Ameren(US:AEE)2023-08-02 16:00PART I. Financial Information Item 1. Financial Statements (Unaudited) Unaudited consolidated financial statements for Ameren Corporation and its key subsidiaries, Ameren Missouri and Ameren Illinois, are presented, detailing financial performance and position Ameren Corporation Financial Statements Ameren Corporation's consolidated financial statements show increased net income and EPS, with total assets growing to $38.9 billion, driven by capital investments Ameren Corporation - Consolidated Statement of Income (in millions, except per share) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $1,760 | $1,726 | $3,822 | $3,605 | | Operating Income | $329 | $309 | $680 | $640 | | Net Income Attributable to Ameren Common Shareholders | $237 | $207 | $501 | $459 | | Earnings per Common Share – Diluted | $0.90 | $0.80 | $1.90 | $1.77 | Ameren Corporation - Consolidated Balance Sheet (in millions) | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $38,947 | $37,904 | | Property, Plant, and Equipment, Net | $32,351 | $31,262 | | Total Liabilities | $28,121 | $27,267 | | Long-term Debt, Net | $14,328 | $13,685 | | Total Equity | $10,826 | $10,637 | Ameren Corporation - Consolidated Statement of Cash Flows (YTD, in millions) | Metric | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,111 | $872 | | Net cash used in investing activities | $(1,889) | $(1,552) | | Capital expenditures | $(1,822) | $(1,538) | | Net cash provided by financing activities | $808 | $686 | Union Electric Company (d/b/a Ameren Missouri) Financial Statements Ameren Missouri's financial statements show stable Q2 operating revenues but decreased six-month net income, with assets increasing Ameren Missouri - Consolidated Statement of Income (in millions) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $941 | $919 | $1,864 | $1,737 | | Operating Income | $132 | $135 | $192 | $200 | | Net Income | $103 | $101 | $132 | $152 | Ameren Missouri - Consolidated Balance Sheet (in millions) | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $19,784 | $19,506 | | Property, Plant, and Equipment, Net | $16,560 | $16,124 | | Total Liabilities | $13,227 | $13,079 | | Total Shareholders' Equity | $6,557 | $6,427 | Ameren Missouri - Consolidated Statement of Cash Flows (YTD, in millions) | Metric | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $443 | $181 | | Net cash used in investing activities | $(980) | $(818) | | Capital expenditures | $(914) | $(806) | | Net cash provided by financing activities | $532 | $636 | Ameren Illinois Company (d/b/a Ameren Illinois) Financial Statements Ameren Illinois reported higher net income for both periods, driven by increased electric revenues and asset growth Ameren Illinois - Statement of Income (in millions) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $779 | $769 | $1,880 | $1,793 | | Operating Income | $183 | $155 | $459 | $401 | | Net Income | $130 | $104 | $328 | $273 | Ameren Illinois - Balance Sheet (in millions) | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $17,110 | $16,441 | | Property, Plant, and Equipment, Net | $13,955 | $13,353 | | Total Liabilities | $10,615 | $10,273 | | Total Shareholders' Equity | $6,495 | $6,168 | Ameren Illinois - Statement of Cash Flows (YTD, in millions) | Metric | YTD 2023 | YTD 2022 | | :--- | :--- | :--- |\n| Net cash provided by operating activities | $637 | $675 | | Net cash used in investing activities | $(846) | $(699) | | Capital expenditures | $(844) | $(699) | | Net cash provided by financing activities | $247 | $37 | Note 1. Summary of Significant Accounting Policies Ameren's business structure, GAAP adherence, and unconsolidated variable interest entities for clean energy investments are detailed - Ameren's principal subsidiaries are Ameren Missouri (rate-regulated electric and gas in MO), Ameren Illinois (rate-regulated electric and gas in IL), and ATXI (FERC rate-regulated electric transmission)71 - As of June 30, 2023, Ameren held $72 million in unconsolidated variable interests in equity method investments, primarily to advance clean and resilient energy technologies. The maximum exposure to loss is this investment plus $16 million in outstanding funding commitments73 Note 2. Rate and Regulatory Matters Regulatory proceedings affect Ameren's subsidiaries, including Missouri's revenue increase, Illinois' rate filings, and federal FERC ROE matters - Missouri: In June 2023, the MoPSC approved a $140 million increase to Ameren Missouri's annual electric revenue requirement, effective July 9, 2023. The order also approved trackers for property tax and IRA tax credits76 - Illinois: In January 2023, Ameren Illinois filed a Multi-Year Rate Plan (MYRP) for 2024-2027. The revised July 2023 filing requests a 2024 revenue requirement of $1,291 million with a 10.5% ROE. The