Alliant Energy Corp (LNT) 2002 Q3 法說會逐字稿

Thank you for holding, ladies and gentlemen, and welcome to the length third quarter earnings release conference call. At this time all lines are in a listen-only mode. There will be an opportunity to ask questions at the end of today's conference. Instructions for asking questions will be given to you at a later time. I thank you for your attention and turn it over to your host Mr. Eric Mott. Go ahead, please.

Good morning, thank you for your participation in our call this morning many I'm Eric Mott Assistant Treasurer and Manager of Investor Relations. With me today are Erroll Davis, the Chairman, President and Chief Executive Officer and Tom Walker, Executive VP and Chief Financial Officer of Alliant Energy. Also with us today are Tom Hanson, Vice President and Treasurer and John Kratchmer Vice President and Controller, both of Alliant Energy.

Earlier this morning we issued a news release reporting Alliant Energy's third quarter 2002 results. If you haven't seen the release, it is available on our web site at www.alliantenergy.com in the news section. The format for today's call is as follows: Erroll Davis and then Tom Walker will make some brief prepared remarks regarding the third quarter results and the outlook for 2002 as well as near term strategic actions. This will be followed by a question and answer session for questions from investment analysts and institutional investors. Before we begin, I would like to remind you that the remarks we make on this call, including our answers to your questions, include forward looking statements. These forward looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters discussed in Alliant Energy's issued this morning and filed with the Securities and Exchange Commission. Alliant Energy disclaims any obligation to update these forward looking statements. With that being said I will now turn the call over to Erroll Davis.

Thank you very much, Eric. Good morning to all of you on the line. I understand we have a very robust number of participants this morning, and so we'll try and get through the comments in a timely manner to allow you to raise any concerns or ask any questions that you might. While we will discuss the results of our most recent quarter today, I do want to stress that we also want to talk a bit about next year and what we're doing to improve performance in 2003 and beyond, and certainly consistent with our strategy which has been not too manage the company on a quarter to quarter basis, but to take a longer term view of building share owner value.

So let me turn first to 2002. The challenges in the first half of 2002 that we shared with you in our last call have certainly persisted, not only for the company, but for the industry as well. They persist into this quarter and our projections are that they will persist through the remainder of the year, and potentially into next year as well. In a brief summary, our most recent quarterly result was certainly much improved over the prior two quarters as we suggested it would in our last call, but it's not quite as strong as we had expected. We have therefore slightly revised downward our adjusted earnings guidance for 2002 to the $1.25 to $1.35 level compared with the $1.35 to $1.55 we shared in our last conference call with you.

Our main focus for the remainder of this year and into the next year will be on the continuing solid domestic you utility operational performance, maintaining strong credit ratings, and strengthening our balance sheet. Coming out four years of base rate freezes, our utility net income is down slightly so far this year compared to last year, but that certainly was to be expected. We've made significant progress, as we forecast we would. We've obtained already $120 million in interim and permanent rate relief thus far this year, and I think this provides the evidence that we had suggested earlier that the regulatory environments in Wisconsin and Iowa are in fact balanced and supportive. Nonetheless we still have, as indicated in the release, outstanding rate actions and we expect that our utility earnings in 2002 will be less than they were in 2001 until we receive rate relief in all the remaining cases.

Overall our non-utility operations have had some wins and losses this year, but they're driven primarily by the results of our Brazil investment. Because of that our non-regulated earnings are going to be off significantly compared to last year when they, in fact, contributed about 15 percent of our total overall earnings. But we are beginning to see results from the operational improvements that we've made in Brazil, sales volumes as we predicted have continued to climb there, although at a slightly slower pace than we had hoped. The operational positives have really been wiped out by continued set backs related to regulatory and political uncertainties there, not operating problems, a weaker currency, and a depressed wholesale market there. It's important to note that we have not been required to invest additional capital in Brazil over the past year and we have no plans to invest additional capital in this business. It is not the cash drain on this company. We expect and, in fact, will demand that the business improve based on the investments we have already made there.

Unlike last year, our non-utility operations will not be able to offset lower utility earnings and will probably have a negative impact on our overall results. Again, this is disappointing, but we also believe it to be temporary. As I did last quarter, let me again stress that our domestic regulated utility operations are kept completely separate from our non-regulated operations.

Let me turn - before I turn it over to Tom, to the issue of credit ratings. As you in the financial community are well aware, the entire industry is facing some very different and very difficult credit and capital markets. Clearly, we are navigating through the same rough waters as everyone else as evidenced by recent announcements by Moody's Investor Services so I wanted to spend just a bit of time discussing the steps we intend to take to make sure that our credit ratings remain strong and our balance sheet does as well.

While we have a very rigorous routine to accomplish these two important goals on an ongoing basis, we have started to conduct a thorough comprehensive review of all of our strategic options to address the specific concerns raised by the credit rating agencies. We are in very close communications with these agencies and we will formulate plans that will not only address their concerns, but also leave us positioned for strong and sustainable long term growth. I also want to stress that we will look at the widest spectrum of possible actions, but we have not yet made any decisions as to which options we will ultimately pursue. You are, of course, familiar with all of the tools at our disposal. We will look at our capital expenditure budgets. We will look at potential sale of non-utility assets. We will look at financing options that will reduce our debt exposure. We will continue to explore operational improvements, efficiency enhancements, and strict cost controls, primarily through the implementation of the sixth sigma program which we started in September, prior to the announcement by the credit agencies.

And lastly, of course, we will be compelled to review our dividend policy. We have to put all of the options on the table. We have expressed over a long period of time a commitment to our dividend, our commitment to the dividend remains strong and we have made no decision to change our current dividend policy. We are sensitive to the importance of the dividend to our income oriented shareholders, but we are equally committed to strong credit ratings and a strong balance sheet. So, we expect to disclose the results of this comprehensive review within the next four to six weeks pending the resolution of the credit rating reviews. So, with that introduction, let me now turn it over to our Chief Financial Officer, Tom Walker, who will discuss the third quarter financial results in detail. and then after he's done , we'll come back and take your questions.

Thank you, Erroll. The third quarter adjusted earnings were 59 cents per diluted share compared to 90 cents in the same period for 2001. On a GAAP basis, our earnings were 49 cents for 2002 and 87 cents in 2001. As Erroll mentioned, disappointing results in Brazil were the primary driver for lower earnings. Higher utility operating expenses, the delutive effect of additional common shares outstanding compared to last year had the impact of certain non-cash valuation charges, played a significant role in overall results as well. These were offset by higher electric utility margins. Improved results from Australia, New Zealand, and higher earnings from our investment business unit.

