needed to maintain system reliability.
And we are certainly mindful of the policies that are being considered at the federal level to help address climate change.
Should our decision results in a material change to our integrated resource plan, we will file an updated plan with the Missouri PSC.
Turning to page nine.
We remain focused on delivering a sustainable energy future for our customers communities and our country.
This page summarizes our strong sustainability value proposition for environmental social and governance matters and is consistent with our vision, leading the way towards sustainable energy future.
Beginning with environmental stewardship last September and then announced this transformational plan to achieve net zero carbon emissions by 2050 across all of our operations in Missouri and Illinois.
This plan includes interim carbon emission reduction targets of 50% and 85% below 2005 levels in 2030, and 2040, respectively and is consistent with the objectives, the Paris agreement and Liberty Global temperature rise to one five degrees Celsius.
We also have a strong long term commitment to our customers and communities to be socially responsible and economically impactful.
This slide highlights the many things, we're doing for our customers and communities, including being an industry leader in diversity equity and inclusion.
Further our strong corporate governance is led by a diverse board of directors focused on strong oversight, that's aligned with ESG matters and our executive compensation practices include performance metrics that are tied to sustainable long term performance diversity equity and inclusion and progress towards a cleaner sustainable energy future.
Finally, this slide highlights our very strong sustainable growth proposition, which is among the best in the industry.
Turning to page 10, we will drill down further on this key element.
Our strong sustainable growth proposition is driven by a robust pipeline of investment opportunities.
<unk> $40 billion over the next decade that will deliver significant value to all of our stakeholders and making our energy grid stronger smarter and cleaner.
Importantly, these investment opportunities exclude any new reasonably beneficial transmission projects, including the potential roadmap of MISO transmission projects I discussed earlier.
All of which would increase the reliability and resiliency of the energy grid as well as help to enable our country's transition to a cleaner energy future.
In addition, we expect to see greater focus on infrastructure investments to support the electrification of the transportation sector in the future.
Our outlook through 2030 does not include significant infrastructure investments for electrification and at this time.
Maintaining constructive energy policies that support robust investment in energy infrastructure, and a transition to a cleaner energy future and a safe reliable and affordable fashion will be critical to meeting our country's future energy needs and delivering on our customers' expectations.
Moving to page 11.
Another key element of our sustainable growth proposition is the five year earnings per share growth guidance, we issued in February which included a 6% to 8%.
Annual earnings per share growth rate from 2021 through 2025.
This earnings growth is primarily driven by strong rate base growth and compares very favorably with our regulated utility peers.
Importantly, our five year earnings and rate base growth projections do not include 200 megawatts of incremental renewable investment opportunities outlined at Ameren Missouri's integrated resource plan.
Our team continues to assess several mobile generation proposals from developers.
We expect to file with the Missouri PSC for approval of a portion of these planning renewable investments this year.
And confident in our ability to execute our investment plans and strategies across all four of our business segments.
That fact, coupled with our sustained past execution of our strategy on many fronts has positioned us well for future success.
Further our shares continue to offer investors, a strong dividend, which we expect to grow in line with our long term earnings per share growth guidance.
Simply put we believe our strong earnings and dividend growth outlooks.
<unk> and a very attractive total return opportunity for shareholders.
Finally, turning to page 12, I will wrap up with few comments about the organizational changes, we announced a few weeks ago.
Over the past eight years I've had the great privilege to serve as chairman President and Chief Executive Officer of Amarin.
During this time I've been very fortunate to lead a team that has done an excellent job in executing that strategy and delivering strong value to our customers communities and shareholders.
Last month, I was humbled and honored that the board of directors elected me to serve as executive Chairman effective January one 2022.
At the same time and consistent with our robust succession planning process I was very pleased that the board of directors also elected Marty Lyons to serve as President and Chief Executive Officer, as well as who joined the board of directors on January one.
Marty is an outstanding leader and an exceptionally qualified to lead our company as CEO. During this transformational time in our industry.
Of course, many of you know Marty very well because he spent a decade is the company's chief financial officer.
And during the past 20 years, Marty has demonstrated strong operational financial regulatory and strategic acumen.
MSA.
I am very excited about our new forward thinking leadership structure.
Working closely with Marty and a strong leadership team and will remain actively engaged in overseeing important strategic matters impacting the company.
Including our transition to a cleaner energy future.
I will also remain focused on key energy and economic policy matters, especially in my leadership roles at the Edison Electric Institute and the electric Power Research Institute.
As well as engaging with key stakeholders.
But it will take on the ceiling of the duties of the CEO, which includes leading all aspects of Ameren strategy development and execution.
While as the day to day operational financial regulatory legal and workforce Spanish impacting the company.
I along with our board of directors are very confident that Marty is clearly ready to lead amarin as its new CEO.
