Ameren Corporation (AEE) Q2 2017 Earnings Report, Transcript and Summary

Greetings, and welcome to the Ameren Corporation Second Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Doug Fischer, Senior Director of Investor Relations for Ameren Corporation. Thank you, Mr. Fischer, you may begin.

Thank you, and good morning. On the call with me today are Warner Baxter, our Chairman, President and Chief Executive Officer and Marty Lyons, our Executive Vice President and Chief Financial Officer, as well as other members of the Ameren management team. Warner and Marty will discuss our quarterly results and earnings guidance as well as provide a business update. Then we will open the call for questions. Before we begin, let me cover a few administrative details. This call contains time sensitive data that is accurate only as of the date of today’s live broadcast, and redistribution of this broadcast is prohibited. To assist with our call this morning, we have posted a presentation on the amereninvestors.com Web site homepage that will be referenced by our speakers. As noted on page two of the presentation, comments made during this conference call may contain statements that are commonly referred to as forward-looking statements. Such statements include those about future expectations, beliefs, plans, strategies, objectives, events, conditions and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated. For additional information concerning these factors, please read the forward-looking statements section in the news release we issued today and the forward-looking statements and risk factors sections in our filings with the SEC. Lastly, all per share earnings amounts discussed during today's presentation, including earnings guidance, are presented on a diluted basis, unless otherwise noted. Now here is Warner, who will start on page four of the presentation.

