AMEREN CORPORATION 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 ofAmeren as a whole. Also see the Glossary of Terms and Abbreviations at the front of this report and in the Form 10-K. 41 --------------------------------------------------------------------------------Ameren , headquartered inSt. 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 onAmeren's common stock and the payment of expenses byAmeren 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 inMissouri . •Ameren Illinois Company, doing business asAmeren Illinois , operates rate-regulated electric transmission, electric distribution, and natural gas distribution businesses inIllinois . •ATXI operates aFERC 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, except as disclosed in Note 8 - Related-party Transactions. Ameren Missouri andAmeren 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 affectAmeren's earnings. We believe this per share information helps readers to understand the impact of these factors onAmeren's earnings per share. OVERVIEW Net income attributable toAmeren common shareholders in the three months endedSeptember 30, 2020 , was$367 million , or$1.47 per diluted share, compared with$364 million , or$1.47 per diluted share, in the year-ago period. Net income attributable toAmeren common shareholders in the nine months endedSeptember 30, 2020 , was$756 million , or$3.04 per diluted share, compared with$734 million , or$2.97 per diluted share, in the year-ago period. Net income for the three and nine months endedSeptember 30, 2020 , compared to the year-ago periods, was favorably affected by the results of Ameren Missouri'sMarch 2020 electric rate order and infrastructure investments that drove higher earnings at Ameren Transmission and Ameren Illinois Electric Distribution. Earnings for the three and nine months endedSeptember 30, 2020 , compared to the year-ago periods, were also favorably affected by lower other operations and maintenance expenses not subject to riders or regulatory tracking mechanisms, primarily due to lower electric system infrastructure maintenance expenses as a result of decreased system load, disciplined cost management, and the deferral of projects to future periods. Net income for the three and nine months endedSeptember 30, 2020 , compared to the year-ago periods, was unfavorably affected by lower revenues due to reduced MEEIA performance incentives; decreased electric retail sales at Ameren Missouri due to milder summer temperatures in 2020 and due, in part, to the COVID-19 pandemic; a lower recognized ROE atAmeren Illinois Electric Distribution; and higher net financing costs, primarily atAmeren (parent). Net income for the nine months endedSeptember 30, 2020 , compared to the year-ago period, was favorably affected by the absence in 2020 of expenses related to the Callaway Energy Center's 2019 scheduled refueling and maintenance outage, increased Ameren Transmission earnings resulting from theMay 2020 FERC order addressing the allowed base ROE, and increasedAmeren Illinois Natural Gas earnings from investments. Earnings for the nine months endedSeptember 30, 2020 , compared to the year-ago period, were unfavorably affected by decreased income tax benefits atAmeren (parent) related to stock-based compensation.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 believes it has constructive regulatory frameworks for investment at all of its utility businesses and invested$1.9 billion in those businesses in the nine months endedSeptember 30, 2020 . The COVID-19 pandemic continues to be a rapidly evolving situation. In the first nine months of 2020, we experienced a net decrease in our sales volumes, an increase in our accounts receivable balances that were past due or that were a part of a deferred payment arrangement, and a decline in our cash collections from customers. 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. Shelter-in-place orders began taking effect in our service territories inmid-March 2020 . These orders generally required individuals to remain at home and precluded or limited the operation of businesses that were deemed nonessential. In early 2020,Ameren began implementing its business continuity plans, and continues to take measures to mitigate the risk of COVID-19 transmission. Actions included restricting travel for employees, implementing work-from-home policies, securing and supplying personal protective equipment, and implementing work practices to ensure the safety of our employees and customers, while maintaining social distancing. While our business operations were deemed essential and were not directly impacted by the shelter-in-place orders, approximately 65% of our workforce transitioned to remote working arrangements inmid-March 2020 . In earlyJune 2020 , a small portion of our workforce began the process of returning to our work locations under a phased approach and approximately 50% of our workforce continues to work remotely. Inmid-May 2020 , shelter-in-place orders effective in our service territories began to be relaxed, with fewer restrictions on social activities and nonessential businesses beginning to reopen. However, 42 -------------------------------------------------------------------------------- certain restrictions remain in place that limit individual activities and the operation of nonessential businesses. Additional restrictions may be imposed in the future. We continue to assess the impacts the 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, 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 Missouri's andAmeren 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. InFebruary 2020 , Ameren Missouri filed an update to its Smart Energy Plan with the MoPSC, which includes a five-year capital investment overview with a detailed one-year plan for 2020. The plan is designed to upgradeAmeren Missouri's electric infrastructure and includes investments that will upgrade the grid and accommodate more renewable energy. Investments under the plan are expected to total approximately$7.6 billion over the five-year period from 2020 through 2024, with expenditures largely eligible for recovery under thePISA and the RESRAM. These investments exclude incremental renewable generation investment opportunities of 950 megawatts by 2024, which are included inAmeren Missouri's 2020 IRP discussed below. The planned investments beyond 2023 included in the five-year range above are based on the assumption thatAmeren Missouri requests and receives MoPSC approval of an extension of thePISA . InFebruary 2020 , the MoPSC issued an order approving a stipulation and agreement allowing Ameren Missouri to defer and amortize maintenance expenses related to scheduled refueling and maintenance outages at its Callaway Energy Center. Maintenance expenses associated with the fall 2020 refueling and maintenance outage are being deferred, as incurred, as a regulatory asset, and will be amortized after completion of the outage. Maintenance expenses will be amortized over the period between refueling and maintenance outages, which is approximately 18 months. Deferring and amortizing these expenses allows the timing of expense recognition to more closely align with revenues and mitigates future earnings volatility between outage and non-outage years. InMarch 2020 , the MoPSC issued an order in Ameren Missouri'sJuly 2019 electric service regulatory rate review, approving nonunanimous stipulation and agreements. The order resulted in a decrease of$32 million to Ameren Missouri's annual revenue requirement for electric retail service, which reflects infrastructure investments as ofDecember 31, 2019 . The order also provided for the continued use of the FAC and trackers for pension and postretirement benefits, uncertain income tax positions, and certain excess deferred income taxes that the MoPSC previously authorized in earlier electric rate orders. In addition, the order required Ameren Missouri to donate$8 million to low-income assistance programs, which was reflected in results of operations in the first quarter of 2020. The new rates became effective onApril 1, 2020 . InAugust 2020 , the MoPSC issued an order approving a unanimous stipulation and agreement with respect to the 2022 program year of Ameren Missouri's six-year MEEIA 2019 program and related performance incentives. The order also approved Ameren Missouri's energy savings results for the first year of the MEEIA 2019 program. As a result of this order and in accordance with revenue recognition guidance, Ameren Missouri recognized revenues of$6 million in the third quarter of 2020. InSeptember 2020 , Ameren Missouri filed its 2020 IRP with the MoPSC. In connection with the 2020 IRP filing,Ameren established a goal of achieving net-zero carbon emissions by 2050.Ameren is also targeting a 50% CO2 emission reduction by 2030 and an 85% reduction by 2040 from the 2005 level. The plan targets cleaner and more diverse sources of energy generation, including solar, wind, hydro, and nuclear power, and supports increased investment in new energy technologies. The plan, which is subject to review by the MoPSC, also includes expanding renewable sources by adding 3,100 megawatts of renewable generation by the end of 2030 and a total of 5,400 megawatts of renewable generation by 2040. These amounts include the 700 megawatts of wind generation projects discussed below, which are expected to be substantially complete in 2020 and fully in-service in early 2021, and will support Ameren Missouri's compliance with the state ofMissouri's requirement of achieving 15% of native load sales from renewable energy sources by 2021, subject to customer rate increase limitations. Based on current and projected market prices for energy and for wind and solar generation technologies, among other factors, Ameren Missouri expects its ownership of these renewable resources would represent the lowest-cost option for customers. The plan also includes advancing the retirement dates of the Sioux andRush Island coal-fired energy centers to 2028 and 2039, respectively, which are subject to the approval of a change in the assets' depreciable lives by the MoPSC in a future regulatory rate review, the continued implementation of customer energy-efficiency programs, and the expectation that Ameren Missouri will seek an extension of the operating license for the Callaway Energy Center beyond its current 2044 expiration date. Additionally, the plan includes retiring the Meramec andLabadie coal-fired energy centers at the end of their useful lives, or by 2022 and 2042, respectively. InOctober 2020 , Ameren Missouri filed requests with the MoPSC for accounting authority orders related to its electric and natural gas services. The orders would allow Ameren Missouri to accumulate certain costs incurred related to the COVID-19 pandemic and forgone customer late fee revenues fromMarch 2020 toJune 2021 , for potential recovery in future electric and natural gas service regulatory rate reviews. These costs would be net of any cost savingsAmeren Missouri realizes as a result of the COVID-19 pandemic. The orders would also allow Ameren Missouri to accumulate bad debt write-offs incurred fromMarch 2020 toSeptember 2021 due to the COVID-19 pandemic, for potential recovery in future electric and natural gas service regulatory rate reviews. The requests include an estimated$9 million of costs incurred, net of savings, and forgone customer late fee revenues related to the COVID-19 pandemic fromMarch 2020 through September 43 -------------------------------------------------------------------------------- 2020. The requests did not seek accumulation for potential recovery of forgone revenues associated with decreased sales volumes related to the COVID-19 pandemic. The MoPSC is under no deadline to issue orders, and Ameren Missouri cannot predict the ultimate outcome of these regulatory proceedings. Construction on the new wind generation facilities continues to progress. Delays to the original construction schedule have occurred in 2020 due to changes in supply and construction activities. During the third quarter of 2020, all remaining wind turbine deliveries for the up-to 400-megawatt project were completed. Based on the construction schedule, Ameren Missouri expects this project to be placed in-service by the end of 2020. At this time, due to manufacturing, shipping, and other supply chain issues in 2020, and, based on an updated construction schedule from the developer, Ameren Missouri expects the up-to 300-megawatt project to be partially placed in-service by the end of 2020, and the remaining portion of the project, representing approximately$200 million of investment, to be placed in-service in the first quarter of 2021. Ameren Missouri and the developer of the up-to 300-megawatt project continue to monitor the impact to this project's schedule. InMay 2020 , theIRS issued guidance that extended the in-service date criteria toDecember 31, 2021 , for qualifying for federal production tax credits. As a result of this extension,Ameren does not anticipate that delays in the completion of the wind generation facilities will affectAmeren's ability to realize anticipated federal production tax credits. InFebruary 2020 ,Ameren Illinois filed a request with the ICC seeking approval to increase its annual revenues for natural gas delivery service. InSeptember 2020 ,Ameren Illinois filed a revised request seeking to increase its annual revenues for natural gas delivery service by$97 million , which includes an estimated$46 million of annual revenues that would otherwise be recovered under the QIP and other riders. The request is based on a 10.5% ROE, a capital structure composed of 54.1% common equity, and a rate base of$2.1 billion .Ameren Illinois used a 2021 future test year in this proceeding. InOctober 2020 , the ICC staff recommended an increase to annual revenues for natural gas delivery service of$69 million , based on a 9.3% ROE, a capital structure composed of 50.4% common equity, and a rate base of$2.1 billion . A decision by the ICC in this proceeding is required byJanuary 2021 , with new rates expected to be effective inFebruary 2021 .Ameren Illinois cannot predict the level of any delivery service rate change the ICC may approve, nor whether any rate change that may eventually be approved will be sufficient to enableAmeren Illinois to earn a reasonable return on investments when the rate changes go into effect. InApril 2020 ,Ameren Illinois filed its annual electric distribution service formula rate update with the ICC, requesting a reduction of$45 million in its rates. InSeptember 2020 , the ICC staff submitted its revised calculation of the revenue requirement included inAmeren Illinois' update filing, recommending a$49 million decrease inAmeren Illinois' electric distribution service rates. An ICC decision in this proceeding is expected byDecember 2020 , with new rates effectiveJanuary 2021 . InMay 2020 , in connection with customer complaint cases filed with theFERC relating to the allowed base ROE, theFERC issued an order addressing the requests for rehearing, which set the allowed base ROE at 10.02%, superseding the 9.88% previously ordered, and required refunds, with interest, for the periodsNovember 2013 toFebruary 2015 and from lateSeptember 2016 forward. TheMay 2020 order also denied rehearing of theFERC's dismissal of theFebruary 2015 complaint case. InJuly 2020 , Ameren Missouri,Ameren Illinois , and ATXI filed an appeal of theMay 2020 order to theUnited States Court of Appeals for the District of Columbia Circuit challenging the refunds required for the period fromSeptember 2016 toMay 2020 . The court is under no deadline to address the appeal. For more information regarding Ameren Missouri'sMarch 2020 electric rate order, the expected acquisition of wind generation facilities by Ameren Missouri,Ameren Illinois' electric distribution service formula rate update, and legal proceedings related to theFERC allowed base ROE, see Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report. RESULTS OF OPERATIONS Our results of operations and financial position are affected by many factors. Economic conditions, including those resulting from the COVID-19 pandemic discussed below, energy-efficiency investments by our customers and by us, technological advances, distributed generation, and the actions of key customers can significantly affect the demand for our services.Ameren and Ameren Missouri results are also affected by seasonal fluctuations in winter heating and summer cooling demands, as well as by non-nuclear energy center maintenance outages. Additionally, fluctuations in interest rates and conditions in the capital and credit markets affect our cost of borrowing, and our pension and postretirement benefits costs. Almost all ofAmeren's revenues are subject to state or federal regulation. This regulation has a material impact on the rates we charge customers for our services. Our results of operations, financial position, and liquidity are affected by our ability to align our overall spending, both operating and capital, with the frameworks established by our regulators. See Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report and Note 2 - Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K for additional information regarding Ameren Missouri's,Ameren Illinois' , and ATXI's regulatory mechanisms. We continue to assess the impacts of the COVID-19 pandemic on our businesses, including impacts on electric and natural gas sales volumes, supply chain operations, and bad debt expense. Ameren Missouri andAmeren Illinois suspended customer disconnections and late fee charges for nonpayment inmid-March 2020 and resumed these activities in the third quarter of 2020. For additional information, see Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report. Regarding uncollectible accounts receivable,Ameren Illinois' electric distribution and natural gas distribution businesses have bad debt riders, which provide for recovery of bad debt write-offs, net of any subsequent recoveries. Pursuant to aJune 2020 ICC order,Ameren