Alliant Energy Corporation 2021 Form 10-K Summary
Business context and reporting period
Combined annual report for Alliant Energy Corporation, Interstate Power & Light Company (IPL), and Wisconsin Power & Light Company (WPL) for the fiscal year ended December 31, 2021. Alliant Energy is a regulated Midwest utility holding company serving approximately 985,000 electric and 425,000 natural gas customers through IPL in Iowa and WPL in Wisconsin. The filing also includes non-utility activities, including ATC Holdings, Travero, a non-utility wind farm, corporate venture investments, and the Sheboygan Falls Energy Facility.
The filing is an annual report rather than a standalone quarterly Q4 filing. Financial statements were audited by Deloitte & Touche LLP with unqualified opinions; Alliant Energy management and its auditor concluded that internal control over financial reporting was effective.
Key financial metrics
| Alliant Energy consolidated | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $3,669 million | $3,416 million | +$253 million, +7.4% |
| Operating income | $795 million | $740 million | +$55 million, +7.4% |
| Net income | $674 million | $624 million | +$50 million, +8.0% |
| Net income attributable to common shareowners | $659 million | $614 million | +$45 million, +7.3% |
| Diluted EPS | $2.63 | $2.47 | +$0.16, +6.5% |
| Operating margin | 21.7% | 21.7% | Approximately flat |
| Net margin attributable to common shareowners | 18.0% | 18.0% | Approximately flat |
| Cash flow from operating activities | $582 million | $501 million | +$81 million |
| Capital expenditures and acquisitions | $1,169 million | $1,366 million | -$197 million |
Utility earnings and EPS increased primarily because of rate-base growth and higher sales, partly offset by higher depreciation and lower allowance for funds used during construction. Utilities and Corporate Services generated $632 million of income, compared with $586 million in 2020. ATC Holdings contributed $31 million, compared with $34 million, while non-utility and parent activities recorded a $4 million loss.
- Electric utility revenue was $3,081 million, up from $2,920 million. Retail electric sales increased 4% to 25,432 thousand MWh.
- Gas utility revenue was $456 million, up from $373 million, while retail gas volumes decreased 1% to 48,179 thousand Dth.
- Utility electric margin, a non-GAAP measure, increased to $1,902 million from $1,819 million. Utility gas margin increased to $198 million from $191 million.
- Operating expenses rose to $2,874 million from $2,676 million, including higher depreciation and amortization of $657 million versus $615 million and higher transmission expense of $537 million versus $449 million.
- Income tax benefit was $74 million in 2021 versus $57 million in 2020, producing an overall effective tax rate of negative 12%.
Liquidity, debt, and balance sheet
- At December 31, 2021, cash and cash equivalents were $39 million; available capacity under the shared revolving credit facility was $485 million, and IPL had $109 million of additional receivables-program capacity.
- Commercial paper outstanding was $515 million. Long-term debt, net of current maturities, was $6.735 billion; current maturities were $633 million.
- Total assets were $18.553 billion and total equity was $5.990 billion.
- The shared credit facility totals $1.0 billion and expires in December 2026, subject to extension options and other conditions. Actual debt-to-capital ratios were 57% for Alliant Energy, 49% for IPL, and 49% for WPL, below the 65% covenant limit.
- Alliant Energy issued $300 million of IPL 3.1% senior debentures due 2051 and $300 million of WPL 1.95% green bonds due 2031. IPL also redeemed its $200 million of 5.1% cumulative preferred stock, recording a $5 million non-cash charge.
- Cash flow from operations was $582 million, versus $728 million used in investing activities and $130 million provided by financing activities. The company paid $403 million of common dividends.
Material changes versus 2020
- Consolidated earnings improved, supported by higher rate-base revenue requirements, increased retail electric sales, weather effects, COVID-19-related sales normalization, and a new WPL wholesale customer.
- IPL electric production fuel and purchased-power expense decreased to $295 million from $352 million, partly reflecting expanded renewable generation and the shortened Duane Arnold Energy Center power purchase agreement. IPL transmission expense increased to $367 million from $298 million.
- WPL electric revenue increased to $1.329 billion from $1.225 billion, while operating income was broadly stable at $308 million versus $306 million because of higher operating and depreciation expenses.
