Q4 2023 Ameren Corp Earnings Call
Participants
Andrew Kirk; Director of IR; Ameren Corporation
Martin J. Lyons; President, CEO & Chairman of the Board; Ameren Corporation
Michael L. Moehn; Senior EVP, CFO, Chairman & President of Ameren Services; Ameren Corporation
David Keith Arcaro; Executive Director & Lead Analyst of Utilities; Morgan Stanley, Research Division
Durgesh Chopra; MD and Head of Power & Utilities Research; Evercore ISI Institutional Equities, Research Division
Jeremy Bryan Tonet; Senior Analyst; JPMorgan Chase & Co, Research Division
Julien Patrick Dumoulin-Smith; Director and Head of the US Power, Utilities & Alternative Energy Equity Research; BofA Securities, Research Division
Nicholas Joseph Campanella; Research Analyst; Barclays Bank PLC, Research Division
Shahriar Pourreza; Senior MD & Equity Research Analyst; Guggenheim Securities, LLC, Research Division
Presentation
Operator
Greetings, and welcome to the Ameren Corporation's Fourth Quarter 2023 Earnings Call. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andrew Kirk, Director of Investor Relations and Corporate Modeling for Ameren Corporation. Thank you, Mr. Kirk. You may begin.
Andrew Kirk
Thank you, and good morning. On the call with me today are Marty Lyons, our Chairman, President and Chief Executive Officer; and Michael Moehn, our Senior Executive Vice President and Chief Financial Officer; as well as other members of the Ameren management team. 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. We have posted a presentation on the amereninvestors.com homepage that will be referenced by our speakers.
As noted on Page 2 of the presentation, comments made during this conference call may contain statements about future expectations, plans, projections, financial performance and similar matters which are commonly referred to as forward-looking statements. Please refer to the forward-looking statements section in the news release we issued yesterday as well as our SEC filings for more information about the various factors that could cause actual results to differ materially from those anticipated. Now here's Marty, who will start on Page 4.
Martin J. Lyons
Thanks, Andrew. Good morning, everyone, and thank you for joining us today. Beginning on Page 4. Our strategic plan highlights our steadfast commitment to providing safe and reliable energy in a sustainable manner. We do this by investing in rate-regulated infrastructure, enhancing regulatory frameworks and advocating for responsible energy policies, while optimizing operating performance through ongoing continuous improvement in order to keep rates affordable. Our strong 2023 operating and financial results, which we will cover today reflect execution on our key business objectives for the year, which will continue to create value for our customers, communities, shareholders and the environment in the years ahead. I'd like to express appreciation for my Ameren coworkers' unwavering commitment to our strategy.
Turning to Page 5. This page summarizes our strong sustainability value proposition. Our operations and investments in 2023 made the energy grid safer, smarter, cleaner, more reliable and resilient, supporting thousands of jobs in our local communities in Missouri and Illinois and driving a positive impact on the economies of each state. In the process, we helped hundreds of local small and diverse businesses grow, and we gave back to numerous charitable organizations to help our neighbors in need. For example, last year, almost 60% of our total sourceable spend was with suppliers in our Missouri and Illinois communities while 26% was with local small and diverse suppliers, creating jobs and economic growth and contributing to thriving communities in the areas where we operate.
The positive impact of our investments was reinforced by our top quartile reliability performance in 2023 as measured by the frequency of outages. At the same time, our Ameren supplied residential customer rates on average were below the Midwest average. Today, we published our updated sustainability investor presentation called leading the way to a sustainable energy future available at amereninvestors.com. I encourage you to take some time to read more about our strong sustainability value proposition.
Turning to Page 6. When I reflect on the business objectives we laid out at the start of 2023, I am pleased to say that we made some great strides in each of our three strategic pillars. That said, we did not achieve the results expected in our Illinois gas and electric regulatory proceedings.
On Page 7, we lay out our key strategic accomplishments for 2023 in more detail. This past year, we invested $3.6 billion in infrastructure, spread strategically across our business segments in order to improve service for our customers. These investments are needed to reduce the frequency and duration of outages in the face of volatile weather events such as this past summer when we experienced the most impactful storms in the last 10 years. Ameren Illinois work in restoring power to nearly 200,000 customers in the wake of the June 29, 2023 derecho was recognized with an Emergency Response Award by the Edison Electric Institute at its recent winter membership meeting. And there's plenty more work to be done to address aging infrastructure and make the grid stronger and smarter while supporting the clean energy transition, making it truly an exciting time to be in the utility industry.
Of course, every utility's ability to invest must be supported by constructive regulation, which brings me back to our regulatory developments in the fourth quarter. The state of Illinois has ambitious energy transition goals, goals which we continue to work collaboratively with state holders to support. Of course, achieving these goals will require significant sustained investment in the state's energy infrastructure in the coming decades. In 2023, Ameren Illinois filed plans with the Illinois Commerce Commission, or ICC, to incorporate proposed investments in critical electric and natural gas infrastructure into prospective rates.
Unfortunately, the ICC decisions in both the electric and natural gas rate reviews late last year were disappointing, reducing cash flows available for investment and delaying needed investments in energy infrastructure. We will continue working with stakeholders on a path forward to approval of an electric grid investment plan, revised revenue requirements incorporating ongoing and prospective investments and an improved overall regulatory environment. We must work to build a stronger understanding that consistent, constructive regulatory environments are required to attract investment, support energy infrastructure development, economic expansion and jobs. Michael will cover the electric multiyear rate plan and the natural gas orders in more detail in a moment.
Moving to Ameren Missouri. In November, Ameren Missouri filed a petition with the Missouri PSC seeking approval to securitize the unrecovered investment in, and costs associated with the planned fall 2024 retirement of, our Rush Island Energy Center. The securitization is expected to result in significant savings for our customers when compared with cost recovery under traditional rate making. We, of course, recognize the importance of keeping our customers' bills as low as possible while investing to improve service. Which leads me to the third pillar of our strategy: Optimizing operating performance.
In 2023, our operations and maintenance expenses declined by 4% year-over-year. We automated and streamlined many of our finance, supply chain and customer service and workforce processes. And we continue to drive new efficiencies in our field work through deployment of smart meters, work management systems and distribution automation. Notably, our Missouri customer rates have only increased 1.8% compounded annually since the smart energy plan legislation took effect in April 2017, with our Missouri residential customer rates consistently remaining 25% or more below the Midwest average.
