Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Alliant Energy Corporation (NYSE:LNT)

Q3 2011 Earnings Call

November 3, 2011 10:00 AM ET

Executives

Susan Gille – Manager, IR

Bill Harvey – Chairman and CEO

Pat Kampling – President and COO

Tom Hanson – CFO

Analysts

Brian Russo – Ladenburg Thalmann

Jay Dobson – Wunderlich Securities

Alex Kania – Bank of America

John Alley – Decade Capital

Eric McCarthy – Praesidis Asset Management

Operator

Thank you for holding, ladies and gentlemen, and welcome to Alliant Energy’s Third

Quarter 2011 Earnings and 2012 Guidance Conference Call. At this time, all lines are in a listen-only mode. Today’s conference is being recorded. I would now like to turn the call over to your host, Susan Gille, Manager of Investor Relations at Alliant Energy.

Susan Gille

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. With me here today are Bill Harvey, Chairman and Chief Executive Officer, Pat Kampling, President and Chief Operating Officer, and Tom Hanson, Chief Financial Officer as well as other members of the senior management team.

Following prepared remarks by Bill and Tom, we will have time to take questions from the investment community. We issued a news release this morning announcing Alliant Energy’s third quarter 2011 earnings and 2012 earnings guidance and five year capital expenditure plan. This release, as well as supplemental slides that will be referenced during today’s call, are available on the investor’s page of our website at www.alliantenergy.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 this morning 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 non-GAAP financial measures. The reconciliations between the non-GAAP and GAAP measures are provided in the supplemental slides, which are available on our website at www.alliantenergy.com.

At this point, I’ll turn the call over to Bill.

Bill Harvey

Thank you Sue, and good morning, everyone. We want to be efficient with your time. So my comments will first focus briefly on our 2011 results thus far. And then I will provide details on the drivers behind the 2012 financial guidance and five-year capital expenditure plan we announced this morning. Later in the call, Tom will discuss third quarter results in more detail as well as important financial and regulatory matters.

As noted in our press release, we posted supplemental slides on our website to assist in your 2012 guidance and third quarter 2011 earnings analysis. You may want to have these slides available for reference during our remarks.

Before addressing 2012 guidance, let me comment briefly on the quarter and year-to-date results. But for the third quarter loss at RMT, those results are in line with our expectations. Our utilities continue to provide safe, reliable service to our customers, and are delivering earnings in line with guidance issued earlier this year. At the parent and

IPL, the accounting for the tax benefit rider causes considerable quarter-over-quarter variation in earnings per share which will even out by year’s end. In the third quarter, $0.10 of the underperformance at the parent level is attributable to this necessary accounting variability. Tom will cover this in greater detail.

In our non-regulated businesses, transportation and non-regulated generation continue to produce solid financial results. The negative performance at RMT, driven largely by a subcontractor performance failure on a solar project in New Jersey, resulted in a $0.13 loss for the quarter. This loss exceeds the $0.09 estimate previously announced. We’ve reduced our non-regulated and parent guidance for the year to reflect this circumstance. The New Jersey solar project will be completed this month and we will put this difficult experience behind us.

So let’s move to 2012. The midpoint of our 2012 earnings guidance is $2.95 per share, a $0.15 increase over the midpoint of our revised 2011 guidance shown on supplemental Slide 2. Our 2012 utility guidance reflects stable economies and normal weather conditions but flat weather-normalized electric sales in Iowa, Wisconsin and Minnesota for 2012 compared to 2011. Forecasted 2011 and 2012 weather normalized sales by customer class may be found on supplemental Slide 3.

Next year’s projected utility earnings growth is primarily a result of lower operation and maintenance expenses from operating modifications and efficiencies gained throughout the business. 2012 earnings will also benefit from lower tax expense and higher AFUDC. These positive drivers are expected to be partially offset by increased capacity and depreciation expenses. A summary of the guidance walk from 2011 to 2012 is available on supplemental Slide 4.

The 2012 guidance for our non-regulated and parent businesses increased $0.15 from our updated 2011 guidance, since the $0.13 solar project loss at RMT is not expected to repeat in 2012. 2012 earnings guidance assumes RMT will contribute $0.04.

Our targeted dividend payout ratio is 60% to 70% of utility earnings. Our current approved dividend is a $1.70. The Board will discuss the 2012 dividend at its December Board meeting.