- Property, plant, and equipment, net increased to $14.987 billion from $14.336 billion, with construction work in progress rising to $778 million from $405 million.
- Operating cash flow increased by $81 million, although financing cash flow declined from $488 million provided in 2020 to $130 million provided in 2021, reflecting lower debt and equity issuance, preferred-stock redemption, and higher dividends.
- Regulatory assets declined to $1.940 billion from $2.010 billion, while regulatory liabilities declined to $1.271 billion from $1.306 billion. Recovery of these balances depends on future regulatory treatment.
Guidance, outlook, commentary, and unusual items
- Management expects higher 2022 earnings from increasing utility rate base, including WPL solar investments, partly offset by higher income tax expense. Depreciation, interest expense, and AFUDC are also expected to increase.
- WPL expects to issue up to $600 million of long-term debt in 2022; AEF expects up to $800 million. Scheduled 2022 long-term debt maturities total $633 million, including $250 million at WPL, $75 million at Corporate Services, and $308 million at AEF.
- The targeted 2022 annual dividend was increased 6% to $1.71 per share, or $0.4275 quarterly. Management’s long-term payout-ratio goal is approximately 60% to 70% of consolidated earnings from continuing operations.
- Planned 2022-2025 construction and acquisition expenditures total approximately $7.405 billion, including renewable projects, electric and gas distribution systems, generation, and technology investments. WPL plans approximately 1,100 MW of solar generation with expected in-service dates in 2022 and 2023; IPL plans approximately 400 MW of solar generation and 75 MW of battery storage.
- The company is transitioning away from coal. IPL completed the Burlington fuel switch to natural gas in December 2021 and expects to retire Lansing by the end of 2022. WPL expects to retire Edgewater Unit 5 by early 2023 and Columbia Units 1 and 2 by the end of 2023 and 2024, respectively.
- WPL received authorization for 2022-2023 annual base-rate increases of $114 million for retail electric customers and $15 million for retail gas customers, effective January 1, 2022. The order includes recovery of and a return on Edgewater Unit 5’s remaining net book value through 2023.
- WPL reported that estimated costs for its initial 675 MW solar authorization exceeded approved amounts by approximately 7% to 10%. Solar projects are exposed to supply constraints, labor issues, commodity inflation, permitting delays, and tax-credit eligibility risk.
- COVID-19 had not materially affected overall operations, financial condition, results, or cash flows through 2021, but management identified continuing uncertainty involving customer collections, supply chains, labor availability, construction schedules, and capital-market access.
- Material contingencies include environmental compliance and remediation, coal combustion residuals, greenhouse-gas regulation, MGP-site remediation, possible changes to MISO capacity accreditation, guarantees related to a former Whiting Petroleum affiliate, and regulatory recovery of deferred costs.
- Known Whiting Petroleum-related partnership abandonment obligations were estimated at $60 million, with a $5 million liability recorded for expected credit losses. The filing states that no material payment was currently considered probable.
Most important facts for an investor to verify
- Whether planned solar, storage, distribution, and coal-retirement projects remain on schedule and within approved cost caps, particularly given supply-chain inflation and the reported 7% to 10% WPL solar cost increase.
- The final regulatory treatment and recoverability of $1.940 billion of regulatory assets and $1.271 billion of regulatory liabilities.
- Funding requirements for approximately $7.4 billion of planned 2022-2025 capital expenditures, scheduled debt maturities, and expected tax-equity financing.
- The effect of WPL’s earnings-sharing mechanism, fuel-cost recovery structure, and future rate cases on margins and cash flow.
- The impact of MISO’s proposed seasonal capacity methodology on renewable accreditation, resource adequacy, and unrecovered capacity costs.
- Exposure to environmental rules, coal ash obligations, greenhouse-gas regulation, early plant retirements, and potential remediation costs.
- Ability to utilize federal and state tax-credit and net-operating-loss carryforwards before expiration, including federal credits that may expire in 2022.
- Dividend sustainability, access to capital markets, credit ratings, interest-rate sensitivity, pension and OPEB funding, cyber risk, severe weather, and continuing COVID-19 or supply-chain effects.