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

Executives

Jamie Freeman - Manager, IR

William D. Harvey - Chairman, President and CEO

Eliot G. Protsch - Senior EVP and CFO

Analysts

Steven Gambuzza - Longbow Capital

Daniele Seitz - Dahlman Rose

Alliant Energy Corp. (LNT) Q4 FY07 Earnings Call February 6, 2008 10:00 AM ET

Operator

Thank you for holding, ladies and gentlemen and welcome to Alliant Energy's Year End 2007 Earnings Conference Call. At this all lines are in a listen-only mode. As a reminder this call is being recorded.

I would now like to turn the call over to your host Jamie Freeman, Manager of Inventory Relations at Alliant Energy.

Jamie Freeman - Manager, Investor Relations

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, President and Chief Executive Officer; and Eliot Protsch, our Chief Financial Officer as well as other members of the senior management team. Following prepared remarks by Bill and Eliot, we will have time to take questions from the investment community.

We issued a news release this morning announcing Alliant Energy's 2007 fourth quarter and full year earnings. This release is available on the right hand side of the Investors 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, our presentation today contains non-GAAP financial measures. The reconciliations between the GAAP and non-GAAP measures are provided in the supplemental slides available on our website.

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

William D. Harvey - Chairman, President and Chief Executive Officer

Thank you, Jamie and welcome to our Investor Relations team. For those on the call good morning and thanks for your continued interest in our company. My comments will focus on key takeaways from 2007 and on our generation build out initiatives. Later in the call Eliot will provide a more detailed discussion of our 2008 financial guidance and our regulatory proceedings.

We are pleased with our financial results for 2007. Our strength enabled us to increase our common dividend for the third year in a row. We continue to execute our strategic plan by completing the sales of our IP&L transmission assets and the Laguna del Mar property.

We have posted supplemental slides on our website to aid-in our discussion with you this morning. At this point, I would direct you to slide number 2 that provides a reconciliation of our 2007 earnings. I'll pause for a moment to allow you to pull that up. We recommend making several adjustments to our earnings from continuing operations of $3.78 in order to get a more normalized level. These include items such as the gain and the sale of our IP&L transmission assets, settlement of a fuel-related rate case at WP&L and various tax items.

Factoring out such items, results in adjusted earnings per share from containing operations of $2.66. Our utility results, excluding the gain on the transmission sale, reflect higher electric margins due to improved fuel cost recoveries and more favorable weather. Lower cost from retirement and incentive compensation plans and the accretive effect of fewer shares outstanding. These increases were partially offset by higher effective income tax rate and lower gas margins due to the reduced gains from WP&L's discontinued performance-based gas cost recovery program.

Utility results were also negatively impacted by $0.06 due to severe ice storms that paralyzed the large portion of our Iowa and Minnesota territory and left more than half of IP&L's electric customers without power. Recently, the Edison Electric Institute presented IP&L with the 2007 Emergency Recovery Award recognizing our employees and contractors exemplary restoration efforts.

Once you exclude the impacts of weather, the February sale of electric distribution properties in our Illinois service territory and the impact of February's ice storm outages. Year-over-year retail electric sales growth at WP&L was approximately 1.6%, while sales at IP&L increased approximately six-tenths of a percent. While these results were lower than our expected long term electric sales growth projections, we do not see anything in the fundamentals that alter our growth outlooks of approximately 2.5% for WP&L and 1.5% for IP&L.

Next, as I update you on our generation plan, I'll refer you to slides 4 through 6 of the supplemental material. In Wisconsin, our certificate of public convenience and necessity application for Nelson Dewey unit number 3 was deemed complete by the Public Service Commission last December. Tomorrow, the first pre-hearing conference will be held, and a second pre-hearing conference later this month, the procedural schedule will be set.

Under Wisconsin law, the Commission can take a maximum of 360 days to act on the application after they complete this ruling. So we expect the decision by December. We expect the decision on axe seven advanced fixed financial parameters at about the same time.

In Iowa, we recently completed public hearings on the proposed Sutherland generating station unit number 4, post hearing briefs in this proceeding will be filed later this month. The Iowa Utilities Board has indicated that it will make a decision in May. The Air Permit is expected to be reviewed in late summer.