In the utility area, net income was down in the third quarter of 2002 compared to last year primarily due to higher operating expenses. This was somewhat offset by the impact of interim and permanent rate relief and electric margins were up, but so were operating expenses. The effects of the economy continue to have an impact on the utility as well. This year we've received about 82 million in permanent rate relief and another 38 million in interim rate relief. We hope to have orders issued and rates in effect for the remaining 209 million in rate relief by July of 2003. Operationally our domestic regulated utilities are performing extremely well and we are delivering on our commitment to provide safe, reliable, and environmentally sound utility service to our customers.

The third quarter results for our non-regulated operations were very disappointing, primarily due to the results in Brazil. On a positive side, the results from Australia, New Zealand and our investments business units improved over the same period last year. These improvements at the investments business unit were due mainly to Whiting, our oil and gas subsidiary and Heartland Properties, our affordable housing subsidiary. While not fully up to our expectation, increased volumes and improved oil and gas prices of Whiting have resulted in significant improvements in the first half of the year.

Let me turn to earnings guidance. Erroll mentioned that we have refined our 2002 guidance to $1.25 to $1.35 per diluted share. We plan to issue new guidance for 2003 after we have completed the comprehensive review discussed earlier. While it is earlier to say what impact this may have, it is I think fair to say it will have some impact. Again we plan to provide the details regarding the results of our review and our new guidance for 2003 in roughly four to six weeks.

There is no question that 2002 is a very challenging year for our industry and our company. We are keenly focused on working through the issues we face today and taking the necessary steps to position the company for improved financial performance in 2003 and beyond. Our utility operations are strong and our rate cases are proceeding. Whiting continues to provide improved results and many of our other non-utility operations are poised for success as the national and international economies improve. Most importantly our employees remain fully engaged and committed to providing excellence in customer service and long term value four our share owners. In short, we believe we are well positioned to rebound from the adversity of 2002 and be a stronger company in 2003.

Thanks, Tom. We'd now like to open up the call to questions from investment analysts and institutional investors. We ask that you limit yourself and your question and to be respectful of the time that others may have who are waiting in the queue to ask questions. At this time, I'd like to turn the call over to the Operator who will provide the directions on how to ask questions.

Thank you. to ask a question, please press a 1 followed by a 4 on your touch phone. If for any reason you need to retract your question, please press a 1 followed by a 3. All questions will be taken in the order they are received. One moment, please, while our system compiles your responses. Your first question comes from Mr. David Parker (ph) with Robert W. Baird. Go ahead, please.

David Parker (ph): Good morning. a couple questions. If we can just focus on trying to get to a more normalized year from earnings perspective given rate relief and then maybe some assuming Brazil gets back to at least break even, can we get an idea of what you would expect an earnings per share impact of the Wisconsin permanent rate increase would be to - you have to recover some of the increased costs that we experienced in '02 and '01 in previous years and also refresh our memory on what maybe Brazil for the nine months to date has been as far as the drag on earnings through '02?

We can give you the Brazil year to date. It's about been about $40 million, David. In terms of what would be a normalized year based on the rate relief, that one is a little more problematic. I really don't have that piece of data. We have one case in and we have another case pending, so I don't have an answer to that one.

David Parker (ph): Can you comment on any updates on just the Iowa jurisdiction pending the rate relief (inaudible) moving the settlement talks along?

We continue to engage in settlement talks. We certainly have no breakthroughs to report at this time. I think it's important to that we continue to talk. the OCA, I should point out in Iowa, was supportive of us in our Power Iowa proceeding. We did reach agreement with them there, and so that was a real positive. The actually, the hearings are, in fact, underway as we speak in Iowa.

David Parker (ph): With an expectation for the full rate case to be done in the first quarter of next year or so?

Absolutely.

David Parker (ph): OK. And I guess last but not least little stronger language in the press release about Brazil and maybe the clock is ticking on us as far as expectations of I guess the timetable you're willing to give us, investment as far as turning around, any speculation when that may be? And if you decided to exit that business, what would - how would that impact the balance sheet as far as write-offs, etc.?

I'm going to defer to Tom on the write-offs on the balance sheet issues. But the point I tried to make in the opening comments, of course, is that we have not had to put cash in Brazil. We are not putting cash in Brazil. The carrying cost of that investment from an interest perspective is not onerous on the company, although, again, most of the charges and losses you see are of the - a non-cash nature. and so, again, we expect a return on the investment there as we do any other investment, and our patience is not limitless and we have suggested release that if it does not turnaround within - turnaround next year, then we're going to have to take a hard look at that asset. Now, Tom can share with you in terms of what we have on books and things of that nature.

David, we've invested 4 to 500 million in Brazil, and this is an unusually bad year for a lot of reasons. Regulatory, the election, foreign exchange, etc. Our asset has devalued substantially because of foreign exchange, maybe 2 to 250 million in value on our balance sheet. Our position is that this business isn't, as Erroll mentioned, really using a lot of our cash. This year interest that we're paying on the debt to be used to finance that business is relatively high, but next year it drops down significantly. So that interest plus some overhead costs at corporate will be a relatively insignificant amount of cash drain on the company.

The Brazilian operations do cash flow positively this year they're covering off their interest, operational cash flows and their maintenance. Next year we expect that to improve. We're starting to see improvement as we move into the fourth quarter. This year we've had a lot of one time charge write-offs, asset write-offs. and so as we move forward into next year, we're expecting to see this turn. We're not putting any more capital into the business. We're not expecting any write-off, and we're not going to put any - we're not going to have a significant cash burden at corporate. So we think we're positioned properly to continue to watch this business as it improves next year.

David Parker (ph): OK. and hopefully just one last question, sorry to take a lot of time here, but the regulatory changes, is there any more sort of preferred or cost recovery as a result of the rationing that regulators could come after and write-off, or have we pretty much seen our way through that?

You know how regulators are anywhere, in the sense that you're always working with regulators to, you know, balance the interest of the shareholder and the rate fare. As you bring that down into Brazil and you look at the regulatory environment, there has been a fix, in a general sense, to the effects of the drought on the utility companies in Brazil. This was a very serious drought two years ago and it's taken a while to come out of that.

And the regulators are, as they should be, looking very hard at the interest of the rate fares in Brazil and the investors to sort out how that is going to be fixed. So they have allowed for special charges from the utilities. And we are in the process of also, in that environment in Brazil, trying to establish some sense of continuity for the wholesale price because that environment is in great need of fossil fuel. and so there's a regulatory initiative to set a floor for instance on the wholesale price. So, those are the real issues that we're facing right now in Brazil from a regulatory standpoint. We did take a small adjustment on the receivable that we've set up pursuant to the relief that we got for the drought this quarter. There may be some minor adjustments going forward. I don't expect any significant adjustments there.

David Parker (ph): OK. Great. Thank you very much.

Thank you. Your next question or comment comes from Ms. Theresa Ho (ph) with Bank of America. Go ahead, please.