Thanks Doug. Good morning everyone and thank you for joining us. Before I begin my business update, I first want to express my deep appreciation to our customers who experienced outages over the last several weeks due to some severe storms. I'm grateful for your patience and the support of our coworkers who are working hard to restore your service in very hot inhuman weather conditions. Of course, I also want to express my appreciation to our coworkers who have been tirelessly working through these difficult conditions for our Missouri and Illinois customers. Our coworkers have continued to work safely and our system has held up well despite these challenging conditions. Again, my thanks to all of you. Moving now to our financial results. Earlier today, we announced strong second quarter 2017 earnings of $0.79 per share compared to earnings of $0.61 per share in the second quarter of 2016. This growth of $0.18 per share was driven by the factors outlined on this page, which Marty will discuss in more detail in a moment. It was particularly satisfying to me is that our strong growth was driven by the solid execution of our strategy across our entire business. I'm also pleased to report that as a result of this execution, we expect to deliver 2017 core earnings within the range of $2.70 to $2.90 per share, a $0.05 improvement over our prior guidance. This updated guidance excludes an expected third quarter non-cash estimated charge of $0.06 per share, primarily at the parent company. This charge is the result of revaluation of deferred taxes due to an increase in the Illinois corporate income tax rate, effective July 1st of this year. Beyond this charge, we expect this tax increase to have no material impact on consolidated earnings prospectively. Marty will also address this matter in more detail in a moment. Moving to page five, here we reiterate our strategic plan. The year-over-year earnings growth, I just mentioned, reflects the significant investments we are making to better serve our customers as illustrated on the right side of this page. We continued to strategically allocate capital to our transmission and distribution businesses where investments are supported by regulatory frameworks that provide fair predictable and timely cost recovery. This, along with our continued disciplined cost management that supports our goal of earning close to allowed returns in all of our jurisdictions, is expected to result in long term earnings growth that is superior to our regulated peers. I'd like to discuss some of our year-to-date accomplishments and efforts towards execution of our strategy. As you can see on the right side of this page, during the first half of this year, we invested more than $640 million or almost two-thirds of our capital expenditures in jurisdictions with more constructive regulatory frameworks. This included about $290 million of capital for FERC regulated transmission projects. A significant portion of this capital was invested in our $1.4 billion MISO approved Illinois Rivers project, which is now about 90% complete with four of its nine line segments energized, including two of three river crossings and with all 10 substations and servers. For the five remaining line segments are in the advanced stages of construction, with two those line segments to be completed by the end of this year, and river project remains on schedule for completion in 2019. At our second MISO approved project, the $150 million Spoon River transmission line in Northwestern Illinois, 85% of pool foundations are complete. Pool installation is now underway and the project remains on schedule for completion in 2019. Moving to our third MISO approved project, the Mark Twain transmission line in Northeastern Missouri, there have been several recent developments. As we discuss on our first quarter call, ATXI has proposed an alternative route for the project that replace more than 90% of the line on existing transmission line corridors. To accomplish this, ATXI has reached agreements in principle with Northeast Missouri Electric Power Cooperative and Ameren Missouri to locate the new line on existing rights of way. This alternative route significantly minimizes the impact to landowners, communities and existing farmland, has been endorse by various agricultural and economic development groups and is not expected to change the estimated $250 million project costs. In June, ATXI along with Northeast Missouri Electric Power Cooperative and the Ameren Missouri posted a series of open-house meetings to obtain public input on the proposed alternative route to help finalize by adoptions. Feedback so far has been positive, and we are working to obtain needed county assents for both crossings. Upon receiving all five count assents, ATXI will request a certificate of convenience and necessity for this route to Missouri PSC. We look forward to continue to work with landowners and the county commissioners to get this important project for Missouri and the entire Mid-West region moving forward. The planned in-service date is late 2019. We also continued to invest in Ameren Illinois’s local electric transmission projects to maintain and enhance reliability, including projects to meet reliability requirements, replace an aging infrastructure and modernize the grid. Our pipeline for these types of projects remains strong and will continue to deliver significant value to our customers and create jobs. Moving on to our other businesses. We invested about $350 million in Illinois Electric and Natural Gas Distribution infrastructure projects during the first half of this year. These investments include Natural Gas Distribution projects that upgrade our gas infrastructure and electric distribution projects that add smart grid technology and upgrade substations, all to improve the safety and reliability of our system. Through the end of June, Ameren Illinois has installed 516,000 smart electric meters and 278,000 gas meter modules that provide customers with enhanced