For our shareholders, yesterday, we announced 2023 earnings of $4.38 per share compared to earnings of $4.14 per share in 2022. The result was above the midpoint of our original earnings per share guidance range of $4.35 per share. On a weather-normalized basis, 2023 earnings results represent a 10% increase year-over-year.
Turning to Page 8. Here, you can see we have delivered consistent superior value to our shareholders for the past decade. Since 2013, our weather-normalized core earnings per share have risen at an approximate 7.8% compound annual growth rate, while our annual dividends paid per share have increased approximately 58% over the same time period. This drove a strong total return of 173% for our shareholders from 2013 to 2023, which was significantly above our utility peer average. This track record of strong and consistent performance gives me conviction regarding our business strategy. And rest assured, we are not looking back, we are focused on the objectives ahead.
Moving to Page 9, we turn our focus to the current year. We expect 2024 to be another busy year and have hit the ground running. Notably, we will maintain our focus on strategic infrastructure investment for the benefit of our customers while working hard to reduce operating costs and improve the regulatory environments in which we operate. We expect to invest approximately $4.4 billion in electric, natural gas and transmission infrastructure to bolster safety, security, reliability, resiliency, and further, the clean energy transition in a responsible fashion. This represents an increase of 22% from the prior year. Our plan includes approximately $1 billion of investment in new generation this year with new solar facilities expected to be in service by year-end. The investment plans are aligned with our regulatory outcomes and expectations associated with each of our business segments.
We also have several opportunities to enhance our regulatory and legislative environments in the year ahead. Next week, Ameren Illinois will file rehearing testimony requesting to update 2024 through 2027 rates for 2023 year-end rate base and a base level of grid reliability investments. Then, in March, Ameren Illinois will file its revised multiyear grid plan with the ICC to address the commission's findings stated in their December order. An updated rate plan will also be filed to incorporate revised investment plans. Concurrently, we are evaluating all appropriate options to better align prospective regulatory outcomes with the goal of making progress on a reliable clean energy transition in an affordable fashion. We will work with all impacted stakeholders to advocate for constructive regulatory frameworks across our Illinois businesses, which will better support the state's energy transition goals.
At Ameren Missouri, we look to obtain approval to securitize the Rush Island Energy Center and advocate for Certificates of Convenience and Necessity, or CCNs, for future renewable and dispatchable generation consistent with the Integrated Resource Plan filed in September. The plan calls for investment in new dispatchable energy resources, including an on-demand 800-megawatt gas simple-cycle energy center by 2027, which could be turned on as needed in a matter of minutes to ensure reliability of the energy grid during periods of peak energy demand. In January, we filed a request for the air permit for this simple cycle plant, Castle Bluff Energy Center, to be located on the site of our retired Meramec Energy Center. Utilizing this site will keep construction costs down, bring back jobs and provide additional tax revenue for the surrounding region. We expect to file for CCN approval with the Missouri PSC later this year.
We will also continue to support the analysis and approval of potential MISO Tranche 2 transmission projects that will serve the needs of the Midwest region, improving the grid's ability to integrate renewable resources efficiently and effectively. Given the importance of dispatchable generation to reliability, we are advocating for improved Missouri regulatory treatment for generation investments, akin to the treatment afforded other investments in electric infrastructure in the state. Further, on the legislative front, in both Missouri and Illinois, we are advocating for Right of First Refusal legislation to support the timely construction of transmission resources needed for system reliability and efficiency and to maximize customer benefits.
Shifting our focus to operations. As we identify ways to continuously improve our business, we are focused on maintaining disciplined cost management to hold operations and maintenance expenses flat in 2024 to 2023 levels.
Moving now to Page 10. Yesterday afternoon, we announced that we expect our 2024 earnings to be in a range of $4.52 to $4.72 per share. Based on the midpoint of this range, this represents 6.2% earnings per share growth compared to the midpoint of our original 2023 guidance range of $4.35 per share. Mike will provide you with more details on our 2024 guidance a bit later. We expect to deliver 6% to 8% compound annual earnings per share growth from 2024 through 2028 and using the midpoint of our 2024 guidance $4.62 per share as the base. At this time, we expect earnings growth to trend below the midpoint of our range until the outlook in Illinois improves or the impacts of other growth opportunities are realized. That being said, we continue to have an outstanding portfolio of investment opportunities across our business segments totaling more than $55 billion over the next 10 years and a strong balance sheet, which provides us potential earnings growth levers that warrant maintaining a guidance range with up to 8% growth.
Our dividend is another important element of our strong total shareholder return proposition. Earlier this month, Ameren's Board of Directors approved a quarterly dividend increase of 6.3%, resulting in an annual dividend rate of $2.68 per share. This represents the 11th consecutive year that we have raised the dividend and reflects confidence by Ameren's Board of Directors in our business outlook and management's ability to execute our strategy. Looking ahead, we expect Ameren's future dividend growth to be in line with our long-term earnings per share growth expectations and within a payout ratio range of 55% to 65%. We expect our weather-normalized dividend payout ratio in 2024 to be approximately 58%. Over the last decade, we have gradually lowered our payout ratio, which provides financial flexibility while executing our robust energy infrastructure investment plans.
Turning to Page 11. The strong long-term earnings growth I just discussed is primarily the result of rate base growth, driven by investment in energy infrastructure, made strategically under constructive regulatory frameworks. Today, we are rolling forward our 5-year investment plan. And, as you can see, we expect to grow our rate base and an 8.2% compound annual rate for 2023 through 2028. This plan represents an increase of $2.2 billion compared to the $19.7 billion 5-year plan for 2023 through 2027 that we laid out last February. The plan includes investment in renewables and simple cycle gas generation consistent with Ameren Missouri's Integrated Resource Plan. And because of the ICC's orders late last year, our capital plan for Ameren Illinois investments has been reduced by approximately $400 million from 2024 through 2027 compared to our prior 5-year plan.
We expect that this level of investment, which we expect will provide safe and adequate service as well as meet compliance requirements under the Climate and Equitable Jobs Act will ultimately be approved by the ICC. That said, we continue to believe that a higher level of investment, supported by a more constructive return on capital investment would be in the best interest of our customers and communities, and we will continue our advocacy. Finally, we remain focused on keeping customer bills as low as possible and improving earned returns in all of our businesses.
