UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 -----------------
| [X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year endedDecember 31, 2003 |
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to _______ |
| Commission | Name of Registrant, State of Incorporation, | IRS Employer |
| File Number | Address of Principal Executive Offices and Telephone Number | Identification Number |
| 1-9894 | ALLIANT ENERGY CORPORATION | 39-1380265 |
| (a Wisconsin corporation) | ||
| 4902 N. Biltmore Lane | ||
| Madison, Wisconsin 53718 | ||
| Telephone (608)458-3311 | ||
| 0-4117-1 | INTERSTATE POWER AND LIGHT COMPANY | 42-0331370 |
| (an Iowa corporation) | ||
| Alliant Energy Tower | ||
| Cedar Rapids, Iowa 52401 | ||
| Telephone (319)786-4411 | ||
| 0-337 | WISCONSIN POWER AND LIGHT COMPANY | 39-0714890 |
| (a Wisconsin corporation) | ||
| 4902 N. Biltmore Lane | ||
| Madison, Wisconsin 53718 | ||
| Telephone (608)458-3311 | ||
This combined Form 10-K is separately filed by Alliant Energy Corporation, Interstate Power and Light Company and Wisconsin Power and Light Company. Information contained in the Form 10-K relating to Interstate Power and Light Company and Wisconsin Power and Light Company is filed by such registrant on its own behalf. Each of Interstate Power and Light Company and Wisconsin Power and Light Company makes no representation as to information relating to registrants other than itself.
Securities registered pursuant to Section 12 (b) of the Act:
| Securities registered pursuant to Section 12 (b) of the Act: | ||
| Name of Each Exchange | ||
| Title of Class | on Which Registered | |
| Alliant Energy Corporation | Common Stock, | New York Stock Exchange |
| Alliant Energy Corporation | Common Stock Purchase Rights | New York Stock Exchange |
| Interstate Power and Light Company | 8.375% Series B Cumulative Preferred Stock, | New York Stock Exchange |
| $0.01 Par Value | ||
| Interstate Power and Light Company | 7.10% Series C Cumulative Preferred Stock, | New York Stock Exchange |
| $0.01 Par Value | ||
| Wisconsin Power and Light Company | 4.50% Preferred Stock, No Par Value | American Stock Exchange |
Securities registered pursuant to Section 12 (g) of the Act: Wisconsin Power and Light Company Preferred Stock
(Accumulation without Par Value)
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) have been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants'registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act).
Alliant Energy Corporation Yes [X] No [ ]
Interstate Power and Light Company Yes [ ] No [X]
Wisconsin Power and Light Company Yes [ ] No [X]
The aggregate market value of the voting and non-voting common equity held by
nonaffiliates as of June 28, 2002:
Alliant Energy Corporation $2.32 billion
Interstate Power and Light Company $--
Wisconsin Power and Light Company $--
Number of shares outstanding of each class of common stock as of Feb. 28, 2003:
| Indicate by check mark whether the registrants are accelerated filers (as defined in Rule 12b-2 of the Exchange Act). | |||
| Alliant Energy Corporation | Yes [X] | No [ ] | |
| Interstate Power and Light Company | Yes [ ] | No [X] | |
| Wisconsin Power and Light Company | Yes [ ] | No [X] | |
| The aggregate market value of the voting and non-voting common equity held by nonaffiliates as of June 30, 2003: | ||
| Alliant Energy Corporation | $1.76 billion | |
| Interstate Power and Light Company | $-- | |
| Wisconsin Power and Light Company | $-- | |
| Number of shares outstanding of each class of common stock as of Feb. 27, 2004: | |
| Alliant Energy Corporation | Common stock, $0.01 par value, |
| Interstate Power and Light Company | Common stock, $2.50 par value, 13,370,788 shares outstanding (all of which |
| are owned beneficially and of record by Alliant Energy Corporation) | |
| Wisconsin Power and Light Company | Common stock, $5 par value, 13,236,601 shares outstanding (all of which are |
| owned beneficially and of record by Alliant Energy Corporation) | |
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statements relating to Alliant Energy Corporation'sCorporation’s and Wisconsin Power and Light Company's 2003Company’s 2004 Annual Meetings of Shareowners are, or will be upon filing with the Securities and Exchange Commission, incorporated by reference into Part III hereof.
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TABLE OF CONTENTS
| Page Number | ||
| Part I | Item 1. Business | 3 |
| Item 2. Properties | 18 | |
| Item 3. Legal Proceedings | 20 | |
| Item 4. Submission of Matters to a Vote of Security Holders | 21 | |
| Executive Officers of the Registrants | 21 | |
| Part II | Item 5. Market for | 22 |
| Item 6. Selected Financial Data | 23 | |
| Item 7. | ||
| Results of Operations | 25 | |
| Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 50 | |
| Item 8. Financial Statements and Supplementary Data | 50 | |
| Item 9. Changes in and Disagreements With Accountants on Accounting and | ||
| Financial Disclosure | 121 | |
| Item 9A. Controls and Procedures | 121 | |
| Part III | Item 10. Directors and Executive Officers of the Registrants | 121 |
| Item 11. Executive Compensation | 122 | |
| Item 12. Security Ownership of Certain Beneficial Owners and Management | 123 | |
| Item 13. Certain Relationships and Related Transactions | 124 | |
| Item 14. | 124 | |
| Part IV | Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K | 124 |
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes of this report are defined below:
| Abbreviation or Acronym | Definition |
| AEG | Alliant Energy Generation |
| AFUDC | Allowance for Funds Used During Construction |
| Alliant Energy | Alliant Energy Corporation |
| APB | Accounting Principles Board Opinion |
| ARO | Asset Retirement Obligation |
| ATC | American Transmission Company LLC |
| CAA | Clean Air Act |
| Cargill-Alliant | Cargill-Alliant, LLC |
| CIPCO | Central Iowa Power Cooperative |
| Corporate Services | Alliant Energy Corporate Services, Inc. |
| DAEC | Duane Arnold Energy Center |
| DNR | Department of Natural Resources |
| DOE | U.S. Department of Energy |
| Dth | Dekatherm |
| EAC | Energy Adjustment Clause |
| EBITDA | Earnings Before Interest, Taxes, Depreciation and Amortization |
| EIP | 2002 Equity Incentive Plan |
| EITF | Emerging Issues Task Force |
| EITF Issue 02-3 | Issues Related to Accounting for Contracts Involved in Energy Trading and Risk |
| Management Activities | |
| Emery | Emery Generating Station |
| EPA | U.S. Environmental Protection Agency |
| EPS | Earnings Per Average Common Share |
| EWG | Exempt Wholesale Generator |
| FASB | Financial Accounting Standards Board |
| FERC | Federal Energy Regulatory Commission |
| FIN | FASB Interpretation No. |
| FIN 46 | Consolidation of Variable Interest Entities |
| FSP | FASB Staff Position |
| FUCO | Foreign Utility Company |
| GAAP | Accounting Principles Generally Accepted in the U.S. |
| IBEW | International Brotherhood of Electrical Workers |
| ICC | Illinois Commerce Commission |
| IES | IES Industries Inc. |
| IESU | IES Utilities Inc. |
| Integrated Services | Alliant Energy Integrated Services Company |
| International | Alliant Energy International, Inc. |
| Investments | Alliant Energy Investments, Inc. |
| IPC | Interstate Power Company |
| IP&L | Interstate Power and Light Company |
| IPO | Initial Public Offering |
| IRS | Internal Revenue Service |
| ISO | Independent System Operator |
| IUB | Iowa Utilities Board |
| Kewaunee | Kewaunee Nuclear Power Plant |
| KW | Kilowatt |
| KWh | Kilowatt-hour |
| LTEIP | Long-Term Equity Incentive Plan |
| MAIN | Mid-America Interconnected Network, Inc. |
| McLeod | McLeodUSA Incorporated |
| MD&A | Management's Discussion and Analysis of Financial Condition and Results of Operations |
| MG&E | Madison Gas & Electric Company |
| MGP | Manufactured Gas Plants |
1
| Abbreviation or Acronym | Definition |
| Moody's | Moody's Investors Service |
| MPUC | Minnesota Public Utilities Commission |
| MW | Megawatt |
| MWh | Megawatt-hour |
| N/A | Not Applicable |
| Neenah | Alliant Energy Neenah, LLC |
| NEIL | Nuclear Electric Insurance Limited |
| NEPA | National Energy Policy Act of 1992 |
| NERC | North American Electric Reliability Council |
| NG Energy | NG Energy Trading, LLC |
| NMC | Nuclear Management Company, LLC |
| NOx | Nitrogen Oxides |
| NRC | Nuclear Regulatory Commission |
| NWPA | Nuclear Waste Policy Act of 1982, as amended in 1987 |
| PSCW | Public Service Commission of Wisconsin |
| PUHCA | Public Utility Holding Company Act of 1935 |
| Resources | Alliant Energy Resources, Inc. |
| SEC | Securities and Exchange Commission |
| SFAS | Statement of Financial Accounting Standards |
| SFAS 115 | Accounting for Certain Investments in Debt and Equity Securities |
| SFAS 133 | Accounting for Derivative Instruments and Hedging Activities |
| SFAS 142 | Goodwill and Other Intangible Assets |
| SFAS 143 | Accounting for Asset Retirement Obligations |
| SFAS 149 | Amendment of SFAS 133 on Derivative Instruments and Hedging Activities |
| SmartEnergy | SmartEnergy, Inc. |
| South Beloit | South Beloit Water, Gas and Electric Company |
| Southern Hydro | Southern Hydro Partnership |
| Standard & Poor's | Standard & Poor's Rating Services |
| Synfuel | Alliant Energy Synfuel LLC |
| TBD | To Be Determined |
| TRANSLink | TRANSLink Transmission Company LLC |
| Transportation | Alliant Energy Transportation, Inc. |
| U.S. | United States of America |
| VEBA | Voluntary Employees' Beneficiary Association |
| WEPCO | Wisconsin Electric Power Company |
| WPC | Whiting Petroleum Corporation |
| WP&L | Wisconsin Power and Light Company |
| WPSC | Wisconsin Public Service Corporation |
| WRPC | Wisconsin River Power Company |
| WUHCA | Wisconsin Utility Holding Company Act |
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FORWARD-LOOKING STATEMENTS
Refer to "Forward-Looking Statements"“Forward-Looking Statements” in MD&A for information and disclaimers regarding forward-looking statements contained in this Annual Report on Form 10-K.
PART I
This Annual Report on Form 10-K includes information relating to Alliant Energy, IP&L and WP&L (as well as Resources and Corporate Services). Where appropriate, information relating to a specific entity has been segregated and labeled as such. At Dec. 31, 2002, the assets and liabilities of Alliant Energy'sEnergy’s oil and gas (Whiting)(WPC), Australian (including Southern Hydro), affordable housing and affordable housingSmartEnergy businesses were classified as held for sale. Alliant Energy completed the sale of the Australian, affordable housing and SmartEnergy businesses in 2003, as well as the sale of over 94% of the WPC stock. The operating results for these non-regulated businesses for all periods presented have been separately classified and reported as discontinued operations in Alliant Energy'sEnergy’s Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this Annual Report. Refer to Note 16 of Alliant Energy's
"NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for additional information. On Jan.
1, 2002, IPC merged with and into IESU and IESU changed its name to IP&L. IP&L's
Consolidated Financial Statements and Notes to Consolidated Financial Statements
included in this Annual Report illustrate the impact of the merger as if it had
occurred as of Jan. 1, 2000.
A. GENERAL
In April 1998, IES, WPLH and IPC completed a merger resulting in Alliant
Energy.
The primary first tier subsidiaries of Alliant Energy include: IP&L, WP&L, Resources and Corporate Services. Among various other regulatory constraints, Alliant Energy is operating as a registered public utility holding company subject to the limitations imposed by PUHCA. Alliant Energy was incorporated in Wisconsin in 1981. A brief description of the primary first-tier subsidiaries of Alliant Energy is as follows:
1) IP&L - —incorporated in Iowa1925 in 1925Iowa as Iowa Railway and Light Corporation. IP&L is a public utility engaged principally in the generation, transmission, distribution and sale of electric energy; and the purchase, distribution, transportation and sale of natural gas; and the provision of
steam servicesgas in selective markets in Iowa, Minnesota and Illinois. InIllinois.In Iowa, non-exclusive franchises, which cover the use of streets and alleys for public utility facilities in incorporated communities, are granted for a maximum of 25 years by a majority vote of local qualified residents. At Dec. 31, 2002,2003, IP&L supplied electric and gas service to 526,284528,977 and 234,853235,812 (excluding transportation and other) customers, respectively. IP&L also provides steam services to certain customers in one community in Iowa and various other energy-related products and services including construction management services for wind farms. In 2003, 2002 2001
and 2000,2001, IP&L had no single customer for which electric, gas, steam and/or steamother sales accounted for 10% or more of IP&L's&L’s consolidated revenues.
2) WP&L - —incorporated in Wisconsin1917 in 1917Wisconsin as Eastern Wisconsin Electric Company,Company. WP&L is a public utility engaged principally in the generation, distribution and sale of electric energy; and the purchase, distribution, transportation and sale of natural gas; and the provision of water servicesgas in selective markets. Nearly all of WP&L's&L’s customers are located in south and central Wisconsin. WP&L operates in municipalities pursuant to permits of indefinite duration, which are regulated by Wisconsin law. At Dec. 31, 2002,2003, WP&L supplied electric and gas service to 430,406436,976 and 170,123172,615 (excluding transportation and other) customers, respectively. WP&L also had
19,527provides water customers.services in select markets and various other energy-related products and services including construction management services for wind farms. In 2003, 2002 2001 and 2000,2001, WP&L had no single customer for which electric, gas, water and/or waterother sales accounted for 10% or more of WP&L's&L’s consolidated revenues. WPL Transco LLC is a wholly-owned subsidiary of WP&L and holds WP&L's&L’s investment in ATC. WP&L also owns all of the outstanding capital stock of South Beloit, a public utility supplying electric, gas and water service, principally in Winnebago County, Illinois, which was incorporated in 1908.
3) RESOURCES - —incorporated in 1988 in Wisconsin, theWisconsin. The majority of Alliant Energy'sEnergy’s non-regulated investments are organized under Resources. Resources'Resources’ significant wholly-owned subsidiaries at Dec. 31, 20022003 include AEG, International,
Alliant Energy Generation, Inc., Integrated Services, Investments,Neenah, Transportation Whiting and SmartEnergy.Synfuel. Refer to "D.“D. Information Relating to Non-regulated Operations"Operations” for additional details.
4) CORPORATE SERVICES - subsidiary—incorporated in 1997 in Iowa. Corporate Services was formed to provide administrative services to Alliant Energy and its subsidiaries as required under PUHCA.
6
Refer to Note 13 of the "Notes“Notes to Consolidated Financial Statements"Statements” for further discussion of business segments, which information is incorporated herein by reference.
3
1) EMPLOYEES
As of Dec. 31, 2002,2003, Alliant EnergyEnergy’s consolidated subsidiaries had the following employees (full-time and part-time):
Percentage
Number of Number of of Workforce
Number of Bargaining Unit Bargaining Covered by
Employees Employees Agreements Agreements
------------- ----------------- -------------- ----------------
IP&L 1,692 1,426 7 84%
WP&L 1,541 1,456 1 94%
Resources:
International (a) 3,135 -- -- --
Integrated Services 647 -- -- --
Investments (a) 246 81 5 33%
Other 83 -- -- --
Corporate Services 1,626 -- -- --
------------- ----------------- --------------
8,970 2,963 13 33%
============= ================= ==============
(a) Includes employees of Alliant Energy's discontinued operations, which
represented approximately 2% of total employees at Dec. 31, 2002.
| Percentage | ||||
| Number of | Number of | of Workforce | ||
| Number of | Bargaining Unit | Bargaining | Covered by | |
| Employees | Employees | Agreements | Agreements | |
| IP&L | 1,686 | 1,410 | 7 | 84% |
| WP&L | 1,524 | 1,438 | 1 | 94% |
| Resources: | ||||
| International | 3,239 | -- | -- | -- |
| Integrated Services | 652 | -- | -- | -- |
| Other Investments | 120 | 80 | 5 | 67% |
| Other | 29 | -- | -- | -- |
| Corporate Services | 1,693 | -- | -- | -- |
| 8,943 | 2,928 | 13 | 33% | |
In 2003, fiveSeptember 2004, three bargaining agreements expire representing approximately 51%17% of employees covered under bargaining agreements and 17%6% of total Alliant Energy employees. WP&L’s bargaining agreement with IBEW Local 965 expired in 2003 and has not been renewed, which represents 49% of employees covered under bargaining agreements and 16% of total Alliant Energy employees. While negotiations continue on the WP&L bargaining agreement, Alliant Energy is currently unable to predict the outcome. Alliant Energy has not experienced any significant work stoppage problems in the past. While negotiations have commenced, Alliant Energy is
currently unable to predict the outcome of these negotiations.
2) CAPITAL EXPENDITURE AND INVESTMENT PLANS
Refer to "Liquidity“Liquidity and Capital Resources -— Construction and Acquisition Expenditures"Expenditures” in MD&A for discussion of anticipated construction and acquisition expenditures for 2003-2005. Refer to "C. Information Relating to
Domestic Utility Operations - 1) Electric Utility Operations - Power Supply"
for information related to IP&L's2004 and WP&L's plans for the development of new
electric generation in Iowa and Wisconsin, respectively.
2005.
3) REGULATION
PUHCA — Alliant Energy operates as a registered public utility holding company subject to regulation by the SEC under PUHCA. Alliant Energy and its
subsidiaries are subject to the regulatory provisions ofRegulation under PUHCA includingincludes provisions relating to the issuance and sales of securities, acquisitions and sales of certain utility properties, acquisitions and retention of interests in non-utility businesses, including EWGs and FUCOs, and the services provided by Corporate Services to Alliant Energy and its subsidiaries. Under an SEC order, Alliant Energy has aggregate investment authority for EWGs and FUCOs equivalent to 100% of consolidated retained earnings as defined in the regulations. At Dec. 31, 2003, Alliant Energy’s remaining investment authority under this Order was approximately $267 million.
PSCW — Alliant Energy is subject to regulation by the PSCW. The PSCW regulates, among other things, the type and amount of Alliant Energy'sEnergy’s investments in non-utility businesses. WP&L is also subject to regulation by the PSCW as toregarding retail utility rates and service, accounts, issuance and use of proceeds of securities, certain additions and extensions to facilities and in other respects. WP&L is required to file a rate case with the PSCW at least every two years based on a forward-looking test year period.
IUB — IP&L operates under the jurisdiction of the IUB. The IUB has authority to regulate rates and standards of service, to prescribe accounting requirements and to approve the location and construction of electric generating facilities having a capacity in excess of 25,000 KW. Requests for rate relief are based on historical test periods, adjusted for certain known and measurable changes. The IUB must decide on requests for rate relief within 10 months of the date of the application for which relief is filed or the interim prices granted become permanent. Interim rates, if allowed, are permitted to become effective, subject to refund, no later than 90 days after the rate increase application is filed.
7
MPUC — IP&L is also subject to regulation by the MPUC. Requests for rate relief can be based on either historical or projected data. The MPUC must reach a final decision within 10 months.months of filing for rate relief. Interim rates are permitted. The MPUC also has jurisdiction to annually approve IP&L's&L’s capital structure on an annual basis. In
addition,structure.
4
ICC — IP&L and South Beloit are subject to regulation by the ICC for retail utility rates and service, accounts, issuance and use of proceeds of securities, certain additions and extensions to facilities and in other respects. Requests for rate relief must be decided within 11 months.months of filing.
FERC — FERC has jurisdiction under the Federal Power Act over certain of the electric utility facilities and operations, wholesale rates and accounting practices of IP&L and WP&L, and in certain other respects. In addition, certain natural gas facilities and operations of IP&L and WP&L are subject to the jurisdiction of FERC under the Natural Gas Act.
With respect to environmental matters, the
Environmental — The EPA administers certain federal statutesregulatory programs and has delegated the administration of other environmental initiativesregulatory programs to the applicable state environmental agencies. In addition,general, the state agencies have jurisdiction over safety, air and water quality, and waste handling standards associated with certain electric power generation, andincluding the level and flow of water safety and other matters pertaining to hydroelectric generation. In certain cases, the state environmental agencies have delegated the administration of environmental programs to local agencies. In addition, International has investments that are subject to environmental regulations in the countries in which they operate.
Nuclear — IP&L and WP&L are directly and indirectly subject to the jurisdiction of the NRC, with respect to DAEC and Kewaunee, respectively, and torespectively. Among other things, the jurisdiction
of the DOE with respect toNRC regulates the disposal of nuclear fuel and other radioactive wastes from DAEC and Kewaunee.
At Dec. 31, 2002, Alliant Energy's remaining investment authority under the
100% of consolidated retained earnings PUHCA order was approximately $200
million of future EWG and/or FUCO investments with financings that have
recourse to the parent company in addition to certain commitments already
made.wastes.
Brazil — The electricityelectric industry in Brazil, as it relates to Alliant Energy'sEnergy’s unconsolidated investments, is regulated by the Brazilian federal government, acting through the Ministry of Mines and Energy, which has exclusive authority over the electricityelectric sector through its regulatory powers assigned to
it.powers. Regulatory policy for the sector is implemented by an autonomous national electric energy agency (Agencia Nacional de Energia Eletrica or "ANEEL"“ANEEL”), which delegates certain functions to agencies based in certainvarious states of Brazil. However, ANEEL cannot delegate any authority regarding tariffs to state agencies. In January 2003, a new Minister of Mines and Energy was appointed, thusresulting in the cessation of the ongoing comprehensive review of the regulatory process and policies that was underwaybegan in 2002 has ceased and a2002. A new plan has since
been announced. This plan includes a poolingwas announced in December 2003 (effective date as yet unspecified) which is intended to provide limited and balanced regulation of the generation so thatand distribution of electric energy within the sectors of the Brazilian economy. Although all companies will have access to lower energy prices, use of a different
inflation index for purposes of tariff settingthe details and aid from the national
development bank. Although detailsprecise timing of the plan are unknown at this time, Alliant Energy believesdoes not expect the plan will not have a material adverse impact on Alliant Energy'sEnergy’s investments in Brazil.
