Q3 2022 Alliant Energy Corp Earnings Call

November 8, 2022

Today's conference call is being recorded.

I would now like to turn the call over to your House, Susan Gil Investor Relations manager at Alliant energy.

Morning, I would like to thank all of you on the call and the webcast for joining US today. We appreciate your participation.

With me here today are John Larsen Chair, President and CEO , 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's third quarter and year to date financial results.

Narrowed and raised the midpoint of our 2022 earnings guidance range and announced the 2023 earnings guidance and common stock dividend target.

It also provided our annual capital expenditure plan through 2026.

This release as well as an earnings presentation, which will be referenced during today's call are available on the investor page of our website at www dot align 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 are provided in the earnings release.

And our quarterly report on Form 10-Q, which is available on our website.

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

Thank you Susan good morning, everyone and thank you for joining us today.

We continue to be on track for another solid year with strong financial and operating results.

I'll hit on the highlights I'll hit on the key headlines and then turn it over to Robert for additional details.

I'll start with 2022.

The combination of solid weather normalized sales positive temperature impact.

As a result, we are increasing and narrowing our 2022 earnings guidance range.

We are well positioned for 2022 to be the 13th year in a row of achieving our targeted 5% to 7% earnings growth objective.

And turning to 2023, I'm pleased to share our earnings guidance and dividend target.

We pride ourselves on consistency and these targets demonstrate our commitment to our long term, 5% to 7% earnings growth objectives.

Our 2023 earnings midpoint represents a 6% increase to our forecasted 2022 temperature normalized adjusted earnings.

And our 2023 common stock dividend target is $1 81 per share.

Which is a 6% increase from the prior year.

Our commitment to steady and predictable results has never been stronger.

Another key headline is our updated capital investment forecast, we are adding $2 $4 billion of investment compared to last year's plan.

This is yet another indication of how our well executed and transparent clean energy blueprint has us positioned for long term growth.

Our clean energy blueprint serves as our roadmap to deliver on our purpose to serve customers and build stronger communities.

It's not only well designed for success, but also flexible, allowing us to adjust and adapt to the needs of our customers and economic changes.

One of the largest opportunities to add value for our customers is the inflation reduction act or IRR.

Our success in advancing and executing our capital projects. This year has us well positioned to take advantage of the many customer benefits from the IRI.

An example of this was our fast pivot away from tax equity to full ownership of our solar projects.

As we shared in the last call we haven't taken our foot off the gas as we continue to execute on our large solar project portfolio.

This positioned us well to take immediate advantage of the IRA providing even greater benefits to our customers and value to our shareowners.

On our current solar and battery projects, our customers will see nearly $500 million.

Incremental net present value benefits as a result of the impacts from the IRA when compared to traditional ownership.

We don't have to change our plans to take advantage of the eye are a it's a natural fit with our clean energy blueprint.

Another area of focus is addressing the proposed MISO seasonal capacity construct.

We've shared in previous calls how this has also impacted the retirement dates for some of our remaining coal facilities.

We have always kept a balanced generation portfolio and while the end state of our blueprint will not change this new construct will advance our need for dispatch able and flexible generation, ensuring reliable service to our customers no matter the season.

As we embrace these opportunities we revised our capital expenditure plan, which contributed to a solid 8% rate base growth through 2026.

Approximately one half of our investments over the next four years will be in renewable generation and battery storage.

A strong demonstration of our commitment to a clean energy future for our customers.

Now with our outlook for 2023 established let me share some of the achievements during the last quarter.

We are keeping pace on our projects within the clean energy blueprint.

Not only is this positioned us well to take advantage of the I R. A.

We are also well positioned for future investments.

We have all 16 sites that make up our overall, one five gigawatts of solar additions across both Iowa, and Wisconsin under site control.

We also have the majority of generator interconnect agreements in place.

And all solar panels are either under our control or under construction.

Our 50 megawatt Bear Creek project went into service on time and within budget and two more projects should be operational by the end of the year, including our 150 megawatt Wood County, and our 50 megawatt north rock projects.

We also added two new battery storage projects, one in Portage, Wisconsin, and one in Cedar Rapids, Iowa.

I'm very proud of our teams that work to make this all happen in some very challenging sourcing and economic times.

I'm also pleased to share that we continue to see solid growth in both Iowa and Wisconsin.

