Greetings, and welcome to Ameren Corporation’s Third Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andrew Kirk, Director of Investor Relations for Ameren Corporation. Thank you, Mr. Kirk. You may begin.

Thank you, and good morning. On the call with me today are Warner Baxter, our Chairman, President, 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 earnings results and guidance as well as provide a business update. Then we will open the call for questions. Before we begin, let me cover a few administrative details. This call contains time-sensitive data that’s accurate only as of the – of today’s live broadcast, and redistribution of this broadcast is prohibited. To assist with our call this morning, we have posted a presentation on the amereninvestors.com homepage that will be referenced by our speakers. As noted on Page 2 of the presentation, comments made during this conference call may contain statements that are commonly referred to as forward-looking statements. Such statements include those about future expectations, beliefs, plans, strategies, objectives, events, conditions and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated. For additional information concerning these factors, please read the Forward-looking Statements section in the news release we issued today and the Forward-looking Statements and Risk Factors section 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’s Warner, who’ll start on Page 4 of the presentation.

Thanks, Andrew. Good morning, everyone, and thank you for joining us. Earlier today, we announced third quarter 2019 GAAP and core earnings, $1.47 per share, compared to 2018 core earnings of $1.50 per share. A summary of the key drivers of the third quarter year-over-year change in earnings per share is provided on Page 4. Marty will discuss these and other items in more detail a bit later. Overall, we delivered solid results during the third quarter. From an operations standpoint, our team continues to perform very well, and we continue to execute on all elements of our strategy, which includes significant investments in energy infrastructure and disciplined cost management. I’ll share my perspectives on the progress we’ve made in executing key elements of our strategy during the whole third quarter in a moment. Due to the strong execution of our strategy, I’m pleased to report that we are narrowing our 2019 earnings guidance range to $3.23 to $3.33 per share from our initial 2019 guidance range of $3.15 to $3.35 per share. In so doing, we are raising the guidance midpoint $0.03 per share from $3.25 to $3.28 per share. Moving to Page 5. Here, we reiterate our strategic plan, which we expect continued delivery in significant value for our customers and strong long-term earnings growth for our shareholders. First pillar of our strategy stresses investing in and operating our utilities in a manner consistent with existing regulatory frameworks. This has driven our multiyear focus on investing in energy infrastructure for the long-term benefit of customers and jurisdictions that are supported by modern, constructive regulatory frameworks. As we have discussed with you in the past, all 4 of our business segments have constructive regulatory frameworks that support investment in energy infrastructure. As a result, and as you can see…

Thank you, Warner, and good morning, everyone. On Page 11 of the presentation is a table outlining the GAAP to core earnings reconciliations. I’ll simply note that there was a noncore charge in 2018, but no noncore activity in 2019. Turning to Page 12 of our presentation. As Warner mentioned, today, we reported third quarter 2019 GAAP and core earnings of $1.47 per share compared to core earnings of $1.50 per share for the year-ago quarter. Here, we highlight the key factors by segment that drove the overall $0.03 per share decrease. Earnings per share for Ameren Illinois Electric Distribution were down $0.02 compared to last year, driven by a lower-allowed return on equity due to a projected average 30-year treasury bond yield in 2019 compared to 2018. This was partially offset by earnings on increased infrastructure and energy efficiency investments. The expected allowed return on equity this year is 8.3% down from the 2018 average of 8.9%. The 2019 allowed ROE is based on an expected average 30-year treasury yield of 2.5% down from the 2018 average of 3.1%. Ameren Illinois Natural Gas results decreased $0.01 due to a change in rate design, which was partially offset by earnings on increased infrastructure investments. The rate design change is not expected to impact full year results. Ameren Parent results decreased $0.02 per share primarily due to timing of income tax expense, which is also not expected to impact full year results. Ameren Transmission earnings were up $0.02, reflecting increased infrastructure investments. And finally, Ameren Missouri, our largest segment, reported earnings that were comparable to prior year results. Ameren Missouri’s 2019 earnings reflect EMEA performance incentive related to the 2016 energy efficiency plan, which contributed $0.05 per share. I am pleased to report that we met the energy-savings goals needed to…

[Operator Instructions] Our first question comes from Julien Dumoulin-Smith with Bank of America.

Good morning, Julien.

It’s actually Alex Morgan calling in for Julien. Congrats on the guide up in 2019 earnings. Marty, I have two quick questions. The first one, I was just hoping you might be able to confirm that you have not received the letter from the SEC or the FBI regarding any of your activities in Illinois, just thinking about some of your peers in the state?

