Alliant Energy Corp (LNT) 2002 Q4 法說會逐字稿

Thank you for holding, ladies and gentlemen. And welcome to the Alliant Energy year end 2002 earnings 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 will be given at a later time. I thank you for your attention and I turn the time over to your host, Mr. Eric Mott.

Good morning, and thank you for joining us today . for Alliant Energy Corporation’s year-end 2002 earnings conference call. We welcome those of you who are joining us on the phone and those of you who are joining us via our web site today. We appreciate your participation.

I'm Eric Mott, Assistant Treasurer at Alliant Energy and with me today are Erroll Davis, Alliant Energy’s Chairman, President and Chief Executive Officer and Tom Walker, Executive Vice President and Chief Financial Officer, as well as various other senior executives of the organization. This call is open to the general public and media, but our content and answers are primarily designed for the financial community, including institutional investors and investment analysts.

We will have a formalized question and answer period following some prepared remarks by Erroll Davis and Tom Walker. We will take as many questions as we can within the one-hour time frame for today's call. As most of are you aware, earlier this morning we issued a news release announcing Alliant Energy’s year end and fourth quarter 2002 earnings and affirming our 2003 adjusted earnings guidance. If you haven't seen the release, a copy of it is available on our web site at WWW.alliantenergy.com, in the news section.

Let me briefly point out the structure of the today's news release. We will continue to report our earnings on a GAAP and adjusted basis as we believe both provide value to investors. In the interest of disclosure, clarity, and transparency we have provided additional tables and reconciliations between GAAP and adjusted earnings but have moved all that information to the back of the release. It is very important information that you should reference, and we hope that our current format will be much easier for you to read and understand.

Also, before we begin today, I would like to remind you that the remarks we make on this call and 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 please press release issued this morning, and Alliant Energy’s filings with the Securities & Exchange Commission. We disclaim any obligations to update these forward-looking statements. With that being said I will turn the all over to Erroll Davis.

Thank you very much, Eric, and thanks to all of you on the call for joining us here this morning. Frankly, like most business people, I wasn't sorry to see 2002 end. It was a very difficult year for many industries, and certainly a difficult one for the electric power industry. And clearly, it was a challenging year for Alliant Energy.

This morning we're going to talk a bit about our 2002 results, but I also want to focus on the progress we're making in executing our plan to improve our financial performance in 2003, and beyond. You will remember we did make some announcements back in November, and on that front we do have some good news to report. Today, we reported final 2002 GAAP net income of $106.9 million in earnings per share of $1.18, that is down from net income of $172.4 million and $2.14 per share in 2001.

On an adjusted basis, which we again believe is more instructive our earnings per share were $1.33, and our total net income was $121 million, which is again down from the adjusted earnings per share of $2.42, and net income of $195.1 million in 2001. On that adjusted basis, our results were at the upper end of our previously announced adjusted earnings guidance for 2002, which, if you remember, from November was $1.25 to $1.35. While at the upper end there obviously they're lower than you are 2001 results. Importantly, though we did see improvements in the fourth quarter which we expect to continue into 2003, and we'll talk a bit about those later as well.

As noted in our 2002 year-end results our utility earnings were up very slightly over last year's results, but we experienced substantial losses on the non-regulated side of our businesses -- of our business, for a variety of reasons. I'm going to ask Tom Walker to give a brief recap of our businesses and their segment results in a few moments. As I said earlier, without question 2002 was a tough year, but we believe we have taken the necessary steps to address the issues that came with it. Those of you who follow us on an ongoing basis remember that last November we announced a series of strategic actions that we believe will put us on a course to return to the solid financial results we delivered in 2000 and again in 2001. A number of those decisions were very difficult, but very Necessary, as we seek to strengthen our balance sheet and improve our financial position. And we have made progress.