Refer to Note 2 of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” and "Rates“Rates and Regulatory Matters"Matters” in MD&A for additional information regarding regulation and utility rate matters.
4) STRATEGIC ACTIONS
OVERVIEW
Refer to "Strategic Actions"“Strategic Overview” in MD&A for a discussion of various strategic actions Alliant Energy is takinghas taken to strengthen its financial profile.
profile and information regarding Alliant Energy’s updated strategic plan.
C. INFORMATION RELATING TO DOMESTIC UTILITY OPERATIONS
Alliant Energy realized 50%48%, 44%47%, 4%3% and 2% of its 20022003 electric utility revenues in Iowa, Wisconsin, Minnesota and Illinois, respectively. Approximately 91% of the electric revenues were90% was regulated by the respective state commissions while the other 9% were10% was regulated by FERC. Alliant Energy realized 50%48%, 44%47%, 3% and 3%2% of its 20022003 gas utility revenues in Iowa, Wisconsin, Minnesota and Illinois, respectively.
IP&L realized 91%92%, 7%6% and 2% of its 20022003 electric utility revenues in Iowa, Minnesota and Illinois, respectively. Approximately 96% of IP&L's 2002
electric revenues werewas regulated by the respective state commissions while the other 4% werewas regulated by FERC. IP&L realized 93%, 5% and 2% of its 20022003 gas utility revenues in Iowa, Minnesota and Illinois, respectively. WP&L realized 98%99% of its 20022003 electric utility revenues in Wisconsin and 2%
8
84% of WP&L's 2002 electric revenues were83% was regulated by the PSCW or the ICC while the other 16% were17% was regulated by FERC. WP&L realized 97% of its 20022003 gas utility revenues in Wisconsin and 3% in Illinois.
5
1) DOMESTIC ELECTRIC UTILITY OPERATIONS
General - The utilities— IP&L and WP&L provide electric service in Iowa, southern and central Wisconsin, southern Minnesota and northern and northwestern Illinois. The number of electric customers and communities served by each
utility at Dec. 31, 20022003 was as follows:
Retail Customers Wholesale Customers Other Customers Communities Served
----------------- ----------------------- -------------------- ----------------------
IP&L 524,956 10 1,318 760
WP&L 428,390 30 1,986 602
----------------- ----------------------- -------------------- ----------------------
953,346 40 3,304 1,362
================= ======================= ==================== ======================
2002
| Retail Customers | Wholesale Customers | Other Customers | Communities Served | |
| IP&L | 527,650 | 9 | 1,318 | 760 |
| WP&L | 434,941 | 30 | 2,005 | 601 |
| 962,591 | 39 | 3,323 | 1,361 | |
2003 electric utility operations accounted for 80%73% and 81%75% of operating revenues and 90%92% and 90%85% of operating income for IP&L and WP&L, respectively.
Electric sales are seasonal to some extent with the annual peak normally occurring in the summer months. In 2002,2003, the maximum peak hour demands for IP&L and WP&L were 3,0973,123 MW on July 8, 2002 and 2,6742,782 MW, respectively, both on Aug. 1, 2002,
respectively.20, 2003. In 2002,2003, the maximum peak hour demand for Alliant Energy was 5,7295,887 MW on July 8, 2002,Aug. 20, 2003, which was the coincident peak of the entire Alliant Energy system.
Transmission Business —IP&L and WP&L are members of the MAIN Regional Reliability Council which is one of the 10 regional members of NERC. Each regional member of NERC is responsible for maintaining reliability in its area through coordination of planning and operations.
In 2001,2002, IP&L filed for IUB and five other electric utility companies filed an application
with FERCMPUC approval to createtransfer its transmission assets to TRANSLink, a proposed independent for-profit, transmission-only company. In April 2002, FERC conditionally approvedNovember 2003, TRANSLink announced that upon direction of the participant utilities, formation of TRANSLink had been suspended due to continued regulatory and TRANSLink's participation in the Midwest ISO. In June 2002, TRANSLink
Development Co. LLC was formed to oversee the start-up activities for
TRANSLink. In the fourth quarter of 2002, three additional electric utility
companies joined TRANSLink. Current plans call formarket uncertainty. IP&L continues to contributesupport the independent transmission assetscompany model but is not able to predict the ultimate outcome of 69 KV and greater, which have an estimated net book
valuethe structure of approximately $226 million (as of Dec. 31, 2002), to TRANSLink in
exchange for a yet to be determined combination of a corresponding ownership
interest in TRANSLink and cash. IP&L filed for the necessary state approvals
in the fourth quarter of 2002. TRANSLink is currently expected to be
operational in the third quarter of 2003 and will be theits transmission network
provider to approximately 7.7 million customers in 13 states.
The PSCW issued a final ruling in October 2002 regarding incremental electric
transmission costs, which allows Wisconsin utilities, including business.
WP&L to
continue to defer any such costs related to retail service for five years
with deferred amounts included in future base rate cases. During this
period, changes in electric transmission costs will have no material impact
on WP&L's results of operations.
WP&L, including South Beloit, transferred its transmission assets with no gain or loss (approximate net book value of $186 million) to a transmission-only company, ATC, on Jan. 1, 2001. WP&L received a tax-free
cash distribution of $75 million from ATC2001, and had a $112 million equity
investment in ATC, with an ownership percentage in ATC of approximately 26.6%25% at Dec. 31, 2002.2003. This transfer has not resulted in a significant impact on WP&L's&L’s financial condition or results of operations since FERC allows ATC to earn a return on the contributed assets comparable to the return formerly allowed WP&L by the PSCW and FERC. In addition, incremental start-up and
ongoing transmission costs are being recovered in rates. During 2002,2003, ATC returned approximately 80% of its earnings to the equity holders and, although no assurance can be given, Alliant Energy anticipates ATC will continue with this policydividend payout ratio in the future. ATC realizes its revenues from the provision of transmission services to both participants in ATC as well as non-participants. ATC is a transmission-owning member of the Midwest ISO and the MAIN Regional Reliability Council.
In 2002, the PSCW issued a final ruling regarding incremental electric transmission costs, such as ATC start-up costs and ongoing network transmission costs. This ruling allows Wisconsin utilities, including WP&L, to continue to defer any such costs related to retail service for five years with deferred amounts included in future base rates. Further, in December 2003, the PSCW issued a final order in WP&L’s 2004 retail rate case, which expanded the 2002 ruling allowing for the deferral of any retail transmission wheeling expenses that are different from amounts included in existing rates. During the remainder of this deferral period, changes in total retail electric transmission costs will have no material impact on WP&L’s results of operations.
IP&L and WP&L are members of the Midwest ISO, which is in the process of restructuring the bulk power market in its domain. Such restructuring could have an impact on the costs associated with Alliant Energy serving its utility customers’ energy requirements. The Midwest ISO currently plans to implement the market restructuring effective Dec. 1, 2004. Given the anticipated regulatory treatment of any potential cost differences, Alliant Energy does not currently expect the ultimate outcome will have a material impact on its results of operations or financial condition.
The PSCW is authorized to order construction of new transmission facilities. In 2001, the PSCW approved the construction of a 345-kilovolt transmission line, which would be constructed by ATC and would improve transmission import capabilities in Wisconsin. Due to significant cost increases, the PSCW re-evaluated and re-approved the project in December 2003. Pending various other regulatory approvals, construction could begin as early as 2004 and the transmission line is expected to be in service in 2008.
6
IP&L maintains and operates transmission and substation facilities connecting with its high voltage transmission systems pursuant to a non-cancelable operation agreement (the Operating Agreement) with CIPCO. The Operating
9
Midwest. WP&L transferred its transmission and substation
facilities to ATC on Jan. 1, 2001Midwest and ATC also has various transmission interconnections
at various locations.interconnections. These interconnections enhance the overall reliability of the Alliant Energy transmission system and provide access to multiple sources of economic and emergency energy.
In 2002, FERC issued a notice of proposed rules intended to standardize the wholesale electric market, which has generated significant industry discussion. Although Alliant Energy believes that standardization of the wholesale electric market is appropriate and would benefit market participants, there may be significant changes to the proposed rules before they are adopted. Therefore, Alliant Energy cannot determine the impact the final rules will have on its results of operations or financial condition.
Refer to "Properties"“Properties” for additional information regarding electric properties.
Power Supply —Alliant Energy currently anticipates meeting its 2004 power supply requirements through a variety of incremental power supply resources including purchased-power contracts utilizing existing firm transmission rights and additional power purchases from existing generating units located within and outside of Alliant Energy’s service territory. While Alliant Energy currently expects to meet utility customer demands in 2004, unanticipated reliability issues could still arise in the event of unexpected delays in the construction of new generating and/or transmission facilities, power plant outages, transmission system outages or extended periods of extremely hot weather. Refer to “Strategic Overview — Updated Strategic Plan” in MD&A for discussion of Alliant Energy’s domestic utility generation plan.
Average Fuel -Costs — Refer to the Electric Operating Information tables for details on the sources of electric energy for Alliant Energy, IP&L and WP&L from 19982001 to 2002.2003. The average cost of fuel per million Btu'sBritish Thermal Units used for electric generation was as follows:
IP&L WP&L
---------------------------------------- ----------------------------------------
2002 2001 2000 2002 2001 2000
---------------------------------------- ----------------------------------------
Coal $1.067 $0.991 $0.981 $1.262 $1.146 $1.152
Nuclear 0.572 0.608 0.594 0.457 0.423 0.424
All Fuels 1.032 1.046 1.014 1.234 1.158 1.115
| IP&L | WP&L | |||||
| 2003 | 2002 | 2001 | 2003 | 2002 | 2001 | |
| Gas | $5.884 | $3.613 | $4.721 | $6.823 | $4.066 | $5.397 |
| Coal | 1.072 | 1.067 | 0.991 | 1.224 | 1.262 | 1.146 |
| Nuclear | 0.546 | 0.572 | 0.608 | 0.441 | 0.457 | 0.423 |
| All Fuels | 1.088 | 1.032 | 1.046 | 1.370 | 1.234 | 1.158 |
Coal -— Alliant Energy, through Corporate Services, IP&L and WP&L, has entered into contracts with different suppliers to ensure that a specified supply of coal is available at known prices for IP&L and WP&L for 20032004 through 2006.2008. These contracts provide for a portfolio of coal supplies that cover approximately 94%96%, 68%76%, 49%54%, 21% and 23%11% of the total utilities'utilities’ estimated coal supply needs for 20032004 through 2006,2008, respectively. Management believes this portfolio of coal supplies represents a reasonable balance between the risks of insufficient supplies and those associated with larger open positions subject to price volatility in the coal markets. Remaining coal requirements will be met from either future contracts or purchases in the spot market.
The majority of the coal utilized by IP&L and WP&L is from the Wyoming Powder River Basin. A majority of this coal is transported by rail-car directly from Wyoming to IP&L's&L’s and WP&L's&L’s generating stations, with the remainder transported from Wyoming to the Mississippi River by rail-car and then via barges to the final destination. As protection against interruptions in coal deliveries, IP&L and WP&L maintain average coal inventories of 3025 to 50 days for generating stations with year-round deliveries and 30 to 150 days (depending upon the time of the year) for generating stations with seasonal deliveries.
Average delivered fossil fuel costs are expected to increase in the future due to price/rate structures and adjustment provisions in existing coal and transportation contracts and recent coal market trends. Existing coal contracts with terms of greater than one year have fixed future year prices that generally reflect recent upward market trends. Other factors which may impact coal prices are related to changes in various associated laws and regulations. For example, sulfur dioxide and NOx emission restrictions and other environmental limitations on generating stations have increased significantly and proposed additional restrictions (including some for
mercury emissions), if enacted, will likely limit the ability to obtain, and further increase the difficulty
and cost of, obtaining adequate coal supplies. Rate adjustment provisions in transportation contracts are primarily based on changes in the Rail Cost Adjustment Factor as published by the STB.U.S. Surface Transportation Board. Refer to Note 1(j)1(i) for discussion of IP&L's&L’s and WP&L's&L’s rate recovery of fuel costs, Note 10(a) for information on coal derivatives and Note 11(b) for details relating to coal purchase commitments in the "Notes“Notes to Consolidated Financial Statements."
”
7
Purchased-Power -— During 2002,2003, approximately 23%25% and 30%31% of IP&L's&L’s and WP&L's&L’s total MWh requirements, respectively, were met through purchased-power. Refer to Notes 3 and 11(b) of the "Notes“Notes to Consolidated Financial Statements"Statements” for details relating to purchased-power commitments.
commitments and “Transmission Business” for discussion of proposed rules intended to standardize the wholesale electric market.
Nuclear - Alliant Energy owns—Summary — IP&L and WP&L own partial interests in two nuclear generating facilities, DAEC and Kewaunee. DAEC, a 580 MW (net capacity) boiling water reactor plant, isKewaunee, respectively, which are operated by the NMC under contract to IP&L,the majority owners, which has a 70% ownership
interestremain in the plant. The ownerseffect until notice of DAEC are responsible for the
decommissioning of the plant. The DAEC operating license expires in 2014.
Kewaunee, a 532 MW (net capacity) pressurized water reactor plant,termination is operated by the NMC under contractprovided one year prior to WPSC and is jointly owned by WPSC (59%)
10
and WP&L (41%). WPSC and WP&L are responsible for the decommissioning of the
plant. The Kewaunee operating license expires in 2013. WPSC is considering
whether or not to seek extension of the operating license to 2033.
Alliant Energy Nuclear LLC, a non-utility subsidiary ofsuch termination would be effective. Alliant Energy has a 20% ownership interest in the NMC. The purpose of the NMC is to consolidate
operation of theoperates all nuclear plants owned by the NMC partners, and to provide
similar capability for other nuclear plant operators and owners.
Consolidation of operation by the NMC is expected to sustainwhich provides long-term safety, optimize reliability and improveoperational benefits for the operational performance of the
nuclear generating plants.plant owners. The NMC currently operates eight nuclear generating units at six sites.sites but has no ownership interest in the plants it operates and bears no financial risk associated with operation of the plants. The NMC partners continueplant owners retain all rights to individually own
their plants through their utility subsidiaries, are entitled tothe energy generated at the plants and retain theall financial obligationsresponsibility for thetheir safe operation, maintenance and decommissioningdecommissioning. Certain details for DAEC and Kewaunee are as follows:
| DAEC | Kewaunee | |
| Rating, net electric capacity | 583 MW (100%) | 543 MW (100%) |
| Alliant Energy ownership | IP&L - 70% | WP&L - 41% |
| Other ownership | CIPCO - 20%; Corn Belt | WPSC - 59% |
| Power Cooperative - 10% | ||
| Reactor type | Boiling water | Pressurized water |
| NRC operating license expiration | 2014 | 2013 |
DAEC License Renewal — IP&L has made no decision regarding license extension for DAEC. IP&L’s approach has been and continues to be to preserve the option of renewing the license and has directed that DAEC be operated and maintained in a manner that ensures license extension remains a viable option. Preserving DAEC’s license extension option will include ensuring adequate time is available for the possibility of preparing specific license renewal studies, submittal of study results for NRC review, evaluation of the plants.
As co-ownersresults of nuclear generating units, IPthe NRC’s review, and making a decision on whether and to what degree any license extension will be pursued.
Kewaunee Sale — Refer to Note 17 of Alliant Energy’s “Notes to Consolidated Financial Statements” for information on the sale of Kewaunee by WP&L and WP&L are subjectWPSC expected to the
jurisdiction of the NRC.be completed by fall 2004, pending various regulatory approvals.
Nuclear Operating Issues — The NRC has broad supervisory andsignificant regulatory jurisdictionauthority over the constructiondesign and operation of nuclear reactors,
particularlygenerating facilities with regard to environmental considerations and public health safety and environmental
considerations. The operation and designsafety. Exercise of nuclear power plants is under
constant reviewthis authority by the NRC. IP&L'sNRC is continuous and WP&L's anticipated nuclear-related
construction expenditures for 2003-2005 are approximately $70 million and $32
million, respectively.
Kewaunee is subjectresponsive to additional inspectionsany nuclear related to reactor vessel head
cracking found at other pressurized water reactor plants. After evaluating
the cost of continued required inspections of the existing reactor vessel
head, WPSC and WP&L have submitted a construction authorization request to
the PSCW for replacement of the reactor vessel head. The replacement is
scheduled to occur during the fall 2004 refueling outage at a total cost of
approximately $20 million (WP&L's share is approximately $8 million). issue.
In 2001, a steam generator replacement was completed at Kewaunee.
On Feb. 25,February 2002, the NRC issued an order to all licensees formalizing their requirements for additional security resulting from the Sept. 11, 2001 terrorist attacks on the U.S. Prior to this order, the additional security measures were voluntary, based on NRC guidance. The NMC, as operator of DAEC and Kewaunee, responded to the NRC and has fully implemented the additional
security measures. The issueimmediate actions required and is in the process of cost recovery for DAEC is being addressed in
IP&L's pending retail rate case.completing longer term actions as required. In December 2001, the PSCW authorized WP&L to defer incremental costs for security measures and insurance premiums related to the Sept. 11, 2001 terrorist attacks. Both IP&L and WP&L began deferringare recovering the increased costs of the required immediate actions in December 2001their respective rates.
IP&L’s and WP&L’s share of anticipated nuclear-related construction expenditures at DAEC and Kewaunee for 2004 and 2005 are approximately $23 million and $19 million, respectively. These expenditures would be reduced for WP&L if the sale of its interest in Kewaunee is completed prior to the end of 2005.
Refueling Outages and Procurement of Nuclear Fuel — The NMC, acting on behalf of IP&L and the issueother DAEC owners, purchases uranium and enrichment services for DAEC using a combination of cost recoveryspot market and medium term contracts. This procurement is being
addressedcomplete for the spring 2005 DAEC refueling outage. Arrangements for the fabrication of nuclear fuel are in WP&L's pending 2003 retail rate case.
In 2000,place through the NRC issued expanded performance measures, which raised several
areas2011 refueling of concern with Kewaunee's operations. AddressingDAEC. WPSC purchases uranium concentrates and conversion, enrichment and fabrication services for nuclear fuel assemblies at Kewaunee. Sufficient fuel is in inventory for the NRC's concernsfall 2004 refueling outage and ensuring thatadditional fuel will be purchased in 2004 for the spring 2006 refueling outage. WPSC’s uranium inventory policy is to maintain sufficient inventory for up to two reloads of fuel. Refer to Note 1(j) of Alliant Energy’s “Notes to Consolidated Financial Statements” for information related to the timing of DAEC and Kewaunee operates in accordance with current industry and
regulatory standards resulted in additional operating costs. WP&L has
deferred $5.5 million of such costs at Dec. 31, 2002. The incremental and
deferred amounts are currently being collected in WP&L's 2002 retail rate
increase.
Public liabilityrefueling outages.
8
Nuclear Liability/Insurance — Liability for nuclear accidents is governed by the Price-Anderson Act of 1988 as amended (Act), which sets a statutory limit of $9.55$10.86 billion for liability to the public for a single nuclear power plant incident and requires nuclear power plant operators to provide financial protection for this amount. As required, IP&L provides this financialFinancial protection for a nuclear incident at DAECis provided through a combination of liability insurance ($300 million) and industry-wide retrospective payment plans ($9.2510.56 billion). Under the industry-wide plan, the owners of each operating licensed nuclear reactor in the U.S. isare subject to an assessment in the event of a nuclear incident at any nuclear plant in the U.S. IP&L, as a 70% ownerThe applicability of DAEC, could be assessed a
maximum of $61.7 million per nuclear incident, with a maximum of $7 million
per incident per year, if losses relating to the incident exceeded $300
million. These limits are subject to adjustments for changes in the number
of participants and inflation in future years. Similarly, WP&L, as a 41%
owner of Kewaunee, is subject to an overall assessment of approximately $36.1
million per incident, not to exceed $4.1 million payable in any given year.
The Act expired on Aug. 1, 2002, with no impact to IP&L orand WP&L, as existing nuclear power plants are covered under the insurance system of the Actplant owners, continues for the remainder of theirthe operating lives. It is anticipated that extension or
renewallives of the Act will apply only to new construction. Currently there is
legislation pending inplants they own. Alliant Energy expects the U.S. Congress that includes extensions ofwill consider in 2004 coverage under the Act for new nuclear generating stations and increasing the statutory limitlimits for liability to the public for a single nuclear power plant incident and increasing the maximum annual assessment per incident.
