Ameren's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.21.14 | About: Ameren Corporation (AEE)

Ameren Corporation (NYSE:AEE)

Q4 2013 Results Earnings Conference Call

February 21, 2014, 10:00 AM ET

Executives

Douglas Fischer - Director, Investor Relations

Thomas R. Voss - Chairman, Chief Executive Officer and President

Martin J. Lyons - Chief Financial Officer and Executive Vice President

Warner Baxter - President

Maureen A. Borkowski - Chairman, President and Chief Executive Officer, Ameren Transmission Company

Analysts

Julien Dumoulin-Smith - UBS

Paul Patterson - Glenrock Associates LLC

Ashar Khan - Visium Asset Management

Paul Ridzon - KeyBanc Capital Markets

Michael J. Lapides - Goldman Sachs Group Inc.

Andy Bischof - Morningstar, Inc.

Dan Jenkins - State of Wisconsin Investment Board

Rajeev Lalwani - Morgan Stanley

Bill Appicelli - Nexus Asset Management

Gregg Gillander Orrill - Barclays Capital Inc.

Operator

Greetings, and welcome to Ameren Corporation's Fourth Quarter 2013 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Douglas Fischer, Senior Director of Investor Relations. Thank you, sir. You may now begin.

Douglas Fischer

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

Before we begin, let me cover a few administrative details. This call is being broadcast live on the Internet and the webcast will be available for one year on our website at ameren.com. Further, this call contains time-sensitive data that is accurate only as of the date of today's live broadcast. And redistribution of this broadcast is prohibited.

To assist with our call this morning, we have posted a presentation on our website that will be referenced by our speakers. To access this presentation, please look in the Investors section of our website under Webcasts and Presentations and follow the appropriate link.

Turning to page two of the presentation, I need to inform you that comments made during this conference call may contain statements that are commonly referred to as forward-looking statements. Such statements include those about future expectations, beliefs, plans, strategies, objectives, events, conditions and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated.

For additional information concerning these factors, please read the Forward-Looking Statements section in the news release we issued today and the Forward-Looking Statements and Risk Factors sections in our filings with the SEC.

Tom will begin this call with a review of 2013 earnings and accomplishments. Warner will follow with a discussion of our plans for executing on our strategy and our earnings growth outlook. Marty will conclude with discussions of 2013 financial results, 2014 guidance, 2015 earnings drivers and other financial matters. We will then open the line for questions.

Before Tom begins, I would like to mention that all per share amounts discussed during today's presentation, including earnings guidance, are presented on a diluted continuing operations basis unless otherwise noted.

Now here's Tom, who will begin on page four of the presentation.

Thomas R. Voss

Thanks, Doug. Good morning and thank you for joining us. Today, we announced earnings for 2013 of $2.10 per share, compared to $2.13 per share for 2012. On a weather-normalized basis 2013 results improved over the prior year's results reflecting increased rates for Missouri electric and Illinois transmission service and increased Illinois electric delivery service earnings under formula ratemaking.

The increase in weather-normalized earnings was achieved despite several negative impacts on year-over-year earnings comparison. These negative impacts included 2013 nuclear refueling outage expenses compared to no refueling outage in 2012; two 2013 charges related to regulatory decisions and the absence in 2013 of a benefit from 2012 regulatory decision. Marty will provide further details on earnings in a few minutes.

Moving to page five. Last year was a pivotal one in the history of Ameren, and I would like to highlight some of our key 2013 accomplishments. First and foremost, we exited our merchant generation business to focus exclusively on strengthening and growing our rate regulated utilities.

As we will highlight in a moment, we are very excited about our prospects with these businesses with divestiture of our Ameren Energy Resources business to an affiliate of Dynegy was completed in early December. Further, we closed the sale of our remaining operating merchant facilities, three gas-fired energy centers to an affiliate of Rockland Capital last month.

The second major accomplishment was State of Illinois' enactment of legislation for which we advocated that supports our plans to invest in energy delivery infrastructure for the benefit of our customers and create jobs. This included one law that constructively clarified certain elements of electric delivery formula ratemaking, and the second law that established the framework for timely gas delivery rate adjustments for qualified infrastructure investments.

Third, Ameren Transmission Company of Illinois attained a certificate of public convenience and necessity from the Illinois Congress Commission from portions of it's approximately $1.1 billion Illinois Rivers transmission project in 2013. And just yesterday the ICC issued a constructive order on rehearing, granting a certificate for all remaining portions of the project. Illinois Rivers is our largest current investment project and is a cornerstone of our plan to grow FERC-regulated investments.

Fourth, Ameren Illinois received a December order from ICC authorizing increased gas delivery service rates that reflect planned investments that will enhance safety and service to customers.

Fifth accomplishment of note was Ameren Missouri's successful implementation of the state's most expensive energy efficiency plan. This plan includes the range of programs and provides timely recovery of associated cost as well as the opportunity for us to earn the performance incentive to be collected after completion of the three year plan.

Finally, 2013 was another year of strong operating performance at our utilities as well as disciplined cost management. Combining Missouri and Illinois electric distribution reliability as measured by the number of interruptions per customer served state a company record for the third year in a row, and Missouri baseload energy center performance remained solid with equivalent availability of 83%. I believe each of these accomplishments positions us well to execute our strategy; a strategy that we believe will deliver superior long term value for our customers and shareholders in the future.

Speaking of the future, earlier this week we announced that I will retire from Ameren on July 1 of this year. In connection with my upcoming retirement, our Board named Warner Baxter President of Ameren and also elected him to the Board. On April 24, Warner will become CEO and on July 1 he is expected to be named Chairman.

Warner joined Ameren in 1995 and he was promoted to Executive Vice President and CFO in 2003. Since 2009 Warner has served as President and CEO of our largest subsidiary Ameren Missouri and remains so until successor's name. I know that many of you already know Warner and share my belief that he is focused on providing value for both our shareholders and customers.

Moving to page seven of our presentation, I will now turn the call over to Warner.

Warner Baxter

Thanks Tom, and let me begin by saying that I'm just very humble and honoured to follow you as the leader of Ameren. I have a few more comments to add at the end of our call, but I want to begin this discussion by saying that I'm very excited about the company's future.

I'm excited because over the last several years our entire Ameren team has positioned itself to execute a solid growth strategy that I believe will deliver superior long term value to our customers and superior returns to our shareholders.

This is the same strategy that we have outlined to you previously. We are committed to successfully executing that strategy in years ahead. In particularly, we remained committed to investing and operating our regulated businesses in a manner consistent with our existing and regulatory frameworks.