Illinois' electric bad debt rider provides for the recovery of bad debt 44 -------------------------------------------------------------------------------- expense in 2020. Ameren Missouri does not have a bad debt rider or regulatory tracking mechanism and its earnings are exposed to increases in bad debt expense. InOctober 2020 , Ameren Missouri filed requests with the MoPSC for accounting authority orders related to costs incurred, net of savings, and forgone customer late fee revenues resulting from the COVID-19 pandemic. As ofSeptember 30, 2020 , accounts receivable balances that were 30 days or greater past due or that were a part of a deferred payment arrangement represented 26%, 18%, and 35%, or$151 million ,$49 million , and$102 million , ofAmeren's , Ameren Missouri's, andAmeren Illinois' customer trade receivables before allowance for doubtful accounts, respectively. As ofSeptember 30, 2019 , these percentages were 13%, 9%, and 18%, or$65 million ,$23 million , and$42 million , forAmeren , Ameren Missouri, andAmeren Illinois , respectively.Ameren Missouri's electric sales volumes have been, and continue to be, affected by the COVID-19 pandemic. In the three and nine months endedSeptember 30, 2020 , compared to the same periods in 2019, Ameren Missouri experienced a reduction in commercial and industrial electric sales volumes, partially offset by increased electric sales volumes to higher margin residential customers, excluding the estimated effects of weather and customer energy-efficiency programs. While the impacts of the COVID-19 pandemic are difficult to predict, Ameren Missouri expects the net reduction in sales volumes, excluding the estimated effects of weather and customer energy-efficiency programs, to continue in the fourth quarter of 2020, compared to the same period in 2019. The COVID-19 pandemic may continue to affect Ameren Missouri's total electric sales volumes and sales volumes by customer class beyond 2020. Assuming a ratable change inAmeren Missouri's electric sales volumes by month, a 1% change for the calendar year 2020 to residential, commercial, and industrial customers would affect earnings per diluted share by approximately3 cents ,2 cents , and a half-cent, respectively. The actual change in earnings per diluted share will be affected by the timing of sales volume changes due to seasonal customer rates. Based on Ameren Missouri's current projections, and assuming no significant additional restrictions are placed on individuals and businesses in our service territories, the net decline in electric sales volumes forOctober 1 through December 31, 2020 , compared to the same period in 2019, excluding the estimated effects of weather and customer energy-efficiency programs, is expected to result in a decline in earnings per diluted share of approximately1 cent . The following table provides the approximate increases and (decreases) inAmeren Missouri electric sales volumes by customer class for the three and nine months endedSeptember 30, 2020 , and the estimated changes for the calendar year 2020, compared to the same periods in 2019, excluding the estimated effects of weather and customer energy-efficiency programs: QTD YoY Calendar Year (a) YTD YoY Residential 2.0 % 3.5 % 3.5 % Commercial (7.5) % (7.5) % (6.5) % Industrial (0.5) % (4.0) % (3.0) % Total (2.5) % (2.5) % (2.0) % (a) Based on actual results fromJanuary 1 through September 30, 2020 , and Ameren Missouri's projection forOctober 1 through December 31, 2020 , compared to the same periods in 2019.Ameren Illinois also experienced decreases in electric and natural gas sales volumes in the three and nine months endedSeptember 30, 2020 . However,Ameren Illinois' electric distribution and transmission businesses have formula ratemaking frameworks, which provide for recovery of their revenue requirements independent of sales volumes, andAmeren Illinois' natural gas distribution business has a VBA, which provides for recovery of the natural gas distribution service revenue requirement associated with sales volumes for residential and small nonresidential customers. Additionally, ATXI's electric transmission business has a formula ratemaking framework, which provides for recovery of its revenue requirement independent of sales volumes. None ofAmeren's businesses have experienced significant disruptions to their supply chain operations. However, see Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report for information regarding the impact of supply chain disruptions related to Ameren Missouri's acquisition of an up-to 300-megawatt wind generation facility. Ameren Missouri principally uses coal and enriched uranium for fuel in its electric operations and purchases natural gas for its customers.Ameren Illinois purchases power and natural gas for its customers. The prices for these commodities can fluctuate significantly because of the global economic and political environment, weather, supply, demand, and many other factors. We have natural gas cost recovery mechanisms for ourIllinois andMissouri natural gas distribution businesses, a purchased power cost recovery mechanism forAmeren Illinois' electric distribution business, and a FAC for Ameren Missouri's electric business. We employ various risk management strategies to reduce our exposure to commodity risk and other risks inherent in our business. The reliability ofAmeren Missouri's energy centers and our transmission and distribution systems, and the level and timing of operations and maintenance costs and capital investment, are key factors that we seek to manage in order to optimize our results of operations, financial position, and liquidity. 45 -------------------------------------------------------------------------------- Earnings Summary The following table presents a summary ofAmeren's earnings for the three and nine months endedSeptember 30, 2020 and 2019: Three Months
Nine Months
2020 2019 2020 2019
Net income attributable to Ameren common shareholders $ 367 $ 364 $ 756 $ 734
Earnings per common share - diluted 1.47 1.47 3.04 2.97
Net income attributable toAmeren common shareholders increased$3 million , with comparable earnings per diluted share, in the three months endedSeptember 30, 2020 , compared with the year-ago period. The increase was due to net income increases of$9 million ,$3 million , and$2 million at Ameren Transmission,Ameren Illinois Natural Gas , and Ameren Illinois Electric Distribution, respectively. These increases were partially offset by a net income decrease of$3 million at Ameren Missouri and an$8 million increase in the net loss for activity not reported as part of a segment, primarily atAmeren (parent). Net income attributable toAmeren common shareholders increased$22 million , or7 cents per diluted share, in the nine months endedSeptember 30, 2020 , compared with the year-ago period. The increase was due to net income increases of$29 million ,$9 million , and$2 million at Ameren Transmission,Ameren Illinois Natural Gas , and Ameren Illinois Electric Distribution, respectively. These increases were partially offset by a net income decrease of$7 million atAmeren Missouri and an$11 million increase in the net loss for activity not reported as part of a segment, primarily atAmeren (parent). Earnings per diluted share were favorably affected in the three and nine months endedSeptember 30, 2020 , compared to the year-ago periods (except where a specific period is referenced), by: •lower base level of expenses, partially offset by lower base rates, net of recovery for amounts associated with the reduction in sales volumes resulting from MEEIA programs and recoverable depreciation under thePISA , atAmeren Missouri pursuant to theMarch 2020 MoPSC electric rate order as discussed in Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report (8 cents and15 cents per share, respectively); •increased Ameren Transmission and Ameren Illinois Electric Distribution earnings due to additional rate base investments, including energy-efficiency investments atAmeren Illinois (3 cents and11 cents per share, respectively); •decreased other operations and maintenance expenses related to the absence of a scheduled refueling and maintenance outage at the Callaway Energy Center, which last occurred in the second quarter of 2019 and which costs previously were expensed as incurred, as compared with the deferral of expenses for the fall 2020 refueling and maintenance outage under theFebruary 2020 MoPSC order (10 cents per share for the nine months endedSeptember 30, 2020 ); •decreased other operations and maintenance expenses not subject to riders or regulatory tracking mechanisms, excluding decreased costs associated with the Callaway Energy Center's scheduled refueling and maintenance outage, primarily due to lower electric system infrastructure maintenance expenses as a result of decreased system load, disciplined cost management, and the deferral of projects to future periods, and changes in the cash surrender value of company-owned life insurance, which increased in the three months endedSeptember 30, 2020 , but decreased in the nine months endedSeptember 30, 2020 (4 cents and5 cents per share, respectively); •increased Ameren Transmission earnings resulting from theMay 2020 FERC order addressing the allowed base ROE forFERC regulated transmission rate base under the MISO tariff (4 cents per share for the nine months endedSeptember 30, 2020 ); and •increasedAmeren Illinois Natural Gas earnings from investments in qualifying infrastructure recovered under the QIP rider (1 cent and3 cents per share, respectively). Earnings per diluted share were unfavorably affected in the three and nine months endedSeptember 30, 2020 , compared to the year-ago periods (except where a specific period is referenced), by: •lower MEEIA performance incentives recognized at Ameren Missouri (3 cents and9 cents per share, respectively); •decreased electric retail sales, excluding the estimated effects of weather, at Ameren Missouri due to decreased sales volumes and demand charge revenue from commercial and industrial customers, partially offset by increased sales volumes to higher margin residential customers. Demand was affected, in part, by the COVID-19 pandemic (2 cents and8 cents per share, respectively); •decreased electric retail sales at Ameren Missouri due to weather, primarily resulting from milder summer temperatures experienced in 2020 (estimated at5 cents and6 cents per share, respectively); •decreased Ameren Illinois Electric Distribution earnings under performance-based formula ratemaking because of a lower recognized ROE driven by lower annual average monthly yields on 30-year United States Treasury bonds (1 cent and5 cents per share, respectively); •increased net financing costs primarily atAmeren (parent), primarily because of itsApril 2020 debt issuance (3 cents and5 cents per share, respectively); 46 -------------------------------------------------------------------------------- •lower margins at Ameren Missouri including decreased revenues from customer late fees and reconnection fees, and transmission service charges due, in part, to the COVID-19 pandemic (1 cent and3 cents per share, respectively); •decreased income tax benefits atAmeren (parent) related to stock-based compensation (3 cents per share for the nine months endedSeptember 30, 2020 ); •increased charitable donations at Ameren Missouri pursuant to itsMarch 2020 electric rate order (2 cents per share for the nine months endedSeptember 30, 2020 ); •increased depreciation and amortization expenses not subject to riders or regulatory tracking mechanisms at Ameren Missouri andAmeren Illinois Natural Gas , primarily due to additional property, plant, and equipment investments (1 cent and2 cents per share, respectively); and •increased weighted-average basic common shares outstanding (1 cent and2 cents per share, respectively). The cents per share information presented is based on the weighted-average basic common shares outstanding in the three and nine months endedSeptember 30, 2019 , and does not reflect any change in earnings per share resulting from dilution, unless otherwise noted. Amounts other than variances related to income taxes have been presented net of income taxes usingAmeren's 2020 statutory tax rate of 26%. For additional details regarding the Ameren Companies' results of operations, including explanations of Electric and Natural Gas Margins, Other Operations and Maintenance Expenses, Depreciation and Amortization Expenses, Taxes Other Than Income Taxes, Other Income, Net, Interest Charges, and Income Taxes, see the major headings below. 47 --------------------------------------------------------------------------------
Below is
Ameren
Illinois Ameren Other /
Ameren Electric Illinois Ameren Intersegment
Missouri Distribution Natural Gas Transmission Eliminations Ameren
Three Months 2020:
Electric margins $ 795 $ 279 $ - $ 141 $ (7) $ 1,208
Natural gas margins 12 - 93 - - 105
Other operations and maintenance
expenses (221) (133) (52) (14) 2 (418)
Depreciation and amortization expenses (154) (71) (21) (25) (2)
(273)
Taxes other than income taxes (92) (21) (11) (2) (2) (128) Other income, net 26 9 4 4 5 48 Interest charges (50) (19) (10) (19) (12) (110) Income taxes (18) (10) (1) (22) (12) (63) Net income (loss) 298 34 2 63 (28) 369 Noncontrolling interests - preferred stock dividends (1) - - (1) -
(2)
Net income (loss) attributable to Ameren common shareholders$ 297 $ 34 $ 2 $ 62 $ (28)$ 367 Three Months 2019: Electric margins$ 844 $ 270 $ - $ 128 $ (9)$ 1,233 Natural gas margins 13 - 87 - - 100 Other operations and maintenance expenses (242) (128) (52) (15) 3
(434)
Depreciation and amortization expenses (138) (68) (20) (21) (1)
(248)
Taxes other than income taxes (96) (22) (10) (1) (2) (131) Other income, net 15 9 3 2 5 34 Interest charges (44) (19) (9) (20) (4) (96) Income taxes (51) (10) - (19) (12) (92) Net income (loss) 301 32 (1) 54 (20) 366 Noncontrolling interests - preferred stock dividends (1) - - (1) -
(2)
Net income (loss) attributable to Ameren common shareholders$ 300 $ 32 $ (1) $ 53 $ (20)$ 364 Nine Months 2020: Electric margins$ 1,862 $ 823 $ - $ 400 $ (22)$ 3,063 Natural gas margins 58 - 379 - - 437 Other operations and maintenance expenses (662) (381) (161) (43) 7
(1,240)
Depreciation and amortization expenses (448) (213) (62) (72) (4)
(799)
Taxes other than income taxes (254) (59) (46) (6) (7) (372) Other income, net 55 25 11 9 17 117 Interest charges (140) (55) (30) (58) (28) (311) Income (taxes) benefit (29) (32) (24) (61) 12 (134) Net income (loss) 442 108 67 169 (25) 761 Noncontrolling interests - preferred stock dividends (3) (1) (1) (1) 1
(5)
Net income (loss) attributable to Ameren common shareholders$ 439 $ 107 $ 66 $ 168 $ (24)$ 756 Nine Months 2019: Electric margins$ 1,948 $ 804 $ - $ 351 $ (24)$ 3,079 Natural gas margins 57 - 373 - - 430 Other operations and maintenance expenses (720) (373) (170) (44) 6
(1,301)
Depreciation and amortization expenses (417) (204) (59) (62) (3)
(745)
Taxes other than income taxes (256) (61) (47) (3) (8) (375) Other income, net 43 25 9 6 16 99 Interest charges (136) (54) (28) (58) (14) (290) Income (taxes) benefit (70) (31) (20) (50) 13 (158) Net income (loss) 449 106 58 140 (14) 739 Noncontrolling interests - preferred stock dividends (3) (1) (1) (1) 1
(5)
Net income (loss) attributable to Ameren common shareholders$ 446 $ 105 $ 57 $ 139 $ (13)$ 734 48
--------------------------------------------------------------------------------
Below is
Ameren
Illinois Ameren Ameren
Electric Illinois Illinois Ameren
Distribution Natural Gas Transmission Illinois
Three Months 2020:
Electric and natural gas margins $ 279 $ 93 $ 91 $ 463
Other operations and maintenance expenses (133) (52) (12) (197)
Depreciation and amortization expenses (71) (21) (17) (109)
Taxes other than income taxes (21) (11) (1) (33)
Other income, net 9 4 4 17
Interest charges (19) (10) (10) (39)
Income taxes (10) (1) (14) (25)
Net income attributable to common shareholder $ 34 $
2 $ 41 $ 77
Three Months 2019:
Electric and natural gas margins $ 270 $ 87 $ 81 $ 438
Other operations and maintenance expenses (128) (52) (13) (193)
Depreciation and amortization expenses (68) (20) (14) (102)
Taxes other than income taxes (22) (10) (1) (33)
Other income, net 9 3 1 13
Interest charges (19) (9) (10) (38)
Income taxes (10) - (10) (20)
Net income (loss) attributable to common
shareholder $ 32 $ (1) $ 34 $ 65
Nine Months 2020:
Electric and natural gas margins $ 823 $ 379 $ 252 $ 1,454
Other operations and maintenance expenses (381) (161) (36) (578)
Depreciation and amortization expenses (213) (62) (48) (323)
Taxes other than income taxes (59) (46) (2) (107)
Other income, net 25 11 9 45
Interest charges (55) (30) (31) (116)
Income taxes (32) (24) (37) (93)
Net income 108 67 107 282
Preferred stock dividends (1) (1) - (2)Net income attributable to common shareholder $ 107 $
66 $ 107 $ 280
Nine Months 2019:
Electric and natural gas margins $ 804 $ 373 $ 217 $ 1,394
Other operations and maintenance expenses (373) (170) (37) (580)
Depreciation and amortization expenses (204) (59) (41) (304)
Taxes other than income taxes (61) (47) (2) (110)
Other income, net 25 9 5 39
Interest charges (54) (28) (29) (111)
Income taxes (31) (20) (28) (79)
Net income 106 58 85 249
Preferred stock dividends (1) (1) - (2)
Net income attributable to common shareholder $ 105 $
57 $ 85 $ 247
Electric and Natural Gas Margins
Electric margins are defined as electric revenues less fuel and purchased power
costs. Natural gas margins are defined as natural gas revenues less natural gas
purchased for resale. We consider electric and natural gas margins useful
measures to analyze the change in profitability of our electric and natural gas
operations between periods. We have included the analysis below to complement
the financial information we provide in accordance with GAAP. However, these
margins may not be a presentation defined under GAAP, and they may not be
comparable to other companies' presentations or more useful than the GAAP
information we provide elsewhere in this report.
