Earnings Labs

Ameren Corporation (AEE)

Q1 2016 Earnings Call· Wed, May 11, 2016

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Transcript

Operator

Operator

Greetings and welcome to Ameren Corporation's First Quarter 2016 Earnings Call. At this time, all participants are in a listen-only mode. A brief 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, Doug Fischer, Senior Director of Investor Relations for Ameren Corporation. Thank you. Mr. Fischer, you may begin.

Doug Fischer

Analyst

Thank you and good morning. I am Doug Fischer, Senior Director of Investor Relations for Ameren Corporation. 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. Before we begin, let me cover a few administrative details. This call is being broadcast live on the Internet and the webcast will be available for one year on our Web site at ameren.com. Further, 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 on our Web site a presentation that will be referenced by our speakers. To access this, please look in the Investors section of our Web site under Webcasts and Presentations and follow the appropriate link. Turning to Page 2 of the presentation, I need to inform you that comments made during this conference call may contain statements that are commonly referred to as forward-looking statements. Such statements include those about future expectations, beliefs, plans, strategies, objectives, events, conditions and financial performance. We caution you that various factors could cause actual results to differ materially from those anticipated. For additional information concerning these factors, please read the forward-looking statements section in the news release we issued yesterday and the forward-looking statements and Risk Factors section in our filing with the SEC. Warner will begin this call with comment on first quarter financial results, full year 2016 earnings guidance and a business update. Marty will follow with a more detailed discussion of first quarter results and an update on financial and regulatory matters. We will then open the call for questions. Before Warner begins, I would like to mention that all per share earnings amounts discussed during today's presentation, including earnings guidance, are presented on a diluted basis unless otherwise noted. Now here is Warner who will start on Page 4 of the presentation.

Warner Baxter

Analyst

Thanks, Doug. Good morning, everyone and thank you for joining us. Yesterday afternoon we announced first quarter 2016 earnings of $0.43 per share compared to $0.45 per share in last year's first quarter. The earnings decline reflected more electric and natural gas sales volumes which were primarily due to milder winter temperatures. These milder temperatures lowered earnings by an estimated $0.10 per share compared to 2015. The year-over-year earnings comparison was also reduced as a result of lower electric sales to Noranda Aluminum, historically Ameren Missouri's largest customer. In early January 2016, Noranda announced that production had been idled at two its three smelter pot lines as a result of an operational failure. And in mid-March Noranda idled its remaining smelter pot line. The impact of these unfavorable items was partially offset by a decrease in the effective income tax rate which was primarily due to tax benefits associated with share-based compensation. The earnings comparison also benefitted from increased earnings on FERC regulated transmission in Illinois electric and natural gas delivery service, resulting from infrastructure investments made under modern, constructive regulatory frameworks in order to better serve our customers. Overall, our first quarter results were solid and we remain on track to deliver within our 2016 earnings guidance range of $2.40 to $2.60 per share. Turning now to Page 5. Here we reiterate our strategic plan. We remain focused on executing this strategy and continue to strongly believe that we will deliver superior long-term value to both our customers and shareholders. I would like to highlight some of our year-to-date efforts and accomplishments towards this end. These include our continued strategic allocation of significant amounts of capital to those businesses whose investments are supported by regulatory frameworks that provide fair, predictable and timely cost recovery and also deliver long-term benefits…

Marty Lyons

Analyst

Thanks, Warner. Good morning, everyone. Turning now to Page 9 of our presentation. As Warner already noted, we reported earnings of $0.43 per share for the first quarter of 2016 compared to earnings of $0.45 per share for the year ago period. Key drivers of the earnings variance are listed on this page. Lower electric and natural gas sales volumes reduced earnings with milder winter temperatures accounting for an estimated $0.10 per share decline. This temperature related earnings decline was almost entirely driven by lower electric sales volumes since Illinois gas sales are subject to a volume balancing adjustment effective at the beginning of this year. This volume balancing adjustment ensures that changes in natural gas sales, including those from weather, do not result in an over or under collection of revenues from residential and small non-residential customers. First quarter 2016 temperatures were not only milder than those experienced in the year ago period, they were also milder than normal with heating degree days about 20% less than the year ago period and about 10% less than normal. The remainder of the sales volume related earnings decline was almost entirely due to the idling of Noranda's smelter pot lines. Further, the carryover effect from Ameren Missouri's 2013 through 2015 energy efficiency plan, reduced earnings by $0.03 per share. Moving to the next key driver of the first quarter earnings variance. Last year's Ameren Illinois results benefited from recovery of certain cumulative power usage costs. The absence of this benefit had a $0.04 per share unfavorable effect on the earnings comparison. Shifting now to factors that had a favorable effect on the first quarter earnings comparison. A decrease in the effective income tax rate, lifted earnings by $0.08 per share. This reduced tax rate was primarily due to recognition of 2016…

Operator

Operator

[Operator Instructions] Our first question comes from the line of Paul Patterson with Glenrock Associates. Please go ahead with your question.

