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Ameren Corp
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Greetings, and welcome to the Ameren Corporation First Quarter 2018 Earnings Conference Call. [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, sir. You may begin.
Thank you, and good morning. On the call with me today are Warner Baxter, our Chairman, President and Chief Executive Officer; and Marty Lyons, our Executive Vice President and Chief Financial Officer; as well as other members of the Ameren management team. Warner and Marty will discuss our earnings results and guidance as well as provide a business update. Then we will open the call for questions. Before we begin, let me cover a few administrative details. This call contains time-sensitive data that is accurate only as of the date of today's live broadcast, and redistribution of this broadcast is prohibited.
To assist with our call this morning, we have posted a presentation on the amereninvestors.com website home page that will be referenced by our speakers. As noted on Page 2 of the presentation, 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 Factors sections in our filings with the SEC.
Now here's Warner, who will start on Page 4 of the presentation.
Thanks, Doug. Good morning, everyone, and thank you for joining us. Earlier today, we announced first quarter 2018 earnings of $0.62 per share compared to $0.42 per share earned in the first quarter of 2017. The year-over-year increase of $0.20 per share was driven by higher Ameren Missouri electric service rates effective April 1, 2017, as well as higher Ameren Missouri electric retail sales, primarily due to colder winter temperatures this year compared to the very mild temperatures experienced in the year-ago period.
In addition, the comparison benefited from earnings on increased infrastructure investments made at Ameren Transmission, Ameren Illinois Electric Distribution and Ameren Illinois Natural Gas. Marty will discuss these and other factors driving the quarterly results in more detail in a moment.
I am also pleased to report that we remain on track to deliver strong earnings results in 2018 in the range of $2.95 per share to $3.15 per share. We continue to focus on executing our strategic plan, which includes operating our businesses safely, while strategically allocating capital and exercising disciplined cost management.
Moving to Page 5. Here we reiterate our strategic plan, which we have been executing very well over the last several years. That plan is expected to continue to result in strong long-term earnings growth. As you can see on the right side of this page, during the first 3 months of this year, we invested over $325 million, or nearly 60% of total capital expenditures in our transmission and distribution businesses, where investments are supported by regulatory frameworks that provide fair, predictable and timely cost recovery.
For Ameren Transmission, the Illinois rivers and Mark Twain projects remain on schedule for completion by the end of 2019, and we continue to make significant investments in Ameren Illinois local reliability projects. For Ameren Illinois Electric and Natural Gas Distribution businesses, substantial grid modernization investments continue, including replacing aging infrastructure, supporting system capacity additions, making reliability improvements and deploying smart electric meters and gas meter modules.
And finally, for Ameren Missouri, investments continue to be focused on providing a safe and adequate service across our entire system.
Speaking of Ameren Missouri, we are working on 2 key strategic initiatives that support important incremental investments that will deliver significant long-term benefits to our customers and the State of Missouri. These initiatives are our efforts to enhance the Missouri electric regulatory framework, and our plan to add significant wind generation to Ameren Missouri's energy portfolio.
Turning now to Page 6. I'll update you on the first of these strategic initiatives, our efforts to enhance the Missouri regulatory framework through legislation. As you know, over the last several years, Ameren Missouri has worked with other Missouri investor-owned electric utilities, state leaders and key stakeholders to modernize energy policies through legislation to support incremental investment in the state's energy grid. Consistent with the benefits we have seen in Illinois and around the country, modernized policies to support energy infrastructure investments would lead to a more reliable and smarter energy grid as well as provide greater tools for customers to manage their future energy usage. In addition, modernized policies will position us to meet our customers' energy needs and rising expectations and create significant quality jobs for Missouri. As most of you know, the Missouri Senate passed Senate Bill 564 earlier this year on a strong bipartisan vote. The bill is now ready to be taken up for consideration by the full Missouri House of Representatives. If the bill passes the House without amendments, it will be sent to the Governor. If enacted, Senate Bill 564 would significantly enhance Missouri's electric regulatory framework. In particular, it would support our ability to invest an incremental $1 billion in infrastructure for 2023 to deliver significant benefits to our customers and better position Missouri for the future.
In addition, the Missouri PSC would be granted onetime authority to pass on the customers, in a very timely fashion, the savings stemming from the lower federal income tax rate retroactive to January 1, 2018.