Now let’s discuss our five-year capital expenditure plan. The financial guidance issued this morning projects 2011 through 2015 capital expenditures of $4.7 billion. Compared to our 2010 10-K, the capital expenditure estimate has increased for 2012 and decreased for 2013 largely due to a revised timeline for the purchase of Riverside.

Later this month, WPL plans to file an application with the Public Service Commission of Wisconsin for the purchase of Riverside in the fourth quarter of 2012. Riverside is an existing 600 megawatt combined cycle natural gas fired plant located in Beloit, Wisconsin. WPL currently has a purchased power agreement with Calpine for 490 megawatts from this facility and holds an option to purchase the entire plant. Through this purchase, WPL would increase its gas-fired capacity by approximately 110 megawatts which should assist us in addressing WPL’s future capacity needs.

WPL also currently has a purchased power agreement with Dominion Resources for capacity and energy from the Kewaunee nuclear facility that is set to expire at the end of 2013. We are in on-going negotiations with Dominion regarding a new agreement.

IPL also currently has a purchased power agreement with NextEra Energy for capacity and energy from the Duane Arnold nuclear facility that is set to expire in February 2014. We believe it is unlikely that we will renew this purchased power agreement with NextEra Energy.

A schedule of the various capacity payments expected to be made to Calpine, Dominion, and NextEra, which exhibits a considerable decrease in capacity payments in 2014, is shown on supplemental Slide 5. The decline in these capacity payments plays an important role in how we plan to manage customer rates in the face of the rate base additions driven by our capital expenditure plan.

At WPL, we are replacing capacity payments with operation and maintenance expenses and a return of and on the proposed Riverside purchase. So we do not see a material impact on Wisconsin customers’ rates as a result of this acquisition.

At IPL, we are continuing the due diligence and planning related to construction of a new

600 megawatt natural gas combined cycle generating facility. The capital expenditure plan presented today anticipates expenditures related to that facility to begin in 2014. The current estimated cost of the project is between $650 million and $750 million. By constructing this plant, we would be replacing capacity payments with operation and maintenance expenses, and a return of and on an owned asset, again resulting in a minimal rate impact to Iowa customers. Regulatory approvals will be required to construct the proposed plant and we expect those filings to be made in mid-2012. If the project moves forward, our plans indicate an anticipated in-service date of no earlier than

2016.

In addition to the purchase and construction of gas generation, our capital expenditure plan calls for installing emission control equipment to ensure compliance with stricter environmental rules. We plan to equip our larger plants, which we call Tier 1 units, with a full array of emission control equipment. We have provided a summary of our Tier 1 projects in supplemental Slide 6.

As you can see from the slide, we plan on investing approximately $850 million in our Tier 1 plants between 2011 and 2015. The installation of structural steel and foundations for the SCR is underway at WPL’s Edgewater Unit 5. The SCR is expected to be in service in 2013.

The remainder of WPL’s current Tier 1 environmental compliance plan includes installation of a scrubber and bag house at both units of the Columbia generating station and at Edgewater 5. The Columbia project has received approval from the Wisconsin Public Service Commission and is expected to be in-service in 2014.

An engineering firm has been selected, and engineering and design work is well underway. The Edgewater 5 scrubber and bag house will require approval from the Public Service Commission of Wisconsin. This project is in the preliminary planning phase and is currently expected to be placed in service in 2017.

IPL’s Tier 1 emissions control projects also continue to move forward. Engineering firms are engaged in the initial design and specification phase for the scrubber and bag house at the Ottumwa generating facility. The Ottumwa project is expected to be placed in service in 2014. Engineering has also begun for the scrubber project at IPL’s Lansing unit 4 which is expected to be in service in 2015.

In addition, installation of a bag house, SNCR and scrubber at Neal Units 3 and 4 will start this year with estimated in-service dates for those controls expected in 2013 and 2014. IPL co-owns these plants which are operated by MidAmerican.

Let’s move on to our Tier 2 plants. Our current capital expenditure projections for 2011 through 2015 include a total estimate of only $100 million for environmental controls at these plants. We have defined Tier 2 as plants which will not be fully retrofit with emission control equipment and for which we are exploring lower cost emission options. The future of these plants is dependent on the evolving environmental compliance rules as well as operational factors.