With that I'll congratulate Marty once again for his promotion to CEO and turn it over to him to say a few words.
Thank you Warner I'm truly grateful for and humbled by the opportunity to lead Ameren. During these exciting times.
For our company and for our industry I'm also honored to follow in your footsteps Warner you've led our team to execute on a strategy that has delivered significant value to our customers and shareholders working with this outstanding leadership team and my dedicated coworkers at Ameren. We will remain focused on successfully executing this strategy in the future I look for.
To engaging with all of you joining us on the call today and in the weeks and months ahead with that I'll turn it back over to you Werner Thank you Marty.
Forward to continue to work closely with you in your new role together, we remain firmly convinced that the continued execution of our strategy in the future will deliver superior value to our customers communities shareholders and the environment.
Thank you all for joining us today I'll now turn the call over to Michael.
Thanks, Warner and good morning, everyone. Turning now to page 14 of our presentation yesterday, we reported third quarter 2021 earnings of $1 65 per share compared to $1 47 per share for the year ago quarter.
Earnings Ameren, Missouri, our largest segment increased 27 per share driven primarily by a change in seasonal electric rate design, resulting from the March 2020 radar, which provided for lower winter rates in may and higher summer rates in September rather than the blended rates used in both months in 2020.
Higher electric retail sales also increased earnings by approximately <unk> 10 per share.
Largely due to continued economic recovery in this years third quarter compared to the unfavorable impacts of COVID-19 in the year ago period, as well as higher electric retail sales driven by warmer than normal summer temperatures in the period compared to near normal summer temperatures in the year ago period.
We've included on this page the year over year weather normalized sales variances for the quarter.
Total weather normalized sales year to date shown on page 2700 presentation are largely consistent with our expectations outlined on our call in February as we still expect total sales to be up approximately 2% in 2021 compared to 2020.
That said, we've seen a net benefit in margins due to residential and commercial sales coming in higher than expected and industrial sales slightly lower than expected.
Increased investments in infrastructure and wind generation eligible for a plant in service accounting and the renewable energy standard rate adjustment mechanism or <unk>.
Positively impacted earnings by <unk> <unk> per share.
The timing of tax expense, which is not expected to materially impact full year results increased earnings by <unk> <unk> per share.
Higher operations and maintenance expense decreased earnings by <unk> <unk> per share in 2021 compared to the third quarter of 2020, which was which was affected by COVID-19, and remained flat year to date driven by disciplined cost management.
Finally, the amortization and deferred income taxes related to the fall 2021 'twenty Callaway Energy center scheduled refueling and maintenance outage also decreased earnings <unk> <unk>.
<unk> per share.
Moving to other segments Ameren transmission earnings increased <unk> <unk> per share year over year, reflecting increased infrastructure investment.
Ameren, Illinois electric distribution earnings per share were comparable which reflected increased infrastructure and energy efficiency investments and a higher allowed ROE under performance based ratemaking.
Surely offset by dilution.
Earnings for Ameren, Illinois, natural gas decreased <unk> <unk> per share.
Increased delivery service rates that became effective in late January 2021 were more than offset by a change in rate design during the quarter, which is not expected to impact full year results.
Ameren parent and other results decreased eight per share compared to the third quarter of 2020, primarily due to the timing of income tax expense, which is not expected to materially impact full year results.
Finally, 2021 earnings per share reflected higher weighted average shares outstanding.
Before moving on I will touch on year to date sales trends for Ameren, Illinois and <unk>.
Electric distribution.
Weather normalized kilowatt hour sales to Illinois residential customers decreased eight 5%.
And weather normalized kilowatt hour sales to Illinois, commercial and industrial customers increased two 5% and one 5% percent respectively.
Recall that changes in electric sales in Illinois, no matter the cause do not affect our earnings since we have full revenue decoupling.
Turning to page 15, now I'd like to briefly touch on key drivers impacting our 2021 earnings guidance, we remain very focused on maintaining disciplined cost management.
That focus is.
As Warner noted due to the solid execution of our strategy. We now expect 2021 diluted earnings to be in the range of $3 75 per share to $3 95 per share an increase from our original guidance range of $3 65 per share to $3 85 per share.
Select earnings considerations for the balance of the year are listed on this page in our supplemental are the key drivers and assumptions discussed on our earnings call in February.
Moving to page 16 for an update on regulatory matters.
On March 31, we filed for a $299 million electric revenue increase with the Missouri Public Service Commission.
Request includes a nine 9% return on equity a 51, 9% equity ratio and a September 32021 estimated rate base of $10 billion.
In October the Missouri Public Service Commission staff and other intervenors filed rebuttal testimony.
