阿莫林 (AEE) 2014 Q1 法說會逐字稿

Greetings. Welcome to the Ameren Corporation's first-quarter 2014 earnings call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the floor over to your host, Mr. Douglas Fisher, Senior Director of Investor Relations. Thank you, Mr. Fischer, you may now begin.

Thank you and good morning. I'm Doug Fischer, Senior Director of Investor Relations for Ameren Corporation. On the call with me today are Warner Baxter, our President and Chief Executive Officer, and Marty Lyons, our Executive Vice President and Chief Financial Officer, as well as other members of the Ameren management team.

Before we begin, let me cover a few administrative details. This call is being broadcast live on the internet and the webcast will be available for one year on our website at www.ameren.com. Further, this call contains time sensitive data that is accurate only as of the date as of today's live broadcast and redistribution of this broadcast is prohibited. To assist with our call this morning, we have posted on our website a presentation that will be referenced by our speakers. To access this presentation please look in the investors section of our website under webcasts and presentations and follow the appropriate link.

Turning to page 2 of the presentation, I need to inform you that 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.

Warner will begin this call with a review of first-quarter 2014 our earnings and updated 2014 guidance as well as an update on legislative, regulatory and business developments. Marty will follow with a more detailed discussion of first-quarter financial results and comment on earnings considerations for the balance of the year. We will then open the call for questions. Before Warner begins I'd like to mention that all per-share amounts discussed during today's presentation, including earnings guidance, are presented on a continuing operations basis unless otherwise noted.

Now, here's Warner who will start will start on page 4 of the presentation.

Great. Thanks, Doug, and good morning, everyone, and thank you for joining us. Today we announced first-quarter 2014 earnings of $0.40 per share compared to first quarter 2013 earnings of $0.22 per share. This increase was primarily the result of much colder winter temperatures, which drove higher electric and natural gas sales levels and increased revenues for electric transmission service. During this comparison also benefited from lower interest expense, increased Illinois electric delivery earnings recognized under formula rate making and substantial elimination of business and administrative costs previously incurred in support of the divested merchant generation business.

Today we also updated our earnings guidance for this year. We now expect 2014 earnings to be in a range of $2.30 to $2.50 per share, a $0.05 per share increase from our prior range of $2.25 to $2.45 per share. This increase incorporates the positive effect of the cooler-than-normal first-quarter temperatures just discussed. Marty will provide further details on first-quarter earnings in a few minutes. Before he does so I would like to update you on recent developments in our Missouri and Illinois utilities and our FERC regulated electric transmission activities.

Turning to page 5, I will begin my Missouri update by discussing legislative matters. In the current session of the Missouri General Assembly, we have strongly advocated for legislation that would reduce regulatory lag and support investments in aging infrastructure, namely Senate Bill 909 and House Bill 2204. However, with the legislative session scheduled to end next week on May 16, it does not appear likely that such legislation will win approval from the General Assembly this year. While progress was made in securing support for these bills from certain legislators who opposed the infrastructure legislation proposed last year, other legislative priorities, such as income tax and education reform, overshadowed the need to enhance policies to support energy infrastructure investment this session. We are disappointed that infrastructure legislation is not likely to be enacted this session but this will not affect our ability to execute the strategic plan we have discussed with you in the past. We have, and will continue, to operate and invest in our utility businesses is in a manner consistent with existing regulatory frameworks.

Under the five-year investment plan we presented to you in February, we will continue to allocate less discretionary capital to Missouri operations and greater levels of capital to our Illinois energy delivery and transmission businesses, where regulatory frameworks are more supportive of infrastructure investment. Nevertheless, another key component of our long-term strategy is to enhance frameworks and advocate for responsible energy policies. As a result, we will continue to actively work with legislators and other key stakeholders to build support for energy policies that reduce regulatory lag and support investment in our aging infrastructure in Missouri. Such investment will result in long-term benefits for our customers, shareholders and the entire state of Missouri.

Moving from legislative to regulatory matters, I would like to update you on important pending and planned rate cases in Missouri. Last month Missouri public service commission established schedules electric rate shift and earnings complaint cases filed by Ameren Missouri's largest industrial customer, Noranda, which operates an aluminum smelter in southeastern Missouri. In the rate shift case, the Commission's schedule calls for hearings in mid-June and a decision on August 6, while in the earnings case the schedule calls for hearings in late July and early August with a decision on September 26. These schedules are summarized in the appendix of today's presentation. In both of these cases, the burden of proof rests squarely on Noranda and the 37 residential customers who joined the complaint filings.