ICC staff recommended $1,211 million with an 8.9% ROE. A decision is required by December 20238384 - Illinois: Ameren Illinois filed a revised request in July 2023 to increase annual natural gas delivery revenues by $148 million, based on a 10.3% ROE. A decision is required by late November 20239091 - Federal: The allowed base ROE for FERC-regulated transmission rates (currently 10.02%) remains subject to refund pending a final FERC order after a court remand in August 2022. A 50-basis-point change in ROE would impact Ameren's annual revenue by an estimated $19 million95 Note 3. Short-term Debt and Liquidity Ameren Companies maintain liquidity via cash, credit agreements, and commercial paper, with $1.3 billion net available liquidity - As of June 30, 2023, the net liquidity available to Ameren (parent), Ameren Missouri, and Ameren Illinois, collectively, was $1.3 billion97 Commercial Paper Outstanding (in millions) | Registrant | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Ameren (parent) | $839 | $477 | | Ameren Missouri | $373 | $329 | | Ameren Illinois | $117 | $264 | | Ameren consolidated | $1,329 | $1,070 | - The weighted-average interest rate on Ameren Consolidated's short-term borrowings for the six months ended June 30, 2023, was 5.10%, a significant increase from 0.75% in the same period of 2022102 Note 4. Long-term Debt and Equity Financings Ameren Missouri and Ameren Illinois each issued $500 million in bonds, with $389 million in Ameren Corporation forward sale agreements - In March 2023, Ameren Missouri issued $500 million of 5.45% first mortgage bonds due 2053, with net proceeds of $495 million used for capital expenditures and to repay short-term debt107 - In May 2023, Ameren Illinois issued $500 million of 4.95% first mortgage bonds due 2033, with net proceeds of $495 million used to repay matured bonds and short-term debt108 - As of June 30, 2023, Ameren had outstanding forward sale agreements for 4.3 million shares of common stock, which could be settled for $389 million in cash. These agreements are part of the ATM program and are classified as equity transactions105 Note 5. Other Income, Net Other Income, Net increased to $160 million for the six months ended June 30, 2023, driven by higher non-service cost benefit income Components of Other Income, Net (YTD, in millions) | Component | Ameren 2023 | Ameren 2022 | Ameren Missouri 2023 | Ameren Missouri 2022 | Ameren Illinois 2023 | Ameren Illinois 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Allowance for equity funds used during construction | $23 | $19 | $12 | $10 | $10 | $9 | | Non-service cost components of net periodic benefit income | $127 | $93 | $28 | $28 | $62 | $42 | | Interest income on industrial development revenue bonds | $1 | $12 | $1 | $12 | - | - | | Total Other Income, Net | $160 | $122 | $41 | $47 | $78 | $49 | Note 6. Derivative Financial Instruments Ameren uses derivatives to manage commodity price risk, with gains and losses deferred, holding $43 million in assets and $145 million in liabilities - The company uses derivatives to hedge risks in commodity prices. Gains and losses on these instruments are deferred for future recovery or refund in customer rates, resulting in no effect on current operating income113116 Carrying Value of Derivative Commodity Contracts (June 30, 2023, in millions) | Registrant | Total Assets | Total Liabilities | | :--- | :--- | :--- | | Ameren Missouri | $30 | $31 | | Ameren Illinois | $13 | $114 | | Ameren Consolidated | $43 | $145 | - If Ameren's credit ratings were downgraded below investment grade, it could be required to post additional collateral. As of June 30, 2023, the potential additional collateral required was $47 million for Ameren, $10 million for Ameren Missouri, and $37 million for Ameren Illinois124125 Note 7. Fair Value Measurements Fair value measurements show Ameren held $1.11 billion in assets, primarily the nuclear decommissioning trust fund, and $145 million in derivative liabilities Assets and Liabilities Measured at Fair Value (June 30, 2023, in millions) | Category | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Assets | | | | | | Derivative assets | $6 | $16 | $21 | $43 | | Nuclear decommissioning trust fund | $727 | $342 | $0 | $1,069 | | Total Assets | $733 | $358 | $21 | $1,112 | | Liabilities | | | | | | Derivative liabilities | $15 | $51 | $79 | $145 | - The fair value of Ameren's long-term debt (including current portion) was estimated at $13.2 billion as of June 30, 2023, compared to a carrying amount of $14.7 billion136 Note 8. Related-party Transactions Related-party transactions between Ameren's subsidiaries include support services and utility money pool borrowings, with average interest rates increasing to 5.04% - For the six months ended June 30, 2023, Ameren Services