Missouri, PSC staff recommended a $188 million revenue increase including a return on equity range of nine 5% to 975% and an equity ratio of 50% based on Ameren Missouri's capital structure at June 32021, which will be updated as the capital structure.
As of September 32021.
The October staff recommendation was lower primarily due to lower recommended depreciation expense, which would not be expect expected to impact earnings.
Turning to page 17 and.
In addition to the electric filing on March 31, we filed for a $9 million natural gas revenue increased with the Missouri PSC.
The request includes a nine 8% return on equity.
A 51, 9% equity ratio and a September 32021 estimated rate base of $310 million.
The Missouri, PSC staff recommended a $4 million revenue increase including return on equity range of nine 5% to 975% and an equity ratio of 53, 2% based on <unk> capital structure at June <unk>, 2021, which will be updated and use the capital structure as of September.
<unk> 2021.
Other parties, including the Missouri office of public Counsel have also made recommended adjustments to our Missouri electric and gas rate request.
Evidentiary hearings are scheduled to begin in late November and the Missouri PSC decisions from both rate reviews are expected by early February with new rates expected to be affected by late February.
Moving to page 18, and Ameren, Illinois regulatory matters.
April we made our required annual electric distribution rate update filing.
Under Illinois performance based rate, making these annual rate update systematically adjust cash flows overtime for changes in cost of service and true up any prior period over or under recovery of such costs.
In August the ICC staff recommended a $58 million base rate increase compared to our request of $59 million base rate increase.
An ICC decision is expected in December with new rates expected to be effective in January 2022.
Turning now to page 19, as Warner mentioned in September constructive energy legislation was enacted in the state of Illinois with.
This allows ameren, Illinois, the option to file a four year rate plan in January 2023 for rates effective beginning in 2024.
The return on equity, which will be determined by the Illinois Commerce Commission may impacted by plus or minus 20 to 60 basis points based on the utility's ability to meet certain performance metrics related items, such as reliability customer service and supplier diversity.
The plan also allows for the use of year end rate base equity ratio up to 50% with a higher equity ratio. So that they are approved by the ICC.
In addition, it cause a revenue decoupling and an annual reconciliation of costs and revenues for each annual period approve in the multiyear rate plan.
There is a cap on the true up which may not exceed 105% of the revenue requirement and excludes variation from certain forecasted cost.
The exclusions include costs associated with major storms changing in timing of expenditure and investment that new the expenditure and investment in two or out of the applicable calendar year and changes in income taxes among other things.
The trio of cap also excludes cost recovered through riders such as purchase power transmission and bad debts.
<unk> impacts of <unk> may also be mitigated through the ability to phase in rates.
Legislation also allows for two utility owned solar into a battery storage pilot projects to be located near Peoria any St. Louis at a cost not to exceed 20 million each.
It also provides for our programs that encourage transportation electrification in the state.
We believe this framework will improve our ability to make significant investments in the state of Illinois and earn a fair return on equity.
Looking ahead, we have the ability to opt in to the multiyear rate plan or use the future test year traditional rate, making framework. Both on which include a return on equity determined by the ITC and revenue decoupling.
Should we choose to opt into the new multiyear rate plan in our four year plan must be filed by January 'twenty 2023.
We anticipate continued use their performance based ratemaking infill. We proceed with a multiyear rate plan filing or choose to move ahead with using the traditional framework.
Moving to page 24, our financing update we continue to feel very good about our financial position, we're able to successfully actually on several debt issuances earlier this year, which we have outlined on this page.
In order for us to maintain our credit ratings and a strong balance sheet, while we fund our robust infrastructure plan and consistent with prior guidance as of August <unk>. We have completed the issuance of approximately $150 million of common equity through our at the market or ATM program that was established in May.
Further approximately $30 million of equity outlined for 2022 have been sold year to date on the programs forward sales agreement.
Together with the issuance under our 400, K and drip plus program are $750 million ATM equity program is expected to support our equity needs through 2023.
Moving now to page 21, I would like to briefly touch on our recent increase in natural gas prices around the country and the potential impact it may have on customer bills this coming winter.
Beginning with our natural gas business.
Heading into the winter season, the Ameren, Illinois is approximately 75% hedged and Ameren, Missouri is approximately 85% hedged based on normal seasonal sales approximately 60% of Ameren, Illinois winter supply of natural gas was bought this summer at lower prices and is being stored in the company's 12 underground storage fields.
Both companies are 100% volume metrically hedged based on maximum seasonal sales.
Regarding the electric business in Missouri, We are currently long generation and any margin made through office and sales flow back to customers as a benefit on the bill through the fuel adjustment clause.
Given our low cost of generation rising natural gas and power prices and have the potential to benefit our electric customers in Missouri.
Turning to page 22.
