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Ameren Corp
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Greetings, and welcome to the Ameren Corporation's Fourth Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Mr. Andrew Kirk, Director of Investor Relations for Ameren Corporation. Thank you, Mr. Kirk. 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's 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 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 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.
Lastly, all our per share earnings amounts discussed today during today's presentation including earnings guidance are presented on a diluted basis unless otherwise noted.
Now here's Warner, who will start on Page 4 of the presentation.
Thanks, Andrew. Good morning everyone, and thank you for joining us. Earlier today, we announced 2018 core earnings of $3.37 per share compared to $2.83 per share earned in 2017. Marty will discuss the drivers of our 2018 results in few minutes. I'd like to highlight some key accomplishments that are indicative of our team's strong performance in 2018 and importantly that will position Ameren for success in years ahead.
As you can see from this slide, we were very busy in 2018. 2018 marked another year of solid earnings growth driven by the successful execution of our strategy across all of our businesses. Our strategy is to invest in rate-regulated energy infrastructure continuously improve operating performance and adequate responsible energy policies to deliver superior customer and shareholder value. Our customers are at the center of our strategy.
Simply put, we're focused on meeting our customer's energy needs and exceeding their expectations and in so doing, delivering superior shareholder value. With these objectives in mind, we made $2.3 billion of investments in 2018 it resulted in a more reliable, resilient and secure energy grid. As well as strong rate base growth and we were pleased to be able to pass onto customers in a very timely fashion, the savings from the lower federal income tax rate.
In 2018, we also achieved constructive outcomes in many regulatory proceedings that will help drive additional investments for the benefit of customers and shareholders. I was also pleased by the fact, that many of these constructive regulatory outcomes were supported by strong collaboration with key stakeholders which ultimately resulted in agreements on the key issues. In our Illinois businesses, we received approval from the Illinois Commerce Commission on our electric delivery and natural gas rate reviews consistent with our request.
In addition, we were pleased with the FERC's decision to allow for 50 basis point ROE incentive adder for Mark Twain due to the unique nature of the risks involved in that project. We also received approvals for several Ameren Missouri customer focus program including the third energy efficiency plan as well as renewable choice and community solar programs both of which will allow customers to work with Ameren Missouri to procure greater levels of renewable energy in a cost effective manner.
We see these achievements as a big win for our customers and the environment, yet our biggest achievements in 2018, related to the significant progress we made in advancing energy policy to support significant increment electric grid modernization investments in Missouri as well as the progress we made in responsibly transitioning to a cleaner, more diverse generation portfolio with the announcement of significant investments in Missouri.
The enactment of Senate Bill 564 marks a step changes in Missouri's energy policy to enable investment to modernize the energy grid and drive economic development in the state. And our planned acquisition of at least 700 megawatts of wind generation consistent with Missouri's renewable energy standard will drive significant incremental investments in renewable energy. I will cover both of these important strategic opportunities in more details shortly.
The bottom line is, we now have constructive regulatory frameworks in all of our jurisdiction which allows us to allocate significant amounts of much needed investment to each of our business segments by the benefit of our customers, the communities we serve and our shareholders. As I said a few minutes ago, we accomplished a great deal in the execution of our strategy in 2018 with regard to significant long-term value for all of our stakeholders.
I think it's important to note, that our team's strong execution of our strategy in 2018 was not an aberration. As you can see on Page 5 of our presentation, we have been laser focused on executing the same strategy for the last five years. Our successful execution of this strategy has transformed our business mix deliver significant value to our customers and shareholders. Position the company for success in the years ahead.
In particular, consistent with regulatory frameworks the supported investment in energy infrastructure we invested approximately $10 billion over the last five years. Slide 5, highlights some of the investments we've made during this period. Since 2013, we've improved the safety and reliability of our electric and natural gas systems, improved the efficiency of our energy centers, enhanced our environmental footprint and strengthened our cyber security posture.
At the same time our relentless focus on disciplined cost management has kept our electric rates affordable and very competitive. As they remain well below the Midwest and national average. We've also been very active and successful and working collaboratively with key stakeholders in Missouri and Illinois on implementing constructive energy policies in all of our jurisdictions to support ongoing and future investment in energy infrastructure.
And we've been capitalizing new opportunities for our investment most notably those associated with transmission projects and plan when generation in Missouri. All of these actions when taken together resulted in the successful execution of our strategy which will deliver significant value to our customers and shareholders. Our investments over the last five years have driven robust, compound annual rate base growth of approximately 8%, that growth coupled with improved earned returns drove a strong compound annual earnings per share growth of more than 7% over the same period.
We also grew our common dividend during this time period and improved our overall business risk profile. Combined these actions also resulted in strong total shareholder returns over the same five-year period. I want to be clear, we do not take these results for granted. Achieving these results require a great deal of hard work, persistence and team effort. Why I'm pleased with what we've accomplished I'm even more excited about the fact that the execution of our strategy has positioned us very well to continue to deliver superior customer and shareholder value in the future.
