Alliant Energy Corp (LNT) 2012 Q2 法說會逐字稿

Thank you for holding, ladies and gentlemen, and welcome to Alliant Energy's second-quarter 2012 earnings call. At this time, all lines are in a listen-only mode. Today's conference is being recorded.

I would now like to turn the conference over to your host, Susan Gille, Manager of Investor Relations at Alliant Energy. Please go ahead.

Good morning. I would like to thank all of you on the call and the webcast for joining us today. We appreciate your participation. With me here today are Pat Kampling, Chairman, President, and Chief Executive Officer, and Tom Hanson, Vice President and CFO, as well as other members of the senior management team. Following prepared remarks by Pat and Tom, we will have time to take questions from the investment community.

We issued a news release this morning announcing Alliant Energy's second-quarter 2012 earnings. This release, as well as supplemental slides that will be referenced during today's call, are available on the investor page of our website at www.Alliant Energy.com.

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

In addition, this presentation contains non-GAAP by natural measures. The reconciliations between non-GAAP and GAAP measures are provided in the supplemental slides which are available on our website at www.Alliant Energy.com.

At this point, I will now turn the call over to Pat.

Good morning and thank you for joining us today. This morning we issued a press release providing second-quarter results, new capital guidance for 2012 through 20016 and affirming our 2012 earnings guidance range of $2.75 to $3.05.

It has been a hot and dry summer. In fact IPL service territory reached a new peak load last week. Our facilities and systems have been operating well and I would like to take this opportunity to thank our employees for their dedication in meeting our customers' needs in very challenging working conditions.

June's warm weather did help us recover about half of the negative earnings from the first quarter when we experienced a warm winter. Including the expected results from a hot July we now estimate that we are trending for the top end of our 2012 earnings guidance range. This guidance assumes that we will have normal weather for August through December.

Recently, Alliant Energy received our highest rating ever in the JD Power Electric Utility Residential Customer Satisfaction Survey. We took second place out of 16 electric companies in the Midwest Large Utility segment. I am so proud that the hard work and dedication from all of our employees has been recognized by our customers.

It has been a busy week as we have been communicating our generation strategies for our utilities. Our plan provides an orderly transition of our fleet and gives us the flexibility to ensure that we can cost-effectively, safely, and reliably meet the energy needs of our customers while managing current and emerging environmental regulations.

Our plan includes increasing the amount of gas-fired generation in our portfolio, retrofitting our Tier 1 coal plants, evaluating less expensive emissions controls or repowering to gas for our Tier 2 units and retiring our smaller and less efficient units which are no longer cost-effective to operate and maintain.

Focusing first on IPL, our plans call for construction of a new 600 megawatt combined cycle gas plant, an 11-year purchase power agreement with Nexstar Energy Resources.

As you recall, IPL completed an extensive RFP and due diligence process in the first half of 2012. We believe that the combined solution of competitively priced purchase power from DAEC and construction of a new natural gas-fired facility is the best way to meet the capacity energy needs of our IPL customers while maintaining a reasonable cost of power by utilizing a balanced portfolio of resources.

On the PPA, we have a new agreement with Nexstar Energy Resources to continue to receive 70% of the outputs from the Duane Arnold Energy Center. This new PPA will commence on the expiration of the existing PPA in February 2014 and will go into December 2025. IPL will seek regulatory approval of this PPA next week as IPL plans to file with the IUB an amendment to the DAEC sale docket. The existing PPA was a key component of the original DAEC IUB application and filing this amendment is the best path to receive regulatory approval.

By statute, the IUB has six months to render a decision in this docket. DAEC's capacity expense will cease with the expiration of the existing PPA and we will submit a tariff filing to receive recovery of the new PPA through the Energy Adjustment clause.

