Alliant Energy Corporation 2012 Q1 SEC Filing Summary
Business context and reporting period
This combined, unaudited Form 10-Q covers Alliant Energy Corporation and its wholly owned utility subsidiaries, Interstate Power and Light Company (IPL) and Wisconsin Power and Light Company (WPL), for the three months ended March 31, 2012. Alliant Energy operates regulated electric and natural gas utilities in Iowa, Wisconsin and Minnesota, with additional transmission and non-regulated activities.
Key financial metrics
| Metric | Q1 2012 | Q1 2011 | Change |
|---|---|---|---|
| Operating revenues | $765.7 million | $877.2 million | Down $111.5 million |
| Operating income | $95.6 million | $127.3 million | Down $31.7 million |
| Income from continuing operations | $43.3 million | $78.2 million | Down $34.9 million |
| Net income | $38.9 million | $79.7 million | Down $40.8 million |
| Net income attributable to common shareowners | $34.9 million | $73.5 million | Down $38.6 million |
| Diluted EPS | $0.32 | $0.66 | Down $0.34 |
| Dividends declared per common share | $0.45 | $0.425 | Up $0.025 |
| Net cash from operating activities | $215.0 million | $261.3 million | Down $46.3 million |
| Capital expenditures and acquisitions | $135.6 million | $237.1 million | Lower year over year |
| Cash and cash equivalents at March 31 | $30.9 million | $126.1 million | Lower year over year |
Reported operating margin was approximately 12.5%, compared with 14.5% in the prior-year quarter. Net margin was approximately 5.1%, compared with 9.1%. Continuing-operations net income attributable to common shareowners was $39.3 million, or $0.36 per diluted share, compared with $72.0 million, or $0.65 per diluted share.
At March 31, 2012, total assets were $9.63 billion. Capitalization included $3.14 billion of equity, $2.73 billion of long-term debt excluding current maturities, and $57.0 million of commercial paper. Consolidated debt represented approximately 46.6% of capitalization, including short-term debt. Available revolving credit capacity was $918 million, and IPL had an additional $35 million of availability under its receivables program.
Material changes versus the prior comparable period
- Revenue declined primarily because unusually warm weather reduced electric and natural gas demand. Heating degree days were approximately 20% to 25% below normal.
- Electric margins declined $18 million, or 5%, to $351.0 million. Gas margins declined $10 million, or 14%, to $62.3 million.
- Electric sales volumes declined 7% overall, while retail electric sales volumes declined 1%. Gas sales volumes declined 18%.
- IPL reported a $1.5 million net loss and a $4.7 million loss available for common stock, compared with $27.1 million of net income and $21.7 million available for common stock in Q1 2011.
- WPL reported $31.9 million of net income and $31.1 million available for common stock, compared with $44.4 million and $43.6 million, respectively, in Q1 2011.
- Income taxes increased to $27.7 million from $22.4 million. A planned sale of RMT caused state apportionment changes that added approximately $15.2 million of deferred tax expense for Alliant Energy, including $8.1 million at IPL and $7.0 million at WPL.
- Q1 2011 included a $5 million WPL impairment charge for a Wisconsin wind site; the absence of that charge partially offset the 2012 earnings decline.
- Cash flow from operations decreased primarily because of weather-related reductions in customer collections, higher production fuel inventories, timing of fuel-cost recoveries and higher Iowa customer credits under IPL's tax benefit rider.
- Capital spending declined substantially because Q1 2011 included major payments for wind turbine generators, the Bent Tree wind project and Edgewater Unit 5.
Guidance, outlook, commentary, risks and unusual items
- The filing does not provide a clear consolidated 2012 earnings or EPS guidance range. Management states that quarterly results are not necessarily indicative of full-year results.
- Management expects approximately $81 million of 2012 credits to Iowa customers under IPL's tax benefit rider. The rider reduces quarterly revenue but is generally offset by lower income tax expense over the full year.
- WPL planned to acquire the approximately 600 MW Riverside natural gas facility for about $393 million by the end of 2012, subject to remaining approvals. The filing states that the acquisition was approved by the PSCW in April 2012 and was expected to close in December 2012.
- IPL was evaluating proposals for a potential 600 MW natural gas-fired generating facility and expected to decide how to meet future customer demand in the third quarter of 2012.
- Alliant Energy intended to sell RMT during 2012. RMT was classified as held for sale and discontinued operations; Q1 2012 discontinued operations produced a $4.4 million after-tax loss.
- WPL faced Sierra Club and EPA allegations concerning air permitting at the Nelson Dewey, Columbia and Edgewater generating stations. Potential penalties, injunctive relief, emission controls, operating restrictions or plant retirements could be significant, but no material loss was accrued because the outcome was not considered probable and reasonably estimable.
- The Cash Balance Pension Plan litigation had an estimated trial-court damages exposure of at least $17 million, excluding attorneys' fees and costs, although no material loss contingency was accrued.
- Environmental remediation liabilities for manufactured gas plant sites were recorded at $31 million, with estimated remaining costs ranging from $21 million to $45 million.
- Alliant Energy had $609 million of RMT performance guarantees and $114 million of surety bonds and related guarantees outstanding. Management believed material cash payments were unlikely.
- Derivative agreements had aggregate net liability fair values of $83.2 million for Alliant Energy, $38.1 million for IPL and $45.1 million for WPL. A ratings downgrade or other trigger could require additional collateral of up to those exposure amounts, subject to stated offsets; the filing quantified potential additional support at $82.2 million, $37.1 million and $45.1 million, respectively.
- Management identified regulatory rate recovery, weather, fuel and purchased power costs, environmental compliance, access to capital markets, interest rates, tax matters, pension obligations, litigation and credit-counterparty exposure as material risks.
Important facts an investor should verify
- Whether warmer-than-normal weather was temporary and how normalized demand affects full-year electric and gas margins.
- The final outcome and timing of the RMT sale, including any sale-price adjustment or impairment.
- Regulatory approval, financing and closing status of the Riverside acquisition and its effect on rates, capital spending and purchased-power costs.
- The decision on IPL's potential 600 MW gas-fired facility and the resulting construction or power-purchase commitments.
- Developments in WPL's air-permitting litigation and related EPA or Sierra Club settlement requirements.
- The final damages and appeal status of the Cash Balance Pension Plan litigation.
- The sustainability of regulatory assets, tax benefits, tax carryforwards and the IPL tax benefit rider, including any IRS audit effects.
- Actual capital expenditures, debt refinancing needs and available liquidity relative to the company's strategic and environmental commitments.