And for the fourth year in a row, we've been named the top utility and economic development by site selection magazine.

As I've discussed in the past, we invest in key industrial property locations to spur economic development and growth within the communities we serve.

This past quarter. It was an honor to help celebrate the planned expansion of Wyffels hybrids as they announced their expansion in Ames, Iowa.

Our team was also busy positioning us for the next phase of our generation transformation and grid resilience.

We have been identifying additional opportunities advancing our efforts to move our grid underground and continuing our development efforts for future investments and new wind Repowering wind solar storage and sustainable fuels. We continue to have a strong backlog of development to provide us with choices.

For our future investments.

The cap off a great third quarter of solid results and execution are reflect on how the intersection of the IRA and our clean energy Blueprint has made such a tremendous impact for us.

<unk> is well positioned to be one of the strongest beneficiaries of the I R. A because we can put the IRA to work immediately to benefit both our shareowners and customers through added rate base opportunities and lowered cost to customers.

We're also well positioned to benefit from cash flow improvements through transferability of tax credits and we're not subject to the corporate minimum tax in the near term.

Before I close a quick reminder, that is not too late to vote.

And with veterans day coming up soon.

I'd like to pass on a sincere thank you.

To all veterans, especially to the over 200 that are part of the Alliant energy team and all military families.

I. Thank you for your service and sacrifice.

Robert and I look forward to sharing more details next week when we see many of you in Florida at the EI Conference.

I'll now turn the call over to Robert.

Thanks, John Good morning, everyone.

Yesterday, we announced third quarter non-GAAP earnings of 93 cents per share compared to $1 <unk> per share in the third quarter of 2021, our quarterly earnings change year over year was primarily due to higher interest expense and the timing of income taxes.

The non-GAAP adjustment recorded in the third quarter of <unk> <unk> per share related to our tax reform enacted earlier this year.

In September I would department of revenue announced a corporate state tax rate of eight 4% for 2023.

Which is down from the current rate of nine 8%.

This change resulted in a current year charge at our non utility and parent operations related to lower deferred tax asset values.

However, this change will also enable us to past millions of dollars of annual savings from lower state taxes onto our customers in Iowa for decades into the future.

Through September of this year, our net temperature impacts increased alliant energy earnings by approximately seven cents per share.

And our temperature normalized sales are tracking above our sales growth expectations from the beginning of the year.

Looking forward to the fourth quarter and our full year 2022 results, we expect strong earnings growth from investments in Wisconsin solar projects.

And the reversal of tax timing issues that have impacted the first nine months of this year.

As a result of stronger sales through September and our projected fourth quarter results, we have narrowed and raised our 2022 earnings guidance to a range of $2.76 per share to $2 83 per share.

During 2022, our team has been advancing and transfer them in our clean energy blueprint.

Ensure that we not only accomplished our current year goals, but also enable the achievement of our financial and operational objectives over the long term.

Our sourcing team has been ensuring materials and equipment are on site or are in order to achieve the targeted completion dates of our announced solar projects.

And our development team has been advancing a robust portfolio of future generation resources that supports a future of clean affordable and reliable energy for our customers.

As John mentioned, we issued our consolidated 2023 earnings guidance range of $2 82 to two.

$2 96 per share.

The key drivers of the 6% growth in EPS are related to earnings on investments in our core utility business.

And our continued efforts to reduce costs to support customer affordability.

We are forecasting these key earnings growth drivers will be offset by higher depreciation and higher financing costs associated with new construction projects.

We invest strategically in the best interest of our customers.

These investments include implementing technology in many areas of our business from our enterprise work and asset management solution to our advanced distribution management system.

We are working to improve the customer and employee experience, while controlling customer costs.

Through our ongoing transition of retirement of our fossil fuel generation resources, we will continue reducing our operating costs.

And as we bring our planned solar projects into service, we expect production tax credits and lower fuel expenses to largely offset the impact of increases in renewables rate base.

Which makes these new investments very cost effective for customers.

This will translate into long term benefits for our customers and as John mentioned long term value for our shareowners.

Moving to our financing plans and.

In August we successfully completed a $600 million green bond issuance at W. P L to finance solar generation projects.

And in September we filed information with our two state Commission announcing plans to move away from tax equity financing to full ownership of <unk> and IPL solar and battery projects to capture even more benefits for our customers.