While Noranda's electric rate shift proposal is revenue neutral to Ameren Missouri, we do not believe Noranda's proposed reduction in its electric rates, which is significantly below its cost of service, is appropriate or in the best interests of our other 1.2 million electric customers. Nor do we believe that an overall reduction in our electric rates is justified. The testimony we file in the rate shift case tomorrow and in the earnings case on June 6 will strongly support our positions. In fact by July 15 Ameren Missouri will file a long planned electric rate increase request. This rate request will further demonstrate that Ameren Missouri rates should be increased to recover updated operating costs, including higher net fuel costs, to recover and earn a return on additional electric infrastructure investments made for the benefit of our customers and to reflect rebates provided for customer installed solar generation.

The additional infrastructure investments include several significant projects. These are replacement of the reactor head at our Callaway nuclear energy center in order to ensure continued safe and dependable operations. Upgrades to the electrostatic precipitators at our coal-fired Labadie Energy Center to reduce emissions and make the air cleaner. Two new substations in downtown St Louis and construction of the O'Fallon Renewable Energy Center, Missouri's largest investor owned utility solar facility. All of these projects are scheduled to be completed by the fourth quarter of this year and, therefore, eligible for inclusion in the new rates. In summary, our rate increase request in Missouri is about providing our customers and the state with the safe, dependable and cleaner energy they need and expect.

I will conclude my Missouri update by commenting on the United States Supreme Court's recent decision upholding the Environmental Protection Agency's cross-state air pollution rule, or CSAPR. We are continuing to review the court's decision and expect the EPA to issue guidance on implementing the rule in the near future. Assuming the EPA does not revise the emission reductions it previously included in CSAPR, we believe this new rule will have a minimal effect on our business. This is due to the fact that in recent years we have taken a number of important actions to significantly reduce sulfur dioxide and nitrogen oxide emissions for our Missouri energy centers. We installed scrubbers at our Sioux Energy Center and began burning ultra low sulfur coal in all of our coal-fired energy centers. Further, we modified our generating units to lower nitrogen oxide emissions. These actions have positioned us well to comply with CSAPR.

Moving to page 7, and an Illinois regulatory update. I remind you that each year's Illinois electric delivery earnings are a function of that year's ending rate base. The formula determined allowed return on equity, which is the annual average of 30-year US Treasury bond yields plus 580 basis points and the ICC authorized equity ratio. Illinois formula rate making requires Ameren Illinois to file for annual rate updates, to systematically update cash flows over time with changes in cost of service and a true-up of any period over or under recovery of such costs.

Last month Ameren Illinois filed an update seeking a $206 million increase in electric rates reflecting 2013 actual costs, expected 2014 infrastructure investments and changes in prior period over and under recovery balances. While the filing with the Illinois Commerce Commission would result in an increase in 2015 electric delivery service rates, total electric bills in 2015 are still expected to remain below 2011 levels for most customers. An ICC order is expected by December of this year and new rates will be affected in January of next year. A summary of our filing is included in the appendix for this presentation.

While we are on the subject of electric delivery service, I want to highlight the fact that our Illinois electric delivery customers are beginning to experience the benefits of a long-term approach to upgrading the state's electric infrastructure under the Illinois Energy Infrastructure Modernization Act. Simply put, implementation of advanced technology is increasing electric system performance. We are hardening our system by installing larger poles that can withstand stronger storms, installing smart sensors and switches to reduce outages, resizing transformers to meet future capacity needs for customers and constructing new overhead and underground lines.

The Company also plans to install new advanced meters beginning in the summer of this year. Over time these upgrades will improve service by helping Ameren Illinois detect and isolate outages faster. Customers will also have more information and new tools and programs to better manage their energy costs. All in all, we are on track to meet the performance goals of, and the incremental investments required by, the Infrastructure Modernization Act as well as past the 2014 rate impact test of the act.

Finally, investments in modernizing the grid are creating significant new jobs. Since January 3, 2012, these forward-thinking energy policies have supported over 1,000 new jobs in Ameren Illinois' service territory alone, including contract workers. These jobs are providing a needed economic boost to downstate Illinois.

Turning now to page 8 and our FERC regulated transmission businesses. As we stated on our February earnings call, we currently plan to invest substantial incremental capital, $2.25 billion, over the 2014 through 2018 period, given local and regional needs for transmission investments and FERC's constructive forward-looking formula rate making framework. I am pleased to report that our investment plans are proceeding as expected.

In particular, I would like to update you on activities at Ameren Transmission Company of Illinois, or ATXI. We are in the early stages of construction of our largest single project. The approximately $1.1 billion Illinois Rivers, MISO approved, regional multi-value project. Substation construction is already underway and line construction is expected to begin later this year. We are also currently reviewing, and expect to update later this year, the estimated cost of this project. This estimate will incorporate the final ICC approved route, which is somewhat longer than originally proposed and accommodates certain property owner and environmental concerns.