Moving to Page 12. As we look to the future, our 5-year plan is not only focused on delivering strong results through 2028, but is also designed to position Ameren for success over the next decade and beyond. The right side of this page shows how our allocation of capital is expected to change over the next five years. Incorporating generation investment opportunities from our latest IRP, we expect our 2028 rate base to reflect our diversified approach for maintaining reliability with renewable generation and dispatchable generation representing 12% and 11% of rate base, respectively. Notably, our coal-fired generation is expected to be just 3% of rate base by the end of 2028. The bottom line is that we are taking steps today across the board to position Ameren to provide safe, reliable, affordable and cleaner energy for the long term.
Moving now to Page 13. Our investment plan released today incorporated our intentions to invest over time in significant renewable and dispatchable resources as laid out in our Ameren Missouri IRP. In 2023, we were pleased the Missouri PSC approved CCNs for the Huck Finn and Boomtown solar projects, and, in doing so, indicated support for a responsible, gradual transition. And I'm happy to announce that we reached a stipulation and agreement regarding our next four solar projects totaling 550 megawatts. These projects will support our lease-cost plan for meeting customers' energy needs as we systematically invest to create a diverse mix of generation resources that preserves reliability as we retire our existing coal fleet over the next 20 years. While the Missouri PSC is under no deadline to issue an order on these four project CCNs, we expect a decision in March with these projects expected to go in service between 2024 and 2026. We expect to file additional CCNs, consistent with the IRP later this year.
Moving to Slide 14. As we've discussed in the past, MISO completed a study outlining a proposed road map of transmission projects through 2039. Detailed project planning, design work and procurement for the Tranche 1 projects assigned or awarded to Ameren is underway, and we expect construction to begin in 2026. During 2023, Ameren was awarded the first two competitive Tranche 1 projects totaling approximately $100 million. Ameren submitted the third, and final, Tranche 1 competitive bid in October and expects the project to be awarded by June 2024. When awarding the competitive projects to Ameren, MISO noted our sound route design, engineering and cost containment plan and innovative approach working with stakeholders as key factors in the winning bids. This is indicative of how we plan and develop all transmission projects. We believe our collaborative, customer-centric and community respectful approach to building and maintaining low-cost projects is why we should be directly assigned these projects in the future in both Missouri and Illinois. MISO expects to approve a set of Tranche 2 long-range transmission projects in the first half of 2024, which will again address Midwest region needs.
Turning now to Page 15. Looking ahead, over the next decade, we have a robust pipeline of investment opportunities of over $55 billion that will deliver significant value to all of our stakeholders by making our energy grid stronger, smarter and cleaner. Of course, our investment opportunities will also create thousands of jobs for our local economies. Maintaining constructive energy policies that support robust investment in energy infrastructure and a transition to a cleaner future in a responsible fashion will be critical to meeting our country's energy needs and delivering on our customers' expectations.
Moving to Page 16. Disciplined cost management and a focus on customer affordability is nothing new to us here at Ameren. And we expect 2024 to be another year of disciplined cost control and value realization from continuous improvement initiatives which Mike will provide more details on in a few minutes. Through innovation and new efficiencies, we continue to target flat operations and maintenance expenses through 2028.
Moving to Page 17. To sum up our value proposition, we remain firmly convinced that the execution of our strategy in 2024 and beyond will continue to deliver superior value to our customers, shareholders and the environment. We believe our expectation of 6% to 8% compound annual earnings growth from 2024 through 2028, driven by strong rate base growth and supported by a strong balance sheet compares favorably with our regulated utility peers. I'm confident in our ability to execute our strategy and investment plans across all four of our business segments as we have an experienced and dedicated team with a track record of execution. Further, our shares continue to offer investors an attractive dividend, and we are positioned well for future dividend growth. Simply put, we believe this results in an attractive total return opportunity for shareholders. Again, thank you all for joining us today. And I will now turn the call over to Michael.
Michael L. Moehn
Thanks, Marty, and good morning, everyone. Turning now to Page 19 of our presentation. Yesterday, we reported 2023 earnings of $4.38 per share compared to earnings of $4.14 per share in 2022, an increase of approximately 6%. This page summarizes key drivers impacting earnings at each segment, which are largely consistent with what we reported throughout 2023. As Marty noted, we normalized for temperature variations over the past two years, we estimate that our earnings grew 10%.
Moving to Page 20. I'll cover a few key developments from the fourth quarter. In November, Ameren Missouri filed for securitization of costs associated with the Rush Island Energy Center as we approach the planned retirement date of October 15, 2024. If approved as requested, Ameren Missouri will be able to refinance and recover approximately $519 million, reflecting the remaining value of the plant and decommissioning costs. Missouri PSC order is expected in June 2024. To mitigate the impact of the lost rate base associated with the Rush Island retirement, we expect our Huck Finn and Boomtown solar facilities with an estimated total investment of approximately $650 million to be placed in service near the end of this year.
Turning to Page 21. As Marty mentioned, late in 2023, the ICC issued orders in our Ameren Illinois natural gas and electric rate reviews. In November, the ICC approved a $112 million annual base rate increase for natural gas delivery, service which included $77 million that would have otherwise been recovered under riders. The order reflects a 2024 future test year, a 9.44% allowed return on equity, a 50% common equity layer and a rate base of $2.85 billion.
New rates were effective in late November. We filed for rehearing of this order with the ICC and were denied. So on January 3, Ameren Illinois appealed the ICC decision to the Illinois Fifth District Appellate Court, seeking that the ICC modify the return on equity and certain plant disallowances, among other things. The court is under no deadline to address this appeal.
Turning to Page 22. In December, the ICC issued an order in our Ameren Illinois electric multiyear rate and Grid Plan filings. In its order, the ICC established an alternative revenue requirement based on our 2022 rate base and is requiring us to refile and provide additional justification for our grid plan. We're in the process of revising our grid plan and will follow it by the March 13 deadline. We will also revise our multiyear rate plan to incorporate these grid plan revisions. In the meantime, the December order reflects a cumulative increase from 2024 through 2027 of $142 million in revenues. The order approved an allowed return on equity of approximately 8.72% and a 50% equity layer.