Now let me discuss proposing a gas plant. In the fourth quarter of this year IPL plans to file under Iowa House File 577 for advanced rate making principles and site approval with the IUB to construct an approximately 600 megawatt combined cycle natural gas fired generating station located in Marshalltown, Iowa. We would expect IUB approval approximately 12 months after filing, and air permitting and pipeline approval within six months after that. The anticipated in-service date for the new generating station will be the second quarter of 2017. The cost of the new gas-fired generating station is estimated to be $700 million.

On supplemental slide 2, we have provided you with IPL's anticipated MISO credited capacity changes through 2017. If you exclude the current DAEC PPA, IPO would currently be short capacity requirements by approximately 450 megawatts and we would still need to fill an additional 23% of our energy needs. Similar to our coal fleet, we have tiered our gas generation fleet which includes intermediate, peaking, and recently repowered units. Based on operating characteristics, we expect some of these units to be retired by 2017, making IPL short of its capacity requirements by approximately 850 megawatts.

The renewal of the DAEC PPA and the proposed new gas facility are expected to meet the projected capacity requirements and assist in fulfilling both capacity and energy needs for 2017 and beyond.

Turning now to emission control projects in Iowa we have finalized the engineering, procurement and construction contract for the scrubber and baghouse at our Ottumwa facility and will have a groundbreaking ceremony there later this month. IPL's portion of the total capacity extension for this project excluding AFUDC is currently estimated to be approximately $160 million.

In addition, MidAmerican is currently installing baghouses and scrubbers at Neal units 3 and 4. IPL's portion of the total capital expenditures excluding AFUDC is estimated to be approximately $130 million.

Moving to WP&L, the Public Service Commission of Wisconsin and FERC have already approved WPL's purchase of the Riverside Energy Center, and in July, WPL filed the Hart-Scott-Rodino application which is the last regulatory approval needed for this purchase. We expect another result of this application by the end of this month and we expect the purchase to occur at the end of this year.

With last year's acquisition of the 95 megawatt stake of Edgewater unit 5 and the scheduled addition of 100 megawatts of capacity upon the purchase of Riverside, WPL has almost fully replaced the capacity that will be lost with the expiration of the PPA with the Kewaunee nuclear plant. Therefore, we do not plan to renew the 234 megawatt Kewaunee PPA which expires at the end of 2013.

To meet customers' near-term energy needs, however, WPL will rely on market purchases and short-term PPAs.

Last week, we announced our plans to retire Edgewater unit 3 and the Nelson Dewey units. Unlike Iowa, our Wisconsin jurisdiction currently has capacity in excess of requirements, primarily due to the load lost in 2009 with the shutdown of the GM plant and its associated businesses. With our current capacity we can reliably meet our customers needs' even with retirements of these units. And earlier this year, the PSCW approved WPL's depreciation study which modified the asset lives of Edgewater 3 and the Nelson Dewey units. As a result, we expect recovery of these assets over the next 10 years.

Before I move on, I would like to provide some insight regarding our decision to retire certain generating facilities. The decision to retire facilities is not taken lightly. It is based on the age of the units, competitiveness of the units as well as current and proposed environmental regulations. We are announcing our plans to retire these facilities now so we may start working with MISO regulators, the local communities, and the hard-working and dedicated employees impacted by these retirements so they may find other jobs within the Company.

Our goal was to provide a cleaner generating fleet while meeting our customers' energy needs in a safe, reliable and cost-effective manner. To that end we are in the construction phase of the Edgewater 5 STR and Columbia units 1 and 2 baghouse and scrubber projects. We are pleased to report that the Edgewater 5 project is proceeding within budget and is a bit ahead of schedule. The project's capital expenditures excluding AFUDC are estimated to be $150 million and the controls are expected to be in service by the end of 2012.

Construction is progressing well on the approximately $630 million baghouse and scrubber project at Columbia. WPL's portion of this project is approximately $300 million and the controls are expected to be in service in the first half of 2014.

Last week, we filed a construction authorization request with the PSCW for a scrubber and baghouse at Edgewater 5. We expect approval in mid-2013 and construction of the approximately $410 million project is expected to begin in 2014 and completed in 2016.