After hearings, we received strong support from local citizens, state officials and unions. As anticipated, opponent's questioned the need for the plant and cited concerns over its carbon emissions. We do not believe, we can meet our responsibilities to customers by waiting for clarity on carbon that could be years away on the political and regulatory front and decades away on the technology front. We have an obligation to balance reliability, economics and the environment. This project along with our investments in wind and environmental retrofits of existing plants is the right plan to deliver on this obligation.

The last step before construction can began is the receipt in order on rate making principles under House File 577. This filing is expected to be made later this quarter and will include a fixed return on equity and a cost cap for the project. We would expect the board to take about six months to rule on this filing. Therefore, under the timeline I have just outlined, construction could begin in the fourth quarter of this year. This brings us to an important distinction between the fixed rate making principles in Iowa and Wisconsin.

Under Act 7 in Wisconsin, a utility is not obligated to file four rate making principles. Also we can proceed with an approved project under traditional rate making, if the terms of the commission order on the rate making principles are viewed as unsatisfactory to the company. You'll recall that is what WP&L did, with respect to the Cedar Ridge Wind project. By contrast, in Iowa, we must file for rate making principles under House File 577, or any electric power generating station over 300 megawatts in size. The project if approved must be built using the principles ordered by the board or not at all.

Historically, House File 577 has worked as intended in Iowa. There have been 790 megawatts of coal fire generation, 1,100 megawatts of natural gas fire generation and over 1,000 megawatts of wind power generation either placed in service or under construction pursuant to this legislation.

Next we intend to add almost 500 megawatts of owned wind generation to our system over the next three years. The official ground breaking for WP&L Cedar Ridge Wind Farm took place last year. Access roads have been laid and the foundations have been built. Right now, we are in the winter construction break. In April, however, we will begin public road improvements, crane passed development and underground cable installation. In late May, the towers will be delivered followed by the turbines in June. The first turbine will be erected in mid July. We expect to begin commercial operation some time during the fourth quarter of 2008. The 68 megawatt wind farm is expected to cost approximately $165 million.

WP&L is working on an additional 200 megawatts of owned wind generation as well. We have executed letter of intent on a site in our service territory in Southern Minnesota, with the wind regimes are superior to those found in Wisconsin. We are preparing the necessary regulatory filings for Minnesota and Wisconsin. Similar to Cedar Ridge, we plan to use traditional rate making procedures for this project. Pending regulatory approval and the availability of turbines, we expect this capacity to be online during 2010, at a total cost between $400 million to $450 million.

In Iowa, we have filed for rate making principles for up to 200 megawatts of wind generation. We have requested a 12.3% return on the common equity component of the investment. However, in negotiations with the Office of Consumer Advocate, we settled on a 11.7% return on equity, which is consistent with the return approved by the IUB in another recent wind project in the state. We expect an IUB decision on this project shortly.

IPL has secured development rights on two sites, in North-Central Iowa collectively named Whispering Willow with a combined potential capacity of approximately 500 megawatts. Pending the availability of turbines, we anticipate 200 megawatts of this project to be online during 2010 at a total cost between $400 million to $450 million. And finally, in April 2007, WP&L filed an application with the Wisconsin Commission to purchase the Neenah generating facility. This is an existing 300 megawatts simple cycle natural gas facility located in Neenah, Wisconsin, which is owned by our non-regulated subsidiary.

This purchase by WP&L is intended to replace the capacity currently available under a purchase power agreement with Calpine's RockGen facility. We expect the decision from the commission shortly and will then file for approval with the FERC. Pending these approvals, the purchase is expected to occur in June of 2009 when the RockGen PPA expires. The Neenah facility's existing PPA with Wisconsin Energy will expire this summer. We have signed a contract to sell the plants capacity until the proposed transfer of other facility to WP&L in June of 2009.

Turning to the legislative arena, last November, several members of the Mid-western Governor's Association including governors from Iowa, Minnesota and Wisconsin signed the Mid West regional Greenhouse gas reduction accord. The accord presents an ambitious vision for the region. There will be a tremendous amount of legislative and regulatory activity over the next few years to determine how much of this vision can and will be implemented. We look forward to being an active participant in that process.

In closing then, I'll summarize the key takeaways from 2007. First, we produced solid financial results despite the negative impact from multiple ice storms in our IP&L service territory, the worse storms in our company's history. Second, we successfully completed two significant divestitures. Third, our financial profile continues to strengthen. This is evidenced by our dividend increase, our successful completion of $400 million common share repurchase program and a strong year end cash position. And finally, 2007 marked the beginning of our substantial generation build-out program.

