Martin J. Lyons Jr.
President and Chief Executive Officer at Ameren
Thanks, Warner. Before I jump into the details, I would like to extend my appreciation to all of my coworkers for their dedication in 2021. Our accomplishments during the year are a result of their hard work and focus on executing our strategy, which has been delivering significant long-term value for all of our stakeholders.
Going forward, our strategy remains the same, which is to invest in and operate our utilities in a manner consistent with existing regulatory frameworks, enhance regulatory frameworks, advocate for responsible energy and economic policies, and create and capitalize on opportunities for investment for the benefit of our customers, shareholders and the environment.
As Chief Executive Officer, my focus is to drive continuous improvement as we execute our strategy and take Ameren to higher heights.
Moving now to Page 9. Yesterday afternoon, we announced that we expect our 2022 earnings to be in a range of $3.95 to $4.15 per share. Based on the midpoint of the range, this represents 8% earnings per share growth compared to the midpoint of our initial 2021 guidance range. Michael will provide you with more details on our 2022 guidance a bit later.
Building on the strong execution of our strategy and our robust earnings growth over the past several years, we continue to expect to deliver long-term earnings growth that is among the best in the industry. We expect to deliver 6% to 8% compound annual earnings per share growth from 2022 through 2026, using the midpoint of our 2022 guidance, $4.05 per share as the base. Our
Long-term earnings growth will be driven by continued execution of our strategy, including investing in infrastructure for the benefit of our customers while keeping rates affordable.
Our dividend is another important element of our strong total shareholder return. I am pleased to report that last week, Ameren's Board of Directors approved a quarterly dividend increase of 7.3%, resulting in an annualized dividend rate of $2.36 per share. This increase reflects confidence by Ameren's Board of Directors in the outlook for our businesses and management's ability to execute its strategy for the long-term benefit of our customers and shareholders. Looking ahead, we expect Ameren's future dividend growth to be in line with our long-term earnings per share growth expectations and within a payout ratio range of 55% to 70%. And while I'm very pleased with our past performance, we are not sitting back and taking a breath.
Turning to Page 10. The first pillar of our strategy stresses investing in and operating our utilities in a manner consistent with existing regulatory frameworks. The strong long-term earnings growth I just discussed is primarily driven by our rate base growth plan. Today, we are rolling forward our five-year investment plan. And as you can see, we expect to grow our rate base at an approximate 7% compound annual rate for the 2021 through 2026 period. This growth is driven by our robust capital plan of approximately $17 billion over the next five years that will deliver significant value to our customers and the communities we serve.
Our plan includes strategically allocating capital to all 4 of our business segments. Importantly, renewable generation and regionally beneficial transmission represent additional investment opportunities. We expect to file an update to our 2020 Missouri Integrated Resource Plan in the first half of this year, in light of the accelerated retirement of our Rush Island energy center. This filing will include a comprehensive set of updated assumptions, taking into account MISO's long-range transmission planning process and potential legislative and regulatory developments at the federal level among other things. This updated planning process is underway, and we fully expect it to underscore the need for expansion of our renewable generation portfolio and transmission investment. We continue to work in earnest with developers to acquire renewable generation projects to be completed in 2024 through 2026, as evidenced by the announcement earlier this week of an agreement to acquire a 150-megawatt solar energy project. We expect to announce further agreements over the course of this year and to file certificates of convenience and necessity, or CCN, with the Missouri PSC after the updates to the 2020 IRP have been filed.
Finally, we remain focused on disciplined cost management to keep rates affordable and improve earned returns in all of our businesses.
Moving to Page 11. As we look to the future, our five-year plan is not only focused on delivering strong results through 2026, but it is also designed to position Ameren for success over the next decade and beyond. We believe that a safe, reliable, resilient, secure and cleaner energy grid will be increasingly important and bring even greater value to our customers, our communities and shareholders.
With this long-term view in mind, we are making investments that will position Ameren to provide safe and reliable electric and natural gas service but also to meet our customers' future energy needs and rising expectations and support our transition to a cleaner energy future.
The right side of this page shows that our allocation of capital is expected to grow our electric and natural gas energy delivery investments to be 84% of our rate base and coal-fired generation to decline to just 6% of rate base by the end of 2026. Only 4% of the capital expenditures in our five-year plan are expected to be spent on coal-related projects. Importantly, our five-year plan does not reflect the expected early retirement of the Rush Island Energy Center or investment opportunities associated with renewable generation and regionally beneficial transmission projects. The bottom line is that we are taking steps today across the board to position Ameren for success in 2022 and beyond.
