Alliant Energy Corp (LNT) 2004 Q3 法說會逐字稿

Thank you for holding, ladies and gentlemen. Welcome to Alliant Energy's third-quarter 2004 earnings conference call. At this time, all lines are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer period. If you would like to ask a question during this time, simply press star then the number 1 on your telephone keypad. If you would like to withdraw your question, press star then the number 2 on your telephone keypad. Thank you. I would now like to turn the call over to your host, Becky Johnson, Manager of Investor Relations at Alliant Energy. You may begin.

Good afternoon and thank you for joining us today for Alliant Energy Corporation's third-quarter 2004 earnings conference call. We welcome those of you who are joining us on the phone and also those of you who are joining us via the web. We appreciate your participation. With me today are Erroll Davis, Alliant Energy's Chairman and Chief Executive Officer; Bill Harvey, President and Chief Operating Officer; and Eliot Protsch, Senior Executive Vice President and Chief Financial Officer, as well as various other senior executives of the organization.

As most of you are aware, earlier today we issued a news release announcing Alliant Energy's third-quarter 2004 earnings and narrowing our 2004 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. We have allotted an hour for this afternoon's call, which will include time to take questions from the investment community, following some prepared remarks from Erroll, Bill and Eliot.

Before we begin, 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 press release issued this morning and in Alliant Energy's filings with the Securities and Exchange Commission. We disclaim any obligation to update these forward-looking statements.

With that housekeeping out of the way, I will now turn the call over to Erroll Davis.

Thank you very much, Becky, and thank all of you for joining us here today. It is a pleasure to be here to report on our earnings for the quarter and also on our continuing strong results for the first 9 months of this year. Earlier today, we reported earnings from continuing operations for the third quarter of 2004 of 87.4 million or 76 cents a share. By comparison in the third quarter of 2003, we reported income and earnings per share from continuing operations of 84.6 million and 77 cents respectively. Alliant Energy's net income and earnings per share for the third quarter of 2004 was 81.8 million or 71 cents respectively. This compares to net income of 103.2 million and EPS of 94 cents for the same period of 2003. Now, you should note that those latter figures contain the result from businesses that we have now classified as discontinued operations, many of which we have already sold.

Earnings from continuing operations for our domestic utility operations were 91.1 million or 83 cents per share compared to earnings from continuing operations of 83.9 million or 77 cents per share in the third quarter of 2003. Our non-regulated businesses posted losses in the third quarter of 12.7 million or 12 cents per share compared to losses of 3.2 million or 3 cents per share in the third quarter of 2003. I would also mention that our 2004 EPS amounts from continuing operations are computed based on the average shares outstanding in third quarter of 2003, as is our practice to report the dilutive impact of additional shares outstanding as a separate earnings variance item if it is material. The dilutive effect of additional shares outstanding in the third quarter was approximately 4 cents per share.

I will leave it to Bill and Eliot to explain the details of our earnings, but I would point out that even with the significantly cooler-than-normal summer weather we experienced during the third quarter, our domestic utility earnings per share were up 8% over third-quarter 2003 results. This increase was largely due to rate increases implemented throughout our various utility jurisdictions, comprehensive cost reduction and operational efficiency programs, as well as a 2% increase in weather normalized sales. However, our non-regulated results from continuing operations were down 9 cents when comparing third-quarter 2004 and third-quarter 2003. However, I would note that our year-to-date results from continuing operations in the non-regulated area improved by 1 cent per share in 2004 compared to the same period in 2003.

The 2004 results also include 4 cents per share for debt repayment premiums, as well as losses of 4 cents per share from our Energy Management Services business, which we expect to reclassify as a discontinued operation in the fourth quarter. So that number will come out of our continuing operations in the fourth quarter. I would also underscore that we continue to strengthen our financial profile, and as Eliot will detail later in the call, our balance sheet continues to strengthen.

In reflection on that progress, and as part of our staunch commitment to provide our investors with a competitive return on their investment, on October 11, our Board of Directors approved a 5% increase in our quarterly dividend, beginning with our November 15 dividend, bringing our targeted annual dividend rate to $1.05. Additionally, increasing our dividend brings us closer to our long-term goal to have a dividend payout in the range of 60% to 70% of our utility earnings. Even with our recent modest dividend increase, which would have annualized cash impacts of approximately $6 million, we still have head room to grow out our dividend payout within that range. Our Board will continue to assess this situation on a quarterly basis.

