Alliant Energy Corp

NASDAQ:LNT

Earnings Call Transcript 2020-Q3

[Operator]

[00:00:00] Good morning and welcome to the Alliant Energy's conference call for the third quarter 2020 results. This call is being recorded for rebroadcast at this time or later in listen only mode. I would now like to turn the call over to your host, Susan Gille, investor relations manager at Alliant Energy.

[Susan Gille, IR Manager]

[00:00:18] Good morning. I would like to thank all of you on the call and webcast for joining us today. We appreciate your participation joining me on this call or John Larson, chairman, president and chief executive officer, and Robert Durian, executive vice president and CFO, following prepared remarks by John Roberts. We will have time to take questions from the investment community. We issued a news release last night announcing a joint energy third quarter financial results, updated a consolidated 2020 earnings guidance range and announced our one earnings guidance and common stock dividend target. 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.YOUTUBE.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 a line energy press release issued last night in our filings with the Securities and Exchange Commission, we disclaim any obligation to update these forward looking statements. In addition, this presentation contains references to non financial measures of reconciliation between non-GAAP and gas measures are provided in the earnings release and our TENGKU, which will be available on our website. At this point, I'll turn the call over to John.

[John Larsen, Chairman, President and CEO]

[00:01:52] Thanks, Susan. Good morning, everyone, and thank you for joining us today as we highlight our solid results for the third quarter of 2020. I want to start by saying how proud I am to be part of the online energy team. Our purpose to serve customers and build strong communities has guided us throughout the year and the events of this quarter. 2020 has highlighted the importance of resiliency as we face the challenges of the pandemic and the jeriko in in Iowa. But resiliency is not new for us. Our customer focused strategy is designed to promote resiliency and flexibility in mind. On August 10th, just a few days after our second quarter call of teams with a picture of resiliency as they responded to an unprecedented storm that impacted three hundred and forty one of the nearly 700 communities we serve in Iowa storm known as the derecho, with little warning, even more than half of our Iowa customers without power. This was the biggest storm in our company's 100 plus year history. Our dedicated employees, many of whom were without power, were assisted by crews from across the country and Canada, working day in and day out for more than two weeks until every customer had power available to them. I also want to recognize the kindness and resiliency of our Iowa customers.

[00:03:10] During this time, our employees were overwhelmed with the kindness and patience expressed to them throughout the restoration process. Her resilience extended to our social commitments to our customers in partnership with our employees. We started a project, Reconnect, a program to help homeowners make costly repairs to their residences after the storm. To date, Alliant Energy, along with our employees, have donated more than three hundred thousand dollars to project reconnect. It's one more way that our values to do the right thing and care for others make a difference in the communities we call home. We remain flexible to assist those in need beyond the borders of our service territory as well. Over the weekend, nearly 200 airline energy employees left home to help restore power following Hurricane Rita in Gulfport, Mississippi, where they'll be joined by utility crews from several other states to help get the lights back on. In a few moments, I'll turn the call over to Robert, who addressed the sales trends we are seeing as a result of the ongoing cold pandemic. I'm proud of the efforts our employees have made in driving cost reductions and advancing our broader transformation efforts, helping us offset expenses from the storm as well as the pandemic, and resulting in lower costs for our customers and 2020 compared to 2020.

[00:04:31] Turning to the execution of our strategy, we recently announced the on time and on budget completion of our two billion dollar wind expansion in Iowa. Our generation transformation started over a decade ago and required thoughtful planning, flexibility and solid execution. And that's just what we did, making this now the third largest regulated wind owner operator in the country. And we take pride in our sustainable construction practices, delivering a range of environmental, social and economic benefits to the communities we serve. Continuing our purpose driven strategy and building on our strong, strong track record of project execution. Last week we announced the next phase of our clean energy expansion in Iowa as part of our clean energy blueprint. The blueprint offers clarity about the generation plans in Iowa through our 2020 to 2020 for planning horizon. The blueprint aligns with our consumer preferences for more renewable energy includes adding up to four hundred megawatts of solar by 2023, our near term investments in renewables creates long term savings for customers. When the four hundred megawatts of solar is combined with the nearly 13 hundred megawatts of owned and operated wind, plus the power generated by our existing solar farms and Duke, Marshalltown and Cedar Rapids, nearly 50 percent of Alliant Energy's Iowa generation portfolio will be from renewables.