Paul Patterson

Analyst

Just with respect to the long-term earnings growth rate and your comments regarding the legislation and Noranda, I guess. You seemed like you are suggesting that Noranda might be a temporary situation and that you expect that it might change. I was just wondering, is Noranda in the long-term guidance. Noranda coming back that is, or how should we think about that?

Marty Lyons

Analyst

Sure, Paul. This is Marty. You may recall when we gave the long-term guidance outlook back in February. We, number one, said we expected 5% to 8% compound annual EPS growth from 2016 through 2020. The foundational element of that of course is the 6.5% rate base growth that we have which we showed from 2015 to 2020. But importantly when we talked about that 5% to 8% compound annual EPS growth, we were basing that off of an adjusted 2016 EPS guidance of $2.63. Obviously, if you took our guidance for this year, the midpoint is $2.50. But we added to that the impact we estimated at that time of the Noranda outage which was $0.13 at that time, to get to an adjusted midpoint of $2.63 and then base the earnings guidance off of that. And the reason we did that is that we do believe the impact of Noranda's outage on our earnings to be temporary. And as we mentioned on the call, we do expect to file a Missouri rate case in early July of this year. We expect that that rate case will reflect the reduced usage by Noranda and as our rates are adjusted next year, than the temporary impact of this earnings decline from the outage would be erased. So that’s how we expect it to go and so long-term in terms of our earnings growth guidance, Noranda maybe there and Noranda may not be there. We are not speculating on that but we do believe that through the rate case process that the impact of the outage will be mitigated.

Paul Patterson

Analyst

Okay. That makes sense. And just in terms of the legislation as I recall, so your earnings growth rate is not dependent upon Missouri legislation getting enacted. Is that still the case?

Marty Lyons

Analyst

Yes. That’s absolutely right. We said that in February and we stand by that. You should know that the overall 6.5% rate base growth is the foundation. We have got about 2% growth forecasted for Missouri over that period of time. And we do believe both that rate base growth as well as our earnings growth expectation of 5% to 8% can be achieved without the need for legislation in Missouri.

Paul Patterson

Analyst

How should we think about this tax benefit? I mean how do you still model it? It sounds like there was obviously a benefit this year but just in general, how do we factor in this new guidance associated with the taxes?

Marty Lyons

Analyst

You know Paul, it's a good question. And I think going forward, continuing to think about that 38% effective tax rate is probably the right way to think about it. But to be aware that there could be some variation, up or down, from year to year, based upon this new accounting guidance. And as mentioned on the call, what it would really be a function of is what the fair value is of long-term share based compensation is at the time it vests, versus what's been reflected in book expense over the three years as it relates to our plans over the three year vesting period. And that can create a little bit of volatility in the effective rate. In this particular period as you see the value of what vested was greater than what had been recognized in expense over the past three years and therefore the tax benefit was greater than the effective tax rate reflected over the past few years. So we ended up with a benefit this year. But as noted on the talking points, it could be a benefit or it could be a detriment. But I think in the absence of any further information, I think I would expect that 38% effective tax rate. As it relates to this year, that item had a discrete impact on the first quarter, so it lowered the first quarter effective tax rate. At the end of the year, as we mentioned in the prepared remarks, we expect the tax rate, effective tax rate, to be around 35%, which would imply over the reminder of this year, in the remaining three quarters that effective tax rate somewhere between 37% and 38%.

Paul Patterson

Analyst

Okay. And then just finally on the Mark Twain transmission ruling. There was this idea that you have to go back to the counties to get approval there, county consent. There was some discussion at the PSC that, that was going to probably lead to more litigation in the court system. I just wonder if you could elaborate a little bit on how you see that.

Maureen Borkowski

Analyst

Maureen Borkowski. Yes, at this point in time, we are fully expecting just to go to each county and present the evidence. Really their statutory obligation in each county is to ensure that the transmission line doesn’t have any impact on the user safety of public roadways. So we will put that packet of information together for each county and pursue getting their assent when we make that demonstration. So at this point in time we are not anticipating any additional litigation in that regard.

