Earnings Call: Q4 2020

Feb 19, 2021

Greetings, and welcome to Amarin Corporation's 4th Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Andrew Kirk, Director of Investor Relations. Thank you. You may begin. Thank you, and good morning. On the call with me today are Warner Baxter, our Chairman, President and Chief Executive Officer and Michael Main, our Executive Vice President and Chief Financial Officer as well as other members of the Ameren management team joining remotely. Juan and Michael will discuss our earnings results and guidance as well as provide a business update. Then we will open the call for questions. Before we begin, let me cover a few administrative details. This call contains time sensitive data that is accurate only as of the date of today's live broadcast and redistribution of this broadcast is prohibited. To assist with our call this morning, we have posted a presentation on the amereninvestors.com homepage that will be referenced by our speakers. As noted on Page 2 of the presentation, comments made during this conference call may contain statements that are commonly referred to as forward looking statements. Such statements include those about future expectations, beliefs, plans, strategies, objectives, events, conditions and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated. For additional information concerning these factors, please read the forward looking statements section in the news release we issued today and the forward looking statements and risk factors sections in our filings with the SEC. Lastly, all per share earnings amounts discussed during today's presentation, including earnings guidance, are presented on a diluted basis unless otherwise noted. And here's Warner. Thanks, Andrew. Good morning, everyone, and thank you for joining us. Before I begin our discussion of year end results and other key business matters, I'll start with a few comments on COVID-nineteen as well as the steps we have taken to deliver safe, reliable electric and natural gas service to our customers during the recent period of extremely cold weather in our region. So again, I hope you, your families and colleagues are safe and healthy. While COVID-nineteen has driven a great deal of change, I can assure you that one thing that remains constant in Amarin is our strong commitment to the safety of our coworkers, customers and communities. So too is our strong focus on delivering safe, reliable, cleaner and affordable electric and natural gas service during this unprecedented time. We recognize that millions of customers in Missouri and Illinois are dependent on us. I can't express enough appreciation to my coworkers who have shown great agility, innovation, determination and a keen focus on safety, while delivering on our mission to power the quality of life. And while we are focused on addressing the challenges associated with the pandemic and achieving our mission each day, we never lose sight of our vision, leading the way to a sustainable energy future. Despite the significant challenges presented by COVID-nineteen, I look to the future with optimism, not just because vaccines are now being distributed to millions around the world, but also because of how our coworkers stepped up and addressed a multitude of challenges and capitalize on opportunities in 2020 that will clearly help us achieve our vision. Speaking of stepping up the challenges to ensure that we continue to deliver on our mission and vision, our team has been tirelessly working over the last week to ensure that we continue to deliver safe and reliable electric and natural gas services to millions of people in our service territory, despite the extremely cold weather that we are experiencing in our region. As you know, the extremely cold weather has created significant challenges to maintain the safety and reliability of the imagery grid in several areas of the country. Understandably, the cold weather has driven a significant increase in customer demand for electric and natural gas service. At the same time, the extreme weather has resulted in natural gas supply disruptions and limitations, operational issues at power plants and transmission constraints. Combined, these extraordinary circumstances led several regional transmission organizations to implement emergency operations protocols, which include a controlled interruptions of service to customers in several states, most notably in Texas. Not surprisingly, the same set of conditions resulted in significant increases in power and natural gas prices in the energy markets. To date, we have not experienced any significant reliability issues in our Missouri or Illinois businesses as past investments in energy infrastructure have paid off. In addition, the strong operation of our gas storage fields in Illinois and coal fired energy centers in Missouri as well as our robust interconnections with gas pipeline suppliers and the power markets have played a major role as well. Rest assured, we will continue to actively manage this challenging situation for our customers. Turning now to Page 4. Before I jump into the details of our accomplishments and strategic areas of focus, I want to reiterate the strategy that has been delivering significant long term value to all of our stakeholders. Specifically, our strategy is to invest in a robust pipeline of great regulated energy infrastructure, continuously improve operating performance and advocate for responsible energy and economic policies to deliver superior value to our customers and shareholders. As always, our customers continue to be at the center of our strategy. I am pleased to say that our actions and performance in 2020 as well as our strategic areas of focus for the future are strongly aligned with our customers' and shareholders' expectations to lead the way to a sustainable energy future, which brings me to a discussion of our 2020 performance. As I said earlier, we delivered strong financial and operational performance in 2020. Yesterday, we announced 20 20 earnings of $3.50 per share compared to earnings of $3.35 per share earned in 2019. Excluding the impact from weather, 2020 normalized earnings increased to $3.54 per share or approximately 6.6% from 20 nineteen's weather normalized earnings or $3.32 per share. With our customers' and shareholders' expectations in mind, we made significant investments in energy infrastructure in 2020 that resulted in a more reliable, resilient, secure and cleaner energy grid as well as contributed to strong rate base growth in all of our business segments. Consistent with these objectives and despite COVID-nineteen challenges, we successfully executed on a robust pipeline of investments across all of our businesses. In 2020, as outlined on this page, we also achieved constructive outcomes in several regulatory proceedings that will help drive additional infrastructure investments that will benefit customers and shareholders while keeping our customers' rates affordable. The bottom line is that we successfully executed our strategy in 2020, which will drive significant long term value for all of our stakeholders. Turning to Page 5. Here, we highlight the significant progress we made in an area that has and will continue to be a significant area of focus, sustainability. Last September, we announced the transformation of clean energy transition plan that effectively balances environmental stewardship with reliability and affordability. In particular, we established a clean energy goal of net zero carbon emissions by 2,050 across all of our operations in Missouri and Illinois. We also established strong interim