Martin J. Lyons
Chairman, President and Chief Executive Officer at Ameren
Thanks, Andrew. Good morning, everyone, and thank you for joining us today. We had a strong quarter and we're excited to share an update with you on recent developments. But before I begin our quarterly update, I would like to take the opportunity to congratulate Warner Baxter, who retired as Executive Chairman on November 2. Over his 28-year career with the company, Warner has had a significant positive impact on our industry, company and community and, frankly, each of us here this morning. Under Warner's leadership, Ameren has successfully executed a strategy focused on robust energy infrastructure investments supported by constructive energy policies, driving strong value for Ameren's customers, communities and shareholders. And consistent with his focus on sustainability, he leaves behind a strong team dedicated to maintaining that focus and continuously improving. Congratulations, Warner, and I wish you well in your retirement.
Moving now to Page 5 and our quarterly update. Our dedicated team continues to execute our strategic plan across all of our business segments, which entails investing in energy infrastructure to deliver safe, reliable, clean, and affordable electric and natural gas services to our customers.
Turning to Page 6, our strategic plan integrates our strong sustainability value proposition, balancing the four pillars of environmental stewardship, positive social impact, strong governance and sustainable growth. Here, we summarize some of the many things we are doing for our customers, communities, co-workers and shareholders. And today, we published our updated sustainability investor presentation called Leading the Way to a Sustainable Energy Future available at AmerenInvestors.com, which more fully details how we have been effectively integrating our sustainability values and practices into our corporate strategy. Importantly, it highlights Ameren Missouri's new Integrated Resource Plan, filed with the Missouri PSC in late September.
In terms of governance, in October, the CPA-Zicklin Index once again named Ameren one of the Top 3 companies in the utility industry for corporate political disclosures and accountability. Additionally, I'd like to recognize our team's strong commitment to the communities we serve. In October, more than 600 Ameren team members and community leaders came together in person and virtually for our seventh Diversity, Equity and Inclusion Leadership Summit, featuring nationally-recognized leaders and speakers.
Another example of our team's commitment to our communities is our recently concluded 2023 company-wide United Way employee campaign, which raised nearly $1.7 million funds which will go towards supporting more than 60 United Way organizations across our service territory. This is in addition to the United Way contribution being made by Ameren. Again, thank you for all you do. Our co-workers really do care about making our community better. I encourage you to take some time to read more about our strong sustainability value proposition.
Moving to Page 7. Yesterday, we announced third quarter 2023 earnings of $1.87 per share, compared to earnings of $1.74 per share in the third quarter of 2022. The key drivers of our third quarter results are outlined on this slide. As a result of our strong execution, we narrowed our 2023 earnings guidance to a range of $4.30 to $4.45 per share. This compares to our initial guidance range of $4.25 to $4.45 per share.
Turning to Page 8. On our call in February, I highlighted some of our key strategic business objectives for 2023. We continue to make great progress as a result of our team's dedication.
Outlined on Page 9 are a few key accomplishments this quarter. As you can see on the right side of this page, we have invested significant capital in each of our business segments during the first nine months of this year, increasing spending approximately 6% compared to the year ago period. These investments will continue to improve the reliability, resiliency, safety and efficiency of our system as we make a clean energy transition for the benefit of our customers.
During the first nine months of this year, Ameren Missouri installed over 270,000 smart meters and 230 smart switches, upgraded 55 underground cable miles, hardened 32 sub-transmission miles and energized eight upgraded substations. Over 80% of our Ameren Missouri electric customers now have smart meters, allowing for better understanding of their energy usage and choice among several time of use rates offered.
The storms this summer in the Ameren Missouri service area were among the most impactful compared to the last 10 years. However, we saw the benefits of the Smart Energy Plan investments we have been making. During the July and August storms, over 55,000 customer outages were prevented due to rapid detection, rerouting and restoration of power by automated switches across our system, and over 27 million minutes of customer outages were avoided due to these investments. Investments made to harden the systems withstood over 50 mile per hour winds and experienced minimal damage.
Under the Smart Energy Plan, we have hardened over 200 miles of lines across our system to mitigate the risks of severe weather events. Looking forward, I'm pleased to say that in October, the U.S. Department of Energy awarded Ameren Missouri approximately $50 million to provide half the funding needed to accelerate infrastructure upgrades to support reliability for customers in rural and disadvantaged communities statewide.
At our Ameren Illinois Electric Distribution segment, during the first nine months of 2023, 4,872 poles were replaced as a result of inspections or storm damage remediation, 190 smart switches were added to improve system reliability, and a total of 100 miles of underground cable were added for new business, relocations and replacement of aging cable. Similar to Missouri, the investments made to harden the system substantially withstood a derecho where winds exceeded 95 miles per hour. These experiences underscore the value of our ongoing grid investments and as customers' reliability expectations continue to rise.
