Alliant Energy Corp (LNT) 2005 Q1 法說會逐字稿

Welcome to Alliant Energy's first-quarter 2005 earnings conference call. At this time all lines are in a listen-only mode. I would like to turn the call over to your host, Becky Johnson, Manager of Investor Relations at Alliant Energy.

Good morning, and thank you for joining us today for Alliant Energy Corporation's 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.

Joining from a number of locations this morning are Erroll Davis, Alliant Energy's Chairman and Chief Executive Officer; Bill Harvey, President and Chief Operating Officer; and Eliot Protsch, our Chief Financial Officer, as well as various other senior executives of the organization.

As most of you are aware, earlier this morning we issued a news release announcing Alliant Energy's first-quarter 2005 earnings. If you haven't seen the release, a copy of it is available on our website at www.alliantenergy.com in the investor section.

I would also note that unless otherwise noted all of our per-share references on this call refer to diluted earnings per share.

We have allotted an hour for this morning's call, which will include time to take questions from the investment community following some prepared remarks from Erroll, Eliot and Bill.

Before we begin, I would like to remind you that our remarks we may on the 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 an Alliant Energy's filings with the Securities and Exchange Commission. We disclaim any obligation to update these forward-looking statements.

With that said, I will now turn the call over Erroll Davis.

Thank you very much Becky, and good morning to all of you on the call. We're here this morning for a number of reasons. First, we want to report on our earnings for the first quarter. And given that we have had a number of movements, we also want to provide an update on the continuing progress we're making in executing our strategic plan. We will also provide you some insights into our plans for the remainder of this year.

As you are all aware, on April 21st we issued a preview of our first-quarter earnings. Today, consistent with that message, Alliant Energy reported earnings from continuing operations for the first quarter of 2005 of 11.6 million, or $0.10 per share, compared to income and earnings per share from continuing operations in the first quarter of 2004 of 36.3 million and $0.33 respectively.

Alliant Energy's net income and earnings per share for the first quarter of 2005 were 2.4 million and $0.02 respectively. This compares to net income of 34.1 million and EPS of $0.31 for the first quarter of 2004. Again, as we have noted in the past, these figures reflect results from businesses that we have now classified as discontinued operations. These include our energy service business, which also has now been sold.

Earnings from our domestic utility operations were 41.8 million, or $0.36 per share, compared to earnings of 33.4 million, or $0.30 per share, in the first quarter of 2004. We're pleased with the 20% increase in earnings per share from our core domestic utility business. There we continue to focus on earning our allowed returns, while maintaining operational excellence and providing customers with reliable and environmentally friendly utility service.

Our non-regulated businesses, however, posted a loss from continuing operations of 32.1 million, or $0.28 per share, compared to income and earnings per share of 6.1 million, or $0.06 per share, in the first quarter of 2004. As was noted in our release, however, these results include two charges that are not related to the fundamental operations of the business.

First, we elected to retire an additional $100 million of long-term debt at Alliant Energy Resources, which resulted in an $0.08 per-share charge computed based on the average shares outstanding in 2005. While this obviously had a negative effect on our short-term earnings, our continuing efforts to reduce debt at our non-regulated business is part of our strategic plan and enables us to continue strengthening our financial profile, and that is happening. Since early 2003 we have now retired over $1 billion of debt and lowered our total debt to cap ratio from over 60% at that point in time to 47% at the end of the first quarter, something we're obviously pleased about.

Our quarterly non-regulated results also included a non-cash valuation charge of $0.10 per share related to several generating facilities in China. If you add back these two items, our earnings from continuing operations were $0.28 per share.

Needless to say, we're disappointed by the results from our international investments this quarter. However, as Bill will explain in detail later in the call, we are engaging advisers and are pursuing strategies that will both reduce our volatility and allow us to achieve maximum realizable value from those assets. And we will talk quite about a bit about that later.

Before that, however, let me turn the call over to Eliot for a financial overview of the first quarter, as well as a discussion of various other financial matters. Eliot?

Thank you Erroll, and good morning everyone. I would like to take a few minutes to discuss both our domestic utility and international results in a bit more detail.

As Erroll indicated, we are very pleased with the results from our core domestic utility business, which posted a 20% increase in earnings compared to the first quarter of 2004. Yet while utility earnings were strong, we have not yet achieved our authorized returns. We remain committed to bridging this gap.

The increase in utility earnings in the first quarter was driven by higher electric utility margins due to the impact of rate increases implemented in 2005 and 2004, as well as a 2% increase in weather normalized sales. This sales growth included an increase of 2% in industrial sales, reflecting improving economic conditions in our domestic utility service territories. These items were partially offset by the impact of higher than anticipated fuel and purchase power expenses at WP&L, which in turn was driven largely by an unplanned outage at Kewaunee, our nuclear plant, and slightly milder than normal weather.

Since the first of the year, we also have had significant developments in several rate cases with the Wisconsin Power and Light fuel and purchase power issue having the greatest impact on the quarter. WP&L filed a fuel related rate case in March because of increased fuel and purchase power costs experiencing in February with such increases continuing and are now expected to result in total fuel and purchase power costs that would exceed annual cost projections currently being recovered in rates. These costs were exacerbated by WP&L's need to generate and/or procure higher cost replacement power due to the continuing outage that began at the Kewaunee Nuclear Power Plant in February. Effective April 15th, the Public Service Commission of Wisconsin granted WP&L authority to increase electric rates on an interim basis by approximately 26 million. Interim rates will remain in effect until a final order is issued later this year.

