Ameren's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Ameren Corporation (AEE)

Q1 2012 Earnings Call

May 4, 2012 10:00 am ET

Executives

Thomas Voss – Chairman, President, Chief Executive Officer

Martin Lyons – Senior Vice President, Chief Financial Officer

Doug Fischer – Director of Investor Relations

Analysts

Paul Ridzon – Keybanc

Paul Patterson – Glenrock Associates

Terran Miller – Cantor Fitzgerald

Ashar Khan – Visium Asset Management

David Paz – Bank of America

Reza Hatefi – Decade Capital Management

Michael Lapides – Goldman Sachs

Tom Rebinoff – Fore Research & Management

Alex Tai – Standard General

Julian Dumoulin-Smith – UBS

Raymond Leung – Goldman Sachs

Presentation

Operator

Greetings and welcome to the Ameren Corporation’s First Quarter 2012 Earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star, zero on your telephone keypad. As a reminder, this conference is being recorded.

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

Doug Fischer

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

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

To assist with our call this morning, we have posted a presentation on our website that will be referenced during this call. To access this presentation, please look in the investor section of our website 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 and described in the forward-looking statements. 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 factors section in our filings with the SEC.

Tom will begin this call with an overview of first quarter 2012 earnings and 2012 guidance, followed by a discussion of recent regulatory and business developments. Marty will follow with more detailed discussions of first quarter 2012 financial results as well as regulatory and other financial matters. We will then open the call for questions.

Here is Tom, who will start on Page 3 of the presentation.

Thomas Voss

Thanks, Doug. Good morning and thank you for joining us. Today we announced a first quarter 2012 net loss in accordance with generally accepted accounting principles, or GAAP, of $1.66 per share compared to first quarter 2011 GAAP net income of $0.29 per share. This first quarter 2012 GAAP net loss included a non-cash pre-tax asset impairment charge of $628 million related to the write-down of our Duck Creek merchant generation energy center which was triggered by the first quarter 2012 sharp decline in forward prices for electricity. Excluding the impacts of this charge, a related tax adjustment and mark-to-market activity, first quarter 2012 core results were positive with earnings of $0.22 per share compared to first quarter 2011 core earnings of $0.25 per share. The decrease in first quarter 2012 core earnings compared to first quarter 2011 core earnings primarily reflected the impact of warm winter weather on our regulated utility electric and natural gas sales.

First quarter 2012 winter temperatures were among the warmest on record with heating degree days approximately 30% fewer than those experienced in the year-ago quarter. As a result, kilowatt hour sales of electricity to weather-sensitive residential and commercial utility customers declined 9%. Natural gas sales were also negatively impacted by the much warmer weather with first quarter 2012 volumes down 21% compared to the first quarter of 2011. In total, we estimate that warmer temperatures reduced first quarter 2012 earnings by $0.13 per share compared to the first quarter of 2011, and by $0.10 per share compared to normal.

On a positive note, kilowatt hour sales to industrial customers rose 5% compared to the first quarter of 2011, a sign of economic improvement in our region. A second key driver of lower first quarter 2012 core earnings compared to the year-ago quarter was reduced margins in the merchant generation segment. The decreased margins reflected reduced generation to the merchant segment due to lower market prices for electricity.

The effects of the warm weather and lower merchant margins were partially offset by increased electric utility rates in Missouri, increased natural gas delivery rates in Illinois, and lower non-fuel operations and maintenance expenses, including reduced storm-related costs.

Turning now to Page 4, today we are affirming our core earnings guidance range of $2.20 to $2.50 per share for this year. The much warmer than normal weather led us to reduce core guidance for our regulated utility business by $0.05 per share at both the high and low ends of the range to $2.15 to $2.35 per share. This reduction in earnings guidance for the utilities is offset by an increase in the core guidance range for our merchant generation business segment of $0.05 per share at both the high and low ends of the range to $0.05 to $0.15 per share. The increase in merchant generation guidance primarily reflects lower expected depreciation expense due to the write-down of the Duck Creek energy center.

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