provided support services resulting in operations and maintenance expenses of $70 million for Ameren Missouri and $68 million for Ameren Illinois142 - The average interest rate for borrowings under the utility money pool for the six months ended June 30, 2023, was 5.04%, compared to 0.69% for the same period in 2022103 Note 9. Commitments and Contingencies Significant environmental commitments include $90-120 million in capital expenditures, Rush Island Energy Center retirement, and coal ash and MGP site remediation - Ameren estimates environmental compliance capital expenditures of $90 million to $120 million from 2023 through 2027149 - Rush Island Litigation: Ameren Missouri has requested a court extension to retire the Rush Island Energy Center by October 15, 2024, in lieu of installing a flue gas desulfurization system. The plant's net book value was approximately $550 million as of June 30, 2023. The company plans to seek securitized financing for the retirement costs156157 - CCR Management: Ameren Missouri plans to substantially complete the closure of remaining surface impoundments at its Sioux and retired Meramec energy centers by the end of 2024, with an associated Asset Retirement Obligation (ARO) of $45 million as of June 30, 2023161 - MGP Site Remediation: Ameren Illinois estimates its remaining obligation for former Manufactured Gas Plant (MGP) site remediation to be between $61 million and $112 million, with a liability of $61 million recorded. These costs are recoverable from customers through riders163 Note 10. Callaway Energy Center Ameren Missouri's Callaway Energy Center's nuclear decommissioning trust fund was $1.075 billion, with significant insurance coverage - The fair value of the nuclear decommissioning trust fund for the Callaway Energy Center was $1.075 billion as of June 30, 202336166 Callaway Energy Center Insurance Coverage (June 30, 2023, in millions) | Type of Coverage | Maximum Coverage | Maximum Assessment for Single Incident | | :--- | :--- | :--- | | Public liability and nuclear worker liability | $13,660 | $138 | | Property damage | $3,200 | $28 | | Accidental outage | $490 | $9 | Note 11. Retirement Benefits Ameren recorded net periodic benefit income of $67 million for pension and $42 million for postretirement plans, an improvement Net Periodic Benefit Cost (Income) (YTD, in millions) | Plan | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | Pension Benefits | $(67) | $(3) | | Postretirement Benefits | $(42) | $(27) | Note 12. Income Taxes Ameren's effective tax rate was 13% for the six months ended June 30, 2023, influenced by deferred taxes and renewable tax credits Effective Income Tax Rates (YTD 2023 vs YTD 2022) | Registrant | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | Ameren | 13% | 13% | | Ameren Missouri | (1)% | (3)% | | Ameren Illinois | 25% | 26% | Note 13. Supplemental Information Supplemental information includes Ameren's $246 million cash, $39 million allowance for doubtful accounts, and noncash financing activities - As of June 30, 2023, Ameren's total cash, cash equivalents, and restricted cash was $246 million177 - The Asset Retirement Obligation (ARO) balance for Ameren was $798 million as of June 30, 2023, up from $786 million at year-end 2022, primarily due to accretion expense185 - In Q1 2023, Ameren granted 265,422 performance share units and 116,701 restricted share units with a combined grant date fair value of $34 million186 Note 14. Segment Information Ameren Transmission was the most profitable segment with $143 million net income, and Ameren Missouri had the highest capital expenditures Ameren Net Income by Segment (YTD 2023, in millions) | Segment | Net Income Attributable to Ameren Common Shareholders | | :--- | :--- | | Ameren Missouri | $130 | | Ameren Illinois Electric Distribution | $127 | | Ameren Illinois Natural Gas | $98 | | Ameren Transmission | $143 | | Other | $3 | | Total | $501 | Ameren Capital Expenditures by Segment (YTD 2023, in millions) | Segment | Capital Expenditures | | :--- | :--- | | Ameren Missouri | $914 | | Ameren Illinois Electric Distribution | $350 | | Ameren Illinois Natural Gas | $141 | | Ameren Transmission | $410 | | Other / Intersegment | $7 | | Total | $1,822 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Ameren's financial results, condition, and performance drivers for Q2 and H1 2023, including liquidity, capital resources, and strategic initiatives like clean energy transition Overview Q2 2023 net income increased to $237 million ($0.90/share), driven by rate base investments and higher Ameren Illinois ROE - Q2 2023 diluted EPS was $0.90, compared to $0.80 in Q2 2022. YTD 2023 diluted EPS was $1.90, compared to $1.77 in YTD 2022209 - Favorable drivers included increased rate base investments and a higher recognized ROE at Ameren