The extended unplanned outage at Kewaunee, now expected to last until mid to late May, will have further impact on WP&L's fuel and purchase power costs. For that reason, WP&L filed a request with the Public Service Commission of Wisconsin to defer approximately 13 million in incremental costs associated with the extended unplanned outage that are over and beyond what was requested in the March 2005 fuel rate case. This request was granted by the commission on April 15th. WP&L has also been granted a deferral order for the incremental O&M spending related to this unplanned outage.

Wisconsin Power and Light's $63 million base rate increase request for its 2005/2006 split test year rate case is proceeding through the regulatory process as scheduled. The hearings were completed last week. We expect new rates to become effective on or about July 1, 2005, which is the beginning of that test year.

Allow me now to move on to the financial performance of our international businesses. As Erroll mentioned, we are disappointed with our international results for the quarter. The details of our China and Brazilian financial performance are included in our earnings release.

The release referenced gains from the sale of two of our Hydro assets in Brazil that occurred in the first quarter in 2004. Those gains accounted for over half of the 2005 versus 2004 first-quarter earnings variance. Earlier this month our Brazilian partners completed the sale of additional hydroelectric assets, and we expect to realize a modest gain on this sale in the second quarter of this year.

The proceeds from the sale are expected to be utilized to pay down in-country debt in Brazil. As we noted in our release, higher interest, litigation related and other operating expenses also contributed to the lower results from our Brazilian investments in the first quarter of 2005 when compared to 2004.

Our China results were down $0.15 per share in the first quarter of 2005. Most of the decrease was due to recording a $0.10 per share non-cash valuation charge related to several of our China generating facilities. The continued downward pressure on the profitability of these generating facilities, as well as increased likelihood that we will divest our China assets before the end of their useful lives, were the primary drivers for this valuation charge. Continued downward pressure on margins from increased coal and transportation costs and the lag related to associated tariff increases in China's evolving regulatory involvement environment also contributed to the lower results from our China investments.

Lastly, we currently estimate repatriating approximately 55 to $60 million of cash from China in 2005 under the provisions of the American Jobs Creation Act.

As Erroll noted in his remarks, our ongoing debt reduction efforts continue. In the first quarter we retired an additional $100 million of 7 3/8 senior notes at Alliant Energy Resources. Retirement of this debt resulted in an $0.08 per-share charge as computed on the 2005 average shares outstanding, but contributed to the continued delevering of our balance sheet. I would reiterate as well that our actions since 2003 have resulted in the retirement of over $1 billion of debt on a consolidated level. Our targeted capitalization ratio is in the upper 40% to lower 50% range for total debt capital, with our actual ratio at end of the first quarter being 47%.

Once again we are reporting a strong liquidity position. As of March 31 we had $36 million of commercial paper outstanding. Combined with cash and short-term investments, our consolidated liquidity position was in excess of $750 million at the end of the first quarter.

Our preliminary figures show our cash flows from operations for the first quarter of 2005 exceeded $200 million, compared to approximately $100 million for the same period in 2004. Approximately $75 million of this increase simply relates to changes in the level of utility receivables being sold, but our cash flow guidance for 2005 remains in the range of 575 to $625 million.

Our capital expenditures for the first quarter of 2005 were approximately $120 million. We have lowered our anticipated 2005 capital expenditures to $560 million from the previously reported range of 625 to $655 million. The decrease relates to a reduction in the anticipated expenditures related to Alliant Energy's China and Laguna del Mar investments. As a result of our adjusted spending plans, approximately 91% of the anticipated 2005 capital expenditures are now solely related to our domestic utility operations.

I would also note that the rating agencies recently completed their annual reviews of our ratings, and in February Moody's upgraded Alliant Energy Resources' unsecured long-term debt and Alliant Energy's commercial paper ratings by one notch to BBB2 and P2, (ph) respectively -- or BAA2, I'm sorry to P2, respectively.

Finally, the last topic I will cover is our 2005 earnings guidance.

As a result of lower anticipated results from our non-regulated business, international in particular, we have lowered our guidance for earnings from continuing operations in 2005 to a range of $1.40 to $1.65 per share. The primary drivers of this $0.30 reduction in the earnings guidance range are decreased earnings in Brazil and China, including the non-cash valuation charge we recorded in the first quarter of 2005 related to several of our generating facilities in China.

Further, this updated guidance includes an estimate of $0.10 to $0.15 per share for debt repayment premiums that the Company currently anticipates incurring in 2005 as a part of its ongoing debt reduction program. As noted earlier, we have already incurred $0.08 of this $0.10 to $0.15 estimate.

The guidance also reflects the Company's assumptions related to contemplated equity issuance, up to $90 million in 2005, of which 30 million is expected to be generated to from our dividend reinvestment and 401(k) plans.

Finally, I would emphasize that our guidance for our domestic utility business remains unchanged at $1.80 to $2 per share.

I will now turn the call over to Bill to provide you with an operational update, as well as a discussion on a number of opportunities and challenges we are facing during the remainder of the year.

