Alliant Energy Corporation 2020 Q1 Form 10-Q Summary
Business context and reporting period
Combined unaudited quarterly filing for Alliant Energy Corporation, Interstate Power and Light Company and Wisconsin Power and Light Company for the three months ended March 31, 2020. Alliant Energy is primarily an electric and natural gas utility serving Iowa and Wisconsin, with additional investments in transmission and non-utility wind assets.
Key financial metrics
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Total revenues | $915.7 million | $987.2 million | Down $71.5 million |
| Operating income | $188.3 million | $176.8 million | Up $11.5 million |
| Net income | $172.6 million | $127.7 million | Up $44.9 million |
| Net income attributable to common shareowners | $170.0 million | $125.1 million | Up $44.9 million |
| Diluted EPS | $0.70 | $0.53 | Up $0.17 |
| Operating margin | 20.6% | 17.9% | Improved |
| Net margin | 18.8% | 12.9% | Improved |
| Operating cash flow | $160.2 million | $181.1 million | Down $20.9 million |
| Capital expenditures | $288.5 million | $406.1 million | Down $117.6 million |
Electric utility revenue declined to $730.3 million from $743.4 million, while gas utility revenue declined to $152.2 million from $215.8 million. Non-utility revenue increased to $21.6 million from $16.9 million.
Management’s non-GAAP utility electric margin increased to $424.0 million from $402.0 million, while utility gas margin declined to $67.2 million from $94.2 million. These measures exclude certain operating expenses and are not substitutes for GAAP operating income.
At March 31, 2020, cash and cash equivalents were $55.2 million, total assets were $16.9 billion, total debt including current maturities was approximately $6.2 billion, and total equity was $5.7 billion. Available capacity under the single revolving credit facility was $730 million, and IPL had $74 million of additional receivables-sale capacity.
Material changes versus the prior comparable period
- Operating income improved despite lower revenue, primarily from higher IPL electric rates, lower fuel and purchased-power costs, lower gas costs, reduced energy-efficiency expenses and lower other operation and maintenance expenses.
- Net income benefited substantially from income tax expense becoming a benefit of $18.7 million, compared with $15.1 million of expense in Q1 2019. The effective tax rate was negative 12.2%, versus positive 10.6%, primarily due to higher production tax credits and amortization of excess deferred taxes.
- Retail electric and gas sales volumes declined 4% and 17%, respectively, primarily because of warmer-than-normal temperatures. COVID-19 effects during the quarter were not material overall, although residential demand increased while commercial and industrial demand declined.
- Operating cash flow decreased, reflecting lower collections and working-capital changes. Investing cash outflows improved because utility construction expenditures were lower, particularly for IPL wind expansion.
- Alliant Energy issued 4.275 million common shares under equity forward agreements, generating $222 million of proceeds. The quarterly common dividend was $0.38 per share, compared with $0.355 in Q1 2019.
- Alliant Energy recorded an $8 million pretax credit-loss expense and a $20 million liability related to guarantees of partnership obligations associated with an affiliate of Whiting Petroleum. It also recorded an $8.7 million after-tax reduction to opening retained earnings upon adoption of the current expected credit loss standard.
Guidance, outlook, risks and unusual items
- The filing does not provide a clear consolidated EPS or revenue guidance figure. Management stated that it expected adequate liquidity, continued access to capital markets, compliance with credit-facility covenants and continuation of planned quarterly dividend payments.
- Management expected major renewable construction projects to remain on schedule for maximum available tax credits and did not expect material changes to capital expenditure plans disclosed in the 2019 Form 10-K.
- COVID-19 had no material adverse effect through March 31, 2020, but management identified risks from lower commercial and industrial sales, customer arrears and bad debts, suspended disconnects and waived late fees, supply-chain and labor disruptions, construction delays, pension asset declines, counterparty credit deterioration and reduced capital-market access.
- April 2020 temperature-normalized retail electric sales increased 5% for residential customers and decreased 13% in aggregate for commercial and industrial customers versus April 2019. Management expected these trends to continue into May, subject to pandemic developments.
- WPL received authorization to defer certain COVID-19-related costs, and IPL was permitted to propose a regulatory asset for qualifying incremental impacts. Recovery of such amounts remains subject to future regulatory proceedings.
- WPL issued $350 million of 3.65% debentures due 2050 in April 2020, after the quarter end, using proceeds partly to reduce revolving-credit borrowings. AEF refinanced a $300 million term loan in March 2020, extending maturity to March 2022.
- Significant commitments and contingencies include $1.218 billion of minimum commodity and other purchase commitments, a $110 million September 2020 buyout payment related to the Duane Arnold Energy Center power purchase agreement, environmental remediation obligations, and future compliance costs under the IPL consent decree.
- IPL and WPL have 2020 long-term debt maturities of $200 million and $150 million, respectively. The filing states there are no other material long-term debt maturities in 2020 and 2021.
Important facts for investors to verify
- Whether COVID-19-related commercial and industrial sales declines, customer arrears and bad-debt expense materially affect subsequent quarters.
- The timing and recoverability of COVID-19 regulatory deferrals and any future rate relief for IPL and WPL.
- Execution of renewable projects, including in-service dates required to qualify for production and investment tax credits.
- Liquidity, refinancing needs and covenant compliance, including the $350 million WPL debt issuance and 2020 debt maturities.
- Potential additional exposure from the Whiting Petroleum guarantee, whose estimated underlying abandonment obligation was $63 million, or $40 million on a discounted basis.
- Potential refunds and future earnings effects from FERC proceedings involving MISO transmission-owner returns on equity.
- The expected reversal later in 2020 of favorable tax-rate effects recognized in the first half of the year.