Our 2012 through 2016 capital expenditure plant has been updated to reflect a one-year delay in the in-service date for the new IPL gas facility and the acceleration of the Edgewater unit 5 scrubber/baghouse by one year. The [walk] of the changes from the capital expenditure plan released in February to our current capital expenditure plan is provided on supplemental slide three. Our new detailed capital expenditure plan is provided in the earnings release we issued this morning.

Supplemental slide four summarized that a capital expenditure plan in service states where our Tier 1 plan emission controls project and has been updated to reflect the new date for the baghouse and scrubber at Edgewater 5.

While we continue to rely on lower emission Powder River Basin coal for the majority of our baseload generation, we expect the emissions from our coal plants to continue to decline as our retrofits become operational. In addition, the emission profile will also improve as we convert some of our older, less efficient units to run on gas as we have done with IPL Sutherland and Dubuque generating facilities.

Last week, we announced that we are in the very preliminary stages of analyzing the possibilities of a coal to gas fuel switch at Edgewater unit 4. If it is found that a fuel switch is not economically feasible then the plan is to retire this unit by the end of 2018.

Renewable energy also remains an important element of our generation portfolio which includes both Company-owned renewable generation as well as renewable energy purchased power agreements. On the unregulated side of our business, construction is progressing well on the 100 megawatt wind farm in Franklin County, Iowa. The total estimated cost of this project is approximately $235 million excluding capitalized interest costs, and since this project is scheduled to be in service by year-end, it will allow us to elect a cash grant option. We continue to seek the off takes contract for this facility.

Before handing off to Tom, I would like to provide an update on the RMT sale process. Earlier this year, the Alliant Energy Board of Directors approved a plan to sell the RMT business. RMT was moved to discontinued operations in our first-quarter 2012 and the decision to sell RMT resulted in a one-time $0.14 per share charge in the first quarter due to a change in our state tax apportionment. We excluded this one-time charge from our 2012 guidance. We anticipate closing the RMT sale by the end of this year.

So to recap the priorities as we execute our plan, we are transforming our generation portfolio to one that is balanced and has the flexibility to comply with all existing and currently proposed environmental regulations. We have affirmed our earnings guidance range for 2012 and updated our capital expenditure plan to reflect the one-year delay of the in-service date of the new IPL gas facility and a one-year acceleration of the Edgewater 5 scrubber and baghouse project.

And finally, we will manage our Company, focusing on operational and financial discipline with the goal of earning our authorized returns. Thank you for your interest in Alliant Energy and I will now turn the call over to Tom.

Good morning, everyone. We released our second-quarter earnings this morning with our GAAP earnings from continuing operations of $0.60 per share. Adjusting for items we typically exclude from guidance, second-quarter 2012 adjusted earnings were $0.58 per share. Second-quarter 2012 earnings are up over the second-quarter 2011, primarily due to the impacts of warmer weather and the tax benefit rider.

Additional drivers for the increased earnings are higher APDC, increased earnings on non-regulated transportation and continued cost controls across the organization. The 2012 non-GAAP adjustment relates to the $0.02 per share credit from the June WPL rate case decision. Comparisons between the second-quarter 2012 and 2011 earnings per share are detailed on supplemental slides five, six, and seven.

As with many Midwest utilities, the warm weather in the second quarter positively impacted electric margins and negatively impacted gas margins. The second-quarter 2012 weather variants resulted in positive earnings per share impact of $0.06. This impact, coupled with positive weather for July, will more than offset the first quarter negative weather impact. Assuming normal weather after July, we expect 2012 earnings to trend toward the top end of our consolidated earnings guidance range of $2.75 to $3.05 per share.

For the quarter, weather normalized retail sales were up by approximately 0.5% at both IPL and WP&L, driven primarily by the commercial customer class. As a reminder, our 2012 guidance was based on no sales growth between 2011 and 2012. These trends are illustrated on supplemental slide eight.