In January, Ameren Illinois filed for rehearing of the December order with the ICC. On January 31, the ICC ordered a partial rehearing regarding certain operations and maintenance expenses, use of the 2022 rate base for establishing the revenue requirement for 2024 through 2027 and a base level of grid reliability investments. We expect a decision on these items, subject to rehearing by the end of June, with new interim rates expected to be effective at the discretion of the Commission. Following the ICC's response to our rehearing request, Ameren Illinois also filed an appeal to the Illinois 5th District Appellate Court on January 31 to address the remaining items which were denied for rehearing, including the return on equity. The court is under no deadline to address this appeal. We remain focused on providing safe and adequate service for our Illinois customers.
Moving to Page 23. Our overall outlook remains bright as we have a robust pipeline of investment opportunities. Our Ameren Transmission Missouri business segments continue to benefit from meaningful ongoing investments supported by reliable constructive regulation. Here, we provide an overview of our $21.9 billion of planned capital expenditures for 2024 through 2028 by business segment that supports our consolidated 8.2% compound annual rate base growth expectations.
As you can see on the right side of this page, we're allocating capital consistent with the allowed return on equity under each regulatory framework. Our annual Missouri Smart Energy Plan filed today with the Missouri PSC provides more detail on how we strategically invest to replace aging infrastructure with more resilient, reliable equipment to serve our customers. After five years of Smart Energy Plan investments, we are a full year ahead of our initially planned smart meter installations in the state. That said, at our current investment levels, we still have decades of investment needed to address aging distribution substations and overhead and underground lines. You can find additional details on the Smart Energy Plan and allocation of our 2024 planned capital investments on Page 32 and 33 in the appendix of this presentation.
Turning to Page 24. We outline here the expected funding sources for the infrastructure investments noted on the prior page. We expect continued growth in cash from operations as investments are reflected in customer rates. We also expect to generate significant tax deferrals, driven primarily by the timing differences between financial statement depreciation reflected in customer rates and the accelerated depreciation for tax purposes. As we sit here today, we do not expect the transferability of solar and wind tax credits to materially impact capital funding, nor do we expect the Corporate Minimum Tax to apply during our 5-year plan. From a financing perspective, we expect to continue to issue long-term debt to fund a portion of our cash requirements.
For us to maintain a strong balance sheet while we fund our robust infrastructure investment plan, we have entered into forward sales agreements for $230 million of common stock issuances under our at-the-market equity distribution program to address most of our 2024 equity needs. We expect to settle these by the end of the year. The only additional equity we expect to issue in 2024 will be approximately $70 million for our dividend reinvestment and employee benefit plans.
Incremental equity issuances of approximately $600 million each year are planned for 2025 through 2028, a portion of which we expect to be issued through our DRIP and employee benefit plans. The $600 million per year is unchanged from our previous plan outlined last February. All of these actions are expected to sustain our strong balance sheet and credit ratings.
Moving to Page 25 of our presentation. I would now like to discuss key drivers impacting our 2024 earnings guidance. We expect 2024 diluted earnings per share in the range of $4.52 per share to $4.72 per share. This accommodates a range of outcomes on our ongoing in regulatory proceedings, along with our typical business risk and opportunities. Detail by segment as compared to the 2023 results can be found on this page and the next. Beginning with Ameren Missouri, earnings are expected to rise in 2024. Earnings are expected to be favorably impacted by higher investments in infrastructure that are eligible for PISA and AFUDC treatment, as well as new electric service rates effective July 2023.
Earnings are also expected to benefit from higher weather-normalized kilowatt hour sales to Missouri residential and commercial customers, which are expected to increase by 1% year-over-year in 2024, while sales to industrial customers are expected to increase by 4% year-over-year. These projected increases are driven primarily by customer count growth and General Motors resuming full production levels after a work stoppage in the third quarter of 2023. We also expect to benefit from lower operations and maintenance expenses. And, we expect a return to normal weather in 2024 will increase Ameren Missouri earnings by approximately $0.03 compared to 2023 results. These favorable factors are expected to be partially offset by higher interest expense, primarily due to higher long-term debt balances. Moving on, earnings from our FERC-regulated electric transmission activities are expected to benefit from additional investments in Ameren Illinois and ATXI projects made under forward-looking formula ratemaking.
Turning to Page 26. For Ameren Illinois Electric Distribution, the year-over-year earnings comparison will be impacted by the lower allowed ROE approved by the ICC in the multiyear rate plan versus the 2023 allowed ROE, which was driven by the 30-year treasury rates plus 580 basis points. The allowed ROE is applied to year-end rate base, which includes 2023 rate base and 2024 planned capital additions. For Ameren Illinois Natural Gas, earnings will benefit from higher delivery service rates effective in November 2023, incorporating additional infrastructure investments partially offset by a lower allowed ROE and common equity ratio. Earnings will also benefit from lower operations and maintenance expenses.
Moving now to Ameren-wide drivers and assumptions. We expect increased weighted average common shares outstanding to unfavorably impact earnings per share. We expect higher interest rate expense at Ameren Parent due to increased debt balances. At the end of 2023, we termed out all then-outstanding commercial paper balances at Ameren Parent through two debt offerings. The first issued in November was $600 million, with 5.7% senior unsecured notes due in 2026, and the second in December was $700 million of 5% senior unsecured notes due in 2029. Of course, in 2024, we will seek to manage all of our businesses to earn as close to our allowed returns as possible.
With that in mind, and to support our expectation for lower operations and maintenance expenses in our Ameren Missouri and Illinois Natural Gas businesses. We've instituted several cost-saving initiatives in 2024, including a hiring freeze, reducing our contractor and consultant workforce and deferring or eliminating discretionary spend. We'll be strategic about workforce management and continued investment in digital efficiency to allow us to sustain these cost reductions.
Before moving on, I'd like to touch on expected sales growth for our service territory. While we're conservative in our modeling, we are optimistic about the opportunity for strong economic development in the years ahead. In the last three years, our economic development team has helped to bring 65 new projects to our communities in Missouri and over 125 projects into Illinois, bringing with them an estimated total of over 14,000 jobs. These projects are generally expected to be completed in the next couple of years.