Thanks Eliot. I'll begin with a discussion of our domestic utility business, and then move on to our non-regulated businesses.

On the generation front, construction of the 300 MW simple cycle natural gas-fired Sheboygan Falls Energy Facility is over 90% complete and is expected to go online in June of this year. The project is awaiting lease approval from the Public Service Commission of Wisconsin under the Wisconsin Lease Generation Law. When the lease terms are approved, our non-regulated affiliate will own the facility and lease it to Wisconsin Power and Light Company for an initial term of 20 years with an option to renew two lease renewal periods thereafter. Wisconsin Power and Light Company will be responsible for the operation of the plant and will have exclusive rights to its output. The Commission's verbal order is expected in early May with a written order to follow a few weeks later. We will then have a certainty of return for 20 years related to this facility.

Also, our plan to increase base load generating capacity in Wisconsin continues to progress. We continue to narrow the potential sites and technologies for a planned new plant, and intend to share our findings with you in the very near future.

We're also encouraged by the legislative efforts underway in Wisconsin to develop a model similar to Iowa's that will permit utilities to apply to the Commission for determination of the rate-making principles that will apply to a generation investment prior to the construction or acquisition of those investments. In fact, such a bill has been passed by both the Senate and Assembly, and is currently awaiting Governor Doyle's signature.

On April 1st our utility business began to function under the Midwest market initiative of MISO. The implementation of this restructured wholesale electricity market marks a major change in the way utilities buy and sell electricity, planned transmission needs and scheduler to generation. We're well-prepared to function in this restructured energy market, and have not experienced any major problems with the transition. We will contain to work closely with MISO and other market participants to ensure that our needs and the needs of our customers are being met.

Our domestic utilities are currently working through the regulatory process to establish recovery mechanisms for MISO-related costs. In the near term, we have approval to defer costs in Wisconsin. And in Iowa we have been authorized to pass through MISO-related costs under the Energy Adjustment Clause.

We also continue to monitor developments in the transmission industry, including the recent Initial Public Offering efforts of ITC Holdings. We're assessing various options with the potential to create value for us regarding our transmission investments. And we also continue to monitor closely the evolving federal environmental initiatives. We're convinced that we understand the potential impact of these initiatives on us, and we believe those impacts are manageable.

Recently, we entered into a weather hedge for our domestic electric utility business to minimize the potential for volatility in our electric margins from extreme summer weather conditions. We've utilized winter weather hedges in our domestic gas utility business for many years now with excellent results. The decision to extend the use of weather hedges to our summer electric utility business is a long-term strategic decision to manage our business going forward in a manner calculated to continue reducing the earnings volatility we face and improving the predictability of results at our domestic utilities.

Let me shift gears for a moment and review the status of our various asset sales.

Last week, the Public Service Commission of Wisconsin issued its written decision approving the sale of the Kewaunee Nuclear Power Plant to Dominion Energy Kewaunee, Inc., a subsidiary of Dominion Resources. The final terms of the sale will obviously reflects the impacts of the current unplanned extended outage.

Interstate Power and Light's efforts to sell its interests in the Duane Arnold Energy Center are progressing as planned, with bids due in June. We expect to select and announce a bid winner in July of this year. There has been strong interest from both traditional nuclear investors, as well as non-traditional institutional investors.

Let there be no misunderstanding here, however, we continue to support nuclear energy. Nuclear power will remain a strong component of our diversified energy portfolio, even after the sale of our interests in these two nuclear power plants as we intend to continue purchasing our respective portion of the generation from these plants after the sales are consummated. However, we do not believe that the financial exposure associated with owning a single nuclear generating facility is in our customers' or our shareowners' best long-term interests.

We're in the final stages of selecting a buyer for our Illinois utility assets, and then we will begin the negotiation process. We expect to have a signed sales agreement perhaps by June. And regulatory approval of that sale is expected to take up to 11 months after the sales agreement is signed.

We also continue making progress on the divestiture of additional non-regulated investments. We announced on April 18th that we had completed the sale of our Cogenics energy services business. The sale resulted in net cash proceeds of approximately $35 million, which will be available for AER debt reduction.

Finally, we continue to make progress towards the sale of our oil and gas pipeline gathering systems, our small biomass facility in Cedar Rapids, and our two remaining utility water businesses.

I should note that as we have shed less productive assets, our return on invested capital has steadily increased over the last two years.

Now, let me turn to an update on our international businesses. I'll start with China, which I visited earlier this year.

We continue to experience margin pressure as coal and related transportation prices at our facilities have risen much more than our tariffs. Frankly, the pace with which the government and various provincial authorities are reacting to this margin squeeze has not met with our expectations. Despite the recent publicity of the Chinese government that action on tariff increases is soon forthcoming, we are reducing our forecast for the year in China to reflect both our disappointing experience to date and our concern over the pace of tariff adjustments in the near-term future.

As part of the guidance we issued with our year-end 2004 earnings release, we announced that we expected to invest approximately $60 million of additional capital in our China businesses in each of 2005 and 2006. Given the current financial challenges we are facing with our China investments, we no longer intend to make these additional investments. And we have retained a financial adviser to assist us in evaluating the business alternatives for our China investments, including the potential merger or sale of the business. We plan to make decisions on the future of this business by the midsummer.