As part of -- for example, as part of executing our financial plans, in the fourth quarter alone, we closed on six separate financial transactions that raised 1.9 billion dollars of capital, with the net result of significantly strengthening our liquidity at year end, we felt this a very significant achievement and a very difficult market in the fourth quarter. We also have the most recent series of credit rating reviews behind us. While that process was difficult it's certainly isone that's been shared by a significant number of our industry peers over the past few years.

We came away from that process believing we had strong support for our plan but also with an obvious requirement to successfully execute the plan. And we are well into the execution process. We have financial advisors on board to help us execute our exit strategies for each of the three businesses we announced in November that we would be leaving. These businesses include Whiting, our oil and gas business, Heartland Properties, our affordable housing business and our Australian utility business. We are proceeding with those transactions and we are encouraged by the interest being expressed in the marketplace. We will execute these transactions at various times throughout 2003 but we expect all of them to be completed by the end of the year.

This will assist us in making significant progress towards reducing our goal of reducing our net debt -- excuse me. Our goal is to reduce our net debt by approximately $800 million to a billion by year end 2003. Our plans for an equity offering of between $200 and $300 million in 2003 remain on course. Our current plans call for this offering to be conducted in 2003, probably sometime after the first quarter when our reaudits are complete. I know that in some earlier releases this morning some allusions to reaudits and I want to make it clear that our reaudits are necessary primarily because we are selling businesses and therefore we are reclassifying the financials for those businesses. They have not been motivated by any red flags or anything found in the audit process. And again, our equity offering will go forth after those are completed, but of course, dependent upon market conditions at the time.

We remain committed to the reduced capital expenditure budget we shared with you in November of approximately $900 million for this year. We believe our success in attracting capital in a difficult market in the fourth quarter of 2002 reflects growing market confidence in the execution of our plan. There's no question that the capital markets for our industry remain difficult, and we are going to access them with great care during the year.

We continue to engage in prudent cost control, emphasizing process improvements through the signal program we recently put in place. With our last dividend payment we of course implemented the previously announced dividend reduction. Reducing the dividend to our shareholders was a very difficult and painful decision for us. We do note, Hover, that dividends reductions are becoming a more recurring phenomenon throughout the industry.

Today we view ourselves as a more focused company, executing a more focused strategic plan. As evidence of this, last Friday we closed on Alliant Energy generations previously announced acquisition of a 309 megawatt plant that we purchased from Mirant, and it was located in NENANT, Wisconsin. This is facility is fully tolled through 2008. Nonregulated generation is one of our three key growth platforms and we will patiently and prudently build that platform. You will also note in today's news release that we plan to sell our interest in Smart Energy, an electric and gas retailer in competitive energy markets. This business no longer fits within our more refined focus and it's proposed sale is yet another action we are taking to align our portfolio with our strategic plan.

In short, we are refining our focus in precisely the areas we have outlined in the past. They are no different. Domestic regulated utilities operations, nonregulated domestic generation and utility-based international investments and as I have stressed in the past, our domestic regulated utility operations are kept completely separate from our nonregulated operations.

Let me turn the call over now to Tom Walker who is going to add some flesh and context to our numbers. After Tom is finished I want to close with a brief discussion of our projections and focus a bit more on 2003. Tom?

Thanks, Erroll. As Erroll said, our final 2002 GAAP net income and earnings were $107 million and $1.18 per share, down from $172 million and $2.14 per share for 2001. On an adjusted basis our earnings per share were $1.33 and total net income was $121 million, which is down from an adjusted EPS of $2.42, and adjusted net income of $195 dollars in 2001. On the utility side, our net income was $166 million, as compared to $165 million in 2001. On the nonregulated side of our business, our net loss was $61 million compared to net income of $6.1 million in 2001. On adjusted basis net loss was $46.9 million compared to net income of $ 28.9 million in 2001.