energy usage data and access to programs to help them save on their energy bills. Ameren Illinois expects to saw another 185,000 smart electric meters and 76,000 gas meter modules in the second half of 2017, as works to deploy these two all this 1.2 million electric and 800,000 gas customers by the end of 2019. Turning now to page six for a Missouri business update. As we discussed in our first quarter earnings call, new electric rates went into effect on April 1st of this year as a result of unanimous agreement resolving all the issues in the rate review. Again, we appreciate the corporative effort of all parties involved. In concerted unanimous agreement a positive constructive step forward. In addition to successfully executing our rate review, we continued to effectively manage our Missouri operations and earn solid returns. We are doing so by effectively managing our capital projects, as well as by keeping a very sharp eye on our operating costs. We’re also very focused on enhancing Missouri’s regulatory framework. As you know, construction rate making in legislation was not passed by the Missouri General Assembly during this year’s budget state of sessions as a result of pillow buster by a small group of state senators. Our legislation did not get across the finish line. We did make progress on several fronts, progress we will build upon going forward. That progress included constructive reports from the Senate Interim Committee and Missouri PSC that supported enhancing the Missouri regulatory framework. Those reports, coupled with growing avenues from around the country that indicates that modern energy policies that support investment in the energy grid are in the long-term best interest of customers and the economy, help grow the strong by partially support for legislation. Looking ahead, we will leverage the meaningful progress we have made over the last several legislative sessions, continue to work collaboratively with key stakeholders and work towards starting a constructive path forward to enhance Missouri’s regulatory framework. I also expect that we that we will support another legislative initiative in 2018. Turning to page seven. As we look to the future, the successful execution of our robust five year plan is not only focused on delivering strong results for 2021 is also designed to position Ameren for success over the next decade and beyond. We strongly believe that the energy grid will be increasingly more important as we believe that Ameren and our industry will be critical neighbors of advancing technologies that will bring even greater value to our customers, the communities we serve and our shareholders. Further, we continue to believe it will be appropriate to transition our generation fleet to a cleaner more diverse portfolio in a responsible fashion. With this long-term view in mind, we are already making investments that will position us for success. These include significant investments in smart meters, digital technologies and other infrastructure that will result in safer and more secure energy grid that will enable us to meet our customers’ rising energy needs and expectations. And we are making prudent decisions to close down coal fired generation resources at the end of their useful lives, including our Meramec center in 2022, as well as to invest in renewable energy to effectively transition our generation portfolio. Right now, Ameren Missouri is in the process of finalizing its next 20 year integrated resource plan, which is scheduled to be filed with the Missouri PSC in October of this year. In this plan, we will continue to appropriately balance our responsibilities to our customers and communities, the environment and of course, our shareholders. Consistent with this long-term view, by the end of 2021, we expect that nearly 75% of our rate base will be invested in transmission and distribution assets, while just 13% of our rate base will consist of coal fired generation. In addition to making investments with an eye toward the future, we are also actively participating in proceeding for the Illinois Commerce Commission and Missouri PSC that are, among other things, setting appropriate regulatory programs and frameworks to adjust changes taking place in our industry. Bottom line is that we've taken steps today across the Board to position Ameren for success in 2017, the next five years, and the next decade and beyond. And is so doing continue to deliver superior value to our customers and you, our shareholders. Turning now to page eight to conclude my remarks. In February, we outlined our investment plan that included 6% compound annual rate base growth in 2016 through 2021, reflecting greater levels of capital allocated to those jurisdictions with constructive regulatory frameworks. As we stated previously, this plan is not contingent on passage of Missouri legislation. Also, in February, we affirmed our expectation for earnings per share growth of 5% to 8% compounded annually from 2016 to 2020, based on the adjusted 2016 guidance midpoint we outlined early last year. We consider both our rate base and earnings growth rates to be attractive compared to those of our regulated utility peers and Ameren shares, continue to offer investors a solid dividend, which our Board has increased in each of the last three years. Of course, future dividend increases will be based on consideration of, among other things, earnings growth, cash flows and economic and other business conditions. To summarize, we believe our strong rate base and earnings growth profile, combined with our solid dividend, currently providing a yield of approximately 3.1% results in an attractive total return opportunity for shareholders compared to our regulated utility peers. We remain focused on executing our strategy. And I'm firmly convinced that doing so will deliver superior value to our shareholders, customers and the communities we serve. Again, thank you all for joining us today. I'll now turn the call over to Marty.