Further, customers would benefit from the rate certainty this legislation provides. Electric base rates will be frozen until April 1, 2020, and average overall rate increases would be capped at 2.85% compounded annually to 2023.
The legislation will also provide economic development rates for certain incremental electric sales to larger customers, and it would maintain continued strong Missouri PSC oversight and consumer protections. The bottom line is that passage of this legislation would create a win-win for our customers, the State of Missouri and our shareholders. We will continue to work closely with key stakeholders through the end of the session on May 18 to get this important legislation passed.
Moving on to Page 7 for an update on another key strategic initiative, our wind generation investment plans. We continue to make progress on Ameren Missouri's proposed investment in at least 700 megawatts for approximately $1 billion of wind generation to achieve compliance with Missouri's Renewable Energy Standard. In fact, we expect to file for certificates of convenience and necessity for ownership of at least 400 megawatts by June 30 with Missouri PSC. Decisions on these requests are expected within 6 to 10 months of filings.
Further, we continue to hold discussions with other wind developers and expect to file for certificates of convenience and necessity for ownership of the balance of our wind generation needs this year.
And finally, Regional Transmission Organization interconnection studies are already underway for sites under consideration. We look forward to executing this important component of our Integrated Resource Plan because we believe it would deliver clear benefits to our customers, the environment and the communities we serve.
Turning now to Page 8. In February, we rolled forward our 5-year growth plan, which includes our expectation of 5% to 7% compound annual earnings per share growth for the 2017 to 2022 period, choosing 2017 core earnings per share as a base. This earnings growth is primarily driven by expected 7% compound annual rate base growth over the same period. Importantly, our 5-year earnings and rate base growth projections do not include $1 billion of potential incremental capital expenditures through 2023 associated with the Missouri Senate Bill 564 or the incremental investment opportunity of approximately $1 billion of wind generation by 2020. Further, we have a strong long-term infrastructure investment pipeline beyond 2022.
In closing, we believe our strong earnings outlook, combined with our solid dividend, which currently provides a yield of approximately 3.2%, results in a very attractive total return opportunity for shareholders compared to our regulated utility peers.
Now before I turn the call over to Marty, I would like to mention 2 recent and important enhancements to our disclosures about environmental, social and governance matters. First, in March, we issued our initial EEI ESG/sustainability report, which will supplement Ameren's already substantial reporting on these issues. This report is part of a voluntary industry initiative, coordinated by the Edison Electric Institute, to provide electric industry investors with more uniform and consistent environmental, social, governance and sustainability related metrics. And finally, just last week, we issued our annual corporate social responsibility report. Both reports are available at amereninvestors.com.
Again, thank you all for joining us today, and I'll now turn the call over to Marty.
Thanks, Warner, and good morning, everyone. Turning now to Page 10 of our presentation. As Warner mentioned, today, we reported first quarter 2018 earnings of $0.62 per share compared to earnings of $0.42 per share for the year-ago quarter. The key factors that drove the overall $0.20 per share increase are highlighted by segment on this page.
First, I would like to note that the lower 2018 federal corporate income tax expenses were almost entirely offset by a reduction in revenue, reflecting the expected passthrough of those savings to customers.
For our transmission in Illinois electric and gas distribution segments, we have already received approvals from the FERC and ICC, respectively, to pass on approximately $115 million of 2018 federal tax savings to customers. And if Missouri Senate Bill 564 is enacted, that total would reach nearly $250 million.
Now back to first quarter results. Ameren Missouri, our largest segment, and also the largest driver of the year-over-year earnings improvement, reported an increase of $0.14 per share, up from $0.02 per share in 2017 to $0.16 per share in 2018. This improvement was driven by higher electric service rates effective April 1, 2017, as well as higher electric retail sales, primarily due to colder winter temperatures this year compared to the very mild temperatures experienced in the year-ago period. These 2 favorable factors were partially offset by higher other operations and maintenance expenses, primarily due to higher-than-normal scheduled nonnuclear plant outages.
Turning to Ameren Illinois Natural Gas results. Earnings for this segment grew $0.04 per share, reflecting increased infrastructure investments as well as benefits related to the lower 2018 federal income tax rate, though this tax benefit is expected to almost entirely reverse by year-end 2018.
