Greetings, and welcome to Ameren Corporation First Quarter 2020 Earnings Call. [Operator Instructions]. I would now like to turn the conference over to your host, Mr. Andrew Kirk, Director of Investor Relations for Ameren Corporation. Thank you. You may begin.

Thank you, and good morning. On the call with me today are Warner Baxter, our Chairman, President and Chief Executive Officer; and Michael Moehn, our Executive Vice President and Chief Financial Officer; as well as other members of the Ameren management team joining remotely. Warner and Michael will discuss our earnings results and guidance as well as provide a business update. Then we will open the call for questions. Before we begin, let me cover a few administrative details. This call contains time-sensitive data that is accurate only as of the date of today's live broadcast, and redistribution of this broadcast is prohibited. To assist with our call this morning, we have posted a presentation on the amereninvestors.com homepage that will be referenced by our speakers. As noted on Page 2 of the presentation, comments made during this conference call may contain statements that are commonly referred to as forward-looking statements. Such statements include those about future expectations, beliefs, plans, strategies, objectives, events, conditions and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated. For additional information concerning these factors, please read the Forward-looking Statements section in the news release we issued today and the Forward-looking Statements and Risk Factors sections in our filings with the SEC. Lastly, all per share earnings amounts discussed during today's presentation, including earnings guidance, are presented on a diluted basis, unless otherwise noted. Now here's Warner, who will start on Page 4 of the presentation.

Thanks, Andrew. Good morning, everyone, and thank you for joining us. This morning, I'm going to begin our presentation by providing a COVID-19 update and, in particular, highlighting some of the key efforts we are taking for the safety and security of our coworkers and customers during this difficult time, while providing the central electric and natural gas service. I will then touch on our first quarter results and 2020 earnings guidance. Finally, I will discuss our long-term growth prospects while highlighting some important strategic matters that will position Ameren for future success. Before I jump into the details, I hope that you, your families and colleagues are safe and healthy during this unprecedented time. As our world works to address COVID-19, many things are uncertain. But the Ameren's commitment to safety of our coworkers, our customers and our communities remains constant. At Ameren, we never compromise on safety, it is one of our core values. I want to express my profound appreciation for those who are on the front lines battling this virus. To the health care workers, first responders, grocery store workers, local leaders, community workers and, of course, all utility workers across our nation, thank you. In particular, I want to express my sincere appreciation to my Ameren coworkers, who remain focused every day on delivering safe, reliable power and natural gas to millions of people in Missouri and Illinois. To ensure that we could continue to deliver safe and reliable service, we took swift action in January and assembled a cross-functional crisis management response team following reports about threats related to COVID-19. Since January, our team has been planning and implementing a pandemic response, consistent with established guidelines and industry best practices as well as in consultation with world-class health experts and state and local government…

Thanks, Warner, and good morning, everyone. Turning now to Page 14 of our presentation. Today, we reported first quarter 2020 earnings of $0.59 per share compared to earnings of $0.78 per share for the year ago quarter. The key factors that drove the overall $0.19 per share decrease are highlighted by segment on this page. Earnings from Missouri, our largest segment, were down $0.20 per share. The results reflected lower electric retail sales, primarily driven by mild winter temperatures in 2020 compared to colder-than-normal temperatures in the year ago period as well as the absence of energy efficiency performance incentives in the first quarter of 2020, which, combined, reduced earnings by $0.11 per share. In addition, earnings were impacted by higher operations and maintenance expenses, which reduced earnings by $0.08 per share. This increase in operation and maintenance expense was primarily driven by changes in the cash surrender value of our company-owned life insurance. Finally, under terms of the Missouri rate review settlement in order, we recognized a onetime charitable contributions in the first quarter, which reduced earnings by $0.02 per share. Earnings for Ameren Illinois natural gas were slightly lower due to higher operation and maintenance expenses, also due to change in the cash surrender value of COLI, mostly offset by increased investments in infrastructure. Ameren Illinois electric distribution earnings were flat, reflecting increased investments in infrastructure, offset by a lower allowed return on equity. Ameren transmission earnings were $0.01 per share higher due to an increased investments in infrastructure, partially offset by a lower allowed return on equity. Finally, Ameren parent and Other results also increased $0.01 per share, driven primarily by the timing of income tax expense, which is not expected to impact full year earnings, offset by reduced tax benefits associated with share-based compensation. Before moving…

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

Hope you all are doing well.