Next, I would like to update you on ATXI's Spoon River project, a MISO approved regional multi-value transmission line between Peoria and Galesburg, Illinois, that is expected to be in service by 2018. We recently held a first round of six open house meetings to inform area residents about the project and to receive input. A second round of open house meetings will be held in June, at which time ATXI will identify at least two possible routes. We plan to request a Certificate of Public Convenience and Necessity for the Spoon River project from the Illinois Commerce Commission in the third quarter of this year and expect to receive a decision in mid-2015. Spoon River's cost is estimated at approximately $130 million to $150 million, depending on the route approved by the ICC.

On the transmission rate front, a complaint case challenging MISO's current allowed return on equity of 12.38% and other aspects of rate making are pending at FERC. Ameren Illinois and ATXI electric transmission investments are subject to this MISO allowed ROE. We continue to be actively engaged in this proceeding and strongly believe that constructive rate making policies, including the allowed ROE level, play a pivotal role in incenting investment. Our five-year investment plan clearly supports this perspective. While we can't predict the ultimate outcome of this case, we believe the FERC Commissioners are committed to encouraging transmission investment. The FERC has not yet established a schedule for the MISO ROE complaint case and we expect it to first resolve the pending New England ROE complaint case before acting on the MISO case.

Turning to page 9, I firmly believe that Ameren is well-positioned to deliver superior value to our customers and shareholders as we execute on our strategy of investing in and operating our utilities in a manner consistent with existing regulatory frameworks as well as working to enhance those frameworks and advocating for responsible energy policies. Further, we are focused on creating and capitalizing on opportunities to invest in our rate regulated businesses for the benefit of our customers and shareholders. As shown on the top of this page we are allocating significant and growing amounts of discretionary capital to Ameren Illinois' energy delivery and our FERC regulated electric transmission businesses because we can improve the safety, dependability and sustainability of the services we provide to our customers and because these businesses operate under modern constructive regulatory frameworks. We have a solid list of transmission projects that are expected to increase our FERC regulated transmission rate base by approximately 28% compounded annually over the 2013 through 2018 period.

In addition, our Ameren Illinois investments are expected to contribute to projected Illinois electric and gas delivery rate base growth of 5% and 7% respectively on a compound annual basis. Our five-year outlook incorporates expected Missouri rate-base growth at only a 2% compound annual rate, reflecting the need for further enhancements to the regulatory framework that reduce regulatory lag for investment.

In summary, over the next five years we plan to invest almost $5 billion in the State of Illinois, consistent with our approach to strategically allocate capital to those jurisdictions that support investment and provide greater opportunities to earn fair returns on our investments compared to approximately $3.4 billion in the State of Missouri. Pulling all of this together, we continue to expect earnings per share to grow at a 7% to 10% compound annual rate from 2013 through 2018. This outlook is driven primarily by expected rate-base growth of approximately 6% compounded annually from year-end 2013 through 2018, as shown on the bottom half of this page, as well as strategic capital allocation and disciplined cost management.

I will now turn the call over to Marty for further financial update. Marty?

Thanks, Warner. Turning now to page 11 of our presentation. As Warner noted, today we reported earnings for the first quarter of 2014 of $0.40 per share compared to $0.22 per share for the first quarter of 2013. Key drivers of this earnings improvement are listed on this page.

First, colder winter temperatures drove higher electric and natural gas sales volumes, increasing earnings by an estimated $0.07 per share compared to the year-ago period and compared to normal temperatures. Second, increased Ameren Illinois and ATXI electric transmission revenues, under FERC's forward-looking ratemaking reflecting 2014 infrastructure investments, boosted the earnings comparison by a total of $0.03 per share. Third, lower interest expense, primarily at Ameren Missouri, increased first-quarter 2014 earnings by $0.03 per share compared with the first quarter of 2013. Fourth, parent and other results improved reflecting the substantial elimination of business and administrative costs previously incurred in support of the divested merchant generation business. This benefited the earnings comparison by $0.03 per share. Finally, Illinois electric delivery service earnings, recognized under formula rate making, increased $0.02 per share reflecting 2014 infrastructure investments and a higher allowed ROE due to increased 30-year US Treasury bond yields.

Moving now to page 12, Warner already mentioned that we raised our 2014 earnings guidance to reflect the colder-than-normal first-quarter temperatures. On this page we list selected items to consider as you update your 2014 earnings models. These include the effect on earnings that a return to normal temperatures would have on this year's remaining quarters. Also, next year Ameren's high-cost -- excuse me, next week, Ameren's high-cost $425 million parent company debt issue will mature. We plan to fund this maturity with short-term debt and expect to issue approximately $200 million to $300 million of parent company long-term debt late this year as we continue to fund our ATXI infrastructure investment. In addition, I want to remind you that the 2013 Callaway Energy Center nuclear refueling outage and the associated increase in operations and maintenance expenses was a second quarter event last year but this year's refueling will take place in the fourth quarter.