11
IP&L and WP&L are members of NEIL, which provides $1.5$2.0 billion and $1.8 billion of insurance coverage for DAEC and $1.8 billionKewaunee, respectively, for Kewaunee on certain property losses for property damage, decontamination and premature decommissioning. The proceeds from such insurance, however, must first be used for reactor stabilization and site decontamination before they can be used for plant repair and premature decommissioning. NEIL also provides separate coverage for additional expenses incurred during certain outages. Owners of nuclear generating stations insured through NEIL are subject to retroactive premium adjustments if losses exceed accumulated reserve funds. NEIL'sNEIL’s accumulated reserve funds are currently sufficient to more than cover its exposure in the event of a single incident under the primary and excess property damage or additional expense coverages. However, IP&L and WP&L could be assessed annually a
maximum of $3.3 million for NEIL primary property, $3.2 million for NEIL
excess property and $2.4 million for NEIL additional expenses if losses exceed the accumulated reserve funds. A summary of IP&L’s and WP&L could be assessed annually a&L’s share of maximum of $1.7 million for NEIL primary property, $3.3 million for NEIL
excesspossible retrospective liability, property and $1.0 million for NEIL additional expense coverage. IP&Lassessments is as follows (in millions):
| DAEC | Kewaunee | |
| Price-Anderson Act liability | $70.4/incident | $41.2/incident |
| $7.0/incident/year | $4.1/incident/year | |
| NEIL primary property | $3.3/year | $1.8/year |
| NEIL excess property | $4.4/year | $3.5/year |
| NEIL additional expense | $2.4/year | $1.0/year |
These limits are subject to adjustments for changes in the number of participants and WP&L are not currently aware of any losses that they believe are likely
to resultinflation in an assessment.future years. In the event of a catastrophic loss at DAEC or Kewaunee, the amount of insurance available may not be adequate to cover property damage, decontamination and premature decommissioning. Uninsured losses, to the extent not recovered through rates, would be borne by IP&L or WP&L, as the case may be, and could have a material adverse effect on their respective financial condition and results of operations. TheIP&L and WP&L are not currently aware of any losses that they believe are likely to result in an assessment.
Spent Nuclear Fuel (High Level Waste) Disposal — NWPA assigned responsibility to the DOE to establish a facilityprovide for the ultimate dispositionpermanent disposal of high level waste and spent nuclear fuel and authorized
the DOE to enter into contracts with parties for the disposal of such material
beginning in 1998, in exchange for payments by contract holders.holders and also requires generators and owners of spent nuclear fuel to provide for interim storage until the fuel is accepted by the DOE. IP&L, (for DAEC)on behalf of the DAEC owners, and WPSC, (for Kewaunee)on behalf of the Kewaunee owners, entered into such contracts with the DOE for this disposal service and have made the agreed payments to the Nuclear Waste Fund held by the U.S. Treasury. The companies were
subsequently notified by the DOE that it was not ablecontracts provided for this service to begin acceptance of
spent nuclear fuel by thein 1998, deadline. Furthermore,however, the DOE has experienced significant delays in its efforts and material acceptance is now expected to occur no earlier than 2010 with the possibility of further delay being likely.
Alliant Energy continues to monitor and evaluate its options for recovery of
damages due to the DOE's delay in accepting spent nuclear fuel.2010. The DOE is currently preparing an application to licenseproceeding with the licensing phase for a permanent spent fuel storage facility in the Yucca Mountain area of Nevada.
The NWPA also assigned responsibility for interim storage of spent nuclear
fuel to generators of such spent nuclear fuel, such as IP&L and WPSC.
In accordance with thistheir interim storage responsibility, IP&L and WPSC have been and will continue storing spent nuclear fuel on site at DAEC and Kewaunee, respectively, until removal of all spent nuclear fuel by the DOE to its permanent repository occurs. Interim storage activities at reactor sites, regardless of DOE delays or acceptance schedules, will extend after final reactor shutdown. Construction of a dry cask storage facility by IP&L at DAEC has been completed and transfer of usedapproximately 10 years worth of spent nuclear fuel into the facility is
expected to beginwas completed in November 2003. The dry storage facility will provideprovides assurance that both the operating and post-shutdown storage needs of DAEC are satisfied. Kewaunee has sufficient fuel storage capacity to store allmeet its operating storage needs through 2009. Additional storage facilities will be needed at Kewaunee by 2010 for full offload capability for future outages.
In January 2004, IP&L filed a claim against the U.S. government for recovery of damages due to the DOE’s delay in accepting spent nuclear fuel. IP&L is one of a number of utility companies with nuclear assets that has filed similar claims against the DOE for its failure to accept spent nuclear fuel in a timely manner. Determination and adjudication of the fuel it
will generate through 2009. No decisions have been made concerning
additional storage capacity needed beyond 2009.specific claim amount depends upon resolution of related court cases involving DOE acceptance rates and acceptance orders of spent nuclear fuel. Alliant Energy does not anticipate resolution of this issue until 2006 at the earliest and cannot currently predict the ultimate outcome.
9
Low-Level Radioactive Waste Disposal — The Low-Level Radioactive Waste Policy Amendments Act of 1985 mandates that each state must take responsibility for the storage of low-level radioactive waste produced within its borders. The States of Iowa and Wisconsin are
members of the six-state Midwest Interstate Low-Level Radioactive Waste
Compact (Compact), which is responsible for development of any newHowever, disposal
capability within the Compact member states. Disposal facilities located near Barnwell, South Carolina and Clive, Utah continue to accept the low-level waste from DAEC and Kewaunee, thereby minimizing the amount of low-level waste stored on-site. Given technological advances,on-site and delaying the need for any action by individual states or groups of states to develop new facilities. While it is difficult to predict how long the South Carolina and Utah facilities will continue to accept low-level radioactive waste,
compaction and the reduction in the amount of waste generated, DAEC and Kewaunee each have on-site storage capability sufficientfor at least 10 years of waste generation beyond any date that both facilities might cease to storeaccept such waste.
The costs associated with high- and low-level waste expected to be generated over at least the next 10 years. While the
operators of DAECdisposal and Kewauneestorage are unable to predict how long these
facilities will continue to accept their waste, continuing access to these
facilities expands their on-site storage capability indefinitely.
WPSC purchases uranium concentrates, conversion services, enrichment
services, and fabrication services for nuclear fuel assemblies at Kewaunee.
New fuel assemblies replace used assemblies that are removed from the reactor
every 18 months and placed in storage at the plant site pending removal by
the DOE. Uranium concentrates, conversion services, and enrichment services
are purchased at spot market prices, through a bid process, or using existing
contracts. Conversion services are complete for the nuclear fuel reload
scheduled in 2003. WPSC has contracted for a fixed quantity of enrichment
12
services through 2004. Additional enrichment services will be acquired under
an existing contract or by purchases on the spot market. WPSC has contracted
for fuel fabrication services for the next six reloads. WPSC's uranium
inventory policy is to maintain sufficient inventory for up to two reloads of
fuel. At Dec. 31, 2002, approximately 160,000 pounds of yellowcake (a
processed form of uranium ore) or its equivalent was held in inventory for
the plant. Each refueling requires approximately 500,000 pounds of
yellowcake. In 2003, approximately 825,000 pounds of yellowcake will be
acquired to meet the requirements of the inventory policy.
Uranium and enrichment services for the Spring 2003 refueling outage at DAEC
have been completed. IP&L believes that an ample supply of uranium and
enrichment services will be available in the future and intends to continue
its strategy of purchasing such uranium and enrichment services as necessary
on the spot market and/or via medium length (less than five years) contracts
to meet its generation requirements. These sources of supply will be used to
meet delivery requirements for an early 2005 refueling outage. Arrangements
for the fabrication of nuclear fuel are in placecurrently recovered through the 2011 refuelingrates of DAEC.Alliant Energy’s utility subsidiaries and therefore do not have a material impact on its results of operations or financial condition.
Additional Nuclear Discussion — Additional discussions of various other nuclear issues relating to DAEC andand/or Kewaunee are included in Notes 1,1(g), 1(j), 3, 9, 10(c), 11(e), 11(f), 12, 17 and 1218 of the "Notes“Notes to Consolidated Financial Statements."
Power Supply - Wisconsin enacted electric reliability legislation in 1998
(Wisconsin Reliability Act) with the goal of assuring reliable electric
energy for Wisconsin. The law allows the construction of merchant power
plants in the state and streamlines the regulatory approval process for
building new generation and transmission facilities. The PSCW is authorized
to order construction of new transmission facilities, based on the findings
of its regional transmission constraint study, through Dec. 31, 2004. In
October 2001, the PSCW approved the construction of a 345 KV transmission
line, which will improve transmission import capabilities in Wisconsin.
Re-approval of the project due to significant cost increases is expected
during the summer of 2003 by the PSCW. WP&L notes that it may take time for
new transmission and power plant projects to be approved and built in
Wisconsin.
In 2000, WP&L and Calpine announced an agreement whereby Calpine would build,
own and operate a 600 MW natural gas-fired combined cycle power plant in
Wisconsin at WP&L's Rock River plant (Riverside project). WP&L has entered
into a purchased-power agreement for 453 MW of this plant's output, which is
anticipated to be available prior to the time of the 2004 summer peak
demand. Construction began in September 2002 and is expected to assist WP&L
in meeting its growing demands for electricity, to place a greater reliance
on generation physically located in Wisconsin versus power purchased from
outside of Wisconsin and to help WP&L maintain the required 18% reserve
margin in Wisconsin.
The Iowa Legislature passed a bill in 2001 to encourage construction of new
generating facilities in Iowa. In 2001, Alliant Energy's subsidiaries
announced their interest in developing new electric generation capacity in
Iowa and Wisconsin over the next 10 years with an estimated investment of
$2.5 billion. IP&L announced a willingness to develop up to 1,200 MW of new
electric generation over the next 10 years. Currently, Alliant Energy's
Power Iowa plan includes adding approximately 550 MW of natural gas-fired
generation (500 MW by 2004), 100 MW of capacity generated from renewable
energy sources by December 2003, researching options for an additional
500-600 MW of generation and increases in energy efficiency through energy
conservation and process improvements at various commercial and industrial
customer locations. In January 2003, the IUB approved IP&L's siting
certificate for a 500 MW natural gas-fired plant in Mason City, Iowa and
construction began. In addition, in December 2002, IP&L began purchasing
approximately 57 MW of capacity from a wind generation facility in Iowa. In
Wisconsin, Alliant Energy's current plans are to install approximately 800 MW
of additional electric generation over the next 10 years, including
approximately 500-700 MW of base and/or intermediate generation and
approximately 100-300 MW of simple-cycle gas generation.
WP&L currently anticipates meeting its 2003 power supply requirements,
including the required 18% reserve margin, through a variety of incremental
power supply resources which include, but are not limited to, renegotiated
purchased-power contracts from current suppliers utilizing existing firm
transmission rights to replace currently expiring purchased-power contracts
and additional power purchases from existing generating units located within
and outside of Wisconsin. The largest challenge that WP&L faces in securing
power supply resources necessary to meet its 2003 requirements is the lack of
available incremental firm transmission service to import additional power
13
supply resources into WP&L's load-serving area from bulk power supply sources
outside of Wisconsin. While Alliant Energy currently expects to meet utility
customer demands in 2003, unanticipated reliability issues could still arise
in the event of unexpected power plant outages, transmission system outages
or extended periods of extremely hot weather.
Refer to "Liquidity and Capital Resources - Construction and Acquisition
Expenditures" in MD&A for additional information.
”
Electric Environmental Matters -— Alliant Energy is regulated in environmental matters by a number of federal, state and local agencies. Such regulations are the result of a number of environmental laws passed by the U.S. Congress, state legislatures and local governments and enforced by federal, state and local regulatory agencies. The laws impacting Alliant Energy'sEnergy’s operations include, but are not limited to, the Safe Drinking Water Act; Clean Water Act; CAA, as amended by the CAA Amendments of 1990; National Environmental Policy Act; Toxic Substances Control Act; Emergency Planning and Community Right-to-Know Act; Resource Conservation and Recovery Act; Comprehensive Environmental Response, Compensation and Liability Act of 1980;1980, as amended by the Superfund Amendments and Reauthorization Act of 1986; Endangered Species Act; NWPA; Occupational Safety and Health Act; and NEPA. Alliant Energy regularly obtains federal, state and local permits to assure compliance with the environmental protection laws and regulations. Costs associated with such compliance have increased in recent years and are expected to increase moderately in the future. Although Alliant Energy cannot guarantee rate recovery, it anticipates its prudently incurred utility costs will be recovered in future rates.
In February 2003, WP&L's&L’s Columbia Energy Center (Columbia) received a Notice of Violation from the Wisconsin DNR for exceeding limits in its Wisconsin Pollutant Discharge Elimination System (WPDES) permit, which requires Columbia to sample its ash pond discharge to testand sanitary wastewater plant discharge for various parameters, including acute and chronic toxicity. In its most
recentThe WPDES permit issued in 1998 required Columbia was to identify what was causing the toxicity issuein its discharge through an evaluation and to develop a reduction plan. The evaluation was performed and Columbia developed a reduction plan that identified carbon dioxide injection as the treatment to reduce the aluminum concentrations. The Wisconsin DNR did not approve this method of treatment and directed Columbia to revise the reduction plan, at which time Columbia began evaluating a number of treatment alternatives and undertaking a physical evaluation. In November 2003, WP&L has been working withsubmitted a progress report to the Wisconsin DNR for the ash pond toxicity discharges along with plans for the sanitary wastewater treatment plant. In December 2003, a construction permit for the sanitary wastewater treatment plant was submitted to resolve this issue.the Wisconsin DNR with an anticipated construction start date in spring 2004. While it is possible that the Wisconsin DNR may subsequently seek to impose a civil penalty for the discharge toxicity, WP&L believes it can resolve this issue to the Wisconsin DNR'sDNR’s satisfaction in a manner that will not have a material adverse effect on its financial condition or results of operations. Refer to "Liquidity“Legal Proceedings” for further discussion.
Refer to “Liquidity and Capital Resources - Environmental"— Environmental” in MD&A and Note 11(e) of the "Notes“Notes to Consolidated Financial Statements"Statements” for further discussion of electric environmental matters.
14
Alliant Energy Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Operating Information (Utility Only) 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $626,947 $599,074 $567,283 $541,714 $532,676
Commercial 376,365 373,145 349,019 329,487 317,704
Industrial 526,804 543,471 501,155 476,140 477,241
---------------------------------------------------------------------------
Total from ultimate customers 1,530,116 1,515,690 1,417,457 1,347,341 1,327,621
Sales for resale 160,335 184,507 173,148 155,801 199,128
Other 62,083 56,359 57,431 45,796 40,693
---------------------------------------------------------------------------
Total $1,752,534 $1,756,556 $1,648,036 $1,548,938 $1,567,442
===========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Sales (000s MWh):
Residential 7,616 7,344 7,161 7,024 6,826
Commercial 5,542 5,464 5,364 5,260 4,943
Industrial 12,297 12,469 13,092 13,036 12,718
---------------------------------------------------------------------------
Total from ultimate customers 25,455 25,277 25,617 25,320 24,487
Sales for resale 4,805 4,936 4,906 5,566 7,189
Other 197 168 174 162 158
---------------------------------------------------------------------------
Total 30,457 30,381 30,697 31,048 31,834
===========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers (End of Period):
Residential 822,229 807,754 799,603 790,669 781,127
Commercial 128,212 125,539 123,833 122,509 121,027
Industrial 2,905 2,826 2,773 2,730 2,618
Other 3,344 3,324 3,316 3,282 3,267
---------------------------------------------------------------------------
Total 956,690 939,443 929,525 919,190 908,039
===========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Electric Data:
Maximum peak hour demand (MW) 5,729 5,677 5,397 5,233 5,228
Sources of electric energy (000s MWh):
Coal and gas 18,349 18,662 19,139 19,078 19,119
Purchased power 8,596 8,727 8,058 8,619 10,033
Nuclear 5,012 4,116 4,675 4,362 4,201
Other 379 452 427 528 504
---------------------------------------------------------------------------
Total 32,336 31,957 32,299 32,587 33,857
===========================================================================
Revenue per KWh from ultimate customers (cents) 6.01 6.00 5.53 5.32 5.42
- ------------------------------------------------------------------------------------------------------------------------------------
15
Interstate Power and Light Company
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Operating Information 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $355,072 $350,946 $337,615 $328,218 $333,906
Commercial 229,639 234,876 221,820 212,540 208,980
Industrial 315,494 335,680 311,070 305,022 314,470
------------------------------------------------------------------------
Total from ultimate customers 900,205 921,502 870,505 845,780 857,356
Sales for resale 34,513 53,320 57,433 53,050 70,592
Other 30,136 28,284 27,907 23,501 24,790
------------------------------------------------------------------------
Total $964,854 $1,003,106 $955,845 $922,331 $952,738
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Sales (000s MWh):
Residential 4,184 4,026 4,010 3,913 3,862
Commercial 3,392 3,342 3,333 3,280 3,045
Industrial 7,843 7,931 8,404 8,466 8,225
------------------------------------------------------------------------
Total from ultimate customers 15,419 15,299 15,747 15,659 15,132
Sales for resale 1,151 1,412 1,678 2,314 2,697
Other 103 107 111 108 99
------------------------------------------------------------------------
Total 16,673 16,818 17,536 18,081 17,928
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers (End of Period):
Residential 446,202 439,508 437,425 434,978 430,793
Commercial 76,856 75,132 74,483 73,813 73,170
Industrial 1,898 1,836 1,799 1,783 1,709
Other 1,328 1,359 1,393 1,389 1,407
------------------------------------------------------------------------
Total 526,284 517,835 515,100 511,963 507,079
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Electric Data:
Maximum peak hour demand (MW) 3,097 3,104 3,021 2,930 2,902
Sources of electric energy (000s MWh):
Coal and gas 10,219 10,343 11,065 10,892 10,203
Purchased power 4,134 4,595 4,041 5,183 6,110
Nuclear 3,202 2,697 3,117 2,548 2,682
Other 127 171 179 240 216
------------------------------------------------------------------------
Total 17,682 17,806 18,402 18,863 19,211
========================================================================
Revenue per KWh from ultimate customers (cents) 5.84 6.02 5.53 5.40 5.67
- ------------------------------------------------------------------------------------------------------------------------------------
16
Wisconsin Power and Light Company
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Operating Information 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $271,875 $248,128 $229,668 $213,496 $198,770
Commercial 146,726 138,269 127,199 116,947 108,724
Industrial 211,310 207,791 190,085 171,118 162,771
------------------------------------------------------------------------
Total from ultimate customers 629,911 594,188 546,952 501,561 470,265
Sales for resale 125,822 131,187 115,715 102,751 128,536
Other 31,947 28,075 29,524 22,295 15,903
------------------------------------------------------------------------
Total $787,680 $753,450 $692,191 $626,607 $614,704
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Sales (000s MWh):
Residential 3,432 3,318 3,151 3,111 2,964
Commercial 2,150 2,122 2,031 1,980 1,898
Industrial 4,454 4,538 4,688 4,570 4,493
------------------------------------------------------------------------
Total from ultimate customers 10,036 9,978 9,870 9,661 9,355
Sales for resale 3,654 3,524 3,228 3,252 4,492
Other 94 61 63 54 59