Hope you are doing well as well. Good to hear your voice.

Likewise. I wanted to follow-up on Missouri. And I mean, this is mostly in context of 1Q, you had a number of, call it, higher expenses. You've listed them out fairly in some detail. How do you think about those cascading through the course of the year and into '21? I imagine much of it like weather and onetime contributions are pretty limited to 1Q '20. But separately from focusing on higher expense, how do you think about the totality of O&M opportunities to offset the details that you provided on the lower 2.5% sales altogether?

Perfect. Julien, this is Michael. So I'll take a stab at this and then certainly Warner can add anything as well. But I mean, if I heard you right, you broke up a little bit there, but in terms of the higher costs that we saw in the first quarter, clearly, we're impacted by this company-owned life insurance, which we indicated in there, so that obviously provided a headwind. As you think back in terms of where we were at the beginning of the year, we talked about O&M costs being higher in general. We didn't guide to a specific number, we just said that we were going to be higher. Obviously, you have these headwinds that are occurring in the first quarter. As we think about all these COVID-related issues that we outlined in terms of what's going on with sales and bad debt, we are clearly focused on guiding to a lower O&M number today. And so hopefully, it gives you some context, not giving you the specifics of it. But clearly, we were higher O&M going into the year, got these headwinds. We've taken a number of actions, as Warner said, in terms of just managing headcount, obviously travel, conferences, watching overtime where we can, all those kind of things to make sure that we can keep a firm grasp on this.

Yes. I think, Michael, you hit it right. So look, we're guiding down now from O&M expenses from where they were last year. And look, in looking at some of those things, Julien, clearly, we're mindful of several things. Of course, we're mindful of the expected impacts of COVID-19, which Michael did a nice job of outlining before. But of course, we're also mindful that we need to make sure we're delivering safe and reliable service to our customers. But clearly, we never lose our focus to earn as close to allowed return as possible. So when we think about all those things and providing that guidance, that's how we think about the O&M actions that we've taken.

Got it. Okay. But no specific pinpoint number here for the total -- totality of the year. And then a follow-up...

Yes, not at this point. I think we're going to continue to monitor it. And as you can appreciate here, we're here in the first quarter. And so we'll continue to monitor operations for the rest of the year, so yes. But that gives you, I think, a good sense of the direction that we're headed.

Absolutely. And then related to this, if I can, what about the Missouri's rate case strategy? I know you put a bullet in your slides about that, but can you elaborate on your thinking today? And again, also being cognizant that, yes, we're still in the first quarter here in terms of results, but how are you at least conceptually thinking about approaching it?

Yes. So Julien, just a couple of thoughts there. And then Marty, who's joining us remotely, all of our leaders, just so you know, our presidents are joining us remotely today as we continue to make sure we do the proper social distancing. So look, I think, at the end of the day, really no decision has been made at this time. But clearly, when you think about your next rate case filing, there are several things you have to think about. And certainly, the wind projects, right, which we've talked about on the call, but we also have to be mindful of the implications and impacts of COVID-19. And so those coupled with the fact that we just completed our last rate review, and those are some of the things that you would put on the list in terms of making a final determination there. And Marty, I know that you're on, anything that you would add to some of the things that you and your team are kicking around?

Well, Warren, you hit on a couple of the key ones. I think, Julien, when you look back at our last rate review filing, it was really to set up the timing for this next one, given the wind projects that we have going into service later this year, so those projects will still be top of mind in terms of getting those completed and making sure we think about how to time a rate case around those. Of course, Senate Bill 564, the Plan and Service Accounting, has really provided us some better flexibility on capital expenditures and the ability to be able to defer depreciation, return and get full recovery, so that's a consideration. But as Warner said, we feel good about the constructive rate settlement that we just had in this past rate review. I think that puts us in a good position to really think about the timing going forward. COVID-19, obviously, having impacts on our customers and our business, as Warner mentioned. And so all of those will be considerations as well as other cost of service considerations that will go into it. So I think all of that considered just means that we'll be thinking about really the best timing for this next rate review.