Theresa Ho (ph):Yes, good morning. I have several questions actually maybe just a couple of questions regarding your cash. If you could provide, say - if you could review the sources and uses of cash, and I understand that you have a comprehensive review underway, but could you at least go through it for the rest of the year?

Our cash from operations continues to be strong. We haven't put our Q yet, but through the first half of the year over year was very strong in light of the downturn in earnings. Going throughout the rest of the year our cash flows are expected to continue to be strong from operations. We have (inaudible) in the process of executing. We just had rollover of our short term debt successfully completed the syndication here just recently. So those would be the cash flows that we would expect to get throughout the rest of the year. Operational cash flows, some funding from debt offerings and also the rollover of our bank facility which we successfully completed here in the last two weeks, two to three weeks.

Theresa Ho (ph):And the uses of cash, could you go over CAPEX for the rest of the year?

Well, we really pretty much have done our capital spending in AER. There's not a lot of significant capital spending - I'm sorry, AER is our unregulated businesses that we expect to do. There is a focus on the utilities as we go forward. We expect to continue to invest at a rate of capital investment that provides reliable service. So it will be consistent with what we've done in the past there, but we're almost to the end of the year and we have two more months to go. So, even that won't be extraordinarily significant.

The only significant expenditure will be for the Nina (ph) facility, and that may not be this year. It may be next year.

Theresa Ho (ph):OK. and could you review for us what your maintenance CAPEX is?

The utility expenditures for next year will total expenditures will be in the neighborhood of $450 to $500 million.

Theresa Ho (ph):And this includes Power Iowa or -

No, that does not include. You asked for the maintenance.

Theresa Ho (ph):I'm sorry, excuse me, excludes the Power Iowa. That's right. OK. and then you mentioned that you refinanced your short term debt recently. What are the upcoming debt payments?

We don't have any significant - you mean short term -

Theresa Ho (ph):Short term, renewals, and if you could go over your credit facilities and how much you've drawn down and what's available?

With regard to debt, we're paying out over the next quarter or so - you know, I don't have a ready answer for you, except that there's nothing significant that's rolling over in the short term. The credit facility is a $915 million facility. I don't have a number for you, but I can say that we, you know, we have utilized that facility, and we don't expect to utilize this facility as we rollover that facility with the long term debt financings.

Theresa Ho (ph):OK. And the 915, that at the corporate level or is that at the utility level?

It's both.

Theresa Ho (ph):Yes. Can you hear me?

I'm sorry. It covers both. the utilities and the AEC.

Theresa Ho (ph):OK. Can you break that down for us?

It would be 565 at AEC.

Theresa Ho (ph):OK.

And the balance at the utilities.

Theresa Ho (ph):Balance at the utilities. And last question, how much do you have for cash on hand as of I guess September 30th?

I don't have that figure right now. We'll have that in the Q.

Theresa Ho (ph):OK. Is it significantly different from your ending balance of ending of second quarter?

You know, I'm not sure. I haven't looked at it.

Theresa Ho (ph):OK. OK. Thank you.

Your next question comes from Mr. Michael Garvey (ph) with Angelo Gordon. Go ahead, please.

Michael Garvey (ph):A couple of questions here. On the E&P side, you commented there was a production shortfall. Could you just get a little more specific in terms of magnitude, what was behind that shortfall and any impact on the fourth quarter '03?

The production shortfall was not huge. The earnings were up year on year for that business. So it wasn't anything that was very significant. What we do in that business is we buy businesses that are proven, that have proven reserves, and then - so we have investments in that arena. Then we have drilling investments, and those drilling investments sometimes pay up, sometimes they don't. We also have an issue or a circumstance where when you're drilling in a well and you get to the lowest level of the well, you're not quite certain how much you're going to get out, you know, to get the final parts out. and so it's really a timing issue. It's not that we're finding less than we expected to. It's just that a particular well might go dry, you know, in the third month of the quarter. So it's a timing issue from one quarter to the next.

Our volumes, if you turn to page 8 of the release, you will note that our volumes are in fact higher than last year. When we say shortfall it's really a shortfall from our expectations that we would get wells open earlier and more productive earlier than we did. It's not a decline in our production. Our production has, in fact, increased. However, if you look at production, you'll note the prices were also softer in the first half of the year. Fortunately the prices have started to firm up as well, but we will have, in fact, more volumes this year, consistent with our expansion program, than we did last year.

Michael Garvey (ph):I'm just trying get a better handle on, you don't have '03 - you're not giving new '03 guidance now, but just trying to get a better handle on what may be the impact on your previous guidance for '03 if you're starting to see timing or drilling issues?

Again, as we said, when you said timing and drilling issues -

Michael Garvey (ph):Timing or drilling.

Those were issues in 2002. We have not yet firmed up what our budgets are going to be for and for 2003 in this area.

Michael Garvey (ph):OK. and then back to Brazil which seems to be a hot topic today, you commented on improved sales volumes and financial results in the release, but the loss and why there were currency issues. Can you give a little more detail as to what the impact of the currency, you know, what the different pieces were to get to the loss for the quarter? You know, how much of that was currency, you know, offsetting what kind of improvement in volume, etc.?

Well, in country, in the quarter, the volumes are starting to improve from prior quarters. We did have some write-offs. We had an adjustment for what's called ANX 5 (ph) in country. This is the sixth that the regulators negotiated with the utility companies for the drought and there were was some adjustment on that. But by and large, the volumes are starting to come back up in Brazil. We're incurring significant interest expense at corporate from original investment. That drops down significantly next year and, from a cash standpoint, that's really - that's maybe as much as half of the impact this year on the earnings. Foreign exchange impacts us, really from the standpoint of the balance sheet, the impact on the investment itself, but not as much from the standpoint of the earnings, because we're not in an earnings position.

Michael Garvey (ph):OK. And then...

Our phones facility is something you are aware of, and the interest rate on that as published previously dropped from 7 percent to two and a half percent, 7.25 to two and a half percent next year. So our interest costs are going to go down on over $400 million.

Michael Garvey (ph):One last thing. As the performance continues, the comment that you wouldn't expect any major write-offs, but you said you've seen like a 50 percent decline in the value due to the currency. I'm curious, you switched auditors to Deloitte (ph) from Anderson, have they finished reviewing all this? Because the new impairment rules, it would seem, you know, with the comment it's kind of close to a 50 percent decline in value, why would there be no - you know, you're saying there's no real likelihood of a material write-off?

This is Tom. First of all, it's management's responsibility to write the financial statements. and our view, management's view has been and continues to be these assets are recoverable. We can't predict foreign exchange any better than anybody else, but business is a solid business. The political environment there, who knows what might happen in the short run. But over the long hall, the long term, we think these investments are solid investments and they have every - we have every expectation that they're going to recover themselves.