Finally, earnings for Ameren Transmission and Ameren Illinois Electric Distribution were each up slightly, reflecting increased infrastructure investments. In summary, we had a positive start to the year with increased earnings across all four operating segments. Before moving on, let me briefly cover electric sales trends for Ameren Missouri and Ameren Illinois Electric Distribution for the first 3 months of this year compared to the first 3 months of last year. Weather-normalized kilowatt-hour sales to Missouri residential and commercial customers on a combined basis increased about 0.5%, excluding the effects of our energy efficiency plan under MEEIA. We exclude MEEIA effects because the program provides rate recovery to ensure that earnings are not affected by reduced electric sales, resulting from our energy efficiency efforts.
Weather-normalized kilowatt-hour sales to Illinois residential and commercial customers on a combined basis increased about 1%. Recall that changes in electric sales in Illinois, no matter the cost, do not affect our earnings since the Future Energy Jobs Act provided for full revenue decoupling beginning in 2017.
Moving to Page 11 of our presentation. I would now like to briefly touch on key drivers impacting our 2018 earnings guidance. As Warner stated, we continue to expect 2018 diluted earnings to be in a range of $2.95 to $3.15 per share. Select earnings considerations for the balance of the year are listed on this page. I will not comment specifically on these considerations since they are largely self-explanatory and consistent with the 2018 earnings drivers and assumptions discussed on our February earnings call.
Moving now to Page 12 for a discussion of select regulatory matters. For Ameren Transmission, there has been no change in the status of the second complaint case pending at the FERC that seeks to reduce the base allowed ROE for MISO transmission owners. We continue to expect that the FERC commissioners will consider the court ruling in the New England ROE case as well as the MISO transmission owners' motion to dismiss the second MISO ROE complaint case, as both may influence the future MISO allowed ROE.
Moving to Ameren Illinois Electric Distribution regulatory matters. Last month, we made our required annual electric distribution rate update filing. Under Illinois' formula ratemaking, our utility is required to file annual rate updates to systematically adjust cash flows over time for changes in cost of service and to true-up any prior period over or under recovery of such cost. The ICC will review the matter in the months ahead, with the decision expected in December of this year and new rates effective early next year. For perspective, if the requested rate update is approved by the ICC, all-in 2019 residential electric grades for customers taking delivery and energy service from Ameren Illinois will have decreased by an estimated 1% since electric formula ratemaking began in 2012, even after incorporating substantial infrastructure investments made for the benefit of customers.
Moving to Page 13. In Ameren's natural gas regulatory matters, earlier this year, we filed with the ICC for an annual increase in gas distribution rates using a 2019 future test year. On this page, we have updated our request for stipulations and agreements with the ICC staff that incorporate a 9.87% allowed ROE and up to a 50% equity ratio. A decision is required by December of 2018, with new rates expected to be effective in January 2019.
Turning now Missouri regulatory matters. In late February, the Missouri PSC staff issued its report recommending the commission open a proceeding for each utility and pursue rate reductions to pass savings from the lower federal income tax rate onto customers. Of course, if Senate Bill 564 is enacted, Ameren Missouri would pass savings from the lower federal rate onto electric customers in a timely fashion and retroactively apply to January 1, 2018, pursuant to the bill's provisions.
Finally, turning to Page 14, I will summarize. We expect to deliver strong earnings growth in 2018, as we successfully execute our strategy. As we look over the longer term, we continue to expect strong earnings per share growth driven by rate-based growth and disciplined financial management. Further, we expect this growth to compare favorably with the growth of our regulated utility peers. In addition, Ameren shares continue to offer investors an attractive dividend. In total, we have an attractive total shareholder return story that, we believe, compares very favorably to our peers.
That concludes our prepared remarks. We now invite your questions.
[Operator Instructions]. Our first question comes from the line of Julien Dumoulin-Smith with Bank of America Merrill Lynch.
So I wanted to follow up first on the wind investment side of the equation. I just wanted to dig in a little bit on the 700 megawatts and the breakdown between the 400 and the balance, if you will. Can you talk a little about the sort of the time line here with respect to the incremental? You talked about the 400 being filed by June 30. What about the remainder here as far as the time when they see the CapEx dollars? And how should we be thinking about it if you ultimately are awarded this, the cadence of the CapEx, vis-à-vis the plan?