49
--------------------------------------------------------------------------------
Electric Margins
Total by Segment(a) Increase (Decrease) by Segment
Overall Ameren Decrease Overall Ameren Decrease
of $25 Million (QTD of $16 Million (YTD
YoY) YoY)
[[Image Removed: aee-20200930_g4.jpg]][[Image Removed: aee-20200930_g5.jpg]][[Image Removed: aee-20200930_g6.jpg]]
(a)Includes other/intersegment eliminations of $(7) million and $(9) million in
the three months ended September 30, 2020 , and 2019, respectively. Also includes
other/intersegment eliminations of $(22) million and $(24) million in the nine
months ended September 30, 2020 , and 2019, respectively.
Ameren Ameren Missouri
Electric
Distribution
Natural Gas Margins
Total by Segment Increase (Decrease) by Segment
Overall Ameren Increase of Overall Ameren Increase of
$5 Million (QTD YoY) $7 Million (YTD YoY)
[[Image Removed: aee-20200930_g7.jpg]][[Image Removed: aee-20200930_g8.jpg]][[Image Removed: aee-20200930_g9.jpg]]
Ameren Missouri Ameren Illinois Natural Gas
50
--------------------------------------------------------------------------------
The following tables present the favorable (unfavorable) variations by Ameren
segment for electric and natural gas margins for the three and nine months ended
September 30, 2020 , compared with the year-ago periods:
Ameren Illinois Ameren Other
Electric Illinois /Intersegment
Three Months Ameren Missouri Distribution Natural Gas Ameren Transmission(a) Eliminations Ameren
Electric revenue change:
Effect of weather (estimate)(b) $ (23) $ - $ - $ - $ - $ (23)
Base rates (estimate)(c) (34) 1 - 13 - (20)
Sales volumes and changes in customer usage
patterns (excluding the estimated effects
of weather and MEEIA) (7) - - - - (7)
Customer demand charges (4) - - - - (4)
MEEIA 2013, MEEIA 2016, and MEEIA 2019
performance incentives (11) - - - - (11)
Off-system sales 33 - - - - 33
Energy-efficiency program investments - 2 - - - 2
Other - 3 - - 2 5
Cost recovery mechanisms - offset in fuel
and purchased power(d) - (6) - - - (6)
Other cost recovery mechanisms(e) (10) 2 - - - (8)
Total electric revenue change $ (56) $ 2 $ - $ 13 $ 2 $ (39)
Fuel and purchased power change:
Energy costs (excluding the estimated
effect of weather) $ (29) $ - $ - $ - $ - $ (29)
Effect of weather (estimate)(b) 5 - - - - 5
Effect of lower net energy costs included
in base rates 32 - - - - 32
Transmission services charges (1) - - - - (1)
Other - 1 - - - 1
Cost recovery mechanisms - offset in
electric revenue(d) - 6 - - - 6
Total fuel and purchased power change $ 7 $ 7 $ - $ - $ - $ 14
Net change in electric margins $ (49) $ 9 $ - $ 13 $ 2 $ (25)
Natural gas revenue change:
QIP rider $ - $ - $ 6 $ - $ - $ 6
Software licensing agreement - - (5) - - (5)
Other (1) - 4 - - 3
Cost recovery mechanisms - offset in
natural gas purchased for resale(d) (1) - 4 - - 3
Other cost recovery mechanisms(e) - - 1 - - 1
Total natural gas revenue change $ (2) $ - $ 10 $ - $ - $ 8
Natural gas purchased for resale change:
Cost recovery mechanisms - offset in
natural gas revenue(d) $ 1 $ - $ (4) $ - $ - $ (3)
Total natural gas purchased for resale
change $ 1 $ - $ (4) $ - $ - $ (3)
Net change in natural gas margins $ (1) $ - $ 6 $ - $ - $ 5
51--------------------------------------------------------------------------------
Ameren Illinois Other
Ameren Electric Ameren Illinois /Intersegment
Nine Months Missouri Distribution Natural Gas Ameren Transmission(a) Eliminations Ameren
Electric revenue change:
Effect of weather (estimate)(b) $ (29) $ - $ - $ - $ - $ (29)
Base rates (estimate)(c) (51) 5 - 49 - 3
Sales volumes and changes in customer usage
patterns (excluding the estimated effects
of weather and MEEIA) (33) - - - - (33)
Customer demand charges (5) - - - - (5)
MEEIA 2013, MEEIA 2016, and MEEIA 2019
performance incentives (32) - - - - (32)
Off-system sales 33 - - - - 33
Customer late fees and reconnection fees (4) - - - - (4)
Energy-efficiency program investments - 8 - - - 8
Other (3) 4 - - 2 3
Cost recovery mechanisms - offset in fuel
and purchased power(d) (1) (20) - - - (21)
Other cost recovery mechanisms(e) (6) 1 - - - (5)
Total electric revenue change $ (131) $ (2) $ - $ 49 $ 2 $ (82)
Fuel and purchased power change:
Energy costs (excluding the estimated
effect of weather) $ (21) $ - $ - $ - $ - $ (21)
Effect of weather (estimate)(b) 9 - - - - 9
Effect of lower net energy costs included
in base rates 61 - - - - 61
Transmission services charges (3) - - - - (3)
Other (2) 1 - - - (1)
Cost recovery mechanisms - offset in
electric revenue(d) 1 20 - - - 21
Total fuel and purchased power change
21 $ - $ - $ -$ 66 Net change in electric margins$ (86) $ 19 $ - $ 49 $ 2$ (16) Natural gas revenue change: Effect of weather (estimate)(b)$ (2) $ - $ - $ - $ -$ (2) QIP rider - - 16 - - 16 Software licensing agreement - - (5) - - (5) Other 2 - 2 - - 4 Cost recovery mechanisms - offset in natural gas purchased for resale(d) (11) - (41) - - (52) Other cost recovery mechanisms(e) - - (7) - - (7) Total natural gas revenue change$ (11) $ - $ (35) $ - $ -$ (46) Natural gas purchased for resale change: Effect of weather (estimate)(b)$ 1 $ - $ - $ - $ -$ 1 Cost recovery mechanisms - offset in natural gas revenue(d) 11 - 41 - - 52 Total natural gas purchased for resale change$ 12 $ - $ 41 $ - $ -$ 53 Net change in natural gas margins$ 1 $ - $ 6 $ - $
-
(a)Includes an increase in transmission margins of$10 million and$35 million atAmeren Illinois for the three and nine months endedSeptember 30, 2020 , compared with the year-ago periods. (b)Represents the estimated variation resulting primarily from changes in cooling and heating degree-days on electric and natural gas demand compared with the year-ago periods; this variation is based on temperature readings from theNational Oceanic and Atmospheric Administration weather stations at local airports in our service territories. (c)For Ameren Illinois Electric Distribution and Ameren Transmission, base rates include increases or decreases to operating revenues related to the revenue requirement reconciliation adjustment under formula rates. For Ameren Missouri, base rates exclude an increase of$23 million and$35 million for the recovery of lost electric margins for the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods, resulting from the MEEIA 2016 and 2019 customer energy-efficiency programs. This amount is included in the "sales volumes and changes in customer usage patterns (excluding the estimated effects of weather and MEEIA)" line item. (d)Electric and natural gas revenue changes are offset by corresponding changes in "Fuel," "Purchased power," and "Natural gas purchased for resale" on the statement of income, resulting in no change to electric and natural gas margins. (e)Offsetting expense increases or decreases are reflected in "Other operations and maintenance," "Depreciation and amortization," or in "Taxes other than income taxes," within the "Operating Expenses" section and "Income Taxes" in the statement of income. These items have no overall impact on earnings. 52 --------------------------------------------------------------------------------
Ameren's electric margins decreased$25 million , or 2%, and$16 million , or 1%, for the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods, primarily because of decreased margins atAmeren Missouri , partially offset by increased margins at Ameren Transmission and Ameren Illinois Electric Distribution, as discussed below.Ameren's natural gas margins increased$5 million , or 5%, and$7 million , or 2%, for the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods, primarily because of increased margins atAmeren Illinois Natural Gas , as discussed below. Ameren Transmission Ameren Transmission's margins increased$13 million , or 10%, and$49 million , or 14%, for the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods. Base rate revenues were favorably affected by increased capital investment, as evidenced by a 13% increase in rate base used to calculate the revenue requirement, and an increase in the allowed ROE resulting from theMay 2020 FERC order. See Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report for additional information regarding theFERC complaint cases. Ameren Missouri Ameren Missouri's electric margins decreased$49 million , or 6%, and$86 million , or 4%, for the three and nine months endedSeptember 30, 2020 , respectively, compared with the year ago periods. The following items had an unfavorable effect on Ameren Missouri's electric margins for the three and nine months endedSeptember 30, 2020 , compared with the year-ago periods (except when a specific period is referenced): •The aggregate effect of changes in customer usage, excluding the estimated effects of weather and the MEEIA customer energy-efficiency programs, decreased electric revenues an estimated$11 million and$38 million , respectively. The decrease was primarily due to a reduction in sales volumes (-$18 million and -$37 million , respectively) and decreased revenues from customer demand charges (-$4 million and -$5 million , respectively), both of which were unfavorably affected by the COVID-19 pandemic. An increase in the average retail price per kilowatthour due to changes in customer usage patterns partially offset the decreases by+$11 million and+$4 million , respectively. While the MEEIA customer energy-efficiency programs reduced retail sales volumes, the recovery of lost electric margins under the MEEIA ensured that electric margins were not affected. •The absence of revenues associated with MEEIA 2013 and 2016 performance incentives in 2020, partially offset by revenues from the MEEIA 2019 performance incentive, decreased revenues$11 million and$32 million , respectively. See Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report for information regarding the MEEIA performance incentives. •Summer temperatures were milder as cooling degree days decreased 14% and 8%, respectively, and winter temperatures were warmer as heating degree days decreased 9% for the nine months endedSeptember 30, 2020 . The aggregate effect of weather decreased margins an estimated$18 million and$20 million , respectively. The change in margins due to weather is the sum of the effect of weather (estimate) on electric revenues (-$23 million and -$29 million , respectively) and the effect of weather (estimate) on fuel and purchased power (+$5 million and+$9 million , respectively) in the table above. •The COVID-19 pandemic caused the suspension of customer late fees and disconnections, which decreased revenues$4 million for the nine months endedSeptember 30, 2020 . See Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report for information on the suspension of customer late fees and disconnections. The following items had a favorable effect on Ameren Missouri's electric margins for the three and nine months endedSeptember 30, 2020 , compared with the year-ago periods (except when a specific period is referenced): •Lower net energy costs increased margins$4 million and$12 million , respectively, as a result of decreased sales volumes, which were reduced by the COVID-19 pandemic. The change in net energy costs is the sum of the effect of revenue change in off-system sales (+$33 million and+$33 million , respectively), and the effect of the change in energy costs (-$29 million and -$21 million , respectively) in the table above. •Lower net energy costs included in base rates partially offset by lower electric base rates as a result of theMarch 2020 MoPSC electric rate order, with new rates effectiveApril 1, 2020 , increased margins$10 million for the nine months endedSeptember 30, 2020 . The change in electric base rates is the sum of the change in base rates (estimate) (-$51 million ) and the effect of lower net energy costs included in base rates (+$61 million ) in the table above. Ameren Missouri's natural gas margins were comparable between periods. 53 --------------------------------------------------------------------------------Ameren Illinois Ameren Illinois' electric margins increased$19 million , or 5%, and$54 million , or 5%, for the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods, driven by increased margins atAmeren Illinois Transmission and Ameren Illinois Electric Distribution.Ameren Illinois Natural Gas' margins increased$6 million , or 7%, and$6 million or 2%, respectively, for the three and nine months endedSeptember 30, 2020 , compared with the year-ago periods. Ameren Illinois Electric DistributionAmeren Illinois Electric Distribution's margins increased$9 million , or 3%, and$19 million , or 2%, for the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods. The following items had a favorable effect onAmeren Illinois Electric Distribution's margins for the three and nine months endedSeptember 30, 2020 , compared with the year-ago periods (except when a specific period is referenced): •Margins increased due to higher recoverable non-purchased power expenses (+$10 million ) and increased capital investment (+$8 million ), as evidenced by a 8% increase in rate base used to calculate the revenue requirement, partially offset by a lower recognized ROE (-$13 million ), as evidenced by a decrease of 100 basis points in the estimated annual average of the monthly yields of the 30-year United States Treasury bonds under performance-based formula ratemaking for the nine months endedSeptember 30, 2020 . The sum of these changes collectively increased margins$5 million for the nine months endedSeptember 30, 2020 . •Revenues increased$2 million and$8 million , respectively, due to recovery of increased energy-efficiency program investments under performance-based formula ratemaking.Ameren Illinois Natural Gas Ameren Illinois Natural Gas' margins increased$6 million , or 7%, and$6 million or 2%, for the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods. Revenues increased from QIP recoveries due to additional investment in qualified natural gas infrastructure increased margins$6 million and$16 million , for the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods. The absence of revenues from a 2019 software licensing agreement withAmeren Missouri decreased margins$5 million for the three and nine months endedSeptember 30, 2020 , compared with the year-ago periods. See Note 8 - Related-party Transactions under Part I, Item 1, of this report for additional information. Ameren Illinois Transmission Ameren Illinois Transmission's margins increased$10 million , or 12%, and$35 million , or 16%, for the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods. Margins were favorably affected by increased capital investment, as evidenced by a 18% increase in rate base used to calculate the revenue requirement, and an increase in the allowed ROE resulting from theMay 2020 FERC order. See Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report for additional information regarding theFERC complaint cases. 54 --------------------------------------------------------------------------------
Other Operations and Maintenance Expenses
Total by Segment(a) Increase (Decrease) by Segment
Overall Ameren Decrease Overall Ameren Decrease
of $16 Million (QTD of $61 Million (YTD
YoY) YoY)
[[Image Removed: aee-20200930_g10.jpg]][[Image Removed: aee-20200930_g11.jpg]][[Image Removed: aee-20200930_g12.jpg]]
(a)Includes $14 million and $15 million of other operations and maintenance at
Ameren Transmission in the three months ended September 30, 2020 and 2019,
respectively. Includes other/intersegment eliminations of $(2) million and $(3)
million in the three months ended September 30, 2020 , and 2019, respectively.