Before handing off to Tom, I have a closing observation concerning RMT. We have said before that RMT is not core to our business, but that we value its robust participation in the renewables space, since we expect renewables to be part of the US energy landscape for decades to come. Over the last year, we have re-engineered the business to narrow its focus and enhance its profitability, and the business has new leadership. While we believe the business, as reengineered, is poised to succeed, the setback experienced this quarter at the solar projects in New Jersey will rightfully cause us to reassess our expectations of this business.

We very much appreciate your continued support of our company and look forward to meeting with many of you at the EEI finance conference next week. At this time, I will turn the call over to Tom.

Tom Hanson

Thanks Bill and good morning to everyone. Let’s start with a recap of third quarter results. We released earnings this morning with our GAAP earnings from continuing operations of $1.10 per share. However, adjusting for items we typically exclude from the guidance, third quarter 2011 adjusted or non-GAAP earnings were $1.12 per share. The third quarter 2011 adjustment relates to charges for a small portion of IPL’s forward emission allowance contracts. Comparisons between third quarter 2011 and 2010 earnings per share are detailed on supplemental Slides 7, 8 and 9.

The utilities generated GAAP earnings of $1.35 per share in the third quarter of 2011 compared to $1.32 per share in the third quarter of 2010. The biggest drivers of the increase in utility results include higher earnings due to IPL’s tax benefit rider, a retail base rate increase at WPL, warmer weather and lower capacity payments due to Kewaunee’s PPA. These positive EPS drivers were offset by income tax benefits from the completion of a tax audit in the third quarter of 2010, higher depreciation and operating expenses for the Bent Tree wind project, under recovery of WPL retail fuel expenses and lower residential weather-normalized electric sales.

The non-regulated and parent businesses generated GAAP losses from continuing operations of $0.25 per share in the third quarter of 2011 compared to income of $0.05 per share in the third quarter of 2010. The biggest drivers of the decrease in non-regulated and parent results include losses related to the solar subcontractor issue at RMT and the impact of the IPL tax benefit rider at the parent.

As we discussed in the second quarter earnings call, the accounting for IPL’s tax benefit rider has given rise to considerable quarter-over-quarter variation in earnings per share at both IPL and the parent for 2011, but is not expected to have any impact on total year’s earnings.

On supplemental Slide 10, we have provided an estimate of the earnings impact for both IPL and the parent for each quarter of 2011. The tax benefit rider provides a credit to customers at a rate per kilowatt hour used. However, due to accounting rules, the tax credit is recognized each quarter based upon the quarterly profile of estimated annual income. Since IPL earns a greater portion of its income in the third quarter due to summer rates and air conditioning load, a much larger portion of the annual tax credit for IPL is recognized in the third quarter.

On the consolidated financials, the tax credit for each quarter is based on estimated annual consolidated income which has a different profile than IPL. The parent’s EPS impact of the tax benefit rider is the difference between the quarterly tax credit reflected on IPL’s financials, and the quarterly tax credit reflected on the consolidated financials.

IPL’s net impact of the tax benefit rider for the third quarter was income of $0.12 per share and the parent EPS impact was a loss of $0.10 per share. The key takeaway from this schedule is that both of these amounts are a result of timing, and at year-end the tax benefit rider will not have an impact on earnings.

Moving to the economy in our service territory, the 2011 weather-normalized sales to our industrial customers are increasing modestly while, like other utilities in our region, residential sales are decreasing when comparing 2011 to 2010 weather-normalized sales.

These trends are illustrated on supplemental Slide 3.

As noted in the earnings release issued this morning and on supplemental Slide 2, we have adjusted Alliant Energy’s 2011 earnings guidance with the midpoint estimate at $2.80 per share, comprised of the utilities’ midpoint of $2.75 per share and the non-regulated and parent at $0.05 per share. The guidance assumes normal weather for the last quarter of 2011.

Our 2011 earnings guidance of $0.05 for non-regulated and parent is comprised of the following key items. Our transportation business is on track to contribute $0.12 and non-regulated generation is expected to contribute $0.06. These items are offset by a loss of $0.12 from RMT due to the subcontractor issue bill described earlier.

Our current liquidity position is strong, totaling approximately $690 million, comprised of over $40 million of cash and marketable securities and approximately $640 million of available capacity under our credit facilities and sale of receivables program. We currently have no commercial paper outstanding at IPL or WPL, and less than $25 million of commercial paper outstanding at the parent.