So Julien, this is Warner. I'll start with the overall timing and then I'll let Marty comment a little bit more on the CapEx piece. Now as we've said, we expect to file certificates of convenience for at least 400 megawatts by June 30. And then it is our expectation that we'll fill in the rest of our wind generation needs with agreements and filings with the Missouri Public Service Commission by the end of 2018. So Michael and his team in Ameren Missouri have been working hard with many of the developers, and they will continue to do so. So Marty, do you want to comment a little bit about the CapEx and the cadence associated with that?
Yes. Julien, taking your question in terms of the cadences, when would the CapEx occur relative to our plan. I think with regard to all of these projects, our objective is to get them in service by the end of 2020 in order to take advantage of the production tax credits depending upon how we finalize negotiations. For example, if they were ended up being build-transfer agreements, then, likely, the CapEx would really occur in that 2020 time frame. And again, the goal here is approximately 700 megawatts or at least 700 megawatts with approximately $1 billion of overall spending.
And just to clarify, why is it broken up between 400 and 300? Is it basically, if I were to read between the lines, the 400 you've sort of established and the 300 would be likely a build on transfer? Is that the right way to interpret this?
No, it's not, Julien. It's really just the status of our ongoing negotiations. So we have ongoing negotiations with multiple developers, and that's just how we see the time line unfolding this year in terms of completing negotiations and getting CCMs filed. It really does not have anything to do with the nature of the ultimate agreement, whether it be a build-transfer or otherwise. It's really just the situation where you're negotiating with multiple developers for multiple sites. Yes, but at the end of the day, the goal with respect to all 700 is to get that -- those megawatts into service, providing value to customers in the 2020 time frame.
Excellent. And then just as we come to the end of the legislative session here, sort of curious, what are options, if you will, be -- assuming there is an extension even beyond the end of the session here in the spring?
Julien, this is Warner. I'm not quite sure if I understand what you mean by options, but let me just tell you what we're focused on. We're focused on Senate Bill 564, which now has passed all the -- received approval by all the necessary legislative committees. It is now very well positioned for a final vote with the House -- in the House of Representatives. And so as you've been following this, I know you have, there's been a great deal of hard work, collaborative efforts and compromise to get this bill to where it's positioned now. And along the way, every time this bill has been reviewed by one of the committees, it has received strong bipartisan support. And so now, we have until May 18. And so Michael Moehn and his team are very focused on working with key stakeholders to make sure that bill gets adequate time in the floor and a vote in the House of Representatives.
Got it. So it sounds like, for the time being, focused on the May 18 deadline and then we'll talk about anything after that in another point in time.
We are focused on May 18.
Our next question comes from the line of Paul Patterson with Glenrock Associates.
We're focused on May 18, as well. But anyway, just on the impact of the wind on rates, could you remind me what you guys are thinking in terms of what you think the impact of the wind projects might be on rates? We've seen some utilities talk about actual rates going down. I'm just wondering what you guys are thinking.
Yes. Paul, this is Marty. We have not said specifically what we expect the impact to be. Over time, as we file the -- for the certificates of convenience and need and updates, the commission on our plans for compliance with the Renewable Energy Standard, we'll certainly provide that information to them. Overall, what we have said, which is consistent with the law, is that we do believe that we can ultimately own the 700 megawatts to comply with the Renewable Energy Standard, that the overall investment it'll make and the impact on customer rates would result in rates, on average, rising less than 1% on average over a 10-year period -- projected period, following the wind being put in place. And that's really a requirement of the Renewable Energy Standard. That's not to say, however, that we expect that rates would rise that much necessarily on average. As you note, there could certainly be expected benefits from the wind over time depending especially on what power prices are over time. So in any event, we haven't said specifically, but we will be providing those updates to the commissions through time. And we do expect that, like I said, we'll be able to deliver these projects and keep the impact on rates that -- under that 1% average.
Okay. Great. And then on the tax side, if the legislation were to happen, how would we think about this offset that you guys have, I guess, in booking in terms of the tax benefit, if you follow me? How would we think about that in -- how should we think about the tax benefit impacting your earnings if for the -- I know you guys don't expect this, but if the legislation were, for some reason, not to happen, how should we think about it?