Let me provide a bit of detail on both sides of our business. Our utilities experienced a slight increase over last year's results. This was primarily due to strong fourth quarter results as net income increased from $40 million in 2001 to $49.3 million in 2002. This fourth quarter increase was primarily due to several rate increases that were implemented at various times throughout the year. Lower fuel and purchase power cost and more favorable weather conditions late in 2002, as compared to 2001. In addition, as we noted in our news release, we saw growth in industrial electric sales volumes for the first time in two and a half years. We hope this is an indication that the economy and our service territories is beginning to recover.

While we are here to talk about the bottom line, I'd like to talk a moment about and reemphasize that our utilities remain financially and operationally strong, continuing to rank highly in customer satisfaction surveys while maintaining enviable environmental and safety records. This is translated into a slight improvement in 2002 results, in spite of the fact we were coming off multiple merger-related price freezes in 2002, and we still don't have all of the related rate increases in place. Obviously, our news on the nonregulated side of the business is not as positive as it is on the regulated side.

In a direct about face from its big scores in both 2000 and 2001, last year Alliant Energy Resources, the parent company of our nonregulated operations, scored only a few small wins. Hover, please note that AER's 2002 results on adjust basis would have been break-even had it not been for the performance of our Brazilian operation. Since we have made the decision to exit the oil and gas business, I will only briefly mention that it reported lower earnings in 2002 as compared to 2001, due to lower oil and gas prices as well as higher operating expenses. Oil and gas prices were stronger in the latter half of 2002, but not nearly enough to make up for the reduction of the record highs of early 2001.Sales volumes were up, Hover, which contribute positively to the bottom line.

Results from nonregulated generation and trading business were also depressed in 2001. This is primarily due to our decision to exit the trading business in 2002 by selling our interest in our once very profitable electricity joint venture. By exiting this business, we were unable, of course, to record a full year of earnings. Nonregulated generation earnings were also impacted by our decision to cancel the joint venture generation project in Michigan. As market conditions dictated going forward with that specific project was simply too risky. The acquisition of the Neenant plant that Erroll mentioned is a good example of our willingness to capitalize on a good opportunity with a fully tolled facility, which is indicative of where our efforts will be focused in this business in the near term.

Obviously no discussion of our non- regulated operations would be complete without talking a bit about our international investments. We expressed our disappointment with our Brazilian investments.

and discussed the reasons behind those results, several times in 2002. So I won't cover that again today. But I'd like to emphasize that our numbers from Brazil are improving as evidenced by our fourth quarter results, which were significantly improved over the results from each of the three previous quarts in 2002. While it has yet to turn the corner toward profitability, we are certainly headed in the right direction.

Let me reiterate two points we've made previously. First that in country, the Brazilian companies do cash flow. And second we do not intend to make any further capital investments in this market in 2003. Electricity sales volume throughout the country are starting to trend upwards, where operating rationing programs are now a problem of the past. While our sales have not recovered to the 2000 levels, we did see a nearly 5% increase in sales in 2002, as compared to 2001. From an operational perspective, we continue to generate efficiencies, thereby reducing costs and our program to control system losses resulted in a 3% reduction between 2001 and 2002.

Account selections have sometimes been problematic for other utilities in Brazil, but our collections continue to improve. Similar to our domestic utility operations, our Brazilian utilities have excellent customer service records, and are highly regarded for environmental stewardships. While our investments in Brazil didn't make earnings expectations, positively our investments in China, Australia, and New Zealand did, as they each produced significantly higher adjusted earnings over 2001 results.In fact, together they generated $20 million in GAAP earnings and $16 million in adjusted earnings, in 2002.Let me shift to a little bit of a discussion about our liquidity.

Our liquidity position at year end, consisted of short-term debt outstanding at AEC, of $220 million, $135 million of that was commercial paper. Our available facility beyond that is $230 million at the AEC level. In addition, we have a standby facility of $250 million, also to complement the bank line of credit. At WP&L we had commercial paper outstanding totaling $60 million, with available facility liquidity of $90 million. At IP&L, we had no short-term debt outstanding at year end with available facility liquidity of $200 million. In summary, 2002 was what it was, a disappointing year from the financial perspective.