We plan to provide 22022 earnings guidance when we release fourth quarter results in February next year user.
Using our 2021 guidance as a reference point, we have listed on this page select items to consider as you think about our earnings outlook for next year.
Beginning with Missouri, we expect the new electric service rates to be effective in 2022 as a result of our pending rate review.
These rates are expected to reflect recovery of.
And return on new infrastructure in wind generation investments, which are expected to increase earnings when compared to 2021.
Prior to new electric service rates, taking effect in late February we expect increased investments in infrastructure and wind generation eligible for plant in service accounting and their <unk> to positively impact earnings.
Next I would note we expect to recognize earnings related to energy efficiency performance incentives from both 2021 and 2022 plan years in 2022.
As a result, we expect energy efficiency performance incentives to be approximately <unk> <unk> per share higher in 2021.
Further a return to normal weather in 2022 with decrease Ameren, Missouri earnings by approximately <unk> <unk>.
Compared to 2021 results to date, assuming normal weather in the last quarter of the year.
Next earnings from our FERC regulated electric transmission activities are expected to benefit from additional investments inherent Illinois projects made under forward looking formula Ratemaking.
For Ameren, Illinois Electric distribution earnings are expected to benefit in 2022 compared to 2021 from additional infrastructure investments made under Illinois Formula Ratemaking the.
The allowed ROE we ended the formula will be the average 2020 to 30 year Treasury yield plus five 8%.
For Ameren, Illinois natural gas earnings are expected to benefit from new delivery service rates effective late January 2021, as well as an increase in infrastructure investments qualifying for rider treatment that will earn the current allowed Roe of 967%.
Lastly, turning to page 23, we are well positioned to continue executing our plan continue to expect to deliver strong earnings growth in 2021, as we successfully execute our strategy and as we look to the longer term, we expect strong earnings per share growth driven by robust rate base growth and disciplined cost management.
Further we believe this growth will compare favorably with the growth of our regulated utility peers and Ameren shares continue to offer investors an attractive dividend in summary, we have a total shareholder return story that compares very favorably to our peers that concludes our prepared remarks, we now invite your questions.
Thank you.
And ladies and gentlemen at this time, we will be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate that your line is in the question queue.
You May press the Star key followed by the number two if you would like to remove your question from the queue.
All participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question comes from Jeremy Tonet with Jpmorgan. Please state your question.
Hi, good morning.
Good morning. Thanks.
For all the detail there and just wanted to pick up on the MISO <unk> side.
I was just wondering if you might be able provide any more color for your expectations, there and the processing and what could this specifically mean for ameren over time.
Realize you might be getting a little bit ahead of ourselves here, but just wanted to know if there's any way you could frame I guess, what you think could be possible for ameren capex yet.
Yes, thanks, showing further questions number one let me just start with US we're very excited about the opportunity that we have for the transmission investment number one.
We're absolutely convinced that transmission is going to play an integral role in that.
So for our company for our country and really executing this clean energy transition and we're right in the middle of it we had been before and we are going to continue to be and so now it's premature to put I would say a specific number as you heard us in our prepared remarks MISO has identified 30 billion to one.
$100 billion of investment opportunities or potential projects.
I will tell you where the country is going is closer to that scenario, three which is closer to the $100 billion number.
So what we're doing what MISO is doing what stakeholders, you're doing look we're working together.
Try and make sure that we put together a good set of projects coming out of this first and tap that will start us on this path towards clean energy transition and.
As we look at it maybe.
When you look at that scenario, one that <unk> highlighted that data.
We really think the focus will be on more no regrets types of projects as we as we start putting our toes in the water. If you will maybe getting up to our knees.
And then from there I think we'll see it continuing to get progressively bigger over time.
So we think there'll be some <unk> projects.
And in terms of timing look I think that the.
Group, our group and many stakeholders are working collaboratively to try and figure out the best projects.
As well as cost allocation things. These things are all things that are typical during this process and so at the end of the day, we think that that MISO will propose early in 2022 of these projects to the board of directors.
It will be well informed and then what we believe will be hopefully it will be an approval process that will get them in early 2022. So when you look at them in our overall plans as we've said before.
Or might see some of these projects in our current five year plan start coming into play towards the back end of that five year plan is certainly.
In the second half of this decade, I think youre going to see a significant emphasis.
And need for transmission projects. So that's really what I can tell you today, but.
I'll finish where I started there when you were excited about the opportunity because we think it's significant and important.
Got it that's helpful.
Eagerly await there.
We view as well.
Maybe just pivoting over to the Missouri ERP here, just wondering if you could share with us thoughts on next steps and I guess, you know how rush island plays into it what we should be.
Thinking about there.
Yes, Thanks, Jeremy Marty Lyons has been in the middle of all of those things I'm going to turn it over to him to respond to your questions. Marty go ahead.
