ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Ameren, headquartered in St. Louis, Missouri, is a public utility holding company whose primary assets are its equity interests in its subsidiaries.Ameren’s subsidiaries are separate, independent legal entities with separate businesses, assets, and liabilities. Dividends on Ameren’s common stock and the payment of expenses by Ameren depend on distributions made to it by its subsidiaries.
Below is a summary description of Ameren’s principal subsidiaries – Ameren Missouri, Ameren Illinois, and ATXI. Ameren also has other subsidiaries that conduct other activities, such as providing shared services. A more detailed description can be found in Note 1 – Summary of Significant Accounting Policies under Part II, Item 8, of this report.
•Ameren Missouri operates a rate-regulated electric generation, transmission, and distribution business and a rate-regulated natural gas distribution business in Missouri.
•Ameren Illinois operates rate-regulated electric transmission, electric distribution, and natural gas distribution businesses in Illinois.
•ATXI operates a FERC rate-regulated electric transmission business in the MISO.
Ameren has four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission. The Ameren Missouri segment includes all of the operations of Ameren Missouri. Ameren Illinois Electric Distribution consists of the electric distribution business of Ameren Illinois. Ameren Illinois Natural Gas consists of the natural gas business of Ameren Illinois. Ameren Transmission primarily consists of the aggregated electric transmission businesses of Ameren Illinois and ATXI. See Note 16 – Segment Information under Part II, Item 8, of this report for further discussion of Ameren’s and Ameren Illinois’ segments.
Ameren’s financial statements are prepared on a consolidated basis and therefore include the accounts of its majority-owned subsidiaries. All intercompany transactions have been eliminated, except as disclosed in Note 13 – Related-party Transactions under Part II, Item 8, of this report. Ameren Missouri and Ameren Illinois have no subsidiaries. All tabular and graphical dollar amounts are in millions, unless otherwise indicated.
The following discussion should be read in conjunction with the financial statements contained in this Form 10-K. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. The discussion also provides information about the financial results of our business segments to provide a better understanding of how those segments and their results affect the financial condition and results of operations of Ameren as a whole. Discussion regarding our financial condition and results of operations for the year ended December 31, 2019, including comparisons with the year ended December 31, 2020, is included in Item 7 of our Form 10-K for the year ended December 31, 2020, filed with the SEC on February 22, 2021.
In addition to presenting results of operations and earnings amounts in total, we present certain information in cents per diluted share. These amounts reflect factors that directly affect Ameren’s earnings. We believe this per diluted share information helps readers to understand the impact of these factors on Ameren’s earnings per diluted share.
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OVERVIEW
Our core strategy is driven by the following three pillars:
Improved Reliability(f)
Rate Base ($ in billions)(a) Constructive Regulatory Frameworks(c)
Segment Regulatory Framework
Key announcements, updates, and regulatory outcomes
The COVID-19 pandemic continues to affect our results of operations, financial position, and liquidity. While our electric sales volumes, excluding the estimated effects of weather and customer energy-efficiency programs, increased in 2021, compared to 2020, and total sales volume levels were more comparable to pre-pandemic levels, there has been a shift in sales volumes by customer class, with an increase in residential sales, and a decrease in commercial and industrial sales. The continued effect of the COVID-19 pandemic on our results of operations, financial position, and liquidity in subsequent periods will depend on its severity and longevity, future regulatory or legislative actions with respect thereto, and the resulting impact on business, economic, and capital market conditions. We continue to assess the impacts the COVID-19 pandemic is having on our businesses, including impacts on electric and natural gas sales volumes, liquidity, bad debt expense, and supply chain operations. For further discussion of these and other matters discussed below, see Note 1 – Summary of Significant Accounting Policies and Note 2 – Rate and Regulatory Mattersunder Part II, Item 8, of this report, and Results of Operations, Liquidity and Capital Resources, and Outlook sections below. In addition, for information regarding Ameren Illinois’ suspension and
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subsequent reinstatement of customer disconnection activities and late fee charges for nonpayment, see Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report.
Due to extremely cold winter weather in mid-February 2021, Ameren Missouri and Ameren Illinois experienced higher than anticipated commodity costs for natural gas purchased for resale and purchased power, which contributed to the acceleration of the timing of certain planned 2021 long-term debt issuances. Ameren Missouri and Ameren Illinois have cost recovery mechanisms in place that provide recovery of the higher natural gas costs and purchased power from customers over periods of time established under the applicable mechanisms.
In January 2021, Ameren Missouri acquired a 300-MW wind generation project located in northwestern Missouri. As of June 30, 2021, Ameren Missouri had placed the project in service as the Atchison Renewable Energy Center. The purchase price of the energy center was approximately $500 million, including an immaterial amount of transaction costs. In December 2020, Ameren Missouri acquired a 400-MW wind generation project located in northeastern Missouri for approximately $615 million, and placed the assets in service as the High Prairie Renewable Energy Center. The purchase price included $564 million of cash, a deferred purchase price obligation withheld as credit support in relation to certain potential claims, contingent consideration, and transaction costs. Both renewable energy centers support Ameren Missouri’s compliance with the Missouri renewable energy standard.
During its return to full power after the completion of the last refueling and maintenance outage in late December 2020, the Callaway Energy Center experienced a non-nuclear operating issue related to its generator. After replacement of certain key components of the generator, the energy center returned to service in early August 2021. The cost of generator repairs was approximately $60 million, which was largely capital expenditures. See Note 9 – Callaway Energy Center under Part II, Item 8, of this report for additional information.
In August 2021, the United States Court of Appeals for the Eighth Circuit issued a decision that affirmed the United States District Court for the Eastern District of Missouri’s January 2017 liability ruling and the district court’s September 2019 remedy order as it related to the installation of a flue gas desulfurization system at the Rush Island Energy Center, but reversed the order as it related to the installation of a dry sorbent injection system at the Labadie Energy Center. In November 2021, the court of appeals issued an order denying requests for consideration previously sought by both Ameren Missouri and the United States Department of Justice. Based on its assessment of available legal, operational and regulatory alternatives, Ameren Missouri has determined not to further appeal the court rulings and, in December 2021, filed a motion with the district court to modify the remedy order to allow the retirement of the Rush Island Energy Center in advance of its previously expected useful life in lieu of installing a flue gas desulfurization system. The district court is under no deadline to issue a ruling revising the remedy order. In January 2022, the MISO completed a preliminary assessment regarding potential impacts of the retirement to the regional electric power system, which indicated transmission upgrades and voltage support would be needed in advance of the retirement to address reliability concerns. In February 2022, Ameren Missouri expects to formally notify the MISO of its intent to retire the Rush Island Energy Center. Upon receipt of the formal notification, the MISO will conduct a final reliability assessment. The MISO must also separately approve the specific upgrades and transmission support required to address reliability concerns noted in the assessment. Related to this matter, in February 2022, the MoPSC issued an order directing the MoPSC staff to review Ameren Missouri’s planned accelerated retirement of the Rush Island Energy Center, including potential impacts on the reliability and cost of Ameren Missouri’s service to its customers, Ameren Missouri’s plans to mitigate the customer impacts of the accelerated retirement, and the prudence of Ameren Missouri’s actions and decisions with regard to the Rush Island Energy Center, among other things. The MoPSC staff is under no deadline to complete this review. Ameren Missouri expects to seek approval from the MoPSC to finance the costs associated with the retirement, including the remaining unrecovered net plant balance associated with the facility, through the issuance of securitized utility tariff bonds pursuant to the Missouri securitization statute that became effective in August 2021.See Note 14 – Commitments and Contingencies under Part II, Item 8, of this report for additional information.
In September 2021, the MoPSC issued an order approving Ameren Missouri’s energy savings results for the second year of the MEEIA 2019 program. As a result of this order, and in accordance with revenue recognition guidance, Ameren Missouri recognized revenues of $9 million in 2021.
In December 2021, the MoPSC issued orders in Ameren Missouri’s 2021 electric service and natural gas delivery service regulatory rate reviews. The orders will result in increases of $220 million and $5 million to Ameren Missouri’s annual revenue requirements for electric retail service and natural gas delivery service, respectively. The electric revenue requirement increase is based on a rate base of $10.2 billion, infrastructure investments as of September 30, 2021, and a change in the depreciable lives of the Sioux and Rush Island energy centers’ assets consistent with Ameren Missouri’s 2020 IRP. The electric order did not specify an ROE, but specified that Ameren Missouri’s September 30, 2021 capital structure, which was composed of 51.97% common equity, will be used in the PISA and RESRAM. The electric rate order provides for the continued use of the FAC and trackers for pension and postretirement benefits, uncertain income tax positions, certain excess deferred income taxes, and renewable energy standard costs that the MoPSC previously authorized in earlier electric rate orders. It also establishes a five-year recovery period for $61 million of certain costs associated with the Meramec Energy Center, which is expected to be retired in 2022. The orders also approved for recovery $9 million of certain costs and forgone customer late fee and reconnection fee revenues resulting from the COVID-19 pandemic that were accumulated pursuant to March 2021 MoPSC orders. The new electric and natural gas rates will become effective on February 28, 2022.
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In February 2022, Ameren Missouri filed an update to its Smart Energy Plan with the MoPSC, which includes a five-year capital investment overview with a detailed one-year plan for 2022. The plan is designed to upgrade Ameren Missouri’s electric infrastructure and includes investments that will upgrade the grid and accommodate more renewable energy. Investments under the plan are expected to total approximately $8.4 billion over the five-year period from 2022 through 2026, with expenditures largely recoverable under the PISA and the RESRAM. The planned investments in 2024 through 2026 are based on the assumption that Ameren Missouri requests and receives MoPSC approval of an extension of the PISA from December 2023 to December 2028.
In March 2021, the ICC issued an order approving Ameren Illinois’ requested tariff to reconcile its electric distribution service revenue requirement once Ameren Illinois ceases to update customer rates under performance-based formula ratemaking. The last update under such ratemaking is anticipated to be for 2023 customer rates. The tariff would allow Ameren Illinois to reconcile its revenue requirement for customer rates established for 2022 and 2023. To utilize the reconciliation, Ameren Illinois is required to file a request to update its electric distribution service rates through either a traditional regulatory rate review, which may be based on a future test year and would reflect a proposed ROE subject to ICC approval, or through the filing of an MYRP, which Ameren Illinois expects to file for rates effective beginning in 2024 pursuant to the IETL as described below. The rate update request would need to be filed by mid-January 2023. Pursuant to the order, Ameren Illinois’ 2022 and 2023 revenues would reflect each year’s actual recoverable costs, year-end rate base, and a return at the applicable WACC, with the ROE component based on the annual average of the monthly yields of the 30-year United States Treasury bonds plus 580 basis points. The revenue requirement reconciliation adjustment would be collected from, or refunded to, customers within two years from the end of the reconciled year.
In September 2021, the IETL was enacted, which resulted in changes to the regulatory framework applicable to Ameren Illinois’ electric distribution business, among other things. The IETL allows Ameren Illinois to file an MYRP with the ICC by mid-January 2023, with rates effective beginning in 2024. Subject to a constructive outcome regarding the ICC’s determination of performance metrics, Ameren Illinois anticipates filing an MYRP by mid-January 2023 to establish rates for 2024. Under the MYRP, the ICC would approve base rates for electric distribution service to be charged to customers for each calendar year of a four-year period, based on each year's forecasted recoverable costs, an ICC-determined ROE applied to each calendar year of the four-year period, and a common equity ratio of up to 50% being deemed prudent and reasonable by law, with a higher equity ratio requiring specific ICC approval. The approved ROE would be subject to adjustment during the four-year period based on certain performance metrics, with aggregate symmetrical performance-based ROE incentives and penalties ranging from 20 to 60 basis points. The MYRP would also allow Ameren Illinois to reconcile electric distribution service rates to its actual revenue requirement on an annual basis, subject to an aggregate reconciliation cap of 105% of the annual revenue requirement approved by the ICC. Certain variations from forecasted costs and costs recovered through riders outside of base rates would be excluded from the reconciliation cap. Electric distribution service revenues would continue to be decoupled from sales volumes under an MYRP. If Ameren Illinois does not file an MYRP for rates effective beginning in 2024, its next opportunity to file an MYRP would be for rates effective beginning in 2028.
In July 2021, the ICC issued an order approving Ameren Illinois’ energy-efficiency plan that includes annual investments in electric energy-efficiency programs of approximately $100 million per year from 2022 through 2025. Pursuant to the IETL, the planned annual investments in electric energy-efficiency programs will increase to approximately $120 million. Ameren Illinois expects to file a revised energy-efficiency plan with the ICC by early March 2022 to reflect the expected increased level of annual investments. The ICC has the ability to reduce the amount of electric energy-efficiency savings goals in future plan program years if there are insufficient cost-effective programs available, which could reduce the investments in electric energy-efficiency programs. The electric energy-efficiency program investments and the return on those investments are collected from customers through a rider and are not recovered through the electric distribution service performance-based formula ratemaking framework.
In December 2021, the ICC issued an order in Ameren Illinois’ annual update filing that approved a $58 million increase in Ameren Illinois’ electric distribution service rates beginning in January 2022. This order reflected an increase to the annual performance-based formula rate based on 2020 actual recoverable costs and expected net plant additions for 2021, an increase to include the 2020 revenue requirement reconciliation adjustment including a capital structure composed of 51% common equity, and an increase for the conclusion of the 2019 revenue requirement reconciliation adjustment, which was fully refunded to customers in 2021, consistent with the ICC’s December 2020 annual update filing order.
In December 2021, the ICC issued an order in Ameren Illinois’ annual update filing that approved electric customer energy-efficiency rates of $61 million beginning in January 2022, which represents an increase of $10 million from 2021 rates.
In February 2021, Ameren’s board of directors increased the quarterly common stock dividend to 55 cents per share, resulting in an annualized equivalent dividend rate of $2.20 per share. In February 2022, Ameren’s board of directors increased the quarterly common stock dividend to 59 cents per share, resulting in an annualized equivalent dividend rate of $2.36 per share.
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Earnings
Net income attributable to Ameren common shareholders was $990 million, or $3.84 per diluted share, for 2021, and $871 million, or $3.50 per diluted share, for 2020. Net income was favorably affected in 2021, compared with 2020, by increased infrastructure investments across all business segments; increased Ameren Missouri electric retail sales, primarily resulting from improving economic conditions and the effects of weather; and by the results of Ameren Missouri’s March 2020 electric rate order. Earnings in 2021, compared with 2020, were also favorably affected by higher delivery service rates at Ameren Illinois Natural Gas and a higher recognized ROE at Ameren Illinois Electric Distribution. Net income was unfavorably affected in 2021, compared with 2020, by the effect of dilution and higher other operations and maintenance expenses at Ameren Missouri due to the amortization of expenses related to the 2020 scheduled refueling and maintenance outage at the Callaway Energy Center and increased non-nuclear energy center and distribution maintenance costs, as well as higher other operations and maintenance expenses due to increased infrastructure maintenance and compliance costs at Ameren Illinois Natural Gas. Earnings in 2021, compared with 2020, were also unfavorably affected by the absence in 2021 of the FERC’s May 2020 order addressing the allowed base ROE for FERC regulated transmission rate base under the MISO tariff, which increased earnings in the year-ago period, and the result of the FERC’s March 2021 order, primarily related to the historical recovery of materials and supplies inventories; increased financing costs at Ameren (parent) and Ameren Missouri, primarily due to higher long-term debt balances; and increased depreciation and amortization expenses not recoverable under riders or trackers at Ameren Missouri and Ameren Illinois Natural Gas, primarily due to additional property, plant, and equipment investments.
