Alliant Energy (LNT) Q3 2024 earnings call transcript

Susan Gille: Good morning. I would like to thank all of you on the call and the web cast for joining us today. We appreciate your participation. With me here today are Lisa Barton, President and CEO, and Robert Durian, Executive Vice President and CFO. Following prepared remarks by Lisa and Robert we will have time to take questions from the investment community. We issued a news release last night announcing Alliant Energy’s third quarter and year- to-date financial results, narrowed our 2024 earnings guidance range, provided 2025 earnings and dividend guidance, and provided our updated capital expenditure plans through 2028. This release, as well as an earnings presentation, will be referenced during today’s call, and are available on the investor 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 news release issued last night and in our filings with the Securities and Exchange Commission. We disclaim any obligation to update these forward-looking statements. In addition, this presentation contains references to ongoing earnings per share, which is a non-GAAP financial measure. References to ongoing earnings exclude material charges or income that are not normally associated with ongoing operations. The reconciliation between ongoing and GAAP measures is provided in the earnings release which is available on our website.

At this point, I will turn the call over to Lisa.

LISA BARTON: Thank you, Susan. Good morning, everyone – and thank you for joining our third- quarter earnings call. Today we’re pleased to share our Q3 results – another quarter where we delivered solid financial performance while advancing our key strategic priorities. We’ll take you through the details of our performance, share our outlook for the remainder of the year, provide insights into our strategic initiatives, and discuss how we’re positioned for continued success and growth over the longer term. We are narrowing our 2024 ongoing earnings guidance range based on our confidence in our ability to offset a majority of the negative impacts of temperatures; and we are reaffirming our long-term earnings growth target of five to seven percent.

Looking ahead – I am pleased to share our 2025 earnings guidance and dividend targets. • Our 2025 earnings guidance midpoint represents a six percent increase to the midpoint of our forecasted 20-24 ongoing earnings. • And - our 2025 annual common stock dividend target is two dollars and three cents per share – a six percent increase from this year’s dividends. While we are sharing our Q3 2024 results today - our team is acutely focused on the future and building a strong pipeline of investment opportunities while concurrently solving for affordability. Our relentless focus on delivering consistent, predictable results with a steadfast commitment to customer-centricity, affordability, reliability, and sustainability serves as the foundation of our strategy. In a rapidly evolving energy landscape, four key strengths set us apart and underpin our success in supporting growth of long-term shareholder returns: An Economic Development Focus: We drive growth in the communities we serve, creating shared prosperity and building robust local economies.

Use of a Dynamic Resource Planning Model: Our flexible approach to resource planning ensures our ability to scale generation quickly, with a non-litigated resource plan, to meet evolving customer and community needs. Forward-Thinking Regulatory Alignment: We work proactively with regulators and intervenors to shape frameworks that solve for affordability and growth, strengthening our ability to provide win/win outcomes. Strategic Capacity Positioning: Leveraging existing resources along with strategic generation queue positions, enables us to adapt our generation portfolio, as customer needs evolve. These differentiators enable us to pivot – as needed – to grow with our customers.

With that in mind, I’m excited to announce we are preparing to bring two prestigious data center companies to our Big Cedar Industrial Center in Cedar Rapids, Iowa. We expect these data centers to add 1.1 gigawatts in Phase 1, which is anticipated to come online by year-end 2028. This first phase of new data center demand is projected to boost our peak demand by nearly twenty percent over the next five years, with the potential for a second phase by the end of the decade. We are confident in the timing and magnitude of the 1.1 gigawatts, all of which is backed by fully executed land, transmission and energy supply agreements. We will continue to provide updates on future loads and new customers – as we gain greater clarity on the size and timing of the forecasted load.

Our recently approved Individual Customer Rate – or ICR - in Iowa is enabling Alliant Energy to adapt and align with the needs of both future and existing customers, while ensuring meaningful long-term growth for our investors. We appreciate the Iowa Utilities Commission’s recent decision supporting our rate review settlement and use of the ICR construct. This order stabilizes base rates for Iowa customers through the end of the decade, providing predictability for current and future customers. The ICR also serves as a tool for economic development and community growth in Iowa. We look forward to the Iowa Utilities Commission’s review of our ICR contracts for these new customers. As we have mentioned in the past, we are committed to ensuring all such arrangements are beneficial for existing customers, new customers, and our shareowners.