As a result, 2014 will be another year of optimizing our operating and capital spending within these regulatory frameworks including managing costs in a disciplined manner. It will also be another year of allocating increasing amounts of discretionary capital into businesses operating under constructive regulatory frameworks.

Ameren Illinois will continue to invest in electric and gas delivery service enhancements and our Illinois monetization action plan. In addition, Ameren Illinois is focused on continued investment in local transmission, reliability projects that benefit from FERC's formulaic ratemaking and allow return on investment. These investments are made possible by the constructive regulatory frameworks in place for these businesses.

We're also committed to pursuing rate increases when needed. That's why this year in Missouri plans to file an electric rate increase request to recover operating costs including higher net fuel costs and investments in energy infrastructure made for the benefit of our customers.

These investments include two significant capital projects, replacement of the reactor head at our Callaway Nuclear Energy Center and upgrades to the electrostatic precipitators in our coal-fired Labadie energy center. Both projects were scheduled to be completed in fourth quarter of this year.

The timing of the rate request is designed to minimize as much as possible under the existing Missouri regulatory framework, the regulatory life on these important projects. Our need to file this rate increase request squarely contradicts the February 12 filing by Noranda Aluminum with the Missouri of Pubic Service Commission alleging that the Ameren Missouri is over-earning and then its rates should be reduced.

Interestingly, on the same day, Noranda also filed with the commission a request that it's electric rates to be reduced outside of a traditional rate case, asking that a significant portion of our cost to serve them is shifted to our other customers for 10 years. We will vigorously appose these Noranda filings and look forward to defending our position before the Missouri Public Service Commission.

Moving onto another element of our strategy. This year we will continue our work to enhance regulatory frameworks. In Missouri, we have been engaged with customers, legislators, state officials and other stakeholders to build support for legislation that will reduce regulatory lag allowing us to increase discretionary investments in our aging Missouri energy infrastructure to enhance customer service and reliability and create jobs.

Yesterday Senate Bill 909 was filed. The primary objective of this bill is to modernize Missouri's regulatory framework to support investment in aging energy infrastructure to all the investor-owned utilities in the state. You should note this bill is different from the bill that was filed last year. After numerous discussions with key stakeholders after last year's session, it was determined that a more incremental approach to modernising Missouri's regulatory framework was appropriate.

As a result, this bill is targeted to address the regulatory lag associated with depreciation and the cost of capital for qualifying energy infrastructure investments, placement service between rate cases. This bill will not allow interim adjustments in customers' rates between rate cases, but it will allow utilities to differ and to cover the depreciation and cost of capital associated with infrastructure investments actually serving customers in the next rate case.

Robust consumer protections are included in the bill, including the 1% rate cap for every year between rate cases. The lead sponsor of this bill is Senator Parson and the bill's co-sponsor is Senator Kehoe. We appreciate Senator Parson's and Senator Kehoe's leadership on this important energy policy initiative for state of Missouri.

A third element of our strategy is to develop and execute on rate regulated opportunities for investments that benefit our customers, create jobs and grow rate base and earnings. Our ability to successfully execute this element of our strategy is best executed by the multi-value Illinois Rivers transmission project.

As Tom mentioned, just yesterday the ICC issued a constructive order on the hearing for this project, granting the certificate of public convenience and necessity for all portions of the project. It was a certificate that not been previously granted. Substation construction is already underway and line construction is expected to begin later this year.

Looking ahead, our planning efforts extend well beyond the next several years. We are actively focused on selecting and developing other investment projects in all our regulated businesses to provide customers with safe, reliable and environmentally responsible service not just for the near term, but over the coming decade.

Turning now to page eight of our presentation. Clearly outlined how we were investing in a manner consistent with our strategy. On the top of this page we list our rate regulated business by jurisdiction and summarized our allowed rates return on equity, speed of cost recovery and forecasted annual rate base growth. On the bottom half of the slide we show our plans to grow rate base by a projected 6% compound annual rate from year end of 2013 to 2014.

Importantly, you should note that we are allocating significant and growing amounts of discretionary capital to our FERC-regulated electric transmission businesses and Illinois deliverable utilities as these operate under formulaic and constructive regulatory frameworks. We have a solid list of transmission projects which are projected to increase our FERC-regulated transmission rate base by approximately 28% compounded annually over this period.

In addition, our Illinois Modernization Action Plan investments are expected to contribute to projected Illinois electric and gas delivery compound annual rate base growth of 5% and 7% respectively. Our Missouri rate base is expected to grow at a slower 2% compound annual rate. Over the last several years the regulatory framework in Missouri has improved, especially in terms of addressing regulatory lag associated with significant and volatile operating costs.

However, rate of progress must be made to improve the framework to support investment in our aging energy infrastructure. Further regulatory enhancement in Missouri would allow us to develop a pipeline of future Missouri investment opportunities that enhanced customer service and reliability and increased rate base growth.

This is the primary driver behind the legislation that was filed yesterday and discussed a moment ago. As the rate-regulated utility business we expect our planned rate base growth will drive earnings growth. In addition, we expect an increase in the FERC-regulated piece of the rate base pie from 7% at year end 2013 to 18% by year end 2018 will improve our jurisdictional diversity in our blended earn return on rate base.

Finally, parent and other expenses are expected to decline in 2014 and in 2015 for reasons Marty will discuss, further enhancing earnings in these years.

Moving now to page nine, we project a continued execution of our strategy will drive strong earnings growth in 2014 as well as over the next five years. We expect 2014 earnings per share to be in the range of $2.25 per share to $2.45 per share. A significant advance from the $2.10 per share earned last year. Marty will discuss the specific drivers of this 2014 earnings growth in a few minutes.

Further, we expect earnings per share to grow at a 7% to 10% compound annual rate from 2013 to 2018, rate better than the expected average of our regulated peers. This five-year outlook accommodates a range of treasury rate, sales growth, spending level and regulatory developments.

I would note that assuming treasury rates are flat with current levels over the period and all other assumptions are unchanged, our five-year earnings growth rate will fall slightly below the midpoint of our expected range.

Finally, we inspired to grow the dividend as earnings grow and expect our dividend payout to be between 55% and 70% of annual earnings.

Like Tom, I am pleased with the progress we have made to-date in implementing our strategy. And I firmly believe the company is well positioned to deliver superior value to our customers and shareholders as we continue to execute that strategy.

Now before I turn the call over to Marty, I want to express my appreciation for the patience from our customers who experienced power outages last evening, and those still without power this morning. Very storm with high winds roared to our service territory last evening and brought down trees and power lines.

Our crews worked throughout the night and this morning we had approximately 7,000 customers without power. We will have nearly all customers back on by the end of the day. And a special thanks to all of our dedicated co-workers who worked safely and diligently to restore power to our customers.