Now, on the short run, there are problems in Brazil, there's no question of that. But we think over the longer term, those problems will resolve. If you get into the complexities of accounting and the various different accounting literatures that affect valuations, I think you might get to four or five different sources of literature and you may be referring to, I think it's FAS-E (ph) 142 on good will. We don't have a lot of good will on the books in Brazil. In fact, it's - I think it's year 0. and if you stepped through the other literature gives guidance to management as to how they should value these assets, as we do step through that literature, we understand that in fact there isn't any reasonable basis for taking write-offs other than what we have already done, nor do we expect it in the foreseeable future.

Michael Garvey (ph):How much of the small - you commented on some small write-offs. to date how much of those amounted to?

Well, for Brazil, they're probably pennies a share. But then adjustments really not from the value perspective of the business, but really from the negotiation of the original deal and the metrics of that. There was an impact there, small few pennies a share. The regulatory adjustments in Brazil pursuant to the fixes that were given to utilities for the impairments they had in their profitability pursuant to the drought, and the regulators are sorting out how that impacts customers and have made some new regulatory adjustments to the so-called ANX 5 (ph). So there haven't really been impairment of the business aspects, so to speak. They've just been some adjustments to receivables and some things like that.

Published one time charges through the year for the quarter have been 25 cents. and out of that 24, 3 cents has been Brazil.

Michael Garvey (ph):You're saying you don't have any of the balance sheet items yet, Tom? (inaudible)?

We haven't published - the Q is not out yet.

Michael Garvey (ph):OK. Thank you.

Your next question comes from Mr. Gabe (inaudible) with Sigma Capital. Go ahead, please.

Gabe (ph):Hi, gentlemen, a couple of interrelated questions. First in terms of financing, I understand that you're going to discuss it more, but just sort of walk me through. On the short term loans, the bank facilities, it's declining by the end of the year. Is there any mandatory equity issuance, or dividend action presumed in the covenants of those short term facilities?

No, there aren't.

Gabe (ph):OK. Is there a debt to cap ratio different than the 65 percent that was on the previous facilities?

No.

Gabe (ph):OK. Have the terms of the facilities changed in any way other than the size?

That's a pretty over arching question. I would have to look at it in great detail to say of any change in the facility.

Gabe (ph):OK. But I mean it is an important area of detail, right? I'm just trying to get a sense for what is really on the table because, when we step back, earnings have been coming in weak. If you were to issue equity, it could put pressure on the dividend. I want to understand if there could be a combined dividend cut in equity issuance as one of the contemplated actions.

I understand what you want to understand. I'm just not prepared to go through the details of the agreement in great detail. I think I've really focused on the major items. The one item that is an additional item is the EBITDA coverage ratio. But based on our estimates of our business, there's not any issue there.

Gabe (ph):OK. the second question is, without going through the minutiae, not to bring up Brazil again, but I'm going bring up Brazil again. Without the minutiae of accounting literature, could you sell that asset today for $450 million or whatever it's on the books for?

Have not evaluated that.

Gabe (ph):OK. What would it take to...

Let me just respond very briefly to that question, because as Tom mentioned before, we have a business that is in fact cash flowing in country and we have carrying costs for that asset at corporate that are in fact going down. and all of these valuations tests are long term accounting tests. They're not short term looks at it. Vis-a-vis, what can some other person sell its assets for in that marketplace. And so if there's anything we're trying to convey here is that this is not a distressed a set. Asset. It is not earning what we would like it to earn, but it is, in fact cash flowing. We are not putting cash, have not had to put cash in it, and we will not put cash in it in the coming year until it starts to earn at rates that are acceptable to our share owners.

Gabe (ph):I guess the question is, since you've purchased the asset, the currency has declined by over 50 percent. It's been downgraded by the ratings agencies and it's had difficult operation performance through no fault of your own. I understand. What else would it take to see a write down for that eight asset and, if that in fact occurred, what would be the impact on the balance sheet ratios.

You can't speculate about what might happen in the future. We do a review every quarter of all of our assets and we are very conversing with the accounting literature. We do use auditors in this process as well, and the value of those assets are appropriately disclosed on our balance sheets.

Gabe (ph):And as a final question, this quarter you had some difficulty with the mass marketing business which is not a business that had been (inaudible) focus, but clearly large enough to impact the results. Last quarter I believe it was an investment in Baha, Mexico. Are there any other things that we should be aware of that could be potentially material to the financials of the company that have not gotten focus yet?

When you say, "not gotten focus," I believe in the Q last time or in our 10(k) last year there was a complete description of that investment in Mexico, and I believe there are descriptions of all of our investments in our financial documents. and so to the extent that they are surprises or could be described as surprises to people, we, of course have difficulty with the concept of being surprised since we do and try our best, given what we're compelled to do by the SEC and our own desires to make sure our investors understand all of our investments and all of these attendant risks. Now, you are correct, I believe we had a $3 million adjustment this time for collectibles in smart energy. That remains a very small business for us. So again, we have disclosed appropriately consistent with, I believe, the risks that we have identified previously.

Gabe (ph):OK. and then a final quick question.

That is pretax, I should point out as well.

Gabe (ph):I applaud your efforts to maintain balance sheet, that's of paramount importance. My question is given that and given the scrutiny by the ratings agencies, what else do you need to do to understand what your alternatives are and what - what the outcome will be of the ultimate financing plan? In other words, over the next four to six weeks, what exactly are you looking at and looking for, and why is it taking so long to come up with a plan?

As I said in my opening comments, any time you address the balance sheet, you are aware of the tools that you have to deal with. You have the ability to sell assets, but when one sells assets, that removes earnings for the future. You have the ability to reduce capital expenditures that have led to impact on short term on earnings, but it also affects your long term view. You have an ability to do some financial - make some financial adjustments, whether that's equity, whether it's convert, to whether it's others, but again these also put - as you have suggested - put pressure on your dividends and again can be potentially diluted from an earnings perspective. You have the ability, of course, to address your dividend policy. That does not affect earnings if you were to reduce the dividend, but it does of course affect our investor attitudes. So all these work together in very complex ways as you are well aware, and what we will plan to do over the next four to six weeks is to work closely with the rating agencies to try and understand not only what their priorities are, but to balance those priorities with the priority of our share owners as well as and we will try and come up with what we believe to be the best approach to address the concerns of all of our constituencies, both at rating agencies and in investment communities.

The only thing that I would add is really the four to six weeks doesn't go to deriving a plan. We do think we have the financial metric, quite frankly, to maintain a very strong investment grade credit rating. We put out a release that's on the short term paper, our expectation is to, and desire is to keep a very strong commercial paper rating. and then that goes to, of course, our longer term rating. We have the metrics, we think, already. It's not an issue of really coming up with any extraordinary plan. As you know, the credit rating agencies do their due diligence, and that necessarily takes an appropriate amount of time, and this is no precedent. I'm sure you're familiar with how long that might take. But credit rating agencies could take anywhere from four to six weeks in the normal course of their reviews.

