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Title: Alliant Energy Corporation's CEO Discusses Q1 2014 Results - Earnings Call Transcript
Call Start: 10:00Call End: 10:33 Alliant Energy Corporation. (LNT) Q1 2014 Earnings Call May 2, 2014 10:00 AM ET Executives Susan Gille - Manager, IR Pat Kampling - Chairman, President and CEO Tom Hanson - SVP and CFO Robert Durian - Controller and Chief Accounting Officer Analysts Andrew Weisel - Macquarie Capital Brian Russo - Ladenburg Thalmann & Co. Inc Steve Fleishman - Wolfe Research Andrew Levi - Avon Capital Advisors Presentation Operator Welcome to the Alliant Energy's First Quarter 2014 Earnings Conference Call. (Operator Instructions). Today's conference is being recorded. I would now like to turn the call over to your host, Susan Gille, Manager of Investor Relations at Alliant Energy. Susan Gille Good morning. I would like to thank all of you on the call and on the 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, Controller and Chief Accounting Officer, 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 first quarter 2014 earnings and reaffirming 2014 earnings guidance. 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.alliantenergy.com. Before we begin, I need to remind you that 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 yesterday 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 financial measures. The reconciliation between the non-GAAP and GAAP measures are provided in the supplemental slides which are available on our website at www.alliantenergy.com. At this point, I'll turn the call over to Pat. Pat Kampling Good morning and thank you for joining us today. The first quarter certainly goes down as one of the most memorable for those of us within, in the middle of the Polar Vortex. I must thank our men and women, who tucked it out and go to work each and every day and never lost focus on providing exceptional customer service. I'm pleased to report that our first quarter earnings that we are discussing today are the highest in company history. Driven mostly by the reduction nuclear capacity payments and realizing increased electricity and gas sales from both economic growth in our service territory and the weather. Tom will provide more details on the financials, but in summary those three items alone increased earnings by $0.31 per share over the first quarter of last year. However, we do recognize that this winter was typical for some of our customers. Especially in dealing the entire utility bill. Earlier this year, we contributed $3 million to the Hometown Care Energy Fund to help our income eligible customers with their utility bills. We have also expanded our customer outreach efforts and are working with customers to help them other funds of the systems and payment plan options. On a positive note, we are trying to continue to improve in our service territory, unemployment rates are below the national average, with Iowa's rate now at 4.5% and Wisconsin's at 5.9% five year both for the State. Some of the trends we are experiencing include our modest increase of number of retail, electric and gas customers. Continued expansion by our industrial customers and a slight increase in the used per customers. This is certainly encouraging and we will continue to monitor sales and determine if the weather normalized sales growth experienced in the last quarter of 2013 and the first quarter of this year represent a sustainable growth trend. We have incorporated our first quarter weather normalized sales growth and chartered by 2014 sales forecast. We are now forecasting 1.7% in retail weather normalized, electric sales for challenging your 2014 over 2013. Now let me update you on our regulatory activities. We have made the regulatory filings proposing retail electric base rate freezes, through the end of 2016 in both Wisconsin, Iowa and have proposed low rate gas base rate in Wisconsin for 2015. For WPL electric customers, we've proposed that retail electric base rate, which was set in 2011 we may have their current levels through the end of 2016. We also requested that retail national gas customer base rate will reduce by $5 million in 2015 followed by a freeze on those rates through 2016. We are pleased that we are able to offer set of deductibles with a input from the Citizens Utility Board, Wisconsin Industrial Energy Group and PSCW staff. The WPL's approval includes return off and on the significant investments made in our Michigan folks office, at Columbia and Edge Water as well as in industrial and electric and natural gas system. To recovery of these investments, is to be offset with changes in the amortization of the Energy Efficiency Regulatory Liability. We expect to have $64 million in the Electric and Gas Energy Efficiency Liability at the end of 2014 and we're hoping $17 million of it for 2015 and $32 million of it for 2016. We've also proposed the continuation of the 10.4% ROE, a common equity ratio of slightly above 50% and the ROE sharing mechanism established in the last rate case. The Commission has requested comments on the proposal by no later than Tuesday, May 20. We anticipate the