I'll now turn the call over to Marty.

Martin J. Lyons

Thank you, Warner. Good morning, everyone. Turning now to page 11 of our presentation. Today we did report earnings for the fourth quarter of 2013 of $0.19 per share compared to $0.05 per share for the fourth quarter of 2012.

There were several key drivers on the $0.14 per share earnings improvement. First, increased rates for Missouri electric and Illinois transmission service both effective in January of 2013 at a combined positive effect of $0.05 per share.

Second, higher Illinois electric delivery earnings recognized under formula ratemaking improved earnings by $0.04 per share compared to the year ago quarter. This improvement reflect the timing differences among each year's quarters, increased rate base and the higher allowed return on equity as a result of higher 30-year treasury bond yields.

Third, winter weather was colder in the fourth quarter of 2013 compared to the fourth quarter of 2012 when weather was closer to normal. This colder weather increased earnings by an estimated $0.04 per share compared to the prior year period.

Fourth, an increase in weather-normalized electric and gas sales volumes boosted the earnings comparison by $0.03 per share. These positive factors will partially offset by a fourth quarter 2013 charge of $0.04 per share related to the ICC's disallowance of certain debt redemption cost in December electric and gas delivery rate orders.

Moving to page 12, in the discussion of full-year 2013 results. As Tom previously mentioned, earnings for 2013 were $2.10 per share compared to $2.13 per share for 2012. However, on a weather-normalized basis result increased to approximately $2.08 per share in 2013 from approximately $2.04 per share in 2012. This non-GAAP comparison reflected the fact that earnings for both years were boosted by abnormal weather in the amounts noted on this page.

Factors favourably affecting the comparison of 2013 earnings to prior year results included previously mentioned Missouri electric and Illinois transmission rate increases which lifted earnings by a combined $0.29 per share. These January 2013 rate increases provided recovery of and returns on infrastructure investments made to serve customers.

In addition, higher Illinois electric delivery earnings recognized under formula ratemaking boosted results by $0.06 per share, reflecting infrastructure investment, a higher allowed return on equity due to higher 30-year treasury yields and the absence in 2013 of 2012 contribution required to implement formula ratemaking.

The increase in weather-normalized earnings for 2013 as compared to 2012 was achieved despite several notable drags on the comparison. These drags included 2013 nuclear refueling outage expenses for the Callaway Energy Center of $0.10 per share, compared to 2012 when there was no refueling outage, and two 2013 charges in the absence of the 2012 benefit are related to regulatory decisions which had a combined negative effect of $0.18 per share.

Turning now to page 13, as Warner mentioned, we expect 2014 earnings to be in the range of $2.25 to $2.45 per share. Factors expected to positively impact 2014 earnings compared to 2013 include the absence of the previously discussed 2013 charges related to regulatory decisions.

In addition, Illinois electric delivery earnings are expected to increase under formula ratemaking, driven by planned investments to provide enhanced service to customers and result in rate base growth, as well as the higher allowed return due to expected higher treasury yield. We estimate Ameren Illinois 2014 year-end electric delivery rate base to be approximately $2.2 billion.

Further, the 2014 formula midpoint allowed return on equity is estimated to be 9.9%, which incorporates a forecasted 2014 average 30-year treasury yield of 4.1% compared with the 2013 average yield of 3.45%. The 2014 treasury yield forecast was based on the Blue Chip consensus estimate as of February 1, 2014.

The year-over-year earnings comparison will benefit from an increase in Illinois gas delivery rates that became effective at the beginning of this year. We also expect higher transmission earnings form Ameren Illinois and ATXI under forward-looking formula FERC ratemaking reflecting our growing investments in these businesses. The combined Ameren Illinois and ATXI average transmission rate base has projected to grow to approximately $900 million, up from approximately $600 million in 2013.

Another driver of expected 2014 earnings growth compared to 2013 is a decline in parent company and other cost. We project that these costs will decline to approximately $0.10 per share in 2014 due to refinancing of an 8.875% parent company debt issue that matures in May and a reduction of operating cost.

Turning now to page 14. These expected positive factors are projected to be partially offset by a return in normal weather, reducing earnings by an estimate of $0.02 per share. In addition, we expect weather-normalized electric sales volumes to decline in both Missouri and Illinois compared to 2013, reflecting the effects of our energy efficiency plans in both states and the ongoing phase out for incandescent light bulbs and the replacement with more energy efficient lighting alternatives.

It's important to note that the earnings impact of reduced Missouri electric sales volumes due to our energy efficiency programs will be mitigated by revenue recovery based on programs under our Missouri Energy Efficiency Investment Act plan. Further, the earnings impact of lower electric sales volumes in Illinois is limited by the 50 basis point colour around the allowed ROE.

Other factors expected to negatively effect 2014 earnings compared to 2013 include increases in other operations and maintenance, depreciation and property tax expenses for Missouri and Illinois gas delivery service. Our 2014 earnings guidance incorporates an effective consolidated income tax rate of approximately 38.5%. Finally, the earnings guidance incorporates average basic common shares of $242.6 million, unchanged from the prior year level.

Turning to page 15 of our presentation, I would like to discuss 2015 earnings drivers. Factors expected to positively impact next year's earnings include new Missouri electric rates effective in mid-2015. In addition, Illinois electric delivery earnings are expected to increase under formula ratemaking as a result of rate base growth and a higher allowed ROE due to a forecasted increase in 30-year treasury bond yields.

Ameren Illinois and ATXI transmission earnings are also expected to increase, reflecting FERC formula ratemaking and rate base growth. Further, the earnings comparison should be positively affected by the absence of the Callaway Energy Center nuclear refueling outage and related expenses since no refueling outage is scheduled for 2015.

Finally, we expect a further decline in parent and other cost, reflecting a full year's benefit from the 2014 refinancing of parent company debt. These expected positive factors are projected to be partially offset by increased Missouri operations and maintenance expenses, excluding the benefit of no refueling outage as well as increased Missouri depreciation property tax and interest cost.

Before we conclude our discussion of our earnings outlook, I'll remind you that our 2014 guidance as well as the 2013 through 2018 earnings growth expectations Warner discussed, are subject to the risks and uncertainty outlined or referred to in the forward-looking statement section of today's press release and our SEC filings.

Moving now to page 16. Here we provide our 2014 cash flow guidance. As shown on this page, we calculate free cash flow by starting with our cash flows from operating activities, subtracting from our capital expenditures, adding other cash flows from investing activities and subtracting dividends.

For 2014 we anticipate negative free cash flow of approximately $800 million. On the right side of the page we provide a breakdown of our $1.825 billion of planned 2014 capital expenditures including substantial investments in businesses which operate under constructive regulatory frameworks.