The integrity of the Ameren Illinois Natural Gas system also continues to improve. During the first nine months of 2023, the Ameren Illinois Natural Gas Distribution segment completed the replacement of 43 miles of mechanically coupled gas distribution mains and 2,111 mechanically-coupled gas service lines. And our Transmission segment has been focused on executing projects, including line rebuilds, new transmission circuits, transformer replacements, generator interconnections and other upgrades to aging infrastructure, supporting the economic delivery of renewable energy resources for our customers, as well as the overall reliability and resiliency of the transmission system. I'd like to express my appreciation for the Ameren team's dedication, hard work and collaboration so far this year to deliver value for our customers.
Moving on to regulatory matters. In July, as a result of our constructive Ameren Missouri electric rate review settlement, new customer rates became effective, representing an increase in customer rates of approximately 2% compounded annually since April 1, 2017 prior to Ameren Missouri adopting plant-in-service accounting, or PISA. In September, Ameren Missouri filed its updated Integrated Resource Plan, which I will cover in more detail on the next page.
Also in September, we were pleased with the District Court's decision to extend the retirement date of the Rush Island Energy Center from March 30, 2024 to October 15, 2024. This allows Ameren Missouri sufficient time to complete the transmission upgrades needed to ensure system reliability before the energy center is retired. We will seek to finance the costs associated with the retirement, including the remaining net book value of the Rush Island Energy Center through securitization. We expect to file our petition seeking commission approval of the securitization by the end of this year. Once filed, the regulatory proceeding is expected to take approximately seven months to complete.
Moving to Ameren Illinois. In September and October, we received the administrative law judges proposed orders in the natural gas and electric rate reviews, respectively. With respect to the electric multi-year rate plan, we are disappointed with the ALJ recommendation of 9.24% allowed ROE, 50% common equity layer, and no return on an overfunded post-employment benefit plan asset. We are also disappointed by the ALJ recommendation to scale back or eliminate certain reliability-driven investments like Ameren Illinois' storm hardening programs and grid protection microprocessor relay upgrades. Our filing aligns with the policy goals of the State of Illinois Climate and Equitable Jobs Act. Last Thursday, we filed briefs detailing our concerns with the ALJ proposed electric order, and we will see if the Illinois Commerce Commission, or ICC, will take a different approach before issuing a final decision in mid-December.
Moving now to Ameren Transmission. Open houses started in August for the Central Illinois Grid Transformation Program. This program consists of projects that were assigned to Ameren by MISO as part of their LRTP Tranche 1 portfolio. The projects are targeted for completion by 2030. Open houses are held to engage with and gather feedback from communities and stakeholders before filing route plans early next year. We are committed to working to build transmission lines affordably with robust input from our neighbors and communities impacted by these projects. ATXI and Ameren Illinois will work together to build approximately 380 miles of new or upgraded transmission lines across Central Illinois, with nearly 85% of the lines slated to be rebuilt in our existing rights of way.
Moving on to operational matters. Earlier this week, the Callaway Energy Center was brought back online following a planned refueling and maintenance outage, which was completed safely. Finally, we remain focused on keeping customer bills as low as possible through disciplined cost management, continuous improvement and optimizing our operating performance as we transform our business through investment to ensure we sustainably provide safe, reliable and cleaner energy for our customers.
Turning to Page 10. As I mentioned in September, Ameren Missouri filed its updated Integrated Resource Plan, or IRP, outlining our least-cost approach to reliably meet customer energy needs in an environmentally responsible manner. The IRP thoughtfully integrates a new, diverse mix of generation resources, while maintaining the availability of our existing energy centers through retirement, which is essential for a reliable and affordable clean energy future. The plan calls for investment in new dispatchable energy sources, including an on demand 800 megawatt gas simple cycle energy center by 2027 to ensure the long-term stability of the energy grid during the deployment of renewable energy generation.
This energy center represents an investment opportunity of $800 million and is expected to provide backup power at times of peak winter and summer demand. The plan also moves back the previously announced addition of a 1,200 megawatt combined-cycle energy center to 2033 from 2031 to align with the retirement of the Sioux Energy center in 2032. The combined-cycle energy center represents an investment opportunity of $1.7 billion. The IRP also includes planned renewable energy additions of 4,700 megawatts by 2036, representing a total investment opportunity of approximately $9.5 billion. This maintains the previously planned goal of 2,800 of renewables by 2030 and investment opportunity of $5.3 billion. Further, we expect to add 400 megawatts of battery storage by 2030 and an incremental 400 megawatts by 2035, representing investment opportunities of $600 million and $700 million, respectively.
Finally, the IRP includes the addition of 1,200 clean, dispatchable energy in 2040 and additional 1,200 megawatts by 2043. The exact type of resource deployed will be dependent upon cost-effective advancements in innovative clean energy technologies in the coming years. Overall, we believe the plan includes a balanced path to achieving net zero carbon emissions by 2045 and interim reductions of 60% and 85% below 2005 levels by 2030 and 2040, respectively. It is also consistent with the objectives of the Paris Agreement to limit global temperature rise to 1.5 degrees Celsius. We remain focused on affordability and reliability as we continue to execute our clean energy transition. Collectively, this IRP provides incremental investment opportunities of approximately $1.5 billion over those included in our current five-year plan. We will update and roll forward our overall five-year capital plan next February.
