Q2 2021 Alliant Energy Corp Earnings Call

August 6, 2021

Good morning, and welcome to Alliant Energy Conference call for second quarter 2021 results.

This call is being recorded for rebroadcast at this time all lines are in a listen only mode.

I would now like to turn the call over to your host Zack fields lead Investor Relations analyst at Alliant energy.

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.

Joining me on this call are John Larsen Chair, President and CEO, and Robert Durian, Executive Vice President and CFO.

Following prepared remarks by John and Robert We will have time to take questions from the investment community.

We issued a news release last night announcing Alliant energy second quarter 2021 financial results.

This release as well as supplemental slides that will be referenced during today's call are available on the investors page of our website.

At Www Dot Alliant energy Dot 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 last night 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 references to non-GAAP financial measures.

The reconciliation between non-GAAP and GAAP measures is provided in the earnings release, and our 10-Q, which are available on our website.

At this point I'll turn the call over to John.

Thank you Zach Hello, everyone. Thank you for joining us today.

We completed another solid quarter with strong operational and financial results.

I'll share a few of the highlights from the quarter and then turn it over to Robert to recap key regulatory customer and financial results.

I'll start with a focus on our strong ESG story.

We recently issued our 2021 corporate responsibility report.

This year's update showcases many examples of our environmental stewardship governance, and our long standing efforts to address the important social needs on the communities we proudly serve.

I'll start with the end in mind is no clean energy story is complete without results.

First off in 2020, we achieved a 42% reduction in Cotwo <unk> compared to 2005 levels with a clear path toward our goal of 50% reduction by 2030, we also reduce water usage by 66% in 2020, well on our way to a 75% reduction by 2030.

And we've already met or exceeded our ambitious Nox Sox and mercury emission goals.

Looking forward, our aspiration is to achieve net zero carbon dioxide emissions from the electricity, we generate by 2050.

We've been reducing our carbon footprint for many years transitioning from older and less efficient coal units, the low cost and efficient generation resources like wind natural gas and solar.

These resources continue to be low cost options in our service territory, making them a smart choice to serve our customers well into the future.

We're building on our successful wind energy expansion that includes our excellent track record of project execution, as we turn toward expanding our solar energy profile.

Our balance generation profile of efficient natural gas wind solar and battery storage will serve as the backbone for delivering safe reliable affordable and resilient energy to our customers.

We recently announced that our first 675 megawatts of new solar in Wisconsin is advancing to the construction phase after receiving approval from the public Service Commission.

Robert will share more details on these projects as well as our efforts to expand our solar energy footprint in Iowa, a bit later in the call.

You've heard us talk about our clean energy blueprint designed to guide us toward a clean energy future.

Blueprint is comprehensive going beyond generation to also ensure a clean efficient and resilient energy grid.

We're adding smart technologies to our grid transitioning our electric lines from overhead to underground and expanding the use of energy storage.

Blueprint is designed to ensure resiliency and reliability of our grid reduce customer costs and allow for more distributed renewable generation on our grid.

For example.

We recently were joined by Iowa's Lieutenant Governor Adam Greg along with several local and state leaders and our partners at the ribbon cutting event for our latest battery storage project into core Iowa.

We're very excited to continue expanding battery storage solutions not only do these projects have a future on our system as dispatch below.

But they can also serve to enable distributed energy resources and support the resiliency of our distribution system.

Speaking of resiliency as we approach the 1 year anniversary of the derecho that devastated our Iowa's service territory I'm reminded of the resiliency of our customers and employees as we recovered from the largest storm in our company's history.

It's 1 of the reasons I'm also excited about our commitment to plant 1 million trees, representing the customers. We are so privileged to serve.

As these trees grows you'll capture cotwo out of the atmosphere and help rebuild the tree canopy lost in the storm across so many Iowa communities.

I mentioned earlier, our focus on ESG 1 of our newest social efforts is investing in the energy impact partners elevate future fund, which aims to create a more diverse founder community within the broader energy transition.

The fund will be focused on investing in companies founded on run by diverse leaders that are driving innovation and advancing the low carbon economy.

Including supply de carbonization electrification and technology enabled infrastructure.