[00:05:59] We also announced our intent to retire our lands and generating station by the end of 2022 and the coal to natural gas conversion of our Burlington Generating Station, these plans will allow us to avoid significant investments and helps to advance toward our goal of eliminating all coal from our generation fleet by 2040. These retirements also bring the end of an era for our employees at these facilities. For decades, our employees have done an outstanding job safely maintaining and efficiently operating these plants, providing affordable and reliable energy for our customers. We will continue to live our values by caring for our employees and assist in assisting the affected communities throughout the transition. The Iowa blueprint builds upon our clean energy strategy, including plans to add up to 100 megawatts of distributed energy such as community, solar and energy storage systems, our clean energy vision is more than renewables. It's a comprehensive view of the energy ecosystem, recognizing the changing needs of our customers and advancing investments in our connected energy network, which prioritizes reliability, resiliency and customer affordability. These investments include transitioning our grid from overhead to underground, deploying technologies such as maximizing the use of our Amite system and advancing high speed fiber communications. And, of course, we'll continue our efforts to retain and attract customers driving economic development through a variety of projects and partnerships in the face of this unprecedented gear.

[00:07:34] Our teams have embodied resiliency and flexibility. They deliver results. For the second year in a row, we've been recognized as a top utility for economic development by Site Selection magazine. Our teams have also secured 19 projects across our service territory and helping to create more than seventeen hundred new jobs. These developments are good news for our customers and communities and another example of our purpose in motion. In closing, I'm pleased to share our forecast for our 10th year in a row of five to seven percent earnings growth. Are increased and narrow 2020 earnings guidance range between two dollars and 40 cents per share and two dollars and forty six cents per share. Ah, 2020 one earnings guidance range between two dollars and fifty cents per share and two dollars and sixty four cents per share, and in keeping with our plan to grow dividends commensurate with earnings growth. Our board of directors has approved a six percent increase in our target, an annual common stock dividend of one dollar and sixty one cents per share. We remain committed to our purpose driven strategy, the health, safety and well-being of our employees, customers and communities, advancing our clean energy vision and delivering consistent returns for our investors. I'll now turn the call over to Robert.

[Robert Durian, EVP and CFO]

[00:08:59] Thanks, John. Good morning, everyone. Yesterday, we announced third quarter 2020 Japanese ninety eight cents per share, compared to ninety four cents per share in the third quarter of last year, higher earnings year over year, driven by higher revenue requirements due to increasing rate base, the timing of income tax expense and the favorable for some adjustment to the credit loss liability and the legacy guarantees of a non utility business. Entire earnings were partially offset by higher depreciation and equity dilution. We provided additional details on the earnings, various drivers for the quarter and pages three and four in the supplemental slides. The first nine months of this year, temperatures in our service territory have increased, retail, electric and gas margins are approximately one cent per share. By comparison, in nineteen, the temperature impacts for the first three quarters, increased retail electricity as far as potentially five cents per share. The temperature, normalized sales, we've been very encouraged by the improvement we've seen in our sales in comparing the second quarter to the third quarter this year for churchyards occurrence, those levels have been flat versus the same period of twenty nineteen with the increase in residential sales offsetting the decreases in the commercial and industrial sales. It's important to note that our third quarter results also reflected the impacts of the August 10th to register in Iowa, which caused a temporary reduction in sales as we wait for a couple of weeks to restore power to our customers in central Iowa.

[00:10:28] As I mentioned last night, we issued our consolidated 2020 earnings guidance range from two dollars and 50 cents to two dollars and 64 cents per share. The key drivers of the six percent growth in temporary normalized EPS and investments are our core utility business, including the details concerning foreign western Wisconsin gas pipeline. And I feel for an expansion program. These investments were reflected in government approved electric rates for 2020 one as part of a rate stabilization program, and I failed to prove electric rates, the recommended in February of this year.

[00:11:07] Our 2014 guidance also reflects additional earnings that IPO related to wind generation and injured service in September, which will be capturing the capital's renewable energy writer. And the fire payment in the third quarter, which we captured in Hydrosphere.

[00:11:25] The details of our updated capital expenditure plan on Friday, five included in this plan are a total of one point four gigawatts of solar generation, up to 100 megawatts of distributed energy such as community solar and better storage. And then three billion dollars of investment into our electric distribution system. As noted on this site, we tend to finance our solar investments with tax equity funding, so we anticipate approaching several million dollars in contributions for solar projects from tax equity partners. I'm fine, we'll be ready to walk the last year's capital expenditure plan to this year's planned. We've accelerated removal expenditures into the next two years, which were originally forecasted in 30 and also increased from overexpenditure to total over the five year period of. These changes for the better than expected development progress the society required for Wisconsin customers and the addition of a virus or John mentioned earlier. Point seven is a very good system and the effective tax rates for our two utilities and our consolidated group. He also made a consolidated, effective tax rate of negative nine percent for 2020 and negative 14 percent for 2020 one. Additional production tax credits from the billion projects placed into service in 2020 and the access to protections be returned to customers in trouble for the primary drivers, for the decrease of the vegetation. The production tax credit and access to tax benefits for tax adjustments resulting in lower electric margins next year. That's the difference when, in fact, it's actually related to and different tax benefits are largely earnings neutral. Next month to highlight our continued commitment and focus on controlling costs for our customers. In September of this year or early July, one hundred ten million dollars to terminate the brain of a five year old.