Liquidity
At December 31, 2021, Ameren, on a consolidated basis, had available liquidity in the form of cash on hand and amounts available under the Credit Agreements of $1.8 billion.
In May 2021, Ameren entered into an equity distribution sales agreement pursuant to which Ameren may offer and sell from time to time up to $750 million of its common stock through an ATM program, which includes the ability to enter into forward sales agreements. During 2021, Ameren issued 1.8 million shares of common stock and received proceeds of $148 million. In September 2021, December 2021, and January 2022, Ameren entered into forward sale agreements under the ATM program with counterparties relating to 0.4 million, 0.5 million, and 0.2 million shares of common stock, respectively. See Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report for additional information.
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Ameren remains focused on strategic capital allocation. The following chart presents 2021 capital expenditures by segment and the midpoint of projected cumulative capital expenditures for 2022 through 2026 by segment:
Ameren Missouri(a) Ameren Illinois Natural Gas
Ameren Illinois Electric Distribution Ameren Transmission
(a)Ameren Missouri’s capital expenditures include $525 million for wind generation expenditures for the year ended December 31, 2021. Ameren Missouri’s projected capital expenditures for 2022 through 2026 includes approximately $0.7 billion of capital expenditures related to coal-fired generation.
For 2022 through 2026, Ameren’s cumulative capital expenditures are projected to range from $16.6 billion to $18.0 billion. The following table presents the range of projected spending by segment:
Range (in billions)
Ameren Missouri(a) $ 8.5 – $ 9.2
Ameren Illinois Electric Distribution 3.0 – 3.3
Ameren Illinois Natural Gas 1.7 – 1.8
Ameren Transmission 3.4 – 3.7
(a)Amounts exclude renewable generation investment opportunities of 1,200 MWs by 2026, which are included in Ameren Missouri’s 2020 IRP, and additional investment opportunities that may be approved by the MISO to address reliability concerns in connection with the planned accelerated retirement of the Rush Island Energy Center.
RESULTS OF OPERATIONS
Our results of operations and financial position are affected by many factors. Economic conditions, including those resulting from the COVID-19 pandemic discussed below, energy-efficiency investments by our customers and by us, technological advances, distributed generation, and the actions of key customers can significantly affect the demand for our services. Ameren and Ameren Missouri results are also affected by seasonal fluctuations in winter heating and summer cooling demands, as well as by energy center maintenance outages. Additionally, fluctuations in interest rates and conditions in the capital and credit markets affect our cost of borrowing, and our pension and postretirement benefits costs. Almost all of our revenues are subject to state or federal regulation. This regulation has a material impact on the rates we charge customers for our services. Our results of operations, financial position, and liquidity are affected by our ability to align our overall spending, both operating and capital, with the frameworks established by our regulators. See Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report for additional information regarding Ameren Missouri’s, Ameren Illinois’, and ATXI’s regulatory frameworks.
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We continue to assess the impacts of the COVID-19 pandemic on our businesses, including impacts on electric and natural gas sales volumes, supply chain operations, and bad debt expense. Regarding uncollectible accounts receivable, Ameren Illinois’ electric distribution and natural gas distribution businesses have bad debt riders, which provide for recovery of bad debt write-offs, net of any subsequent recoveries. Ameren Missouri does not have a bad debt rider or tracker, and thus its earnings are exposed to increases in bad debt expense, absent regulatory relief. However, Ameren Missouri has not experienced and does not expect a material impact to earnings from increases in bad debt expense. Our accounts receivable balances that were past due or that were a part of a deferred payment arrangement are more comparable to pre-pandemic levels. As of December 31, 2021, accounts receivable balances that were 30 days or greater past due or that were a part of a deferred payment arrangement represented 20%, 17%, and 24%, or $94 million, $34 million, and $60 million, of Ameren’s, Ameren Missouri’s, and Ameren Illinois’ customer trade receivables before allowance for doubtful accounts, respectively. As of December 31, 2019, these percentages were 18%, 18%, and 20%, or $75 million, $30 million, and $45 million, for Ameren, Ameren Missouri, and Ameren Illinois, respectively. Ameren Missouri’s electric sales volumes have been, and continue to be, affected by the COVID-19 pandemic, including a shift in sales volumes by customer class compared to pre-pandemic levels, with an increase in residential sales, and a decrease in commercial and industrial sales, excluding the estimated effects of weather and customer energy-efficiency programs.
Ameren Missouri principally uses coal and enriched uranium for fuel in its electric operations and purchases natural gas for its customers. Ameren Illinois purchases power and natural gas for its customers. The prices for these commodities can fluctuate significantly because of the global economic and political environment, weather, supply, demand, inflation, and many other factors. We have natural gas cost recovery mechanisms for our Illinois and Missouri natural gas distribution businesses, a purchased power cost recovery mechanism for Ameren Illinois’ electric distribution business, and a FAC for Ameren Missouri’s electric business.
We employ various risk management strategies to reduce our exposure to commodity risk and other risks inherent in our business. The reliability of Ameren Missouri’s energy centers and our transmission and distribution systems and the level and timing of operations and maintenance costs and capital investment are key factors that we seek to manage in order to optimize our results of operations, financial position, and liquidity.
Earnings Summary
The following table presents a summary of Ameren’s earnings for the years ended December 31, 2021 and 2020:
Net income attributable to Ameren common shareholders $ 990 $ 871
Earnings per common share – diluted 3.84 3.50
Net income attributable to Ameren common shareholders in 2021 increased $119 million, or $0.34 per diluted share, from 2020. The increase was due to net income increases of $82 million, $22 million, $14 million, and $9 million at Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Transmission, and Ameren Illinois Natural Gas, respectively. The increases in net income were partially offset by an increase in the net loss for activity not reported as part of a segment, primarily at Ameren (parent) of $8 million.
Earnings per share in 2021, compared with 2020, were favorably affected by:
•investments in infrastructure and wind generation pursuant to the PISA and the RESRAM, which resulted in increased deferral of interest expense (21 cents per share);
•increased rate base investments at Ameren Transmission and Ameren Illinois Electric Distribution and a higher recognized ROE at Ameren Illinois Electric Distribution, which increased revenues at these segments (19 cents per share);
•the results of the MoPSC’s March 2020 electric rate order, which reduced the base level of expenses at Ameren Missouri, partially offset by lower base rates, net of recovery for amounts associated with the reduction in sales volumes resulting from MEEIA programs and recoverable depreciation under the PISA (10 cents per share);
•increased electric retail sales, excluding the estimated effects of weather and MEEIA, at Ameren Missouri, largely due to improving economic conditions, which resulted in increased sales volumes (10 cents per share);
•higher base rates pursuant to the ICC's January 2021 natural gas rate order, which increased margins at Ameren Illinois Natural Gas (8 cents per share);
•higher other income, net, due to the absence of charitable donations made in 2020 pursuant to the MoPSC’s March 2020 electric rate order, increased earnings from equity method investments to advance clean and resilient energy technologies, and a return to more normal levels of charitable donations at Ameren (parent) (8 cents per share);
•the impact of weather on electric retail sales at Ameren Missouri, primarily resulting from warmer summer temperatures experienced in 2021 (estimated at 6 cents per share); and
•the results of true-ups to the 2020 revenue requirement reconciliation adjustment in 2021 related to Ameren Illinois’ rates for electric distribution delivery service and electric customer energy-efficiency program investments (2 cents per share).
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Earnings per share in 2021, compared with 2020, were unfavorably affected by:
•increased other operations and maintenance expenses at Ameren Missouri, primarily due to the amortization of expenses related to the 2020 scheduled refueling and maintenance outage at the Callaway Energy Center and increased non-nuclear energy center and distribution maintenance costs, and at Ameren Illinois Natural Gas due to increased infrastructure maintenance and compliance activity (17 cents per share);
•the effect of dilution, primarily due to increased weighted-average basic common shares outstanding resulting from issuances of common shares as detailed in Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report (14 cents per share);
•the absence in 2021 of the FERC’s May 2020 order addressing the allowed base ROE for FERC regulated transmission rate base under the MISO tariff, which increased Ameren Transmission earnings in the year-ago period, and the result of the FERC’s March 2021 order, primarily related to the historical recovery of materials and supplies inventories, which decreased Ameren Transmission earnings in 2021 (7 cents per share);
•increased financing costs, primarily at Ameren (parent) and Ameren Missouri, largely due to higher long-term debt balances (5 cents per share);
•increased depreciation and amortization expenses not recoverable under riders or trackers at Ameren Missouri and Ameren Illinois Natural Gas, primarily due to additional property, plant, and equipment investments (5 cents per share); and
•decreased income tax benefits at Ameren (parent), primarily related to employee retention tax credits, changes in the distribution of taxable income by state, and company owned life insurance, partially offset by increased amortization of excess deferred income taxes at Ameren Missouri (3 cents per share).
The cents per share information presented is based on the weighted-average basic shares outstanding in 2020 and does not reflect any change in earnings per share resulting from dilution, unless otherwise noted. Amounts other than variances related to income taxes have been presented net of income taxes using Ameren’s 2021 statutory tax rate of 26%. For additional details regarding the Ameren Companies’ results of operations, including explanations of Electric and Natural Gas Margins, Other Operations and Maintenance Expenses, Depreciation and Amortization, Taxes Other Than Income Taxes, Other Income, Net, Interest Charges, and Income Taxes, see the major headings below.
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Below is Ameren’s table of income statement components by segment for the years ended December 31, 2021 and 2020:
Natural gas purchased for resale (60) — (382) — — (442)
Noncontrolling interests – preferred stock dividends (3) (1) — (1) — (5)
Natural gas purchased for resale (43) — (229) — — (272)
Noncontrolling interests – preferred stock dividends (3) (1) (1) (1) — (6)
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Below is Ameren Illinois’ table of income statement components by segment for the years ended December 31, 2021 and 2020:
Natural gas revenues — 957 — — 957
Natural gas purchased for resale — (382) — — (382)
Natural gas margins — 575 — — 575
Other operations and maintenance expenses (534) (236) (50) — (820)
Depreciation and amortization (309) (90) (73) — (472)
Taxes other than income taxes (76) (73) (4) — (153)
Preferred stock dividends (1) — (1) — (2)
Net income attributable to common shareholder $ 165 $ 108 $ 152 $ — $ 425
Natural gas revenues — 760 — — 760
Natural gas purchased for resale — (229) — — (229)
Natural gas margins — 531 — — 531
Other operations and maintenance expenses (506) (221) (48) — (775)
Depreciation and amortization (288) (81) (65) — (434)
Taxes other than income taxes (72) (65) (3) — (140)
Preferred stock dividends (1) (1) (1) — (3)
Net income attributable to common shareholder $ 143 $ 99 $ 137 $ — $ 379
Margins
Electric margins are defined as electric revenues less fuel and purchased power costs. Natural gas margins are defined as natural gas revenues less natural gas purchased for resale. We consider electric and natural gas margins useful measures to analyze the change in profitability of our electric and natural gas operations between periods. We have included the analysis below as a complement to the financial information we provide in accordance with GAAP. However, these margins may not be a presentation defined under GAAP, and they may not be comparable to other companies’ presentations or more useful than the GAAP information we provide elsewhere in this report.
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Electric Margins
Total by Segment(a) Increase by Segment
Overall Ameren Increase of $202 Million
(a)Includes other/intersegment eliminations of $(29) million and $(29) million in 2021and 2020, respectively.
Natural Gas Margins
Total by Segment(a) Increase (Decrease) by Segment
Overall Ameren Increase of $44 Million
(a)Includes other/intersegment eliminations of $(1) million and $(2) million in 2021and 2020, respectively.
Ameren Missouri Ameren Illinois Natural Gas Other/Intersegment Eliminations
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The following table presents the favorable (unfavorable) variations by segment for electric and natural gas margins in 2021, compared with 2020:
Electric and Natural Gas Margins
Electric revenue change:
Effect of weather (estimate)(b) $ 24 $ — $ — $ — $ — $ 24
Base rates (estimate)(c) (6) 63 — 39 — 96
MEEIA performance incentives 3 — — — — 3
Off-system sales, capacity, and FAC revenues, net 96 — — — — 96
Customer energy-efficiency program investments — 12 — — — 12
Other cost recovery mechanisms(e) — 1 — — — 1
Fuel and purchased power change:
Energy costs $ (99) $ — $ — $ — $ — $ (99)
Sales volumes (excluding the estimated effects of weather) (3) — (3)
Effect of weather (estimate)(b) (4) — — — — (4)
Effect of lower net energy costs included in base rates 36 — — — — 36
Other (7) — — — — (7)
Cost recovery mechanisms – offset in electric revenue(d) (70) (59) — — 22 (107)
Total fuel and purchased power change $ (147) $ (59) $ — $ — $ 22 $ (184)
Net change in electric margins $ 81 $ 82 $ — $ 39 $ — $ 202
Natural gas revenue change:
Effect of weather (estimate)(b) $ (4) $ — $ — $ — $ — $ (4)
Base rates (estimate) — — 28 — — 28
Change in rate design — — (2) — — (2)
QIP rider — — 9 — — 9
Other (1) — — — 1 —
Other cost recovery mechanisms(e) — — 9 — — 9
Total natural gas revenue change $ 16 $ — $ 197 $ — $ 1 $ 214
Natural gas purchased for resale change:
Effect of weather (estimate)(b) $ 4 $ — $ — $ — $ — $ 4
Total natural gas purchased for resale change $ (17) $ — $ (153) $ — $ — $ (170)
Net change in natural gas margins $ (1) $ — $ 44 $ — $ 1 $ 44
(a)Includes an increase in transmission electric margins of $36 million in 2021, compared with 2020, at Ameren Illinois.
(b)Represents the estimated variation resulting primarily from changes in cooling and heating degree days on electric and natural gas demand compared with the prior year; this variation is based on temperature readings from the National Oceanic and Atmospheric Administration weather stations at local airports in our service territories.