I would also point out that while we have 1 quarter to go, our third-quarter earnings brings us 1 step closer to achieving full-year results consistent with our original earnings expectations. In fact, at $1.35 our year-to-date earnings per share from continuing operations are up over 22% from 2003 results through the third quarter. As one might expect, with 3 quarters of the year behind us, we are also now in a position to narrow our earnings guidance range. As we said in this morning's news release, we expect our 2004 earnings from continuing operations to be in the $1.75 to $1.90 per share range which remains within our previously-stated guidance of $1.75 to $2 per share. Earnings guidance for our domestic utility operation will remain in the range of $1.75 to $1.90. Our updated guidance also reflects the impact of our lower-than-anticipated year-to-date non-regulated results.

Now with that very brief snapshot of where we are today, I will turn the call over to Bill Harvey, our President and Chief Operating Officer, who will give you some operational highlights for the quarter. Bill?

Thanks, Erroll. As I have done in the past, I will begin with a discussion of our utilities as they are the foundation of our business. Our 2 domestic regulated utilities, Interstate Power & Light Company and Wisconsin Power & Light Company continue to perform well, earning 83 cents in the third quarter of 2004 as compared to 77 cents for the same period in 2003. As Erroll said, we are very pleased that we were able to generate strong utility earnings, even under the stress of extremely unusual weather conditions. We estimate that weather had a negative impact of 12 to 14 cents in the third quarter alone.

Eliot will provide some detail on all of the factors that impacted our third-quarter results; however, I want to emphasize that our employees certainly answered our call to work even harder to reduce costs and continue to implement operational efficiencies. It was, in part, because of the successful execution of these efforts that we were able to offset the sizable negative weather impacts of the quarter and remain poised to meet full-year earnings consistent with the expectations we set back in January. In short, we were able to achieve cost reductions and maintain excellence in customer service, reliability, and safety.

As an aside, it is typical in the fall season to undertake several planned outages, including a scheduled refueling at the Kewaunee Nuclear Power Plant and at the Duane Arnold Energy Center. We continue to place a high property on vigilant and careful attention to plant maintenance in spite of our needs to manage costs under challenging conditions.

Let me now take just a few minutes to update you on the status of our utility generation plan that we announced in December of 2003. In Iowa, our 565 megawatt combined cycle natural gas Emery Generating Station went commercial in May of this year. The Iowa Utilities Board approval of the ratemaking principles for this plant was significant because we knew up front that the common equity component of that $400 million investment would earn a 12.23% rate of return over the 28-year depreciable life of the plant.

I am also pleased that construction has begun on our $155 million 300 megawatt natural gas fired Sheboygan Falls energy facility in Wisconsin in the third quarter. Construction has begun, and depending on the regulatory approval timeline, the plant should be operational by the summer of 2005. As we have discussed in the past, our non-regulated generation subsidiary Alliant Energy Generation is constructing the plant and will then lease the facility to Wisconsin Power & Light Company. We believe this financing arrangement for the facility is beneficial for all stakeholders, as it will provide certainty for investors and customers while retaining for the Wisconsin Public Service Commission all of the tools necessary to protect customers' interests.

Additionally, Wisconsin Power & Light Company continues to make progress in the planning for a 500 megawatt jointly-owned base-load generating facility working in collaboration with Wisconsin Public Service Corporation. At this time research is being conducted on potential sites and technologies. We expect to announce decisions on both the location and the fuel source for the plant in late December of this year or early in 2005.

Our commitment to securing a reliable energy future for our utility customers is not limited to constructing only large-scale generating facilities. Our near-term plan to add 100 megawatt of nameplate wind generation capacity in Wisconsin was, in fact, re-energized by the recent enactment of a 2-year extension to the renewable Energy Production Tax Credits. We have received numerous bids in response to our request for a proposal on this project, and expect to announce our partner for the project next month. As you can see, our generation plan is flexible, balanced and financially viable. It allows us to continue to provide our customers with needed reliability, yet we will do so prudently in order to minimize the impact on the prices our customers experience.