[00:13:26] The strategic decision to intervene in exchange for cost savings for our customers. Additionally, we have and will continue to make investments in technology that will further reduce costs for our customers. A great example of this is our and our investment in our jurisdictions completed earlier this year. The reduced and costs associated with. Are also pursuing additional technology investments to reduce their costs, such as their advance distribution management system. I want to recognize the great efforts of our employees for the hard work we're putting into cost transformation efforts on behalf of our customers. In terms of the vision proposal earlier this year was recently approved by the Public Service Commission, Wisconsin considered a win win for the utility and for our customers because we're able to begin to recover the money. Previously approved projects such as Wind Farm in the western Wisconsin pipeline are leveraging fuel savings and different income taxes, base rates and 2020 on flat for our customers. Are utility customers in both states benefiting from lower transmission costs, lower taxes for the country, for more fuel costs and tax credits essentially for renewable generation, and finally, lower on an expensive. That's next to our financial plans for the remainder of 2020 and 2020 on. Our plans include the 25 million dollars in new private equity through our growth plan in 2021. Our financial plans also include new long term debt over the next 14 months, leading up to 300 million dollars of our responsibility in a situation like ours and a lot of it in finance. And finally, there are no long term debt maturities between now and the end of 2020 one.

[00:15:14] Last week, we visited a regulatory initiatives and note on Slide eight for this year, we expect to receive the legislation regarding the WTO waste in addition to this quarter, including the final fuel cost recovery allowance for 2020 one. Next year, I will want to make an adventure making principals filing for a plan for making lots of money for a generation is also filing for the subsequent proceeding required as part of our test year 2020 Regional Electric and Gas Review. Of these firings anticipated in the first half of next year. And in Wisconsin, the judge made a decision from the government regarding our first certificate of filing for generation by the second quarter. We also plan to make the second CIA filing for tomorrow, plant one to the water of Wisconsin for the first half of the year. Lastly, in the second quarter, 2020 want to final retail, electric and gas reserves in Wisconsin at this time. They're still evaluating whether that would be a single test your case or maybe this year's.

[00:16:18] These regulatory initiatives are important components of our operations and financial results. We very much appreciate your continued support of our company and look forward to meeting with many of the personal finance conference next week. Later today is going to post on our website in the investor presentation with a rather 2020 fact book which details the IPO and updated capital expenditures, rate base and construction work, and Target's forecast of 2020 for. But this time, I'll turn the call back over the operator to facilitate the question and answer session.

[Operator]

[00:16:54] Thank you. At this time, the company will open up the calls questions from members of the investment community. If you would like to ask a question, please signal by pressing star one on your telephone keypad. Please ensure that the mute button on your telephone was switched off to allow your signal to reach our equipment. Again, please. Press star one. Ask a question. The first question today comes from Julien Dumoulin-Smith of Bank of America, and.

[Julien Dumoulin-Smith, Bank of America]

[00:17:21] Good morning to you and thanks for the time. Congratulations to all team, your excellent outcome here, perhaps just to kick things off. I mean, obviously a good start on twenty one here. How are you thinking about the trajectory over the longer term, especially given the poor part of CapEx? And he has to put the question where not you to be your guys on the five to seven? And secondly, how do you think about some of the other CapEx tailwinds? You just got so much renewal going here. How do you think about additional TMD then in the budget of the cumulative five year?

[John Larsen, Chairman, President and CEO]

[00:18:04] Great, Julian, happy to still feel very, very comfortable with the five to seven. And as you know, the midpoint is where we spent a lot of time making sure we have a plan to get solidly within that range. And we'll continue to you know, as far as some of the tailwinds, as you probably noticed, there's a little maybe decrease in some of the and spending as we brought some additional renewables in in the 22, 23 and as we shared with you and others, we do have some plans for increasing our spend overhead to underground. As Robert mentioned, you see a little bit of that in the tail end in 2020 for there's some great fee and spend yet. So, as you know, we try to have that. But one, two, one four billion per year is a really good spot for us to maintain the five to seven minimal equity needs and keeping customer costs affordable. So we really like the CapEx plan. And I would say there's some great TV spend that we continue to look at and we'll just let capital compete as we always do. Julia, thanks for the question.

[Julien Dumoulin-Smith, Bank of America]

[00:19:17] Absolutely, and his quick, quick follow up here in the context of 21. Can you elaborate a little bit more on the execution of cost controls item?