Also includes other/intersegment eliminations of $(7) million and $(6) million
in the nine months ended September 30, 2020 , and 2019, respectively.
Ameren Missouri
Ameren Illinois Electric Ameren Transmission DistributionAmeren Other operations and maintenance expenses decreased$16 million and$61 million in the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods, due to changes discussed below. Ameren Transmission Other operations and maintenance expenses were comparable between periods. Ameren Missouri Other operations and maintenance expenses decreased$21 million and$58 million in the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods. The following items decreased other operations and maintenance expenses in the three and nine months endedSeptember 30, 2020 , compared with the year-ago periods (except where a specific period is referenced): •Callaway Energy Center refueling operations and maintenance costs decreased$34 million in the nine months endedSeptember 30, 2020 , primarily because of the refueling and maintenance outage that was completed inMay 2019 . The 2019 outage costs were expensed as incurred. Costs for the current year's fall refueling and maintenance outage are being deferred as a regulatory asset pursuant to theFebruary 2020 MoPSC order. •Energy center maintenance costs, other than those associated with theCallaway refueling and maintenance outage, decreased$6 million and$21 million , respectively, primarily due to lower electric system infrastructure maintenance expenses as a result of decreased system load, disciplined cost management, and the deferral of projects to future periods. •Transmission and distribution expenditures decreased$6 million and$11 million , respectively, primarily due to increased labor directed towards capital projects versus operations and maintenance-oriented projects. The decrease in the three months endedSeptember 30, 2020 , was partially offset by increased storm costs in the current year period. 55 -------------------------------------------------------------------------------- •Amortization of solar rebate costs incurred prior to the RESRAM decreased$5 million and$9 million , respectively, as a result of theMarch 2020 MoPSC electric rate order. •The cash surrender value of company-owned life insurance increased$4 million in the three months endedSeptember 30, 2020 , because of favorable market returns in the current-year period. •Customer energy-efficiency program costs decreased$3 million in the three months endedSeptember 30, 2020 , because of increased participation in the MEEIA 2019 programs in the third quarter of 2019. The following items partially offset the above decreases in other operations and maintenance expenses in the three and nine months endedSeptember 30, 2020 , compared with the year-ago periods (except where a specific period is referenced): •Solar rebate costs recoverable under the RESRAM resulted in increased expenses of$3 million and$7 million , respectively. •Technology-related expenditures increased$6 million in the nine months endedSeptember 30, 2020 , primarily due to costs associated with the implementation of cloud computing technology. •The cash surrender value of company-owned life insurance decreased$5 million in the nine months endedSeptember 30, 2020 , because of less favorable market returns in the current-year period, compared with the year-ago period.Ameren Illinois Other operations and maintenance expenses increased$4 million and decreased$2 million in the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods, as discussed below. Other operations and maintenance expenses were comparable between periods atAmeren Illinois Transmission. Ameren Illinois Electric Distribution Other operations and maintenance expenses increased$5 million and$8 million in the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods. The following items increased other operation and maintenance expenses in the three and nine months endedSeptember 30, 2020 , compared with the year-ago periods (except where a specific period is referenced): •Amortization of regulatory assets associated with energy-efficiency program investments under performance-based formula ratemaking increased$5 million in the nine months endedSeptember 30, 2020 . •Labor and benefits increased$4 million and$5 million , respectively, including an increase in power restoration assistance provided to other utilities. •The cash surrender value of company-owned life insurance decreased$2 million in the nine months endedSeptember 30, 2020 , because of less favorable market returns in the current-year period, compared with the year-ago period. •Environmental remediation rider costs increased$2 million in the three months endedSeptember 30, 2020 , due to timing of projects. The following items partially offset the above increases in other operations and maintenance expenses in the three and nine months endedSeptember 30, 2020 compared with the year-ago periods (except where a specific period is referenced): •Meter reading costs decreased$4 million in the nine months endedSeptember 30, 2020 , as Ameren Illinois Electric Distribution completed deployment of automated smart meters in 2019. •The cash surrender value of company-owned life insurance increased$2 million in the three months endedSeptember 30, 2020 , resulting from favorable market returns in the current-year period.Ameren Illinois Natural Gas Other operations and maintenance expenses were comparable between the three months endedSeptember 30, 2020 , and the year-ago period. Other operations and maintenance expenses decreased$9 million in the nine months endedSeptember 30, 2020 , compared with the year-ago period, primarily because of a$4 million reduction in energy-efficiency rider costs due to the deferral of projects to future periods and a$3 million reduction in meter reading costs asAmeren Illinois Natural Gas completed deployment of automated smart meters in 2019. 56 --------------------------------------------------------------------------------
Depreciation and Amortization Expenses
Total by Segment(a) Increase (Decrease) by Segment
Overall Ameren Increase Overall Ameren Increase
of $25 Million (QTD of $54 Million (YTD
YoY) YoY)
[[Image Removed: aee-20200930_g13.jpg]][[Image Removed: aee-20200930_g14.jpg]][[Image Removed: aee-20200930_g15.jpg]]
(a)Includes $25 million and $21 million of depreciation and amortization expense
at Ameren Transmission in the three months ended September 30, 2020 and 2019,
respectively. Includes other/intersegment eliminations of $2 million and $1
million in the three months ended September 30, 2020 , and 2019, respectively.
Also includes other/intersegment eliminations of $4 million and $3 million in
the nine months ended September 30, 2020 , and 2019, respectively.
Ameren Missouri
Ameren Illinois Electric Ameren Transmission Distribution Depreciation and amortization expenses increased$25 million ,$16 million , and$7 million in the three months endedSeptember 30, 2020 , and$54 million ,$31 million , and$19 million in the nine months endedSeptember 30, 2020 , compared with the year-ago periods, atAmeren , Ameren Missouri, andAmeren Illinois , respectively, primarily because of additional property, plant, and equipment investments across their respective segments.Ameren's and Ameren Missouri's depreciation and amortization expenses reflect a deferral to a regulatory asset of depreciation and amortization expenses pursuant to thePISA . As a result of theMarch 2020 MoPSC electric rate order, the deferral to a regulatory asset of depreciation and amortization expenses related toPISA -eligible assets placed in-service throughDecember 31, 2019 , ceased as ofApril 1, 2020 , as the associated depreciation and amortization expenses were then reflected in customer rates. ThePISA deferral of depreciation and amortization expenses was$3 million and$7 million for the three months endedSeptember 30, 2020 and 2019, respectively, and$17 million and$14 million for the nine months endedSeptember 30, 2020 and 2019, respectively. 57 --------------------------------------------------------------------------------
Taxes Other Than Income Taxes
Total by Segment(a) Increase (Decrease) by Segment
Overall Ameren
Overall Ameren Decrease of $3 Decrease of
Million (QTD YoY) $3 Million (YTD YoY)
[[Image Removed: aee-20200930_g16.jpg]][[Image Removed: aee-20200930_g17.jpg]][[Image Removed: aee-20200930_g18.jpg]]
(a)Includes $2 million , $1 million , $6 million , and $3 million at Ameren
Transmission in the three months ended September 30, 2020 , the three months
ended September 30, 2019 , the nine months ended September 30, 2020 , and the nine
months ended September 30, 2019 , respectively, and other/intersegment
eliminations of $2 million , $2 million , $7 million , and $8 million , in the three
months ended September 30, 2020 , the three months ended September 30, 2019 , the
nine months ended September 30, 2020 , and the nine months ended September 30,
2019 , respectively.