FERC-regulated transmission and Illinois electric and gas delivery service. I call your attention to the two footnotes on this page. First, the other cash flows from investing activities includes approximately $150 million of cash proceeds in the previously mentioned January 2014 sales of three merchant gas-fired energy centers. These cash proceeds are equal to Ameren's 2013 put option related payments to a former affiliate that was included in the divestiture of the Ameren Energy Resources business to Dynegy as well as sell related cost.

Second, the dollar amount of dividend shown on this page incorporates the current common dividend rate. Of course, the amount and timing of common dividends are considered by Ameren's Board of Directors on a quarterly basis.

In terms of financing we plan to fund the 2014 negative free cash flow with a mix of long-term and short-term borrowings.

Turning to page 17, I would like to provide an overview of our $8.3 billion of planned regulated capital expenditures for the 2014 through 2018 period. The expected funding sources for these infrastructure investments are listed on this page. In particular, we expect to benefit from approximately $1.3 billion to $1.4 billion of changes in differed tax and tax assets over this five-year period.

The expected changes in differed taxes are driven primarily by our planned capital expenditures. The tax assets include at year end 2013 approximately $600 million consisting of federal and state net operating loss carry-forwards, federal and state income tax credit carry-forwards and expected income tax refunds and state tax over payments.

Approximately $450 million of this total is driven by historical merchant generation related tax losses. These tax assets are expected to be realized into 2016. As I mentioned earlier, we do not expect to issue any additional common shares in 2014. Should we decide to issue additional equity at some point over this five-year period, we would expect to do so by issuing new shares for dividend re-investments in 401-K plans.

We’re committed to funding our capital expenditures in a manner that maintains solid credit metrics and this is reflected in our capitalization target of around 50% equity.

Turning to Page [18], I will summarize, well 2013 earnings per share declined on a reported basis, they improved on a weather-normalized basis despite several negative impacts on the year-over-year comparison.

We’ve completed our exit from the merchant generation business and are focused exclusively on strengthening and growing our rate-regulated utilities. We have a well-defined strategic plan that is aligned with our regulatory frameworks and designed to enhance customer service and reliability.

Our investment plan coupled with disciplined cost control is expected to lead the solid earnings per share growth in 2014 and we expect earnings per share to grow at a 7% to 10% compound annual rate from 2013 to 2018, a rate better than we expected average of our regulated peers.

Further aiming $1.60 per share annualized dividend rate provides investors with the yield of approximately 4.1%.

Finally, we aspire to grow our dividend as earnings grow and expect our dividend payout ratio to be between 55% and 70% of annual earnings.

That concludes our prepared remarks. We now invite for questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will now be conducting our question-and-answer session. (Operator instructions)

Our first question is coming from the line of Julien Dumoulin-Smith with UBS. Please with your question.

Julien Dumoulin-Smith - UBS

Hi, good morning.

Martin J. Lyons

Good morning Julien.

Julien Dumoulin-Smith - UBS

So, first quick question kind of a high level one. Can you perhaps more precisely address the disproportion at EPS growth versus the prior rate base CAGR you’ve been talking about? Can you kind of delineate the drivers of that?

Martin J. Lyons

What are trying to reconcile the rate base growth to what?

Julien Dumoulin-Smith - UBS

To your EPS CAGR.

Martin J. Lyons

Sure.

Julien Dumoulin-Smith - UBS

How would you guess the 10% if you will?

Martin J. Lyons

Yeah, sure Julien. I think we provided these building blocks in the past and I’ll go through them again. I mean the rate base growth is the foundation. But then when you look at some of these one-items that I prefer or the regulatory impacts this past year, these are the charges that I outlined. The fuel adjustment cost charge that we had, the ICC redemption cost disallowance.

You back out some of those, you build up your 2014 earnings then you can talk about and you look that reduction and compare other cost where we had about if you look at the income statement or look in the staff pages on the other.

We had about $0.18 of drag this past year from those other costs which as I said on the call, we expect to get down to about $0.10 in 2014 and then you can realize some further savings into 2015.

Then you think about where our rate base growth is going as we transition our rate base to a heavier emphasis on FERC-regulated transmission. You again and get a blended average return that's even higher and those are really the building blocks that get you up into that 7% to 10% range. And then add on top of that whatever you may for expected rising 30-year treasury yields over that period of time.

But Julien those are the building blocks we’ve been providing and I think that 7% to 10% growth range that we’ve given is very much in alignment with the building blocks that we provided.

Julien Dumoulin-Smith - UBS

Great. And perhaps if you could elaborate a little bit more about the Illinois gas opportunity, it seems as if you’ve driven of the CAGR a little bit from your last slide deck as best I can tell can. You talk about the timing on timing and growth out of that. And whether that was incorporated within your current CAGR?

Martin J. Lyons

It really is incorporated within that current CAGR to the extent that in this five-year period, we plan to enhance the investment in the gas portion of our business. If you do look at the CapEx that we historically have provided which is 13 to 17 and then CapEx in this period 14 to 18.

The overall I would say amount of capital expenditures of those five-year periods are about the same. But as you note there's been a bit added to the gas portion of the business and that really does reflect what we talked about last year that to the extent that we had a favorable legislation passed in Illinois, it would serve as the basis to invest more in that area for safety and reliability and that's been added to the mix.

Julien Dumoulin-Smith - UBS

Great. And then sorry to keep going here, but last quick question on refining the debt here, what's kind of your thought process if you will in terms of size and I suppose how does that fit into your financing plan, what's your target capitalization if you can kind of remind us again as well?

Martin J. Lyons

Yes, sure so maybe I’ll talk about that overall. We had in one of our slides target capitalization of around 50%. And on slide 16 of our materials, we laid out our free cash flow for the year. This year we’ve got negative free cash flow of about $800 million that's forecast.

In terms of debt maturities, Julien, I think the one you're referring to is the Ameren long-term debt issue of $425 million that comes due in May and provides us with a nice refinancing opportunity.

We’ve also got a maturity in Missouri, a little over $100 million, and in January, we actually did move to redeem some debt at Ameren Illinois of about $160 million. So, when you add those things together, that's total funding needs of about $1.5 billion.

We plan to tackle that with a couple of debt offerings in Illinois this year which will -- we estimate will total about $600 million of long-term debt financings. We're planning the Missouri financing of about $350 million.

And then with respect to the Ameren parent both for the debt maturity as well as some of the funding that Ameren will be providing to ATXI as it begins to build its transmission project, the Illinois Rivers project we plan at Ameren Corp. to have a mix of long-term and short-term borrowings.

At this point, we're expecting a long-term offering that's something less than the current amount of the long-term debt that's out of Ameren Corp. So, something less than that $425 million.