With that, let me quickly recap our utility rate case activity for the quarter. I'll begin with Iowa. As we discussed in July, a group of major intervenors filed a non-unanimous settlement, proposing to the Iowa Utilities Board a resolution of the revenue requirement component for Interstate Power & Light Company's retail electric rate case. The parties agreed to a $107 million increase, which is $9 million more than the revenues granted in the Iowa Utilities Board interim rate order in June, and this reflected a 10.7% return on equity. While uncontested in hearings before the Iowa Utilities Board, this agreement is still subject to regulatory approval, but that approval is expected in January of 2005, with rates going into effect in the first quarter.

Fuel and purchase power costs are the main drivers behind Wisconsin Power & Light Company's 2005, 2006 split test year rate case, filed in September of this year. The $63 million request assumes that Wisconsin Power & Light Company will also file a $35 million fuel-related case in early 2005. The approval process for the base-rate case is expected to take roughly 9 months, resulting in new rates becoming effective on or about July 1 of 2005. However, an interim decision on the fuel filing has been accelerated to approximately 21 days from the time the application is filed, and consequently, we would expect a final decision on the fuel-related case in the second quarter of 2005.

Additionally, Wisconsin Power & Light Company filed a $12 million wholesale rate case with the Federal Energy Regulatory Commission in August of this year. Increased fuel costs, as well as new generation capacity costs are the main drivers in the case. Pending FERC approval, interim rates are expected in January 2005 with final rates put in place by mid-year 2005. We are also continuing to streamline our business portfolio and rationalize our investments, and we continue to make progress in divesting certain businesses.

Let me briefly recap our progress on asset sales. Reflecting our August announcement, we are now identifying potential buyers for our Illinois utility assets. We have retained a financial advisor to assist in the sale and expect to have a sales agreement in hand by the end of the first-quarter 2005. However, given the necessary regulatory approvals, we may not see the actual transfer of assets until sometime later next year. The sale of the Kewaunee nuclear facility to Dominion Resources is currently awaiting regulatory approval from the Public Service Commission of Wisconsin, and we are expecting a decision on the conditions of transfer by the end of this year.

Divestitures of certain of our integrated services or ISCO businesses are also progressing. In September, we completed the sale of NG Energy Trading. We are now working with our financial advisor to work out the timeline and a list of potential buyers for Cogenex, an energy infrastructure services business. Note that we are still on track to complete the ISCO divestitures within 12 months of the original announcement, which occurred in July of this year. Additionally, it is our intent to sell our remaining 1.1 million shares of Whiting Petroleum Corporation in 2004. Whiting recently filed a registration statement with the Securities and Exchange Commission proposing to sell 7.5 million new shares, as well as our remaining shares. We are precluded by guidelines of the Securities and Exchange Commission from commenting on any further on this transaction, and you may view the related filing at www.sec.gov.

Shifting the focus, let me now discuss a few issues related to our non-regulated businesses. I will start with Brazil. As some of you may know, while day-to-day operations go on as usual in Brazil, we are engaged in an ongoing dispute with our Brazilian partners over reducing debt, cutting costs, and our minority shareholder rights. The important take-away in this situation is that we remain committed to taking action to improve the return on our investment in Brazil. We remain open to a variety of options to resolving this matter, among others. We still have the potential to repair our relationships with our partners, the potential to restructure that relationship, and ultimately the potential to exit this market. These developments are evolving, and we are evaluating our alternatives, but are unable to predict at this time the ultimate outcome.

Lastly, I would like to touch on our approximately $82 million investment in Laguna Del Mar, which is a secured loan receivable from a Mexican development company. As noted in the past, we have found the developer's pace and level of performance in all phases of the project to be unacceptable. We have concluded that a transfer of ownership and control is our best option to maximize the recovery of our loan and related interest income. And we have negotiated an agreement to that effect. While the completion of the transfer pursuant to the agreement is subject to certain conditions precedent that the developers must satisfy, we currently anticipate that this transfer will take place before the end of this year. Once the transfer is made, we will continue to evaluate the various alternatives available to us, including the potential sale of the entire project and its associated land assets.