Moving to Page 11. As laid out in the IRP, we are taking a thoughtful and measured approach to investing in new generation as our older energy centers near retirement. In support of this transition, we were pleased with the Missouri PSC approvals of Certificates of Convenience and Necessity, or CCNs, for the Huck Finn solar project and Boomtown solar project earlier this year. Construction is now well underway for both projects.
In June, we filed with the Missouri PSC for four additional CCNs, totaling 550 megawatts solar generation across our service territory. In October, the PSC staff filed a recommendation against CCN approval of the 550 megawatts, citing a lack of need for the additional generation. We believe these projects are needed as a part of our least-cost plan for meeting customers' energy needs as we systematically invest to create a diverse mix of generation resources that preserves reliability as we retire our existing coal fleet over the next 20 years.
Importantly, the renewable energy tax credits included in the Inflation Reduction Act will reduce the cost of these projects to our customers. In addition, these projects will bring over 900 new construction jobs and additional tax revenues and other payments to the area. Subject to approval, these solar projects are expected to go in service between 2024 and 2026. While the Missouri PSC is under no deadline to issue an order on these CCN filings, we expect decisions in the first quarter of 2024. We look forward to continuing to engage with stakeholders regarding our future generation needs and clean energy transition.
Turning to Page 12, as we've discussed in the past, MISO completed a study outlining a proposed roadmap of transmission projects through 2039. Detailed project planning, design work, and procurement for the Tranche 1 projects assigned to Ameren is underway, and we expect construction to begin in 2026. MISO requests for proposal for its estimated $700 million of Tranche 1 competitive projects in our territory have been issued. We submitted our first bid related to the Orient-Denny-Fairport project in May and were pleased to be awarded the project late last month.
MISO noted our sound route design, engineering and cost containment plan and innovative approach working with stakeholders as key factors in the winning bid. This is indicative of how we plan and develop all transmission projects. We believe our collaborative, customer-centric and community respectful approach to building and maintaining low-cost projects is why we should be directly assigned these projects in the future in both Missouri or Illinois. For the remaining two competitive projects, we recently submitted a bid for the Skunk River to Ipava project in October, and the remaining bid is due later this month. The evaluation process for these competitive projects is expected to take place over the remainder of this year and into mid-2024. Last, we continue to expect MISO to approve a set of Tranche 2 projects by June 30, 2024.
Moving to Page 13. In May, the Illinois General assembly passed House Bill 3445 or the Transmission Efficiency and Cooperation Law, which, if enacted, would provide incumbent utilities, including Ameren, a right of first refusal to build MISO long-range transmission planning projects in their respective service territories for projects approved by year end 2024. HB 3445 would support the clean energy transition, benefiting our Illinois customers and communities and the broader MISO region. As a local utility, we believe we are well positioned to efficiently build, operate and maintain these transmission assets over time. The right of first refusal would allow for the construction process to begin sooner and the resulting customer benefits to be realized more quickly. Importantly, we competitively bid each component of our projects and utilize local suppliers and contractors who support the local economy.
In addition, we have long-term relationships with key stakeholders in the region and work closely with landowners and communities when citing transmission lines. Such legislation would support the timely and cost-effective construction of the MISO long-range transmission planning projects and other needed transmission investments. Unfortunately, the legislation was vetoed by the governor in August and was not ultimately brought to a vote during the veto session. We will continue to work with key stakeholders to support this important piece of legislation in the spring legislative session.
On Page 14, we look ahead to the next decade. We have a robust pipeline of investment opportunities, totaling more than $48 billion that will deliver significant value to all our stakeholders by making our energy grid stronger, smarter and cleaner. The $48 billion does not reflect the incremental investment opportunities included in the recently filed Integrated Resource Plan. We will provide an updated number on our call next February, along with the new five-year capital Plan. Of course, our investments create thousands of jobs for our local economies. Maintaining constructive energy policies that support robust investment in energy infrastructure into a transition to a cleaner future in a responsible fashion will be critical to meeting our country's energy needs and delivering on our customers' expectations.
Turning now to Page 15. In February, we updated our five-year growth plan, which included our expectation of a 6% to 8% compound annual earnings growth rate from 2023 through 2027. This earnings growth is primarily driven by strong compound annual rate-based growth of 8.4%, supported by strategic allocation of infrastructure investment to each of our operating segments based on their constructive regulatory frameworks. Combined, we expect to deliver strong long-term earnings and dividend growth, resulting in an attractive total return that compares favorably with our regulated utility peers. I'm confident in our ability to execute our investment plans and strategies across all four of our business segments as we have an experienced and dedicated team to get it done.
Again, thank you all for joining us today, and I will now turn the call over to Michael.
