Alliant Energy Corp (LNT) 2003 Q3 法說會逐字稿

Thank you for holding ladies and gentlemen and welcome to the Alliant Energy's third quarter 2003 earnings conference call. At this time, all lines are in a listen-only mode. I would now like to turn the call over to your host, Mr. Eric Mott, Assistant Treasurer of Alliant Energy.

Good morning. Thank you for joining us today for our third quarter 2003 earnings conference call. I'd like to welcome those of you who are joining us today, both on the phone and on the web, we certainly appreciate your participation. With me today are Erroll Davis, Alliant Energy's Chairman, President and Chief Executive Officer and Eliot Protsch is also joining us for the first time in his role as Executive Vice President and Chief Financial Officer. Various other senior executives of the organization are also with us today. Our call is open today to the general public and to the media, but our content and answers are primarily designed for the financial community including institutional investors and investment analysts. We will have a formal question and answer period following some prepared remarks by Erroll Davis and Eliot Protsch. We will take as many questions as we can within the one hour time frame for today's call. As most of you are aware, earlier this morning we issued a news release announcing Alliant Energy's third quarter 2003 earnings and narrowing our 2003 earnings guidance for earnings from continuing operations. If you haven't seen the release, it is available on our website at www.alliantenergy.com in the investor section.

Let me briefly point out the structure of today's news release. Just as we did in the first and second quarters, we are reporting our earnings exclusively on a GAAP basis and our year-to-date GAAP results consist of three components. Earnings from continuing operations, earnings from discontinued operations and the cummulative effect of changes in accounting principles. As we previously stated, Alliant Energy's management believes earnings from continuing operations provide a more meaningful representation of the company's fundamental earnings capacity, going forward. Before we begin, I would like to remind you that 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 press release issued this morning and in Alliant Energy's filings with the Securities Exchange Commission. We disclaim any obligation to update these forward-looking statements. With that said, I would now like to turn the call over to Erroll Davis.

Thank you very much Eric and good morning to all of you on line. It's certainly a pleasure to be here this morning to report on our earnings for the third quarter and on our progress for the first nine months of this year. As Eric noted, today we've reported income and earnings per share from continuing operations for the third quarter of $85.3m and $0.78 per share respectively. This certainly compares very favorably to our third quarter 2002 results where we earned $46.7m or $0.51 per share. Thus, our results from continuing operations are up $0.27 a share over our third quarter 2002 results. Obviously after posting a 53% increase in earnings as compared to third quarter 2002, we are extremely pleased to be here this morning and to report on our continuing progress. Throughout this year, we've spent a lot of time strengthening our financial profile, we've worked on maintaining operational excellence and we've certainly continued to sharpen our business focus. And our numbers do reflect that progress. Year-to-date we've earned $1.13 per share from continuing operations, this is $0.76 per share higher than our earnings from the previous year, and which were $0.37 per share for the first nine months of last year. While we still have a quarter to go, our third quarter earrings clearly bring us much closer to achieving our earnings goal for 2003. Now in that vein and given that our summer cooling season is now behind us, we've updated our 2003 earnings guidance as you noted in the release. And as we said we expect the number to fall somewhere between $1.50 and $1.60 per share. That number of course is within the $1.45 to $1.65 range we stated at the beginning of the year and that same range that we have affirmed each quarter that we have had the opportunity to discuss our earnings with you. Now, as many of you who followed us closely know, we've historically earned the majority of our annual earnings in the second half of the year. In 2002 for example, we earned $0.61 per share from continuing operations in the fourth quarter.

I know all of you are doing the math very quickly, and that our updated earnings guidance assumed earnings from our continuing operations in the fourth quarter of 2003 will be lower than those generated in the same period for a variety of reasons. But first of course is the impact of having for the first time seasonal rates this year at our Wisconsin subsidiary. And so, one might on a year-over-year basis assume that we have actually pulled sales - our earnings out of the fourth quarter into the third quarter because of that. Also in 2002, the results included income of $0.11 per share related to adjustments to reserves recorded previously for a utility fuel refund, as well as a reversal of a loan receivable from a development project in MexicoSo that $0.11 of course, and will not be in the fourth quarter of this year. Those have a very interesting anomaly because assuming Alliant Energy's initial public offering of its Whiting business it completed in the fourth quarter, we also expect to incur charges to continuing operations related to debt repayment premiums, we anticipate paying as we applied the proceeds from the sale of our Whiting stock to reduce debt.