Which brings me to Page 6 of our presentation and discussion of our earnings growth expectations for the next five years. We expect our 2019 earnings per share to be in the range of $3.15 to $3.35 per share. Earnings within this range will deliver strong growth again in 2019, as the midpoint of this guidance represents nearly 7% earnings per share growth compared to 2018 weather normalized core results.
Marty will provide you with more details on our 2019 guidance a bit later. [Indiscernible] our robust earnings growth over the past several years I'm also pleased to announce that we have rolled forward our long-term guidance. Last February, we guided to our 5% to 7% compound annual earnings per share growth rate for the 2017 to 2022 period. For the 2018 to 2023 period, we've increased that range and now expect strong 6% to 8% compound annual earnings per share growth using 2018 weather normalized core earnings of $3.05 per share as base.
This base excludes Ameren Missouri's estimated favorable weather, impact of $0.32 per share from 2018 core earnings per share of $3.37. This long-term earnings growth outlook was driven by continued execution of our strategy including investing in infrastructure for the benefits of customers while keeping rates affordable. This outlook also accommodates a range of treasury rates, sales growth, spending levels and regulatory developments.
And of course, earnings growth in any individual year will be impacted by the timing of capital expenditures, regulatory rate reviews, Callaway refueling and maintenance outages, and weather, among other factors. I would also note that Callaway refueling outage is scheduled for 2023. In contrast, we did not have a Callaway refueling outage in 2018. We believe the best way to assess our long-term earnings growth is to normalize for the timing of Callaway refueling costs as well as weather impacts. That said, our earnings guidance range accommodates the inclusion or exclusion of 2023 Callaway refueling outage cost.
Turning now to Page 7, we expect to grow our rate base in an approximately 8% compound annual rate for the 2018 through 2023 period. Our plan includes allocating significant capital to all four of our business segments as they now all have - operating jurisdictions with constructive regulatory frameworks for our investments. This is reflected in the expected rate base growth for each of these businesses as noted in the graph on the right side of this page.
Importantly, our five-year earnings and rate base growth projections include significant investments to modernize the electric grid, as set forth in Ameren Missouri's Smart Energy Plan which we follow with Missouri PSE earlier this morning. Enabled by the enactment of Senate Bill 564, the Smart Energy Plan includes $6.3 billion of investment over the next five years with a specific focus on modernizing the grid and acquiring renewable wind generation.
Specifically, it includes approximately $1 billion of Ameren Missouri's wind generation investment related to the announced bill transfer agreements for up to 557 megawatts. The incremental grid modernization and announced wind generation investments increased Ameren Missouri's compound annual rate base growth of 3.5% and last year's five-year plan to 7.8% and our five-year plan announced today. It is important to note, that any additional wind generation investments would be incremental to this capital plan. And our plan continues to call for our investment and at least 700 megawatts of wind generation.
Finally, we remain relentlessly focused on continuous improvement and disciplined cost management to keep rates affordable and keep earned returns close to the allowed returns in all of our jurisdictions. Moving now to Page 8, as previously noted today Ameren Missouri filed its Smart Energy Plan with the Missouri Public Service Commission driven by the enactment of constructive legislation in 2018. This five-year plan includes significant investments to modernize the energy grid and enhance how customers receive and consume electricity, while at the same time keeping electric rate stable and predictable.
Constructive energy policies have driven similar investments and benefits and adding thousands of new jobs to the State's economy while also keeping customer rates affordable. Ameren Missouri's Smart Energy Plan filing includes a five-year capital investment overview with a detailed one-year plan for 2019 and sets forth the improvements and upgrades to modernize the energy grid infrastructure to benefit customers and offer more tools to manage their energy usage.
Upgrades and reliability, resilience and service throughout Ameren Missouri's 24,000 square mile service territory are the foundation of the plan that includes more than 2,000 electric infrastructure improvements projects across the state. This plan also includes major renewable energy projects to continue the transition to a cleaner generation portfolio and a responsible fashion for our customers.
This slide highlights several key elements of the five-year Smart Energy Plan. The Smart Energy Plan meets our customer's desire for stable and predictable rates. A smarter energy grid that is even more reliable, resilient and secure. New sources of clean energy and greater tools to manage their energy usage. In addition to the 6.1% rate decrease last August for the lower federal income tax rate. Customers will also benefit from a rate freeze until April 2020 and a 2.85% compound annual cap on electric rate increases from April 1, 2017 to December 31, 2023.
Several cost reductions opportunities are expected to provide headroom to stay under this rate cap including the benefit of tax reform, lower fuel and transportation cost. Refinancing long-term debt at lower rates and expected O&M savings through technological improvements and disciplined cost control. In addition, we will seek to drive greater economic development in Missouri with a meaningful incentive rate enabled by Senate Bill 564 for new or expanding large energy users.