Moving on to Brazil, we continue to examine the operations and structure of our investments in order to accelerate financial improvements and protect our shareowner interests. We're continuing both discussions and disputes with our partners regarding various options to accomplish these goals.

As previously reported, we have taken measured legal actions in Brazil to protect our minority shareholder rights. Earlier this month an arbitration award in our favor related to our investment in the Juiz de Fora generating facility was upheld in the International Court of Arbitration. The award contemplated us receiving US$22 million from our Brazilian partners in exchange for our 50% direct ownership interest in this facility. We have entered into a structured settlement agreement, under which we have received $11 million in cash as a non-refundable deposit, and will receive the remaining $9.4 million upon the close of the exchange of our direct 50% interest in the facility, which must occur by April 1 of 2006. If the transfer of our direct ownership interest does not occur by April 1, 2006 our Brazilian partners will no longer be required to purchase our direct interest, but we will be allowed to keep the $11 million cash deposit, as well as our 50% direct interest in the facility. This settlement agreement allows us to avoid the time, uncertainty and costs associated with enforcing the arbitration award through the Brazilian courts.

I would note that our direct investment in the Juiz de Fora facility as of March 31st of 2005 was approximately $21 million.

A second arbitration against our Brazilian partners for shareholder rights violations related to our investment in the Cataquazes Distribution Company is proceeding as expected, and we anticipate a decision being issued by the International Court of Arbitration in May or June of this year.

While we continue to pursue our rights in the legal arena, we're also attempting to negotiate a resolution of our disputes. One way or another, we are focused on protecting the value of our investments in Brazil. We have engaged a financial adviser to assist us in exploring our strategic alternatives with respect to our Brazilian investments. And in addition, I'm planning to visit Brazil later this year to see if I can help further those efforts.

I would also note that I recently returned from a trip to New Zealand. I'm very pleased to report that our New Zealand investments continue to perform in line with our expectations. Based on the exchange rates and trading prices as of March 31st, our investment in Trust Power has a market value of $277 million, which compares favorably to our carrying value of $91 million.

We are taking steps to manage our currency risk and to assure that we capture the value of this investment for our shareowners. And I would add our relationship with our partners in New Zealand remains positive and constructive.

Finally, I'll touch on Laguna del Mar, the resort development in Mexico. As noted in the past, we found the developer's pace and level of performance in all phases of the project to be unacceptable, and we took action to protect our interests and position ourselves to maximize the recovery of our investment in this project. This past February, we completed the transfer of the ownership of the development project to Alliant Energy, and we are now in a position to control the choice of alternatives concerning this investment.

I will reiterate that it is not Alliant Energy's intention to be in the real estate development business long term. A real estate investment adviser is assisting us with evaluating various alternatives, including entering into a joint venture with experienced developers or finding buyers for the entire project. Alliant Energy intends to pursue the course of action that best enables it to protect its interests and maximize the recovery of its investments in a timely fashion.

In closing, let me summarize what I believe to be the major points of our discussion with you this morning. We are pleased with the 20% increase in earnings per share from our domestic utility businesses. We are disappointed by the results from our international investments, and have engaged advisers as we intensify our efforts to determine our intentions with respect to these investments. The strategic actions we have taken to narrow our business focus have significantly improved the financial profile of this Company. And we are pleased that we can point to over $1 billion in consolidated debt retirement since early 2003. We are committed to building on that momentum.

I will now turn the call back over to the operator, who will discuss the process we will use for the question-and-answer portion of the call.

(OPERATOR INSTRUCTIONS) Dave Parker, Robert Baird.

Thanks for a very detailed discussion of the moving parts here. But I still have a lot of questions, so I hope you can bear with me. First off, a couple of easy ones. Can you give us what the regulated return on your US utility operations was in the first quarter of '05?

David this is Erroll. I appreciate your question. Given that we are in a number of locations this morning I'm going to try and gate keep these questions. So bear with me as I try and channel them to the correct person.

In terms of that, let me defer that one -- or refer that one -- to Eliot. I'm not sure we divulge those things, but if we do I'm sure he will be happy to tell you.

First of all, good morning and thanks for the question and listening in. As you know, the manner in which the returns are calculated in the rate cases don't always connect with the simple math that you folks would do when you look at the 10-Q, which will be out in a couple of weeks. But when you take your 10-Q and conduct those calculations on a trailing 12 basis, I think you'll be in that 10 to 11% range overall for our regulated utilities. But you should necessarily interpret that number as directly corresponding to that which is authorized in rate cases.

Good, thank you. That gets me where I want to go anyway.

Second question has to do with if you could refresh my memory with the plant coming online in the second quarter, or I guess the summer anyway, what is sort of the cost, and what was the authorized return and the equity debt structure of that whole approval?

Why don't we let Bill handle that one?

Sheboygan Falls we estimate is going to cost us about 140 to $145 million, right in that range. That's the plant you were referring to, isn't it?

Yes it is. And the PSE (ph) approved return on equity there and the equity percentage was --?

That will be, as I indicated in the prepared remarks, that will be determined as a part of the lease approval process. And that's the decision we expect in the near future.

In May, okay, or so. Alright, very good. Shifting gears here to the international operations, could you tell me -- you had two moving parts you identified in the press release. Interest rates increasing, could you tell me what the interest rates are today, and maybe what they were a year ago?