The Cedar Ridge Wind Farm is under construction, the plans to add two new hybrid base load coal units and additional wind capacity continue to advance through the regulatory process. We believe we are well positioned to meet our customer's future energy needs with a plan that balances reliability, economics and the environment. We appreciate, your continued support and interest in our company.

At this time, I'll turn the call over to Eliot.

Eliot G. Protsch - Senior Executive Vice President and Chief Financial Officer

Thanks Bill. And thanks to all of you for joining us today. Our comprehensive earnings release is posted on our website. As Bill has touched upon our annual financial highlights, my primary focus here this morning will be on our 2008 financial guidance and an update on rate case matters.

In December, we announced our 2008 financial guidance. We are reaffirming this guidance in our earnings release issued earlier today. Slide 8, of the supplemental material on our website details the key drivers for the change from 2007 actual results to the midpoint of our 2008 guidance. Our adjusted 2007 earnings from continuing operations starting point is $0.10 higher than the level we shared with you during the December guidance call.

The majority of this increase is attributable to tax items including flow through accounting for income taxes in our Iowa jurisdiction which resulted in a lower effective tax rate than was earlier contemplated. Our 2008 effective tax rate assumptions remain unchanged at 36% on a consolidated basis. Our 2008 earnings guidance of $2.55 to $2.75 per share, calls for utility earnings to be essentially flat net of the transmission sale. This is based upon the midpoint of our 2008 utility earnings guidance of $2.33 per share, compared to $2.34 per share in 2007. Investors should take note of our higher projected earnings at the parent [ph] for 2008, which includes interest earnings on the cash associated with the transmission sale, net proceeds until those funds are redeployed in support of our core utility operations.

Let's move to capital expenditures for the year 2008 through 2010, the substantial increase forecasted for 2008 versus 2007 is driven largely by the spending associated with our generation build-out program and an increase in our anticipated environmental related capital expenditures. Slide 7 in the supplemental material references the approximate amount for individual utility generation projects.

Our environmental capital spending plan encompasses the next 10 years and includes the installation of emissions controls supplemented with the allowance market as a balancing mechanism. Our upcoming 10-K disclosure will include our current estimated ranges of capital spending to achieve compliance over the next 10 years. In addition for those of you who are interested in more detail on our environmental strategy, emissions profile and compliance plans, I refer you to our Annual Environmental Report which is also available on our website.

Among other accomplishments, this report highlights NOx reductions of 33% from 2002 to 2006 due to the installation of Smart Burn technology at several WPL and IPL generation units. Smart Burn technology provided by our RMT subsidiary, lowers NOx emissions at substantially lower capital and operating costs then installing an SCR. We expect 2007 NOx emission rates to be further reduced when final numbers are available.

Next I would like to provide an update on our advanced metering infrastructure project or AMI. We expected decision this quarter from the Public Service Commission of Wisconsin on WPL certificate of authority application, which would allow us to begin implementing the project for natural gas customers. WPL will also install AMI for electric customers, but that portion of the project does not require prior regulatory approval. Assuming all approvals are received, we estimate the total expenditures on AMI in Wisconsin to be approximately $95 million and for the project to be completed by 2010.

We are also planning to install AMI in our IPO service territory. The estimated cost for full deployment at IPO is approximately $105 million. However, the timing and amount of this investment is conditional upon appropriate regulatory treatment in the various IPO jurisdictions. When fully deployed, AMI will provide backbone for a future smart grid capability which will allow customers to better monitor their electric and gas usage and offer increased energy conservation opportunities. These expenditures complement our generation build-out program by furthering our focus on demand side management initiatives.

Finally with respect to CapEx, I would like to comment on slide number 4 posted on the website detailing our utility generation plan. This table which will be included in our 10-K now includes the amount of capitalized cost incurred to-date for the major generation projects listed. This totals $99 million as of December 31, 2007.

Next we would also like to reaffirm that our 2008 cash flow from operations is expected to be in the range of $550 million to $600 million. This range is consistent with our 2007 results of approximately $590 million.

I would now like to touch upon our future financing plans. We plan to fund utility capital expenditures of a combination of internally generated funds, external debt financings and equity infusions from the parent. We expect to issue up to $400 million of long term debt net of majorities in 2008. At year-end, we had approximately $750 million in cash and short term investments. As a result of a strong cash position, we are reaffirming that we do not anticipate issuing external common equity until 2010.

