LNT

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2007, for Alliant Energy Corporation (Alliant Energy), a regulated investor-owned public utility holding company. The company operates primarily through two utility subsidiaries: Interstate Power and Light Company (IPL), serving Iowa and southern Minnesota, and Wisconsin Power and Light Company (WPL), serving south and central Wisconsin. Alliant Energy also maintains non-regulated businesses through its subsidiary, Alliant Energy Resources, Inc. (Resources).

Key Financial Metrics (2007)

Material Changes vs. Prior Period

• Significant Asset Sale: In December 2007, IPL sold its electric transmission assets for net proceeds of $772 million, resulting in a pre-tax gain of $219 million ($123 million after-tax). This transaction was a primary driver of the 26% increase in Alliant Energy's net income compared to 2006.
• Divestitures: In February 2007, IPL and WPL sold their electric and gas utility operations in Illinois. In June 2007, Alliant Energy sold its investment in Mexico.
• Utility Margins: Electric margins increased by 2% in 2007 due to improved fuel cost recoveries, weather impacts, and rate increases. Gas margins decreased by 6% due to changes in WPL's gas performance incentive program and weather impacts.
• Winter Storms: Major winter storms in IPL's service territory in early 2007 resulted in approximately $51 million in incremental costs, reducing earnings by an estimated $0.06 per share.
• Dividend Increase: In December 2007, Alliant Energy announced an increase in its annual common stock dividend to $1.40 per share (from $1.27), effective February 2008.

Guidance, Outlook, and Risks

• Utility Generation Plan: Alliant Energy is executing a multi-year plan to build new generation capacity, including two coal-fired facilities (Sutherland #4 in Iowa and Nelson Dewey #3 in Wisconsin) and several wind farms (Whispering Willow, Cedar Ridge, and a Minnesota project). Total estimated capital expenditures for 2008-2010 are approximately $4.3 billion.
• Regulatory Environment: The company is subject to significant regulatory risk regarding rate recovery, environmental compliance (Clean Air Interstate Rule, Clean Air Mercury Rule), and greenhouse gas emissions. WPL is currently refunding approximately $20 million to retail electric customers for over-recovered fuel costs in 2007.
• Commodity Price Risk: While fuel cost recovery mechanisms mitigate risk for most operations, WPL's retail electric margins remain exposed to fuel price volatility due to Wisconsin's rate-making structure.
• Capital Markets: Management notes that credit market strains could impact the availability and cost of capital required for the substantial infrastructure investment program.

Investor Verification Checklist

• Transmission Asset Sale Proceeds: Verify the final post-closing adjustments on the $772 million sale of IPL's transmission assets and the associated regulatory liability of $89 million established for customer refunds.
• WPL Fuel Refunds: Monitor the finalization of the $20 million refund obligation to WPL retail customers for 2007 fuel cost over-recoveries and the timing of remaining payments in 2008.
• Capital Expenditure Execution: Track progress and cost overruns on the major generation projects (Sutherland #4, Nelson Dewey #3, and wind farms) which represent a significant portion of future cash outflows.
• Environmental Compliance Costs: Review updates on compliance costs for the Clean Air Interstate Rule (CAIR) and potential impacts of new greenhouse gas regulations on the coal-fired generation fleet.
• Dividend Sustainability: Assess the ability of subsidiaries (IPL and WPL) to maintain dividend payments to the parent company given regulatory restrictions on equity ratios and capital requirements for new construction.