The tax benefit rider resulted in a quarter-over-quarter variations at IPL and the parent. The tax benefit rider resulted in $0.04 per share of higher earnings in the second quarter of 2012 and when compared to the second quarter of 2011. The actual projected quarterly earnings impact of 2012 tax benefit rider as well as the actual quarterly earnings impact of the 2011 tax benefit rider is provided in supplemental slide nine. As demonstrated in the slide, the tax benefit rider quarterly timing issue is not anticipated to impact full year 2012 results.

Turning to our financing plans. We believe that with our strong cash flow and financing plan, we can maintain our target liquidity, capitalization ratios and credit metrics. Our current financing plan anticipates issuing long-term debt of approximately $450 million in the second half of 2012, and we do not currently plan on issuing any material new equity through 2013. We will continue to assess our future equity needs based on the regulatory approvals received for the various large capital projects that we are proposing and also based on our ongoing assessment of evolving capital market conditions.

Cash flows from operations are expected to be strong the next few years as we do not expect to make any material federal income tax payments until 2015. These tax-related cash flow benefits will be partially offset with credits to customer build in accordance with IPL's tax benefit rider.

Turning to our regulatory calendar, we have several current and planned regulatory dockets of note for 2012 which are summarized in slide 10. There was a great deal of regulatory activity in the second quarter of this year and, as you can see, IPL will have an active regulatory calendar during the second half of this year. In June, W -- excuse me, the PSC issued its final order in a base rate freeze for 2013 and 2014 for the Wisconsin retail electric customers. The PSC also approved a Wisconsin retail gas-based rate decrease of $13 million for 2013 and is leaving rates constant through 2014. The electric-based rate freeze factors in the recovery of the Riverside acquisition, the Edgewater 5 SCR emission control and the baghouse and scrubber project at Columbia units 1 and 2.

The recovery of the capital cost is offset by increased deferred tax liabilities, reduction of capacity payments and changes in amortization of regulatory assets and liabilities which include the conservation escrow. This order increases rate base by approximately $400 million in 2013 with an incremental $150 million in 2014 and includes no changes to the authorized ROE of 10.4%. In accordance with the PSE rules, WPL filed its 2013 electric fuel cost plan in June and anticipates the Commission will issue an order prior to year end.

In May, we filed an IPL Iowa gas-based case with a 2011 test year. The request proposes increased annual revenue requirements by approximately $[15] million or 6%. It has been seven years since based rates have changed for Iowa retail gas customers and during that period of time, plant additions have outpaced depreciation expense and the weather normalized use of residential customer has declined approximately 12%. We have proposed to an increase to gas rate base of approximately $50 million with no change to the current ROE of 10.4% for interim rates but our request for final rates includes a 10.9% ROE. This requested regulatory common equity ratio is 48.7%.

Interim rates went into effect in June and it is anticipated we will receive a final order on this case in the second quarter of 2013. We propose the use of a temporary tax benefit rider to partially offset the requested gas increase to minimize the impact to customer rates. If approved, the rider would credit customer bills for three years using approximately $36 million of federal tax benefits.

We very much appreciate your continued support of the Company and look forward to meeting you at our upcoming investor events.

At this time I'll turn the call back to the operator to facilitate the question-and-answer session.

Thank you, Mr. Hansen. 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).

Andrew Weisel, Macquarie Capital.

Good morning. First question about some of the capacity to things on slide two here. Congrats on the Board approving the plants for a new gas plant there at IPL. Definitely good to take another step forward there. My question though is if you are extending the contract at Duane Arnold it is -- I understand from a megawatt basis that you are going to be retiring some of these old gas plants from the early 1950s. But as you say yourself there's only 4% of energy needs last year.

Given how oversupplied MISO is, how confident are you that there will be a need for the energy coming from a new plant as opposed to buying from other plants?

That is a very good question. We are very confident that by -- when this plant goes online in 2017 it will definitely be needed for energy also at that point, again, as a lot of these other older coal plants retire in the MISO region.

Okay. So it is more a call on the market itself tightening over the next five years or so?

