Ameren (AEE) Q4 FY25 earnings call: guidance and Q&A

Why are the 2.2 GW executed ESAs not included in the current guidance, and how does this impact the expectation of achieving the upper end of the 6-8% EPS growth range?

Marty Lyons stated that the 2.2 GW of executed ESAs represent upside to the 1.2 GW of new demand assumed in the 6-8% EPS growth guidance, increasing confidence in delivering near the upper end of that range, with potential for even higher depending on ramp rates. He acknowledged that there are still significant milestones ahead for these projects.

“That, of course, was sort of the baseline that was in our preferred resource plan that we filed with the commission this past year and is shown on Page 13 of the slide deck we posted today. But importantly, that 1.2 gigs was in the guidance we provided, that 6% to 8%. And as we guided last year and we continue to guide, we really expect to be able to deliver near the upper end of that range over the 5-year period. So as you look at this 2.2 gigawatts of ESAs that certainly represents upside to the sales growth that has been embedded in that 6% to 8% guidance.”

asked by Julien Dumoulin-Smith · answered by Martin Lyons

How do hybrid securities fit into the financing plan, and are they accretive to the 6-8% EPS growth target?

Marty Lyons indicated that utilizing hybrid securities might be slightly accretive in the short term, but potentially neutral over the long term due to associated interest costs. He emphasized that ATM issuances remain a heavily relied-upon financing approach, but the company keeps its options open.

“I think over time, we'd have to evaluate whether it is or isn't from that standpoint. Obviously, there's the interest cost associated with those securities. So it may be more of a neutral over time, but something that we're going to evaluate as we think about the financing plans we have ahead.”

asked by Julien Dumoulin-Smith (Jefferies) · answered by Martin Lyons

What causes the lag between the 10.6% rate base CAGR and the 6-8% EPS CAGR, and can this lag be narrowed?

Marty Lyons explained that the primary difference is the dilution from planned equity issuance. He added that improved focus on hyperscaler sales could help reduce the differential between allowed and earned ROEs, and acknowledged the inherent regulatory lag between rate reviews.

“Look, I think if you look at our rate base growth about 10.6%, and you think about the amount of equity that we plan to issue, and think about the dilution from that, that's the primary difference between the 10.6% rate base CAGR, and where we plan to deliver from an EPS perspective, which, as I just said a moment ago, is consistently towards the upper end of that 6% to 8% range.”

asked by Andrew Kadavy (Wells Fargo) · answered by Martin Lyons

Are there concerns about potential cancellations of data center projects despite signed ESAs, and when do take-or-pay provisions become binding?

Marty Lyons stated no current concerns about cancellations but acknowledged future milestones. Michael Moehn clarified that the tariff and ESAs include protective provisions for existing customers, such as termination clauses, minimum monthly payments, and security requirements, in case projects do not materialize.

“I mean, there are a number of provisions, obviously, in the tariff itself and the ESA that are protective to customers in terms of termination provisions, minimum monthly payment, security requirements, et cetera. So a number of links have gone -- number of us have gone to great links here to make sure that we're protecting customers at the end of the day as well, in case that would happen.”

asked by Andrew Kadavy (Wells Fargo) · answered by Michael Moehn

How should investors think about the timing and visibility of investment opportunities beyond the current 5-year plan, particularly regarding potential lumpiness?

Marty Lyons highlighted a $70 billion 10-year investment pipeline and the $31.8 billion 5-year plan. He noted that large generation investments, like the combined cycle facility planned for 2031, can introduce lumpiness. He also pointed to the upcoming Missouri IRP update and Illinois grid plan filing as sources for more detailed year-by-year investment plans.

“At times, it will be a bit lumpy though, as we -- especially as you think about some of the infrastructure investments we have with respect to generation resources, they can certainly be more significant investments and create some lumpiness in the investment profile.”

asked by Diana Niles (JPMorgan) · answered by Martin Lyons

How does the updated plan impact customer bills, especially in Missouri, and do the ESAs help defray costs for existing customers?

Marty Lyons emphasized Ameren's focus on affordability and disciplined cost control, aiming to keep O&M growth below inflation. He explained that Missouri Senate Bill 4 and the PSC-approved tariff ensure new data centers pay for their connection and service costs, providing reasonable assurance that existing customers are not burdened and potentially benefiting from increased sales.

“But again, the goal is for them to pay their fair share, the cost of providing them service, and at a minimum, to not have a burden fall on the rest of our customers. And we're certainly hopeful that over time, as these sales increase, that there would actually be benefits for the remainder of our customers.”

asked by William Appicelli (UBS) · answered by Martin Lyons

Does Ameren see itself as having a role in educating communities, particularly in Missouri, about the benefits of data centers and their special tariffs, given potential public pushback?

Marty Lyons stated Ameren's role is to clarify the impacts on reliability and affordability of energy services, and to speak to the legislation, tariffs, and generation resources. He noted that broader economic benefits (jobs, development) are primarily for data center developers and hyperscalers to communicate.

“We think it's, again, important though for us to be there and be engaged and to be able to speak to the legislation that's been put in place, the terms and conditions of our tariffs, the ESAs that we're assigning also important, the generation resources that we have available, the generation resources that we're building.”

asked by Sophie Karp (KeyBanc) · answered by Martin Lyons

How has the regulatory climate in Illinois evolved, and is there potential for upside from the multiyear grid plan or other proceedings?

Marty Lyons described the Illinois regulatory environment as stabilizing and improving, citing recent constructive decisions like rate increases and reconciliation adjustments. He highlighted significant ongoing investments and the multiyear grid plan filing. Michael Moehn added that the new IRP construct for Illinois is a positive step for long-term reliability.

“If you look at this past year end, and you can see some of this on slide, i think, Slide 21 that we provided, but the commission approved the reconciliation for our last multiyear rate plan in December. In November, we got an order in our gas case that we had pending. And what you saw there is both an increase in average rate base going from $2.85 billion to $3.2 billion, and you saw an ROE move from 9.44% up to 9.6%.”

asked by Sophie Karp (KeyBanc) · answered by Martin Lyons