Alliant Energy Corp

NASDAQ:LNT

Earnings Call Analysis

Strong Start to 2024 and Focus on Strategic Objectives

Alliant Energy kicked off 2024 on a solid note, continuing its legacy of operational and financial execution. The core mission of serving customers and strengthening communities remains paramount. The company announced first-quarter 2024 earnings of $0.62 per share, slightly down from $0.65 per share in the first quarter of 2023. This dip was largely driven by higher financing and depreciation costs linked to capital investments, as well as historically mild temperatures in their service territory, which trimmed earnings by approximately $0.08 per share.

Solar Investments and Clean Energy Progress

Alliant Energy is pushing forward with its strategic solar investments to enhance its renewable energy portfolio. The final solar project in Wisconsin is nearing completion, solidifying the company’s position as the largest solar power operator in the state with 1.1 gigawatts of installed capacity. In Iowa, the 50-megawatt solar project in Linn County became operational, with further projects totaling 350 megawatts slated for completion by the end of 2024. These investments are pivotal to providing zero-fuel-cost energy resources and improving grid reliability.

Financial Performance and Operational Cost Management

Despite the challenges posed by mild temperatures, Alliant Energy managed to lower its other operation and maintenance expenses by nearly $15 million in the first quarter of 2024 compared to the same period in 2023. This reduction is part of the company’s broader strategy to control costs and enhance customer affordability. Furthermore, cash flows from operations saw a boost of over $100 million, primarily due to timely fuel cost recoveries and rate increases that took effect at the beginning of the year.

Regulatory and Legislative Developments

Alliant Energy remains engaged with regulatory proceedings and legislative activities to foster an environment conducive to economic growth. In Wisconsin, the company expects to refund over $30 million to customers following its annual fuel reconciliation. Legislative efforts in Iowa and Wisconsin are geared towards supporting clean energy initiatives and attracting large businesses. For instance, new laws in Iowa provide incentives for mega projects and enable advanced rate-making for nuclear and electric storage technologies.

Earnings Guidance and Future Outlook

Alliant Energy reaffirmed its 2024 earnings guidance range of $2.99 to $3.13 per share, forecasting a consistent 5% to 7% growth in adjusted earnings per share. This projection is contingent upon effective regulatory outcomes, stringent cost controls, and normal weather patterns. The company’s strategic plan includes substantial investments in renewable energy and upgrades to existing infrastructure, maintaining a focus on long-term growth and sustainability.

Cash Flow and Financing

The company’s financing plans for 2024 are well underway, with $300 million raised through a green bond at WPL and the refinancing of a $300 million term loan at Alliant Energy Finance. An additional $120 million is expected from the sale of partial interest in West Riverside. Alliant Energy also plans to raise approximately $25 million in equity through its Dividend Reinvestment Plan (DRIP). This financial strategy supports their extensive investment in renewable and battery projects while efficiently managing debt maturities.

Earnings Call Transcript 2024-Q1

[Operator]

Welcome to Alliant Energy's First Quarter 2024 Earnings Conference Call. [Operator Instructions]. Today's conference call is being recorded. I would now like to turn the call over to your host, Susan Gille, Investor Relations Manager at Alliant Energy. Please go ahead.

[Susan Gille, executive]

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 John Larsen, Executive Chairman; Lisa Barton, President and CEO and Robert Durian, Executive Vice President and CFO. Following prepared remarks by John, Lisa and Robert, we will have time to take questions from the investment community.

We issued a news release last night announcing Alliant Energy's first quarter financial results. This release as well as the earnings presentation will be referenced during today's call and 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 news release issued last night and in our filings with the Securities and Exchange Commission. We disclaim any obligation to update these forward-looking statements. References to adjusted earnings exclude temperature impacts and any non-GAAP adjustments.

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

[John Larsen, executive]

Thank you, Sue. Good morning, everyone, and thank you for joining us. We are excited to share some key milestones and provide updates on several areas of the business today. 2024 is off to a solid start, and we remain committed to achieving our strategic objectives while continuing our long track record of solid operational and financial execution.