Ameren Missouri
Ameren Illinois Electric Ameren Transmission Distribution Taxes other than income taxes decreased$3 million in the three months endedSeptember 30, 2020 , compared with the year-ago period, primarily due to a decrease in excise taxes at Ameren Missouri as a result of reduced sales, as discussed in the Electric and Natural Gas Margins section above. Taxes other than income taxes decreased$3 million in the nine months endedSeptember 30, 2020 , compared with the year-ago period, primarily due to a$7 million decrease in excise taxes at Ameren Missouri and a$2 million reduction in the electric distribution tax at Ameren Illinois Electric Distribution, both as a result of reduced sales. These decreases were partially offset by property tax increases of$4 million and$3 million at Ameren Missouri and Ameren Transmission, respectively, resulting from higher assessed values. 58 --------------------------------------------------------------------------------
Other Income, Net
Total by Segment(a) Increase (Decrease) by Segment
Overall Ameren Increase Overall Ameren Increase
of $14 Million (QTD of $18 Million (YTD
YoY) YoY)
[[Image Removed: aee-20200930_g19.jpg]][[Image Removed: aee-20200930_g20.jpg]][[Image Removed: aee-20200930_g21.jpg]]
Ameren Missouri
Ameren Illinois Electric Ameren Transmission Distribution (a)Includes$4 million and$2 million of other income, net, atAmeren Transmission in the three months endedSeptember 30, 2020 and 2019, respectively. Other income, net, increased$14 million in the three months endedSeptember 30, 2020 , compared with the year-ago period, primarily due to a$9 million increase in the non-service cost components of net periodic benefit income atAmeren Missouri , partially due to changes in the base level of pension and postretirement costs as a result of theMarch 2020 MoPSC electric rate order. Additionally, other income, net, increased due to a$3 million increase in the equity portion of allowance for funds used during construction atAmeren Transmission, primarily due to lower short-term borrowings in the current-year period. Other income, net, increased$18 million in the nine months endedSeptember 30, 2020 , compared with the year-ago period. An increase of$19 million in the non-service cost components of net periodic benefit income at Ameren Missouri was partially offset by a$6 million increase in donations, primarily due to charitable donations made pursuant to theMarch 2020 MoPSC electric rate order. Additionally, other income, net, increased due to a$3 million increase in the equity portion of allowance for funds used during construction at Ameren Transmission. See Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report for additional information regarding the Ameren Missouri'sMarch 2020 electric rate order. See Note 5 - Other Income, Net under Part I, Item 1, of this report for additional information. 59 --------------------------------------------------------------------------------
Interest Charges
Total by Segment Increase (Decrease) by Segment
Overall Ameren Increase of Overall Ameren Increase of
$14 Million (QTD YoY) $21 Million (YTD YoY)
[[Image Removed: aee-20200930_g22.jpg]][[Image Removed: aee-20200930_g23.jpg]][[Image Removed: aee-20200930_g24.jpg]]
Ameren Missouri
Ameren Illinois Electric Ameren Transmission Distribution (a)Includes other/intersegment eliminations of$12 million and$4 million of other income, net, in the three months endedSeptember 30, 2020 and 2019, respectively. Interest charges increased$14 million and$21 million in the three and nine months endedSeptember 30, 2020 , respectively, compared with the year-ago periods, primarily due to a long-term debt issuance atAmeren (parent) inApril 2020 , which increased interest charges by$7 million and$14 million , respectively, and a long-term debt issuance at Ameren Missouri inMarch 2020 , which increased interest charges by$3 million and$7 million , respectively. LowerPISA deferrals also resulted in increased interest charges atAmeren Missouri in the three months endedSeptember 30, 2020 . Interest charges atAmeren and Ameren Missouri reflect a deferral to a regulatory asset of interest charges pursuant toPISA . As a result of theMarch 2020 MoPSC electric rate order, the deferral to a regulatory asset of amounts related toPISA -eligible assets placed in-service throughDecember 31, 2019 , ceased as ofApril 1, 2020 , as the return on thosePISA assets was then reflected in customer rates. ThePISA deferral of interest charges was less than$1 million and$4 million for the three months endedSeptember 30, 2020 and 2019, respectively, and$9 million for each of the nine months endedSeptember 30, 2020 and 2019. Income Taxes The following table presents effective income tax rates for the three and nine months endedSeptember 30, 2020 and 2019: Three Months(a) Nine Months(a) 2020 2019 2020 2019 Ameren 15 % 20 % 15 % 18 % Ameren Missouri 6 % 14 % 6 % 13 % Ameren Illinois 24 % 24 % 25 % 24 % Ameren Illinois Electric Distribution 21 % 23 % 23 % 23 % Ameren Illinois Natural Gas (b) (b) 26 % 26 % Ameren Illinois Transmission 25 % 24 % 26 % 25 % Ameren Transmission 26 % 25 % 27 % 26 % (a)Estimate of the annual effective income tax rate adjusted to reflect the tax effect of items discrete to the three and nine months endedSeptember 30, 2020 and 2019. (b)Not meaningful because of the insignificant amount of income before income taxes. See Note 12 - Income Taxes under Part I, Item 1, of this report for a reconciliation of the federal statutory corporate income tax rate to the effective income tax rate for the Ameren Companies. 60 -------------------------------------------------------------------------------- The effective income tax rate was lower at Ameren Illinois Electric Distribution in the three months endedSeptember 30, 2020 , compared with the year-ago period, primarily because of lower amortization of excess deferred taxes and lower tax benefits from certain depreciation differences on property-related items largely attributable to the allowance for equity funds used during construction. LIQUIDITY AND CAPITAL RESOURCES Collections from our tariff-based revenues are our principal source of cash provided by operating activities. A diversified retail customer mix, primarily consisting of rate-regulated residential, commercial, and industrial customers, provides us with a reasonably predictable source of cash. In addition to using cash provided by operating activities, we use available cash, drawings under committed credit agreements, commercial paper issuances, and/or, in the case of Ameren Missouri andAmeren Illinois , short-term affiliate borrowings to support normal operations and temporary capital requirements. We may reduce our short-term borrowings with cash provided by operations or, at our discretion, with long-term borrowings, or, in the case of Ameren Missouri andAmeren Illinois , with capital contributions fromAmeren (parent). We expect to make significant capital expenditures over the next five years as we invest in our electric and natural gas utility infrastructure to support overall system reliability, grid modernization, renewable energy requirements, environmental compliance, and other improvements. As part of its plan to fund these cash flow requirements,Ameren is using newly issued shares of common stock, rather than market-purchased shares, to satisfy requirements under the DRPlus and employee benefit plans and expects to continue to do so through at least 2024.Ameren expects these issuances to provide equity of about$100 million annually.Ameren also plans to issue incremental common equity to fund a portion ofAmeren Missouri's wind generation investments through the physical settlement of the forward sale agreement entered into inAugust 2019 relating to 7.5 million shares of common stock. Additionally,Ameren plans to issue incremental equity of about$150 million annually from 2021 to 2024. Incremental renewable generation investment opportunities included in Ameren Missouri's 2020 IRP may result in the need for additional equity. For additional information about the forward sale agreement, see Note 4 - Long-Term Debt and Equity Financings under Part I, Item 1, of this report.Ameren expects its equity to total capitalization to be about 45% through the period endingDecember 2024 , with the long-term intent to support solid investment-grade credit ratings. The use of cash provided by operating activities and short-term borrowings to fund capital expenditures and other long-term investments at theAmeren Companies frequently results in a working capital deficit, defined as current liabilities exceeding current assets, as was the case atSeptember 30, 2020 , forAmeren andAmeren Illinois . With the credit capacity available under the Credit Agreements, and cash and cash equivalents,Ameren (parent), Ameren Missouri, andAmeren Illinois , collectively, had net available liquidity of$2.0 billion atSeptember 30, 2020 . As a result of capital market volatility, due, in part, to the COVID-19 pandemic, and to increase net available liquidity,Ameren (parent) accelerated a debt issuance toApril 2020 , which had been planned for later in 2020, and used a portion of the proceeds to repay$350 million of senior unsecured notes held byAmeren (parent) inOctober 2020 . Additionally,Ameren expects to receive between$540 million and$550 million upon settlement of the forward sale agreement, which can be settled atAmeren's discretion on or prior toMarch 31, 2021 . See Credit Facility Borrowings and Liquidity and Long-term Debt and Equity below for additional information. The following table presents net cash provided by (used in) operating, investing, and financing activities for the nine months endedSeptember 30, 2020 and 2019: Net Cash Provided By Net Cash Used In Net Cash
Provided by (Used in)
Operating Activities Investing Activities Financing Activities
2020 2019 Variance 2020 2019 Variance 2020 2019 Variance
Ameren $ 1,329 $ 1,668 $ (339) $ (1,981) $ (1,798) $ (183) $ 644 $ 178 $ 466
Ameren Missouri 709 840 (131) (877) (785) (92) 139 (49) 188
Ameren Illinois 515 706 (191) (1,030) (903) (127) 537 234 303
Cash Flows from Operating Activities
Our cash provided by operating activities is affected by fluctuations of trade
accounts receivable, inventories, and accounts and wages payable, among other
things, as well as the unique regulatory environment for each of our businesses.
Substantially all expenditures related to fuel, purchased power, and natural gas
purchased for resale are recovered from customers through rate adjustment
mechanisms, which may be adjusted without a traditional rate proceeding. Similar
regulatory mechanisms exist for certain other operating expenses that can also
affect the timing of cash provided by operating activities. The timing of cash
payments for costs recoverable under our regulatory mechanisms differs from the
recovery period of those costs. Additionally, the seasonality of our electric
and natural gas businesses, primarily caused by seasonal customer rates and
changes in customer demand due to weather, significantly affects the amount and
timing of our cash provided by operating activities.
Our customers' payment for our services has been adversely affected by the
COVID-19 pandemic, resulting in a decrease to our cash flow from operations. For
information regarding Ameren Missouri's and 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. In addition, see Results of Operations above for more
information on Ameren's , Ameren Missouri's, and Ameren Illinois' accounts
receivable balances that were 30 days or greater past due or that were a part of
a deferred payment arrangement.
61
--------------------------------------------------------------------------------Ameren's cash provided by operating activities decreased$339 million in the first nine months of 2020, compared with the year-ago period. The following items contributed to the decrease: •A$281 million decrease resulting from decreased customer collections, primarily due to an increase in accounts receivable balances, which reflected an increase in amounts that were 30 days or greater past due or that were a part of a deferred payment arrangement, a decrease in sales volumes and a net decrease attributable to regulatory recovery mechanisms, partially offset by decreased fuel and purchased power costs at Ameren Missouri and decreased purchased power costs and volumes and natural gas costs atAmeren Illinois . •A$40 million decrease, primarily resulting from increases to materials and supplies to support operations as levels were increased to mitigate against any potential supply disruptions. •A$32 million increase in payments to settle ARO liabilities, primarily related to Ameren Missouri's CCR storage facilities. •A$27 million increase in pension and postretirement benefit plan contributions. •A$25 million decrease in net collateral activity with counterparties, primarily resulting from changes in the market prices of power and natural gas, changes in contracted commodity volumes, and decreases resulting fromAmeren Illinois' renewable energy contracts entered into pursuant to the FEJA. •A$19 million increase in interest payments, primarily due to an increase in the average outstanding debt atAmeren (parent) andAmeren Illinois . •A$17 million decrease, primarily resulting from increased coal inventory levels as less coal was purchased in 2019 due to delivery disruptions that occurred from flooding. •A$14 million increase in property tax payments at Ameren Missouri due to higher property tax values in 2019, compared with 2018. Property tax payments in a given year are based on the preceding year's property tax values. •Refunds paid in 2020 of$13 million associated with theNovember 2013 FERC complaint case, as discussed in Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report. The following items partially offset the decrease inAmeren's cash from operating activities between periods: •A$28 million decrease in non-Callaway Energy Center maintenance costs at Ameren Missouri, primarily due to lower electric system infrastructure maintenance expenses as a result of decreased system load, disciplined cost management, the deferral of projects to future periods, and lower storm costs. •A$27 million decrease in payments for the employer portion ofSocial Security taxes as a result of a payment deferral allowed under the Coronavirus Aid, Relief, and Economic Security Act. Half of this deferral will be paid at the end of 2021 and the remaining half will be paid at the end of 2022. •A$22 million decrease in payments for nuclear refueling and maintenance outages at Ameren Missouri's Callaway Energy Center, as the current year refueling and maintenance outage began inOctober 2020 , while the prior year refueling and maintenance outage was completed in the second quarter of 2019. Ameren Missouri Ameren Missouri's cash provided by operating activities decreased$131 million in the first nine months of 2020, compared with the year-ago period. The following items contributed to the decrease: •A$147 million decrease resulting from decreased customer collections, primarily due to an increase in accounts receivable balances, a decrease in electric sales volumes, and a net decrease attributable to regulatory recovery mechanisms, partially offset by decreased fuel and purchased power costs. •A$32 million increase in payments to settle ARO liabilities, primarily related to CCR storage facilities. •A$23 million decrease, primarily resulting from increases to materials and supplies to support operations as levels were increased to mitigate against any potential supply disruptions. •A$17 million decrease, primarily resulting from increased coal inventory levels as less coal was purchased in 2019 due to delivery disruptions that occurred from flooding in 2019. •A net$16 million increase in collateral posted with counterparties, primarily resulting from changes in the market prices of power and natural gas and changes in contracted commodity volumes. •A$14 million increase in property tax payments due to higher property tax values in 2019, compared with 2018. Property tax payments in a given year are based on the preceding year's property tax values. •A$14 million increase in pension and postretirement benefit plan contributions. The following items partially offset the decrease in Ameren Missouri's cash from operating activities between periods: •A$43 million decrease in income tax payments toAmeren (parent) pursuant to the tax allocation agreement, primarily due to the timing 62 -------------------------------------------------------------------------------- of payments and lower taxable income in 2020. •A$28 million decrease in non-Callaway Energy Center maintenance costs, primarily due to lower electric system infrastructure maintenance expenses as a result of decreased system load, disciplined cost management, the deferral of projects to future periods, and lower storm costs. •A$22 million decrease in payments for nuclear refueling and maintenance outages at the Callaway Energy Center, as the current year refueling and maintenance outage began inOctober 2020 , while the prior year refueling and maintenance outage was completed in the second quarter of 2019. •A$12 million decrease in payments for the employer portion ofSocial Security taxes as a result of a payment deferral allowed under the Coronavirus Aid, Relief, and Economic Security Act. Half of this deferral will be paid at the end of 2021 and the remaining half will be paid at the end of 2022.Ameren Illinois Ameren Illinois' cash provided by operating activities decreased$191 million in the first nine months of 2020, compared with the year-ago period. The following items contributed to the decrease: •A$136 million decrease resulting from decreased customer collections, primarily due to an increase in accounts receivable balances, which reflected an increase in amounts that were 30 days or greater past due or that were a part of a deferred payment arrangement, a decrease in sales volumes, and a net decrease attributable to regulatory recovery