(c)For Ameren Illinois Electric Distribution and Ameren Transmission, base rates include increases or decreases to operating revenues related to the revenue requirement reconciliation adjustment under formula rates. For Ameren Missouri, base rates exclude an increase of $7 million for the recovery of lost electric margins in 2021, compared with 2020, resulting from the MEEIA customer energy-efficiency programs. This amount is included in the “sales volumes and changes in customer usage patterns (excluding the estimated effects of weather and MEEIA)” line item.
(d)Electric and natural gas revenue changes are offset by corresponding changes in “Fuel,” “Purchased power,” and “Natural gas purchased for resale” on the statement of income, resulting in no change to electric and natural gas margins. Activity in Other/Intersegment Eliminations represents the elimination of related-party transactions between Ameren Missouri, Ameren Illinois, and ATXI, as well as Ameren Transmission revenue from transmission services provided to Ameren Illinois Electric Distribution. See Note 13 – Related-party Transactions and Note 16 – Segment Information under Part II, Item 8, of this report for additional information on intersegment eliminations.
(e)Offsetting expense increases or decreases are reflected in “Other operations and maintenance,” “Depreciation and amortization,” or in “Taxes other than income taxes” within the “Operating Expenses” section of the statement of income. These items have no overall impact on earnings.
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Ameren
Ameren’s electric margins increased $202 million, or 5%, in 2021, compared with 2020, because of increased margins at Ameren Missouri, Ameren Illinois Electric Distribution, and Ameren Transmission, as discussed below. Ameren’s natural gas margins increased $44 million, or 7%, between years primarily because of increased margins at Ameren Illinois Natural Gas, as discussed below.
Ameren Transmission
Ameren Transmission’s electric margins increased $39 million, or 7%, in 2021, compared with 2020. Base rate revenues were favorably affected by continued capital investment (+$23 million), as evidenced by a 12% increase in rate base used to calculate the revenue requirement, and higher recoverable expenses (+$33 million). These increases were partially offset by the absence in 2021 of the FERC’s May 2020 order addressing the allowed base ROE and the effect of the FERC’s March 2021 order (-$17 million), which required refunds primarily related to historical recovery of materials and supplies inventories. See Transmission Formula Rate Revisions in Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report for additional information regarding the May 2020 and March 2021 FERC orders.
Ameren Missouri
Ameren Missouri’s electric margins increased $81 million, or 3%, in 2021, compared with 2020. Revenues associated with “Cost recovery mechanisms – offset in fuel and purchased power” increased $70 million in 2021, compared with 2020. The increased revenues are fully offset by an increase in fuel and purchased power costs, which increased primarily due to higher electric prices, the absence of the Callaway Energy Center generation and a significant increase in customer demand for electricity in mid-February 2021 due to extremely cold weather. The changes to “Cost recovery mechanisms – offset in fuel and purchased power” are fully offset by “Cost recovery mechanisms – offset in electric revenue” in the table above, and result in no impact to margins. Ameren Missouri’s 5% exposure to net energy costs variances under the FAC is reflected within “Off-system sales, capacity and FAC revenues, net” and “Energy costs”.
The following items had a favorable effect on Ameren Missouri’s electric margins in 2021, compared with 2020:
•Excluding the estimated effects of weather and the MEEIA customer energy-efficiency programs, electric sales margins increased an estimated $32 million. The increase was primarily due to an increase in retail sales volumes in 2021, which were unfavorably affected by the COVID-19 pandemic in 2020, partially offset by a decrease in the average retail price per kilowatthour due to changes in customer usage patterns. The change in sales margins is the sum of the change in “Sales volumes and changes in customer usage patterns (excluding the estimated effects of weather and MEEIA)” on electric revenues (+$35 million) and “Sales volumes (excluding the estimated effects of weather)” on fuel and purchased power (-$3 million). While the MEEIA customer energy-efficiency programs reduced retail sales volumes, the recovery of lost electric margins under the MEEIA ensured that electric margins were not affected.
•The March 2020 MoPSC electric rate order that resulted in lower net energy costs included in base rates, partially offset by lower electric base rates, increased margins $30 million. The change in electric base rates is the sum of the change in “Base rates (estimate)” (-$6 million) and the “Effect of lower net energy costs included in base rates” (+$36 million) in the table above.
•Summer temperatures were warmer as cooling degree days increased 12%, and winter temperatures were warmer as heating degree days decreased 4%. The aggregate effect of weather increased margins by an estimated $20 million. The change in margins due to weather is the sum of the “Effect of weather (estimate)” on electric revenues (+$24 million) and the “Effect of weather (estimate)” on fuel and purchased power (-$4 million) in the table above.
Ameren Missouri’s electric margins decreased $3 million due to higher net energy costs. The absence of the Callaway Energy Center generation and the extremely cold weather in mid-February 2021, partially offset by insurance recoveries related to the unplanned Callaway Energy Center maintenance outage, drove net energy costs higher than those reflected in base rates, resulting from Ameren Missouri’s 5% exposure to net energy cost variances under the FAC. The change in net energy costs is the sum of “Off-system sales, capacity and FAC revenues, net” (+$96 million) and “Energy costs” (-$99 million) in the table above.
Ameren Missouri’s natural gas margins were comparable between years. Purchased gas costs increased $21 million in 2021, compared with 2020, primarily resulting from higher natural gas prices throughout 2021 and the significant increase in customer demand and prices for natural gas in mid-February 2021 due to extremely cold weather. The increased purchased gas costs are fully offset by an increase in natural gas revenues under the PGA, resulting in no impact to margin. The increase in purchased gas cost is reflected in “Cost recovery mechanisms – offset in natural gas revenue” and the associated recoveries from customers is reflected in “Cost recovery mechanisms – offset in natural gas purchased for resale” in the table above.
Ameren Illinois
Ameren Illinois’ electric margins increased $118 million, or 8%, in 2021, compared with 2020, driven by increased margins at Ameren Illinois Electric Distribution and Ameren Illinois Transmission. Ameren Illinois Natural Gas’ margins increased $44 million, or 8%, between years.
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Ameren Illinois Electric Distribution
Ameren Illinois Electric Distribution’s margins increased $82 million, or 8%, in 2021, compared with 2020. Purchased power costs increased $59 million in 2021, compared with 2020, primarily resulting from higher electric prices and the significant increase in customer demand for electricity in mid-February 2021 due to extremely cold weather. The increased purchased power costs are fully offset by an increase in electric revenues under the cost recovery mechanisms for purchased power, resulting in no impact to margin. The increase in purchased power cost is reflected in “Cost recovery mechanisms – offset in electric revenue” and the associated recoveries from customers is reflected in “Cost recovery mechanisms – offset in fuel and purchased power” in the table above.
The following items had a favorable effect on Ameren Illinois Electric Distribution’s margins in 2021, compared with 2020:
•Base rates increased due to a higher recognized ROE (+$9 million), as evidenced by an increase of 49 basis points in the annual average of the monthly yields of the 30-year United States Treasury bonds, increased capital investment (+$10 million), as evidenced by a 8% increase in year-end rate base, higher recoverable non-purchased power expenses (+$35 million), and revenue requirement reconciliation adjustment true-ups for 2020 (+$9 million). The sum of these changes collectively increased margins $63 million.
•Revenues increased $12 million due to the recovery of and return on increased customer energy-efficiency program investments under performance-based formula ratemaking.
Ameren Illinois Natural Gas
Ameren Illinois Natural Gas’ margins increased $44 million, or 8%, in 2021, compared with 2020. Purchased gas costs increased $153 million in 2021, compared with 2020, primarily resulting from higher natural gas prices throughout 2021 and the significant increase in customer demand for natural gas in mid-February 2021 due to extremely cold weather. The increased purchased gas costs are fully offset by an increase in natural gas revenues under the PGA, resulting in no impact to margin. The increase in purchased gas cost is reflected in “Cost recovery mechanisms – offset in natural gas revenue” and the associated recoveries from customers is reflected in “Cost recovery mechanisms – offset in natural gas purchased for resale” in the table above. The following items had a favorable effect on Ameren Illinois Natural Gas’ margins in 2021, compared with 2020:
•Revenues increased $28 million due to higher natural gas base rates as a result of the January 2021 natural gas rate order.
•Revenues increased $9 million due to additional investment in qualified natural gas infrastructure under the QIP.
•Other cost recovery mechanisms increased revenues $9 million, primarily due to increased revenues for excise taxes.
Ameren Illinois Transmission
Ameren Illinois Transmission’s electric margins increased $36 million, or 11%, in 2021, compared with 2020. Margins were favorably affected by increased capital investment (+$23 million), as evidenced by an 18% increase in rate base used to calculate the revenue requirement, and higher recoverable expenses (+$26 million). These increases were partially offset by the absence in 2021 of the FERC’s May 2020 order addressing the allowed base ROE and the effect of the FERC’s March 2021 order (-$13 million), which required refunds primarily related to historical recovery of materials and supplies inventories. See Transmission Formula Rate Revisions in Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report for additional information regarding the May 2020 and March 2021 FERC orders.
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Other Operations and Maintenance Expenses
Total by Segment(a) Increase by Segment
Overall Ameren Increase of $113 Million
(a)Includes $62 million and $57 million at Ameren Transmission in 2021 and 2020, respectively, and other/intersegment eliminations of $(6) million and $(9) million in 2021and 2020, respectively.
Ameren Missouri Ameren Illinois Natural Gas Other/Intersegment Eliminations
Ameren Illinois Electric Distribution Ameren Transmission
Ameren
Other operations and maintenance expenses at Ameren increased $113 million in 2021, compared with 2020. In addition to changes by segments discussed below, other operations and maintenance expenses increased $3 million in 2021 for activity not reported as part of a segment, as reflected in “Other/Intersegment Eliminations” above, primarily because of increased costs for support services.
Ameren Transmission
Other operations and maintenance expenses at Ameren Transmission increased $5 million in 2021, compared with 2020, primarily because of increased maintenance activity.
Ameren Missouri
The $62 million increase in Ameren Missouri’s other operations and maintenance expenses in 2021, compared with 2020, was primarily due to the following items:
•Energy center maintenance costs, other than Callaway refueling and maintenance costs, increased $29 million, primarily because of costs related to new wind generation facilities, which are recovered under the RESRAM, and the deferral of projects in 2020.
•Callaway Energy Center refueling and maintenance costs increased $28 million because of the amortization of those costs, beginning in January 2021, which were previously deferred as a regulatory asset, pursuant to the MoPSC’s February 2020 order.
•Recoverable customer energy-efficiency program costs increased $16 million because of increased participation in the MEEIA programs in 2021.
•Technology-related expenditures increased $11 million, primarily because of cloud computing licensing costs and software maintenance.
•Transmission and distribution expenditures increased $6 million, primarily because of increased storm costs.
•The cash surrender value of company-owned life insurance decreased $6 million because of less favorable market returns in 2021, compared with 2020.
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The following items partially offset the above increases in other operations and maintenance expenses between years:
•Labor and benefit costs decreased $12 million, primarily because of higher capitalization of costs resulting from increased construction activity.
•Amortization of regulatory balances, primarily solar rebate costs pursuant to the MoPSC’s March 2020 electric rate order and RESRAM deferrals, decreased $11 million.
•Expenses decreased $10 million because of increased bad debt costs in 2020 largely due to the COVID-19 pandemic.
•Deferral to a regulatory asset of $5 million of certain costs incurred in 2020 related to the COVID-19 pandemic, pursuant to the MoPSC’s March 2021 orders.
Ameren Illinois
Other operations and maintenance expenses increased $45 million at Ameren Illinois in 2021, compared with 2020, as discussed below. Other operations and maintenance expenses were comparable at Ameren Illinois Transmission between 2021 and 2020.
Ameren Illinois Electric Distribution
The $28 million increase in Ameren Illinois Electric Distribution’s other operations and maintenance expenses in 2021, compared with 2020, was primarily due to the following items:
•Amortization of regulatory assets associated with customer energy-efficiency program investments under formula ratemaking increased $8 million.
•Technology-related expenditures increased $8 million, primarily because of cloud computing licensing costs and software maintenance.
•Increased bad debt expense of $7 million, primarily because of increased recovery of bad debt costs allowed by the ICC.
•Expenses increased $5 million because of the true-up of vegetation management expenditures consistent with the December 2021 ICC electric distribution service rate order.
•The cash surrender value of company-owned life insurance decreased $3 million because of less favorable market returns in 2021 compared with 2020.
The above increases were partially offset by a $7 million reduction in environmental remediation rider costs, which resulted from a decline in the required remediation efforts.
Ameren Illinois Natural Gas
Other operations and maintenance expenses at Ameren Illinois Natural Gas increased $15 million in 2021, compared with 2020, largely due to an $8 million increase in infrastructure maintenance and compliance activity. Other operations and maintenance expenses also increased $5 million because of the absence in 2021 of miscellaneous amortizations of regulatory liabilities, which lowered expenses in 2020. These increases were partially offset by $3 million reduction in recoverable bad debt expense and environmental remediation rider costs consistent with the amounts allowed by the ICC.
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Depreciation and Amortization
Total by Segment(a) Increase by Segment
Overall Ameren Increase of $71 Million
(a)Includes other/intersegment eliminations of $4 million and $4 million in 2021 and 2020, respectively.
Ameren Missouri Ameren Illinois Natural Gas Other/Intersegment Eliminations
Ameren Illinois Electric Distribution Ameren Transmission
The $71 million, $28 million, and $38 million increase in depreciation and amortization expenses in 2021, compared with 2020, at Ameren, Ameren Missouri, and Ameren Illinois, respectively, was primarily due to additional property, plant, and equipment across their respective segments. Ameren’s and Ameren Missouri’s depreciation and amortization expenses reflected a deferral to a regulatory asset of depreciation and amortization expenses pursuant to the PISA and the RESRAM. The PISA and RESRAM deferrals of depreciation and amortization expenses was $98 million and $27 million in 2021 and 2020, respectively.
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Taxes Other Than Income Taxes
Total by Segment(a) Increase by Segment
Overall Ameren Increase of $29 Million
(a)Includes $8 million and $8 million at Ameren Transmission in 2021 and 2020, respectively, and other/intersegment eliminations of $12 million and $10 million in 2021and2020, respectively.
Ameren Missouri Ameren Illinois Natural Gas Other/Intersegment Eliminations
Ameren Illinois Electric Distribution Ameren Transmission
Taxes other than income taxes increased $29 million at Ameren in 2021, compared with 2020, primarily because of increased excise taxes of $11 million and $7 million at Ameren Missouri and Ameren Illinois Natural Gas, respectively, resulting from increased sales. Additionally, taxes other than income taxes increased $5 million, compared with the year-ago period, at Ameren Missouri because of increased property taxes, primarily resulting from the addition of wind generation properties and higher assessed values, partially offset by lower natural gas property taxes. Taxes other than income taxes also increased $3 million at Ameren Illinois Electric Distribution because of increased excise taxes, resulting from decreased tax credits compared with 2020.