Our next question comes from the line of Jeremy Tonet with JPMorgan.

It's Rich Sunderland, on for Jeremy. So just starting off with the wind project, appreciate the update there. Could you speak to any regulatory obligations with regards to the in-service dates? And maybe just a little bit more color with the line of sight to the potential end of year versus a slight push into Q1 for the 300 megawatts?

Yes. So this is Warner. So in terms of regulatory obligations, really none by the end of this year. Of course, we're very focused on getting those done in a timely fashion, as we outlined during the call. But if some of the projects -- and we talked about, at this time, we think there's a possibility for $100 million of that second project to get pushed into 2021. That doesn't cause any particular regulatory challenges for us. So that's how I see that.

Yes. I mean, you got the renewable standard here in the state of Missouri. You got 15% by 2021, but we'll be in compliance with that. That's what Warner is saying that no issues with that.

Great. And then on bad debt expense, could you speak to a little bit about trends from maybe '08, '09 and what you're baking into guidance for 2020?

Yes, Michael, why don't you take that one, please?

Yes, you bet. So look, we're looking and mindful of everything that's happening to the customers. They're looking at in terms of LIHEAP is providing, obviously, an unprecedented amount of dollars here. I think Warren mentioned as well that we have dollars that are being allocated, obviously, to energy assistance as well. But as we step back and look at and going back to '08, '09, you're right, I think that's a great place for us to spend some time. I mean, we've done a nice job of driving down bad debt expense over time. We're probably at about $8 million today in bad debt expense. If you think about '08, '09 time frame, you're probably closer to $14 million, $15 million. So that's probably a good proxy to think about in terms of a couple of cents, about $6 million in terms of headwind potentially associated with bad debt expense.

Our next question comes from the line of Paul Patterson with Glenrock.

Just on your comments, you mentioned that the long-term growth had certain expectations with respect to the 30-year treasury. And I know you guys have legislation pending in Illinois, which you mentioned and went over. But how should we think about what the long-term growth rate is if we do have this 30-year treasury where it is at? And also just your rate base growth seems to be unchanged and what have you. How should we think about what your expectation is, absent any legislation changing what the treasury -- the 30-year treasury would be?

So Michael, why don't you address sort of the overall 30-year treasury, and then maybe I can jump in and talk about the potential allocation of capital and -- okay?

Got it. I appreciate the question. I think as you think about the long-term guidance, and if you think about the 350 as the midpoint for 2020 and you take the 6% to 8% off of that, Paul, I mean, you get to about a $0.35 range out there in 2024, so a decent size range. And I think that range accommodates a number of things, which I think Warner maybe even referred to earlier. I mean, it refers potential treasury outcomes, certainly rate case outcomes, the timing of CapEx, other things. I mean, there are a number of levers that can be pulled over time. I would remind you a couple of, I think, key data points just to keep in mind. I mean, for every 50 basis points move in that distribution business, it's worth about -- it's an impact of about $0.035. And the other thing to keep in mind, too, is, I mean, as you think about how we're allocating capital today and where rate base growth is going over time, I mean, you get out to 2024, that Illinois distribution business is only about 18% of the overall rate base. So those are things just to keep in the back of your mind as you think about different impacts associated with that $0.35 range. I don't know if Warner...

