Q3 2020 Alliant Energy Corp Earnings Call
Good morning, and welcome to the Alliant Energys conference call for the third quarter 2012 results. This call is being recorded for rebroadcast.
Hi, all lines are in listen only mode.
I would now like to turn call over to your host Susan go Investor Relations manager at Alliant energy.
Good morning, I would like to thank all of you on the call and the webcast for joining US today. We appreciate your participation.
Joining me on this call are John Larson, Chairman, President and Chief Executive Officer, and Robert Durian, Executive Vice President and CFO.
Following prepared remarks by Johnny Robert Me, they'll have trying to take questions from the investment community.
We issued a news release last night announcing Alliant Energy's third quarter financial results update or consolidated 2020 earnings guidance range I know start 21 earnings guidance in common stock dividend target.
That's released as well as supplemental slides that will be referenced during today's call are available on the investor page of our website at www Dot Alliant energy dotcom.
Before we begin I need to remind you the remarks, we make on this call and 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 which include among others matters discussed in Alliant Energy's 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, the presentation contains references to non-GAAP financial measures a reconciliation between non-GAAP and GAAP measures are provided in the earnings release, and our 10-Q, which will be available on our website.
At this point I'll turn the call over to John.
Thanks to 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 wind energy team.
Our purpose to serve customers and build strong communities as guided up throughout the year. He eventually this quarter.
2020, it's highlighted the importance of resiliency as we face the challenges of the pandemic in the Duraseal windstorm in Iowa.
But we feel good she's not new for US a customer focused strategy is designed with both resiliency and flexibility in mind.
On August 10th just a few days after our second quarter call.
Seems where the picture resiliency. They responded to an unprecedented storm impacted 341 of the nearly 700 communities we serve in the <unk>.
Windstorm known as a great show stupid little warning lead and more than half of our Iowa customers without power.
The biggest storm in our Companys 100, plus year history.
Our dedicated employees, many of whom were without power, what's just by teams from across the country in Canada working day in and day out more than two weeks until every customer had power available to them.
I also want to recognize the kitchen resiliency of our <unk> customers. During this time.
Employees were overwhelmed with the kitchen patients express to them throughout the restoration process.
Oh, we shouldn't see extended to our social commitments to our customers in partnership with our employees. We started project we connect <unk>.
A program to help homeowners make costly repairs to the residences after the storm.
To date Alliant energy, along with our employees have donated more than $200000 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 called <unk>.
We remain flexible to assist those in need beyond the borders of our service territory is well over the weekend nearly 200 Alliant energy employees, what Tony do you hope to store power following hurricanes data in Gulfport, Mississippi.
It'll be joined by neutrally crews from several other states to help get the lights back on.
In a few moments I'll turn the call over to Robert well just the sales trends, we are seeing as a result of the ongoing Colby pandemic.
I'm proud of the efforts of our employees that made in driving cost reductions and advancing our broader transformation efforts.
Hoping that's offset expenses from the storm as well as the pandemic and resulting in lower cost for our customers and 2020 compared to 2019.
Turning to the execution of our strategy, we recently announced the on time and on budget completion of our 2 billion dollar wind expansion in Iowa, our generation transformation started over a decade ago and require thoughtful planning flexibility and solid execution.
And that's just what we did mention that's now the third largest regulated when owner operator in the country.
We take pride in our sustainable construction practices.
They bring a range of environmental social and economic benefits to the communities we serve.
Continuing our purpose driven strategy building on our strong <unk> strong track record of project execution.
Last week, we announced the next phase of our clean energy expansion and probably well, it's part of our clean energy blueprint.
Spread offers clarity about the generation plans and I went through our 2020 2024 planning horizon.
The blueprint aligns with our consumer preferences for more renewable energy, including adding up to 400 megawatts of solar I 2023.
Our near term investments in renewables creates long term savings for customers.
One of the 400 megawatts of solar it's combined with the nearly 1300 megawatts of owned and operated when plus the power generated by existing solar farms in Dubuque, Marshalltown, Cedar Rapids, nearly 50% of Alliant Energys I will generation portfolio will be from renewables.
We also announced our intent to retire Lansing generating station by the end of 2022, and the coal to natural gas conversion of our Burlington generating stations.
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 an efficient the operating these plants, providing affordable and reliable energy for our customers. We will continue to live our values like hearing for employees and insisted.