The elevate team will form partnerships with technology accelerators, and universities, including historically black colleges to nurture talent promote infrastructure and support systems to retain talent from underrepresented groups.

We're excited about the promising opportunities this partnership creates for inclusiveness locally and nationally and we appreciate the opportunities to support innovative ways to build a more diverse and inclusive workforce that advances our collective efforts for creating a carbon free future.

Before I turn the call over to Robert I want to share that the accomplishments that I've highlighted today are the direct results of the efforts of our talented employees.

Each and every day to deliver on our purpose to serve customers and build stronger communities. Their efforts over the past year are nothing short of amazing and I want to take the opportunity today to thank them for all that they do.

Thank you for your continued interest in Alliant energy.

I will turn the call over to Robert.

Thanks, John Good morning, everyone.

Yesterday, we announced second quarter 2021, GAAP earnings of <unk> 57 per share compared to 54 per share in 2020.

Our utility earnings increased year over year, driven by higher margins from increasing rate base and warmer temperatures.

These increases in earnings were partially offset by higher depreciation expense and lower allowance for funds used during construction from rate base additions in 2020.

With a very solid first half of the year now on the books.

We are reaffirming our 2021 on the earnings guidance range of $2.50.

The $2.64 per share.

And as a result of favorable margins from temperature impacts year to date.

As well as our continued success in managing costs.

We are currently trending towards the upper half of our guidance range.

Yeah.

Contributing to the higher margins was a higher rate base at our Iowa utility related to the successful completion of our 1000 megawatt wind expansion program in 2020, which has resulted in lower fuel costs and increased cash credits for Iowa customers.

Additionally, our other utility began recovering earlier this year, a return of and a return on a $110 million payment made to nextera to terminate the purchase power agreement with the Duane on old nuclear facility 5 years early.

Customers and I will begin benefiting from lower energy costs related to this transaction last fall.

And Wisconsin higher margins are attributable to the rate stabilization plan that was approved last year.

Based on what the unexpected challenges associated with the COVID-19 pandemic, we worked collaboratively with our stakeholders to keep rates flat for customers in 2021.

This approach is benefiting both our customers as well as our shareholders.

As we began recovery of previously approved projects such as <unk> wind farm and the Western Wisconsin pipeline, which we offset with excess deferred income tax benefits and fuel savings.

The second quarter continued the trend of improving economic conditions as our service territory has returned to pre pandemic levels of economic activity.

Our temperature normalized retail electric sales in the second quarter were up 4% versus the second quarter last year.

This increase was largely from strength in commercial and industrial sales.

These changes in sales are a positive sign of economic recovery and resulted in a positive impact on margin.

As economic conditions have improved we've also seen an uptick in economic development in our service territory.

2 noteworthy successes so far this year other announcements of new facilities for Simmons pet food, and our Iowa jurisdiction and spray tech in our Wisconsin jurisdiction.

These 2 new customers or bringing new jobs in the communities in our service territories. In addition to new load for Alliant energy.

Many of you joined US a few weeks ago at our ESG investor event.

I Hope you took away from our comments how passionate we are about our leadership position in the transition to cleaner energy and other important aspects of our ESG performance.

1 key area of ESG is 2.

<unk> story is our commitment to focus on customer affordability.

That begins with the efforts on innovations of our outstanding employees.

2 such innovations include our planned tax equity partnerships for solar generation.

And the level of other cost recovery mechanism for our retiring edgewater coal plant in Wisconsin.

Both of these were brought to us through the research and hard work of our employees, who are consistently looking for new and unique ways to keep customer costs low.

Let me spend a moment on our corporate tax rate.

Which are provided on slide 4 of our supplemental slides.

We estimate our full year 2021 effective tax rate will be negative 17%, which.

Which is primarily the result of production tax credits, we earned from our expansion of wind generation.

On the excess deferred tax benefits from the 2017 federal tax reform, which we continue to return to our customers.

Both of these items support affordable rates for our customers.

And please note that these items are largely earnings neutral as a lower both revenues and income tax expense.

Our financing plans for 2021 remain unchanged.

We plan to issue up to $300 million of long term debt for our Wisconsin utility later this year.

And we're also on track to issue approximately $25 million of common equity through our shareowner direct plan in 2021.