See Excise Taxes in Note 15 – Supplemental Information under Part II, Item 8, of this report for additional information.
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Other Income, Net
Total by Segment Increase by Segment
Overall Ameren Increase of $51 Million
Ameren Missouri Ameren Illinois Natural Gas Other/Intersegment Eliminations
Ameren Illinois Electric Distribution Ameren Transmission
Other income, net, increased $51 million at Ameren in 2021, compared with 2020, primarily because of the following items:
•The non-service cost component of net periodic benefit income increased $20 million, primarily because of increases of $9 million, $5 million, and $4 million for Ameren Missouri, Ameren Illinois Electric Distribution, and activity not reported as part of a segment, respectively.
•Income from equity method investments to advance clean and resilient energy technologies increased $9 million for activity not reported as part of a segment.
•Charitable donations were $8 million lower at Ameren Missouri due to the absence of charitable donations made in the year-ago period pursuant to the MoPSC’s March 2020 electric rate order. Charitable donations were $7 million lower for activity not reported as part of a segment due to a return to normal levels at Ameren (parent).
•The equity portion of allowance for funds used during construction increased $7 million at Ameren Missouri due to higher construction work in progress balances during 2021.
See Note 6 – Other Income, Net under Part II, Item 8, of this report for additional information. See Note 10 – Retirement Benefits under Part II, Item 8, of this report for more information on the non-service cost components of net periodic benefit income.
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Interest Charges
Total by Segment Increase (Decrease) by Segment
Overall Ameren Decrease of $36 Million
Ameren Missouri Ameren Illinois Natural Gas Other/Intersegment Eliminations
Ameren Illinois Electric Distribution Ameren Transmission
Interest charges decreased $36 million and $53 million in 2021, compared with 2020, at Ameren and Ameren Missouri, respectively, primarily because of increased deferrals to a regulatory asset of interest charges pursuant to the PISA and RESRAM. The PISA and RESRAM deferrals of interest charges were $82 million and $12 million in 2021 and 2020, respectively. Interest charges increased $9 million at Ameren Illinois in 2021, compared with 2020, as discussed below.
The following items partially offset the above decreases in interest charges in 2021, compared with 2020:
•Issuances of long-term debt at Ameren Missouri in October 2020 and June 2021 collectively increased interest charges by $11 million and $6 million, respectively.
•Issuance of long-term debt at Ameren (parent) in April 2020 increased interest charges by $7 million.
•Interest charges at Ameren Illinois Transmission increased by $5 million as a result of the Ameren Illinois issuances of long-term debt in November 2020 and June 2021 and a March 2021 FERC order, primarily related to the historical recovery of materials and supplies inventories.
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Income Taxes
The following table presents effective income tax rates for the years ended December 31, 2021and 2020:
Ameren Missouri 1% 7%
Ameren Illinois 25% 24%
Ameren Illinois Electric Distribution 24% 22%
Ameren Illinois Natural Gas 27% 26%
Ameren Illinois Transmission 25% 25%
Ameren Transmission 26% 26%
See Note 12 – Income Taxes under Part II, Item 8, of this report for information regarding reconciliations of effective income tax rates for Ameren, Ameren Missouri, and Ameren Illinois.
The effective income tax rate was higher at Ameren Illinois Electric Distribution in 2021, compared with 2020, primarily because of decreased tax benefits from certain depreciation differences on property-related items largely attributable to lower amortization of excess deferred taxes.
LIQUIDITY AND CAPITAL RESOURCES
Collections from our tariff-based revenues are our principal source of cash provided by operating activities. A diversified retail customer mix, primarily consisting of rate-regulated residential, commercial, and industrial customers, provides us with a reasonably predictable source of cash. In addition to using cash provided by operating activities, we use available cash, drawings under committed credit agreements, commercial paper issuances, and/or, in the case of Ameren Missouri and Ameren Illinois, short-term affiliate borrowings to support normal operations and temporary capital requirements. We may reduce our short-term borrowings with cash provided by operations or, at our discretion, with long-term borrowings, or, in the case of Ameren Missouri and Ameren Illinois, with capital contributions from Ameren (parent). In addition, to support a portion of its fuel requirements for generation, Ameren Missouri has entered into various long-term commitments to meet these requirements. Ameren Missouri and Ameren Illinois also have entered into various long-term commitments for purchased power and natural gas for distribution. Ameren’s, Ameren Missouri’s, and Ameren Illinois’ estimated minimum purchase obligations associated with these commitments totaled $1.6 billion, $0.7 billion, and, $0.8 billion, respectively, which include $0.7 billion, $0.3 billion, and, $0.4 billion, respectively, in 2022.
We expect to make significant capital expenditures over the next five years, as discussed in the Capital Expenditures sections below, supported by a combination of long-term debt and equity, as we invest in our electric and natural gas utility infrastructure to support overall system reliability, grid modernization, renewable energy target requirements, environmental compliance, and other improvements. For additional information about our long-term debt outstanding, including maturities due within one year, and the applicable interest rates, see Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report. As part of its funding plan for capital expenditures, Ameren is using newly issued shares of common stock, rather than market-purchased shares, to satisfy requirements under the DRPlus and employee benefit plans and expects to continue to do so through at least 2026. Ameren expects these issuances to provide equity of about $100 million annually. In addition, in 2021, Ameren established an ATM program under which Ameren may offer and sell from time to time up to $750 million of its common stock, which includes the ability to enter into forward sales agreements, subject to market conditions and other factors. During 2021, Ameren issued a total of 3.4 million shares of common stock and received aggregate proceeds of $261 million under the ATM program and the settlement of the remaining portion of the August 2019 forward sale agreement. Ameren plans to issue approximately $300 million of equity each year from 2022 to 2026 in addition to issuances under the DRPlus and employee benefit plans. Ameren expects its equity to total capitalization to be about 45% through December 31, 2026, with the long-term intent to support solid investment-grade credit ratings. See Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report for additional information on the ATM program, the 2021 settlement of the remaining portion of the August 2019 forward sale agreement, and the September 2021, December 2021, and January 2022 forward sale agreements.
The use of cash provided by operating activities and short-term borrowings to fund capital expenditures and other long-term investments at the Ameren Companies frequently results in a working capital deficit, defined as current liabilities exceeding current assets, as was the case at December 31, 2021, for Ameren, Ameren Missouri, and Ameren Illinois. With the credit capacity available under the Credit Agreements, and cash and cash equivalents, Ameren (parent), Ameren Missouri, and Ameren Illinois, collectively had net available liquidity of $1.8 billion at December 31, 2021. See Credit Facility Borrowings and Liquidity and Long-term Debt and Equity below for additional information.
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The following table presents net cash provided by (used in) operating, investing, and financing activities for the years ended December 31, 2021 and 2020:
Cash Flows from Operating Activities
Our cash provided by operating activities is affected by fluctuations of trade accounts receivable, inventories, and accounts and wages payable, among other things, as well as the unique regulatory environment for each of our businesses. Substantially all expenditures related to fuel, purchased power, and natural gas purchased for resale are recovered from customers through rate adjustment mechanisms, which may be adjusted without a traditional regulatory rate review, subject to prudence reviews. Similar regulatory mechanisms exist for certain other operating expenses that can also affect the timing of cash provided by operating activities. The timing of cash payments for costs recoverable under our regulatory mechanisms differs from the recovery period of those costs. Additionally, the seasonality of our electric and natural gas businesses, primarily caused by seasonal customer rates and changes in customer demand due to weather, such as increased demand resulting from the extremely cold weather in mid-February 2021, significantly affects the amount and timing of our cash provided by operating activities. See Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report for more information about our regulatory frameworks.
Ameren
Ameren’s cash provided by operating activities decreased $66 million in 2021, compared with 2020. The following items contributed to the decrease:
•A $62 million increase in payroll tax payments primarily due to the employer portion of Social Security taxes as a result of a payment deferral allowed in 2020 under the Coronavirus Aid, Relief, and Economic Security Act. Half of the 2020 deferral was paid at the end of 2021 and the remaining half will be paid at the end of 2022.
•A $49 million increase in the cost of natural gas held in storage, primarily at Ameren Illinois, because of higher prices.
•A $44 million decrease in net collateral activity with counterparties, primarily resulting from changes in the market prices of power, natural gas, and other fuels.
•A $43 million increase in interest payments, primarily due to an increase in the average outstanding debt.
•An $18 million increase in energy center maintenance costs, other than those associated with the Callaway refueling and maintenance outage, at Ameren Missouri, primarily because of costs related to new wind generation facilities.
•A $15 million increase in major storm restoration costs at Ameren Illinois, primarily due to a January 2021 storm.
•An $8 million increase in pension and postretirement benefit plan contributions.
•A $6 million increase in payments to contractors at Ameren Illinois, primarily related to distribution expenditures for increased natural gas infrastructure maintenance and compliance costs.
•A $6 million increase in property tax payments at Ameren Missouri due to higher assessed property tax values.
The following items partially offset the decrease in Ameren’s cash from operating activities between periods:
•A $74 million increase due to the net impact of customer collections, the effect of riders, and increased commodity costs. An increase at Ameren Missouri, as discussed below, and increased customer collections at ATXI were partially offset by a decrease at Ameren Illinois, as discussed below.
•A $30 million decrease in payments for nuclear refueling and maintenance outages at Ameren Missouri’s Callaway Energy Center. There was no scheduled refueling and maintenance outage in 2021.
•A $21 million decrease in payments to settle ARO liabilities, primarily related to the closure of Ameren Missouri’s CCR storage facilities.
•A $21 million increase, primarily resulting from reduced purchases of materials and supplies at Ameren Illinois to support operations in 2021 as levels were increased in 2020 to mitigate against potential supply disruptions associated with the COVID-19 pandemic.
•A $21 million increase resulting from a reduction in payments for certain cloud computing arrangements.
•A $14 million increase resulting from income tax refunds of $1 million in 2021, compared with income tax payments of $13 million in 2020, primarily from lower taxable income and the timing of payments in 2021.
•A $12 million decrease in payments related to charitable donations.
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Ameren Missouri
Ameren Missouri’s cash provided by operating activities increased $18 million in 2021, compared with 2020. The following items contributed to the increase:
•An $86 million increase due to the net impact of customer collections, the effect of riders, and increased commodity costs. The increase resulted from increased retail sales and a net increase attributable to riders, excluding the PGA. These increases were partially offset by increased purchases for natural gas for resale and purchased power as a result of the significant increase in customer demand and increased prices for natural gas and electricity experienced in mid-February 2021 due to extremely cold weather, which also contributed to a net decrease under the PGA, and a decrease in collections of outstanding account receivables. See Outlook below for additional information about the extension of the collection period for the PGA related to the extremely cold weather in mid-February 2021.
•A $30 million decrease in payments for nuclear refueling and maintenance outages at the Callaway Energy Center. There was no scheduled refueling and maintenance outage in 2021.
•A $22 million decrease in payments to settle ARO liabilities, primarily related to the closure of CCR storage facilities.
•An $11 million increase resulting from a reduction in payments for certain cloud computing arrangements.
The following items partially offset the increase in Ameren Missouri’s cash from operating activities between periods:
•A $45 million decrease in net collateral activity with counterparties, primarily resulting from changes in the market prices of power, natural gas, and other fuels.
•A $28 million increase in payroll tax payments primarily due to the employer portion of Social Security taxes as a result of a payment deferral allowed in 2020 under the Coronavirus Aid, Relief, and Economic Security Act. Half of the 2020 deferral was paid at the end of 2021 and the remaining half will be paid at the end of 2022.
•An $18 million increase in energy center maintenance costs, other than those associated with the Callaway refueling and maintenance outage, primarily because of costs related to new wind generation facilities.
•A $15 million increase in interest payments, primarily due to an increase in the average outstanding debt.
•A $6 million increase in property tax payments due to higher assessed property tax values.
•A $5 million increase in pension and postretirement benefit plan contributions.
Ameren Illinois
Ameren Illinois’ cash provided by operating activities decreased $17 million in 2021, compared with 2020. The following items contributed to the decrease:
•A $45 million increase in the cost of natural gas held in storage because of higher prices.
•A $27 million decrease due to the net impact of commodity costs, the effect of riders, and customer collections. The decrease resulted from increased purchases for natural gas for resale and purchased power as a result of the significant increase in customer demand and increased prices for natural gas and electricity experienced in mid-February 2021 due to extremely cold weather, which also contributed to a net decrease under the PGA, and a net decrease attributable to other riders. The decrease from riders was partially offset by increased retail sales; the effect of the phase-in of collection activities beginning in April 2021, which had been suspended for most of 2020; increased customer collections resulting from base rate increases pursuant to the January 2021 natural gas rate order and due to electric transmission rate base growth; and state funding received for customer billing assistance. See Outlook below for additional information about the extension of the collection period for the PGA related to the extremely cold weather in mid-February 2021.
•A $21 million increase in payroll tax payments primarily due to the employer portion of Social Security taxes as a result of a payment deferral allowed in 2020 under the Coronavirus Aid, Relief, and Economic Security Act. Half of the 2020 deferral was paid at the end of 2021 and the remaining half will be paid at the end of 2022.
•A $15 million increase in major storm restoration costs, primarily due to a January 2021 storm.
•An $11 million increase in interest payments, primarily due to an increase in the average outstanding debt.
•A $6 million increase in payments to contractors primarily related to distribution expenditures for increased natural gas infrastructure maintenance and compliance costs.
The following items partially offset the decrease in Ameren Illinois’ cash from operating activities between periods:
•An $82 million increase resulting from income tax refunds of $41 million in 2021, compared with income tax payments of $41 million in 2020, from Ameren (parent) pursuant to the tax allocation agreement, primarily from lower taxable income and the timing of payments in 2021.
•A $21 million increase, primarily resulting from reduced purchases of materials and supplies to support operations in 2021 as levels were increased in 2020 to mitigate against potential supply disruptions associated with the COVID-19 pandemic.
•A $10 million increase resulting from a reduction in payments for certain cloud computing arrangements.
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Cash Flows from Investing Activities
Ameren’s cash used in investing activities increased $199 million during 2021, compared with 2020, primarily as a result of a $246 million increase in capital expenditures, net of a decrease in wind generation expenditures. Increased capital expenditures at Ameren Missouri were partially offset by decreased expenditures at Ameren Illinois and ATXI. See discussion of changes at Ameren Missouri and Ameren Illinois below. ATXI’s capital expenditures decreased $66 million, primarily as a result of placing the ninth and final line segment of the Illinois Rivers transmission line in service in December 2020. Ameren’s increase in capital expenditures was partially offset by a $28 million decrease in net investment activity in the nuclear decommissioning trust fund at Ameren Missouri and a $22 million decrease due to the timing of nuclear fuel expenditures.
