This MDA includes information relating to Alliant Energy, and IPL and WPL
(collectively, the Utilities), as well as
2020 HIGHLIGHTS
Key highlights since the filing of the 2019 Form 10-K include the following:
COVID-19:
The outbreak of COVID-19 has become a global pandemic and Alliant Energy's
service territories are not immune to the challenges presented by COVID-19.
Despite these challenges, Alliant Energy, IPL and WPL continue to focus on
providing the critical, reliable service their customers depend on, while
emphasizing the health and welfare of their employees, customers and
communities. Alliant Energy, IPL and WPL have not experienced significant
impacts on their overall business operations, financial condition, results of
operations or cash flows for the three and six months ended
Operational and Supply Chain Impacts - Alliant Energy has modified certain business practices to help ensure the health and safety of its employees, contractors, customers and vendors consistent with orders and best practices issued by government and regulatory authorities. For example, Alliant Energy implemented its business continuity and pandemic plans for critical items and services, including travel restrictions, physical distancing, working-from-home protocols, and rescheduling of planned EGU outages. Alliant Energy also temporarily suspended service disconnects, waived late payment fees for its customers, and modified reconnect service procedures to ensure continuity of service for customers unable to pay their bills and consistency with regulatory orders.
While Alliant Energy has not experienced any significant issues to-date, it continues to monitor potential disruptions or constraints in materials and supplies from key suppliers. In addition, Alliant Energy's construction projects are currently progressing as planned with added safety protocols, and while it continues to monitor its supply chain, there have been no immediate disruptions. Currently, Alliant Energy expects its large renewable construction projects to be placed in service as previously planned to meet the timing requirements to qualify for the maximum renewable tax credits. In addition, Alliant Energy does not currently expect any material changes to its construction and acquisition expenditures plans disclosed in the 2019 Form 10-K resulting from COVID-19.
Alliant Energy has not experienced, and currently does not expect, an interruption in its ability to provide electric and natural gas services to its customers. Alliant Energy currently expects to incur incremental direct expenses related to certain of these operational changes and does expect them to have a material impact on its results of operations.
Customer Impacts - COVID-19 has resulted in various travel restrictions and
closures of commercial spaces and industrial facilities in Alliant Energy's
service territories. While the total expected impact of COVID-19 on future sales
is currently unknown, Alliant Energy has experienced higher electric residential
sales and lower electric commercial and industrial sales since the outset of the
pandemic, and this has continued through
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commercial and industrial customers started to rebound in
Liquidity and Capital Resources Impacts - In response to the uncertainty of the
impacts of COVID-19, Alliant Energy enhanced its liquidity position in the first
quarter of 2020 by settling
Alliant Energy, IPL and WPL currently expect to maintain compliance with the financial covenants of the credit facility agreement, and Alliant Energy currently expects to maintain compliance with the financial covenants in AEF's term loan credit agreement. In addition, Alliant Energy currently expects to have adequate liquidity to fulfill its contractual obligations, access to capital markets and continue with its planned quarterly dividend payments.
Credit Risk Impacts - Alliant Energy's temporary suspension of service
disconnects and waivers of late payment fees for its customers, as well as broad
economic factors, may negatively impact its customers' abilities to pay, which
could increase customer arrears and bad debts, and negatively impact Alliant
Energy's cash flows from operations. Currently, Alliant Energy does not
anticipate any material credit risk related to its commodity transactions. In
addition, Alliant Energy recorded an
Regulatory Impacts - In
Legislative Impacts - In
Rate Matters: • Final retail electric rates for IPL's 2020 Forward-looking Test Period rate review were effectiveFebruary 26, 2020 . Effective with the implementation of final rates, IPL started to recover a return of and return on its new wind generation placed in service in 2019 and 2020 through the renewable energy rider.
• In
retail electric and gas base rates, authorized return on common equity, regulatory capital structure and earnings sharing mechanism through the end of 2021. WPL's proposal utilizes anticipated fuel-related cost savings in 2021 to offset the revenue requirement impacts of the Kossuth wind farm expected to be placed in service in late 2020. In addition, WPL's proposal utilizes excess deferred tax benefits to partially offset the revenue requirement of the expansion of its gas distribution system in WesternWisconsin also expected to be placed in service in late 2020. WPL's proposal also seeks additional flexibility to mitigate certain cost impacts outside of its control due to the COVID-19 pandemic if circumstances warrant.
• In the second quarter of 2020, pursuant to a
transmission cost rider for amounts previously collected in rates.