Sure. Sure. This is Warner. So look, the simple answer to that question is no, on both counts. And just to be clear, in the normal course, we don’t normally comment on litigation matters and subpoenas unless they’re material or have a financial impact. But I recognize the sensitivity of this. And so I’ll just reiterate again, no on both counts, period.

Okay. Thank you. I just wanted to ask that one quickly. And then the other question that I had was just a little bit on that 2020 driver slide that you had included. In Ameren Missouri, I know you talked a little bit about the $0.09 lower-energy efficiency performance. I was hoping you could delve into that a little bit more. Specifically, how we should be thinking about energy efficiency going forward? And also, for 2020, how should we be thinking about that being offset?

Sure, Alex. This is Marty. Let me talk a little bit about that. In 2019, we’ve had a little bit of an unusually positive year in terms of MEEIA performance incentive benefits. In Q1, you may recall that we had about a $20 million benefit. And in Q3, we’ve recognized another approximately $18 million benefit. So the total is about $38 million for the year or approximately $0.11, maybe a little over $0.11. And really, that’s because of incentives related to 2 prior programs, both the 2013 program and the 2016 programs. And in the quarter, we actually had, as I mentioned, in the third quarter, we have this $18 million benefit. And the range could have been anywhere from a target incentive of about $5 million up to the $18 million that was recognized, as I mentioned in our prepared remarks, where we achieved the maximum under the program. So we actually had a fairly positive year. Just to give you a little bit of a sense of history, if you go back in time, in 2017, we had really no benefit. In 2018, I think it was about a $0.03 benefit. And then this year, we had, as I said, about $0.11 benefit. And like I said, it was something that was – could have been a range of 5 – $5 million to $18 million in Q3. So a bit of a positive benefit there relatively and versus expectations. As you look ahead to next year, we roll into – we’re into now, this year, the MEEIA 3, the third version of this energy efficiency program. And depending upon the performance under this first year, we expect that the benefits next year could be in the range of $7 million to $8 million. So down next year, which is why we’re guiding at this point to about a $0.09 negative year-over-year. But I just do want to highlight again that when you look at this year, the fact that we are raising guidance here in the quarter, raising the midpoint of our guidance by $0.03, certainly part of our ability to do that is the performance incentive that we did earn in Q3 at that maximum level.

Thank you so much. have a great day.

Our next question comes from Greg Reiss with Centenus.

Good morning, Greg.

Hey, congrats on a good quarter.

Thank you.

I was wondering, can you guys quantify this Callaway deferral request? I know that you’ve embedded about $0.11 for next year as a headwind. But if you get this deferral, I guess, how much of that $0.11 would get pushed out and kind of spread over the next period?

Yes, Greg, this is Marty again. You’re right. The outage next year, we’re forecasting being about $0.11 outage. If the request we made is accepted by the commission, what we would expect then is that we would defer that $0.11 and then amortize it over approximately an 18-month period. So to a large extent, that $0.11 would be removed from earnings next year. There would be a little bit of amortization sort of at the end of next year. But then, of course, the next year, when you roll around to 2021, when we otherwise – when we won’t have an outage, that we would see approximately 2/3 of an outage expense reflected in that year. So that’s how we do it. I’ll tell you, Greg, in terms of this ask we’ve made of the commission, and it’s really not a change in ratemaking per se, or revenue requirement. But I think what this would allow us to do is, over time, not have fluctuations in our earnings due to the timing of this Callaway outage and give us a smoother trajectory of earnings growth going forward. So that’s part of the goal with respect to this ask.

Got you. And then would you envision this being something that you’d be able to utilize to potentially help offset some of the headwinds you’re experiencing from the 30-year treasury move down?