So, in many ways we've been more successful with our Whiting sale and accruing cash to pay down debt, we will in fact be pushing earnings down in the fourth quarter. Now, while the ultimate amount of theses potential premiums is impacted by numerous variables, we estimate that we could incur charges of at least $0.06 to $0.10 in the fourth quarter of this year. Now, I want to emphasis that $0.06 to $0.10 estimate is included in our current guidance of $1.50 to $1.60 for continuing operations. We do expect to offset of course a portion of the negative impact of these items due to the impact with various rate increases implemented during the year, some genuine but modest sales growth, as well as our continued focus on cost control and a number of other factors. Now, let me emphasize that well I certainly feel good about the tremendous efforts we've seen across our company to improve our financial performance. We certainly have not reached the finish line or the end of this year and we are certainly not going to be satisfied until we return to the level of financial performance that our share owners have come to expect from us. However, I'm pleased to report that we have successfully attributed on all of the actions we announced in the last call to both strengthen our financial positions and narrow our business focus with the exception, of course, of the ongoing divestiture of our Whiting businesses. And before I go through that detail and discuss our final SEDU (ph) ratio on our November 2002 financial improvement plan. Let me turn the call over to Eliot Protsch, our Chief Financial Officer, who is going to take us through the details of our quarterly numbers and also provide an update on various liquidity and capitalization issues. After he is finished with that I will come back again and talk a bit more about the progress that we've made on executing our 2002 financial improvement plan. Eliot?

Thank you Erroll, and good morning to everyone who has taken the time to join us on this call this morning. Allow me to begin my comments regarding our business with our regulated domestic utilities as that is the core and foundation of our business. This quarter our two domestic utilities Wisconsin Power and Light and Interstate Power and Light company earned $0.92 per share, a much improved figure from our 3Q02 earnings of $0.69 per share. In spite of milder weather conditions in 3Q03 compared to the same period in '02. I will note that the $0.92 per share is computed based on the average shares outstanding in 3Q02 as it is our practice to report the diluted impact of additional shares outstanding as they suffered earnings variance items if it is material. One of the primary reasons for the favorable utility earnings comparison is that we benefited from the impact of several electric and gas rate increases implemented over the course of the last year. These increases, which I would emphasize were both fair and reasonable, allowed our utilities to recover a greater portion of their operating expenses for the quarter and also reflect the returns on the increased capitals that we have deployed in these businesses. As Erroll mentioned earlier, the third quarter earnings comparisons also benefited from seasonal electric rates that was implemented last April at Wisconsin Power and Light. Seasonal rates are based on the premise that itcost utilities more to provide electric service during the higher demand summer months and in the non-peak months.

Therefore, rather than charging an average rate throughout the year as we did last 2002 and the years previous to that in Wisconsin. We now charge a higher relative rate during the summer peak months, hence generating the financial returns that are referred to earlier. However, given the rates are still designed to collect the same amount of revenue on an annual basis, the impact of seasonal rates simply changes in timing when such revenues are recorded. Thus all other things being equal, our 4Q03 revenue at WP&L would be expected to be lower than those realized in the same period of '02. Before I move on and discuss our non-regulated results, I would like to emphasize that Alliant Energy's utilities continue to perform very well. I must admit that we had a few trying days this summer as temperatures approached and in some cases exceeded the 100 degrees in our territory. Back on August 20, our utilities set a new combined system wide peak of 5835 megawatts. But even under those demanding circumstances, our employees are delivering networks as well as are generating plans came through for our customers. This provides concrete evidence as the quality of our utility operations and of our utility team, that is certainly good news for our customers and investors alike.

Now, I'd like to move on to a quick summary of our non-regulated result. As was the case with our utility results, I'm pleased to report that the financial results from our non-regulated businesses were also significantly improved in 3Q03 compared to the same period in 2002. These businesses incurred a modest loss of $0.03 per share from continuing operations this year versus a loss of $0.27 per share last year. This significant improvement was once again largely due to improvements in the results from our international business unit, it's increased $0.18 per share in 3Q03, compared to the same period in 2002. As we said last quarter, we expect improvement over 3Q02 results and we delivered. In addition, this marks, the second quarter in a row that the international business unit has seen profits, while these profits are still not where we expect them to be, we are very pleased with the steady progress, this business continues to make. The increase this quarter was driven by a $0.15 per share improvement in the results from our Brazilian investment. Let me briefly discuss a few of the factors that contributed to this improvement. Rate increases have now been implemented at all five of the Brazilian operating companies throughout 2003. Additionally, the earnings comparisons was impacted by a charge recorded in 3Q02, relating to the receipt of a regulatory order as well as foreign currency translation losses incurred in 3Q02. A 3.2% increase in electric sales in 3Q03, prior to the same period in 2002 also contributed to the improved Brazilian result. While we have certainly made significant headway in turning this investment around, I would note we're not satisfied until we have translated our progress into realizing a reasonable return on our investment. In the third quarter, in country Brazil, earnings were once again positive, but we still incurred a net loss of $5m after capital and overhead charges. However, I would emphasize that the $5m loss does compare very favorably to a loss of $19m in 3Q02.