Finally, second-quarter 2014 earnings should benefit, compared to 2013, from the absence of last year's Missouri fuel adjustment clause disallowance while fourth quarter 2014 earnings should benefit, again, compared to 2013, from the absence of last year's Illinois debt redemption cost disallowance. Of course, these are only some of the factors that will have an effect on balance of the year 2014 earnings compared to last year.

Turning finally to page 13, I will summarize. We are executing on a well-defined strategy, as mentioned by Warner. Our first quarter 2014 earnings results were strong. As a result, we have raised our guidance range for this year. Our investment plan, including our strategic allocation of capital, disciplined cost control and reduced parent company earnings drag, are expected to lead to earnings-per-share growth of 7% to 10% compounded annually from 2013 to 2018. This growth rate is better than the expected average of our regulated peers. Further, Ameren's $1.60 per share annualized dividend rate provides investors with the yield of approximately 4%. Finally, we aspire to grow our dividend as earnings grow and expect our dividend payout ratio to be between 55% and 70% of annual earnings.

This concludes our prepared remarks. We now invite your questions.

(Operator Instructions)

Stephen Byrd, Morgan Stanley.

I wanted to talk about transmission growth plans beyond what you've already laid out. As I think about Entergy joining MISO and as you think about your service territory being a linkage, could you talk about how you think about additional transmission growth plans? What would the process be -- timing, et cetera -- for thinking through that? And is that something we should be actively thinking about?

Good morning, Stephen, this is Warner. I'll touch on some of the big picture things and then in terms of some of the timing maybe I'll ask Maureen Borkowski, our CEO of our transmission business, to step in. But big picture, we do see opportunities for incremental investments in transmission. Certainly as you mentioned, you look at Entergy coming into MISO and we see that there's clearly opportunities there. But I wouldn't limited to just that. I would look at the opportunities at the MISO and PJM as well as between MISO and SPP and, frankly, beyond that just with some of our NERC liability projects.

You put all those types of things together and we see over the next several years real opportunities for growth in transmission. And Maureen and her team, even today, are taking steps to position ourselves to execute on an investment strategy there just as we did, frankly, many years ago to put ourselves in the position we're at today to execute on the $2.25 billion that we're executing that plan. So we -- that's something you should be thinking about. That's something we are clearly thinking about and we intend to execute on. In terms of overall timing, Maureen, I know there's a process going on. Perhaps you could fill us in a little bit on that.

Yes. Certainly from a timing perspective, all of the RTOs are engaged in implementing their post FERC order 1,000 processes. And we've been actively engaged and participating in those, both in terms of the certification processes to participate as a transmission developer in those regions, as well as to participate in the planning process proposed projects. We've actually already been pre-certified by both PJM and MISO to participate in that post-FERC Order 1,000 process. We're working with Southwest Power Pool as they continue to develop their rules for certification. So we are in the development phase, I would say at this point in time. But as Warner mentioned, those are all milestones that need to be met. And as we continue to accomplish those, we're hoping to increase that portfolio of projects.

Great. Thank you. And shifting gears over to Missouri, clearly disappointing that the legislature didn't take action. Can you talk about what would need to happen, what would need to change in the state, for there to be better appreciation for the need for more incentives to actually spend capital in the state? Sounds like other priorities really -- you're saying, Warner, sort of took higher priority this year. But just wondering, what needs to change for the situation in Missouri to improve?

Thanks, Stephen. This is Warner. I think, certainly, there were other priorities that the legislature took on this year. And certainly to be clear, there certainly was some opposition by certain consumer groups that really I would say are taking more of a shorter-term energy focus than a longer-term. So one of the things that we have been and will continue to do is continue to educate key stakeholders, not just legislators, but others around the state about the importance of solid energy policy in the state of Missouri, and about the importance of infrastructure investment. And not only how it's going to meet our customers energy needs and expectations in the future, but also how we're convinced it can drive economic development and growth.

I think a great example that will be helpful for us, or the great things that Richard Mark and his team are doing over in Illinois in terms of using that constructive regulatory policy over there to invest in our infrastructure, helping deliver on the energy needs and expectations of customers and certainly driving job growth. So it is an educational process that we'll continue to do. It is outreach process to legislators and key individuals and it's important that we continue to raise the priority level of responsible energy policies in the state of Missouri. And Michael Moehn, who I know has taken over in my role in Ameren Missouri, I know this is a top priority for he and his team. And we're going to continue to be relentless in our discussions around this important energy policy in the state. But I think, ultimately, it's just going to continue to be working very hard to educate key stakeholders and continue to advocate for that responsible policy.

Great. Thank you very much.

Paul Patterson, Glenrock Associates.

