01—Abstract
Summary
Summary of the 10-K filed February 28, 1994. Cited figures are marked; the original filing is the authoritative source.
WPL Holdings, Inc. is a Wisconsin holding company whose largest subsidiary, Wisconsin Power and Light Company (WP&L), is a public utility providing electric service to about 360,000 customers and gas service to about 136,000 customers in southern and central Wisconsin.
Its nonregulated subsidiary, Heartland Development Corporation (HDC), is engaged in environmental engineering and consulting (RMT, Inc. and others), affordable housing and historic rehabilitation, and energy-related products and services. For 1993, operating revenues rose to $773 milliona from $673 million, net income increased to $63 million from $58 million, and earnings per share were $2.11 compared with $2.10 in 1992. Electric margin rose to $350.7 million from $329.9 million, driven by warmer summer weather and lower electric fuel costs per kilowatt-hour.
The company's regulatory return on common equity for WP&L was reduced from 12.4 percent to 11.6 percent in the final PSCW retail rate order effective October 1, 1993, which authorized an annual electric rate increase of $15.6 millionb. Management plans to hold WP&L retail rates flat through 1996 in response to competitive pressures from regulatory change. Capital requirements are significant, with WP&L estimating total capital requirements of $154.8 million in 1994, and the company issued 1.65 million common shares in April 1993 for net proceeds of $56.7 million.
Common equity rose to 47.9 percent of total capitalization at year-end 1993 from 44.2 percent a year earlier. Key risks flagged in the filing include the Wisconsin Supreme Court's decision on a 1989 coal contract assessment, whose financial impact management said cannot currently be determined, and a manufactured gas plant remediation program estimated at about $81 millionc over 35 years. The Kewaunee nuclear plant's steam generator tube corrosion may lead to a gradual power reduction of about 1 percent per year beginning as soon as 1995.
02—Key points
Key Highlights
- Revenues: Total operating revenues of $773 million in 1993, up from $673 million in 1992; net income of $63 million versus $58 million; EPS of $2.11 versus $2.10.
- Electric margin of $350.7 million, up 6 percent, driven by warmer summer weather and lower electric fuel costs per kWh.
- Rate outcome: PSCW authorized a $15.6 million (3.8 percent) annual electric rate increase effective October 1, 1993; WP&L's allowed return on common equity fell from 12.4 to 11.6 percent.
- Rate outlook: Management plans to hold WP&L retail rates flat through 1996 to meet competitive pressures.
- Capital needs: WP&L's total capital requirements are estimated at $154.8 million in 1994, rising to $205.4 million in 1997; the company expects $71 million of additional equity and $60 million of long-term debt over the next three years.
- Balance sheet: Common equity was 47.9 percent of total capitalization at year-end 1993, up from 44.2 percent, after a 1.65 million share offering that raised $56.7 million.
- Risks: Kewaunee steam generator tube corrosion could cause a gradual power reduction of about 1 percent per year as soon as 1995; an unresolved Wisconsin Supreme Court matter over a 1989 coal contract assessment has an impact that cannot currently be determined.
03—Questions
Frequently Asked Questions
What is the company's core business and how big is it?
WPL Holdings is a holding company whose main subsidiary, Wisconsin Power and Light Company, provides electric service to about 360,000 customers and natural gas service to about 136,000 customers in south and central Wisconsin. Its nonregulated subsidiary, Heartland Development Corporation, runs environmental consulting, affordable housing and energy-services businesses. Consolidated total assets were $1.76 billion at December 31, 1993.
How did earnings and revenues change in 1993?
Operating revenues rose to $773 million from $673 million, and net income rose to $63 million from $58 million. Earnings per share were $2.11, compared with $2.10 in 1992. The filing attributes the increase mainly to warmer summer weather and lower electric fuel costs per kilowatt-hour, partly offset by higher depreciation and a one-time charge tied to a voluntary separation program.
What regulatory changes affect the utility's returns?
The PSCW's final retail rate order, effective October 1, 1993, authorized an annual electric rate increase of $15.6 million and a gas rate increase of $1.8 million. The allowed return on common equity was reduced from 12.4 percent to 11.6 percent. The company also expects competitive pressures from deregulation and open transmission access, which led management to plan flat retail rates through 1996.
What are the main risks and contingencies disclosed?
The filing cites several: an environmental remediation program at manufactured gas plant sites, estimated at about $81 million over 35 years and expected to be recovered in rates; steam generator tube corrosion at the Kewaunee nuclear plant, which may reduce output by about 1 percent per year from as soon as 1995; and a Wisconsin Supreme Court decision on a 1989 coal contract assessment, whose financial impact management said cannot currently be determined.
How is the company funding its construction program?
The company financed an average of 62 percent of construction expenditures from internal sources over the last five years, but expects that share to fall over the next five years. It raised $56.7 million from a public offering of 1.65 million common shares in April 1993 and issued $15.3 million of shares through its dividend reinvestment plan. Future financing is expected to include $71 million of additional equity and $60 million of long-term debt over the next three years.
04—Continue