I think that's a good point. So maybe I'll add then a little bit more color because you had a specific question around how we might think about our investments in Illinois. So look, we're mindful of the fact that our return on equity in Illinois is below industry averages. And I mean, that's why we're supporting legislation that's going to add 100 basis points to the current 580 basis points to the 30-year treasury. And so at the same time, too, we recognized that we're currently in an, frankly, unprecedented period in our country's history that's obviously driving historically low interest rates. And so what I would say is that, look, we're not going to have a knee-jerk reaction to our investment strategy because the investments that we've been making in Illinois have been delivering value to both our customers and shareholders. But look, we're also going to continue to monitor the situation. And at the same time, Rich and his team, they're going to be relentless and trying to make sure we pass what we think is really good legislation for our customers, the state of Illinois and certainly for our shareholders. And in so doing, we're going to continue to advocate for fair returns on those infrastructure investments. And then so doing, too, we think if we continue to make them, they're going to deliver a lot of value to our customers. So that's the color, that's in terms of how we think about it right now.

Okay. I mean -- and I appreciate the color. I'm just sort of wondering, though, if we don't get legislation and if the rate is so low, would you -- I mean, I would assume that there would probably be some change in how you would allocate capital. I mean, it is a pretty robust rate base growth that you have in those slides and stuff where...

Sure. Like I said before, we're going to be mindful of our returns in our businesses. We always are mindful about how we allocate capital. We obviously are very thoughtful and strategic and so doing. But at the same time, as I sit here today, we're not going to be making any predictions or knee-jerk reactions.

Okay. Fair enough. And these are some technically...

Thanks, Paul. Please -- if you have another comment, please.

Okay. I'm sorry. Just on the COLI, you broke it out for Missouri. And I just was sort of -- just trying to understand why the Illinois distribution isn't affected apparently by it? And could you just give us a little bit more color about how that COLI is distributed and -- I mean, not anything huge, if it's very complicated, don't bother your time, but just want to get more on that.

No worries. Good question. Certainly, it's not complicated. I mean, it really -- Illinois -- it doesn't impact the Illinois distribution business because of the formula rate nature of it. So where you do have a little bit of impact is on the Illinois natural gas side. And so really focused in on the primary piece of Missouri because that's where the biggest impact is just because of the nature of that regulatory regime.

[Operator Instructions]. Our next question comes from the line of James Thalacker with BMO Capital Markets.

Just following up real quickly on Paul's question. As you kind of look out at the reaffirmation of the 6% to 8% in the past, I know you guys have used kind of the forward curve for treasuries. Is that kind of what we should assume as embedded in the growth rate from here?

Yes. No, Paul -- no, Jim. Historically, I think we maybe did guide to that several years ago. I think we kind of moved away from that a bit ago. And so again, just we have various internal assumptions in there. And again, as Warner stated, when we have a lot of different levers that we can pull, I know there's some sensitivity about just given, obviously, where that 30-year treasury sits today. But again, it's a $0.35 range, talked about the size of that overall distribution out there in 2024. I talked about the sensitivity to those rates. And so I think there are things that we continue to do to manage around that.

Yes. I think, too, Michael, just to add. I mean, so don't lose sight of the slide that we show up there about the robust pipeline of investment that we have across all of our enterprises that goes not just beyond this first 5 years, but the $36 billion in total over 10 years. So that's certainly a lever that we have. And of course, all along, we're mindful of customer affordability and those types of things. So look, we don't -- we never say anything is a lay up, right? But at the same time, we're going to be very thoughtful in terms of how we manage the business that drives value for our customers and value for our shareholders.

Got it. Okay. And I guess, just as a real quick follow-up. As you look at the range, I know that you affirmed it today, but are you guys comfortable at this point in kind of talking about with your cost containment, and what you see for your sort of sales progression through the year through the various scenarios of kind of where you see yourself within that range? Would it be sort of at the midpoint, upper half, sort of lower half? Like how are you thinking about that?

Yes, Jim. So this is Warner again. So I assume you're talking about our 2020 EPS guidance. And so look, consistent with our past practice, we just don't disclose where we're at within our guidance range, frankly, at any given time. And so the only thing I would say is that this team is focused and has a strong record of not just being focused but delivering within our guidance, and that's where we're going to continue to be focused in 2020.

Hope everyone is safe and well.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Kirk for any final 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 can -- may call the contacts listed on our earnings release. Financial analysts' inquiries should be directed to me, Andrew Kirk. Media should call Erin Davis. Again, thank you for your interest in Ameren, and have a great day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.