Thanks, Warner and good morning, everyone. Turning now to page 10 of our presentation. As Warner mentioned, we reported second quarter 2017 earnings of $0.79 per share compared with earnings of $0.61 per share for the year ago quarter. On this page, we highlight by segment the key factors that drove the overall $0.18 per share increase. Starting with Ameren Missouri, second quarter year-over-year earnings increased $0.11 from $0.38 to $0.49 per share. This improvement reflected new electric service rates effective April 1st, driven in part by increased infrastructure investments and removal of the negative effect of lower sales to the New Madrid smelter. The earnings improvement also resulted from the absence of a scheduled Callaway Energy Center nuclear refueling and maintenance outage. The favorable factors were partially offset by lower electric retail sales, primarily driven by milder early summer temperatures. Next, Ameren Illinois electric distribution's second quarter year-over-year earnings rose from $0.08 to $0.14 per share. This largely reflected the favorable impact of the 2017 change in the timing of interim period revenue recognition, resulting from the Future Energy Jobs Act. This act modified the existing formulated rate making by decoupling our distribution revenues from sales volumes. While this change will impact quarterly comparisons, it will not affect full year earnings. Second quarter 2017 earnings at Ameren Illinois electric distribution also benefitted from increased infrastructure investments, as well as a higher allowed return on equity under formulated rate making of 8.8% compared to 8.45% for the year ago quarter. Turning to Ameren Transmission. Second quarter year-over-year earnings rose from $0.13 to $0.14 per share. This was due to increased transmission infrastructure investments at ATXI and Ameren Illinois, which both operate under constructive FERC formulaic rate making, partially offset by lower average allowed return on equity, which was 10.82% in 2017 compared to an average of 11.4% in the year ago quarter. In 2016, our Transmission segment benefited from a temporarily higher FERC-allowed ROE as a result of the expiration in May of 2016 of the 15 months refund period for the second MISO ROE complaint case. Before moving on, let me briefly cover sales trends for the first half of 2017 compared to the first half of 2016. Weather normalized kilowatt-hour sales to Illinois and Missouri residential and commercial customers on a combined basis were flat, excluding the effects of Missouri energy efficiency program under MEEIA. We exclude MEEIA affects because the program provides rate recovery to ensure that earnings are not affected by reduced electric sales resulting from our energy efficiency efforts. The sales results reflect underlying 2017 growth, offset by the absence of the 2016 leap-day sales benefit. Kilowatt-hour sales to Missouri industrial customers increased about 0.5%, excluding MEEIA affects in sales to the New Madrid smelter, which shutdown operations during the first quarter of 2016. Kilowatt-hour sales to Illinois industrial customers in 2017 decreased 3%, primarily due to lower sales to a low, to a large low margin processor of agricultural products. Recall the changes in electric sales in Illinois. No matter the cost, do not impact our earnings since the Future Energy Job Act provided full revenue decoupling beginning this year. Moving to page 11 of our presentation, I would now like to discuss our 2017 earnings guidance. Today, we reaffirmed our GAAP guidance at $2.65 to $2.85 per share, which now includes an expected third quarter non-cash tax related charge of $0.06 per share, which I will discuss in more detail in a moment. Excluding this charge, we expect to deliver 2017 core earnings within a range of $2.70 to $2.90 per share, a $0.05 per share improvement over our prior guidance range, reflecting solid execution of our strategy, including continued disciplined cost management. This updated guidance assumes normal temperatures for the second half of this year. While July temperatures were much warmer than normal, we don’t expect that this impact was significant enough to offset the very mild temperatures experienced during the first half of the year, which reduced earnings by approximately $0.07 per share. Listed on this page are select earnings considerations that will affect the comparability of second half 2017 core earnings to last year’s second half results. Some of the larger impacts included change in the timing of interim period revenue recognition at Ameren Illinois’ electric distribution business and assumed return to normal temperatures of fourth quarter Callaway refueling and maintenance outage, the absence of 2016 Ameren Missouri energy efficiency performance incentives, the 2017 Ameren Missouri electric rate review settlement and increased transmission and electric distribution infrastructure investments at ATXI and Ameren Illinois. I want to particularly call your attention to the change in timing of interim period revenue recognition in Ameren Illinois, because it is expected to decrease earnings by approximately $0.23 per share in the third quarter of 2017 and increase earnings by approximately $0.11 per share in the fourth quarter of 2017. Finally, I would like to discuss the impact on Ameren of the recently enacted increase in Illinois’ Corporate Income tax rate. Early last month, the Illinois General Assembly approved budget related legislation that effectively increased the corporate income tax rate to 9.5% from 7.75% as of July 1st of this year. The tax increase is expected to result in a third quarter 2017 non-core non-cash charge of an estimated $0.06 per share, primarily at the parent company due to revaluation of deferred taxes. Beyond this charge, we do not expect the tax increase to have a material impact on our consolidated earnings prospectively. The tax increase is not expected to materially impact earnings of Ameren Illinois’ electric distribution or Ameren Illinois’ and ATXI’s transmission businesses, since they operate under formulaic rate making. The tax increase is expected to reduce Ameren Illinois’ gas distribution business earnings, but only by approximately $1 million annually until customer rates are reset in the next rate review. And we plan to file for a gas distribution rate review in Illinois in early 2018 with new customer rates to be effective in early 2019. Turning now to page 12 for an update on 2017 long-term debt financings. On June 15th, Ameren Missouri issued $400 million of 2.95% senior secured notes due 2027. The proceeds of which were used in connection with the repayment at maturity of $425 million of 6.4% senior secured notes. Also, ATXI agreed to privately place $450 million of 3.43% senior unsecured notes due 2050, $150 million of such notes were issued on June 22nd with the remaining $300 million to be issued on August 31st. The proceeds of the ATXI private placement will be used to repay Ameren parent for a portion of ATXI’s existing intercompany debt. This is the first time ATXI has issued external debt, and we are pleased with the successful low cost issuance, including the strong investment grade credit rating the notes received. Finally, we expect Ameren Illinois to issue long-term debt later this year to repay at maturity $250 million of 6.125% senior secured notes and short-term debt. Moving now to page 13 for a discussion of select regulatory matters pending at the Illinois Commerce Commission and the Federal Energy Regulatory Commission. In July, Ameren Illinois updated its required annual electric distribution rate update filing, requesting $17 million decrease in the annual electric distribution revenue requirement. This is consistent with the ICC’s stats file testimony and other parties did not file revenue requirement testimony. And ICC decision is expected in December of this year with new rates effective early next year. Turning to the FERC, one complaint case remains that seeks to reduce the base allowed ROE from MISO transmission owners, including Ameren Illinois and ATXI. These businesses are currently earning 10.82% ROE, including a 50 basis point adder for MISO membership, and will continue to do so pending any change required by the FERC as a result of this case. Our updated guidance assumes this ROE continues through the end of the year. While the U.S. Senate's approval yesterday of two new commissioners reestablishes a quorum at the FERC, it remains uncertain when the commission will rule on the pending complaint case. In addition to facing a significant backlog of other cases, we expect that the FERC commissioners will take time to consider the recent ruling of the U.S. Court of Appeals for the DC Circuit that vacated the FERC's order in a New England transmission ROE case, as this court ruling may influence the FERC's order in the pending MISO ROE complaint case. Turning to page 14, I will summarize. We expect to deliver 2017 core earnings within a range of $2.70 to $2.90 per share as we continue to successfully execute our strategy. As Warner stated, as we look ahead, we continue to expect strong earnings per share growth, driven by strong rate base growth in disciplined financial management. And Ameren shares continue to offer investors an attractive dividend. In total, we believe we have an attractive total shareholder return story compared to our regulated utility peers. That concludes our prepared remarks. We now invite your questions.