With that, in mind, we expect weather-normalized kilowatt hour sales to be in the range of flat to up approximately 0.5% compounded annually over the 5-year plan, excluding the effects of our MEEIA energy efficiency plans, using 2023 as the base year. We exclude MEEIA effects because the plan provides rate recovery to ensure that earnings are not affected by reduced electric sales resulting from our energy efficiency efforts.
Turning to Illinois. We expect our weather-normalized kilowatt-hour sales to be relatively flat to down 0.5% over our 5-year plan, driven primarily by increases in energy efficiency and solar adoption. Recall that changes in Illinois electric sales, no matter the cause, do not affect earnings, since we have full revenue decoupling.
Finally, moving to Page 27. I'll emphasize again that we have a strong team and have a long track record of execution. We delivered strong earnings growth in 2023 and expect to continue to deliver 6% to 8% compound earnings per share growth over the next five years, driven by robust rate base growth and disciplined cost management. We believe this growth will compare favorably with the growth of our peers Further, Ameren shares continue to offer investors an attractive dividend. In total, we have an attractive total shareholder return story. That concludes our prepared remarks. We now invite your questions.
Question and Answer Session
Operator
(Operator Instructions) Our first question comes from the line of Shar Pourreza with Guggenheim.
Shahriar Pourreza
Marty, obviously, you've throttled back Illinois electric spend here pretty significantly versus the product plan, which I think is completely expected, just coming off those ICC orders. Can you just speak a little bit more to what you've actually embedded in that 2.3% 5-year CAGR as it relates to the grid plan. I guess put differently, could we see that tick higher later this year once the plan is approved? Or is the embedded base case there still subject to some upside and downside scenarios.
Martin J. Lyons
Yes, I'll let Michael comment on that further. But I would say, Shar, you're right. What we've done here is we baked in what we believe to be a prudent level capital expenditures given the overall outcomes that we had in Illinois. As we said in our prepared remarks, we do believe that this is an appropriate amount to continue to provide safe and adequate service to our customers and meet the requirements of [CAGR] and what's been baked in. I just repeat what I said earlier, which is that we do believe a higher amount of investment over time as originally proposed last year is prudent and appropriate for our customers to provide the kind of service that they expect to really further the state's energy goals and policy goals.
But again, what we've modeled in here is what we do believe would be a level that would be expected to be approved by the commission over time through the rehearing process as well as through our upcoming grid plan filing and rate plans. So again, we do expect that this level of investment is something that will ultimately be reflected in those outcomes. But with that, in terms of further clarity on the CapEx, Michael, any comments?
Michael L. Moehn
Yes. Maybe just a couple of finer points. I think Marty said it well. I mean as we think about the capital plan that we've allocated there. Again, Marty is correct. I mean, we're absolutely focused on providing safe and reliable service. I think we're being conservative in how we think about that. There's this 105% revenue requirement cap that we need to stay underneath. And as you know, and I think there was some discussion about this, the commission's order pointed to '22 rate base. I think it was really more of a function of -- because that was really the only year-end rate base to point to.
We definitely have the ability to, I think, recover our '23 expenditures. It's really under another formula rate. As they do that and they update and we're seeking some of this clarification, that obviously would give you more headroom under that 105% revenue cap. I think we took a conservative approach saying let's make sure whatever we spend in '24, we stay under pointing back to the '22. So my point is you have a lot more flexibility going forward. I think, to Marty's point, we'll have to step back and then decide given the 8.72%, how do you feel about allocating more capital there. But as we continue to see improvement here, there's obviously would be those opportunities.
Shahriar Pourreza
And then Marty, just on Tranche 1, is it versus Tranche 2? Is it still your expectation Tranche 2 will exceed Tranche 1? And then just on Tranche 2 estimates, are they embedded in that $55 billion pipeline number? Could any of the awards fall within this kind of 5-year cycle you've got out there?
Martin J. Lyons
Good questions, Shar. So with respect to Tranche 2, we do continue to expect it to be considerably larger than the Tranche 1 investments. And MISO, as we said in our prepared remarks, is still saying that they expect to have those approved by the middle of this year. We'll see how that comes to fruition. But we do expect that in the first half, will at minimum start to get some clarity on what some of those projects might look like. But again, Shar to your point, significantly larger. Now with respect to our plans that we've laid out, within the 5-year plan, nothing is baked in for Tranche 2 investments. However, in the $55 billion, we do have some amount in there for potential Tranche 2 investments. So within the $55 billion, yes, certainly, we do have some.
Operator
Our next question comes from the line of Nicholas Campanella with Barclays.
Nicholas Joseph Campanella
I appreciate the guidance update and just the comment that you're kind of below the midpoint of the 6% to 8% range. Can you just kind of expand on what we should be watching for that kind of gets you back to that midpoint? And I just -- I'm taking into account the comments around, it seems that some of this transmission spending has been reflected in the plan. Correct me if I'm wrong. And then you're also just kind of assuming CapEx for the Illinois distribution segment as proposed is approved as well. Just what should we be looking for to get you back into that midpoint?
Martin J. Lyons
Yes. Nick, maybe we'll take that in two parts. I'll actually turn it over to Michael first to maybe provide a little more clarity on our thinking around the growth. And then I'll provide some color on some of the upsides in our plan.
Michael L. Moehn
Just to put a little finer point on the midpoint. I think, as Marty said in his comments, expect to be a little below that midpoint. And if you think about historically where we have been just sort of the highest level, I mean if you go back to February last year, we had 8.4% rate base growth. And over that period of time, we were issuing roughly about 2% worth of dilution, say, over the 5-year plan, so got you down to call it, 6.4%, 6.5% something like that. And then we've done a nice job of continuing to close the allowed-versus-earned gaps, et cetera, continuous improvement. There's been a number of opportunities being really thoughtful about allocating capital to the place that are giving us the highest return.
And you can see, obviously, historically, we were trending above that 7% midpoint. And we kind of think about where we are today, we got this 8.2% rate base growth, really kind of the same dilution math. So with all things we need to look at, put you that 6.2%. And then there's obviously still improvement opportunities as we continue to look forward. And I think as we think about a midpoint, in some place between that 6.5% to 7% today. So let's call it 6.7%, just to put a little finer point on. So 6.7% versus sort of 7%, where I think we kind of appointed people historically. And again, we've had opportunities to do better than that, and Marty will talk about where I think the future still lies for us, you think about the $55 billion in the capital projects that we have there. There's opportunities to continue to be thoughtful about the transmission that we just talked about a second ago. And so those are the things that will provide us those opportunities. So hopefully that gives you a little more clarity on the math. I'll let Marty talk a little larger picture.