I join with Erroll in stressing that we are doing what we need to do to improve earnings in 2003, and we are beginning to see some positive results. Now I'd like to turn the call back over to Erroll, who will take a little bit of time and talk a bit about what you can expect from Alliant Energy going forward.

Thank you, Tom. I did mention earlier that we finished 2002 at the high end of our adjusted earnings guidance. However, we obviously still have much work to do in order to return to the growth levels we achieved in 2000 and in 2001. In many ways, we are not responsible for everything that happened to us in 2002, but we certainly are responsible and accept that responsibility for returning this company to enhanced profitability in 2003.

We have affirmed our 2003 adjusted earnings guidance of between $1.65 and $1.90 per share. I want to caution that this does include 20 to 30 cents per share in adjusted earnings as defined in our release that we expect to realize from businesses that we will exit in 2003, as you might imagine, that number is dependent upon the time that we exit from those businesses. But our success in 2003 is really going to come down to achieving results in three areas.

First, executing on the strategic actions we announced last November and continuing to focus con financial, fundamentals and in particular the strengthening of our balance sheet. Secondly, strengthening our relationship with our utility customers while working with regulators and legislators to create a positive growth environment for the energy sector, power Iowa is a good example of the fruits of that labor. And thirdly, refining our strategic focus on the nonregulated side of our business. As I've said time and time again our primary focus remains unchanged. And that's to continue providing our regulated customers in the upper Midwest with the energy they both want and need. We have never wavered from that commitment.

I note with great pride that throughout the turbulent energy markets of 2002, our utilities operational performance remained very strong. Our employees have proven they are able to stay focused and committed amid some very unusual pressures. In fact, our customer satisfaction level actually increased in 2002. While we have made progress in receiving some rate relief in our regulated jurisdictions there's obviously much work to be done. We do have an Iowa case that is scheduled for March of this year, while we expect that our rates in our Wisconsin 2003 test year to be in effect by late February or early March, the possibility now exists that these rates may not be in effect until sometime in the second quarter. But again, we have reaffirmed our earnings guidance.

Let me summarize by saying that with our refined strategic focus we are drawing on our key strengths, with our prudent financial plans we are strengthening our balance sheets and our cash position, and we are continuing to invest prudently in our key businesses. We are executing on our plan with focus and with discipline and we're beginning to see that approach bear fruit. In short, we are committed to rebounding from the adversity of 2002 and producing stronger results in 2003, building on the stronger fourth quarter in 2002. .

Thanks, Erroll. We would now like to open up open up the call to questions from members of the investment communities including institutional investors and investment analysts. Due to large number of participants on our call today and in the interest of keeping the call to 1 hour, we would like to ask your assistance in limiting your question to one question plus a follow-up if necessary. If we have extra time, we will try to take additional questions as they come in. I would now like to turn the call over to the operator who will explain how to ask questions.

Thank you, sir. If you would like to ask a question, please press a 1, followed by a 4 on your Touch-Tone 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. And please continue to hold while our system compiles the results. Our first question comes from Dave Parker from Robert Baird.

Good morning, I'll try to limit this to one really long question, I guess it's more focused on 2003 and the guidance and I guess on the outlook in your release you talk about utility earnings and your overall guidance being of $1.75 to $1.95, and given '02 was closer to $2.40, I guess taking delusion of shares out, that obviously is a hit but you had rate relief, more normal weather, et cetera. I want to focus on that, why it looks as if utility profitability margins will come down, and then also, just a little bit, if you could talk to us about the ins and outs, thanks for laying out in your expectations the 20 to 30 cents, and adjusted earnings that you expect coming from businesses that are eliminated, I assume that the proceeds and I don't know if you can tell us what you expect proceeds may be, to paid out debt and just sort what were the contributions or losses from those operations, and you know, to give us a little more comfort, I guess, with what we may expect unregulated operations to be in '03 as well.