Yes, both. Both. And our strategy has been to rely less on the markets and rely more on our own generation.

Sounds good. Then related to those retirements -- definitely appreciate the updated CAPEX outlook, but there is no update on the future rate base. Is there going to be any kind of step back from these plants that -- as far as I know -- are not fully depreciated before you have the pickup from the new capacity?

No, we don't anticipate that.

Great, thank you very much.

Brian Russo, Ladenburg Thalmann.

Good morning. Are you still comfortable with the 5% to 7% long-term CAGR that has been previously conveyed?

Yes, we are.

Okay. Can you remind us over what type period that CAGR is for and what year we should be using as a base now?

We are still sticking with the 2010 as the base year. So that is 2010 to 2016. Weather normalized.

Okay and I believe that weather normalized is [2.62] in 2010?

Yes. That's correct.

And what is the book value on the plants that you plan to retire at IPL?

At IPL, boy, it is not material at all. It's like $15 million.

So that is why we were -- following up on the last question we are not going to see any real significant -- any real step down when these plants are retired prior to when the (multiple speakers) [CCGT].

Yes, let me correct myself. The ones all the way through 2017 it is about $50 million.

50.

5-0.

And can you also maybe just talk about the evaluation or process or the criteria that the IUB will use when evaluating the need and what is in the best interest for customers in terms of the CCGT development?

There are several different methods. Of course we will be looking at cost to customers. We will also looking at the impact to the state of Iowa as well. And reliability is a key issue especially with all the transmissions being built in Iowa as well. So there's multiple facets, cost being one but there's a lot of other issues and I would just prefer owned generation as opposed to lease generation.

Okay and lastly just the strategy are how should we think about the upcoming IPL electric rate case for 2014? I think you mentioned earlier that you were going to submit a tariff filing to adjust the PPA, the new PPA you signed, relative to the PPH that is rolling off. I am just trying to get a feel for -- will we see rates step down assuming this PPA -- this new PPA is at a much lower price than the one currently in rates?

Yes. No, our plan is to list with the additional capital that we are putting in place in Iowa. That will make up the capacity payment that we are paying now and the new PPA will be flowing right through the energy clause. So our strategy has not changed.

Okay. Can you remind us how much new capital you will file for recovery of or you'll be adding to the rate base in 2014?

I'm looking to see which would the best method to be.

It is going to be all of the emissions projects so it will be the Ottumwa, Neal 3, Neal 4 as well as Lansing environmental projects. And they are identified in our CAPEX forecast. So those will be the primary incremental in-service additions over this period of time.

Okay. So just to be clear will you file a case or will you just let the PPA roll off? I have been trying to get to understand the procedure of it.

Yes. We are still discussing that one.

Okay. Understood. Thank you very much.

James Dobson, Wunderlich Securities.

Good morning. Maybe just take me through the Duane Arnold and I ask the question largely because I know Bill did and I'm pretty sure you did, were pretty clear saying, well, we are not going to recontract with Duane Arnold and then here we are, which since it is not going through the capacity charge sounds like you got a pretty good deal. But talk us through how that developed and we got to where we are today.

Sure. Going back to the beginning of the year when we issued that RFP to look at alternatives for Iowa customers, we had many, many bids, good-quality bids coming. I know we have discussed that with you. The bid that we got in from Nexstar on the Duane Arnold Energy was a very attractive price.

Okay. So it really all just came down to price and obviously the earlier discussions you had had with them changed a lot, I imagine.

Yes. So the combination of extending that PPA plus the gas plant, we believe, is in the best interest of our customers and the lowest cost option.

Fair enough. Maybe then think -- what I am still trying to struggle with this we are sort of replacing the Duane Arnold capacity with the Iowa plant. We are pushing out the Iowa plant. Does it make sort of the Tier 2 plan's coal less likely or do they have a higher hurdle to meet since essentially even by slide two you'll be longer generation, once we are out in that 2017 timeframe?