This year, we are refreshing our Clean Energy Blueprint – which serves as our resource planning process and roadmap. This unique, dynamic, non-litigated resource planning process provides for meaningful stakeholder engagement. It is a disciplined and thoughtful approach that proactively adapts to MISO accreditation changes and aligns our energy resources with growing demand. By evaluating our needs to support “low” – “mid” – and “high” load growth scenarios, we have the ability to flex our resource plan as necessary. The 2025 to 2028 capital expenditure plan incorporates a “mid” growth scenario - or Phase 1 - of anticipated economic growth at Big Cedar. We recognize supporting reliability, resiliency and the clean energy transition requires continued robust planning, a strong transmission network and a mix of flexible, controllable resources – such as natural gas, energy storage and advanced grid technologies - to ensure grid reliability.

Our capex plan includes investments • In strengthening and improving the performance of our existing natural gas investments, • Additional energy storage • Additional highly efficient natural gas assets to further diversify our energy mix and • Finally, as we have done in the past, we will continue to evaluate extending the operation of existing fossil facilities and repowering opportunities. These investments in energy resources will enhance energy security, create local jobs and provide valuable tax revenues for the communities we serve – all while maintaining affordable rates for our customers across Iowa and Wisconsin. In both Iowa and Wisconsin, the regulatory environment is collaborative, constructive and fosters growth. Collectively, it’s a win for all stakeholders – and critical to our success in meeting the evolving needs of our customers and the communities we serve.

I want to underscore our unwavering commitment to continue providing top-tier reliability and achieving our long-term sustainability goals, outlined in the Corporate Responsibility Report published this week. We are extremely proud of our efforts to enhance our portfolio of zero fuel cost, clean energy resources. Alliant Energy continues to be a leader in the clean energy transition – with 1.8 gigawatts of regulated wind –and, by the end of this year - 1.5 gigawatts of regulated solar resources. We plan to continue investing in renewable generation and energy storage. In fact - over 40 percent of our 2025 to 2028 capital expenditure plan includes investments in wind, solar and energy storage. These investments result in our company having one of the cleanest fleets in the country.

Our focus on customers and building stronger communities is at the heart of everything we do. With our strong track record of exceptional project execution, we are confident in our ability to continue meeting customer, community and investor expectations. Speaking of communities, I would like to extend my gratitude to the many business partners, vendors and providers who collaborated with our foundation to help raise more than half a million dollars this year to support programs that combat hunger and food insecurity across our service territory. Before we dive into our financial results, I want to take a moment to express my deepest gratitude to our dedicated team members who go above and beyond to help communities in need. In support of the industry’s mutual assistance efforts, our team lent their expertise to restore power to communities impacted by Hurricane Helene.

The team’s dedication and willingness to lend a hand exemplifies the strength and unity of our industry. Thank you for your incredible work and commitment. I will now turn the call over to Robert to provide our financial results, earnings and dividend guidance, financing plans and an update on regulatory matters.

ROBERT DURIAN: Thank you, Lisa. Good morning, everyone. Yesterday, we announced third quarter earnings of 1 dollar and 15 cents per share, compared to non-GAAP earnings of 1 dollar and 5 cents per share in the third quarter of 20-23. Our quarterly ongoing earnings change year-over-year was primarily due to higher revenue requirements from capital investments at our Wisconsin utility and the timing of income tax expense. These positive drivers were partially offset by higher depreciation and financing expense. The remaining earnings drivers for the year largely relate to the negative impacts of milder temperatures on electric and gas sales and our team’s successful efforts to reduce O&M, interest, and tax expenses to offset a majority of such temperature impacts.