Ameren Missouri’s cash used in investing activities increased $18 million during 2021, compared with 2020, primarily as a result of a $349 million increase in capital expenditures, primarily related to electric delivery infrastructure upgrades and electric transmission system reliability projects partially offset by a decrease in wind generation expenditures. The increase in capital expenditures was partially offset by a $278 million decrease related to money pool advances activity, a $28 million decrease in net investment activity in the nuclear decommissioning trust fund, and a $22 million decrease due to the timing of nuclear fuel expenditures.
Ameren Illinois’ cash used in investing activities decreased $7 million during 2021, compared with 2020, due to decreased capital expenditures, primarily related to electric transmission system reliability projects and natural gas infrastructure, partially offset by electric delivery infrastructure upgrades.
Capital Expenditures
The following charts present our capital expenditures for the years ended December 31, 2021 and 2020:
Ameren Illinois Electric Distribution Ameren Illinois Transmission
(a)Includes Other capital expenditures of $(9) million and $7 million for the years ended December 31, 2021 and 2020, respectively, which includes amounts for the elimination of intercompany transfers.
(b)Ameren Missouri’s capital expenditures include $525 million and $564 million for wind generation expenditures for the years ended December 31, 2021 and 2020, respectively.
Ameren’s 2021 capital expenditures consisted of expenditures made by its subsidiaries, including ATXI and other electric transmission subsidiaries, which spent $41 million. Of the $278 million in capital expenditures spent by Ameren Illinois Natural Gas during 2021, $170 million related to natural gas projects eligible for QIP recovery. In addition, Ameren Missouri expenditures included $525 million for wind generation, primarily for the acquisition of the Atchison Renewable Energy Center. In both years, other capital expenditures were made principally to maintain, upgrade, and improve the reliability of the transmission and distribution systems of Ameren Missouri and Ameren Illinois by investing in substation upgrades, energy center projects, and smart-grid technology. Additionally, the Ameren Companies invested
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in various software projects. As of December 31, 2021, Ameren Illinois exceeded the minimum capital spending levels required pursuant to IEIMA.
Ameren’s 2020 capital expenditures consisted of expenditures made by its subsidiaries, including ATXI and other electric transmission subsidiaries, which spent $113 million primarily on the Illinois Rivers transmission line. Of the $301 million in capital expenditures spent by Ameren Illinois Natural Gas during 2020, $189 million related to natural gas projects eligible for QIP recovery. In addition, Ameren Missouri expenditures included $564 million for the acquisition of the High Prairie Renewable Energy Center.
The following table presents Ameren’s estimate of capital expenditures that will be incurred from 2022 through 2026, including construction expenditures, allowance for funds used during construction, and expenditures for compliance with existing environmental regulations:
ATXI and other electric transmission subsidiaries 85 105 – 115 190 – 200
Ameren Missouri’s estimated capital expenditures include transmission, distribution, grid modernization, and generation-related investments, as well as expenditures for compliance with environmental regulations. Capital expenditures related to coal-fired generation of approximately $0.7 billion are included in Ameren Missouri’s estimated capital expenditures. Ameren Illinois’ estimated capital expenditures are primarily for electric and natural gas transmission and distribution-related investments, including capital expenditures to modernize its electric and gas distribution systems. These planned investments are based on the assumption of continued constructive regulatory frameworks, including an assumption that Ameren Missouri requests and receives MoPSC approval of an extension of the PISA from December 2023 to December 2028. Ameren’s and Ameren Missouri’s estimated capital expenditures exclude renewable generation investment opportunities of 1,200 MWs by 2026, which are included in Ameren Missouri’s 2020 IRP, and additional investment opportunities that may be approved by the MISO to address reliability concerns in connection with the planned accelerated retirement of the Rush Island Energy Center.
In April 2021, the MISO issued a report outlining a preliminary long-range transmission planning roadmap of projects through 2039, which considers the rapidly changing generation mix within MISO resulting from significant additions of renewable generation, actual and expected generation plant closures, and state mandates or goals for clean energy or carbon emissions reductions. In February 2022, the MISO updated a list of projects under consideration for the first phase of the roadmap, and is expected to approve certain projects for the first phase by mid-2022. Expenditures that result from the MISO long-range transmission planning roadmap may cause adjustments to our estimated 2022 through 2026 capital expenditures.
Ameren Missouri continually reviews its generation portfolio and expected power needs. As a result, Ameren Missouri could modify its plan for generation capacity, the type of generation asset technology that will be employed, and whether capacity or power may be purchased, among other changes. Additionally, we continually review the reliability of our transmission and distribution systems, expected capacity needs, and opportunities for transmission investments within and outside our service territories. The timing and amount of investments could vary because of changes in expected capacity, the condition of transmission and distribution systems, and our ability and willingness to pursue transmission investments, as well as our ability to obtain necessary regulatory approvals, among other factors. Any changes in future generation, transmission, or distribution needs could result in significant changes in capital expenditures or losses, which could be material. Compliance with environmental regulations could also have significant impacts on the level of capital expenditures.
Environmental Capital Expenditures
Ameren Missouri will continue to incur costs to comply with federal and state regulations, including those requiring the reduction of SO2, NOx, and mercury emissions from its coal-fired energy centers. See Note 14 – Commitments and Contingencies under Part II, Item 8, of this report for a discussion of existing and proposed environmental laws that affect, or may affect, our facilities and capital expenditures to comply with such laws.
Cash Flows from Financing Activities
Cash provided by, or used in, financing activities is a result of our financing needs, which depend on the level of cash provided by operating activities, the level of cash used in investing activities, the level of dividends, and our long-term debt maturities, among other things.
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Ameren’s cash provided by consolidated financing activities decreased $6 million during 2021, compared with 2020. During 2021, Ameren utilized net proceeds of $1,997 million from the issuance of long-term debt for general corporate purposes, including to repay then-outstanding short-term debt, including short-term debt incurred in connection with the increased purchases for natural gas for resale and purchased power costs discussed above, and to fund, in part, investing activities. In 2021, Ameren received $55 million from net commercial paper issuances. In addition, Ameren received aggregate cash proceeds of $308 million from the issuance of common stock under the ATM program, the DRPlus, and the 401(k) plan and the settlement of the remaining portion of the August 2019 forward sale agreement. These proceeds, along with cash on hand, were used to fund a portion of Ameren Missouri’s wind generation investments and to fund, in part, other investing activities. In comparison, in 2020, Ameren utilized net proceeds of $2,183 million from the issuance of long-term debt for general corporate purposes, including to repay then-outstanding short-term debt, including short-term debt incurred in connection with the repayment at maturity of long-term debt, to partially finance the acquisition of two wind generation facilities, and to repay other long-term debt. In addition, in 2020, Ameren received cash proceeds of $425 million from the partial settlement of a forward sale agreement of common stock that were used to fund a portion of Ameren Missouri’s wind generation investments. Collectively, in 2020, Ameren repaid long-term debt of $442 million, received $50 million from net commercial paper issuances, and used cash provided by financing activities to fund, in part, investing activities. During 2021, Ameren paid common stock dividends of $565 million, compared with $494 million in dividend payments in 2020.
Ameren Missouri’s cash provided by financing activities decreased $243 million during 2021, compared with 2020. During 2021, Ameren Missouri utilized net proceeds of $524 million from the issuance of long-term debt to repay then-outstanding short-term debt, including short-term debt incurred in connection with the increased purchases for natural gas for resale and purchased power costs discussed above. Additionally, the proceeds from the issuance of long-term debt and $207 million of capital contributions from Ameren (parent) were used to fund, in part, investing activities. In 2021, Ameren Missouri also received $165 million from commercial paper issuances. In comparison, in 2020, Ameren Missouri utilized cash on hand and net proceeds of $1,012 million from the issuance of long-term debt to repay then-outstanding short-term debt, including short-term debt incurred in connection with the repayment of maturity of long-term debt, and to partially finance the acquisition of two wind generation facilities. In 2020, Ameren Missouri also received $491 million in capital contributions from Ameren (parent). Collectively, in 2020, Ameren Missouri repaid long-term debt of $92 million, repaid net short-term debt of $234 million, and used cash provided by financing activities to fund, in part, investing activities. During 2021, Ameren Missouri paid common stock dividends of $24 million, compared with $66 million in dividend payments in 2020.
Ameren Illinois’ cash provided by financing activities decreased $26 million during 2021, compared with 2020. During 2021, Ameren Illinois utilized net proceeds of $449 million from the issuance of long-term debt to repay then-outstanding short-term debt, including short-term debt incurred in connection with the increased purchases for natural gas for resale and purchased power costs discussed above. Additionally, the proceeds from the issuance of long-term debt and $262 million of capital contributions from Ameren (parent) were used to fund, in part, investing activities. In 2021, Ameren Illinois also received $103 million from commercial paper issuances. In addition, Ameren Illinois repaid $19 million of money pool borrowings and redeemed $13 million of preferred stock in 2021. In comparison, in 2020, Ameren Illinois received $464 million in capital contributions from Ameren (parent). In addition, in 2020, Ameren Illinois utilized net proceeds of $373 million from the issuance of long-term debt to repay then-outstanding short-term debt. Collectively, in 2020 Ameren Illinois repaid net short-term debt of $53 million, borrowed $19 million from the money pool, and used cash provided by financing activities to fund, in part, investing activities.
Credit Facility Borrowings and Liquidity
The liquidity needs of the Ameren Companies are typically supported through the use of available cash, drawings under committed credit agreements, commercial paper issuances, and/or, in the case of Ameren Missouri and Ameren Illinois, short-term affiliate borrowings. See Note 4 – Short-term Debt and Liquidity under Part II, Item 8, of this report for additional information on credit agreements, commercial paper issuances, Ameren’s money pool arrangements and related borrowings, and relevant interest rates.
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The following table presents Ameren’s consolidated net available liquidity as of December 31, 2021:
Ameren (parent) and Ameren Missouri(a):
Missouri Credit Agreement – borrowing capacity $ 1,200
Less: Ameren (parent) commercial paper outstanding 178
Less: Ameren Missouri commercial paper outstanding 165
Less: Letters of credit 2
Missouri Credit Agreement – subtotal 855
Ameren (parent) and Ameren Illinois(b):
Illinois Credit Agreement – borrowing capacity 1,100
Less: Ameren (parent) commercial paper outstanding 99
Less: Ameren Illinois commercial paper outstanding 103
Illinois Credit Agreement – subtotal 898
Cash and cash equivalents 8
Net available liquidity $ 1,761
(a) The maximum aggregate amount available to Ameren (parent) and Ameren Missouri under the Missouri Credit Agreement is $900 million and $850 million, respectively. See Note 4 – Short-term Debt and Liquidity under Part II, Item 8, of this report for further discussion of the Credit Agreements.
(b) The maximum aggregate amount available to Ameren (parent) and Ameren Illinois under the Illinois Credit Agreement is $500 million and $800 million, respectively. See Note 4 – Short-term Debt and Liquidity under Part II, Item 8, of this report for further discussion of the Credit Agreements.
In December 2021, the Credit Agreements, which were scheduled to mature in December 2024, were extended and now mature in December 2025. The Credit Agreements provide $2.3 billion of credit through December 2025. See Note 4 – Short-term Debt and Liquidity under Part II, Item 8, of this report for additional information on the Credit Agreements. During the year ended December 31, 2021, Ameren (parent), Ameren Missouri, and Ameren Illinois each issued commercial paper. Borrowings under the Credit Agreements and commercial paper issuances are based upon available interest rates at that time of the borrowing or issuance.
Ameren has a money pool agreement with and among its utility subsidiaries to coordinate and to provide for certain short-term cash and working capital requirements. As short-term capital needs arise, and based on availability of funding sources, Ameren Missouri and Ameren Illinois will access funds from the utility money pool, the Credit Agreements, or the commercial paper programs depending on which option has the lowest interest rates.
The issuance of short-term debt securities by Ameren’s utility subsidiaries is subject to FERC approval under the Federal Power Act. In 2020, the FERC issued orders authorizing Ameren Missouri and Ameren Illinois to each issue up to $1 billion of short-term debt securities through March 2022 and September 2022, respectively. In July 2021, the FERC issued an order authorizing ATXI to issue up to $300 million of short-term debt securities through July 2023.
The Ameren Companies continually evaluate the adequacy and appropriateness of their liquidity arrangements for changing business conditions. When business conditions warrant, changes may be made to existing credit agreements or to other short-term borrowing arrangements, or other arrangements may be made.
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Long-term Debt and Equity
The following table presents Ameren’s issuances (net of any issuance premiums or discounts) of long-term debt and equity, as well as redemptions and maturities of long-term debt and preferred stock for the years ended December 31, 2021 and 2020. For additional information related to the terms and uses of these issuances and effective registration statements, and Ameren’s forward sale agreements relating to common stock, see Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report. For information on capital contributions received by Ameren Missouri and Ameren Illinois from Ameren (parent), see Note 13 – Related-party Transactions under Part II, Item 8, of this report.
Month Issued, Redeemed, Repurchased, or Matured 2021 2020
Issuances of Long-term Debt
Ameren:
1.75% Senior unsecured notes due 2028 March $ 450 $ —
1.95% Senior unsecured notes due 2027 November 499 —
Ameren Missouri:
2.15% First mortgage bonds due 2032 (green bonds) June 524 —
2.625% First mortgage bonds due 2051 (green bonds) October — 547
Ameren Illinois:
2.90% First mortgage bonds due 2051 (green bonds) June 349
ATXI:(a)
2.45% Senior unsecured notes due 2036 November 75 —
Total Ameren long-term debt issuances $ 1,997 $ 2,183
Issuances of Common Stock
Ameren:
DRPlus and 401(k)(b) Various $ 47 $ 51
August 2019 forward sale agreement(c) Various 113 425
ATM program(d) Various 148 —
Total Ameren common stock issuances(e) $ 308 $ 476
Maturities of Long-term Debt
Ameren:
2.70% Senior unsecured notes due 2020 October $ — $ 350
Ameren Missouri:
5.00% Senior secured notes due 2020 February — 85
City of Bowling Green financing obligation (Peno Creek CT) December 8 7
Total long-term debt redemptions, repurchases, and maturities $ 8 $ 442
Redemptions of Preferred Stock
Ameren Illinois:
7.75% Series March 1 —
Total Ameren Illinois preferred stock redemptions $ 13 $ —
(a) Pursuant to a note purchase agreement, ATXI agreed to issue $95 million principal amount of 2.96% senior unsecured notes due 2052, see Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report for further information.
(b) Ameren issued a total of 0.5 million and 0.7 million shares of common stock under its DRPlus and 401(k) plan in 2021 and 2020, respectively.
(c) Ameren issued 1.6 million shares of common stock in February 2021 to settle the remainder of the August 2019 forward sale agreement. Ameren issued 5.9 million shares of common stock pursuant to a partial settlement of the August 2019 forward sale agreement in December 2020.
(d) Ameren issued 1.8 million shares of common stock under the ATM program in 2021.
