Alliant Energy Corp (LNT) 2016 Q1 法說會逐字稿

Thank you for holding, ladies and gentlemen and welcome to the Alliant Energy's First Quarter 2016 Earnings Conference Call. At this time, all lines are in a listen-only mode. Today's conference is being recorded. I would like to turn the call 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 webcast for joining us today. We appreciate your participation. With me here today are Pat Kampling, Chairman, President and Chief Executive Officer; Tom Hanson, Senior Vice President and CFO and Robert Durian, Vice President, Chief Accounting Officer and Controller, 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 last night announcing Alliant Energy's first quarter 2016 earnings and reaffirmed 2016 earnings guidance. Press 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.alliantenergy.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 last night 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 Pat.

Thank you, Su. Good morning and thank you for joining us for our first quarter 2016 earnings call. I'll begin with an overview of our first quarter performance, then I'll review the progress made in transforming our generation fleet, creating a smarter energy infrastructure and expanding our natural gas system. I will then turn the call over to Tom, to provide details on our first quarter results as well as review our regulatory calendar.

Like other utilities in the region, mild winter temperatures reduced first quarter results by $0.05 per share. This is was quite the opposite from first quarter 2015 where we experienced a $0.04 per share positive temperature impact to earnings. Therefore temperature swings led to a significant quarter-over-quarter variance of $0.09 per share.

During the past few years, we've been executing on a plan for the orderly transition of our generating fleet in an economic manner to serve our customers. We made progress in building a generation portfolio that has lower emissions, greater field diversity and is more cost efficient. The transition includes increasing levels of natural gas-fired and renewable energy generation, lower levels of coal generation through coal unit retirements and installing emission controllers and performance upgrades at our largest coal-fired facilities. We have also started water and ash programs at our facilities to meet current and expected future environmental requirements.

Now, let me brief you on our construction activities. 2016 is another very active construction year with forecasted investments of over $1.1 billion. Our investments are projected to include approximately $300 million for our electric distribution systems. These investments are driven by customer expectations to make our electric systems more robust, reliable and resilient. This year's plan also includes $200 million for improvements and expansion of our natural gas distribution business, almost double prior year's spending. The electric and gas distribution business will continue to be a focus for future investments as we create a smarter energy infrastructure.

Now, I'll provide an overview of our growing investments in new gas-fired generation. As you are aware, the Public Service Commission of Wisconsin approved the Certificate of Public Convenience and Necessity for the Riverside expansion, and we expect to receive the written order today. We have already received the air permit and are awaiting approval of the water permit. We expect the acid from the new Riverside unit to be approximately 700-megawatts and total anticipated capital expenditure for Riverside remains at approximately $700 million excluding AFUDC and transmission. The targeted in-service date is by early 2020. Later this month, we plan to announce the engineering, procurement and construction firm selected for this project.

In Iowa, the Marshalltown natural gas-fired generating facility is progressing well and is now approximately 73% complete. Total capital expenditures are anticipated to be approximately $700 million excluding AFUDC and transmission. Marshalltown is on time and on budget and is expected to go in-service in the spring of 2017.

Riverside and Emery are two primary existing gas generating facilities, had another quarter of significant increase in their dispatch when compared to prior years. During the first quarter of 2016, Riverside and Emery's capacity factors were more than double their five-year averages. The ability to lean on our gas-fired generation during periods of low gas prices resulted fuel savings for customers and shows the importance of a balanced energy mix.

Moving onto our existing coal fleet. We're getting towards the end of our successful construction program through reduced emissions at our largest facilities. At Edgewater Unit 5, progress continues on the installation of a scrubber and baghouse. This project is approximately 97% complete, and is on time and below budget and should be in-service later this year.

Total capital expenditures for these projects are anticipated to be approximately $270 million. And last month construction of the Columbia Unit 2 SCR began. WPL's total capital expenditure for this project is anticipated to be approximately $50 million and is expected to go in-service in 2018.

There are several new order and ash regulations being developed by the Environmental Protection Agency which we anticipate will impact nine of our generating facilities located across Iowa and Wisconsin. Our water and ash program was designed according to pending EPA and DNR rules and regulations. We have ash pond closures and bottom ash conversion projects underway in Iowa as outlined in IPL's filed emissions plan and budget.

In Wisconsin, we filed an application for Certificate of Authority for bottom ash conversion at Edgewater. The total expenditures for our water and ash programs are anticipated to be over $200 million during the next seven years. The rate base estimates provided in our Investor Relations presentation include the near-term expenditures for this program.

As we plan for future generation needs, we aim to minimize environmental impact while providing safe, reliable and affordable energy for our customers. We believe that our carbon emissions will continue to decrease due to the transition of our generating fleet, the availability of lower natural gas prices and increased renewable energy.