David, are you referring to a specific country or --?

Yes, in-country in Brazil. I'm sorry.

Okay, the in-country rates in Brazil. Eliot, do you have those at your disposal, Eliot or Bill?

I can certainly give, I think, a general range. I believe interest rates have come down modestly in Brazil, but they are still clearly very, very high by US standards, and I would say exorbitant when compared to the rate of inflation which is one of our challenges down there in terms of money lender's earning equity-type returns. So I think we're looking at the, depending on the level of security and such, anywhere from 18 to 25%.

And then you also mentioned there are some more hydro assets that will be sold by the partnership. I assume that will be used to lower debt, so potentially we would see margins improved in Brazil.

Again, we did indicate in the remarks that they have in fact sold (multiple speakers) hydro. And we will be booking a gain from that in the next quarter.

You didn't release with the amount was, so I don't know if you'll tell me now.

Eliot, I don't know whether you know that at this point.

We can give you sort of a general estimate in the $0.03 to $0.05 range. And again, we have every expectation that our partners will use that money to pay down debt when we evaluate the overall year. All of that is in our guidance. But still, the results are going to the below our expectations.

The $0.03 to $0.05 number, that's the gain, Eliot, that you --

Yes.

Okay. Question then if we shift to China. Since we had a $0.05 swing from the positive contribution to the negative here, refresh my memory. I know that the increased coal transportation problems on that side started building last year. So I guess my question is do I expect to see the same kind of delta or change second, third, fourth quarter? Or were those increased costs fully reflected in operational results midway through last year?

As Bill mentioned, and he certainly can and should build on this answer, we had in the past certainly anticipated tariff relief to mitigate margin pressures. We are uncomfortable, and frankly disappointed, with the pace of that tariff relief. And also, as suggested, given that we now believe we may exit this market before the depreciable lives of those assets, we had to take a very hard look at the value of those assets at this point in time. That resulted in valuation charges.

Again, the government has announced its intent to make these tariff changes. But that's an announcement at the national level, and that has to work through provincial levels. And again, we have not been happy with the pace of that process which led to our reforecasting the results from those properties this year.

I don't know, Bill, whether you have anything you want to add to that.

Very little. Dave, you're absolutely right, this decline did begin last year. Our view is that the Chinese government is doing exactly the right thing by promulgating a national policy which will effectively call for the implementation of what we here in the states would see as fuel adjustment clauses. Our concern is with the pace at which they are doing it. And while conventional wisdom might suggest we would begin to see the implementation reflected as early as the second quarter of this year, we remain a little more skeptical than conventional wisdom and suspect that it will take longer than that.

Right. Assuming you get the cash, we have got sources coming from -- are you able to from your arbitration order in Brazil get that money back in the country to pay down further debt? Or is that a problem given taxes?

I'm sorry, given? I didn't hear (multiple speakers)

Given the international tax situation.

Again, let me defer that one to Eliot. I don't believe we'll have problems getting money out of (multiple speakers)

We've begun the process with respect to the cash we have received in Brazil, and that process is expected to encompass 90 to 120 days.

Okay, so with that, as well as the other cash you're repatriating from China, you have got another 60 to $90 million to pay down debt with, I assume. Is there any debt that you could go after without paying substantial penalties?

We're certainly willing to redeem all the debt that people bring (ph) to us without prepayment penalties. But offhand I'm not aware of any.

I'm sorry I have so many darn questions here. With all your frequent-flier miles, Bill, what do you plan on doing?

Probably letting them sit in the drawer, which is where they usually sit.

Thanks for your answers. Thank you.

Steve Fleishman, Merrill Lynch.

Good morning. A couple of questions. First, you mentioned you're still under earning at your utilities at the beginning of the call. If you took like the midpoint, the $1.90 of utility range, would you still be under earning, and roughly by how much? Or what kind of regulated return is that midpoint assuming?

As Eliot suggested, the strict translation of those allowed returns to what you would see in the 10-K is not always as transparent as we would like. But again, Eliot, if you have a more focused answer to that you should do it at this time.

I would, I think, comment that $1.90 is below the authorized return that we currently have in our various jurisdictions. I think it's important to keep in mind that we're very much in an investment mode with building new capacity, etc. And one our states has an historical test year and the other and has future test year. And of course we have differences in how fuel clauses operate, and then there are various elements and case filings, as you know, that are -- costs that are allowed and some that are disallowed. When you add it all up, we're just not there yet. But we're very focused on trying to get those earned returns to match that which we're authorized.

Secondly, I think if you look the earnings guidance range, you reduced it by $0.25 a share versus you're prior range.

30 on the range. It was 30 on the previous range.

I'm sorry. $0.30 a share?

Yes.

And obviously, $0.10 of that is this onetime valuation adjustment in China. And I think the $0.06 in the quarter was already contemplated in the prior guidance.

Erroll, would you like me to (multiple speakers)

I guess my question is of the part that is kind of related to operational earnings not these onetime events, is that all related to weaker expectations for China, or is some of that also related to weaker expectations for Brazil or other non-regulated businesses?

It is primarily China and Brazil.

So it is both China and Brazil?

Yes.

Could you split those up in some way, the extent of it, or it's hard to say?

