Ameren's (AEE) CEO Warner Baxter on Q2 2016 Results - Earnings Call Transcript

| About: Ameren Corporation (AEE)

Ameren Corporation (NYSE:AEE)

Q2 2016 Earnings Conference Call

August 05, 2016 10:00 AM ET

Executives

Doug Fischer - Senior Director, IR

Warner Baxter - Chairman, President & CEO

Marty Lyons - EVP & CFO

Maureen Borkowski - President, Transmission Operations

Michael Moehn - Ameren Missouri Chairman & President

Richard Mark - Chairman & President

Analysts

Julien Dumoulin-Smith - UBS

Brian Russo - Ladenburg Thalmann

Michael Lapides - Goldman Sachs

Paul Patterson - Glenrock Associates

Steve Fleishman - Wolfe Research

Operator

Greetings, and welcome to Ameren Corporation's Second Quarter 2016 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.

It is now my pleasure to introduce your host, Doug Fischer, Senior Director of Investor Relations for Ameren Corporation. Thank you. Mr. Fischer, you may begin.

Doug Fischer

Thank you and good morning. I am Doug Fischer, Senior Director of Investor Relations for Ameren Corporation. On the call with me today are Warner Baxter, our Chairman, President & Chief Executive Officer and Marty Lyons, our Executive Vice President & 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 a webcast will be available for one year on our Web site 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 on our Web site a presentation that would be referenced by our speakers. Acronyms used in the presentation are defined in the glossary on the last page. To access the presentation, please look in the Investors section of our Web site under Webcasts and presentations and follow the appropriate link.

Turning to Page 2 of the presentation, I need to inform you that comments made during this conference call may contain statements that are commonly referred to as forward-looking statements. Such statements include those about future expectations, beliefs, plans, strategies, objectives, events, conditions and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated. For additional information concerning these factors, please read the forward-looking statement section in the news release we issued today and the forward-looking statements and risk factor sections in our filings with the SEC.

Warner will begin this call with comments on second quarter financial results, full year 2016 earnings guidance and a business update. Marty will follow with a more detailed discussion of second quarter results and an update on financial and regulatory matters. We will then open the call for questions. Before Warner begins I would like to mention that all per share earnings amounts discussed during today’s call including earnings guidance are presented on a diluted basis unless otherwise noted.

Now here is Warner who will start on Page 4 of the presentation.

Warner Baxter

Thanks Doggie. Good morning everyone, and thank you for joining us. Today we announced second quarter 2016 core earnings of $0.61 per share compared to core earnings of $0.58 per share in last year’s second quarter. This earnings increase reflected higher retail electric sales volumes, excluding sales to Noranda Aluminum driven by warmer early summer temperatures. The earnings comparison also benefited from increased FERC regulated transmission and Illinois Electric Distribution infrastructure investments made under modern constructive regulatory frameworks to better serve our customers.

These favorable items were partially offset by expenses for the 2016 scheduled Callaway nuclear refueling and maintenance outage as well as lower electric sales to Noranda Aluminum historically Ameren Missouri's largest customer. Earlier this year Noranda idled production at its smelter and the plant remains shutdown. Overall our second quarter results were solid as our team continued to successfully execute our strategy. And I am pleased to report that we have raised our 2016 guidance to a range of $2.45 to $2.65 per share, up from our prior range of $2.40 to $2.60 per share, reflecting year-to-date results.

Turning to Page 5, here we reiterate our strategic plan. We remain focused on executing the strategy and continue to strongly believe it will deliver superior long-term value to both our customers and shareholders. I would like to take a moment and highlight some of our year-to-date efforts and accomplishments towards this end. To begin our accomplishments include continued strategic allocation of significant amounts of capital to those businesses whose investments are supported by regulatory frameworks to provide fair, predictable and timely cost recovery and also deliver long-term benefits to our customers.

This capital allocation is illustrated in the graphic on the right side of this slide. As you can see, year-to-date, we invested almost $650 million of capital in jurisdictions with these supportive regulatory frameworks. This represented almost two-thirds of our year-to-date 2016 investments and included approximately $330 million of capital spent on FERC regulated transmission projects. The largest of these is ATXI’s $1.4 billion Illinois Rivers transmission project. Construction of the first of this project’s nine line segments is complete with construction of three other segments and two of three river crossing is well underway. Further two of the project’s 10 substations are already in service with remaining eight under construction.