In summary, while we continue to address some challenges, we've delivered solid earnings in the first 9 months of 2004. Our focus on execution and financial discipline is delivering the results we expect. Our year-to-date earnings per share from continuing operations are up 22% from where they stood at the same time last year. We've always had strong utility operations, and they remain strong today. We continue to focus on streamlining our regulated businesses and to position the remaining businesses for improvement, in a fashion that will satisfy the reasonable expectations of our investors. With that, I will now turn the call over to Eliot for a financial overview.

Thank you, Bill. While Bill and Erroll have provided a high-level overview of our results for the quarter, I would like to take a few moments to explain the variance in both our domestic utility and our international results. As noted in our news release, the higher electric utility margins resulted from the impact of various rate increases implemented in 2003 and 2004, and an approximate 2% increase in weather normalized sales. This sales growth included an increase of 3% in industrial sales reflecting improving economic conditions in Alliant Energy's domestic utility service territories.

These items were partially offset by the impact of the extremely mild weather in the third quarter of 2004 and timing differences related to the rate recovery and payment of capacity payments at WPL associated with the purchase power agreement for output from Calpine Corporation's Riverside plant that was placed in service earlier in 2004. The higher operating expenses were driven by increases in depreciation and taxes, other than income taxes. These cost increases were largely offset by lower operation and maintenance expenses, resulting from the ongoing impact of Alliant Energy's comprehensive cost control and operational efficiency efforts, as well as lower administrative and general expenses.

I will now move on to an earnings review for our non-regulated businesses, more specifically our international results. Our international results fell approximately 6 cents per share in the third quarter after allocated debt and overhead charges from the break-even results recorded for the third quarter of 2003. We realized a loss of 6 cents per share in the third quarter of 2004 from our Brazilian investments compared to a loss of 5 cents per share in the same period in 2003. These results included our allocated debt capital and overhead charges. The lower results are primarily due to higher bad debt, litigation related, and interest expense, largely offset by the impact of rate increases implemented in 2004 at the Brazilian operating companies.

In-country earnings in Brazil in 2004 for the quarter, and for the 9 months ended September 30, we are positive $1 million and $16 million respectively. In addition, we continue to be encouraged by the strengthening Brazilian economy, the falling inflation rate, and stable currency. This is reflected in the upgrades of sovereign credit ratings by Fitch, S&P and Moody's that occurred in the month of September. Our international results were more significantly impacted by our China investments, where earnings fell by about 4 cents per share to a loss of 1.3 million in the third quarter of 2004 to a profit of 2.7 million in the third quarter of 2003. The variance was primarily due to significant increases in coal prices and lags in procuring recovery for fuel price increases in our electricity and steam tariffs in China's immature regulatory environment.

China's rapid economic expansion has caused bottlenecks in transportation, as well as shortages of coal, driving these price increases. While total sales and revenues are generally higher at almost all of our plants, margins have been squeezed by regulatory lag. We have had success in increasing tariffs at 4 of our plants to help offset the higher prices for coal, and are seeking ways to increase earnings through a number of strategies. These actions include, purchasing larger quantities of coal in the warmer seasons when prices are lower, grouping the plants as much as possible to obtain volume discounts in purchasing coal, seeking higher dispatch rates to increase total revenue, lobbying at higher levels of government to raise the visibility of the regulatory lag issue, and continuing to work aggressively at local levels for both steam and electric tariff increases. I would note that our China investment continues to make a positive contribution to earnings for the first 9 months of 2004, and as Bill has stated, we continue our aggressive efforts to increase the return on capital of both Brazil and China.

At this point, I would like to take a few minutes to update you on various financing transactions that occurred in the third quarter, and discuss our progress with several key financial measures. Since the second quarter, we have completed several financing transactions that support our objective of reducing interest costs, strengthening liquidity, and improving our overall financial profile. In August WPL issued $100 million of 6.25% senior debentures using the proceeds to repay maturing long-term debt, short-term debt, as well as for general corporate purchases at WPL. IPL issued 25 million of 6.3% senior debentures in addition to the 100 million issued earlier in the year. Proceeds being used to repay short-term debt primarily incurred in the construction of the Emery generating plant.

