Q2 2020 Alliant Energy Corp Earnings Call
Good morning, and welcome to be aligned Energy conference call for second quarter 2020 years old. It's called is being recorded she'll be brought that up each time all lines are in a listen only mode I would knowledge to turn the call over to your host Shouldnt, Susan field Investor Relations manager at away.
Please go ahead.
Good morning, I would like to think overview on the call in the webcast for joining US today. We appreciate your participation.
Joining me on this call or John Larsen, Chairman, President and Chief Executive Officer, and Robert Durian, Executive Vice President and CFO.
Following prepared remarks by John in Robert You don't have trying to take questions from the investment community.
We issued a news release last night announcing Alliant Energys second quarter financial results and reaffirmed the consolidated 2020.
<unk> guidance issued in November 2019.
Yes reach as long as supplemental slides it would be reference during today's call are available on the investor page of our website at Www Dot light energy dotcom.
Before we begin I need to remind you. The remarks you make on this call sooner. He answers to 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 Europe filings with the Securities and Exchange Commission.
Disclaims any obligation to update these forward looking statements.
In addition, this presentation contains references to non-GAAP financial measures reconciliation between non-GAAP and GAAP measures are provided in the earnings release in our 10-Q, which would be available on our website.
At this point I'll turn the call over to John.
Thanks, Good morning, everyone I.
I hope, you're all staying safe and healthy.
Thank you for joining us today is we highlight our solid results for the second quarter of 2020.
I'll share a few notable stories from the quarter and then turn the call over to Robert Edgy recap some of our regulatory customer in financial highlights.
I'll start my comments with a focus on our recently issued corporate responsibility report.
It's years update showcases many examples of our environmental stewardship, it's what was our longstanding efforts to address the important social needs of the communities we proudly serve.
On the environmental French.
We're excited to announce that we achieved our twentys duty goal, having 30% of our energy mix come from carbon free renewable resources 10 years ahead of schedule.
Stopping there are customer focused strategy continues to advances toward it clean energy future.
<unk> responsibility report has been updated with new and even more aggressive clean energy goals.
These new goals are shown on slide two of the supplemental slides.
I report also highlights the great work of our employees to support our customers and communities.
No news for like energy, it's part of how we do business.
We continue to support our costumes and communities as they respond to the ongoing demands of the cold 19 held an economic crisis or.
Charitable Foundation recently released a new wave and community grants benefiting more than 230 nonprofit organizations across Iowa and Wisconsin.
Our stated purpose to serve customers and build stronger communities is core to everything we do and we're proud of the many ways, we hope to build stronger communities, where we live work and raise your families.
No more than ever social part of our corporate responsibility is at the forefront.
You're committed to partnering with our communities working to understand and help address their needs. We act by providing financial support to agencies nonprofit organizations that help our communities Richard gaps that social in equities and two programs that supports eating security in housing workforce readiness.
Mmm stewardship and diversity seats you wellbeing.
Our employees and retirees are a driving force in our communities and I'm very proud to be part of the company that lizard values in so many ways.
And if you you moments I'll turn the call over to Robert will address the trends, we're seeing across our residential commercial and industrial customer bases as result of the ongoing hold it pandemic.
Our employees have made great progress in driving cost reductions and advancing our broader transformation efforts during the first half of your while keeping a strong focus on safety and reliability.
Turning to the execution of our strategy I'll highlight progress we've made as we advance our clean energy vision.
A key driver.
Achieving our goals is the continued successful advancement of new renewable energy source wind and solar.
In May we filed a certificate of authority the public service Commission of Wisconsin.
675 megawatts, new solar generation.
Collectively these solar projects are expected to create more than 1200 local construction jobs and once operational will provide an estimated $80 million in local tax revenues over the next 30 years.
In conjunction with our solar filing we also announced our plans to retire our edgewater generating station.
Our efforts to transition or generation to a cleaner and more fishing fleet or not new in fact, we've been on this path for over a decade.
As we have in the past, we will live our values to care for others do the right thing as we support the transition of impact that employees and their Sheboygan community.