carbon reduction goals of 50% by 2,030 and 85% by 2,040 based on 2,005 levels. In addition, our plan includes robust investments in new wind and solar generation, while being mindful of reliability. Notably, we are targeting adding 5,400 megawatts of new renewable wind and solar generation resources to our generation portfolio by 2,040. Our plan also includes advancing the retirement of 2 coal fired energy centers, extending the life of our carbon free Callaway Nuclear Energy Center to 80 years and partnering with the Electric Pearl Research Institute in assessing advanced clean energy technologies for the future. We have already executed key elements of this plan. In particular, a significant milestone toward accomplishing our net zero carbon emissions goal was reached with the acquisition of the 400 Megawatt High Prairie Renewable Energy Center in December. This was our first wind generation addition and is the largest wind facility in the State of Missouri. Earlier this year, we also acquired our 2nd wind generation investment, the Atchison Renewable Energy Center, which when completed is expected to be a 300 megawatt facility. We also have a strong long term commitment to our customers and communities to be socially responsible and economically impactful. There has never been a more important time than now to be a leader in this area and we are leaning forward. In terms of COVID-nineteen relief, we've been continuously working to help our customers in need, including implementing disconnection moratoriums, providing special bill payment plans and providing over $23,000,000 of critical funds for energy assistance and other basic needs. We held a virtual Diversity, Equity and Inclusion Leadership Summit in June 2020 that included over 600 community leaders and coworkers. During that summit, Erin made a commitment of $10,000,000 over the next 5 years to non profit organizations focused on DE and I. And we spent over $800,000,000 with diverse suppliers in 2020, a 24% increase over 2019. From a governance perspective, our Board of Directors oversight of sustainability risks was enhanced. In addition, we named our 1st Chief Renewable Development Officer to lead our continued efforts to transition to a cleaner and more diverse generation portfolio. Further, the Board of Directors strengthened our executive compensation program by adding a 10% long term incentive based on implementing our clean energy transition plans. And just last week, the Board approved the addition of workforce and supplier diversity metrics to our short term incentive plan for 2021. All of these efforts are consistent with our vision, leading the way to a sustainable energy future and our mission to power the quality of life. Turning to Page 6. As you can see on this page, our laser focus on executing our strategy for the last several years has delivered strong results. From a customer standpoint, our investments in infrastructure have driven our reliability to top quartile performance. While at the same time, our disciplined cost management has kept our electric rates among the lowest in the country. The combination of these factors has helped drive significantly higher customer satisfaction scores. We have also delivered superior value to our shareholders, as you can see on Page 7. Our weather normalized core earnings per share has risen 70% or at an approximately 8% compound annual growth rate since we exited our unregulated generation business in 2013. Our dividend rate has increased 25% over the same time period. This has resulted in a significant reduction in our weather normalized dividend payout ratio from over 77% in 2013 to 56% in 2020, near the bottom of our 55% to 70% targeted dividend payout range, positioning us well for continued strong infrastructure investments and rate base growth as well as future dividend growth. Speaking of dividend growth, I am pleased to report that last week Ameren's Board of Directors approved a quarterly dividend increase of approximately 7%, resulting in an annualized dividend rate of $2.20 per share. This increase, coupled with a dividend increase of 4% in October 2020, reflects confidence by Ameren's Board of Directors in the outlook for our businesses and management's ability to execute its strategy for the long term benefit of our customers and shareholders. While I'm very pleased with our past performance, we are not sitting back and taking a deep breath. We remain focused on accelerating and enhancing our performance in 2021 and in the years ahead, so we can continue to deliver superior value to our customers, communities and shareholders, which brings me to Page 8. Yesterday afternoon, we also announced that we expect our 2021 earnings to be in the range of $3.65 to $3.85 per share. Michael will provide you with more details on our 2021 guidance a bit later. Building on the strong execution of our strategy and our robust earnings growth over the past several years, we continue to expect to deliver long term earnings growth that is among the best in the industry. We expect to deliver 6% to 8 percent compound annual earnings per share growth from 2021 through 2025 using the midpoint of our 2021 guidance, $3.75 per share as the base. Our long term earnings growth will be driven by continued execution of our strategy, including investing in infrastructure for the benefit of our customers while keeping rates affordable. Another important element of our strong total shareholder return story is our dividend. Looking ahead, Ameren expects future dividend growth to be in line with its long term earnings per share growth expectations within a payout ratio range of 55% to 70%. In addition to earnings growth considerations, future dividend decisions will be driven by cash flow, investment requirements and other business conditions. Turning to Page 9, the first pillar of our strategy stresses investing in and operating our utilities in a manner consistent with existing regulatory frameworks. The strong long term earnings growth I just discussed is primarily driven by our rate base growth plan. Today, we are rolling forward our 5 year investment plan. And as you can see, we expect to grow our rate base in an approximately 8% compound annual rate for the 2020 through 2025 period. This growth is driven by our robust capital plan of approximately $17,000,000,000 over the next 5 years that will deliver significant value to our customers and the communities we serve. Our plan includes strategically allocating capital to all 4 of our business segments. Importantly, our 5 year earnings and rate base growth projections do not include 1200 megawatts of incremental renewable investment opportunities frozen and in Missouri's Integrated Resource Plan. Our team continues to assess several renewable generation proposals from developers. We expect to file for certificates of convenience and necessity for some renewable generation projects in 2021 with the Missouri PSC. We expect to add these investments to our multiyear rate base outlook as we finalize pending negotiations with renewable energy developers and move further along in the regulatory approval process in Missouri. Finally, we remain focused on disciplined cost management to earn as close to our allowed returns as possible in all of our businesses. Speaking of disciplined cost management, let's now turn to Page 10. Over the last several years, we have worked hard to enhance the regulatory frameworks in both Missouri and Illinois to help drive additional infrastructure investments that will benefit customers and shareholders. At the same time, we have been very focused on disciplined cost