Martin J. Lyons
Yes. I think what Michael started to touch on it a little bit. In terms of the upside, as I said in the prepared remarks, we certainly see good justification for keeping that 6% up to 8% growth. And really, what it reflects is that strong pipeline of investments that we have. We start there, $55 billion of potential investments over the next 10 years. We have baked into the 5-year plan, the Tranche 1 investments that we've been assigned to us or that we've won, but we also have competitive proposal out there right now for another tranche 1 project, which hasn't been baked in, and that provides us some upside. We've talked about just a second ago, some of the Tranche 2 projects got further investments to be made with respect to Missouri as it relates to the IRP. We've got some of those certainly baked in today.
As I mentioned, we had a very strong balance sheet. And opportunities, as Michael just said, to continue to close the gap between our allowed and earned returns which provide upside. And then, of course, as we look ahead in Illinois, a couple of things. I mean, first, the current multiyear grid plan or rate plan ends in 2027. And so as we look out even to 2028, there's opportunities to think about that differently and what our approach will be in 2028. And then I go back to maybe the most important thing, which is in the interim, to really work to improve the Illinois situation and perhaps provide an opportunity for greater investment in Illinois. So there, as we said in the call, we're going to continue to engage in a dialogue with all stakeholders about the benefits of investment risks of this investment. And our goal of really aligning our investments with the policy goals of the state around reliability, affordability, the clean energy transition and of course, we all know that our investments drive not only improvements in critical energy infrastructure but jobs and economic expansion.
So look, we've got to just continue to show financial discipline in the short term. But in the longer term, make sure we create this dialogue that having consistent constructive regulation having strong investment in infrastructure in the state is going to benefit our customers, our communities, the economy of the state and continue to work to make Illinois a place that attracts greater investment.
Nicholas Joseph Campanella
All right. And then I guess just on the O&M. I think in your prepared remarks or even on slides here, 4% versus last year. And then you're doing more O&M, just looking through the EPS slides, you have positives from Missouri and Illinois. So just -- is 4% of the magnitude of decrease that we should expect to continue through '24? Can you maybe give us any type of way to frame that? And then how are you kind of thinking about just recapture of that or timing of the next rate cases in Missouri? If you can maybe expand.
Michael L. Moehn
Nick. This is Michael, let me take this and Marty can certainly add in. Yes, we've talked about this, obviously, over time. I mean customer affordability is not something that is new to us. I think we've been really focused as a company on it for a number of years and really up and down the P&L. And we talked about this, we, I think, do a great job of kind of going in and continuing to benchmark ourselves all of the different areas of our business. And some are really good. Some have opportunities and we continue to close the gap on those opportunities. And I think Marty pointed to the 4% [news], it was obviously, people are very focused on it. We talked about flat O&M over the 5-year period is a good way to think about it. But the bottom line is there are a number of levers that we're able to pull here.
I think as we think about '24 specifically, I mean I mentioned in my opening remarks, I mean, I think we're taking just another view here. We're looking at headcount, you talked about the headcount, hiring freeze at the moment, being very thoughtful about just contingent workforce, consultant dollars, any sort of discretionary spend. I think all the right things to do just in this elevated rate environment anyway for customers, and so that's really the focus there. But we're also being very thoughtful and strategic about as you mentioned, just rate reviews, et cetera, and being thoughtful about investments on the digital side, too, just to make sure we make these costs sustainable. That's really what we want to do.
I think we've talked about we've had an increased investment in the digital platform over the last several years after we got PISA passed. And it's allowed us to replace our work management systems, our back-office accounting systems. We continue to put a great deal of distribution automation, et cetera, on the system. And all of these things are productivity improvements over time, which just give us a lot of confidence. This is a lever that we can continue to pull. So Marty, anything to add there?
Martin J. Lyons
No, nothing to add there. Thanks for the question.
Nicholas Joseph Campanella
And I'm sorry, just to follow up on that. Are you planning to file a Missouri rate case in the next year? Or is that more than a year out?
Martin J. Lyons
Yes, that's not something we've decided yet. And look, if you look back over time, it's been every 18 to 24 months. We filed the case, but haven't stated when we're going to plan to file the next one. So we'll be thoughtful about that. I mean look, we always try to go as long as we can between rate cases, and we'll continue to take that approach. But be thoughtful about when major capital additions go in and the like to think about the timing of our cases.
Operator
Our next question comes from the line of Jeremy Tonet with JPMorgan.
Jeremy Bryan Tonet
I just wanted to kind of follow up on some of the points that you've talked about before. And just regarding your capital reallocation, how should we be thinking about Missouri bill impact over time from the higher CapEx, just any thoughts there? And then also as we think about deploying that capital, the timing for receiving approvals and permits with the additional transmission investments, broadly speaking, on that side, if you could provide some more color there would be helpful.
Martin J. Lyons
Yes, [I'll let there], Jeremy. I think, number one, in terms of bill impacts, we're going to work through time as we have to keep the bill impacts as manageable as possible. I think we had a pretty good track record in Missouri since we got more constructive regulation, legislation back in 2018 and really kept the growth in bills really below the level of inflation. And so we're going to look to continue to, as Michael stated a minute ago pretty comprehensively, take a lot of actions across the board to really manage our operating costs. And really, to the extent that we have rate increase requests, really make those about the capital additions that are going in that are producing greater reliability for our customers, et cetera, where they're seeing the benefit. So we're going to continue to work to keep our belt tight, and as I said, overall, look to keep our operating costs flat over the next several years. And as Michael said, create as many productivity improvements as we can. So that's our goal.
Now with respect to these projects, I would say, when you look at our capital expenditure plans over the next 5 years for Missouri. I would say [a need] -- they really relate on the left side of the graph on Page 23 to things that were included in our integrated resource plan. So there -- the integrated resource plan had called for 2,800 megawatts of renewables by 2030. This is a piece of that as we move ahead with renewables. Over half of what we got there in that capital spend of $3.3 billion is related to two CCNs that have already been approved. And then there's four CCNs that are pending right now and we expect to be able to file a stipulated settlement on those in the near term. And so those are proceeding well. And then with respect to the dispatchable generation, part of this is the simple cycle gas plant that we plan to put in service over the next five years.