Through September of this year, net temperature impacts on electric and gas margins have decreased Alliant Energy’s earnings by approximately 10 cents per share. In comparison, net temperatures decreased Alliant Energy earnings for the first three quarters of 2023 by 2 cents per share. While temperatures have had a material impact on earnings in 2024, margins from our temperature normalized electric sales have been close to plan with higher-than- expected sales to residential and commercial customers partially offset by lower sales to our low margin IPL industrial customers, primarily due to less customer owned generation maintenance in 2024.

Turning to our full year 2024 earnings forecast. As a result of • our solid earnings through September, • our successful efforts to offset a majority of the losses due to mild temperature impacts, and • our projected fourth quarter results, We have narrowed our 2024 earnings guidance to a range of 2 dollars and 99 cents per share to 3 dollars and 06 cents per share. As Lisa mentioned, we also announced our projected 2025 earnings guidance range and dividend target yesterday. The 2025 earnings growth is driven by higher earnings from capital investments in both Iowa and Wisconsin, partially offset by higher depreciation and financing expenses. Our 2025 earnings and dividend guidance continue our consistent track record of achieving our long-term growth targets of 5 to 7 percent.

Our team has continued to advance our purpose-driven strategy, to ensure that we not only accomplish our current year goals, but also enable the achievement of our financial and operational objectives over the long term. These long-term objectives include a strong focus on customer value while planning and investing for the future. We are well positioned to provide competitive rates for our customers over the long term as a result of our economic development efforts, our continued focus on cost controls, and our pursuit of federal program benefits. Our economic development efforts - including new data center loads - are expected to increase energy sales over the long-term which spreads fixed costs across more units sold thereby driving affordability for our customers and communities.

Through our continued focus on operational excellence, and cost management efforts to offset inflationary pressures, we are targeting sustainable cost controls across various expense categories to support customer affordability. As part of these efforts, we are restructuring our workforce and have initiated a Voluntary Employee Separation Program - in the fourth quarter of 2024 - which is expected to reduce our current workforce by approximately 5%. In addition, we continue to drive reductions across other expense categories to deliver on investor and customer expectations. One area where we see this happening is with our generation transition. As we continue to move to more renewables and energy storage - while preparing to fuel switch or retire our fossil fuel generation resources - we will continue to reduce our operating costs.

Also, with the implementation of our planned additional renewable and energy storage projects and the repowering of our wind facilities, we anticipate the tax credits and reduced fuel expenses will help offset the impact of increased renewable rate base, rendering these new investments highly cost-effective for our customers. This commitment will result in long-term benefits for our customers and long-term value for our shareowners. With our success thus far in advancing - and executing – on our capital projects, we expect to continue capturing additional federal benefits by applying for grant and loan funding, maximizing tax benefits from renewables and energy storage projects, and leveraging opportunities to monetize tax credits, which materially improve our cashflows and credit metrics, as well as reduce future financing needs.

The U. S. Department of Energy’s recent announcement that we were selected for a 50- million-dollar grant to advance electric grid reliability, visibility and control in rural Wisconsin is a great example of our team’s successful efforts to capture such federal benefits for our customers. Yesterday we announced an updated capital expenditure plan through 2028. The updates to our plan were largely related to increased capital expenditures for additional generation and energy storage projects necessary to meet growing demand from our customers in the future. Our customer-focused investment plan continues to diversify our generation resources, while transitioning our fleet to more renewable and energy storage resources. We have increased our four-year capital expenditure plan by approximately 1.8 billion dollars and now have a compounded annual growth rate of 10% for rate base plus construction work in progress - extending our confidence in meeting the long-term growth objectives shared with our investors.

Moving to our financing plans. In September, we successfully completed 650-million-dollars of debt issuances at IPL which has finalized our planned debt issuances for 2024. We plan to use the proceeds from these debt issuances to retire maturing debt in December and finance the 400 megawatts of Iowa solar projects which we expect to be in-service by the end of the year. As we look to future financings - and with the increase in our capital expenditure plan - we have provided updated financing plan indications through 2028 - on slide 7 of our supplemental slides. Of note, our capital expenditures will primarily be financed with a combination of cash from operations - including significant proceeds expected from the continuation of tax credit monetization - and new debt and common equity issuances to maintain regulatory capital structures and a desired parent capital structure of approximately 40%.