Now I will update you on our various rate matters. In late November, we received an order from the Public Service Commission of Wisconsin approving our request to reopen WPL's 2006 general rate case due to the discontinuation of customer credits. The order authorized and electric rate increase of $26 million for WPL to reflect the customer credits that discontinued at the end of 2007. The new electric rates were effective on January 1, 2008. No incremental change in natural gas rates was requested. The order also clarified the regulatory accounting for Alliant UTC [ph] and current return on quip accounts to ensure that the financing cost associated with their planned capital expenditures are recovered.

This reopener also facilitates the Public Service Commission of Wisconsin and WPL's desire to evolve to a biannual rate case cycle. WP&L currently plans to file its next base rate case by the end of the month or a 2009-2010 forecasted test period. During 2007, Wisconsin investor-owned utilities worked with Commission staff and broader stake holder groups on a revised mechanism for recovery of retail fuel cost, as both fair to customers and... fair to both customers and shareholders. The Commission is currently considering these proposals for new administrative rules governing fuel cost recovery. As for WP&L's wholesale business which represents approximately 15% of WP&L's electric revenues, formula rates became affective June 1, 2007 subject to refund.

We are in the process of settling on the terms of the rates with their customers and will then file with the FERC for final approval. We look forward to having formula rates becoming an ongoing component of our wholesale business as we embark upon our generation build-out program. At IPL, we do not anticipate any rate filings during the course of 2008.

Finally, I would like to comment on the customer rate impact of our generation build-out and environmental compliance plans. While many factors go into building and estimate for future rates, the most volatile component is fuel cost, particularly natural gas and purchase power. One of the many benefits for our customers of our build-out program is the replacement of purchase power with coal and wind generation.

Coal as a fuel is both lower cost and more predictable, while wind powered energy has no fuel-related cost. Overall, while rate changes will certainly vary, both by year and by customer class, we expect rates to increase at an average annual growth rate of approximately 5% to 6% from 2007 through 2015, when most of our planned new generation and environmental compliance investments will be complete.

In closing, we are in the process of finalizing our 2008 Investor Relations plans and look forward to the opportunity to meet with many of you throughout the course of this year. At this time I will turn the call back over to our operator, Margaret, to facilitate the question-and-answer session.

Question And Answer

Operator

Thank you Mr. Protsch. 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 1 hour timeframe for this morning's call. [Operator Instructions]. And we'll take our first question from Steve Gambuzza, Longbow Capital.

Steven Gambuzza - Longbow Capital

Good morning.

William D. Harvey - Chairman, President and Chief Executive Officer

Hey Steve.

Steven Gambuzza - Longbow Capital

I had a few questions for you. I guess first on the AMI front, have you selected an equipment provider for the Wisconsin deployment?

William D. Harvey - Chairman, President and Chief Executive Officer

Yes we have.

Steven Gambuzza - Longbow Capital

Is that... how do you... is that a public information yet?

William D. Harvey - Chairman, President and Chief Executive Officer

I honestly don't know if we've made that public yet or not so.

Steven Gambuzza - Longbow Capital

Okay.

William D. Harvey - Chairman, President and Chief Executive Officer

Probably shouldn't reply but we'll follow up with Jamie, on that and he can provide you the name assuming we have disclosed it.

Steven Gambuzza - Longbow Capital

Understood, and that's... so full deployment, there will be $95 million through 2010. And when did you say regulatory... when did you said that regulatory process will be concluded on that front?

William D. Harvey - Chairman, President and Chief Executive Officer

This quarter, with respect to the gas portion of the WP&L service territory, there is no regulatory approval required for the electric portions of that investments.

Steven Gambuzza - Longbow Capital

Okay. And then you mentioned, IP&L would be $105 million, conditional upon appropriate regulatory treatment, I was wondering if you could just expand upon what you meant by that?

Eliot G. Protsch - Senior Executive Vice President and Chief Financial Officer

Steve, this is Eliot. Iowa has an historical test year with the opportunity for post test year adjustments. As we look forward and embark upon our generation plan, we will attempt to time those investments in a manner that optimizes the recovery of the invested capital for our shareowners before we significantly deploy that capital.

Steven Gambuzza - Longbow Capital

Okay, so, I guess that mean, that you'd want to time the expenditures, such that you would be shortly filing a rate case subsequent to make --

Eliot G. Protsch - Senior Executive Vice President and Chief Financial Officer

Right, right you got it.