For ATXI's Spoon River project in Northwestern Illinois, we are acquiring the balance of the write away and we plan to begin line construction later this year. As for the Mark Twain project we are in the process of obtaining a sense from the five counties this transmission line will cross and have begun right of way acquisition. All three of these transmission projects, Illinois Rivers, Spoon River and Mark Twain are MISO approved multi value projects. When completed they will deliver significant customer benefits such as improved reliability and access to cleaner energy, including wind power from the western and northern parts of the MISO region. We also continue to make significant investments in Ameren Illinois transmission that will result in a smarter and more reliable energy grid.

Turning to Page 6 of our presentation, let me update you on the execution of our strategic plan at Ameren Illinois. We invested approximately $320 million in Illinois Electric and natural gas distribution infrastructure projects during the first six months. These include investments made under the Company's modernization action plan, which was enabled by Illinois' Energy Infrastructure Modernization Act. This work remains on-track to meet or exceed its investments, reliability and smart meter goals. Ameren Illinois customers are experiencing fewer and shorter power outages due to our smart grid investments. In addition natural gas distribution infrastructure projects are improving the safety and reliability of our gas distribution system.

Turning now to Missouri, first on May 10th, we safely completed the 21st nuclear refueling and maintenance outage for our Callaway Energy Center ahead of schedule. In addition, Ameren Missouri continues to aggressively manage those costs that are under its control. Our success in this area has helped maintain electric rates that are the lowest of any investor owned utility in Missouri and are well below the Midwest and national averages. While we're taking actions to keep our electric rates among the lowest in the country, we also need to take action to begin recovery of energy infrastructure investments that are not included in rates.

As a result in early July Ameren Missouri filed a request with the Missouri Public Service Commission or PSC for a $206 million increase in annual electric service revenue. This request included recovery of and a return on the new infrastructure investments I just mentioned including those from nuclear safety, environmental controls, transmission line improvements and reliability. In addition, the filing includes recovery of fixed cost related to the loss of sales to Noranda as well as increased MISO transmission charges. We expect the Missouri PSC to issue a decision in this proceeding in late April of next year. Marty will discuss this rate filing further in a moment.

Shifting now to efforts to enhance Missouri's regulatory framework. As you know comprehensive performance based ratemaking legislation was not enacted by the Missouri General Assembly before its session ended in mid-May, as a result of a filibuster by a small group of state senators. Since then two separate efforts have been initiated by the state to address the need for regulatory reform to support investments in Missouri Energy Infrastructure. One of these efforts is an undertaking of the Missouri PSC and the other is the work of a Senate Interim Committee. Stated purpose of the Missouri PSC's effort is to consider policies to improve the way in which the commission regulates Missouri’s investor owned electric utilities. And the stated objective of the Senate Interim Committee is to evaluate ways utility regulatory process in Missouri might be modernized in order to ensure sustained investment in utility infrastructure while at the same time promoting interest of fairness among all constituencies including customers and shareholders.

We're pleased and we're certainly appreciate that the Missouri PSC and the senate interim committee are taking the time and effort to study this important issue. I am convinced that improvements to Missouri's regulatory framework are in the best long-term interests of our customers and the entire state of Missouri as we seek to implement a smarter grid, transition to a cleaner and more diverse energy portfolio as well as create jobs. We've filed comments with the Missouri PSC and we will be actively engaged in both proceedings this summer and fall. In addition we continue to engage with other key stakeholders involved in the process to explore constructive paths forward to support investment in Missouri's aging infrastructure.

As I wrap up my business update I want to take a moment to express my appreciation to all of our co-workers who have maintained their relentless focus on executing our strategy which is enabling us to deliver safe, reliable and affordable service to our customers and the communities we serve. Our actions have included working under challenging and hot operating conditions in the field and in our energy centers, responding to our customers' needs in a timely manner when faced with periodic summer storms, using innovation to meet our customers' rising expectations as well as making our operations even more efficient and most importantly doing all of these things with safety being at the top of their mind.