Expansion or Wisconsin, renewable resource portfolio as well as the decision to retire. The Edgewater facility was result of the year long process that involved working with key stakeholders and ultimately forming what we call our clean energy blueprint.
But similar process started in Iowa and expect to share the results of our clean energy input for our IPO business later this year.
Speaking to buy what I'll also I'm sure that we recently announced an innovative partnership with the city of decor.
New project features a 2.5 megawatt battery storage facility to support distributed solar.
It's battery system will help us better suited to community and allowance to efficiently integrate a growing desire for distributed energy resources.
And while a lot of great work is happening related to solar energy storage I also want to highlight American didn't week, which kicks off next Monday.
We are proud to be part of advancing wind energy and the men benefits it brings to our customers and rural communities.
We remain on track to install an additional 280 megawatts of win for our Iowa, and Wisconsin customers by the end of this year.
Well 130 megawatt Richmond Windfarm will be completed by the ended the third quarter.
And our 150 megawatts consumer wind farm is 80% complete and will be placed into service in the fourth quarter of this year.
Making us the third largest owner operator of regulated wind in the United States.
To summarize we remain committed to focusing on the health safety and wellbeing of our employees customers and communities.
Advancing our clean energy vision.
Ensuring our investments are well executed fishing and customer focused and delivering consistent returns for investors with a 5% to 7% growth, we and our 60% to 70% dividend payout ratio.
Thank you for your interest Alliant energy I'll now turn the call over to Robert.
Thanks, John Good morning, everyone.
That's sort of you know second quarter 2020, GAAP earnings of 54 cents per share compared to 40 cents per share in the second quarter 20 lazy.
Our utilities had higher earnings year over year, driven by increasing rate base and higher electric margins for warmer temperatures.
These increases in earnings were partially offset by higher depreciation.
We provided additional details on earnings range drivers for the quarter on slides three and four.
A temperature normalized retail electric sales in the second quarter were down 6% versus last year, reflecting the impact of the cold the 19 pandemic.
Residential temperature normalized sales increased 5% year over year or just given by the customer spending more time level.
On the other and commercial and industrial temperature normalized sales declined 9%.
Manufacturing sales, which make up approximately 50% of our commercial industrial sales were down 15% to 25% during April and May.
And as expected some material declines in electric sales in April night to other sectors of our commercial and industrial customers, including retail lodging and food service as there's also a temporary business closures.
More recently, we've been encouraged to see electric sales through our commercial industrial customers rebound in June and July the levels of only modestly lower than let's say loves last year.
We're also fortunate to have a broad diversity of customers across or two state jurisdictions.
But even sell certain customers such as our food processing packaging and girls customers, having flat so higher than normal cells, we wish him well into the pandemic.
It's a faster than expected rebounded Olympic says we've updated our current projection is reflected approximately 2% to 3% reduction in temperature normalized electric sales for calendar year 2020 compared to last year.
We've made significant progress mitigating and then they committed sales declines like selling plan cost transformation activities, we imagine in how we do work.
This is a direct reflection of all employees leadership and dedication to reducing costs for customers.
I speak for the entire executive team and sharing my appreciation for the employees wind energy.
Especially for the many of them we're in the field each day.
Ensuring the safe and reliable delivery of affordable energy, that's where a customer throughout the spend of it.
So crisis has reaffirmed how essential energy services Archer the country.
And our learned or just how critical it purposes to the communities and customers reserve.
Slide six of the provided to assist you in modeling the effective tax rates for two utilities and our consolidated boot.
We currently estimate a consolidated effective tax rate of negative 10% for 24.
The primary driver the lower tax rate of production tax credits and excess deferred tax benefits, which flow back to customers resulted in lower electric margins.
Thereby resulting in no material impact on full year earnings.
The timing of when production tax credits and excess deferred income tax other basins are recognized will close quarter over quarter fluctuations in earnings.
This results in higher earnings in the first half of the year.
Turning to the second half the year, then compared to the results of last year.