Thank you. We will now be conducting a question-and-answer session. In the interest of time, we ask that you please limit yourselves to one question and one follow-up and re-queue for any additional [Operator Instructions]. Our first question comes from the line of Andy Levi with Avon Capital Advisors. Please proceed with your question.

So just on the earnings revision for '17. So we -- is the new base to gross off of is the midpoint of that number, which is like 280 that kind of how to think about it?

Andy, obviously, the guidance we gave in terms of our long term earnings guidance has been really based on 5% to 8% compound annual EPS growth from 2016 to 2020. Of course when we started that, we used to base in 2016 of 263, which was an adjusted base. Clearly, you're right. I mean as we look at this year, we've upped our guidance for our core earnings, the midpoint is 280. And as we think about going in next year any kind of long term guidance we give, yes, the foundation would be whatever the core earnings were for the prior year. So that would be -- that very well maybe the 280, going forward.

And what's the difference between the mid-point in 290 just thinking, because I mean it's August in revenue. So obviously you’re through the 290 in there for a reason, and must be achievable. So what is the delta that gets you to 290 versus 280?

Well, when you say that, obviously, as we go through the remainder of the year, we don’t have, for example in there, any kind of July whether that’s been baked in. And then you’re really asking, I think, about the range and what justifies the range up or down.

Or what gets you to, 280 is your midpoint. But what would get you to 290, I mean, what’s in the thinking that gets you to 290…

It’s quite anything else for the remainder of the year. To the extent that there were sales volume changes, as I mentioned, we don’t include in our guidance typically include normal weather, certainly there could be some weather impact up or down. We have had some warm weather here in July, which is an exclusively factored in. As I mentioned on the call, we don’t expect that to offset the negative impacts of weather from earlier this year. And probably as we sit here today, it’s probably less than $0.05 impact from what we’re seen in July. But things like sales trends, reductions in operations and maintenance spending, positive weather, those for the kinds of things that can really move you up or down within your range.

And are you trending towards the mid-point or the high-end right now? But you don’t have to answer, I just…

Look, we give a range. We feel comfortable with that range. And look, we started the year with a little bit lower. As we move through the year, we started the year with a little bit of negative weather that was certainly influencing our thinking at the beginning of the year in terms of the guidance range we gave. As we’ve moved through the year, we’ve had a constructive outcome in the Missouri rate case, which was terrific. We’ve got disciplined financial management as we move through the year too, making sure we keep tight control of our costs. As you know, our goal in each one of our jurisdictions is to earn as close to our lab returns as we can. And we’re executing on our strategy well, deploying the capital as we expected to, which drives rate base growth, which drives earnings growth. So we’re executing well. We feel comfortable with raising the overall range. And obviously, work hard to achieve year-end results within that range.

