What drove the increase in Alliant Energy's 2007 earnings?

Net income rose to $425.3 million from $315.7 million. The main driver was IPL's after-tax gain of $123 million ($1.09 per share) from selling its electric transmission assets. Higher electric margins from improved fuel cost recoveries and weather, lower retirement and incentive compensation costs, and fewer shares outstanding also contributed. These gains were partly offset by a higher effective tax rate and winter storm costs in IPL's territory, which the company estimated reduced 2007 earnings by about $0.06 per share.

What is the company's capital spending plan and how will it be financed?

Alliant Energy expects utility construction and acquisition expenditures of $1,040 million in 2008, $1,220 million in 2009 and $2,000 million in 2010. The filing says 2008 spending will be funded with cash, short-term debt and internally generated cash, with the short-term debt refinanced by about $400 million of incremental long-term debt, primarily at WPL. Financing for 2009 and 2010 is expected to combine long-term debt, preferred stock and common equity, with the exact mix to be set closer to the time of need.

What regulatory and environmental risks does the company face?

Key risks include state commission approval of new generation and possible legal challenges to those approvals, the IUB and MPUC review of the IPL transmission sale (including a judicial review petition and an MPUC rehearing granted in February 2008), and WPL's pending FERC and PSCW approvals. On environmental matters, the Clean Air Mercury Rule was vacated and remanded by a court in February 2008, and CAIR, regional haze (CAVR), Section 316(b) and proposed greenhouse gas legislation could require significant capital investment, the amount of which the company says it cannot yet predict.

How much cash and liquidity does Alliant Energy have, and what debt covenants apply?

At December 31, 2007, Alliant Energy and its subsidiaries had $557 million of available revolving credit capacity and $746 million of cash and cash equivalents. The credit facilities, extended to November 2012, require debt-to-capital ratios below 65% for the parent, 58% for IPL and 58% for WPL, and the company stated it was in compliance with all covenants at year-end 2007.

Did the company change its dividend or share repurchases?

Yes. In December 2007 Alliant Energy announced that its expected 2008 annual dividend would rise to $1.40 per share, or $0.35 quarterly, from $1.27 in 2007. The company completed its $400 million common stock repurchase program in 2007, buying 7.0 million shares that year, and common shares outstanding fell to 110,359,314 at year-end from 116,126,599. Its stated dividend payout goal is about 60% to 70% of utility earnings.

LNT 10-K FY2007 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed February 28, 2008. Cited figures are marked; the original filing is the authoritative source.

Alliant Energy Corporation (LNT) reported 2007 net income of $425.3 million^a, or $3.78 per basic share, compared with $315.7 million in 2006.

Continuing-operations income was $424.7 million^b, boosted by a pre-tax gain of $219 million from IPL's December 2007 sale of its electric transmission assets to ITC Midwest LLC for net proceeds of $772 million. Electric utility operating revenues were $2,410.8 million in 2007 versus $2,443.0 million in 2006, and electric margins rose to $1,208.1 million from $1,185.6 million. Non-regulated Resources earnings fell to $34.7 million from $69.0 million, largely because 2006 included a $150 million after-tax gain on the sale of Alliant Energy New Zealand stock.

The company is executing a utility generation plan for 2008 to 2013 that includes the Sutherland #4 coal unit (630 MW, IPL), Nelson Dewey #3 coal unit (300 MW, WPL), the Cedar Ridge wind farm (68 MW), the Whispering Willow wind project (up to 200 MW, IPL), a planned 200 MW Minnesota wind farm, and the purchase of the 300 MW Neenah Energy Facility from Resources. Total construction and acquisition expenditures were $542.0 million^c in 2007. The company forecasts utility construction and acquisition expenditures of $1,040 million in 2008, $1,220 million in 2009 and $2,000 million in 2010, and it describes cumulative capital expenditure plans of over $4 billion over three years.

Liquidity was $557 million^d of available revolving credit capacity and $746 million of cash at December 31, 2007. The 2008 annual dividend was increased to $1.40 per share from $1.27.