We look forward to working the Commission and other key stakeholders to implement the benefits of the Smart Energy Plan as we transform the energy rate of today to power the quality of life and build a brighter energy future for generations to come.
Moving now to Page 9, for an update on our wind generation investment plans to achieve compliance with Missouri's renewable energy standard and continue to transition our generation portfolio. Today I'm pleased with the progress we've made to pursue ownership of at least 700 megawatts of wind generation by 2020. Specifically, Ameren Missouri has reached agreements with two developers to acquire after construction of the 557 megawatts of wind generation representing about 80% of our compliance needs.
The proposed 400-megawatt facility to be located in Northeast Missouri was approved by the Missouri PSE last October and when built, will be the largest ever in the state. The next key milestone is the MISO transmission interconnection agreement which is expected in the fall of 2019. For the proposed 157-megawatt facility to be located in Northwest Missouri, a non-unanimous stipulation and agreement was reached earlier this month with the Missouri PSU staff and other parties on our CCM request.
The Missouri PSU decision is expected by May 1 of this year representing approximately $1 billion investment and are expected to be in service by the end of 2020. Of course, we're not done. Our team continues to actively negotiate with several developers for additional win generation. And as I noted earlier, any additional investments in wind generation will be incremental to the capital and rate base growth plan I discussed previously.
We remain confident in our ability to complete these negotiations, obtain necessary regulatory approvals and have these facilities constructed in a timely fashion. We believe these investments will clear, long-term benefits to our customers, the environment and the communities we serve. Turning now to Page 10, as we look to the future the successful execution of our five-year plan is not only focused on delivering strong results through 2023 but is also designed to position Ameren for success for the next decade and beyond.
We believe that the energy grid will be increasingly important as we expect Ameren and our industry to be critical enablers of advancing technologies that will bring even greater value to our customers, the communities we serve and our shareholders. With this long-term view in mind, we're making investments though positioned to meet our customer's future energy needs and rising expectations, support increased electrification of the transportation sector and other industrial processes and provide safe and reliable natural gas services.
Right side of this page, shows that our allocation of capital is expected to grow our energy delivery businesses to approximately three quarters of our rate base by the end of 2023. In addition to focusing on investments in the energy grid, we're also committed to transitioning Ameren Missouri's generation to a cleaner, more diverse portfolio in a responsible fashion. Ameren Missouri's pursuit of at least 700 megawatts of wind by 2020 combined with the scheduled retirement of Meramec coal-fired energy center in 2022 reflects this continued commitment.
As a result, our investment in coal and gas-fired generation is expected to be a combined 11% of rate base by year end 2023. The bottom line is that we're taking steps today across the board to position Ameren for success in 2019. The next five years. The next decade and beyond. Moving to Page 11, to sum up our value proposition we remain firmly convinced that the execution of our strategy in 2019 and beyond will deliver superior value to our customers and shareholders. We believe the rate base and related earnings per share growth rates I just discuss compare very favorably with those of our regulated utility peers and I'm confident in our ability to execute our investment plans and strategies because we now have all four of our business segments operating with constructive regulatory frameworks to support investment.
That fact, coupled with our sustained past execution of our strategy on many fronts has positioned us well for future success. Further our shares continue to offer investors a solid dividend. In the fourth quarter of last year, Ameren's Board of Directors express its confidence in our long-term growth plan by increasing the dividend by approximately 4%, the fifth consecutive year with a dividend increase.
For 2018, our dividend payout based on weather normalized earnings was in the lower half of our expected payout range of between 55% and 70% of annualized earnings. Our strong earnings growth expectation outlined today positions us well for future dividend growth. Of course, future dividend decisions will be driven by earnings growth in addition to cash flows and other business conditions. Together, we believe our strong earnings growth outlook combined with our solid dividend which currently provides a yield of approximately 3% results in a very attractive total return opportunity for shareholders.
Again, thank you all for joining us today. Now I'll turn the call over to Marty.
Thanks Warren and good morning, everyone. Turning now to Page 13 of our presentation. Today we reported 2018 GAAP earnings of $3.32 per share compared to GAAP earnings of $2.14 per share for the prior year. As outlined in the table on this page excluding the 2018 and 2017 non-core non-cash charges for the revaluation of deferred taxes of $0.05 and $0.69 per share respectively. Ameren reported core earnings of $3.37 per share for 2018 compared to core earnings of $2.83 per share for 2017.
Turning to Page 14, we highlight by segment the key factors that drove the overall $0.54 per share increase in 2018 core earnings compared to 2017 results. Ameren Missouri, our largest segment and also the largest driver of the year-over-year earnings increase experienced an increase of $0.50 per share from $1.48 per share in 2017 to $1.98 per share in 2018. This earnings improvement was largely driven by higher electric retail sales which contributed approximately $0.42 per share.