(e) Excludes 0.5 million and 0.5 million shares of common stock valued at $33 million and $38 million issued for no cash consideration in connection with stock-based compensation in 2021 and 2020, respectively
The Ameren Companies may sell securities registered under their effective registration statements if market conditions and capital requirements warrant such sales. Any offer and sale will be made only by means of a prospectus that meets the requirements of the Securities Act of 1933 and the rules and regulations thereunder.
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Indebtedness Provisions and Other Covenants
At December 31, 2021, the Ameren Companies were in compliance with the provisions and covenants contained within their credit agreements, indentures, and articles of incorporation, as applicable, and ATXI was in compliance with the provisions and covenants contained in its note purchase agreements. See Note 4 – Short-term Debt and Liquidity and Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report for a discussion of covenants and provisions (and applicable cross-default provisions) contained in our credit agreements, certain of the Ameren Companies’ indentures and articles of incorporation, and ATXI’s note purchase agreements.
We consider access to short-term and long-term capital markets to be a significant source of funding for capital requirements not satisfied by cash provided by our operating activities. Inability to raise capital on reasonable terms, particularly during times of uncertainty in the capital markets, could negatively affect our ability to maintain and expand our businesses. After assessing its current operating performance, liquidity, and credit ratings (see Credit Ratings below), Ameren, Ameren Missouri, and Ameren Illinois each believes that it will continue to have access to the capital markets on reasonable terms. However, events beyond Ameren’s, Ameren Missouri’s, and Ameren Illinois’ control may create uncertainty in the capital markets or make access to the capital markets uncertain or limited. Such events could increase our cost of capital and adversely affect our ability to access the capital markets.
Dividends
Ameren paid to its shareholders common stock dividends totaling $565 million, or $2.20 per share, in 2021 and $494 million, or $2.00 per share, in 2020. The amount and timing of dividends payable on Ameren’s common stock are within the sole discretion of Ameren’s board of directors. Ameren’s board of directors has not set specific targets or payout parameters when declaring common stock dividends, but it considers various factors, including Ameren’s overall payout ratio, payout ratios of our peers, projected cash flow and potential future cash flow requirements, historical earnings and cash flow, projected earnings, impacts of regulatory orders or legislation, and other key business considerations. Ameren expects its dividend payout ratio to be between 55% and 70% of earnings over the next few years. On February 11, 2022, the board of directors of Ameren declared a quarterly dividend on Ameren’s common stock of 59 cents per share, payable on March 31, 2022, to shareholders of record on March 9, 2022.
Certain of our financial agreements and corporate organizational documents contain covenants and conditions that, among other things, restrict the Ameren Companies’ payment of dividends in certain circumstances.
Ameren Illinois’ articles of incorporation require its dividend payments on common stock to be based on ratios of common stock to total capitalization and other provisions with respect to certain operating expenses and accumulations of earned surplus. Additionally, Ameren has committed to the FERC to maintain a minimum of 30% equity in the capital structure at Ameren Illinois.
Ameren Missouri and Ameren Illinois, as well as certain other nonregistrant Ameren subsidiaries, are subject to Section 305(a) of the Federal Power Act, which makes it unlawful for any officer or director of a public utility, as defined in the Federal Power Act, to participate in the making or paying of any dividend from any funds “properly included in capital account.” The FERC has consistently interpreted the provision to allow dividends to be paid as long as (1) the source of the dividends is clearly disclosed, (2) the dividends are not excessive, and (3) there is no self-dealing on the part of corporate officials. At a minimum, Ameren believes that dividends can be paid by its subsidiaries that are public utilities from net income and from retained earnings. In addition, under Illinois law, Ameren Illinois and ATXI may not pay any dividend on their respective stock unless, among other things, their respective earnings and earned surplus are sufficient to declare and pay a dividend after provisions are made for reasonable and proper reserves, or unless Ameren Illinois or ATXI has specific authorization from the ICC.
At December 31, 2021, the amount of restricted net assets of Ameren’s subsidiaries that may not be distributed to Ameren in the form of a loan or dividend was $3.8 billion.
The following table presents common stock dividends declared and paid by Ameren Corporation to its common shareholders and by Ameren subsidiaries to their parent, Ameren:
Ameren Missouri 24 66
Ameren Illinois — 9
Ameren Missouri and Ameren Illinois each have issued preferred stock, which provide for cumulative dividends. Each company’s board of directors considers the declaration of preferred stock dividends to shareholders of record on a certain date, stating the date on which the dividend is payable and the amount to be paid. See Note 5 – Long-term Debt and Equity Financings under Part II, Item 8, of this report for further detail concerning the preferred stock issuances.
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Credit Ratings
Our credit ratings affect our liquidity, our access to the capital markets and credit markets, our cost of borrowing under our credit facilities and our commercial paper programs, and our collateral posting requirements under commodity contracts.
The following table presents the principal credit ratings of the Ameren Companies by Moody’s and S&P effective on the date of this report:
Moody’s S&P
Ameren:
Issuer/corporate credit rating Baa1 BBB+
Senior unsecured debt Baa1 BBB
Commercial paper P-2 A-2
Ameren Missouri:
Issuer/corporate credit rating Baa1 BBB+
Secured debt A2 A
Senior unsecured debt Baa1 Not Rated
Commercial paper P-2 A-2
Ameren Illinois:
Issuer/corporate credit rating A3 BBB+
Secured debt A1 A
Senior unsecured debt A3 BBB+
Commercial paper P-2 A-2
ATXI:
Issuer credit rating A2 Not Rated
Senior unsecured debt A2 Not Rated
A credit rating is not a recommendation to buy, sell, or hold securities. It should be evaluated independently of any other rating. Ratings are subject to revision or withdrawal at any time by the rating organization.
Collateral Postings
Any weakening of our credit ratings may reduce access to capital and trigger additional collateral postings and prepayments. Such changes may also increase the cost of borrowing, resulting in an adverse effect on earnings. Cash collateral postings and prepayments made with external parties, including postings related to exchange-traded contracts, were $66 million for Ameren and Ameren Missouri and cash collateral posted by external parties were $22 million for Ameren and Ameren Illinois at December 31, 2021. A sub-investment-grade issuer or senior unsecured debt rating (below “Baa3” from Moody’s or below “BBB-” from S&P) at December 31, 2021, could have resulted in Ameren, Ameren Missouri, or Ameren Illinois being required to post additional collateral or other assurances for certain trade obligations amounting to $89 million, $61 million, and $28 million, respectively.
Changes in commodity prices could trigger additional collateral postings and prepayments. Based on credit ratings at December 31, 2021, if market prices were 15% higher or lower than December 31, 2021 levels in the next 12 months and 20% higher or lower thereafter through the end of the term of the commodity contracts, then Ameren, Ameren Missouri, or Ameren Illinois could be required to post an immaterial amount, compared to each company’s liquidity, of collateral or provide other assurances for certain trade obligations.
Environmental Matters
Our electric generation, transmission, and distribution and natural gas distribution and storage operations must comply with a variety of statutes and regulations relating to the protection of the environment and human health and safety including permitting programs implemented via federal, state, and local authorities. Such environmental laws address air emissions; discharges to water bodies; the storage, handling and disposal of hazardous substances and waste materials; siting and land use requirements; and potential ecological impacts. See Note 14 – Commitments and Contingencies under Part II, Item 8, of this report for a discussion of existing and proposed environmental laws, including those that may address climate change, that affect, or may affect, our facilities, operations, and capital expenditures to comply with such laws. The individual or combined effects of existing and new environmental regulations could result in significant capital expenditures, increased operating costs, or the closure or alteration of operations at some of Ameren Missouri’s energy centers.
Additionally, international agreements could lead to future federal or state legislation or regulations. In 2015, the United Nations Framework Convention on Climate Change reached consensus among approximately 190 nations on an agreement, known as the Paris
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Agreement, that establishes a framework for greenhouse gas mitigation actions by all countries, with a goal of holding the increase in global average temperature to below 2 degrees Celsius above pre-industrial levels and an aspiration to limit the increase to 1.5 degrees Celsius. The Biden administration has announced a new policy commitment regarding a reduction in greenhouse gas emissions for the United States, but rulemaking to achieve such reductions has not yet been implemented. Actions taken to implement the Paris Agreement could result in future additional greenhouse gas reduction requirements in the United States. In addition, the Biden administration has announced plans to implement new climate change programs, including potential regulation of greenhouse gas emissions targeting the utility industry.
We provide information regarding our sustainability initiatives through our website, including in our annual sustainability report, our responses to the annual climate change and water surveys conducted by CDP, and an ESG investor presentation. In addition, we issue an annual report in accordance with the Edison Electric Institute’s (EEI) and American Gas Association’s (AGA) ESG and sustainability-related reporting program. We also issue a periodic climate risk report and a report on our management of CCR. Additionally, we have posted a Task Force on Climate-related Financial Disclosures (TCFD) and Sustainability Accounting Standards Board (SASB) mapping of sustainability data. The reports may be updated at any time. The information on Ameren’s website, including the reports and documents mentioned in this paragraph, is not incorporated by reference into this report.
OUTLOOK
Below are some key trends, events, and uncertainties that may reasonably affect our results of operations, financial condition, or liquidity, as well as our ability to achieve strategic and financial objectives, for 2022 and beyond. The continued effect of the COVID-19 pandemic on our results of operations, financial position, and liquidity in subsequent periods will depend on its severity and longevity, future regulatory or legislative actions with respect thereto, and the resulting impact on business, economic, and capital market conditions. Although restrictions on social activities and nonessential businesses implemented in our service territories in 2020 have been relaxed, additional restrictions may be imposed in the future. We continue to assess the impacts the COVID-19 pandemic is having on our businesses, including but not limited to impacts on our liquidity; demand for residential, commercial, and industrial electric and natural gas services; changes in deferred payment arrangements for customers; bad debt expense; supply chain operations; the availability of our employees and contractors; counterparty credit; capital construction; infrastructure operations and maintenance; and pension valuations. For additional information regarding recent rate orders, lawsuits, and pending requests filed with state and federal regulatory commissions, including those discussed below, see Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report.
Operations
•In 2021, our sales volumes, which have been, and continue to be, affected by the COVID-19 pandemic, among other things, increased compared to 2020, excluding the estimated effects of weather and customer energy-efficiency programs. While total sales volume levels were more comparable to pre-pandemic levels, there has been a shift in sales volumes by customer class, with an increase in residential sales, and a decrease in commercial and industrial sales. We expect total weather-normalized sales to return to 2019 levels by mid-2022 with the growth expected to be primarily over the second half of 2022. Because of their regulatory frameworks, Ameren Illinois’ and ATXI’s revenues are largely decoupled from changes in sales volumes. See the Results of Operations section above for additional information on our accounts receivable balances and Ameren Illinois’ electric and natural gas bad debt riders. Additionally, see Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report for information on Ameren Illinois’ reinstatement of customer disconnection and late fee charges for non-payment, accounting authority orders issued by the MoPSC related to Ameren Missouri's electric and natural gas services to allow Ameren Missouri to accumulate certain costs incurred, net of savings, and forgone customer late fee revenues related to the COVID-19 pandemic, with such amounts approved for recovery by the MoPSC in the December 2021 electric and natural gas service rate orders, and orders issued by the ICC in a service disconnection moratorium proceeding, which required Ameren Illinois to implement more flexible credit and collection practices and allowed for recovery of costs incurred related to the COVID-19 pandemic and forgone late fees.
•The PISA permits Ameren Missouri to defer and recover 85% of the depreciation expense and earn a return at the applicable WACC on investments in certain property, plant, and equipment placed in service, and not included in base rates. The regulatory asset for accumulated PISA deferrals also earns a return at the applicable WACC, with all approved PISA deferrals added to rate base prospectively and recovered over a period of 20 years following a regulatory rate review. Additionally, under the RESRAM, Ameren Missouri is permitted to recover the 15% of depreciation expense not recovered under the PISA, and earn a return at the applicable WACC for investments in renewable generation plant placed in service to comply with Missouri’s renewable energy standard. Accumulated RESRAM deferrals earn carrying costs at short-term interest rates. The PISA and the RESRAM mitigate the effects of regulatory lag between regulatory rate reviews. Those investments not eligible for recovery under the PISA and the remaining 15% of certain property, plant, and equipment placed in service, unless eligible for recovery under the RESRAM, remain subject to regulatory lag. Ameren Missouri defers its cost of debt relating to PISA eligible investments as an offset to interest charges with the difference between the applicable WACC and its cost of debt recognized in revenues when recovery of such deferrals is reflected in customer rates. As a result of the PISA election, additional provisions of the law apply to Ameren Missouri, including limitations on electric customer rate increases. Ameren Missouri does not expect to exceed these rate increase limitations in 2022. Both the rate increase
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limitation and the PISA are effective through December 2023, unless Ameren Missouri requests and the MoPSC approves an extension through December 2028.
•In 2018, the MoPSC issued an order approving Ameren Missouri’s MEEIA 2019 plan. The plan includes a portfolio of customer energy-efficiency programs through December 2023 and low-income customer energy-efficiency programs through December 2024, along with a rider. Ameren Missouri intends to invest approximately $360 million over the life of the plan, including $70 million in 2022 and $75 million in 2023. The plan includes the continued use of the MEEIA rider, which allows Ameren Missouri to collect from, or refund to, customers any difference in actual MEEIA program costs and related lost electric margins and the amounts collected from customers. In addition, the plan includes a performance incentive that provides Ameren Missouri an opportunity to earn additional revenues by achieving certain customer energy-efficiency goals. If the target goals are achieved for 2021 and 2022, additional revenues of $24 million would be recognized in 2022, and, if target goals are achieved for 2023, additional revenues of $13 million would be recognized in 2023.
•In December 2021, the MoPSC issued an order in Ameren Missouri’s 2021 electric service regulatory rate review, resulting in an increase of $220 million to Ameren Missouri’s annual revenue requirement for electric retail service. The order also changed annualized depreciation, regulatory asset and liability amortization amounts, and the base level of expenses for trackers. On an annualized basis, these changes reflect approximate increases in depreciation and amortization of $140 million and other operating and maintenance expenses of $40 million. As a result of the order, all off-system sales resulting from the High Prairie Renewable and Atchison Renewable energy centers will be included in the RESRAM beginning February 28, 2022. Prior to this change, 95% of these sales were included in the FAC and 5% were included in the RESRAM. The order also establishes a five-year recovery period for $61 million of certain costs associated with the Meramec Energy Center, which is expected to be retired in 2022. The new rates, base level of expenses, and amortizations will become effective on February 28, 2022.
