ALLIANT ENERGY CORP quarterly report, Q1 FY2011

Alliant Energy Corporation — Form 10-Q Summary

Reporting period: Three months ended March 31, 2011. The combined unaudited filing covers Alliant Energy Corporation, Interstate Power and Light Company (IPL), and Wisconsin Power and Light Company (WPL). Alliant Energy is an investor-owned utility holding company serving Iowa, southern Minnesota, and Wisconsin, with regulated electric and gas operations and non-regulated businesses.

Financial performance and position

Metric	Q1 2011	Q1 2010	Change
Operating revenues	$945.0 million	$890.2 million	+6%
Operating income	$127.8 million	$109.0 million	+$18.8 million
Income from continuing operations	$78.4 million	$48.1 million	+63%
Net income attributable to common shareowners	$73.5 million	$43.4 million	+69%
Diluted EPS	$0.66	$0.39	+$0.27
Operating cash flow	$261.3 million	$189.2 million	+$72.1 million
Capital and acquisition expenditures	$237.1 million	$229.3 million	+$7.8 million
Cash and cash equivalents at March 31	$126.1 million	$140.2 million	-$14.1 million

Operating revenues increased primarily from higher electric and gas utility revenues and substantially higher non-regulated revenues, including RMT construction-management activity. Electric margins increased 11% to $368.5 million, while gas margins increased 6% to $72.6 million. Retail electric sales volumes increased 1% and retail gas volumes increased 5%.

The consolidated effective tax rate declined to 22.4% from 41.9%, principally because of IPL’s customer cost management plan, production tax credits, and the absence of the prior-year Federal Health Care Legislation charge. Income from discontinued operations was $1.3 million, including the gain on sale of the Industrial Energy Applications business.

Liquidity, debt, and capitalization

• Alliant Energy had $126.1 million of cash, $591 million of available revolving-credit capacity, and $85 million of remaining availability under IPL’s receivables-sale program at March 31, 2011.
• Consolidated long-term debt, including current maturities, was approximately $2.705 billion; commercial paper outstanding was $32.4 million.
• Consolidated capitalization was approximately $5.905 billion: 49.5% common equity, 4.2% preferred stock, 45.8% long-term debt, and 0.5% short-term debt.
• Debt-to-capital ratios were approximately 46% for Alliant Energy, IPL, and WPL, below their respective credit-facility limits.
• Alliant Energy paid $47.1 million of common dividends in the quarter and declared a quarterly common dividend of $0.425 per share.

Material changes versus the prior comparable period

• Net income attributable to common shareowners rose to $73.5 million from $43.4 million, supported by rate increases, improved utility margins, lower effective tax rates, and stronger non-regulated earnings.
• Operating cash flow increased to $261.3 million from $189.2 million, aided by rate-related customer collections, fuel-cost recovery timing, and $10 million of cash proceeds from IPL’s receivables-sale program.
• Utility electric margins increased $37 million. Non-fuel rate increases contributed approximately $34 million of additional electric revenue, partly offset by higher transmission expense, a $5 million WPL wind-site impairment, and higher Bent Tree operating and depreciation costs.
• IPL earnings available for common stock increased to $21.7 million from $5.8 million. IPL’s effective tax rate fell to 5.9% from 50.5%.
• WPL earnings available for common stock increased to $43.6 million from $36.2 million. WPL’s effective tax rate declined to 32.5% from 40.3%.
• WPL placed the remaining portion of the 200 MW Bent Tree Phase I wind project into service and purchased the remaining 25% interest in Edgewater Unit 5 for $38 million.
• WPL recorded a $5 million impairment for a Wisconsin wind-site development project due to increased permitting and siting uncertainty.
• Alliant Energy’s regulatory assets increased to $1.261 billion from $1.142 billion, and regulatory liabilities increased to $933.9 million from $800.1 million, primarily because of tax-accounting changes and IPL’s customer cost management plan.

Guidance, outlook, risks, and unusual items

• Management stated that current liquidity and capital structures should support strategic plans and long-term contractual obligations; the filing does not provide a specific full-year earnings guidance range.
• WPL expected to file a fuel-related rate case in the second quarter of 2011 for a forward-looking 2012 test period, with any rate changes expected in early 2012.
• IPL’s Iowa rate case resulted in a final annual increase of $114 million versus $119 million of interim rates. The company reserved $5 million for anticipated customer refunds. IPL’s Minnesota case remained pending; the administrative law judge recommended an increase that could require a modest Whispering Willow wind-project impairment if adopted.
• Alliant Energy was evaluating alternatives for its remaining 100 MW of Vestas wind equipment. The carrying amount was $109 million, with total expected cost of approximately $147 million; management reported no impairment at March 31, 2011, but identified potential for a future material impairment if project or sale assumptions change.
• Major environmental and regulatory uncertainties include proposed EPA Utility MACT and Section 316(b) rules, potential Clean Air Transport Rule requirements, coal-ash assessments, and Clean Air Act permitting litigation involving WPL facilities. Potential penalties, required pollution controls, operating restrictions, or plant retirements could be significant, but no related loss contingency was recorded because the outcomes were not considered both probable and reasonably estimable.
• The Alliant Energy Cash Balance Pension Plan litigation could result in damages of up to $25 million, excluding legal fees and costs. No liability was recorded while the matter was being contested. An IRS agreement was expected to require approximately $9 million of future participant payments.
• IPL faced an Enerfab contract dispute involving approximately $8 million of claimed additional payments and approximately $12 million of subcontractor liens. IPL recorded $6 million of related project costs.
• At March 31, 2011, environmental liabilities for manufactured-gas-plant sites totaled $35 million, with estimated remaining costs ranging from $21 million to $46 million.
• Subsequent to quarter-end, IPL redeemed its 7.10% Series C preferred stock for $40 million plus accrued dividends, funded with operating cash.

Important facts for investors to verify

• Whether the MPUC adopts the Minnesota rate-case recommendation and whether a Whispering Willow impairment is recorded in the second quarter.
• The final scope, timing, and cost of EPA environmental rules and WPL air-permitting proceedings.
• The outcome and potential funding impact of the Cash Balance Pension Plan lawsuit and related IRS-required amendment.
• The recoverability and ultimate disposition of the remaining 100 MW of Vestas wind equipment.
• The sustainability of improved earnings, particularly the unusually low tax rates, tax-accounting benefits, production tax credits, and regulatory mechanisms.
• Future capital requirements for Bent Tree, Edgewater, environmental compliance, transmission, and potential Riverside or alternative gas-generation acquisitions.
• Exposure from IPL’s receivables-sale program, derivative credit-support requirements, purchase obligations, and regulatory assets and liabilities.
• The filing is unaudited and states that first-quarter results are not necessarily indicative of full-year 2011 results.