Of course we're not done, looking ahead we will be relentless in our efforts to improve our operating and financial performance including maintaining our strong focus on safety as well as exercising disciplined cost management and strategic capital allocation, and we will continue to focus on meeting and exceeding our customers' energy needs and expectations, and ultimately delivering superior long-term value to you, our shareholders.

Speaking of delivering and superior value to our shareholders I will now move to Page 7 and our long-term total return outlook. In February we outlined our plan to grow rate base in an approximate 6.5% compound annual rate over the 2015 to 2020 period driven by a strong pipeline of investments to benefit customers and shareholders. Our above peer average rate base growth plan reflects strategic allocation of capital to those jurisdictions that operate under constructive and modern regulatory frameworks, now rate base growth is foundational to our strong earnings per share growth expectations.

We stated in February that we expected earnings per share to grow at a 5 to 8% compound annual rate from 2016 to 2020 excluding the estimated temporary negative effect on 2016 earnings of lower sales to Noranda. We also remain focused on delivering a solid dividend, because we recognize its importance to our shareholders. Today our dividend yield remains above the average of our regulated utility peers. Of course future dividend increases will be based on consideration of among other things earnings growth, cash flows and economic and other business conditions. Our strong earnings growth profile combined with our solid dividend results in superior total return opportunity for our shareholders.

To summarize we continue to successfully execute our strategy and I remain firmly convinced that doing so would deliver superior value to our shareholders, customers and the communities we serve. Again, thank you all for joining us today, and now I'll turn the call over to Marty. Marty?

Marty Lyons

Thank you, Warner and good morning everyone. Turning now to Page 9 of our presentation, today we reported second quarter 2016 GAAP earnings of $0.61 per share which matched last year's second quarter GAAP earnings. As you can see on this page, there was no difference between GAAP and core results for this year’s second quarter.

Moving then to Page 10, here we highlight factors that drove the $0.03 per share increase in second quarter 2016 results compared to prior year core results. In 2016 we experienced higher retail electric sales volumes excluding sales to Noranda driven by warmer early summer temperatures. These temperatures increased earnings by an estimated $0.07 per share versus 2015 and $0.06 per share versus normal conditions.

Moving to the next key driver of the second quarter earnings variance, increased investments in electric transmission and distribution infrastructure in our ATXI and Ameren Illinois businesses lifted earnings by $0.06 per share compared to the year ago period and net of changes in returns on equity. Our Illinois electric distribution business results incorporated an 8.45% allowed ROE under formulaic rate making compared to 8.75% for the year ago period, based on an assumed average of 30 year treasury rate of 2.65% for the full year.

Moving to the next two items on the page, earnings for the second quarter also benefited from higher Illinois natural gas distribution service rate effective this year as well as a decline in other operations and maintenance expenses not subject to writers, regulatory trackers or formulaic rate each adding $0.02 per share compared to the prior year period.

Shifting now to factors that had an unfavorable effect on the second quarter earnings comparison, the scheduled 2016 Callaway nuclear refueling and maintenance outage reduced second quarter 2016 earnings by $0.07 per share compared to 2015 when there was no refueling outage. The next Callaway refueling that scheduled for the fall of next year. The previously mentioned idling of Noranda smelter pot lines reduced earnings by $0.05 per share. And finally the quarter-over-quarter impacts of Ameren Missouri’s 2015 energy efficiency plan negative affected the earnings comparison by $0.04 per share.

Before moving on, let me briefly cover electric sales trends year-to-date. Overall, we experienced sales trends similar to those discussed on our first quarter call. Weather normalized kilowatt hour sales to Illinois and Missouri residential and commercial customers on a combined basis were essentially flat as the 2016 leap day sales benefit was offset by energy efficiency impacts. Kilowatt hour sales to Illinois industrial customers decreased approximately 5% primarily reflecting lower sales to several large low margin Illinois customers, including those in steel making, heavy equipment manufacturing, mining and energy. Excluding lower sales to Noranda kilowatt hour sales to Missouri industrial customers were down one half of 1%.

Turning to Page 11 of our presentation, now I would like to move from this discussion of sales to our guidance for the full year. As Warner stated we now expect 2016 diluted earnings to be in a range of $2.45 to $2.65 per share, an increase from our prior range of $2.40 to $2.60 per share. This increased guidance reflects solid year-to-date results including a first quarter tax gain associated with the new accounting rule and an estimated $0.01 per share first half weather benefit compared to normal as warmer than normal second quarter temperatures more than offset milder than normal first quarter temperatures.