I was wondering if you could just give us a flavor for what the level of discretionary capital would have been if something like SB 909 had been implemented? How much more you would have been investing in Missouri and where that would have come from? Would it have come from Illinois or would have been additional capital raised in the capital markets? How should we have thought about it?

Hi, Paul, I'll start with it. This is Warner. I'll start with sort of the big picture about the incremental capital we thought we could put to work and then I'll let Marty jump in in terms of how we're thinking about allocation of capital. The big picture, we looked at this legislation if it would've got cross the finish line it would have given us the ability to add, say, $50 million to $100 million per year of incremental discretionary capital we could put to work. Now this bill was not that -- we're talking about this session -- was not the same bill that we had looked at in the past, nor is it really a similar bill that was done in Illinois where you get more timely recovery of costs.

No matter. We could clearly have put the $100 million incrementally per year in a variety of aging infrastructure projects on both the transmission distribution and generation side of our business. Marty, you want to touch a little bit about how we think about that in terms of allocation of capital?

Sure, Warner. Paul, as I mentioned on our last call, what we'll do to the extent that we do have incremental capital expenditure opportunities, whether they be in Missouri at some point in the future or other parts of our business, is really look at the relative returns that we can get on our various projects across the enterprise, look at our overall funding needs. But also look beyond the current five-year period, as we've said before, to be developing a pipeline of investment opportunities, rate-based growth and earnings growth opportunities beyond the five-year period through 2018.

So as the opportunities present themselves, no matter where they be, we'll take a look enterprise-wide and across, not just the five years, but the 10-year and decide whether to fund those incrementally in the short term or rearrange our project timing to push some of those projects out and build that pipeline for the future.

Okay. And I guess just to clarify, there really was no -- you guys in your forecast previously hadn't really baked in anything for SB 909. Is that correct?

That's absolutely right, Paul. There was nothing baked into our capital expenditure guidance for that, nor did we feel that that was necessary in order to achieve the earnings growth targets that we provided on our last call.

Okay. Great. And then on the Noranda case, any potential for settlement? Or should we just expect this to be litigated like -- what do you guys think?

Paul, this is Warner. Big picture, we feel two things about those cases. Number one, about the earnings complaint case, we don't feel it's justified for our rates to go down. So we look forward to having that discussion before the Missouri public service commission here over the next several months. And then secondly, I think we've been clear that we believe that the rate shift that Noranda's proposing is simply not in the best interest of our customers. And so as you should expect these cases to go before the Missouri public service commission over the next several months.

Okay. And then finally, the FERC ROE case that you guys touched on -- looks like things are just sort of halted there. I'm wondering if you had any other insight or read tea leaves in any certain way about how that might -- or when something might happen there?

This is Maureen Borkowski. We really don't have any particular insight on either what might happen with the MISO case or even watching to see what happens with the New England case. One thing I will say, we were pleased to see the re-nomination of Commissioner LaFleur and are also watching to see what happens with the Norman Bay nomination. I certainly think some of those things are things that need to be resolved, perhaps, but we're watching it just like you are.

Okay. Great. Thanks so much.

Julien Dumoulin-Smith, UBS.

First, quick question if you will. Under the EIMA there seems to be a certain element of inflation permissible. As we're seeing some of the commodity prices recover, how are you seeing your latitude remaining under that mechanism? And if you could remind us a bit, when do we actually true that up and test that, if you will?

Sure, Julien. I think that under the legislation, coming up actually here in July of this year, we'll be making a filing to show how rates have been impacted in Illinois across the board in terms of the total customer bill. Interestingly, what's been happening since we got into the formula rates is the major components of the customers' bill, both the power prices as well as the delivery service component. Both of those components have actually been coming down. So as we said in our prepared remarks, number one, we expect that when we present that to the ICC, which is due, again, on or before July 31, we're going to show a reduction for our residential customers during that period. We also had mentioned in our prepared remarks that while we did just file recently a rate update case that would take effect early in 2015, we still believe, even with that increase, that the total electric bills for most of our customers will still be below the 2011 levels. So far so good in terms of not only meeting the overall test, if you will, which was a 2.5% compound annual growth rate in total bills, we actually believe that the bills for our customers are actually down versus where we started.

Great. Thank you very much. I suppose just a second question, in light of CSAPR of late, but more broadly, environmental spending, especially focusing here in Missouri at this point -- how are you thinking about your exposure, A, to coal ash? And then secondarily to future around the regulations one-hour SO2, et cetera -- what kind of spend are you thinking about in the latter half of the decade as you might tactically shift back to Missouri at some point in time?

