Alliant Energy Corporation 2023 Q3 Form 10-Q Summary
Business context and reporting period
Alliant Energy Corporation, together with its wholly owned utilities Interstate Power and Light Company (IPL) and Wisconsin Power and Light Company (WPL), filed a combined unaudited Form 10-Q for the quarter and nine months ended September 30, 2023. The business is principally regulated electric and gas utility operations in Iowa and Wisconsin, with additional investments including ATC Holdings and non-utility activities.
Key financial metrics
| Alliant Energy consolidated | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Total revenues | $1,077 million | $1,135 million | $3,066 million | $3,147 million |
| Operating income | $322 million | $309 million | $760 million | $769 million |
| Net income attributable to common shareholders | $259 million | $227 million | $582 million | $579 million |
| Diluted EPS | $1.02 | $0.90 | $2.31 | $2.31 |
| Operating margin | 29.9% | 27.2% | 24.8% | 24.4% |
| Net margin | 24.0% | 20.0% | 19.0% | 18.4% |
| Cash flow from operating activities | Not separately provided for quarter | Not separately provided for quarter | $622 million | $485 million |
| Utility construction and acquisition expenditures | Not separately provided for quarter | Not separately provided for quarter | $1,201 million | $873 million |
Q3 utility electric margin, a non-GAAP measure, was $610 million versus $608 million in the prior-year quarter. Nine-month utility electric margin was $1,571 million versus $1,563 million. Utility gas margin was $35 million in Q3 and $174 million for nine months, compared with $36 million and $176 million, respectively, in the prior-year periods.
At September 30, 2023, Alliant Energy reported $206 million of cash and cash equivalents, $409 million of current maturities of long-term debt, $451 million of commercial paper, $50 million of other short-term borrowings, and $8.429 billion of long-term debt excluding current maturities. Available capacity under the combined revolving credit facility was $549 million, and IPL had $109 million of additional availability under its receivables program.
Material changes versus prior comparable periods
- Q3 revenue declined 5.1%, primarily due to lower electric and gas revenues, while operating income increased 4.2% and net income increased 14.1%.
- Q3 diluted EPS increased to $1.02 from $0.90. Nine-month EPS was unchanged at $2.31 despite a modest increase in net income, reflecting higher average shares outstanding.
- Q3 results benefited from higher WPL revenue requirements and AFUDC related to capital investment, lower operation and maintenance expense, and higher ATC Holdings equity income. These benefits were partly offset by higher interest expense.
- Interest expense increased to $99 million in Q3 from $83 million and to $289 million for nine months from $235 million, primarily because of 2023 and 2022 financings and higher interest rates.
- Operating cash flow increased $137 million year over year to $622 million, while investing cash outflow increased to $952 million from $599 million, largely because of higher utility construction spending, particularly solar projects.
- Alliant issued $575 million of 3.875% convertible senior notes due 2026, WPL issued $300 million of 4.95% debentures due 2033, and IPL issued $300 million of 5.70% senior debentures due 2033. AEF also retired $400 million of 3.75% senior notes.
- Alliant issued 3.57 million common shares through its at-the-market program, receiving $183 million net of fees. Total shares outstanding increased to 255.2 million from 251.1 million at year-end 2022.
Guidance, outlook, risks and unusual items
- Management expects 2024 earnings to benefit from higher utility revenue requirements and increasing rate base. It also expects higher depreciation and interest expense, with interest affected by completed and planned financings and higher rates.
- Alliant expects to issue up to $225 million of common stock in 2024. IPL and AEF expect to issue up to $700 million and $1.0 billion, respectively, of long-term debt by the end of 2024.
- The targeted 2024 annual dividend was increased 6% to $1.92 per share, or $0.48 per quarter beginning with the February 2024 payment, subject to board approval and business conditions.
- Planned 2023-2027 capital expenditures total approximately $10.8 billion for Alliant Energy, including renewable generation, battery storage, gas projects, and electric and gas distribution investments. The filing does not provide a formal consolidated EPS guidance range.
- IPL retired the coal-fired Lansing Generating Station in May 2023 and reclassified $221 million of remaining net book value to a regulatory asset. Continued recovery through 2037 was requested in IPL’s pending rate case.
- WPL’s pending rate case requested 2024 electric and gas increases of $111 million and $17 million, plus an additional $71 million electric increase for 2025. IPL’s pending case requested 2024 electric and gas increases of $160 million and $14 million, plus an additional $124 million electric increase for 2025. These are requested amounts, not approved increases.
- Iowa tax reform reduced Alliant and IPL tax-related regulatory assets by $73 million and produced an $8 million income-tax expense at the Alliant parent in Q3. The filing states that future customer rate reductions cannot yet be predicted with certainty.
- Key risks include regulatory recovery and rate-case outcomes, higher interest rates and financing access, construction costs and execution for renewable and storage projects, fuel and purchased-power prices, weather, cybersecurity, environmental rules, MISO resource adequacy requirements, equipment reliability, and potential changes to ATC returns.
- Minimum future commitments at September 30, 2023 included $221 million for capital projects and $1.275 billion for natural gas, coal, and other purchases. The filing also disclosed an estimated $58 million of currently known partnership abandonment obligations associated with guarantees related to former Whiting Petroleum interests; a $5 million liability was recorded for expected credit losses.
Most important facts for investors to verify
- Track approval and final outcomes of the WPL and IPL rate cases, including requested rate increases, authorized returns, capital structures, and Lansing cost recovery.
- Reconcile planned renewable, battery-storage, gas, and distribution capital spending with actual spending, project cost targets, in-service dates, and regulatory recovery.
- Monitor leverage, interest expense, refinancing needs, the 2024 debt issuance plans, and the potential dilution or cash settlement implications of the $575 million convertible notes.
- Assess whether operating cash flow and renewable tax-credit transfers will adequately support the substantial capital program and dividend obligations.
- Review the effect of weather-driven sales volatility, lower gas demand, fuel-cost recovery timing, and MISO market and capacity changes on utility margins.
- Follow developments involving EPA greenhouse-gas and coal-ash rules, environmental remediation, the MISO transmission return-on-equity proceedings, and other regulatory contingencies.