The higher electric sales were primarily due to warmer summer and colder winter temperatures in 2018 compared to near normal summer and milder winter temperatures in the year ago period. In addition, the earnings improvement was higher electric service rates effective April 1, 2017 as well as the absence in 2018 of a Callaway energy center nuclear refueling and maintenance outage. Each contributed approximately $0.09 per share to 2018 compared to 2017.
These favorable earnings drivers were partially offset by a planned increase in other operations and maintenance expenses primarily reflecting higher than normal scheduled non-nuclear plant outages, increased routine maintenance work and additional distribution reliability projects. Turning to the other segments, earnings for Ameren Transmission and Ameren Illinois Electric Distribution were up $0.09 and $0.03 respectively reflecting increased infrastructure investments.
In addition, Ameren Illinois Electric Distributions earnings benefited from higher allowed return on equity under formally [indiscernible] making of 8.9% compared to 8.7% for the prior year. The 2018 allowed ROE was based on the 2018 average 30-year treasury yield of 3.1% up from the 2017 average of 2.9%. Earnings for Ameren Illinois Natural Gas were up $0.04 reflecting increased infrastructure investments and higher rates effective in early November, 2018.
Finally, Ameren parent and other results reflected higher charitable donations, lower net state and federal tax benefits and dilution. Before moving on, let me briefly cover electric sales trends for Ameren Missouri and Ameren Illinois Electric Distribution for 2018 compared to 2017. Weather normalized kilowatt hour sales to Missouri residential and commercial customers on a combined basis were up 1% excluding the effects of our energy efficiency plan under EMEA.
Kilowatt hour sales to Missouri industrial customers also increased about 1% after excluding the effects of our energy efficiency plan. We exclude EMEA effects because the plan provides rate recovery to ensure that earnings are not affected by reduced electric sales resulting from our energy efficiency at half percent and kilowatt hour sales to Illinois industrial increased 2%. Recall the changes in electric sales in Illinois no matter cost do not affect our earnings since we have full revenue decoupling.
Moving to Page 15 of the presentation. Here we provide an overview of our approximately $13.3 billion of planned capital expenditures for the 2019 through 2023 period by business segment that underlies the 8% projected rate base growth Warner discussed earlier. Note, the capital expenditures and rate base shown on this include Ameren Missouri's approximately $1 billion wind generation investment for up to 557 megawatts related to its announced build-transfer agreements. And the addition of wind generation investments would be incremental to this investment plan.
Turning to Page 16, looking ahead we will remain focused on maintaining a strong balance sheet. We're comfortable with the current capitalization levels at each legal entity and expect our capitalization levels over the coming five-year period to remain in line with those at the end of 2018. Consistent with that expectation, here we outline 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. The tax deferrals and driven primarily by timing differences between financial statement depreciation reflecting customer rates and accelerated depreciation for tax purposes under makers [indiscernible]. I should note, that over the five-year time horizon of our plan we do not expect to be a material, federal or state cash tax payer.
In addition to the benefit of accelerated tax depreciation because of our expected $1 billion investment and up to 557 megawatts of wind generation we also expect to generate production tax credits beginning in the 2020 timeframe. From a financing perspective, we expect to continue to issue long-term debt to refinance maturing obligations and to fund a portion of our cash requirements. We also plan to continue to use newly issued shares for our dividend reinvestment and employee benefit plans over the five-year guidance period. We expect this to provide equity funding of approximately $100 million annually.
Our plans also include incremental common equity to fund a portion of Ameren Missouri's expected wind generation investment. We believe these action should enable us to maintain the strong balance sheet and credit ratings that we've worked hard to achieve overtime. Moving to Page 17 of our presentation, I would now like to discuss key drivers impacting our 2019 earnings guidance.
As Warner stated, we expect 2019 diluted earnings to be in the range of $3.15 to $3.35 per share. The midpoint of this range represents nearly 7% EPS growth versus 2018 weather normalized core results. On this page and the next, we have listed key earnings drivers of and assumptions behind our 2019 earnings guidance broken down by segment and as compared to 2018 results.
Beginning with Ameren Missouri, earnings are expected to be lower in 2019 largely due to an approximately $0.32 per share benefit from favorable weather in 2018. We also expect expenses for the spring 2019 scheduled Callaway refueling and maintenance outage to decrease earnings by approximately $0.09 per share. Recall that there were no refueling outage for Callaway in 2018 given that these scheduled outages occur on an 18-month cycle.
Further, higher depreciation expense will decrease earnings approximately $0.03 which reflects the full year application of Plant-In-Service Accounting or PISA to a higher level of infrastructure investments. Partially offsetting these unfavorable earnings drivers, we expect lower interest expense of approximately $0.05 per share including the PISA benefit. We also expect lower other operations and maintenance expenses to benefit 2019 earnings by approximately $0.05. This reduction is primarily driven by higher than normal scheduled non-nuclear plant outages and increased maintenance work experienced in 2018.