On slide seven we provided the details of what financial plan for 2020.
It does not have largely been completed.
In June we finalized the 400 million dollar 10 year bond issuance.
At least part of the proteins to call earlier maturity that was due later this year.
This deal was well received by the market, which is the lowest bond interest rate in each other's history.
We also used a portion of the remaining proceeds from the new bond issues like the 110 million dollar payment in September the bio that we're doing on a purchase power agreement.
Our current liquidity is approximately $1.1 billion, including cash.
Borrowing capacity under our credit facility or sell accounts receivable program.
With no material debt maturities in 2021, we're well positioned to this dog and potential changes are projected cash flows.
The key to achieving our updated carbon dioxide emissions goals is expanding or do something other than resources.
As John mentioned, we recently announced plans to retire one of our Wisconsin pull together facilities answered 1000 megawatts of solar, Wisconsin, but the other 2023.
Recently filed a certificate of authority to close for the first phase of construction, which includes 675 megawatts of wind solar generation.
As a result of this filing there are plenty to ship $350 million of capital expenditures into 2021 2022, there were originally forecast for the 2023.
The earlier timing of capital expenditures is based on our progress with all that activity is today and the expected construction schedules.
Our forecast also assumes 35% of the construction costs will be financed through tax equity partners.
The contributions from the tax equity partners occurring in the projects are placed in service.
We expect to place 425 megawatts of solar to service and 2022 and 570 like there's lots of it sort of some 2023.
We plan to refresh or for future capital expenditure forecasts and disclose or 2021 financing plans as part of a third quarter earnings release in November.
Lastly, we've included a regulatory initiatives and load of flight age.
As shown on the slide or regulatory killed it for 2020 as many key milestones now behind us.
One what will be displays or developments since our last quarterly earnings call, Wisconsin Certificate of authority filing and lately for 675 megawatts, a new solar generation.
The filing is progressing as expected.
Currently awaiting the procedural schedule.
We also incurred the other car this other 2021 customer rate stabilization proposal, Wisconsin.
Comments recently filed by the end of any goods, representing a retail customers, including support for the proposal.
We anticipate a decision from the public Service Commission, Wisconsin. Other proposal later this quarter.
We appreciate your continued interest in our company and look forward to collect or whether you virtually every probably labs.
At this time ill turn the call back over the other sorts or the question answer session.
Thank you Mr. During this time the company will open the call to questions from members of the investment community.
Good question to signal.
Star one.
Telephone keypad, if you're using a speaker phones. Please make sure your mute function is turned off.
Your signal to reach our equipment again, that's star one to ask a question.
Sure just a moment in a lot I do want an opportunity to sitting on your question.
And we'll take on first question Andrew.
From what the Scotia Bank caller. Please go ahead.
Hey, everyone. Good morning.
Good morning, Andrew.
A couple of questions here first as far as had been man trend I think he said manufacturing was down like 15% to 25% do you have overall weather adjusted demand by month and have that progress through the quarter.
And this is Robert from I'd say, what we saw in April and May was below points.
During the June and July as I indicated in my prepared remarks.
So commercial and industrial down maybe about 3% and lot of that was largely offset the increase in residential sales. So so that's the more recent trends we're seeing continued.
Continues through the remainder of the year and that's what we project at this point to get this to a full year forecast.
About a 2% to 3% temperature normalized decrease for the calendar year relative to last year.
No I understand that I guess I'm asking more was it a step up in demand when the state's reopened or is it didn't sort of an ongoing continuous.
Moving trajectory.
I'd say it was more of a step change when you look from a from May to June and I think a larger part of it is you're going to get it was largely due to reopen the mistakes, but yet from may to June news quite a bit of a jump on its little bit leveled off like was off at this point from June July but to.
A lot better than originally expected here we're optimistic.
Andrew John Here, I think I might add that you know we've seen business is really planned for and prepare for how to operate you know during the cold crisis. So we've seen some really innovative ways for businesses to getting back to the production and still address the safety needs imply.
Ease et cetera, So I think it's a combination of that just.