Illinois. Unfavorable drivers included decreased electric sales at Ameren Missouri due to milder weather and increased financing costs209211 - Ameren invested $1.8 billion in its rate-regulated businesses in the first six months of 2023211 Results of Operations Detailed financial performance shows diluted EPS increased by $0.13 YTD, driven by rate base investments and lower O&M Key Drivers of YTD 2023 vs YTD 2022 Diluted EPS Change | Driver | Impact (cents per share) | | :--- | :--- | | Favorable: | | | Decreased other O&M expenses | +12¢ | | Increased rate base investments (Ameren Transmission & IL Electric) | +12¢ | | Favorable tax impacts | +2¢ | | Unfavorable: | | | Decreased electric retail sales at Ameren Missouri (weather) | -16¢ | | Increased financing costs | -7¢ | | Increased weighted-average common shares | -3¢ | - Ameren Missouri's electric margins decreased by $9 million YTD, primarily due to an estimated $46 million negative impact from weather, partially offset by higher base rates and favorable net energy cost variances under the FAC256257258 - Ameren Illinois Electric Distribution's margins decreased by $5 million YTD, mainly due to lower recovery of bad debt costs, partially offset by a higher recognized ROE and increased capital investment264265 Liquidity and Capital Resources Ameren maintains liquidity through operating cash flow, credit facilities, and capital markets, with $1.3 billion net available liquidity Cash Flow Summary (YTD 2023 vs YTD 2022, in millions) | Activity | YTD 2023 | YTD 2022 | Variance | | :--- | :--- | :--- | :--- | | Operating | $1,111 | $872 | $239 | | Investing | $(1,889) | $(1,552) | $(337) | | Financing | $808 | $686 | $122 | - As of June 30, 2023, Ameren had net available liquidity of $1.3 billion from its credit facilities and cash on hand309330 - Ameren plans to issue approximately $100 million in equity annually through its DRPlus and 401(k) plans, and an additional $500 million of equity each year from 2024 to 2027308 Outlook Management outlines future trends, including inflationary pressures, regulatory recovery mechanisms, net-zero carbon targets, and planned capital expenditures - Ameren is targeting net-zero carbon emissions by 2045, with goals to add 2,800 MW of renewable generation by 2030 and retire coal-fired plants like Rush Island (2025) and Labadie (2036-2042)373 - The company plans to invest up to $20.5 billion in capital expenditures from 2023 through 2027, assuming constructive regulatory frameworks379 - Ameren Missouri's PISA cost recovery mechanism has been extended through 2028, mitigating regulatory lag349 - Based on preliminary calculations, Ameren does not expect to be subject to the 15% minimum tax on adjusted financial statement income imposed by the IRA in 2023 and 2024391 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures, except for nuclear fuel supply update: final Russian delivery received, with sufficient non-Russian supply - Ameren Missouri received its final delivery of enriched uranium from a Russian supplier in spring 2023 and has no future deliveries planned with any Russian suppliers394 - The Callaway Energy Center has sufficient nuclear fuel inventory and supply contracts with non-Russian suppliers to meet its needs through the 2026 refueling394 Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures are effective, with no material changes to internal control over financial reporting - As of June 30, 2023, the principal executive and financial officers concluded that the company's disclosure controls and procedures are effective395 - No material changes to internal control over financial reporting occurred during the most recent fiscal quarter396 PART II. Other Information Item 1. Legal Proceedings The company is involved in various legal and administrative proceedings, with management believing their final disposition will not materially adversely affect financial condition - The company believes that the final outcome of its ordinary course legal proceedings will not have a material adverse effect on its financial results397399 Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the Form 10-K400 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No equity securities were purchased by Ameren Corporation, Ameren Missouri, or Ameren Illinois during the quarter - No equity securities were purchased by Ameren Corporation, Ameren Missouri, or Ameren Illinois during the quarter ended June 30, 2023401 Item 5. Other Information No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter402 Item 6. Exhibits Exhibits filed with the Form 10-Q include supplemental indentures, credit agreement amendments, officer certifications, and Interactive Data Files - Exhibits filed include supplemental indentures, amendments to credit agreements, officer certifications, and XBRL data files405