Business Context and Reporting Period
Alliant Energy Corporation, together with its wholly owned utilities Interstate Power and Light Company (IPL) and Wisconsin Power and Light Company (WPL), filed this unaudited combined Form 10-Q for the quarter and nine months ended September 30, 2022. The businesses are primarily regulated electric and gas utilities, with additional non-utility operations and an investment in American Transmission Company Holdings.
Financial Performance and Position
| Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
|---|---|---|---|---|
| Total revenue | $1,135 million | $1,024 million | $3,147 million | $2,742 million |
| Operating income | $309 million | $289 million | $769 million | $663 million |
| Net income attributable to common shareholders | $227 million | $256 million | $579 million | $571 million |
| Diluted EPS | $0.90 | $1.02 | $2.31 | $2.28 |
| Operating margin | 27.2% | 28.2% | 24.4% | 24.2% |
| Net margin | 20.0% | 25.0% | 18.4% | 20.8% |
Revenue increased 10.8% in the quarter and 14.8% year to date, driven primarily by higher electric and gas revenues, including WPL rate-base growth and higher gas sales and recovery amounts. Electric utility margin, a non-GAAP measure, increased to $608 million from $584 million in the quarter and to $1.563 billion from $1.476 billion year to date. Gas utility margin increased to $36 million from $32 million in the quarter and to $176 million from $140 million year to date.
Quarterly net income declined despite higher operating income because of higher interest expense, the timing of income taxes, lower equity income from unconsolidated investments and an $8 million tax expense related to Iowa tax-rate remeasurement. The effective tax rate was 6% versus a 9% benefit in the prior-year quarter; the year-to-date rate was 4% versus a 13% benefit.
| Cash flow and balance-sheet metric | September 30, 2022 | December 31, 2021 |
|---|---|---|
| Cash and cash equivalents | $344 million | $39 million |
| Total assets | $20.205 billion | $18.553 billion |
| Long-term debt, including current maturities | $8.228 billion | $7.368 billion |
| Commercial paper | $383 million | $515 million |
| Common equity | $6.265 billion | $5.990 billion |
| Operating cash flow, 9M | $485 million | $477 million |
| Capital and acquisition expenditures, 9M | $942 million | $832 million |
Alliant Energy generated $485 million of operating cash flow and used $599 million in investing activities during the first nine months. Financing activities provided $421 million, including $1.238 billion of long-term debt issuance, partly offset by $379 million of debt retirements, a $132 million reduction in commercial paper and $322 million of common dividends. At September 30, available revolving-credit capacity was $617 million, and IPL had $109 million of additional receivables-program capacity.
Material Changes Versus the Prior Comparable Period
- WPL operating income rose to $131 million from $100 million in Q3 and to $357 million from $245 million year to date, primarily reflecting higher rate-base revenue requirements and solar investment.
- IPL operating income declined to $171 million from $180 million in Q3 and to $389 million from $394 million year to date, mainly due to lower electric margin and higher interest expense.
- WPL issued $600 million of 3.95% debentures due 2032, and AEF issued $350 million of 3.6% senior notes due 2032. Consolidated leverage increased as capital investment accelerated.
- WPL and its tax-equity partner terminated the solar tax-equity partnership after enactment of the Inflation Reduction Act. WPL returned the partner’s $29 million contribution and expects to retain full ownership of planned solar projects.
- WPL deferred $83 million of higher-than-expected fuel-related costs into regulatory assets during the first nine months.
- A federal appellate court decision regarding MISO transmission-owner returns led Alliant to record a $5 million reduction in equity income related to ATC.
- Alliant’s retail electric sales volumes declined 3% in Q3 and were flat year to date, while retail gas sales volumes increased 10% and 12%, respectively.
Guidance, Outlook, Risks and Unusual Items
Management expects 2023 earnings to increase compared with 2022 as rate base expands, particularly through WPL solar investment. Management also expects lower operation and maintenance expense from operating efficiencies but higher interest expense from completed and planned financings and higher rates.
- Alliant expects to issue up to $250 million of common stock in 2023. IPL, WPL subject to regulatory approval, and AEF expect to issue up to $300 million, $300 million and $450 million of long-term debt, respectively, by the end of 2023.
- The targeted 2023 annual dividend was increased 6% to $1.81 per share, or $0.4525 per quarter, beginning with the February 2023 payment; future dividends remain subject to board approval and financial conditions.
- Planned 2022-2026 construction and acquisition expenditures total approximately $9.745 billion for Alliant Energy, including substantial renewable generation, battery storage and electric and gas distribution investment.
- WPL expects to retire Edgewater by June 2025 and Columbia Units 1 and 2 by June 2026. IPL expects to retire the 275 MW Lansing Generating Station in the first half of 2023. These dates remain subject to operational, regulatory and market conditions.
- Key uncertainties include regulatory rate recovery, inflation, higher interest rates, fuel and purchased-power prices, renewable-project cost and supply-chain pressures, solar tariff investigations, MISO’s seasonal capacity rules, environmental requirements, extreme weather, credit-market access, pension funding and litigation.
- Alliant reported $1.931 billion of minimum future commodity and other purchase commitments, including $1.608 billion for natural gas. It also reported $208 million of minimum future capital commitments, substantially related to renewable projects.
- Known Whiting Petroleum-related partnership abandonment obligations were estimated at $58 million, with a $5 million liability recorded for expected credit losses. The filing states that no material payment is currently probable.
- Management concluded that disclosure controls and procedures were effective as of September 30, 2022, and reported no material change in internal control over financial reporting.
Important Facts for Investors to Verify
- Whether planned renewable and battery-storage projects receive timely regulatory approval and remain within cost and in-service-date targets.
- The amount and timing of future rate relief, including WPL’s fuel-cost recovery and anticipated 2024/2025 rate filing and IPL’s expected 2024 filing.
- The ultimate impact of the MISO seasonal capacity construct and any additional generation or capacity-market purchases required.
- Whether higher debt balances, planned equity issuance and rising interest rates affect earnings, credit ratings and dividend capacity.
- The final outcome of the MISO transmission-owner return-on-equity proceedings and its effect on ATC-related earnings.
- Recovery of WPL’s deferred fuel costs and other regulatory assets, including the $83 million fuel-cost deferral.
- Potential effects of environmental regulations, coal-plant retirements, solar-material tariffs, supply constraints and commodity-price volatility.