management to keep CREETS affordable. Our efforts are paying off. As outlined on this page, residential rates have decreased since opting into these enhanced regulatory frameworks for all of our Missouri Electric and Illinois Electric and Natural Gas Distribution Businesses. So to be clear, since these constructive frameworks have been put in place, significant investments have been made, reliability has improved, rates have gone down and thousands of jobs have been created. While this is a great win for our customers and communities, we are not done. Turning to Page 11, as you can see from this chart, our operating expenses have decreased 14% since 2015. We will remain relentlessly focused on disciplined cost management as we look forward to the next 5 years and beyond. This will not only include the robust cost management initiatives undertaken to manage through COVID-nineteen, but also several other customer affordability initiatives. These initiatives include the automation and optimization of our processes, including leveraging the benefits from significant past and future investments in digital technologies and grid modernization. In addition, as part of the Ameren Missouri Integrated Resource Plan, we will work to responsibly retire our coal fired energy centers over time, which includes thoughtfully managing workforce changes through attrition, transfers to other facilities and retraining for other positions in the company. Turning now to Page 12, next I want to cover the 2nd pillar of our strategy, enhancing regulatory frameworks and advocating for responsible energy and economic policies. An enhanced version of the Downstate Clean Energy Affordability Act legislation was filed in the past week, which if passed would apply to both the Ameren Illinois Electric and Natural Gas Distribution Businesses. Legislation will allow Ameren Illinois to make significant investments in solar energy, battery storage and gas infrastructure to improve safety and reliability as well as in transportation electrification in order to benefit customers and the economy across Central and Southern Illinois. This important piece of legislation also required diverse supplier spend reporting for all electric renewable energy providers. Another key component of the Downstate Clean Air Energy Reportability Act is that it would allow for performance based rate making for Ameren Illinois, Natural Gas and Electric Distribution Businesses through 2,032. The proposed performance metric would ensure investments are aligned with and are contributing to the reliability of the energy grid as well as to transition to the clean energy vision of the state. Further, this legislation would modify the allowed return on equity methodology in each business to align with returns being earned by other gas and electric utilities across the nation. This legislation builds on Ameren Illinois' efforts to invest in critical energy infrastructure under a transparent and stable regulatory framework that has supported significant investments, improved safety and reliability, as well as created over 1400 jobs, all while keeping electric rates well below the Midwest and national averages. This bill would also move the state of Illinois closer to reaching its goal of 100 percent clean energy by 2,050. By providing for performance based rate making for both electric and gas distribution businesses, we believe the proposed legislation would further align the energy goals of Ameren Illinois and the State of Illinois for the benefit of our customers, the communities we serve and the environment. With all these benefits in mind, we are focused on working with key stakeholders to get this important legislation passed this year. Moving now to Page 13 for an update on our $1,100,000,000 wind generation investment plan to achieve compliance with Missouri's renewable energy standard through the acquisition of 700 megawatts of new wind generation at 2 sites in Missouri. As I mentioned earlier, Ameren Missouri closed on the acquisition of our 1st wind energy center, a 400 megawatt project in Northeast Missouri in December. Last month, we acquired our 2nd wind generation project, which we own a Megawatt Atchison Renewable Energy Center located in Northwest Missouri. Approximately 120 Megawatts are already in service. We expect a total of 150 Megawatts to be in service by the end of the Q1, which remain expected later in 2021 upon the replacement of certain turbine blades. These projects through a combination of green first mortgage bonds and common stock issued under our forward equity sale agreement. We do not expect the construction delay on our Atchison wind facility to have significant economic consequences or reduce the production tax credits for this project because of the rule change made by the U. S. Department of Treasury last year to extend the in service criteria by 1 year to December 31, 2021. Turning now to Page 14 and an update on our Callaway Energy Center. During its return to full power as part of its 24th refueling and maintenance outage in late December 2020, Ameren Missouri Callaway Energy Center experienced a non nuclear operating issue related to its generator. A thorough investigation of this matter was conducted the decision was made to replace certain key components of the generator in order to safely and sustainably return the energy center to service. Work is already underway on this capital project, which we expect will cost approximately $65,000,000 We are also pursuing the recovery of costs through applicable warranties and insurance. Due to the long lead time for the manufacturing, repair and installation of these components, the energy center is expected to return to service in late June or early July. And as announced previously, we do not expect this to have a significant impact on Amarin's financial results. Turning now to Page 15. As we look to the future, the successful execution of our 5 year plan is not only focused on delivering strong results for 2025, but is also designed to position Amarin for success over the decade and beyond. We believe that a safe, reliable, resilient, secure and cleaner energy grid will be increasingly important and bring even greater value to our customers, our communities and shareholders. With this long term view in mind, we are making investments that will position Ameren to meet our customers' future energy needs and rising expectations, support our transition to a cleaner energy future, and provide safe, reliable natural gas services. The right side of this page shows that our allocation of capital is As a result of Ameren Missouri's investment in 700 megawatts of wind generation, combined with the scheduled retirement of the Meramec Coal Fired Energy Center in 2022, we expect coal fired generation to decline to just 7% of rate base and our renewable generation to increase to 6% of rate base by year end 2025. As noted previously, our current 5 year plan does not include 1200 megawatts of incremental renewable generation included in Ameren Missouri's integrated resource plan by 2020 5. These actions are just further examples of the steps we are taking to address our customers and shareholders' focus on ESG matters and achieve our net sale carbon emissions goal by 2,050. The bottom line is that we're taking steps today across the board to position Amarin for success in 2021 beyond. Moving to Page 16. Looking ahead through the end of this decade, we have a robust pipeline of investment opportunities over $40,000,000,000 that will deliver significant value to all of our stakeholders by making our energy grid stronger, smarter and