As many of you know, what's close followers of our industry, the entire energy sector is now experiencing a much more favorable market conditions than what we experienced in 2002 that will be the financial market. Alliant Energy is capitalizing on these conditions and opportunities they represent or progress on the continued strengthening of our balance sheet. In the third quarter, we completed several financing transactions that will provide the benefits of reducing our interest costs and strengthening our cash position and also improving our overall capitalization ratios. I would like to share a bit of detail on these transactions. As you may recall in July, we completed an equity offering by issuing 17.3m shares of our holding company common stock, which was priced at $19.25 per share for the public.

We raised net proceeds in excess of $318m from this transaction and infused this capital into our two regulated utilities. 200m of equity capital going into Wisconsin Power and Light and 118m of equity capital going into Interstate Power & Light. We've also recently completed several debt refinancing at IPO in order to drive down interest costs. Specifically, we issued two 100m franchise of senior unsecured debentures with both franchise we we're able to reduce our interest rates by between 100 and 200 basis points both favorably impacting our investors and customers ultimately. Additionally, we raised nearly 39m in net proceeds from an IPO of Preferred Stock Offering in September. Alliant Energy Corporate Services Inc., our support services subsidiary also completed its first ever financing transaction succesfully issuing 75m in senior debentures with a coupon rate of 4.5%. In addition, we successfully completed this indication of a three or up three --364 day revolving credit facilities totaling 650m on September 30. The facilities which replaced former facilities that were to expire on October 10 are available for direct borrowing and to support commercial paper. These facilities provide 200m for Alliant Energy at the parent company level, which is also used to support our non-regulated businesses, 250m were IPO and 200m were WPO. These amounts represent a 50m increase for each of our domestic utilities and a $250m decrease at the parent level compared to the previous credit facility. An important message here is that we have reduced the overall borrowing capacity under our credit facilities while increasing the credit availability for our growth engines, our domestic utility. This certainly provides yet another example of our heightened focus on our domestic regulated utility business and our commitment to reduce our overall risk profile.

Regarding our short-term credit facilities as of September 30, we had short-term debt outstanding at Alliant Energy Corporation of 98m all of which is commercial paper, leaving us with available facility liquidity of 102m. Our domestic utilities had 47m of commercial paper outstanding on that date with available facility liquidity of approximately 403m. Capital expenditures for the first nine-months of 2003 for continuing operations were approximately 633m. And our expected capital expenditures for '03 remains slightly in excess of 800m. Our consolidated unadjusted capitalization ratio continues to improve. At the end of the quarter, it was approximately 51% total debt-to-capital, down from 57% at the end of the second quarter and 60% at the beginning of the year. Note that this ratio will decrease even further if we are successful in completing the Whiting IPO later this year. You may have seen our announcements that we now intend to sell 80.1% or more of our stake in Whiting in this IPO, up from 51% when we originally announced the offering. Erroll will speak to this issue a bit more later. Our targeted unadjusted capitalization ratio for year-end 2003 is in the upper 40% for total debt-to-capital. We are obviously quite pleased with the progress we have made in this area. As Erroll briefly mentioned in his opening remarks, we are also very pleased with the progress that we've made in successfully achieving appropriate and fair rate relief in all of our regulated utility jurisdictions and as we sit here today, we are currently expecting a final order or additional rate relief in January or our pending rate case in Wisconsin and expect to file a rate case in Iowa in 2004. I would now like to turn the call back over to Erroll to discuss the final steps of the plan we announced last November, as well as what you can expect from us in the future. Erroll?

