Skip to Content
Morningstar

Ameren: Missouri Integrated Resource Plan Supports Long-Term Growth Expectations

""

We are maintaining our $86 per share fair value estimate for Ameren AEE after the company filed its Missouri integrated resource plan, or IRP, with state regulators.

Ameren trades a 7% discount to our fair value estimate as of Sept. 26, in line with the median discount for our U.S. utilities coverage. Ameren’s 3.2% dividend yield is 60 basis points below the sector median yield, but the stock trades at a 7% premium to the sector median 17 P/E. We think Ameren deserves a premium to the group due to its above-average growth opportunities.

The updated IRP presents no significant near-term changes to our earnings outlook but continues to highlight Ameren’s leading long-term growth opportunities. Ameren has identified over $28 billion of additional growth opportunities beyond the company’s $19.7 billion five-year capital investment plan, supporting more than 8% annual rate base growth. We expect these investments combined with strong management execution to allow Ameren to achieve the high end of the company’s 6% to 8% annual earnings growth target, among the highest in the sector.

The IRP supports Ameren’s net-zero carbon emissions goal by 2045. Ameren slightly accelerated renewable energy and battery storage additions but also highlighted additional natural gas needs. Ameren’s gas portfolio will eventually transition to hydrogen or hydrogen blend with carbon capture long term to support the company’s carbon emission reduction goals.

Beyond the company’s IRP, we expect Ameren to have significant transmission investment opportunities. The Midwest transmission operator has approved the first tranche of 18 transmission projects, estimated to cost $10 billion, as part of the operator’s long-range transmission planning process. Ameren Transmission estimates total investment opportunities of $1.8 billion, with additional competitive investment opportunities. Tranche 2 of the operator’s plan is expected to be two to three times larger than Tranche 1.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

More in Stocks

About the Author

Andrew Bischof

Strategist
More from Author

Andrew Bischof, CFA, CPA, is an equity strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers regulated utilities, diversified utilities, and independent power producers.

Before joining Morningstar in 2011, Bischof was a senior treasury analyst for Mead Johnson Nutrition. Previously, he was a group audit officer for Bank of America in Chicago, and before that, an auditor for Ernst & Young.

Bischof holds a bachelor’s degree in business administration and accounting and a master’s degree in accounting from the University of Wisconsin. He also holds a master’s degree in business administration, with a concentration in finance, from Indiana University’s Kelley School of Business and the Chartered Financial Analyst® and Certified Public Accountant designations.

Sponsor Center