Gabe (ph):OK, I understand. Thank you.

Your next question comes from Mr. John Elwood with (inaudible). Go ahead, please.

John Elwood (ph):Yes. I had to break away from the call, but just a quick question. Does operating cash flow cover the dividend?

It has historically done that. We haven't put out the Q this quarter, but I wouldn't expect any trend - there's a huge coverage ratio there. Has been historically been significantly above, and I'm only hedging because we don't have the Q out. I fully expect it would continue.

John Elwood (ph):Thank you.

Your next question comes from Mr. Craig Albert (ph) with (inaudible) Fund.

Craig Albert (ph):Hi, good morning. I have a couple questions. Can you quantify for us if you got 100 percent of the rate relief that you had asked for over the next year when you get those rate orders back, what impact that would have on EPS on an annualized basis?

One reason why we probably don't have that answer is that our expectation is never to get 100 percent.

Craig Albert (ph):Right. That gives me sort of a top end. and then I can work back from there.

We really can't, you know, give you that information. All I can say is in our prior guidance, we have a reasonable expectation of what we might recover in our jurisdictions in Wisconsin and Iowa that was included in our prior guidance. Our change in guidance going forward, if there is a change pursuant to this work over the next four to six weeks, really won't be predicated on any significant differences in our aspirations or expectations that we had previously. Based on what we know right now with the negotiations we have on the rate cases.

I should caution you as well, everyone else, as you look at those numbers, that there are - you need to peel back the onion a bit on those numbers because there are lots of items in there that have no net income effect that are, in fact, changes in regulatory procedures or accelerations of things such as nuclear decommissioning, which, if you don't get the acceleration, it certainly has no impact short term as well as the way we do accounting for our demand side management program.

So, again, there are a lot of things in those larger numbers which would - we would describe as more favorable rate treatment, but, in fact, do not impact earnings. And I certainly can't predict what the outcomes will be or whether we will get some or not get others. And I certainly can't predict the mix. I would like to be able to predict what regulators will do, but we've learned that that's probably not something we want to spend a lot of time doing, other than saying that what we have seen to date has been what we think supportive and constructive regulatory environments in both of our main jurisdictions.

Craig Albert (ph):Maybe if I can ask the question another way. I understand that. I'm just trying to get a sense, is it when you ask for rate relief and you ask for 313 million, and some of it I understand has already been granted at least on an interim basis, but is it as simple as if you get 313 million that I just need the tax effect that and divide by the share count? And that is the annualized benefit?

Absolutely not. As I suggested to you, some of these, such as the way we accumulate decommissioning funds have no net income impact and there are a lot of items in there that have no net income impact.

Craig Albert (ph):Does that entire 313 million have - forget the income statement for a second - the cash flow statement, would it have, if you got them all a $313 million cash benefit?

No.

No. I think that we probably need to have someone take you through the public rate filings and explain the pieces of those.

Craig Albert (ph):OK, fair enough. In terms of CAPEX, are you still on plan for - you mentioned most of it's already done . Does that mean that 1.2 billion for the full year, I believe, or a billion was the number in your Q?

Actually we've come off of that. It's going to be lower than that by the end of the year.

Craig Albert (ph):OK. and in terms of the Power Iowa, how would you finance that if it does get approved?

Well, what we said in our last release, and pursuant to these rate cases, there are equity infusions anticipated in these rate cases. Power Iowa was promulgated under House Rule 577 which set guidelines for the building and the financing and the facility starting with the return equal to 12.23 percent on the equity investment in that business. And we would expect that then to apply to our rate cases. and in a traditionally finance these kind of investments that are 50/50, debt and equity basis.

Again, I want to stress the importance of House File 577 in Iowa, because this is the closest thing one can get in the United States to a regulatory contract. We know what the return will be over the life of the facility. The facility will have a fixed depreciation life. That will not change. And again, we have gone through the siting and permitting process and in fact we had a groundbreaking with the it governor. So, again, if you compare this to a non-regulated toll unit, that's probably the regulatory equivalent of a tolled unit. And so the financing of that should not be a particular challenge to it.

Craig Albert (ph):Gotcha. OK. Thank you very much.

Thank you. Your next question comes from Ms. Phyllis Gray (ph) with Dwight Asset Management (ph).

Phyllis Gray (ph):Yes, hello. Could you tell me what the breakdown geographically of your investment and energy resources is?

We said that in previous public presentations. I don't have that right now, so we certainly - information this we have it disclosed publicly, so we can certainly get you that.

Phyllis Gray (ph):Thank you.

If you wanted to call Eric Mott or Tom Hanson, we'll certainly provide you with that information.

Phyllis Gray (ph):Thank you.

Thank you. Your next question comes from Mr. Barry Abrason (ph) with Govelli (ph) Company. Please go ahead.

Barry Abrason (ph):Good morning. Wanted to just follow-up on I think one of the comments you made about - in the possibility of considering ways to improve the balance sheet, you might consider selling some non-utility or non-core assets. Do you have any rough estimates of the asset value of Whiting Oil compared to the debt associated with that investment? And then similar question for the asset value of the affordable housing portfolio versus the debt associated with that investment?

We certainly have ideas, Barry, as you suggested, as to their value. We have not made those ideas public, nor do I intend to do so on this plan - on this phone call, but let me suggest to you as I suggested earlier, that we are dealing not only with just asset values, but also what are the earnings on those assets at this point in time, and we hope to come out with an appropriate balance that maximizes and positions us for continued growth into the future.

Barry Abrason (ph):OK. But - and the reason I brought that up is that some companies in the last few months have been forced to make less than optimal decisions in order to maintain credit ratings.

I understand what you're saying. We are not anticipating fire sales here, Barry. We anticipate that we are of a strong enough credit quality and our balance sheet is strong enough that we will continue to try to achieve maximum value over any asset that we harvest. And I should point out to you that the process of harvesting assets is a process that already has begun here at Alliant Energy. If you remember, we sold our Cargill Alliance joint venture this summer, and we are - we announced the sale of our water business. and again, we certainly did not have to take any write-offs on our Cargill Alliance joint venture and that was a very profitable venture for us. So we have a lot of assets that are, in fact, making money. They tend to be over shadowed by - from a publicity perspective and from a financial perspective by the challenges of currency and other things in Brazil at the moment, but we do not expect to go into any fire sale mode.

Barry Abrason (ph):OK. Thanks for the explanation.

Thank you. Your next question comes from Ms. Danielle Fife (ph)with Salomon Smith Barney.

Danielle Fife (ph):Hello. I was wondering on the normal basis, based on rate of return, etc., utility business should generate roughly $1.50, $1.70, or is optimistic. Do you anticipate a rise in operating cost as well as pension cost insurance, etc.?