Thank you very much Eliot. Now, as I've done in previous calls, let me spend just a few moments updating you on the progress that we made in executing the plan, we announced last November, just about a year ago. As you may remember then, we announced our intent to implement five strategic actions to improve our financial profile and to strengthen our balance sheet going forward. We told you what wewould do and today; I'm pleased to say that we are one transaction way from having completed the execution of that plan.

First, we said we would reduce our anticipated aggregate 2002 and 2003 capital expenditures primarily in our non-regulated businesses and we've done that. We've done it by about $400m. Secondly, we said, we would make the difficult -- I believe prudent decision to reduce our dividends to $1 per share. As difficult as it was, we took that action, the dividend is now at a sustainable level and we believe also that the new tax treatment, the dividend income will further enhance the appeal of our dividend. Third, we committed to enhance cost control. For example, we're implementing Six Sigma processes, which we expect will yield cost savings not only today but far into the future. We also continue to focus on numerous other cost control initiatives, which is a normal part of our on-going business. As a result, we probably will never be in a position to state that this component of our strategic action is complete; instead it will be a continual work in progress. Fourth, as Eliot noted, we completed a very successful common equity offering earlier this year. And finally, our plans call for us to divest certain non-core non-strategic assets to achieve debt reduction in excess of $800m and we believe we're on track to meet this goal.

As we discussed on this more last quarter, we sold our Australian, our affordable housing, and our smart energy businesses earlier this year and as Eliot mentioned, we continue to refine our plans to sell our Whitening business. More specifically, on October 17, we filed an amended registration statement with the SEC increasing the percentage of Whiteningthat we initially intended to sell through an IPO. We now intend to sell 81.1%.

Now, assuming the transaction is successfully completed, we'll be able to deconsolidate $185 million of debt currently outstanding at Whiting and with the net proceeds, we currently anticipate from the sale, we believe we would be able to achieve our previously stated goal of reducing our debt in excess of $800m as outlined in our November 2002 plan. I appreciate this caused the bitter frustration in our last conference call, but due to SEC regulations, we simply cannot comment further at this time on either whiting Petroleum's business or the proposed IPO. Therefore, again, we'll not be able to take any questions during the Q&A session on these subjects. I will refer you however to the registration statement as well as the subsequent amendments filed by Whiting's holding company, Whiting Petroleum Corporationand they could be found on the SEC's website, which I believe is www.sec.gov. Prior (ph) commitments that we made last November to take action were followed by successful execution in each of these five years. We are executing on our promises, we are proud of our achievements in that regard but also are fully recognized that we all are investors and nothing less than that. And so, the question we can start to ask and you should start to ask is, what's next? At the risk of being compared to a television program that ends with ' to be could' (ph) - continued my reply is to simply stay tuned. We do plan to announce our 2004 earnings guidance, our 2004, 2005 capital expenditure projections and updates regarding our domestic utility generation strategies. In a series of communications that we anticipate to issue remain (ph) later in this quarter.

So additional details will be forth coming at a later date. Without putting too fine or a too blunt a point on it, however, let me say now that our updated plans will focus heavily on our domestic utility operations, where we continue departments (ph) . While we will continue to have non-regulated business platforms. Overall, this plan will be more conservative yet robust across the board. We do plan to build new generation to support the growing energy needs of our domestic regulatory utility customers. But rest assured, we'll do so in a balanced and measured manner that will serve our customers, but also our investors and the environment well. At a summary, let me again say that our third quarter results have certainly taken us one step closer to achieving our 2003 earnings guidance. We're pleased - we're pleased with the significant improvement in the earnings realized by both our utilities and our non-regulated businesses in the third quarter. We'll continue focusing and improving our financial performance, maintaining our operational excellence, and providing our customers with the safe reliable and environmentally sound utility services that they have come to expect from. We're nearing the completion of the successful implementation with the five actions laid out in the plan we announced 11 months ago, thereby improving our financial profile and strength. With the continued strengthening of this financial foundation, we believe we're now well positioned to provide solid growth and increased shareholder value in the future. There has been large [Inaudible] by our investments and our domestic utility operations. Now let me apologize for taking so long as usual, now, let me turn the call back to Eric for the question and answer portion of this meeting.

Thanks Errol. At this time, we would like to open up the call for questions from members of the investment community, including institutional investors and investment analysts. As I stated before, we'll take as many questions as we can within the one-hour time frame for this morning's call. Once again, I would like to remind you that due to SEC regulations we cannot comment further at this time on either Whiting Petroleum business or the proposed initial public offering and we will not be answering questions during this Q&A session on these subjects. Also today, we will not be answering any questions regarding financial outlooks for 2004, including 2004 earnings guidance, cash flows, financings or capital expenditures on today's call as Erroll said those would be handled at a later date later this quarter. I would now like to turn the call over to the conference call operator who will guide us through the question and answer session.