Again, Dave, you are correct, the utility guidance we gave is $1.75 to $1.90 and of course overall guidance was $1.95. Overall guidance was $1.65 to $1.90, so you can see if you back out of the midpoint of the discontinued operations, you're looking at $1.40 to $1.65, if you back out the midpoint of what we're expecting from the discontinued operations and therefore you can see the impact of our non-regular operations. .

and any comment on the -- what appears to be a decline in utility margins, Erroll?

Again, as -- when we talk about declining utility margins, remember we're coming off of four years worth of rate freezes and we will still not, in 2003, yet have full year effects of rates in place. As I suggested, that you know, we're expecting the Iowa rates, probably around mid year of this year, if maybe a little sooner, but the Wisconsin rates are delayed just a bit. We expected them in February or early March, and they look to be slipping into the second quarter, not for any significant reason other than we, of course, had a change in the commission structure and people are just getting up to speed there. So again, I would I wouldn't read too much into the margins, because they're not ongoing, steady state numbers, as opposed to still ramping up.

Dave, this Tom. The margins are, as Erroll indicated, directionally correct. They're moving in the right direction. It won't be a significant ramp-up in ‘02 to '03. On the high end of the guidance there would be a fairly significant ramp 'up. On the low end of our guidance there would not be a significant ramp up. We do have rate cases that is are coming into play this year, as Erroll has indicated. We have much of that behind us in the prior year but we still have this year to go. So we thought it would be prudent to put a range out there of $1.75 to $1.95 but that $1.95 would be a substantial increase over 2002 on earnings per share basis.

Quick follow-up. Any guesstimate on net proceeds from asset sales? On International operations in Whiting and what your cap ex this year may be from continuing operations?

We have indicated that we would do somewhere between $800 million and a billion in proceeds. From the sale of our assets, and will apply that for debt reduction and liquidity purposes. We have also previously indicated what the book values of the assets are on our books, and that's previously disclosed. We don't want to go beyond that because we don't want to prejudice any of the sales.

in our November, guidance we indicated the capital budget for 2003 at approximately $900 million and we expect to come in at or below that.

from a cash flow perspective, understand that we'll be generating between $500 and $550 million in the utility and probably between $550 and $625 million overall for the corporation.

Okay, great, thank you very much.

Thank you, Dave.

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Thank you. And our next question is from Theresa Ho, from Bank of America Securities. Go ahead, please.

Thank you. I have a question related to the asset sales and the debt pay-down from the proceeds of the asset sales. First, I guess, what is the book value of Smart Energy, now that you're putting that on the selling block?

$25 million.

Theresa Ho $25 million, okay. Okay, so --.

That's the asset value.

That's the asset value. What is the book value?

Well, we didn't disclose debt on the assets that we're selling, we disclosed the asset, the values of the Whiting and the Australian and HPI businesses.

It's comparable.

It isn't significantly different than that.

Okay. And actually, if I may, going into the 20 to 30 cents that you expect from the adjusted earnings in your guidance, what portion is that, what is the Whiting's portion of that 20 to 30 cents?

We have it -- we haven't broken that out, Theresa, and again, that's going to be a -- that number -- that number, that total number will be a function of when those entities are sold.

I guess, would it be fair to say it's the majority of that number?

No.

It's not?

It's a significant portion. I don't know that it would be a majority.

Okay. And then, in terms of your commercial paper rate, I understand you still have some CP outstanding but you have a split rating from the ratings rating agencies, what is is your outlook for the CP CP program in are you continue to go access that going forward forward? Are you looking to wind that down completely?

