By Chris O’Malley
Ameren reported a 30% jump in fourth-quarter earnings and said it expects future growth from new transmission projects, even as federal regulators consider lowering the rate of return on such investments.
The St. Louis-based company reported net income of $48 million ($0.20/share) compared with $37 million ($0.15/share) during the fourth quarter of 2013.
Electric revenues grew 19% to $360 million in Illinois, due in part to increasing residential and industrial demand, while falling 3% to $692 million in Missouri.
For the year, earnings soared to $586 million ($2.40/share) from $289 million ($1.18/share) in 2013, when the costs of the divestiture of its deregulated power generation unit crimped results.
On a continuing operations basis, net income in 2014 was $587 million ($2.40/share) versus $512 million ($2.10/share) in 2013.
“We delivered strong earnings growth in 2014,” Ameren CEO Warner Baxter told analysts during a Feb. 25 conference call. “I am pleased with the progress we made last year.”
Current Year Growth
Executives said they expect 2015 earnings to rise to between $2.45 and $2.65 per diluted share. Diluted earnings per share from continuing operations are expected to grow at a 7 to 10% compound annual rate.
Those estimates assume the Missouri Public Service Commission’s approval of the company’s request for a $190 million annual rate increase. A decision is expected by May.
Ameren expects a higher average estimated rate base of $1.4 billion in 2015 compared to $900 million in 2014.
Transmission Potential
Transmission services revenues in 2014 increased to $33 million from $19 million in 2013.
Last fall, MISO industrial customers filed a complaint contending that the MISO transmission operators’ current base return on equity — 12.38% except for American Transmission Co. — is too high. Industrials argue the base ROE for TOs including Ameren should not exceed 9.15%.
Ameren said it has established a reserve for the potential ROE reduction. Although the amount wasn’t disclosed, the company assumed a scenario similar to what the Federal Energy Regulatory Commission set last June involving New England TOs — a 7.03 to 11.74% “zone of reasonableness.”
Ameren officials said the ROE decision may not come until 2016. Regardless, Baxter said the company sees “robust opportunities” in additional transmission projects. He noted that not only does Ameren’s territory sit on the seams of multiple RTOs but that there are a number of local reliability projects that could be explored.
“We see meaningful investment opportunities in the transmission businesses,” Baxter added.
The biggest current transmission project for Ameren and its Ameren Transmission Co. of Illinois subsidiary is the nearly 400-mile Illinois Rivers project, a 345-kV line crossing the Mississippi River that will head east to nearly the Indiana border. It’s estimated to cost about $1.4 billion.
Ameren is also eyeing about $1 billion in local reliability projects for completion by 2019.