Yes. I think the difference in the analysis we did now is opposed to what we've discussed in the past is the evaluation of the older gas units as well in the peakers and the intermit -- ones that are intermittent. So that is really what is new to the capacity of question today as opposed to the tier twos.

No, no, no. I absolutely appreciate that but I'm just saying does -- it certainly would appear to give you more flexibility around the tier 2.

Yes, absolutely. Yes, this plan gives us a lot of flexibility around those units now.

Got you. Fair enough. And have you identify which gas plants will actually be retired? I appreciate the sensitivity of employees and the like but I just didn't know if you have publicly announced which will be retired.

Yes. No, we have not.

And then, Tom, I heard you on equity sort of no need through 2013 and if I recall is consistent with what you have said previously. We are seeing CAPEX come down in 2014, up in 2015 so maybe you are just buying yourself some flexibility for 2014. But what makes you not clear that you wouldn't need it in 2014?

Well, as we finalize our plans for 2013 as we issued guidance later this year we will certainly convey all of that as part of our package. But as you said, as we continue to look at CAPEX and to the extent that we are able to delay some of that by virtue of the new plants for the IPL gas plant there should be some impact to our future equity needs.

Meaning pushing out.

Conceivably, yes.

That's great. Thanks very much. I appreciate the insight.

Ashar Khan, Visium.

Good morning. Just wanted to check back. What are you saying on rate base? Are you going to provide us with some rate base slides or how should we look at this reduction in CAPEX on to the rate base? For 2014, I guess the main issue is here.

If we take a look at WPL, certainly that is pretty well fixed in terms of the addition of Riverside, the Edgewater SCR and the Columbia units and as I mentioned as part of the rate order here in Wisconsin we will be increasing rate base by about $400 million in 2013 and $150 million in 2014. In Iowa, as we said we have got the environmental projects going in service. The gas plant will not be going in service until 2017 and, again, it is part of our 2013 guidance we will be giving updated rate base forecasts at that time.

What should we take from today's -- this CAPEX slide? Should we assume that the rate base is going to be lower in 2014 versus what was previously given out?

No, I don't think there will be any major changes. Because we have the in service additions for Ottumwa and Lansing and Neal 3 and Neal 4 have not changed. In fact, if you go to slide four, that highlights the in service additions and, on the right side, the actual dates themselves that we expect those to go in service. There's really no change of significance at IPL from what our previous CAPEX forecast is in terms of the emission projects.

Understand, but the gas plant has been moved out one year, right? Am I right or wrong?

Yes. But keep in mind it would not be into rate base until it was in service. So it is really not changing the 2014 rate base.

So it is not changing the 2014 rate base as such. So then, what it would have only impacted would have been AFUDC earnings. Is that fair? That is the only kind of impact from 2014 from last time to this time.

That is correct.

Thank you so much.

Andy Bishop, Morningstar Financial Services.

Good morning. Thanks so much for all the clarification regarding your resource strategy. A little bit of clarification on potential fuel switch at Edgewater Station unit 4. If you decide not to repower and retire, would you then have a new build at that 330 megawatts?

We will have to evaluate the need for additional resources at that point. We have no conclusions at this point but you are right. We'll have to evaluate that.

And then I guess if you could just maybe highlight some of the level of interest you are getting in for RMT?

As we have stated, we continue to expect we will complete the deal by 2012 and so management believes that we will be able to complete that.

Okay, perfect. Thank you.

Paul Patterson, Glenrock Associates.

Good morning. Just wanted to get a better feel for what the -- and I am sorry if I miss this, demand growth that you have on slide two. What is the annualized normal weather growth that you are expecting here through the 2017? I saw the 50 megawatts, I just wanted to figure out what that meant in terms of low growth annually.

Yes, we are estimating between 0.75% and 1% a year.

Okay and in terms of the rate impact, it is too early to say what that would be with this plan. Is that right? Or do we have an idea?

I would say it is too early, but we will as we file our filings with the IUB, it would be fully vetted in that proceeding.