Actually, we're going to measure, as we go forward right now we see, you know, 135 million, as I said, of CP at year end. At the AEC level. We're probably 15 basis points higher in cost than it was six months ago. So that's not a significant cost variant. And we're just going to measure as we go forward. Our internal planning is to ensure that we are not in a position where we are going to be obligated or need to have bank facilities, as we go through the year. Our bank facilities at the AEC level extend through October. We think it's prudent to manage the business from a standpoint of significantly reducing our reliance on the bank facility and of course CP, would follow that are. At the utilities we would expect to continue to have those facilities roll over consistently going forward.

You mentioned the $15 million, and this is just my last follow-up on this. You mentioned 15 million for the additional cost of the CP?

No, 15 basis points.

15 basis points. Okay over lie bore

More than what we were paying six months ago, which is lie bore plus some amount.

So more like 200-plus basis points over lie bore?

No; I think 200 all-in.

200 all-in. Okay, thank you very much.

the point I was trying to make is that the split reading has cost us only 15 basis points of difference.

Oh, I see what you're saying.

Compared to what we had before.

Okay, thank you very much.

Thank you. Our next question comes from Mr. Jose Alamante, from Teachers Insurance. Go ahead.

Good morning.

Good morning.

I was wondering whether or not you could provide us I guess with a credit ratios at year end and debt to cap, and let's say SFO to interest coverage, and then also, on the Neenan project, I guess the original plan was to proceed with non-recourse financing at that facility. Can you provide us an update as to where that stands now or if the financing plan has changed for that particular project?

Yeah, let me go backwards. We closed on that project Friday, we have $60 million worth of non-recourse out of $109 million total on that. On our equity, our debt equity ratios this year we ended 2002 with about 60/40 debt equity at the parent company level, with our plans executed we expect to be about 50/50 by year end of 2003.

and our debt covenant ratios would be -- actually our debt would be a little bit lower than that, year end 2002.

and interest covered ratios?

We're still working those up. We're going to break out discontinued operations but those will be strong as well.

Thank you.

Thank you our next question comes from Danielle Seitz from Solomon Smith Barney, go ahead, please.

Hi, I was wondering, could you give a little bit of color as to where you believe most of the improvement in the nonregulated operations will come from this year?

Yes, Danielle. Primarily, we're looking for a continuation of the improvement in Brazil, and so I don't want to give you the distinct impression that this is a wished for outcome in the fourth quarter the loss in Brazil was probably one-fourth of what it was in the third quarter. It's still a minor loss there, but it's now less than $5 million We are also, our ISCO operations, industrial services company, started to contribute as well in the fourth quarter, and we're also looking for that to improve as well.

Please understand also, that part of what you see in 2002 are some very significant asset valuation charges, which, again, if we have continued progress in these companies, we don't expect to see in 2003. For example, in the ISCO we had probably 8 cents worth of asset valuation charges in 2002, which brought those earnings down. We don't expect -- again, dependent upon continued progress in the business, to have those kinds of charges again.

The only thing I'd add to that as well is just to stress how Brazil is already starting to turn here in the fourth quarter. We have disclosed that our expectation would be that next year we might have half of the losses we had this year.

Okay.

Which were around $47 million, and we're already at that running rate in the fourth quarter of this year.

Okay. Great.and also, you have contributions from the new plants -- I suppose unregulated continuation. Do you have a sense of how much do you anticipate in terms of contributions from Nina?.

Again, --.

Just a color.

Yeah,.

It is positive, right?

Certainly, oh, yeah, by all means it will be a positive contribution. It will not be significant in terms of our total generation business, Hover, again that is the first total facility that has come on line and so it significantly will be trended positively, but again we haven't broken that out, and it's not a significant amount.

Right. Assuming that you -- I know I'm pushing you.

That's okay.

Assuming that you are -- I mean, that you're selling those operations, can you give a little bit of color of what kind of O D and M, will be dropping just from the sale of the operations, just a sense of the magnitude

I'm not sure I quite understand your question, Danielle.

Danielle Seitz You are going to be selling Australia and Whiting and all of that, all of these operations are included in the O&M, I'm assuming, and I was wondering how much the O&M could drop because of that.