Julien as you think about the capital expenditures that we show on slide 16 and we think about the where we’re going to issue that long-term debt as I said of $600 million at Ameren Illinois, $350 million at Missouri. When we look at the capital expenditure, it’s pretty clear obviously that we have about $760 million in Ameren Missouri.

At Ameren Illinois, we have $530 million for the energy delivery businesses, but it's also important to remember that a good portion of our transmission build is also within Ameren Illinois.

So, when you break that $510 million of FERC transmission, what you find is about -- in addition to the $530 million, I guess overall at Ameren Illinois we've got about $800 million of capital expenditures at Ameren Illinois.

So, when you think about where we're issuing that debt it’s really at Ameren Illinois and Ameren Missouri for the most part of this coming year. There at the end of 2013, our equity ratios and the cap structures when you get the 10-K and you look at that it was 53% or north or 53%, both of those legal entities. So, what will happen is we issue some of these debt is those equity ratios will trend down somewhat into the approximately 51% kind of range.

And then overall, at Ameren, as you saw on our stats page, we’re a little above 50% in terms of our equity content right now. I would expect that as we fund ATX and build that out, we should slip maybe a little below the 50%, but then trend back to our target ratio over time.

Julien Dumoulin-Smith - UBS

Great. Thank you. Very thorough.

Operator

Thank you. The next question is coming from the line of Paul Patterson with Glenrock Associates. Please proceed with your question.

Paul Patterson - Glenrock Associates LLC

Good morning.

Martin J. Lyons

Good morning.

Paul Patterson - Glenrock Associates LLC

Congratulations on the promotion and the retirement guys?

Martin J. Lyons

Thank you, Paul.

Paul Patterson - Glenrock Associates LLC

I wanted to touch base with you on just the EPS growth rate on slide 15 and make sure I sort of understand this. The treasury yield of 4.5% in 2015 is there any sensitivity you can give us in terms of what the -- what that -- if we don't get interest rate sensitivity in terms of what your growth rate might be all things being equal?

Martin J. Lyons

Paul you're looking at particular slide 15 in 2015, earnings are just kind of overall--

Paul Patterson - Glenrock Associates LLC

Whatever you can give us. You know I’m saying I realize there a lot of moving parts.

Martin J. Lyons

Yeah. What we try to provide in terms of the longer-term guidance was just sort of a benchmark or an anchor point if you will. In Warner’s talking points, one of the things he said is that all of the things being equal in our plan if treasury rates were to stay constant, we would expect to deliver an earnings growth rates that was slightly below the midpoint of the range that we provide of 7% to 10%.

It’s not necessarily our belief that treasury yields are going to stay at the current levels, but wanted to provide that as a bit of an anchor point. Otherwise within that 7% to 10% growth, Paul as we talked about, we think it accommodates a range of treasury rate outcomes if you will or sales growth levels, spending levels, whether the capital or O&M and regulatory developments. We feel like again, Paul the building blocks are the ones they laid out earlier. It’s the rate base growth, it’s the reduction of parent another cost, it’s the capital allocation to FERC-regulated transmission. Those are the things that are really going to drive the growth that we've got outlined.

Paul Patterson - Glenrock Associates LLC

Okay. And these SB 909 is the implementation of that sort of necessary for this growth rate or--?

Martin J. Lyons

No, I wouldn’t say it's necessary for this growth rate. I think the outcome of that however; I’d said is baked into our overall range of potential outcomes in terms of the 7% to 10%.

Paul Patterson - Glenrock Associates LLC

Okay. And then just finally on the transmission build out. I know you guys are no longer a merchant, which is kind of nice, but can you tell us how you think that these transmission projects might impact power flows or congestion or what have you in terms of wholesale prices and perhaps how you’d like to benefit your customers or anything else you could elaborate on that?

Martin J. Lyons

Yeah, I don't know that we'll get into all those specifics, but Maureen Borkowski is the Head of Transmission business was here with us this morning and I’ll give her the opportunity to make, if she has any.

Maureen A. Borkowski

Yes, good morning with regard to the multi-value project that Ameren Transmission company at Illinois is building, those were approved by MISO for multiple reasons, basically to improve reliability, to enhance the accessibility of renewable resources, particularly wind, but also to improve the efficiency of the power market and that equates to congestion relief in the marketplace. So, yes that is the focus of those projects is to improve the efficiency of the markets as well as reliability of the customers.

Paul Patterson - Glenrock Associates LLC

Could you give us a sense of basis differential changes are nothing like there were any quantification on that sort of latter point?

Maureen A. Borkowski

I’m sorry, but it really don't have any information like that. Again MISO did a pretty extensive analysis to define what their entire portfolio across MISO footprint, what savings those might be, but I don't have anything specific to our system.

Paul Patterson - Glenrock Associates LLC

Okay. Thanks a lot.

Operator

Thank you. The next question is coming from the line of Ashar Khan from Visium. Please proceed with your question.

Ashar Khan - Visium Asset Management

Good morning and congrats. I wanted to go, more on this dividend payout you gave a range and if I do my math correctly, next year we’ll be at the lower portion of the payout. So I was just trying to see how is the Board thinking this year or next year?

I know you declared the dividend earlier this week or last week, is it something done for this year or is there a quarter we should look at some people have a quarter in which the increase the dividend every year?

Or how is the board looking at the dividend? Is it done for this year that we have the same rate and we look for next year? Or can it be reviewed later this year? Or could you just tell us the deliberations the Board might've gone through as you went through this new outlook of yours and the dividend staying constant as you declared it at the end of last week?

Thomas R. Voss

Yes, this is Tom Voss. I think we mentioned previously that the 55% to 70% payout ratio is what we hope for and we're somewhat at the high end of that this year. But the Board is very much engaged every quarter and looking at our earnings and our projections and they review it. And I would say that as we continue to grow earnings over this period, we hope to continue to grow our dividend.

Ashar Khan - Visium Asset Management

Okay. Okay. Thank you.

Operator

Thank you. The next question is coming from the line of Paul Ridzon with KeyBanc Capital Markets. Please proceed with your question.

Paul Ridzon - KeyBanc Capital Markets

Good morning.

Martin J. Lyons

Good morning.

Paul Ridzon - KeyBanc Capital Markets

Senate Bill 909 if that were to pass, would that alter your 2% Missouri rate base CAGR?

Warner Baxter

Hey, Paul this is Warner. I think in the bigger picture what we have said, if we have constructive legislation passed that supports investment in Missouri, we would put more money to work. And so if you look at SB 909, which is a little bit than that we saw last year, we step back -- we think we would have the opportunity to put the work incremental investments in Missouri of say $50 million to $100 million per year should that legislation get passed in its current form. So simple answer to your question is yes, we do believe that we could put more money to work and we think it's absolutely a very good thing for the State of Missouri and its customers.