On the non-regulated side, in August and in October, we retired via open market purchases, 22 million of Alliant Energy Resources senior notes bringing our year-to-date repurchases to 42 million. As of today, our earnings from continuing operations include approximately 5 cents per share of debt repayment premiums, 4 cents of which is included in our year-to-date September results. This month, Alliant Energy issued 100 million in New Zealand dollars of non-recourse redeemable preferred -- or preference shares secured by our investment in Trust Power Limited. This non-recourse financing was motivated by the current considerable strength of the New Zealand currency. The approximately 68 million U.S. proceeds from this transaction are available for further debt reduction at Alliant Energy Resources.

We also announced that we had completed common equity in 2004 under the continuous equity program launched in May of this year. Through this program, we raised proceeds of nearly $90 million. While the decision was made not to issue any more equity through this program this year, we intend to continue to issue modest amounts of equity through both our dividend reinvestment plan and 401-K programs throughout the remainder of 2004. As of today, the Company has issued approximately 18 million in equity through September through these programs, thus continuing to strengthen our balance sheet.

I would also note that as a result of the recently enacted American Jobs Creation Act, we are evaluating the potential tax implications for Alliant Energy related to the repatriation of foreign earnings from our investments in China and New Zealand. As a result of all of these actions, we are once again reporting a strong liquidity position. As of September 30 we had 21 million of commercial paper outstanding, combined with cash and short-term investments our consolidated liquidity position was in excess of 800 million at the end of the third quarter. Our targeted capitalization ratio is in the upper 40 to lower 50% range for total debt-to-capital. As of the end of the third quarter of 2004, our debt-to-total-capital ratio remained unchanged from its second-quarter level of 47%. Yet this represents a dramatic improvement from the first quarter of 2003 when it stood at 61%.

Our preliminary figures show our cash flows from operations for the 9 months ended September 2004 are approximately 315 million compared to 198 million for the same period in 2003. Our anticipated 2004 capital expenditures are approximately 650 million to 700 million, of which approximately 450 million has been incurred through September. Approximately 88% of these capital expenditures were related to our domestic utility operations. Our income statement also reflects the benefits of our continued debt repurchases. Interest expense is down 4 million for the third quarter and 26 million year-to-date as compared to the same period in 2003, with the lion's share of the reduction coming from our non-regulated businesses.

In summary, our earnings remain on target. We have completed all of our planned long-term financings for 2004 and our liquidity and overall financial condition are solved. This short, our commitment to final financial discipline and crisp execution is paying off for both our share owners and our customers, and we intend to work very hard to keep it that way. As we plan for 2005, it is our intent to issue 2005 earnings and other financial guidance in January of 2005, in conjunction with the release of our overall 2004 financial results. I will now turn the call back over to Erroll.

Thank you, Eliot, and Bill as well. As I have done in previous calls, let me close before we go to the questions by just a few -- with just a few forward-looking statements. As we stated for over a year, we are now placing more emphasis on growth through our regulated utilities, and we will also continue to hold certain non-regulated investments to augment that growth. Our stated high-level five-year aspirational goal is to provide, 1, above-average shareholder return compared to our peer group. And 2 compound annual earnings growth per share of at least 5% over our plan cycle. That's 5% growth on an average annualized basis with fluctuations in any given year that may be above or below the targeted range. We believe we are on track to meet that goal and expect to do so over the 5-year plan period.

With that, let me turn the call back to Becky for the question-and-answer session.

Thank you, Erroll. At this time, we would like to open up the call to questions from members of the investment community. Once again, I would like to remind you that due to SEC regulations, we cannot comment at this time on either Whiting Petroleum's business or the proposed common stock offering, and will not be answering questions during this Q&A session on these subjects. Our conference call operator will now guide us through the Q&A session.

At this time I would like to remind everyone, if you would like to ask a question press star then the number 1 on your telephone keypad. We will pause for a moment to compile the Q&A roster. Your first question comes from Aaron Bond with Robert W. Baird.

Good afternoon.

Good afternoon.

Congratulations on a good quarter considering the weather we have had up here.

Thank you.

A question with regards to China. Eliot, you touched on some of the tactical things you are doing to address the coal and transportation costs. Have you made -- turned the corner on that already? Or when do you see that coming in line with what would you like to see going forward?

I think Bill is closer to the operations, Aaron.

Okay.

