10-QPeriod: Q1 FY2016

AMEREN CORP Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 10, 2016For Securities:AEE

Summary

Ameren Corporation (AEE) reported a slight decrease in net income attributable to common shareholders for the first quarter of 2016 compared to the same period in 2015. This was primarily driven by decreased electric sales volumes due to milder winter temperatures and reduced sales to Noranda at Ameren Missouri. Factors like the absence of certain regulatory orders benefiting Ameren Illinois in the prior year and a decrease in shared benefits from energy efficiency programs at Ameren Missouri also impacted earnings negatively. However, these were partially offset by positive factors including an income tax benefit at the parent company due to new accounting guidance, and increased earnings from electric transmission investments at Ameren Illinois and ATXI, as well as higher natural gas delivery rates in Illinois. The company continues to focus on strategic capital allocation towards regulated infrastructure, particularly in electric transmission projects, and maintaining disciplined cost management. Liquidity remains adequate, supported by credit facilities and commercial paper programs. Investors should monitor the ongoing regulatory proceedings, particularly those impacting return on equity for transmission services and potential revenue shortfalls from large industrial customers like Noranda, as these could significantly influence future financial performance.

Financial Highlights

47 data points
Beta

Revenue

$1.43B

Net Income

$107.00M

7.5% Net Margin

EPS (Diluted)

$0.43

Total Assets

$23.39B

Cash & Equivalents

$13.00M

Free Cash Flow

-$147.00M

Financial Statements
Beta
Revenue$1.43B
Operating Expenses$1.21B
Operating Income$220.00M
Interest Expense$95.00M
Net Income$107.00M
EPS (Basic)$0.43
EPS (Diluted)$0.43
Shares Outstanding (Basic)242.60M

Key Highlights

  • 1Net income attributable to Ameren common shareholders from continuing operations decreased by $3 million to $105 million, or $0.43 per diluted share, compared to $108 million, or $0.45 per diluted share, in Q1 2015.
  • 2Ameren Missouri's electric margins decreased by $48 million, largely due to milder weather and the idling of production by its largest customer, Noranda.
  • 3Ameren Illinois' electric margins remained flat, with increased revenue from infrastructure investments offset by the absence of a prior year's favorable regulatory order.
  • 4Cash flows from operating activities for Ameren Corporation increased by $39 million, primarily due to improved margins and a significant insurance receipt for Ameren Missouri related to the Taum Sauk breach.
  • 5Capital expenditures increased by $85 million to $524 million, with a significant portion allocated to electric transmission projects and infrastructure upgrades.
  • 6The company maintained compliance with all debt covenants and had adequate liquidity of $1.5 billion as of March 31, 2016.
  • 7Ameren recorded an income tax benefit of $21 million in Q1 2016 due to the adoption of new accounting guidance for share-based payments, positively impacting earnings per share by 8 cents.

Frequently Asked Questions

The primary driver for the decrease in net income was a $27 million decrease in net income from the Ameren Missouri segment. This was mainly due to decreased electric sales volumes primarily caused by milder winter temperatures and a significant reduction in sales to Noranda, Ameren Missouri's largest customer, which idled its production.

Ameren Missouri expects to file an electric rate case in 2016 to reflect additional infrastructure investments and rising costs, including depreciation, transmission service, and property tax expenses. The new rates are expected to reflect Noranda's actual sales volumes, which would prospectively eliminate the current revenue shortfall. Ameren Missouri may also seek recovery of certain costs incurred but not contemporaneously recovered due to Noranda's reduced operations.

The FERC complaint cases challenging the allowed base return on common equity for MISO transmission owners have led Ameren and Ameren Illinois to recognize a liability for potential customer refunds. While the cases are ongoing, with initial decisions expected in 2016, they have reduced current transmission earnings. A reduction in the FERC-allowed base return on common equity could reduce Ameren's and Ameren Illinois' annual earnings.

Ameren adopted new accounting guidance related to employee share-based payment accounting in the first quarter of 2016. This resulted in an income tax benefit of $21 million recorded at Ameren (parent), which favorably impacted earnings per diluted share by approximately 8 cents for the quarter. This guidance requires all excess tax benefits and deficits to be recognized in 'Income taxes' as discrete items.