mechanisms, partially offset by decreased purchased power costs and volumes and natural gas costs. •A$32 million increase in income tax payments toAmeren (parent) pursuant to the tax allocation agreement, primarily due to the timing of payments in 2020. •A$17 million decrease, primarily resulting from increases to materials and supplies to support operations as levels were increased to mitigate against any potential supply disruptions. •An$11 million increase in interest payments, primarily due to an increase in the average outstanding debt. •Refunds paid in 2020 of$9 million associated with theNovember 2013 FERC complaint case, as discussed in Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report. •A net$9 million decrease in collateral received from counterparties, primarily resulting from changes in the market prices of power and natural gas, changes in contracted commodity volumes, and decreases resulting from renewable energy contracts entered into pursuant to the FEJA. •A$7 million increase in pension and postretirement benefit plan contributions. The decrease inAmeren Illinois' cash from operating activities between periods was partially offset by a$10 million decrease in payments for the employer portion ofSocial Security taxes as a result of a payment deferral allowed under the Coronavirus Aid, Relief, and Economic Security Act. Half of this deferral will be paid at the end of 2021 and the remaining half will be paid at the end of 2022. Cash Flows from Investing ActivitiesAmeren's cash used in investing activities increased$183 million during the first nine months of 2020, compared with the year-ago period, primarily as a result of a$123 million increase in capital expenditures. Partially offsetting capital expenditure increases at Ameren Missouri andAmeren Illinois discussed below, ATXI's capital expenditures decreased$37 million , primarily as a result of decreased expenditures on the Mark Twain project as the project was placed in service in 2019. Cash used in investing activities also increased$35 million due to the timing of nuclear fuel expenditures and$26 million due to net investment activity in the nuclear decommissioning trust fund at Ameren Missouri during the first nine months of 2020, compared with the year-ago period. Ameren Missouri's cash used in investing activities increased$92 million during the first nine months of 2020, compared with the year-ago period, primarily as a result of a$35 million increase due to the timing of nuclear fuel expenditures, a$27 million increase in capital expenditures, and a$26 million increase due to net investment activity in the nuclear decommissioning trust fund compared with the year-ago period. Ameren Missouri's increase in capital expenditures was primarily related to electric delivery infrastructure upgrades and electric transmission system reliability projects.Ameren Illinois' cash used in investing activities increased$127 million during the first nine months of 2020, compared with the year-ago period, primarily due to a$131 million increase in capital expenditures primarily related to electric transmission system reliability projects. Cash Flows from Financing Activities Cash provided by, or used in, financing activities is a result of our financing needs, which depend on the level of cash provided by operating activities, the level of cash used in investing activities, the level of dividends, and our long-term debt maturities, among other things. As a result of capital market volatility, due, in part, to the COVID-19 pandemic, and to increase net available liquidity,Ameren (parent) accelerated a debt issuance toApril 2020 , which had been planned for later in 2020, and used a portion of the proceeds to repay$350 million 63 -------------------------------------------------------------------------------- of senior unsecured notes held byAmeren (parent) inOctober 2020 .Ameren's cash provided by consolidated financing activities increased$466 million during the first nine months of 2020, compared with the year-ago period. During the first nine months of 2020,Ameren utilized proceeds from the issuance of$1,263 million of long-term debt for general corporate purposes, including to repay then-outstanding short-term debt, including short-term debt incurred in connection with the repayment at maturity of long-term debt of$85 million , and to fund, in part, investing activities. During the first nine months of 2020,Ameren repaid net short-term debt of$168 million . In comparison, during the first nine months of 2019,Ameren utilized proceeds from the issuance of$900 million of long-term debt to repay then-outstanding short-term debt, including short-term debt incurred in connection with the repayment at maturity of long-term debt of$329 million . During 2019,Ameren repaid net short-term debt of$53 million , and used cash provided by financing activities to fund, in part, investing activities. During the first nine months of 2020,Ameren paid common stock dividends of$367 million , compared with$350 million in dividend payments in the year-ago period. Ameren Missouri's financing activities provided cash of$139 million during the first nine months of 2020, compared to using cash of$49 million during the year-ago period. During the first nine months of 2020, Ameren Missouri utilized net proceeds from the issuance of$465 million of long-term debt to repay then-outstanding short-term debt, including short-term debt incurred in connection with the repayment at maturity of long-term debt of$85 million . During the first nine months of 2020, Ameren Missouri repaid net short-term debt of$234 million and used cash provided by financing activities to fund, in part, investing activities. In comparison, during the first nine months of 2019, Ameren Missouri utilized net proceeds from the issuance of$450 million in long-term debt to repay then-outstanding short-term debt, including short-term debt incurred in connection with the repayment at maturity of long-term debt of$329 million , and net commercial paper issuances of$89 million to fund, in part, investing activities. During the first nine months of 2020,Ameren Missouri did not pay common stock dividends, compared with$250 million in dividend payments in the year-ago period, due to an expected increase in investing cash needs, including the anticipated acquisition of wind generation facilities.Ameren Illinois' cash provided by financing activities increased$303 million during the first nine months of 2020, compared with the year-ago period. During the first nine months of 2020,Ameren Illinois received$350 million in capital contributions fromAmeren (parent), and utilized net proceeds from commercial paper issuance of$189 million to fund, in part, investing activities. In comparison, during the first nine months of 2019,Ameren Illinois utilized net proceeds from commercial paper issuances of$237 million to fund, in part, investing activities. See Long-term Debt and Equity in this section for additional information on maturities and issuances of long-term debt. Credit Facility Borrowings and Liquidity The liquidity needs of the Ameren Companies are typically supported through the use of available cash, drawings under committed credit agreements, commercial paper issuances, and/or, in the case of Ameren Missouri andAmeren Illinois , short-term affiliate borrowings. See Note 3 - Short-term Debt and Liquidity under Part I, Item 1, of this report for additional information on credit agreements, commercial paper issuances,Ameren's money pool arrangements and related borrowings, and relevant interest rates. The following table presentsAmeren's consolidated liquidity as ofSeptember 30, 2020 :Ameren (parent) and Ameren Missouri: Missouri Credit Agreement - borrowing capacity$ 1,200 Less: Ameren (parent) commercial paper outstanding 19 Less: Ameren Missouri letters of credit 3 Missouri Credit Agreement - subtotal 1,178Ameren (parent) andAmeren Illinois : Illinois Credit Agreement - borrowing capacity 1,100 Less: Ameren (parent) commercial paper outstanding 11 Less: Ameren Illinois commercial paper outstanding 242 Less: Ameren Illinois letters of credit 2 Illinois Credit Agreement - subtotal 845 Subtotal$ 2,023 Add: Cash and cash equivalents 6 Net Available Liquidity$ 2,029 The Credit Agreements, among other things, provide$2.3 billion of credit until maturity inDecember 2024 . See Note 3 - Short-term Debt and Liquidity under Part I, Item 1, of this report for additional information on the Credit Agreements. During the nine months endedSeptember 30, 2020 ,Ameren (parent), Ameren Missouri, andAmeren Illinois each borrowed under the Credit Agreements and issued commercial paper. Borrowings under the Credit Agreements and commercial paper issuances are based upon available interest rates at that time of the borrowing or issuance. As a result of volatility in the capital markets, the Ameren Companies borrowed under the Credit Agreements in certain instances in the first quarter of 2020 rather than issuing commercial paper. 64 --------------------------------------------------------------------------------Ameren has a money pool agreement with and among its utility subsidiaries to coordinate and to provide for certain short-term cash and working capital requirements. As short-term capital needs arise, and based on availability of funding sources, Ameren Missouri andAmeren Illinois will access funds from the utility money pool, the Credit Agreements, or the commercial paper programs depending on which option has the lowest interest rates. The issuance of short-term debt securities byAmeren's utility subsidiaries is subject toFERC approval under the Federal Power Act. InMarch 2020 , theFERC issued an order authorizing Ameren Missouri to issue up to$1 billion of short-term debt securities, which expires inMarch 2022 . InSeptember 2020 , theFERC issued an order authorizingAmeren Illinois to issue up to$1 billion of short-term debt securities, which expires inSeptember 2022 . InJuly 2019 , theFERC issued an order authorizing ATXI to issue up to$300 million of short-term debt securities, which expires inJuly 2021 . The Ameren Companies continually evaluate the adequacy and appropriateness of their liquidity arrangements for changing business conditions. When business conditions warrant, changes may be made to existing credit agreements or to other borrowing arrangements, or other arrangements may be made. Long-term Debt and Equity The following table presentsAmeren's issuances (net of any issuance premiums or discounts) of long-term debt and equity, as well as redemptions and maturities of long-term debt for the nine months endedSeptember 30, 2020 and 2019: Month Issued, Redeemed, or Matured 2020 2019 Issuances of Long-term Debt Ameren: 3.50% Senior unsecured notes due 2031 April$ 798 $ - 2.50% Senior unsecured notes due 2024 September - 450 Ameren Missouri: 2.95% First mortgage bonds due 2030 March$ 465 $ - 3.50% First mortgage bonds due 2029 March - 450 Total Ameren long-term debt issuances$ 1,263 $ 900 Issuances of Common Stock Ameren: DRPlus and 401(k) Various$ 37 (a) (b)$ 54 (a) (b) Total common stock issuances$ 37 $ 54 TotalAmeren long-term debt and common stock issuances$ 1,300 $ 954 Redemptions and Maturities of Long-term Debt Ameren Missouri: 5.00% Senior secured notes due 2020 February$ 85 $ - 6.70% Senior secured notes due 2019 February - 329 Ameren Illinois: 5.70% First mortgage bond due 2024 September - (c) TotalAmeren long-term debt redemptions and maturities$ 85 $ 329 (a)Ameren issued a total of 0.5 million and 0.7 million shares of common stock under its DRPlus and 401(k) plan in the nine months endedSeptember 30, 2020 and 2019, respectively. (b)Excludes 0.5 million and 0.8 million shares of common stock valued at$38 million and$54 million issued for no cash consideration in connection with stock-based compensation for the nine months endedSeptember 30, 2020 and 2019, respectively. (c)Less than $1 million InOctober 2020 ,Ameren , Ameren Missouri, andAmeren Illinois filed a Form S-3 shelf registration statement with theSEC , registering the issuance of an unspecified amount of certain types of securities. This registration statement became effective immediately upon filing and expires inOctober 2023 . See Note 4 - Long-Term Debt and Equity Financings under Part I, Item 1, of this report for additional information, including proceeds from issuances of long-term debt, the use of those proceeds,Ameren's forward equity sale agreement relating to 7.5 million shares of common stock, Ameren Missouri'sOctober 2020 issuance of$550 million in first mortgage bonds,Ameren (parent)'sOctober 2020 redemption of$350 million of senior unsecured notes, andAmeren (parent)'s capital contributions toAmeren Illinois . Indebtedness Provisions and Other Covenants See Note 3 - Short-term Debt and Liquidity under Part I, Item 1, of this report and Note 4 - Short-term Debt and Liquidity and Note 5 - Long-term Debt and Equity Financings under Part II, Item 8, of the Form 10-K for a discussion of provisions (and applicable cross-default 65 -------------------------------------------------------------------------------- provisions) and covenants contained in our credit agreements, in ATXI's note purchase agreement, and in certain of the Ameren Companies' indentures and articles of incorporation. AtSeptember 30, 2020 , the Ameren Companies were in compliance with the provisions and covenants contained in their credit agreements, indentures, and articles of incorporation, as applicable, and ATXI was in compliance with the provisions and covenants contained in its note purchase agreement. We consider access to short-term and long-term capital markets to be a significant source of funding for capital requirements not satisfied by cash provided by our operating activities. Inability to raise capital on reasonable terms, particularly during times of uncertainty in the capital markets, could negatively affect our ability to maintain and expand our businesses. After assessing its current operating performance, liquidity, and credit ratings (see Credit Ratings below),Ameren , Ameren Missouri, andAmeren Illinois each believes that it will continue to have access to the capital markets on reasonable terms. However, events beyondAmeren's , Ameren Missouri's, andAmeren Illinois' control may create uncertainty in the capital markets or make access to the capital markets uncertain or limited. Such events could increase our cost of capital and adversely affect our ability to access the capital markets. Dividends The amount and timing of dividends payable onAmeren's common stock are within the sole discretion ofAmeren's board of directors.Ameren's board of directors has not set specific targets or payout parameters when declaring common stock dividends, but it considers various factors, includingAmeren's overall payout ratio, payout ratios of our peers, projected cash flow and potential future cash flow requirements, historical earnings and cash flow, projected earnings, impacts of regulatory orders or legislation, and other key business considerations.Ameren expects its dividend payout ratio to be between 55% and 70% of annual earnings over the next few years. OnOctober 9, 2020 ,Ameren's board of directors declared a quarterly common stock dividend of51.5 cents per share payable onDecember 31, 2020 , to shareholders of record onDecember 9, 2020 , resulting in an annualized equivalent dividend rate of$2.06 per share. The previous annualized equivalent dividend rate, based on the common stock dividend declared and paid in the third quarter of 2020, was$1.98 per share. See Note 4 - Short-term Debt and Liquidity and Note 5 - Long-term Debt and Equity Financings under Part II, Item 8, of the Form 10-K for additional discussion of covenants and provisions contained in certain of theAmeren Companies' financial agreements and articles of incorporation that would restrict the Ameren Companies' payment of dividends in certain circumstances. AtSeptember 30, 2020 , none of these circumstances existed atAmeren ,Ameren Missouri , orAmeren Illinois and, as a result, these companies were not restricted from paying dividends. The following table presents common stock dividends declared and paid byAmeren Corporation to its common shareholders and byAmeren subsidiaries to their parent,Ameren Corporation , for the nine months endedSeptember 30, 2020 and 2019: Nine Months 2020 2019 Ameren$ 367 $ 350 Ameren Missouri - 250 ATXI - 15 Commitments For a listing of our obligations and commitments, see Other Obligations in Note 9 - Commitments and Contingencies under Part I, Item 1, of this report. See Note 11 - Retirement Benefits under Part I, Item 1, of this report for information regarding expected minimum funding levels for our pension plan. Off-balance-sheet Arrangements AtSeptember 30, 2020 , none of the Ameren Companies had any significant off-balance-sheet financing arrangements, other than the forward sale agreement relating to common stock and variable interest entities. See Note 1 - Summary of Significant Accounting Policies under Part I, Item 1, of this report for further detail concerning variable interest entities. See Note 5 - Long-Term Debt and Equity under Part II, Item 8, of the Form 10-K for further detail concerning the forward sale agreement relating to common stock. 66 -------------------------------------------------------------------------------- Credit Ratings Our credit ratings affect our liquidity, our access to the capital markets and credit markets, our cost of borrowing under our credit facilities and our commercial paper programs, and our collateral posting requirements under commodity contracts. The following table presents the principal credit ratings by Moody's and S&P, as applicable, effective on the date of this report: Moody's S&P