------------------------------------------------------------------------
Total 13,784 13,563 13,161 12,967 13,906
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers (End of Period):
Residential 376,027 368,246 362,178 355,691 350,334
Commercial 51,356 50,407 49,350 48,696 47,857
Industrial 1,007 990 974 947 909
Other 2,016 1,965 1,923 1,893 1,860
------------------------------------------------------------------------
Total 430,406 421,608 414,425 407,227 400,960
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Electric Data:
Maximum peak hour demand (MW) 2,674 2,696 2,508 2,397 2,292
Sources of electric energy (000s MWh):
Coal and gas 8,130 8,319 8,074 8,186 8,916
Purchased power 4,462 4,132 4,017 3,436 3,923
Nuclear 1,810 1,419 1,558 1,814 1,519
Other 252 281 248 288 288
------------------------------------------------------------------------
Total 14,654 14,151 13,897 13,724 14,646
========================================================================
Revenue per KWh from ultimate customers (cents) 6.28 5.95 5.54 5.19 5.03
- ------------------------------------------------------------------------------------------------------------------------------------
17
10
Alliant Energy Corporation
| Electric Operating Information | |||||||||||
| (Domestic Utility Only) | 2003 | 2002 | 2001 | 2000 | 1999 | ||||||
| Operating Revenues (000s): | |||||||||||
| Residential | $684,574 | $626,947 | $599,074 | $567,283 | $541,714 | ||||||
| Commercial | 409,704 | 376,365 | 373,145 | 349,019 | 329,487 | ||||||
| Industrial | 571,608 | 526,804 | 543,471 | 501,155 | 476,140 | ||||||
| Total from retail customers | 1,665,886 | 1,530,116 | 1,515,690 | 1,417,457 | 1,347,341 | ||||||
| Sales for resale | 195,822 | 160,335 | 184,507 | 173,148 | 155,801 | ||||||
| Other | 55,360 | 62,083 | 56,359 | 57,431 | 45,796 | ||||||
| Total | $1,917,068 | $1,752,534 | $1,756,556 | $1,648,036 | $1,548,938 | ||||||
| Electric Sales (000s MWh): | |||||||||||
| Residential | 7,565 | 7,616 | 7,344 | 7,161 | 7,024 | ||||||
| Commercial | 5,663 | 5,542 | 5,464 | 5,364 | 5,260 | ||||||
| Industrial | 12,345 | 12,297 | 12,469 | 13,092 | 13,036 | ||||||
| Total from retail customers | 25,573 | 25,455 | 25,277 | 25,617 | 25,320 | ||||||
| Sales for resale | 5,495 | 4,805 | 4,936 | 4,906 | 5,566 | ||||||
| Other | 184 | 197 | 168 | 174 | 162 | ||||||
| Total | 31,252 | 30,457 | 30,381 | 30,697 | 31,048 | ||||||
| Customers (End of Period): | |||||||||||
| Residential | 830,559 | 822,229 | 807,754 | 799,603 | 790,669 | ||||||
| Commercial | 129,130 | 128,212 | 125,539 | 123,833 | 122,509 | ||||||
| Industrial | 2,902 | 2,905 | 2,826 | 2,773 | 2,730 | ||||||
| Other | 3,362 | 3,344 | 3,324 | 3,316 | 3,282 | ||||||
| Total | 965,953 | 956,690 | 939,443 | 929,525 | 919,190 | ||||||
| Other Selected Electric Data: | |||||||||||
| Maximum peak hour demand (MW) | 5,887 | 5,729 | 5,677 | 5,397 | 5,233 | ||||||
| Sources of electric energy (000s MWh): | |||||||||||
| Coal | 18,451 | 17,674 | 18,190 | 18,669 | 18,585 | ||||||
| Purchased power | 9,155 | 8,596 | 8,727 | 8,058 | 8,619 | ||||||
| Nuclear | 4,498 | 5,012 | 4,116 | 4,675 | 4,362 | ||||||
| Gas | 631 | 675 | 472 | 470 | 493 | ||||||
| Other | 240 | 379 | 452 | 427 | 528 | ||||||
| Total | 32,975 | 32,336 | 31,957 | 32,299 | 32,587 | ||||||
| Revenue per KWh from retail customers (cents) | 6.51 | 6.01 | 6.00 | 5.53 | 5.32 | ||||||
11
Interstate Power and Light Company
| Electric Operating Information | 2003 | 2002 | 2001 | 2000 | 1999 | ||||||
| Operating Revenues (000s): | |||||||||||
| Residential | $367,681 | $355,072 | $350,946 | $337,615 | $328,218 | ||||||
| Commercial | 239,362 | 229,639 | 234,876 | 221,820 | 212,540 | ||||||
| Industrial | 327,838 | 315,494 | 335,680 | 311,070 | 305,022 | ||||||
| Total from retail customers | 934,881 | 900,205 | 921,502 | 870,505 | 845,780 | ||||||
| Sales for resale | 40,249 | 34,513 | 53,320 | 57,433 | 53,050 | ||||||
| Other | 31,852 | 30,136 | 28,284 | 27,907 | 23,501 | ||||||
| Total | $1,006,982 | $964,854 | $1,003,106 | $955,845 | $922,331 | ||||||
| Electric Sales (000s MWh): | |||||||||||
| Residential | 4,155 | 4,184 | 4,026 | 4,010 | 3,913 | ||||||
| Commercial | 3,496 | 3,392 | 3,342 | 3,333 | 3,280 | ||||||
| Industrial | 7,750 | 7,843 | 7,931 | 8,404 | 8,466 | ||||||
| Total from retail customers | 15,401 | 15,419 | 15,299 | 15,747 | 15,659 | ||||||
| Sales for resale | 1,299 | 1,151 | 1,412 | 1,678 | 2,314 | ||||||
| Other | 102 | 103 | 107 | 111 | 108 | ||||||
| Total | 16,802 | 16,673 | 16,818 | 17,536 | 18,081 | ||||||
| Customers (End of Period): | |||||||||||
| Residential | 448,719 | 446,202 | 439,508 | 437,425 | 434,978 | ||||||
| Commercial | 77,043 | 76,856 | 75,132 | 74,483 | 73,813 | ||||||
| Industrial | 1,888 | 1,898 | 1,836 | 1,799 | 1,783 | ||||||
| Other | 1,327 | 1,328 | 1,359 | 1,393 | 1,389 | ||||||
| Total | 528,977 | 526,284 | 517,835 | 515,100 | 511,963 | ||||||
| Other Selected Electric Data: | |||||||||||
| Maximum peak hour demand (MW) | 3,123 | 3,097 | 3,104 | 3,021 | 2,930 | ||||||
| Sources of electric energy (000s MWh): | |||||||||||
| Coal | 10,232 | 9,889 | 9,997 | 10,701 | 10,460 | ||||||
| Purchased power | 4,503 | 4,134 | 4,595 | 4,041 | 5,183 | ||||||
| Nuclear | 2,791 | 3,202 | 2,697 | 3,117 | 2,548 | ||||||
| Gas | 227 | 330 | 346 | 364 | 432 | ||||||
| Other | 63 | 127 | 171 | 179 | 240 | ||||||
| Total | 17,816 | 17,682 | 17,806 | 18,402 | 18,863 | ||||||
| Revenue per KWh from retail customers (cents) | 6.07 | 5.84 | 6.02 | 5.53 | 5.40 | ||||||
12
Wisconsin Power and Light Company
| Electric Operating Information | 2003 | 2002 | 2001 | 2000 | 1999 | ||||||
| Operating Revenues (000s): | |||||||||||
| Residential | $316,893 | $271,875 | $248,128 | $229,668 | $213,496 | ||||||
| Commercial | 170,342 | 146,726 | 138,269 | 127,199 | 116,947 | ||||||
| Industrial | 243,770 | 211,310 | 207,791 | 190,085 | 171,118 | ||||||
| Total from retail customers | 731,005 | 629,911 | 594,188 | 546,952 | 501,561 | ||||||
| Sales for resale | 155,573 | 125,822 | 131,187 | 115,715 | 102,751 | ||||||
| Other | 23,508 | 31,947 | 28,075 | 29,524 | 22,295 | ||||||
| Total | $910,086 | $787,680 | $753,450 | $692,191 | $626,607 | ||||||
| Electric Sales (000s MWh): | |||||||||||
| Residential | 3,410 | 3,432 | 3,318 | 3,151 | 3,111 | ||||||
| Commercial | 2,167 | 2,150 | 2,122 | 2,031 | 1,980 | ||||||
| Industrial | 4,595 | 4,454 | 4,538 | 4,688 | 4,570 | ||||||
| Total from retail customers | 10,172 | 10,036 | 9,978 | 9,870 | 9,661 | ||||||
| Sales for resale | 4,196 | 3,654 | 3,524 | 3,228 | 3,252 | ||||||
| Other | 82 | 94 | 61 | 63 | 54 | ||||||
| Total | 14,450 | 13,784 | 13,563 | 13,161 | 12,967 | ||||||
| Customers (End of Period): | |||||||||||
| Residential | 381,840 | 376,027 | 368,246 | 362,178 | 355,691 | ||||||
| Commercial | 52,087 | 51,356 | 50,407 | 49,350 | 48,696 | ||||||
| Industrial | 1,014 | 1,007 | 990 | 974 | 947 | ||||||
| Other | 2,035 | 2,016 | 1,965 | 1,923 | 1,893 | ||||||
| Total | 436,976 | 430,406 | 421,608 | 414,425 | 407,227 | ||||||
| Other Selected Electric Data: | |||||||||||
| Maximum peak hour demand (MW) | 2,782 | 2,674 | 2,696 | 2,508 | 2,397 | ||||||
| Sources of electric energy (000s MWh): | |||||||||||
| Coal | 8,219 | 7,785 | 8,193 | 7,968 | 8,125 | ||||||
| Purchased power | 4,652 | 4,462 | 4,132 | 4,017 | 3,436 | ||||||
| Nuclear | 1,707 | 1,810 | 1,419 | 1,558 | 1,814 | ||||||
| Gas | 404 | 345 | 126 | 106 | 61 | ||||||
| Other | 177 | 252 | 281 | 248 | 288 | ||||||
| Total | 15,159 | 14,654 | 14,151 | 13,897 | 13,724 | ||||||
| Revenue per KWh from retail customers (cents) | 7.19 | 6.28 | 5.95 | 5.54 | 5.19 | ||||||
13
2) DOMESTIC GAS UTILITY OPERATIONS
The utilities
IP&L and WP&L provide gas service in Iowa, southern and central Wisconsin, southern Minnesota and northern and northwestern Illinois. The number of gas customers and communities served by each utility at Dec. 31, 2002 was2003 were as follows:
Transportation and
Retail Customers Other Customers Communities Served
------------------- ---------------------- -----------------------
IP&L 234,853 219 253
WP&L 170,123 254 233
------------------- ---------------------- -----------------------
404,976 473 486
=================== ====================== =======================
2002
| Transportation and | |||
| Retail Customers | Other Customers | Communities Served | |
| IP&L | 235,812 | 214 | 253 |
| WP&L | 172,615 | 266 | 232 |
| 408,427 | 480 | 485 | |
2003 gas utility operations accounted for 18%21% and 18%22% of operating revenues and 7%8% and 9%13% of operating income for IP&L and WP&L, respectively, which include providing gas services to retail and transportation customers.
In providing gas commodity service to retail customers, Corporate Services administers a diversified portfolio of transportation and storage contracts on behalf of IP&L and WP&L. Transportation contracts with NNG, NGPLNorthern Natural Gas Company (NNG), Natural Gas Pipeline Co. of America (NGPL) and ANR Pipeline (ANR) allow access to gas supplies located in the U.S. and Canada. Arrangements with Firm Citygate Supplies (FCS) provide IP&L and WP&L with gas delivered directly to their service territories. The maximum daily delivery capacity of the individual utilities for 20022003 was as follows (in Dths):
| NNG | NGPL | ANR | FCS | Total | |
| IP&L | 198,641 | 89,932 | 56,680 | 22,000 | 367,253 |
| WP&L | 100,056 | -- | 146,467 | 39,000 | 285,523 |
IP&L and WP&L maintain purchase agreements with over 30 suppliers of natural gas from all gas producing regions of the U.S. and Canada. The majority of the gas supply contracts are for terms of six months or less, with the remaining supply contracts having terms up to two years. The utilities'through 2004. IP&L’s and WP&L’s gas supply commitments are index-based.
In addition to sales of natural gas to retail customers, IP&L and WP&L provide transportation service to commercial and industrial customers by moving customer-owned gas through their distribution systems to the customers' meter.customers’ meters. Revenues are collected for this service pursuant to transportation tariffs.
The gas sales of IP&L and WP&L follow a seasonal pattern. There is an annual base load of gas used for cooking, heating and other purposes, with a large heating peak occurring during the winter season. Natural gas obtained from producers, marketers and brokers, as well as gas in storage, is utilized to meet the peak heating season requirements. Storage contracts allow IP&L and WP&L to purchase gas in the summer, store the gas in underground storage fields and deliver it in the winter. Gas storage met approximately 20%23% and 16%24% of IP&L's&L’s and WP&L's&L’s annual gas requirements in 2002,2003, respectively.
Refer to Note 1(j)1(i) for information relating to utility natural gas cost recovery, Note 10(a) for information on natural gas derivatives and Note 11(b) for discussion of natural gas commitments in the "Notes“Notes to Consolidated Financial Statements."
”
Gas Environmental Matters -— Refer to Note 11(e) of the "Notes“Notes to Consolidated Financial Statements"Statements” for discussion of gas environmental matters.
18
Alliant Energy Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Operating Information (Utility Only) 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $218,746 $270,248 $245,697 $185,090 $175,603
Commercial 111,343 141,121 127,104 89,118 85,842
Industrial 25,177 31,262 27,752 21,855 20,204
Transportation/other 38,720 45,246 14,395 18,256 13,941
-----------------------------------------------------------------
Total $393,986 $487,877 $414,948 $314,319 $295,590
=================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Sales (000s Dths):
Residential 30,931 29,580 32,026 30,309 28,378
Commercial 19,348 18,055 19,696 18,349 17,760
Industrial 5,373 5,344 5,350 5,963 5,507
Transportation/other 47,386 48,539 43,931 46,954 52,389
-----------------------------------------------------------------
Total 103,038 101,518 101,003 101,575 104,034
=================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers at End of Period (Excluding Transportation/Other):
Residential 358,384 353,430 351,990 347,533 342,586
Commercial 45,793 45,480 44,654 44,289 43,825
Industrial 799 951 953 1,037 982
-----------------------------------------------------------------
Total 404,976 399,861 397,597 392,859 387,393
=================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Gas Data:
Revenue per Dth sold (excluding transportation/other) $6.38 $8.35 $7.02 $5.42 $5.45
Purchased gas costs per Dth sold (excluding transportation/other) $4.02 $6.31 $4.88 $3.30 $3.22
- ------------------------------------------------------------------------------------------------------------------------------------
19
Interstate Power and Light Company
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Operating Information 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $124,237 $162,575 $149,493 $115,428 $110,430
Commercial 61,222 82,463 72,592 53,548 51,944
Industrial 18,197 22,355 19,171 15,778 14,308
Transportation/other 11,239 13,621 8,540 8,795 7,171
------------------------------------------------------------------
Total $214,895 $281,014 $249,796 $193,549 $183,853
==================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Sales (000s Dths):
Residential 18,068 17,826 19,257 18,239 17,442
Commercial 10,774 10,483 11,101 10,578 10,475
Industrial 4,070 4,147 3,874 4,443 4,085
Transportation/other 28,814 31,673 30,251 33,717 39,441
------------------------------------------------------------------
Total 61,726 64,129 64,483 66,977 71,443
==================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers at End of Period (Excluding Transportation/Other):
Residential 206,808 205,065 205,300 203,518 201,521
Commercial 27,607 27,649 27,071 26,909 26,767
Industrial 438 441 440 461 476
------------------------------------------------------------------
Total 234,853 233,155 232,811 230,888 228,764
==================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Gas Data:
Revenue per Dth sold (excluding transportation/other) $6.19 $8.24 $7.05 $5.55 $5.52
Purchased gas cost per Dth sold (excluding transportation/other) $4.11 $6.20 $4.89 $3.41 $3.20
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin Power and Light Company
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Operating Information 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $94,509 $107,673 $96,204 $69,662 $65,173
Commercial 50,121 58,658 54,512 35,570 33,898
Industrial 6,980 8,907 8,581 6,077 5,896
Transportation/other 27,481 31,625 5,855 9,461 6,770
------------------------------------------------------------------
Total $179,091 $206,863 $165,152 $120,770 $111,737
==================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Sales (000s Dths):
Residential 12,863 11,754 12,769 12,070 10,936
Commercial 8,574 7,572 8,595 7,771 7,285
Industrial 1,303 1,197 1,476 1,520 1,422
Transportation/other 18,572 16,866 13,680 13,237 12,948
------------------------------------------------------------------
Total 41,312 37,389 36,520 34,598 32,591
==================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers at End of Period (Excluding Transportation/Other):
Residential 151,576 148,365 146,690 144,015 141,065
Commercial 18,186 17,831 17,583 17,380 17,058
Industrial 361 510 513 576 506
------------------------------------------------------------------
Total 170,123 166,706 164,786 161,971 158,629
==================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Gas Data:
Revenue per Dth sold (excluding transportation/other) $6.67 $8.54 $6.97 $5.21 $5.34
Purchased gas cost per Dth sold (excluding transportation/other) $3.89 $6.47 $4.69 $3.00 $3.13
- ------------------------------------------------------------------------------------------------------------------------------------
20
14
Alliant Energy Corporation
| Gas Operating Information (Domestic Utility Only) | 2003 | 2002 | 2001 | 2000 | 1999 | ||||||
| Operating Revenues (000s): | |||||||||||
| Residential | $310,658 | $218,746 | $270,248 | $245,697 | $185,090 | ||||||
| Commercial | 162,651 | 111,343 | 141,121 | 127,104 | 89,118 | ||||||
| Industrial | 34,201 | 25,177 | 31,262 | 27,752 | 21,855 | ||||||
| Transportation/other | 59,416 | 38,720 | 45,246 | 14,395 | 18,256 | ||||||
| Total | $566,926 | $393,986 | $487,877 | $414,948 | $314,319 | ||||||
| Gas Sales (000s Dths): | |||||||||||
| Residential | 31,871 | 30,931 | 29,580 | 32,026 | 30,309 | ||||||
| Commercial | 19,947 | 19,348 | 18,055 | 19,696 | 18,349 | ||||||
| Industrial | 5,093 | 5,373 | 5,344 | 5,350 | 5,963 | ||||||
| Transportation/other | 48,978 | 47,386 | 48,539 | 43,931 | 46,954 | ||||||
| Total | 105,889 | 103,038 | 101,518 | 101,003 | 101,575 | ||||||
| Customers at End of Period (Excluding Transportation/Other): | |||||||||||
| Residential | 361,835 | 358,384 | 353,430 | 351,990 | 347,533 | ||||||
| Commercial | 45,826 | 45,793 | 45,480 | 44,654 | 44,289 | ||||||
| Industrial | 766 | 799 | 951 | 953 | 1,037 | ||||||
| Total | 408,427 | 404,976 | 399,861 | 397,597 | 392,859 | ||||||
| Other Selected Gas Data: | |||||||||||
| Revenue per Dth sold | |||||||||||
| (excluding transportation/other) | $8.92 | $6.38 | $8.35 | $7.02 | $5.42 | ||||||
| Purchased gas costs per Dth sold | |||||||||||
| (excluding transportation/other) | $6.11 | $4.02 | $6.31 | $4.88 | $3.30 | ||||||
15
Interstate Power and Light Company
| Gas Operating Information | 2003 | 2002 | 2001 | 2000 | 1999 | ||||||
| Operating Revenues (000s): | |||||||||||
| Residential | $173,598 | $124,237 | $162,575 | $149,493 | $115,428 | ||||||
| Commercial | 88,057 | 61,222 | 82,463 | 72,592 | 53,548 | ||||||
| Industrial | 24,595 | 18,197 | 22,355 | 19,171 | 15,778 | ||||||
| Transportation/other | 8,299 | 11,239 | 13,621 | 8,540 | 8,795 | ||||||
| Total | $294,549 | $214,895 | $281,014 | $249,796 | $193,549 | ||||||
| Gas Sales (000s Dths): | |||||||||||
| Residential | 19,074 | 18,068 | 17,826 | 19,257 | 18,239 | ||||||
| Commercial | 11,408 | 10,774 | 10,483 | 11,101 | 10,578 | ||||||
| Industrial | 3,911 | 4,070 | 4,147 | 3,874 | 4,443 | ||||||
| Transportation/other | 29,182 | 28,814 | 31,673 | 30,251 | 33,717 | ||||||
| Total | 63,575 | 61,726 | 64,129 | 64,483 | 66,977 | ||||||
| Customers at End of Period (Excluding Transportation/Other): | |||||||||||
| Residential | 207,921 | 206,808 | 205,065 | 205,300 | 203,518 | ||||||
| Commercial | 27,465 | 27,607 | 27,649 | 27,071 | 26,909 | ||||||
| Industrial | 426 | 438 | 441 | 440 | 461 | ||||||
| Total | 235,812 | 234,853 | 233,155 | 232,811 | 230,888 | ||||||
| Other Selected Gas Data: | |||||||||||
| Revenue per Dth sold | |||||||||||
| (excluding transportation/other) | $8.32 | $6.19 | $8.24 | $7.05 | $5.55 | ||||||
| Purchased gas cost per Dth sold | |||||||||||
| (excluding transportation/other) | $5.99 | $4.11 | $6.20 | $4.89 | $3.41 | ||||||
Wisconsin Power and Light Company
| Gas Operating Information | 2003 | 2002 | 2001 | 2000 | 1999 | ||||||
| Operating Revenues (000s): | |||||||||||
| Residential | $137,060 | $94,509 | $107,673 | $96,204 | $69,662 | ||||||
| Commercial | 74,594 | 50,121 | 58,658 | 54,512 | 35,570 | ||||||
| Industrial | 9,606 | 6,980 | 8,907 | 8,581 | 6,077 | ||||||
| Transportation/other | 51,117 | 27,481 | 31,625 | 5,855 | 9,461 | ||||||
| Total | $272,377 | $179,091 | $206,863 | $165,152 | $120,770 | ||||||
| Gas Sales (000s Dths): | |||||||||||
| Residential | 12,797 | 12,863 | 11,754 | 12,769 | 12,070 | ||||||
| Commercial | 8,539 | 8,574 | 7,572 | 8,595 | 7,771 | ||||||
| Industrial | 1,182 | 1,303 | 1,197 | 1,476 | 1,520 | ||||||
| Transportation/other | 19,796 | 18,572 | 16,866 | 13,680 | 13,237 | ||||||
| Total | 42,314 | 41,312 | 37,389 | 36,520 | 34,598 | ||||||
| Customers at End of Period (Excluding Transportation/Other): | |||||||||||
| Residential | 153,914 | 151,576 | 148,365 | 146,690 | 144,015 | ||||||
| Commercial | 18,361 | 18,186 | 17,831 | 17,583 | 17,380 | ||||||
| Industrial | 340 | 361 | 510 | 513 | 576 | ||||||
| Total | 172,615 | 170,123 | 166,706 | 164,786 | 161,971 | ||||||
| Other Selected Gas Data: | |||||||||||
| Revenue per Dth sold | |||||||||||
| (excluding transportation/other) | $9.83 | $6.67 | $8.54 | $6.97 | $5.21 | ||||||
| Purchased gas cost per Dth sold | |||||||||||
| (excluding transportation/other) | $6.29 | $3.89 | $6.47 | $4.69 | $3.00 | ||||||
16
Resources manages a portfolio of wholly-owned subsidiaries and additional investments through distinct platforms: International, Non-regulated Generation, International, Integrated Services Investments and Energy Technologies.Other Investments. Resources intends to concentrate its strategic focus on the profitability and cash flow of these platforms and does not currently plan to invest significant capital in the growth of these platforms in the near term other than investments in Non-regulated Generation to support Alliant Energy’s domestic utility business. Refer to “Strategic Overview — Updated Strategic Plan” in MD&A for further discussion.
Non-regulated Generation — was originally formed to acquire, develop and operate a portfolio of competitive power generating assets across the U.S., focusing primarily on the Upper Midwest. In November 2002,February 2003, Resources purchased a 309- MW, non-regulated, tolled, natural gas-fired power plant in Neenah, Wisconsin for $109 million, which Resources financed with a $73 million 8-year secured credit agreement ($55 million of borrowings were outstanding at Dec. 31, 2003), which is non-recourse to Alliant Energy. The entire power output of the facility is sold under contract to Milwaukee-based We Energies through June 2008. In December 2003, Alliant Energy announced its commitment to pursue the sale of,
or other exit strategies for, Whiting, its investments in Australia and its
affordable housing business. Refer to Note 16 in Alliant Energy's "Notes to
Consolidated Financial Statements" for additional information. Resources
intends to focus on its International andthat Non-regulated Generation businesses
aswill refine its primary long-term strategic platformsfocus to support the development, financing and construction of generation to meet the needs of Alliant Energy’s domestic utility business and will continue reviewing for
waysdefer pursuit of other new non-regulated generation projects, other than potential projects to narrow its strategic focus and business platforms.
utilize existing equipment held by Non-regulated Generation, or further acquisitions of existing tolled generation in the near term.