Turning now to Page 12. Looking ahead over the next decade, we have a robust pipeline of investment opportunities of over $45 billion that will deliver significant value to all of our stakeholders by making our energy grid stronger, smarter and cleaner. Of course, our investment opportunities will not only create a stronger, smarter and cleaner energy grid to meet our customers' needs and exceed their expectations, but they will also create thousands of jobs for our local economies.
Maintaining constructive energy policies that support robust investment in energy infrastructure and a transition to a cleaner future in a responsible fashion will be critical to meeting our country's energy needs in the future and delivering on our customers' expectations.
Moving now to Page 13. As we have discussed with you in the past, MISO completed a study outlining the potential road map of transmission projects through 2039. Taking into consideration the rapidly evolving generation mix that includes significant additions of renewable generation, based on announced utility integrated resource plans, state mandates and goals for clean energy or carbon emission reductions, among other things.
Under MISO's Future 1 scenario, which is the scenario that resulted in an approximate 60% carbon emissions reduction below 2005 levels by 2039, MISO estimates approximately $30 billion of future transmission investment would be necessary in the MISO footprint. Under its Future 3 scenario, which resulted in an 80% reduction in carbon emissions below 2005 levels by 2039, MISO estimates approximately $100 billion of transmission investment in the MISO footprint would be needed.
It is clear that investment in transmission is going to play a critical role in the energy transition. And we are well positioned to plan and execute potential projects in the future for the benefit of our customers and country.
I am pleased to report that in January, MISO transmission owners and MISO reached an agreement on a revision to the cost allocation for certain of these important regional transmission projects. The cost allocation tariff revisions were submitted to FERC for approval on February 4. The revisions allow for allocation of project costs within the subregion where the benefits are recognized. Previous regional benefit project costs have been spread broadly across the MISO region, which was prior to the addition of the MISO South subregion. Comments are due by March 7.
MISO and MISO transmission owners have requested an effective date of May 19, 2022. We continue to work with MISO and other key stakeholders and believe certain projects outlined in Future 1 are likely to be included in this year's MISO transmission planning process, which is expected to be completed in mid-2022.
Turning now to Page 14 and an update on our Rush Island Energy Center. As you may recall, in 2011, the Department of Justice, on behalf of the EPA, filed a complaint against Ameren Missouri, alleging that in performing certain projects at the Rush Island Energy Center, it violated the new source review provisions of the Clean Air Act. In 2017, the District Court issued a liability ruling and in September 2019, ordered the installation of pollution control equipment at the Rush Island Energy Center.
In November, the U.S. Court of Appeals denied Ameren Missouri's request for reconsideration of its decision affirming the District Court's order that requires installation of a scrubber at Rush Island Energy Center in order to continue operations. Subsequently, Ameren Missouri announced its intention to retire the energy center in lieu of installing a scrubber and requested a modification from the District Court of its previous order to allow for plant closure, along with time to address any reliability issues.
Ameren Missouri expects to make an Attachment Y filing soon, formally notifying MISO of its intention to retire the Rush Island Energy Center. MISO will then conduct a reliability assessment. A preliminary study completed by MISO in January of 2022, indicated that in advance of retirement, transmission upgrades and additional voltage support are needed on the transmission system to ensure reliability.
The preliminary MISO reliability study was filed with the District Court, which is under no deadline to issue an order regarding our request to modify the September 2019 remedy order. As stated earlier, in light of these developments, Ameren Missouri expects to file an update to the Integrated Resource Plan with the Missouri PSC in the first half of 2022, which will reflect the expected accelerated retirement date of the Rush Island Energy Center. Such filing will also reflect the expected use of securitization in order to recover the remaining investment in Rush Island.
Lastly, this week at the Missouri PSC staff's request, the commission directed them to review various matters associated with our plans to retire Rush Island. Overall, we understand the desire of the commission and staff to develop a deeper understanding of our decision to accelerate closure of Rush Island and related system reliability considerations. We welcome the review and believe it will be good for the commission and staff as well as all stakeholders to have a deeper understanding of this matter. From our standpoint, it should also help to inform future rate review, IRP and securitization proceedings.
Before leaving this slide, I would also like to provide some insight on recent findings proposed by the EPA related to our Sioux and Meramec Energy Center impoundments. Last month, Ameren Missouri received notice of an interim decision by the EPA that has rejected Ameren Missouri's request to extend the time line for operating certain impoundments located at the Sioux and Meramec energy centers until a replacement pound could be built at Sioux and in the case of Meramec, the energy center retires, which is expected later this year. We are pursuing options to address the EPA decision and at this time, do not expect any significant impacts on operations. Meramec will close as planned by the end of 2022.