cleaner. Importantly, these investment opportunities exclude any new regionally beneficial transmission projects that would increase the reliability and resiliency of the energy grid as well as enable additional renewable generation projects. Of course, our investment opportunities will not only create a stronger and cleaner energy grid to meet our customers' needs and exceed their expectations, but they will also create thousands of jobs for our local economies. Maintaining constructive energy policies that support robust investment in energy infrastructure and a transition to a cleaner future in a responsible fashion will be critical to meeting our country's future energy needs and delivering on our customers' expectations. Moving to Page 17. As we have outlined in our presentation today, we are focused on delivering a sustainable energy future for our customers, communities and our country. Consistent with that focus, yesterday, we issued our updated ESG Investor Presentation called Leading the Way to a Sustainable Energy Future. This presentation demonstrates how we have been effectively integrating our focus on environmental, social, governance and sustainability matters into our corporate strategy. This slide summarizes our strong sustainability value proposition for environmental, social and governance matters. Throughout the course of my discussion this morning, I've already covered many of these topics. A few other notable points include the fact that we were honored to again be recognized by DiversityInc as one of the top utilities in the country for diversity, equity and inclusion as well as be rated in the top 25 of all companies for ESG in their inaugural list. Finally, our strong corporate governance is led by a very talented and diverse Board of Directors focused on strong oversight of ESG matters. I encourage you to take some time to read more about our sustainability value proposition. You can find this presentation at amereninvestors dotcom. Moving to Page 18. To sum up our value proposition, we remain firmly convinced that the execution of our strategy in 2021 and beyond will deliver superior value to our customers, shareholders and the environment. We believe our expectation of a 6% to 8% compound annual earnings growth from 2021 to 2025, driven by strong rate base growth, compares very favorably with our regulated utility peers. I am confident in our ability to execute our investment plans and strategies across all four of our business segments as we have an experienced and dedicated team to get it done. That fact, coupled with our sustained past execution of our strategy on many fronts, has positioned us well for future success. Further, our shares continue to offer investors a solid dividend. Our strong earnings growth expectations outlined today position us well for future dividend growth. Simply put, we believe our strong earnings and dividend growth outlooks results in a very attractive total return opportunity for shareholders. Again, thank you all for joining us today. And I'll now turn the call over to Michael. Thanks, Warner, and good morning, everyone. Turning now to Page 20 of our presentation. Yesterday, we reported 20.20 earnings of $3.50 per share compared to earnings of $3.35 per share in 2019. Ameren Transmission earnings were up $0.13 per share, which reflected increased infrastructure investments and the impact of the Q3 on the MISO allowed base return on equity. Earnings from Ameren Illinois Natural Gas were up $0.06 per share, which reflected increased infrastructure investments and lower other operations and maintenance expenses due to disciplined cost management. Earnings in Ameren Missouri, our largest segment, increased $0.03 per share from $1.74 per share in 2019 to $1.77 per share in 2020. The comparison reflected new electric service rates effective April 1, which increased earnings by $0.23 per share compared to 2019. Earnings also benefited from lower operations and maintenance expenses, which increased earnings $0.16 per share. This was due in part to the deferral of expenses related to the fall 2020 Callaway Energy Center scheduled refueling and maintenance outage compared to recognizing all of the expenses for the spring 2019 outage at that time. The change in timing of expense recognition was approved by the Missouri PSC in early 2020 and better aligns revenue with expenses. In addition, the decline in other O and M expenses were driven by disciplined cost management exercised throughout the year. These favorable factors were mostly offset by lower electric retail sales driven by the impacts of COVID-nineteen and weather, which together reduced earnings by approximately $0.18 per share. In 2020, we experienced milder than normal summer and winter temperatures compared to near normal summer and winter temperatures in 2019. In addition, lower EMEA performance incentives reduced earnings by 0 point debt outstanding reduced earnings by 0 point recognized a onetime charitable contribution, which reduced earnings by 0 point 0 $2 per share. Moving to Hammond, Illinois Electric Distribution. Earnings decreased $0.01 per share, which reflected a lower allowed return on equity under performance based ratemaking, mostly offset by increased infrastructure and energy efficiency investments. The allowed return on equity under formulaic rate making was 7.4% in 2020 compared to 8.4% in 2019 and was applied to year end rate base. The 2020 allowed ROE was based on the 2020 average 30 year treasury yield of approximately 1.6%, down from the 2019 average of 2.6%. And finally, Ameren Parent and other results were lower compared to 2019 due to increased interest expense resulting from higher long term debt outstanding as well as reduced tax benefits primarily associated with share based compensation. Turning to Page 21. Outlined on this page are our electric sales trends for Ameren Missouri and Ameren Illinois distribution for 2020 compared to 2019. Overall, the year end results for Ameren Missouri are largely consistent with our expectations outlined in our call in May in terms of impact on total sales and earnings per share for 2020 due to COVID-nineteen. Recall that changes in electric sales in Illinois, no matter the cause, do not affect earnings since we have full revenue decoupling. Moving to Page 22 of the presentation. Here, we provide an overview of our $17,100,000,000 of strategically allocated capital plan expenditures for the 2021 through 2025 period by business segment that NOI is the approximately 8% projected rate base growth Warner discussed earlier. This plan includes an incremental $1,100,000,000 compared to the $16,000,000,000 5 year plan for 2020 through 2024 that we laid out last February. Turning to Page 23. We outlined here the expected funding sources for the infrastructure investments noted on the prior page. We expect continued growth in cash from operations as the investments are reflected in customer rates. We also expect to generate significant tax deferrals. Those tax deferrals are driven primarily by timing differences between financial statement depreciation reflected in customer rates and accelerated depreciation for tax purposes. In addition to the benefits of the accelerated tax depreciation as a result of our $1,100,000,000 investment in 700 megawatts of wind generation, we will generate production tax credits over this period. From a financing perspective, while we have no long term debt maturities in 2021, we do expect to continue to issue long term debt at the Ameren Parent, Ameren Missouri and Ameren Illinois to fund a portion of our cash requirements. We also plan to