Ameren Continues to Find Regulated Investment Opportunities Supporting Long-Term Growth

We are reaffirming our $85 per share fair value estimate after Ameren reported full-year 2022 operating EPS of $4.14, compared with $3.84 per share in 2021.

Management initiated 2023 EPS guidance of $4.25 to $4.45, in line with our $4.41 per share estimate. The company extended its 6% to 8% growth rate guidance through 2027 off the company’s 2023 base. Our expectations are for the company to achieve the high end of its growth range. Ameren recently announced a 7% dividend increase for 2023, among the highest of its peer group. We forecast Ameren’s dividend to grow in line with earnings.

Ameren disclosed its 2023-27 capital investment plan totaling $19.7 billion of infrastructure investments, up $2.4 billion from the company’s previous five-year plan. The plan incorporates significant regulated renewable energy investment opportunities in Missouri and transmission investments related to the Midwest’s regional long-term transmission planning. Management suggested a pipeline of $48 billion of regulated infrastructure projects over the next decade, reaffirming our view that Ameren has one of the best growth outlooks among its peers.

Ameren is entering a key regulatory year for both of its subsidiaries. In Missouri, regulatory staff recommended a 9.59% midpoint return on equity, lower than Ameren’s 10.2% request, and a 51.84% equity ratio, which is in line with Ameren’s request. We expect a decision similar to the staff’s recommendation.

In Illinois, Ameren filed its first multiyear rate plan under recent legislation that supports traditional ratemaking. We expect Ameren’s awarded allowed ROE to be closer to current industry awarded ROE, in the mid-9% range, rather than Ameren’s 10.5% request. We expect any outcome to include an allowed ROE higher than Ameren’s current allowed ROE, which was linked to U.S. Treasury yields in Illinois’ formula ratemaking structure as interest rates fell.