And then part of this is continuing to invest in the dispatchable energy resources that we have in the state. But we will, as we said on our call, we've begun to do work around this 800-megawatt simple cycle gas plant and we will consider when to file a CCN for that. So those are some time lines in terms of some of the investments we've got, Michael, any color to add?
Michael L. Moehn
Yes. Marty, did a great job there, Jeremy. I think the only thing that I'd probably add there is if you think about the $13 billion that we're allocating in Missouri, about 25% of it is renewables. And obviously, an important factor is just PTC, ITC that's being given off with respect to those projects. So you think about the impact for customers ultimately. I mean there is a really big benefit there. And so -- but just something to keep in mind, I agree with everything else Marty said, I mean, we continue to be focused to all the comments I made before. It's not something new that we're doing here. Sometimes you can get a little lumpy impact in Missouri just because of the timing of the rate reviews, but the team really is focused on trying to keep these bills as low as possible.
Jeremy Bryan Tonet
And maybe just shifting towards Illinois and from where you sit, just wondering your perspective and what you see happening with regards to potential legislative or legal responses to the Illinois orders there in the state house? How have your conversations with stakeholders have been trending here? Just any color you could share would be helpful.
Martin J. Lyons
Yes. I think, look, the first order of business, as we look ahead is, as I said before, to really try to work constructively with stakeholders. And right now, I'd say our primary focus is a couple of things. It's number one, making the rehearing filing, which is -- we plan to make next Thursday. So there, the opportunity to have rehearing around incorporation of 2023 rate base as well as baseline capital investments that we plan to make over the next five years and have those included in the rehearing. And then as we've said before, we follow that up with our grid plan update and filing in mid-March. There, again, we get feedback from the commission obviously on deficiencies that they saw within the initial filing. We're looking to address those. We're looking to work constructively with stakeholders, whether it's the staff or other parties to make our filing as strong as we can to address the Commission's identified deficiencies and position ourselves for success in getting, again, both a good outcome in the rehearing as well as getting that grid plan approved and ultimately incorporated into a revised rate plan.
So I think those are where really our focuses are in the short term. Like I said, in the longer term, we'd like to see a more constructive environment for investment, and that's going to take really engagement with all stakeholders. And I think what we found is a receptivity among stakeholders to have the conversation to listen and we'll figure out over time what the best path forward is to achieving the results we want, which is a more constructive environment for investment, which, again, we believe is ultimately in the best interest of customers, communities and the achievement of the state's policy goals.
Operator
Our next question comes from the line of David Arcaro with Morgan Stanley.
David Keith Arcaro
Just wanted to in terms of weather normal load growth, just wondering how conservative.
Michael L. Moehn
David, we're having a really hard time hearing you. Could you speak up a little, David?
David Keith Arcaro
How is that? Sorry about that.
Michael L. Moehn
Better.
David Keith Arcaro
Good. Now just in terms of weather normal load growth, I was wondering how conservative the outlook that you're presenting here. Is there any possibility for acceleration, either from any manufacturing activity or data center activity that you're seeing or otherwise?
Michael L. Moehn
Yes. Let me start off and then certainly Marty can add as well. I think I tried to provide a little of this color in the opening remarks. I mean, look, I think we do a good conservative job of kind of thinking about the load growth, but there are some really positive things happening in our service territory. Just economically, it's very strong. GDP growth is strong here. And I'm really talking about kind of the Greater Missouri area, unemployments running below the national average. We've had -- if you think about even just '24 more specifically, I mean we got the GM coming back on, they've added some additional load. There's a couple of data imaging companies that are using just a tremendous amount of energy, about 20 megawatts. I mean these things really begin to add up.
And there's just a number of longer-term, I think, opportunities as we think about data centers and other things from an information technology standpoint that could provide some economic growth. I think we do a good job of not really baking that in at this point. We talked about toward flat to up 0.5%. But I'm optimistic that, hopefully, that is -- ends up turning out differently. So Marty?
Martin J. Lyons
Yes. I would just say that, look, we have a broad service territory, and we're deeply involved throughout Illinois and Missouri and economic development activities and our team support economic development expansion across both service territories. I would say this, though, in the Greater St. Louis region, both in the Illinois side, the Missouri side. I'm more excited than I've been in years with respect to, I would say, the collaborative approach to really going after economic development efforts and really thinking about how we drive inclusive economic growth, economic development and compete for projects. And I've never seen the community is unified and speaking with one voice and going after these things. So we're seeing some wins, some wins that will produce, I think, economic expansion, 2 and 3 years out, some positive announcements, as Michael said.
But -- and I hope we are being conservative with respect to our growth projections. That said, as we see growth, we often see also continued efforts on energy efficiency, both the energy efficiency we promote, but also just energy efficiency in general. And so try to be realistic about our growth expectations, net of those efforts.
David Keith Arcaro
And then I was just curious, what level of FFO to debt you're seeing over the plan, wondering to the extent you realize some of the CapEx upside opportunities, how that could impact the equity needs going forward?
Michael L. Moehn
So again, we haven't really given targets in the past. I mean, I think what we talked about is, look, we like our ratings where they are, Baa1, BBB+, (inaudible) threshold S&P is 13%, 17% at Moody's. We've trended obviously closer to that 17%. And again, as I outlined in my opening remarks, I mean, we feel good about our balance sheet, and then we come into this from a position of strength, as I look out over the 5 years, the equity needs that I outlined certainly support, I believe actually maintaining that Baa1. And so maintaining something over that 17% over that 5-year period. And so -- and again, I tried to be clear on what we did from an equity standpoint. For 2024, we're assuming $300 million of equity. We've done about $230 million under our ATM program today, really the remaining balance that we need to is related to our DRIP 401(k). And then for all the other years, it's really consistent with where we had been before. So basically $600 million. And again, I think supports those credit ratings that I just spoke about.
Operator
Our next question comes from the line of Durgesh Chopra with Evercore.