Well, I think, if the legislation comes passed, number one, we would expect that the commission would have a proceeding then to figure out how much and over what period of time we would end up providing the benefits of the tax reform to customers. Again, as required by law, that proceeding could be initiated. Right now, as it relates to our financial results, just to be clear, our financial results for the first quarter don't assume that any benefit is retained by the shareholders and that we've established an accrual for the expectation of ultimately providing that benefit back to customers. Michael, do you have finer point?
I would just going to add, assuming the legislation is passed, just to be clear, within 90 days, we will be refunding that amount back to customers. And so that's spelled out in the legislation very clearly.
Okay. So just to clarify, as far as earnings being reported, we should expect the legislation to impact that one way or the other from our perspective. Do you follow me? Is that understanding that correctly?
Yes, you are understanding that correctly, Paul.
Okay. And we'll just wait till the 18th to see what happens.
You bet.
Our next question comes from the line of Paul Ridzon with KeyBanc Capital Markets.
Just a follow-up to Paul's question. If legislation would not to pass, would it require a rate case to decide -- to give the tax advantage back to rate peers?
Yes. And we would have to go through the normal rate proceeding process to figure that out and, ultimately, get that back to customers. That's correct.
And would that be retroactive to January 1 of '18?
Yet to be determined.
And then just now you've kind of added another $1 billion to the -- to potential on the top of wind if the legislation passes. Would this -- what could your rate base CAGR be? Would you just place some capital and reshuffle projects? Or would this be completely additive?
Paul, this is Marty. It would largely be additive. Look, we need to bring the wind into the portfolio for compliance with the Renewable Energy Standard. And we've said that to the extent that this legislation passes, we will invest more in the State of Missouri. We've talked frequently about this potential for $1 billion of investment over a 5-year period. So we said repeatedly, we will invest more in Missouri. We've not said exactly what that growth rate would be. And we said that, overall, as a company, we would step back, however, and take a holistic look at our capital expenditure plan. We may make some modification to our overall 5-year spending plan. But largely, this -- that $2 billion would be additive.
So more patterns have been extending the growth rate. Okay. And then just on 564 in the House, what are the hurdles? And who could trip this up?
Paul, in terms of the hurdles, as I said at the outset, and I'll let Michael comment on some more of the specifics. It's gone through all the legislative committees. There are no more committee hearings to be had. It is on the House calendar. And it is ready to go to the floor when that House leadership chooses to have it go to the floor. And so Michael, any other commentary beyond that?
No, other than, again, just to reiterate that it has continued to experience, I think, strong bipartisan support. As Warner said, it's been through all the various committees, the House Utilities, House Rules. So it's on the calendar and can be debated at any time. And we certainly remain optimistic it will be debated with -- within the next week or so.
Because the bottom line, we've talked a lot about bipartisan support. I think it's important to recognize that key stakeholders from across the state support this legislation. And so at the end of the day, we remain hopeful that it'll have an opportunity to have this bill now and debated with [indiscernible] on the floor of the House by the end of the legislative session.
In the past, I mean, it's similar legislation has enjoyed bipartisan support, but it only takes 1 or 2. Where are those parties now?
Well, look, I think that with the issues in the past, we've had difficulty getting Senate votes. This is a Senate Bill in the House. I think that's just important to recognize. So we did, going back to February, had a long filibuster and, ultimately, a good compromise and a bill that came out of the Senate, 25 to 6, again, a strong bipartisan support. And again, it's gone through the various committees. So we have never been this close, never been this far through the process. And so again, we remain hopeful that it certainly gets debated within the next week or so. I think the support is there for it. Clearly, the benefits are there for the State of Missouri in terms of what we've talked about in the income tax refund, obviously, the rate freeze, the rate cap, the investment in the State of Missouri, the creation of jobs, the economic development riders, et cetera.
[Operator Instructions]. Our next question comes from the line of Michael Lapides with Goldman Sachs.
One Missouri question and then, actually, one for Illinois and then maybe a housekeeping one, so three in total. First, the Missouri question. Just bigger, broader, not just this legislation, but legislation in general. Has -- in the last 30 to 60 days, have any new bills made its way out of the House in the Senate and actually been signed by the Governor in the last 60 days or so?