We have and will continue to invest in and purchase renewable energy. We currently own 568-megawatts of wind generation and purchased approximately 470-megawatts of energy from renewable sources. Our 10-year capital plan includes additional wind investments to meet customer energy needs. Also, we have several solar projects in which we anticipate gathering valuable experience on how best to integrate solar in a cost-effective manner into our electric system.

At our Madison headquarters, over 1,300 solar panels have been installed and they are now generating power for the building. Construction has also started on Wisconsin's largest solar farm on our Rock River landfill, which is adjacent to Riverside. And in Iowa, construction has started on the Indian Creek Nature Center in Cedar Rapids where we will own and operate the solar panels there. We also anticipate collecting additional solar investment opportunities in the near future.

Listening to our customers and understanding their evolving needs is shaping the path for the future. We replaced our decades old customer information and billing system, which is now providing customers with many more online self-service offerings and robust customer communication options and we have plans to ramp up additional offerings through this this new platform. We have managed our Company well and made great strides growing our Company on behalf of our investors, customers and employees. In fact, our stock price doubled between year-end 2010 and the end of the first quarter of this year.

In recognition of this progress and the growth prospects going forward, the Board of Directors announced a 2-for-1 stock split last month. Each shareowner of record at the close of business on May 4, will receive one additional share for every outstanding common share held on that date. The additional shares will be distributed by book entry on May 19 and on May 20, shares will be sold at the post-split price. This is a significant milestone that our Company and investors should be proud of.

Let me summarize the key messages for today. We will work to deliver 2016's financial and operating objective. Our plan continues to provide for 5% to 7% earnings growth and a 60% to 70% common dividend payout target. Our targeted 2016 dividend increased by 7% over the 2015 dividend. Successful execution of our major construction projects include completing projects on time and at or below budget in a very safe manner, working with our regulators, consumer advocates, (inaudible) groups, neighboring utilities and customers in a collaborative manner, reshaping the organization to be leaner and faster, while keeping our focus on serving our customers and being good partners in the community. We will continue to manage the Company to strike a balance between capital investment, operational and financial discipline and cost impacts to customers.

You are invited to join us at our Annual Meeting next week which will be held on May 13, at Madison, Wisconsin. Thank you for your interest in Alliant Energy and I will now turn the call over to Tom.

Good morning, everyone. We released first quarter 2016 earnings last evening, with our earnings from continuing operations of $0.86 per share, which was $0.01 per share lower than first quarter 2015 earnings.

A summary of the quarter-over-quarter earnings drivers may be found on slides 2 and 3. Consistent with the growth assumed in our 2016 earnings guidance, retail, electric, temperature normalized sales for Iowa and Wisconsin increased approximately 1% between first quarter 2015 and 2016. The commercial and industrial sectors continued to be the largest sales growth drivers quarter-over-quarter.

Now, let's briefly review our 2016 guidance. In November, we issued our consolidated 2016 earnings guidance range of $3.60 to $3.90 on a pre-stock split basis. The key drivers for the 5% growth in earnings relate to infrastructure investments such as the Edgewater and Lansing emission control equipment and higher AFUDC related to the Marshalltown generating station. The earnings guidance is based up on the impact of IPLs and WPLs, previously announced retail base rate settlements.

In 2016, IPL expects to credit customer bills by approximately $10 million. By comparison the billing credits in 2015 were $24 million. IPL expects to provide tax benefit rider billing credits to electric and gas customers of approximately $62 million compared to $72 million in 2015. As in prior years, the tax benefit riders may have a quarterly timing impact but are not anticipated to impact full year results.

The WPL settlement reflected electric rate base growth for the Edgewater scrubber baghouse projected to be placed in service this year. The increase in revenue requirements in 2016 for this and other rate based additions was completely offset by lower energy efficiency cost recovery amortizations. Slide 4 has been provided to assist you in modeling the effective tax rates for IPL, WPL and AEC.

Turning to our forecasted capital expenditures. In March, the Pipeline and Hazardous Materials Safety Administration announced proposed regulations to update the safety requirements for gas pipelines. We currently anticipate final regulations will be issued in 2017. The forecasted capital expenditures provided during our year-end call include estimated amounts for these expected regulations.

Now, turning to our financing plans. Our current forecast incorporates the extension bonus depreciation deductions through 2019. As a result of the five-year extension of bonus depreciation, Alliant Energy does not expect to make any significant federal income tax payments through 2021. This forecast is based on current federal net operating losses and credit carry forward positions as well as future amounts of bonus depreciation expected to be taken on the federal income tax returns over the next five years.

Cash flows from operations are expected to be strong given their earnings generated by the business. We believe that with our strong cash flows and financing plan, we will maintain our targeted liquidity and capitalization ratios, as well as high quality credit ratings. Our 2016 financing plans assume we'll be issuing approximately $25 million of new common equity through our share owner direct plan.

The 2016 financing plan also anticipates issuing long-term debt of up to $300 million at IPL and approximately $400 million at the parent and Alliant Energy Resources. $310 million of proceeds at the parent and Alliant Energy Resources are expected to be used to refinance maturity of term loans.