Our company's purpose serving customers and building stronger communities remains at the center of everything we do. I will highlight a few of our key 2024 achievements and then turn the call over to Lisa and Robert to provide more updates as well as additional details relating to our operations financial performance and key regulatory matters.

I'll start by highlighting the successful execution of our strategic solar investments. These investments play an important role in our balanced generation portfolio, a portfolio that delivers safe, resilient and reliable energy to our customers.

Our final solar project in Wisconsin is near completion, which signifies the culmination of our planned 1.1 gigawatts of solar investment in the state and providing long-term value to our customers. The completion of this investment solidifies our position as the largest owner-operator of solar generation in Wisconsin.

When constructing our renewable generation, we follow the Institute for Sustainable Infrastructure framework called Envision. Using this framework, we design projects to enhance environmental, social and economic impacts. I'm pleased to report that so far, we've received platinum Envision certification for 4 of our Wisconsin solar projects.

We also made progress on our solar investments in Iowa, our 50-megawatt solar project in Linn County just outside of Cedar Rapids is now operational, and we remain on track for completing the remaining 350 megawatts in the state by the end of 2024.

These strategic investments in solar energy are enhancing customer value by providing 0 fuel cost resources, tax credits and creating a more balanced energy mix for our customers. This balance is critical to delivering reliable and resilient energy to our customers. And in addition, these solar projects contribute to local economies by generating new job opportunities and revenues.

Another exciting milestone for our company is achieving the halfway mark on our commitment to planting 1 million trees, 1 tree for every electric customer. The effort is to plant these trees is rooted in our commitment to our customers and the communities we proudly serve.

Before I turn it over to Lisa, I want to share some exciting recognition we've recently received. We've been named to Newsweek's list of most trustworthy companies in America for the third year in a row. And for the second year in a row, we earn the highly coveted Vets Indexes Employer Award, recognizing our focus on hiring, retaining and supporting our veterans and the military connected community.

A special thank you to our dedicated veterans. Thank you for your service. I'm grateful to all our employees for their strong commitment to our customers and their continued dedication to delivering outstanding service to the communities we serve.

I'm proud to work for this company and proud of what we have accomplished as a team. Our investment thesis continues to produce consistent performance. We are well positioned for growth and excited for the future. I'll now turn the call over to Lisa.

[Lisa Barton, executive]

Thank you, John, and good morning, everyone. As John stated, we had a solid start to the year, and we are well positioned to achieve our 2024 earnings and growth objectives. Warmer-than-normal temperatures impacted our first quarter earnings, reflecting similar temperatures experienced in the broader region.

It is early in the year, and we have focused our efforts to drive efficiencies in the business and have already made progress implementing cost controls and executing on our customer investments in accordance with our plan.

As John mentioned, we have a long track record of consistent operational and financial execution, a principal reason for your confidence in Alliant Energy. Delivering on the expectations of our customers, communities, regulators and investors is foundational for Alliant Energy, and we are committed to continuing to evolve and adapt to meet those expectations on a year-over-year basis. Executing on our investment strategy is key to our ongoing success.

Building on John's comments about our notable solar progress, we are on track to surpass the 3 gigawatt mark of clean, 0 fuel cost energy resources for our customers. In addition to our utility-scale solar investments, we remain committed to partnering with local businesses interested in hosting solar projects. For example, in Iowa, we recently broke ground on 4 customer-hosted solar projects in Grinell.

Alliance Energy operates in business-friendly states that are well positioned for growth and economic development. Recently passed legislation in both states will establish Iowa and Wisconsin for accelerated economic growth opportunities.

In Wisconsin, the sales and use tax exemption for data centers supports a traction of these types of customers. The IRA conformance bill aligns federal and state tax policies, enabling a smooth transfer of renewable credits to Wisconsin companies and the electric vehicle bill is intended to advance fleet electrification efforts across the state.