Steven Gambuzza - Longbow Capital

Do you have any... can you give us any... given the very substantial capital investment you are going to making in Iowa, and outside of generation on some of these environmental expenditures. I was wondering if you could just give us some sense as to whether a general rate case filing is it 2008, 09 or 10 event?

Eliot G. Protsch - Senior Executive Vice President and Chief Financial Officer

Probably not rather I would not comment on beyond 2008. Clearly we indicated in our... my prepared remarks that we are not contemplating a filing in 2008. I think if you monitor our CapEx plans particularly the availability of turbines and rate case outcomes on our various generation plant applications in Iowa you should be able to derive pretty good insights as to the timing of that CapEx and then enhance related rate filings.

Steven Gambuzza - Longbow Capital

Okay. But I guess the environment is... given that the generation CapEx is all going to recovered under kind of a non-traditional rate making?

William D. Harvey - Chairman, President and Chief Executive Officer

Well it is good question on environmental with reference the Smart Burn technology that we have been using in Iowa and Wisconsin with very good results that's tends to be lower capital cost and buys us some time, generates reduced NOx emissions may well generate credits and we are embarking upon a compliance plan in Iowa that involves a filing with the Iowa Utility Board which will lay out our contemplated plans and once they approve that filing then we would begin a number of those expenditures. We do have a few projects that are previously been improved were... approved where we are beginning to deploy the capital but again I would reiterate as we look at our forward financials we do not contemplate a filing in 2008 and at this point we are not prepared to make any projections for 2009.

Steven Gambuzza - Longbow Capital

Sure I guess what I was trying to understand, it seems like the majority what you are spending is generation related and that's not going to require general rate case filing because you get to recover that under the legislation that exists there.

William D. Harvey - Chairman, President and Chief Executive Officer

No that legislation specifies the rate making treatment for recovery return of and return on those investments it still requires a general rate case to have the revenue requirements established to recover those costs.

Steven Gambuzza - Longbow Capital

Okay that's very helpful, thank you.

William D. Harvey - Chairman, President and Chief Executive Officer

Yes pardon us if we didn't make that clear.

Steven Gambuzza - Longbow Capital

Thank you. And then on the calendars that you included in the slide deck for Iowa, when did you say the return parameters... I didn't follow on the return parameters for the coal plant would be established?

William D. Harvey - Chairman, President and Chief Executive Officer

Yes it's reasonable to expect that Steve about six months following the Board's determination on the construction application. So sometime in the late third quarter, early fourth quarter of this year.

Steven Gambuzza - Longbow Capital

Okay and the 11.7% ROE that you settled with, in Iowa on the wind plant when will... are you be ruling on that?

William D. Harvey - Chairman, President and Chief Executive Officer

We expect that eminently as the best adjective I can use to describe when we expect it.

Steven Gambuzza - Longbow Capital

And is there any equity ratio there as well in that settlement?

Eliot G. Protsch - Senior Executive Vice President and Chief Financial Officer

There's not. They tend to focus on what's being approved in past rate cases. I think for your purposes you should think in terms of that 48% to 50% range.

Steven Gambuzza - Longbow Capital

Okay. And then finally, you mentioned an expectation when you look out your very substantially capital plan that rates would increase at 5% to 6% average rate through 2015. Just curious what kind of assumptions you are making in terms of fuel cost, is it just based on the forward curves that you see going out or is there substantial benefits from switching the cause. I am wondering if you can comment how fuel went in to that forecast?

William D. Harvey - Chairman, President and Chief Executive Officer

Steve your question had the answer, and in terms of gas it's... we look at futures markets. In terms of coal we make modest assumptions in terms of expected increases in price for both the fuel and its delivery. But we don't envision anything, that I'll characterize as out of the ordinary as it relates to solid fuel price and delivery but we use futures market for gas.

Steven Gambuzza - Longbow Capital

Okay. Thank you very much.

Operator

[Operator Instructions]. And we'll take our next question from Reza Hitaffi with Polyguard Investments [ph].

Unidentified Analyst

Thank you. Could you please breakdown the three-year CapEx guidance that occur each of the two utilities?

Eliot G. Protsch - Senior Executive Vice President and Chief Financial Officer

Reza we are looking for that information, I know it will be in our 10-K, I apologize we don't have that handy here. But we have it some for the utilities but we do not have it for the individual utilities.

