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

Transcripts

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.