In Iowa, two key pieces of legislation were signed into law. The mega project build provides incentives to attract large businesses to our pre-review industrial center in AMES and Big Cedar Industrial Center in Cedar Rapids currently meet the criteria specified in the legislation.

The public utilities build makes nuclear and electric storage eligible technologies for advanced ratemaking. This legislation is a clear articulation of the state's support to grow business in the state and to ensure a diverse range of resources are developed to support that growth.

I'm proud of our team's impactful and proactive engagement with the legislatures. The implementation of these business-friendly policies will foster an environment conducive to growth opportunities, help us attract new companies to the area and support growth in the communities we serve.

Iowa and Wisconsin are open for business and Alliance Energy is here to support not only the customers we currently serve but also to ensure that we are supporting the needs of future customers and community growth across our service territory.

Looking ahead, we are evolving and refining our clean energy blueprint. This evaluation is a necessary step as we focus on balancing our energy mix creating greater grid reliability, ensuring customer affordability and addressing MISO's resource adequacy needs.

The results of our updated resource plan will be included in our third quarter capital expenditure update.

Our open and transparent resource planning process allows us to be nimble in responding and preparing for the needs of our customers and communities. Another key differentiator in the states we serve ensuring our ability to be nimble, support and grow with our customers.

Before I turn the call over to Robert, I want to reiterate that we are well positioned to deliver on both customer and investor expectations. We've implemented significant measures to mitigate risk while enhancing reliability. As we continue to execute our strategy, we're uniquely positioned to quickly adapt to a dynamic environment.

I would like to echo John's appreciation for our employees who make what we do possible and ensure our continued ability to deliver outstanding value to our customers and meet investor expectations. At this time, I'll turn the call over to Robert.

[Robert Durian, executive]

Thanks, Lisa. Good morning, everyone. Yesterday, we announced first quarter 2024 earnings of $0.62 per share compared to first quarter 2023 earnings of $0.65 per share. The quarter-over-quarter variances were mainly driven by the successful execution of WPL's customer-focused capital investment program, which supported new electric and gas rates that took effect on January 1, and the higher financing and depreciation expenses associated with such capital investments.

However, the quarter-over-quarter variances were also impacted by historically mild temperatures. Our service territory experienced the warmest first quarter on record for both Cedar Rapids and Madison since 2012.

Temperature impacts decreased Alliant Energy's earnings by approximately $0.08 per share in the first quarter of 2024. In comparison, temperature impacts decreased Alliant Energy's earnings in the first quarter of 2023 by $0.04 per share. Temperature normalized electric sales to Wisconsin retail customers were relatively flat in the first quarter of 2024.

In Iowa, residential sales were higher in the first quarter of 2024 when compared to last year. We continued to experience solid growth in the number of residential customers in both states. However, these positive drivers were offset by decreased electric sales to commercial and industrial customers in Iowa largely due to lower sales to lower-margin cogeneration customers.

We continue to make progress with lowering operating expenses to achieve our financial objectives and support customer affordability. In fact, first quarter 2024 other operation and maintenance expenses were almost $15 million less than the first quarter of 2023.

Through our diverse generation portfolio, and execution of our robust fuel risk management programs, we are also keeping natural gas and electric energy costs in check. Our natural gas customers benefited from this trend as average retail builds in the first quarter of 2024 were approximately 25% lower than the first quarter of 2023.

Turning to cash flows. First quarter 2024 cash flows from operations increased by over $100 million when compared to last year. This increase was primarily due to the timing of WPL's fuel-related cost recoveries and WPL's electric and gas rate increases, which were effective January 1 of this year.

Looking forward, we expect continued improvement in our cash flow metrics as a result of the aforementioned drivers as well as increasing levels of tax credit monetization.

We recently executed agreements on tax credit transfers that cover both 2024 and '25 credits expected to be generated at WPL and IPO. We are also making progress in executing our $1.7 billion financing plans for 2024, largely to fund our investments in renewable and battery projects and support refinancing $800 million in debt maturities this year.