Okay. And then you do mention some operational pollution benefits and stuff like that. I mean, it clearly looks like it is essentially sort of replacing older plants. Can you give us a flavor as to what the operational benefits that we should be thinking about because obviously it is more CAPEX and more costs from customers to that perspective, but theoretically it would be benefiting fuel emissions issues, et cetera. So do you have any flavor just roughly speaking what that might do or --?

It is probably too early to give you that at this point, but again as we go through the process, it will all come out in the process. So we will make sure we are very clear at that point with you.

Okay. Thank you very much.

John Alli, Decade Capital.

Good morning. Good quarter. Two questions for you. First of all in terms of the earnings figure, is it fair to assume that because CAPEX is lower near term that the earnings [will have to be] below the 5% near-term and then pop up in that 2016, 2017 range once the -- all those big units come on?

No, we should continue to see that fairly consistent over that period of time. In terms of again we said from 2010 weather normalized through 2016, the expectation is that we will be able to achieve that 5% to 7% earnings growth.

And then what are the different assumptions between that 5% and that 7%? Is that just a load -- a load assumption that is the variable there?

it is certainly a contributor, yes.

Any other pieces?

I don't know if you heard the answer to the other question though. Part of the reduction in the CAPEX in 2014, that plant wasn't going to be in service until 2016. So the earnings from that was fully going to be shown in 2016 not 2014. It is just the AFUDC.

So the CAGR is smooth and ratable throughout the five-year period? Or is it a little lumpy?

It is a little.

I mean, it is not -- there's not a linear relationship, but I would say that it's lumpy but we still feel confident that we can continue to grow earnings in that 5% to 7% for that period of time.

[Eli Krieser], Millennium.

It is actually [Steve Hanson]. Good morning. If I look at slide three that is for the combined Company, the CAPEX, right?

Yes.

It seems like the changes were, we moved some CAPEX for WPL and it actually moved up or accelerated into this and some -- and the CAPEX for IPL shifted a little bit. I just wanted to get a sense for what the changes to the IP&L -- if the 2012, 2013, 2014 if I look at the total additions deletions versus the prior forecast in 2012, 2013, 2014. Could you provide those numbers for what IP&L would be standalone versus the prior forecast?

Yes, it will be in the 10-Q which we are planning to file later today. We will hope to (multiple speakers) -- as we typically do separate the two utilities by year so I think you will get everything to give you from that, Steve.

Great, thank you. Second question. I just wanted to understand on slide two, it seems like one of the new piece of information today aside from the decision to sign the Duane Arnold, re-signed Duane Arnold contract is the decision to retire some gas units, those 300 megawatts of capacity. And I was just wondering if you could talk about the analysis or what some of the drivers were of the decision to retire old gas units to replace it with a new gas unit. And then just talk about what you need to do in terms of getting approval to make these retirements with the Commission. What are some of the factors they will look at or consider in deciding whether or not to to approve that decision?

Yes. Again, these units that we are discussing right now are some of these older units. A lot of them are the peaking units and, again, as we look at their liability to the system, these units will really not be necessary and again due to the age and the maintenance cost of them, we just made a decision to go ahead and retire them. The book value on those is not very high at all. As it relates to some of the let's call them one of the -- some of the units that we re-powered some of the coal to gas repowering units, we have got to evaluate those also. Again, those are older units and repowering them to gas was really just an intermediate solution.

So again will be working with our regulators to recover all the cost of any retired units. We have been very successful in both jurisdictions of recovering all cost of retired units on any electric properties. So we would anticipate that to continue.

Is there a cost benefit analysis or is there --? Do you have to show --?

Yes.

To show that these -- is there some burden that has to be met in terms of making the retirement decision with the regulators or is it just you are the operator, you own the assets, you can do to your professional discretion?

Yes, it's definitely we have to be reasonable about it but we would definitely show, share with our regulators our decision-making. It's not a prescribed formula but we would show between reliability cost, et cetera, why we are making the decision to retire certain units.

