01—Abstract
Summary
Summary of the 10-K filed February 24, 2017. Cited figures are marked; the original filing is the authoritative source.
Alliant Energy Corporation reported 2016 operating revenues of $3,320.0 milliona and net income attributable to Alliant Energy common shareowners of $371.5 million, or $1.64 per diluted share, compared with $378.2 million, or $1.68 per share, in 2015.
The decrease was primarily due to asset valuation charges of $86.4 millionb related to the Franklin County wind farm, partially offset by higher electric and gas margins and higher AFUDC, primarily related to the Marshalltown project. Alliant Energy is a regulated holding company whose utilities, Interstate Power and Light Company (IPL) and Wisconsin Power and Light Company (WPL), serve approximately 960,000 electric and 410,000 natural gas customers in the Midwest. The company reported total assets of $13,373.8 million at year-end 2016 and plans to invest heavily in its strategic plan, with construction and acquisition expenditures of $1,196.8 million in 2016 and forecasted expenditures of approximately $6 billion over the next four years.
Key growth initiatives include the construction of IPL's Marshalltown natural gas-fired combined-cycle unit, expected in service in April 2017 with estimated capital expenditures of approximately $670 millionc, and WPL's Riverside expansion, expected in service by early 2020 with WPL's estimated portion of capital expenditures of approximately $640 million. IPL received Iowa regulatory approval for up to 500 MW of additional wind generation, subject to a $1,830/kilowatt cost cap. WPL received a Wisconsin retail rate order authorizing a $9 million increase in annual electric rates and a $9 million increase in annual gas rates effective January 1, 2017, with a 10.0% return on common equity.
Alliant Energy announced a targeted 2017 annual common stock dividend of $1.26d per share. Investors should weigh the company's sizeable capital program and regulatory dependence against risks highlighted in the filing, including timely rate recovery, environmental regulation (including the Clean Power Plan, which the Supreme Court stayed in February 2016), Consent Decrees with the EPA and Sierra Club, transmission cost increases, and the potential effects of federal tax reform on net operating loss carryforwards. Holders should also note the expected termination of certain wholesale power supply agreements, including WPPI Energy (sales representing 5% of WPL's 2016 total electric sales) and Jo-Carroll Energy (3% of IPL's total electric sales).
02—Key points
Key Highlights
- Alliant Energy's 2016 net income attributable to common shareowners was $371.5 million, or $1.64 per diluted share, versus $378.2 million, or $1.68 per share, in 2015; the decline was driven mainly by $86.4 million of pre-tax asset valuation charges on the Franklin County wind farm.
- Operating revenues were $3,320.0 million in 2016, up from $3,253.6 million in 2015, with electric utility revenues of $2,875.5 million and gas utility revenues of $355.4 million.
- Capital spending is large: construction and acquisition expenditures were $1,196.8 million in 2016, and the company forecasts about $6 billion of capital expenditures over the next four years.
- Major projects under construction include IPL's Marshalltown unit (about $670 million, in service April 2017) and WPL's Riverside expansion (WPL's share about $640 million, in service by early 2020).
- WPL's Wisconsin retail rate order, effective January 1, 2017, authorizes annual electric and gas rate increases of $9 million each, with a 10.0% return on common equity and an earnings-sharing mechanism above 10.25%.
- IPL received an IUB order approving rate-making principles for up to 500 MW of additional wind generation with a $1,830/kilowatt cost cap and an 11.0% return on common equity; the company also targets a 2017 annual dividend of $1.26 per share.
- Wholesale contract terminations are pending, including WPPI Energy (effective May 31, 2017, 5% of WPL's 2016 electric sales) and Jo-Carroll Energy (effective April 1, 2018, 3% of IPL's 2016 electric sales).
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 24, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $3.32B$3.25B | +2.0% |
| Operating Expenses | $2.77B$2.68B | +3.3% |
| Operating Income | $554.10M$577.00M | −4.0% |
| Interest Expense | $196.20M$187.10M | +4.9% |
| Net Income | $381.70M$388.40M | −1.7% |
| EPS (Basic) | $1.64$1.68 | −2.4% |
| Shares Outstanding (Basic) | 227.10M225.40M | +0.8% |
05—Questions
Frequently Asked Questions
Why did Alliant Energy's earnings decline in 2016?
The filing attributes the lower 2016 net income and EPS from continuing operations primarily to asset valuation charges of $86 million (pre-tax) related to the Franklin County wind farm, partially offset by higher electric and gas margins, higher AFUDC (primarily related to Marshalltown), and 2015 losses on sales of IPL's Minnesota distribution assets that did not recur.
What major capital projects will drive future growth?
The company is constructing IPL's Marshalltown natural gas-fired combined-cycle unit (about 650 MW, expected in service in April 2017, estimated capital expenditures of about $670 million) and WPL's Riverside expansion (about 730 MW, expected in service by early 2020, WPL's estimated portion of about $640 million). IPL also expects to add up to 500 MW of wind generation, expected in service in 2019 and 2020.
What dividend can shareholders expect in 2017?
Alliant Energy announced an increase in its targeted 2017 annual common stock dividend to $1.26 per share, equivalent to a quarterly rate of $0.315 per share beginning with the February 2017 payment. The filing notes that future dividends remain subject to approval by the Board of Directors. The 2016 dividends declared were $1.175 per share, and the dividend payout ratio for 2016 was 71%.
What are the main risks to the company's regulated earnings?
The filing cites the need for timely and adequate rate relief to recover costs and earn authorized returns, uncertainty over environmental rules (including the Clean Power Plan, which is stayed pending legal challenges, and CO2 rules for new EGUs), the Consent Decrees with the EPA and Sierra Club, rising MISO transmission costs, potential changes to ATC's return on equity following FERC complaints, and the impact of potential federal tax reform on net operating loss carryforwards.
How much debt and liquidity does Alliant Energy have?
At December 31, 2016, long-term debt, net was $4,315.6 million at Alliant Energy, with current maturities of $4.6 million and commercial paper of $244.1 million. The company had $8 million of cash and $756 million of available revolving credit capacity ($108 million at the parent, $300 million at IPL and $348 million at WPL), plus $129 million of available capacity at IPL under its accounts receivable sales program. Credit ratings were A- (S&P) and Baa1 (Moody's) at the parent level, with stable outlooks.
06—Continue