Executive Summary / Key Takeaways

• Ameren Illinois (AILLN), a key subsidiary of Ameren Corporation (AEE), is executing a robust strategic plan focused on significant infrastructure investment, aiming for a 9.2% compound annual rate base growth from 2024 through 2029.
• Recent financial performance, including a strong Q1 2025 with a $0.09 increase in diluted EPS for Ameren Corporation, reflects the positive impact of these investments, favorable weather, and disciplined cost management.
• A major catalyst for future growth is the burgeoning economic development pipeline, particularly significant data center demand, with signed construction agreements representing approximately 2.3 gigawatts of future load, driving accelerated generation and transmission investment plans.
• The company's commitment to grid modernization and technological advancements, such as smart switching and automation, is yielding tangible benefits in reliability and outage prevention, enhancing its competitive position.
• Supported by constructive regulatory outcomes and legislative developments, Ameren is confident in its ability to deliver 6% to 8% compound annual EPS growth through 2029, with expectations for performance near the upper end of this range in the latter part of the period.

Powering the Prairie State: A Foundation of Regulated Growth

Ameren Corporation operates as a public utility holding company, with its primary assets held within its rate-regulated subsidiaries. Among these, Ameren Illinois (AILLN) stands as a cornerstone, providing essential electric transmission, electric distribution, and natural gas distribution services across a significant portion of Illinois. Operating within a regulated framework provides AILLN with a degree of revenue stability and predictability, differentiating it from energy companies operating primarily in competitive generation or retail markets. This structure forms the bedrock of Ameren's overarching three-pillar strategy: investing in rate-regulated infrastructure, enhancing regulatory frameworks and advocating for responsible policies, and optimizing operating performance.

The utility industry is currently undergoing a transformative period driven by the clean energy transition, grid modernization needs, and evolving customer demands, including significant load growth from new technologies and industries. AILLN's strategic focus is squarely aimed at navigating this landscape by leveraging its regulated status to make prudent, long-term investments that enhance reliability, support decarbonization goals, and facilitate economic development within its service territory.

In the competitive landscape, AILLN operates alongside other large, diversified energy companies such as Constellation Energy (CEG), Dominion Energy (D), Duke Energy (DUK), Southern Company (SO), and Exelon (EXC). While some of these competitors have significant exposure to competitive generation markets (like CEG and EXC), AILLN's core business lies in regulated transmission and distribution, similar in structure to parts of Dominion and Duke. AILLN's competitive positioning is anchored in its established infrastructure network across central and southern Illinois and its deep understanding of the state's regulatory environment. This local expertise and compliance track record provide a unique value proposition, particularly in securing approvals for necessary infrastructure projects. However, AILLN faces competitive pressures related to technological adoption speed and operational efficiency when compared to peers who may have invested earlier or more aggressively in advanced grid technologies or have a larger, more diversified renewable portfolio. For instance, while AILLN's grid modernization efforts are yielding results, some competitors demonstrate faster processing speeds in smart grid applications or potentially lower operating costs per unit due to more modern asset bases. AILLN's strategy to counter these pressures involves disciplined cost management and targeted investments in grid technology to improve efficiency and reliability, aiming to keep customer rates competitive relative to national and Midwest averages.

Technological Edge: Enhancing Reliability Through Modernization

A critical component of AILLN's strategy, and a key differentiator in its service delivery, is its ongoing investment in grid modernization and related technologies. While specific, quantifiable details on proprietary "core differentiated technology" akin to a unique manufacturing process are not highlighted, the focus is clearly on deploying advanced grid technologies and operational systems.

Key initiatives include the implementation of smart switching and automation across the electric distribution system. These technologies enable rapid detection and isolation of outages, allowing for quicker rerouting of power and restoration of service. The tangible benefits of these investments are quantifiable and significant. In the first quarter of 2025 alone, Ameren's grid improvements prevented over 114,000 customer outages through smart switching during major storms, equivalent to more than 30 million outage minutes avoided. This builds on performance in the first half of 2024, where over 11,000 Illinois customer outages were prevented and over 6.4 million minutes of customer outages were avoided due to grid modernization investments.