If you would like to ask a question at this time simply press star then the number one on your telephone keypad. If you would like to withdraw your question press star then the number two on your telephone keypad. Again to ask a question press star one on your telephone keypad, to withdraw your question press star two on your telephone keypad. And your first question comes from David Parker of Robert W. Baird.

Good morning.

Good morning, Dave.

Congratulations on a good quarter. You know my first question is Eliot, your first quarter as CFO I don't know how you do better than this?

[Laughter]

Or is that the bar was low, what I say.

[Inaudible] .

Right, right. Several questions, I assume out of the, one is going to be Whiting, I think you can answer, when we talked about fourth quarter and expectations for this year versus last year, I think the number, the $0.61number that does excludes Whiting. Is that correct?

That's correct. That's correct.

Alright.

Continuing operations, and again let me amplify on my other answer, David, in terms of year-over-year for the quarter we had a $0.11 in there that I mentioned before of reversal of some reserves that are not going to be there. We're going to have $0.06 to $0.10 of debt premiums and I think our seasonal rates probably pulled ahead $0.03 to $0.05 worth of profits out of the fourth quarter into the third quarter. And so again that should get you, we are doing modeling comfortable with our projection in the $1.50 to $1.60 range.

You anticipated my next question, 'what was that seasonal change?' so very good, $0.03 to $0.05, I appreciate that. As we look, now shifting gears to Brazil and again congratulations for the change there. Just to make sure that I understand the overall change. Can you refresh my memory on the third quarter '02, what the charges and the currency fluctuations sort of hurt that operation and if there were anything of the currency fluctuations or unusual items that maybe helped the third quarter '03?

Third quarter '02 we took a, I believe the total net income there was about negative $19m, it was in the negative $15m, '02 excuse me, $15m in country . And again we had some charges there that was in that number that we are not going to get again, some regulatory asset charges, I believe somewhere between 5 and 7.10.

Okay.

Last year.

As we- you know we sort of look it all and others, is this operation improved now that you have got rate relief. Is it clearly as we start getting, you know, an enhanced positive emerging here, is it kilowatt sales growth and that's what we should be looking for, for the outlook for improving margin at Brazil or the other items there that you hope will come into play?

Again, you're correct. We would be looking at sales but we would also be looking at continuing operational improvements as we force down line losses. For example that's very significant there and we've certainly been making progress on that and we expect to continue to make progress. As well as the, I should point that interest costs are in fact dropping very rapidly in country and so to the extent that we will have lower interest costs, that will help as well. In our road shows, or earlier this year we said we expect the debt to be breakeven in-country this year, it probably, it will in fact do a little bit better than that and so they will start to eat into their carrying charges at the parent level. So we're pleased with progress that's happening in Brazil.

Hopefully this doesn't go beyond the, into the disclaimer, you are not going to talk about '04, but I was wondering given, Erroll, you sort of mentioned about potential robust outlook for growth of your domestic utility business, you are building a big plant in Iowa, I would like an update on that construction. But also you know, given fairly constructive discussions and comments from the Commission on Wisconsin Energy's 'power the future plan' yesterday, that help you make a decision what you may do in Wisconsin?

Well, again as I said we will announce our generation plans, we did in the road show note that we would have to put in place about 2000 MW over the next ten years. We will provide more granularity to that in a couple of weeks, when we have an announcement. But certainly yesterday's announcement at the Commission certainly validates our view that the Regulatory Commissions in the upper Midwest are starting to understand that capacity will have to be put in place, that it requires tremendous amount of capital to put that capacity in place. And that in order to attract that capital we will have to earn an appropriate return on it, and I believe, yesterday that you saw the discounts in energy walk in 12.7% ROE I believe for the next 27 or so years. And again I should also point out in fairness to our other major jurisdiction that Iowa was certainly out of this huge burst in recognizing the need for generation which with the passage of House File 577 there and we are building our Mason city facility under that with a 12.2, I believe return for the next 27 years. And so, again we have in front us, today, opportunities to put capital in place which we simply did not have 4 or 5 years ago, and our plans will move aggressively to put those facilities in place as long as we can earn an appropriate return for our shareholders and again evidence is in, so far that those returns certainly have been appropriate to attract and support the cap. (ph) .