We plan to finance our future capital expenditure plan with cash flows from operations, short and long-term debt, and equity. Cash flows from operations are expected to be strong the next few years since we do not expect to make any material federal income tax payments through 2014 due to our tax initiatives and the extension of the federal tax benefits.

But these cash flow benefits will be partially offset with credits to customer’s bills resulting from the IPL’s tax benefit rider. We forecast the credits to customer bills will be approximately $60 million and $80 million in 2011 and 2012, respectively.

For their short term borrowing needs, IPL and WPL are seeking regulatory authorizations in advance of renewing their credit facilities which expires in November of 2012. WPL filed a request with the PSC for authorization to issue up to $400 million of short-term borrowings.

In addition, WPL also requested authorization from the PSC to issue up to $300 million for a bridge facility to finance the acquisition of Riverside. Later today, the PSC will be meeting to discuss the draft certificate of authority and order relating to these requests. IPL received the necessary FERC authorization in October to issue short-term borrowings beyond 2011.

We continue to evaluate the need to issue equity to finance our future capital expenditure plan. The primary factors in determining our equity needs and timing will be, the magnitude of our capital investment opportunities, ensuring we maintain reasonable capitalization ratios and credit metrics, and prevailing market conditions. The anticipated earliest need to issue any material equity may be in 2013 to replace the short-term financing for the acquisition of the Riverside facility.

One last note on our financing plans. Based on our expected valuation of our pension assets at the end of the year, we may make contributions to our pension plans in 2011 to mitigate any increases in 2012 pension costs. We have assumed no pension expense increase in our 2012 earnings guidance.

We have several current and planned regulatory dockets of note. In Wisconsin, we filed a retail only-fuel case in May 2011. The filing included a fuel plan for 2012 under Wisconsin’s new fuel rules which became effective on January 1 of this year. The new fuel rules allow for recovery of emission control chemicals and allowances within the fuel recovery mechanism. We updated our filing in August after assessing the Cross-State Air Pollution Rule impacts on expected 2012 emission compliance costs. Our current request with the PSC is to increase annual retail electric rates by $20 million.

Earlier this week, intervener and staff testimony was filed. We are expecting a decision in December with new rates effective January 1, 2012. Our 2012 earnings guidance assumes no under-collection or over-collection of fuel costs at WPL in 2012. We are currently evaluating the need to file a Wisconsin retail base case in 2012 with a 2013 and 2014 test year. The primary drivers of a 2013 and 2014 test year would be a partial recovery of the construction work in progress balance for emission control projects at Edgewater 5 and Columbia units.

As Bill noted earlier, the anticipated Riverside facility acquisition is not expected to have an impact on customer rates. Since the Edgewater 5 emission control projects are to be placed in service in 2013, and the Columbia emission control projects to be placed in 2014, there is a possibility that the rate case may be opened in 2014 to adjust rates for those rate base additions.

Finally, I would like to inform you of a few items which should assist you in modeling our future earnings. On Slide 11, we have highlighted the drivers for the change in our effective tax rates in 2011. Also, we have provided our expected effective tax rates included in our 2012 earnings guidance. These 2012 effective tax rates reflect the impact of additional tax benefits from the tax benefit rider and increased production tax credits expected from wind projects. In modeling the quarter-over-quarter impacts of the tax benefit rider, we suggest you follow a similar profile experienced in 2011 and reflected on supplemental Slide 10.

At this time, I will turn the call back over to the operator to facilitate the question-and-answer period.

Question-and-Answer Session

Operator

Thank you, Mr. Hanson. At this time, the company will open up the call to questions from members of the investment community. Alliant Energy’s management will take as many questions as they can within the one hour time frame for this morning’s call.

Our first question comes from Brian Russo with Ladenburg Thalmann.

Brian Russo – Ladenburg Thalmann

Hi, good morning.

Bill Harvey

Hey Brian.

Tom Hanson

Good morning Brian.

Brian Russo with Ladenburg Thalmann

Just on the 2012 drivers, it looks like reduction in O&M expense of positive $0.15 is a fairly big driver. I know you guys have done a pretty good job over the last couple of years of controlling O&M. Could you just provide a little bit more insight as to your confidence level in achieving that $0.15 of growth?