Operator

Operator

Our next question comes from the line of Julien Dumoulin-Smith with UBS. Please proceed with your questions.

Julien Dumoulin-Smith

Analyst

Perhaps following a little bit up on the last round of questions here. Can you elaborate a little bit on the specific differences in the statistics between Missouri and Illinois? You started off your remarks elaborating on Illinois but just how do the two compare? And then what are the tangible projects that would be on the table if you were to succeed either this year or next year under a new legislative framework?

Marty Lyons

Analyst

Julien, this is Marty. Could you restate your first question? We are not clear what statistics you are referring to?

Julien Dumoulin-Smith

Analyst

I suppose what are the reliability statistics? The differentials between Illinois and Missouri. Just to get a sense as to what do you aspire in to Missouri versus Illinois? And then, or perhaps to boot with that, what are the discrete and tangible projects that you are evaluating should you be able to get legislation this year or next year?

Warner Baxter

Analyst

Paul, this is Warner. I think a couple of things. Number one, by and large Illinois has clearly made progress in improving the reliability as well as responding to outage duration as a result of the grid monetization project. By and large, what you are seeing between the two jurisdictions is that they are moving closer in terms of what their overall reliability and ultimate responsiveness to outages are. And so Illinois will continue to have specific metrics that they have to hit as part of the grid modernization act and they will continue to pursue that. As part of the legislative effort in Missouri, there were specific performance metrics that are put out there as well for reliability in that that was in the legislation. I think importantly, what really we were focused on, we will continue to be focused on in Missouri, is to address the aging infrastructure. And so what are the kind of things that we would think about doing? Well, we would certainly be doing many of the things that you are seeing over in Illinois, investing in smart meters. Missouri needs to do that and it's an opportunity not just for our customers ultimately, to be able to use the more advanced meters. It's investing in a smarter grid, whether it be in the power lines, whether it be in automating much of the grid compared to where it is today. Substations, all these things are very important and things that we are doing in Illinois that we would be focused on doing in Missouri. We had also, as part of the legislative effort, we would be looking at the generation portfolio. Clearly, we have aging infrastructure there and we could do improvements in a more timely fashion, we think in our generating power plants as well as invest in renewable energy which was a significant aspect of this bill. So we can put all those things together. These are things that we would be focused on in Missouri should we get legislation passed that would support that investment. And those are the kind of things that we are going to continue to talk about with policy makers, both the remaining part of this session as well as frankly moving into next year. Both during the rate case as well as preparing for the next legislative session.

Julien Dumoulin-Smith

Analyst

Excellent. And then turning my attention to Illinois. Specifically here we've seen a lot of retirements in the last few weeks here. Can you comment at all where you are in the process of evaluating any requisite transmission upgrades?

Warner Baxter

Analyst

Paul, we are going to have Maureen Borkowski, she can jump in. As we have seen some of these retirements, we think that there are some transmission opportunities and so Maureen, why don’t you jump in and talk a little bit about some of those.

Maureen Borkowski

Analyst

Yes. It's a little too early to be specific about what projects but process wise, when a generator applies to MISO to shut down even on interim basis, there is a study that’s done by our transmission planners with the generator on our system to determine what the transmission needs would be to make sure the system can still operate reliably. So there is certainly the potential as these reported shutdowns are studied for additional transmission investment. And one thing I would point out is that because any needed investment here would be for reliability purposes, that would be outside of the competitive process and it would be Ameren's own companies that would be making any investment that was identified.

Warner Baxter

Analyst

And so, Julien, I think I was saying Paul a moment ago. It's Julien. So I apologize for that. I am not sure Paul is not offended, hope that you are not as well.

Julien Dumoulin-Smith

Analyst

I'm sure he isn't, nor am I. Last quick question on Missouri and the rate case. Any changes in the regulatory framework that you'd be seeking in this and also do you have any initial estimate on what the rate impact would be?

Warner Baxter

Analyst

Julien, this is Warner again. I think a couple of things. It would be premature for us to say if we are going to do something special from a regulatory framework perspective. Every time we move into a rate case, we step back and say, okay, what from a policy perspective things that we want to pursue. So we will step back and think about that. And in terms of the overall rate increases, yes, it too is premature. You will see a lot of that here coming up very soon in early July. We will give you all the specifics as we move forward in the rest of the year, we will explain the case in more detail to you and the rest of our shareholders.