The "so what" for investors is clear: these technological deployments directly translate into improved system reliability and resilience, particularly in the face of increasingly frequent severe weather events. Enhanced reliability is a key performance metric for regulated utilities and can influence regulatory outcomes and customer satisfaction. While direct quantitative comparisons of this specific technology's performance against all competitors are not provided, the scale of prevented outages and avoided minutes suggests a material improvement in operational performance. Furthermore, investments in automation and standardization across business processes are aimed at streamlining operations, leveraging shared capabilities, and eliminating redundant work, contributing to disciplined cost management and operational efficiency. This focus on operational optimization complements the infrastructure investments and supports the company's ability to deliver value for customers and shareholders.

Financial Performance: Investments Driving Growth

Ameren Corporation's financial performance in the first quarter of 2025 demonstrated solid growth, with net income attributable to common shareholders increasing by $28 million, resulting in a $0.09 increase in diluted earnings per share compared to the same period in 2024. This performance was significantly influenced by contributions from AILLN's segments, alongside Ameren Missouri and Ameren Transmission.

AILLN's electric revenues saw a notable increase of $80 million, or 13%, in Q1 2025 compared to Q1 2024. This growth was driven by both the Electric Distribution and Transmission segments. Electric Distribution revenues increased by $66 million (13%), primarily due to higher base rates reflecting increased recoverable non-purchased power expenses ($19 million) and capital investment ($3 million), as well as increased revenues from cost recovery mechanisms related to purchased power ($20 million) and bad debt ($13 million). Recovery of energy-efficiency program investments ($5 million) and revenues from mutual assistance during storms ($5 million) also contributed. Ameren Illinois Transmission revenues increased by $23 million (18%), reflecting higher recoverable expenses ($19 million) and increased capital investment ($4 million).

The Natural Gas segment also contributed positively, with revenues increasing by $20 million (5%) in Q1 2025, primarily due to higher collection of natural gas costs deferred under the PGA ($16 million).

While revenues grew, operating expenses also saw increases. Ameren Illinois' other operations and maintenance expenses increased by $26 million in Q1 2025, driven by a $30 million increase in Electric Distribution (higher bad debt, various other expenses, energy efficiency costs, storm costs), partially offset by a $3 million decrease in Natural Gas (lower labor expense). Depreciation and amortization expenses increased by $6 million, primarily due to increased property, plant, and equipment investments at Ameren Transmission. Interest charges for Ameren Illinois increased by $7 million, reflecting increases in both Electric Distribution and Transmission due to long-term debt issuances.

Overall, AILLN's financial results in Q1 2025 underscore the impact of its strategic investment program, which is translating into higher rate base and increased revenues through approved rate mechanisms. The performance also reflects the influence of weather and the effectiveness of cost recovery riders in mitigating commodity price volatility and certain operational expenses. The increase in bad debt costs in Electric Distribution O&M highlights an area requiring continued management focus, although the associated rider helps mitigate the earnings impact.

Strategic Trajectory and Future Outlook

Ameren's strategic plan is underpinned by a massive capital investment pipeline designed to drive future growth and enhance service for its customers. The company plans to invest approximately $26.3 billion from 2025 through 2029, a 20% increase over the prior five-year plan, primarily reflecting accelerated generation needs. This investment is expected to drive a robust 9.2% compound annual rate base growth over the same period. Looking further out, the 10-year investment pipeline exceeds $63 billion, signaling sustained investment activity.

A significant driver of this accelerated investment, particularly in Missouri, is the burgeoning economic development pipeline. Ameren has signed construction agreements with data center developers representing approximately 2.3 gigawatts of future demand. This potential load growth is substantially higher than prior expectations and is prompting Ameren Missouri to update its Integrated Resource Plan (IRP) by February 2025 to incorporate accelerated generation additions, including natural gas, solar, battery storage, and potential future nuclear capacity. While this specific load growth is primarily in Missouri, successful economic development in one part of the Ameren system benefits the overall enterprise and reinforces the need for robust transmission infrastructure, which impacts AILLN.