Durgesh Chopra
Just Michael, on the point about equity, maybe you could just expand on this. So the CapEx plan is up -- the 5-year CapEx plan is up close to 10%. A little over 10%, but the equity is kind of the same. Are you kind of modeling now lesser question versus the downgrade thresholds? Or are there other cash flow improvements that you might be missing?
Michael L. Moehn
Yes. I don't know if there's other cash flow improvements. I mean, again, I think we're always been conservative as we think about the balance sheet. And so again, I feel good about what I just said, David, in terms of how we're thinking about the FFO-to-debt over time and being above that downgrade threshold at 17%. We continue to obviously work with the rating agencies, we'll be in talking to them again in the spring. And so I guess I don't have any reason to feel concerned about it at this point. And again, I think it was -- it's the right thing to do. We added the capital and still feel good about the levels that we're at, given the equity that we're issuing.
Durgesh Chopra
And then maybe just a couple of clarifying questions, and this will be quick, hopefully. But in the current 5-year CapEx plan, the four solar projects that you have settlement for in Missouri, those are included in the plan? Confirm that for us? And then the upside would be the Missouri IRP results and then any transmission project awards from the MISO planning. Am I thinking about it correctly?
Martin J. Lyons
Well, I think, first of all, yes, the projects that we've already had [CCNs for] as well as subject to the stipulation are included E&D 5-year CapEx as shown on Slide 23, and in fact, some additional CapEx as well for renewable projects that we anticipate to come into service by the end of 2028. And then the second part of your question was?
Durgesh Chopra
It was just the traffic?
Martin J. Lyons
Yes, what I think there, what we're saying is with respect to transmission, we've got the Tranche 1 projects that have been assigned to us or awarded or included in there. But what we have -- we have not included in there is any upside for a potential additional win of a transmission project that we've proposed on.
Operator
Our final question comes from the line of Julien Dumoulin-Smith with Bank of America.
Julien Patrick Dumoulin-Smith
Look, maybe just to kick off quickly here, just on the balance sheet. Obviously, you're bringing down equity slightly over the comparable period from last plan, upticking CapEx fairly meaningfully here. I just wanted to clarify, just where are you relative to the required metrics? Can you elaborate a little bit through the cadence of the plan? How you're thinking about the FFO to debt? Or just where you're starting and ending, if you will? And then I got a follow-up real quickly.
Michael L. Moehn
Yes it's Michael. As I said, we have -- the downgrade threshold of Moody's is 17%, and we, historically, haven't talked about exactly what we're targeting. But again, over the 5-year plan, there is cushion over that 17%. Again, I feel good about it, and we have been, I think, done a great job as sort of telegraphing what our equity needs being very disciplined about going out and issuing that equity. I think we come into this kind of super CapEx environment with a very, very healthy balance sheet. As you know, we're not trying to get up to some level, right, where we've been at these levels and I see us staying at that level over the 5-year plan.
Julien Patrick Dumoulin-Smith
So every year kind of over that 17% threshold give or take? And the rate (inaudible).
Michael L. Moehn
Over the 5-year plan. Yes, over 17%. And again, look, as we have frequent conversations with them, we'll go in again and have another conversation with them.
Julien Patrick Dumoulin-Smith
And just to clarify this on the Missouri CapEx. I mean, obviously, that's a nice uptick there. And obviously, you haven't necessarily decided when you're filing the case. But how do you think about just the clarity that you have on that spend, right, when you think about having visibility tied to specific projects that are likely to be approved or what have you. I just want to understand the level of confidence that there is in this CapEx in Missouri. Obviously, you're putting a lot more in there. Just wanted to understand what are the key parameters? What are the key inputs that you're thinking about in saying, look, we've got confidence on the totality list, right? What pieces aren't necessarily proved perhaps?
Martin J. Lyons
Well, look, I think one of the things you could look at Julian, is every year at this time, we make a filing in Missouri where we're very transparent and lay out what our planned capital expenditures are, how we're justifying those, thinking about those, where they plan to go. And so you'll see that actually today coming from Ameren Missouri. It happens every year at the same time and then it's subject to public discussion about the plans and where they're going.
I would say this. I mean, as you look at Missouri, it's really, as I said earlier, it's really to align our investment with the things that were in our IRP last fall. So we do plan to invest in an 800-megawatt simple cycle plant. We do plan to continue to invest in our dispatcher resources, which is both our coal-fired energy centers to get them through to their retirement, making sure that they're reliable and efficient, making sure that we continue to invest our nuclear facility. So we've got a lot of dispatchable resources there.
And then as it related to the IRP, we also, we had planned investments in renewables in some over this 5-year period in battery storage as well. And so those are included in the plan. As I mentioned earlier, with respect to renewables, we got a positive order out of the commission on a couple of CCNs last year. We've got four that are pending right now that we believe will be filing a stipulated settlement here in the short term and we would look to commission approval, but those would be objective commission approval. And then we've got other planned investments in renewables, again, in accordance with that IRP.
And then with respect to the remainder of the spend, it really has to do with continued investment in our distribution infrastructure. I think our customers are seeing a lot of benefits today, as I mentioned in our prepared remarks, especially when we have severe weather events. We're seeing the infrastructure investments that we are making, which are stronger thicker taller poles, smart automation, distribution automation, our system, new substations. We're really seeing the benefit of that in terms of reduced frequency of outage.
I mentioned earlier, hit top quartile in terms of safety measures or frequency of outages this year. So seeing a lot of benefits from that. But we've only really been at that since 2018, and there's a tremendous amount of investment still to be made really decades of investment still to be made in terms of not only replacing aging infrastructure, but really modernizing that infrastructure to make sure that the kind of benefits that we're seeing in terms of reduced frequency and duration of outages are spread across our service territory in Missouri. So again, all of that is subject to further planning and et cetera. But I think, again, I point you today's filing in Missouri, which really lays out all the specifics in terms of the plans we had to invest and the justification. With that, I'll stop.
Operator
Thank you. Mr. Lyons, I would now like to turn the floor back over to you for closing comments.
Martin J. Lyons
Yes. Well, thank you. And I want to thank everybody for their participation today, their questions. We thank you for your investment and your confidence in our Ameren team. We're going to work to build on our [legacy] of delivering reliable, safe and affordable energy for our customers and communities across both Missouri and Illinois. So look, everybody be safe, and we look forward to seeing many of you at conferences over the next few weeks. Bye-bye.
Operator
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