Operator

Operator

Our next question comes from the line of Paul Ridzon with KeyBanc. Please go ahead with your questions.

Paul Ridzon

Analyst · KeyBanc. Please go ahead with your questions.

You mentioned growth in Missouri of 2%. Is that EPS or rate base or both?

Marty Lyons

Analyst · KeyBanc. Please go ahead with your questions.

Yes, Paul. This is Marty. That 2% I was referencing was rate base. So overall we are expecting 6.5% compound annual rate base growth. In Missouri we expect it to be 2% compound annual rate base growth. So really not commenting specifically there on earnings but, overall, I would say that 6.5% rate base growth is sort of the midpoint of our long-term earnings per share growth guidance of 5% to 8%. So consistent with what we have talked about on prior quarters, I mean the bulk of that growth is coming in our FERC regulated transmission and our Illinois electric and Illinois gas distribution businesses, where we are allocating a significant amount of capital because of the constructive regulation we have in those jurisdictions.

Paul Ridzon

Analyst · KeyBanc. Please go ahead with your questions.

What's the [indiscernible] statutory deadline to adjudicate a Missouri rate case?

Warner Baxter

Analyst · KeyBanc. Please go ahead with your questions.

We have typically experienced 11 month resolution of the rate cases in Missouri.

Paul Ridzon

Analyst · KeyBanc. Please go ahead with your questions.

And then in February I think you indicated that you might pursue an accounting order of some sort for Noranda or other means to rectify the situation. Where does that stand? Or is it just going to be through a rate case?

Marty Lyons

Analyst · KeyBanc. Please go ahead with your questions.

Sure. No, good memory, good recollection. We laid that out there as one of the options that we would have in terms of ensuring this impact to be temporary. However, that’s really not needed if the plan is to file a rate case. We will make the appropriate requests in the context of the rate case we filed in early July and therefore that accounting authority order would not be needed. So as we said on the call, that is our plan as we sit here today is to file that rate case in early July.

Paul Ridzon

Analyst · KeyBanc. Please go ahead with your questions.

So should we model in the $0.075 drag for Noranda in '17?

Marty Lyons

Analyst · KeyBanc. Please go ahead with your questions.

We hadn't give that but to your point, we said on our call today is we expect the impact to be about $0.15 this year. And just to give you an idea of how that breaks down, this year we expect, obviously we experienced in the first quarter about a $0.03 drag on earnings. We expect another $0.03 drag in the second quarter. $0.06 in the third quarter and then $0.03 again on the final quarter of the year in the fourth quarter. So through the first half of this year, about $0.06. To your point, Noranda was up and running to some extent in the first quarter, so I would say an impact in the order of $0.07, $0.06 to $0.07 in the early half of next year until we can get rates updated, is probably a fair assumption.

Paul Ridzon

Analyst · KeyBanc. Please go ahead with your questions.

And why is 3Q so heavily weighted? You have summer rates or...?

Marty Lyons

Analyst · KeyBanc. Please go ahead with your questions.

Yes. Noranda, and we talked about this at some length in our February call, Noranda has differential in rates. So between October and May of each year, the rate has been $31 and during per megawatt hour in June to September about $46. So they have had differential, I will call them winter and summer rates. And so there is a differentiated impact in those various quarters.

Operator

Operator

Our next question comes from the line of Felix Carmen with Visium Asset Management. Please proceed with your question.

Ashar Khan

Analyst · Visium Asset Management. Please proceed with your question.

This is Ashar. Marty, one thing which I read in the queue which I was a little bit surprised was that the change in the FASC. Of course I knew there was some transmission earnings, I guess, that we don't get recovery on a timely basis, but you mentioned that in '16 that could be a gap of like $20 million. So as we file the case next year, is there some way that this gap can be minimized to zero or something to be changed? I'm trying to put that into my model. Is there some way that in this next case filing that this regulatory lag can be eliminated?

Marty Lyons

Analyst · Visium Asset Management. Please proceed with your question.

Sure, Ashar. What you are referring to in the queue, I believe, is that we actually layout what the amount was that was actually included in rates, when rates were set. And then contrast that with the transmission cost that we are actually experiencing in 2016. And so there is a differential there. The transmission costs have grown. During our last rate cast, transmission costs were renewed from recovery in the FAC. And that’s an element of lag that we are experiencing. And so you would expect as we go to file this next rate case, that we would update our cost of service for the transmission cost that we are incurring. And through the rate case process you would expect that increased cost would be incorporated into the revenue requirement.

