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Ameren Missouri to spend $7.6 billion on grid, renewables, meter upgrades

Highlights

Rate base to grow about 8.7% a year

Illinois legislation may help earnings

Houston — Ameren's Missouri electric utility on Wednesday filed a plan with state regulators describing a proposal to spend $7.6 billion through 2024 on grid modernization, 700 MW of wind generation and installation of about 1 million smart meters, officials said in an earnings call Wednesday.

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In all, Ameren plans to add $8.8 billion to its regulated rate base between 2019 and 2024, which would represent a compound annual growth rate of about 8.7%.

Ameren Missouri's Smart Energy Plan update, filed Wednesday at the Missouri Public Service Commission, also refers to the $1 billion invested in 2019 on grid modernization, smart switches on circuits to reroute power around repairs and system design and network efforts in preparation for smart meter deployments.

Also in February, Ameren Missouri reached a non-unanimous stipulation and agreement to be filed this week at the Missouri PSC regarding the utility's pending rate review, for which a hearing is likely in early March, said Warner Baxter, Ameren chairman, president and CEO. Issues yet to be resolved include the fuel adjustment charge, affiliate transaction expenses and the recovery of certain expenses related to Ameren's coal-fired power plants.

Ameren has 3,079 MW of coal-fired capacity spread across Illinois and Missouri, with a combined weighted average capacity factor of about 55% in 2018, according to S&P Global Market Intelligence data.

Ameren has 3,065 MW of gas-fired capacity, but its collective weighted-average capacity factor in 2018 was less than 0.6%, and its 405 MW of oil-fired capacity had an even smaller capacity factor.

In contrast, Ameren's 1,236-MW Callaway nuclear plant in Callaway County, Missouri, had a 98.4% capacity factor in 2018.

QUARTERLY RESULTS

Ameren recorded net income for the last three months of 2019 totaling $94 million, or 38 cents per diluted share, compared with $68 million, 28 cent/share, for the same period of 2018.

Ameren's electric utilities in Illinois and Missouri reported total sales of 17.7 GWh in the last three months of 2019, compared with 19.5 GWh in a much colder fourth quarter of 2018.

That power was sold for $960 million in Q4 2019, versus $962 million in Q4 2018.

Ameren's natural gas utilities in both states sold 63 million dekatherms in the most recent quarter, versus 61 million dekatherms for the same period of 2018, for revenues totaling $263 million and $289 million, respectively.

Ameren expects 2020 diluted earnings per share to range from $3.40 to $3.60 and diluted EPS to grow at a compound annual rate of 6% to 8% through 2024, using $3.50/share as the base, assuming normal temperatures, "driven by strong projected rate base growth of approximately 9% compounded annually," the company earnings release states.

ILLINOIS LEGISLATION

Factors that may enhance that growth include a bill introduced in February in the Illinois Legislature, the Downstate Clean Energy Affordability Act, which would allow utility-owned solar and battery facilities to enhance reliability, allow investment in electric vehicle infrastructure, expand the renewable portfolio standard from 25% by 2025 to 32.5% by 2030, and allow a greater return on equity rate.

Currently, the permitted ROE is 580 basis points above the 30-year Treasury rate, but the legislation would raise that number to 680 basis points, but also cap ROE at no more than 50 basis points above the national average for electric utility ROEs.

"[We're] excited about this legislation," Baxter said in the earnings call. "We think it really has some really important elements in terms of trying to move Illinois to the clean energy future that they've been talking about, but also doing the things that we have been doing for the past eight years, and that's modernizing the grid." He also said the electric vehicle provisions were promising. "...I think, across the country, we're just scratching the surface in terms of what those opportunities can be" in the EV sector, said Baxter.