So really smart business operations were seeing as well.
If you hear.
Next question is on the IPO debt issuance first of all very impressive coupon at 2.3, you walk through the proceeds the use of proceeds and all that I guess I'm asking you would upsize Red Bee <unk> first quarter slide deck showed up to 300 million and you actually raised 400 million can you discuss.
Why that was upsized and what that means for the balance sheet and future plans for debt issuances.
Good question, Andrew Thanks, Yeah, as we get into the deal I'm very strong market demand for that debt issuance the utilize that obviously to capture that lower interest rate.
So that's probably was used the proceeds largely for two purposes. One is to retire $200 million of Dettinger live is expected to be maturing in the September this year.
All right now we have about $20 million left out of L. shooting for looks cash we're going to use $110 million oleds. So the payment that we need to make to mixed are too.
Terminate the way levels energy purchase power agreement and the rainy remaining friends allegedly bigger listed in the.
When projects that were contrary to finish up including the rituals subject. It will be finished up sometime later this quarter.
Got it hard to believe that payment is coming up already in just a month or so.
Then one last one if I may be I want to go back to the option that some of your neighbors in Wisconsin have to buy ownership slices in Westminster Sard I know they have a few more years to decide I believe until 24 and 25, but I'm. Just wondering have you spoken has been recently in Howard they thinking about.
The impact at Cobiz 19 on demand in the massive growth in renewables just wondering what the latest thinking might be as far as how likely being like you to exercise the options.
Just remind us what's embedded in your big basin sportswear cancer I'm not.
Yeah, you bet, Andrew So you've got the timing right for that and we we've assumed that there will be options taken in all in all plan I I won't speak for.
For the potential co owners, a let him address that so nothing to add on that besides where our plans would assume that the taken ownership interest and I think you've got the timing right reshaped the question.
Okay, great. Thank you.
You're welcome.
And again, let's start with one to ask a question have you find your questions have been answered. Please press star changes even news from the Q.
Take our next question from Ryan Greenwald with Bank of America.
Okay and good morning, it's Julien here, they've got some time.
One follow up in the last question, though that further.
We are changing your forecast after a pretty meaningful swing in your execution.
What does it say about your cost latitude flexibilities, especially for instance, let's see things turn around here again, how are you speaking about the Cox.
That you guys spoke about.
Not to go at this point.
And ability to use them again.
Good morning enjoy and thanks for the question.
They were very well prepared going into the second half of the here yeah employees have done an amazing job of identifying a lot of.
Different opportunities to reduce cost for our customers. So a majority of which are sustainable others are temporary in nature.
But a lot of Flexibilities, how I'd characterize it at this point with being able to adjust if we do see an upsurge or a resurgence of that they like and some related sales applications. So we feel very well positioned as a as we looked at the rest of here.
Got it back one okay, and then just coming back to a lot of course you there.
Thank you all are.
Pretty good swing.
Some of your peers, but I'm curious.
Work, if we decide what your Q3 in Q4 worldwide trajectory would be to reconcile with a 2% to 3% update.
Different iteration of the last one as well.
Yeah.
Yeah, and Julie maybe I'll share a bit thoughts you know I think earlier, we get booked out of around 5% to 6% total year impact and I think as Robert said, it's maybe looking more now like in the into two to three we had planned for a slow and steady improvement in the back half of the year.
Sure nothing right now that would cause us to think any differently. We did see I step change improvement in Q2, a little faster recovery towards the tail deal into that and what we had originally planned and then as Robert mentioned, we're keeping flexibility in our plan for you know a little bit of the unknown. So part of our plans.
He wants to look in a few different scenarios for the back half, but assuming it does stay steady and slowly improving it's certainly going to the overall better than what we had originally thought that that addresses your question.
Yeah well.
Are you effectively.
Why don't you could be the upper into your guidance or in some of that.
Yeah, I'd ready cool.
What I'm sure you know Julian as you know as Robert noted we've taken a lot of actions in the first half of the year, no reducing cost and help offset lower sales. So that's kept us solidly yet at the midpoint, but what we take a look here who the weather trends that we've seen here in July.