Paul Ridzon - KeyBanc Capital Markets

Would you borrow them from another bucket or would that the incremental capital?

Martin J. Lyons

Paul, this is Marty on that one. I think that really too soon to tell on that particular point. I will say that as we think about managing our overall capital expenditures, we're certainly mindful of impacts on customers rates, we're thinking about impacts on overall funding needs and we're also thinking about building a pipeline of investments beyond the five-year period that we've presented.

So, too soon to tell, but that is certainly a possibility that if we added investment opportunities there in the short-term in Missouri that other investment opportunities may slide to beyond the period presented. But again, really too early to say that. We'll get through this legislation -- legislative season and see where we’re at and make those decisions in due course.

Paul Ridzon - KeyBanc Capital Markets

Okay. Is your guidance -- have you baked anything in to that for year-to-date weather?

Martin J. Lyons

No. Our guidance for 2014 is based on normal weather.

Paul Ridzon - KeyBanc Capital Markets

And then lastly, given your tax position, do you expect to be a cash tax payer 2016?

Martin J. Lyons

As I mentioned earlier on the call, we expect that the NOLs and the tax credit carry-forwards that we have to provide us a benefit out through the 2016 timeframe.

Paul Ridzon - KeyBanc Capital Markets

Through or to, sorry?

Martin J. Lyons

Into 2016.

Paul Ridzon - KeyBanc Capital Markets

Into. Okay. Thank you very much.

Operator

Thank you. Our next question is coming from the line of Michael Lapides with Goldman Sachs. Please proceed with your question.

Michael J. Lapides - Goldman Sachs Group Inc.

Hey guys, congratulations on a good year and a lot of strong accomplishments during 2013. I want to ask just a question about 2014 guidance, which if I just use the midpoint of your guidance range implies almost like 11% or 12% year-over-year growth and then therefore its I think about 7% to 10% implies a much lower growth rate after 2014, am I thinking about that the right way? Am I missing something and how should we think about the puts and takes on that?

Martin J. Lyons

Well, you're right the growth between 2013 and 2014 is certainly significant and it’s driven by the items I highlighted. But Michael obviously you can do the math. As you look at our 2014 guidance range and you look out to the overall growth we've given out period 2018. But if you take that midpoint of 2014 and project out, you still got a really solid growth rate of around 6% to 9.5% in terms of where that range ends up. So, you're right there was a solid amount of growth in 2013 to 2014 and it moderate somewhat from there, but still very solid growth rate off 2014.

Michael J. Lapides - Goldman Sachs Group Inc.

And it strikes me that you're a few years from a dividend policy question. You’re a few years away from -- like you would get if I just use midpoint of guidance, you would get to the middle point of your dividend growth rate -- your dividend payout ratio in 2015 at the current dividend level like $1.60 at I don't know $2.50 or so of earnings in 2015 and I know you're not really giving 2015 guidance I'm just slapping the growth rate on 2014. That still gets you into the low 60s payout ratio, but by 2016 or 2017, your expectation as to grow the dividend with earnings growth?

Martin J. Lyons

Michael just to reiterate or repeat what Tom said, which is that as we grow the earnings. We aspire to be able to grow the dividend. We're not giving out I'd say an expected timing or amount of growth in the dividend. But as Tom has previously said on prior calls, we don't necessarily think that we need to get into the bottom end of the range before we would grow the dividend.

There are a number of factors that are considered. Tom laid those out a few moments ago. Just in terms of our earnings outlook, but also our capital funding, our cash flows, things of that nature. A number of those things are laid out as you've seen in our 10-Ks and 10-Qs that the Board considers, but -- I guess that's about what about to say on that.

Michael J. Lapides - Goldman Sachs Group Inc.

Okay. And then last question just on capital spending because you're investing a good amount of capital in concurrent return businesses like FERC-regulated transmission. Of the transmission investment for 2014, how much of that is ATXI versus Ameren Illinois?

Martin J. Lyons

Let's see if I can do my math here real quick. I think it's about that $510 million -- I think it’s about $270 million is Ameren Illinois and the remainder is ATXI.

Michael J. Lapides - Goldman Sachs Group Inc.

Got it. So, not quite 50/50, but pretty close. Cool. Guys, thank you. I appreciate you taking my questions. And once again congrats on a great 2013.

Martin J. Lyons

Thank you, Michael.

Operator

Thank you. Our next question is coming from the line of Andy Bischof of Morningstar Equity Research. Please proceed with your question.

Andy Bischof - Morningstar, Inc.

Hi good morning. I got just a few follow-on questions in terms of Missouri. I guess in terms of reducing lag, are your efforts solely on Bill 909 or are there other initiatives that we should be thinking about there?

And then in terms of the potential $50 million to $100 million capital spend, can you provide us a little bit more color on what with these investments are?

Warner Baxter

Andy, this is Warner. With regard to Missouri, we're not putting all of our marbles into legislation. We have been working for years to align our spending and to be consistent with the existing regulatory framework in Missouri and we've been successful and that focus, that relentless focus on disciplined cost management will continue.

So, there are a host of initiatives that we’ve taken and we'll continue to take including things like lean initiatives that are being taken place across our enterprise, coupled with again disciplined management of our discretionary capital.

And as we discussed a little bit earlier, you put those factors together, we continue to believe that we’ll be able to align our spend with existing regulatory framework. Of course, as we said earlier, we're going to be going in for an electric rate case later this year to true up our rates as well as cost. And so that obviously will help and certainly help mitigate the regulatory lag that we're experiencing associated with the infrastructure investment in our enterprise.

That's probably one of the biggest sources of regulatory lag that we have today and indeed SB 909 will -- is squarely about trying to address the regulatory lag associated with those investments. And Marty I think there's a question on capital investment. Andy if you could follow-up make sure --

Martin J. Lyons

He was just asking what kinds of projects might be involved in that, Warner.

Warner Baxter

So, when you look at our existing spend this year we have two major projects that we discussed a little bit earlier, the Callaway reactor vessel head as well as the precipitator project. We also have some new substations that we have to bring on. They are at their aging infrastructure and so we have to address some of those. As well is we have renewable energy project. The largest solar facility investor own facility in the State, we're going to get that done by the end of the year as well.

So, looking ahead, we see that we have a need to invest incremental monies, discretionary monies into things like substations into things like our power plants, certainly in things trying to automate our system in a better way, and ultimately we'll have to address -- and maybe even meters that we use in Missouri. So, we see a real need in investing in our aging infrastructure and that's what SB 909 is all about to try and do that on a -- in a more timely fashion.

