Alliant Energy Corporation 2018 Form 10-K Summary
Business Context and Reporting Period
Combined annual report for Alliant Energy Corporation, Interstate Power and Light Company (IPL), and Wisconsin Power and Light Company (WPL), covering the fiscal year ended December 31, 2018. Alliant Energy is a regulated Midwest electric and natural gas holding company serving approximately 965,000 electric and 415,000 natural gas customers through IPL and WPL, primarily in Iowa and Wisconsin.
Key Financial Metrics
| Metric | 2018 | 2017 | Change |
|---|---|---|---|
| Revenue | $3,534.5 million | $3,382.2 million | +4.5% |
| Operating income | $694.4 million | $671.2 million | +3.5% |
| Net income attributable to common shareowners | $512.1 million | $457.3 million | +12.0% |
| Diluted EPS | $2.19 | $1.99 | +10.1% |
| Operating margin | 19.6% | 19.8% | Approximately stable |
| Net margin attributable to common shareowners | 14.5% | 13.5% | Improved |
| Cash flow from operating activities | $527.7 million | $521.6 million | +1.2% |
| Construction and acquisition expenditures | $1,633.9 million | $1,466.9 million | +11.4% |
| Total assets | $15,426.0 million | $14,187.8 million | +8.7% |
| Long-term obligations, net | $5,506.1 million | $4,870.6 million | +13.0% |
Utility electric margin, a non-GAAP measure, increased to $1,649.6 million from $1,595.7 million. Utility gas margin increased to $214.3 million from $189.5 million. Alliant Energy’s retail electric sales increased 2%, while gas retail sales increased materially, supported by colder weather and customer growth.
At December 31, 2018, Alliant Energy reported $20.9 million of cash and cash equivalents, $559 million of available revolving credit capacity, and no available capacity under IPL’s accounts receivable program. Commercial paper outstanding was $441.2 million. Consolidated debt-to-capital was approximately 55%, within management’s target range and below the 65% credit-facility covenant.
Material Changes Versus 2017
- Net income increased primarily because of higher utility margins, rate-base growth, favorable weather, and higher allowance for funds used during construction. These benefits were partly offset by higher depreciation and interest expense.
- IPL’s operating income rose to $350.8 million from $304.1 million, supported by electric and gas rate increases, higher sales, and rate-base additions.
- WPL’s operating income declined to $312.9 million from $333.7 million, mainly because of Federal Tax Reform customer benefits, earnings-sharing requirements, and higher depreciation and operating expenses.
- Federal Tax Reform benefits of approximately $66 million were returned to customers in 2018, including $25 million by IPL and $41 million by WPL. The lower federal tax rate also reduced reported income tax rates.
- Capital spending increased substantially, including investments in wind generation, WPL’s West Riverside natural gas facility, distribution systems, environmental controls, and IPL’s advanced metering infrastructure.
- Alliant Energy issued $173 million of common stock through an at-the-market program and entered into forward sale agreements covering approximately 8.4 million shares, expected to settle during 2019.
- IPL issued $500 million of 4.1% green senior debentures due 2028. Alliant Energy’s long-term debt, including current maturities, increased to approximately $5.5 billion from $4.9 billion.
- WPL acquired approximately 55 MW of the Forward Wind Energy Center for approximately $74 million and retired Edgewater Unit 4. IPL retired M.L. Kapp Unit 2 and Red Cedar Combustion Turbine Unit 1.
Guidance, Outlook, Risks and Unusual Items
- Management expects 2019 electric and gas margins to increase from rate-base growth, WPL’s 2019/2020 rate settlement, and IPL’s planned rate review. Depreciation and interest expense are also expected to increase.
- Alliant Energy expects up to $400 million of common-stock issuance in 2019. IPL and WPL expect to issue up to $600 million and $400 million, respectively, of long-term debt. WPL has a $250 million debt maturity in July 2019.
- WPL’s approximately 730 MW West Riverside combined-cycle facility is expected to be completed by the end of 2019, with estimated WPL capital expenditures of approximately $640 million excluding certain items.
- Alliant Energy plans up to 1,200 MW of additional wind generation during 2018–2020 and targets renewables at approximately 30% of its energy mix by 2030. It targets a 40% reduction in fossil-generation carbon dioxide emissions by 2030 and 80% by 2050 from 2005 levels, with coal eliminated from the overall energy mix by 2050.
- IPL expects to install an SCR at Ottumwa Unit 1 by December 31, 2019 and must fuel-switch or retire certain units under its EPA Consent Decree. Environmental compliance, coal ash, greenhouse-gas rules, water-quality requirements, and remediation obligations could require significant additional expenditures.
- IPL agreed to pay $110 million in September 2020 to shorten the Duane Arnold nuclear PPA by five years; recovery from customers was approved over five years beginning after payment.
- Key risks include regulatory rate recovery, construction delays or cost overruns, capital-market access and credit ratings, interest rates, weather, commodity and transmission costs, cybersecurity, employee negotiations, pension funding, tax-credit utilization, environmental liabilities, and potential changes in FERC policies affecting ATC Holdings.
- Regulatory assets totaled $1,737.3 million and regulatory liabilities totaled $1,493.2 million at year-end. Recovery of regulatory assets is considered probable by management but is not guaranteed.
- The filing reports no material legal proceedings, no unresolved SEC staff comments, unqualified financial-statement audit opinions, and effective internal control over financial reporting for Alliant Energy.
Important Facts Investors Should Verify
- Progress, final cost, regulatory recovery, and commercial operation of West Riverside and the planned wind projects.
- Timing and terms of 2019 equity and debt issuances, including settlement and dilution effects from the forward sale agreements.
- WPL’s $250 million 2019 debt maturity and the company’s ability to maintain investment-grade credit ratings and liquidity.
- Outcomes of IPL’s planned electric and gas rate filings and the effect of WPL’s earnings-sharing mechanism.
- Recovery of regulatory assets and costs associated with Federal Tax Reform, early plant retirements, environmental compliance, and the $110 million Duane Arnold PPA payment.
- Utilization and expiration risk for federal net operating losses and tax credits, including credits expected to expire in 2022 and 2023.
- Funding requirements for underfunded pension and OPEB plans; 2019 expected pension contributions are approximately $34 million for Alliant Energy, $16 million for IPL, and $16 million for WPL.