As we look out for the remainder of the year, there is moving parts. I think when the Q comes out certainly you'll see indications on looking back. But for purposes of your modeling and trying to understand our moving parts I think a 50-50 range is reasonable.

We've been having some trouble just understanding the equity issuance needs and whether those are still required if you do sell, for example, Duane Arnold or the Illinois utility assets, or those needs are needed on top of those assets sales.

That's an excellent observation. We've been very guarded about the amount as we talk about up to because you can certainly in your modeling generate what are reasonable cash returns from these sales. But the problem we have is that there's a difference in our projections from if it happens in December versus when it happens in January. And so there's a lot of things we can try and predict, but how long regulatory processes and approval processes are going to take is something that we've given up predicting over time.

For example, if you look at the Illinois sale, they have up to 11 months to approve that. Now we believe that it's a simple transaction that should easily be approved, but we just don't know when they're going to approve it. And the same thing, Kewaunee needs to get back online. And we need to complete the transaction and go through the approvals there.

We don't think there's any structural problems in any of those asset dispositions, but there are clearly timing issues as to when we will recognize the proceeds. And while we're dealing with those timing issues, we're also dealing with the commitment to keep our balance sheet where it needs to be and continue to strengthen it as we move forward. Thus, you see our rather guarded and clearly not precise guidance of issuing up to (multiple speakers) million dollars in equity.

Eliot, I don't know whether you want to build --

No, I think that really covers it. There is probably a little slack in the 401(k) and dividend reinvestment numbers as well. We get a lot of optional cash payments. People elect in and out of the plan.

I think to the major theme Erroll was communicating to you, Steve, is that when we look at our cash needs, there's a lot of moving parts. We attempted to provide guidance to those who follow us and incorporate into our guidance what we see as a maximum amount of additional equity. So at the margin, if that ends up being 60 million in or out through some sort of a sale, that's less than 3% of shares outstanding. So at this point in time it remains an up to number.

One last quick question. The utility earnings guidance for this year, what is included in there relative to the three major utility assets sales, Kewaunee, Duane Arnold and these Illinois properties? Is Kewaunee soon to be sold and not earning a return, but the other two are in there earning a return?

Eliot, you want to take that one?

Only Kewaunee is in that guidance. The Illinois and Duane Arnold contemplated sales would occur in '06 or so close to '06 it is really more of an '06 issue.

Thank you very much.

Mitchell Moss, Morgan Stanley.

I just had a couple of questions. One, I wasn't quite sure, did you guys say how much share issuance you have done so far in the year?

We haven't had a major issuance other that our dividend reinvestment.

Eliot, I don't know whether that's --

I think if you divide 30 by 4 you'll be close to what will be in the Q. I just don't know offhand, but it will be in the Q. We have done nothing other than the 401(k) and dividend reinvestment plans.

Looking at China, how much are you guys hedged on the fuel side for your Chinese plant?

Bill?

Unfortunately, a very minimal proportion of our actual fuel burned in China is hedged, not because we wouldn't like to hedge it, but because the fuel and financial markets in China do not provide vehicles for doing that. So we're essentially at all of our facilities a month-to-month cash purchaser of coal.

So when we went through the numbers before, where we said it was about $0.20 was primarily China and Brazil, and about 50% of that, I think Eliot mentioned, was coming from China, how much of that is coming from the expectation of a delay in higher tariffs, and how much of that is in expectation in higher fuel costs?

Bill, I'm not sure if we can answer that one at that granularity at this point.

I don't know that I'm able to answer that, other than it's reasonable for you to believe that the earnings attrition that has occurred, and which we expect will continue in China until fuel relief is realized, is all associated with the gap between actual fuel costs and tariff relief.

That's an expectation for full year of that problem, right? Not sort of to see tariff relief happening in the third quarter type of thing?

We do -- I don't know if the right word is expect or hope -- that we will begin to see the benefits of implementation of the fuel adjustment clause policies in the latter part of this year. But I can't be more precise with you than that as to when exactly we expect that to occur.

Thanks guys.

Again, remember that the promulgation was made at the national level. The implementation will be made at the provincial level. So again, if you draw an analogy in United States, it's the promulgation of the rule at the national level, and then the states working their processes to implement that rule. And so our plants are in a variety of provinces, so we have difficulty in suggesting that we know with any precision when we will get relief on a province-by-province basis.

David Thickens, Deephaven Capital.

My questions have been asked. Thank you.

David Grummhaurs, Copia Capital.

A couple questions for you on the utility guidance, picking up on Steve's points. I know when you gave your original guidance that Kewaunee, you assumed, would not be sold. Obviously now you're selling it. And the expectation was that there would be some pickup there if the sale did go through. But that obviously hasn't been reflected, and I guess I wanted some thoughts on that. And then, you have also lowered the amount of shares you expect to issue and haven't really seen any pickup on utility guidance there either. Are there some thing at the utility have changed, or just being conservative, or how do we think about that?

Eliot, why don't you handle that?

David, maybe you could follow up off-line with Becky Johnson, because I think you must be misinterpreting our original guidance versus that which we have today, because the assumptions have been the same pre and post with respect to the two variables that you're articulating.

So you expected when you gave original guidance that Kewaunee was going to be sold?

Yes, and we have not changed our guidance on the share issuance that we have reflected in the up to 90 million. So those assumptions remain unchanged.

The Kewaunee surprises me. Next question -- if you did get rid of all the international, what would the non-reg and sort of holding company earnings be? What would you have left?

On an ongoing basis?

Yes.

Again, I'm not sure we have pulled that out together. We would certainly have a number of ongoing businesses which we have had historically. These would include our transportation business, which is a reasonably profitable railroad and barge business, as well as an extremely profitable environmental consulting business. They would not be a significant contributor to our earnings going forward, however. Nor would I expect, even as they go through business cycles, to be a significant drag.

So going forward, our earnings clearly would be driven by the earnings of our regulated properties. And again, as we noted, we're making progress in moving towards our allowed returns on those properties. And we've had a 20% increase year-over-year in our regulated profitability.

Are Sheboygan Falls and ATC in what you classify as domestic utility?

Sheboygan Falls and ATC, you're correct, are not in. They will be -- Sheboygan Falls, again, will be owned by an affiliate. But again, those will have utility like earnings.

I guess the question, though, in the guidance that you give of the $1.80 to $2, are those numbers in there or are they non-reg?

Erroll, maybe I could --

Yes, go ahead, Eliot.

-- jump in here because ATICO consolidates up through Wisconsin Power and Light. So with respect to historical earnings and guidance, when you see utility earnings it does include the American Transmission Company equity interest that we have.

In the case of Sheboygan Falls, that lease arrangement, etc., will roll up through our non-regulated Alliant Energy Generation company. So that's in the non-regulated line.

So that would still be out there in the non-reg?

Yes.

And then you would just have the parent outside of that, right?

Right.

Lastly, on the international, you clearly seem to be moving more towards looking at strategic options on these businesses. Has the urgency of the Board versus international changed? Are they -- is it fair to say they're starting to really lose patience, they've lost patience, or they're still not convinced either way?

Again, I certainly don't want to speak for individual Board members. Our Board has been constructively critical as we have made these investments and as we have tried to manage these investments.

I think the major factor in this equation that has changed is the availability of capital to grow these investments. These investments that we have made internationally when all is said and done are utility investments, and are therefore capital intensive investments. We made them at a time when we were not building in the United States and the probability of building in the future was low because of the IPT market. That, of course, has turned around. We now have an appetite for capital in our regulated markets, which have always been our core business in the United States. And what you see is an inability to get the capital needed to grow these foreign markets. That is probably most apparent in China, where we would not be able to put the capital in to grow that portfolio into the size we want in a timeframe that's reasonable.

So, again, we have strategic planning meetings with our Board on an ongoing basis. They certainly are asking the right questions. And as was noted earlier, we will present to them, with help of our various advisers, strategies in July to hopefully maximize the value of these assets going forward.

But given how you're describing it, Erroll, I'm gathering that maybe they have not lost as much patience or see the urgency that maybe some of the shareholders like me do. Is that a fair --?

I certainly don't have great insights into your urgency, and so I can't comment on that. But again, they continue to do what they believe is in the best interest of our shareowners on an ongoing basis.

Thank you.

David Reynolds, Tribeca Global Management.

It's Vedula Murti. I'm sure we have beaten this to death, but I guess the one thing that has changed is you did change your capital expenditure program I think since the last time in terms of your planned investment. So those are down approximately, I think it is 100 million or something like that, I think is what you indicated in your release.

Eliot can verify that number.

I'm wondering then how that relates to the guidance on equity issuance; if the capital program has changed, why that wouldn't impact the outlook for equity issuance.

Eliot, do you want to take that?

Thanks for the question. That will help, I think, clarify that issue.

The delta on non-regulated CapEx previous guidance to the guidance issued today is about $75 million. That $75 million related to various projects in China that are at this point in time seen as not likely to go forward and would have been financed with nonrecourse debt in country. So there's no change in the overall need for equity capital in the rest of the businesses.

Thank you very much.

Ashar Khan, SAC Capital.

Good afternoon. Could I ask you on Duane Arnold when you mentioned -- there was two categories you mentioned, one being the traditional and the other the non-traditional. Can you give us a little color whom you count in the non-traditional people who are interested in the asset?

Again, I'm certainly not going to name any buyers at this point. But when we say traditional, we're talking people who have the capability to operate the facility. Those would generally be utilities as opposed to non-traditional, which would be more financial investors, because, again, because of facility is operated by the NMC they now have an ability to make an investment and not worry about the operational issues, or be concerned about the NRC certifying them as operationally capable. So because of the existence of the NMC, we now have, I believe, a much more robust set of people who were interested than in the past.

My second follow-up question is how much of allocated debt and I guess O&M charges are there on the non-regulated businesses?

Would you repeat that again, please?

I guess the non-regulated businesses get some allocation of debt and O&M. Could you quantify what that amount might be?

Eliot, do we make that number available?

No, we don't. But you could certainly take a look at the 10-Q and do your own allocation of interest cost towards the portfolio, and you would probably be close. But we don't disclose that number.

Going to the equity issuance, Eliot, knowing what you're mentioning today, is it fair to assume that any equity issuance would happen towards the later end of the year?

