Ameren Prices $900M in Bonds, Financing Capex but Highlighting Leverage Risks

What happened

Ameren Missouri, a subsidiary of Ameren Corporation, has priced $900 million in first mortgage bonds, split evenly between 4.80% notes due 2036 and 5.55% notes due 2056. This issuance is part of Ameren's strategy to fund its $27.4 billion capital expenditure plan for 2025-2029, aimed at growing its rate base and supporting grid modernization. However, it adds to the company's already elevated debt levels, with net debt/EBITDA at approximately 5.3x and interest coverage around 2.5x, as noted in recent filings. The new bonds will increase interest expenses, potentially squeezing cash flow amid ongoing regulatory and ESG pressures. This move underscores Ameren's dependence on external financing, which includes significant equity issuance, to sustain growth while managing financial vulnerabilities.

Implication

This financing secures capital for Ameren's ambitious capex plan, which is essential for achieving its ~10% rate-base growth targets and supporting long-term earnings. However, it increases total debt, likely pushing net debt/EBITDA higher and straining interest coverage, adding pressure to an already leveraged balance sheet. The ongoing need for external funding, including ~$600 million in annual equity issuance, will continue to dilute per-share earnings, capping shareholder returns despite operational growth. Regulatory approvals for cost recovery remain critical, and any setbacks in Missouri or Illinois could heighten financial instability. Investors should view this as a reminder to monitor balance sheet health and regulatory developments closely before considering an entry point.

Thesis delta

The bond issuance confirms the high financial risk profile highlighted in the master report, with no material shift in the core thesis. It reinforces the 'WAIT' stance by emphasizing ongoing leverage and dilution concerns, while regulatory and ESG overhangs persist. Investors should remain cautious until clearer improvements in credit metrics or a valuation pullback emerge.