10-QPeriod: Q2 FY2018

AMEREN CORP Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 8, 2018For Securities:AEE

Summary

Ameren Corporation (AEE) reported improved financial performance for the six months ended June 30, 2018, compared to the same period in 2017. Net income attributable to common shareholders increased by $95 million, or 32%, to $390 million. This growth was driven by several factors, including increased demand at Ameren Missouri due to favorable weather patterns, higher base rates and lower operational expenses following a March 2017 rate order, and increased infrastructure investments across key segments like Ameren Transmission and Ameren Illinois Electric Distribution. Despite positive net income trends, the company faces ongoing regulatory developments and capital expenditure plans. Significant legislative changes in Missouri (Senate Bill 564) are expected to support approximately $1 billion in grid modernization investments through 2023, while providing regulatory lag mitigation mechanisms. Ameren Illinois is also awaiting regulatory decisions on its electric distribution service rate increases and natural gas delivery service rate adjustments. Capital expenditures remain substantial, with planned investments totaling up to $11.4 billion from 2018 through 2022 across its utility infrastructure.

Financial Highlights

49 data points
Beta

Revenue

$1.56B

Net Income

$239.00M

15.3% Net Margin

EPS (Diluted)

$0.97

Total Assets

$26.64B

Cash & Equivalents

$29.00M

Free Cash Flow

$29.00M

Financial Statements
Beta
Revenue$1.56B
Operating Expenses$1.18B
Operating Income$385.00M
Interest Expense$100.00M
Net Income$239.00M
EPS (Basic)$0.98
EPS (Diluted)$0.97
Shares Outstanding (Basic)243.70M
Shares Outstanding (Diluted)245.80M

Key Highlights

  • 1Net income attributable to Ameren common shareholders increased by $95 million (32%) to $390 million for the six months ended June 30, 2018, compared to the prior year period.
  • 2Favorable weather patterns (colder winter, warmer early summer) and increased base rates at Ameren Missouri contributed to improved financial results.
  • 3Significant infrastructure investments are planned, with total capital expenditures estimated at up to $11.4 billion from 2018 through 2022.
  • 4Missouri Senate Bill 564 was enacted, supporting grid modernization investments and introducing regulatory lag mitigation mechanisms for Ameren Missouri.
  • 5Ameren Illinois is seeking regulatory approval for rate increases for electric distribution services and natural gas delivery, with decisions expected by December 2018.
  • 6The company is actively pursuing renewable energy initiatives, including the planned acquisition of a 400-megawatt wind generation facility by Ameren Missouri.
  • 7Effective income tax rates were lower due to the reduction in the federal statutory corporate income tax rate enacted under the Tax Cuts and Jobs Act (TCJA).

Frequently Asked Questions

Ameren's earnings growth in the first half of 2018 was primarily driven by increased demand at Ameren Missouri due to favorable weather conditions (colder winter and warmer early summer), higher base rates and lower operational expenses following a March 2017 rate order at Ameren Missouri, and increased infrastructure investments across key segments like Ameren Transmission and Ameren Illinois Electric Distribution.

Missouri Senate Bill 564 is significant as it is expected to support approximately $1 billion in grid modernization investments through 2023 by providing regulatory lag mitigation mechanisms. This legislation enhances Ameren Missouri's electric regulatory framework, allowing for the deferral and future recovery of depreciation expense and return on rate base for eligible property, plant, and equipment, while also imposing limitations on rate increases and freezing electric base rates until April 2020 upon election of specific mechanisms like PISA.

Ameren plans significant capital expenditures totaling up to $11.4 billion from 2018 through 2022, primarily for improving electric and natural gas utility infrastructure, including transmission and distribution systems. The company expects cash used for capital expenditures and dividends to exceed cash provided by operating activities. Funding will come from operating cash flows, debt issuances, and equity issuances. Ameren has begun using newly issued shares for its DRPlus and employee benefit plans to satisfy requirements and expects to continue this strategy over the next five years. Incremental debt and/or equity issuances may also be necessary to maintain strong financial metrics.

The TCJA led to a reduction in Ameren's effective income tax rate, benefiting customers through lower rates. While not expected to materially affect overall earnings, the TCJA is anticipated to materially affect cash flows and rate base in the near term. The elimination of accelerated tax depreciation is increasing near-term tax liabilities, which Ameren expects to offset with existing net operating loss and tax credit carryforwards through approximately 2020. Lower customer rates due to the TCJA are expected to decrease operating cash flows, which will be further reduced by the return of excess deferred taxes to customers. Over time, increased customer rates due to higher rate base amounts are expected to partially offset these decreases.