01—Abstract
Summary
Summary of the 10-K filed March 3, 2006. Cited figures are marked; the original filing is the authoritative source.
Alliant Energy Corporation (NYSE: LNT) reported a net loss of $7.7 milliona, or $0.07 per share, for 2005, compared with net income of $145.5 million, or $1.28 per share, in 2004.
The result was driven by non-cash asset valuation charges of $334 millionb pre-tax ($202 million after-tax, or $1.73 per share) on its Brazil investments, which were sold in January 2006 for $152 million. Income from continuing operations fell to $56.4 million from $218.4 million, while utility earnings rose to $251.7 million from $221.4 million, helped by higher electric margins, rate increases and a $0.08 per share benefit from a federal tax audit resolution. The company is shifting its strategy toward regulated utilities, with its utility business expected to provide the majority of earnings and capital investment in 2006 and 2007.
Alliant plans to divest most non-regulated assets, including China, Mexico and New Zealand-related holdings, and sold its interest in the Duane Arnold Energy Center nuclear plant to FPL Group for about $329 millionc in net proceeds in January 2006. Capital expenditures are projected at $475 million for 2006 and $600 million for 2007, and the company plans roughly $1.0 billion of new generation additions from 2006 to 2013. The quarterly dividend was increased to $0.2875 per share from $0.2625.
Key risks include fuel and purchased power cost recovery at WPL, where the company estimates about $40 milliond of under-collected 2005 fuel costs, coal delivery disruptions from railroad derailments, pending rate cases, Calpine's Chapter 11 filing affecting purchased power agreements, and the possibility that Alliant cannot generate enough capital gains to use its capital loss carryforwards. Alliant's credit ratings are in the BBB+ to A- range, with stable outlooks.
02—Key points
Key Highlights
- 2005 net loss of $7.7 million ($0.07 per share) versus 2004 net income of $145.5 million ($1.28 per share)
- Brazil asset valuation charges of $334 million pre-tax ($1.73 per share after-tax) drove the loss; Brazil investments were sold in January 2006 for $152 million
- Utility earnings rose to $251.7 million from $221.4 million, while non-regulated (Resources) continuing operations posted a loss of $197.7 million
- Sold 70% interest in Duane Arnold Energy Center to FPL Group in January 2006 for about $329 million net proceeds; WPL sold its Kewaunee interest in July 2005
- Quarterly dividend raised to $0.2875 from $0.2625 per share beginning February 2006; 2005 dividends declared were $1.05 per share
- Utility generation plan targets about 600 MW of owned generation from 2006 to 2013, requiring roughly $1.0 billion in capital expenditures
- WPL estimates it under-collected about $40 million of 2005 retail fuel and purchased power costs, pressuring electric margins
03—Questions
Frequently Asked Questions
Why did Alliant Energy report a net loss in 2005 after a profitable 2004?
The net loss of $7.7 million reflected pre-tax, non-cash asset valuation charges of $334 million related to the Brazil investments, which reduced earnings by $202 million after tax, or $1.73 per share. Non-regulated operations also absorbed a $54 million pre-tax charge for debt reductions at Resources. Utility earnings improved, rising to $251.7 million from $221.4 million.
What is the outlook for the utility business and capital spending?
Management states the utility business will be the dominant growth platform and is expected to provide the majority of earnings and cash flows. Construction and acquisition expenditures are anticipated at $475 million in 2006 and $600 million in 2007, with most of the utility spending on transmission and distribution, environmental controls and new generation.
What non-regulated businesses is Alliant divesting?
Alliant has completed or is pursuing sales of several non-regulated businesses, including the Brazil investments (sold January 2006 for $152 million), Cogenex energy services, a biomass facility, a synthetic fuel investment and an oil gathering pipeline. Remaining sales include China generating facilities (expected by mid-2006), Mexico (expected by September 2006) and gas gathering pipelines. Its New Zealand investments may not be sold until early 2007 under existing agreements.
What are the main risks to earnings highlighted in the filing?
Key risks include regulatory rate outcomes and timely cost recovery, fuel and purchased power cost volatility (especially at WPL), coal delivery disruptions from railroad derailments in Wyoming, environmental compliance costs under CAIR and CAMR, the Calpine bankruptcy affecting RockGen and Riverside purchased power agreements, and the ability to utilize capital loss carryforwards. Credit rating downgrades could raise borrowing costs.
04—Continue