Ameren Q2 2024 Earnings Call Transcript

Good morning, Shar.

Yes. Thanks, Shar. We posted a slide in the appendix, Slide 27, that just provides -- anybody listening, a little bit of background on the case. But we were pleased that the judge ordered mediation, which hopefully will lead to some constructive settlement negotiations between the parties. And we expect the mediation to take place this summer. In the event that mediation isn't successful in reaching a settlement between the party, we would expect that the judge would likely have evidential hearings in September and we'd still get a resolution of the case this year. So I don't think any read through on exactly where we'll end up between in that bid-ask spread, but nonetheless we think a positive step forward.

Yes, Shar. All good questions. So when you look at Tranche 2.1 and you look at the map that we provided on Page 9, you see a breakdown between the 765 kV lines and the 345 kV lines, and you see some of those in Missouri and Illinois. And we're pretty excited about the way this is shaping up overall.

With respect to the red lines, we see those as being more likely brownfield. The green dotted lines, more likely greenfield. And so, you see a mix of those things there. At this point, no specific cost estimates for those lines that run in our service territory. The $23 billion to $27 billion numbers we give overall are MISO's estimates for the total portfolio, but I can't give you a breakdown right now on those that are in our footprint. And of course, if they're brownfield, we would expect them to be allocated to us. If they're greenfield, we would expect to compete for those.

And we were very pleased with our ability to compete for the Tranche 1 projects, as we noted in our prepared remarks, really winning all three that were in our service territory. And Shar, at the end of the day, we think it speaks to our ability to deliver these projects in a timely way and a cost effective way. And again, we feel like we are good at constructing these and great at operating them and we've done a great job partnering with munis, co-ops, contractors,and others to make sure we can deliver.

Now with respect to the timeline, on the Tranche 1 projects, we really expect the construction of those to extend from 2026 to 2030. I think we have about $1.6 billion or so in our five-year plan for those Tranche 1 projects. And then with response to the Tranche 2.1 projects, I think largely that spend is probably outside of our five-year plan. However, there's really no reason that these have to happen sequentially. To the extent that any of these Tranche 2.1 projects can be started and overlap with some of the work on Tranche 1, no problem there.

And again, excited about this Tranche 2.1, but also expect in Tranche 2.2 that we'll see even more projects in our Missouri and Illinois footprints. And so, overall, again, just very pleased with the work MISO is doing here and the responsiveness to stakeholders in the process.

Hello, Nick. Good morning.

Yes. Nick, those are all good observations and takeaways from the information we provided on Slide 7. When you look at that graph on the right, there, we talk about the economic development pipeline. We have thousands of megawatts or gigawatts of opportunity. And in fact, that is true.

So we've got just a number of parties that are doing engineering reviews and interconnection studies and all of that's great. Those are initial processes. What we called out on the left, however, is you mentioned dirt turning, I would say when we have construction agreements, it means we have an executed agreement between ourselves and a data center, which confirms transmission capacity, cost to extend service and timelines, et cetera, and importantly, obligates the customer to pay for that extension of service with down payments for equipment. So you're right, things have begun to take shape.

And so, that's when we felt like we can move it into the category of really kind of talking about what we see in terms of the timeline, how that would ramp up its overall size. And so, pretty excited there to have a 250 megawatt data center that we see is starting to use service in 2026 and ramping up through 2028. And of course, that's a nice tailwind as we think about that usage over that period of time.

And then, mentioned this other 85 megawatts. We're not just going after data centers from an economic development standpoint, really going after manufacturing and others. And that 85 megawatts that you mentioned is really a mix of manufacturing, smaller data centers, et cetera.

So, look, we're pretty excited. There's a certainly -- I think you mentioned there's a concentration of interest in Missouri. And to the extent that this load grows, that very well may require that we would provide an update to our IRP. So, again, we expect that over the coming six months or so that we'll see a firming of some of these other economic development opportunities. And as we further assess that load and what it means to our sales and we give thought to what that means to our generation portfolio, that's where we expect that we would need to update our IRP with -- in mind, right now, we're thinking February of next year.

Hey, Nick. This is Michael here. I might just add. Yes, that's a great update from Marty. Just from an overall macro perspective, I think the backdrop in the St. Louis region is positive though. Even putting aside this data center opportunity, I think we noted this in the slide, year-to-date sales for residential up 2.5%, commercial 1.6%, industrial 3.1%, so a little bit over 2% year-to-date, which is a marked change since where we've been in the past. And so, there are some really positive things happening, about 25,000 jobs created in the past year in the St. Louis region, one of the kind of hotter job markets here. Unemployment rates running below the national average. So, all of those things, I think, bode well with respect to all the things that Marty talked about as well.