Julien, this is Warner. In the bigger picture, I think that our team has done a nice job in positioning ourselves well to comply, certainly with the existing environmental regulations. We're well-positioned to address MATS rules with these electrostatic precipitators. And as we've said, we're well positioned to address CSAPR. But we certainly can't predict what the new rules are going to be in the future. And so certainly as the actuals get finalized, we will obviously take the steps to comply with them. As we all know, here in June there will be potentially proposed rules around greenhouse gas regulations.

The one thing I will say is that we will continue to be advocating for responsible energy policies. We'll take a very active role within the industry, within the state, and federally try and make sure that we have responsible energy policies that factor in the impacts on customers, the economy and certainly the environment. And so with that, that's really how we see it as we sit here right now.

Julien, the other thing I would add is -- this is Marty -- is go ahead and take a look at the 10-K disclosures we've made. And we'll update them as appropriate in the 10-Q, though I don't think there's anything major in terms of latter half of the decade, changes in estimates for costs. The 10-K is probably the best reference in terms of some of those long-term potential capital expenditures. And the other thing I'd just remind you of and everybody else is we'll be also filing an integrated resource plan in Missouri later this year in the October time frame. And that will also be a document that you might reference in terms of thoughts on our future generations.

Great. And perhaps just a last quick clarification of the last question here around Noranda settlement, et cetera. How does the Noranda case ultimately play out in terms of your own upcoming filing? Obviously the timing of the decision, relative to when you filed the Missouri case, doesn't exactly coincide. Is there any potential true-up or any impact at all as you think about one versus the other?

Julien, this is Warner. The bottom line is that we intend to file our electric rate increase request by July 15. And we will execute that case as planned. We will have these other proceedings going on and, perhaps in parallel, perhaps to be consolidated at some point, we simply can't predict. But we know that we will be filing our other electric rate increase request by mid-July.

Great. Thank you very much.

Paul Ridzon, KeyBanc.

Do you still expect the merchant costs to widdle away to half of those this year?

Yes, Paul. This is Marty. You're correct. The guidance we gave at the beginning of the year -- last year we had about $0.18 of parent and other costs that was both a G&A cost as well as parent interest costs. Our guidance at the beginning of the year was that we would expect to reduce those this year down to about $0.10 per share. And we are on target to accomplish that, if not beat that slightly.

And I know it's less pertinent to you but what's the update on SB 702?

Paul, this is -- SB 702 -- this is the property and transmission cost tracker. Is that what you're referring to?

Yes.

So the update is as follows. That bill has been passed in a bit different, but similar conceptual bill, in the House have been passed by the two committees -- the energy committees both in the Senate and the House. And so it has not received floor debate. And as we said, we're coming up to the end of session. So while not impossible for that bill to still get potential passage, obviously as each day goes by, it becomes more challenging.

Thank you very much.

Michael Lapides, Goldman Sachs.

Congrats on a really good start to 2014. I have -- I want to -- I have a couple of questions. First on Missouri, can you talk about the rate base in Missouri that is being mentioned in the two cases that are outstanding -- the complaint and the earnings -- the rate design case and the earnings complaint case? Versus the amount of rate base addition that might be included in a filing? I'm thinking the work at Labadie, the reactor vessel that you mentioned at the beginning of the call. I'm just trying to get a picture of how much incremental rate base that is. And I know that's capital spend you've probably previously disclosed. I'm just not sure of any of the offsets.

Michael, this is Warner. I'll try and take a high level shot. Because the fact of the matter, the specific rate base in the earnings complaint case is still, I would say, a moving target. No one really knows the specific rate base. I think ultimately the final test year and true-up period is still under discussion. So we really don't have that.

In terms of the rate design case, rate base may not be as critical a discussion as would be in the other earnings case. What I would say is this. As we've talked about on our talking points, just in terms of incremental capital additions, I mentioned three of them that are out there. Number one is the Callaway -- the reactor vessel had at Callaway, the precipitators that are taking place at our Labadie Energy Center. We have a new solar energy facility which will be coming on in the second half of the year. And then we've actually added two new substations downtown. Those projects alone -- I'm not talking about the rest of our projects -- they alone are about $370 million. And so then you can look at some of the other disclosures that we've had in the past in terms of our rate base may be growing. But those are just some meaningful projects that whether a piece of those will be included in this rate base but certainly they'll be included in our rate case that we'll file in July.

And the best way to think about what you'll file in July is you'll use an ending year 2014 rate base because you can -- because you're doing a midyear filing the known and measurable process lets you true that up?

Yes. That's right. We will do the known and measurable process. And historically, what you typically see is a true-up of about six months post that test year. And so, obviously, when we think about filing rate cases, we factor all those elements into our thinking, including meaningful rate base additions. And so that's all parts of the effective management of the case process from our view.