And it is Warner. I would just simply say -- I would just say one thing as Marty said. I think it’s simply evidence of the fact that we’re executing our plan and we’re executing it well, and we’re executing across all of our businesses.

And then I know I’m going to achieve you announced one extra question. But if you kind of -- and I know you haven’t given any key guidance and I am not expecting you to. But just very simplistically, 280 is the mid-point of where we’re going to grow off of. And then you don’t have a Callaway outage next year right at $0.09 to $0.10 to $0.18. Is that correct?

The Callaway outage is around $0.08. But you’re right we don’t have one next year. Look, we’re not giving guidance for next year. But as you look ahead to next year, we certainly expect to benefit from the continued investments we’re making in rate base, which drive earnings growth. We don’t have the Callaway outage next year as you mentioned, which also then would be additive to earnings.

Well, you don’t have a Callaway outage and then you’re not filing a rate case in Missouri, right? Probably some interest expense savings from that you’ll capture in 2018 plus you get about $0.20 of growth in Illinois just from a rate base growth. So I’m just looking at consensus around $3 and this adding up the numbers, so to see some -- the people were underestimating your earnings power. I don’t know if you tend to agree with that, and I guess you saw this year too without obviously giving guidance.

Again, we’re not giving guidance for next year, and I won’t comment on consensus for next year either. And I also wouldn’t comment on necessarily the EPS impacts that you gave from the rate base growth, and then we’ll provide our guidance as we normally do as we roll into the early part of next year. I would mention that you mentioned no Missouri rate case filing. The one think I would mention is on the rate review that we just concluded where the rates went into effect April 1st, this year, we realized about 75% to 80% of the impact of that rate review. Next year, we would incrementally pick up the first quarter benefit of that rate review.

Plus any refinancings that you have, because you have some high cost debt that’s coming due at union and that obviously would have to get back in a future rate case, but not in ‘18. Is that correct?

To the extent that we’re able to, Ameren Missouri, to refinance the debt at a lower rate, we do benefit from that savings until the next rate review. And to your point on that, I mentioned on the call that in June we refinanced, we paid off $425 million of 6.4% debt, issued $400 million at 2.95%, and so 10 year offering. That for example is about $15 million of annual interest savings.

Thank you. Our next question comes from the line of Michael Lapides with Goldman Sachs. Please proceed with your question.

Quick question on Missouri, and Warner you commented a little bit about changing generation fleet. You’re one of the few utilities in the region that has not really, when you look at generation supply, benefited both by sizable in Missouri Transmission growth that leads to a sizable amount of wind generation, entering your service territory and maybe replacing some possible generation. Can you talk a little bit about whether you see that as a significant opportunity either via owning wind plants in rate base or in the need for incremental transmission in Missouri to be able to connect to the West where there is lots of great winds resource? And can you talk about what do you need from a regulatory standpoint, either rate making or approval wise, taxing make that happen if that’s one of the decisions you make going forward?

Thanks Michael for your question, and a couple of comments. Number one, we are in the process we look at the transmission but we also look at generation. And we’ve been consistent in saying that we’re going to transition our generation portfolio to a more diverse claim portfolio. But we’re doing it in a responsible fashion. A little bit later this year, we’re going to update our integrated resource plan and that will highlight some of those opportunities we may have in the renewable energy space, just with regard to our own generation. And as we know, we have renewable energy standard in the State of Missouri. And as a result of that, as renewable energy cost for new generation comes down that’s something we’re going to look carefully at. Of course, to make renewable energy work you need to make sure that you have a transmission system that’s robust enough to support all of that. And at the end of the day, we have certainly made more investments in the transmission space in Illinois and in MISO, we’ve done some way of the Mark Twain project that we’re going to hopefully continue to move forward with, and get across the finish line. So as you continue to see greater levels of renewable generation in MISO in the broader footprint, we do see that there could be some opportunities for incremental transmission that could be done, whether it's done on a multi-value project basis, which would have to go through MISO or potentially of course something that we would do under the state regulatory framework in Missouri. And so I wouldn’t say that we certainly rule that out, we see that as an opportunity. So I'm looking at Shawn Schukar, and Sean in terms of how you look at the space, especially MISO and other things. We do see the incremental transmission opportunities that does support generation, but even just to deal with and to support liability projects and those types of things?