Moving to Page 15 to the second pillar of our strategy, enhancing regulatory frameworks and advocating for responsible energy and economic policies. Over the years, we have been successful in executing this element of our strategy by focusing on delivering value to our customers through investments in energy infrastructure and extensive collaboration with key stakeholders in all of our regulatory jurisdictions. I am very pleased to report progress continued last year when the Illinois energy transition legislation was enacted.
This is a constructive law that addresses the key objectives, and we felt were important for our customers and the communities we serve. The law established a new forward-thinking regulatory framework that will enable us to continue to make important infrastructure investments to enhance the reliability and resiliency of the energy grid as well as enable us to invest in two solar or solar plus battery storage pilot projects. It will also give us the ability to earn fair returns on these investments.
The Illinois energy law allows for an electric utility to opt in to a multiyear rate plan effective for four years beginning in 2024. We are currently working with key stakeholders through various workshops, which will continue over the course of 2022 to establish specific procedures, including performance metrics to implement this legislation. We expect performance metrics to be approved by the ICC by late September. Subject to finalizing key aspects of this rate-making framework, we anticipate filing a multiyear rate plan by January 20, 2023.
Moving to Missouri legislative matters, a key piece of legislation was filed for consideration in this year's session. Bills have been introduced in both the House and the Senate to enhance the Smart Energy Plan legislation enacted in 2018. As part of Missouri's Smart Energy Plan, a multiyear effort to strengthen the grid, our customers are benefiting from stronger poles, more resilient power lines, smart equipment and upgraded circuits to better withstand severe weather events and restore power more quickly.
The proposed legislation would enhance and extend the existing regulatory framework. It would modify the rate cap from the current 2.85% compound annual all-in cap on growth in customer rates, to a 2.5% average annual cap on rates on rate impacts of PISA deferrals. In addition, the proposed legislation would expand and extend economic development incentives as well as remove the sunset date. With all of this in mind, we are focused on working with key stakeholders to get this important legislation passed this year.
Moving to Page 16. Over the last several years, we have worked hard to enhance the regulatory frameworks in both Missouri and Illinois to help drive additional infrastructure investments that will benefit customers and shareholders. At the same time, we have been very focused on disciplined cost management to keep rates affordable. Since opting into constructive regulatory frameworks, significant investments have been made, reliability has improved, rates have remained relatively flat, customer satisfaction has increased and thousands of jobs have been created. While these are great wins for our customers and communities, we are not done.
Turning to Page 17. As you can see from this chart, our total fuel and purchase power and operations and maintenance expenses have decreased 3% compared to 2016 levels. And we will remain relentlessly focused on continuous improvement and disciplined cost management as we look forward to the next five years. This will not only include continuing the robust cost management initiatives implemented over the past two years due to COVID-19, but also several other customer affordability initiatives. These initiatives include the automation and optimization of our processes, including leveraging the benefits from significant past and future investments in digital technologies and grid modernization.
Moving to Page 18. To sum up our value proposition, we remain firmly convinced that the execution of our strategy in 2022 and beyond will continue to deliver superior value to our customers, shareholders and the environment. We believe our expectation of 6% to 8% compound annual earnings growth from 2022 through 2026, driven by strong rate base growth, compares very favorably with our regulated utility peers. I am confident in our ability to execute our customer-focused strategy and investment plans across all four of our business segments as we have an experienced and dedicated team with a track record of execution that has positioned us well for future success.
Further, our shares continue to offer investors an attractive dividend. And the strong earnings growth expectations we outlined today position us well for future dividend growth. Simply put, we believe our strong earnings and dividend growth outlook result in a very attractive total return opportunity for shareholders.
Finally, turning to Page 19. I would like to take the opportunity to introduce to you Ameren Missouri's new Chairman and President, Mark Birk. Over the last two years, I was fortunate to have the opportunity to lead the Ameren Missouri organization and work closely with Mark. Mark has been an invaluable part of the Ameren team over the last 35 years. Prior to his new role, Mark served as Ameren Missouri's Senior Vice President of Customer and Power Operations. And over the course of his career, he has held numerous corporate and operations roles, including oversight of strategy and planning, business risk management, safety, nuclear operations as well as a host of electric and natural gas operational areas. I look forward to working with Mark in the future in our new roles.
Again, thank you all for joining us today. And I will now turn the call over to Michael.