Regarding Noranda, we continue to expect the unfavorable impact of lower electric sales to be approximately $0.15 per share in 2016. This estimate is net of expected revenues from off system sales that Ameren Missouri is making as a result of reduced sales to Noranda and that are retained under a provision of our fuel adjustment clause, we continue to expect Noranda's smelter to remain idle for the rest of this year and that this will reduce earnings by approximately $0.05 per share in the third quarter and approximately $0.02 per share in the fourth quarter compared to the prior year periods.

I will not go through the other earnings considerations listed on this page because they are largely self-explanatory and we discussed them on our February earnings call. Overall, our goal remains to earn at or close to our allowed ROEs in all of our jurisdictions. Of course we're falling short of this goal in Missouri in 2016 due in large part to the Noranda's sales loses.

Moving to Page 12, here we begin to outline in more detail our recently filed Missouri electric rate case which Warner mentioned earlier. Earlier this week parties to this proceeding jointly proposed a schedule to the Missouri Public Service Commission and key dates of the proposed schedule are listed on this page. We expect the Public Service Commission to decide the case by late April of next year with new rates expected to be effective in late May.

Further on Page 13, you can see that three quarters of $206 million request is driven by our need to recover and earn a return on important new infrastructure investments made for the benefit of our customers, adjust rates to reflect reduced customer sales largely driven by the idling of Noranda's smelter and recover increased MISO transmission charges. To address the regulatory leg associated with these increasing transmission expenses we've requested the implementation of a new MISO transmission tracker. In addition the rate filing includes $8 million for amortized recovery of an estimated $81 million of fixed cost not recovered as a result of lower sales to Noranda. I would also like to update you on select regulatory matters pending at the Illinois Commerce Commission and the Federal Energy Regulatory Commission.

Turning to Page 14, in April Ameren Illinois made its required annual electric distribution rate update filing with the ICC. Under formula rate making Ameren Illinois makes such filings to systematically adjust cash flows overtime for changes in cost of service and to true up any period over or under recovery of such costs. Our filing calls for a $14 million decrease in the net annual electric revenue requirement consisting of an increase reflecting 2015 actual cost and expected 2016 infrastructure investments that is more than offset by a decrease reflecting completion of the recovery of 2014 actual costs by the end of this year.

Late last month Ameren Illinois and the ICC staff entered into a stipulation agreement that resolved all issues currently existing between them and supported an annual revenue requirement that is consistent with Ameren Illinois’ filing. The positions for other interveners in the case are noted on this page. And an ICC decision is expected in December of this year with new rates effective early next year. I'll remind you that each year's Illinois electric distribution earnings are a function of that year's ending rate base. The formula determined allowed ROE which is the annual average of 30 year U.S. Treasury bond yields for that year plus 580 basis points and the ICC authorized equity ratio and are not directly determined by that year's rate update filing.

Turning to Page 15 here we outline the previously mentioned complaint cases pending at the FERC that seek to reduce the base allowed ROE from MISO transmission owners including Ameren Illinois and ATXI. In the first case last December, a FERC administrative law judge issued a proposed order recommending a 10.32% base allowed ROE and the FERC is expected to issue a final order in the fourth quarter of this year. In the second case in late June the FERC administrative law judge issued a proposed order recommending a 9.7% base allowed ROE with the final FERC decision expected in the second quarter of next year. As a result of these pending cases and consistent with the ALJ ruling in each case, we have accrued to reserve for potential refunds of $58 million as of June 30, 2016.

Finally turning to Page 16 I will summarize. Year-to-date in 2016 we continue to successfully execute our strategy and we have delivered solid second quarter and year-to-date results. Our solid year-to-date results allowed us to increase our full year earnings guidance range for 2016. Further, on our February call we stated that we expected earnings per share to grow at a strong 5% to 8% compound annual rate from 2016 through 2020 excluding the estimated temporary net effect of lower sales to Noranda this year.

