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Alliant Energy (LNT)Stock (Diversified Utilities Industry, Energy Industry)
 Over the last few years, Alliant has focused on returning to its origins as a domestic regulated utility dropping its unprofitable international ventures. These ventures in the non-regulated international arena lowered earning and caused the company its half its dividend in 2003. Since then the company has sold a majority of its non-regulated ventures. These ventures included:
The downside to not have international exposure is that Alliant's growth prospects have diminished. In order to increase earnings, capacity must be increased in its current territories. It plans to generate this expansion through new wind and coal-burning generators which should be up and running by 2013. Annually, the company is planning to spend about $500 million towards this expansion. These additions should provide another 690 MW of electricity generation or about 12% increase over current production. [3]
[edit] Business Overview and FinancialsAlliant Energy is a public utility holding company that was incorporated in Wisconsin in 1981. Nearly all of Alliant's revenues come from regulated utilities, utilities that have rates and customer regions that are regulated by local and state governments. All of Alliant's business is conducted through its sudsidaries: IPL, WPL, Resources, and Corporate Services.
Since 2004, operating revenue has increased steadily and as of June 2008 95% of it comes from Alliant's government regulated utility businesses. [9] Of regulated business revenues, 20% came from gas sales and 80% came from electric sales. [10] As shown in the graph above, overall, the amounts of gas and electricity supplied have remained consistent and the increased revenue can be attributed to increases in energy and natural gas prices . [11] Regionally, the IPL and its regions constitute about 53% of electric revenues and 58% of gas revenues. WPL comprises the rest of the revenues. [12] A specific break down of the revenues from gas and electric operations is shown below. It is important to note that the Illnois utility operation were sold in February 2007, accounting for decline in revenue from that facility between 2006 and 2007. [13] The net income of Alliant has varied over the last few years, mainly due to lowered expenses resulting from the sale of unprofitable non- government regulated utility ventures. These non-regulated ventures had steep losses and as a result caused Alliant to cut its dividend in half in 2003.[16] Since then, Alliant has been selling these non- regulated ventures causing varied net incomes between 2003 and 2007. The negative income in fiscal year 2005 was the result of losses from non-regulated investments in Brazil and an under-recovery of fuel costs for electricity production. [17] Between 2005 and 2006, the difference in net income was the result of the sale of two nuclear plants, the Duane Arnold Energy Center and the Kewaunee Nuclear Power Plant as well as greater debt reductions at Resources of $23 million. [18] Increased earning between 2006 and 2007 were the result of a $123 million after-tax gain from the sale of its electric transmission assets, increased fuel cost recoveries, lower costs from executive compensation and retirement plans, and fewer weather related impacts. These increased were partially offset by increased marginal tax rates and costs due to winter storms in IPL's area. [19] Alliant's earnings vary with energy rates, the customers in its region, and the seasonal demand in its area. If any of these quantities increase, Alliant's earnings can be expected to increase. However, since Alliant is mainly a regulated utility its earnings potential is undeniably tied to its relation with regulators. [20] [edit] Trends and Forces[edit] 95% of Alliant's business is regulated by the governmentAt the present time the government regulates many aspects of Alliant Energy's business including:
These government regulations could impact Alliant's strategic plan of increasing electric generating capacity by building hybrid coal/biomass generation facilities and wind generating facilities. The Wisconsin government also regulates utility companies investments into other types of businesses which could be seen as a hindrance to companies looking to take over Alliant Energy. Changes in laws including environmental laws could impact Alliant's profit potential. At the same time, these regulations offer Alliant a degree of security since government regulators dictate the region of customers that Alliant supplies.[21] [edit] Commodity pricesChanges in the prices of coal, natural gas, or electricity market can affect Alliant's profitability. In 2007, 57% of IPL energy production was coal powered and 52% of WPL's production was coal powered. Between 2005 and 2007, the price of coal has increased for Alliant as demonstrated in the table below:
Since majority of Alliant's power production comes from coal-fired generators, the price of coal is a very important determinant of Alliant's profitability. Although Alliant uses the future markets to try securing prices for coal and natural gas, if the regulated prices of electricity fall while coal was bought a high price then Alliant will lose money. [23] [edit] Environmental ActionsMost of Alliant's operations emit Carbon dioxide (CO2) from the burning of fossil fuels and Alliant's business plan includes the construction of more coal-fueled plants. Current legislation and regulations on the federal level calling for reductions in CO2 emissions can affect whether these expansions are allowed. State regulators also have control on whether or not current expansion plans can be implemented and policies regarding CO2 emissions will have a negative impact on these plans. The lack of technologies designed to reduce CO2 emissions as well as a lack of specific CO2 levels that will need to be met in the future mean that Alliant cannot guarantee that it will be able to comply with future regulations or avoid any related penalities. As a result, environmental regulations can impact Alliant's growth plans and financial state, however to what extent remains unknown. [24] [edit] CompetitionElectric custumers in Iowa and Wisconsin do not have the ability to choose their electric provider due to government regulation of the utility industry. As a result Alliant has a relative monopoly over the regions it supplies to. However, electric suppliers compete to keep rates low to attract new customers into their service areas. [25] The gas utility business is still regulated at the present time. Currently, federal and state policies are being enacted that will work towards deregulating the industry. This is in hope of bringing more competition and innovation to the industry. This will result in more competition in the sale of Natural gas and similar services. However, the distribution of natural gas will still be a regulated industry. It remains unknown whether the deregulation of the sale of natural gas will actual provide incentive for small retail customers to switch providers or whether there will only be economic incentive for large ones. [26]
 Alliant Energy2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] References
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