Danielle, Tom Walker. All of our earnings this year and our guidance is really coming from the utility. And, in fact, it's greater than the earnings because it's offsetting the losses in Brazil. So while I can't give you an exact number, it's north of $1.35, substantially north of $1.35.With regard to the pension, what we're - what we do is we assess the pension every September and as most companies do and adjust for the expenses going forward on a ratable basis over a five-year period of time. What we're looking at is, as everybody, a significant increase in the pension costs. Those increases were already included in our prior thinking, in our prior guidance, renewed guidance for this assessment that we're doing, but the pension calculation was already in there.

These have been baked into our rate case request already, Danielle (ph), and if you look back historically at our utility business over the last several years, it has generated between $1.75 and $2 in earnings, and so you're certainly your projections are not unreasonable in that context.

Danielle Fife (ph): Yes, obviously, that's exactly it. I was not sure if actually you were anticipating even more increases in the O&M in the future, and or if they were already in your numbers in for most of the year in '02.

Well I hope we have demonstrated to the market over time our ability, on a comparative basis to control costs versus other utilities. As I mentioned in spite of our exemplary cost control effort, we've also launched the very vigorous sig sigma effort here in September and that effort will in fact be focused on generating cash, increasing and increasing productivity, both operationally as well as capital productivity. And so given the rate environments that we are in, and given our ability to manage capital productivity and so given the rate environments that we are in, and given our abilities to manage costs, I do not, I do not envision that we are going to be overwhelmed in any way by uncontrollable cost increases in our utility operation.

Danielle Fife (ph): So this is not an, for example, the rate increases are pretty much incremental. What I was wondering is actually I should be assuming that at least off of that is already taking, is already earmarked for additional expenses, but you don't agree that, or at least you will be able to offset that with some of your programs?

You need to understand of course that the rate-making principles are different by jurisdiction and the numerous jurisdictions in which we do business. Some are forward-looking where we do in fact get to project these types of things. Others are historical in nature and so one must encounter the expenses before one can then substantiate that they do in fact exist. But to the extent that it is permissible within the jurisdictions, we have tried to project what appropriate expenses are going to be and the rate relief that we need to appropriately address those.

And so again, as I have tried to stress, the regulators in the environment, in which we do business, have certainly been responsive to legitimate needs of our companies, and we're comfortable that the regulatory environments will remain supportive.

Danielle Fife (ph): Actually, also I wanted to, I was wondering in terms of cap ex, you were talking about roughly a billion dollars a year or slightly less. Obviously, since 450 is about maintenance cap ex for the utilities, do you anticipate to be able to rid you somewhat, the non-regulated side of the cap ex in the future.

Well certainly let me address both capital and the utility, as well as the non-regulated capital. We will spend, I believe, slightly less than $400 million or was budgeted in the utility, I'm not sure what we'll spend; it hasn't come in yet. We are certainly committed to cost effective and safe operating environments for our people and so we will spend the capital necessary, but again, one of the benefits we will look for from our sig sigma is to make sure that that capital is as productive as possible. We will look at design criteria, for example, and a number of other things, such that we can seek to minimize the capital, while delivering the type of and quality of service there to which our customers have, have become accustomed.

And so that addresses the utility.

In the non-regulated area of course, these expenditures, all tend for the most part to be discretionary, but they also generate or we hope they will, generate income and so there's always trade-offs. If you don't make investment of, you know, what, how do you replace that income. And so it's a complex mix, and it's one of the things that we will be doing over the next four to six weeks, is trying to get the appropriate mix of investment capital. We intend to continue to grow for the future. We understand the nature of the environment. We understand, for example, that markets are not certainly rewarding premiums for large growth aspirations as they have in the past, and so again, we still need to grow. It may be adding more measured pace. We need to take a look at what our rational expectations of outcomes, what are rational levels of capital to invest that will allow us to maintain strong credit quality as we move forward in the future.

Danielle Fife (ph): You were also mentioning a few quarters ago, that you may be selling your Whiting once it got to a size that was appropriate. Is this the case now or are you anticipate to make additional investment there?

As you looked at our strategic plan and as we've discussed it publicly, we, our goal was to get Whiting to a size such that it would put us in a position to sell that asset to a larger audience of buyers, at the, at a smaller size for example, buyers would be limited to those who could integrate the present operations into their existing operations.

At a larger size, that you would have a stand-alone investment, and in fact you would have then the potential for having another set of financial buyers who would be able to purchase a stand-alone business. It will take continued investment to get Whiting to a stand-alone size.

But even at today's size, it does in fact have great value, because it is a cash-generating profitable asset. And so as we look, you are correct that our goal was, again to ultimately put us in a position to harvest this asset, and so we could do that at this point in time, whether it's optimal to do, however is conjectural, and again, it's, as I suggested earlier, it's a matter of trying to balance the mix of asset sales with earnings that one needs to replace.

And so we are certainly not without, I think, a lot of tools in our toolkit to deal with these issues and that's what we'll be dealing with over the next coming weeks.

Danielle Fife (ph): Thank you.

Thank you.

Thank you. Your next question or comment comes from Mr. Sam Botco (ph) with Merrill Lynch. Go ahead please.

Sam Botco (ph): Good morning. Quickly, could you comment on the possible existence of any rating triggers?

In general, we don't have rating triggers. What we have are covenants in our facilities.

So there are, there's some very small leases that have a credit rating trigger in them, probably less than 30 million.

Sam Botco (ph): OK. Thanks.

And your next question comes from Miss Roselyn Armstrong (ph) with Sach Capital (ph). Go ahead please.

Roselyn Armstrong (ph): Hi. How much commercial paper do you have outstanding, currently or at the end of the third quarter?

I don't have that figure. It's within our credit facilities.

Roselyn Armstrong (ph): OK. When you say within the credit facilities, you're referring back to the 915 million?

Right.

Roselyn Armstrong (ph): OK, can you ...

The 915 million facility is a facility that's put in place of the backup to our commercial paper.

Roselyn Armstrong (ph): OK, and so you don't know how much commercial paper you have outstanding?

We'll have that in the queue.

OK, you can't provide that today?

No.

Roselyn Armstrong (ph): OK, is anything drawn on the 915 million facilities?

I think there's a slight amount drawn on the facility.

Roselyn Armstrong (ph): Roughly?

I don't have a figure. It's small.

Roselyn Armstrong (ph): Like 100 or 200 million?

No.

Roselyn Armstrong (ph): . . . roughly . . .

I don't have a figure. It's small.

Roselyn Armstrong (ph): Like 100 or 200 million?

No. No. No. No. No. No.

Roselyn Armstrong (ph): So, something less than 100?

Much less than 100.

Roselyn Armstrong (ph): OK. And can you tell us have there been any changes in the markets receptivity to your commercial paper since the Moody's review began I guess it was last week?

The commercial paper market's not real receptive to utility commercial paper right now quite frankly. So, the sector we've seen in the last week the sector coming off a little bit. But we've been moving commercial paper into the market.

