Ameren 10-Q 2021-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

OR

(Missouri Corporation)

1901 Chouteau Avenue

St. Louis, Missouri 63103

(314) 621-3222

(Missouri Corporation)

1901 Chouteau Avenue

St. Louis, Missouri 63103

(314) 621-3222

(Illinois Corporation)

10 Executive Drive

Collinsville, Illinois 62234

(618) 343-8150

Securities Registered Pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The number of shares outstanding of each registrant’s classes of common stock as of October 29, 2021, was as follows:

This combined Form 10-Q is separately filed by Ameren Corporation, Union Electric Company, and Ameren Illinois Company. Each registrant hereto is filing on its own behalf all of the information contained in this quarterly report that relates to such registrant. Each registrant hereto is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information.

TABLE OF CONTENTS

GLOSSARY OF TERMS AND ABBREVIATIONS

We use the words “our,” “we” or “us” with respect to certain information that relates to Ameren, Ameren Missouri, and Ameren Illinois, collectively. When appropriate, subsidiaries of Ameren Corporation are named specifically as their various business activities are discussed. Refer to the Form 10-K for a complete listing of glossary terms and abbreviations. Only new or significantly changed terms and abbreviations are included below.

ATM program – At-the-market equity distribution program.

CEJA – Climate and Equitable Jobs Act, an Illinois law that, among other things, gives Ameren Illinois the option to establish new electric distribution rates through either a traditional regulatory rate review, which may be based on a future test year, or an MYRP for a four-year period.

Form 10-K – The combined Annual Report on Form 10-K for the year ended December 31, 2020, filed by the Ameren Companies with the SEC.

MIEC – Missouri Industrial Energy Consumers, an association of industrial companies.

MoOPC – Missouri Office of Public Counsel, a state agency.

MYRP – Multi-year rate plan, a four-year electric distribution service rate plan allowed to be filed with the ICC under the CEJA. Under a multi-year rate plan, the ICC would approve base rates for electric distribution service charged to customers for each calendar year of a four-year period. Ameren Illinois would be allowed to reconcile each year's base rates to its actual revenue requirement, subject to a reconciliation cap with exclusions for certain costs and riders, and adjustments to the approved ROE for performance incentives and penalties.

QTD – Three months ended September 30.

YTD – Nine months ended September 30.

YoY – Compared with the year-ago period.

FORWARD-LOOKING STATEMENTS

Statements in this report not based on historical facts are considered “forward-looking” and, accordingly, involve risks and uncertainties that could cause actual results to differ materially from those discussed. Although such forward-looking statements have been made in good faith and are based on reasonable assumptions, there is no assurance that the expected results will be achieved. These statements include (without limitation) statements as to future expectations, beliefs, plans, projections, strategies, targets, estimates, objectives, events, conditions, and financial performance. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are providing this cautionary statement to identify important factors that could cause actual results to differ materially from those anticipated. The following factors, in addition to those discussed within Risk Factors in the Form 10-K and in this report, and elsewhere in this report and in our other filings with the SEC, could cause actual results to differ materially from management expectations suggested in such forward-looking statements:

*•*regulatory, judicial, or legislative actions, and any changes in regulatory policies and ratemaking determinations, that may change regulatory recovery mechanisms, such as those that may result from Ameren Missouri’s electric service and natural gas delivery service regulatory rate reviews filed with the MoPSC in March 2021, the July 2020 appeal filed by Ameren Missouri, Ameren Illinois, and ATXI challenging the refund period related to the FERC’s May 2020 order determining the allowed base ROE under the MISO tariff, the July 2020 appeal filed by Ameren Missouri, Ameren Illinois, and ATXI challenging the FERC’s rehearing denials in the transmission formula rate revision cases, Ameren Illinois’ electric distribution service rate reconciliation request filed with the ICC in April 2021, and Ameren Illinois’ annual electric energy-efficiency formula rate update filed with the ICC in May 2021;

