Ameren(AEE) - 2023 Q4 - Annual Report

Part I Business Overview Ameren is a public utility holding company operating four rate-regulated segments, focused on clean energy transition and human capital strategy - Ameren is a public utility holding company headquartered in St. Louis, Missouri, with principal subsidiaries including Ameren Missouri, Ameren Illinois, and ATXI[30][31] Ameren Business Segments | Segment | Description | | :--- | :--- | | Ameren Missouri | Includes all operations of Ameren Missouri (electric generation, transmission, distribution, and natural gas distribution) | | Ameren Illinois Electric Distribution | Consists of the electric distribution business of Ameren Illinois | | Ameren Illinois Natural Gas | Consists of the natural gas business of Ameren Illinois | | Ameren Transmission | Primarily consists of the aggregated electric transmission businesses of Ameren Illinois and ATXI | Key Rate Orders in Effect (as of Jan 1, 2024) | Utility Service | Regulator | Allowed ROE | Common Equity % | Rate Base (billions) | | :--- | :--- | :--- | :--- | :--- | | Ameren Missouri Electric | MoPSC | Not Specified | Not Specified | Not Specified | | Ameren Missouri Natural Gas | MoPSC | Not Specified | Not Specified | $0.3 | | Ameren Illinois Electric Distribution | ICC | 8.72% | 50.00% | $3.9 | | Ameren Illinois Natural Gas | ICC | 9.44% | 50.00% | $2.8 | | Ameren Illinois Electric Transmission | FERC | 10.52% | 54.90% | $3.9 | | ATXI Electric Transmission | FERC | 10.52% | 60.16% | $1.5 | - Ameren Missouri's 2023 Integrated Resource Plan (IRP) outlines a transition to cleaner energy, including adding 2,800 MW of renewable generation by 2030, retiring all coal-fired plants by 2042, and seeking a license extension for the Callaway nuclear plant beyond 2044[59] Ameren Workforce Statistics (as of Dec 31, 2023) | Metric | Ameren | Ameren Missouri | Ameren Illinois | Ameren Services | | :--- | :--- | :--- | :--- | :--- | | Employee Count | 9,372 | 4,011 | 3,280 | 2,081 | | Collective Bargaining Unit | 46% | 58% | 54% | 10% | | Female | 24% | 17% | 23% | 41% | | Racially/Ethnically Diverse | 16% | 14% | 14% | 23% | Operating Statistics - Rate Base (in billions) | Rate Base Category | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Electric transmission and distribution | $17.5 | $15.4 | $13.5 | | Natural gas transmission and distribution | $3.2 | $2.9 | $2.7 | | Coal generation | $1.9 | $2.0 | $2.1 | | Nuclear generation | $1.5 | $1.5 | $1.5 | | Renewable generation | $1.4 | $1.5 | $1.5 | | Natural gas generation | $0.3 | $0.3 | $0.3 | | Total Rate Base | $25.8 | $23.6 | $21.6 | Risk Factors The company faces significant regulatory, operational, and financial risks, including cost recovery challenges, infrastructure failures, and capital market access - The company is subject to extensive regulation that influences utility rates, cost recovery, and returns on investment. Decisions by regulators are largely outside of the company's control and are exposed to regulatory lag, which could adversely affect financial results[114][115][116] - Ameren Illinois' electric distribution rates are established through a Multi-Year Rate Plan (MYRP) from 2024-2027, which is subject to a reconciliation cap that may not allow for full recovery of actual costs. The company's allowed ROE is also subject to reduction if certain performance metrics are not achieved[120][121][125] - Significant capital expenditures are required to comply with environmental laws. Failure to comply could lead to facility closures, increased operating costs, and fines. Ameren Missouri's coal-fired plants are particularly impacted by regulations concerning air emissions (SOx, NOx, CO2) and coal combustion residuals (CCR)[130][131][135] - Operational risks include facility shutdowns, aging infrastructure requiring significant replacement, disruptions in fuel delivery (particularly coal from the Powder River Basin), and risks associated with operating the Callaway nuclear plant[152][153][162] - The company's operations are subject to acts of sabotage, terrorism, and increasingly sophisticated cyber attacks, which could disrupt systems, compromise sensitive data, and result in significant financial harm[181][182][183] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[186] Cybersecurity Ameren manages cybersecurity as an enterprise risk through a board-overseen program, with no material events reported as of the report date - Cybersecurity is managed through an integrated enterprise risk management program with oversight from the board's Cybersecurity and Digital Technology Committee[187][190] - The company maintains enterprise-wide cybersecurity