Finally in Ameren Missouri, we expect higher electric margins including benefits under EMEA. For Ameren Illinois Electric Distribution, we anticipate increased earnings in 2019 compared to 2018 from additional infrastructure investments made under Illinois formula rate making. Our guidance incorporates a formula based allowed ROE of 8.9% using a forecast 3.1%, 2019 average yield for the 30-year Treasury bond which is comparable to an allowed ROE of 8.9% in 2018.
We've provided the earnings sensitivity to changes in the allowed ROE of the Ameren Illinois Electric Distribution segment on this page. For Ameren Illinois Natural Gas Distribution earnings we expect to benefit from a full year of increased delivery rates as well as qualified investments that are included in rates on a timely basis under the state's gas infrastructure rider.
Turning to Page 18, Ameren Transmission earnings are expected to benefit from additional investments in Ameren Illinois and ATXI projects made under FERC's formula rated making. Our guidance assumes continuation of the current 10.82% allowed ROE for the full year of 2019 which includes 50 basis point adder from MISO participation except for the Mark Twain project which assumes allowed ROE of 11.32%.
We've provided the earning's sensitivity to changes in the allowed ROE of the Ameren Transmission segment on this page. Moving now to Ameren [indiscernible] drivers and assumptions, we expect an effective income tax rate of approximately 19% this year a decrease from last year's core effective income tax rate of 21%. This reflects the full year impact of excess deferred tax flow back in customer rates that began during 2018.
Additionally, we expect lower donations of the parent company of about $0.03 per share. Finally, the issuance of common shares for our dividend reinvestment and employee benefit plans are expected to unfavorably impact earnings by $0.02 per share. I would also like to take a moment to discuss our electric sales outlook. We expect weather normalized Missouri kilowatt hour sales to residential and commercial customers to be up approximately 0.5% to 1% compounded annually over the five-year plan excluding the effects of our EMEA energy efficiency plans.
We expect sales to our Missouri industrial customers to be relatively flat over our five-year plan after excluding the effects of our energy efficiency plan. Again, we exclude EMEA 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 residential, commercial and industrial customers including energy efficiency to be flat over our five-year plan.
Moving now to Page 19 for a discussion of select regulatory matters. For Ameren Transmission there have been recent development that may impact the base allowed ROE from MISO transmission owners. In November 2018, the FERC issued an order in the MISO ROE complaint cases proposing new methodology for determining the base allowed ROE and soliciting feedback from participants. The MISO Transmission owners including Ameren Illinois and ATXI filed initial briefs yesterday regarding the MISO complaint cases.
In summary, we believe the FERC proposed methodology is an improvement over the existing approach with certain recommended modifications. We're unable to predict the timing and ultimate impact of the complaint cases at this time. Turning to Page 20, for an update on cash flow guidance. For 2019, we anticipate negative free cash flow of approximately $950 million. On the right side of this page we provide a breakdown of our $2.4 billion of planned 2019 capital expenditures by business.
We expect to fund this year's negative free cash flow and debt maturities primarily through a combination of short and long-term debt borrowings and issuances. As well as the previously mentioned issuances of common shares for our dividend reinvestment and employee benefit plans. Finally, turning to Page 21 I will summarize, we delivered solid core earnings growth in 2018 capping five years of outstanding compound annual earnings growth. We expect to again deliver strong earnings growth in 2019 as we continue to successfully execute our strategy.
And as we look ahead, we expect strong 6% to 8% compound earnings per share growth over the 2018 to 2023 period driven by an approximately 8% compound annual rate base growth and disciplined financial management. We believe this growth will compare favorably with the growth of our regulated utility peers and 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 Julien Dumoulin-Smith with Bank of America. Please proceed with your question.
This is actually Nick Campanella on for Julien.
No worries, how are you doing this morning?
Very good, congrats on the update here.
Thank you.
I just want to start quickly on the incremental equity funding for the wind. This is with an excess of the drift. Can you just expand at all in terms of the magnitude of the funding you did there, how we should think about quantifying that whether it's from solving for an FFO to debt metric or just in terms of how you plan to finance it?
Good morning Nick. This is Marty. I think it's probably good to step back and look at the totality of what we said, what we said on prior calls. We feel very good about the capitalization levels that we have today meaning the debt to equity ratios and that's both that parent as well as the various legal entities that we have and we're going to seek to keep levels in line with those or approximating those levels over the five-year guidance period. We believe we can do that given the retained earnings associated with our ongoing operations and some equity financing as we noted on the call.
So the equity financing comes in two parts, I mean one of it that we noted is through the dividend reinvestment employee benefit programs. There we think we can generate about $100 million a year of equity proceeds or about 500 over the period. And then we expect to issue some additional equity in amount which equates to a portion of our ultimate wind investment as we mentioned on the call, that amount being sized to achieve the capital structure objectives that we talked about earlier.
