Alliant Energy Corporation 2019 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, 2019. The businesses are primarily regulated electric and gas utilities serving Iowa and Wisconsin, with additional non-utility and investment activities.
Key financial metrics
| Alliant Energy consolidated | Q1 2019 | Q1 2018 | Change |
|---|---|---|---|
| Total revenues | $987.2 million | $916.3 million | +$70.9 million |
| Operating income | $176.8 million | $165.7 million | +$11.1 million |
| Net income | $127.7 million | $123.5 million | +$4.2 million |
| Net income attributable to common shareowners | $125.1 million | $120.9 million | +$4.2 million |
| Diluted EPS | $0.53 | $0.52 | +$0.01 |
| Net cash from operating activities | $181.1 million | $156.3 million | +$24.8 million |
| Capital and acquisition expenditures | $406.1 million | $355.5 million | +$50.6 million |
Revenue growth was led by electric utility revenue of $743.4 million, up from $708.7 million, and gas utility revenue of $215.8 million, up from $185.6 million. Utility electric margin, a non-GAAP measure, increased to $402.0 million from $379.1 million; utility gas margin increased to $94.2 million from $74.4 million. Operating margin was approximately 17.9%, compared with 18.1% in the prior-year quarter.
Alliant’s effective income tax rate was 10.6%, compared with 12.0% in Q1 2018. Net income attributable to common shareowners benefited from higher utility margins and was partially offset by higher depreciation, interest expense, and lower equity income from the Oklahoma wind investment.
Liquidity, debt, and capital resources
- Cash and cash equivalents were $10.1 million at March 31, 2019, compared with $20.9 million at December 31, 2018.
- Available capacity under the single revolving credit facility was approximately $370 million, and IPL had $21 million of remaining accounts-receivable-sale capacity.
- Commercial paper outstanding was $514.7 million at Alliant Energy and $138.4 million at WPL; IPL had no commercial paper outstanding at quarter-end.
- Long-term debt, including current maturities, was approximately $5.62 billion, compared with $5.50 billion at December 31, 2018. The reported fair value was approximately $6.07 billion.
- Operating cash flow of $181.1 million was more than offset by $364.8 million of investing outflows, primarily construction and acquisition expenditures. Financing provided $176.0 million, principally through increased commercial paper and common-stock proceeds.
- Alliant paid $83.7 million in common dividends, or $0.355 per share, during the quarter.
Material changes versus the prior comparable period
- Utilities and Corporate Services net income increased to $122.0 million from $104.4 million, while ATC Holdings income increased to $7.1 million from $6.3 million. Non-utility and Parent income declined to a $4.0 million loss from $10.2 million of income.
- Higher utility margins reflected increased rate base, IPL rate increases effective in 2018 and 2019, WPL rates effective January 2019, and colder temperatures. Retail electric sales volumes were broadly unchanged because temperature-related increases were offset by lower IPL industrial sales.
- Depreciation and amortization increased to $136.9 million from $120.4 million, primarily due to higher IPL depreciation rates and additional plant placed in service.
- Interest expense increased to $66.3 million from $59.2 million, while equity income from unconsolidated investments declined to $10.9 million from $21.3 million of income, largely because Q1 2018 included accelerated Oklahoma wind-farm earnings related to Federal Tax Reform.
- Utility construction expenditures increased to $374.0 million from $335.2 million, largely due to IPL’s wind-generation expansion.
- Alliant adopted the new lease accounting standard on January 1, 2019 without a cumulative-effect adjustment. Prior periods were not restated.
Guidance, outlook, management commentary, and unusual items
- IPL filed for annual Iowa retail electric and gas base-rate increases of $204 million and $21 million, respectively, using a 2020 forward test period. Interim electric rates representing a $90 million annualized increase became effective April 1, 2019, subject to refund pending the Iowa Utilities Board’s final decision. Management expected a final decision in the fourth quarter of 2019, with remaining final rates expected in the first quarter of 2020.
- IPL placed approximately 470 megawatts of new wind generation at the Upland Prairie and English Farms sites into service in March 2019. In April 2019, IPL issued $300 million of 3.6% senior debentures due 2029 as green bonds to fund wind projects.
- IPL incurred a discounted obligation for a $110 million September 2020 buyout payment to shorten the Duane Arnold Energy Center power purchase agreement by five years. The Iowa Utilities Board approved recovery from customers over five years after payment.
- Alliant acquired two freight-management companies for $21 million, including $8 million of contingent consideration expected to be paid within two years.
- Capital commitments included $65 million for Alliant utility projects, $33 million for IPL projects, and $32 million for WPL projects. Additional minimum purchase commitments totaled $1.35 billion for Alliant, including natural gas, purchased power, coal, and other obligations.
- Key risks include regulatory recovery and rate-case outcomes, environmental compliance and remediation, construction and wind-project execution, commodity and transmission costs, weather, access to capital markets, interest rates, cyber and physical security, pension and OPEB funding, litigation, and collective-bargaining negotiations. WPL’s agreement with IBEW Local 965 was scheduled to expire May 31, 2019, and management could not predict the outcome of negotiations.
- IPL and WPL remain subject to environmental obligations, including IPL Consent Decree requirements to fuel-switch or retire specified coal units by 2021 and 2025. The filing states that the complete financial impact of certain proposed or contested environmental rules cannot yet be determined.
Most important facts for investors to verify
- Final Iowa rate-case decisions, refund exposure on interim IPL electric rates, and the timing and recoverability of the $110 million DAEC buyout payment.
- Execution, cost recovery, and production-tax-credit qualification for IPL’s wind projects and WPL’s West Riverside Energy Center.
- Whether higher utility margins and colder-weather benefits are sustainable after normalizing for weather and rate changes.
- Commercial-paper reliance, refinancing requirements, the April 2019 $300 million IPL debt issuance, and available liquidity under the revolving credit facility.
- Potential costs from environmental compliance, coal-unit retirements, MGP remediation, guarantees, and unresolved regulatory or legal matters.
- The filing states that first-quarter results are not necessarily indicative of full-year 2019 results.