Yeah. Thanks, Jeremy Hey, how are you today I appreciate the question yeah as it relates to the integrated resource plan, obviously, we filed last fall and as Warner said earlier in the prepared remarks, we continue to work with multiple developers with respect to several projects that would.
Fit within that 200 megawatts of clean energy that we plan to deliver over the next several years consistent with that integrated resource plan. So.
We're continuing to work on those and we still expect to file with the commission still this year for approval of a portion of those projects. So.
That work is going on and then you mentioned.
The Rush Island Energy Center, and so as you saw in our slides today.
In August the court of Appeals affirmed the district Court's September 19th order.
As we said in our slides and prepared remarks, we did file for a rehearing.
Of that decision on October 18th So we do expect to hear back from the court and quite likely by the end of this year, we expect in terms of that rehearing. So.
It's really premature to say what action, we will take with respect to Rush Island at this point, we'll wait to see whether Theres a rehearing.
But if that rehearing is denied and ultimately we are faced with that decision obviously.
Entail scrubbers.
Rush Island or.
The accelerated retirement of that plant, which might also include than utilization of the securitization legislation was passed earlier. This year. So those are some of the things. We're looking at considerations as we think about those alternatives are things like customer rate impacts replacement generation needs and importantly reliability.
Investments that may be required in terms of transmission.
To the extent that rush island or to be prematurely retired so.
So those are some of the considerations I'll tell you. This is ultimately a decision is made.
To retire rush island prematurely versus the date, we had in our prior integrated resource plan that will require that we file an updated integrated resource plan with the Missouri Public Service Commission. So stay tuned on that like I said, it's premature to say.
How all of that will turn out but that gives you a little bit of color on the potential path forward.
Got it that's helpful. Thank you for that and just one last quick one if I could just wondering if you might be able to comment on your generation position.
And do you see any potential customer benefits under current market conditions right now.
Yeah, Hey, Jeremy It's Michael Yeah, I think we indicated in.
In the prepared remarks in the slides that we historically had been long.
The Missouri side, and so obviously to the extent that we're able to take advantage of that in the marketplace knows off system sales may flow back to customers through the fuel adjustment clause.
Certainly given where natural gas prices are which is what the impact it's having on power prices, it's definitely a bit of a tailwind from a customer affordability standpoint.
Got it I'll leave it there thank you.
Great. Thanks, Jeremy CEO next week.
You bet.
Our next question comes from Julien Dumoulin Smith with Bank of America. Please state your question.
Good morning, Julien how are you doing.
Hey, Good morning. This is Derek on for Julien actually Thank you for taking my question.
Can you just clarify it was a little unclear from the opening remarks.
Do you intend or are you still evaluating whether or not youll file under a multiyear rate plan in Illinois.
In or before January 23.
Yeah. So this is Warner So let me let me just summarize what we've said.
Clearly as I said and as Michael said, we think this is a a forward thinking constructive regulatory structure.
And not only as a constructive that enables us to make investments that we think are important for customers, but also gives us the opportunity to earn a fair return on those investments now no. What we said too is that the structures out there, but theres still some work to be done meaning that their workshops that has to be taken care of next year.
As you might have with any specific and comprehensive piece of legislation and we're going to work through those workshops now we believe those workshops.
We're at the table and we expect them to be constructive outcomes.
So as a result, as we've said too we anticipate filing for a multiyear rate plan in 2023, but there's still some work to be done and so we're not trying to hedge would be cute.
Telling it like it is but at the same time as I said, we think it's a constructive piece of legislation that we think will bring benefits to our customers the state of Illinois, and certainly to our shareholders. Michael you have anything you want to add.
He said it all correctly I mean add these workshops will continue on through 2002, and I think we'll have a conclusion, although my.
Fall, so we'll have an even better clarity, but as Warner said the benefits clearly seem to be.
Significant here in terms of just the overall framework itself. So just give your perspective. These workshops are as you know we talk about performance metrics. There is a performance based ratemaking.
Prospective and concepts incorporated in this legislation to show the performance metrics you have to be determined how you worked through some of the details of the multiyear rate plan and these are things that stakeholders have to come to the table and we look forward to working collaboratively with all of them next year.
Okay. Thank you that's very helpful color.
And if I could pivot maybe to federal.
Deflation if I can.
Have you quantified at all or thought about the potential upside.
Impacts on your credit metrics from direct pay if that were included in final legislation.
Yes. Thanks.
Needless to say.
That is a very fluid situation just in the bigger picture.
So to say that we've quantified in particular.
The specific impacts that would be premature I will say there are elements of the clean energy tax incentives, which I think are very good very good for customers and could be good for cash flows, especially when you look at the direct pay portions around.