Bill Harvey

The confidence level is extraordinarily high. We will achieve it. There’s no question in my mind that we will achieve it. A lot of it is just continuous improvement that occurs in the business, but there’s an awful lot going on in the industry today, and certainly a lot ongoing in our company today, as well. But an illustration of the kinds of things that are creating those cost savings opportunities relate to a Tier 2 plan in Dubuque, Iowa. It’s concurred, it’s already been converted from coal to natural gas. And that substantially reduces the operating cost of the facility.

So while it seems like a big number, our confidence in realizing it is driven by inherent confidence in our ability throughout the organization. But in addition, there are quite noteworthy changes like the one I have just mentioned that are affecting our O&M profile as well, Brian.

Brian Russo with Ladenburg Thalmann

And also does the mid-point of your ’12 guidance assume zero impact for pension expense?

Tom Hanson

Yes. [inaudible] pension expense.

Brian Russo with Ladenburg Thalmann

So if there is some expense incurred, it’s not going to move the mid-point of your guidance, that might just bring it to the lower end and/or the higher end, correct?

Tom Hanson

That’s correct.

Brian Russo with Ladenburg Thalmann

Then also on the Riverside acquisition, it seems that it’s been accelerated by about six months. So we should expect a full year of earning return on that in ’13 versus a partial year now?

Tom Hanson

That’s correct.

Brian Russo with Ladenburg Thalmann

Okay great. And what are the drivers of the revised load expectations in Iowa and Wisconsin for ’12?

Bill Harvey

The predominant change that we have seen is a modest decline in the level of residential sales that’s occurring. It’s not just IPL, it’s WPL as well. So a little more pronounced at IPL, but I think consistent with the experience being had by so many companies in this economy. We are beginning to see the economy impact the electric consumption habits of the residential customer. That’s not a good thing for us or for anybody. I guess, the happy side of the equation is that we continue to see growth on the industrial side, which we hope is more of a leading versus a lagging indicator of what’s going on in our economies. But we’ve got soft residential sales. That’s the single biggest variable by a wide margin, Brian.

Brian Russo with Ladenburg Thalmann

Okay, and then just lastly, any progress on the Merchant Wind Farm.

Bill Harvey

It’s underway, but we have not had any setbacks at all in terms of its development. So we are optimistic that it will remain on schedule and get built at or below the costs that we have estimated.

Brian Russo with Ladenburg Thalmann

I guess you are still looking to sign a PPA. Is that correct?

Bill Harvey

Yes we are. And there is nothing to report on that front, although there is robust activity going on and we hope to have something to report on that, if not by the year-end, certainly by the time we issue year-end results.

Brian Russo with Ladenburg Thalmann

Okay, great, thanks a lot.

Operator

Our next question comes from Jay Dobson with Wunderlich Securities.

Jay Dobson – Wunderlich Securities

Hey good morning.

Bill Harvey

Hi Jay.

Tom Hanson

Good morning Jay.

Jay Dobson – Wunderlich Securities

Bill, I was hoping to revisit the last comment you had in your prepared remarks. You used the word re-assess on RMT. Could you maybe elaborate on sort of what you are thinking there? I know you’ve always said it’s non-core, and you and I have had a number of conversations about this business. What exactly is sort of contemplating or at least considering there?

Bill Harvey

As you would expect, a wide spectrum of possibilities. Number one, we continue to own and operate the business and capitalize on the re-engineering work that’s been accomplished in the business and give the new leadership a chance to prove itself which were optimistic that it can do. Alternatively, we could look to partner with someone else in the business to get the business to a greater level of scale in the marketplace than it is today that would have the effect of reducing the risk of having a single project, have a dramatic impact on the financial performance of the enterprise. And of course the third alternative is, we could sell the business. So we are going to be looking at all of those options.

Jay Dobson – Wunderlich Securities

And similar to an earlier question, your confidence level in the $0.04, understanding it’s been a difficult environment for RMT’s business over the last couple of years, I feel like we’ve been talking about $0.04 for a number of years and haven’t got quite gotten there. So -- ?