More near term, our 2025 financing plans include up to 1.2 billion dollars of long-term debt issuances, including up to 600 million dollars at each of IPL and Alliant Energy Finance and/or at the parent. Our 2025 financing plans also include approximately 25 million dollars of new common equity through our shareowner direct plan.

Finally, I will highlight our regulatory initiatives in progress as well as those regulatory filings we plan to initiate in the future. We have three active dockets currently in progress before the Public Service Commission of Wisconsin which involve requests for certificate of authority for customer focused investments. These dockets relate to investments which will: • enhance the reliability and resiliency of the Riverside generating facility. • refurbish the Bent Tree wind farm to extend production tax credits from the facility for the benefit of our customers • And enable a new long-duration energy storage project called Energy Dome which would be sited next to the Columbia Energy Center. We expect decisions from the Public Service Commission of Wisconsin on these dockets in 2025.

Turning to our planned regulatory filings in the future – • We anticipate filing a Wisconsin retail electric and gas rate review for test years 2026 and 2027 by early second quarter of 2025, and • In conjunction with our updated capital expenditure plan, we also expect to make regulatory filings in both Iowa and Wisconsin for additional renewables and dispatchable resources to enhance reliability, further diversify our energy resources and meet growing customer energy needs. I will now turn the call back over to Lisa to provide closing remarks.

Lisa Barton: Thank you Robert – It is an exciting time to be in the utility industry and more importantly, an exciting time to be at Alliant Energy. In closing, I want to reiterate the elements that set Alliant Energy apart. It’s our ability to continually solve the Rubik’s cube of balancing reliability, sustainability, affordability, and long-term growth. Our unwavering commitment to building stronger communities and advancing economic development is the driving force behind our long-term growth opportunities. Our ability to grow -- in tandem with our customers and communities -- is underpinned by our flexible, timely, and adaptable resource planning process, which enables us to identify and advance the generation resources needed to support growth. Having access to near-term generation resources allows us to meet our customers’ desired timelines, while our investments in future generation queue positions ensure we are well positioned to adapt and grow at the pace of our customers and communities.

As we all know location matters. We are in a strong RTO, operating as a vertically integrated company, with the right and obligation to build, own and operate generation to serve our customers, in states with regulatory frameworks that align with our ability to support continued growth. As we move forward, we remain focused on aligning and adapting to meet the evolving energy needs of those we have the privilege to serve. We remain confident in our team’s ability to execute on our strategic and operational priorities to drive sustainable growth. Thank you for your continued support. We look forward to speaking with many of you at the EEI Finance conference and plan to post updated materials on our website next week.

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

Susan Gille: With no more questions, this concludes our call. A replay will be available on our investor website. Thank you for your continued support of Alliant Energy and feel free to contact me with any follow-up questions. The accompanying conference call script includes forward-looking statements. These forward-looking statements can be identified as such because the statements include words such as “target,” “forecasted,” “expect,” “anticipated,” “projected,” “potential,” “committed,” “plan,” “will,” “forecast,” “expected,” “anticipate,” “approximately,” or other words of similar import. Similarly, statements that describe future financial performance, including earnings guidance, earnings growth, dividend target, and plans or strategies including our investment plans, construction plans, financing plans, plans for load growth, and regulatory plans, are forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those currently anticipated.

