Alliant Energy Corp. 10-Q Summary: Period Ended June 30, 2009
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2009, for Alliant Energy Corporation (Alliant Energy) and its primary 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 three and six months ended June 30, 2009, compared to the same periods in 2008.
Key Financial Metrics (Six Months Ended June 30, 2009)
| Metric | 2009 (in millions) | 2008 (in millions) |
|---|---|---|
| Operating Revenues | $1,692.2 | $1,819.4 |
| Operating Income | $136.5 | $207.1 |
| Net Income | $111.1 | $138.3 |
| Net Income Attributable to Common Shareowners | $101.7 | $128.9 |
| Earnings Per Share (Diluted) | $0.92 | $1.17 |
| Cash Flows from Operating Activities | $439.9 | $259.9 |
| Cash Flows Used for Investing Activities | ($588.3) | ($423.4) |
| Cash and Cash Equivalents (End of Period) | $246.2 | $573.9 |
| Total Debt (Long-term + Current) | $2,121.2 | $1,884.7 |
Note: Total Debt calculated as Long-term debt ($1,648.2M) + Current maturities ($236.5M) + Commercial paper ($237.5M) for 2009.
Material Changes vs. Prior Period
- Revenue Decline: Operating revenues decreased $127.2 million (7%) primarily due to lower gas sales volumes and prices, and reduced industrial electric sales demand driven by the recession.
- Profitability Decrease: Net income attributable to common shareowners dropped $27.2 million (21%). Key drivers included higher electric transmission expenses at IPL, restructuring costs ($11 million), and a $4 million impairment charge on IPL's steam assets.
- Operating Cash Flow Increase: Operating cash flows increased significantly by $180 million, largely due to favorable changes in income tax payments (driven by ARRA bonus depreciation) and increased sales of accounts receivable by IPL.
- Investing Outflows: Cash used for investing activities increased $165 million, reflecting higher construction expenditures for wind projects (Whispering Willow-East, Bent Tree) and restoration activities following the 2008 Midwest flooding.
- Dividends: Dividends declared per common share increased to $0.75 for the six-month period compared to $0.70 in 2008.
Guidance, Outlook, and Risks
Management Commentary & Outlook:
- Capital Expenditures: Management revised its capital expenditure forecast downward, anticipating reductions of $100 million in 2009, $620 million in 2010, and $420 million in 2011 compared to prior estimates, largely due to the cancellation of the Sutherland #4 coal project.
- Rate Cases: IPL implemented an interim 8% retail rate increase in March 2009. WPL filed a 2010 retail rate case requesting a 9% electric and 3% gas increase. Final outcomes are expected in early 2010.
- Wind Projects: Construction continues on IPL's Whispering Willow-East (200 MW) and WPL's Bent Tree (200 MW) wind projects. WPL received regulatory approval for Bent Tree in July 2009.
- Asset Dispositions: WPL acquired the Neenah Energy Facility (NEF) from Resources for $92 million in June 2009. IPL announced the discontinuation of steam service in downtown Cedar Rapids in late 2009.
- Legal Proceedings (Exchangeable Senior Notes): A significant contingency exists regarding an alleged default by Alliant Energy Resources under the Indenture for Exchangeable Senior Notes due 2030 ($402.5 million principal). The Trustee has declared an "Event of Default" and demanded immediate payment. Alliant Energy disputes this, and trial is scheduled for February 2010. An adverse ruling could trigger cross-defaults on credit facilities.
- Regulatory & Environmental: Uncertainty regarding the American Clean Energy and Security Act (cap-and-trade) and EPA regulations (CAIR, MACT, GHG reporting) poses risks for future capital requirements and cost recovery.
- Economic Conditions: Continued recession impacts industrial sales demand and customer creditworthiness.
- Weather: Cooler than normal weather in July 2009 is expected to reduce electric margins by $18-$22 million for the month.
Key Facts for Investor Verification
- Default Litigation Status: Verify the progress of the litigation regarding the $402.5 million Exchangeable Senior Notes and the potential for cross-defaults on credit facilities.
- Rate Case Outcomes: Monitor the final decisions on IPL's 2009 Iowa retail rate case and WPL's 2010 retail rate case, which are critical for revenue recovery.
- Capital Project Costs: Track construction costs for the Whispering Willow-East and Bent Tree wind projects against their regulatory cost caps to assess potential unrecoverable costs.
- Industrial Sales Trends: Monitor the transition of major industrial customers (e.g., ADM, Roquette America) to cogeneration facilities and its long-term impact on electric sales volumes.
- Environmental Compliance Costs: Review updates on multi-emission compliance plans and the impact of new EPA regulations on future capital expenditures.