Bill Harvey

Yes, our records not very good in the last couple of years, is it? Our confidence is good, if we execute efficiently on projects, we are to be able to produce $0.04 of earnings in the business. That said, you never execute perfectly. But the book of business that’s in place going into next year is good. It is all wind. There are no solar projects in the booked book to business so far for RMT next year. Although there are abundant opportunities for there to be solar projects, we’ve not booked any of them today. So our confidence is, I will call it good, but certainly shaken by the experience of the last couple of years.

Jay Dobson – Wunderlich Securities

Fair enough. What’s causing the acceleration in the Riverside acquisition? I thought that was pretty well sort of lined out in the call option you had. What’s allowing you to call that earlier?

Bill Harvey

It is, frankly we’d like to own the property sooner rather than later. We’d like to be financing the acquisition of the property in the interest rate environment that seems to be prevailing in the world today. It’s variables like that that auger us to accelerate the acquisition of the asset and those discussions with Calpine are ongoing. And we are optimistic that we are going to be able to reach agreement with them to accelerate the purchase of the facility. We, of course, have to respect the needs of the Wisconsin Public Service Commission in terms of reviewing our request to purchase the asset. We are hopeful that the Commission will find a way to deal with that request expeditiously. But those are nothing more intriguing than that driving the acceleration in [inaudible] purchase.

Jay Dobson – Wunderlich Securities

Is the price changing, Bill?

Bill Harvey

I beg your pardon.

Jay Dobson – Wunderlich Securities

Does the price change?

Bill Harvey

No. Does not.

Jay Dobson – Wunderlich Securities

Okay fair enough. And then on equity, Tom, you sort of accelerated, I think it was previously – no need through the end of ’13, now you are saying in ’13. Would pension contribution you are talking about for in this year, early next, impact that? And sort of how would that from a sensitivity perspective drive timing?

Tom Hanson

With the rebounding of the market here recently, and the anticipated pension contribution in 2011 will not have any impact on our future equity needs. With respect to the timing of the equity, what we want to do is tie it really to the larger projects, whether it be the likes of a Riverside or the Iowa Gas Plant, recognizing that’s dependent on certain regulatory activity. So the schedule might slide a little bit. We thought it was better to try to target equity needs to those events as opposed to maybe just an artificial date.

Jay Dobson – Wunderlich Securities

No perfect. Again, considering that you will be adding those things to rate base, you ought to pretty quickly get recovery of that equity.

Tom Hanson

That is correct.

Jay Dobson – Wunderlich Securities

Got you. And then last detail Tom, the tax rate at 17% was sort of maybe 200 basis points lower than I expected. But you mentioned PTCs, which I assume are associated with the commercial operation of Franklin County. Is that sort of the impact? 200-ish basis point? Or maybe sort of true us up, I know you said back at 18% and I sort of assumed that went higher in ’12 and instead it’s bit lower.

Tom Hanson

Yes, we are going to have additional production tax credits in 2012 above what we had anticipated in 2011. That’s certainly one of the primary drivers.

Jay Dobson – Wunderlich Securities

And that’s Franklin or that’s existing assets plus Franklin or all going there?

Tom Hanson

No, this would be principally Bent Tree. Keep in mind the Franklin project is going to be constructed in ’12. And we do not anticipate that’s going to be available then until 2013.

Jay Dobson – Wunderlich Securities

Okay, fair enough. Perfect. Thanks so much.

Tom Hanson

You are welcome.

Operator

Our next question comes from Alex Kania with Bank of America.

Alex Kania – Bank of America

Hi good morning. Just a follow-up off of Jay’s question on the Franklin County Wind. I think that previously you’d suggested that you would be taking an ITC grant on that. Is that – do you have any kind of gain on that in 2012 or do you expect that benefit to be in 2013?

Tom Hanson

Yes our plan is to take the grant, and the expectation is that we will be recognizing in 2013, moving forward.

Alex Kania – Bank of America

And I guess when you are talking about equity and tying with new assets -- I guess investments, can you just talk a little bit about just your thoughts on balance sheet, kind of what do you – any ratios that you are targeting in particular, just to get kind of some sense of how big this would end up being?

Tom Hanson

When we look at each of the utilities, we certainly have a desire to maintain the equity levels consistent with what we have in rates currently. Recognizing in both jurisdictions will be adding a fair amount of CapEx. Some of that will be funded with debt. But we need to recognize, certainly desires to continue to keep those equity levels consistent with what we are experiencing now.

Alex Kania – Bank of America

Okay, great. Thanks very much.