•Ameren Illinois and ATXI use a forward-looking rate calculation with an annual revenue requirement reconciliation for each company’s electric transmission business. Based on expected rate base and the currently allowed 10.52% ROE, which includes a 50 basis point incentive adder for participation in an RTO, the revenue requirements included in 2022 rates for Ameren Illinois’ and ATXI’s electric transmission businesses are $422 million and $195 million, respectively. These revenue requirements represent an increase in Ameren Illinois’ revenue requirement of $42 million and a decrease in ATXI’s revenue requirements of $5 million from the revenue requirements reflected in 2021 rates, primarily due to higher expected rate base at Ameren Illinois and a lower expected rate base at ATXI. These rates will affect Ameren Illinois’ and ATXI’s cash receipts during 2022, but will not determine their respective electric transmission service operating revenues, which will instead be based on 2022 actual recoverable costs, rate base, and a return on rate base at the applicable WACC as calculated under the FERC formula ratemaking framework.
•The allowed base ROE for FERC-regulated transmission rates previously charged under the MISO tariff is the subject of an appeal filed with the United States Court of Appeals for the District of Columbia Circuit. Depending on the outcome of the appeal, the transmission rates charged during previous periods and the currently effective rates may be subject to change. Additionally, in March 2019, the FERC issued a Notice of Inquiry regarding its transmission incentives policy. In March 2020, the FERC issued a Notice of Proposed Rulemaking on its transmission incentives policy, which addressed many of the issues in the Notice of Inquiry on transmission incentives. The Notice of Proposed Rulemaking included an increased incentive in the allowed base ROE for participation in an RTO to 100 basis points from the current 50 basis points and revised the parameters for awarding incentives, while limiting the overall incentives to a cap of 250 basis points, among other things. In April 2021, the FERC issued a Supplemental Notice of Proposed Rulemaking, which proposes to modify the Notice of Proposed Rulemaking’s incentive for participation in an RTO by limiting this incentive for utilities that join an RTO to 50 basis points and only allowing them to earn the incentive for three years, among other things. If this proposal is included in a final rule, Ameren Illinois and ATXI would no longer be eligible for the 50 basis point RTO incentive adder, prospectively. The FERC is under no deadline to issue a final rule on this matter. Ameren is unable to predict the ultimate impact of any changes to the FERC’s incentives policy, or any further order on base ROE. A 50 basis point change in the FERC-allowed base ROE would affect Ameren’s and Ameren Illinois’ annual net income by an estimated $12 million and $8 million, respectively, based on each company’s 2022 projected rate base.
•Ameren Illinois’ electric distribution service performance-based formula ratemaking framework under the IEIMA allows Ameren Illinois to reconcile electric distribution service rates to its actual revenue requirement on an annual basis to reflect actual recoverable costs incurred and a return at the applicable WACC on year-end rate base. If a given year’s revenue requirement varies from the amount collected from customers, an adjustment is made to electric operating revenues with an offset to a regulatory asset or liability to reflect that year’s actual revenue requirement, independent of actual sales volumes. The regulatory balance is then collected from, or refunded to, customers within two years from the end of the year. Pursuant to an order issued by the ICC in March 2021, Ameren Illinois expects to use the current IEIMA formula framework to establish annual customer rates effective through 2023, and reconcile the related revenue requirement for customer rates established for 2022 and 2023. As such, Ameren Illinois’ 2022 and 2023 revenues would reflect each year’s actual recoverable costs, year-end rate base, and a return at the applicable WACC, with the ROE component based on the annual average of the monthly yields of the 30-year United States Treasury bonds plus 580 basis points. For more information on the
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March 2021 ICC order, see Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report. By law, the decoupling provisions extend beyond the end of existing performance-based formula ratemaking, which ensures that Ameren Illinois’ electric distribution revenues authorized in a regulatory rate review are not affected by changes in sales volumes.
•Pursuant to the IETL, which was enacted in September 2021, Ameren Illinois may file an MYRP with the ICC to establish base rates for electric distribution service to be charged to customers for each calendar year of a four-year period. An MYRP would allow Ameren Illinois to reconcile electric distribution service rates to its actual revenue requirement on an annual basis, subject to a reconciliation cap and adjustments to the ICC-determined ROE for performance incentives and penalties. Ameren Illinois’ existing riders will remain effective whether it elects to file an MYRP or a traditional regulatory rate review. Additionally, electric distribution service revenues would continue to be decoupled from sales volumes under either election. Subject to a constructive outcome regarding the ICC’s determination of performance metrics, Ameren Illinois anticipates filing an MYRP by mid-January 2023, with rates effective beginning in 2024. If Ameren Illinois does not file an MYRP for rates effective beginning in 2024, its next opportunity to file an MYRP would be for rates effective beginning in 2028.
•In December 2021, the ICC issued an order in Ameren Illinois’ annual update filing that approved a $58 million increase in Ameren Illinois’ electric distribution service rates beginning in January 2022. Ameren Illinois’ 2022 electric distribution service revenues will be based on its 2022 actual recoverable costs, 2022 year-end rate base, and a return at the applicable WACC, with the ROE component based on the annual average of the monthly yields of the 30-year United States Treasury bonds plus 580 basis points. As of December 31, 2021, Ameren Illinois expects its 2022 electric distribution year-end rate base to be $3.9 billion. The 2022 revenue requirement reconciliation adjustment will be collected from, or refunded to, customers in 2024. A 50 basis point change in the annual average of the monthly yields of the 30-year United States Treasury bonds would result in an estimated $11 million change in Ameren’s and Ameren Illinois’ annual net income, based on Ameren Illinois’ 2022 projected year-end rate base, including electric energy-efficiency investments. Ameren Illinois’ allowed ROE for 2021 was based on an annual average of the monthly yields of the 30-year United States Treasury bonds of 2.05%.
•Pursuant to Illinois law, Ameren Illinois’ electric energy-efficiency investments are deferred as a regulatory asset and earn a return at the applicable WACC, with the ROE component based on the annual average of the monthly yields of the 30-year United States Treasury bonds plus 580 basis points. The allowed ROE on electric energy-efficiency investments can be increased or decreased by up to 200 basis points, depending on the achievement of annual energy savings goals. While the ICC has approved a plan for Ameren Illinois to invest approximately $100 million per year in electric energy-efficiency programs through 2025, the ICC has the ability to reduce the amount of electric energy-efficiency savings goals in future plan program years if there are insufficient cost-effective programs available, which could reduce the investments in electric energy-efficiency programs. The electric energy-efficiency program investments and the return on those investments are collected from customers through a rider and are not recovered through the electric distribution service performance-based formula ratemaking framework. Pursuant to the IETL, the planned annual investments in electric energy-efficiency programs will increase to approximately $120 million. Ameren Illinois expects to file a revised energy-efficiency plan with the ICC by early March 2022 to reflect the expected increased level of annual investments.
•Ameren Missouri’s next scheduled refueling and maintenance outage at its Callaway energy center is scheduled for the spring of 2022. Effective beginning with the fall 2020 refueling and maintenance outage, during a scheduled refueling, which occurs every 18 months, maintenance expenses are deferred as a regulatory asset and amortized until the completion of the next refueling and maintenance outage. During an outage, depending on the availability of its other generation sources and the market prices for power, Ameren Missouri’s purchased power costs may increase and the amount of excess power available for sale may decrease versus non-outage years. Changes in purchased power costs and excess power available for sale are included in the FAC, which results in limited impacts to earnings. In addition, Ameren Missouri may incur increased non-nuclear energy center maintenance costs in non-outage years.
•In August 2021, the United States Court of Appeals for the Eighth Circuit issued a decision that affirmed the United States District Court for the Eastern District of Missouri’s January 2017 liability ruling and the district court’s September 2019 remedy order as it related to the installation of a flue gas desulfurization system at the Rush Island Energy Center, but reversed the order as it related to the installation of a dry sorbent injection system at the Labadie Energy Center. In November 2021, the court of appeals issued an order denying requests for consideration previously sought by both Ameren Missouri and the United States Department of Justice. Based on its assessment of available legal, operational and regulatory alternatives, Ameren Missouri has determined not to further appeal the court rulings and, in December 2021, filed a motion with the district court to modify the remedy order to allow the retirement of the Rush Island Energy Center in advance of its previously expected useful life in lieu of installing a flue gas desulfurization system. The district court is under no deadline to issue a ruling revising the remedy order. In January 2022, the MISO completed a preliminary assessment regarding potential impacts of the retirement to the regional electric power system, which indicated transmission upgrades and voltage support would be needed in advance of the retirement to address reliability concerns. In February 2022, Ameren Missouri expects to formally notify the MISO of its intent to retire the Rush Island Energy Center. Upon receipt of the formal notification, the MISO will conduct a final reliability assessment. The MISO must also separately approve the specific upgrades and transmission support required to address reliability concerns noted in the assessment. For additional information on the NSR and Clean Air Act litigation, see Note 14 –
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Commitments and Contingencies under Part II, Item 8, of this report. Ameren Missouri expects to file an update to the 2020 IRP with the MoPSC in the first half of 2022 to reflect the planned acceleration of the retirement of the Rush Island Energy Center from 2039, the retirement year for the facility as reflected in the 2020 IRP. In February 2022, the MoPSC issued an order directing the MoPSC staff to review Ameren Missouri’s planned accelerated retirement of the Rush Island Energy Center, including potential impacts on the reliability and cost of Ameren Missouri’s service to its customers, Ameren Missouri’s plans to mitigate the customer impacts of the accelerated retirement, and the prudence of Ameren Missouri’s actions and decisions with regard to the Rush Island Energy Center, among other things. The MoPSC staff is under no deadline to complete this review. As of December 31, 2021, Ameren and Ameren Missouri classified the remaining net book value of the Rush Island Energy Center as plant to be abandoned, net, within “Property, Plant, and Equipment, Net” on Ameren’s and Ameren Missouri’s balance sheets. As part of the assessment of any potential future abandonment loss, consideration will be given to rate and securitization orders issued by the MoPSC to Ameren Missouri and to orders issued to other Missouri utilities with similar facts.
•In January 2022, Ameren Missouri received notice of a proposed determination by the EPA that it has rejected Ameren Missouri’s requests to extend the timeline for operating certain impoundments located at the Sioux and Meramec energy centers. Compliance with the CCR Rule’s requirements for closure of the impoundments would be required 135 days after the EPA issues a final determination, which Ameren Missouri expects to be issued in the spring of 2022. If Ameren Missouri was no longer able to use the surface impoundments at the Sioux or Meramec energy centers, Ameren Missouri would not be able to operate the energy centers unless an alternative for handling the CCR material is in place. Ameren Missouri plans to retire the Meramec Energy Center in 2022, and is accelerating its construction plans to build a CCR Rule-compliant impoundment at the Sioux Energy Center to allow for continued operations. Additionally, Ameren Missouri is seeking a reliability determination from the MISO, which, if granted, would extend the deadline to comply with the requirement to close the impoundments and allow the energy centers to operate. Ameren Missouri does not expect that this matter will have a material adverse effect on its results of operations, financial position, or liquidity.
•The IETL established emission standards that became effective in September 2021. Ameren Missouri's natural gas-fired energy centers in Illinois will be subject to limits on emissions, including CO2 and NOx, equal to their unit-specific average emissions from 2018 through 2020, for any rolling twelve-month period beginning October 1, 2021, through 2029. Further reductions to emissions limits will become effective between 2030 and 2040, which could limit the operations of Ameren Missouri's five natural gas-fired energy centers located in the state of Illinois, and will result in the closure of one or more energy centers earlier than anticipated. These energy centers are utilized to support peak loads. Subject to conditions in the IETL, these energy centers may be allowed to exceed the emissions limits in order to maintain reliability of electric utility service as necessary. Ameren Missouri is reviewing the emission standards and the effect they may have on its generation strategy, including any increases in capital expenditures or operating costs, and changes to the useful lives of the five natural gas-fired energy centers. Ameren Missouri expects to file an update to the 2020 IRP with the MoPSC in the first half of 2022 to reflect, among other things, the impact of these new emissions standards.
•Ameren Missouri and Ameren Illinois continue to make infrastructure investments and expect to seek increases to electric and natural gas rates to recover the cost of investments and earn an adequate return. Ameren Missouri and Ameren Illinois will also seek new, or to maintain existing, legislative solutions to address regulatory lag and to support investment in their utility infrastructure for the benefit of their customers. Ameren Missouri and Ameren Illinois continue to face cost recovery pressures, including limited economic growth in their service territories, economic impacts of the COVID-19 pandemic, customer conservation efforts, the impacts of additional customer energy-efficiency programs, and increased customer use of increasingly cost-effective technological advances, including private generation and energy storage. However, over the long-term, we expect the decreased demand to be partially offset by increased demand resulting from increased electrification of the economy for efficiencies and as a means to address economy-wide CO2 emission concerns. We expect that increased investments, including expected future investments for environmental compliance, system reliability improvements, and new generation sources, will result in rate base and revenue growth but also higher depreciation and financing costs.
•We are observing inflationary pressures on the prices of commodities, labor, services, materials, and supplies. Ameren Missouri and Ameren Illinois are generally allowed to pass on to customers prudently incurred costs for fuel, purchased power, and natural gas supply. Additionally, for certain non-commodity cost changes, the use of trackers, riders, and formula ratemaking, as applicable, mitigates our exposure. The inflationary pressures could impact our ability to control costs and/or make substantial investments in our businesses, including our ability to recover costs and investments, and to earn our allowed ROEs within frameworks established by our regulators, while maintaining rates that are affordable to our customers.
Liquidity and Capital Resources
•Our customers’ payment for our services has been adversely affected by the COVID-19 pandemic. See the Results of Operations section above for additional information on our accounts receivable balances. Further, our liquidity and our capital expenditure plans could be adversely affected by other impacts resulting from the COVID-19 pandemic, including but not limited to potential impacts on our ability to access the capital markets on reasonable terms when needed and the timing of tax payments and the utilization of tax credits. We expect to make significant capital expenditures to improve our electric and natural gas utility infrastructure, however, disruptions to
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the capital markets and the ability of our suppliers and contractors to perform as required under their contracts could impact the execution of our capital investment strategy. For further discussion on the impacts to our ability to access the capital markets, see below.
•In February 2022, Ameren Missouri filed an update to its Smart Energy Plan with the MoPSC, which includes a five-year capital investment overview with a detailed one-year plan for 2022. The plan is designed to upgrade Ameren Missouri’s electric infrastructure and includes investments that will upgrade the grid and accommodate more renewable energy. Investments under the plan are expected to total approximately $8.4 billion over the five-year period from 2022 through 2026, with expenditures largely recoverable under the PISA and the RESRAM. The planned investments in 2024 through 2026 are based on the assumption that Ameren Missouri requests and receives MoPSC approval of an extension of the PISA from December 2023 to December 2028.