We said this earnings growth was driven by approximately 6.5% compound annual rate base growth over the 2015 through 2020 period, based on a mix of needed transmission, distribution and generation investments across multiple regulatory jurisdictions being made for the benefit of customers. When you combine our strong earnings growth with Ameren's dividend which provides investors with a yield of approximately 3.3% and which is above average compared to fully regulated utility peers, we believe our common stock provides very attractive total return potential for investors.

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

Question-and-Answer Session

Operator

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Julien Dumoulin-Smith with UBS. Please state your question.

Julien Dumoulin-Smith

So just first detailed question and a bigger picture question, on energy efficiency, obviously you're talking about lower load growth here in general, but what is the annualized impact here in 2016 after incentives? It seems as if it's about $0.17. In tandem with, that what are the weather-normalized sales trends excluding Noranda? And then most importantly, what are your 2017 expectations as you think about that energy efficiency drag?

Marty Lyons

Yes sure Julien, this is Marty, and obviously a number of questions there. I think as that relates to energy efficiency you got to keep in mind that some of what we’ve quantified is year-over-year comparative impacts from last year to this year. So when we think about that you got to remember that the construct of the energy efficiency plan in Missouri from 2013 through 2015 was different than the one we’ve got now and last year we were being compensated for some of the efforts associated with energy efficiency and being compensated not only for the current year effects in 2015 but some of the carryover effects to 2016. And so that’s creating a bit of a year-over-year comparison and that’s why we’ve noted some of those effects this year.

In terms of the sales trends what we’re seeing we mentioned this on the call year-to-date on a consolidated basis residential and commercial sales were roughly flat. Frankly they’re up a little bit in Missouri and down a little bit in Illinois. Then industrial sales overall were down about 4% with Missouri down about 0.5% and Illinois down more significantly. When you actually exclude the impacts of energy efficiency in Missouri we would actually see overall sales instead of being flat. Overall sales we see up about a 1.5%. On the residential we think they’d be up about 1.3%, commercial maybe up 2% and industrial while they’re down on a reported basis maybe up 0.5% excluding energy efficiency. So we do see those programs as having an effect both the programs we put in place last year are having a carryover effect to this year, but also the current year programs that we’ve now put into place. So they are having an impact but overall sales are about where we thought. We said they -- we thought they’d be about flattish because of the effects of energy efficiency and that’s about where they are.

I think economically unemployment is running pretty good in Missouri frankly I think you probably saw nationally the unemployment was about 4.9% now for the past couple of months. What we’re seeing in Missouri is it's actually running a little bit below that, closer to 4%. While unfortunately on the Illinois side, where we’re seeing some of the industrial sales declines, seeing unemployment a little bit higher over there about 6% but overall I think the economies are remaining stable. We’re seeing a little bit of growth I’d say in Missouri especially when you strip out energy efficiency. And then in Illinois while the industrial sales are down we’re still seeing some growth in terms of residential and commercial demand, which we see as a positive.

Julien Dumoulin-Smith

And then just a follow-up here on the broader 5% to 8% CAGR, can you comment quickly what the impact is from the U.S. treasury being down within that range perhaps it's linear but I just want to reaffirm it? And then separately related what about the impact from the pension discount rates? Just want to make sure we under it's probably fairly modest given Illinois and then also Missouri. But just want to make sure we have that right?

Marty Lyons

Yes, sure I understand the question. I think that, as you would think about the 5% to 8% growth overtime as we’ve said repeatedly that is really anchored by the 6.5% compound annual rate base growth. And so that really is the foundation and then when you think about whether we would be above that or below that from an earnings per share growth perspective, certainly changes in treasury rates or earned ROEs, sales growth levels, spending levels, regulatory decisions, all of those things can push you up or down within that range. And look it’s a five year outlook going out to 2020, so a number of things can happen over that time and that's why we have sort of a $0.40 range when you look out to 2020.

As it relates to the current impact of 30 year treasuries as we mentioned on the call, we have booked to a lower treasury yield than we expected at the beginning of the year. The beginning of the year we had expected treasury yields to be around 3.2, what we've booked to as of the end of June is an average rate for the year of about 2.65 and of course the current 30 year treasuries are sitting at 2.25. So, that has caused us to change our outlook for this year. We've baked that into our guidance range for this year. I'd remind you that 50 basis points move in ROEs in the Ameren Illinois delivery business about $0.025. That gives you a sensitivity but we've baked that into our current year guidance, we feel very good about the guidance, we were able to raise it $0.05 as you know this year which is a position, it's net of the impacts of those changes in 30 year treasuries.