Yes, yes, Nick. I tell you that was a great question/statement. I think you got it right. If you look back at our track record over the past 10-plus years, we've been growing EPS at north of 7% and that's our goal, which is to deliver at or above the midpoint of our earnings per share growth range.

And as I sit here today versus where we were six months ago, I agree with you that there are a number of tailwinds that have been forming. Inflation has been cooling, interest rates have been moderating, stock price has been improving. You're all right on all those things. Our demand outlook has been improving with data centers and other. Michael just talked about some of the job growth that we're seeing in the Greater St. Louis region. We're really excited about these transmission investment prospects we have with Tranche 1, Tranche 2.1, Tranche 2.2, all very exciting. We still have a tremendous amount of investment needed for grid modernization and the clean energy transition and we've got a really strong balance sheet to be able to get it done. So very excited about those prospects.

And again, when we look back just in terms of what our team was able to accomplish in the second quarter, I'm very proud of that overall. We continue to make great investments for the benefit of our customers. And on Page 6, listed out a half dozen things that we completed during the second quarter that really position us for success in the years ahead. And I have to say this was all accomplished by a team that is also at the same time really focused on customer affordability. We put a lot of cost savings initiatives in place this year and the team overcame that and delivered a really strong quarter from an operations and earnings standpoint. And again, I think you're right, we're set up very well for the future given some of the tailwinds we have.

Thanks. You too.

Hey, Jeremy. Good to hear from you.

Yes, Nick. I don't know that it really changes our thought process going forward. Obviously, Chevron is going to probably have far reaching implications for federal agencies and court proceedings going forward. Of course, it doesn't affect any prior cases. I think when the Supreme Court ruled on Chevron, they basically said, hey, this doesn't call into question any prior cases. But my sense is it will impact ongoing rulemakings and court reviews as it relates to things coming out of FERC or things coming out of EPA, et cetera. So, again, I think there'll be far reaching impacts, but I'll leave it to the lawyers that are working through all those matters to assess how it may impact things.

Yes, Jeremy. Hey, I don't think I called you Nick, but if I did, I apologize. But in any event, Jeremy, it's a good question. I think, again, when I did respond to Nick earlier, I think that -- again, we're going to be conservative, I would say, in how we bring these things into our guidance. Obviously, when we gave our guidance at the beginning of the year, none of this was in our load growth projections. And so we're going to be thoughtful about it.

As I said earlier, we thought it'd be good to share with you all the economic development pipeline that we have and it's robust. But again, a large amount of this is still in the process of engineering reviews and interconnection studies. And so,we're really excited about that.

And as I said in the prepared remarks, our team as well as state and local stakeholders are working hard to bring these to fruition. We think that our -- both of our states, Missouri and Illinois, should be very competitive with respect to these opportunities. Again, access to transmission, fiber, workforce, water, all those things, both of our states have very good sales and use tax incentives. I think we're two of just 26 states that have these and our incentives are very competitive with those that do. So we feel like we're positioned very well to convert these and bring these to fruition.

But to your point, Jeremy, it's hard to know with some of these folks, they're looking at our sites, they're looking potentially at sites in other states. And so we're going to be conservative about how we bring those into our guidance. Again, just repeating, we felt comfortable talking about this 250 megawatt data center because we have a construction agreement. We think that's a firmer position to be in. And then as we update our sales guidance again in February, we'll incorporate those opportunities that we believe are firmer like this one that has a construction agreement.

Well, I would just say that -- I'd refer you back just to even this past quarter, Jeremy, and some of the things that we accomplished from a regulatory standpoint. Missouri, which is back on Page 6, the approval of the Cass County project, we filed the CCN for the 800 megawatt Castle Bluff Natural Gas Energy Center. Some of the commentary coming out of the commission suggests a desire for more dispatchable resources and an understanding that we need that for reliability. So we're excited to make that filing. And then we got the approval of the securitization.

So I think that what we're seeing is a continuation of constructive regulatory results in Missouri. The commission is going to have a forum to talk about reliability for the state looking forward and we think that's a constructive thing. We're seeing these exciting economic development opportunities and we need to make sure that Missouri has the resources to serve our existing customers and those additional economic development opportunities. And so, we think, again, that's a good constructive forum setting up for the future.

Good to hear from you.

Yes. Carly, it's a good question. And, look, it's something we'll file. In February, a lot of work to be done, as I mentioned, really trying to assess the load growth, get our arms around what of this will come to fruition, how do we want to serve it.

I think when you look at the IRP that we filed back in September 2023, it was a good mix of resources, maintaining our existing dispatchable assets, thinking about bringing in a mix of renewables, dispatchable resources like simple cycle gas, combined cycle gas as well as battery storage technologies.