So - look I recognize you're maybe looking for a little bit more specificity, but as we think about what we said and we think about the wind. I'd also ask you to think about how Ameren Missouri is financed overall today which is about 52% equity knowing that the wind ultimately is going to end up in that legal entity.
Appreciate that. And then just like the timing of the wind CapEx, that should all be realized in one-year roughly, is that correct?
Nick, I think it's a good way to think about it. The 557 megawatts that we've announced today we're going to acquire through build-transfer agreements so there again we look for those deals to close between the middle of 2020 and end of 2020 and so I would be thinking about the cash flows occurring during that period of time.
Great and then my last question, just on sticking with Missouri. I think you had a net $1.5 billion increase in the five-year program. I saw that you filed I think grid mod plan and can you just talk about your expectations for grid mod versus the prior - your previous expectations for the $1 billion and if that has shifted it all?
Maybe I could talk a little bit about the overall investment picture, which is on the Slide 15 and then see if, you have some follow-up questions or we can elaborate in some way. In overall, we had a previously a plan of 2018 to 2022 obviously when you're rolled forward you're not only just spending within those periods but mid also, we're looking out to 2023. And so overall its $13.3 billion plan for the five-year period looking ahead. If you compare to the prior plan I think what you'd find is, as we've said we have a strong pipeline of growth in each of our segments and so as you look at the capital spend and the update four to five-year period for Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas and Transmission. Those are all pretty consistent with the levels of investment that we made - we're planning for the prior five-year plan that we've given the real updates there. And I think, long - it should meet with generally expectations as we've added $1 billion for Ameren Missouri wind generation investment. This $1 billion is really associated with 557 megawatts that we've announced to-date.
And then getting to your point, the capital expenditure plan outside of that wind for Missouri's $5.8 billion which compares favorably to the plan we had before which was $4.3 billion over five-year so, again it is $1.5 billion over the five-year period as you mentioned of course for rolling forward to a future period and so in any event. I think you're absolutely right as you would have expected given Senate Bill 564 in the wind generation investment. The investment Missouri overall is up in the plan.
Thanks. Congrats again.
Our next question comes from Ali Agha with SunTrust Robison. Please proceed with your question.
First question, I just wanted to clarify one of the remarks I think you made in your opening comments in regards to the 6% to 8% EPS CAGR that you have over the next five years. And correct me if I'm wrong, but did I hear it right the 8% CAGR would normalize for the Callaway outage and exclude that. Whereas the 6% would include that, did I hear that right? Or does the 8% also contemplate including the Callaway outage?
Good morning, this is Marty. Let me answer that. I think what we meant to say that Warner was saying is that, 6% to 8% range if you will would accommodate either inclusion or exclusion of the cost of the Callaway outage in 2023. Clearly we're planning for an outage in 2023, we had none in 2018. We think the best way to look at our earnings growth profile overtime is to normalize for things like the Callaway outage timing in weather. But we wanted folks to know that, whether you were thinking about earnings in 2023 including or excluding those costs that we believe, our earnings guidance range was such that would accommodate either.
I see. Just to be clear, so including if we include those cost and keep them in there that could still get us to an 8% CAGR.
Well it would depend on other things. Again it's a range, so what I'm saying is if you could include the cost it still get you into that range. If you exclude the cost you're within the range but wasn't really commenting on whether you would get to the 8% or not. Ali, I think the way to think about is, the range accommodates a number of things meaning. It accommodates ranges of treasury rates, allowed ROEs, earned ROEs, various spending levels, regulatory decisions, sales levels, economic conditions, financing plans, all of those things so when we give out the range, the range accommodates all of those variables that may occur.
Okay and second clarification as well Marty, so I think as you mentioned for the wind investments you're looking at completing those acquisitions mid-to-late 2020. And I'm assuming that to the extent as additional wind that comes in, that's also 2020 timeframe period. So when we think about additional equity should we think all of that, if required will be a 2020 event and all the other years we should model out $100 million a year or should we think differently. And also, for modeling purposes should we assume wind will be an earnings contributor and the incremental wind will be an earnings contributor in 2020.
Sure, Ali. Let me take those, I may take those little bit in reverse order. In terms of the wind as I mentioned one of things we want to get done as to get wind [ph] in 2020 working with the developers to make sure we take maximum advantage of the production tax credit. So with respect to the projects that we've announced to-date, the 557 megawatts as well as additional wind investments that we're pursuing that are not embedded in the current plans. In both cases, we're seeking to work with the developers to acquire projects that will get completed as I mentioned earlier in the second half of 2020.