continue to use newly issued shares from our dividend reinvestment and employee benefit plans over the 5 year guidance period. We expect this to provide equity funding of approximately $100,000,000 $8,000,000 Last week, we physically settled the remaining shares under our Ford Equity sale agreement to generate approximately $115,000,000 In order for us to maintain a strong balance sheet while we fund a robust infrastructure plan, we expect incremental equity issuance of approximately $150,000,000 in 2021 $300,000,000 each year starting in 2022 through 2025. All of these actions are expected to enable us to maintain a consolidated capitalization target of approximately 45% equity. Moving to Page 24 of our presentation, I would now like to discuss key drivers impacting our 2021 earnings guidance. As Werner stated, we expect 2021 diluted earnings per share to be in the range of $3.65 to $3.85 per share. On this page and next, we have listed key earnings drivers and assumptions behind our 2021 earnings guidance broken down by segment as compared to our 2020 results. Beginning with Ameren Missouri, earnings are expected to rise in 2021. As previously noted, the majority of the 700 megawatts of wind generation investment was placed in service at the end of 2020 early 2021. As a result, we expect to see significant contributions to earnings from these investments in 2021. The 2021 earnings comparison is also expected to be favorably impacted by the Q1 in the Q1 by increased Missouri electric service rates that took effect April 1, 2020. We also expect higher weather normalized electric sales and other margins in 2021 compared to 2020, as outlined by customer class on this on the slide, reflecting the continued improvement in economic activity since the COVID-nineteen lockdowns that began in the Q2 of last year. While 2021 sales expectations are much improved over 2020, we do not expect total sales to return to pre COVID-nineteen levels this year. Further, we expect a return to normal weather in 2021 will increase Ameren Missouri earnings by approximately $0.04 compared to 2020 results. We expect the amortization expenses associated with the fall 2020 Callaway scheduled refueling and maintenance outage to reduce earnings by approximately $0.08 per share in 2021. The fall 2020 outage cost of approximately $0.12 per share was deferred pursuant to the Missouri PSC order and is expected to be amortized over approximately 17 months starting January 2021. We also expect higher operations and maintenance expenses to reduce earnings. Moving on, earnings from our FERC regulated electric transmission activities are expected to benefit from additional investments in Yarmouth, Illinois and ATXI projects made under forward looking formula rate making. This benefit will be partially offset by the absence of the impact of the 20 2Q1 on the MISO based allowed return on equity. Turning to Page 25. For Ameren Illinois Electric Distribution, earnings are expected to benefit in 2021 compared to 2020 from additional infrastructure investments made under Illinois performance based rate making. Our guidance incorporates a rate based formula based allowed ROE of 7.75% using a forecasted 1.9 percent 2020 average yield for the 30 year treasury bond, which is higher than the allowed ROE of 7 point 4% in 2020. The allowed ROE is applied to year end rate base. For Ameren Illinois Natural Gas, earnings will benefit from higher delivery service rates based on a 2021 future test year, which were effective late last month as well as from infrastructure investments qualifying for the rider investment treatment. Moving now to M and Y drivers and assumptions. We expect to increase common shares outstanding as a result of the issuance under the Ford equity sale agreement, our dividend reinvestment employee benefit plans and additional equity issuance of approximately 100 and $50,000,000 to unfavorably impact earnings per share by $0.12 Of course, in 2021, we will seek to manage all of our businesses to earn as close to our allowed returns as possible while being mindful of operating and other business needs. I'd also like to take a moment to discuss our electric retail sales outlook. We expect weather normalized Missouri kilowatt hour sales to be in the range of flat to up approximately 0.5% compounded annually over our 5 year plan, excluding the effects of our EMEA Energy Efficiency Plans using 2021 as the base year. Again, we exclude EMEA effects because the plan provides rate recovery to ensure that earnings are not affected by reduced electric sales resulting from our energy efficiency efforts. During the Illinois, we expect our weather normalized kilowatt hour sales, including energy efficiency, to be relatively flat over the 5 year plan. Turning to Page 26, any interim Missouri regulatory matters. Last October, we filed a request with the Missouri PSC to track and defer on a regulatory asset, certain COVID-nineteen related costs incurred, net of any COVID-nineteen realized cost savings. Through December 31, 2020, we have accumulated approximately $6,000,000 of net cost, and we requested additional true ups. If our requests are approved by the Missouri PSC, the ability to recover and the timing of the recovery of these costs would be determined as part of the next electric and gas rate reviews. We continue to work towards a settlement with key stakeholders. I would also note that PSC is under no deadline to issue orders. Speaking of future rate reviews, we continue to expect to file the next Ameren Missouri electric and gas rate reviews by the end of March 2021. Turning to Page 27. In Illinois Ameren Illinois Electric Regulatory Matters. In December, the ICC approved a $49,000,000 base electric distribution rate decrease in the annual rate update proceeding, with new rates effective at the beginning of the year. This marks the 3rd consecutive overall reduction in rates and the 7th overall rate decrease since performance based rate making began in 2011. In Ameren Illinois natural gas regulatory matters last month, the ICC approved a $76,000,000 annual increase in gas distribution rates using a 2021 future test year, a 9.67 percent return on equity and a 52% equity ratio. The $76,000,000 included $44,000,000 of annual revenues that would otherwise be recovered in 2021 under Ameren Illinois qualifying infrastructure plant and other writers. New rates were effective in late January. Finally, turning to Page 28. We have a strong team and are well positioned to continue to execute our plan. We delivered strong earnings growth in 2020, and we expect to deliver strong earnings growth in 2021 as we continue to successfully execute our strategy. And as we look ahead, we expect 6% to 8% compound earnings per share growth from 2021 to 2025, driven by robust rate base growth and disciplined cost management. Further, we believe this growth will compare favorably with the growth of our regulated utility peers. And Ameren shares continue to offer investors an attractive dividend. In total, we have an attractive total shareholder return story that compares very favorably to our peers. That concludes our prepared remarks. We now invite your questions. Our first question comes from Julien Dumoulin Smith with Bank of America. Please proceed with your question. Good morning, Junior. Good morning, team. Congratulations on Thank you, sir. How are you doing? Quite well. Thank you. A little frigid here in Texas. I suppose if you could elaborate a little bit, I know you provided some risk here through the period, as well as elaborate a little bit more on just exactly what's transpired and what the repairs