Andy Bischof - Morningstar, Inc.

Great. Thank you. And congrats on the promotions and retirement.

Warner Baxter

Thank you. Thank you, Andy

Martin J. Lyons

Thank you.

Operator

Thank you. Our next question is coming from the line of Dan Jenkins with State of Wisconsin Investment Board. Please proceed with your question.

Dan Jenkins - State of Wisconsin Investment Board

Hi, good morning.

Martin J. Lyons

Good morning.

Dan Jenkins - State of Wisconsin Investment Board

So, I was wondering you mentioned -- I think you're looking for declines in sales volumes for 2014, but it looks like you had slight increases for 2013. So, if you give a little more color on just what you're seeing in customer growth and demand, particularly residential customer growth and then on the industrial side for demand in your service territories?

Martin J. Lyons

Sure, Dan, this is Marty. Thanks for calling and thanks the question. You're right in terms of what we saw this past year. Of course the sales numbers that you see are -- on the stats page are affected by weather, but stripping out weather.

We did see some growth this year in both Missouri and Illinois in residential and commercial categories. Overall, on a weather-normalized basis, we estimate that residential and commercial sales grew about 0.6%. Coming into the year that's about where we expect in somewhere between 0% and 0.5% of growth and so sort of towards the upper end of that range at 0.6%.

We actually did see customer counts in both Missouri and Illinois go up in terms of residential and commercial customer count. So, that was certainly positive in 2013 versus the prior year. Overall, on industrial, we did see a decline in sales of about 3.2% overall.

Missouri, which was positive up about 1% in 2013 in industrial, so that was a good sign while Illinois was down about 6%. And I spoke to that of the earlier calls that we've seen some weakness in Illinois in the manufacturing sector in metals and equipment, those types of things and unfortunately, in Illinois we've been seeing employment -- unemployment recently bump up while national average has been coming down and we've also seen unemployment in Missouri coming down.

So, Illinois unfortunately in recent months have seen unemployment-wise and industrial sales wise to be trending in a negative direction. Missouri seems to be trending in a little bit of a positive direction.

But looking forward to 2014, what we're expecting is a decline as we mentioned in the call in residential and commercial sales. And while we expect to see still slow improvement in the economy and jobs, housing starts et cetera, we do believe that both federal energy efficiency as well as state energy efficiency measures reduced sales and have -- and impacted reducing sales in 2014 compared to 2013.

And as I mentioned on the call and our prepared remarks, it is important to remember that in Missouri, we do have an energy efficiency program whereby we’re -- made hole for the cost of our energy efficiency programs and even provided some incentives with regards to that.

In 2013, we estimated that had an impact on our residential sales of about 0.8% and about 0.1% on commercial. And then as I said, we’re -- made hole for the cost of that. So as you think about 2014, you think about those impacts of the residential and commercial sales going down. They are mitigated in Missouri by what we call our MIA funding programs. As well as in Illinois, it's important to remember that under our formulaic rates, there’s a 50 basis points color around the earned ROE.

With respect to industrial sales, we’re expecting really be down across the two states about 0.7%. We’re expecting to see declines in both states. In Missouri, it’s somewhat specific to some expected customer load that we do expect to see go away. And then in Illinois, I would say its -- continued concerns about general economic weakness.

Dan Jenkins - State of Wisconsin Investment Board

Okay. And then on Missouri, given that you're planning to file for a rate increase. I was wondering if you be able to what your ROE in Missouri in 2013 and the year-end rate base?

Martin J. Lyons

I don't really have the year-end rate base. I think you can go ahead and calculate the ROE I think by referencing the number on the stats page. I don't have that in front of me either, the exact net income. But as we look ahead, as we mentioned, we do see the need for a rate filing which we expect to make in July.

I think in our prior calls we’ve said in the second half and as I've mentioned before really a primary driver of that filing that we plan to make in July has to deal with a significant capital expenditures that we're making in Missouri.

We talked about the electrostatic precipitators at Labadie; we talked about the Callaway reactor head that Warner just mentioned a little while ago, some of the solar installations that we're doing in Missouri as well.

I think if you want to look at rate base, I think the closest is to maybe go back to page eight of our slides and we do have a year-end rate base pie where we break some of the information out. And I think you can find an estimate of the Missouri rate base at the end of 2013 there.

Dan Jenkins - State of Wisconsin Investment Board

Okay. And then I just wanted to add my congratulations to Tom and Warner on their upcoming changes.

Warner Baxter

Thank you.

Thomas R. Voss

Thank you, Dan. I appreciate that.

Operator

Thank you. Our next question is coming from the line of Rajeev Lalwani with Morgan Stanley. Please proceed with your question.

Rajeev Lalwani - Morgan Stanley

I had just two questions on Missouri. The first can you talk about the impact the Noranda complaints may or may not have an upcoming rate case? And the second, when you see the headwinds associated with getting SB 909 past?

Warner Baxter

Hi. This is Warner. I think with regard to the Noranda complaint case, we don't it having any impact on our ability to file and execute the rate case that we plan on doing in July. We were clear last November that we needed to file rate case in the second half and now we’ve sharpen our pencil and it’s going to be July and we plan to execute that in a timely fashion. And I'm sorry you had a second question that was?

Rajeev Lalwani - Morgan Stanley

The major headwinds you see with SB 909?

Warner Baxter

The reality is this as you know the legislative process; it's a dynamic process, so ultimately is always difficult to predict the prospects of the passage of any bill. I'll tell you what I do know. I do know that Missouri must make progress and really modernizing its framework to support investment. And if the message that is understood by many key leaders in the legislature and frankly, many stakeholders around the state and so as we continue to have more discussions with the general assembly in other key stakeholders around the state about SB 909.

Our message is this is an important step forward. As I said before, there’s an incremental step, it’s an important step forward and it can start making progress on the aging infrastructure in Missouri.

So, I'm not going to be able to hand cap. I’m -- we do believe that there will likely be some groups that will oppose the bill, but that's probably true with every bill. But one thing I can tell you our team is going to be very focused on this legislation over the next several months.

Rajeev Lalwani - Morgan Stanley

Great. Thank you. And good luck.

Warner Baxter

Thank you.

Operator

Thank you. Our next question is coming from the line of Bill Appicelli with Nexus Asset Management. Please proceed with your question.

Bill Appicelli - Nexus Asset Management

Hi, good morning.

Martin J. Lyons

Hey, Bill.