We expect to replace the previously planned tax equity financing with additional long term debt issuances.

Lamented with some modest levels of new common equity to fund, our announced solar and battery projects.

Our 2023 plans include $1 $3 billion of financing largely related to funding customer focus and vessel.

This includes issuing up to $300 million of long term debt at both our Iowa and Wisconsin utilities.

Up to $450 million of debt at Alliant Energy finance.

And up to $250 million of new common equity.

We have $1 $400 million maturity in mid 2023, which will be refinanced with the planned new debt issuance at Alliant energy finance.

This 2023 financing plan is driven by robust capital expenditure plans and supports our objective of maintaining capital structures at our two utilities.

System with their most recent regulatory decision.

And our future financing plans anticipate utilizing the new transferability provisions within the inflation reduction Act.

To accelerate cash flows from future tax cutter generated by wind solar and battery projects, thereby reducing our future financing needs.

Finally, I'll highlight our regulatory initiatives and progress as well as those regulatory filings we plan to make in 2023.

First there are two key regulatory initiatives currently in progress.

In Wisconsin, We recently requested construction authority for 175 megawatts of battery storage, which supports capacity needs, resulting from the proposed sale by <unk> of a portion of the west Riverside generating facility to our neighboring utilities.

And in Iowa, we are expecting a decision from regulators on our advanced ratemaking filing for 400 megawatts of solar and 75 megawatts of battery storage.

This proceeding is progressing and we anticipate a decision in the next few weeks.

As a reminder, this decision should include an approved ROE and depreciation rates.

Life of the solar and battery storage assets.

Turning to our 2023 regulatory plans.

In conjunction with our updated capital expenditure plan, we expect to make regulatory filings in both Iowa and Wisconsin in 2023 for additional renewables and dispatch will resources to improve seasonal reliability and meet customer energy needs.

From a rate review calendar, we expect to file a WPS rate review covering future test years, 2024, and 2025 in the first half of next year.

And for IPL, we expect to file our next rate review by the first half of 2024.

Before I wrap up my remarks, I want to acknowledge our alliant energy employees.

We have executed our plan and kept our strategic projects on track, allowing us to share the financial and operational plans today.

From clearing supply chain hurdles to regulatory planning and communication.

From preparing our tax equity financing to pivoting to full ownership to capture even greater customer benefits from the inflation reduction Act.

Our actions have been and continue to be focused on the best interest of our customers and the communities we are privileged to serve.

We very much appreciate the continued support of our company by our investors and look forward to meeting with many of you at the <unk> Finance Conference next week.

Later this week, we plan to post on our website the updated materials in advance of the <unk>.

At this time I'll turn the call back over to the operator to facilitate the question and answer session.

Thank you Mr. Darien at this time the company will open up the call to questions from members of the investment community.

I would like to ask a question. Please signal by pressing star one on your telephone keypad.

If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Again star one to ask a question and we'll pause for just a moment to allow everyone an opportunity to signal for questions.

And we will take our first question from Julien Dumoulin Smith with Bank of America. Please go ahead.

Hey, guys. Good morning. This is areas on for Julien. Thank you for taking the question.

My first one is just about the substantial step up in the capital funding plan just curious how should we be thinking about equity funding needs beyond 2023.

It adds a straightforward just taking approximately half of that incremental.

Capital versus the previous plan or.

Just curious how we should be thinking about that thank you.

Yeah. Thanks for the question there is as we announced in 2023, we are.

Planning on issuing up to $250 million of new common equity is as we think about beyond 2023 at this point there.

There may be some modest levels of new common equity needed and really what we're going to target there is to achieve a.

Equity ratio at the consolidated group of 40% to 45% as well as to maintain those strong credit metrics that we need at the parent company.

Would point to the fact that.

In addition to the factor of adding a bunch of new rate base. As a result of the inflation reduction Act. We are also going to take advantage of the ability to transfer tax credits into the future and we think that's going to be a great opportunity for us to reduce those future financing needs as we think about not only the wind production tax credits from those that we put.

Into service in 2019, and 2022 or 2020, sorry, but also the solar projects from 2022 through 2025, we're going to generate a significant amount of production tax credits and the monetization of those tax credits are going to significantly reduce the amount of financing needs. We have in the future. So we're.