are alongside. It seems like you're going to seek the bulk of the recovery through insurance and warranties here, but if you can elaborate there too. Yes. Thanks, Joanne. Lots of stuff to unpack there. I'm going to first ask Marty to talk a little bit about sort of what happened in the event and some of the actions that we're taking to make sure we get timely recovery. And then we'll talk a little bit about how we're balancing the fuel and purchase power costs. So Marty, why don't you talk a little bit about the event at Callaway and how we're managing through that place? Yes, sure, Warner, and good morning, Julie. Yes, as we talked about in our prepared remarks, during the return to full power after our last refueling and maintenance outage, we experienced an issue with the electric generator, so non nuclear part of the plant non nuclear operating issue. So subsequently, we did open up generator for inspection and identified issues with both the rotor as well as the stator. So we decided that significant components did need to be replaced. Those are long lead time materials that need to be manufactured, installed, tested, etcetera, so that we can ultimately make sure that we bring the plant back safely and sustainably. And we do estimate that that will take till, as we said, late June, early July. So during this period of time, the plan does remain down. But as we suggested, we're going to be doing everything we can to reduce the ultimate costs, including pursuing recovery of costs through warranties as well as we've made insurance claims and to have insurance both on the property side as well as for accidental outage impacts as it relates to loss generation. So I think that summarizes generally the event and what we're doing from a warranty and insurance perspective. I think Julian, what we're doing from an operational perspective is what we do when CalA has its normal outages. We adjust the efforts and the outages or move those around for our coal fired energy centers. Now I got to tell you, I'm pleased to say during this very cold period, our coal fired energy centers operate extremely well. And we do the extremely well. And we do the same thing with the rest of our generating use, because all those go to mitigate the impact that Callaway is out. And so those are things that our team has already checked and adjusted for during this period of time. And we're very focused on just doing the work that Marty described extremely well and getting Callaway back in service for the benefit of our customers. Excellent. And if I can sneak in this one on legislation. I mean, there's been some consternation out in the market about this 30 year treasury gyration and some of the proposals out there. I know a lot of bills floating out there. There's been some pickup in the attention on that nuance. How would you characterize that? It seems like perhaps it's part of the back and forth in negotiations in the early part of the session here. Well, you're right. There are a lot of bills being discussed and actually filed in the state of Illinois. And I'd say, we're excited about the Downstate Clean Energy Affordability Act. And really the enhancements that were made to the Act that we just filed last year, it does several things. 1, Julien, it addresses the issue that you talked about. It really is no longer that Downstate Clean Energy Affordability Act that was filed isn't based on a 30 year treasury. It is doing what legislators really wanted to have done back in 2012 when the modernization action plan was put in place. That was simply to try and have the return on equity really become very close to the national average. And that's exactly what's reflected in there. And so that's why we like that bill. And of course, we like the bill that was filed because it not only applies to our electric business, but our gas business because we're firmly convinced that performance based rate making has been terrific things for the state of Illinois in terms of reliability, in terms of affordability and jobs and we think we can duplicate that in our natural gas business. We think that's the best way forward. Yes. That sounds like that's a lot of work together, seems like part of the year. I'm sorry, Julien, you broke up a little bit there. I'm sorry. Sorry, the gas as well electric seems like a priority. Exactly, exactly right. So look, just to sum it up, there are a lot of bills out there, obviously, very early innings of the session. Yes, there are some that are trying to take different approaches to it. The only thing you can rest assured is that Richard Mark and his team, they're at the table. We're talking with key stakeholders and we are strongly supporting the Downstate Clean Energy Affordability Act. Excellent guys. I'll pass it. Thanks for the time. Thanks Julien. Thank you. Our next question comes from Insoo Kim with Goldman Sachs. Please proceed with your question. Good morning, Insoo. Good morning. Thanks for the time. I guess my first question, going back to the Callaway outage a little bit and the your work to mitigate any of the cost increases from purchased power fuel. Is the expectation currently that during this time period, whether it's with the cold snap now or in the next few months with the outage ongoing that the pass through will still happen through bills? Or is there a contemplation that maybe there will be some type of a deferral, if anything is set up? This is Michael. Yes, you say you have it right. I mean, we have a fuel adjustment clause in place into that fully expected those costs would flow through that. There's a 95.5 percent sharing on that mechanism. As Marty said, I mean, there is this look, do everything we can to possibly mitigate the overall impact on customers. And so there is insurance that both on the property side as well as the replacement power side, not opining on whether or not we're going to get recovered there. But to the extent that we do, it obviously would go to mitigate a big part of that impact. Got it. And then on your on the equity plans through 2025, correct me if I'm wrong, but I think the last time you were contemplating more of the 150,000,000 dollars run rate for the year through 2024 and now it seems like that's stepped up for a bit starting 2022. Is that contemplating just that base CapEx going through 2025 or somewhat inclusive of potential upside from renewable projects or other items? No. Look, you're looking at it the right way. I mean, it's up about $150,000,000 per year starting in 2022 from where we were before. And it really is driven by we got about $1,100,000,000 additional capital here, dollars 16,000,000,000 where we were last February to where we are today, dollars 17.1 $1,000,000,000 And it really is just to continue to conservatively finance this balance sheet. We like our ratings where they are in Baa1 and Moody's BBB at S&P and maintain that capital structure right at about 45%. So that's really what it's being driven to do at the end of the day, I assume. Got it. And just if I may, what range of asset quoted debt should we be considering with this plan? Yes. We haven't specifically given that in the past. I mean, at Moody's, we have a threshold of 3rd or at S and P, we have a threshold of 13%, we have a 17% threshold at Moody's. I would tell you, historically, we've been 19%, 20%. It's been coming down a little bit over time as we've invested more in capital, but we've had some good margins there. Our next question comes from Jaresh Chopra with Evercore ISI. Please proceed with your question. Good morning. Hey, good morning guys. Thanks for taking my question. Absolutely. Going back to