Actual results could be affected by the following factors, among others: • IPL’s and WPL’s ability to obtain adequate and timely rate relief to allow for, among other things, the recovery of and/or the return on costs, including fuel costs, operating costs, transmission costs, capacity costs, deferred expenditures, deferred tax assets, tax expense, interest expense, capital expenditures, marginal costs to service new customers, and remaining costs related to electric generating units (EGUs) that have been or may be permanently closed and certain other retired assets, environmental remediation costs, and decreases in sales volumes, as well as earning their authorized rates of return, payments to their parent of expected levels of dividends, and the impact of rate design on current and potential customers and demand for energy in their service territories; • weather effects on utility sales volumes and operations; • the impact of IPL’s retail electric base rate moratorium; • IPL’s and WPL’s ability to obtain rate relief to allow for the return on costs of solar generation projects that exceed initial cost estimates; • the direct or indirect effects resulting from cybersecurity incidents or attacks on Alliant Energy, IPL, WPL, or their suppliers, contractors and partners, or responses to such incidents; • the impact of customer- and third party-owned generation, including alternative electric suppliers, in IPL’s and WPL’s service territories on system reliability, operating expenses and customers’ demand for electricity; • economic conditions and the impact of business or facility closures in IPL’s and WPL’s service territories; • the impact of energy efficiency, franchise retention and customer disconnects on sales volumes and operating income; • the impact that price changes may have on IPL’s and WPL’s customers’ demand for electric, gas and steam services and their ability to pay their bills; • changes in the price of delivered natural gas, transmission, purchased electric energy, purchased electric capacity, and delivered coal, particularly during elevated market prices, and any resulting changes to counterparty credit risk, due to shifts in supply and demand caused by market conditions, regulations and Midcontinent Independent System Operator, Inc. ’s (MISO’s) seasonal resource adequacy process; • the ability to obtain regulatory approval for construction projects with acceptable conditions; • the ability to complete construction of renewable generation and storage projects by planned in-service dates and within the cost targets set by regulators due to cost increases of and access to materials, equipment and commodities, which could result from tariffs, duties or other assessments, such as any additional tariffs resulting from U. S. Department of Commerce investigations into and any decisions made regarding the sourcing of solar project materials and equipment from certain countries, labor issues or supply shortages, the ability to successfully resolve warranty issues or contract disputes; • the ability to achieve the expected level of tax benefits based on tax guidelines, timely in-service dates, project costs and the level of electricity output generated by qualifying generating facilities, and the ability to efficiently utilize the renewable generation and storage project tax benefits to achieve IPL’s authorized rate of return and for the benefit of IPL’s and WPL’s customers; • the impacts of changes in the tax code, including tax rates, minimum tax rates, adjustments made to deferred tax assets and liabilities, and changes impacting the availability of and ability to transfer renewable tax credits; • the ability to utilize tax credits generated to date, and those that may be generated in the future, before they expire, as well as the ability to transfer tax credits that may be generated in the future at adequate pricing; • the ability to provide sufficient generation and the ability of ITC Midwest LLC and ATC LLC to provide sufficient transmission capacity for potential load growth; • the ability of potential large load growth customers to timely construct new facilities; • disruptions to ongoing operations and the supply of materials, services, equipment and commodities needed to construct capital projects, which may result from geopolitical issues, supplier manufacturing constraints, regulatory requirements, labor issues or transportation issues, and thus affect the ability to meet capacity requirements and result in increased capacity expense; • inflation and higher interest rates; • the future development of technologies related to electrification, and the ability to reliably store and manage electricity; • federal and state regulatory or governmental actions, including the impact of legislation, and regulatory agency orders and changes in public policy, including the potential repeal of the Inflation Reduction Act of 2022; • employee workforce factors, including the ability to hire and retain employees with specialized skills, impacts from employee retirements, changes in key executives, ability to create desired corporate culture, collective bargaining agreements and negotiations, work stoppages or restructurings; • disruptions in the supply and delivery of natural gas, purchased electricity and coal; • changes to the creditworthiness of, or performance of obligations by, counterparties with which Alliant Energy, IPL and WPL have contractual arrangements, including participants in the energy markets and fuel suppliers and transporters; • the impact of penalties or third-party claims related to, or in connection with, a failure to maintain the security of personally identifiable information, including associated costs to notify affected persons and to mitigate their information security concerns; • impacts that terrorist attacks may have on Alliant Energy’s, IPL’s and WPL’s operations and recovery of costs associated