To date, we have issued a $300 million green bond at WPL and refinanced our $300 million term loan at Alliant Energy Finance. Later this quarter, we expect to receive approximately $120 million from the sales of partial interest in West Riverside. And this year, we expect to raise approximately $25 million in equity under our DRIP plan.

Finally, I will highlight our regulatory initiatives in progress as well as some regulatory filings we plan to initiate later this year. IPL's rate reviews continue to advance through their procedural schedules. As a reminder, we filed electric and gas rate reviews in Iowa last year.

These rate reviews focus on recovery of customer-focused investments in Iowa that support building a more reliable, sustainable and resilient energy future. Strengthening the energy grid as energy demand and extreme weather threats increase and diversifying our generation resources.

Last month, interveners in IPL's electric and gas rate review proceeding filed their direct testimony. We were not surprised by the interveners comments as divergent viewpoints are a normal part of the process. We stand by the investments we have made on behalf of our customers and believe in the merits of the case that we put before the Iowa Utilities Board. We look forward to working with the interveners as the process continues.

On Slide 10, we have provided the procedural schedule to help monitor the progress of the rate review proceedings. Under Iowa statutes, rate reviews must generally be decided within 10 months after the filing. Therefore, we anticipate a decision in the third quarter of this year. We have requested new rates to be implemented effective October 1.

Turning to Wisconsin. We have two pending proceedings in progress. We filed our annual Wisconsin fuel reconciliation for 2023 in the first quarter. At the conclusion of the fuel reconciliation process, we expect to refund over $30 million to our Wisconsin customers. And we requested authority to invest in reliability enhancements at our Riverside Generating Station. We are anticipating decisions from the PSCW on both of these dockets later this year.

Turning to our planned regulatory filings in 2024. We expect to make regulatory filings in both Iowa and Wisconsin later this year. For additional renewables and dispatchable resources, following our routine continuous modeling updates of our Clean Energy Blueprint. We expect these projects will enhance reliability as well as further diversify and balance our energy resources to meet customer energy needs.

In closing, we are positioning for another year of consistent 5% to 7% growth in adjusted earnings per share. We are reaffirming our 2024 earnings guidance range of $2.99 to $3.13 per share. As a reminder, our guidance is based on constructive and timely outcomes of our regulatory proceedings, execution of cost controls and normal weather in our service territory for the remainder of the year.

We will continue to manage our business to mitigate ongoing inflationary pressures, enable operational efficiency and deliver long-term consistency.

We very much appreciate the continued support of our company and look forward to meeting with many of you later this month. At this time, I'll turn the call back over to the operator to facilitate the question-and-answer session.

[Operator]

[Operator Instructions]. We will take our first question from Andrew Weisel with Scotiabank.

[Andrew Weisel, analyst]

Good morning. First, a question on economic development efforts. A lot of good details there. Thank you for the info. I know you have 16 big sites and the new legislation in Wisconsin weighs sales and use tax for data centers and all the other attractive features.

I guess qualitatively, what types of customers are you looking to attract? Is it exclusively data centers or other types? And I'm assuming these would be customers with large capacity needs. How do you think about the need for additional generation to service those? And then in timing, any thoughts on how soon we might see announcements?

[Lisa Barton, executive]

Great question, and thank you for it. We are open for all types of economic development opportunities in our territory. We have had a fair amount of success with respect to biofuels, great biofuel companies have located in our service territory, particularly in Iowa as well as manufacturing. Data centers are also potential customers for us as we look towards the future.

One of the things that I think is a real strategic advantage for customers locating in both Iowa and Wisconsin is the fact that we do not have a litigated IRP process. That means we can be very nimble in adapting to the needs of our customers that choose to locate in our service territory.

Because we use the clean energy blueprint, it's our open and transparent process of providing discussions with respect to generation, it's not through any kind of formal process or review that other states have.

[Andrew Weisel, analyst]

Okay. Great. And timing?