Got it. One or two other items. On the Illinois side, we've seen a -- the broader markets have seen a pretty decent downdraft from the highs in terms of where the 10-year treasury was and where the 30-year treasury yield was. Can you talk about just the earnings sensitivity in Illinois to changes in the 30-year treasury?

Yes. Michael, this is Marty. One of (inaudible - background noise). The best way to think about it is we've talked before about a 50 basis point earnings collar in Illinois is about $0.025 per share -- those electric delivery earnings. So I think that's probably the best thing to think about. Coming into this year, with respect to the ROE, we were expecting a formula midpoint of about 9.9%, which is -- we were expecting a 30-year treasury of about 4.1. And as we sit here now and based on as we look at our guidance, given treasury 30-year treasuries today plus (inaudible) assessment as of May 1, we're thinking it could be a little lower than that [4.1%] (corrected by company after the call), maybe around 3.8, which would give us an ROE of about 9.6. So at that 9.6 versus the 9.9 expected, again, that's probably about $0.015 of earnings right there if that holds.

Got it. And one last --

(inaudible - multiple speakers) the earnings --

Not a big number?

Not a big number.

Okay. And then just one last question. I'm trying to think through O&M over the next couple of years. Callaway outage in 2014, no Callaway outage in 2015 but one in, I guess, in like -- if you're on an 18 month cycle or 20 month cycle that would imply like second quarter-ish, first quarter-ish 2016? Do you incur all of the O&M still in the quarter incurred or is there some amortization? Meaning would 2015 benefit because there is no Callaway outage O&M in 2015 but then you'd have it back in 2016?

Michael, absolutely. That is (inaudible) this fourth quarter of this year, [we expect] to have another about (inaudible) of cost for Callaway refueling. Next year we would not expect to incur those costs. So there's no amortization of the actual costs. We end up reflecting those and incurring them in the quarter that they earn. Time-to-time -- and I'm not certainly giving out 2015 guidance, but we certainly think about our average schedules with respect to our other fossil fired generating units too, though, as we think about year changes in O&M. So there's some variability there.

Got it. Okay. Thank you. And one final one on Illinois River's. How significant was the route change? I'm just trying to think about what the -- directionally what the capital spending change could potentially be when you refile.

Well, it's not going to be necessarily to refile but we'll provide you what we're basically saying on the call is that as we go through the year, at some point we'll give some updated guidance on CapEx. And just wanted you all to know, we were looking at the overall final project plan, timing and capital expenditures for that project. Overall as Warner mentioned in his talking points, the route was, I'll call it marginally longer. There were numerous angles that were in the final plan to accommodate property owners and avoid environmentally sensitive areas.

So all of those things, we do think, put some modest upward pressure on the total cost of the project. But as I said, again, we're working through the final project plans, capital expenditure amounts and timing. And as I said, I think in response to a question earlier, what we do then that is we'll step back and look at our overall Ameren-wide capital spending plans and allocate capital as we feel appropriate.

Okay. And can you remind us what was the original capital for that project and what was the length of the original plan? Meaning mileage?

I don't think I have the length of the original plan. But the -- at cost estimates you see in our slides have not been changed. So the cost estimates that you have in the slides are the same cost estimates that we've provided historically. And we're simply saying that we do expect to be some moderate upward pressure on those cost estimates. And we'll provide updates later on. But I don't have the exact change in the miles but the miles were an impact but also, like I said, twists and turns to avoid certain properties also had an impact.

Got it. Marty, thank you. And thank you, Warner.

Our pleasure, Michael. Thank you.

(Operator Instructions)

Carl Seligson, Utility Financial Experts.

Good quarter. Curious -- weather was beneficial in the quarter, as you say, by $0.07. You raised the guidance for the year by $0.05. What's going on that's going to take -- and then you list a bunch of other things -- looked, most of which, are positive this year versus last year for the next three quarters. What's going on that's going to go bad and keep that large range for your guidance?

Carl, this is Marty. Thanks for the question. When you look at those various drivers for the quarter, they were positive versus the prior year. Many of those, though, were right in line with our expectations when we put out the guidance. So the first one, the temperatures, was really the one that was unexpected. It drove electric margins about $0.05 higher, gas margins about $0.02 higher. So the weather clearly had a benefit.

When we think about the guidance for the year, which we started at $0.20 and we're still at $0.20, it's important, obviously, to remember that the bulk of our earnings come in the third quarter of the year. So we've got a long way to go here for the remainder of the year, both in terms of calendar months but also in terms of where the bulk of our earnings really come from. So in thinking about it, while the weather benefited us $0.07, we raised in our guidance about $0.05. There are, obviously, in a forecast there are always things as you move through time that change either plus or minus in terms of a little bit of a negative. Certainly we talked about the 30-year treasuries earlier on the call, which, if our updated treasury forecast holds, probably cost us maybe $0.015 or so versus our initial expectations. Then again we're doing well in terms of reducing the parent and other costs, expected to do well in terms of refinancing of that parent company debt. We'll probably pick up about $0.015.