Can be impacted communities throughout the transition.
Yeah, I will take builds upon our clean energy strategy, including plans to add up to 100 megawatts of distributed energy such as community solar energy storage systems.
Our clean energy vision, it's more than renewables its 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.
Investments include transitioning our grid some overhead the underground deploying technology, such as 80 M.S. maximizing the use of our M life system and advancing high speed fiber communications.
Of course, we'll continue our efforts to retaining attract customers.
Drive economic development through a variety of projects and partnerships.
H. this unprecedented year, our teams have been bodied resiliency and flexibility and they believe they delivered results for the second year in a row, we've been recognized as a top utility for economic development like site selection magazine.
Our teams have also secured 19, new projects across our service territory and helping to create more than 1700 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 5% to 7% earnings growth.
Our increased and narrowed 2020 earnings guidance range between $2.40 per share and $2.46 per share.
Our 2021 earnings guidance range of between $2.50 per share and $2.64 per share and keeping with our plan to go dividends commensurate with earnings growth. Our board of directors approved a 6% increase in our targeted annual common stock dividend.
$1.61 cents per share.
We remain committed to our purpose driven strategy, the health safety and well being of our employees customers and communities.
Eventually our clean energy vision.
And delivering consistent returns for our investors.
I'll now turn the call over to Robert.
Thanks, John Good morning, everyone.
Yesterday, we announced third quarter 2020, jeopardy, it's 98 cents per share compared to 94 cents per share in the third quarter last year.
The higher earnings year over year, driven by higher revenue requirements to increase your rate base the timing of income tax expense.
And the favorable for sale or just hold through the credit loss liability or the legacy debt to EBITDA non utility business.
These higher earnings were partially offset by higher depreciation and equity dilution.
We provided additional details on the earnings various drivers for the quarter on pages, three and four of the supplemental slides.
The first nine months of this year temperatures in our service territory of increased retail electric and gas margins by about one cents per share.
A comparison of 29 to the other day temporary impacts for the first three quarters increased retail electric and gas work, but I would say five that's for sure.
Let me just temperature normalized sales they have been very encouraged by the improvement we see ourselves when compared to the second quarter with a goal this year.
I would characterize the current sales levels are they roughly flat versus the same period is what led to the increase in residential sales offsetting the decrease it's really commercial industrial sales.
Important to note that our third quarter results also reflected the impacts of the August of religious at all but I will.
Which caused a temporary reduction so that's it.
For a couple of weeks to restore power or customers at central.
As John mentioned last night, we issued our consolidated 2021 earnings guidance range $2.50 to $2.64 per share.
The key drivers of the 6% midpoint growth in temperature normalized keep yes, I live in investments in our core utility business, including individuals because he's been far western Wisconsin gas pipeline.
And I feel was sorry when expansion program.
These investments will reflect an individual's approved electric rates for 2021 as part of a rate stabilization program.
I feel the food electric rates that are implemented in February of this year.
A 20.1 guidance also reflects additional learnings that I feel like the wind generation that went into service in September which will to capture the appeals renewable energy rider.
And the different PK bio pay lived to the third quarter, which we captured an ideal feel better.
The details of our updated capital expenditure plan as shown on slide five.
Included in this play a total of 1.4 gigawatts of solar generation.
After 100 megawatts of distributed energy such as community solar data storage.
Nearly $3 billion of asphalt.
Distribution system.
As noted on the slide.
And to finance, our solar investments with tax equity fund it.
So we anticipate approximately $700 million and contributions for solar projects for charity partners.
On slide six we provided a walk the last years capital expenditure plan judiciously.
We've accelerated the mobile expenditures into the next two years, which was originally forecasted the 2023.
And also increase your little upside Richardson told over the five year period.
These changes reflect the better than expected development progress the solar sites, we've acquired for Wisconsin customers.
An additional 400 megawatts of wireless or John legend there.
Slide seven is like a lot of good sister level effective tax rates for our two utilities and our consolidated group.
We also made a consolidated effective tax rate of negative 9% for 20 Twond.
Negative 14% for 2021.
The additional production tax credits for wind projects placed into service in twice what it.
And the excess deferred taxes better terms to customers in 24 wall are the primary drivers for the decrease in the effective tax rate.
The production tax credits and excess deferred tax benefits will pull back to customers, who love to the lower electric margins next year.