Warner, that's correct. We see significant opportunities around the opportunity to improve or to replace the existing transmission system in Illinois and Missouri, but overlaying that with as we see changing generation portfolios in the market that that will create potential new opportunities, especially given the strong wind resources to our west.

Thank you [Operator Instructions]. Our next question comes from the line of Paul Ridzon with KeyBanc Capital Markets. Please proceed with your question.

Can you just delve a little more deeply into the Missouri process, and how you can possibly get more traction there? I'm talking legislative.

I'll comment on that, Michael feel free to jump in. As we said before, of course, we've been disappointed that we haven't got that across the finish line. But you know that the process in legislation is always one of collaboration; it's always one of working with key stakeholders to educate them on the needs; and it's always one of ensuring they understand the real value to modernizing the energy grid. Now, if you look at what we've been able to do in Illinois that's really the formula that we worked we over there, it's making sure everyone understood the value. And then once you have them understand the value, you deliver on those projects. And it's clear what we've seen in Illinois, and what we've seen frankly across the country as that modern energy policies that support investment in a modernized grid not only brings real value to customers it keeps rates still affordable, but it creates thousands of jobs that's been formula that's worked across the country, and we can see has worked clearly in Illinois. So that same message is resonating in the State of Missouri. It's why we have such strong by partisan support that's why the collaborative effort that we've been working on continued to gather even more stakeholders to support it. So it really is one of just doing the work on the ground to work on with collaborating with key stakeholders and being mindful that the approach that we've been taking is very consistent with where Governor Greitens has said that, look, regulatory reform is an important part of his platform to become Governor, as well as creating good paying jobs. We've been talking about the State of Missouri is absolutely consistent with that. So I think that has been their approach. And Michael, you've been on the ground working with key stakeholders, anything there?

I think that's well said. The only thing I would add to that and just a couple of things. We're going to continue to build off of certainly the interim report that the Senate put out last fall along with the Missouri Public Service Commission had the working docket then on looking at issues around regulatory reform. There has also been an emerging issues task force that they’ve kicked off here. We’re going to have some more meetings here in August. All of these are indications and I think they understand that we need to take a different approach to this. There is opportunities around and we’re going to continue to leverage those, going forward.

If it comes down to one party, right. I mean how do you flip them?

So at the end of the day, Paul, this is Warner again. We do what we’ve been doing. We’d continue to work collaboratively with those key stakeholders. And we have a small group that has opposed the legislation but we won’t be deter, because look it’s important for us to continue to get their input, we share our input with them. And as we’ve said before, while we expands the filibuster, there are certainly ways to no way find compromises in advance but in the context the filibusters and like, look the key is you continue to reduce the number of people that may want to participate in the filibuster. Number one, you make sure, you’re given adequate floor time and try and make sure you can address those issues and hopefully come to a compromise. And lastly, as we’ve said before, I mean there are rules in the sense that that would enable to close down the debate. But those rules aren’t used often. We hope we never get to that point. The bottom line is we want board collaboratively with everybody to ultimately get constructive legislation that benefits our customers, the communities that we serve and our shareholders.

Yes, that’s right, Warner. I think that this may sound naïve at the end of the day. But we just -- we actually have to convince them of the value associated with us. There are too many examples them. Warner talked about what’s going to in Illinois but you can certainly look far beyond in Illinois in terms of what’s happening in terms of modernizing the grid and the value they create for customers and shareholders at the end of the day. And so we just, honestly, have to continue to double down that effort to convince them that the State of Missouri is falling behind, if we don’t makes in progress on this.

Are there any terminal mix to consider here?

In Missouri, there are terminal mix, yes.

Thank you. Our next question comes from the line of Kevin Fallon with Citadel LLC. Please proceed with your question.

I just wanted to follow-up on Michael Lapides’ question, and specifically on the wind. Are you guys able to sign PPAs, or do new builds on wind generation with economics below the dispatch costs of your coal fleet?