So Michael, this is Warner. There has been a bill that went out on environmental matters that went out that was approved, but it hasn't been signed by the Governor. Michael, why don't you talk about the...
Warner's commenting on a bill that's specific to us. I mean, obviously, I think the State of Missouri continues to conduct its business. I think there's bills being passed, and I can't comment on what the Governor has signed or not signed. But I do know that the legislature can [indiscernible].specifically, as Warner said to us, we passed a bill related to some coal combustion residuals last week.
Okay. And that bill is awaiting the Governor's signature or has been signed and is now officially law.
It is awaiting the Governor's signature.
Got it. Want to ask a question about Illinois and the need for incremental transmission and/or distribution investment. And I know you've kind of laid out your incremental -- your CapEx plan starting back in the fall for the next 5 years. But just curious, what are things that could move the needle on that plan, I mean, make that plan look very different this time next year versus what you show on the slide decks now? What are some of the things that could, "Hey, we're not putting this into our CapEx guidance, but these are things in Illinois that could really change the CapEx outlook," either on the T side or the D side?
Yes. Michael, this is Marty. I think the -- look, our growth rates, as you know, are pretty robust in Illinois today. I mean, we've got 12.3% kind of growth rates for gas. We've got 8.4% for electric distribution. And our transmission business, overall, is growing at about a 12% compound annual rate. And there's a significant amount of that, that's actually in the Ameren Illinois business. So already growing at pretty good clips. As we look ahead, we do see a continuation of strong growth in all of those areas. In general, I'd say, there's still quite a bit of investment to be done for replacement of aging infrastructure, for reliability as well as capacity additions and safety. The electric business, obviously, substation, transformer replacements, underground replacements, line rebuilds, poor replacement, various grid modernization of the gas business, transmission replacement, regulator station rebuilds, coupled steel system and gas storage filled compressors, et cetera, so there's a lot of investment over the next 5 years and beyond, as it relates to those businesses.
Same thing transmission as it relates to aging structures, shield wire conductors, transformers, breakers, switches, et cetera. So there's a lot of components that are in need of modernization and it's -- that investment opportunity extends beyond the five years. I don't know if there's really anything specific to point to. We've been waiting for some new regulations in the gas business for some time now that may cause us to increase even further level of investment there we have in terms of modernization of our infrastructure. But certainly, the expenditures that we've got planned over the next 5 years and beyond should put us in a good position in terms of compliance with those rules. But that is one of the things, obviously, to look for as you think about future investment.
Got it. And then one last item, just a little bit of the housekeeping side. The expected planned outages or planned work in Missouri on the nonnuclear fleet, is that just a 2018 item? I think it's $0.11 or $0.12 headwind in 2018. Will all of that go away when we think about 2019, so it's just a -- it's a little bit of an incremental bump to '18, but it's kind of a once every 5 or 10 years' thing? Or will some of that drag into either '19, '20 and beyond?
Yes. What we're seeing there is, we took on more of that this year in light of the fact that there was no Callaway refueling outage. So in terms of that type of expense, I would expect to see that drop down as you move into 2019. But as I noted in February, I wouldn't really consider those to be onetime expenses, and I don't really think that we should look at those as something that's occurring this year, but won't reoccur next year. It's something that the amount varies from year to year. And I think you'd expect that we would do more of that in a non-Callaway refueling year. So I guess, bottom line is, Michael, I would expect some further expenses of that nature next year, but, perhaps, not at the level that we're seeing this year.
Our next question comes from the line of Ashar Khan with Verition Fund Management.
Marty, can I just understand one thing? I know we have the, under the legislation, certain price gaps, but is it fair to say that the investments that we would make, right, as part of the legislation and as well as part of the wind investment that have to be done in -- by 2020 that we should, as a shareholder, be expecting to get a return on those investments once they're fully in by the year, I guess, 2021 as we take on the wind and all that, so we should be able to -- on the earnings, as you show them on the book, be able to get a return on those investments as they are fully completed?
This is Michael Moehn. With respect to the caps, the 2.85% that you referenced, yes, I mean, the $1 billion incremental investment we've talked about, the wind investment, we are assuming all of those that underneath the 2.85% cap. And obviously, we'll have to continue to manage things closely as we have been from a discipled cost management side. But absolutely, you should be expecting a return on those investments.