*•*the length and severity of the COVID-19 pandemic, and its impacts on our business continuity plans and our results of operations, financial position, and liquidity, including but not limited to changes in customer demand resulting in changes to sales volumes; customers’ payment for our services and their use of deferred payment arrangements; future regulatory or legislative actions that could require suspension of customer disconnections and/or late fees, among other things, for an extended period of time; the health, welfare, and availability of our workforce and contractors; the impact of federal COVID-19 vaccine mandates on our workforce, our contractors, and our suppliers, including any associated prolonged labor shortages; supplier disruptions; delays in the completion of construction projects, which could impact our expected capital expenditures and rate base growth; Ameren Missouri’s ability to recover any forgone customer late fee revenues or incremental costs; our ability to meet customer energy-efficiency program goals and earn performance incentives related to those programs; changes in how we operate our business and increased data security risks as a result of remote working arrangements for a significant portion of our workforce; and our ability to access the capital markets on reasonable terms and when needed;

• the effect of Ameren Illinois’ use of the performance-based formula ratemaking framework for its electric distribution service, which will establish and allow for a reconciliation of electric distribution service rates through 2023, its participation in electric energy-efficiency programs, and the related impact of the direct relationship between Ameren Illinois’ ROE and the 30-year United States Treasury bond yields;

• the effect and duration of Ameren Illinois’ election to either utilize traditional regulatory rate reviews or MYRPs for electric distribution service ratemaking effective for rates beginning in 2024;

• the effect on Ameren Missouri’s investment plan and earnings if an extension to use PISA is not sought by Ameren Missouri or approved by the MoPSC;

• the effect on Ameren Missouri of any customer rate caps pursuant to Ameren Missouri’s election to use the PISA, including an extension of use beyond 2023, if requested by Ameren Missouri and approved by the MoPSC;

• the effects of changes in federal, state, or local laws and other governmental actions, including monetary, fiscal, and energy policies;

• the effects of changes in federal, state, or local tax laws, regulations, interpretations, or rates, and challenges to the tax positions taken by the Ameren Companies, if any, as well as resulting effects on customer rates;

• the effects on energy prices and demand for our services resulting from technological advances, including advances in customer energy efficiency, electric vehicles, electrification of various industries, energy storage, and private generation sources, which generate electricity at the site of consumption and are becoming more cost-competitive;

• the effectiveness of Ameren Missouri’s customer energy-efficiency programs and the related revenues and performance incentives earned under its MEEIA programs;

• Ameren Illinois’ ability to achieve the performance standards applicable to its electric distribution business and the FEJA electric customer energy-efficiency goals and the resulting impact on its allowed ROE;

• our ability to control costs and 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 affordability of our services for our customers;

• the cost and availability of fuel, such as low-sulfur coal, natural gas, and enriched uranium used to produce electricity; the cost and availability of purchased power, zero emission credits, renewable energy credits, emission allowances, and natural gas for distribution; and the level and volatility of future market prices for such commodities and credits;

• disruptions in the delivery of fuel, failure of our fuel suppliers to provide adequate quantities or quality of fuel, or lack of adequate inventories of fuel, including nuclear fuel assemblies from the one NRC-licensed supplier of Ameren Missouri’s Callaway Energy Center assemblies;

• the cost and availability of transmission capacity for the energy generated by Ameren Missouri’s energy centers or required to satisfy Ameren Missouri’s energy sales;

• the effectiveness of our risk management strategies and our use of financial and derivative instruments;

• the ability to obtain sufficient insurance, or in the absence of insurance, the ability to timely recover uninsured losses from our customers;

• the impact of cyberattacks on us or our suppliers, which could, among other things, result in the loss of operational control of energy centers and electric and natural gas transmission and distribution systems and/or the loss of data, such as customer, employee, financial, and operating system information;

• business and economic conditions, which have been affected by, and will be affected by the length and severity of, the COVID-19 pandemic, including the impact of such conditions on interest rates and inflation;

• disruptions of the capital markets, deterioration in credit metrics of the Ameren Companies, or other events that may have an adverse effect on the cost or availability of capital, including short-term credit and liquidity;

• the actions of credit rating agencies and the effects of such actions, including any impacts on our credit ratings that may result from the economic conditions of the COVID-19 pandemic;