Thanks, one last one and it will try to be quick, since I have already taken about 20 minutes [Inaudible] so I will try to make this my last question. Dividend policy and given that obviously your CAPEX on the domestic side and the utility side is a little more aggressive than normal, I would speculate that looks as if earnings, you know. Outlook would be a lot more improvement than what I had before that dividend or a buck maybe getting to upper dollar, well above $1.50, $1.70 kind of outlook for earnings. Dividend policy maybe can that dividend grow, or are you going to try to hold off until you get to some of these CAPEX programs?

Well, you know as an engineer, when you ask me whether it can grow, I would certainly have to say that certainly it can. But I -- that's the same thing the engineer said when he was asked whether the containment vessel at Three Mile Island could blow, and the headline the next day was that it was going to blow. And so, let me suggest that we are in the process of wrestling with dividend policy right now. We will have a dividend policy review at our November board meeting. And so again we appreciate that what we used apparently also are sensitive to sustainability of dividend appropriate yield, and as you are aware of all of the complex factors was determined, one dividend policy. But we will be addressing that with our board in November and I certainly can't make a prediction on how that will come out at this point in time.

Right, thanks so much and congratulations again.

Thank you.

Your next question is from Lee Anderson of Alliance Capital.

Good morning. Just a follow-up on this Brazilian lot, Brazilian investment. If you could just enumerate some of the other items that management can take to improve the results there? And on the line losses you did mention earlier, can you give us what the percentage is?

Yeah. Let me step back in context just a little bit on what other actions we can take to improve the operations there because I certainly don't want anyone to have had the impression that these were poorly run entities and that we are turning around their operations and that is what is contributing to the enhanced profitability. The lack of profitability in that investment was primarily due to a complex mix of micro and macroeconomic factors as opposed to the performance of those businesses. Those two businesses there are in fact award-winning utilities in country. We have some of the best properties there and while we will do the normal things that we all do as utility managers to make those operations run better, they are in fact well-run operations. But what will drive profitability is in fact full-year of rate cases that we see. We will see increasing sales there at rates certainly faster than we would see in the upper Midwest, for example recently the quarter was up over a 3% there, our prices are up 25 to 30%, interest rates are in fact dropping, our line losses were forcing those down and we are also putting increased emphasis on collections. But again I think that some of the worst macro factors are in fact behind us and these are well-run properties and they should in fact total off a reasonable return on investment, and that's what we're looking for out of that, those entities.

This is just a follow-up on that, some of, you know the growth rates down there have been, I guess, somewhat disappointing post the drought and in some areas, I don't know about your current utilities specifically but others have mentioned, other companies have mentioned that, kind of wanted your view on that? I guess the second thing is, will 2004 be a full year of rate cases or we actually have another series of rate cases to go?

2004 will in fact be a full year of rate cases. As far as the growth is concerned, the country certainly is coming out of a recession; I think we haven't robust economies anywhere in the world the last three years other than, on a large scale other than China. But we're projecting or will be budgeting for over 3% growth, which is 1% to 1.5% higher than what we see in our service territories in the United States. So, while it's not the 16% to 17% we see in parts of China, it certainly is robust and sustainable growth.

I am sorry, just one last one on this line losses. Did you all have a percentage on your line losses?

Yeah, I don't have one right now. We certainly, again I don't know whether we publish that, if we can get you a number that doesn't violate FD, we will do that or put it somewhere where it's accessible to all.

Great, thanks.

Your next question is from Jeffrey Coviallo (ph) with [Inaudible] .

Hi, how are you?

Pretty good, and coming from Pittsburgh, I know it's Ducane (ph) .

I wasn't going to bother to correct it. I just wanted to see if you could sort of go into a little bit more detail on the $0.06-0.10 charge you might be taking based on, I guess, the proceeds you kept avoiding. I was wondering if there is any way you could kind of give us a frame work of what sort of proceeds that equates to maybe if you can work which debt you are looking at?

No. I really can't. Not that I don't want to. But it's really going to be a point in time decision because a lot of the debt we have close with certain interest rates in the marketplace; and what we would do is once it's been sold, we will then make a judgment of what is the most cost effective. (Audio Gap) approach the paying down of debt at that time. But again, we will try to put a bracket on in terms of six to ten; and certainly, what does that represent in terms of sale. Again, I need to be careful and I really don't want to and can't predict the outcome of the IPO and it would be imprudent of me to suggest how much we're going to get, how does that in - I really - the perspective can give you some guidance there in terms of what price we think and what range of the stock - that we're going to ask for the stock.

