Alliant Energy Earnings Call Insights: WPL Rate Base, Weather Impact

On Friday, Alliant Energy Corporation (NYSE:LNT) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

WPL Rate Base

Andrew Weisel – Macquarie Research: I was hoping for just a little bit more detail on the WPL rate base. You gave some numbers there that were very helpful, just want to reconcile that versus the latest forecast. I believe at EEI you shared rate base pretty specific numbers for the next several years at WPL, but when I look at the number in the Slide on 8 here, it looks a little bit lower. If you can just kind of bridge the gap between those two?

Thomas L. Hanson – VP and CFO: The single largest driver would be the deferred taxes due to bonus depreciation. The last time those were updated in terms of rate base was the previous rate case which was our UR-117, which was the 2010 base year. So, since then we’ve been monitoring those, but I think as we do the reconciliation you will see that part will be single largest adjustment is dealing with the deferred taxes. If you got to supplemental Slide 8, we have tried to highlight some of the detail including the rate base, also the information that we filed with the PSC yesterday, and should be available hopefully today. It does take each of the electric and gas rate base components, does compare to the previous rate case to give you kind of a highlight of the increased rate base that we have and how we proposed to increase the offset.

Andrew Weisel – Macquarie Research: So, just to make sure I understand, the changes between EEI in today’s numbers were based on bonus depreciation and not the actual filing versus what we’ve been talking about the past few months. Is that a fair way to put it?

Thomas L. Hanson – VP and CFO: That’s correct.

Andrew Weisel – Macquarie Research: Lastly on the Iowa rate case, I believe you said sometime within the next 60 days, your previous presentation sounded like it will be more like this month. Is that being pushed back, and if so why?

Thomas L. Hanson – VP and CFO: No. We would expect it would be at the earlier end of the 60 day period.

Weather Impact

Brian Russo – Ladenburg Thalmann: Could you quantify what the weather impact was versus normal?

Thomas L. Hanson – VP and CFO: It was about $0.12 and that’s both on the electric and gas side. Brian.

Brian Russo – Ladenburg Thalmann: Okay, good. So, we take your midpoint of $2.90 and subtract $0.12, that’s where you alluded to being at the lower end of the guidance range, right?

Thomas L. Hanson – VP and CFO: That’s correct.

Brian Russo – Ladenburg Thalmann: Also in the WPL rate case filing, I reviewed it really quickly and it looks like we’ve got some share mechanisms if ROEs break above 10.65, and I’m just curious is that just other interveners protecting themselves from you over earning or are there any levers you might be able to pull that can put you north of 10.4?

Thomas L. Hanson – VP and CFO: I think your observation is correct. I mean, given the fact it is a proposed rate freeze, we want to make sure that it was appropriate for all parties, so as we’ve highlighted in Slide 8, there really is an ability for first of all WP&L to earn above its authorized 10.4 and it can retain that up to 10.65. If we’re able to successfully manage the business over 10.65 to 11.4 there is sharing of 50% of that, and anything above 11.4 then is deferred. Generally, there is a net on the bottom end to the extent that our ROE falls below 8.5 then the WP&L can’t file for a case. So, we think it’s appropriate for all parties that there is a balance here.

Brian Russo – Ladenburg Thalmann: Correct me if I am wrong, but your 2013 WPL rate base is now $2.3 billion and the 2014 rate base is $2.4 billion?

Thomas L. Hanson – VP and CFO: The electric?

Brian Russo – Ladenburg Thalmann: The total?

Thomas L. Hanson – VP and CFO: Yes.

Brian Russo – Ladenburg Thalmann: You mentioned some offsets for O&M management to help offset some of the mild weather. I know going into the year you had a fairly aggressive cost management program. I was just wondering if you can maybe talk about some of those initiatives.

Patricia L. Kampling – Chairman, President and CEO: Sure, Brian. The major initiative is really just delaying hiring and keeping positions open for longer.

Brian Russo – Ladenburg Thalmann: Okay, and the (indiscernible) CCGT that’s being planned, you mentioned better options. What are those better options?

Patricia L. Kampling – Chairman, President and CEO: When we issued the RFP, we asked actually for a whole broad variety of options, again sort of to fill our long term capacity in energy, but it’s really owning a plant, PPAs, et cetera, there is a wide variety of options that we are going through right now the analysis on.

Brian Russo – Ladenburg Thalmann: Okay, and just back to the WPL rate base that you filed for, and less the deferred taxes I guess as a function of bonus depreciation. Can you quantify what kind of cash flow is coming in the door that’s offsetting the decline in rate base from prior disclosures?

Patricia L. Kampling – Chairman, President and CEO: I may be confused on your question, you know, we’re still in the position that we’re not paying federal taxes?

Thomas L. Hanson – VP and CFO: We do get the benefit though of bonus depreciation as we talked about before, we had about $1 billion of NOL at the end of ’11, so we’ll get the benefit of that bonus depreciation going forward, but recognizing that until it’ll completely eliminates our NOLs which we expect in 2015 there’ll be some erosion of that NOLs, but recognizing bonus depreciation will be used here in ’12.