• the inability of our counterparties to meet their obligations with respect to contracts, credit agreements, and financial instruments, including as it relates to the construction and acquisition of electric and natural gas utility infrastructure and the ability of counterparties to complete projects which is dependent upon the availability of necessary materials and equipment, including those that are affected by disruptions in the global supply chain caused by the COVID-19 pandemic;

• the impact of weather conditions and other natural phenomena on us and our customers, including the impact of system outages and the level of wind and solar resources;

• the construction, installation, performance, and cost recovery of generation, transmission, and distribution assets;

• the effects of failures of electric generation, electric and natural gas transmission or distribution, or natural gas storage facilities systems and equipment, which could result in unanticipated liabilities or unplanned outages;

• the operation of Ameren Missouri’s Callaway Energy Center, including planned and unplanned outages, as well as the ability to recover costs associated with such outages and the impact of such outages on off-system sales and purchased power, among other things;

• Ameren Missouri’s ability to recover the remaining investment and decommissioning costs associated with the retirement of an energy center, as well as the ability to earn a return on that remaining investment and those decommissioning costs;

• the impact of current environmental laws and new, more stringent, or changing requirements, including those related to NSR and CO2, other emissions and discharges, cooling water intake structures, CCR, energy efficiency, and wildlife protection, that could limit or terminate the operation of certain of Ameren Missouri’s energy centers, increase our operating costs or investment requirements, result in an impairment of our assets, cause us to sell our assets, reduce our customers’ demand for electricity or natural gas, or otherwise have a negative financial effect;

• the impact of a final judgment to be issued by the United States Court for the Eastern District of Missouri regarding its September 2019 remedy order that could require Ameren Missouri to install a flue gas desulfurization system, which would increase capital expenditures and annual operating costs, or could limit the useful life of Ameren Missouri’s Rush Island Energy Center;

• the impact of complying with renewable energy standards in Missouri and Illinois and with the zero emission standard in Illinois;

• Ameren Missouri’s ability to construct and/or acquire wind, solar, and other renewable energy generation facilities, retire energy centers, and implement new or existing customer energy-efficiency programs, including any such construction, acquisition, retirement, or implementation in connection with its Smart Energy Plan, the 2020 IRP, or our emissions reduction goals, and to recover its cost of investment, related return, and, in the case of customer energy-efficiency programs, any lost margins in a timely manner, which is affected by the ability to obtain all necessary regulatory and project approvals, including certificates of convenience and necessity from the MoPSC or any other required approvals for the addition of renewable resources;

• 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; and our ability to obtain timely interconnection agreements with the MISO or other RTOs at an acceptable cost for each facility;

• advancements in carbon-free generation and storage technologies, and the impact of constructive federal and state energy and economic policies with respect to those technologies;

• labor disputes, work force reductions, changes in future wage and employee benefits costs, including those resulting from changes in discount rates, mortality tables, returns on benefit plan assets, and other assumptions;

• the impact of negative opinions of us or our utility services that our customers, investors, legislators, or regulators may have or develop, which could result from a variety of factors, including failures in system reliability, failure to implement our investment plans or to protect sensitive customer information, increases in rates, negative media coverage, or concerns about environmental, social, and/or governance practices;

• the impact of adopting new accounting guidance;

• the effects of strategic initiatives, including mergers, acquisitions, and divestitures;

• legal and administrative proceedings; and

• acts of sabotage, war, terrorism, or other intentionally disruptive acts.

New factors emerge from time to time, and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained or implied in any forward-looking statement. Given these uncertainties, undue reliance should not be placed on these forward-looking statements. Except to the extent required by the federal securities laws, we undertake no obligation to update or revise publicly any forward-looking statements to reflect new information or future events.

PART I. FINANCIAL INFORMATION

AMEREN CORPORATION

CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME

(Unaudited) (In millions, except per share amounts)

The accompanying notes are an integral part of these consolidated financial statements.

AMEREN CORPORATION

CONSOLIDATED BALANCE SHEET

(Unaudited) (In millions, except per share amounts)

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The following discussion should be read in conjunction with the financial statements and Risk Factors contained in this Form 10-Q, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors contained in the 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. Also see the Glossary of Terms and Abbreviations at the front of this report and in the Form 10-K.