• In
of 2019 fuel-related cost over-collections to its retail electric customers inSeptember 2020 . Customer Investments: • InMarch 2020 , IPL completed the construction of the Golden Plains wind farm
in
• In
distribution system inWestern Wisconsin , which is currently expected to be completed in 2020. 28
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• In
Riverside Energy Center (730 MW).
• In
to acquire, construct, own, and operate up to 675 MW of new solar generation, which is expected to qualify for 30% investment tax credits, in the followingWisconsin counties:Grant (200 MW in 2023),Sheboygan (150 MW in 2022), Wood (150 MW in 2022),Jefferson (75 MW in 2022),Richland (50 MW in 2022) and Rock (50 MW in 2023). WPL proposes to own and operate the solar projects through a tax equity partnership, with approximately 35% to 45% of the construction costs financed with capital from the tax equity partner, allowing WPL's customers to share the costs of the solar projects with an investment partner for 10 years or less, while ensuring its customers receive energy, capacity, and renewable energy credit benefits from the projects. WPL would expect to purchase the tax equity partner's interest in the solar projects within 10 years of operation, and then convert to a traditional ownership structure for the remainder of the useful life of the projects. WPL's estimated portion of capital expenditures for the 675 MW of new solar generation, excluding allowance for funds used during construction, is currently expected to be approximately$885 million in aggregate ($25 million ,$410 million ,$370 million and$80 million in 2020 through 2023, respectively). Assuming 35% of the construction costs are financed by the tax equity partner, WPL would receive approximately$190 million and$110 million from the tax equity partner in 2022 and 2023, respectively. WPL requested to include$585 million in rate base, which reflects its portion of capital expenditures, less the amounts financed by the tax equity partner. The 675 MW of new solar generation would replace energy and capacity being eliminated with the planned retirement of the coal-firedEdgewater Generating Station (414 MW) by the end of 2022, which is subject to change depending on operational, regulatory, market and other factors.
• In
overall energy mix be from renewable resources and establishment of updated voluntary environmental-related goals based on its clean energy strategy. By 2030, Alliant Energy expects to reduce carbon dioxide emissions by 50% and water supply by 75% from 2005 levels from its owned fossil-fueled generation. By 2040, Alliant Energy expects to eliminate all coal-fired EGUs from its generating fleet, and by 2050, seeks to achieve an aspirational goal of net-zero carbon dioxide emissions from the electricity it generates. Future updates to sustainable energy plans and attaining these goals will depend on future economic developments, evolving energy technologies and emerging trends in Alliant Energy's service territories.
Financings:
• In
sale agreements by delivering 4,275,127 shares of newly issued Alliant Energy
common stock at a weighted average forward sale price of
• In
June 30, 2020 ) term loan credit agreement (with Alliant Energy as guarantor), which expires inMarch 2022 , and used the borrowings under this agreement to retire its$300 million variable rate term loan credit agreement that would have expired inApril 2020 .
• In
proceeds from the issuance were used by WPL to reduce borrowings under the single credit facility, which currently expires inAugust 2023 , and for general corporate purposes. InJune 2020 , WPL retired its$150 million 4.6% debentures.
• In
net proceeds from the issuance were used by IPL to retire its$200 million 3.65% senior debentures that would have matured inSeptember 2020 and for general corporate purposes. RESULTS OF OPERATIONS
Results of operations include financial information prepared in accordance with GAAP as well as utility electric margins and utility gas margins, which are not measures of financial performance under GAAP. Utility electric margins are defined as electric revenues less electric production fuel, purchased power and electric transmission service expenses. Utility gas margins are defined as gas revenues less cost of gas sold. Utility electric margins and utility gas margins are non-GAAP financial measures because they exclude other utility and non-utility revenues, other operation and maintenance expenses, depreciation and amortization expenses, and taxes other than income tax expense.
Management believes that utility electric and gas margins provide a meaningful basis for evaluating and managing utility operations since electric production fuel, purchased power and electric transmission service expenses and cost of gas sold are generally passed through to customers, and therefore, result in changes to electric and gas revenues that are comparable to changes in such expenses. The presentation of utility electric and gas margins herein is intended to provide supplemental information for investors regarding operating performance. These utility electric and gas margins may not be comparable to how other entities define utility electric and gas margin. Furthermore, these measures are not intended to replace operating income as determined in accordance with GAAP as an indicator of operating performance.
Additionally, the table below includes EPS for Utilities and Corporate Services,
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Financial Results Overview - Alliant Energy's net income and EPS attributable to
Alliant Energy common shareowners for the three months ended
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