PSCW will make a decision regarding our request in the second quarter of this year. The two monitoring level will be addressed outside of this proposal and mostly changed to be set annually. We expect to make a few only filing for 2015 in the next 90 days. In March, we're announcing unanimous retail, electric base rate settlements between IPO. The Office of Consumer Advocate, Iowa Consumer Coalition, and the Large Industrial Group to freeze retail electric base rates for Iowa customers through 2016. This settlements includes customer billing credits of $70 million for 2014, then $25 million for 2015 and a final credit of $10 million for 2016. We have agreements from all the parties in the IUB and again to credit customer bills as of yesterday. The credits are subject to a true up based on the IUB's final decision. We anticipate a decision on this proposed settlement on the second quarter of this year. If this settlement is approved, it will extend the retail electric base rate set in 2011, through the first quarter of 2017. The settlement allows for continuation of the Energy Adjustment Clause, the Transmission Rider and the Electric Tax Benefit Rider through 2016. The settlement are based, are maintained in the current authorize your term equity in common equity ratio and earning a return off and on the 2014, year in Iowa Retail base rates of approximately $3.1 billion. Rate base additions include investments in the emissions patrols, performance improvements at a Ottumwa, George Neal, Burlington and Prairie Creek as well as investments made in our distribution systems. Pending IUB's approval of this settlement is arguably but the next retail base rate case will be filed in the first half of 2017. The 2017 case will be a request to recover the cost associated with the Marshalltown Generating Station, which we anticipate with a place and service in the second quarter of 2017. Let me provide a quick update on our Marshalltown Generating Station. We've recently received the air permit and have filed all the permits with the IUB and our request for the Issuance of a Generating Certificate, which we anticipate by the end of May. The community is very excited about this project and we currently expect to be in construction in July. As a reminder, the IUB approved a return on common equity of 11% to the 35-year depreciable life of the facility and a use of 10.3% on common equities for the calculation of AFUDC. In order to establish $920 million cost cap, including AFUDC and transmission upgrade cost. Recently that the cost cap is sufficient to complete the project including the transmission upgrade that we anticipate ITC will self-fund. We expect that ITC will build IPL directly for the relevant climate, related to the Marshalltown transmission upgrade, once the line is in service and expecting the cost to go through the transmission rider. Now let me quickly brief you on a current emission control construction activities. This is year that the majority of our emission and coal projects will be completed. In Wisconsin, construction of the baghouse and scrubbers at Columbia units 1 and 2 is 98% complete on time and below the original budget. Units 2 equipment was placed in service last month and preliminary test results indicate that performance guarantee are being and achieved. We anticipated in service 6 for Columbia unit 1 is in July. Also construction has already started on scrubber and baghouse with an expected completion in 2016. The installation of baghouse and scrubber for our Ottumwa facility is on budget and anticipated to be placed in service in November 2014. In addition, MidAmerican is installing baghouses and scrubbers at Neal units 3 and 4. The Neal 4 project was placed in service at the end of 2013 and the Neal 3 project is expected to be placed in service, this month. In addition to the progress we are making on transforming our Tier 1 units. We are also making progress on preparing our Tier 2 units to be compliant with the utility mercury and air toxic standards by the April 2015 deadline. We are currently installing low-cost controls at our Prairie Creek and Burlington generating stations and are converting the ML Kapp generating station from coal to gas. Through year end 2013, we spent $20 million on these facilities and our 2014 to 2017 capital expenditure plan includes additional investments of approximately $35 million. We believe, we are well positioned to ensure a balance, flexible and environmental environmentally generating fleet that will serve our customers well into the future. Late last year, we noted planned capital expenditure, starting 2016 for additional generation of WP&L. our current forecast indicates, a need for capacity and energy in 2019 during by the plan retirement of three coal units and by sales growth. As part of our long-term planning resource efforts, WPL is investing a feasibility study of resource options. We plan to issue a request for proposal in the second quarter of this year to determine what available options exist in the region. Following analysis of the ARP results, we anticipate making the regulatory filing with the PSCW in late 2014.