International -— has invested in energy generation and distribution companies and projects in select growing markets. Currently, International has investments in Brazil, China and New Zealand and a loan to a development
project in Mexico.Zealand. International has focused on these locations because of
its belief that they offer a growing demand for energy and are receptivedeveloped local partnerships to foreign investment. International also has developed partnerships with other
entities that have intimateobtain knowledge of each local market'smarket’s business trends and customs. In addition, Alliant Energy has investments in Australia that
it is in the process of selling. Refer to Note 9 of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for additional information related to Alliant Energy'sEnergy’s investments in foreign entities.
Non-regulated Generation - Alliant Energy Generation, Inc., was formed to
build a portfolio of competitive generating assets across the U.S., focusing
primarily on the Upper Midwest. Alliant Energy expects to build this
portfolio through a combination of strategic acquisitions, partnerships and
development projects. Given the status of the current non-regulated
generation market, Alliant Energy's initial investments in this market will
focus on facilities with underlying long-term purchased-power agreements.
While Alliant Energy believes there are strong acquisition opportunities in
the existing non-regulated generation market, it will continue to be patient,
prudent and diligent in its pursuit of such opportunities. Synfuel has an
equity interest in a synthetic fuel processing facility. The synthetic fuel
project generates operating losses at its fuel processing facility, which are
more than offset by tax credits and the tax benefit of the losses generated.
Refer to "Liquidity and Capital Resources - Construction and Acquisition
Expenditures" in MD&A for additional information including an announcement in
February 2003 regarding the purchase of a generation facility.
Integrated Services -— provides a wide range of energy and environmental services for commercial, industrial, institutional, educational and governmental customers. It offers large energy users an array of services to maximize customers'customers’ productivity, profitability and energy efficiency, and provides solutions for waste remediation and other environmental engineering and consulting services. Integrated Services includes: Cogenex Corporation (Cogenex), Industrial Energy Applications, Inc. (IEA), Heartland Energy Group, Inc. (HEG), RMT, Inc. (RMT) and Alliant Energy Integrated Services Company -— Energy Solutions L.L.C. (Energy Solutions). Cogenex andinstalls energy efficient equipment for business customers. IEA provide business customers withprovides on-site energy services.services with small standby generators. HEG offers
commodities-based energy services primarily related to supplying naturalowns an interest in NG Energy, a gas marketing business, and owns several natural gas and oil gathering systems in Texas. RMT is an environmental and engineering consulting company that serves clients nationwide in a variety of industrial market segments and specializes in consulting on solid and hazardous waste management, site remediation, ground water quality protection, industrial designmonitoring and hygiene engineering,detection, and air and water
pollutionquality control. RMT is marketing SmartBurn,SmartBurn™, which is a large-scale emissions-reducing program for coal-burning facilities, to other U.S. companies. Energy Solutions provides energy consulting services to
commercial, industrial and institutional customers.services.
Other Investments - subsidiaries and— represents various additional investments include Transportation and
Investments.of Resources. Transportation is a holding company whose wholly-owned subsidiaries include the Cedar Rapids and Iowa City Railway Company (CRANDIC), which is a short-line railway that provides freight service between Cedar Rapids and Iowa City; IEI Barge Services, Inc. (Barge), which provides barge terminal and hauling services on the Mississippi River; and Williams Bulk Transfer Inc. (Williams) and Transfer Services, Inc.
(Transfer), which provide transfer and storage services. Synfuel has an equity interest in a synthetic fuel processing facility. The synthetic fuel project generates operating losses at its fuel processing facility, which are more than offset by tax credits and the tax benefit of the losses generated. Investments is a holding company whose primary wholly-owned subsidiary includes Iowa Land and
Building Company (Iowa Land) which is organized to pursue real estate and
economic development activities in IP&L's service territory. Investments
also haswith direct and indirect equity interests in various small real estate and economic development ventures, primarily concentrated in Cedar Rapids, Iowa, and holds other passive investments, including an equity interest in McLeod, an integrated telecommunications and services provider. Alliant
Energy isResources also has a loan to a development project in the process of selling Whiting and its affordable housing
business.
21
Energy Technologies - Resources has invested in energy technologies by
purchasing equity interests in Capstone, a microturbine producer; Nth Power
Technologies Fund II, LP, a venture capital fund specializing in emerging
energy-technology companies; andMexico, several other modest investments in emerging energy technology businesses. These ventures allow Alliant Energy to provide
its customers with new technologiesbusinesses and approximately 6% of the outstanding shares of WPC that are smaller in scale than more
traditional generation technologies, such as microturbines, fuel cells, solar
concepts and wind turbines.
Mass Marketing has held interests in energy marketing businesses. In January
2003, Alliant Energy committed to a planit intends to sell SmartEnergy, an
internet-based retailer, and Alliant Energy is in the process of disbanding
its Mass Marketing business unit.
2004.
E. DISCLOSURE CONCERNING WEBSITE ACCESS TO REPORTS
Alliant Energy makes its periodic and current reports, and amendments to those reports, available, free of charge, on its website atwww.alliantenergy.com/investors on the same day as such material is electronically filed with, or furnished to, the SEC. Alliant Energy is not including the information contained on its website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.
22
17
IP&L
IP&L's&L’s principal electric generating stations at Dec. 31, 2002,2003, were as follows:
Name and Location Primary Fuel 2002 Summer Capability
of Station Type in KWs
- ------------------------------------------------------------------ --------------- --------------------------------------
Duane Arnold Energy Center, Palo, IA Nuclear 393,050 (1)
Ottumwa Generating Station, Ottumwa, IA Coal 345,690(2)
Prairie Creek Station, Cedar Rapids, IA Coal 194,560
Sutherland Station, Marshalltown, IA Coal 142,700
Sixth Street Station, Cedar Rapids, IA Coal 49,510
Burlington Generating Station, Burlington, IA Coal 215,060
George Neal Unit 3, Sioux City, IA Coal 144,200(3)
George Neal Unit 4, Sioux City, IA Coal 138,640(4)
Dubuque Units 2, 3 and 4, Dubuque, IA Coal 77,070
M. L. Kapp Plant Units 1 and 2, Clinton, IA Coal 238,300
Lansing Units 1, 2, 3 and 4, Lansing, IA Coal 317,130
Louisa Unit 1, Louisa, IA Coal 28,000(5)
-----------
Total Coal 1,890,860
Marshalltown Combustion Turbines, Marshalltown, IA Oil 167,500
Centerville Combustion Turbines, Centerville, IA Oil 53,660
Montgomery Combustion Turbine Unit 1, Montgomery, MN Oil 20,210
Fox Lake Plant Combustion Turbine Unit 4, Sherburn, MN Oil 20,070
Lime Creek Plant Combustion Turbine Units 1 and 2,
Mason City, IA Oil 72,960
Diesel Stations, in IA/MN Oil 18,350
-----------
Total Oil 352,750
Grinnell Station, Grinnell, IA Gas 25,630
Agency Street Combustion Turbines, West Burlington, IA Gas 66,990
Burlington Combustion Turbines, Burlington, IA Gas 66,730
Red Cedar Combustion Turbine, Cedar Rapids, IA Gas 17,380
Fox Lake Plant Units 1, 2 and 3, Sherburn, MN Gas 106,870
-----------
Total Gas 283,600
------------
Total generating capability 2,920,260
============
| Name and Location | Primary Fuel | 2003 Summer Capability | |||||
| of Station | Type | in KWs | |||||
| Duane Arnold Energy Center, Palo, IA | Nuclear | 393,050 | (1) | ||||
| Ottumwa Generating Station, Ottumwa, IA | Coal | 345,690 | (2) | ||||
| Prairie Creek Station, Cedar Rapids, IA | Coal | 210,910 | |||||
| Sutherland Station, Marshalltown, IA | Coal | 147,090 | |||||
| Sixth Street Station, Cedar Rapids, IA | Coal | 59,150 | |||||
| Burlington Generating Station, Burlington, IA | Coal | 214,120 | |||||
| George Neal Unit 3, Sioux City, IA | Coal | 144,200 | (3) | ||||
| George Neal Unit 4, Sioux City, IA | Coal | 138,640 | (4) | ||||
| Dubuque Units 2, 3 and 4, Dubuque, IA | Coal | 78,020 | |||||
| M. L. Kapp Plant Units 1 and 2, Clinton, IA | Coal | 235,680 | |||||
| Lansing Units 1, 2, 3 and 4, Lansing, IA | Coal | 317,130 | |||||
| Louisa Unit 1, Louisa, IA | Coal | 28,000 | (5) | ||||
| Total Coal | 1,918,630 | ||||||
| Marshalltown Combustion Turbines, Marshalltown, IA | Oil | 170,260 | |||||
| Centerville Combustion Turbines, Centerville, IA | Oil | 51,280 | |||||
| Montgomery Combustion Turbine Unit 1, Montgomery, MN | Oil | 19,920 | |||||
| Fox Lake Plant Combustion Turbine Unit 4, Sherburn, MN | Oil | 19,460 | |||||
| Lime Creek Plant Combustion Turbine Units 1 and 2, | |||||||
| Mason City, IA | Oil | 73,170 | |||||
| Diesel Stations, in IA/MN | Oil | 18,410 | |||||
| Total Oil | 352,500 | ||||||
| Grinnell Station, Grinnell, IA | Gas | 48,300 | |||||
| Agency Street Combustion Turbines, West Burlington, IA | Gas | 70,040 | |||||
| Burlington Combustion Turbines, Burlington, IA | Gas | 70,730 | |||||
| Red Cedar Combustion Turbine, Cedar Rapids, IA | Gas | 18,020 | |||||
| Fox Lake Plant Units 1, 2 and 3, Sherburn, MN | Gas | 109,530 | |||||
| Total Gas | 316,620 | ||||||
| Total generating capability | 2,980,800 | ||||||
All KWs shown below represent the 20022003 summer generating capability.
(1) Represents IP&L's 70% ownership interest in this 561,500 KW generating
station, which is operated by IP&L.
(2) Represents IP&L's 48% ownership interest in this 720,190 KW generating
station, which is operated by IP&L.
(3) Represents IP&L's 28% ownership interest in this 515,000 KW generating
station, which is operated by MidAmerican Energy Company.
(4) Represents IP&L's 21.5% ownership interest in this 644,000 KW generating
station, which is operated by MidAmerican Energy Company.
(5) Represents IP&L's 4% ownership interest in this 700,000 KW generating
station, which is operated by MidAmerican Energy Company.
| (1) | Represents IP&L’s 70% ownership interest in this 561,500 KW generating station, which is operated by the NMC, with IP&L as the contracting partner for NMC operation. |
| (2) | Represents IP&L’s 48% ownership interest in this 720,190 KW generating station, which is operated by IP&L. |
| (3) | Represents IP&L’s 28% ownership interest in this 515,000 KW generating station, which is operated by MidAmerican Energy Company (MidAmerican). |
| (4) | Represents IP&L’s 21.5% ownership interest in summer 2003 in this 644,000 KW generating station, which is operated by MidAmerican. Effective Dec. 31, 2003, IP&L’s ownership interest in this generating station increased to 25.7%. |
| (5) | Represents IP&L’s 4% ownership interest in this 700,000 KW generating station, which is operated by MidAmerican. |
IP&L owns 7,0687,078 miles of electric transmission lines and 801795 substations, substantially all located in Iowa, Minnesota and Illinois. IP&L's&L’s principal properties are suitable for their intended use and substantially all are held subject to the liens of indentures relating to its bonds. 23
18
WP&L
WP&L's&L’s principal electric generating stations at Dec. 31, 2002,2003, were as follows:
Name and Location Primary Fuel 2002 Summer Capability
of Station Type in KWs
- ----------------------------------------------------------- --------------- --------------------------------------
Kewaunee Nuclear Power Plant, Kewaunee, WI Nuclear 217,300 (1)
Nelson Dewey Generating Station, Cassville, WI Coal 222,460
Edgewater Generating Station #3, Sheboygan, WI Coal 76,000
Edgewater Generating Station #4, Sheboygan, WI Coal 230,520 (2)
Edgewater Generating Station #5, Sheboygan, WI Coal 314,340 (3)
Columbia Energy Center, Portage, WI Coal 502,130 (4)
-------------
Total Coal 1,345,450
Blackhawk Generating Station, Beloit, WI Gas 54,500
Rock River Generating Station, Beloit, WI Gas 147,830
Rock River Combustion Turbine, Beloit, WI Gas 150,330
South Fond du Lac Combustion Turbine
Units 2 and 3, Fond du Lac, WI Gas 167,670
Sheepskin Combustion Turbine, Edgerton, WI Gas 37,920
-------------
Total Gas 558,250
Kilbourn Hydro Plant, Wisconsin Dells, WI Hydro 7,000
Prairie du Sac Hydro Plant, Prairie du Sac, WI Hydro 15,000
Petenwell/Castle Rock Hydro Plants,
Wisconsin Rapids, WI Hydro 6,000 (5)
-------------
Total Hydro 28,000
-------------
Total generating capability 2,149,000
=============
| Name and Location | Primary Fuel | 2003 Summer Capability | |||||
| of Station | Type | in KWs | |||||
| Kewaunee Nuclear Power Plant, Kewaunee, WI | Nuclear | 218,940 | (1) | ||||
| Nelson Dewey Generating Station, Cassville, WI | Coal | 223,120 | |||||
| Edgewater Generating Station #3, Sheboygan, WI | Coal | 75,590 | |||||
| Edgewater Generating Station #4, Sheboygan, WI | Coal | 230,346 | (2) | ||||
| Edgewater Generating Station #5, Sheboygan, WI | Coal | 316,800 | (3) | ||||
| Columbia Energy Center, Portage, WI | Coal | 507,304 | (4) | ||||
| Total Coal | 1,353,160 | ||||||
| Blackhawk Generating Station, Beloit, WI | Gas | 52,670 | |||||
| Necedah Combustion Turbine, Necedah, WI | Gas | 7,500 | (5) | ||||
| Rock River Generating Station, Beloit, WI | Gas | 149,890 | |||||
| Rock River Combustion Turbine, Beloit, WI | Gas | 154,980 | |||||
| South Fond du Lac Combustion Turbine | |||||||
| Units 2 and 3, Fond du Lac, WI | Gas | 165,100 | |||||
| Sheepskin Combustion Turbine, Edgerton, WI | Gas | 36,790 | |||||
| Total Gas | 566,930 | ||||||
| Kilbourn Hydro Plant, Wisconsin Dells, WI | Hydro | 9,000 | |||||
| Prairie du Sac Hydro Plant, Prairie du Sac, WI | Hydro | 21,000 | |||||
| Petenwell/Castle Rock Hydro Plants, | |||||||
| Wisconsin Rapids, WI | Hydro | 6,000 | (6) | ||||
| Total Hydro | 36,000 | ||||||
| Total generating capability | 2,175,030 | ||||||
All KWs shown below represent the 20022003 summer generating capability.
(1) Represents WP&L's 41% ownership interest in this 530,000 KW
generating station, which is operated by WPSC.
(2) Represents WP&L's 68.2% ownership interest in this 338,000 KW generating
station, which is operated by WP&L.
(3) Represents WP&L's 75% ownership interest in this 419,120 KW generating
station, which is operated by WP&L.
(4) Represents WP&L's 46.2% ownership interest in this 1,086,860 KW
generating station, which is operated by WP&L.
(5) WP&L has a 50% ownership interest in this 18,000 KW hydro plant, which
is operated by Wisconsin River Power Company, but has a contract to
purchase only one-third of the plant's output.
| (1) | Represents WP&L’s 41% ownership interest in this 534,000 KW generating station, which is operated by the NMC, with WPSC as the contracting partner for NMC operation. Refer to Note 17 of Alliant Energy’s “Notes to Consolidated Financial Statements” for information on the proposed sale of Kewaunee by WP&L and WPSC. |
| (2) | Represents WP&L’s 68.2% ownership interest in this 337,750 KW generating station, which is operated by WP&L. |
| (3) | Represents WP&L’s 75% ownership interest in this 422,400 KW generating station, which is operated by WP&L. |
| (4) | Represents WP&L’s 46.2% ownership interest in this 1,098,060 KW generating station, which is operated by WP&L. |
| (5) | WP&L has a 50% ownership interest in this 15,000 KW combustion turbine, which is operated by WRPC, and has a contract to purchase one-half of the plant’s output. |
| (6) | WP&L has a 50% ownership interest in this 18,000 KW hydro plant, which is operated by WRPC, but has a contract to purchase only one-third of the plant’s output. |
WP&L owns 158162 distribution substations located adjacent to the communities served, substantially all located in Wisconsin. WP&L's transmission assets were transferred to ATC in 2001. Substantially all of WP&L's facilitiesprincipal properties are suitable for their intended use and substantially all are held subject to the lien of its First Mortgage Bond indenture. Refer to "C. Information Relating to Domestic
Utility Operations"Strategic Overview - 1) Electric Utility Operations - General"Updated Strategic Plan" in "Business"MD&A for information related to WP&L's investment in ATC.
24
Resources
Resources'
Resources’ principal properties at Dec. 31, 20022003 were as follows:
1. International - owns nine combined heat and power facilities located in
China with an aggregate generating capacity of approximately 475 MW.
2. Non-regulated Generation - turbines and related generation equipment for
use in future generation projects.
3. Integrated Services - standby generation, cogeneration, steam production
and propane air systems and owns an interest in an oil gathering system
and natural gas gathering systems, which had 500 miles and 213 miles,
respectively, of pipeline in Texas.
4. Investments - CRANDIC has 112 railroad track miles all located within
Iowa.
| 1. | Non-regulated Generation — owns two gas and one steam turbines for use in future generation projects, and also owns a 309-MW, non-regulated, tolled, natural gas-fired power plant in Wisconsin. |
| 2. | International — owns interests in 11 combined heat and power facilities located in China with an aggregate generating capacity of approximately 525 MW. |
19
| 3. | Integrated Services — owns standby generation and steam production systems. Also has interests in oil and natural gas gathering systems, which have 500 miles and 213 miles, respectively, of pipeline in Texas. |
| 4. | Other Investments — CRANDIC has 112 railroad track miles all located within Iowa, and owns 17 locomotives and 192 railcars. |
Alliant Energy
In October 2000, Alliant Energy and WP&L filed a federal lawsuit seeking declaratory relief regarding whether certain provisions of WUHCA are unconstitutional as a violation of the interstate commerce and equal protection provisions of the U.S. Constitution. Alliant Energy and WP&L are challengingchallenged the provisions of WUHCA whichthat restrict ownership in utility holding companies, limit the investments those companies can make, and place significant restrictions on companies that invest in Wisconsin utility holding companies.
Alliant Energycompanies and WP&L also requested that the court consider the
constitutionality of issues related to theimpose an asset cap on non-utility investments
imposed by WUHCA. Alliant Energy and WP&L were seeking only declaratory relief
and not damages in the litigation. In February 2001, the lawsuit wasinvestments. The district court ultimately dismissed
based on lack of allegations of "injury in fact." Alliant Energy and WP&L
filed a motion for reconsideration with the court, which was denied in April
2001. Alliant Energy and WP&L appealed the lower court's rulings to the 7th
Circuit Court of Appeals. In January 2002, the 7th Circuit reversed the
district court's decision and remanded the case back to the district court for
hearing. In May 2002, the district judge granted the state's motion foron summary judgment and dismissed Alliant Energy's and WP&L's case.grounds in May 2002. Alliant Energy and WP&L appealed the district court'scourt’s decision to the 7th7th Circuit Court of Appeals which ruled in June 2002. Briefing of the appeal has been completed,May 2003 that it is unconstitutional to require public utility holding companies with a
decision expectedWisconsin utility subsidiaries to be incorporated in the second quarterstate of 2003.Wisconsin. The remaining WUHCA provisions that Alliant Energy and WP&L
cannot currently predictchallenged were upheld as constitutional. Alliant Energy filed a petition with the outcome ofU.S. Supreme Court asking it to review the case. The Supreme Court decided in January 2004 not to review the case which effectively ended this litigation.
lawsuit.
Alliant Energy received an adverse ruling in 1999 from a U.S. district court dealing with an income tax refund claim Alliant Energy filed relating to capital losses disallowed under audit by the IRS. The district court also disallowed certain related deductions allowed by the IRS to reduce a tax refund due to Alliant Energy related to another tax issue. Alliant Energy appealed the district court'scourt’s ruling and the government appealed the decision whichthat led to the tax refund due to Alliant Energy. In June 2001, the U.S. Court of Appeals for the 8th8th Circuit ruled in Alliant Energy'sEnergy’s favor with respect to both tax issues. In July 2001, the government filed a petition
for rehearing with the U.S. Court of Appeals related to the capital losses
allowed in the 8th Circuit opinion. The 8th Circuit denied the appeal in
September 2001issues and ultimately remanded the case back to the district court for entry of judgment. The federal government decided not to pursue the 8th Circuit’s ruling in favor of Alliant Energy of the U.S. Court of Appeals for the 8th Circuit with respect to these two tax issues. As a result, Alliant Energy recorded the applicable tax benefit and interest income in the fourth quarter of 2001 related to these events. An additional potential refund of approximately $14 million, plus interest, was also being contested by the government. However,government, resulting in the district court ruledruling in favor of the federal government in July 2002 on
such issue.2002. Alliant Energy has appealedwas not successful in its appeal of this decision. However, the most recent district court
decision. An adverse decision on appeal wouldby the 8th Circuit did not result in Alliant Energy recording any charges to earnings, as the potential refund simply representssought represented a gain contingency. Subsequently,As a result, Alliant Energy will receive a tax refund of approximately $20 million in 2004, which includes interest.