Well the decreases in the effective tax rate related to Ptcs, that's such a fairer tax benefits are largely earnings neutral.
Next I'd like to highlight our continued commitment to focus on controlling costs for our customers.
In September of this year.
Italy, but at a $110 million to Charlie to Duane Arnold <unk> five years early.
The strategic decision to lead to a medium and substantial fuel cost savings for our customers.
Additionally, we have and will continue to make investments in technology that will further reduce cost for customers.
A good example of this is our ally legitimate either jurisdiction completed earlier this year.
The reduced all in costs associated with either.
We are also pursuing additional technology investments or this or that caused such as are the answer sufficient management system.
I want to recognize the great efforts of our employees for the hard work they put into cost transformation efforts on behalf of our customers.
In Wisconsin, a rate stabilization proposal older. This year was recently approved by the public Service Commission of Wisconsin.
It was a win win for the utility and for our customers as.
As we're able to begin recovery that many previously approved projects such as our 'cause it wasn't for the westernmost out the pipeline.
Well ever just feel so those are that's a deferred income taxes, you base rates and 2021 plan for our customers.
Our utility customers in both states are benefiting from lower transmission costs.
Lower taxes for federal tax reform.
Lower fuel costs and tax credits associated with more renewable generation.
Finally, lower oil and other expenses.
Let's move next to our financing plans for the remainder of 2020 2021.
Oh plans include approximately $25 million of new common equity through our drip plan and 2021.
Our financing plans also include new long term debt over the last 14 loves its living up to $300 million that are just absolutely children.
That's a $300 million at a lot of it and finance.
And finally, there are no long term debt maturities between now and the other 2021.
Lastly, we have included the regulatory initiatives of note on slide eight.
This year, we expect to receive the witnesses or they go to the other GL rates to the vision that this quarter, including the final fuel cost recovery allows for 2021.
Next year.
Well, it's hard to make it a dancer rig they they can sort of suppose filing for a play on boarded megawatts of new solar generation.
It's all the filing for the subject of pursuit of acquired as part of our test year twice, what it retail electric and gas rate review.
Both of these filings are anticipated in the first half of next year.
And then Wisconsin, we anticipate a decision for the appeals or doesn't do regarding our first such a regulatory filing for solar generation or the second quarter.
We also plan to make the second see they filed to round out our plan, one gigawatt of Wisconsin solar and the first half of the year.
Lastly, the second quarter of 2021.
<unk> retail electric and gas rate reveal Wisconsin.
At this time, we're still evaluating whether there would be a single test your case or multiple gestures.
These regulatory initiatives are important components of our operational and financial results.
Very much appreciate your continued support of our company and look forward to meeting with many of you during the virtual E outside EPS Conference next week.
Later today, we expect to post on our website the investor presentation, a little over 2025, which details the ideal individual ability capital expenditures rig days and construction work in progress forecaster 2024.
At this time I'll turn the call back over to the operator to facilitate the question and answer session.
Thank you.
This time the company would open up the calls questions from members of the investment community.
I'd like to ask question. Please seeking more by pressing star one on your telephone keypad piece ensure that the mute button on your telephone switched off to allow your signal for each hour equipment again. Please press star one to ask a question.
The first question today comes from Julien Dumoulin Smith of Bank of America.
Hey, good morning, and thanks for the time can you hear me.
You bet good morning Julien.
Hey, congratulations.
Excellent outcome here, perhaps they get resolved I mean, obviously a.
Good start on 21 here how are you.
Actually over the longer term, especially given the pull forward to Capex, maybe a two part question.
Can you give your guidance on the five and seven and then secondly, how do you think about some of the other capex tailwind.
I just got so much renewable going here, how do you think about additional <unk> spend and how does the budget over the cumulative five year period.
Okay, Great Julian happy to you know still feel very very comfortable with the five to seven and as you know that the midpoint is where we spend 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 know.
There's a little maybe decreasing somebody t. and G. spend as we brought some additional renewables in the 20 to 23 and as we shared with you and others. We do have some plans for increasing our <unk> spend overhead to underground, it's as Robert and I both mentioned.
You see a little bit of that in the tailwind in 2024, Oh, there's some great PND spend yet so as you know we we try to have that.