Bill Appicelli - Nexus Asset Management

I just had a question on the financing. You had asked or you had mentioned that you didn't expect to issue equity through 2018, but that you would evaluate use of a DRIP. And I know in the past you had talked about the potential for $75 million to $100 million maybe using that. I mean looking at your base plan, do you -- should we assume that there's DRIP been utilized in terms of that growth path that gets you to slightly below the midpoint that you talked about?

Martin J. Lyons

Bill I'd say that's one of the things that probably I’ll leave up to you to kind of factor in. You should look at your model. I mean -- what we plan to do here today was just -- again give this guidance range of 7% to 10%. There's a range of potential things that could affect our results that we outlined there that could put us into the upper or lower end of that range.

In terms of the treasury rates, sales growth, spending levels, regulatory developments and we're simply same. We leave the option open as we encounter these various changes to issue shares as needed through the DRIP or 401-K.

We don't really see the need over that five-year plan for a public equity issuance as we said in the slides. And we'll evaluate the need for the DRIP or 401-K on a year-to-year basis. You're right about the number that we previously said which is if we did I'll say turn that on, it would be about estimated $75 million to $100 million.

Bill Appicelli - Nexus Asset Management

Okay. And then just changing gears, do you guys have any update on the status or timeline resolution of the challenge at FERC around the MISO ROEs?

Martin J. Lyons

I'll let Maureen go ahead and answer that as well.

Maureen A. Borkowski

Yes. In January, the Midwest ISO transmission orders filed their response to the complaint requesting that FERC dismiss it because the complaint, it’s really had met the burden of that the rate is just unreasonable. They provided additional information as well about errors in the calculation in the complaint.

At this point in time, others have also filed their responses, but FERC has not taken any action or set any kind of schedule. So, at this point time, we're really in a wait-and-see mode. We do have confidence though that the FERC Commission is still very pro-transmission development and they understand that the return on equity components are very important element of continuing to encourage transmission investments. So, we're hopeful that the outcome will be positive.

Bill Appicelli - Nexus Asset Management

Okay, great. Thank you.

Martin J. Lyons

Thanks, Bill.

Operator

Thank you. Our final question is coming from the line of Gregg Orrill with Barclays. Please proceed with your question.

Gregg Gillander Orrill - Barclays Capital Inc.

Thank you. And congratulations Tom and Warner.

Thomas R. Voss

Thanks, Greg. Really appreciate that. Thank you.

Gregg Gillander Orrill - Barclays Capital Inc.

So, I think maybe you touched on this already, but I just wanted to come back to it in terms the growth post-2014. With 2014 being an accelerated rate, is it sort of 6% to 9.5% post that? Should we think about it that way? Then I have one detailed question.

Martin J. Lyons

Yeah Greg and I'll let you do a follow-up. Yes and that would be answer that I gave -- this is Marty, by the way. As you know as simply coming off of the midpoint of our 2014 guidance and just looking at -- I mean you can -- as I said earlier, you can do the math if you’re taking the 2013 base in the kid the 7% to 10% growth out 2018, calculate a number and then bring it back to the implied growth off the 2014 midpoint. And you come up with a 6% to 9.5% kind of growth rate off of 2014 over that period.

Gregg Gillander Orrill - Barclays Capital Inc.

And then if you come back to slide 15, the negative driver there just higher cost in Missouri and otherwise is there any -- anything more that you could provide detail on there? Or, is it really just a thought about the impact of regulatory lag in Missouri?

Martin J. Lyons

Yeah. I think that Greg obviously we're trying to do on slide 15 is just provide some of what we considered to be the meaningful drivers of earnings considerations for 2013. As I said before, as we think about the Missouri electric rate case, we would plan to file that in July of this year, July of 2014. So you would expect the normal 11 month resolution with a rate increase in June.

And so -- again we're time in the rate case certainly to pick up these large capital investments that we're making this year, but in the early part of 2015, given the Missouri regulatory framework, you would expect to have some regulatory lag of the results of those investments when you think about depreciation, property taxes, potential for some incremental O&M cost in 2015. And then the rate increase would kick in that June timeframe of 2013.

And then you would lay out just a number of other drivers which we've got. As the formula rates in Illinois, the investments we're making there in both the gas and electric portions of our business and of course, the investments we're making in the transmission. And then as the reduction -- somewhat incremental reduction would expect to get in the parent and other costs going into 2013.

Gregg Gillander Orrill - Barclays Capital Inc.

Okay. Thanks.

Martin J. Lyons

You're welcome.

Operator

Thank you. We've reached the end of our question-and-answer session. I would now like to turn the floor back over to Mr. Fischer for any additional concluding comments.

Douglas Fischer

Before we complete our call today, Warner and Tom have some closing remarks. Warner?

Warner Baxter

Thanks. I know it’s been a long call and I thank you for your interest in the company, but we do have a couple of closing comments. As I said at the outset, I'm very, very humbled and honored to follow in Tom’s footsteps.

I think as you all know his strong leadership over these past five years has delivered tremendous value to our shareholders and I can tell you his leadership has also delivered tremendous value to our customers and all the communities that we serve.

I think it's important to know that Tom's strong leadership has also positioned Ameren and our team to continue to deliver superior value to our shareholders and customers and frankly, the communities we serve in the future.

He has demonstrated commitment to safety, diversity, and service to our shareholders, our customers and our communities as well as a generation of Ameren coworkers for 45 years it's simply unequaled.

So, Tom on behalf of our entire Ameren team, I want to thank you for your tremendous leadership and I just want to personally thank you for being such a fine mentor and a friend to me. So thank you, Tom.

Thomas R. Voss

Thanks, Warner. This is my final quarterly earnings call for Ameren and I’d like to share a few thoughts. It's been an honor to lead this great company for these past five years. I’m pleased that during this time, our team developed a clear vision and strategy for the future and made significant progress on executing that strategy.

My many years at the company have been very rewarding. I've always said that the secret a great career is to be able to say that you love what you do, while you do it, and who you do it with. I can tell you that I have really enjoyed working with our Board of Directors, our leadership team and coworkers for the benefit of Ameren shareholders and customers.

I've also enjoyed interacting with so many of you in the investment community. Warner has been with Ameren for nearly 20 years and has served in a wide variety of leadership roles in Finance and Operations. I have absolute confidence in his ability to lead Ameren and that he will continue to execute on as well is enhance Ameren’s growth strategy.

Douglas Fischer

This is Doug. Thank you for participating in this call. Let me remind you again that a replay of the call will be available for one year on our website. If you have questions, you may call the contacts listed on today's release.

Financial analyst should be -- financial analyst inquiries should be directed to me, Doug Fisher, or my associate Matt Thayer. Media should call Joe Mellencamp. Our contact numbers are on the news release. Again, thank you for your interest in Ameren, and have a great day.

Operator

Thank you. Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time.

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