Alliant Energy Corporation 2021 Q1 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 three months ended March 31, 2021, compared with the same period in 2020. The companies operate regulated electric and gas utilities, with additional investments including ATC Holdings and other non-utility interests.
Key Financial Metrics
| Alliant Energy consolidated | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenues | $901 million | $916 million | Down $15 million |
| Operating income | $198 million | $188 million | Up $10 million |
| Net income attributable to common shareowners | $171 million | $170 million | Up $1 million |
| Diluted EPS | $0.68 | $0.70 | Down $0.02 |
| Operating margin | 22.0% | 20.5% | Improved |
| Operating cash flow | $145 million | $160 million | Down $15 million |
| Capital expenditures and acquisitions | $231 million | $289 million | Down $58 million |
Electric utility revenue declined to $701 million from $730 million, primarily reflecting lower IPL retail and resale revenue. Gas utility revenue increased to $170 million from $152 million. Retail electric sales increased 2% and retail gas sales increased 6%, principally because of more favorable temperatures in 2021.
Utility electric margin, a non-GAAP measure, increased to $434 million from $424 million. Utility gas margin increased to $70 million from $67 million. The filing attributes the improvement primarily to higher rate base-related revenue requirements and favorable weather, partly offset by lower IPL customer credits related to excess deferred taxes and energy-efficiency riders.
Alliant Energy reported $14 million of cash and cash equivalents at March 31, 2021, compared with $54 million at December 31, 2020. Including restricted cash, period-end cash was $18 million. Available revolving credit capacity was $664 million, and IPL had $15 million of additional receivables-sale capacity.
Total debt, including current maturities, was approximately $7.1 billion at March 31, 2021, consisting of $308 million of current maturities, $336 million of commercial paper, and $6.471 billion of long-term debt excluding current maturities. Debt declined from approximately $7.17 billion at year-end 2020, primarily because of the reclassification of $300 million of long-term debt to current maturities and lower long-term debt balances. Alliant Energy's commercial paper outstanding was $336 million at a weighted average rate of 0.2%.
Material Changes Versus the Prior Comparable Period
- Consolidated net income was broadly stable, while diluted EPS declined because average diluted shares increased to 250.4 million from 244.6 million.
- Operating income improved despite lower revenue, aided by higher electric and gas margins, lower operation and maintenance expense, and the absence of an $8 million 2020 credit-loss charge related to legacy Whiting Petroleum guarantees.
- Depreciation and amortization increased to $164 million from $146 million as additional wind, solar, and other generation assets entered service.
- Allowance for funds used during construction declined by $19 million, reducing other income as major construction projects were placed in service.
- Income tax benefits increased to $28 million from $19 million. The consolidated effective tax rate was negative 19%, compared with negative 12% in the prior-year quarter, primarily reflecting excess deferred tax amortization and other regulatory effects.
- Operating cash flow declined because of working-capital effects, including higher natural gas cost payments at IPL and changes in regulatory liabilities and intercompany payments.
- Investing cash outflows improved to $38 million from $179 million, primarily because of lower construction spending and higher cash receipts from sold receivables.
- Financing cash flow changed to a $145 million outflow from a $60 million inflow in 2020, when the company issued $300 million of long-term debt and $228 million of common stock net of issuance costs.
Outlook, Management Commentary, Risks, and Unusual Items
WPL filed for authorization to acquire and construct up to 414 MW of solar generation by the end of 2023. In April 2021, the PSCW issued an oral decision authorizing an additional 675 MW, for a potential total of 1,089 MW. These projects are intended to replace capacity associated with planned retirements of Edgewater and Columbia coal units. The filing states that the projects are expected to qualify for 30% investment tax credits and that approximately 35% to 45% of construction costs may be financed through tax equity.
WPL reported a proposed settlement involving annual base-rate increases of $70 million for retail electric customers and $15 million for gas customers for the 2022/2023 forward-looking test period. The proposed settlement would maintain a 10% authorized return on common equity and provide recovery of and a return on the remaining net book value of Edgewater Unit 5. Rate changes, if approved, are expected to become effective January 1, 2022.
Severe cold weather and winter storms in February 2021 caused commodity price volatility and supply disruptions. IPL under-recovered $20 million of natural gas costs at March 31, 2021, and received approval to recover the amount from retail customers through December 2021.
IPL is required under a consent decree to fuel-switch or retire Burlington by December 31, 2021, and Prairie Creek Units 1 and 3 by December 31, 2025. Management expects to recover material compliance costs from customers, although future environmental rules and carbon-reduction requirements could require significant additional capital investment.
Key risks include COVID-19 effects, customer payment and disconnection trends, regulatory recovery and rate relief, access to capital markets, interest rates and inflation, fuel and purchased-power costs, severe weather, equipment reliability, cybersecurity, environmental compliance, pension funding, tax-credit utilization, and the ability to complete solar projects within regulatory cost targets.
Known commitments included minimum future commodity and other purchase commitments of $1.174 billion for Alliant Energy, including $958 million for natural gas, $94 million for coal, and $122 million for other goods and services. Alliant Energy also disclosed an estimated $68 million of currently known partnership-abandonment obligations associated with guarantees related to a former Whiting Petroleum affiliate; a $5 million liability was recorded for expected credit losses.
Important Facts for Investors to Verify
- Confirm the final PSCW written order and rate-case settlement for WPL, including approval of the proposed solar portfolio and the expected January 1, 2022 rate changes.
- Monitor IPL's recovery of the $20 million under-collection of February 2021 natural gas costs and any continuing effects from commodity-price volatility.
- Assess the funding, tax-equity structure, construction costs, tax credits, and regulatory recovery for the planned 1,089 MW of solar projects.
- Review debt maturities, commercial paper usage, revolving-credit availability, and continued access to capital markets.
- Evaluate the effect of coal-unit retirements, environmental compliance requirements, and potential carbon regulations on capital spending and customer rates.
- Track cash flow conversion, working-capital requirements, dividend funding, and the company's ability to sustain its dividend payout objective.
- Review the potential exposure from Whiting Petroleum guarantees, environmental remediation, pension and OPEB obligations, and other contingencies.
- Reconcile non-GAAP utility margin trends with GAAP operating income and verify the effect of tax-related regulatory credits on reported earnings.