Maybe the ITC and the PTC that you have for wind and solar is really up the entire tax incentives. So Michael I know that you and your team have been looking at it but.
We haven't put a specific finger on it but do you want to add a little more color than that.
High level, that's correct corner I mean, we are digging.
They get into that I think there are some positive aspects. There are also some things that we got to just get our head.
Hands around head around with respect to like this minimum tax liability, which seems to run counter to some of it some of those credits as well. So those are just some different aspects that we're really trying to balance at the end of the day, but hopefully over the course of the next.
Quarter. So we'll have a much better feel for where this is going on underneath the rest assure does that mean.
Me and my industry colleagues, we're at the table to try and make sure that we get a constructive piece of federal legislation that across the board that will enable us to continue to move forward.
Fully and effectively with the clean energy transition.
Great. Thank you very much I'll pass it off from here.
You bet. Thank you.
Our next question comes from <unk>, Kim with Goldman Sachs. Please state your question.
Good morning, and see how are you doing good morning, how are you Mike.
My first question is.
On the question on the Rush island than the long term generation plan.
The appeal process is unsuccessful.
First of all is it.
By the end of 'twenty, three that you need to either put the scrubbers on or retire or is it 24 and then.
The related question to that is as you think about potential changes to the plan. If that's had to shut early.
Given that long generation position, how do we think about some of.
The opportunities on the replacement side of things.
Yeah, Marty one for you might you jump on and address that one please.
Yes.
Thanks into and Hey, good to talk to you again with respect to move.
Moving forward with the scrubber.
There the expectation is that we would if we went that route move as expeditiously as possible to put the scrubbers in place at Rush Island. So.
Not sure that there is an exact timeline obviously the the acquisition design construction would take some time to get that put in place.
And then with respect to the other route that you describe the retirement route.
There we'd be looking at.
How long Rush island, we'd continue to operate obviously, given the things I talked about before.
Replacement generation needs importantly, reliability issues around the system in.
In the event of a premature retirement, which again may necessitate some.
Transmission investments in order to maintain reliability.
All of those things would be.
<unk> into consideration and ultimately to the extent that incremental.
Generation was required or.
Some acceleration of the clean energy transition that we've got laid out in our AARP that would all be laid out in that updated integrated resource plan. So again, if we don't move forward with the scrubber. If we do decide that the rush island needs to be shut down.
Earlier than the date, and our ERP, which was 2039.
Then we would move forward with an update to the integrated resource plan and again into that would assess all of the potential adjustments to generation need and timing that were laid out in that prior September.
Integrated resource plan filing.
Got it thanks for the.
Covered Marty.
Second question.
Is on the.
2021 guidance raising debt by 10.
As we think about the 22.
I know some of the wet weather benefit help this year as well, but how do we think about some of the moving pieces that help 'twenty, one that could potentially carry into 'twenty two and.
In the considerations slide I Didnt see a specific mention too year over year loan growth just curious on your base assumption there.
Hey, Yes look theres a lot in that question.
Let me give you a couple of pieces.
Just in terms of the growth itself I mean.
Year to date, we put in there from a residential standpoint, we're up one 5% commercial three and a half in industrial one so about 2% and Thats really what we guided to.
At the beginning of the year in February and now the mix is a little bit different.
So we're seeing some improvement.
In margin, there, which is a driver of that increase in the midpoint that you talked about in addition to weather.
So the plan remains on track with respect to that sales piece.
At 2%, we see that sort of guiding and at the same point towards the end of the year.
As we talked about at the beginning of the year.
That will get us close to being back to 2019, but not quite so I think the recovery continues and we're optimistic about and we continue to see things open up here in both of our service territories in Missouri and Illinois.
With respect to the guidance itself just remind you again, we released.
In February of last year that 6% to 8% guidance was off of that midpoint. Obviously, a 375 that original midpoint of 375, we certainly are giving you some select.
Items to think about here in 'twenty, two and then obviously in February while all this forward to give you another look at capital as well as give you just more specifics about obviously, where our rate range will be in our earnings guidance for 'twenty two at that point in time, so hopefully that.
Give you a little bit of color you're looking for.
Got it.
It does thank you and congrats.
It's Martin <unk> Warner both of you and see you soon.
And so I think since it was the next week.
Our next question comes from <unk> Chopra with Evercore ISI. Please state your question.
Good morning, Doug.
Hey, good morning congratulations.
Thank you as well Marty look forward to working with you.
I think that maybe.
Maybe just can you talk about that one.
One two gigawatts.
Missouri RFP.
What.
All of that.
How many what portion of that capacity.
Are you going to file for what the commission will get approvals for this year or early next year, just as we're thinking about your Capex plan being extended another year I'm thinking about how much of that one two gigawatt might be layered in.