No, no, no. Not really specifically, Greg, in terms of that. I think that really, like I said, the thrust behind this is to, over time, have a more normalized level of growth over time and not have the sort of fluctuations associated with Callaway. If you look at what we did this year, Greg, I mean, just in terms of this 30-year treasury, this year, we went into the year thinking it was going to be about 3.1%, and we’re booking to about 2.5%, so down about 60 basis points, which created this year about $0.04 of headwind. As you heard today, we raised the midpoint of our guidance $0.03. A little bit of that is positive weather. We’ve had a couple of cents of positive weather. We also had these MEEIA performance incentives I spoke to earlier, but also contributing to that ability to raise guidance at a disciplined cost control. As we look ahead towards the longer term and the growth that we’re expecting, of 6% to 8%, look, the long-term guidance we’ve given, 6% to 8% growth out through 2023, yields about a $0.40 earnings range out there in 2023. If you look at where we are from the beginning of this year until today from, say, a 3.1% treasury down to about a 2.4% today, it’s about 70 basis points. We’re talking about a nickel or so of earnings if those 2.4% treasury rates hold. A nickel, in and of itself, certainly, not going to move us outside that $0.40 range. If we look to the longer term, we’ve got a number of tools in our toolbox. We have actions we believe we can take, and we’ve discussed many times that we’ve got a very robust pipeline of capital investments that we can make over time. And certainly, a tool in our toolkit. But bottom line is, Greg, that range we’ve got out there accommodates a range of treasury rates, allowed returns on equity, spending levels, regulatory decisions, rate review timing, economic conditions, financing plans, et cetera. And we’ll continue to take actions prospectively as we have in the past to deliver on our commitments.

Got you. Thank you very much.

Thanks, Greg.

[Operator Instructions] Our next question comes from Paul Patterson with Glenrock Associates.

So I wanted to follow-up a little bit on Greg’s question regarding the change in sort of the ROE in Illinois. And I’m just wondering, I mean, you went over pretty well the sort of impact on EPS, in general. But just the difference in return versus other jurisdictions is pretty significant. And I’m wondering – I know you’re going to give the CapEx update in February. But could you give us a little bit of a flavor of how it may or may not change in terms of your investment outlook, just simply given the differential that you’re now seeing in Illinois distribution versus the other jurisdictions you have?

Sure, Paul, this is Warner. I’ll touch a little bit on it and then, Marty, feel free to jump in. But no, look, at the end of the day, we’ve said before, we like the formula rate framework. There are many things to like about it, including the ability to not only earn our allowed returns but also to give our retirement cash flows to make these investments. And so that’s worked very well for us for a long time. And as you heard us say and me say on the call, it’s a framework that we’re going to continue to support whether it’d be in the veto session or the next legislative session. Look, we’re mindful of the lower ROEs, too. And it’s not lost upon us. And certainly, as we think about the overall framework, if there’s an opportunity in the context of a legislative initiative for a good reasonable fix to the ROE, Richard and his team, they’ll take a look at that. But we are clearly focused on this formula rates legislation passed through 2032 because we think that has delivered significant results to Illinois for so many reasons, not just investments, reliability, jobs and affordability. Now, when we think about capital allocation, certainly, we’ll be mindful of that, too. But right now, we’ll come out with a more specific plan next year. That is potentially a lever. But as Marty also said, we have robust capital expenditures that we can put to work in all 4 of our business segments. So stay tuned. We’ll talk more about that in February. Marty, anything more to add to that?

Warner, I think that was – it was a great response. And I think one of the things, Paul, to look at is, especially on Slide 8, I mean, over time, we have allocated more growth capital to the places where we’ve had the more robust ROEs. And as Warner said, we do have robust pipelines of infrastructure investment opportunities in all of our jurisdictions. So without giving any specifics as to what we might unveil in February, certainly, we’ve carefully allocated capital over time based upon ROEs and quality of regulatory frameworks. The other thing I just mentioned, this gets a little bit back to Alex’s question, as well as yours too, Paul. I mean in each one of our jurisdictions, we’ll continue to work to earn as close to our allowed returns as we can. Alex was specifically asking about Missouri overcoming some of this decline in the performance incentives. And I would just note as I reflect on her question as it relates to Missouri in each one of our jurisdictions and earning the allowed, certainly, we’re going to exercise disciplined financial management, both capital allocation as well as O&M controls, as well to work to earn as close to those allowed as we can as we deploy that growth capital.

Okay, great. And just in terms of the outlook on the legislation in Illinois, is there a potential, do you think, for changing the legislation significantly? Or is it pretty much more just sort of an effort of getting what’s been working for you pretty well extended? Do you follow what I’m saying?

Paul, this is Warner again. Look, we’ve been real clear. Our objective is to take the existing formula rate framework and extend it to 2032. We’ve been – that’s what we’ve been advocating throughout this year. It’s what we continue to advocate today, and that’s what I said on the call. Whether we have an opportunity to address the ROE, that is something that we will look at. But look, we like what we have. And if we can make it even better, we will do that as well.

Thanks so much guys.

Our next question comes from Kevin Fallon with Citadel.