So it's interesting about interest rates kind of cuts both ways for us in terms of savings on the refinancings. It's a benefit. We mentioned sales when we did look at our Q1 sales, frankly, absent weather normalization. They were actually a little better than expected. So taking credit for that but not really changing the balance of year expectations, probably picked up about $0.01 there and then we lost a little bit in the expectation of a higher effective tax rate. So those things we didn't all call out. There are a bunch of pluses and minuses that are a penny here or a penny there. Again, weather was a big benefit, upped our guidance and the guidance range simply reflects we've got a long way to go here.

Okay. And given the breadth of the range, hopefully you'll tighten that up a little bit perhaps at the next quarter.

Yes. Historically, we'll continue to evaluate it. I think, historically, maybe we'd tighten it up a little after the second quarter. But really, as I said before, the third quarter's where the bulk of the earnings come. [We've used it pretty significantly after the third quarter].

Okay. Well we'll all keep our fingers crossed, particularly with regard to Missouri.

Great. Thanks, Carl.

David Paz, Wolfe Research.

Sorry if I missed this earlier, what was your -- I think you just touched on this, Marty. What was your weather adjusted sales growth by segment?

No, I didn't go through that in any detail. In response to the last question, I simply mentioned it. But I think I'll go ahead and go through it in some detail if you'd like. I'd remind you that coming into the year, we did expect that residential and commercial sales would be down about a full 1% and industrial about 0.7%. And remind you that 1% decline in residential and commercial -- really we expected that to be driven by significant investment energy efficiency in Missouri as well as just national energy efficiency lighting standards. For the quarter, our heating degree days were up about 19% compared to last year and about 26% compared to normal. And as I said on the call, we estimate both of those had an impact of about $0.07. So about $0.07 positive compared to normal and compared to the prior year.

When we weather normalized our residential and commercial sales, they're actually up about 0.8%. Illinois was really driving that -- Illinois residential and commercial sales -- up while Missouri was down, which was certainly our expectation that they would be down given some of the energy efficiency spending. So -- but I would say that overall -- what I said on the last Q&A was that that was better performance, I would say, in terms of sales growth, both in Illinois and Missouri, than had been expected, despite Missouri being down, it was just down less than expected. Absent the impacts of the energy efficiency programs in Missouri, which, as I mentioned -- I think I mentioned on the prior call, we get recovery and are basically made whole of the impacts of energy efficiency investment in Missouri. We actually estimated, excluding those impacts, of energy efficiency. So both weather normalizing and stripping out the impacts of weather efficiency -- energy efficiency that the residential and commercial sales in Missouri also would have been up maybe 0.5% or so across the residential and commercial class.

So overall, David, I think it was a positive. As I said in the last response, though, is I think for the remainder of the year we're going to continue to take a cautious approach and take credit for the good performance here in Q1 but not really raise our expectations for the remainder of the year. I guess a couple other comments in the sales area -- I would remind you that last year our sales in that residential commercial were up about 0.6%, which was good. Our customer counts in Q1 were up about 0.3% in residential and commercial. So there are some good signs there and we'll continue to watch that.

In terms of industrial sales, again Missouri was up, which was positive. We saw that last year. We saw about 0.3% of increase. Nothing huge but, nonetheless, a little bit of positive growth in Missouri, which was great. Illinois, as I mentioned on our last call -- we continue to see industries struggling there where we saw our industrial sales down about 2.6%. So that's kind of an update unless you want more in terms of what we saw in terms of sales.

I can follow-up off-line on that. I just had a couple quick ones. I understand your rate cases in Missouri are based on historical test here. Just wanted to confirm that sales are weather normalized in rate cases, correct?

Absolutely. Yes.

And I presume they will be the same in the pending over earnings complaint?

Well, again, we'll see how that proceeding plays out. But absolutely we believe that in the process of setting rates that sales levels should be normalized for weather.

Great. And then just your coal stockpiles -- I'm just curious what they're looking like right now as we head into the shoulder -- or I guess we're in the shoulder season.

I would say that we don't typically give out our exact coal pile levels. But --

Are they normal -- about normal?

Yes. I would say that they're normal.

Got it. Alright. Thank you so much.

Thank you. I will now turn the call to Mr. Fischer for closing comments.

I want to thank each of you for participating in this call. Let me remind you, again, that a replay of the call will be available for 1 year on our website. If you have questions, you can call the contacts listed on today's release. Financial analyst inquiries should be directed to me, Doug Fischer, or my associate Matt Thayer. Media should call Joe Muehlenkamp. Our contact numbers are on today's news release. Again, thank you for your interest in Ameren and have a great day.

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