It's a tougher market but we don't know that it's any tougher for us than it is for anyone else.

Roselyn Armstrong (ph): OK. What kind of changes have you seen? Is it with regard to the amount that investors are willing to roll or the maturities or both?

Probably both. It's a sector phenomena.

Roselyn Armstrong (ph): OK. And you don't perceive any particular bias against yourselves as a result of the review?

We put out a release that we're - you know we're working and committed to an investment grade credit rating that would support the commercial paper market.

This is . . .

Roselyn Armstrong (ph): I saw that.

This is certainly not the first time we've seen this kind of behavior in the market as well in the commercial paper market. It periodically goes through these types of cycles and so I think the - as you suggested and as Tom (ph) reaffirmed, we can't see anything out there that suggest we're having a set of problems that the sector itself is not having.

Roselyn Armstrong (ph): OK. Thank you.

Your next question comes from Mr. Jeff Cavano (ph) with Keen Capital (ph). Go ahead please.

Zach Schriber (ph): Hi. It's actually Zach Schriber (ph). Can you hear me?

Yes.

Yes. We can hear you.

Zach Schriber (ph): Great. I'm not sure if you said it earlier but can you just sort of tell us what you're balance sheet capitalization ratios are?

That is in the range of 62 to 63 percent.

Zach Schriber (ph): And what about (inaudible) preferred?

The preferred is small and the equity's 35 to 36 percent.

Zach Schriber (ph): And that includes the foreign currency translation adjustments on OCI already writing down . . .

Yes.

Zach Schriber (ph): . . . the value of the equity on the balance sheet?

Exactly.

Correct.

Zach Schriber (ph): OK.

And the - that number included short term debt as well.

Zach Schriber (ph): OK. And just as far as we sort of try and understand you know what the impact of any ratings action could be, there's no increased color you can give us on commercial paper outstanding and what those balances are and what the impact of losing the P2 rating would be and what the duration of those balances are so we can hack that into a normal simple sources and uses analysis?

We're going to have that in the Q but . . .

Zach Schriber (ph): Is there anything you can give us now because I mean there's a lot going on and we're just trying to sort of you know trying to understand if it's as bad as what the market says it is.

We don't expect to be below a P2 rating. Our expectation is that we are going to provide the assurances. We have the metrics to maintain at least a P2 rating.

Zach Schriber (ph): OK. Has there been any sort of response from the regulators in any of your states to sort of this tightening of access to the capital markets for the whole sector? Has there - are any generic proceedings going on in Wisconsin or Iowa . . .

There are no generic proceedings going on. As you may or may not be aware I am chair of the Edison Electric Institute this year, our industry organization. You've got to admire me for my timing on that one.

But in that capacity I have also been able to discuss with the commissioners in our various jurisdictions what is going on in the capital market and what is being done on a generic basis to restore confidence in utilities or in this sector in those marketplaces.

And so I don't know whether it's because of that or in spite of that we don't have any pressures for any sort of generic proceedings and we are trying to work with regulators on an ongoing basis to make sure they understand the dynamics of not only the companies they regulate but also what is happening in the market.

As you are all well aware there has certainly been a meltdown in capitalization in this marketplace since the beginning of the year. And I think it's important that regulatory jurisdictions and regulators understand that and we - I think that an adequate job of doing that. We don't have - we're not under pressures in the states in which we do business.

Zach Schriber (ph): I was actually thinking about it just the opposite. I mean Wisconsin's been a very supportive jurisdiction historically and I was just curious if they'd done anything on the contrary to actually help out the industry.

Well, the regulatory jurisdictions of course are committed to protecting the shareholders within those jurisdictions. So, let me make one point first. And that is our non-regulated activities are completely separate from our utilities. They are separated by law for example in Wisconsin. And no consideration can be taken in the regulatory process there of our non-regulated activities.

But we have succeeded in Wisconsin in suggesting to them that even within regulatory environments the risk of doing business and the risk in the capital market is in fact increasing in spite of the fact that the cost of money is decreasing. And in our last case for example you will see that our ROE in Wisconsin was raised from 11.7 percent to 12.3 percent recognizing that if we are to build facilities to serve customers in Wisconsin we will have to earn an appropriate cost of . . .

Zach Schriber (ph): Right.

. . . capital there. You saw it also in Iowa with the regulatory principles on the power Iowa program where again the ROE was at 12.23 percent over the 27.6 year life of that facility. And so I believe our regulatory jurisdictions have in fact been responsive.

We still have of course some work to do because we have some cases open there. But we are certainly doing business in environments that believe in the concept that it is healthy companies that can deliver the best service to customers . . .

Zach Schriber (ph): Are . . .

. . . and that it is not unhealthy companies that can deliver better service.

Zach Schriber (ph): Are you guys sort of involved in this whole power of the future thing or through the Wisconsin power of life subsidiary or is that sort of not something that you guys would have focused on?

We - power for the future is a Wisconsin energy program. We are not involved with power in the future. We have in fact put in more facilities recently in Wisconsin than anyone else however . . .

are not involved with power in the future. We have, in fact, put in more facilities recently in Wisconsin than anyone else, however. But we have had others build those facilities for us. As the credit quality and worthiness of those participants tends to deteriorate in the marketplace, we may in fact move into building those facilities ourselves as we look into the future in Wisconsin. But we are not involved with the Power of the Future (ph) program.

Zach Schriber (ph): Got it. And last question is just if you could just update us on the - on the nuclear front if you guys have any of these pressurized water reactors or if you could just refresh my memory as to if all your nukes are boiling water reactors. And if they are pressurized water reactors, what vintage are they of and when was the last time you tested them for this reactor vessel head cracking issue?

We are ...

Zach Schriber (ph): And if the testing was done, was it done sort of just visual or did you do (ph) do ultrasonic, as well?

We have two nuclear units that we own. The Duane Arnold (ph) nuclear unit in Palo, Iowa outside of Cedar Rapids - both these units are about 500 megawatts - is a boiling water reactor. The Kewaunee nuclear unit, which we own a piece of, is a pressurized water reactor that's here in Wisconsin. A new steam generator was put into that unit last year, and so that unit was fully opened up and looked at last year when we put a new steam generator in place.

Zach Schriber (ph): Do you know if it was looked at with the ultrasonic testing or was it just sort of a (inaudible) inspection (inaudible)?

I cannot - I cannot tell you what was done at that point in time.

Zach Schriber (ph): Great.

But let me assure you that our nuclear - the history of safety and that aspect of our business is a benchmark that we all aspire to in the other parts of our business.

Zach Schriber (ph): Great. Thanks so much for your time, guys.

The last question comes from Mr. Matt Grossman (ph) with Sigma Capital. Go ahead, please.