Hey guys, how are you?

Good morning.

Good Kevin, thanks.

I just wanted to ask just a little bit more specifically, on the FERC transmission subs, what kind of opportunity is there to add more capital? And also in terms of the kind of rolling five-year period on the PISA in Missouri, what’s the headroom beyond what you currently have in the plan?

So a couple of things there, Kevin. I think when you look at – I’ll start with transmission, and Michael, I’ll let you jump in on the Missouri piece there. When we look together at transmission, as we’ve said before, we think there are many robust transmission opportunities. I think, number one, we’ve said in other calls that when you see the level of renewable generation being added in the broader MISO footprint and you see all the interconnection agreements that are being put in place today, we believe when you step back and we get through these interconnection agreements that MISO will have an opportunity to step back and say, look, is this the most efficient and effective way for the transmission system to be configured? And we’ll give those that are in MISO an opportunity to look at potentially multi-value projects down the road. Now, that’s not tomorrow. But we do see that as certainly an opportunity down the road that could be in a robust expansion there. Even today, we have a vast transmission system. And so today, we’re continuing to address aging infrastructure. We continue to address sort of new compliance standards. That’s not ending, both in Missouri and Illinois, and so we continue to see those investment opportunities to be real and significant. And certainly, beyond that, there’s certainly grid modernization with regard to security and all these other types of things. And so, Shawn, in the transmission business, we’ve talked often about this, but we see the pipeline to continue to be robust. Anything that I missed in those areas that you and your team are looking at?

No. I think you got to hear – well, Warner, there’s a lot of opportunity that we see coming down the road, especially as we think about the transition to a carbon-free generation portfolio that will affect not only the upgrades on our system, but the flows on our system, which will cause us to think about additional investments.

Sure. Michael, why don’t you hit on Missouri, please?

Really just similar, Warner, I don’t think we specifically have commented about sort of where the complete opportunities are, other than to say, we have a robust pipeline there, right? I mean we’re investing quite a bit of capital already year-over-year this year. But as we look, I mean, we’re just beginning to scratch the surface in terms of making the investments to continue to improve the grid and make the – and meet the expectations that customers have for us from an increasing standpoint. So we feel that we have room underneath the cap to continue to do that over time.

Yes, if you look, as I said during the – my prepared remarks, Missouri is going in for a rate review, and it’s asking for a $1 million rate decrease. And so I think that’s evidence of the work that we’re doing to be very disciplined in our cost management as well as putting to work really significant investments that have driven significant value to our customers and our communities.

That’s very helpful. And just a follow-up, when you guys raised the growth rate before, obviously, it was driven by a lot of the stuff you were just highlighting in terms of the sizable capital program that you have going forward. And I know people are focused on the headwind from the 30-year. Should we still think that you guys have the program in place to do the midpoint of the range through the guidance period?

Yes, Kevin, this is Marty. Look, it goes back to the statement I made earlier. The guidance range we gave that 6% to 8%, it’s about a $0.40 range. If you look at where our treasury rates were at the beginning of the year, about 3.1%. We gave guidance and now about 2.4%. It’s about a $0.05 delta. So that is not going to move you outside the range and, frankly, not move you all that far off the midpoint. And as I said earlier, we have a lot of tools in our toolkit as well as actions that we can take to offset a $0.05 decline. So look, I mean, we just talked about the robust pipeline we have in all of our jurisdictions. So we do believe we have a robust pipeline in transmission as well as Missouri, Illinois Gas, Illinois Electric delivery, really across the board, and it’s a major tool that we have in our toolkit. But as I said, over time, that range we have out there accommodates a lot of variables, and we expect to continue to allocate capital wisely. We expect to exercise disciplined management with respect to our costs with a real eye towards affordability for our customers. And we talked here today about making sure that we do the right things regulatorily, legislatively to make sure we deliver on our commitments.

Okay. So it just doesn’t sound, the nickel is basically the bogey for where – what you guys are – have to offset with the capital or whatnot?

Well, as I outlined, we’re at 3.1% at the beginning of the year, we’re at 2.4% today. That’s about a nickel.

Okay. That’s very helpful. Thanks guys.

Thanks, Kevin.

Mr. Kirk, there are no further questions at this time. I’d like to turn the floor back over to you for closing comments.

Thank you for participating in this call. A replay of this call will be available for 1 year on our website. If you have questions, you may call the contacts listed on our earnings release. Again, thank you for your interest in Ameren. Have a great day.

This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.