And as it relates to our long-term guidance we obviously update our overall thoughts about how we're going to manage our business going forward on an annual basis but right now I feel very good about that 6.5% rate base growth and that 5% to 8% compound annual EPS growth that we've projected.

Warner Baxter

[Multiple Speakers] and then one other issue on pensions and OPEBs.

Marty Lyons

Yes thanks Warner. On the pension and OPEB which was a good question Julien, I know that's impacting some folks with the lower discount rates that are expected but we have trackers in Missouri for both pension and OPEB and then in Illinois for our energy deliver business as well as in our FERC transmission business, you have formulaic rates, so we're largely protected from those declines that are happening in terms of the discount rate. In the Illinois gas business obviously we have forecasted test years and depending on the timing of those filings there can be some impact there, but largely insulated from the impacts of the changes in discount rates and any kind of asset performance changes.

Operator

Our next question comes from Brian Russo with the Ladenburg Thalmann. Please state your question.

Brian Russo

The $0.05 increase in the guidance, is there any way to breakdown some of the more noticeable positives and negatives? It looks like interest rates would be maybe a $0.025 negative versus previous guidance and I'm not sure, I think weather is a $0.01 positive, just maybe if you can elaborate on that, what's operational and what's kind of weather related?

Warner Baxter

And I think if you look back at our beginning of the year guidance and then walk through our first quarter and now second quarter disclosures you can piece some of these things together and you've got some of those. I think as it relates to starting with our guidance at the beginning of the year and thinking about how it moved. W had an $0.08 or so pickup from the adoption of the new accounting standard in the first quarter which was a positive. At that same time we also had a couple of additional cents of decline due to this Noranda outage we started the year thinking it was going to be a $0.13 impact and we're at about $0.15 impact. We also had as you mentioned we have now had a little bit of lowered expectation in terms of the treasury rates and again that like you said that has impacted us by $0.02 or $0.03 there as well, so those are some of the impacts of it that we had.

Now in the first quarter we also had negative weather it was it about $0.05 negative in the first quarter as mentioned on the call we had positive weather here in the second quarter which more than offset and we're about a penny positive now for weather year-to-date. So when you look at that, you look at that where we are at the end of six months you have got that tax gain that we experienced in the first quarter, you get about a penny of positive weather. And we've had some offsets due to the decline in the treasuries and then this temporary impact of the Noranda outage that we're experiencing this year. So those are some of the things that were pluses and minuses versus our original expectations and why we were positioned then with the backdrop of solid operations and very solid execution of our strategy and our plan for this year that we're able to raise the guidance by $0.05.

Brian Russo

Okay, great. It's my understanding that you're using the ATXI and FERC transmission is being financed at the parent. Just want to be -- just like you to clarify the financing strategy with ATXI and when might we see it break out into a separate sub and that parent leverage be a little bit more transparent?

Warner Baxter

Yes, that’s a, you correctly described it, I mean what we're doing today think of it as the most, has been the most efficient way to do it as we've been financing the transmission growth at our ATXI business through financing at the parent which we've got both some short-term and long-term financing in place there at the parent that supports the investments we've been making at ATXI. Obviously as that short-term debt grows the parent will consider when it might be appropriate to term some of that out. I don't expect that to be this year, but in perspective periods we very well might consider that and to the extent that we believe it’s more efficient at that point to do it, at an entity other Ameren Corp., at either ATXI or a holding company level, we'll evaluate that going forward. But as we approach that decision, whether that would be next year or in some period beyond we'll certainly be happy to discuss our thinking at that time about why we're proceeding.

Brian Russo

And then the Missouri electric case filing, did you file a utility cap structure or the parent cap structure?

Warner Baxter

Yes in the Missouri filing that we filed as we mentioned on the call, you have a equity content in the cap structure of 51.8% and that is the cap structure of the utility subsidiary Ameren Missouri.

Operator

Our next question comes from Michael Lapides of Goldman Sachs. Please state your question.