And that presumably would be -- you're filing a docket, I guess, is that part of the docket that gets filed? Just looking at slide, the slide on the regulatory. Which docket will that be? Is that in the one you are going to file on May 10?

No, no, no, it will be the one -- the one that we will be filing to approval of the gas plant. It will be in the fourth quarter of this year.

I'm sorry, on the -- that will be the HF 577 filing.

Right. The one that we are filing next week is for the approval of a PPA.

(Operator Instructions). [Neal Carlton], Wells Fargo Securities.

My questions have been answered. Thanks.

James Dobson.

Pat, I wanted to follow up, I think it came up in an earlier question. But can you just review for us what at least the options are currently in the upcoming Iowa rate case while you deal with the rather high-class problem of $150 million roughly of capacity charges going away?

Yes and our goal is to make sure that customer rates are smooth during that period of time. We have been talking about that for a while. Some of the options are working with and we will propose, just had to smooth that three year period out so that we don't have rate increases, rate decreases. But nothing has changed. Again with the PPA, the new PPA that we are proposing is energy only. That still gives us the whole capacity payment to help with the capital additions that we have going forward. So that it has really changed. We will be a little more forthcoming on that as we go throughout the year and get the filings filed.

Right, but in addition to keeping customer rates smooth, do you think the -- I am sure your desire would be, but does the Commission have the flexibility to keep earning smooth over that period? Because obviously you have various states where these environmental projects come into service, rate bases stepping in at a somewhat difficult word but volatile pace and then you have this big 2017 COD. So just help me think through how you are thinking about earnings as well as keeping customer rates smooth.

Yes. I guess they both go hand in hand. When a PPA definitely expires our earnings should be going up much more than customer rates, just because we are substituting capital for the PPA payment. So, we'll see earnings growth much higher than customer rate increases during that period of time.

Got you. And you think the Commission would allow -- I mean, that is a huge number if we just tax (multiple speakers) $150 million.

Yes, we will present a plan to make sure it is smooth and as we've been telling people we are not going to be greedy during this period of time. We will present a plan that is reasonable.

Okay, perfect. And on the Iowa rate base recognizing we have been in a rate freeze and I'm just harkening back to some of the revelations you disclosed a couple of months ago on the Wisconsin rate base. As I think about the impact of deferred taxes on the Iowa rate base, you are encouraging -- I think, Tom, you were in an earlier question saying, well, the CAPEX hasn't changed that much so rate base shouldn't change.

I'm just thinking as we then layer in the deferred tax which at least in Wisconsin had grown a lot faster than perhaps we had expected, do we see some tempering in the growth and rate base in Iowa as we come out the back end of this rate freeze?

We will continue to see bonus depreciation in 2012 and to a much lesser degree in 2013. So that's certainly part of our analysis that we have been very mindful, because we need to look at the entire rate base complement which is, obviously, in many cases influenced by bonus depreciation.

Perfect. That's great. Lastly just on the commercial sales sort of driving -- I think, Pat your comment or Tom's comment, sorry was that they are driving the sales growth. Maybe just what we should read into that as far as economics going on in your service territory.

Well, we are encouraged that they are increasing, first of all. And again, we are very mindful that the recession is still part of the reality that we are doing with the Midwest. But we at least are encouraged by some customer improvement. So still are in the game and what we have stated is that, at least for 2012, our earnings projections we are not assuming significant growth in electric sales.

Thanks so much.

(Operator Instructions). Miss Gille, there are no further questions at this time.

With no more questions, this concludes our call. A replay will be available through August 10, 2012 at 888-203-1112 for US and Canada or 719-457-0820 for international. Callers should reference conference ID 8244179. In addition, an archive of the conference call and a script of the prepared remarks made on the call will be available on the investor section of the Company's website later today.

We thank you for your continued support of Alliant Energy and feel free to contact me with any follow-up questions.

Once again, ladies and gentlemen, that concludes today's conference. We appreciate your patience today.