I don't think we know that number. We really have just focused on the EPS.

Right, right, contribution, right. It's just a thought. Thank you.

Okay, thank you

Thank you. And our next question from Michael Garvey from Angelo, Gordon. Go ahead, please.

Thank you.

Good morning.

Good morning.

on the international side, could you tell us what the foreign currency translation was for the fourth quarter and full year and then how much of that was related to Brazil? And also, what would be to date the total of foreign currency translation numbers on Brazil?

Brazil is about $150 million year to date this year, impact on OCI, last year 2002. That's a cumulative balance at the end of the year.

Okay. And then, also related to that, you comment on the Brazil earn earnings international. How much of that was Australia?

the international, we commented on the Brazil losses at $47 million. All of our other international operations were in fact positive. As Tom mentioned, but for Brazil, our entire nonregulated operations would have been pretty much break-even.

but can you give us any guidance on what Australia made since that's being sold?

We have not broken those out and it was not our intent to break those out by country.

Okay, thank you.

Thank you. And once again, we'd like to reminds you, if you would like to ask a question, press 1 followed by a 4. Next question is Jeff Cavelo of Devein Capital. Go ahead.

I would I want to explore the relationship between the rating cases going on at the utilities and the equity issue answer. Given the delay this timing of the WP&L rate case, does that affect your timing of our equity issuance?

Well, we have -- we certainly don't want to go out with an equity issue with a rate case pending or about to happen, but really our main -- the main driver of our equity offering right now is the reaudit. We think that although we see some delays in the rate action in Wisconsin, we don't see those delays substantially pushing out our original plans. And so, it will be really more driven by market conditions and by a completion of the reaudits.

Jeff Cavelo Thank you.

Thank you. Our next question comes from Mr. Mike Weinstein from Zimmer Lucas partners. Go ahead, please.

Hi. I was wondering if you could kind of explain what kind of interest expenses are being expensed inside the subs that are being sold off, so we can kind of get an idea of how, when you pay down debt with the proceed, how your overall interest will be affected.

Well, the debt levels on subsidiaries are somewhere a little bit north of $400 million, and you could make your own estimate as to what those interest costs might be associated with those subsidiaries. There is a mix of short and long-term debt on those entities. .

Okay, thank you very much.

Thank you. And our next question comes from Mr. Craig Shears of Standard & Poor's. Go ahead, please.

Hi. I was wondering if you could comment on the pension drag, the 9% return assumption. Can you hear me?

Yes.

Okay. Sorry. The 9% return assumption on plan assets, if you could share with us the percentage of stocks and bonds weighting in the portfolio and finally your ability to recoup any pension drag or get pension relief from the rate cases.

We have -- let me address the last one first. We have in fact sought recovery in our rate case for a large portion. We expect expenses to be approximately $18 million high higher this year than in 2002 for pensions, but as I said, we are seeking rate recovery for a large portion of that, and so we do not expect to be substantially challenged by that. In terms of our structure, our equity targets in our portfolio or generally 55 to 65% with the remainder being fixed income, not a lot of exotic investments in there.

Great, thank you.

9%, of course, is the long-term assumption.

Right. So, you're comfortable with that and there's no changes?

Staying the same.

Okay, thanks.

Thank you. And our next question comes from Mark Lennenborg of Towen Capital.

Good Morning I wanted to ask you what the investment in Brazil is on the books for at year’s end?

the investment was $450 million investment and our OCI is $150 million so approximately $300 million.

and that OCI; all related to Brazil?

It is foreign exchange in Brazil.

Yes.

Great, thanks.

You're welcome.

Our next question comes from James Sackler from SoCap. Go ahead, please.

Two real quick questions. Of the $800 to billion dollars of debt paydown; is that the gross proceeds that you're assuming from the asset sales, and could you give us a rough idea of what the three assets that are held for disposition would have earned on a full year basis, had you not considered selling them?

the 800 to a billion is our commitment to pay down our year end debt levels. We will achieve that through a variety of means, increasing our earnings, prudently managing cash investment in capital, as well as sales, which again we haven't broken out what we expect from each asset. Let me ask Tom to just add to that.

