Alliant Energy Corporation 2021 Q3 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 quarter and nine months ended September 30, 2021. The businesses are primarily regulated electric and gas utilities serving Iowa and Wisconsin, with additional investments and non-utility operations.
Key financial metrics
| Alliant Energy consolidated | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Total revenues | $1,024 million | $920 million | $2,742 million | $2,599 million |
| Operating income | $289 million | $272 million | $663 million | $628 million |
| Net income attributable to common shareowners | $256 million | $246 million | $571 million | $550 million |
| Diluted EPS | $1.02 | $0.98 | $2.28 | $2.22 |
| Operating margin | 28.2% | 29.6% | 24.2% | 24.2% |
Alliant Energy’s non-GAAP utility electric margin was $584 million in Q3 and $1,476 million for the nine months, compared with $541 million and $1,404 million, respectively, in the comparable 2020 periods. Utility gas margin was $32 million in Q3 and $140 million for the nine months, compared with $31 million and $136 million.
- Cash flow: Nine-month operating cash flow was $477 million, compared with $436 million in 2020. Investing cash outflows were $452 million, primarily for construction and acquisitions, while financing cash outflows were $57 million.
- Capital expenditures: Utility construction and acquisition expenditures were $772 million through September 30, compared with $935 million in 2020.
- Liquidity: Cash and cash equivalents were $20 million at September 30, 2021. Available revolving-credit capacity was $684 million, and IPL had an additional $60 million of capacity under its receivables-sale program.
- Debt: Alliant Energy had $383 million of current maturities, $316 million of commercial paper, and $6,692 million of long-term debt excluding current maturities. WPL issued $300 million of 1.95% debentures due 2031 as green bonds.
- Capitalization: Total equity was $6.185 billion at September 30, 2021, compared with $5.888 billion at December 31, 2020. Common dividends paid during the first nine months were $304 million.
- Effective tax rate: Alliant Energy reported an overall effective tax benefit rate of 9% for the nine months, compared with a 9% benefit rate in 2020; the filing presents this as a negative 13% rate versus negative 9% in the statement convention.
Material changes versus the prior comparable period
- Q3 revenue increased 11%, while nine-month revenue increased 6%. Growth reflected higher electric and gas revenue, increasing rate base, higher retail electric sales, and comparisons against COVID-19 and 2020 derecho-related effects.
- Q3 net income attributable to common shareowners increased 4%, and nine-month net income increased 4%. Diluted EPS increased from $0.98 to $1.02 in Q3 and from $2.22 to $2.28 for the nine months.
- Utility electric margin increased $43 million in Q3 and $72 million for the nine months, principally due to higher revenue requirements from rate-base growth, sales and temperature effects, wholesale margin improvements at WPL, and other operating factors.
- Operating costs increased, including depreciation and amortization of $494 million for the nine months versus $454 million in 2020. Alliant also reported higher generation operation and maintenance expenses.
- IPL operating income increased to $394 million from $347 million for the nine months, while WPL operating income declined to $245 million from $255 million. WPL’s reduction primarily reflected higher operating expenses, depreciation, and lower AFUDC.
- Operating cash flow improved by $41 million. The comparison benefited from the absence of the $110 million Duane Arnold Energy Center power-purchase-agreement buyout payment made in 2020, partially offset by working-capital and derivative-related changes.
- Alliant Energy’s property, plant and equipment, net, increased to $14.738 billion from $14.336 billion at year-end 2020, reflecting continuing utility investment.
Guidance, outlook, risks and unusual items
- 2022 outlook: Management expected higher earnings in 2022 from increasing utility rate base and solar investments, lower operation and maintenance expenses from operating efficiencies, higher depreciation and interest expense, and higher AFUDC associated with WPL solar construction. The filing does not provide a consolidated 2022 EPS guidance range.
- Dividend: Alliant announced a 6% increase in its targeted 2022 annual dividend to $1.71 per share, or $0.4275 per quarter, beginning with the February 2022 payment. Future dividends remain subject to board approval and financial conditions.
- Financing plans: IPL expected to issue up to $300 million of long-term debt and redeem its $200 million of cumulative preferred stock in the fourth quarter of 2021. WPL and AEF expected to issue up to $300 million and $800 million of long-term debt, respectively, in 2022.
- Renewable transition: Planned investments include approximately 1,100 MW of WPL solar generation, approximately 400 MW of IPL solar generation, and approximately 75 MW of IPL battery storage. WPL reported that estimated costs for its authorized 675 MW solar program could exceed approved amounts by approximately 7% to 10%.
- Coal retirements: WPL planned to retire Edgewater by the end of 2022 and Columbia Units 1 and 2 by the end of 2023 and 2024, respectively. WPL concluded that the Columbia units were probable of abandonment but expected full recovery and return through rates; no disallowance was recorded.
- Commodity recovery: Severe February 2021 winter conditions caused IPL to under-collect natural gas costs. The cumulative IPL under-collection was $15 million at September 30, with recovery authorized through December 2021. WPL recorded a $12 million fuel-cost deferral.
- Commitments and contingencies: Minimum future commodity and other purchase commitments totaled $1.201 billion for Alliant Energy. Known partnership abandonment obligations related to legacy Whiting Petroleum guarantees were estimated at $68 million, with a $5 million recorded liability. Environmental remediation estimates for former manufactured-gas-plant sites ranged from $9 million to $24 million for Alliant Energy.
- Principal risks: Risks include regulatory cost recovery and rate relief, commodity prices and supply disruptions, inflation and interest rates, solar-project cost escalation and supply-chain constraints, environmental and emissions requirements, extreme weather, cybersecurity, COVID-19 effects, pension funding, access to capital, credit ratings, and litigation or regulatory proceedings.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. No reportable legal proceedings were disclosed under the applicable threshold.
Investor verification checklist
- Verify the status and final economics of IPL’s preferred-stock redemption and planned debt issuance.
- Review regulatory approvals and final rate outcomes for WPL’s proposed 2022–2023 rate increases and IPL’s planned solar and battery projects.
- Assess whether solar construction costs, supply constraints, tax-equity financing, and project timing remain consistent with management’s estimates.
- Monitor recovery of IPL’s winter natural-gas under-collection and WPL’s fuel-cost deferral.
- Reconcile planned capital expenditures, debt maturities, commercial-paper usage, and liquidity against the dividend and renewable-investment plans.
- Evaluate exposure to environmental compliance, coal-unit retirements, legacy guarantees, commodity derivatives, pension obligations, and regulatory disallowance risk.