Alliant Energy Corporation 2018 Q1 SEC Filing Summary
Business context and reporting period
This combined, unaudited Form 10-Q covers Alliant Energy Corporation, Interstate Power and Light Company (IPL), and Wisconsin Power and Light Company (WPL) for the three months ended March 31, 2018. Alliant Energy is a Midwest energy holding company with regulated electric and gas utilities in Iowa and Wisconsin, wholesale electric operations, transmission investments, non-utility generation, transportation activities, and corporate services.
Key financial metrics
| Alliant Energy consolidated | Q1 2018 | Q1 2017 | Change |
|---|---|---|---|
| Total revenues | $916.3 million | $853.9 million | +$62.4 million |
| Operating income | $165.7 million | $147.2 million | +$18.5 million |
| Income from continuing operations | $123.5 million | $101.6 million | +$21.9 million |
| Net income attributable to common shareowners | $120.9 million | $100.4 million | +$20.5 million |
| Diluted EPS | $0.52 | $0.44 | +$0.08 |
| Dividends declared per share | $0.335 | $0.315 | +$0.020 |
| Operating margin | 18.1% | 17.2% | +0.9 percentage points |
Revenue increased approximately 7%, while net income attributable to common shareowners increased approximately 20%. Reported operating income reflected stronger utility margins, partly offset by higher operation and maintenance and depreciation expenses. The effective income tax rate was 12.0%, compared with 14.8% in the prior-year quarter, primarily reflecting the lower federal statutory rate and other tax-related items.
- IPL: Revenue was $525.8 million versus $450.5 million; operating income was $75.6 million versus $51.3 million; earnings available for common stock were $46.7 million versus $37.2 million.
- WPL: Revenue was $381.7 million versus $393.1 million; operating income was $84.0 million versus $88.6 million; earnings available for common stock were $54.0 million versus $45.5 million.
- Margins: Alliant electric utility margin was $379.1 million versus $345.1 million, and gas utility margin was $74.4 million versus $62.1 million. These are non-GAAP measures.
- Sales: Alliant retail electric sales increased 2%. Colder first-quarter weather, compared with unusually warm weather in Q1 2017, increased electric and gas demand and margins.
Cash flow, capital spending, debt, and liquidity
| Alliant Energy | Q1 2018 | Q1 2017 |
|---|---|---|
| Operating cash flow | $89.3 million | $119.0 million |
| Investing cash flow | $(85.2) million | $(87.2) million |
| Utility construction and acquisition expenditures | $335.2 million | $268.9 million |
| Financing cash flow | $(9.8) million | $(29.9) million |
| Cash, cash equivalents, and restricted cash at March 31 | $28.2 million | $15.0 million |
Operating cash flow declined $29.7 million, largely because the prior-year period included larger transmission-related refunds and because working-capital movements were unfavorable. Higher utility construction spending was driven primarily by IPL wind generation and advanced metering projects. Cash dividends paid were $77.5 million.
At March 31, 2018, Alliant reported $4.9 billion of long-term debt including current maturities, $336.4 million of commercial paper, and $95.0 million of other short-term borrowings. Available revolving credit capacity was $617.7 million, consisting of $95.0 million at the parent, $204.1 million at IPL, and $319.4 million at WPL. IPL had no available capacity under its receivables-sale program. In April 2018, AEF entered into a $300 million variable-rate term loan, guaranteed by Alliant Energy, for general corporate purposes.
Material changes versus the prior comparable period
- Alliant’s earnings improvement was primarily attributable to IPL’s interim electric base-rate increase implemented in April 2017, colder weather, higher retail electric and gas sales, and higher equity income.
- IPL’s electric utility margin increased $35 million, including $23 million from the interim rate increase and $17 million from the prior-year tax benefit rider presentation. IPL also benefited from higher weather-related sales.
- WPL’s electric utility margin declined $1 million. Lower wholesale margins, including the expiration of a wholesale power supply agreement, were largely offset by lower fuel-related costs and transmission-cost recovery effects.
- Other operation and maintenance expense increased $14 million, and depreciation and amortization increased $13 million, primarily because of additional plant in service, including the Marshalltown Generating Station.
- Equity income from unconsolidated investments increased to $21.3 million from $11.5 million. The increase included $12.1 million from an Oklahoma wind farm investment, principally due to a Tax Reform-related acceleration that management expects to reverse over time.
- Alliant adopted new revenue-recognition and cash-flow presentation standards on January 1, 2018. The revenue standard had no material effect on revenue recognition or retained earnings; comparative cash-flow amounts were reclassified.
Guidance, outlook, risks, contingencies, and unusual items
- Regulatory outlook: IPL’s final annual electric rate increase of approximately $130 million became effective May 1, 2018. IPL filed for a $20 million annual Iowa retail gas rate increase; an interim increase of $11 million became effective May 14, 2018, subject to refund, with a final decision expected in 2019.
- Tax Reform: IPL expects to return approximately $38 million of estimated 2018 tax benefits to electric and gas customers, subject to true-up and regulatory review. WPL expects to return approximately $43 million through customer credits and monthly refunds. Excess deferred taxes will be addressed in future rate reviews.
- Capital program: WPL is constructing the approximately 730 MW West Riverside natural-gas facility, expected to be completed in early 2020. IPL plans up to 1,000 MW of new wind generation targeted for service in 2019 and 2020. WPL acquired 55 MW of the Forward Wind Energy Center in April 2018 for approximately $74 million.
- Generation retirements and environmental compliance: IPL expected to retire M.L. Kapp Unit 2 by June 1, 2018. Consent Decree requirements include SCR installation and potential fuel switching or retirement of specified coal units. Future environmental compliance costs could be significant, although the utilities expect material consent-decree costs to be recovered from customers.
- Commitments: Minimum future purchase obligations totaled approximately $2.3 billion for Alliant, including $1.2 billion for purchased power, $892 million for natural gas, and $165 million for coal. Project-related capital commitments totaled $95 million.
- Risks: Principal risks include regulatory rate relief and cost recovery, Tax Reform implementation, weather and customer demand, fuel and purchased-power prices, environmental rules, generation and transmission reliability, access to capital markets, interest rates, cyber and physical security, pension obligations, litigation, and the ability to execute wind and other construction projects.
- The filing does not provide explicit consolidated earnings guidance. Management states that quarterly results are not necessarily indicative of full-year results.
Most important facts for investors to verify
- Progress and final outcomes of IPL’s gas and electric rate proceedings, including any refunds or changes to authorized returns.
- Actual customer refunds and regulatory treatment of Tax Reform benefits and excess deferred taxes at IPL and WPL.
- Construction cost, schedule, regulatory approvals, and rate recovery for West Riverside and IPL’s wind expansion.
- Liquidity after the April 2018 $300 million AEF term loan and the continuing use of commercial paper and receivables financing.
- Cash-flow conversion relative to elevated capital spending and dividend requirements.
- Environmental compliance costs, coal-unit retirement decisions, and the recoverability of related expenditures.
- The extent to which weather-driven sales, rate increases, and the Oklahoma wind farm tax benefit affected Q1 results and whether those effects are recurring.