thank you. Going back to just the ROE, can you so you're pretty clear on what you're assuming for 2021, but maybe just how you're thinking about 30 year in the context of your 5 year plan? Yes. I appreciate the question. We historically you're right. I mean, we're assuming 1.95% here for this year. And as you think, Doris, about our overall range, the 6% to 8% off of this $3.75 it provides you quite a bit of range as you go out in time, obviously, about 40 percent 0.40 in total. And we really haven't historically said what we are assuming. It obviously accommodates a number of things within that in terms of those ROEs, in terms of CapEx, in terms of regulatory outcomes, etcetera. But we haven't specifically said what we're targeting from a 30 year treasury. Got it. Is it can we assume that like with the most of the forecast here that you're assuming that yields creep up higher? Is that a fair assumption? Or are you kind of modeling 30 or flat and that would be upside? It is a wide range and lots different things kind of accommodated in there. I mean, obviously, the 30 years moved quite a bit here in the last few months or so, but difficult to speculate exactly where it's going. Understood. Okay. I understand that. Maybe just one quick one. The 1.2 gigawatt of the investment that you highlight in the Missouri IRP, what's the cadence of timing and cadence of including that in the current 5 year plan? Or do you think that falls out of the current 5 years and it's more like 2025 and beyond? So, yes, this is Warner. Look, as we've said before, we're focused on getting some of these renewable energy projects done consistent with our integrated resource plan. And so Marty and his team are working very hard looking at several proposals. And as we said in our prepared remarks that we plan on filing some CCNs still in 2021 to start Simply put, once we do that, we get further along in the regulatory process. We finish our negotiations with developers. We think about the interconnection agreements to the extent needed. All those things will really dictate when we ultimately put them in our CapEx plan. But I would not suggest that 1200 megawatts are outside of all of that will be outside of 2025 period. Our next question comes from Steve Fleishman with Wolfe Research. Please proceed with your question. So just a question on the dividend increase you did, which obviously very happy about, but you did do it kind of off cycle. So you kind of did an increase higher increase than you've been doing 5 months after you did your last one. So I'm kind of curious like why didn't you do that in October or why don't you wait till next October? Is there any other kind of sense on what like why now and is this kind of the timing when you're going to do dividend increases going forward? Yes. Look, that's a great question. Look, we've discussed with you and investors in the past that, look, Ameren's dividend and his dividend policy are really important matters to our Board of Directors. And so clearly, the Board took careful consideration in terms of thinking 1st and foremost about the dividend policy. And as you know, we announced that dividend policy change that talked about the future dividend growth is really going to be in line with our long term earnings per share growth and within our payout ratio of 55% to 70%, which is what we talked about in the past. And so when they did that, we all collectively did that, we also carefully considered the practice that we've been using over the last several years of raising the dividend in the fall in October. And at the end of the day, the Board of Directors came to the conclusion that it was really just appropriate to align the dividend increase we announced last week with the simultaneous update into the dividend policy, which I just described. And then also to align it with our discussion of our long term earnings guidance, which as you know, we typically do right now at the beginning of the year. And so I can never tell you exactly what the Board will do in the future and I would expect the practice that we have been pointing this year to continue in the future. So, of course, all future dividend decisions, as we've said before, are driven by all kinds of things, earnings growth, cash flow, investments, business conditions, those types of things. But I don't expect the practice, Steve, that we've employed this year to be consistent in the future. Our next question comes from Paul Patterson with Glenrock Associates. Please proceed with your question. With respect to the legislation and just sort of to follow-up on Julien's question, it seems like the sort of you've got a downstate approach. And as you know, there and as you mentioned, there are other builds and stuff going on. I'm just wondering sort of the strategy there or the thoughts about having sort of one approach for downstate versus upstate? Could you just sort of elaborate a little bit more on the strategy there? And just sort of in general, what your thoughts are about what might be going on? Sure. Look, really our message around this, Paul, hasn't really changed. We talked last year and we'll continue to talk about that. But as we see it, as our legislators see it, the downstate needs are different. Keep in mind, when we think about downstate, I mean, we are the major energy supplier downstate, not just on the electric side, but on the gas side as well. And so as our downstate legislators looked at it and they clearly recognize there's some broad of course, we're engaged in those conversations because we want to make sure that of course, we're engaged in those conversations because we want to make sure that policy decisions made for the nuclear plants and others don't have negative implications for our customers downstate. So we're engaged there. But similarly, we know the importance of investing in energy infrastructure on the electric and gas businesses and we don't want to lose sight of that. And so we have proposed legislation like we did last year that really is affecting the downstate, which is very consistent with what the state of Illinois wants to move towards, a cleaner energy future in this Downstate Affordability Act isn't just about grid modernization, let's just be clear, it is in part and certainly around the gas business, but also is driving towards greater electrification, greater solar and battery storage and it's all just to have policies that support these critical investments. So look, at the end of the day, we believe this is an appropriate approach. Of course, we're still early in the session, Julian and I discussed a little while ago. And so we'll engage with key stakeholders, other utilities on these important matters. This is the direction that we think is appropriate and certainly the sponsors of the legislation do as well. Okay, great. And then appreciate the data on the cost reductions and build out, but just in general, as you've updated your forecast and everything here, what's your expectation for the potential build impact or just roughly speaking with this growth trajectory that you guys have? Yes. I might comment just specifically for on O and M. I'm not going to really comment on the overall bill impact itself. I think we've done a very good job obviously over time in managing that in terms of impact to customers. But if you think about the O and M piece of that, as Warren pointed out, we've had some good success in managing those costs really on a flat basis over the last 5 years. And as we think about the future, we're obviously mindful of the capital that we're investing and we're really focused on keeping that O and M