Yeah. When you think of our China investments, think of it as 7 discreet generating projects. We have secured tariff relief with respect to 2 of those 7 facilities so far. We continue to vigorously pursue tariff relief as it relates to the other 5 facilities. We exercise as much vigor as is possible in the marketplace to ratchet down the coal prices that we pay. We are having modest success in that effort at best, and I would conclude by saying that we do look at our China operations under these circumstances with the objective of understanding, are they performing in a thermally efficient fashion? Are they minimizing their auxiliary power usage so that we can be comforted that the facilities are operating at a U.S. grade standard of efficiency? And I am pleased to say that they are uniformly operating at U.S. grade levels of efficiency.

So going forward next year in '05, I know you are not giving guidance on a segment level, but would you be -- would you anticipate similar levels of earnings going forward? Or is this going to continue to pressure earnings going into next year.

This is Erroll, Aaron. As Bill suggested, we are essentially in a regulatory process. We don't see any strategic or structurally broke there. It is just that costs have gone up very quickly, and we are working the process. We expect to work the process. We expect to work the process successfully, and, therefore, we do not expect that we would see declines on an ongoing basis as we get the tariffs in line with cost. Now one can always argue, of course, that costs will continue to escalate, but, again, the regulatory regime is evolving, and we are getting better at seeking those. And just also, I just want to make 1 qualification just in case somebody was counting. We have 7 plants in China that are operated by our peak subsidiary and we have 3 other plants there as well for a total of 10.

Sticking with the China then and the repatriation with New Zealand. In the past you've talked about possibly using some of that excess cash and building more plants in China. Has that changed?

Again, if -- our articulated strategy in China was to take the portfolio to a size where it -- we had the potential to IPO it, because that we believed was the route to maximizing our share owner value. That is the exact same route that we did with Whiting when we spun it off. We tried to get it -- we made significant investment. Took it to a critical size and had a very successful IPO there. Again, it is our -- as we have stated before, our intention is to use in-country cash flows to increase the size of the portfolio there to a size where we can IPO it probably on a Hong Kong exchange.

Okay.

What I would add, Aaron, is that the new tax law is clearly very complex, and we are just beginning the process of studying how it might be applicable to us, and I think for purposes of tax efficiency, one should differentiate that element of financial management from the decision to deploy new capital.

Okay. Do you happen to have any idea what the excess cash would be at those 2 segments?

The cash that we currently have in-country in China?

And New Zealand that could be repatriated. Do you have any idea what that balance would be?

Well, it is a very preliminary estimate, but it might be somewhere in the range of, you know, 55 million to 75 million.

Okay. Thank you for the call.

Your next question comes from David Dickens with Deep Haven Capital Management.

Good afternoon. Can you give us a little more color on your decision to exit the business in Illinois?

Yeah, it's a pretty simple decision there. Rate cases are getting increasingly complex, as well as increasingly expensive, and one of the things that we look at, of course, is if the cost of putting a rate -- of doing a rate case is, in fact, greater than what we might achieve in results or outcomes from that case, then your business is probably a bit too small there. It is just a very small part of our business, and the regulatory challenges there were as great or greater than in other jurisdictions, so it really didn't make a lot of sense for us to remain in those jurisdictions, and we are really pleased by those who are very interested in those properties and, again, we expect to complete those in the near future as well.

What's the number -- what is the customer count in Illinois?

Well, we have essentially have 2 businesses there. One was a business in South Beloit that was part of Wisconsin Power & Light, and when we had the merger, we got a part over on the western side of the state in Golina [ph]. But between the 2 of those, I think there's probably less than 50,000 customers or about 50,000 customers there.

Okay. Thank you. And the other question I have is, can you talk about the plans for compete -- for completing the equity sale that I know has been halted at least for the remainder of the year. Kind of what the outlook is for that in 2005? Is that something you believe you will complete?

We will discuss all of our financing plans for 2005 and whatever focal lengths we may have looking forward in connection with our 2005 earnings guidance in January. I wish I could be more specific, but we are really not in a position to do that at the moment.

All right. Thank you.

Again, I would like to remind everyone, if you would like to ask a question, simply press star and then the number 1 on your telephone keypad. Your next question comes from Jeff Savello with Duquesne Capital.

How are you?

Very good.