Moving to our key regulatory initiatives.

We are pleased that our strong collaboration with stakeholders resulted in a settlement agreement in the second quarter of 2022, and 2023 revenue requirements in our Wisconsin rate review.

The agreement includes maintaining a 10% return on equity.

Even an effective regulatory equity layer of 54% and.

And utilizing an innovative recovery mechanism for WPS retiring edgewater coal plant.

The settlement is now subject to review and approval by the PSC W.

We anticipate a decision on this filing later this year.

More details on the terms of the settlement agreement can be found on slide 6.

As John mentioned earlier, we received written approval from appears CWA in June for 675 megawatts of new solar generation, Wisconsin.

This is a significant milestone in our clean energy transition and another example of our long track record of achieving constructive regulatory outcomes.

We also filed our second certificate of authority application for an additional 414 megawatts of Wisconsin solar in March.

So it's been a decision from the <unk> on this filing in the first half of next year.

Later this quarter, we plan to file a request for advanced ratemaking principles for up to 400 megawatts of new solar projects in Iowa.

The advanced Ratemaking principles process on Iowa includes approval of the return on equity from the life of the asset.

<unk> rates and cost cuts from the project.

We anticipate a decision from the Iowa utility board on this filing by the middle of next year.

Thank you for joining us today and for your interest in Alliant energy, we look forward to connecting with many of you over the coming months.

Now I'll ask the operator to facilitate the question and answer session.

Thank you Mr. <unk> at this time the company will open the call to questions from members of the investment community. If you would like to ask a question. Please check now by pressing star 1 on your telephone keypad.

If you are using a speaker phone. Please make sure you're on mute function is disabled to allow your signal to retire a quick.

Once again press the star followed by the 1 to ask a question.

We'll pause for just a moment to turn on our effort on opportunity to signal for questions.

We can now take the first question from Julien Dumoulin Smith from Bank of America.

Hi, good morning, Darius on for Julien. Thank you for taking my question I just wanted to.

Ask about your comments about the upper half of the 'twenty 1 guidance range I just wanted to maybe talk through some of the puts and takes as far as how youre looking at Q3 and 4.

Relative to how youre tracking for the first half of the year compared to 2020. If you can maybe just talk about some of the moving parts there and.

And Additionally is there any july weather effects.

Built into that assumption as well thank you.

Yeah, you bet. Thanks for the question, maybe I'll start with the July part.

Not really any notable impact on the July front, so we did track.

Whether in some favorable O&M or costs. If you will on the first half. So it has is currently tracking towards the upper half we're expecting.

A fairly normal second half of the year. There is always a number of things that can come into play, but with those things in consideration and that's why we've.

Did the upper half that we're currently tracking so I'll see Robert anything else you'd like to add yes, just maybe to quantify the impacts so through the first half of the year the weather impacts on our sales our temperature impacts on our sales or about 5% to 6 positive and so that's what's really pushing us to that upper half of the range.

Okay, great. Thank you that's very helpful. If I could.

Also ask 1 more about I know in the past you've spoken about some potential future under grounding efforts for some of your distribution lines I was curious when.

When we might hear more about debt.

Specific.

Investment amount.

<unk> rolled forward Capex plan or anything along those lines, if you cannot speak to that at all.

Yes, certainly we would expect to roll forward Capex as we get to <unk>. So you'll see more at that time, along with some other items that we typically share dividend and others financing towards that time of the year, we've been working the overhead to underground now on getting more and more efficient at that so we've got certainly a.

A lot more opportunity, we will share more of the specifics a bit later in the year as I noted but were we.

We really are moving towards that path quite aggressively and we'll share more about how that plays into future capex when we get towards the <unk> and later in the year.

Okay, great. Thank you very much I'll leave it there.

Okay. Thank you.

Once again, if you would like to ask a question. Please press star 1.

We can now take the next question from Michael Sullivan from Wolfe Research.

Yeah, Hey, good morning.

First question I just wanted to ask on.

Could you guys remind us where you stand on credit metrics and how much capacity. There is there is potentially.

Potentially.

<unk> capex over time.

Yeah. Michael This is Robert So you should think of us as.

Right now when you think about 2021 were probably lower in a in a range of credit metrics largely because we're refunding a lot of cash.