flattish over this 5 year forecast as well. Okay. Thanks so much. Have a good one. You bet. Stay warm. You bet. Have a good weekend. Be safe. Bye. Our last question comes from the line of Jeremy Tonet with JPMorgan. Please proceed with your question. Jeremy, good morning. Good morning. Few questions here. Thanks for taking my questions. Looking at your prior rate base disclosures in today's update, growth rates of growth into 2025 is closer to 9%, if I'm doing the math there right. Can you speak to the CapEx drivers here versus the typical industry profile that is more hand loaded on the CapEx? And do you have any thoughts on ultimate? It. Hey, Jeremy, I'm sorry. You were breaking up. It was hard to hear the first part of your question. So rate base growth. Yes. If you could start again, I apologize, it just wasn't coming across clearly, please. Sure. Can you hear me now? Is this better? Yes, that's much better. Thank you. Sorry about that. So looking at your prior rate base disclosures in today's update, it looks like growth into 2025 is closer to 9%. Can you speak to the CapEx drivers here versus typical industry profile, which is more kind of front end loaded on the CapEx? And then just also kind of thinking about Missouri Renewables ownership and transmission investments as well, do you see this as additive to this growth, extending the growth runway or driving any other impacts here? Yes. So let me I'll answer the second part and then Michael maybe you can get a little bit into the math in the first part. A couple of things. With regard to the renewables and the transmission, we do see these as meaningful opportunities to continue our rate base growth. Now as we said in the past, we're not out here given our 5 year plan and whether it would be 100% additive in all respects, that'd be premature for me to say that. But to be clear, we see the real needs clearly in our integrated resource plan for renewables and we are taking steps as we discussed earlier to begin executing that plan. In fact, we've already started that as you know with regard to the 700 megawatts. But we believe it's absolutely prudent and appropriate to do more as we transition to a cleaner energy future. But that cleaner energy future really is not going to be coming forth if we don't have greater levels of investment in transmission. And so as we pointed out in our slides and before that these large regional transmission projects, which have really put our country in the position where it is today in terms of growth and renewables, we're going to need to do more of that. And so we see those as greater opportunities. When they come in, it's a little early to say. We have been actively working with MISO and other key stakeholders to try and put the process in place for those transmission investments to get going on those. As I've said before, those take time. They're not going to be done here in a year or 2. If anything, we might see some towards the back end of our '21 to 'twenty five plan, but we certainly see greater levels of investment in transmission in the next decade to enable this transition to a cleaner energy future. So stay tuned in terms of how it ultimately gets additive, but we see that as clearly potential upside opportunities. And Michael, I'll let you address specific rate base question. Yes, Jeremy. And I'm not sure I completely followed your question. But let me here and then you can do a little follow-up if it doesn't hit what you're looking for. I mean, the overall rate base growth obviously has come down a little bit from where we were in February. It's just a function of obviously a higher jump off point here in 2020, but still very robust rate base growth of 8% as is noted on the slide. As we think about beyond 'twenty five, I mean, obviously, there's a large pipeline of opportunity there, dollars 40 plus 1,000,000,000 that we've indicated. And look, we'll have to just continue to assess over how we continue to phase this into the capital plan. We're mindful to the previous question about customer affordability and just managing overall rate impact. So that's got to be factored into all of this, just overall financing, those types of things. So I think there's lots of opportunity there in terms of the overall runway, and we'll just continue to update as we move through time. Got it. That's helpful. Maybe just to clarify, if I look at kind of the power plan, what 24 was and 25 is to go for the rate base, I think it looks like a 9% step up there. And so but we could take that discussion offline. Maybe just kind of building off some of the other comments you've had here. Given this week's extreme weather, how has your system performed overall, I guess, in light of everything? But more importantly, do you expect any local policy impacts as a result of this week, whether it's capacity resiliency, generation transition or anything come from these events? Yes. So Jeremy, this is Warner again. Look, a couple of things. One, our system performed really quite well. Do we have our share of challenges because of the overall impacts to the energy grid broadly in different areas of the country, yes, we're impacted by that because of the interconnectability. But our system performed well. And as I said before, certainly the fact that we had our coal fired energy centers running well, our gas storage operations doing very well. And those investments that we've been making over the last 5, 10 years have really paid off during this period of time. So, no, we as I said, we did not have any significant reliability issues and we're pleased to say that. Now, when you step back and say what is going to happen as a result of all this, I believe there will be greater levels of oversight or perhaps hearings as we all collectively try to understand how we can continue to improve the grid. I'm not going to speculate where it will be, whether there will be, I think, likely state or federal matters, but we're just what we've been very focused on as an industry is making sure that we're taking care of our customers collectively. But there's going to be more to be had on this to be sure. And we look forward to engaging with stakeholders should we be asked to, but I can be pleased to tell you and others that our system held up well and we delivered customers safe, reliable electric and natural gas during this period of time. Got it. That's very helpful. And just one last one if I could on Callaway here and the outage. And just wanted to come back to how much ultimate cost recovery do you expect to seek from warranties in the insurance? And just are there any early investigations, findings that inform your kind of confidence here on ultimate liability and prudence? And Jeremy, honestly, we're it'd be premature for us to comment on that. We're dealing with the appropriate parties from a warranty perspective, from an insurance perspective, that work continues. So if we when we have material updates on that, we'll provide a bit. It's just too early for us to really comment any further at this stage. Understood. Appreciate that. Thank you so much for taking my questions. You bet. Have a good weekend. We have reached the end of the question and answer session. I'd like to turn the call back over to Andrew Kirk for closing comments. Thank you for participating in this call. A replay of this call will be available for 1 year on our website. If you have questions, you may call the contacts listed on our earnings release. Financial analyst inquiries should be directed to me, Andrew Kirk. Media should call Tony Perreno. Again, thank you for your interest in Amarin, and have a great day.