In the governmentfourth quarter of 2003, the Wisconsin Environmental Law Advocates (WELA) filed a cross appeal, which
it later decided not to pursuecomplaint in the U.S. District Court for the Western District of Wisconsin against WP&L and voluntarily moved for its dismissal. Alliant Energy is awaiting a decision fromalleging violations of the 8th Circuit Courtfederal Clean Water Act at the Columbia generating station. The complaint seeks certain upgrades to Columbia’s wastewater treatment program, as well as unspecified penalties and attorney fees. In addition, the Wisconsin DNR has been pursuing enforcement of Appeals.
IP&L
IP&Lthis same matter and has appealedrecently referred the matter to the Iowa State BoardWisconsin Department of Tax Review, an agency ofJustice (WDOJ). To date, no action has been filed by the State of Iowa,Wisconsin; however, Alliant Energy expects a complaint to be filed in due course. Alliant Energy, WDOJ and WELA have initiated settlement discussions. Alliant Energy believes that the total cost to resolve any potential penalties and implement any required upgrades in this matter will not be material. Refer to "Electric Environmental Matters" in "Business" for further discussion.
IP&L —None.
WP&L — Refer to “Legal Proceedings — Alliant Energy” for information regarding assessments of Iowa property tax made by the
Director of the Iowa Department of Revenuejoint Alliant Energy and Finance. The appeals involve
assessments for the years 1994 through 1998 and seek reduction of the
assessments reflecting the true value of the operating property of the
companies. At the present time, IP&L cannot predict what impact, if any, the
appeals process will have on its financial condition or results of
operations.
25
- None
lawsuits.
Environmental Matters
The
Additional information required by Item 3 with regards to environmental matters is included in "C.“C. Information Relating to Domestic Utility Operations -— 1) Domestic Electric Utility Operations"Operations” in "Business," "Liquidity“Business,” “Liquidity and Capital Resources - - Environmental"— Environmental” in MD&A and Note 11(e) of the "Notes“Notes to Consolidated Financial Statements,"” which information is incorporated herein by reference.
Rate Matters
The information required by Item 3 with regards to rate matters is included in "Business," Note 2 of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” and "Rates“Rates and Regulatory Matters"Matters” in MD&A, which information is incorporated herein by reference.
20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
IP&L
At IP&L's annual meeting of shareowners held on Oct. 9, 2002, Alan B. Arends,
Katharine C. Lyall, Singleton B. McAllister and Anthony R. Weiler were
elected as directors of IP&L for terms expiring in 2005. Alliant Energy
voted all of the outstanding shares of common stock of IP&L (consisting of
13,370,788 shares) in favor of the election of these individuals. The
following are the other directors of IP&L whose terms of office continued
after the 2002 annual meeting: Erroll B. Davis, Jr., Lee Liu, Robert W.
Schlutz and Wayne H. Stoppelmoor, with terms expiring in 2003; and Jack B.
Evans, Joyce L. Hanes, David A. Perdue and Judith D. Pyle, with terms
expiring in 2004.
None.
EXECUTIVE OFFICERS OF THE REGISTRANTS
- -------------------------------------
The executive officers of Alliant Energy, IP&L and WP&L as of the date of this filing are as follows (figures following the names represent the officer'sofficer’s age as of Dec. 31, 2002)2003):
Executive Officers of Alliant Energy
Erroll B. Davis, Jr., 58,59, was elected Chairman of the Board effective April - ---------------
2000, has served as President and Chief Executive Officer (CEO) since 1990 and has been a board member since 1988. He previously also served as President from 1990 through 2003.
William D. Harvey 53,, 54, was elected President and Chief Operating Officer (COO) effective January 2004. He previously served as Executive Vice President (EVP)-Generation - -----------------since 1998.
Eliot G. Protsch, 50, was elected Senior EVP and Chief Financial Officer (CFO) effective April 1998.
January 2004. He previously served as EVP and CFO since September 2003 and as EVP-Energy Delivery from 1998 to September 2003.
James E. Hoffman 49,, 50, was elected EVP-Business Development effective April - ----------------
1998.
Eliot G. Protsch, 49, was elected EVP-Energy Delivery effective April 1998.
- ----------------
Barbara J. Swan 51,, 52, was elected EVP and General Counsel effective October - ---------------
1998.
Pamela J. Wegner, 56, was elected EVP-Strategy and Performance effective January 2004. She previously served as Vice President (VP)-General Counsel from 1994
to 1998 at WP&L.
EVP-Shared Solutions since 1998.
Thomas M. Walker, 55,L. Aller, 54, was elected EVP and Chief Financial Officer (CFO)
- ----------------Senior Vice President-Energy Delivery effective April 1998.
Pamela J. Wegner, 55, was elected EVP-Shared Solutions effective October
- ----------------
1998. SheJanuary 2004. He previously served as VP-Information Servicesinterim EVP-Energy Delivery since September 2003 and Administration
from 1994 to 1998as Vice President (VP)-Investments at WP&L.
Dundeana K. Doyle, 44, was elected VP-Infrastructure Security effective
- -----------------
January 2002. She previously served as VP-Customer Operations since December
2000 at IESU and WP&L, VP-Customer Services and Operations from 1999 to 2000
at IESU and WP&L, VP-Customer OperationsResources from 1998 to 1999 at IESU and
VP-Customer Services from 1998 to 1999 at WP&L.
2003.
Thomas L. Hanson 49,, 50, was elected VP and Treasurer effective April 2002. He
- ---------------- previously served as Managing Director-Generation Services since 2001 and General Manager-Business and Financial Performance, Generation from 1998 to 2001.
John E. Kratchmer 40,, 41, was elected VP-Controller and Chief Accounting Officer - -----------------(CAO) effective October 2002. He previously served as Corporate Controller and Chief Accounting Officer since October 2000 and Assistant Controller from 1998 to 2000.
Barbara A. Siehr, 51, was elected VP-Financial Planning and Strategic
- ----------------
Projects effective October 2002. She previously served as Managing
Director-Operations and Operations Services since December 2000, General
Manager-Operations East from 1999 to 2000 and General
Manager-Engineering/Operations Services from 1998 to 1999.
26
F. J. Buri, 48, was elected Corporate Secretary effective April 2002. He
- ----------
previously served as Senior Attorney since June 1999. Prior to joining
Alliant Energy, he was General Counsel and Secretary from 1996 to 1999 at
Universal Savings Bank, N.A.
None of the executive officers listed above is related to any member of the Board of Directors or nominee for director or any other executive officer. Mr. Davis has an employment agreement with Alliant Energy pursuant to which his term of office is established. All other executive officers have no definite terms of office and serve at the pleasure of the Board of Directors.
Additional Officers of Alliant Energy
Enrique Bacalao, 53, was elected Assistant Treasurer effective November
- ---------------
1998. Prior to joining Alliant Energy, he was VP, Corporate Banking from
1995 to 1998 at the Chicago Branch of The Industrial Bank of Japan, Limited.
Eric D. Mott, 35, was elected Assistant Treasurer effective December 2001.
- ------------
He previously served as Manager-Investor Relations and Trust Fund Investment
Management since December 2000 and Senior Treasury Analyst from 1998 to 2000.
Joan M. Thompson, 45, was elected Assistant Controller effective June 2000.
- ----------------
She previously served as Manager-IESU and IPC Accounting since February 1999
and Manager-IESU Accounting from 1998 to 1999.
Patricia L. Reininger, 50, was elected Assistant Corporate Secretary
- ---------------------
effective January 2003. She previously served as Executive Administrative
Assistant since August 2000. Prior to joining Alliant Energy, she was
Assistant to the Chairperson and Assistant Corporate Secretary from 1993 to
1999 at Sentry Insurance.
Executive Officers of IP&L
Erroll B. Davis, Jr., 58,59, was elected Chairman of the Board effective April
- --------------- 2000 and CEO effective April 1998. Mr. Davis is also an officer of Alliant Energy and WP&L.
Eliot G. Protsch, 49,
William D. Harvey, 54, was elected PresidentCOO effective April 1998. Mr.
- ----------------
Protsch is also an officer of Alliant Energy and WP&L.
William D. Harvey, 53, was elected EVP-Generation effective October 1998.
- -----------------January 2004. Mr. Harvey is also an officer of Alliant Energy and WP&L.
Thomas L. Aller, 54, was elected President effective January 2004. Mr. Aller is also an officer of Alliant Energy and WP&L.
Eliot G. Protsch, 50, was elected CFO effective January 2004. He previously served as EVP and CFO since September 2003 and also as President from 1998 through 2003. Mr. Protsch is also an officer of Alliant Energy and WP&L.
Barbara J. Swan 51,, 52, was elected EVP and General Counsel effective October
- --------------- 1998. Ms. Swan is also an officer of Alliant Energy and WP&L.
Thomas M. Walker, 55, was elected EVP and CFO in 1996. Mr. Walker is also an
- ----------------
officer of Alliant Energy and WP&L.
Pamela J. Wegner, 55, was elected EVP-Shared Solutions effective October
- ----------------
1998. Ms. Wegner is also an officer of Alliant Energy and WP&L.
Dundeana K. Doyle, 44, was elected VP-Infrastructure Security effective
- -----------------
January 2002. Ms. Doyle is also an officer of Alliant Energy and WP&L.
Vern A. Gebhart, 49, was elected VP-Customer Operations effective January
- ---------------
2002. He previously served as Managing Director-Strategic Projects and
Capital Control since 2000 and Director-Strategic Projects and Capital
Control from 1998 to 2000 at Alliant Energy. Mr. Gebhart is also an officer
of WP&L.
Thomas L. Hanson 49,, 50, was elected VP and Treasurer effective April 2002. Mr.
- ---------------- Hanson is also an officer of Alliant Energy and WP&L.
John E. Kratchmer 40,, 41, was elected VP-Controller and Chief Accounting Officer
- -----------------CAO effective October 2002. Mr. Kratchmer is also an officer of Alliant Energy and WP&L.
Daniel L. Mineck, 54, was elected VP-Performance Engineering and
- ----------------
Environmental effective October 1998. He previously served as Assistant
VP-Corporate Engineering since 1996. Mr. Mineck is also an officer of WP&L.
Barbara A. Siehr, 51, was elected VP-Financial Planning and Strategic
- ----------------
Projects effective October 2002. Ms. Siehr is also an officer of Alliant
Energy and WP&L.
Kim K. Zuhlke, 49, was elected VP-Engineering, Sales and Marketing effective
- -------------
September 1999. He previously served as VP-Customer Operations since October
1998. Mr. Zuhlke is also an officer of WP&L.
F. J. Buri, 48, was elected Corporate Secretary effective April 2002. Mr.
- ----------
Buri is also an officer of Alliant Energy and WP&L.
None of the executive officers listed above is related to any member of the
Board of Directors or nominee for director or any other executive officer.
Mr. Davis has an employment agreement with Alliant Energy pursuant to which
27
his term of office is established. All other executive officers have no
definite terms of office and serve at the pleasure of the Board of Directors.
Additional Officers of IP&L
Enrique Bacalao, 53, was elected Assistant Treasurer effective November 1998.
- ---------------
Mr. Bacalao is also an officer of Alliant Energy and WP&L.
Steven F. Price, 50, was elected Assistant Treasurer effective April 1998.
- ---------------
Mr. Price is also an officer of WP&L.
Patricia L. Reininger, 50, was elected Assistant Corporate Secretary
- ---------------------
effective January 2003. Ms. Reininger is also an officer of Alliant Energy
and WP&L.
Daniel L. Siegfried, 43, was elected Assistant Corporate Secretary effective
- -------------------
April 1998. He also serves as Senior Attorney for Alliant Energy.
Executive Officers of WP&L
Erroll B. Davis, Jr., 58, was elected Chairman of the Board effective April
- --------------------
2000 and CEO effective April 1998. Mr. Davis is also an officer of Alliant
Energy and IP&L.
William D. Harvey, 53, was elected President effective April 1998. Mr.
- -----------------
Harvey is also an officer of Alliant Energy and IP&L.
Eliot G. Protsch, 49, was elected EVP-Energy Delivery effective October
- ----------------
1998. He previously served as Senior VP from 1993 to 1998 at WP&L. Mr.
Protsch is also an officer of Alliant Energy and IP&L.
Barbara J. Swan, 51, was elected EVP and General Counsel effective October
- ---------------
1998. She previously served as VP-General Counsel from 1994 to 1998 at
WP&L. Ms. Swan is also an officer of Alliant Energy and IP&L.
Thomas M. Walker, 55, was elected EVP and CFO effective October 1998. Mr.
- ----------------
Walker is also an officer of Alliant Energy and IP&L.
Pamela J. Wegner, 55, was elected EVP-Shared Solutions effective October
- ----------------
1998. She previously served as VP-Information Services and Administration
from 1994 to 1998 at WP&L. Ms. Wegner is also an officer of Alliant Energy
and IP&L.
Dundeana K. Doyle, 44, was elected VP-Infrastructure Security effective
- -----------------
January 2002. Ms. Doyle is also an officer of Alliant Energy and IP&L.
Vern A. Gebhart, 49, was elected VP-Customer Operations effective January
- ---------------
2002. Mr. Gebhart is also an officer of IP&L.
Thomas L. Hanson, 49, was elected VP and Treasurer effective April 2002. Mr.
- ----------------
Hanson is also an officer of Alliant Energy and IP&L.
John E. Kratchmer, 40, was elected VP-Controller and Chief Accounting Officer
- -----------------
effective October 2002. Mr. Kratchmer is also an officer of Alliant Energy
and IP&L.
Daniel L. Mineck, 54, was elected VP-Performance Engineering and
- ----------------
Environmental effective April 1998. Mr. Mineck is also an officer of IP&L.
Barbara A. Siehr, 51, was elected VP-Financial Planning and Strategic
- ----------------
Projects effective October 2002. Ms. Siehr is also an officer of Alliant
Energy and IP&L.
Kim K. Zuhlke, 49, was elected VP-Engineering, Sales & Marketing effective
- -------------
September 1999. He previously served as VP-Customer Operations since April
1998 at WP&L and since October 1998 at IESU and as VP-Customer Services and
Sales from 1993 to 1998 at WP&L. Mr. Zuhlke is also an officer of IP&L.
F. J. Buri, 48, was elected Corporate Secretary effective April 2002. Mr.
- ----------
Buri is also an officer of Alliant Energy and IP&L.
None of the executive officers listed above is related to any member of the Board of Directors or nominee for director or any other executive officer. Mr. Davis has an employment agreement with Alliant Energy pursuant to which his term of office is established. All other executive officers have no definite terms of office and serve at the pleasure of the Board of Directors.
Additional
21
Executive Officers of WP&L
Enrique Bacalao, 53,
Erroll B. Davis, Jr., 59, was elected Assistant TreasurerChairman of the Board effective November
- ---------------April 2000 and CEO effective April 1998. Mr. BacalaoDavis is also an officer of Alliant Energy and IP&L.
Steven F. Price, 50,
William D. Harvey, 54, was elected Assistant Treasurer effective April 1998.
- ---------------
Mr. Price is also an officer of IP&L.
Patricia L. Reininger, 50, was elected Assistant Corporate Secretary
- ---------------------COO effective January 2003. Ms. Reininger2004. He previously served as President since 1998. Mr. Harvey is also an officer of Alliant Energy and IP&L.
28
Barbara J. Swan, 52, was elected President effective January 2004. She previously served as EVP and General Counsel since 1998. Ms. Swan is also an officer of Alliant Energy and IP&L.
Eliot G. Protsch, 50, was elected CFO effective January 2004. He previously served as EVP and CFO since September 2003. Mr. Protsch is also an officer of Alliant Energy and IP&L.
Thomas L. Aller, 54, was elected Senior VP-Energy Delivery effective January 2004. Mr. Aller is also an officer of Alliant Energy and IP&L.
Thomas L. Hanson, 50, was elected VP and Treasurer effective April 2002. Mr. Hanson is also an officer of Alliant Energy and IP&L.
John E. Kratchmer, 41, was elected VP-Controller and CAO effective October 2002. Mr. Kratchmer is also an officer of Alliant Energy and IP&L.
None of the executive officers listed above is related to any member of the Board of Directors or nominee for director or any other executive officer. Mr. Davis has an employment agreement with Alliant Energy pursuant to which his term of office is established. All other executive officers have no definite terms of office and serve at the pleasure of the Board of Directors.
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Alliant Energy'sEnergy’s common stock trades on the New York Stock Exchange under the symbol "LNT."“LNT.” Quarterly sales price ranges and dividends with respect to Alliant Energy'sEnergy’s common stock were as follows:
| 2003 | 2002 | |||||
| Quarter | High | Low | Dividend | High | Low | Dividend |
| First | $18.30 | $14.98 | $0.25 | $31.01 | $28.67 | $0.50 |
| Second | 20.60 | 16.03 | 0.25 | 30.85 | 24.75 | 0.50 |
| Third | 22.70 | 18.69 | 0.25 | 25.77 | 16.35 | 0.50 |
| Fourth | 25.09 | 21.94 | 0.25 | 19.89 | 14.28 | 0.50 |
| Year | 25.09 | 14.98 | 1.00 | 31.01 | 14.28 | 2.00 |
Stock closing price at Dec. 31, 2002: $16.55
2003: $24.90
Although Alliant Energy'sEnergy’s practice has been to pay cash dividends on its common stock quarterly, the timing of payment and amount of future dividends are necessarily dependent upon future earnings, capital requirements, general financial condition, general business conditions, the ability of Alliant Energy'sEnergy’s subsidiaries to pay dividends and other factors. Effective with the
dividend declared and paid in the first quarter of 2003, Alliant Energy
reduced its targeted annual common stock dividend from $2.00 to $1.00 per
share.
At Dec. 31, 2002,2003, there were approximately 55,47053,231 holders of record of Alliant Energy'sEnergy’s stock, including holders inthrough Alliant Energy'sEnergy’s Shareowner Direct Plan.
Alliant Energy is the sole common shareowner of all 13,370,788 shares of IP&L common stock currently outstanding. During 20022003 and 2001,2002, IP&L paid dividends on its common stock of $82$89 million and $80$82 million, respectively, to its parent. Under certain circumstances,In accordance with the IUB order authorizing the IP&L hasmerger, IP&L must inform the right under termsIUB if its common equity ratio falls below 42% of its
subordinated deferrable interest debentures to extend interest payments for
periods not to exceed 20 consecutive quarters. It is IP&L's current intent not
to exercise such right. In the event IP&L did exercise this right, it would
limit IP&L's ability to pay dividends, among other things.total capitalization. Alliant Energy is the sole common shareowner of all 13,236,601 shares of WP&L common stock currently outstanding. During both2003 and 2002, and 2001, WP&L paid dividends on its common stock of $71 million and $60 million, respectively, to its parent. In its December 2003 rate order, the PSCW stated that WP&L's&L may not pay annual common stock dividends, including pass-through of subsidiary dividends, in excess of $89 million to Alliant Energy if WP&L’s actual average common equity ratio, on a regulatory financial basis, is or will fall below the authorized level of 54.01%. WP&L’s dividends are also restricted to the extent that such dividend would reduce the common stock equity ratio to less than 25%. The PSCW has ordered that it must approve the
payment of dividends by WP&L to Alliant Energy that are in excess of the
level forecasted in the rate order ($62 million), if such dividends would
reduce WP&L's average common equity ratio below 44.67% of total
capitalization. The dividends paid by WP&L to Alliant Energy since the rate
order was issued have not exceeded such level. IP&L and WP&L each have common stock dividend payment restrictions based on their respective bond indentures and the terms of their outstanding preferred stock. 29
22
ITEM 6. SELECTED FINANCIAL DATA
Alliant Energy Corporation
| Financial Information | 2003 (1) | 2002 (1) | 2001 (1) | 2000 (2) | 1999 (3) | ||||||
| (dollars in thousands, except per share data) | |||||||||||
| Income Statement Data: | |||||||||||
| Operating revenues | $3,128,187 | $2,486,590 | $2,634,230 | $2,270,975 | $2,048,158 | ||||||
| Income from continuing operations | 159,701 | 87,456 | 128,159 | 330,915 | 154,334 | ||||||
| Income from discontinued operations, net of tax | 29,825 | 19,425 | 57,071 | 51,039 | 42,247 | ||||||
| Income before cumulative effect of changes in | |||||||||||
| accounting principles | 189,526 | 106,881 | 185,230 | 381,954 | 196,581 | ||||||
| Cumulative effect of changes in accounting | |||||||||||
| principles, net of tax | (5,983 | ) | -- | (12,868 | ) | 16,708 | -- | ||||
| Net income | 183,543 | 106,881 | 172,362 | 398,662 | 196,581 | ||||||
| Common Stock Data: | |||||||||||
| Earnings per average common share (diluted): | |||||||||||
| Income from continuing operations | $1.57 | $0.97 | $1.59 | $4.18 | $1.98 | ||||||
| Income from discontinued operations | $0.30 | $0.21 | $0.71 | $0.64 | $0.53 | ||||||
| Cumulative effect of changes in accounting principles | ($0.06 | ) | -- | ($0.16 | ) | $0.21 | -- | ||||
| Net income | $1.81 | $1.18 | $2.14 | $5.03 | $2.51 | ||||||
| Common shares outstanding at year-end (000s) | 110,963 | 92,304 | 89,682 | 79,010 | 78,984 | ||||||
| Dividends declared per common share | $1.00 | $2.00 | $2.00 | $2.00 | $2.00 | ||||||
| Market value per share at year-end | $24.90 | $16.55 | $30.36 | $31.88 | $27.50 | ||||||
| Book value per share at year-end (4) | $21.37 | $19.89 | $21.39 | $25.79 | $27.29 | ||||||
| Other Selected Financial Data: | |||||||||||
| Cash flows from operating activities (continuing operations) | $419,990 | $555,338 | $433,346 | $393,090 | $423,794 | ||||||
| Construction and acquisition expenditures | $838,893 | $656,752 | $712,991 | $845,454 | $418,371 | ||||||
| Total assets at year-end (4) | $7,775,446 | $7,814,084 | $6,971,735 | $7,399,468 | $6,663,175 | ||||||
| Long-term obligations, net | $2,321,634 | $2,784,216 | $2,586,044 | $2,128,496 | $1,660,558 | ||||||
| Times interest earned before income taxes (5) | 2.20X | 1.74X | 2.03X | 4.35X | 3.05X | ||||||
| Capitalization ratios: | |||||||||||
| Common equity (4) | 47 | % | 36 | % | 41 | % | 44 | % | 50 | % | |
| Preferred stock | 5 | % | 4 | % | 2 | % | 2 | % | 3 | % | |
| Long- and short-term debt | 48 | % | 60 | % | 57 | % | 54 | % | 47 | % | |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |
| (1) | Refer to "Alliant Energy Results of Operations" in MD&A for a discussion of the 2003, 2002 and 2001 results of operations. |
| (2) | Includes $204 million ($2.58 per diluted share) of non-cash net income related to Alliant Energy's adoption of SFAS 133 and $16 million ($0.20 per diluted share) of net income from gains on sales of McLeod stock. |
| (3) | Includes $25 million ($0.32 per diluted share) of net income from gains on sales of McLeod stock. |
| (4) | Alliant Energy |
| (5) | Represents income from continuing operations |
23
| IP&L | 2003 (1) | 2002 (1) | 2001 (1) | 2000 | 1999 | ||||||
| (in thousands) | |||||||||||
| Operating revenues | $1,371,207 | $1,242,410 | $1,352,611 | $1,234,007 | $1,142,801 | ||||||
| Earnings available for common stock | 87,137 | 88,015 | 94,656 | 99,724 | 93,896 | ||||||
| Cash dividends declared on common stock | 89,144 | 81,790 | 80,340 | 80,339 | 120,509 | ||||||
| Cash flows from operating activities | 321,918 | 250,430 | 305,948 | 267,564 | 227,363 | ||||||
| Total assets | 3,599,040 | 3,158,695 | 2,818,467 | 2,886,974 | 2,742,986 | ||||||
| Long-term obligations, net | 910,527 | 902,243 | 922,941 | 792,323 | 836,486 | ||||||
(1) Refer to "MD&A - Alliant Energy“IP&L Results of Operations"Operations” in MD&A for a discussion of the 2003, 2002 2001 and 20002001 results of operations.