Ashar Khan

Analyst · Visium Asset Management. Please proceed with your question.

But my question is, is there some way - because I'm assuming the transmission costs are going to keep on going up. So is this going to be a repeat issue like a year after the next rate case we will again have under recovery, or is this just something which is happening this year? That's what I'm trying to kind of like gather.

Marty Lyons

Analyst · Visium Asset Management. Please proceed with your question.

You know Ashar, in the absence of a change in the regulatory framework or some mechanism to avoid that, there would be continuing drag on earnings or regulatory lag associated with that item. So that’s something that certainly we will consider as we go into this next rate case, is how to deal with that. But, absolutely, at this point in time, it is not incorporated into the FAC. I would remind you, Ashar, that overall, we continue to work very hard to earn as close to our allowed return as we can. We have had that lag from transmission since the last rate case and we have been working hard to do what we can to find cost reductions in other areas. We mentioned in the guidance earlier this year that year-over-year as we move from '15 to '16, that we expect overall our operations and maintenance expenses to be down in Missouri and when you normalize for the Callaway refueling and remove the effect of Noranda, we expect to earn within 50 basis points for the allowed this year. So in isolation, absolutely, yes. That transmission, the increases in transmission costs are creating lag for us.

Operator

Operator

[Operator Instructions] Our next question comes from the line of Brian Russo with Ladenburg Thalmann. Please go ahead with your questions.

Brian Russo

Analyst · Ladenburg Thalmann. Please go ahead with your questions.

Could you remind us of the test year in the most recently concluded Missouri rate case?

Marty Lyons

Analyst · Ladenburg Thalmann. Please go ahead with your questions.

Yes, I think it was -- you might look, I think it was in 2015, but I can't remember what the exact date was. I will let Doug maybe address it.

Doug Fischer

Analyst · Ladenburg Thalmann. Please go ahead with your questions.

Yes. The test year was the 12 months ended March 31 of '15 but then a number of things were updated. And then a number of things were updated through the end of the year. Am I giving the year wrong there? '14, I am sorry. End of March '14 was the test year and then we updated for rate base and a number of items through the end of '14. And the rates went into effect in May of '15, late May.

Brian Russo

Analyst · Ladenburg Thalmann. Please go ahead with your questions.

Okay. So I guess if we wanted to kind of calculate the incremental net plan that you will be seeking recovery of in the July rate case. Could we just, back in the envelope, take your year-end '14 and grow it by the 2% CAGR?

Marty Lyons

Analyst · Ladenburg Thalmann. Please go ahead with your questions.

Yes. I think we would have to give that one some thought whether that simplified works or not.

Brian Russo

Analyst · Ladenburg Thalmann. Please go ahead with your questions.

Got it. Okay. And I'm just curious, hypothetically speaking, what happens if you go through the Missouri rate case, you get new rates in effect to reflect the loss of Noranda sales and then Noranda resumes the plant? Is that just incremental excess sales and margin until your next rate case?

Marty Lyons

Analyst · Ladenburg Thalmann. Please go ahead with your questions.

You know, I don’t know but I would assume that to be the case. As we work through the rate case, maybe there will be clarity brought to that issue. But we wouldn’t want to speculate that there would be some windfall that would be achieved as a result of that.

Operator

Operator

Our next question comes from the line of Andy Levi with Avon Capital. Please go ahead with your questions.

Andy Levi

Analyst · Avon Capital. Please go ahead with your questions.

Just two questions. Can you talk about M&A and in the context of Ameren as a buyer?

Warner Baxter

Analyst · Avon Capital. Please go ahead with your questions.

Andy, this is Warner. And so a couple of things. Just in general, as you know from a buyer perspective obviously if you look in the past, we have been a buyer of M&A. But as I have said before and continue to say, our policy has been really kind of, don’t get into the specifics or comment on speculative transactions or M&A activities just in general. That’s not very constructive but as you know, we have grown in the past two acquisitions. But to be clear, our current plan is focused on the plan that I laid out before, and it's on the organic growth in our regulated business. We plan to deliver strong earnings growth that I outlined and it's driven by the rate base growth, of course. And with our strong dividend we believe we will deliver the superior value to our shareholders and ultimately to customers too. And so M&As happen in our space, so that doesn’t surprise us that there continues to be some level of consolidation. And in particular, we continue to be attentive to things going on our space like other companies. But whether we are buyer or anything, that probably takes it one step too further than just what we have done in the past.