And my sense is that, if we see load growth that we're going to build into our plans going forward, it probably means in the short-term an acceleration of some of the renewables, the batteries, and very possibly additional simple cycle natural gas.

When you look longer-term, we will have to give some thought as we file that. And to your point about how we think about the EPA's proposed greenhouse gas rules, and that may be impacted by whether the Supreme Court issues a stay of those later this year. But, again, I would just say the things we have to think about, as I mentioned on one of our prior calls, is the implications of those rules for carbon capture at our planned combined cycle facility as well as cofiring with gas at our Labadie Energy Center. And so, those are some of the things we'll be thinking about. And given the uncertainty of whether that greenhouse gas rule will ultimately come into effect, we'll have to think about how we do or don't reflect that in our plans going forward.

So a lot to think about. So, I appreciate you teeing it up. I don't have any firm answer for you today, but those are some of the considerations.

Yes. Hey, Carly. It's Michael here. The only thing I might add to that is, with respect to some of these environmental rules, there probably are some no-regrets-moves that we'll continue to look at. Marty mentioned this cofiring issue, trying to make sure we have access to gas at some of these facilities that we don't have today. So taking some steps there that we think probably are prudent just to give us some additional flexibility, not knowing exactly where these rules will ultimately end up.

Yes. This is Marty again, Carly. I'll start. I think as MISO looked at these projects and heard from stakeholders, there was some logical order in terms of how you might want to build out some of the infrastructure that we believe is ultimately going to be required in the Midwest region, given all of the region's goals with respect to clean energy transition and what MISO sees in terms of the potential relocation of generation facilities and load, et cetera. So, yes, I think it was more or less what's a logical order to build some of these things out and then to step back and use the expectation of these investments in the consideration and planning for the next set of projects.

Now with that said, I'd mentioned, for example, we have this 345 kV line that they're planning in Missouri. It may or may not preclude the need for a 765 kV line, which was in the last presentation presented. We also don't see a whole lot of investment on the current map in the Southern part of Illinois and extending into Indiana. So we may see some more investment there.

But, again, it's premature. Again, we'll get these finalized by MISO, expecting this year. Talking to MISO, while they've been at it working on potential for Tranche 2.2, there's still a lot of more work to be done, which is why they really don't expect to get those approved until sometime into 2025.

So, look, I just think it's really premature to talk about what those might be and what the size of it's going to be. I don't think this -- I don't think it will be insignificant in terms of the additional investment, but probably premature to specifically speculate.

Hey, Paul.

Hey, Paul. This is Michael. From a year-to-date standpoint, again, residential is up 2.5%, 1.6% on the commercial side, and 3.1% on the industrial side. So about 2.2% overall. With the MEEIA impact, it is a little bit less than that. I don't have it right here in front of me. But, overall, look, it's just -- it's been much stronger than it has historically been.

Well, there certainly is some impact from an energy efficiency standpoint, although I think it's less than that. The one thing that you're not seeing in here a little bit is a bit of price variance. So as you're switching kind of from between summer and winter rates, you get some different price variances in the block sales. And so when you strip that out, that's masking a little bit of the growth there and that will -- should -- like it typically does, will flip around as you kind of move through time. But EE does have an impact.

Yes. I think, Paul, if you're looking at that zero versus normal, what that's really just meant to say is that the weather to date has been normal. So in the first quarter -- yes, in the first quarter, weather was weak, second quarter weather was strong. What we're saying here is year-to-date, there's been no weather impact versus normal conditions.

Yes. Paul, Michael here again. A bit premature, I think, to get into that conversation again. As we came out in February, and I probably recall this, we've been seeing historically kind of flat to up maybe 0.5% in terms of growth. And then I think there's been some positive updates as we've kind of moved through the year here, and I just went through the year-to-date statistics. We will absolutely do that. I think we're just wanting to make sure we feel good about the confidence level around, as Marty mentioned around a number of these data centers, et cetera.

And as we, I think, kind of marched through time, we're going through our typical update and planning process as we always do right now, and so we'll do that here into the fall and then I think we'd be in a much better position as we refresh that IRP and refresh that sales forecast to give you a sense.

Again, just -- I think we've used a little bit of the statistic in the past. Just from an industrial perspective, that 250 megawatt project that Marty referenced, that would represent about a 40% increase in our industrial sales and about an overall 5% increase in Missouri's retail sales, just to give you a sense of it.

Yes. And I think, Paul, following up on Michael's comment there, we have the ability to serve that data center today with our existing mix of resources and the planned additions that we've got. So as we think about that IRP update, it's really about thinking about those thousands of megawatts that are in the queue today looking -- doing these engineering studies, interconnection studies, and really working with them and giving more thought to what of that's going to come to fruition and what changes to the IRP might need to be made in light of those.