policies, conducts regular training and tests, and has incident response plans that are tested through recurring exercises[192] - The company is not aware of any cybersecurity events that have materially affected or are reasonably likely to materially affect its business, strategy, operations, or financial condition[195] Properties This section details Ameren's principal properties, including energy centers and utility infrastructure, with most assets subject to mortgage bond liens Ameren Missouri Net Kilowatt Capability by Fuel Source (2024 Peak Estimate) | Primary Fuel Source | Net Kilowatt Capability | | :--- | :--- | | Coal | 4,522,000 | | Nuclear | 1,194,000 | | Natural gas (CTs) | 2,535,000 | | Hydroelectric | 383,000 | | Pumped-storage | 440,000 | | Wind | 698,800 | | Oil (CTs) | 217,000 | | Methane gas (CT) | 9,000 | | Solar | 15,300 | | Total Ameren Missouri | 10,014,100 | In-Service Utility Properties (as of Dec 31, 2023) | Property | Ameren Missouri | Ameren Illinois | | :--- | :--- | :--- | | Circuit miles of electric transmission lines | 3,140 | 4,761 | | Circuit miles of electric distribution lines | 33,927 | 45,984 | | Miles of natural gas transmission and distribution mains | 3,532 | 18,713 | Legal Proceedings The company is involved in ordinary course legal proceedings, not expected to have a material adverse effect, with environmental disclosures for sanctions over $1 million - The company is involved in legal proceedings in the ordinary course of business but does not expect them to have a material adverse effect, except as otherwise disclosed in the report[202] Mine Safety Disclosures This item is not applicable to the company - Not applicable[203] Information about Our Executive Officers This section lists Ameren Corporation's executive officers, including the Chairman, President, and CEO, and the Senior Executive Vice President and CFO - Martin J. Lyons, Jr. is the Chairman, President, and Chief Executive Officer of Ameren Corporation[204] - Michael L. Moehn is the Senior Executive Vice President and Chief Financial Officer of Ameren Corporation[204] Part II Market for Registrants' Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Ameren's common stock (AEE) is listed on the NYSE, with no equity repurchases in Q4 2023, and a five-year TSR of $126.94 on a $100 investment - Ameren's common stock is listed on the New York Stock Exchange (NYSE) with the ticker symbol AEE[207] - The company did not purchase any of its equity securities during the fourth quarter of 2023[208] Five-Year Cumulative Total Shareholder Return (TSR) | Index | Dec 31, 2018 | Dec 31, 2023 | | :--- | :--- | :--- | | Ameren (AEE) | $100.00 | $126.94 | | S&P 500 Index | $100.00 | $207.04 | | S&P 500 Utility Index | $100.00 | $141.05 | | Philadelphia Utility Index | $100.00 | $140.83 | Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Ameren's financial condition, results of operations, liquidity, capital resources, outlook, and critical accounting estimates Overview Ameren's strategy focuses on infrastructure investment and regulatory enhancement, with $21.0 billion to $22.8 billion in planned capital expenditures from 2024-2028 - Ameren's core strategy is driven by three pillars: investing in rate-regulated energy infrastructure, enhancing regulatory frameworks, and optimizing operating performance[220][221] - In June 2023, the MoPSC approved a $140 million increase to Ameren Missouri's annual electric service revenue requirement, effective July 2023[223] - In December 2023, the ICC issued an order for Ameren Illinois' Multi-Year Rate Plan (MYRP) for 2024-2027. Ameren Illinois has since filed for a rehearing and an appeal of the order[230][232][233] Projected Capital Expenditures by Segment (2024-2028) | Segment | Range (in billions) | | :--- | :--- | | Ameren Missouri | $12.5 – $13.5 | | Ameren Illinois Electric Distribution | $2.8 – $3.1 | | Ameren Illinois Natural Gas | $1.8 – $1.9 | | Ameren Transmission | $3.9 – $4.3 | | Total Ameren | $21.0 – $22.8 | Results of Operations Ameren's net income increased to $1,152 million in 2023, driven by infrastructure investments and new rates, partially offset by lower sales and higher financing costs Earnings Summary | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net income attributable to Ameren common shareholders (in millions) | $1,152 | $1,074 | | Earnings per common share – diluted | $4.38 | $4.14 | - The $0.24 per share year-over-year earnings increase was favorably impacted by increased rate base investments (+25¢), new Ameren Missouri base rates (+12¢), and lower O&M expenses (+11¢)[255] - Unfavorable impacts on year-over-year earnings per share included