Yes, I mean in terms of moving forward, clearly, there could be PPAs we enter into. We could own wind generation, both of those are viable options. And in terms of that question, I mean there is a couple of ways that it could happen prospectively; one, as you mentioned is to the extent that the all-in costs of those renewables was below the dispatch costs of our existing generation. Of course, one of the reasons why maybe the penetration hasn’t been as great here as maybe other places is that the dispatch costs of our existing generation is pretty low. And it’s a real benefit for our customers. However, the cost of renewables continues to come down and we watch those economics very closely. As Warner mentioned in this answer to Michael earlier, as part of the integrated resource plan, we also look at compliance with the Missouri renewable energy standard. That standard actually requires us to purchase or generate 15% of and native sales from renewables by 2021, subject though to 1% annual limit on rates. And really that’s been limiter historically in term of introducing even more renewables into the portfolio. In our 2014 IRP, we had about 130 megawatts of wind coming in by 2021. So as Warner mentioned in his talking points, we’re working on an update to that integrated resource plan. And in answer to your question, we’re both looking at the economics of renewables as compared to the dispatch cost of our existing generation, but also looking at it in terms of compliance with that renewable energy standard within the limits of that 1% impact on rates. So those are the two ways that really as we look ahead there is the opportunity to bring even further renewables into our portfolio.

And where are you relative to that 15% by 2020 right now in terms of your fleet?

In terms of the existing assets that we have with things under purchased, we’re below that, significantly below that. But there are a few ways to go about compliance; one is PPAs; one is ownership; and the other is renewable energy credit. So we’re looking at all options as we move ahead for compliance with that standard.

And just one last thing. In terms of the process, going forward, obviously, you guys have said that you’re going to seek legislation again next year in Missouri. But is there any possibility of trying to do something at the commission before with the billion dollars of grid monetization CapEx that you guys have highlighted in the past? Or is that something that you’re just going to defer and try and seek the legislation itself only?

Also on the respect to your question on that renewables and where we are, I believe we’re right at around 5% today in terms of that 15% compliance.

With respect to the legislative question regulatory, look I think we’re not obviously foreclosing any tools available to us. I think we look at a number of options that we can pursue. As Warner indicated, we certainly intend to file, as we sit here today, legislation but we’re going to continue to look at all options to continue to make progress here. And we’ve used regulatory tools in the past that are being constructive. So it is certainly an option available for us.

Is there a certain timeframe that you’re looking to make a decision on that before the legislation? Or is it just a general sense that you always make those types of calculations?

More of the latter…

Thank you. Our next question is a follow up from Andy Levi with Avon Capital Advisors. Please proceed with your question.

So, on the renewables that was just brought up. So why wouldn’t you guys do the majority of it yourself if there was the opportunity, and it was economical for rate bearers?

Andy, no disagreement with that assertion. I mean, certainly, if that makes the most sense for the customers that would be a positive. So we’ll need to look at as we are as we’re assessing it, what the best compliance option is for the renewable energy standard for our customers, and looking at the various options and thinking about the benefits, risks, cost of all of those options.

And what’s the timeframe of that, because obviously things are getting closed here. So what's the timeframe? When will we hear about the decision making process on that?

As Warner indicated, we have an IRP that needs to be filed in October. So my sense is that we'll have some communication right around that timeframe.

And obviously, you don't have anything in your current CapEx forecast for any of this?

Very little on the current CapEx forecast for that, given as I mentioned earlier, the IRP we had a few years ago, 2014 had about 130 megawatts of wind by 2021.

And how much gains from that 5% to the 20% I think you said, with the standard. How many megawatts are we talking about?

Well, it's really again limited by the 1%. And I think rather than getting into that here, something we're assessing. And as Michael said when we file the IRP in October, we'll see where we're at.

Thank you. There are no further questions at this time. I would like to turn the call back over to Mr. Doug Fischer for any closing remarks.

Thank you for your questions today. As we discussed today, we believe the Ameren shares offer investors attractive total return potential based on our strong expected earnings growth outlook and solid dividend. Finally, let me remind you that a replay of this call will be available for one year on our Web site. If you've questions, please call the contacts listed on our earnings release. Thank you for your interest in Ameren, and have a great day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.