Well, the customers that are signing on today, the 250 megawatts as well as the 85 plus megawatts are really utilizing existing tariffs that we have in place today that, obviously, have been vetted by the commission and put in place. And the goal of any of these tariffs is to make sure that costs are allocated appropriately and spread appropriately amongst customer classes.

I think as we sit here today, I think we're fine. As we move through time, if we have thousands of megawatts that come to fruition and we start to think about the different resources we may need to put in place to serve them, we're going to have to be thoughtful about what the appropriate tariffs are for those customers to make sure that they pay a fair price and that value again accrues to all of our customers and communities.

Thank you. You too.

Good morning. It's a beautiful day here. Yeah, things are good.

Yes. Look, I think, in both states, I mentioned Missouri earlier and the commission having a forum on reliability and resource adequacy and the same concerns I know exist in Illinois. And so, we'll see how policies shift and change over time. But, look, I think at the end of the day, all stakeholders in both states and certainly us as a utility and other service providers were all concerned and mindful of resource adequacy, reliability, affordability and a clean energy transition. And so, I think your intuition is right that as you see cost pressures grow because of things like capacity prices or you see the need to support economic development and growth logically, you're going to have to start to think about the policies that support those things and resource adequacy. So I think your intuition is correct.

You too. Thanks.

Good morning. Thanks for squeezing me in here. Popular call today.

Yes, we have historically, David. For every 1% on the industrial side, it's about $0.05. Here's a good way to think about it. Now that change -- will change over time as you kind of move through and you've got to change the generation mix, et cetera. But I think it's probably a decent rule of thumb today.

Yes. I think, David, all things for consideration. As I mentioned a few moments ago, with respect to the data center that we show on Page 7, this 250 megawatt data center and the other 85 megawatts of load again, they're able to use our current industrial tariffs and we're able to serve them with our current generation -- planned generation. So no need for any special tariff there. Over time, as I said, to the extent that these other opportunities come to fruition, we may need to think about special tariffs.

One thing to point to is we just had that Cass County Solar Project approved. And there, we did put a special sort of tariff arrangement into place to ensure that there was an appropriate apportionment of cost between our customer base as well as those industrial customers that are going to take power from Cass County. So we do have some experience working with the commission to put special tariffs in place. And we'll be giving thought to that as we move forward with additional data centers that we may be able to serve.

And then, to your point on -- I think it was on PISA, certainly one of the things we pursued legislatively last spring that had very good support was the extension of PISA to dispatchable generation, such as the simple cycle assets that we're planning and combined cycle asset that we're planning. And so, again, we had very good support for that. Again, the legislative session ended with that not getting across the finish line, but certainly expect that it -- strong support as we go into next year.

You bet.

Yes. Good to hear from you, Julien.

Yes, all good questions, Julien. So first of all, as I mentioned, with respect to these opportunities, we're certainly not waiting. We and other stakeholders around the states are aggressively interacting with these folks that are doing these engineering reviews, interconnection studies and doing everything we can to be able to support them in locating these facilities either in Missouri or Illinois, as is appropriate. And so, we're aggressively doing that.

When you look at some of this opportunity, think about this 250 megawatt one that we talked about specifically, there, they're going to be in service in 2026, ramping up, usage through 2028. And that's what we're hearing from any of these, is really a desire to ramp up over time. And so, the idea is that that would sort of dovetail with an update to the IRP where we would potentially again accelerate some of the planned additions, perhaps add some additional resources that we would get in place in time to be able to serve this load as it grows.

And when you think about that, certainly, there are some limitations. But when you think about that 800 megawatt simple cycle that we're putting in our plans today, the Castle Bluff, about four years to get that in-service between turbines, transformers, construction timeline, et cetera. So we feel like we'll be able to work with some of these data center opportunities, get the IRP updated and filed, and hopefully be able to sort of have all these things dovetailed and brought together at the right pace and speed.

And, yes, in terms of the -- any kind of changes in tariffs, we think those can happen both inside the context of a rate review or outside of a rate review. So we think we have flexibility there.

Hey, Julian. Michael here. It's really not a significant issue for us. We did go through and freshen up a couple of AROs, but really immaterial amount. If you think about our exposure from a coal ash standpoint, we really got in front of this issue probably seven or eight years ago. All of our ponds are closed or are in the process of being finalized here. And so, just not a lot of additional exposure, just a little bit of stuff around the edges.

You too, Julien. Have a good weekend.

Hey, thanks, everybody, for joining us today. Some great questions. Appreciated the dialogue. Look, overall, we are really pleased to share our updates with you today, and we remain absolutely focused on strong execution for the remainder of this year. And we look forward to seeing many of you in the coming months. So with that, thanks. Have a great day. And have a great weekend.