(2) Includes $25 million ($0.32 per diluted share) of net income from gains on
sales of McLeod stock.
(3) Results reflect the recording of $54 million of pre-tax merger-related
charges.
(4) Alliant Energy adjusts the carrying value of its investments in McLeod to
its estimated fair value, pursuant to the applicable accounting rules. At
December 31, 2002, 2001, 2000, 1999 and 1998, the carrying amount reflected an
unrealized gain (loss) of approximately $1 million, ($13) million, $543 million,
$1.1 billion and $291 million, respectively, with a net of tax increase
(decrease) to common equity of $0.4 million, ($9) million, $317 million, $640
million and $170 million, respectively.
(5) Represents income from continuing operations before income taxes plus
preferred dividend requirements of subsidiaries plus interest expense divided
by interest expense.
30
IP&L 2002 2001 2000 1999 1998
- ---- -----------------------------------------------------------------------------
(in thousands)
Operating revenues $1,211,608 $1,316,250 $1,234,007 $1,142,801 $1,162,819
Earnings available for common stock 88,015 94,656 99,724 93,896 77,278
Cash dividends declared on common stock 81,790 80,340 80,339 120,509 27,612
Total assets 2,738,406 2,426,314 2,524,802 2,415,068 2,446,315
Long-term obligations, net 902,243 922,941 792,323 836,486 872,517
Alliant Energy is the sole common shareowner of all 13,370,788 shares of IP&L's&L’s common stock outstanding. As such, earnings per share data is not disclosed herein. The 1998 financial
| WP&L | 2003 (1) | 2002 (1) | 2001 (1) | 2000 | 1999 | ||||||
| (in thousands) | |||||||||||
| Operating revenues | $1,216,981 | $989,525 | $993,716 | $862,381 | $752,505 | ||||||
| Earnings available for common stock | 111,564 | 77,614 | 70,180 | 68,126 | 67,520 | ||||||
| Cash dividends declared on common stock | 70,580 | 59,645 | 60,449 | -- | 58,353 | ||||||
| Cash flows from operating activities | 138,495 | 223,750 | 135,886 | 174,060 | 163,228 | ||||||
| Total assets | 2,469,277 | 2,335,138 | 2,217,457 | 2,160,554 | 2,025,709 | ||||||
| Long-term obligations, net | 453,509 | 523,308 | 523,183 | 569,309 | 471,648 | ||||||
(1) Refer to “WP&L Results of Operations” in MD&A for a discussion of the 2003, 2002 and 2001 results reflect the recording of $31
million of pre-tax merger-related charges.
Alliant Energy is the sole common shareowner of all 13,236,601 shares of WP&L's&L’s common stock outstanding. As such, earnings per share data is not disclosed herein. The 1998 financial results reflect the recording of $17
million of pre-tax merger-related charges.
31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
24
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND |
FORWARD-LOOKING STATEMENTS
Statements contained in this report that are not of historical fact are forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. Some, but not all, of the risks and uncertainties include: factors listed in "Other Matters - Other Future
Considerations;" weather effects on sales and revenues; economic and political conditions in Alliant Energy'sEnergy’s domestic and international service territories; federal, state and international regulatory or governmental actions, including the impact of potential energy-related legislation in Congress and the ability to obtain adequate and timely rate relief includingto allow for, among other things, the recovery of operating costs and the earning of reasonable rates of return, and to payas well as the payment of expected levels of dividends; Alliant Energy's proposed asset
divestitures at expected values and on expected timelines; unanticipated construction and acquisition expenditures; unanticipated issues in connection with Alliant Energy’s construction of new generating facilities; issues related to the supply of
purchased electricityelectric supplies and price thereof, including the ability to recover purchased-power and fuel costs through rates; issues related to electric transmission, including recovery of costs incurred, and federal legislation and regulation affecting such transmission; risks related to the operations of Alliant Energy'sEnergy’s nuclear facilities;facilities and unanticipated issues relating to the sale of Alliant Energy’s interest in Kewaunee; costs associated with Alliant Energy'sEnergy’s environmental remediation efforts and with environmental compliance generally; developments that adversely impact Alliant Energy'sEnergy’s ability to implement its strategic plan; the amount of premiums incurred in connection with Alliant Energy’s planned debt reductions; improved results from Alliant Energy'sEnergy’s Brazil investments and no material adverse changes in the rates allowed by the Brazilian regulators or from the expected utility sector reform currently being considered by Brazil regulators; improved performance by Alliant Energy'sEnergy’s other non-regulated businesses as a whole; no material permanent declines in the fair market value of, or expected cash flows from, Alliant Energy'sEnergy’s investments; continued access to the capital markets; Alliant Energy'sEnergy’s ability to continue cost controls and operational efficiencies; Alliant Energy'sEnergy’s ability to identify and successfully complete proposed acquisitions and development projects; access to technological developments; employee workforce factors, including changes in key executives, collective bargaining agreements or work stoppages; continued access to the capital markets; the ability to successfully complete ongoing tax audits and changesappeals with no material impact on Alliant Energy’s earnings or cash flows; inflation rates; and factors listed in the rate of inflation.“Other Matters — Other Future Considerations.” Alliant Energy assumes no obligation, and disclaims any duty, to update the forward-looking statements in this report.
STRATEGIC ACTIONS
In OVERVIEW
November 2002 Plan — In 2003, Alliant Energy's BoardEnergy completed the plan it outlined in November 2002 to strengthen its financial profile. A summary of Directors approvedthe five strategic actions designed to maintaincompleted under the plan follows.
| o | Asset sales and related debt reduction - |
| o | By July 2003, Alliant Energy had completed the sales of its Australian, affordable housing and SmartEnergy businesses. |
| o | In November 2003, Alliant Energy completed an IPO of WPC, leaving Alliant Energy with a 5.76% ownership interest in WPC. Alliant Energy currently plans to divest its remaining interest in WPC during 2004, subject to market conditions. |
| o | In 2003, Alliant Energy sold its water utility serving the Beloit area. Alliant Energy continues to pursue the sale of its water utilities serving the Ripon and South Beloit areas. |
| o | As a result of the above completed asset sales, Alliant Energy reduced debt by approximately $875 million during 2003. Alliant Energy incurred charges to continuing operations of approximately $0.10 per diluted share in the fourth quarter of 2003 related to debt repayment premiums from long-term debt repurchases. Alliant Energy also had $242 million of cash and temporary cash investments as of Dec. 31, 2003. |
| o | Common equity offering - in July 2003, Alliant Energy sold 17.25 million shares (net proceeds of $318 million) of its common stock in a public offering and infused $200 million and $118 million into WP&L and IP&L, respectively, in support of their respective domestic utility generation and reliability initiatives. |
| o | Common stock dividend - Alliant Energy reduced its targeted annual common stock dividend from $2.00 per share to $1.00 per share effective with the dividend paid in the first quarter of 2003. |
| o | Anticipated construction and acquisition expenditures for 2002 and 2003 - Alliant Energy reduced such aggregate expenditures by approximately $400 million, largely in its non-regulated business, from the plan that existed earlier in 2002. |
| o | Cost control - Alliant Energy has implemented a comprehensive Lean Six Sigma program, which it expects to help reduce its operating costs and improve the efficiency of its operations. |
25
Updated Strategic Plan —Alliant Energy’s domestic utility business is its core business and the sole growth platform within its updated strategic plan. As a strong credit profile forresult, Alliant Energy strengthen its balance sheet and position Alliant Energy for improved
long-term financial performance. The five strategic actions, which signaled
a shift to less aggressive growth targets driven primarily by Alliant
Energy's utility operations, included:
1. A commitment to pursue the sale of, or other exit strategies for, a
number of non-regulated businesses, including Alliant Energy's oil and
gas (Whiting), Australian (including Southern Hydro) and affordable housing
businesses. For accounting purposes, such businesses
have been classified as available for sale, and the
operating results of these businesses have been
separately classified and reported as discontinued operations, in Alliant
Energy's Consolidated Financial Statements. Alliant Energy anticipates
strengthening its liquidity position by up to $800 million to $1 billion
from reductions in consolidated debt and increasing its cash and
temporary cash investment balances as a result of these transactions.
The amount of proceeds ultimately received from these divestitures, and
the timing of the completion of the transactions, are subject to a
variety of factors, including the transaction structures Alliant Energy
utilizes to exit these businesses. In January 2003, Alliant Energy also
decided to sell SmartEnergy which was classified as held and used, and
its operating results were included in continuing operations, in Alliant
Energy's Consolidated Financial Statements. Refer to Note 16 of Alliant
Energy's "Notes to Consolidated Financial Statements" for further
discussion.
2. A reduction in Alliant Energy's targeted annual common stock divided
from $2.00 per share to $1.00 per share, effective with the dividend
declared and paid in the first quarter of 2003.
3. Reductions in Alliant Energy's aggregated anticipated 2002 and 2003
construction and acquisition expenditures by approximately $400 million.
4. A plan to raise approximately $200 to $300 million of common equity in
2003, dependent on market conditions. Alliant Energy expects to direct
the majority of the proceeds towards additional capital investments in
its regulated domestic utilities.
5. The implementation of additional cost control measures to be
accomplished through Alliant Energy's new Six Sigma program, the
operation of its new enterprise resource planning system that was placed
in service in October 2002 and by a heightened focus on operatingviews its domestic utility business as the area of its business that is expected to provide the larger share of its long-term earnings growth. It will also be the area of the business that Alliant Energy will invest the bulk of its capital in during 2004 and 2005. Alliant Energy’s remaining non-regulated businesses will serve as ongoing business platforms. Alliant Energy expects these businesses to contribute to its earnings growth, but to a mannerlesser degree than its growth platform (i.e., domestic utility business). Alliant Energy does not expect to invest significant capital into these ongoing business platforms in 2004 and 2005. In addition,Alliant Energy’s Non-regulated Generation business has refined its focus to support the development, financing and construction of generation to meet the needs of Alliant Energy’s domestic utility business. Refer to “Liquidity and Capital Resources — Construction and Acquisition Expenditures” for additional information.
Alliant Energy’s updated strategy reflects the fact that aligns operating expensesit has investment opportunities in its domestic utility business that did not exist several years ago. Progressive legislation was passed in Iowa that provides companies with the revenues grantednecessary rate making principles — and resulting increased regulatory and investment certainty — prior to making certain generation investments in Iowa. Wisconsin also enacted legislation with the goal of assuring reliable electric energy for Wisconsin. The law allows the construction of merchant power plants in the state and streamlines the regulatory approval process for building new generation and transmission facilities. More recently, the PSCW approved a plan proposed by another Wisconsin utility which provides a similar level of investment certainty by leasing generation from an affiliate. These changes have enabled Alliant Energy to pursue additional generation investments in its various rate filings.
32
In December 2003, Alliant Energy announced its updated domestic utility generation plan, which is continuing in its effortsexpected to implement these strategic
actions. Refer to "Other Matters - Other Future Considerations - Asset
Sales" for discussionadd a diversified portfolio of an agreement nameplate generation between 2004 and 2010 as follows (in MW):
| IP&L | WP&L | Total | |
| Natural gas-fired generation | 840 | 300 | 1,140 |
| Wind (purchased-power and/or generation) | 130 | 100 | 230 |
| Coal | -- | 200 | 200 |
| Other | 15 | 15 | 30 |
| Total | 985 | 615 | 1,600 |
Alliant Energy recentlyintends to add this new generation to meet increasing customer demand, reduce reliance on purchased-power agreements and mitigate the impacts of potential future plant retirements. Alliant Energy will continue to purchase energy and capacity in the market and intends to remain a net purchaser of both, but at a reduced level assuming the successful completion of these generation projects. Alliant Energy expects that 590 MW of the natural gas-fired generation will be installed as combustion turbines for peaking generation. The plan also reflects continued commitments to Alliant Energy’s energy efficiency and environmental protection programs. The capital expenditures associated with this plan are expected to be approximately $650 million over the seven-year period of 2004 to 2010.
IP&L is currently constructing a $400 million 550 MW natural gas-fired plant (Emery) near Mason City, Iowa under its Power Iowa program to develop new electric generation capacity in Iowa. The Emery plant is expected to be placed in-service late in the second quarter of 2004. The rate making principles established for this investment reflect, among other things, recovery of the investment over 28 years based on a fixed 12.23% return on the common equity component of this investment. In January 2004, Alliant Energy announced that Resources’ Non-regulated Generation business has assumed an option to purchase a site for a 300 MW natural gas-fired power plant outside Sheboygan Falls, Wisconsin. Subject to PSCW approval, Resources’ Non-regulated Generation business would construct and own the approximately $150 million plant (of which $75 million has been expended as of Dec. 31, 2003 to purchase two gas turbines) and lease the facility to WP&L. WP&L will operate the plant and utilize the plant’s output. With the appropriate timely regulatory approvals, Alliant Energy currently intends to have this facility placed in-service in 2005. Both the Emery and Sheboygan Falls facilities are included in the figures in the previous table. In addition, Calpine Corporation is currently constructing a 600 MW natural gas-fired combined cycle power plant in Wisconsin at WP&L’s Rock River plant (Riverside). WP&L has entered into relateda purchased-power agreement for 453 MW of this plant’s output and the plant is expected to be placed in-service prior to the sale of its Australian business.
2004 summer peak demand.
RATES AND REGULATORY MATTERS
Overview - —Alliant Energy has two primary utility subsidiaries, IP&L and - --------
WP&L. IP&L was formed as a result of the merger of IPC with and into IESU
effective Jan. 1, 2002. WP&L has one utility subsidiary, South Beloit. Alliant Energy’s utility subsidiaries are currently subject to federal regulation by FERC and state regulation in Iowa, Wisconsin, Minnesota and Illinois. Such regulatory oversight covers not only current facilities and operations, but also the utilities’ plans for construction and financing of new generation facilities and related activities.
26
As a public utility holding company with significant utility assets, Alliant Energy competesconducts its utility operations in an ever-changing utility industry.business environment. Electric energy generation, transmission and distribution are infacing a period of fundamental change resulting from potential legislative, regulatory, economic and technological changes. These changes could impact competition in the electric wholesale and retail markets asin the event customers of electric utilities are being offered alternative suppliers. Such competitive pressures could result in electric utilities losing customers and incurring stranded costs (i.e., assets and other costs rendered unrecoverable as the result of competitive pricing), which would be borne by security holders if the costs cannot be recovered from customers. Alliant Energy's utility subsidiaries are currently subject to regulation by
FERC, and state regulation in Iowa, Wisconsin, Minnesota and Illinois. FERC regulates competition in the electric wholesale power generation market and each state regulates whether to permit retail competition, the terms of such
retail competitionthat would apply and the recovery of any portion of stranded costs that are ultimately determined to have resulted from retail competition. Alliant Energy cannot predict the timing of a restructured electric industry or the impact on its financial condition or results of operations but does believe
it is well-positioned to compete in a deregulated competitive market.
Although Alliant Energy ultimately believes that the electric industry will
be deregulated, theoperations. The pace of deregulationrestructuring in its primary retail electric service territories has been delayed (and may continue to be delayed for a long period of time) due to more recentuncertainty and developments in the industry.
Certain Recent Developments - In July 2002, FERC issued a notice — Details of proposed
- ---------------------------
rules intended to standardize the wholesale electric market, which has
generated significant industry discussion. Although Alliant Energy believes
that standardization of the wholesale electric market is appropriate and
would benefit market participants, there may be significant changes to the
proposed rules before they are adopted. Therefore, Alliant Energy cannot
determine the impact the final rules will have onEnergy’s rate cases impacting its results of operations or financial condition.
Alliant Energy's merger-related price freezes expired in April 2002 in all of
its primary domestic utility jurisdictions and it is currently addressing the
recovery of its utility cost increases through numerous rate filings. WP&L
has received final orders in two of its rate cases and IP&L and WP&L
currently have four other rate cases pending. Details of these rate casessince 2001 are as follows (dollars in millions):
| Expected | Return | |||||||||
| Interim | Interim | Final | Final | Final | on | |||||
| Utility | Filing | Increase | Increase | Effective | Increase | Effective | Effective | Common | ||
| Case | Type | Date | Requested | Granted (1) | Date | Granted (1) | Date | Date | Equity | Notes |
| WP&L: | ||||||||||
| 2002 retail | E/G/W | 8/01 | $104 | $49 | 4/02 | $82 | 9/02 | N/A | 12.3% | |
| 2003 retail | E/G/W | 5/02 | 123 | -- | N/A | 81 | 4/03 | N/A | 12% | (2) |
| 2004 retail | E/G/W | 3/03 | 87 | -- | N/A | 14 | 1/04 | N/A | 12% | (3) |
| Wholesale | E | 2/02 | 6 | 6 | 4/02 | 3 | 1/03 | N/A | N/A | (4) |
| Wholesale | E | 3/03 | 5 | 5 | 7/03 | 5 | 2/04 | N/A | N/A | |
| South Beloit | ||||||||||
| retail - IL | G/W | 10/03 | 1 | N/A | N/A | TBD | TBD | 9/04 | TBD | |
| 2004 retail | ||||||||||
| (fuel-only) | E | 2/04 | 16 | TBD | TBD | TBD | TBD | 8/04 | N/A | |
| IP&L retail - IA | E | 3/02 | 82 | 15 | 7/02 | 26 | 5/03 | N/A | 11.15% | |
| IP&L retail - IA | G | 7/02 | 20 | 17 | 10/02 | 13 | 8/03 | N/A | 11.05% | (4) |
| IP&L retail - MN | E | 5/03 | 5 | 2 | 7/03 | TBD | TBD | 5/04 | TBD | |
| (1) | Interim |
| (2) | A |
| (3) | A |
| (4) | Since the final increase was lower than the interim relief granted, a refund to customers was made in 2003. |
A significant portion of the rate increases included in the previous table reflect the recovery of anticipated increased costs incurred by IP&L and WP&L, or costs they expect to incur, thus the total increase in revenues related to these costrate increases wouldhave not or are not expected to result in a corresponding increase in net income. IP&L WP&L and South Beloit areexpects to file for an Iowa electric rate increase in March 2004 which will include costs associated with the Emery plant currently under construction in interim rates pursuant to the process of determining what
other rate case filings may be necessary in 2003.
making principles approved earlier. Refer to "Strategic Overview - Updated Strategic Plan" for further information regarding Emery.
WP&L's retail electric rates are based on annual forecasted fuel and purchased-power costs. Under PSCW rules, WP&L can seek emergency rate increases if it experiences an extraordinary increase in the cost of fuel or if the annual costs are more than 3% higher than the estimated costs used to establish rates. For 2001Such rules were revised effective for 2003 for WP&L and 2002, any collections in excess
of costs incurred must be refunded, with interest. Accordingly, WP&L has
established a reserve due to overcollection of past fuel and purchased-power
costs and expects to refund such amount in 2003. The final ruling from the
PSCW could result in an increase or decrease to the reserve that has been
recorded.
The PSCW has issued new rules relating to the collection of fuel and
purchased-power costs by Wisconsin utilities, including WP&L. The new rules
and related procedures are intended, among other things, to significantly reduce the regulatory lag for theWisconsin utilities and customers related to the timing of the recovery ofchanges in rates for increased or decreased fuel and purchased-power costs. Purchased-power capacityThe revised rules require that an interim increase/decrease in rates subject to increased/decreased fuel costs, will nowif determined to be includedjustified, be approved within 21 days of notice to customers. Any such change in base rates. Arates would be effective prospectively, would require a refund with interest if final rates are determined to be lower than interim rates approved, and would not include a provision for collection of retroactive fuel cost variances. The revised rules also include a process will also exist whereby theWisconsin utilities can seek deferral treatment of capacity, transmission and emergency changes in fuel costs between fuel-only or base rate cases. The new
rules are expectedSuch deferrals would be subject to be implemented for WP&L with its pending 2003 retailreview, approval and recovery in future fuel-only or base rate case.
cases.