As we look beyond 2016, our equity needs will be driven by the Riverside expansion project. Our forecast assumes that capital expenditures for 2017 would be financed primarily by a combination of debt and new common equity.

Our 2017 finance plan currently assumes issuing up to $150 million of common equity. We may adjust our financing plan as being prudent, if market conditions warrant and as our debt-to-net equity needs continue to be reassessed. We have several current and planned regulatory dockets of note for 2016 and 2017, which we have summarized in slide 5.

During the second quarter of this year, we anticipate filing a WPL retail electric and gas base case for 2017 and 2018 rates. For IPL, we expect a decision regarding a permit application for the approximately $60 million Clinton Natural Gas Pipeline. The next Iowa retail electric and gas base rate cases are expected to be filed in the first half of 2017. We very much appreciate your continued support of the Company.

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

Thank you, Mr. Hanson.(Operator Instructions). Andy Levi, Avon Capital.

Just a quick question. Just on the non-reg, where was the breakdown on the earnings on the non-reg for the quarter, the railroad and the wind facility?

I think the transportation generated $0.01, our non-reg generation was another $0.01, Franklin County was a drag of about $0.01 and then we had some parent activity, I think of about another $0.01. No, the last item was a positive in terms of the other benefits of the parent.

How did the Franklin, the non-reg generation and the railroad, how did that compare to last year?

I would say it's fairly consistent.

And then just in general on Franklin and the railroad, what's kind of the thinking on the outlook for this year relative to last year?

I think with Franklin, last November when we gave guidance, we said it would probably be a drag on earnings of about $0.04 to $0.05.

Is that still good?

That's still reasonable, yes.

And then on the railroad?

And assume that $0.07 was in our current outlook, our current forecast and we're assuming the same expectation for 2016 now.

$0.07 to the railroad, is that what the railroad earned in 2015 or was it higher or lower.

No it was $0.07 last year as well.

Got it, that's all I needed. Thank you very much.

Brian Russo, Ladenburg Thalmann.

Just curious, you reaffirmed your 5% to 7% CAGR, does that run through a particular year or through a particular planning period. Maybe you could just talk about that just a little bit?

Brian, we actually based it on last year's weather normalized sales and it goes out five years, so that's till 2019.

And what was last year's weather normalized sales?

I'm looking that up in the IR -- it's in the IR deck.

$3.57.

And then just remind us the Riverside settlement and options from the municipal co-ops and WEC Energy? Can you just remind us of the timing of that?

Brian, we updated our investor deck earlier this season and so there's a slide on it. If you go to slide 9 on the deck, so basically it's Wisconsin Public Service has the option for up to 200-megawatt in the 2020 to 2024 timeframe. MGE has up to 50-megawatt from the 2020 to 2025 timeframe. And the co-ops have up to 60-megawatts and they'll determine that in the third quarter of this year.

And how is that priced?

They will be at the current book value at the time.

Current book value. Okay, great. Alright. That's all I had. Thank you.

Andrew Weisel, Macquarie Capital.

I appreciate the commentary on potential equity needs for next year. Just want to understand, is that sort of a run rate we should assume for all years in 2017 and beyond or is it sort of a one-time thing? Obviously, there's billion other variables that could make the number -- the need go up or down, but should we think of that as the number for the next several years or just 2017 and there could be more in 2018?

Assume that as the initial estimate for 2017. And in terms of the outer years it's going to be somewhat dependent on the options that some of the parties that Pat just made reference to in terms of the Riverside expansion. So if and when MGE and pub service might step into Riverside, so for now just assume up $250 million applies only to 2017.

$150 million.

And then the other one is, just want to verify, there was some change to the effective tax rate forecast in slide deck. I believe I just want to confirm, that's earnings neutral, right, that an offset to revenue line or is that something that could affect where you shake out within the guidance range?

There will be some movement with the income statements. What has changed is principally at IPL. We'll have less flow through benefit. But that should not be impacting earnings that will be offset some place else.

So that seems to be effective tax rate for both IPL and the corporations, I should think of those as earnings neutral?

No, think of it -- there will be an adjustment to tax but something else will be offsetting it. So the earnings guidance will remain consistent with previous estimates.

So the $0.09 benefit in the full-year guidance is still a good number to think about?

Probably a little high, but again it's not going to be significantly different and as Pat said, it will be offset by something else. So, our guidance for 2016 is unchanged.

We know how carefully you guys track the effective tax rate. That's why we want to provide the update this quarter.

We appreciate it, but every penny does count. So I was just trying to understand the potential impact to the bottom line. Okay, thank you.

And Tom counts every penny also.

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

With no more questions, this concludes our call. A replay will be available through May 12, 2016 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 the 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.

This concludes today's call. We thank you for your participation. You may now disconnect.