So as you think about that, there would be some earnings impact in 2020 but it really would depend on when those projects went into service or when they get into rate base in 2020. And you really get to I think a more full annualized benefit of the wind when you get into 2021 and as you get through the rate cases associated with those even into 2022, but you're really going to get to a more full annualized benefit again in that 2021 timeframe.
Now as it relates to the equity, we talked about today we do expect incremental equity to fund a portion of the wind investment and so again those cash flows. You're right, occur in the 2020 timeframe so that's a consideration and then I would also say that, again we have not announced the - we aspire to acquire additional wind beyond the 557 and so as we complete those negotiations we'll be certainly thinking about financing that, in addition to what we've talked about, the wind we've announced to-date and will be thinking about the sizing in the way, that's consistent with what we discussed today and on prior calls.
Okay and last question. I know in the past when you talked about the SB 564 related CapEx you had mentioned at a minimum $1 billion over five years and I guess based on your commentary today it looks like it's more than a $1 billion at least embedded in this five-year plan. Does that still leave you room for even additional upside to that CapEx as we think about this five years or do you think this is pretty much what you expect to spend now going forward?
Ali, this is Warner. Thanks for the question, I'll let Michael comment a little bit further because he filed the Smart Energy Plan. I'll just start with this saying that, the robust infrastructure plan that we talked about over five years and 10 years in Missouri as I sit here today. It still remains robust beyond just the five years and frankly it continues to grow with various needs. Michael, you can talk a little bit about what you've incorporated in the five-year plan and certainly some opportunities that you continue to see from Missouri.
Well I mean, I think Warner just adding a little bit to that I mean obviously we have the $5.3 billion that we filed today on the electric side. As we get in and develop those plan and be able to show all the customer benefits. It's obvious that we're finding just more opportunities. I think you described as a robust plan. I would say that is absolutely the case. And we look forward to continue to work through time and looking for projects that are going to provide meaningful benefit to customers.
So the bottom line, when you look back three years ago when we talked about the plan that was filed. We look at the grid modernization opportunities every bit as robust today as we looked at them back then three years ago.
Understood. Thank you.
Our next question is from Insoo Kim with Goldman Sachs. Please proceed with your question.
Starting on the wind side, just to clarify by 2020 the 700 megawatts that you guys are targeting or at least 700 megawatts that implies I guess versus the current plan that you have today you'll have another around 150 megawatts at least announced in build-in transfer by 2020 or are you - when you're talking about negotiating with multiple developers are there opportunities beyond that 700 that you're talking about or is that largely it?
This is Michael Moehn, as we think about it today we're obviously very focused on that 700 megawatts for the Missouri renewable standard having that 15% by 2021. Obviously we're keeping our mind and options open as we move through time in terms of other offerings that we out there, but we're really focused on filling out, that 700 megawatts at this point.
Understood. And then on the cost side, I think in the past you've targeted not making formal guidance but I was trying to [indiscernible] growth slight on a year-over-year basis, is that still part of your plan?
Go on Marty, please.
Yes, Insoo this is Marty. As we look ahead I mean that continues to be our goal. I mean we recognize that one of our objectives is to make sure that we can carry out this $13.3 billion infrastructure plan for the benefit of our customers and keep rates affordable along the way. So we will look to keep tight control on our O&M cost as we look ahead.
Understood and then maybe just one more if I could. The recent electric vehicle decision, I know it's a fairly small part of your investment opportunity. But that decision for the five-year $4 million or so does that basically cap how much you're going to be spend in that arena at least for the medium term.
Again this is Michael, I would say it's a start with respect to what we're trying to do from a transportation perspective. We're excited about having the opportunity to build out this corridor. I think we'll continue to evaluate overtime. The commission has actually opened up a workshop to have some further conversations beyond just the charging corridor they approved, so that could all planned up including other types of charging as well. So we look forward to engaging in a discussion, see if we can move this discussion forward.
Mike, I'll just add. I think this is clearly a step forward and importantly I think what Mike and his team have been able to do is just raise the level of awareness and the conversation in the State of Missouri on this. And so this is what we have today, but dialog it will be ongoing here in the relative near future and we look forward to continue to lean further forward in the electrification because we think there are real opportunities and benefits for our customers in the State of Missouri and we will be looking at similar types of things frankly in the State of Illinois too because we see similar benefits over there as well.
Understood. Thank you very much.
Our next question comes from Stephen Byrd with Morgan Stanley. Please proceed with your question.
Congratulations on a constructive update.
Thank you.
So I just wanted to discuss the Smart Energy Plan filed in Missouri and just better understand the regulatory process and just how we think about where procedurally it goes from here. It's obviously great that, the customer bills [ph] are, the bill impact is capped. It seems to all makes sense but I just wanted to understand a little bit more about what we should be looking for, now that you've made that filing.
Sure, Michael why don't you talk about that? Because I know it's some of this is embedded in Senate Bill 564, so why don't you give an update there.