Issuer/corporate credit rating Baa1 BBB+ Senior unsecured debt Baa1 BBB Commercial paper P-2 A-2 Ameren Missouri: Issuer/corporate credit rating Baa1 BBB+ Secured debt A2 A Senior unsecured debt Baa1 Not Rated Commercial paper P-2 A-2 Ameren Illinois: Issuer/corporate credit rating A3 BBB+ Secured debt A1 A Senior unsecured debt A3 BBB+ Commercial paper P-2 A-2 ATXI: Issuer credit rating A2 Not Rated Senior unsecured debt A2 Not Rated A credit rating is not a recommendation to buy, sell, or hold securities. It should be evaluated independently of any other rating. Ratings are subject to revision or withdrawal at any time by the rating organization. Collateral Postings Any weakening of our credit ratings may reduce access to capital and trigger additional collateral postings and prepayments. Such changes may also increase the cost of borrowing, resulting in an adverse effect on earnings. Cash collateral postings and prepayments made with external parties, including postings related to exchange-traded contracts, and cash collateral posted by external parties were immaterial atSeptember 30, 2020 . A sub-investment-grade issuer or senior unsecured debt rating (below "Baa3" from Moody's or below "BBB-" from S&P) atSeptember 30, 2020 , could have resulted inAmeren ,Ameren Missouri , orAmeren Illinois being required to post additional collateral or other assurances for certain trade obligations amounting to$167 million ,$150 million , and$17 million , respectively. Changes in commodity prices could trigger additional collateral postings and prepayments. Based on credit ratings atSeptember 30, 2020 , if market prices were 15% higher or lower thanSeptember 30, 2020 levels in the next 12 months and 20% higher or lower thereafter through the end of the term of the commodity contracts, thenAmeren , Ameren Missouri, orAmeren Illinois could be required to post an immaterial amount, compared to each company's liquidity, of collateral or other assurances for certain trade obligations. OUTLOOK Below are some key trends, events, and uncertainties that may reasonably affect our results of operations, financial condition, or liquidity, as well as our ability to achieve strategic and financial objectives, for 2020 and beyond. 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. We continue to assess the impacts the pandemic is having on our businesses, including but not limited to impacts on our liquidity; demand for residential, commercial, and industrial electric and natural gas services; more flexible payment plans for customers; the timing and extent to which recovery of incremental costs incurred, net of savings, and forgone customer late fee revenues at Ameren Missouri is allowed by the MoPSC; changes in our ability to disconnect customers for nonpayment; bad debt expense; supply chain operations; the availability of our employees and contractors; counterparty credit; capital construction; infrastructure operations and maintenance; energy-efficiency programs; and pension valuations. For additional information regarding recent rate orders, lawsuits, and pending requests filed with state and federal regulatory commissions, including those discussed below, see Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report and Note 2 - Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K. 67 --------------------------------------------------------------------------------
Operations
•In the first nine months of 2020, we have experienced a net decrease in our sales volumes, which have been, and continue to be, affected by the COVID-19 pandemic, among other things. Further, our customers' payment for services has been adversely affected by the COVID-19 pandemic, which has led to an increase in our accounts receivable balances that are past due or that are a part of a deferred payment arrangement. Because of their regulatory frameworks,Ameren Illinois' and ATXI's revenues are largely decoupled from changes in sales volumes. Additionally,Ameren Illinois' electric distribution and natural gas distribution businesses have bad debt riders, which provide for recovery of bad debt write-offs, net of any subsequent recoveries. Pursuant to aJune 2020 ICC order,Ameren Illinois' electric bad debt rider provides for the recovery of bad debt expense in 2020. Ameren Missouri does not have a bad debt rider or regulatory tracking mechanism and its earnings are exposed to increases in bad debt expense. See the Results of Operations section above for additional information on our accounts receivable balances and changes in Ameren Missouri's sales volumes in 2020, compared to 2019. Additionally, see Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report for information on Ameren Missouri's andAmeren Illinois' reinstatement of customer disconnection and late fee charges for non-payment, requests filed with the MoPSC for accounting authority orders related to Ameren Missouri's electric and natural gas services to allow Ameren Missouri to accumulate certain costs incurred, net of savings, and forgone customer late fee revenues related to the COVID-19 pandemic for consideration of recovery in future regulatory rate reviews, and aJune 2020 ICC order in a service disconnection moratorium proceeding, which requiredAmeren Illinois to implement more flexible credit and collection practices and allowed for recovery of costs incurred related to the COVID-19 pandemic and forgone late fees. •ThePISA permits Ameren Missouri to defer and recover 85% of the depreciation expense and a return at the applicable WACC on investments in certain property, plant, and equipment placed in service afterSeptember 1, 2018 , and not included in base rates. The regulatory asset for accumulatedPISA deferrals also earns a return at the applicable WACC, with all approvedPISA deferrals added to rate base prospectively and recovered over a period of 20 years following a regulatory rate review. Additionally, under the RESRAM, Ameren Missouri is permitted to recover the 15% of depreciation expense and a return at the applicable WACC for investments in renewable generation plant placed in service and not recovered under thePISA . Accumulated RESRAM deferrals earn carrying costs at short-term interest rates. ThePISA and the RESRAM mitigate the effects of regulatory lag between regulatory rate reviews. Those investments not eligible for recovery under thePISA and the remaining 15% of certain property, plant, and equipment placed in service, unless eligible for recovery under the RESRAM, remain subject to regulatory lag. Ameren Missouri recognizes the cost of debt onPISA deferrals in revenue, instead of using the applicable WACC, with the difference recognized in revenues when recovery of such deferrals is reflected in customer rates. As a result of thePISA election, additional provisions of the law apply to Ameren Missouri, including limitations on electric customer rate increases. Both the rate increase limitation and thePISA are effective throughDecember 2023 , unless Ameren Missouri requests and the MoPSC approves an extension throughDecember 2028 . •In 2018, the MoPSC issued an order approving Ameren Missouri's MEEIA 2019 plan. The initial plan included a portfolio of customer energy-efficiency programs throughDecember 2021 and low-income customer energy-efficiency programs throughDecember 2024 , along with a rate-adjustment mechanism. Ameren Missouri intends to invest$226 million over the life of the plan, including$65 million per year through 2021 and$70 million in 2022. The plan includes the continued use of the MEEIA rider, which allows Ameren Missouri to collect from, or refund to, customers any difference in actual MEEIA program costs and related lost electric margins and the amounts collected from customers. In addition, the plan includes a performance incentive that provides Ameren Missouri an opportunity to earn additional revenues by achieving certain customer energy-efficiency goals. InAugust 2020 , the MoPSC issued an order approving a unanimous stipulation and agreement establishing performance incentives for the 2022 program year. The order also approved Ameren Missouri's energy savings results for the first year of the MEEIA 2019 program. As a result of this order and in accordance with revenue recognition guidance, Ameren Missouri recognized revenues of$6 million in the third quarter of 2020. If the target goals are achieved for 2020, 2021, and 2022, additional revenues of$10 million ,$13 million , and$11 million would be recognized in 2021, 2022, and 2022, respectively. Incremental additional revenues of$3 million ,$3 million , and$1 million may be earned for 2020, 2021, and 2022, respectively, and would be recognized in the respective following year if Ameren Missouri exceeds its targeted energy savings goals. Ameren Missouri's ability to achieve and/or exceed targeted energy savings goals could be affected by the COVID-19 pandemic. Ameren Missouri recognized$28 million ,$11 million , and$37 million in revenues related to MEEIA performance incentives in 2016, 2018, and 2019, respectively. •InMarch 2020 , the MoPSC issued an order in Ameren Missouri'sJuly 2019 electric service regulatory rate review, resulting in a decrease of$32 million to Ameren Missouri's annual revenue requirement for electric retail service. The order reduced the annualized base level of net energy costs pursuant to the FAC by approximately$115 million from the base level established in the MoPSC'sMarch 2017 electric rate order. The order also changed the annualized regulatory asset and liability amortization amounts and the base level of expenses for regulatory tracking mechanisms. On an annualized basis, these changes reflect approximately$20 million of increased revenues and approximate decreases in purchased power expenses of$15 million , other operating and maintenance expenses of$60 million , and income tax expenses of$20 million . Additionally, the annual revenue requirement incorporated increases of approximately$50 million for the reduction in sales volumes resulting from MEEIA programs and approximately$50 million of depreciation and amortization expense for amounts previously deferred underPISA . The increase in the annual revenue requirement related to the 68 -------------------------------------------------------------------------------- MEEIA programs is seasonally weighted to the summer. One of the stipulation and agreements approved by the MoPSC'sMarch 2020 order states that the net impact of the revenue and expense changes noted above reflects a 9.4% to 9.8% ROE on an unspecified percent of common equity applicable to rate base. The new rates, base level of expenses, and amortizations became effective onApril 1, 2020 . •Ameren Missouri expects to file for electric and natural gas service regulatory rate reviews in the first half of 2021. Ameren Missouri expects key drivers of the electric service regulatory rate review to include increased infrastructure investments and other costs of service. Electric base rates were last reset onApril 1, 2020 , and are required to be reset at least every four years to allow for continued use of the FAC. Natural gas base rates were last reset onSeptember 1, 2019 . •Ameren Illinois and ATXI use a forward-looking rate calculation with an annual revenue requirement reconciliation for each company's electric transmission business. Based on expected rate base growth and the currently allowed 10.52% ROE, the revenue requirements included in 2020 rates forAmeren Illinois' and ATXI's electric transmission businesses are$313 million and$192 million , respectively. These revenue requirements represent an increase inAmeren Illinois' and ATXI's revenue requirements of$16 million and$15 million , respectively, from the revenue requirements reflected in 2019 rates, primarily due to expected rate base growth. These rates will affectAmeren Illinois' and ATXI's cash receipts during 2020, but will not determine their respective electric transmission service operating revenues, which will instead be based on 2020 actual recoverable costs, rate base, and a return on rate base at the applicable WACC as calculated under theFERC formula ratemaking framework. •There are various legal proceedings pending that could result in a change to the allowed base ROE forFERC -regulated transmission rate base under the MISO tariff. A 50 basis point change in theFERC -allowed base ROE would affectAmeren's andAmeren Illinois' annual net income by an estimated$10 million and$6 million , respectively, based on each company's 2020 projected rate base. •Ameren Illinois' electric distribution service performance-based formula ratemaking framework allowsAmeren Illinois to reconcile electric distribution service rates to its actual revenue requirement on an annual basis. If a given year's revenue requirement varies from the amount collected from customers, an adjustment is made to electric operating revenues with an offset to a regulatory asset or liability to reflect that year's actual revenue requirement, independent of actual sales volumes. The regulatory balance is then collected from, or refunded to, customers within two years from the end of the year. Unless extended, the formula ratemaking framework expires at the end of 2022. If not extended,Ameren Illinois would then be required to establish future rates through a traditional regulatory rate review, which would allow the use of a future test year, with the ICC. The decoupling provisions extend beyond the end of the formula ratemaking by law, which ensures thatAmeren Illinois' electric distribution revenues authorized in a regulatory rate review are not affected by changes in sales volumes. •In 2019, the ICC issued an order inAmeren Illinois' annual update filing that approved a$7 million decrease inAmeren Illinois' electric distribution service rates beginning inJanuary 2020 .Illinois law provides for an annual reconciliation of the electric distribution revenue requirement as is necessary to reflect the actual costs incurred and a return at the applicable WACC on year-end rate base in a given year with the revenue requirement that was reflected in customer rates for that year. Consequently,Ameren Illinois' 2020 electric distribution service revenues will be based on its 2020 actual recoverable costs, 2020 year-end rate base, and a return at the applicable WACC as calculated under theIllinois performance-based formula ratemaking framework. As ofSeptember 30, 2020 ,Ameren Illinois expects its 2020 year-end rate base to be$3.4 billion . The 2020 revenue requirement reconciliation will be collected from, or refunded to, customers in 2022. A 50 basis point change in the annual average of the monthly yields of the 30-year United States Treasury bonds would result in an estimated$9 million change inAmeren's andAmeren Illinois' annual net income, based onAmeren Illinois' 2020 projected year-end rate base.Ameren Illinois' allowed ROE for the first nine months of 2020 and 2019 was based on an expected annual average of the monthly yields of the 30-yearUnited States Treasury bonds of 1.5% and 2.5%, respectively. •InApril 2020 ,Ameren Illinois filed its annual electric distribution service formula rate update with the ICC, requesting a reduction of$45 million in its rates. An ICC decision in this proceeding is expected byDecember 2020 , with new rates effectiveJanuary 2021 . These rates will affectAmeren Illinois' cash receipts during 2021, but will not affect electric distribution service revenues, which will be based on 2021 actual recoverable costs, 2021 year-end rate base, and a return at the applicable WACC as calculated under theIllinois performance-based formula ratemaking framework. •InSeptember 2020 ,Ameren Illinois filed a revised request seeking to increase its annual revenues for natural gas delivery service by$97 million , which includes an estimated$46 million of annual revenues that would otherwise be recovered under the QIP and other riders. A decision by the ICC in this proceeding is required byJanuary 2021 , with new rates expected to be effective inFebruary 2021 .Ameren Illinois cannot predict the level of any delivery service rate change the ICC may approve, nor whether any rate change that may eventually be approved will be sufficient to enableAmeren Illinois to earn a reasonable return on investments when the rate changes go into effect. •Ameren Illinois earns a return at the applicable WACC on its electric energy-efficiency program investments.Ameren Illinois' electric energy-efficiency investments are deferred as a regulatory asset and earn a return at the applicable WACC, with the ROE based on the 69 -------------------------------------------------------------------------------- annual average of the monthly yields of the 30-year United States Treasury bonds plus 580 basis points. The allowed ROE on electric energy-efficiency investments can be increased or decreased by up to 200 basis points, depending on the achievement of annual energy savings goals. Pursuant to the FEJA,Ameren Illinois plans to invest up to approximately$100 million per year in electric energy-efficiency programs through 2024, and will earn a return on those investments. While the ICC has approved a plan consistent with this spending level through 2021, the ICC has the ability to reduce the amount of electric energy-efficiency savings goals in future plan program years if there are insufficient cost-effective programs available, which could reduce the investments in electric energy-efficiency programs. The electric energy-efficiency program investments and the return on those investments are collected from customers through a rider and are not included in the electric distribution service performance-based formula ratemaking framework. •InFebruary 2020 , the MoPSC issued an order approving a stipulation and agreement allowing Ameren Missouri to defer and amortize maintenance expenses related to scheduled refueling and maintenance outages at its Callaway Energy Center. Maintenance expenses associated with the fall 2020 refueling and maintenance outage are being deferred, as incurred, as a regulatory asset, and will be amortized after completion of the outage. Maintenance expenses will be amortized over the period between refueling and maintenance outages, which is approximately 18 months. Ameren Missouri's scheduled fall 2020 outage began in earlyOctober 2020 . Ameren Missouri expects