Andy Levi

Analyst · Avon Capital. Please go ahead with your questions.

Got it. Okay. Thank you. And then the second question I have is just regarding Missouri Commission. What's the thinking now since the legislation is not getting done that the commission may do some type of workshops this summer to maybe address some of the things in the legislation?

Warner Baxter

Analyst · Avon Capital. Please go ahead with your questions.

So Andy, this is Warner and I will ask Michael Moehn to speak up as well. I think that whether there is going to be a specific workshop, I don’t think there has anything been decided in particular and that’s always a possibility. But I don’t think the commission has come out with a specific statement or ruling that they plan on doing that. Michael, I don’t know...

Michael Moehn

Analyst · Avon Capital. Please go ahead with your questions.

I think that’s right, Warner. I think the commission remains focused on trying to help deal with this regulatory lag issue and I think that that could potentially be an outcome to our work through this summer to help gain some additional support with respect to what we are trying to do here in Missouri.

Operator

Operator

Our next question comes from the line of Paul Patterson with Glenrock Associates. Please go ahead with your questions.

Paul Patterson

Analyst · Glenrock Associates. Please go ahead with your questions.

Just really quickly, I think you guys mentioned the potential for non-comprehensive legislation. In other words, you guys mentioned that you felt comprehensive legislation wasn't likely this session. I was wondering if that meant that there was maybe some other legislative opportunities that you do see potentially and if you could elaborate on that?

Warner Baxter

Analyst · Glenrock Associates. Please go ahead with your questions.

Sure, Paul. This is Warner. I guess a couple of things. Number one, the session, as I said, ends this Friday. So the reality is, time is very short. And while comprehensive performance based regulation legislation will not pass, at least from our perspective, it doesn’t mean that we still don’t have conversations with key stakeholders to see if we can some level of progress. It's probably not appropriate for me to speculate, frankly, to say what that may or may not look like. We will know in a few short days whether anything happens, but time is short and so while it may be difficult it doesn’t mean that we are not on the table talking to the key stakeholders.

Paul Patterson

Analyst · Glenrock Associates. Please go ahead with your questions.

Okay. So stay tuned.

Warner Baxter

Analyst · Glenrock Associates. Please go ahead with your questions.

Stay tuned. It's a good way to put it.

Operator

Operator

Our next question comes from the line of Steve Fleishman with Wolfe Research. Please go ahead with your questions.

Steve Fleishman

Analyst · Wolfe Research. Please go ahead with your questions.

Going back a while ago, the company used to talk about keeping the parent balance sheet pretty consistent with the utilities and particularly in Missouri that used to be a focus in terms of just making sure there's not a big difference there. Is that still something that you need to monitor and keep in balance or no?

Marty Lyons

Analyst · Wolfe Research. Please go ahead with your questions.

Yes, Steve, this is Marty. I think still if you look at our, in the slides that we have got out there today, we look to keep a parent company cap structure around 50% equity. Today I think in our Missouri rates we have got a little north of 51%, Illinois about 50%. You know the transmission business depending on where it's at, [north] [ph] of 51% to 56%, with our hypothetical cap structure for ATXI. So we have over time tried to keep those all in the ballpark in the general vicinity of one another and generally keep strong balance sheets and solid credit ratings.

Steve Fleishman

Analyst · Wolfe Research. Please go ahead with your questions.

Okay. But is that just a choice or is there, in Missouri, kind of a risk of some kind of imputation if you were to have a lot more parent or holdco leverage?

Marty Lyons

Analyst · Wolfe Research. Please go ahead with your questions.

You know, I guess, Steve, I would say in Missouri we really haven't experienced any sort of look through kind of issue, if that’s what you are getting at. I think over time in Missouri we have been able to demonstrate that the equity in the utility balance sheet hasn’t been funded by any debt at the parent. So largely I would say it's by choice. We think it's good to keep all of those in genera alignment and like I said, keep a strong balance sheet. I don’t think as you look around, in around the state, there is different historical practices in terms of use of the parent company balance sheet or utility specific balance sheet. But it seems more situational versus some bright line test or standard practice.

Operator

Operator

Thank you. This concludes today's question-and-answer session. I would like to turn the floor back to Doug Fischer, Senior Director of IR, for closing remarks.

Doug Fischer

Analyst

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 Web site. 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, thank you for your interest in Ameren and have a great day.

Operator

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.