Perfect. Thanks for the question. Obviously it's an important filing that we did today with the commission. We're required to layout and quite a bit of detail for 2019 where our investments are going to go and then little less detail for the next four years through 2023. What else is contemplated, is public meeting that's scheduled for March 4 will again layout the customer benefits associated with this, where our investments are going etc and get some feedback from that.
And then obviously Senate Bill 564 didn't change the Commissions' authority anyway, so they'll have a chance to weigh in this as we go through regular rate reviews and have an opportunity to look at where we're making investments etc. so we look forward to engaging with them around this, getting feedback along the way.
Let me just add Stephen. When you look at the details of the plan. I think these are things that we've been talking about is needed in the State of Missouri frankly for many years and so I think what we've now provided is just greater levels of detail and as we referred to little bit earlier. Michael and his team have put together a plan three years ago almost now, that highlighted some of these things. So lot of dialog and conversations around these have been discussed before now we're giving a lot more detail, which I think is certainly appropriate at this time.
Yes that's right. I mean the other thing just to note is, we have been operating under this Senate Bill 564 really since September 1 and next thing you noted, the 6% rate reduction that occurred is part of the tax refund. We obviously had some solar rebates that we were required to do, all of that has been taken care of. We recently economic development rider approved. So I give you that, just because there are number of aspects that we have been executing underneath Senate Bill 564 for some time.
And that all makes sense, it does seem consistent what you've talked about before. And just shifting over to Illinois, I guess there is some discussion of potential movement towards greater levels of clean energy in this state. I'm curios from your system perspective or just more broadly investment opportunities, changes to grid. Anything else that you foresee, if the state did in fact move towards greater levels of clean energy.
Sorry, Stephen it is Warner. And then Richard feel free to jump in. Big picture when you think about renewable generation we're not allowed to own renewable generation in State of Illinois. So we stay very mindful of the activities there because certainly since we purchased energy on behalf of our customers we want to make sure that rates continue to be good, as well as making sure that the reliability is spot through.
Having said that, Richard was at the table with key stakeholders during the Governor's transition period and they talked about transition plan around energy policy. One of things that we pointed out very clearly is that, the energy policy in the State of Illinois is working quite well and the formulate rates is working quite well and so, we see that there are investments opportunities associated with that and for our distribution business to make sure we can continue to deliver the safe reliable service for our customers, we will do so.
If we become more broadly in terms of renewable generation, certainly we will be thoughtful about transmission opportunities because we've said this before and we'll say it again when you look at the MISO footprint. There are lot of wind and solar projects going on in the MISO footprint and we stand ready and are able to help implement those, with not just in a connection agreements, but perhaps sometime down the road. There'll be an opportunity for multi-value projects. Early innings, but we could see that as a potential opportunity and so Richard, I know that you've been working with your team over there, anything that you would add to what I said.
You covered it perfectly. I think that's really good observation of how it's going work.
Thank you very much.
[Operator Instructions] our next question comes from Kevin [indiscernible] with Citadel. Please proceed with your question.
Just to clarify, is the implied cost for KW on the 557 megawatts wind, do you guys right now a reasonable proxy for what would cost you to get you up to the 700?
This is Michael Moehn, I think it's difficult, you got to be a little careful with it just because so many different factors apply here in terms of there's some benefits associated with doing projects in State. There's 1.25% credit versus outstay there's capacity factor issue, so you can probably draw some conclusions, we got to be a little careful with it, just in terms of some of the specifics.
Okay, fair enough. But the actual target amount is the 700 megawatts, correct?
That is what we're focused on.
Kevin, maybe I'll add to that though and build off of what Michael said into earlier. I mean hitting 700 neatly is a difficult thing to do. These projects vary in sizes. One of things we said, if you look closely at the wording we used, we said at least 700. It could be that the ultimate project that selected and picked would actually be, get us to a number that was above 700 because again it's difficult to find a site that neatly gets you to 700. So we think it's going to be at least 700. But the target again is to fulfil the requirements under the renewable energy standard, which we believe is would approximate about 700.
Okay, that's helpful. And the other thing is, I think a securitization build has been introduced in the Missouri legislature. I know you guys have said in the past, you have very low dispatch cost on your coal fleet. But if the securitization was past, would that change the dynamic there and kind of still for fuel type of outlook?
You're right, there are couple of securitization builds fooling [ph] around. Look I would just say, at a very high level and Marty can certainly add to this. I mean we're having some conversations with the stakeholders and none of those bills have been assigned to committee yet. So they had a hearing at this point, we look forward to continue to have some conversations around the details of these bills and what benefit there may or may not be there for us.
Are these bills being? Are you guys sponsoring these bills or supporting these bills? Or is that all just to be determined?
Yes that is all to be determined.
That's great. Well thank you very much.
Ladies and gentlemen, we reached the end of question-and-answer session. At this time, I would like to turn the call back to Andrew Kirk for closing comments.
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