Our next question comes from the line of Paul Ridzon with KeyBanc.
A quick follow-up. You said that Illinois gas benefited from some tax timing issues. How much was that?
Yes, Paul. it's a good question. It's, honestly, about $0.01 to $0.02 in terms of the timing impact.
And that will reverse by the end of the year, yes.
Yes, exactly. So the natural gas segment earnings were up about $0.04. And like I said, $0.01 to $0.02 of that would reverse over the remainder of the year.
And then the fossil outages that are going to be $0.11 for the balance of the year, should we think that those are -- in the shoulder months, we should those in the 2Q and 4Q?
Yes, yes. I think that's a fair assumption in terms of those overall expenses. When we talked -- when we gave our guidance in the beginning of the year and we said higher O&M in Missouri of $0.14 and we talked about the scheduled nonnuclear outages, which you're right, would generally occur in shoulder months. Also talked about timing of vegetation and management, routine line inspections, which would be more ratable for the year. But you're absolutely right as it relates to the outage cost.
Our next question comes from the line of Kevin Fallon with Citadel.
Just a question for you on the transmission businesses. You have a thicker equity ratio at ATXI than you do at Ameren Illinois transmission. Is there any chance that you guys could increase the equity ratio at the -- at Ameren Illinois transmission up to the 56%? And if so, how do you have to do that?
Yes, Kevin. This is Marty. At -- the Ameren Illinois would really reflect the capital structure of that legal entity, so I would say to assume that going forward. And of course, it's a holistic business, Ameren Illinois with gas, electric and transmission. As we noted earlier, both in the gas and the electric distribution businesses, we're targeting a 50% equity ratio there in keeping with the agreements we have for ratemaking under both of those 2 areas. So again, Kevin, I would look, as you look ahead of today and in the future, I'd simply look at the equity ratio for the Ameren Illinois business overall.
Okay. That's helpful. And then on the timing on a CapEx refresh, assuming a legislation in Missouri gets done by the 18th, when are you guys going to be in a position to actually refresh your outlook?
I think, Kevin, given the spot, obviously, we've reported out today, both in our prepared remarks and our Q&A sort of the status for the ongoing wind negotiations, they're again looking to file CCNs some by June 30, some by later in the year. We've updated you on the situation in terms of the legislation. Look, I mean, as we look ahead, I think it'd be reasonable to assume that we might update the plans as early as the third quarter call. But then, again, as has been more typical, we've done that in conjunction with our year-end call. So I think we will -- again, we're progressing well on both of those initiatives, but I think we'll let both of those things play out a little further and be thinking again, either late this year or early next in terms of an update.
And just to clarify, on the legislative related to CapEx, you guys already have a line of sight of what you want to do, correct, like, you know what the projects are behind the $1 billion?
Yes. I mean, we filed a filing back in 2016 that outlined $1 billion. And I would say that we continue to refine that and make sure that we got exactly the right projects. But that gives you a pretty good glimpse on where we're headed on grid modernization.
Our next question is a follow-up from Michael Lapides with Goldman Sachs.
Nitty-gritty tax reform question probably for Marty. Have you all quantified what the excess or unprotected accumulated deferred federal income tax is? And what the time horizon -- either on the Missouri bill or in something in the Illinois, what the time horizon is for refunding that level back to customers?
Michael, probably in the details with the regulatory filings, those things are probably embedded. But I'll be honest with you, off the top of my head, I don't have that number. And I do think that the actual timing of the flowback is somewhat still up in the air as it relates to -- especially in Missouri where we don't yet have a definitive time line on -- or amount that would be flowing back to customers. So that's something, Michael, I just don't have at the top of my head. We can see if we can provide that to you over time. But I don't think either -- that we have it in our 10-Q that we plan to file, either. So that's maybe something we'll have to provide you over time.
We have reached the end of the question-and-answer session. I would now like to turn the floor back over to Mr. Fischer for closing comments.
Thank you. 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 website. If you have questions, you may call the contacts listed on our earnings release. Financial analyst inquiries 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, thanks for your interest in Ameren, and have a great day.
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.