Unidentified Analyst

I guess you have the generation...

Eliot G. Protsch - Senior Executive Vice President and Chief Financial Officer

We will call you back on that for that information... wait a minute, here somebody is giving me a piece of paper that might have that information.

Unidentified Analyst

Okay.

William D. Harvey - Chairman, President and Chief Executive Officer

Here we go, okay it's actually in... you do not have it in front of you.

Unidentified Analyst

Well I have the press release that has the total utility CapEx.

Eliot G. Protsch - Senior Executive Vice President and Chief Financial Officer

Okay, what... I can read them off for you very quickly here if you wish.

Unidentified Analyst

Sure.

Eliot G. Protsch - Senior Executive Vice President and Chief Financial Officer

Total CapEx for IPL 08, $605 million; WPL, $525 million. IPL, 2009, $575 million; IPL... WPL 2009, $735 million; IPL 2010, $920 million; WPL $1.50 billion.

Unidentified Analyst

Great, thank you. And just kind of following up on the last series of questions, I kind of got lost a little bit, the recovery of capital of the two large coal plants with that start when the plants go online?

Eliot G. Protsch - Senior Executive Vice President and Chief Financial Officer

Generally that's the case if the rate cases that we will file capture you know the in service states in a way that is sort of perfection oriented rate making and that will likely be near the case for WPL where we file a forecasted test year. At IPL we have an historical test year with permitted post test year adjustments that should allow us to get very close to that.

Unidentified Analyst

So is it fair to assumer that from now till 2012 you most likely have non-cash ASDC earnings through that time and then starting in 2013 that will become cash recovery of the return as well as return of the capital expenditure?

Eliot G. Protsch - Senior Executive Vice President and Chief Financial Officer

Yes, that issue varies a bit by the two jurisdictions at IPL, your statement is 100% true. At WPL we are allowed to earn a cash return on some level of construction work in progress. That was one of the clarified... issues that we clarified in the recent re-opener with respect to WPL and in the case that we will shortly be filing for 2009 and 2010. We will of course, ask for an appropriate returns on construction work in progress and the advanced rate making dockets in Wisconsin also will address that issue. And it would be premature to speculate on what exactly will come out of that, but I think if you look at history and what we are doing now, you can get some pretty good insights into where they might land.

Unidentified Analyst

Thank you.

Operator

We will go next to Daniele Seitz of Dahlman Rose.

Daniele Seitz - Dahlman Rose

Hi. I... so that you have to heavy cost cap on the projects and since you have a wide range in cost estimates, when do you sense that those estimates will be finalized and given the escalation rate that is going on in construction, does that... do you have some sort of safety net for that?

William D. Harvey - Chairman, President and Chief Executive Officer

Well commercially our plan Daniele with respect to both of the hybrid coal projects is to reach agreements with our EPC partners on a target price or the ultimate investment. And we would expect that to be accomplished with respect to both of the projects by the time the regulatory filings for fixed rate making principles are made for each of the projects. That in both cases will be some time mid-year this year. In Wisconsin the commission's historic practice has been to authorize the construction of a facility at an estimated cost and then to specify a 5% or 10% addition to that estimated price as it a bandwidth within which the company operates before it has to go back to the commission and get a reauthorization in Iowa as part of the fixed rate making principles there will be a cost cap prescribed.

Daniele Seitz - Dahlman Rose

I see. Today I'm assuming that it should be on high end of the range that you have or it is still to be decided on the part of the builder?

William D. Harvey - Chairman, President and Chief Executive Officer

It continues to be a work in progress but it is fair to assume that in connection with both the target price and the regulatory filings, there will be some level of contingency of built into the price to deal with cost escalations. That's a reason our assumption that I'm sure the regulators in both jurisdictions expect.

Daniele Seitz - Dahlman Rose

Yes, I was also wondering about the replacement of the RockGen contract with actually putting Neenah in rate base. Does... is that the right thing to assume and also is there a saving... will there be savings involved or is it just the replacement of a contract versus the ownership of the plant?

William D. Harvey - Chairman, President and Chief Executive Officer

There will be lower capacity costs reflected in revenue requirement as a consequence of Neenah replacing RockGen simply because it's fewer megawatts.

Daniele Seitz - Dahlman Rose

Okay.

William D. Harvey - Chairman, President and Chief Executive Officer

Neenah is a 300 megawatt project, RockGen is 450 megawatts of capacity charges.