Got it. Okay, well keep up the good work. Thanks a lot.

Right. Thank you.

Your next question is from Michael Einstein (ph) of Simmer Lucas (ph) .

Hi, good morning.

Great. How are you?

Yes, great. Congratulations on a great quarter.

Thank you.

I just wanted to ask about the utility and try to breakout how much of the improvement in utility was due to the seasonal rates and how much was due to other factors? And maybe you could talk about the other factors.

Well, clearly as I suggested the seasonality was probably $0.03 to $0.05, on that in terms of pull forward, but in terms of the total seasonality in the quarter is probably -- versus '02 is probably about $0.07 to $0.08.

Your next question is from Medulla Murphy (ph) of Simmer Lucas.

Good morning, Damien Tyteen (ph) here. Let's see, Eric, that last number was, did you say it was $0.07 to $0.08 in total you think was the benefit from seasonal rate shift?

The $0.07 to $0.08 is what the Q3 in 2003 versus Q3 in 2002, all other things being equal which means at the same rate. Level if they were both at the same rates. I got to pull something constant.

All right, so, I guess in order to reconcile this $0.31 variant, you'd say $0.07 to $0.08, is the variant associated with the seasonal rate change? Or in terms of electric margins?

Yes.

Okay, and also, I am wondering in terms of the rate increases that were new, do you have an estimate of how much that contributed this $0.31 improvement in margins?

Yes, the rate increases are really primarily, you know, I need to be careful because the rate increases go to cover expenses as well, and so, the only thing you'd see really is the incremental return on increase rate base and so, I'll have a harder time answering that one.

I mean, because the expenses are broken down it is $0.14 if you go a little further down within the utilty operation. So, I'm simply trying to ascertain what the margin benefit was before you know, deducting for the expenses?

You are looking on what page?

The [Inaudible] earnings from continuing operations, page 2 and page 6.

I don't think I have that number right in front of me.

Okay, in my last question you talked about meeting 2000 megawatts over the next 10-year, and I think you were referring to with Wisconsin, the Wisconsin Power and Light Company?

No, no, that would be in Total.

Total, okay. Beyond the Mason city facility, when you think about this 2000 megawatts and you look at your plan, when is the next increment you fell like is needed to come into service in order to meet your requirements?

We are going to lay that all out for you in the next couple of weeks, in terms of where, what type, what technologies we plan on using and in what environment, what facilities we take or should be shut down and things of that nature, and so you will have to -- if you would be a little bit patient with us on this one and what we are pulling together that plan information to address that. Clearly is going to be a balance proportions will not be all cold, it will not be all renewable either and we will try and have a balance between, again our impact on the environment plus the cost that our customers will have to bear for this mix.

Okay, and I apologize, one last thing. In terms of $0.06 to $0.10 you identified associated with the debt premiums for Whiting, why should we not consider that a one-time item in your outlook, because there is no reason in thinking next year's fourth quarter 2004 we're going to have a $0.06 to $0.10 item?

It absolutely is a one-time items, though in a perfect world we would like to have associated with discontinued operations, but again accounting convention mentioned as we will run it through continuing operations which is the reason quite frankly we highlighted it. But as only on the premiums, on debt that we will be liquidating from the sale of discontinued assets; and so again we don't expect that to be here next year.

Really then, when you think about this range from continuing operations, you know, the way we would think, want to think about, you know; excluding the semantics of the economic accounting convention] we really think more $1.56 to $1.70? It's really the base for '04 if you really want to look at '03 based on your current guidance is out there?

I think this year's continuing operation. Certainly if you wanted to throw six to ten hours, you could add six to ten on top of the guidance that we gave you for continuing operations. Certainly, I don't think that that remain constant as we move into the next year in terms of interest, in terms of other expenses, in terms of timing of rate release for example. And again as I said that we will very shortly, I believe within a two-week time frame, two to four week time frame, put out our guidance for 2004. One of the reason we're delaying it frankly is, at last year, before last year, we put our guidance prior to our final budget being put to bid, and again that came back the haunt us . And so, what we'd like to do as we did last year, is wait until we it goes though the final scrubbing and gets approved by our Board, and then we can put our guidance. And, once again I'd point out, for example we put our guidance in the last. We did very early this year. In the last part of last year we said it's $1.45 to $1.65 and we have not had to change that guidance throughout the entire year and in fact we are narrowing it now to name within that range and we want to be able to make predictions with that type of certainly and we won't be able to do that for another two week or so.