Alliant Energy completed a $400 million share repurchase program in 2007, reducing common shares outstanding to 110.4 million from 116.1 million. The filing also flags risks including Iowa and Wisconsin regulatory outcomes for new generation, environmental rules (CAIR, CAMR, which a February 2008 court decision vacated and remanded, and possible greenhouse gas regulation), MISO market changes, and a pending IRS proposal to defer $257 million of capital losses tied to former Brazil investments.

02—Key points

Key Highlights

Net income rose to $425.3 million ($3.78 per basic share) in 2007 from $315.7 million ($2.70) in 2006, helped by a $219 million pre-tax gain on IPL's electric transmission asset sale.
Electric utility operating revenues were $2,410.8 million in 2007, down from $2,443.0 million in 2006, while electric margins increased 2% to $1,208.1 million.
Non-regulated Resources income from continuing operations declined to $34.7 million from $69.0 million, as 2006 included a $150 million after-tax gain on the sale of Alliant Energy New Zealand Ltd. stock.
The utility generation plan for 2008 to 2013 includes coal (Sutherland #4, Nelson Dewey #3), wind (Cedar Ridge, Whispering Willow, a Minnesota project) and the purchase of the Neenah Energy Facility.
Forecast utility construction and acquisition expenditures are $1,040 million in 2008, $1,220 million in 2009 and $2,000 million in 2010.
Liquidity at year-end 2007 consisted of $557 million of available revolving credit capacity and $746 million of cash and cash equivalents.
The 2008 annual dividend was raised to $1.40 per share ($0.35 quarterly) from $1.27, and the $400 million share repurchase program was completed in 2007.

03—Questions

Frequently Asked Questions

What drove the increase in Alliant Energy's 2007 earnings?
Net income rose to $425.3 million from $315.7 million. The main driver was IPL's after-tax gain of $123 million ($1.09 per share) from selling its electric transmission assets. Higher electric margins from improved fuel cost recoveries and weather, lower retirement and incentive compensation costs, and fewer shares outstanding also contributed. These gains were partly offset by a higher effective tax rate and winter storm costs in IPL's territory, which the company estimated reduced 2007 earnings by about $0.06 per share.
What is the company's capital spending plan and how will it be financed?
Alliant Energy expects utility construction and acquisition expenditures of $1,040 million in 2008, $1,220 million in 2009 and $2,000 million in 2010. The filing says 2008 spending will be funded with cash, short-term debt and internally generated cash, with the short-term debt refinanced by about $400 million of incremental long-term debt, primarily at WPL. Financing for 2009 and 2010 is expected to combine long-term debt, preferred stock and common equity, with the exact mix to be set closer to the time of need.
What regulatory and environmental risks does the company face?
Key risks include state commission approval of new generation and possible legal challenges to those approvals, the IUB and MPUC review of the IPL transmission sale (including a judicial review petition and an MPUC rehearing granted in February 2008), and WPL's pending FERC and PSCW approvals. On environmental matters, the Clean Air Mercury Rule was vacated and remanded by a court in February 2008, and CAIR, regional haze (CAVR), Section 316(b) and proposed greenhouse gas legislation could require significant capital investment, the amount of which the company says it cannot yet predict.
How much cash and liquidity does Alliant Energy have, and what debt covenants apply?
At December 31, 2007, Alliant Energy and its subsidiaries had $557 million of available revolving credit capacity and $746 million of cash and cash equivalents. The credit facilities, extended to November 2012, require debt-to-capital ratios below 65% for the parent, 58% for IPL and 58% for WPL, and the company stated it was in compliance with all covenants at year-end 2007.
Did the company change its dividend or share repurchases?
Yes. In December 2007 Alliant Energy announced that its expected 2008 annual dividend would rise to $1.40 per share, or $0.35 quarterly, from $1.27 in 2007. The company completed its $400 million common stock repurchase program in 2007, buying 7.0 million shares that year, and common shares outstanding fell to 110,359,314 at year-end from 116,126,599. Its stated dividend payout goal is about 60% to 70% of utility earnings.

04—Continue

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