with restoration activities, or on the operations of Alliant Energy’s investments; • any material post-closing payments related to any past asset divestitures, including the transfer of renewable tax credits, which could result from, among other things, indemnification agreements, warranties, guarantees or litigation; • continued access to the capital markets on competitive terms and rates, and the actions of credit rating agencies; • changes to MISO’s resource adequacy process establishing capacity planning reserve margin and capacity accreditation requirements that may impact how and when new and existing generating facilities, including IPL’s and WPL’s additional solar generation, may be accredited with energy capacity, and may require IPL and WPL to adjust their current resource plans, to add resources to meet the requirements of MISO’s process, or procure capacity in the market whereby such costs might not be recovered in rates; • issues associated with environmental remediation and environmental compliance, including compliance with all current environmental and emissions laws, regulations and permits and future changes in environmental laws and regulations, including the Coal Combustion Residuals Rule, Cross-State Air Pollution Rule and federal, state or local regulations for greenhouse gases emissions reductions from new and existing fossil-fueled EGUs under the Clean Air Act, and litigation associated with environmental requirements; • increased pressure from customers, investors and other stakeholders to more rapidly reduce greenhouse gases emissions; • the ability to defend against environmental claims brought by state and federal agencies, such as the U. S. Environmental Protection Agency and state natural resources agencies, or third parties, such as the Sierra Club, and the impact on operating expenses of defending and resolving such claims; • the direct or indirect effects resulting from breakdown or failure of equipment in the operation of electric and gas distribution systems, such as mechanical problems, disruptions in telecommunications, technological problems, and explosions or fires, and compliance with electric and gas transmission and distribution safety regulations, including regulations promulgated by the Pipeline and Hazardous Materials Safety Administration; • issues related to the availability and operations of EGUs, including start-up risks, breakdown or failure of equipment, availability of warranty coverage and successful resolution of warranty issues or contract disputes for equipment breakdowns or failures, performance below expected or contracted levels of output or efficiency, operator error, employee safety, transmission constraints, compliance with mandatory reliability standards and risks related to recovery of resulting incremental operating, fuel-related and capital costs through rates; • impacts that excessive heat, excessive cold, storms, wildfires, or natural disasters may have on Alliant Energy’s, IPL’s and WPL’s operations and construction activities, and recovery of costs associated with restoration activities, or on the operations of Alliant Energy’s investments; • Alliant Energy’s ability to sustain its dividend payout ratio goal; • changes to costs of providing benefits and related funding requirements of pension and other postretirement benefits plans due to the market value of the assets that fund the plans, economic conditions, financial market performance, interest rates, timing and form of benefits payments, life expectancies and demographics; • material changes in employee-related benefit and compensation costs, including settlement losses related to pension plans; • risks associated with operation and ownership of non-utility holdings; • changes in technology that alter the channels through which customers buy or utilize Alliant Energy’s, IPL’s or WPL’s products and services; • impacts on equity income from unconsolidated investments from changes in valuations of the assets held, as well as potential changes to ATC LLC’s authorized return on equity; • impacts of IPL’s future tax benefits from Iowa rate-making practices, including deductions for repairs expenditures, allocation of mixed service costs and state depreciation, and recoverability of the associated regulatory assets from customers, when the differences reverse in future periods; • current or future litigation, regulatory investigations, proceedings or inquiries; • reputational damage from negative publicity, protests, fines, penalties and other negative consequences resulting in regulatory and/or legal actions; • the direct or indirect effects resulting from pandemics; • the effect of accounting standards issued periodically by standard-setting bodies; and • the ability to successfully complete tax audits and changes in tax accounting methods with no material impact on earnings and cash flows.

Without limitation, the expectations with respect to 2024 and 2025 earnings guidance, 2025 annual common stock dividend target, and 2024-2028 capital expenditures guidance, long-term earnings growth objective, financing plans, regulatory plans and growth associated with data centers in this script are forward-looking statements and are based in part on certain assumptions made by Alliant Energy, some of which are referred to in the forward-looking statements. Alliant Energy cannot provide any assurance that the assumptions referred to in the forward-looking statements or otherwise are accurate or will prove to be correct. Any assumptions that are inaccurate or do not prove to be correct could have a material adverse effect on Alliant Energy’s ability to achieve the estimates or other targets included in the forward-looking statements.

The forward-looking statements included herein are made as of the date hereof and, except as required by law, Alliant Energy undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances.