Alliant Energy Corp (LNT) 2006 Q4 法說會逐字稿

Thank you for holding, ladies and gentlemen, and welcome to Alliant Energy's 2006 Year-End Earnings Conference Call.

At this time, all lines are in a listen-only mode.

I would now like to turn the call over to your host, Becky Johnson, Manager of Investor Relations at Alliant Energy.

Good morning. I would like to thank all of you for joining us today, those of you who are on the phone and also those who are listening to the webcast. We appreciate your participation.

With me here today are Bill Harvey, Chairman, President, and Chief Executive Officer, and Eliot Protsch, our Chief Financial Officer, as well as other members of the senior management team. Following some prepared remarks by Bill and Eliot, we will have time to take questions from the investment community.

We issued a news release this morning announcing Alliant Energy's fourth quarter and annual 2006 earnings. In addition, we have posted supplemental slides to accompany our discussion on the conference call. If you haven't seen the release or the slides, they are available on our website at www.alliantenergy.com.

Before we begin, I need to remind you that the remarks we make 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 in our filings with the Securities and Exchange Commission. We disclaim any obligation to update these forward-looking statements.

At this point, I'll turn the call over to Bill.

Thank you, Becky.

Good morning, and thanks for your continued interest in our Company.

We are pleased with the solid financial results produced in our core utility and ongoing non-regulated businesses in 2006. That solid performance, coupled with the successful completion of our divestiture efforts, has enabled us to both substantially increase our common dividend and the size of our previously announced share repurchase effort by another $200 million to a total target of $400 million.

Additionally, when we close the announced sale of Laguna Del Mar, we will have fully divested all of our international investments.

We are well positioned to undertake our substantial utility infrastructure program ahead of us.

As we mentioned in our press release, we've posted supplementary slides on our website to aid you in our discussion with you this morning. At this point, I would direct you to the slide containing the reconciliation of our 2006 earnings from continuing operations.

Our 2006 earnings from continuing operations of $2.89 per share included some significant items not related to the fundamental operations of our remaining businesses going forward. To assist you in understanding our 2006 performance and to provide visibility to the strong results of our ongoing businesses, we suggest making several adjustments for items which are either nonrecurring in nature, such as debt retirement charges, or are not related to our fundamental operations going forward, like New Zealand. Factoring in such items brings you to an adjusted earnings per share of $2.27 from continuing operations.

In addition to our utilities, our ongoing businesses are comprised primarily of our transportation business, our environmental consulting business, and our non-regulated generation business.

Turning to our 2006 utility operations, the primary drivers of the increase in earnings were improved recovery of fuel and purchase power expenses at WP&L, lower depreciation expenses at IP&L, and higher gas margins.

I will remind you that in 2005, WP&L failed to recover $0.21 per share under the fuel adjustment clause. This shortfall was reduced to near zero in 2006.

These increases were partially offset by increased incentive compensation expenses and the negative impacts of weather and weather-hedging activities.

As noted in our release, the 2006 results from our utility operations reflect increases in both electric and gas customers. More importantly, weather-normalized retail electric and gas sales increased by 1% for electric and 2% for gas compared to 2005.

In addition to our financial performance, we have many things to be proud of regarding the operational aspect of our utility business in 2006 -- corporate-wide safety performance metrics improved across the board; the overall availability of our generating fleet significantly surpassed our targets despite a challenging summer; and our customers have ranked us fifth out of 16 Midwest utilities in the J.D. Powers Electric Utility Residential Customer Satisfaction Study.

Let me turn to a discussion of the progress we're making on the execution of our generation build-out plan.

Let's start with Wisconsin. Last fall, we filed the regulatory applications required to build the Cedar Ridge Wind Farm near Fond du Lac, Wisconsin. We anticipate receiving regulatory approval for this project in the first half of 2007. We currently expect the project to be fully operational in 2008, with total capacity ranging from 60 to 100 megawatts, depending upon the turbines selected for the project. We are confident in our ability to secure turbines for this project.

We currently estimate that Cedar Ridge will cost approximately $170 million. In our regulatory applications, we requested a return on equity of 12.9%, along with a regulatory capital structure, which includes 53% common equity and a current return on construction work in progress. This was our first application made under the provisions of Act 7 in Wisconsin.

In addition to Cedar Ridge, WP&L is evaluating sites in Iowa and Minnesota for an additional 200 megawatts of wind generation. We expect this capacity to be online in 2009.

Yesterday, WP&L filed the necessary regulatory applications to build a baseload expansion at its existing Nelson Dewey site in Cassville, Wisconsin. This planned 300-megawatt unit will utilize circulating fluidized bed technology. We currently estimate the standalone cost of this facility to be $717 million in current-year dollars, excluding AFUDC, if applicable.

In addition, as part of this expansion, WP&L plans to invest an additional $60 million at this site for equipment utilized by existing units one and two. This primarily consists of the expansion of existing barge transportation facilities and the addition of rail transportation facilities.

As previously disclosed, we are planning environmental retrofits of the existing units one and two near the end of this decade. We currently expect the cost of those environmental improvements to be approximately $100 million.

In summary then, we estimate the total investment at Cassville to be approximately $880 million in current-year dollars, excluding AFUDC, if applicable.

In our regulatory applications for this new baseload plant, WP&L requested a return on equity of 12.95%, 50% common equity in the capital structure, and a current return on construction work in progress. We expect the regulatory approval process to take approximately one year. If approval is received in that timeframe, we would begin construction in the second quarter of 2008.

Currently, we have approval from the Public Service Commission of Wisconsin to defer up to $15 million in pre-certification costs for this facility.

I would assess our meetings to date with the stakeholders as positive and constructive, and we greatly value the support we have received from officials and citizens in Cassville and the surrounding area.

Turning now to IP&L, last month, we announced plans to seek approval from the Iowa Utilities Board to build a 600-megawatt baseload coal plant adjacent to our Sutherland Generating Station in Marshalltown, Iowa. IP&L currently expects to utilize at least 40% of that planned capacity and to announce partners for the balance later in 2007. There are many parties interested in owning a part of this needed plant. The total cost to IP&L and its partners is estimated to be $1 billion in current-year dollars, excluding AFUDC. We plan to file the regulatory applications beginning in mid-2007 and anticipate approvals in 2008. This plant is expected to be operational in 2013.

We're very pleased with the enthusiastic and constructive welcome our announcement has received from officials and citizens in Marshalltown and the surrounding area. We intend to rely on Iowa House File 577 to obtain the ratemaking principles applicable to this generation investment in advance of beginning construction.

A similar approval was granted to IP&L for its combined cycle Emery generating station. IP&L is also looking at potential sites for 100 megawatts of wind generation. We currently expect this capacity to be operational in 2009.

Let's turn to the transmission site. After evaluating the alternatives for our IP&L transmission assets, we announced last month that we had entered into an agreement to sell our IP&L assets to a subsidiary of ITC Holdings for $750 million subject to various adjustments at closing. Eliot will go into more detail a little later to illustrate how this transaction is expected to provide attractive returns to our shareowners. It's also expected to provide funding for the generation investments planned in our service territories.

I'd like to take a moment to place the proposed sale in context for you before Eliot covers the more detailed financials.

I begin with a certain assurance. The transaction will close only if regulatory approvals preserve the accretive potential of this sale to our shareowners. National energy policy, as expressed in both legislation and regulation, has encouraged the independent operation of transmission systems and the formation of independent transmission companies.

From a financial perspective, those policies provide inducements to both buyers and sellers of transmission properties. Buyers are incented through the availability of higher allowed returns on equity, high equity levels, and increased financing flexibility compared to the norm. Sellers are incented through favored tax treatment on gains realized upon the sale of transmission properties to an independent company.