•In connection with Ameren Missouri’s 2020 IRP, Ameren established a goal of achieving net-zero carbon emissions by 2050. Ameren is also targeting a 50% CO2 emission reduction by 2030 and an 85% reduction by 2040 from the 2005 level. In August 2021, the MoPSC issued an order affirming the plan’s compliance with Missouri law. The plan targets cleaner and more diverse sources of energy generation, including solar, wind, hydro, and nuclear power, and supports increased investment in new energy technologies. It also includes expanding renewable sources by adding 3,100 MWs of renewable generation by the end of 2030 and a total of 5,400 MWs of renewable generation by 2040. These amounts include 700 MWs related to the High Prairie Renewable and Atchison Renewable energy centers, which support Ameren Missouri’s compliance with the state of Missouri’s requirement of achieving 15% of native load sales from renewable energy sources that began in 2021. The plan also includes accelerating the retirement dates of the Sioux and Rush Island coal-fired energy centers to 2028 and 2039, respectively, the continued implementation of customer energy-efficiency programs, and the expectation that Ameren Missouri will seek NRC approval for an extension of the operating license for the Callaway Energy Center beyond its current 2044 expiration date. Additionally, the plan includes retiring the Meramec and Labadie coal-fired energy centers at the end of their useful lives (by 2022 and 2042, respectively). Ameren Missouri’s plan could be affected by, among other factors: Ameren Missouri’s ability to obtain certificates of convenience and necessity from the MoPSC, and any other required approvals for the addition of renewable resources, retirement of energy centers, and new or continued customer energy-efficiency programs; the ability to enter into build-transfer agreements for renewable generation and acquire that generation at a reasonable cost; the ability of developers to meet contractual commitments and timely complete projects, which is dependent upon the availability of necessary labor, materials, and equipment, including those that are affected by the disruptions in the global supply chain caused by the COVID-19 pandemic, among other things; changes in the scope and timing of projects; the availability of federal production and investment tax credits related to renewable energy and Ameren Missouri’s ability to use such credits; the cost of wind, solar, and other renewable generation and storage technologies; changes in environmental regulations, including those related to carbon emissions; energy prices and demand; and Ameren Missouri’s ability to obtain necessary rights-of-way, easements, and transmission interconnection agreements at an acceptable cost and in a timely fashion. In December 2021, the MoPSC issued an order in Ameren Missouri’s 2021 electric service regulatory rate review, which, among other things, approved a change in the depreciable lives of the Sioux and Rush Island energy centers’ assets consistent with Ameren Missouri’s 2020 IRP. Due to the NSR and Clean Air Act Litigation discussed in Note 14 – Commitments and Contingencies under Part II, Item 8, of this report, Ameren Missouri plans to retire the Rush Island Energy Center prior to the 2039 date discussed above. Ameren Missouri expects to file an update to the 2020 IRP with the MoPSC in the first half of 2022 to reflect an accelerated retirement date for the Rush Island Energy Center and the impact of new emission standards pursuant to the IETL, as discussed in Note 14 – Commitments and Contingencies, among other things. The next integrated resource plan is expected to be filed in September 2023.
•Effective beginning August 2021, Missouri law allows Missouri electric utility companies to petition the MoPSC for a financing order to authorize the issuance of securitized utility tariff bonds to finance the cost of retiring electric generation facilities before the end of their useful lives, including the repayment of existing debt. In connection with the planned accelerated retirement of the Rush Island Energy Center due to the NSR and Clean Air Act Litigation discussed above, Ameren Missouri expects to seek approval from the MoPSC to finance the costs associated with the retirement, including the remaining unrecovered net plant balance associated with the facility, through the issuance of securitized utility tariff bonds.
•In February 2022, Ameren Missouri entered into a build-transfer agreement with a subsidiary of Invenergy Renewables Global, LLC to acquire a 150-megawatt solar generation facility after construction. The facility is expected to be located in southeastern Illinois. The acquisition is subject to certain conditions, including the issuance of a certificate of convenience and necessity by the MoPSC, obtaining a MISO transmission interconnection agreement, and approval by the FERC. Ameren Missouri expects to file for a certificate of convenience and necessity with the MoPSC by mid-2022.
•Through 2026, we expect to make significant capital expenditures to improve our electric and natural gas utility infrastructure, with a major portion directed to our transmission and distribution systems. We estimate that we will invest up to $18.0 billion (Ameren Missouri – up to $9.2 billion; Ameren Illinois – up to $8.6 billion; ATXI – up to $0.2 billion) of capital expenditures during the period from 2022 through 2026. These planned investments are based on the assumption of continued constructive regulatory frameworks, including an assumption that Ameren Missouri requests and receives MoPSC approval of an extension of the PISA from December 2023 to December 2028. Ameren’s and Ameren Missouri’s estimates exclude renewable generation investment opportunities of 1,200 MWs by
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2026, which are included in Ameren Missouri’s 2020 IRP, and additional investment opportunities that may be approved by the MISO to address reliability concerns in connection with the planned accelerated retirement of the Rush Island Energy Center.
•In April 2021, the MISO issued a report outlining a preliminary long-range transmission planning roadmap of projects through 2039, which considers the rapidly changing generation mix within MISO resulting from significant additions of renewable generation, actual and expected generation plant closures, and state mandates or goals for clean energy or carbon emissions reductions. In February 2022, the MISO updated a list of projects under consideration for the first phase of the roadmap, and is expected to approve certain projects for the first phase by mid-2022. Expenditures that result from the MISO long-range transmission planning roadmap may cause adjustments to our estimated 2022 through 2026 capital expenditures.
•Environmental regulations, including those related to CO2 emissions, or other actions taken by the EPA or state regulators, or requirements that may result from the NSR and Clean Air Act Litigation discussed in Note 14 – Commitments and Contingencies under Part II, Item 8, of this report, could result in significant increases in capital expenditures and operating costs. Regulations enacted by a prior federal administration can be reviewed and repealed, and replacement or alternative regulations can be proposed or adopted by the current federal administration including the EPA. The ultimate implementation of any of these regulations, as well as the timing of any such implementation, is uncertain. However, the individual or combined effects of existing and new environmental regulations could result in significant capital expenditures, increased operating costs, or the closure or alteration of some of Ameren Missouri’s coal and natural gas-fired energy centers. Ameren Missouri’s capital expenditures are subject to MoPSC prudence reviews, which could result in cost disallowances as well as regulatory lag. The cost of Ameren Illinois’ purchased power and natural gas purchased for resale could increase. However, Ameren Illinois expects that these costs would be recovered from customers with no material adverse effect on its results of operations, financial position, or liquidity. Ameren’s and Ameren Missouri’s earnings could benefit from increased investment to comply with environmental regulations if those investments are reflected and recovered on a timely basis in customer rates.
•The Ameren Companies have multiyear credit agreements that cumulatively provide $2.3 billion of credit through December 2025, subject to a 364-day repayment term for Ameren Missouri and Ameren Illinois, with the option to seek incremental commitments to increase the cumulative credit provided to $2.7 billion. See Note 4 – Short-term Debt and Liquidity under Part II, Item 8, of this report for additional information regarding the Credit Agreements. By the end of 2022, $55 million $400 million, and $50 million of long-term debt obligations are due to mature at Ameren Missouri, Ameren Illinois, and ATXI, respectively. Ameren, Ameren Missouri, and Ameren Illinois believe that their liquidity is adequate given their expected operating cash flows, capital expenditures, and financing plans. To date, the Ameren Companies have been able to access the capital markets on reasonable terms when needed. However, there can be no assurance that significant changes in economic conditions, disruptions in the capital and credit markets, or other unforeseen events will not materially affect their ability to execute their expected operating, capital, or financing plans.
•Ameren expects its cash used for currently planned capital expenditures and dividends to exceed cash provided by operating activities over the next several years. As part of its funding plan for capital expenditures, Ameren is using newly issued shares of common stock, rather than market-purchased shares, to satisfy requirements under the DRPlus and employee benefit plans and expects to continue to do so through at least 2026. Ameren expects these issuances to provide equity of about $100 million annually. In addition, in 2021, Ameren established an ATM program under which Ameren may offer and sell from time to time up to $750 million of its common stock, which includes the ability to enter into forward sales agreements, subject to market conditions and other factors. Ameren plans to issue approximately $300 million of equity each year from 2022 to 2026 in addition to issuances under the DRPlus and employee benefit plans. Ameren expects its equity to total capitalization to be about 45% through December 31, 2026, with the long-term intent to support solid investment-grade credit ratings. Ameren Missouri and Ameren Illinois expect to fund cash flow needs through debt issuances, adjustments of dividends to Ameren (parent), and/or capital contributions from Ameren (parent).
•As of December 31, 2021, Ameren had $133 million in tax benefits from federal and state income tax credit carryforwards and $66 million in tax benefits from federal and state net operating loss carryforwards, which will be utilized in future periods. Ameren expects federal income tax payments at the required minimum levels from 2022 to 2026 resulting from the anticipated use of existing production tax credits generated by Ameren Missouri’s High Prairie Renewable and Atchison Renewable energy centers, existing tax net operating losses, tax credit carryforwards, tax overpayments, and outstanding refunds.
•As a result of the significant increase in customer demand and prices for natural gas and electricity experienced in mid-February 2021 due to extremely cold weather, for the month of February 2021, Ameren Missouri and Ameren Illinois had under-recovered costs under their PGA clauses and, for Ameren Missouri, under the FAC (Ameren Missouri - PGA $53 million, FAC $50 million; Ameren Illinois - PGA $221 million). Ameren Missouri’s PGA and FAC under-recoveries are designed to be collected from customers over 12 months beginning November 2021 and eight months beginning October 2021, respectively. In October 2021, the MoPSC issued an order allowing Ameren Missouri to extend the collection period for the cumulative PGA under-recovery as of August 2021, which includes the February 2021 under-recovery, from 12 months to 36 months beginning November 2021, to lessen the impact on customer rates. Ameren Illinois is collecting the PGA under-recovery over 18 months beginning April 2021, but the collection of the remaining balance may be extended at Ameren Illinois’ election to lessen the impact on customer rates.
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The above items could have a material impact on our results of operations, financial position, and liquidity. Additionally, in the ordinary course of business, we evaluate strategies to enhance our results of operations, financial position, and liquidity. These strategies may include acquisitions, divestitures, opportunities to reduce costs or increase revenues, and other strategic initiatives to increase Ameren’s shareholder value. We are unable to predict which, if any, of these initiatives will be executed. The execution of these initiatives may have a material impact on our future results of operations, financial position, or liquidity.
REGULATORY MATTERS
See Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report.
ACCOUNTING MATTERS
Critical Accounting Estimates
Preparation of the financial statements and related disclosures in compliance with GAAP requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates. These estimates involve judgments regarding many factors that in and of themselves could materially affect the financial statements and disclosures. We have outlined below the critical accounting estimates that we believe are the most difficult, subjective, or complex. Any change in the assumptions or judgments applied in determining the following matters, among others, could have a material impact on future financial results.
Accounting Estimate Uncertainties Affecting Application
Regulatory Mechanisms and Cost Recovery
Basis for Judgment
The application of accounting guidance for rate-regulated businesses results in recording regulatory assets and liabilities. Regulatory assets represent the deferral of incurred costs that are probable of future recovery in customer rates. Regulatory assets are amortized as the incurred costs are recovered through customer rates. In some cases, we record regulatory assets before approval for recovery has been received from the applicable regulatory commission. We must use judgment to conclude that costs deferred as regulatory assets are probable of future recovery. We base our conclusion on certain factors including, but not limited to, orders issued by our regulatory commissions, legislation, or historical experience, as well as discussions with legal counsel. If facts and circumstances lead us to conclude that a recorded regulatory asset is no longer probable of recovery or that plant assets are probable of disallowance, we record a charge to earnings, which could be material. Regulatory liabilities represent revenues received from customers to fund expected costs that have not yet been incurred or that are probable of future refunds to customers. We also recognize revenues for alternative revenue programs authorized by our regulators that allow for an automatic rate adjustment, are probable of recovery, and are collected within 24 months following the end of the annual period in which they are recognized. Under IEIMA performance-based formula ratemaking, effective through 2023, Ameren Illinois estimates its annual electric distribution revenue requirement for interim periods by using internal forecasted rate base and published forecasted data regarding the annual average of the monthly yields of the 30-year United States Treasury bonds.
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Ameren Illinois estimates its annual revenue requirement as of December 31 of each year using that year’s actual operating results and assesses the probability of recovery from or refund to customers that the ICC will order at the end of the following year. Variations in investments made or orders by the ICC or courts can result in a subsequent change in Ameren Illinois’ estimate. Ameren Illinois and ATXI follow a similar process for their FERC rate-regulated electric transmission businesses. Ameren Missouri estimates lost electric margins resulting from its MEEIA customer energy-efficiency programs, which are subsequently recovered through the MEEIA rider. See Note 2 – Rate and Regulatory Matters under Part II, Item 8, of this report for a description of our regulatory mechanisms and quantification of these assets or liabilities for each of the Ameren Companies.
The following table reflects the gain and other comprehensive income, which would be offset by the removal of regulatory assets and liabilities and an increase in accumulated other comprehensive income, that would have resulted if accounting guidance for rate-regulated businesses had been eliminated as of December 31, 2021:
Ameren AmerenMissouri AmerenIllinois
Accounting Estimate Uncertainties Affecting Application
Benefit Plan Accounting
Basis for Judgment
Ameren has defined benefit pension plans covering substantially all of its employees and has postretirement benefit plans covering non-union employees hired before October 2015 and union employees hired before January 2020. Our ultimate selection of the discount rate, health care trend rate, and expected rate of return on pension and other postretirement benefit plan assets is based on our consistent application of assumption-setting methodologies and our review of available historical, current, and projected rates, as applicable.
The following table reflects the sensitivity of Ameren’s pension and postretirement plans to potential changes in key assumptions for the year ended December 31, 2021:
Pension Benefits Postretirement Benefits
0.25% decrease in return on assets 11 — 3 —
0.25% increase in future compensation 5 21 — —
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Accounting Estimate Uncertainties Affecting Application
Accounting for Contingencies
Basis for Judgment
The determination of a loss contingency requires significant judgment as to the expected outcome of the contingency in future periods. In making the determination as to the amount of potential loss and the probability of loss, we consider the nature of the litigation, the claim or assessment, opinions or views of legal counsel, and the expected outcome of potential litigation, among other things. If no estimate is better than another within our range of estimates, we record as our best estimate of a loss the minimum value of our estimated range of outcomes. As additional information becomes available, we reassess the potential liability related to the contingency and revise our estimates. The amount recorded for any contingency may differ from actual costs incurred when the contingency is resolved. Contingencies are normally resolved over long periods of time. In our evaluation of legal matters, management consults with legal counsel and relies on analysis of relevant case law and legal precedents. See Note 2 – Rate and Regulatory Matters, Note 9 – Callaway Energy Center, and Note 14 – Commitments and Contingencies under Part II, Item 8, of this report for information on the Ameren Companies’ contingencies.
Accounting Estimate Uncertainties Affecting Application
Accounting for Income Taxes
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Basis for Judgment