Michael Lapides

Can you talk about in your multi-year forecast what your planning is for leverage at the holding company level? Meaning, do you plan on de-levering the holding company? Do you plan on issuing debt solely to fund ATXI or using debt at the holding company level and sending it down to the utilities to help fund utility growth?

Marty Lyons

Michael this is Marty and as you've seen in our slides we have about an $11 billion expenditure plan over the next five years. It's something that we believe given the strength of our balance sheet today. We can finance solely with debt and maintain a very strong balance sheet and maintain very strong credit metrics relative to the ratings that we have today. And then as we think about the expenditures, obviously we’ve got those in each of the subsidiaries. We do financing independently at each one of the subsidiaries. So we have obviously we issued long-term debt at Ameren Illinois and Missouri and then as we just spoke about on our prior Q&A as it relates to the ATXI transmission business then we are using parent company leverage to be able to adapt, to be able to fund those investments at ATXI. And at some point may very well be able to do financing either at ATXI or some sort of intermediate holding company. But that’s overall our plan and our goal is with each one of our utility subsidiaries to maintain very strong overall balance sheets there as well. So, that’s how we’re balancing things out and again we do believe we’ll be able to finance this capital expenditure plan with that over the coming five year period.

Michael Lapides

So no real plans for equity or significant debt at the holding company to infuse those equity into the operating companies?

Warner Baxter

That is correct that’s absolutely correct. And I think one thing too to keep in mind longer term overtime we’ll be able to monetize some of the tax assets that we have up at the parent. We’ve got quite a bit of tax assets built up overall, about 760 million but about 460 million or so of that is really at the parent company and something that overtime we’ll be able to monetize as well.

Michael Lapides

One last one and this is really I don’t know if this is Warner or for Michael, but when you’re thinking about the proceeding in Missouri to help improve rate making processes. I know some of the testimony filing dates have already passed and honestly it didn’t look like there were a lots of suggestions of very specific things that other interveners besides you guys really were recommending more -- and that testimony seem like it was more please don’t this or don’t do that but not as much please do this or do that. How do you think the commission kind of takes it from there, like if you think about it as this is a giant kind a caldron a boiling pot or lots of things can come out this. How do you think about what the options that the commission actually looks at are based on what’s been filed in the public estimates?

Warner Baxter

Hello Michael this is Warner. I’ll take a shot at it and then I’ll let Michael add some more of the details on that. Number one I think I would start with this. This is a positive development that we’re talking about the need to address Missouri’s agent infrastructure and seeking solutions, especially outside of the legislative session. So I see that these proceedings that are being conducted both by the Missouri Public Service Commission and the Senate Interim Committee an opportunity for stakeholders really to come together to not only share ideas, to share differences and to try and find a constructive path forward.

And so while maybe some of the filings included things that the interveners or others did not want to see that’s informative. But secondly I know that Ameren Missouri and then certainly the utility group they filed specific suggestions and there was a host of suggestions to try and address this issue. So I fully expected the commission to carefully look at these things to engage with stakeholders as well as the Senate Interim Committee to try and advance Missouri forward, because as we’ve been consistent, we strongly believe that this is not only an opportunity but one of these things that is really imperative to Missouri to move forward with that constructive policies. And so we're encouraged by these developments, we look forward to engage with the key stakeholders. Michael you've been working with some of the more specific key stakeholders, anything you'd like to add in terms of the overall process and where things go from here?

Michael Moehn

I think that I mean where we are today is a positive as Warner said, I mean there's a great deal of dialogue that's occurring and I think that given where the various stakeholders are it's not terribly surprising I think that the commission has been very constructive in this process, we'll have a couple of more rounds of testimony as we move through it. As Warner said the Interim Senate Committee is going to hold some hearings in the very near future. They're really looking to get some outside perspectives. And I think to me the one thing that's really positive in all of this is there's a recognition of the issue. Now, there's not tremendous consensus on what the solution is yet but there's a recognition of the issue and that's where this whole thing starts. Once we have the problem identified we can figure out how to go about it and come through debate and dialogue, come up with the right solutions. So, I think it's a positive first step, it is hard to predict where it's going to go, but both I think the commission ordered process as well as the Interim Senate Committee are driving towards an early December date with ample time to work something through the legislative process.

Operator

Our next question comes from Paul Patterson with Glenrock Associates. Please state your question.