Not signaling exact numbers of what the equity would be beyond 2023 is we're still working through the exact timing as well as the amounts of those monetization of tax credits, but we do think that's going to significantly reduce where previously we had expected with the new common equity.

Darius John here Im just might add that primary drivers here are really growth.

Renewables and dispatch able as Robert outlined in.

The IRI alone adds about $1 billion of investment that we'll have really minimal.

Or no impact bill impact to customers, so really a great capex update and refresh.

Got it thank you for the detail there I appreciate that.

A related one.

Relative to the 5% to 7% long term CAGR target.

2023 guidance range.

Basically right at that midpoint, maybe just incrementally lower how should we think about.

The cadence of the five to seven again beyond 2023, obviously, the capital steps up into 2425 periods.

Expect a corresponding increase in EPS CAGR.

Yes, I think thinking of it as continued on the 5% to 700 areas, but as you noted the capital plan, we have set sets us up quite well for us.

For a very long term, 5% to 7%. So we feel very well positioned in a lot of strength in that 5% to 7% long term outlook.

Excellent. Thank you very much for the color I'll pass it along here.

As a reminder, its star one to ask a question we will take our next question from Michael Sullivan with Wolfe Research. Please go ahead.

Hey, Ron good morning.

Good morning.

Sticking with the <unk>.

Credit.

Funding plan line of questioning.

Can you give any more specifics on just how.

Helpful to cash flow the transferability provision can be like on a metric basis, whether it be episode of that or how that helps you with that consolidated equity ratio target.

Yeah, Michael maybe I'll give you some sense of the magnitude of the production tax credits that were forecasting.

So right now we're generating a little over $100 million a year from those wind projects that were put into service in 2019 and 2020.

When you layer on the 500 megawatts of solar that we're planning on putting into service.

2025 time period.

Also have roughly another $100 million of production tax credits so roughly in the neighborhood of about $200 million to $250 million of production tax credits from wind and solar projects.

We also expect with our battery projects investment tax credits that will be generated those will be I would say less consistent there'll be just timed with the number we put those into into service, but we're talking upwards of probably $200 million to $300 million of annual tax credits and dependent upon.

The ability to monetize those timely.

We do see some pretty significant inflows of cash flows that will reduce our future financing needs. So we're still working with the credit rating agencies to know exactly how they will treat those future inflows of cash.

We know we will be able to reduce our financing needs on the debt side. We're just not sure if that will be reflected as part of our <unk> to know exactly how that's going to be treated for the year.

Credit metrics.

Okay, Great that's really helpful.

I know you don't want to give specifics on the out years on equity purchase.

Maybe if you could help us out directionally like is $250 million. This year in 2023 should we think of that as kind of like.

The Max that you see in any one given year.

Look out over say the next four or five.

I think Thats a fair statement, we don't expect in eight years in the future.

To be even at that level, we're expecting it'll be lower than level. When you think about 24 through 26.

Okay, I just might add Michael a lot of moving parts, there, but a lot of positives as well. So as you can imagine I think we're.

Following that as a modest and in the future, but working towards making that.

On the low end.

If it all needed.

Okay very helpful. Thanks, and my last one just on.

Can you just refresh us on where things stand on the MISO seasonal.

Construct is that all in place or are there still some things that need to be hashed out and how that.

Shapes, where you're at on your resource planning.

Yes, maybe I'll just start we're anticipating that seasonal construct.

It's a matter of probably when not if as we see that go forward. So we've been doing a lot of planning for that in advance we've got.

Capacity and resource needs just from our load growth.

And maintaining reliability and then when you add what we would expect on the seasonal construct if you think of that long term with resources and resource plan.

Just going to drive some additional resources for us timing wise I might ask Robert to opine on.

Where we're at on the schedule for that but it's.

It's likely to happen. It's just timing is the question Michael.

Yes, Michael so the FERC approved the seasonal construct at the end of August and so there have been some requests to reconsider the timing aspect of it I would expect that we'll probably hear about those here in the next couple of quarters is the the new seasonal construct is going to go into effect starting on June one of 2023.

Okay. Thanks, so much so you guys down in Florida.

Thanks, Michael.

Thank you. Our next question from Nick Campanella with Credit Suisse. Please go ahead.

Hey, good morning, everyone.

I think the connect here thanks for all the updates.

So I guess I guess Robert.