I just had 2 questions. The first sort of relates to the weather over the course of, I guess, these 9 months of 2004 so far. Do you have sort of a number -- a net deficiency versus normal in EPS?

Yeah, let me give you the cooling days, because essentially those are the -- where we make the most money as opposed to the heating days. And as we mentioned earlier, we think it cost us somewhere between 14 and 18 cents, but let's take our 2 major centers, Madison and Cedar Rapids. Normally in Madison, you would see about 181 cooling days. And last year we had 191. It was above average. This year we had 102. And it was even more pronounced in our largest load center in Cedar Rapids because there normal cooling-degree days are 276. And, again, that's just for the quarter, for the -- not for the year, but for the quarter. Normal is 276, last year it was a little cool, it was 232, and this quarter it was 85. So we -- this was the summer that did not come.

Right.

Our service territory. Again, I want to emphasize, as Bill did, our people did a fabulous job on our Lean Six Sigma programs and other cost control programs partially offsetting a lot of that decline.

Great, great. And my second question. You threw out a figure related to the China and New Zealand investments, I think it was 55 million to 75 million that you might be able to repatriate under this new jobs bill, I know it is not formalized and it was just an approximation, but is that -- that is not actually selling the projects and bringing all the capital home, is it? It is just sort of dividends, is that the right way to look at it?

It's retained earnings earned in-country not yet taxed here.

Okay. Okay. I got it. Great. Thank you very much.

Okay. Thank you. Thank you for your question.

Your next question comes from Greg Oreal with Lehman Brothers.

Thanks. Good afternoon. Good afternoon, Greg. I was calling about the -- was asking about the coal plant you are looking to build in Wisconsin and you talked about a partner you were looking to attract. Would that be a utility partner or financial investor or --

Yeah, Greg, this is Bill, perhaps I was -- I may have slurred my way through that, but the partner who we have announced publicly that we're working with in that effort is Wisconsin Public Service Corporation out of Green Bay.

Just double checking. Okay. That's pretty much it. Thank you.

Thank you.

Your next question comes from David Grumhaus with Copia Capital.

Good afternoon, congrats on a nice quarter.

Thank you.

A couple of questions on Brazil. First, what do you think the timing is and I know you can never really know but to get this -- get a resolution reached there. Is it realistic to think about year-end? Or who knows.

Well, I think you hit the nail on the head when you said you don't really know. We have been working, as you are all aware, over the last several years to improve performance down there, and I do want to point out that in-country, we now have had 5 consecutive quarters of positive performance in Brazil. So they are profitable in Brazil. They are not profitable enough, however, from our perspective to offset our interest carrying costs here. And so it has been made there, but as Bill mentioned, we continue in a dispute. We have decision trees and I am sure some of your preferred alternatives are on those decision trees and we are continuing to march down those, but, again, at all times, we want to make sure that we take the path that we believe maximizes our share owner value.

I mean clearly, we don't have limitless patience, and as I have said earlier publicly, you know, we need to also look at Brazil in the context of our entire international portfolio. And the rest of the portfolio is progressing along the appropriate strategic paths. As I mentioned before, you know, we are getting China to the IPO state, and, so, again, we will not have limitless patience, but we are not just sitting there. We are pursuing a number of alternatives to increase the value of our investment there.

Okay. Following up on that, when you talk about litigation expense and I know you have mentioned this now for a couple of quarters. Can you give us a sense of what that added cost is in the quarter and what it is on a year-to-date basis?

It is probably about a penny a share. And as you can see, the year-over-year difference was about a penny for the quarter. And so this cost us about a penny a share.

Is that for the quarter or for the year?

Well, the difference for the quarter is a penny, but it's cost us -- I mean year-to-date it's probably 2 cent to 3 cents.

Okay, great. Thanks a lot for the time today.

Thank you.

At this time, there are no further questions. I would now like to turn the call back over to Ms. Johnson for any closing remarks.

With no more questions, this concludes our call today. Thank you for your participation this afternoon and for your continued support of Alliant Energy. A replay of the call will be available through November 5, 2004 at 800-642-1687 for domestic callers and 706-645-9291 for international. Callers should reference conference ID 242627. In addition, an archive of the conference call and a script of the prepared remarks made on the call will be available in the Investor section of the Company's website at www.alliantenergy.com/investors later today. Thank you.