That one to the one 4 billion per year is a really good spot for us to maintain the five to seven minimal equity needs and and keeping customer cost affordable. So we really like the Capex plan and I wouldn't say, there's some great TV spend that we continue to look at and we'll just let capital compete as we are.
Just you Julien thanks for the question.
Absolutely and just quick quick follow up here in the context of 21 can you elaborate a little bit more on the execution of cost controls item.
If you don't mind.
Sure.
Roberts team's done a great job of focusing on some of our transformation and then near in and a little longer term. So I'll, maybe ask Robert to weigh in on that one Robert.
Good morning, Julien Good question, so a customer affordability is going to be a key component of our strategic plan I was there and 2021 forward. We've made some great progress for sure through the first three quarters, we reduced all of them, but $60 million or about 12% compared to last year, but about half of that was from energy efficiency expenditure.
So the other half is largely related to our ability to manage costs, such as solar and some of the transformation activities for future sustainable savings and so we'll continue to work on those areas as we look into 2021 look at all or is all parts of the organization and implement a voice and changes to drive cost efficiencies throughout our business I'm really excited.
About a lot of the new technology opportunities for us to drive those expense reductions well celebrating with a lot fewer employees, but not backfilling certain vacated positions. So I think our efforts on the 20 likelihood helped us position us well for 2020 I'm looking forward to the rest of this year for instance, that's real well for for next year for 24.
Okay I'll leave it there thank you guys.
Thanks Julie.
As a reminder, please press star one facet question all.
Our next question comes from Andrew Weisel of Scotiabank.
Hey, good morning, everyone through.
Congrats on the recent renewables update on and have a nice increase in the five year Capex outlook.
Can you share the latest forecast for a rate case, gager, perhaps a with or without the solar tax equity funding that will weigh on that gross.
Yeah, Andrew So, we'll we'll be writing some additional details regarding that information later today as part of our November 2020 that works as well as the <unk>. The presentation, we'll be sharing next week as far the judge Finance conference.
If you think about Oh, so the base of 2019, which is less full year, we've completed or expect to approximately 8% to trigger through 2024, a lot of that is dependent upon the all of the renewables as well as its been the job and I've discussed earlier so that's.
So think of that is about an 8% CAGR over that time period.
Great that's helpful and then.
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 bills and recovery because of co bid or was there a physical limitations.
And would you be temporary or timing issues are more permanent changes.
So think of that as a as John alluded to before we've got a lot of flexibility in our capital expenditure plans and so what we see there are opportunities oil requirements to spend dollars in certain areas, we'll flex the rest of the pleasant like sort of the for plywood or targeted 1.2 to 1.4 billion.
We saw the 2020 is a little the richest or we did have to increase our electric TMT expenditures on the Io jurisdiction older store. The Buildout system, that's always flex down some of the others, but think of that is just a lot of smaller items. Some.
Some generation spend for Rytary players so much spend that are not as its older business to keep the growth aspects or was this a lower facility spend so a lot of smaller pieces that added up to world to live to see other trade there.
Okay got it thank you on.
On equity next with moving around of Capex any change to that prior plans youve laid out I I have a feeling as might be in the slide deck coming later today, but maybe you could give us a little preview of what the equity outlook looks like.
Yeah, Hey, Andrew beyond the the drip nothing's changed on on the equity with with refresh Capex.
Terrific great.
And then just one last housekeeping one are you able to quantify the EPS impact from the Direxxis from.
<unk>.
Yeah at this point, so you haven't quantified it but there was some sales impact as we alluded to earlier I think of that as probably about a two cents a decrease in the third quarter.
Other than just the sales or that the remaining portions of the restoration costs were expecting to get recovery of those costs. So we've actually capitalized well.
Those.
We're also seeking later today this filing a deferral requests for near the upper end of expenses as well as well. So I think the tax benefits associated with the store. So so beyond the sales impact a lot of negative two cents without inspected everything else bits or.
Great very helpful. Thank you everyone.
Thanks, Andrew.
As a reminder, if you would like a question for you signaled by pressing star one.
There are no further questions at this time.
This concludes Alliant Energy's third quarter earnings call a replay will be available through November 10 to 2020, 888, 203 111 or two for you let's see.
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In addition, an archive of the conference call and it's and it's scripted that prepared remarks made on the call will be available on the investors 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.
Okay.
Ladies and gentlemen back after today's conference call. Thank you for your participation you may now disconnect.
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