<unk> O&M above 5% or about $40 million in total.

When you kind of factor all that together, we actually expect 2023 O&M expenses to be lower.

From a longer term perspective, it'll continue to be a focus for us for O&M.

No.

Just recognizing I think you've already moved towards a forward looking test here in this jurisdiction. So what's just the other considerations in that test year that we should be thinking about thanks.

Middle of 'twenty three in first half of 'twenty four would be likely the timeframe that we would file anything you'd add to that Robert.

With our next major construction and service dates for the 475 megawatts of solar and batteries.

I recognize it's small but you do have a small proportion of unregulated earnings mostly at parent and I'm. Just curious in this new forecast are you just holding that flat is there any kind of considerations there around the unregulated business.

Thanks.

Next week actually thank you.

And we will take our next question from Masha Kahn with Parisian. Please go ahead.

Hi, how are you doing.

A couple of hundred basis points I know there is a little bit more equity.

You're trying to minimize equity.

I mean, that's what the math towards all the benefits you think that's what's missing to me is am I thinking something wrong. All of these benefits that you have ascribed mentioned.

New equity that we proposed in 2023 as well as we are expecting some higher interest expense.

That's the key offsets as we think about the next few years I would say that we.

We do have some opportunities to be kind of in the upper half of that.

And Miss Gill there are no further questions at this time.

Yeah.

And this concludes today's call. Thank you for your participation you may now disconnect.

Yeah.

[music].

Yeah.

Okay.

[music].

Thank you for holding ladies and gentlemen, and welcome to Alliant Energy's third quarter 2022 earnings conference call. At this time all lines are in a listen only mode.

Today's conference call is being recorded.

I would now like to turn the call over to your House, Susan Gil Investor Relations manager at Alliant energy.

Morning, I would like to thank all of you on the call and the webcast for joining US today. We appreciate your participation.

With me here today are John Larsen Chair, President and CEO , 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's third quarter and year to date financial results.

Narrowed and raised the midpoint of our 2022 earnings guidance range and announced the 2023 earnings guidance and common stock dividend target.

It also provided our annual capital expenditure plan through 2026.

This release as well as an earnings presentation, which will be referenced during today's call are available on the investor page of our website at www Dot Alliant energy Dot com.

Those risks include among others matters discussed in a line 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 are provided in the earnings release and our quarterly report on Form 10-Q, which is available on our website.

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

Thank you Susan good morning, everyone and thank you for joining us today.

We continue to be on track for another solid year with strong financial and operating results.

I'll hit on the highlights I'll hit on the key headlines and then turn it over to Robert for additional details.

I'll start with 2022.

The combination of solid weather normalized sales positive temperature impact.

Project execution, and our continued focus on cost management have us well positioned for another year of achieving our long term guidance objectives.

As a result, we are increasing and narrowing our 2022 earnings guidance range.

We are well positioned for 2022 to be the 13th year in a row of achieving our targeted 5% to 7% earnings growth objective.

And turning to 2023, I'm pleased to share our earnings guidance and dividend target.

We pride ourselves on consistency and these targets and demonstrate our commitment to our long term, 5% to 7% earnings growth objectives.

And our 2023 common stock dividend target is $1 81 per share.

Which is a 6% increase from the prior year.

Our commitment to steady and predictable results has never been stronger.

Another key headline is our updated capital investment forecast, we are adding $2 $4 billion of investment compared to last year's plan.

This is yet another indication of how our well executed and transparent clean energy blueprint has us positioned for long term growth.

Our clean energy blueprint serves as our roadmap to deliver on our purpose to serve customers and build stronger communities.

It's not only well designed for success, but also flexible, allowing us to adjust and adapt to the needs of our customers and economic changes.

One of the largest opportunities to add value for our customers is the inflation reduction act or IRA.

Our success in advancing and executing our capital projects. This year has us well positioned to take advantage of the many customer benefits from the I R E N.

An example of this was our fast pivot away from tax equity to full ownership of our solar projects.

As we shared in the last call we haven't taken our foot off the gas as we continue to execute on our large solar project portfolio.

This positioned us well to take immediate advantage of the eye or a providing even greater benefits to our customers and value to our shareowners.

On our current solar and battery projects, our customers will see nearly $500 million of incremental net present value benefits as a result of the impacts from the IRA when compared to traditional ownership.