Paul Patterson

Just a few quick follow-ups, most of my questions have been answered but, the tax asset monetization that you were referring to is that just over the course of business or is there any potential transaction that might be contemplated as such I was just wondering if you could elaborate a little further on that?

Warner Baxter

Yes, really expect it to be monetized just over the course of business. As we go through time, what'll happen is that as we have taxable earnings and we have taxes due, what'll happen overtime is that the utilities will burn off their tax assets the utilities will then pay taxes up to the parent. The parent will be able to monetize the sort of kind of this tax shield of the 460 million that I spoke about. And then ultimately once that's burned through Ameren Corp. becomes a tax payor which is out in the 20-21 timeframe is when we project today.

Paul Patterson

And then on Illinois, there's a lot of legislative discussion there regarding the nuke stuff that EXELON is asking for but also others are asking for sort of renewable stuff etcetera and there's been some discussion of an ominous bill. There's discussion of singlized those kind of things, and I was just wondering is there any opportunity there for you guys giving your formula rate plan and everything else for additional investments or additional opportunity or any thoughts of risks or any thoughts that you guys have that in terms of seeing what's going on in the Illinois?

Warner Baxter

Hello Paul this is Warner again. The simple answer is yes, we're at the table with key stakeholders and as EXELON and others have promoted plans or potential pieces of legislation. We've provided input and we provided input that we believe that will encourage some additional investments that we believe will benefit customers, but also to make sure that is balanced for certainly the Southern part of Illinois as well as the Northern part of Illinois. It's all part of the framework and so we think there are opportunities, whether that will be a legislative effort that will be the priority for this legislature here in the short-term remains to be seen. They obviously are very focused on addressing some budget issues and so once those matters are addressed perhaps an energy legislation will come to the forefront. But the bottom-line is we're engaged, we're simply engaged with them and Richard Mark oversees our operations there. Richard would you have anything else to add there?

Richard Mark

No, I think you put it well Warner. I think we're at the table with stakeholders who are watching the legislation very closely, but in Illinois right now I think the primary focus of the legislature is trying to get some of the state budget issues resolved.

Warner Baxter

Sure.

Paul Patterson

Right, sure. And then just finally, on the Mark Twain, you guys mentioned the assent process of the counties. Is that going well? Is that working out, as just as a sort of a follow-up from -- was just wondering what, if there was anything, going on there?

Warner Baxter

We'll have Maureen Borkowski who oversees our transmission operations she will be able to give you some input on that.

Maureen Borkowski

Hi, this is Maureen, yes we think that Mark Twain is going as per schedule, we're basically preparing packets of information to demonstrate to each county that we need the statutory requirement of safely crossing public roadways and we continue to have dialogue with each of the commissioners in each of the five counties to move that forward. So everything's on schedule at this point.

Operator

Our last question comes from Steven Fleishman with Wolfe Research. Please state your question.

Steve Fleishman

I wanted to give you a rare compliment for basically staying disciplined in this Westar M&A process. Usually people congratulate on doing deals but sometimes best not to. Just on that front, though, could you maybe just give a sense of how important M&A is to the plan, or is it pretty much focus on the core rate-based growth and is kind of more opportunistic?

Warner Baxter

Steve, this is Warner, so let me comment squarely on this. Our focus is on the strategic plan we laid out right at the outset. And that focus as you can see is on the organic growth in our business which is driven by robust rate base growth which we believe is going to deliver solid earnings per share growth. And we have obviously talked about the dividend that goes along with it, it is going to deliver what we think is superior total shareholder return. As you said we do believe the industry will continue to consolidate and certainly in the past we have obviously participated in some level of consolidation and so the bottom-line is we're focused on our organic growth plan, we're attentive to what’s going on in the industry and we'll simply just continue to execute, execute, execute, period.

Operator

I'm showing no further questions at this time, so I will turn it back to Mr. Fischer for closing remarks.

Doug Fischer

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 Web site, if you have question you may call the contacts listed on our earnings release, financial analyst inquiry should be directed to me Doug Fischer or my associate Andrew Kirk. Media should call Joe Muehlenkamp, our contact numbers are on the release. Again, thank you for your interest in Ameren and have a great Friday.

Operator

This concludes today’s conference. Thank you for your participation you may disconnect your lines at this time.

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