Thank you very much.

All right. Thank you

And once again I'd like to remind everyone in order to ask a question please press star then the number one on your telephone keypad. Again, that is star one your telephone keypad. And your next question comes from Peter Sue (ph) of Jim Co Capital (ph) .

Good morning. Congratulations on a good quarter.

Thanks very much Peter.

Just a quick question in regard to your earnings from Brazil. I'm trying to understand the seasonality of the earnings would it be better from what I understand that as if it's summer here in North America, it's winter there in South America and probably in terms of volume, it's probably a little bit less than it would be throughout the rest of the year. So, what I am trying to say is like as the peak quarter should be fourth quarter and the first quarter, correct me if I'm wrong?

That's correct.

Should I think about when I translate into - translate that seasonality into the earnings, should I expect the $0.03 loss that you recorded this quarter and then I think you recorded $0.02 loss in the second quarter of this year. Should I expect that to be a floor for earnings?

I'm sorry should you expect what to be atfloor?

For the earnings power of Brazil what I'm trying to understand is, if the peak season is during the fourth quarter and the first quarter and the cross seasons during the second and third quarters, given what you have reported so far for the third quarter will thatserve as a floor in terms of the earnings powers the company, so for example you report a $0.03 loss during the third quarter. Should I expect only upside during the fourth and first quarters, given those are your strongest quarters?

Clearly, as you mentioned the first and the fourth - the fourth and first quarter will be the strongest quarters. You should expect, however, continued progress throughout the year because of the full-year effect of five separate rates by increases, the last of which I believe didn't look into several months ago and so, again there are five different company down there. They got rate increase at different times, the last one came in September and so because of that in addition to the seasonality you will see steady growth. And I should point out that while seasonality is a factor of the air-conditioning saturation there, it is not nearly what it is in the United States and so, I don't expect as we move forward in 2004 to see why swing because of seasonality. That's the way we do in the United States. But, I would expect to see steady and constant growth in income there.

I see. Is there any quantification that you could add to that to give me a sense of how sensitive the numbers are to others, so for example, I guess maybe on a margin basis because the company -- the segments not reporting net income yet, but on a margin basis at least what percentage of the earnings flow through the individual quarters?

What we would do is, I don't have this with me right now, but again we are going to come out with our 2004 earnings guidance and we will, based upon again the robustness of the profitability of all our subsidiaries, make some decision in terms of what increased transparency that we're going to have with these entities and if you've noted over the years, we become more and more transparent with them particularly as they've gotten bigger and I expect that will continue.

Okay, great. Thank you very much.

Alright, thank you.

Our last question come from Gregg Orrill of Lehman Brothers.

Thanks, good morning.

Good morning.

My question is about the dividend and I guess you've made a number of comments about the dividend on the conference call, and I just wanted to make sure that the thought processes and evaluation of the dividend level for another reduction?

Well, I've answered every question. I'm going to let Eliot answer this one. But, I would say as a transition that as we look at policies and options, I don't think we're looking at reduction.

Okay.

Greg. This is Eliot and good to talk to you. I think if you look at the metrics that would drive the dividend policy of any corporation and apply it to ours, as Erroll indicated, those metrics would suggest that there is a very significant change that has occurred from when the dividend was reduced. With respect to commenting on where it might go going forward, given those metrics and forecast for those metrics, hopefully you would only conclude that it's sustainable. Any speculation on our part as to whether it's going to go up in the slow run and by how much, would be inappropriate as you enter.

Okay, thank you.

Thank you, and thank all of you. We're standing.

I would now like to turn the conference over to Mr. Mott.

No more questions today. This concludes our call. But take this time to thank everyone for their participation this morning and for your continued support of Alliant Energy. A replay of the call will be available through November 6, at 800-642-1687 domestically and 706-645-9291 internationally. Callers should reference conference id number 3161192. And in addition, an archive of the conference call and a script of the prepared remarks are made on the call today will be available on investors section of the company's web site at www.alliantenergy.com in the investors section later today. Thank you.

Thank you.

Thank you for your participation in the Alliant energy's third quarter 2003 earnings conference call. You may now disconnect.