Our company has previously responded to those policies by transferring ownership of our Wisconsin transmission properties to the American Transmission Company in exchange for an equity position in that company. That experience has been a good one. ATC has done a good job for consumers by designing and building infrastructure in Wisconsin, and ATC has been a solid investment for our shareowners.

In the ITC transaction, we are again responding to national energy policy. ITC is independent, has a good track record of operations and construction, and has made a robust commitment to continue to do so in Iowa, Minnesota, and Illinois.

The sale price and required closing before the end of 2007 reflect both the buyer's enhanced financial opportunity and the seller's aim of capitalizing on available market opportunities and federal tax incentives. We believe the transaction falls foursquare consistent with federal energy policy, and, importantly, we believe the transaction will be very positive for customers and our shareowners. Customers can be assured they will have a high-quality builder and operator of the transmission system.

Favorable tax incentives provide our customers with economic benefits, and our shareowners can be assured the transaction will be accretive to our earnings because the transaction will not close if regulatory approvals undermine the accretion and earnings which should attend a transaction so clearly in sync with national energy policy.

Finally, let me close with a few comments on our recent asset divestitures.

As we previously announced, we closed on the sale of our New Zealand investments at the end of December as planned. Net proceeds from this transaction were approximately $180 million U.S.

In the fourth quarter, we also completed the sale of our remaining interests in China.

As a result of our successful execution of these divestitures, we had in excess of $250 million in cash and short-term investments at the end of 2006, which supports increasing the size of our common stock buyback.

This morning, we announced that we've entered into a definitive agreement to sell our Laguna Del Mar investment in Mexico. We are not at liberty to disclose the buyer or the price but will say that the buyer is substantial and creditworthy and the price should not lead to any further impairment charges associated with this holding.

We expect the closing to take place near the end of the first quarter of this year. The carrying value of this investment is approximately $60 million as of December 2006. The closing on Laguna Del Mar will mark the end of our foreign investments.

Finally, on the regulated front, earlier this week, we completed the divestiture of our Illinois utility assets. Net proceeds of approximately $51 million will be used to reduce short-term debt at the utilities.

In closing, let me summarize the key takeaways from 2006.

The financial profile of our Company is now stronger and less volatile than it has been for some time.

We have increased our dividend and the size of our share repurchase program.

We are on the front end of a substantial infrastructure investment program at both WP&L and IP&L, which are required to meet our customers' needs. We embark on those programs in states which have in place progressive laws aimed at providing clear financial metrics for the investments before we make them.

Finally, we've agreed to sell our IP&L transmission assets to ITC and will do so by the end of the year if acceptable regulatory approvals are received.

In closing, we appreciate your continued support of our Company, and at this time, I'll turn the call over to Eliot for a more detailed financial overview of 2006 and our financial guidance for 2007.

Thanks, Bill.

I would also like to thank all of you for joining us today and for your continued support of our Company.

Our comprehensive earnings release is posted on our website. Bill has touched upon our financial highlights. Thus, my primary focus here this morning will be on our 2007 financings and on our financial guidance.

In December, we announced our 2007 financial guidance and updated it in our earnings release issued today. We have posted the prepared remarks from our December guidance conference call on our Investors' website for those of you who could -- who would find it helpful to review the assumptions for the guidance we issued at that time.

At this point, I would like to spend a few minutes building the bridge from our 2006 financial results to our 2007 earnings guidance.

As Bill mentioned earlier, internally, we used 2006 adjusted earnings of $2.27 per share as the base from which to measure our earnings growth because we believe the adjustments make it more representative of our business on an ongoing or a forward basis.

On a consolidated basis, the earnings growth implied by our 2007 guidance is the result of impacts of our 2006 and planned 2007 share repurchases and the improved profitability of our utility and non-regulated business. Improved utility earnings are primarily due to modest sales growth and continued focus on controlling costs.

At AER, we expect interest expense to decline, reflecting a full-year impact of the continued debt reduction at the AER holding company level.

In addition, we do not anticipate reoccurring tax adjustments of the magnitude, approximately $0.08, which occurred in 2006.

