Alliant Energy Corporation 2023 Q1 Form 10-Q 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, 2023. Alliant Energy operates regulated electric and natural-gas utilities in Iowa and Wisconsin, along with investments in transmission and other businesses.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Total revenue | $1,077 million | $1,068 million | +$9 million |
| Operating income | $222 million | $248 million | -$26 million |
| Net income attributable to common shareowners | $163 million | $192 million | -$29 million |
| Diluted EPS | $0.65 | $0.77 | -$0.12 |
| Cash flow from operations | $188 million | $251 million | -$63 million |
| Utility construction and acquisition expenditures | $417 million | $307 million | +$110 million |
Alliant Energy’s operating margin was approximately 20.6% of revenue in Q1 2023, compared with approximately 23.2% in Q1 2022. Reported utility electric margin declined to $465 million from $467 million, while utility gas margin increased to $95 million from $94 million. These are non-GAAP measures defined by management.
- Electric utility revenue was $768 million, compared with $773 million; gas utility revenue increased to $276 million from $262 million.
- Other operation and maintenance expense increased to $174 million from $153 million. Interest expense increased to $94 million from $74 million.
- The effective income tax rate was approximately negative 1% in Q1 2023, compared with 4% in Q1 2022, primarily reflecting state taxes, production tax credits, excess deferred-tax amortization, and regulatory accounting effects.
- At March 31, 2023, total assets were $20.24 billion and Alliant Energy common equity was $6.33 billion.
- Long-term debt, including current maturities, was approximately $8.94 billion at March 31, 2023, compared with $8.08 billion at December 31, 2022. Current maturities were $808 million and commercial paper outstanding was $60 million.
- Cash and cash equivalents were $157 million. Available revolving credit facility capacity was $940 million, and IPL had $21 million of remaining capacity under its accounts-receivable sales program.
Material changes versus the prior comparable period
- Net income declined primarily because warmer-than-normal Q1 2023 weather reduced retail electric and gas sales, whereas colder-than-normal weather increased Q1 2022 demand. Higher interest expense and the timing of income tax expense also reduced earnings.
- Retail electric sales volumes decreased 3% and retail gas sales volumes decreased 15% year over year. Weather reduced estimated Alliant Energy electric margins by $16 million and gas margins by $10 million versus the prior period.
- Operating expenses increased $35 million, led by higher other operation and maintenance, electric transmission service, cost of gas sold, and taxes other than income taxes. These increases were partly offset by lower electric production fuel and purchased power expense.
- Operating cash flow decreased because of lower customer collections, higher interest payments, working-capital movements, and changes in IPL receivables sales.
- Investing cash usage increased to $263 million from $223 million, largely due to higher utility construction spending, including WPL solar projects. WPL also received $25 million from the sale of a partial ownership interest in West Riverside; its ownership interest declined to 87.6%.
- Financing cash flow increased to $212 million from $3 million. Alliant Energy issued $575 million of 3.875% convertible senior notes due 2026, and WPL issued $300 million of 4.95% green debentures due 2033.
- Alliant Energy’s quarterly dividend increased to $0.4525 per share from $0.4275 per share in the prior-year quarter.
Guidance, outlook, commentary, risks, and unusual items
- No updated consolidated earnings guidance is provided in the supplied filing text.
- WPL filed a rate review seeking 2024 annual retail electric and gas increases of $111 million and $17 million, respectively, plus a further $71 million electric increase for 2025. A PSCW decision was expected by year-end 2023.
- IPL received approval for solar and battery-storage projects, including advance rate-making principles for up to 200 MW of solar generation. Costs above the $1,575 per kilowatt target may require treatment in future rate cases.
- WPL expects construction costs and related rate-base additions for 414 MW of new solar generation to exceed amounts approved in June 2022 by approximately 10% to 14% because of higher commodity, labor, and site-specific costs.
- Alliant Energy has minimum future capital commitments of $252 million, including IPL and WPL solar projects, and commodity and other purchase commitments totaling $1.57 billion. Natural-gas commitments were $1.28 billion.
- Key risks include regulatory recovery and rate relief, higher interest rates and inflation, construction cost overruns and supply-chain constraints, weather, energy commodity prices, MISO resource-adequacy changes, environmental compliance, cybersecurity, counterparty credit, pension costs, and access to capital markets.
- IPL must fuel-switch or retire Prairie Creek Units 1 and 3 by December 31, 2025 under its EPA consent decree. The companies expect to recover material compliance costs from customers, but future environmental rules could require significant additional investment.
- Alliant Energy estimates maximum exposure of approximately $58 million under guarantees related to a former Whiting Petroleum affiliate; $5 million was recorded for expected credit losses. No material payment was considered probable.
- The filing reports no legal proceedings requiring disclosure under the applicable threshold, and management concluded disclosure controls were effective as of March 31, 2023.
Most important facts for investors to verify
- Whether pending IPL and WPL rate cases produce sufficient recovery for planned solar, battery-storage, transmission, and other capital investments.
- The final cost and in-service timing of WPL’s 414 MW solar portfolio and the potential effect of the reported 10% to 14% cost increase.
- Alliant Energy’s ability to refinance or repay the $808 million of current maturities and manage higher interest expense and short-term borrowing costs.
- Weather-normalized demand, retail sales volumes, and whether utility margins stabilize after the unfavorable Q1 weather comparison.
- Potential changes in MISO capacity requirements, environmental regulations, carbon policy, and recovery of related costs through customer rates.
- Future cash flow coverage of capital expenditures and dividends, including continued access to credit markets and the effect of the convertible notes on future dilution.