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. Ameren’s principal subsidiaries are listed below. Ameren has other subsidiaries that conduct other activities, such as providing shared services.

• Union Electric Company, doing business as Ameren Missouri, operates a rate-regulated electric generation, transmission, and distribution business and a rate-regulated natural gas distribution business in Missouri.

• Ameren Illinois Company, doing business as 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’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. Ameren Missouri and Ameren Illinois have no subsidiaries. All tabular dollar amounts are in millions, unless otherwise indicated.

In addition to presenting results of operations and earnings amounts in total, we present certain information in cents per share. These amounts reflect factors that directly affect Ameren’s earnings. We believe this per share information helps readers to understand the impact of these factors on Ameren’s earnings per share.

OVERVIEW

Net income attributable to Ameren common shareholders in the three months ended September 30, 2021, was $425 million, or $1.65 per diluted share, compared with $367 million, or $1.47 per diluted share, in the year-ago period. Net income attributable to common shareholders in the nine months ended September 30, 2021, was $865 million, or $3.36 per diluted share, compared with $756 million, or $3.04 per diluted share, in the year-ago period. Net income for the three and nine months ended September 30, 2021, compared to the year-ago periods, was favorably affected by increased infrastructure investments at Ameren Missouri, Ameren Transmission, and Ameren Illinois Electric Distribution; increased Ameren Missouri electric retail sales, primarily resulting from improving economic conditions and the effects of weather; higher delivery service rates at Ameren Illinois Natural Gas; and a higher recognized ROE at Ameren Illinois Electric Distribution. Net income for the three months ended September 30, 2021, compared to the year-ago period, was also favorably affected by a change in rate design at Ameren Missouri, which resulted in more revenues in the third quarter of 2021 due to a change in the timing of transition from summer to winter volumetric rates. Net income for the nine months ended September 30, 2021, compared to the year-ago period, was favorably affected by the results of Ameren Missouri’s March 2020 electric rate order. Earnings for the three and nine months ended September 30, 2021, compared to the year-ago periods, were unfavorably affected by the effect of dilution; higher other operations and maintenance expenses at Ameren Missouri due to the amortization of expenses, beginning in January 2021, related to the 2020 scheduled refueling and maintenance outage at the Callaway Energy Center pursuant to the MoPSC’s February 2020 order; increased financing costs at Ameren Missouri and Ameren (parent), primarily due to higher long-term debt balances; 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; and decreased income tax benefit at Ameren (parent), due to decreased interim period income tax benefits in 2021, largely related to wind generation facilities. Net income for the three months ended September 30, 2021, compared to the year-ago period, was also unfavorably affected by a change in rate design at Ameren Illinois Natural Gas, which concentrates more revenues in the winter heating season due to an increase in volumetric rates. Net income for the nine months ended September 30, 2021, compared to the year-ago period, was 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.

Ameren’s strategic plan includes investing and operating its utilities in a manner consistent with existing regulatory frameworks, enhancing those frameworks, and advocating for responsible energy and economic policies, as well as creating and capitalizing on opportunities for investment for the benefit of its customers, shareholders, and the environment. Ameren remains focused on disciplined cost management and strategic capital allocation. Ameren invested $2.6 billion in its rate-regulated businesses in the nine months ended September 30, 2021.

The COVID-19 pandemic continues to affect our results of operations, financial position, and liquidity, but we continue to expect gradual improvement in sales volumes in 2021, compared to 2020. In the first nine months of 2021, our sales volumes, excluding the estimated effects of weather and customer energy-efficiency programs, increased compared to the same period in 2020. However, our accounts receivable balances that were past due or that were a part of a deferred payment arrangement are higher than normal historical levels, as customer payments have been affected. 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. In general, restrictions on social activities and nonessential businesses implemented in our service territories in 2020 have been relaxed. 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 2 – Rate and Regulatory Matters under Part I, Item 1, of this report, and Results of Operations, Liquidity and Capital Resources, and Outlook sections below. In addition, for information regarding Ameren Illinois’ suspension and subsequent reinstatement of customer disconnection activities and late fee charges for nonpayment, see Note 2 – Rate and Regulatory Matters under Part I, Item 1, of this report and

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There have been no material changes to the quantitative and qualitative disclosures about interest rate risk, credit risk, commodity price risk, investment price risk, and commodity supplier risk included in the Form 10-K. See Item 7A under Part II of the Form 10-K for a more detailed discussion of our market risk.