Finally, our 2007 forecast does not include any short-term incentive compensation. As will be fully disclosed in our 2006 proxy statement, our short-term incentive plan is designed to fund only after achieving a pre-established earnings target. After achieving such target, there is a sharing mechanism between employees and shareowners up to an established cap. We accrue incentive compensation expense at the time our current-year earnings forecast indicates that we are above the target. Thus, one might make these adjustments when comparing 2007 guidance to 2006 actual results.

Negative factors that are reflected in our 2007 earnings guidance primarily relate to the outcome of the WP&L 2007 rate case, which I'll go into further in a few minutes. In addition, our guidance reflects expected lower earnings from WP&L's gas performance-based rate mechanism.

Moving on to our capital plans, in our release today, we have included our 2008 planned capital expenditure guidance of $1 billion 105 million, which is more than double our 2007 capital plan. These additions are comprised of the Cedar Ridge Wind Project and the beginning of the spending for the baseload plant in Wisconsin, as well as IP&L's 100-megawatt wind project.

The timing of the capital spending for the various generation projects we have outlined is dependent upon a number of variables, the most significant of which is the regulatory approval process. As Bill mentioned, we are uniquely positioned in two states that have enacted progressive legislation allowing us to obtain increased certainty of ratemaking principles in advance of building new generation.

We have posted information on Iowa House File 577 and Wisconsin Act 7 on the Rates and Regulatory Matters page of our Investors' website for those of you who are interested in more background information.

We currently estimate that our 2007 cash flows from operations will be in the range of $525 million to $575 million. In 2006, cash flows from operations were approximately $420 million. The expected increase in cash flow from operations from 2006 to 2007 is attributable largely to 165 million of pension plan contributions that were made in 2006.

I will now discuss the outcome of the WP&L 2007 base rate case and wholesale rate matters.

Last month, Wisconsin Power & Light received the final order in which the Wisconsin Public Service Commission authorized an increase in base rates of $36 million for electric revenues and a decrease of $2 million for gas revenues. In addition, the Wisconsin Public Service Commission determined that WP&L's targeted financial capital structure should include 51% common equity and that the authorized return on this equity should be 10.8%.

Our 2007 earnings guidance, issued late last year, allowed for a range of outcomes associated with this case. While the Wisconsin Public Service Commission final order did not allow us to adjust the capital structure for imputed debt as much as we requested, an adjustment of approximately $200 million was adopted to reflect various off-balance sheet items.

As a result of these approved adjustments, the targeted regulatory capital structure, that which is used for ratemaking purposes, includes approximately 54% common equity. This compares to 59% common equity in the prior rate order. This difference in the equity ratio and the return on equity is reflected in our revised guidance.

Finally, in the base rate case, the Wisconsin Public Service Commission approved a fuel-monitoring band of plus or minus 2%. This band is now consistent with that in place for other investor-owned utilities in Wisconsin and represents a change from WPL's prior monitoring band of plus 2% and minus 0.5%. You may recall that the regulatory lag associated with adjusting rates when annual forecasted fuel-related costs were above the band has made it very difficult for WP&L to earn its authorized return. Our efforts continue to work with other Wisconsin investor-owned utilities, the Public Service Commission, and other interested parties to modify these rules.

In fact, the Joint Utility Group filed its final proposal of recommended changes to the Fuel Administrative Rules on February 1 of this year. If approved, these changes would provide more assurance of WPL's ability to recover all prudently incurred fuel costs required to meet our obligation to serve our customers.

Last September, WP&L filed a request with the Federal Energy Regulatory Commission to change its wholesale rates. We requested a $9 million annual increase in wholesale revenues based upon 2005 cost and customer usage patterns. Proposed formula rates will be updated for 2006 cost and usage patterns before being implemented on June 1, 2007 subject to refund. WPL is currently engaged in settlement discussions with all parties to determine the final rates in this case. Absent such agreement, the case will be set for hearing by FERC.

I would now like to touch upon our financing plans. We plan to fund utility capital expenditures in 2007 and 2008 with a combination of internally generated funds, asset sale proceeds, external debt financings, and equity infusions from the parent.

As we noted in our earnings release, we have repurchased $105 million of common stock as of year-end 2006, and as Bill mentioned, our Board has authorized us to increase the size of our common stock buyback by an additional 200 million, raising the target to $400 million. Our objective is to reach this target by the end of 2007. 2.9 million shares repurchased in 2006 more than offset the 2 million shares issued for our various equity incentive plans. Our forecasted share issuance from such plans in 2007 is 1 million shares. Thus, based upon a price of $38 per share, our net share count, giving effect to the cumulative $400 million share repurchase program and the shares issued in connection with our equity incentive plans, could decrease the share count approximately 7 million shares in 2007. We are very pleased that the better-than-expected results of our recent divestitures enhanced our ability to repurchase these additional shares.

Debt maturities for 2007 include 80 million at IP&L. Our current plan is to fund these maturities with commercial paper in anticipation of using the proceeds from the transmission sale to reduce the short-term debt balances at a later date.

WPL has filed an application with the Wisconsin Public Service Commission to issue 150 million of long-term debt in 2007. We are evaluating whether to increase the debt issuances at WP&L in view of the Wisconsin Public Service Commission's capital structure determinations in the recent rate case.

I would now like to move on to a discussion of the financial implications of the proposed sale of IP&L's transmission assets.

The proposed sale will not impact earnings guidance, capital expenditure, or our share repurchase plans for 2007. Under the assumption that the sale closes at year-end 2007, our 2008 capital expenditure guidance does not include any forecasted transmission spending.

We have a supplemental slide on our website to assist you with an analysis of the implications of the sale of IP&L's transmission system from an earnings perspective. This slide offers an overview of what we would characterize as a hypothetical, but not unreasonable, scenario of the financial impacts arising out of the sale of these assets.

On the left-hand of the slide, we are providing the data required to calculate the estimated earnings attrition that IP&L would experience as a result of selling the transmission rate base. The $0.16-per-share attrition shown in this example assumes that we would do nothing else with the cash that we receive as a consequence of the sale and that the rate base and rates would decrease immediately upon closing.

On the right, we outline a potential scenario for use of proceeds from the sale that illustrates how the cash proceeds could be redeployed. This potential redeployment generates $0.25 earnings per share using a combination of debt reduction and share repurchases.

Line D on the slide identifies the estimated incentive from the Federal Energy Policy Act of 2005. As Bill mentioned earlier, this represents the benefit resulting from our ability to pay the taxes on the gain ratably over eight years.

It is our intent to submit regulatory filings that will demonstrate that this sale transaction is not detrimental to our customers. It is anticipated that IP&L will establish a regulatory liability account. This account provides a commitment from us to use these proceeds for future investments in our infrastructure. In this hypothetical analysis, we assume a commitment of $55 million.

Post-sale closing, our intent would be to reduce the debt component associated with the net book value of the transmission assets in the same proportion as long-term debt and preferred stock currently reflected in the capital structure, or approximately 49%.

As an illustrative way of calculating the financial benefits of this transaction, if the remaining $390 million were used to repurchase stock at a stock price of $38, the net accretion resulting from this transaction would be $0.09. In order to secure the tax deferral benefit, federal tax law mandates that the sale must be to a qualified independent transmission company and that the net proceeds be reinvested in the utility business.

Qualified reinvestment includes electric generation transmission and distribution, as well as natural gas production or distribution properties. In addition, federal law requires that this occur within four years of the date of the sale.

We are confident that we will fulfill the requirements of the federal statute given the equity needs associated with our planned infrastructure investment program.

While our hypothetical example identifies share repurchase as the mechanism to achieve earnings accretion, such accretion is also possible as a consequence of reinvesting the proceeds in our core business in lieu of issuing new common equity. What we ultimately choose to do will be determined post the sale closing.

Our objective this morning was to provide both a global context for this transaction and also add some granularity to the financial components in order to assist you with your financial projections for 2008 and beyond. We are currently in the process of developing the requisite regulatory filings to effect this transaction and expect to submit them over the next two months.

In closing, we are also in the process of finalizing our 2007 Investor Relations plans and look forward to the opportunity to meet with many of you throughout the course of this year.

At this time, I'd like to turn the call back over to the Operator to guide us through the question-and-answer session.

Thank you, Mr. Protsch.

At this time, the Company will open up the call to questions from members of the investment community. Alliant Energy's management will take as many questions as they can within the one-hour timeframe for this morning's call. [OPERATOR INSTRUCTIONS]

Your first question comes from Dave Parker, Robert W. Baird.

Good morning, and congratulations on another good quarter.

Just one question. With the step-up in CapEx expected in 2008, is there any color you can provide just what maybe 2009 and '10 will look like, not absolute numbers but just the trend? Is '08 sort of a new base we'll see until we get the coal units built?

I think -- David, this is Bill -- I think that's a very realistic assumption that you should make. The building program will go on for several years with the big ramp-ups beginning in 2008, so that's a good assumption.

Okay. Could you refresh my memory on the environmental equipment that's being added in Cassville? Does that fall under any rider treatment in Wisconsin, or is that a base rate item?

We believe it will be a base rate item. We've looked at that pretty carefully. Obviously, we'd like to get as much of it covered under an Act 7 form of treatment, but right now, we expect it will be base rate.

Okay, great. That's my questions. Congratulations again.

Thanks.

Your next question comes from David Grumhaus of Copia Capital.

Good morning, guys, and congrats on a great job.

Thank you, David.

A couple of housekeeping items. Fuel recovery for 2006, did you pretty much get fully recovered?

Yes.

Okay.

At retail, we did, yes.

Okay. In the fourth quarter, there was an Other line in the non-reg that was like negative $0.09 that you said primarily taxes. What was that?

David, this is Eliot. We have a lot of complexity in our taxes with Iowa flow-through and apportionment issues, and basically, that's an adjustment of those items. We do not expect that to be reoccurring.

Okay. And so for the year, where were you on taxes? It's probably in here and I missed it.

In terms of effective rate?

Well, just in terms of --

We'll have that in our K, but for the year overall, we'll be around 36%.

Okay. Okay, that's helpful.

The IP&L coal plant, do you earn current earnings on that, or do you have to get the plant in service before you book earnings on the investment?

Yes, historically, the convention in Iowa has been, as you suggest, which is we carry AFUDC through construction and begin to earn when the unit goes into service. That has been the convention historically in Iowa.

And will you all try in your approval process to get that changed, or should we assume that that's probably how that one will get billed?

A very low probability that we will try to move that mountain in the filing. It's been the historic convention in Iowa for a very long time.

I want to add, David, that our regulatory liability account that we established with Duane Arnold, and may well seek to incorporate in our transmission filing, provides much of the same thing in that that case of DAC will be used to fund the accrued AFUDC.

Okay. That's helpful. And then on the two wind plants, Cedar Ridge, you said '08. Is that sort of a mid-'08? I mean for purposes of trying to think --

The probability is that it will be later in the year.

Okay. And then same set of things for the Iowa plant, sort of mid to late '09?

I think that's the most reasonable assumption.

Okay, great. All right, guys. Thanks a lot. I appreciate it.

Your next question comes from Steven Gambuzza from Longbow Capital.

Good morning.

Morning, Steven.

Just on the megawatts -- the wind megawatts that you're adding in Wisconsin, 200 megawatts, will that fulfill your requirements for the RPS standards by 2010, or will there be additional generation needed to meet those requirements?

That will fulfill the requirements.

Okay. And then for 2008 CapEx, $450 million from new generation, does that -- is that pretty much the wind in Wisconsin, as well as the wind in Iowa, or is there significant amount of coal spending in there, as well?

Let me break it down for you into chunks. WP&L baseload plant, about $85 million; the IP&L baseload plant, about $15 million; Cedar Ridge wind, 110; IP&L wind, 45; the balance being the early spending with respect to the remaining 200 megawatts of WP&L wind, which will go into service in '09. We estimate we'll spend about $195 million in 2008. Those should total up to 450.

So 195 million for the second wind?

Correct.

Okay.

In '08.

In '08, great. And then in terms of the cost of the coal plant in Wisconsin, I heard you mention $880 million. Is that correct?

That would be the total estimated spending at the Cassville site.

And your share of that would be how much?

All of it.

Okay. And that's 880 million -- okay. So that includes the coal plant, as well as the environmental? Or what else is in there besides the 300 megawatts?

It's the new coal plant, it's some upgrade of barge delivery, and the installation of new rail delivery facilities for the entire site, and it's the environmental upgrades at existing units one and two.

Okay, great. Okay, and then with respect to the WP&L rate order, now that you have a 54% equity ratio there with the -- which takes into account, I think you said 200 million of imputed debt, is that roughly what we should expect from a GAAP -- is that how you intend to capitalize that from a GAAP standpoint?

Yes, it is, Steven. Pretty much the way that that works is the Commission zeroes in on what they would determine to be an appropriate debt-to-equity ratio, and then it is adjusted for off-balance sheet, and then we're allowed to carry more equity to compensate for the OBS. So when the Commission basically established 51 without OBS as the ratio and then when the OBS was incorporated, it goes up to 54, so that's what we're being allowed to carry and earn on.

So is it fair to say that the -- that decision versus where you were last year, what you requested, that that decision actually was a driver of the incremental share repurchase, in part?

No, I wouldn't make necessarily a total connection there in that we, of course, had our internal assumptions as to how we were going to fare with New Zealand and Mexico and cash flow and associated other developments, and when we add it all up, we're pleased to be in a position to rebalance our cap structure accordingly.

However, from a financial perspective, one might -- you know, it's appropriate to take a look at whether we should be carrying equity in a utility that we're not earning on.

Okay. And, finally, you mentioned, I think, $160 million pension contribution in 2006. Will there be any pension contribution in 2007?

No, there really won't.

Okay. Thank you very much for your time.

Okay. Thank you, Steven.

[OPERATOR INSTRUCTIONS]

Your next question comes from Jeff Coviello of Duquesne Capital.

Morning, guys. How are you?

Morning, Jeff.

Just want to see if you could go through on the non-reg side just what the remaining businesses are quickly and, also, what the current debt balance is at AER. I think it might just be the phones now, but I wanted to check.

David, let me maybe just refer you to page 3 of 12 of our earnings release [inaudible] that handy because in there, there's a line near the bottom under the non-regulated businesses that references transportation, RMT, WindConnect, and other investments. That -- you should look at that line as our business portfolio going forward.

Right.

Okay? And then your question on the debt -- actually, the line above there, I failed to mention, non-regulated generation, which is our Sheboygan Falls plant leased to the utility and the Neenah facility, which is a [tolling] facility, those will remain in the portfolio, as well, and those currently have some debt against those assets financed at the project level, but excluding that, the only debt at AER remaining is the phones.

Great. Well, then, obviously --

We could give you the numbers, but they'll all be laid out in our 10-K, but it's around 500 million in total.

A really low rate.

Phones is 402 at 2.5%, yes.

Yes.

But when you throw in the project, there's about $0.5 billion of total debt within the AER portfolio.

Including the project debt?

Including the project debt currently.

Great. Okay, great. Thank you very much, guys.

Ms. Johnson, there are no further questions at this time.

With no more questions, this concludes our call this morning. Thanks for your continued support of Alliant Energy, and feel free to contact me with any of your follow-up questions.

A replay of this call will be available through Friday, February 15 at 800-642-1687 for domestic or 706-645-9291 international. Callers should reference conference ID 5578820.

In addition, an archive of the conference call and a script of our prepared remarks made on the call today will be available on the Investors' section of the Company's website later today. Thank you.