As Errol indicated, there are a number of moving parts associated with asset sales that are in the works which will have some bearing on where we go with this. So we'll keep you posted as we have our future earnings calls. At this point in time, I really can't say anything other than that.

But can I just go over those asset sales? Because Kewaunee, you will know if Kewaunee gets online at the end of the month, assets will close at the middle of the year. And that you mentioned yourself Duane Arnold, you aren't expecting a sale to occur by January, if I'm right, next year. And the Illinois is again for next year, so I'm just trying to see as you look at this year -- to me if you look at this calendar year the only thing that is timing is Kewaunee, which is a month or month and a half away. What am I missing?

That would be the actual closing. Keep in mind we have got regulatory processes that we will be going through in both Illinois and Iowa with respect to those sales. And at this point we're still in the bid evaluation stage. So we are just not prepared to give you any more color around what our expectations might be as to when these sales might occur and at what level.

Could I just end up with why is the Kewaunee thing getting delayed? I guess now the new date is end of May that the plant comes back online. Could you tell us what's happening there?

Bill, do you want to handle that?

Yes, I would be happy to. The plant is in an extended shutdown as we speak, and it's only reasonable for the actual closure of the sale to abide the plant's return to service. So that's why it has slipped.

But what is the expected date that it is expected back, and why is it getting delayed? Because it was expected to come back at the end of March, if I'm right, from the previous schedule, and then it was in April, and now it's moved to May. What's causing this delay, can I ask you?

Sure, and I will answer it generally. There have been a variety of issues that been identified for remediation by the Nuclear Regulatory Commission over that period of time. And that identification and resolution is following a normal course.

What kind of issues are there? Are they engineering issues or what issues?

There is a wide variety of issues, none of which are monumental from a capital expenditure perspective; many of which are systemic or management process in orientation; nothing that is extraordinary from a nuclear plant perspective, but all of which have to be resolved before the plant returns to service. And we believe that will occur in mid to late May of this year.

Thank you very much.

Leon DeBove (ph), Zimmer Lucas Partners.

Actually it's Mike Weinstein. A couple of questions. I think I just missed some details before; bear with me. For the Laguna del Mar investment, now you've already written down the 82 million loan receivable, right?

I don't believe that's correct.

No? So in other words, there's an $82 million investment there that has to be recovered, right?

We have a loan receivable for (multiple speakers). Eliot, again I --?

No, that is the carrying value of the investment. As Bill indicated, we now have control of the property. So think that as our investment in the project.

You haven't taken any write-downs with regard to this yet?

No.

Or reserves.

We took, I think two years ago, a minor impairment, and I believe then reversed it as the value of the property continued to increase.

Got you. Maybe that's why I'm confused. And I know I heard something before about the International Court of Arbitration decision coming in May or June, but I didn't hear what that was for.

That relates to our Brazilian operation, and it is the second of two arbitrations where we have used that that court. And we have been successful in the first relating to Juiz de Fora. As Bill noted, the second related to a dispute we had over the Cataquazes properties and our shareholder rights there.

What are you asking for from the court?

Bill, do you want to add a little color more to that?

The high end of our claim is on the order of US$325 million to US$350 million.

Would that exit your investment in Brazil if you won the arbitration?

No it would not.

So you would still retain whatever ownership you have, even if you won this?

We would retain the ownership interest that we have in Brazil and would be the holder of an arbitration award for whatever amount is awarded.

Got it. What's the reason for your arbitration request?

Shareowner rights violations that we believe have occurred with respect to our shareowner agreements relating to the Cataquazes Distribution Company.

You expect a decision on that in May or June.

Yes.

Okay, thank you.

Andrea Feinstein (ph), CB Warren (ph).

Just a quick question. Can you remind us how much recourse debt resides at the parent that we would need to be cognizant of in the event that you do exit China and Brazil as a remaining interest drag at the parent?

Eliot, you want to take --? Again, that is going to -- the amount of debt, of course, will be a function of the proceeds we receive. So I certainly couldn't tell you the amount of debt left --

Understood. I guess the question would have been better phrased how much is the current existing recourse debt so that we can better understand relative to proceeds when and if you do sell.

We certainly can address that. Eliot?

If I am understanding the question correctly, I would answer it this way. At Alliant Energy Resources we have approximately $1.2 billion of gross debt on our balance sheet which is guaranteed by the parent. Around 800 billion net has to do with the -- the difference being the unamortized discount at phones (ph). So again, that's right off the reported balance sheet, if that's what you're looking for.

, Great. Thanks. Is there anything else other than that 800 million that we should be aware of, or is that really capturing everything?

All of our debt is disclosed.

No, I wasn't trying to imply -- I definitely wasn't trying to imply that.

What you might want to do is call Becky off-line, and she can perhaps walk you through that from our financial statements to make sure we understand your question and can be responsive to your needs here.

Thank you very much.

There are no further questions at this time.

Let me wrap up by saying again we appreciate everyone's continuing interest. As you can note from our comments this morning, we are clearly working, particularly in the utility, to achieve our all-out returns. And with the 20% increase, again we've made great progress there. In the international arena we have engaged a number of advisers, and that we will be taking some strategic actions in these markets, and that we will be presenting a series of steps to our Board in July. After our Board approves courses of action, we will certainly make the appropriate announcements at that time. So again, thank you very much, and I look forward to our next conference.