AILLN is also actively involved in the MISO Long-Range Transmission Planning (LRTP) process, having been awarded all Tranche 1 competitive projects in its service territory and identified to lead $1.3 billion of Tranche 2.1 projects. These transmission investments are crucial for grid reliability and facilitating the integration of new generation resources across the region.

Regulatory outcomes remain central to realizing the benefits of these investments. In Illinois, the Multi-Year Rate Plan (MYRP) for electric distribution, approved in December 2024, provides clarity on planned investments and revenue requirements through 2027, although aspects of the order are currently under appeal. AILLN also has pending rate reviews for its natural gas delivery service, seeking a $140 million annual increase based on a 2026 future test year, with an ICC decision expected by early December 2025. The outcome of these proceedings will be critical in ensuring timely recovery of costs and a reasonable return on invested capital.

Ameren is affirming its 2025 diluted EPS guidance range of $4.85 to $5.05, with a focus on delivering at the midpoint or higher. Looking longer term, the company expects to deliver 6% to 8% compound annual EPS growth from 2025 through 2029, using the 2025 midpoint as the base. Management anticipates performance near the upper end of this range in the mid to latter part of the period (late 2026 onwards) as the impact of accelerated load growth and associated rate base additions materializes.

To fund this ambitious investment plan and maintain a strong balance sheet, Ameren expects to issue approximately $600 million of common equity annually from 2025 through 2029, utilizing its ATM program and employee benefit plans. Debt issuances will also play a significant role, with over 80% of 2025 debt financings completed by early May 2025.

Risks and Considerations

Despite the positive outlook and strategic momentum, investors should be mindful of potential risks. Regulatory uncertainty remains a key factor. While recent outcomes have been constructive, future rate case decisions, appeals of existing orders (like the Illinois MYRP), and the outcome of proceedings like the Illinois "future of gas" review could impact approved revenue requirements, allowed returns, and the recovery of costs. Changes in legislative policies could also alter the regulatory landscape.

Operational risks include the potential for cost overruns or delays in executing the large capital investment plan, particularly given supply chain challenges and labor availability. Environmental regulations, such as potential new EPA rules on CO2 emissions and MATS, could require significant, potentially unbudgeted capital expenditures, the timing and recovery of which are subject to regulatory approval. While Ameren estimates environmental CapEx of $900 million to $1 billion from 2025-2029, actual costs could vary. The ongoing remediation obligations, particularly for former MGP sites, also represent a financial commitment with inherent uncertainty in final costs and timing.

Financial risks include exposure to changes in interest rates, which affect borrowing costs and pension/postretirement benefit obligations. While Ameren is hedging some interest rate risk, prolonged high rates could increase financing costs. Disruptions in capital markets could also affect the ability to raise funds on favorable terms.

Competitive pressures, while mitigated by AILLN's regulated status, could still arise from technological advancements by competitors or changes in customer energy usage patterns (e.g., increased distributed generation), although the significant data center demand currently presents a strong tailwind.

Conclusion

Ameren Illinois, as a vital component of Ameren Corporation, is positioned for a period of significant growth driven by a clear and ambitious strategic plan. The company's focus on investing in rate-regulated infrastructure, enhancing regulatory frameworks, and optimizing operations is yielding tangible results, as evidenced by improved reliability metrics and solid financial performance in Q1 2025.

The burgeoning economic development pipeline, particularly the substantial data center demand, represents a compelling organic growth opportunity that is accelerating investment plans and is expected to drive robust rate base and earnings growth in the coming years. Supported by constructive regulatory relationships and a commitment to disciplined cost management and technological advancement, Ameren is confident in its ability to deliver on its 6% to 8% long-term EPS growth target. While regulatory and operational risks persist, the company's proactive approach to managing these challenges, coupled with a strong balance sheet and a clear investment trajectory, underpins the investment thesis. For investors seeking exposure to a regulated utility with a compelling growth story tied to essential infrastructure upgrades and expanding industrial demand, AILLN, through its parent AEE, presents a noteworthy opportunity.