Alliant Energy Corporation 2017 Form 10-K Summary
Business context and reporting period
Combined annual filing for Alliant Energy Corporation, Interstate Power and Light Company (IPL), and Wisconsin Power and Light Company (WPL), covering the fiscal year ended December 31, 2017. Alliant Energy is a regulated Midwest utility holding company. IPL serves Iowa and WPL serves Wisconsin, together providing electric service to approximately 960,000 customers and natural gas service to approximately 410,000 customers. Alliant Energy also owns the ATC investment and a modest portfolio of non-utility businesses.
Key financial metrics
| Alliant Energy consolidated | 2017 | 2016 | Change |
|---|---|---|---|
| Operating revenues | $3,382.2 million | $3,320.0 million | +1.9% |
| Operating income | $653.4 million | $537.0 million | +21.7% |
| Income from continuing operations attributable to common shareowners | $455.9 million | $373.8 million | +22.0% |
| Net income attributable to common shareowners | $457.3 million | $371.5 million | +23.1% |
| Diluted EPS | $1.99 | $1.64 | +$0.35 |
| Cash flow from operating activities | $983.4 million | $859.6 million | +$123.8 million |
| Construction and acquisition expenditures | $1,466.9 million | $1,196.8 million | +$270.1 million |
| Total assets | $14,187.8 million | $13,373.8 million | +$814.0 million |
| Long-term obligations, net | $4,870.6 million | $4,325.1 million | +$545.5 million |
Calculated consolidated operating margin was approximately 19.3% in 2017 versus 16.2% in 2016; calculated net margin attributable to common shareowners was approximately 13.5% versus 11.2%. These are calculated from reported figures and are not company-defined non-GAAP measures.
- Electric utility revenue was $2,894.7 million, up from $2,875.5 million. Utility electric margin increased to $1,595.7 million from $1,493.6 million.
- Gas utility revenue was $400.9 million, up from $355.4 million. Utility gas margin increased to $189.5 million from $161.1 million.
- Retail electric sales declined 1% to 25,095 thousand MWh, primarily because of cooler summer weather and one fewer sales day compared with leap-year 2016. Retail electric customers increased to 959,295 from 955,533.
- Alliant Energy ended the year with $27.9 million of cash and $680 million of unused revolving-credit capacity, plus $91.7 million of available capacity under IPL’s receivables program.
- The new revolving credit facility totals $1.0 billion and expires in August 2022. Year-end debt-to-capital ratios were 54% for Alliant Energy, 47% for IPL, and 51% for WPL, below the 65% covenant limit.
- Alliant Energy declared $1.26 per common share of dividends in 2017 and announced a targeted 2018 dividend of $1.34 per share, a 6% increase.
Material changes versus the prior comparable period
- Alliant Energy earnings improved principally because 2016 included an $86.4 million pre-tax asset valuation charge for the Franklin County wind farm. Additional 2017 benefits came from IPL and WPL base-rate increases, higher electric and gas margins, and Tax Reform effects.
- IPL placed the 706 MW Marshalltown natural-gas combined-cycle facility into service in April 2017. Final construction expenditures were $645 million, excluding transmission upgrades and AFUDC.
- IPL transferred the 99 MW Franklin County wind farm from AEF to IPL in April 2017 for a purchase price of $32 million.
- Alliant Energy acquired a 50% cash-equity interest in a 225 MW Oklahoma wind farm for approximately $98 million and obtained a related $95 million variable-rate term loan.
- WPL’s earnings available for common stock declined to $186.6 million from $190.4 million, primarily reflecting the loss of ATC equity income after its investment was transferred to Alliant Energy’s non-utility subsidiary at the end of 2016, along with higher depreciation and operating costs.
- Operating cash flow increased 14.4%, but investing cash use rose to $1,496.3 million, driven by utility construction and other investments. Financing cash flow of $532.6 million funded a portion of the investment program.
- Tax Reform reduced the federal corporate tax rate from 35% to 21%. Alliant Energy recorded a $18.1 million income tax benefit from Tax Reform, while IPL recorded $3.8 million of expense and WPL recorded a $14.5 million benefit. Significant deferred-tax balances were remeasured, with related regulatory assets and liabilities expected to benefit customers.
- Alliant Energy issued 3.1 million common shares through its at-the-market program and received $124 million of net proceeds.
Guidance, outlook, management commentary, risks and unusual items
- Management expects 2018 electric and gas margins to increase because of IPL’s final electric rate increase, expected IPL gas-rate relief, WPL rate actions, and lower transmission expense. Higher depreciation, interest expense, and AFUDC are also expected.
- Planned 2018 financing includes up to $200 million of Alliant Energy common stock, up to $700 million of IPL long-term debt, and up to $1.0 billion of AEF long-term debt, including refinancing needs.
- Management forecasts approximately $5 billion of capital expenditures over four years. Planned projects include up to 1,200 MW of additional wind generation, WPL’s approximately 730 MW West Riverside facility, distribution-system modernization, gas infrastructure, and environmental controls.
- 2018-2021 anticipated construction and acquisition expenditures total approximately $5.395 billion, including $1.720 billion in 2018. Most estimates are not yet contractual and may change based on regulatory approvals, project economics, and market conditions.
- Key regulatory matters include IPL’s approved $130 million annual electric-rate increase, WPL’s earnings-sharing mechanism, pending tax-reform treatment, and a pending FERC decision on a second MISO transmission-owner return-on-equity complaint.
- Environmental obligations include consent-decree requirements, SCR systems at IPL’s Ottumwa and WPL’s Columbia facilities, and planned retirement or fuel switching of older generating units. WPL expects to retire Edgewater Unit 4 by September 30, 2018; IPL expects to retire certain combustion turbines by June 1, 2018.
- Major risks include failure to obtain timely and adequate rate relief, cost overruns or delays on large projects, changes in tax law and use of tax carryforwards, environmental compliance costs, transmission expense, weather and demand volatility, cyber and physical security events, commodity and fuel supply disruptions, pension funding risk, credit-rating changes, and limited access to capital markets.
- Alliant Energy reported no material legal proceedings, received unqualified audit opinions, and management concluded that disclosure controls and internal control over financial reporting were effective.
Most important facts for an investor to verify
- Confirm the final implementation and customer treatment of IPL’s $130 million electric-rate settlement and the regulatory treatment of Tax Reform benefits.
- Track completion, cost, regulatory recovery, and ownership changes for West Riverside and the planned wind-generation expansion.
- Review 2018 debt maturities of approximately $856 million, refinancing plans, and the effect of higher interest rates on liquidity and earnings.
- Assess whether operating cash flow can support the planned capital program and dividends without materially increasing leverage or equity issuance.
- Evaluate the recoverability of regulatory assets, including tax-related balances, pension and OPEB costs, early-retired generating units, environmental expenditures, and deferred fuel or transmission costs.
- Monitor FERC transmission-rate proceedings, wholesale-customer departures, environmental consent-decree deadlines, and potential generating-unit retirements.
- Reconcile reported earnings growth with the nonrecurring 2016 Franklin County charge, rate increases, weather effects, Tax Reform, and higher depreciation and interest costs.