<unk> reform benefits back to our customers in this time frame.

Scheduled to sunset so towards the end of this year into 2022, and so we're expecting over time those credit metrics to improve when we go through 'twenty 3 'twenty 4 time frame.

So we feel well positioned to maintain our current credit ratings.

If anything I see some optimism as far as increasing credit metrics over time, largely because of the cash flow improvements that we see on the future.

Okay.

Any just like number specifics on terminal in terms on the debt.

Yeah think of US right now in the in the mid teens for the most part.

Like I said, a lot of that will be improving over time as we get into 'twenty 3 'twenty 4 even until the latter part of 'twenty 2 so.

Like I said, we feel well positioned for where we're at with our credit metrics and credit ratings currently.

And an improving environment going forward, but think of us on the mid teens now with things getting better over time.

Okay, great. Thanks.

And then also just.

Any color on what you guys are seeing in terms of <unk>.

Inflationary pressures, particularly with some of the solar development that you're doing.

Yeah. Thanks, Michael John Here, certainly have seen some cost increase.

A lot of those commodities are level is a better some of them are but we've seen that in week 2.

Our estimates so we do see some additional costs for the solar going forward. The projects. We have that we've filed for with our first CA in Wisconsin, and we expect others are very low cost. So they are very very competitive cost even with these.

These increases and of course, they provide significant benefits for our customers over time, so well positioned a lot of flexibility in our plan, but we have seen some increases on commodities as I'm sure most of our peers have as well.

Great. Thanks, and just last 1 real quick I could have missed it in the prepared remarks, but are you guys are reaffirming the 5% to 7% long term.

It wasn't specifically in our remarks, but we are so we've.

<unk> identified the 5% to 7% over the long term.

Through this point, maybe through 2023, and we'll refresh that so when we get through.

Through the November conference. So that's our normal protocols, we usually add another year into the process. When we provided additional capex for another year and rate base for another year to support them.

Awesome. Thanks, so much.

Thanks, Michael.

This concludes today's question and answer session. Mr. Fears I'd like to turn the conference back over to you for any additional or closing remarks.

This concludes Alliant Energy's second quarter earnings call on.

A replay will be available through August 13, 2021.

At 8882031112 for U S and Canada.

<unk> 700, $945.70820 for international.

Callers should reference conference I'd.

For 107, 5543, and 90.578 and.

In addition, an archive of the conference call and a script of the prepared remarks made on the call will be available on the investors 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 questions.

Yeah.

[music].

Good morning, and welcome to Alliant Energy Conference call for second quarter 2021 results.

This call is being recorded for rebroadcast at this time all lines are in a listen only mode.

I would now like to turn the call over to your host Zach feels lead Investor Relations analyst at Alliant energy.

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.

Joining me on this call on John Larsen Chair, President and CEO, and Robert Durian, Executive Vice President and CFO.

Following prepared remarks by John and Robert We will have time to take questions from the investment community.

We issued a news release last night announcing on line energy second quarter 2021 financial results.

This release as well as supplemental slides that will be referenced during today's call are available on the investors page of our website.

At Www Dot Alliant energy Dot 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 last night and in our filings with the Securities and Exchange Commission we.

We disclaim any obligation to update these forward looking statements.

In addition, this presentation contains references to non-GAAP financial measures.

The reconciliation between non-GAAP and GAAP measures is provided in the earnings release, and our 10-Q, which are available on our website.

At this point I'll turn the call over to John.

Thank you Zach Hello, everyone. Thank you for joining us today.

We completed another solid quarter with strong operational and financial results.

I'll share a few other highlights from the quarter and then turn it over to Robert to recap key regulatory customer and financial results.

I'll start with a focus on our strong ESG story.

We recently issued our 2021 corporate responsibility report.

This year's update showcases many examples of our environmental stewardship governance, and our long standing efforts to address the important social needs on the communities we proudly serve.

I'll start with the end in mind is no clean energy story is complete without results.

First off from 2020, we achieved a 42% reduction in cotwo emissions compared to 2005 levels with a clear path toward our goal of 50% reduction by 2030, we also reduce water usage by 66% in 2020, well on our way to our 75% reduction by 2030.