We would see that's helping us trend up into the upper half of the guidance range.
Okay, Alright fair enough. It's sorry, one last one here if I can obviously would be a first wave here you're putting some.
No. It seems like it accelerating if I heard you right from 23 to 21 to 22 to two to 350 million.
That sounds like a net increase in your outlook could be from a timing perspective.
If I understand the offset there would be some of that capital that was originally forecast and 23 was it always assumed at 35%.
Just to make sure wins and all the puts and takes here I guess your outlook.
Yes, I think you've got that spot on Julie.
Okay never got excellent aren't well thanks very much.
Thank you.
And again, that's a ones asked my question.
And we'll take our next question from Michael.
Research.
Hey, good morning.
Good morning, Michael.
I wanted to ask on the a range approval in Wisconsin, I think we got some intervenor testimony there earlier this week, but just a kind of what what's remaining path forward here or were there any.
Issues with what the Interveners put out there can you settle and one one well the commission weigh in on this thing.
Yeah, Michael Thanks for that question, though.
She was very encouraged by the progress, we're making with a 2021 customer lead civilization proposal and currently expect a decision Olympias you know you sometime later this quarter could be as early as later this month.
Overall, we saw support for the plan given the purpose of it was too, though we try and protect our customers from rates.
Given the economic conditions that we see through this pandemic, but we were very pleased to see the support from the major customer groups, representing a residential customers.
Great. Thanks, and then my second one was just on.
It seems like what this clean energy vision, you guys are laying out.
We continue to transition from coal towards renewables and just curious how you're thinking about.
The recovery or regulatory treatment of coal and rebates that you habits as you work through this I know a I think edgewaters gonna come off maybe in the next rate case.
However, you're going to handle things and so yeah, maybe just what the past person I understand and how you're thinking about this regulatory treatment and the future.
Yeah. So I'll give you a little picture of the past precedent. So we've heard a few different examples and both of our jurisdictions, where weve slots recovery of Oh place over and started early well both states has approved both returned all the return on.
A full recovery of those facilities are those all facilities generally with the remaining balances are probably in the tens of millions of dollars age so as I look forward.
No. That's what are five retirements by the end of 2022.
So we're expecting that that's assertion that issue will be addressed in the next rate filing that we make sometime next year.
I will without a allows for any early retirement, so those states and we'll evaluate that as part of our clean energy blueprint that we're performing in Iowa, and we'll have some more information to share later, this year or any potential or the retirements, where I suppose.
Okay, maybe if I could just follow up it.
You just said that.
The past precedent, we're only talk talking tens of millions of dollars on it sounds like these and plans going forward are probably a materially higher than that so does that potentially change.
How how regulators might be thinking about how they get treated.
Yeah, you know Mico and you've got the the magnitude right I think is we look at.
Some of the larger facilities, they certainly have a little bit larger balance, but you know as we filed with our clean energy Blueprint you know all of that factors into show I met customer benefit for our plans going forward. So certainly can't tell you exactly how that's going to play out with regulators right now, but I think we have.
Solid track record of working with the regulators in putting a very.
You know very solid plan that makes sense for customers or we wouldn't file that so I'd say, we feel comfortable with that filing but some of those are yet to be determined.
Okay awesome, Thanks, a lot.
You're welcome.
[laughter] Star one to ask a question.
At this time.
Sure there are no further questions afterwards.
Thank you. It concludes Alliant Energy's second quarter earnings call a replay will be available through August 14th 2028, eight to all three one when one two for you I think Canada or 719 flipside seven 820 for international callers should reference conference.
I'd following seven I fight for three and nine 570. In addition, an archive of the conference call ended scripted their prepared remarks made on the call will be available on the Investor section of the company's website later today.
Thank you for your continued support of Alliant energy and feel free to contact me with any follow up question.
Oh.
And this concludes today's call. Thank you for your participation you may now disconnect [noise].
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Uh huh.
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