Necessarily we've computed what the sales value would be, what the tax implications are for the various businesses we're selling, what the note proceeds would be, and what we expect then we'd be able to apply to debt. And that's the 800 to a billion-dollar number. With regard to the earnings that those businesses would generate, we've already disclosed in our earnings guidance that for the year 2003, dependent on the timing of the sale of those businesses, it's 20 to 30 cents a share.

Right, I guess what I was asking if we were just to take the timing effects out of that, what would they have earned on a full year basis.

We've not disclosed the timing effects so we wouldn't disclose the number that would get to you the timing effects and the reason is we don't want to impact, you know, the sale of the business.

Okay, and just one follow-up, I guess, then. Of the 800 to a billion dollars of total debt paydown, I'm assuming that that includes, I think you said 400 million dollars of debt associated with the assets held for sale?

Yes, a little bit higher than that, actually, but in that range.

James Sackler Okay, thank you.

You're welcome.

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Thank you. And once again, ladies and gentlemen, if you would like to ask a question, please press a 1 followed by 4 on your touch Touch-Tone phone. Next question is from Theresa Ho, of Bank of America Securities.

I had a question regarding your utility earnings guidance, the fact that you are maintaining your range of $175 to $195, but you're not expecting the new rates to come into effect until the second quarter of '03. Should we read into that that the first quarter for the utilities is doing well?

Well, I think first of all, this is Tom. Our earnings guidance is dependent and predicated on a judgment internally, which provides for flexibility on these rate cases. And so, I think that first -- the first interpretation, it would be that notwithstanding that we get some movement in these rate cases, we're still committed to that earnings guidance, because we've done a lot of analysis to support that

In fact, the first quarter would not have been significantly impacted by the rate cases in any event, because we would have had to implement, you know, get the notice out to the customers and so forth. So, I think the answer to your question directly, no, I don't think you should expect a significant uptake in the first quarter first quarter that would be incrementally benefited by the rate case later in the year. But notwithstanding the fact there's a little bit of movement on the rate case, we're still confident of our earnings guidance.

if I could add to that, Theresa, as Tom said, that the first quarter was never particularly a function of the rate cases. As you are aware, that we tend to be weather-driven and cost- cost-driven, and we continue to implement cost control measures here. And it's not exactly been Balmy here for the last month, so we're comfortable with the guidance. It doesn't mean it's easy to do but we made a commitment to that.

Okay. And then, in terms, I guess just a follow-up on the asset sales. I understand that you've received some bids for Australia, it seems like that is going to come on line first. Could you speak to the interest right now, with the other assets, and maybe you could provide more color on where Australia is now.

Yes, I can, Theresa. One thing I do want to put to rest right away, is the concept of a fire sale. As for any of our assets, as we said, when we put these assets on the market, they were all profitable assets and we expected robust interest in all of them. And we have not been disappointed. In fact, in many cases our expectations have been exceeded.

You are correct that Australia probably will be first out of the chute. Data rooms are up and running, we have a number of interested buyers, and as you say, you only need two for an auction, and we have until well in excess of that, and in fact for some of the assets we're having trouble keeping up with the data requests, quite frankly. And so, again, we're very pleased by the market receptivity to the assets we have put out there, and again we're on target with our milestones.

As I said, we have bankers in place, offering memoranda either out, as in the case of Australia, or still being refined and prepared. The sequence will probably be, and again Australia followed by heartland properties, followed by Whiting. But again, that's a projection of the order.

Thank you very much.

Thank you. And thank you, ladies and gentlemen, and that concludes today today's Alliant Energy year-end 2002 earnings call. Thank you for your participation.

Thank you very much.

Thank you, everyone. --- 0