Ameren (NYSE:AEE) invested $2.1bn in utility infrastructure in 2016, with two-thirds of that, or more than $1.3bn, going to projects in the FERC-regulated electric transmission and Illinois regulated electric and natural gas distribution businesses, Ameren Chairman, President and CEO Warner Baxter said on Feb. 16 during the company’s 4Q16 earnings call.
“A significant portion of the $1.3bn was invested in the Illinois Rivers Project, a new high-voltage transmission line, which will span 385 miles across the state of Illinois,” he said. “This project remains on schedule for completion in 2019, with four of its nine line segments energized, including two river crossings, and eight of 10 substations now in service.”
Baxter also said that Ameren Illinois in 2016 “successfully advocated for the recently enacted Future Energy Jobs Act, which improves the already constructive regulatory framework for electric distribution business in Illinois.”
The legislation “enables expansion of energy efficiency programs and allows Ameren Illinois to capitalize and earn a fair return on those investments,” he said.
The legislation, as posted on the Illinois General Assembly’s website, notes that the General Assembly finds that Illinois should encourage the adoption and deployment of cost-effective distributed energy resource technologies and devices, as well as investment in renewable energy resources. Furthermore, the General Assembly finds that the state’s existing energy efficiency standard should be updated to ensure that customers continue to realize increased value, to incorporate and optimize measures enabled by the smart grid, and to provide incentives for electric utilities to achieve the energy savings goals, according to the legislation.
The General Assembly also finds that it is necessary to establish and implement a zero emission standard, which will increase the state’s reliance on zero emission energy through the procurement of zero emission credits from zero emission facilities, in order to achieve Illinois’ environmental objectives and reduce the adverse impact of emitted air pollutants, the legislation noted.
Baxter also noted that the Missouri Public Service Commission (PSC) in 2016 approved two solar pilot programs that will provide clean energy choices for customers and increased investment opportunities for Ameren Missouri should those pilots prove successful and the programs be expanded.
Baxter also noted that Ameren Missouri last September filed a plan with the PSC for potential incremental infrastructure investments of $1bn over a five-year period ending in 2022 that would benefit customers, should those investments be enabled by an enhanced electric regulatory framework.
Ameren Missouri identified additional potential incremental infrastructure investments over a 10-year period that would modernize its energy grid and facilitate the transition to a cleaner and more diverse generation portfolio for the long-term benefit of its customers and the state of Missouri, he said.
Baxter said that Ameren is rolling forward its five-year investment plan and that the company expects to grow rate base at a 6% compound annual rate over the 2016 through 2021 period.
“[W]e continue to allocate greater levels of capital to those jurisdictions with constructive regulatory frameworks that support investment,” he said. “Our transmission projects are projected to increase FERC-regulated rate base by 13%, compounded annually over the 2016 through 2021 period. In addition, our investments in Illinois electric distribution and Illinois natural gas are expected to result in 9% compound annual rate base growth for each of these businesses for the same period. … [O]ur Missouri rate base is expected to grow at a slower 2% compound annual rate. Of course, we expect the Missouri rate base growth rate would increase from this level if legislation is enacted that sufficiently enhances the state’s regulatory framework to support investment.”
Baxter said that all of the major parties participating in the company’s electric rate review in Missouri – including Ameren Missouri, Missouri PSC staff, the Office of the Public Counsel, and investor consumer groups – recently reached an agreement in principle in all of the issues in the case. The company expects that a stipulation and agreement signed by those parties, and possibly others, will be filed with the PSC soon, he said, adding that the agreement in principle is considered confidential at this time.
He also said that enhancing Missouri’s electric regulatory framework remains a key strategy focus for Ameren.
Baxter noted that “Senate Bill 190, the Missouri Economic Development and Infrastructure Investment Act, was filed” last December.
According to the state General Assembly’s website, the bill requires, among other things, electrical corporations that defer depreciation expense and return to file with state regulators a five-year capital investment plan, and a specific capital investment plan for the following year, on Feb. 28 of each year setting forth capital expenditures that the corporation will pursue in furtherance of modernizing and securing its infrastructure.
“[E]nactment of this legislation, in its current form, would support Ameren Missouri’s ability to execute on $1bn of incremental infrastructure investment over five years, consistent with this filing with the Missouri [PSC] last fall,” Baxter said.
According to Baxter, the Missouri Senate Commerce, Consumer Protection, Energy and the Environment Committee recently approved the bill, which is now headed to the full Senate for consideration.
Baxter also said that Ameren’s strategic and disciplined allocation of capital is being driven by the company’s view that the energy grid will be increasingly more important and valuable to its customers, the communities it serves, and its shareholders.
“We plan to continue to invest to modernize our electric and gas transmission and distribution operations to make them safer, smarter, and more resilient, as well as invest in smart meters and new technologies in order to meet our customers’ future energy needs and expectations,” he said.
Ameren’s allocation of capital is expected to grow those energy delivery businesses to nearly three-quarters of its rate base by the end of 2021, he said, adding, “We are also advancing our efforts on innovative technologies to increase operating efficiencies, strengthen the energy grid, and create innovative energy solutions for our customers.”
Among other things, he said that Ameren Missouri is developing its next 20-year integrated resource plan, which is scheduled to be filed with the Missouri PSC in October.
Ameren on Feb. 16 announced 2016 net income attributable to common shareholders in accordance with Generally Accepted Accounting Principles (GAAP) of $653m, or $2.68 per diluted share, compared to $630m, or $2.59 per diluted share, for 2015. The 2015 GAAP earnings included results from discontinued operations and a loss provision for discontinuing the pursuit of a construction and operating license for a second nuclear unit at Ameren Missouri’s Callaway Energy Center, the company said, adding that excluding those two items, Ameren recorded 2015 core earnings of $622m, or $2.56 per diluted share.
The company also said that the year-over-year increase in 2016 earnings reflected increased 2016 electric transmission and distribution infrastructure investments made by Ameren Transmission Company of Illinois and Ameren Illinois under modern, constructive regulatory frameworks.