(a)Evaluation of Disclosure Controls and Procedures

As of September 30, 2021, evaluations were performed under the supervision and with the participation of management, including the principal executive officer and the principal financial officer of each of the Ameren Companies, of the effectiveness of the design and operation of such registrant’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on those evaluations, as of September 30, 2021, the principal executive officer and the principal financial officer of each of the Ameren Companies concluded that such disclosure controls and procedures are effective to provide assurance that information required to be disclosed in such registrant’s reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and such information is accumulated and communicated to its management, including its principal executive officer and its principal financial officer, to allow timely decisions regarding required disclosure.

(b)Changes in Internal Controls over Financial Reporting

There has been no change in any of the Ameren Companies’ internal control over financial reporting during their most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, each of their internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are involved in legal and administrative proceedings before various courts and agencies with respect to matters that arise in the ordinary course of business, some of which involve substantial amounts of money. We believe that the final disposition of these proceedings, except as otherwise disclosed in this report, will not have a material adverse effect on our results of operations, financial position, or liquidity. Risk of loss is mitigated, in some cases, by insurance or contractual or statutory indemnification. We believe that we have established appropriate reserves for potential losses. For additional information on material legal and administrative proceedings, see Note 2 – Rate and Regulatory Matters, Note 9 – Commitments and Contingencies, and Note 10 – Callaway Energy Center, under Part I, Item 1, of this report. Pursuant to Item 103(c)(3)(iii) of Regulation S-K, our policy is to disclose environmental proceedings to which a governmental entity is a party if we reasonably believe such proceedings will result in monetary sanctions of $1 million or more.

The Form 10-K includes a detailed discussion of our risk factors. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in the Form 10-K.

The COVID-19 vaccine mandate issued under an executive order may have a material adverse effect on our results of operations, financial position, or liquidity.

In September 2021, President Biden issued an executive order directing that federal agencies require employers with United States government contracts to ensure that their United States-based employees, contractors, and subcontractors, at on-site and remote locations, are fully vaccinated for COVID-19, subject to certain exceptions for valid medical and religious reasons, as identified in applicable guidance. Without further change, the expected deadline for compliance is January 4, 2022. The executive order does not provide an exception for regular COVID-19 testing as an alternative to vaccination. As a United States government contractor, the Ameren Companies will be required to comply with the executive order’s vaccine mandate.

The timing of implementation of the executive order may be affected by additional guidance issued, including any extensions of time granted to comply. Compliance with the executive order or any future vaccine mandates may result in labor shortages, including shortages in skilled professional and technical labor, supply chain disruptions, delays in contractors’ performance or completion of work, and/or increased costs for us, our contractors, or our suppliers, which may have a material adverse effect on our results of operations, financial position, and liquidity.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Ameren Corporation, Ameren Missouri, and Ameren Illinois did not purchase equity securities reportable under Item 703 of Regulation

S-K during the period from July 1, 2021, to September 30, 2021.

The documents listed below are being filed or have previously been filed on behalf of the Ameren Companies and are incorporated herein by reference from the documents indicated and made a part hereof. Exhibits not identified as previously filed are filed herewith.

The file number references for the Ameren Companies’ filings with the SEC are: Ameren, 1-14756; Ameren Missouri, 1-2967; and Ameren Illinois, 1-3672.

Each registrant hereby undertakes to furnish to the SEC upon request a copy of any long-term debt instrument not listed above that such registrant has not filed as an exhibit pursuant to the exemption provided by Item 601(b)(4)(iii)(A) of Regulation S-K.

SIGNATURES

Pursuant to the requirements of the Exchange Act, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.

Date: November 4, 2021