Sure you bet, Marty one should come on in and the address that from an operational perspective, and maybe Mike you can talk about how we think about guidance in terms of capital expenditures and those types of things.
Yes that sounds great Warner.
<unk> I appreciate the question.
And I think Michael get into this and expand on none of that.
1200 megawatts is really included today in the rate base growth. The earnings guidance, we have as I said earlier, we continue to work with multiple developers with respect to multiple projects that would go towards filling out that 200 megawatts.
At this point.
Negotiate through those I mean, its important to understand that those negotiations take time there is diligence involved.
Multiple developers, we're working with really to get the best deals we can for our customers ultimately and there are multiple contracts that need to be negotiated with each one of the developers. So we continue to work again with multiple of them on multiple projects.
<unk> and <unk> at this point I'd say again, I'd say, we're expecting to file for approval for a portion of that 200 megawatts.
I expect that that will happen this year still.
But also then even further into next year so.
Stay tuned I think it's premature to say exactly.
Which project or projects, we will announce this year or early next but we're working actively on several so that's where we stand today.
Thanks, Marty just a couple of other small point on that $17 billion plan that we have out there as Marty pointed out there is very very little in there with respect to any of these renewable projects now we did indicate that 10 year plan that $40 billion plus there is $3 billion in potential projects, which are what.
Marty as we're referring to so we get more clarity on that timing, obviously typically what we do in February as well for that capital plan to be able to give you a bit more.
Transparency about what the timing of that to the extent that we feel better about it and know it. So that's just a little bit more color on exactly what's there from a capital standpoint.
I appreciate that detail.
Then just shifting gears to Illinois, obviously, you know the under the new framework.
So it goes back to the ICC and they kind of.
Come back with it.
Remember just any early thoughts on how might they be calculating that.
In rescue we have talked about sort of your gas assets there in the row, they're getting in nine plus percent range just any any from your seat just any early color into what.
You might look like or how might that be calculated I appreciate that thank you Sean.
This is Warner look it certainly would be premature to predict where the ROE would be I mean, the filing is going to be sometime in 2023, and it's a multiyear filing but when we can point to is obviously you know that 580 basis points puts a 30 year treasury what that yields today when we can.
<unk> in our gas business that we did at the beginning of this year put in place a.
The way we view results there was a 967% return on equity for our gas business is not the electric business, but it's the gas business.
It is just a data point.
But how that will ultimately look and what the request will be for a multiyear rate plan a lot of facts and circumstances are going to that but.
But we do see an opportunity for improvement clearly from our existing return on equity.
Going forward.
Yes.
Just think about that $9 67 is kind of traditional cost of capital kind of calculations. There is nothing thats sort of unique about it from a regulatory perspective. So it's obviously different in moving away from those formulary piece that we have exactly and we would expect the overall process and looking at the return on equity in terms of.
A traditional look would be very similar but but obviously with the multiyear rate plan. There maybe some other factors that come into it so so stay tuned.
Alright, we'll leave it there thanks guys.
You bet. Thank you.
Our next question comes from Paul Patterson with Glenn <unk> Associates. Please state your question.
Good morning, Good morning, how are you doing.
Good how are you.
Okay. So what I wanted to first of all I wanted to congratulate you guys is this your last quarter.
Number one thank you truly excited about the new leadership structure and certainly the new roles that Marty and I are taking and in terms of our last call gosh, we're taking it one step at a time or we're not saying. This is my last call or anything like that where it will take that one step at a time, but.
Maybe an EI next week Thats for sure.
Okay well congratulations.
Thank you.
<unk>.
So just most of my questions been answered, but a couple of quick one for you and I apologize for not knowing this but what are no regrets projects.
There is still that.
Group like what does that mean.
Probably it's probably a warner term of art right.
So really when you look at all of these projects even some some you can sit there and say gosh, when we had to get we're having these congestion areas. When we have to get from point a to point being we have these projects that are in the queue. There are certain of these regional projects, which really satisfy a lot of those transmission or excuse me renewable energy projects that are in the queue.
And you do the analysis and you sit there and say gosh no. One can really no one you shouldn't say that.
It'd be hard for people to argue that this isn't a project that isn't going to be significantly beneficial to the MISO footprint frankly to our country.
I can't put those is no regrets low risk, let's call them that way lower risk projects relatively speaking compared to some that may have more complications and so when you look at that that scenario. One we think from our perspective, right <unk> holder, but from our perspective.
There are several of those in there that need to be they need to move forward.
That's what I mean, we.
We have an outline which of those that we believe are there and this is part of the collaborative process that we go through with MISO and other key stakeholders, but that's how we think it really lower risk is probably a better term too.
To characterize those projects says.
