Alliant Energy Corp. Q1 2009 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2009, for Alliant Energy Corporation and its primary utility subsidiaries, Interstate Power and Light Company (IPL) and Wisconsin Power and Light Company (WPL). Alliant Energy is an investor-owned public utility holding company operating in Iowa, Minnesota, and Wisconsin. The filing includes unaudited condensed consolidated financial statements for the parent company and its subsidiaries.
Key Financial Metrics
| Metric (in millions) | Q1 2009 | Q1 2008 |
|---|---|---|
| Operating Revenues | $949.9 | $992.0 |
| Operating Income | $73.7 | $125.1 |
| Net Income | $77.3 | $72.8 |
| Net Income Attributable to Common Shareowners | $72.6 | $68.1 |
| Earnings Per Share (Diluted) | $0.66 | $0.62 |
| Cash and Cash Equivalents (End of Period) | $283.7 | $632.4 |
| Net Cash from Operating Activities | $267.6 | $91.6 |
| Long-Term Debt (Net) | $1,648.5 | $1,748.3 |
| Total Assets | $8,239.4 | $8,201.5 |
Material Changes vs. Prior Period
- Revenue Decline: Total operating revenues decreased $42.1 million (4.3%) primarily due to lower non-regulated revenues ($51.7 million decrease) driven by reduced construction activity for wind projects at RMT, and lower gas utility revenues due to warmer weather and lower industrial demand.
- Operating Income Drop: Operating income fell $51.4 million (41.1%) year-over-year. This was largely due to the significant decline in non-regulated operating income and higher utility operating expenses, including increased electric transmission costs and pension expenses.
- Net Income Increase: Despite lower operating income, Net Income increased $4.5 million. This was primarily driven by a significant income tax benefit of approximately $40.4 million recognized in Q1 2009. This benefit resulted from changes in state apportioned income tax rates due to Wisconsin Senate Bill 62 (combined reporting) and WPL's decision to file as part of the Iowa consolidated tax return.
- Cash Flow Improvement: Net cash provided by operating activities increased significantly to $267.6 million from $91.6 million, largely due to $125 million in proceeds from the sale of accounts receivable by IPL.
- Capital Expenditures: Investing cash outflows increased to $311.4 million (from $116.3 million) due to higher construction expenditures for wind projects and restoration activities related to the June 2008 Midwest flooding.
Guidance, Outlook, and Risks
- Strategic Plan Updates: In March 2009, IPL and partners decided not to proceed with the construction of the Sutherland #4 coal-fired facility. WPL purchased a 400 MW wind project site in Minnesota and development rights for a 100 MW site in Wisconsin. Capital expenditure forecasts for 2009-2011 were revised downward by $160 million, $615 million, and $420 million, respectively, compared to the 2008 10-K.
- Regulatory Developments:
- IPL Rate Case: IPL filed for a $171 million (approx. 17%) increase in Iowa retail electric rates. An interim increase of $84 million (approx. 8%) was implemented in March 2009.
- WPL Refunds: WPL is required to refund $7 million to retail customers in Q2 2009 related to prior fuel rate cases.
- Tax Legislation: Wisconsin SB 62 requires combined reporting for corporate income tax, impacting future tax rates and the utilization of net operating loss carryforwards.
- Legal Contingencies:
- Exchangeable Senior Notes: A dispute exists regarding an alleged default under the Indenture for $402.5 million of Exchangeable Senior Notes due 2030. The Trustee has declared an "Event of Default" and accelerated the debt. Alliant Energy disputes this and has obtained waivers to prevent cross-defaults on credit facilities through late 2009. If the court rules against Alliant Energy, a pre-tax loss of approximately $364.3 million could be recorded.
- Pension Litigation: A class action lawsuit alleges improper interest crediting rates in the Cash Balance Pension Plan. Alliant Energy believes losses are not probable.
- Weather and Economic Risks: Warmer weather reduced gas sales demand. Industrial sales demand declined due to the economic recession, plant closures, and shift reductions. The company expects further declines in retail electric sales in 2009.
- Flood Restoration: Costs for rebuilding and restoration following the June 2008 Midwest flooding are estimated at $100 million for 2009. Approximately $66 million of remaining insurance coverage is expected to be recovered.
Investor Verification Checklist
- Legal Outcome on Senior Notes: Verify the status of the litigation regarding the $402.5 million Exchangeable Senior Notes and the potential for a $364.3 million pre-tax loss if the "Event of Default" is upheld.
- Tax Rate Sustainability: Assess the long-term impact of Wisconsin SB 62 and the Iowa consolidated filing on future effective tax rates, given the one-time benefit recognized in Q1 2009.
- Capital Expenditure Revisions: Confirm the revised capital expenditure forecasts and the impact of the cancelled Sutherland #4 project on future rate cases and earnings.
- Industrial Sales Trends: Monitor the impact of the economic recession and customer-owned generation (e.g., ADM and Roquette America cogeneration facilities) on future industrial electric sales volumes.
- Flood Recovery Costs: Track the actual costs incurred for flood restoration versus the estimated $100 million and the timing of insurance reimbursements.