Alliant Energy Corporation 2023 Q2 Form 10-Q Summary
Business context and reporting period
Combined unaudited Form 10-Q for Alliant Energy Corporation, Interstate Power and Light Company (IPL), and Wisconsin Power and Light Company (WPL), covering the three and six months ended June 30, 2023. Alliant Energy is primarily a regulated electric and gas utility serving Iowa and Wisconsin, with additional investments in transmission and non-utility businesses.
Key financial metrics
| Alliant Energy consolidated | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $912 million | $943 million | $1.990 billion | $2.012 billion |
| Operating income | $217 million | $212 million | $439 million | $460 million |
| Net income attributable to common shareowners | $160 million | $159 million | $323 million | $351 million |
| Diluted EPS | $0.64 | $0.63 | $1.28 | $1.40 |
| Operating margin | 23.8% | 22.5% | 22.1% | 22.9% |
| Net margin | 17.5% | 16.9% | 16.2% | 17.4% |
Operating margin and net margin are calculated from reported figures. Utility electric margin, a non-GAAP measure, increased to $495 million in Q2 from $488 million and was $961 million for the first six months versus $956 million. Utility gas margin declined to $44 million in Q2 from $46 million and to $138 million for the first six months from $140 million.
- Six-month operating cash flow was $311 million, compared with $300 million in 2022.
- Six-month investing cash flow was $(482) million, including $758 million of utility construction and acquisition expenditures and $120 million of proceeds from partial sales of West Riverside.
- Six-month financing cash flow was $161 million, including $862 million of long-term debt issuance, $404 million of debt retirements, $146 million of net reductions in commercial paper and other short-term borrowings, and $226 million of common dividends.
- Cash, cash equivalents and restricted cash totaled $14 million at June 30, 2023, compared with $20 million at year-end 2022.
- Alliant Energy reported $8.595 billion of long-term debt including current maturities, $441 million of commercial paper and other short-term borrowings, and $6.452 billion of common equity at June 30, 2023.
- Available revolving credit capacity was $554 million, and IPL had an additional $50 million available under its receivables-sale program.
Material changes versus the prior comparable period
- Q2 revenue declined 3.3%, while operating income increased 2.4% and net income increased 0.6%. For the first six months, revenue declined 1.1%, operating income declined 4.6%, and net income declined 8.0%.
- Retail electric and gas sales volumes declined 2% and 17%, respectively, in Q2, and 3% and 15%, respectively, for the first six months, primarily because of temperature differences.
- Electric production fuel and purchased-power expense declined $25 million in Q2 and $37 million for the first six months, partly offset by higher electric transmission expense and higher operation and maintenance costs.
- Interest expense increased $18 million in Q2 and $38 million for the first six months, primarily from new financings and higher interest rates. Alliant issued $575 million of 3.875% convertible senior notes, while WPL issued $300 million of 4.95% debentures due 2033. AEF also retired $400 million of 3.75% senior notes.
- WPL’s Q2 net income increased to $72 million from $63 million, while IPL’s increased to $89 million from $87 million. Six-month net income declined at IPL to $161 million from $173 million and increased at WPL to $160 million from $156 million.
- IPL retired the coal-fired Lansing Generating Station in May 2023 and reclassified its remaining $226 million net book value to a regulatory asset. Recovery is expected to be addressed in future rate reviews.
- Utility construction and acquisition expenditures increased to $758 million from $550 million for the first six months, largely because of solar generation investment.
Guidance, outlook, commentary, risks and unusual items
- Management did not provide new consolidated earnings guidance in the provided filing text. The filing states that interim results are not necessarily indicative of full-year results.
- WPL requested 2024 annual retail electric and gas rate increases of $111 million and $17 million, respectively, and an additional $71 million electric increase for 2025. A PSCW decision was expected by year-end 2023. IPL expected to file a retail electric and gas rate review in the third quarter of 2023.
- IPL and the Iowa Utilities Board were reconsidering approval terms for up to 400 MW of solar generation and 75 MW of battery storage. The filing also describes an August 2023 settlement agreement, subject to IUB approval, with a $735 million cost target and a 10.75% return on common equity.
- WPL received an oral PSCW decision authorizing 175 MW of battery storage; a written order was expected in the third quarter of 2023. WPL also reported that estimated costs for 414 MW of new solar generation could exceed prior approvals by approximately 10% to 14%.
- Major risks include regulatory cost recovery and rate relief, higher interest rates and financing costs, construction cost inflation and supply-chain constraints, weather-driven demand, commodity prices, MISO capacity requirements, cyber and operational risks, environmental regulation, and access to capital markets.
- Proposed EPA greenhouse-gas and coal-ash rules could affect several IPL and WPL generating facilities. The companies stated that the financial impact could not yet be predicted with certainty.
- Alliant Energy guaranteed certain Whiting Petroleum affiliate obligations with estimated known abandonment obligations of $58 million and had a $5 million recorded liability for expected credit losses. Other guarantees included obligations related to an Oklahoma wind farm.
- Alliant Energy’s credit facility was extended to December 2027 with total commitments of $1 billion, allocated among the parent, IPL, and WPL. A $300 million interest-rate swap fixed a portion of AEF variable-rate borrowings at 3.93% through January 2026.
- Management concluded that disclosure controls and procedures were effective as of June 30, 2023, and reported no material changes in internal control over financial reporting.
Important facts investors should verify
- Progress and final regulatory decisions for WPL’s 2024/2025 rate case and IPL’s planned rate filing.
- Final approval, cost recovery, and construction economics for IPL and WPL solar and battery-storage projects, including WPL’s reported 10% to 14% cost escalation.
- Expected retirement, compliance, and recovery costs for coal and gas generating facilities affected by EPA rules and the IPL Consent Decree.
- Impact of higher interest rates, refinancing requirements, convertible-note terms, and debt maturities on earnings and liquidity.
- Whether weather-normalized customer demand and gas volumes recover after the reported Q2 declines.
- Potential changes to Alliant Energy’s share of ATC earnings resulting from pending MISO transmission-owner return-on-equity proceedings.
- Exposure under environmental obligations, Whiting Petroleum guarantees, commodity contracts, and other purchase commitments, including $1.352 billion of minimum commodity and other purchase commitments for Alliant Energy.