Okay Fair.
Fair enough and then sort of a technical question. There was this discovery dispute in the Missouri rate case on the Smart energy plan.
And it looks to me like basically they didn't address it in their testimony.
Rethought or.
What have you.
And I just wanted to make sure is that the leap and resolved, but just wasn't clear to me from what they were saying they didn't really seem to address the revenue requirement everything thats seem to penalize.
Penalize you or anything for it.
The recommendation so.
My question is does that does that issue has been taken care of.
Paul It's Marty.
I can't say, whether its been fully taken care of to everybody's satisfaction I will tell you. This we do look to work constructively with all the parties in these rate reviews to get everybody the information they need.
In a timely basis to make decisions and.
To your point.
Do not believe it is an active issue in terms of.
A quantified difference between our position and the positions of others in the K. So.
Hopefully we have resolved that issue fully but like you said, it's not manifesting itself today and any kind of difference between the parties.
Okay, Great and then finally back to the 2024 question.
I realize it's very early.
But it does seem like a big opportunity with respect to the Illinois legislation and I'm just wondering.
Yes.
When you guys might.
<unk> incorporated.
The potential outlook with it.
Into your long term guidance I mean, it doesn't sound like it will be anything immediate but I was just wondering.
Could it be a year from now or so that you guys would we feel more comfortable.
Talking about its potential.
Benefit impact to the two.
Long term.
Growth outlook, or where would you be basically waiting till.
Whenever the 2023.
The decision was made kind of so to speak.
Sure. Paul This is mark no. It's a fair question right.
We'll provide a lot more guidance on that specific question and others when we come with our longer term guidance in February.
I'll give you our view right how do we think about the guidance that we see that and how we think about regulatory frameworks and all those types of things. So so as we sit here today, obviously nothing to change nothing to talk about other than that as we've said we think it's a constructive piece of legislation that we anticipate.
Assuming that things go well in the workshops that we would file for a multi year rate plan, how we embed that into our long term guidance in early 2022 and stay tuned we'll be able to provide more detail on that.
Okay awesome. Thanks, so much and congratulations again.
Have a great one.
Thanks, Paul you do the same.
Thank you and our next question comes from David Paz with Wolfe. Please state your question.
Hello, David how are you doing.
Hey, Warner how you doin' congratulations on both of them.
Marty.
Thank you thanks, David Thank you.
I just wanted to follow up on a couple of quick questions. Just following up on the 200 megawatt.
I mean, what's the Missouri question I understand that spend is not in your and your stated outlook financial outlook.
Is any of the equity that investment in your financing plan.
Hey, David This is Michael.
That $17 billion plan again out there the equity that we talked about back in February really supports that $17 billion plan, that's against where there by default that wind is not in there there is no equity and therefore.
Got it.
And then in an earlier question, Mike did you say that you would be going forward your growth rate off of.
2022 guidance or 2021 actual when we're talking about.
February update.
And I was just referring to last February David when we gave the 6% to 8% earnings per share growth guidance. It was off of that midpoint of $3 75 and.
Zoe.
Where people should continue to stay progress. We obviously gave you. Some 22 selected items here to think about it in the third quarter and then we'll obviously roll forward stuff and give you specific guidance in February of 'twenty two.
Okay, Great and maybe just last question.
Thanks, Marty can you provide an update maybe on just how settlement talks are going in the rate case or whether they are still growing.
Yes, Thanks, David.
<unk> really get going here over the next couple of weeks, we actually have as we laid out in the slide sorry.
<unk> testimony Thats actually do Friday, so I think all the parties are focused on that and then soon after that the parties will be.
Pulling together reconciliations of the differences between our case and the updated positions of staff in particular, but also other parties and then.
Settlement discussions will will get underway as you know again as our right now the evidentiary hearings are released scheduled to begin right. After Thanksgiving on November 29. So.
My my expectation is that starting next week and all the way through that time period there'll be settlement discussions hopefully to narrow the issues.
And if possible too.
Resolve the entire case, obviously we.
We have been successful in settling a number of cases that we've had over the past several years, including the last rate review so.
We certainly expect to work towards that goal and like I said those discussions are really be happening between now and likely the beginning of those evidentiary hearings.
Great. Thank you so much.
Thanks, David So you're next week.
Thank you and we have reached the end of the question and answer session. So I'll now turn the call back over to Andrew Kirk for closing remarks.
Thank you for participating in this call a replay of this call will be available for one year on our website. If you have questions. You may call. The contacts listed on our earnings release financial inquiries should be directed to me Andrew Kirk Media should call Tony Marino again. Thank you for your interest in Ameren and looking forward to seeing many of you next week at <unk>.
Thanks.
Thank you. This concludes today's conference all parties may disconnect have a good day.