[Lisa Barton, executive]

So we're in the process this year in both Wisconsin and in Iowa of reviewing our Clean Energy Blueprint. So that's something that we are currently in the process of and we'll have any updates with respect to our capital forecast at the end of the third quarter.

[Andrew Weisel, analyst]

Okay. Great. Next, I want to ask about the agreement you've entered to sell the tax credit. Can you quantify that? You mentioned you'll generate around $400 million this year. Are you fully committed for about $400 million this year and next?

[Robert Durian, executive]

Yes. Great question. This is Robert. So yes, just to give you a sense of where we've been with tax credit transfers, we really see this as a great opportunity to both lower customer costs because we'll be reducing the carrying cost for our tax credit carryforwards. It also provides a lot of cash flows, as you indicated, which helps reduce some of the external financing requirements as well as improve our FFO to debt metrics.

We have completed the sales of all of the 2023 generating tax credits. I think of that as roughly $120-some million. And then as you think about 2024, 2025 and going forward, it's going to continue to increase. What we've indicated is roughly somewhere north of $200 million for 2024 tax credits. Growing to somewhere between $300 million to $400 million in 2025.

As we continue to build out the solar projects that was mentioned by Lisa as well as continue to implement battery projects that have ITCs associated with them, those will continue to grow.

And so we feel very well positioned. The team has done an excellent job of working with different counterparties and negotiating very what I would say fair rates that will be, like I said, cost-effective for our customers. We're also monitoring different guidance that comes from the treasury the IRS periodically.

And just more recently, there's some more flexibility with normalization rules on ITC. So the team is currently evaluating might that provide some additional opportunities for us when it relates to PTCs versus ITCs for some projects.

[Andrew Weisel, analyst]

Very good. One more, if I can squeeze it in. Any update on the timing for approvals for your proposed energy dome? I think you're waiting to hear about a DOE grant, but with Columbia slated to retire in mid-2026, how does that timing look?

[Robert Durian, executive]

Yes, I would expect that sometime later this year. We do have to file for regulatory approval in the State of Wisconsin for that through the PSCW. And so Normally, that will take up to a year to get completed. And so expect the filings to be made later this year and then hopefully, we'll learn by early 2025, the completion of that.

[Andrew Weisel, analyst]

Great. A lot of good things to look forward to in the coming months. Thank you very much.

[Operator]

[Operator Instructions]. We will take our next question from Paul Fremont with Ladenburg.

[Paul Fremont, analyst]

Thank you very much. In the -- in the advanced ratemaking proceeding, I think you reached a partial settlement in Iowa. If you were to settle, would you expect a settlement to be a partial settlement or unanimous settlement?

[Lisa Barton, executive]

Good morning, Paul. Good to have you here today. So with respect to -- if we were to have a settlement on the rate review in Iowa, we would expect that to be a total settlement rather than a partial settlement. But currently, the time to watch is mid-May to mid-June. That's the settlement window opportunity.

The advanced ratemaking that you were referencing, that was last year, the determination as to whether we're at the 10.25% or the $10.75 million that we had in the last settlement would likely be a part of any settlement that we would have.

[Paul Fremont, analyst]

Great. And then my other question is you mentioned that there's no required IRP in Iowa. Was there testimony at some point earlier this year before the commission, where I think parties may have recommended that Iowa implement an IRP process? And maybe if you could tell us where that stands.

[Lisa Barton, executive]

Good memory, Paul. Yes, it was actually part of some legislation that was circulated and that did not go forward. Iowa recognizes the need for the utilities in Iowa to be flexible with respect to the generation. And in fact, we saw the advanced ratemaking and expansion to batteries and to nuclear investments on a going-forward basis.

[Operator]

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

[Susan Gille, executive]

With no more questions, this concludes our call. A replay will be available on our investor website. We thank you for your continued support of Alliant Energy and feel free to contact me with any follow-up questions.

[Operator]

This does conclude today's program. Thank you for your participation.