decreased retail sales due to milder weather and lower volumes (-25¢), increased financing costs (-13¢), and a higher share count (-7¢)[257] Net Income (Loss) Attributable to Ameren Common Shareholders by Segment (in millions) | Segment | 2023 | 2022 | | :--- | :--- | :--- | | Ameren Missouri | $545 | $562 | | Ameren Illinois Electric Distribution | $258 | $202 | | Ameren Illinois Natural Gas | $134 | $123 | | Ameren Transmission | $296 | $263 | | Other / Intersegment Eliminations | $(81) | $(76) | | Total Ameren | $1,152 | $1,074 | Liquidity and Capital Resources Ameren's liquidity is driven by cash from operations and financing, with $2.1 billion available liquidity and planned equity issuances to fund $22.8 billion in capital expenditures through 2028 Consolidated Cash Flow Summary (in millions) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $2,564 | $2,263 | | Net Cash Used in Investing Activities | $(3,798) | $(3,370) | | Net Cash Provided by Financing Activities | $1,290 | $1,168 | - Ameren plans to issue approximately $300 million of equity in 2024 and approximately $600 million annually from 2025 to 2028 to help fund its capital expenditure program[318][411] - As of December 31, 2023, Ameren had net available liquidity of $2.1 billion, consisting of cash and available capacity under its credit agreements[244][350] Credit Ratings (as of report date) | Company | Moody's | S&P | | :--- | :--- | :--- | | Ameren | Baa1 | BBB+ | | Senior Unsecured Debt | Baa2 | BBB | | Ameren Missouri | A3 | BBB+ | | Senior Debt | A2 | A | | Ameren Illinois | A2 | BBB+ | | Senior Debt | A1 | A | Outlook Ameren's outlook is influenced by inflation, interest rates, and regulatory outcomes, with a focus on clean energy transition and the Rush Island Energy Center retirement by October 2024 - The company is observing inflationary pressures and high interest rates, which could impact its ability to control costs and recover investments within established regulatory frameworks[375] - Ameren Missouri's 2023 IRP targets net-zero carbon emissions by 2045, with goals to add 2,800 MW of renewable generation by 2030 and retire all coal-fired energy centers by 2042[398][400] - The Rush Island Energy Center is scheduled for retirement by October 15, 2024. Ameren Missouri has petitioned the MoPSC to finance $519 million of associated costs through securitized utility tariff bonds, with a decision expected by June 2024[396][401] - The IRA, enacted in 2022, provides clean energy tax credits and allows for their transferability. Ameren expects to transfer production tax credits from its renewable energy centers from 2024 to 2028 and does not expect to be subject to the 15% corporate minimum tax through 2028[412][415][417] Accounting Matters This section details critical accounting estimates, including regulatory accounting, benefit plans, contingencies, income taxes, and asset retirement obligations, especially for the Callaway nuclear plant - Critical accounting estimates involve significant judgment and include regulatory mechanisms, benefit plan accounting, contingencies, income taxes, and asset retirement obligations[420] - The application of accounting for rate-regulated businesses allows the company to record regulatory assets for costs probable of future recovery and regulatory liabilities for amounts probable of future refund to customers[424] Sensitivity of Callaway Energy Center ARO to Changes in Assumptions | Change in Key ARO Assumption | Increase (Decrease) to ARO (in millions) | | :--- | :--- | | Discount rate decreased by 0.10% | $12 | | Cost escalation rate increased by 0.25% | $28 | | Increase in estimated decommissioning costs by 10% | $45 | | Two-year deferral in timing of cash expenditures | $(30) | Quantitative and Qualitative Disclosures About Market Risk Ameren is exposed to market risks from interest rates, commodity prices, and equity, largely mitigated by regulatory recovery mechanisms and a structured hedging program - The company is exposed to market risk from changes in interest rates, commodity prices, and equity security prices, which are managed through established policies and derivative instruments[438][439] - Commodity price risk is largely mitigated by cost recovery mechanisms (FAC, PGA) that allow prudently incurred costs for fuel, purchased power, and natural gas to be passed on to customers[454] Percentage of Projected Required Supply Price-Hedged (as of Dec 31, 2023) | Ameren (Consolidated) | 2024 | 2025 | 2026 – 2028 | | :--- | :--- | :--- | :--- | | Coal | 98% | 85% | 48% | | Coal transportation | 100% | 100% | 98% | | Nuclear fuel | 100% (for 2025 refueling) | 100% | 100% | | Natural gas