Tom Hanson

You are welcome.

Operator

We have a follow-up question from Brian Russo with Ladenburg Thalmann.

Brian Russo – Ladenburg Thalmann

Just, sorry for missing this earlier, but in 2012, the $0.15 to $0.25, can you break that down between the transportation, Sheb and RMT and then parent?

Bill Harvey

You bet Brian. Transportation about $0.12, RMT $0.04, Sheboygan Falls, the unregulated generation assets $0.06; Franklin County $0.01, and the parent costs us $0.02.

Brian Russo – Ladenburg Thalmann

So you are assuming $0.01 for the Franklin County Wind Farm contribution?

Bill Harvey

Yes. Excuse me. That will be the capitalized interest during the construction period that we are recognizing in 2012.

Brian Russo – Ladenburg Thalmann

Okay, understood. Thanks for that. And then, is there anything ongoing on the tax planning side or with bonus, depreciation that might kind of push out the potential need for equity in ’13 or have you guys done everything you can?

Bill Harvey

Yes, we have captured for the most part everything that’s available to us.

Brian Russo – Ladenburg Thalmann

Okay, thanks a lot.

Operator

(Operator Instructions). Our next question comes from John Alley with Decade Capital.

John Alley – Decade Capital

Good morning. Two questions for you guys. I am sorry if I missed this. Could you explain why the tax rate was more than 2011 or the PTCs were greater than in 2011? I wasn’t sure I understood that.

Bill Harvey

Yes, we do have at Bent Tree some transmission limiting factors. And we continue to see improvement in that situation. So we would expect that there would be additional output in 2012 that will result in an additional production tax credits that we will be able to capture in 2012.

John Alley – Decade Capital

And will these benefits be ongoing post rate freeze or is this only benefit the shareholder for the next couple of years?

Bill Harvey

No, that should be ongoing. Certainly that’s our expectation.

John Alley – Decade Capital

But presumably they would calculate that in the revenue requirement in the next rate case?

Bill Harvey

Yes.

John Alley – Decade Capital

I just want to ensure that. Thank you. And that was it. Thank you.

Bill Harvey

Thank you.

Operator

Our next question comes from Eric McCarthy with Praesidis Asset Management.

Eric McCarthy – Praesidis Asset Management

Hi good morning.

Bill Harvey

Hey Eric good morning.

Eric McCarthy – Praesidis Asset Management

And I apologize if I missed some of this. But as a follow-up to Brian’s question that he just asked, could you provide a breakdown of the non-regulated business in ’11 somewhere to how you just gave it for – how you are forecasting it for ’12?

Bill Harvey

Sure. Transportation business will earn about $0.12, RMT is going to lose $0.12, the Sheboygan Falls, unregulated generating asset will earn $0.06, the parent will cost $0.01.

Eric McCarthy – Praesidis Asset Management

Again, I am sorry if you went over this as well. But the O&M cut that you provided in the guidance for next year, what’s the split of that between Wisconsin and Iowa?

Bill Harvey

I can’t answer that right now. Can we follow up with you on that? I just don’t have the answer here Tom, do you have it? We don’t have it. We don’t have that answer here, Eric, but we will be sure to get it to you. I apologize for that.

Eric McCarthy – Praesidis Asset Management

Okay, great.

Operator

And we have a follow-up question from Jay Dobson with Wunderlich Securities.

Jay Dobson – Wunderlich Securities

Hey Tom, just following up on that question, the [inaudible] costs $0.01. I assume that excludes the holding company debt, so that’s just a pure sort of O&M or SG&A?

Tom Hanson

No that includes it, Jay.

Jay Dobson – Wunderlich Securities

That includes it? Okay, great. Thank you.

Operator

Ms. Gille, there are no further questions at this time.

Susan Gille

With no more questions, this concludes our call. A replay will be available through November 10, 2011 at 888-203-1112, for US and Canada, or 719-457-0820 for international. Callers should reference conference ID 8244179.

In addition, an archive of the conference call and a script of the prepared remarks made on the call will be available on the investor’s section in the company’s web site later today. We thank you for your continued support of Alliant Energy and feel free to contact me with any follow-up questions.

Operator

This concludes today’s conference. Thank you for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Alliant Energy's CEO Discusses Q3 2011 Results - Earnings Call Transcript
This Transcript
All Transcripts