to incur approximately$40 million in maintenance expenses related to this outage. During a scheduled outage, depending on the availability of its other generation sources and the market prices for power, Ameren Missouri's purchased power costs may increase and the amount of excess power available for sale may decrease versus non-outage years. Changes in purchased power costs and excess power available for sale are included in the FAC, which results in limited impacts to earnings. Prior to 2020, maintenance expenses for refueling and maintenance outages were expensed as incurred. •Ameren Missouri andAmeren Illinois continue to make infrastructure investments and expect to seek increases to electric and natural gas rates to recover the cost of investments and earn an adequate return. Ameren Missouri andAmeren Illinois will also seek new, or to maintain existing, legislative solutions to address regulatory lag and to support investment in their utility infrastructure for the benefit of their customers. Ameren Missouri andAmeren Illinois continue to face cost recovery pressures, including limited economic growth in their service territories, economic impacts of COVID-19, customer conservation efforts, the impacts of additional customer energy-efficiency programs, and increased customer use of increasingly cost-effective technological advances, including private generation and energy storage. However, over the long-term, we expect the decreased demand to be partially offset by increased demand resulting from increased electrification of the economy for efficiencies and as a means to address economy-wide CO2 emission concerns. Increased investments, including expected future investments for environmental compliance, system reliability improvements, and potential new generation sources, result in rate base and revenue growth but also higher depreciation and financing costs. Liquidity and Capital Resources •Our customers' payment for our services has been adversely affected by the COVID-19 pandemic, resulting in a decrease to our cash flow from operations. See the Results of Operations section above for additional information on our accounts receivable balances. Further, our liquidity and our capital expenditure plans could be adversely affected by other impacts resulting from the COVID-19 pandemic, including but not limited to potential impacts on our ability to access the capital markets on reasonable terms and when needed,Ameren Missouri's expected wind generation acquisitions, and the timing of tax payments and the utilization of tax credits. We expect to make significant capital expenditures to improve our electric and natural gas utility infrastructure, however, disruptions to the capital markets and the ability of our suppliers and contractors to perform as required under their contracts could impact the execution of our capital investment strategy. For further discussion on the impacts to our ability to access the capital markets and Ameren Missouri's expected wind generation acquisitions, see below. •InFebruary 2020 , Ameren Missouri filed an update to its Smart Energy Plan with the MoPSC, which includes a five-year capital investment overview with a detailed one-year plan for 2020. The plan is designed to upgradeAmeren Missouri's electric infrastructure and includes investments that will upgrade the grid and accommodate more renewable energy. Investments under the plan are expected to total approximately$7.6 billion over the five-year period from 2020 through 2024, with expenditures largely eligible for recovery under thePISA and the RESRAM. These investments exclude incremental renewable generation investment opportunities of 950 megawatts by 2024, which are included inAmeren Missouri's 2020 IRP discussed below. The planned investments beyond 2023 included in the five-year range above are based on the assumption thatAmeren Missouri requests and receives MoPSC approval of an extension of thePISA . As a part of its Smart Energy Plan, Ameren Missouri expects to build solar generation facilities, including utility scale facilities and nonresidential customer site facilities. InSeptember 2019 , Ameren Missouri filed for certificates of convenience and necessity with the MoPSC to build three solar-plus-storage facilities. InJune 2020 , Ameren Missouri withdrew its application for the certificates of convenience and necessity following intervenor feedback.Ameren Missouri is evaluating new solar generation facilities as a part of its integrated resource plan, which was filed inSeptember 2020 . Also in 2019, the MoPSC approved Ameren Missouri's Charge Ahead program, which provides incentives for the development of over 1,000 electric vehicle charging stations along highways and at various locations in communities throughout Ameren Missouri's service territory. The purpose of the program is to promote the development of electric vehicle charging infrastructure that will enable long-distance electric vehicle travel and encourage electrification of the transportation sector. 70 -------------------------------------------------------------------------------- •InSeptember 2020 , Ameren Missouri filed its 2020 IRP with the MoPSC, which targets cleaner and more diverse sources of energy generation, including solar, wind, hydro, and nuclear power, and supports increased investment in new energy technologies. The plan, which is subject to review by the MoPSC, also includes expanding renewable sources by adding 3,100 megawatts of renewable generation by the end of 2030 and a total of 5,400 megawatts of renewable generation by 2040. These amounts include the 700 megawatts of wind generation projects discussed below, which are expected to be substantially complete in 2020 and fully in-service in early 2021, and will support Ameren Missouri's compliance with the state ofMissouri's requirement of achieving 15% of native load sales from renewable energy sources by 2021, subject to customer rate increase limitations. Based on current and projected market prices for energy and for wind and solar generation technologies, among other factors, Ameren Missouri expects its ownership of these renewable resources would represent the lowest-cost option for customers. The plan also includes advancing the retirement dates of the Sioux andRush Island coal-fired energy centers to 2028 and 2039, respectively, which are subject to the approval of a change in the assets' depreciable lives by the MoPSC in a future regulatory rate review, the continued implementation of customer energy-efficiency programs, and the expectation that Ameren Missouri will seek an extension of the operating license for the Callaway Energy Center beyond its current 2044 expiration date. Ameren Missouri's plan could be affected by, among other factors: Ameren Missouri's ability to obtain a certificate of convenience and necessity from the MoPSC, and any other required approvals for the addition of renewable resources, retirement of energy centers, and new or continued customer energy-efficiency programs; the ability of developers to meet contractual commitments and timely complete projects, which is dependent upon the availability of necessary materials and equipment, including those that are affected by the disruptions in the global supply chain caused by the COVID-19 pandemic, among other things; the availability of federal production and investment tax credits related to renewable energy andAmeren Missouri's ability to use such credits; the cost of wind, solar, and other renewable generation and storage technologies; changes in environmental laws or requirements, including those related to carbon emissions; energy prices and demand; and Ameren Missouri's ability to obtain timely interconnection agreements with the MISO or other RTOs at an acceptable cost. •In connection with the 2020 IRP filing discussed above,Ameren established a goal of achieving net-zero carbon emissions by 2050.Ameren is also targeting a 50% CO2 emission reduction by 2030 and an 85% reduction by 2040 from the 2005 level. In order to meet these goals, among other things, the 2020 IRP includes retiring Ameren Missouri's Meramec andLabadie coal-fired energy centers at the end of their useful lives and advancing the retirement dates of its Sioux andRush Island coal-fired energy centers. As indicated in the 2020 IRP, the Meramec, Sioux,Rush Island , andLabadie energy centers are expected to be retired by 2022, 2028, 2039, and 2042, respectively. The next integrated resource plan is expected to be filed inSeptember 2023 . •Consistent with its 2020 IRP filing, Ameren Missouri entered into build-transfer agreements to acquire, after construction, an up-to 300-megawatt wind generation facility and an up-to 400-megawatt wind generation facility in 2019 and 2018, respectively. Delays to the original construction schedule have occurred in 2020 due to changes in supply and construction activities. During the third quarter of 2020, all remaining wind turbine deliveries for the up-to 400-megawatt project were completed. Based on the construction schedule,Ameren Missouri expects this project to be placed in-service by the end of 2020. At this time, due to manufacturing, shipping, and other supply chain issues in 2020, and, based on an updated construction schedule from the developer,Ameren Missouri expects the up-to 300-megawatt project to be partially placed in-service by the end of 2020, and the remaining portion of the project, representing approximately$200 million of investment, to be placed in-service in the first quarter of 2021. Ameren Missouri and the developer of the up-to 300-megawatt project continue to monitor the impact to this project's schedule. •Through 2024, we expect to make significant capital expenditures to improve our electric and natural gas utility infrastructure, with a major portion directed to our transmission and distribution systems. We estimate that we will invest up to$16.6 billion (Ameren Missouri - up to$8.4 billion ;Ameren Illinois - up to$8.0 billion ; ATXI - up to$0.2 billion ) of capital expenditures during the period from 2020 through 2024.Ameren's and Ameren Missouri's estimates include the 700 megawatts of wind generation projects discussed above, but exclude incremental renewable generation investment opportunities of 950 megawatts by 2024, which are included in Ameren Missouri's 2020 IRP. •Environmental regulations, including those related to CO2 emissions, or other actions taken by theEPA , could result in significant increases in capital expenditures and operating costs. Certain of these regulations are being challenged through litigation, or reviewed or recommended for repeal by theEPA , or new replacement or alternative regulations are being contemplated, proposed, or adopted by theEPA and state regulators. The ultimate implementation of any of these regulations, as well as the timing of any such implementation, is uncertain. However, the individual or combined effects of existing and new environmental regulations could result in significant capital expenditures, increased operating costs, or the closure or alteration of some ofAmeren Missouri's coal-fired energy centers. Ameren Missouri's capital expenditures are subject to MoPSC prudence reviews, which could result in cost disallowances as well as regulatory lag. The cost ofAmeren Illinois' purchased power and natural gas purchased for resale could increase. However,Ameren Illinois expects that these costs would be recovered from customers with no material adverse effect on its results of operations, financial position, or liquidity.Ameren's andAmeren Missouri's earnings could benefit from increased investment to comply with environmental regulations if those investments are reflected and recovered on a timely basis in customer rates. 71 -------------------------------------------------------------------------------- •The Ameren Companies have multiyear credit agreements that cumulatively provide$2.3 billion of credit throughDecember 2024 , subject to a 364-day repayment term for Ameren Missouri andAmeren Illinois , with the option to seek incremental commitments to increase the cumulative credit provided to$2.7 billion . See Note 3 - Short-term Debt and Liquidity under Part I, Item 1, of this report and Note 4 - Short-term Debt and Liquidity under Part II, Item 8, in the Form 10-K for additional information regarding the Credit Agreements.Ameren (parent)'s$350 million of senior unsecured notes maturing inNovember 2020 were repaid inOctober 2020 using a portion of the proceeds fromAmeren (parent)'sApril 2020 issuance of$800 million of senior unsecured notes. TheAmeren Companies have no material maturities of long-term debt until 2022.Ameren Illinois expects to issue long-term debt in the fourth quarter of 2020. With the recently completed Ameren Missouri debt issuance and availability under the Credit Agreements, as well as anticipated proceeds from the settlement of the forward sale agreement discussed below,Ameren , Ameren Missouri, andAmeren Illinois believe that their liquidity is adequate given their expected operating cash flows, capital expenditures, including the expected wind generation acquisitions, and financing plans. The Ameren Companies continue to monitor the effect of the COVID-19 pandemic on their liquidity, including as a result of decreased sales and increased customer nonpayment. To date, the Ameren Companies have been able to access the capital markets on reasonable terms when needed. However, there can be no assurance that significant changes in economic conditions, disruptions in the capital and credit markets, or other unforeseen events will not materially affect their ability to execute their expected operating, capital, or financing plans. •Ameren expects its cash used for currently planned capital expenditures and dividends to exceed cash provided by operating activities over the next several years. As part of its plan to fund these cash flow requirements,Ameren is using newly issued shares of common stock, rather than market-purchased shares, to satisfy requirements under the DRPlus and employee benefit plans and expects to continue to do so through at least 2024.Ameren expects these issuances to provide equity of about$100 million annually.Ameren also plans to issue incremental common equity to fund a portion of Ameren Missouri's wind generation investments through the physical settlement of the forward sale agreement discussed below. Additionally,Ameren plans to issue incremental equity of about$150 million annually from 2021 to 2024. Incremental renewable generation investment opportunities included in Ameren Missouri's 2020 IRP may result in the need for additional equity.Ameren expects its equity to total capitalization to be about 45% through the period endingDecember 2024 , with the long-term intent to support solid investment-grade credit ratings.Ameren Missouri andAmeren Illinois expect to fund cash flow needs through debt issuances, adjustments of dividends toAmeren (parent), and/or capital contributions fromAmeren (parent). •InAugust 2019 ,Ameren entered into a forward sale agreement with a counterparty relating to 7.5 million shares of common stock. The forward sale agreement can be settled atAmeren's discretion on or prior toMarch 31, 2021 . On a settlement date or dates, ifAmeren elects to physically settle the forward sale agreement,Ameren will issue shares of common stock to the counterparty at the then-applicable forward sale price. The forward sale agreement will be physically settled unlessAmeren elects to settle in cash or to net share settle. If physically settled,Ameren expects to receive between$540 million and$550 million upon settlement.Ameren expects to settle a portion of the forward sale agreement in the fourth quarter of 2020 to fund, in part,Ameren Missouri's wind generation investments discussed above. See Note 5 - Long-Term Debt and Equity Financings under Part II, Item 8, of the Form 10-K for additional information. •As ofSeptember 30, 2020 ,Ameren had$63 million in tax benefits related to federal and state income tax credit carryforwards, which will be utilized in future periods. •The Coronavirus Aid, Relief, and Economic Security Act is a federal law enacted inMarch 2020 . Provisions in the act include temporary changes to the utilization of net operating losses, deferral of the payment of the employer portion ofSocial Security taxes, and additional funding for customer energy assistance, among other things. As ofSeptember 30, 2020 , the implementation of the act by the Ameren Companies had no material impact to their financial statements. As ofSeptember 30, 2020 ,Ameren , Ameren Missouri, andAmeren Illinois have deferred$27 million ,$12 million , and$10 million , respectively, of the 2020 employer portion ofSocial Security taxes. Half of this deferral will be paid at the end of 2021 and the remaining half will be paid at the end of 2022. •In 2018, legislation modifyingMissouri tax law was enacted to decrease the state's corporate income tax rate from 6.25% to 4%, effectiveJanuary 1, 2020 . The effect of this tax decrease is reflected in Ameren Missouri's electric service rates that became effective onApril 1, 2020 .Ameren and Ameren Missouri do not expect this income tax decrease to have a material impact on net income. The above items could have a material impact on our results of operations, financial position, and liquidity. Additionally, in the ordinary course of business, we evaluate strategies to enhance our results of operations, financial position, and liquidity. These strategies may include acquisitions, divestitures, opportunities to reduce costs or increase revenues, and other strategic initiatives to increaseAmeren's shareholder value. We are unable to predict which, if any, of these initiatives will be executed. The execution of these initiatives may have a material impact on our future results of operations, financial position, or liquidity. REGULATORY MATTERS See Note 2 - Rate and Regulatory Matters under Part I, Item 1, of this report. 72
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