Matt Grossman (ph): Hi. Good afternoon now. Just wanted to get a little bit of guidance because I'm confused. You'd issued '03 guidance of 240 to 260 (ph) per share, which on a 90 million share base would be something like 225 million of net (ph) income. And now you're retracting your '03 guidance saying that, you know, we need to improve the balance sheet and that might involve selling assets, equity, debt, dividend - whatever. Has your forecast for the actual operations of the business changed?

If you're looking at - again, we have a complex mix of businesses - if you're looking at the utility operations, I believe you could make a reasonable assumption that that will be little impacted by what we do. If you look at the mix of our other businesses, their profitability, of course in many cases and more so some than others, will be impacted by the amount of investment we do make. And so, again, it's complex.

You can make new investments in some of these businesses and the earnings will go down on short term because they're longer lived - or, lived - businesses, and we don't get immediate return on capital. And so in those types of businesses, if you don't make investments, earnings may in fact go up short term. But as I suggested earlier, we don't run the business for the short-term. We run the business for the long term.

And so, again, we pulled the guidance because we don't know at this point what is the best mix of the use of the tools that we outlined to you further. We have said we're committed to maintaining our appropriate credit quality, and we will continue to work closely with the rating agencies to try and understand what that means a little better than we do today and, again, try and balance what their concerns are with what we believe the real concerns of our shareowners are for continued profitability and continued growth in our operations.

Grossman (ph): What - could you just refresh us on what your original capital spending guidance was for 2003 on utility, Power Iowa, and then unregulated?

Utilities were in the four (ph) to 500 million range, Power Iowa was going to be about 300 million, of which about half was the purchase of the turbines which would be an inner-company (ph) purchase. We already have those in-house. And then the balance was going to be in the diversified businesses with a focus in China and a focus in our (inaudible).

Grossman (ph): I'm sorry, the balance of what?

Getting to what we disclosed last time, which was a billion two (ph).

Grossman (ph): A billion two (ph). So, you're saying 400 to 500 for the utility, 300 for Power Iowa, ...

Correct.

Grossman (ph): ... and 500 - ...

Well, 100 ...

Grossman (ph): ... four (ph) to 500 for unregulated cap ex. Correct?

One hundred and thirty for our oil and gas business. Our international businesses, we're going to be 110 and that's - we're not investing in Brazil, so that's largely China. And then there was just a whole host of nits and nats (ph) that - they come up to around 100, all of which are discretionary.

Grossman (ph): So that was a billion two (ph) of estimated capital spending and about 180 million of estimated dividends. So that's a billion three eight (ph) of uses of cash and something ...

All of that was detailed in great detail in our July 18 release.

Grossman (ph): OK, I understand.

And I believe that's still available out on our Web site. If you want to go out and pull that down, you'll see there's a table out there that'll show you the breakdown.

Grossman (ph): OK. And then the cash flow from operations for '03 was estimated to be 500 to 600 million. Correct? So you had something like six (ph) to 700 million of either debt financing, equity - whatever you want to call it. Let's just call it a funding gap. Correct? Now, did your guidance of 240 to 260 include additional financing costs ...

Yes.

Grossman (ph): ... to fund that funding gap?

Yes. We're pursuing debt offerings (ph) as we speak. And then there is a potential for an equity offering. There are equity infusions or there's equity implied in our rate case filings. And Power Iowa, of course, is a - you know, a significant capital investment for us next year.

Grossman (ph): I guess where I'm confused, then, is what's the surprise? Why aren't you guys better prepared to answer what you need to do to get your balance sheet in shape? You knew in July that you had a massive funding gap in 2003. And now we're sitting here in October and we're saying, "Well, we don't know. We don't know what assets we're going to have. We don't know what assets we're going to sell. We don't know what the impact's going to be on earnings."

Let me, I guess, try to address the surprise component here.

You know, as you are aware, credit rating agencies are, in fact, from our perspective either changing the rules or applying the rules or redefining the rules. And so we certainly know what our businesses are worth. We certainly know the impact of removing a business. We know the impact of removing an investment.

What we don't know is out of our control necessarily, which is what is exactly the set of parameters across the broad range of operations that you have to have to, in fact, maintain one credit quality rating versus another. And as you look at what has happened in this industry this year, there have been massive credit quality downgrades and there's been a large number of them and I don't know that everyone was particularly using your term "surprised" by all of these, but I'm sure not everyone beginning in this year was planning on having a credit downgrade.

The only thing I'd add, too, is it's not a surprise to us and that's why we believe we have a metric that will insure a very strong investment grade credit rating. We're in the process of working with (inaudible) ...

Grossman (ph): What is that metric?

I'm sorry?

Grossman (ph): What is that metric?

We're in the process of working with the credit rating agencies to work through an evaluation of that, and when that's complete, we'll - we will come out with that metric.

Grossman (ph): Right. And is that metric consistent with, you know, somewhere between a 90 and 100 percent payout ratio on your dividend and a commitment to growth?

Well, as we've said, there are many tools that we can use to optimize our strategic plan and our balance sheet and credit rating at the same time. We're going to - and we are evaluating those tools.

Grossman (ph): OK, thanks.

Yes, let me actually end by saying I appreciate that we've created a degree of uncertainty, and creating uncertainty is not something that we are fond of doing and it's not something that markets particularly like. But whatever solution we come up with will be built on the base of strong cash flows, of strong utilities, a set of profitable businesses that we have going forward.

And again, our expectations of growth may have to be modified and expectations of magnitude may have to be modified, but we also know that you can't sustain high payout ratios for long periods of time. And so we want to make sure that whatever plan we come up is a long-term sustainable plan as opposed to a short-term, fire sale-type set of changes that may solve an instant problem, but may cause you greater problems as you move into the future.

So, again, to the extent that we created uncertainty, we certain apologize for that, but we're not going to apologize for taking the time necessary to get it right and as we suggested over the next four to six weeks, we will be coming out with the appropriate guidance for next year and guidance that hopefully can be sustained.

Grossman (ph): And so with all due respect, your stock is back to where it was in 1985. I mean you're a utility. You have a responsibility to your income-oriented shareholders, and stocks don't go back to where they were 17 years ago because of good management. So, I think that (inaudible) ...

I ...

Grossman (ph): ... to be realistic with everyone.

We are trying to be realistic as we can with respect to what we can divulge. I - again, I certainly have no reason to dispute your statistics. I would suspect that this entire sector has taken a great step backwards as well based on the information that we have. And so, again, it is what it is.

Grossman (ph): Thank you.

Thank you.

Since there's no more questions from analysts and institutional investors, I would like to take this time to thank you for your participation on the call this morning and for your continued support of Alliant Energy.

A replay of this call will be available until November 1 of 2002 by dialing 800-839-0860 and entering the pass code of 1316. And an archive of this Webcast will be available on the company's Website at www.alliantenergy.com in the Investors section. Thank you.

This concludes today's conference call. Thank you for your participation.