[John Larsen, Chairman, President and CEO]

[00:19:28] Here, you know, Roberts team's done a great job of focusing on some of our transformation and then near and a little longer term, so maybe ask Robert to weigh in on that one.

[Robert Durian, EVP and CFO]

[00:19:40] Good morning, good question. So customer affordability is going to be a key component of our strategic plan here 2020 going forward. We've made some great progress this year to the first three quarters we were just on, but about 60 billion dollars or about 12 percent compared to last year. About half of that was from energy efficiency expenditure reductions. The other half is largely related to our ability to manage and accelerate some of the transformation activities for future sustainable savings. And so we'll continue to work on those areas as we look into 2020 one look at all of the organization and implement some changes to drive cost efficiency throughout our business. I'm really excited about a lot of new technology opportunities for us to drive those expense reductions and also operating with a lot fewer employees. We're not actually certain positions. So I think our efforts in trying to help this position as well for 2020 and looking forward to the rest of this year, position us really well for next year for 2020.

[Julien Dumoulin-Smith, Bank of America]

[00:20:43] Ok, I'll leave it there. Thank you. Thanks, Julie.

[Operator]

[00:20:49] As a reminder, Fuchsbau star one to ask a question. Our next question comes from Andrew Weisel of Scotiabank.

[Andrew Weisel, Scotiabank]

[00:20:58] Hey, good morning, everyone, and congrats on the recent renewables update and a nice increase in the five year tax outlook. Can you share the latest forecast for a race with Google Glass, with or without the solar tax equity funding that will weigh on that growth?

[Robert Durian, EVP and CFO]

[00:21:17] So we will be getting some additional details regarding that information later today as part of our November 20 25 transload presentation, will be sharing next week as part of the financial conference, if you think about it. Also, the base of twenty nineteen, which is the last full year we've completed, we're expecting approximately eight percent to 2020 for all of that is dependent upon all of the renewables as well as the 2020 John and I discussed earlier. So I also think that is about an eight percent figure over that time frame.

[Andrew Weisel, Scotiabank]

[00:21:51] Great, that's helpful in terms of the CapEx walk, 2020 is obviously down a bit, mostly in that other category. Can you elaborate? There was some of that discretionary spending that you're being sensitive to, customer building recovery because of covid or what their physical limitations and would it be temporary or timing issues and more permanent changes?

[Robert Durian, EVP and CFO]

[00:22:14] Think of it as John alluded to before, we got a lot of flexibility in our capital expenditure plans, and so what we see there are opportunities or requirements to spend dollars in certain areas of reflects the rest of the plan to make sure that we comply with our target at one point to one point four billion. What we saw here in 2020 is the original storm. We did have to increase our electric candy. Expenditures in the hardware section will be restored with that system. And so we shut down some of the other spending that a lot of smaller items from generation spent retiring plants might spend on or not utility business to keep the growth aspects that are going to lead to more facility spending. So a lot of smaller pieces that added up to you, which is the right there.

[Andrew Weisel, Scotiabank]

[00:23:06] Ok, got it. Thank you. On equity next, with the moving around of CapEx, any change to the prior plan we've laid out? I have a feeling this might be in the slide come coming later today, but really did give us a little preview of what the equity outlook looks like.

[John Larsen, Chairman, President and CEO]

[00:23:20] You know, Andrew, beyond the drift, nothing's changed on equity with refreshed CapEx.

[Andrew Weisel, Scotiabank]

[00:23:31] Last housekeeping one, are you able to quantify the EPS impact from the directions from.

[Robert Durian, EVP and CFO]

[00:23:40] At this point, we haven't quantified it, but there was some sales, in fact, as we alluded to earlier, I that is probably about a two percent decrease in the third quarter and related to just the sales into the remaining portions and the restoration costs, we're expecting to recover those costs until we've actually capitalized those. And we're also seeking later today to define the official request for any of the operating expenses, as well as the offsetting tax benefits associated with the storm. So, so down the sales impact in a negative sense that we're not expecting this announcement to.

[Andrew Weisel, Scotiabank]

[00:24:21] Great. Very helpful. Thank you, everyone.

[Operator]

[00:24:28] It's a reminder you would like to ask the question to Signaler, personal style one. There are no further questions at this time.

[Susan Gille, IR Manager]

[00:24:41] This concludes Alliant Energy third quarter earnings call, a replay will be available through November 10th, 2020 at eight eight eight two three one one one two four U.S. Canada or seven one nine four five seven zero eight two zero four caller should reference conference April one seven five five four three and 10 nine five seven eight. In addition and archives of the conference call and in 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.

[Operator]

[00:25:26] Ladies and gentlemen, that concludes today's conference call. Thank you for your participation, you may now disconnect.