for distribution | 97% | 50% | 27% | | Purchased power for Ameren Illinois | 77% | 37% | 11% | Financial Statements and Supplementary Data This section presents Ameren's audited consolidated financial statements, including the auditor's report identifying regulatory accounting as a critical audit matter - The independent auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting for Ameren Corporation[469] - The auditor identified "Accounting for the Effects of Regulation" as a critical audit matter due to the significant management judgment involved in assessing the probability of recovering regulatory assets and refunding regulatory liabilities[477][478] Ameren Corporation Consolidated Statement of Income (in millions) | Line Item | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total operating revenues | $7,500 | $7,957 | $6,394 | | Total operating expenses | $5,942 | $6,442 | $5,061 | | Operating Income | $1,558 | $1,515 | $1,333 | | Income Before Income Taxes | $1,340 | $1,255 | $1,152 | | Net Income Attributable to Ameren Common Shareholders | $1,152 | $1,074 | $990 | Ameren Corporation Consolidated Balance Sheet (in millions) | Line Item | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total current assets | $2,181 | $2,668 | | Property, Plant, and Equipment, Net | $33,776 | $31,262 | | Total investments and other assets | $4,873 | $3,974 | | TOTAL ASSETS | $40,830 | $37,904 | | Total current liabilities | $3,345 | $3,366 | | Long-term Debt, Net | $15,121 | $13,685 | | Total deferred credits and other liabilities | $10,886 | $10,216 | | Total equity | $11,478 | $10,637 | | TOTAL LIABILITIES AND EQUITY | $40,830 | $37,904 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[860] Controls and Procedures Management concluded that both disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes reported - Management concluded that disclosure controls and procedures were effective as of December 31, 2023[861] - Management concluded that internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework[862] Other Information During the fiscal quarter ended December 31, 2023, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fourth quarter of 2023[864] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not Applicable[864] Part III Directors, Executive Officers, and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 proxy statement, with a code of ethics for all personnel - Information required for this item is incorporated by reference from the company's definitive proxy statement for its 2024 annual meeting of shareholders[865] - The company has adopted a code of ethics for all directors, officers, and employees, as well as a supplemental code for senior financial officers[870] Executive Compensation Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement for its 2024 annual meeting of shareholders - Information required for this item is incorporated by reference from the company's definitive proxy statement for its 2024 annual meeting of shareholders[871] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details equity compensation plans and security ownership, with 1,376,597 outstanding awards and 8,201,140 securities available for future issuance as of December 31, 2023 Equity Compensation Plan Information (as of Dec 31, 2023) | Plan Category | Securities to Be Issued Upon Exercise | Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 1,376,597 | 8,201,140 | | Equity compensation plans not approved by security holders | — | — | | Total | 1,376,597 | 8,201,140 | - Information on security ownership of certain beneficial owners and management is incorporated by reference from the company's definitive proxy statement[874] Certain Relationships and Related Transactions and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive proxy statement for its 2024 annual meeting of shareholders - Information required for this item is incorporated by reference from the company's definitive proxy statement for its 2024 annual meeting of shareholders[875] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement for its 2024 annual meeting of shareholders - Information required for this item is incorporated by reference from the company's definitive proxy statement for its 2024 annual meeting of shareholders[876] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed with the Form 10-K, including condensed parent company information - This section contains the list of financial statements, schedules, and exhibits filed with the Form 10-K[878] Form 10-K Summary The company elected not to provide a summary of the Form 10-K - The Ameren Companies elected not to provide a summary of the Form 10-K[893]