Daniele Seitz - Dahlman Rose

So which would allow for the rate base signal to plant on a regulated basis?

William D. Harvey - Chairman, President and Chief Executive Officer

That's correct.

Daniele Seitz - Dahlman Rose

Great thanks a lot.

Operator

[Operator Instructions]. And we will go next to Jim Ferguson of IAG [ph].

Unidentified Analyst

AIG. I am referring again to slide 4 on the Neenah transfer, could you just clarify how RockGen factors into this transfers just to get regulatory approval for the change of the PPA?

William D. Harvey - Chairman, President and Chief Executive Officer

Well the PPA will fall away by its own terms in June of 2009 Jim.

Unidentified Analyst

Yes.

William D. Harvey - Chairman, President and Chief Executive Officer

The Neenah facility is currently owned by an unregulated affiliate, although Alliant Energy we require Wisconsin Public Service Commission approval to transfer it from the unregulated affiliate to Wisconsin Power and Light company because it's an affiliated interest, transaction and Wisconsin law requires the commission approve that.

Unidentified Analyst

So the two... the RockGen and the transfer of Neenah, two separate events, just happened at the same time?

William D. Harvey - Chairman, President and Chief Executive Officer

That's right, they are into related in the sense that, from our integrated resource planning perspective, we view Neenah and its capacity as replacing the capacity available to us under the RockGen contract, obviously 300 is less than 450.

Unidentified Analyst

Sure.

William D. Harvey - Chairman, President and Chief Executive Officer

But our integrated resource plan indicates that we require fewer peaking megawatts of capacity than was the case at the time the RockGen agreement was put into effect, now it's a right thing for us.

Unidentified Analyst

And what does the $95 million cost estimate mean, is that the price of the, that you will gain in the sale from non-regulated to regulated?

William D. Harvey - Chairman, President and Chief Executive Officer

Yes, it's the net book value, the estimated net book value of Neenah at the time of transfer. The affiliated interest of legislation and the Wisconsin Utility Holding Company Act require that, asset transfers from the unregulated side to the regulated side occur at the lower of cost or fair market value.

Unidentified Analyst

Okay.

William D. Harvey - Chairman, President and Chief Executive Officer

And that book value is cost.

Unidentified Analyst

So there will be a non-cash transaction within the overall LNT?

William D. Harvey - Chairman, President and Chief Executive Officer

Exactly right.

Unidentified Analyst

Okay. One other thing, in the past, couple of years you've had cash flow augmented by asset sales, are there any to be anticipated in 2008 or 2009?

William D. Harvey - Chairman, President and Chief Executive Officer

We are not planning on any.

Unidentified Analyst

Is there anything left to sell?

William D. Harvey - Chairman, President and Chief Executive Officer

Well, the answer to that is, yes, of course there is a lot... not planning on selling anything. Our unregulated holding adjustment activity over the course of the last few years has been completed.

Unidentified Analyst

Great. Thank you very much.

Operator

And we'll take a follow-up question from Steve Gambuzza of Longbow.

Steven Gambuzza - Longbow Capital

Hi just wanted to make sure and understood how the regulation in Iowa is going to work. For example the wind farm you plan on bringing on line and I guess its 2010 is it?

William D. Harvey - Chairman, President and Chief Executive Officer

Yes.

Eliot G. Protsch - Senior Executive Vice President and Chief Financial Officer

Yes.

Steven Gambuzza - Longbow Capital

So you've essentially established the parameters for what the investment will ultimately earn, let's say your 11.7% gets approved by the commission. But when you bring the plant on line in 2010 you will have to file a general rate case to adjust the revenue requirement to reflect that return. And that will essentially open up the entire structure for utility is that correct?

William D. Harvey - Chairman, President and Chief Executive Officer

That's right.

Steven Gambuzza - Longbow Capital

Okay. Thank you.

Operator

And Mr. Freeman there are no further questions at this time.

Jamie Freeman - Manager, Investor Relations

With no more questions this concludes our call. A replay will be available through February 13, 2008 at 888-203-1112 for U.S. and Canada and or 719-457-0820 for international. Caller should reference conference ID number 4784982. 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 to Alliant Energy and feel free to contact me with any follow-up questions.

Operator

Ladies and gentleman that concludes today's conference. You may now disconnect.

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 Corp. Q4 2007 Earnings Call Transcript
This Transcript
All Transcripts