27
In 2002, IP&L filed with the IRS for a change in method of accounting for tax purposes for 1987 through 2001 that would allow a current deduction related to mixed service costs. Such costs had previously been capitalized and depreciated for tax purposes over the appropriate tax lives. This change would create a significant current tax benefit whichthat has not been reflected in IP&L's results of operations pending a decision from the IUB on the required rate making treatment of the benefit. In its April 2003 order, the IUB approved IP&L's proposed accounting treatment to defer the tax savings resulting from the change of accounting method until the IRS audit on this issue is complete. The rate making impact will be addressed once the issue is resolved with the IRS, which is expected to occur in 2004. There would be no material negative impact on IP&L's results of operations or financial position should the IUB and/or IRS reject IP&L's proposal.
Energy-related legislation is currently pending in the U.S. Congress that, among other proposals, would repeal PUHCA. However, it is uncertain when or whether such legislation will be enacted or what impact it would have on Alliant Energy.
ALLIANT ENERGY RESULTS OF OPERATIONS
Unless otherwise noted, all "per share" references in the Results of Operations section refer to earnings perdiluted share. Refer to Note 1(a) of Alliant Energy's "Notes to Consolidated Financial Statements" for discussion of the various components of Alliant Energy's business.
Alliant Energy
Overview -Alliant Energy's EPS for 2002, 2001 and 2000was as follows:
| 2003 | 2002 | 2001 | |||||
| Income from continuing operations | $1 | .57 | $0 | .97 | $1 | .59 | |
| Income from discontinued operations | 0 | .30 | 0 | .21 | 0 | .71 | |
| Cumulative effect of changes in accounting principles | (0 | .06) | -- | (0 | .16) | ||
| Net income | $1 | .81 | $1 | .18 | $2 | .14 | |
Additional details regarding Alliant Energy’s net income were - -----------------------
as follows:
| 2003 | 2002 | 2001 | |||||
| Continuing operations: | |||||||
| Domestic utility operations | $197 | .2 | $165 | .8 | $164 | .9 | |
| Non-regulated (Resources) | (25 | .7) | (80 | .4) | (38 | .1) | |
| Alliant Energy parent and other (primarily taxes, interest and | |||||||
| administrative and general) | (11 | .8) | 2 | .1 | 1 | .4 | |
| Income from continuing operations | 159 | .7 | 87 | .5 | 128 | .2 | |
| Discontinued operations: | |||||||
| Operating results (includes SFAS 133 and tax adjustments) | 27 | .9 | 15 | .9 | 57 | .1 | |
| Losses on sales of discontinued operations, net | (22 | .9) | -- | -- | |||
| Discontinuing depreciation, depletion and amortization of | |||||||
| assets held for sale | 24 | .8 | 3 | .5 | -- | ||
| Income from discontinued operations | 29 | .8 | 19 | .4 | 57 | .1 | |
| Cumulative effect of changes in accounting principles | (6 | .0) | -- | (12 | .9) | ||
| Net income | $183 | .5 | $106 | .9 | $172 | .4 | |
The 2003 increase in 2002 and 2001 included $0.46 per share
and $0.26 per share, respectively, of valuation charges incurred in its
non-regulated businesses. Income from continuing operations in 2000 included
$2.37 per share of non-cash income related to Alliant Energy's adoption of
SFAS 133. In addition to the higher valuation charges, the lower 2002domestic utility income from continuing operations was primarily the result of lower earningslargely due to higher electric and gas margins, which were partially offset by higher operating expenses. The significant improvement in Alliant Energy’s non-regulated results from Alliant Energy's non-regulated businesses. Thiscontinuing operations for 2003 was primarily due to a net
loss of $47 million from Alliant Energy's Brazil investments in 2002,
compared to a net loss of $24 million in 2001, lower earnings from Alliant
Energy's Mass Marketing business and higher interest expense. Improvedimproved results from Alliant Energy's Chinaits International and New ZealandIntegrated Services businesses and lower non-cash valuation charges of $0.35 per share, which were partially offset the lower non-regulated results.by $0.10 per share of charges in 2003 related to early debt reductions. Income from Alliant Energy'scontinuing operations for domestic utility businessoperations increased slightly in 2002 as higher electric and gas margins were largely offset by increased operating expenses and a higher effective income tax rate. 34
28
Domestic Utility Electric Utility Margins - —Electric margins and MWh sales for
- --------------------------------- Alliant Energy were as follows (in thousands):
| Revenues and Costs | MWhs Sold | ||||||||||||||||||||
| 2003 | 2002 | * | 2001 | ** | 2003 | 2002 | * | 2001 | ** | ||||||||||||
| Residential | $684,574 | $626,947 | 9 | % | $599,074 | 5 | % | 7,565 | 7,616 | (1 | %) | 7,344 | 4 | % | |||||||
| Commercial | 409,704 | 376,365 | 9 | % | 373,145 | 1 | % | 5,663 | 5,542 | 2 | % | 5,464 | 1 | % | |||||||
| Industrial | 571,608 | 526,804 | 9 | % | 543,471 | (3 | %) | 12,345 | 12,297 | -- | 12,469 | (1 | %) | ||||||||
| Total from retail | |||||||||||||||||||||
| customers | 1,665,886 | 1,530,116 | 9 | % | 1,515,690 | 1 | % | 25,573 | 25,455 | -- | 25,277 | 1 | % | ||||||||
| Sales for resale | 195,822 | 160,335 | 22 | % | 184,507 | (13 | %) | 5,495 | 4,805 | 14 | % | 4,936 | (3 | %) | |||||||
| Other | 55,360 | 62,083 | (11 | %) | 56,359 | 10 | % | 184 | 197 | (7 | %) | 168 | 17 | % | |||||||
| Total revenues/sales | 1,917,068 | 1,752,534 | 9 | % | 1,756,556 | -- | 31,252 | 30,457 | 3 | % | 30,381 | -- | |||||||||
| Electric production | |||||||||||||||||||||
| fuel and purchased- | |||||||||||||||||||||
| power expense | 730,594 | 651,813 | 12 | % | 695,168 | (6 | %) | ||||||||||||||
| Margin | $1,186,474 | $1,100,721 | 8 | % | $1,061,388 | 4 | % | ||||||||||||||
| * | Reflects the % change from 2002 to 2003. ** Reflects the % change from 2001 |
Electric production
fuels expense 286,474 292,002 (2%) 271,073 8%
Purchased-power expense 362,501 403,166 (10%) 294,818 37%
------------ ------------ ------------
Margin $1,103,559 $1,061,388 4% $1,082,145 (2%)
============ ============ ============
* Reflects the percent change from 2001 to 2002. ** Reflects the percent
change from 2000 to 2001.
To comply with FERC regulatory requirements governing transmission systems,
WP&L transferred its transmission assets to ATC on Jan. 1, 2001, in exchange
for cash and an equity ownership in ATC. The wheeling expenses from ATC
included in electric margin in 2002 and 2001 were offset by equity income
(WP&L accounts for its investment in ATC under the equity method), reduced
other operation and maintenance expenses and lower depreciation expense,
resulting in no significant net income impact due to the formation of ATC.
On a comparable basis, electric margin increased $42.2$85.8 million, or 8%, and $39.3 million, or 4%, for 2003 and $9.6 million, or 1%, for 2002, and 2001, respectively. The 2002 increase wasrespectively, primarily due to the impact of rate increases implemented in 2003 and 2002, more
favorable weather conditions,including increased revenues to recover a significant portion of higher utility operating expenses, lower purchased-power and fuel costs impacting margins, the impact of WP&L implementing seasonal rates in 2003 for the first time and increased sales resulting from continued modest retail customer growth. These increases wereThe 2003 increase was also due to higher sales to non-retail customers, partially offset by milder weather conditions in 2003 compared to 2002. The 2002 increase was also due to more favorable weather conditions, partially offset by reduced energy conservation revenues (which were largely offset by lower energy conservation expense)expenses) and the impact of a sluggish economy. The
2001 increase was primarily due
In April 2003, WP&L implemented seasonal electric rates that are designed to result in higher rates for the peak demand period from June 1 through Sept. 30 and lower purchased-power and fuel costs
impacting margin,rates in all other periods during each calendar year. As a result, total annual revenues are not expected to be impacted significantly. However, given the seasonal rates were not implemented in 2003 until April, the impact of seasonal rates increased residential and commercial sales due to more
favorable weather conditionselectric margins by approximately $6 million in 20012003 compared to 2000 and continued retail
customer growth. These items2002 when no seasonal rates were partially offset by $10 millionin effect. As a result, the first quarter of income
recorded2004 margins are expected to be negatively impacted in 2000 for a change in estimate of WP&L's utility services rendered
but unbilled at month-end duecomparison to the implementation of2003 margin for the same period by a refined estimation
process and lower industrial sales, largely due to impacts of a slowing
economy.similar amount.
Domestic Utility Gas Utility Margins - —Gas margins and Dth sales for Alliant Energy were as - -------------------
follows (in thousands):
| Revenues and Costs | Dths Sold | ||||||||||||||||||||
| 2003 | 2002 | * | 2001 | ** | 2003 | 2002 | * | 2001 | ** | ||||||||||||
| Residential | $310,658 | $218,746 | 42 | % | $270,248 | (19 | %) | 31,871 | 30,931 | 3 | % | 29,580 | 5 | % | |||||||
| Commercial | 162,651 | 111,343 | 46 | % | 141,121 | (21 | %) | 19,947 | 19,348 | 3 | % | 18,055 | 7 | % | |||||||
| Industrial | 34,201 | 25,177 | 36 | % | 31,262 | (19 | %) | 5,093 | 5,373 | (5 | %) | 5,344 | 1 | % | |||||||
| Transportation/other | 59,416 | 38,720 | 53 | % | 45,246 | (14 | %) | 48,978 | 47,386 | 3 | % | 48,539 | (2 | %) | |||||||
| Total revenues/sales | 566,926 | 393,986 | 44 | % | 487,877 | (19 | %) | 105,889 | 103,038 | 3 | % | 101,518 | 1 | % | |||||||
| Cost of gas sold | 396,102 | 248,994 | 59 | % | 360,911 | (31 | %) | ||||||||||||||
| Margin | $170,824 | $144,992 | 18 | % | $126,966 | 14 | % | ||||||||||||||
| * | Reflects the % change from 2002 to 2003. ** Reflects the % change from 2001 |
Gas revenues and cost of utility gas sold were unusually highhigher in 2003 and 2001 as compared to 2002 primarily due to increased natural gas prices in the first half of 2001.prices. Due to Alliant Energy'sEnergy’s rate recovery mechanisms for gas costs, these price differences alone had little impact on gas margin. Gas margin increased $25.8 million, or 18%, and $18.0 million, or 14%, for 2003 and decreased $9.2 million, or 7%, for 2002, and 2001, respectively. The 2002
increase was largelyrespectively, primarily due to the impact of several rate increases implemented induring 2003 and 2002, improved results of $3 million from WP&L's&L’s performance-based gas commodity cost recovery program (which(benefits are shared by ratepayers and shareowners), and continued modest retail customer growth andgrowth. The 2003 increase was also due to slightly more favorable weather conditions during the heating season in 2003 compared to 2002. The 2002 increase was also due to the negative impact high gas prices in early 2001 had on gas consumption during that period. These increases wereperiod, partially offset by reduced energy conservation revenues (which were largely offset by lower energy conservation expenses). The 2001 decrease was largely
due to lower retail sales primarily related to the unusually high gas prices
in early 2001 as some customers either chose alternative fuel sources or used
less natural gas, the impact of the slowing economy and losses associated
with performance-based commodity costs at WP&L. Alliant Energy realized
35
pre-tax income of $0, $4.0 million and $2 million from weather hedges it had
in place in 2002, 2001 and 2000, respectively, which is recorded in
"Miscellaneous, net" in the Consolidated Statements of Income.
29
Refer to Note 1(j) 1(i)of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for information relating to utility fuel and natural gas cost recovery. Refer
Domestic Utility Other Revenues —Other revenues for the domestic utilities increased $18.8 million and decreased $16.5 million for 2003 and 2002, respectively. The 2003 increase was largely due to Note 2 ofincreased revenues from WindConnect™, which includes Alliant Energy's "NotesEnergy’s wind farm construction management projects. The 2002 decrease was primarily due to Consolidated
Financial Statements"lower non-commodity products and "Ratesservices revenues. These 2003 and Regulatory Matters"2002 variances were largely offset by variances in other operation and maintenance expenses for discussion of
various rate filings.
the domestic utilities.
Non-regulated and Other Revenues - —Details regarding Alliant Energy's
- --------------------------------Energy’s non-regulated and other revenues arewere as follows (in millions):
2002 2001 2000
------------- ------------- -------------
Integrated Services $259 $242 $172
International 103 85 --
Mass Marketing 47 7 1
Investments 26 27 29
Other (includes eliminations) 27 19 15
------------- ------------- -------------
$462 $380 $217
============= ============= =============
| 2003 | 2002 | 2001 | |
| Integrated Services | $382 | $134 | $193 |
| International | 117 | 100 | 77 |
| Non-regulated Generation | 15 | -- | -- |
| Other (includes eliminations) | 26 | 21 | 18 |
| $540 | $255 | $288 | |
The 20022003 Integrated Services increase was primarily due to increased gas revenues at Alliant Energy’s natural gas marketing business, NG Energy, largely due to the impact of a new accounting pronouncement, higher natural gas sales, partially offset byprices and increased volumes sold. Increased revenues at Alliant Energy’s energy and environmental services businesses also contributed to the increase. Refer to Note 10(d) of Alliant Energy’s “Notes to Consolidated Financial Statements” for further discussion of the impact of the new accounting pronouncement. The 2002 Integrated Services decrease was primarily due to decreased gas prices and lower energy services revenues. The increased International revenues for 2003 and 2002 were primarily due to the 2001 acquisitions of additional combined heat and power facilities in China. Mass MarketingChina during 2001, 2002 and 2003. The 2003 Non-regulated Generation revenues for 2002 increasedwere due to the fourth quarter
2001 acquisition ofgeneration from a controlling interest309-MW, non-regulated, tolled, natural gas-fired power plant in SmartEnergy, an energy services
company operating in competitive energy markets. The 2001 Integrated
Services increase was primarily due to acquisitions in the third and fourth
quarters of 2000 of various energy services businesses. The 2001
International increase resulted from the December 2000 change from the equity
method of accounting to the consolidation method for an investment in China
and the addition of five combined heat and power facilities to Alliant
Energy's China portfolio during the fifteen months prior to Dec. 31, 2001.
Neenah, Wisconsin.
Other Operating Expenses - —Other operation and maintenance expenses for the domestic utilities increased $78.5 million in 2003, primarily due to increases in the amortization of deferred costs that are now being recovered in rates and increased employee and retiree benefits (primarily compensation, medical and pension costs), WindConnect™ and nuclear expenses. The increased nuclear expenses resulted primarily from a planned refueling outage at Kewaunee in 2003. There was no refueling outage in 2002. These items were as
- ------------------------
follows (in millions):
2002 2001 2000
------------- ------------- -------------
Utility $555 $509 $497
Integrated Services 242 229 158
International 83 69 4
Mass Marketing 57 8 2
Investments 15 16 18
Other (includes eliminations) 5 (3) 8
------------- ------------- -------------
$957 $828 $687
============= ============= =============partially offset by lower fossil generation expenses due to the timing of boiler plant maintenance. The 2002 utility increase of $36.7 million was primarily due to increased fossil and nuclear generation expenses, employee benefit and energy deliveryretiree benefits, transmission and distribution expenses and higher regulatory amortizations, partially offset by lower energy conservation and non-commodity products and services expenses and decreased uncollectible customer account balances. Alliant Energy is addressingA significant portion of these cost increases in
various utility rate proceedings that are currently pending. The 2001
utility increase was primarily due to higher transmission wheeling and other
costs in Alliant Energy's energy delivery business unit, increased nuclear
operating costs (partially due tobeing recovered as a planned refueling outage at Kewaunee in
2001), higher uncollectible customer account balances largely due to the
unusually high gas prices earlier in the year and higher costs in the
generation business unit. These increases were partially offset by the
impactresult of the formation of ATC earlier in 2001,rate increases implemented during 2003 and 2002. Refer to “Rates and Regulatory Matters” for additional information.
Non-regulated operation and maintenance expenses were as discussed in "Domestic
Electric Utility Margins."
follows (in millions):
| 2003 | 2002 | 2001 | |
| Integrated Services | $366 | $119 | $181 |
| International | 90 | 77 | 59 |
| Non-regulated Generation | 10 | 7 | 5 |
| Other (includes eliminations) | 27 | 20 | 14 |
| $493 | $223 | $259 | |
The Integrated Services, International and Mass MarketingNon-regulated Generation variances were largely driven by the same factors impacting the revenue variances discussed previously. The Mass Marketing 20022003 Integrated Services increase was also impacted by increasesdue to an asset valuation charge of $6 million in the provisions for uncollectible accounts at SmartEnergy in 2002.2003 related to a small waste-to-energy plant. Charges of $4 million, $5 million and $2 million are included in "Other"“Non-regulated Generation” in 2003, 2002 and 2001, respectively, for cancelled contracts and generation projects in Alliant Energy's
Non-regulated Generation business unit. The 2001 Integrated Services
increase was partially offset by a one-time charge of $4 million related to a
loss on a contract in 2000.
projects.
30
Depreciation and amortization expense increased $8.0$23.0 million and $5.9decreased $12.2 million in 2003 and 2002, and 2001, respectively. ContributingThe 2003 increase was primarily due to both increases were utility property additions, an increase of $9.5 million in non-regulated depreciation and amortization due largely to acquisitions at the non-regulated businesses and 36
increased regulatory and software amortizations. Increased earnings on the
WP&Lhigher contributions of $4 million to IP&L’s nuclear decommissioning trust fund also contributed to the 2002
increase.fund. The 2002 increasedecrease was partially offset by lower expensesprimarily due to: a decrease of $14 million from implementation of lower depreciation rates at IP&L on Jan. 1, 2002, resulting from an updated depreciation study; lower decommissioning expense based on reduced retail funding levels at WP&L;&L; and the elimination of $5 million of goodwill amortization expense in compliance with new accounting rules effective in 2002. These items were partially offset by utility property additions, acquisitions at the non-regulated businesses and increased software amortizations.
Taxes other than income taxes decreased $14.4 million in 2003 primarily due to decreased property taxes related to a 2003 property tax settlement and expiration of provisions which required additional payments in the early years of the revised property tax regulations in Iowa at IP&L. In 2003, IP&L settled a property tax appeal it had filed with the Iowa Department of Revenue and Finance. In addition to the benefits realized in 2003, IP&L expects to realize reductions in property tax expense of $5.1 million, $3.6 million and $2.1 million in 2004, 2005, and 2006 and thereafter, respectively, in comparison to what property tax expense would have been without the settlement. The 2001impact of the settlement on ratepayers will be addressed in future rate making proceedings.
Interest Expense and Other —Interest expense increased $24.4 million and $0.7 million in 2003 and 2002, respectively. The 2003 increase was due to higher average borrowing rates at Resources due to an increase in the mix of long- versus short-term debt outstanding, higher credit facility fees at Resources and higher interest expense at the parent company. These items were partially offset by the impact of the formation of ATC in 2001, as discussed in
"Domestic Electric Utility Margins," and lower earnings on the WP&L nuclear
decommissioning trust fund.average borrowings at Resources. The accounting for earnings on the nuclear
decommissioning trust fund results in no net income impact. Miscellaneous,
net income increases for earnings on the trust fund and the corresponding
offset is recorded through depreciation expense at WP&L.
Taxes other than income taxes increased $2.1 million and $4.4 million in 2002 and 2001, respectively, primarilyincrease was due to increased property taxes in 2002 and
increased gross receipts and payroll taxes in 2001.
Interest Expense and Other - Interest expense increased $0.9 million and
- --------------------------
$17.5 million in 2002 and 2001, respectively. Both increases were impacted
by higher non-regulated borrowings, partiallysubstantially offset by the impact of lower interest rates on Alliant Energy'sEnergy’s variable rate borrowings. The 2002
increase was also partially offset byborrowings and lower short-term debt borrowings at the Alliant Energy parent level, largely due to the impact of proceeds received in November 2001 from a common equity offering.
Loss on early extinguishment of debt in 2003 includes debt repayment premiums and charges for the unamortized debt expenses related to long-term debt retirements of $71.5 million of senior notes at Resources and $24.0 million of senior notes at the Alliant Energy recorded income tax and associated interest income of $0.13
per share in 2001 related to a ruling in a tax refund case. The federal
government decided in the fourth quarter of 2001 not to pursue the ruling in
favor of Alliant Energy by the U.S. Court of Appeals for the 8th Circuit
dealing with capital losses disallowed under audit by the IRS and certain
related deductions. An additional potential refund of approximately $14
million, plus interest, remains a contested issue in this case. Alliant
Energy cannot offer any assurance it will be successful in obtaining this
additional refund and has not recognized any income for the potential
additional refund.
parent company.
Equity income (loss)(income) loss from Alliant Energy'sEnergy’s unconsolidated investments was as follows (in millions):
2002 2001 2000
------------- -------------- -------------
ATC (began operations 1/01) $14 $15 $--
New Zealand 4 -- 3
China* 2 2 1
Cargill-Alliant (sold in 2002) 1 7 15
Synfuel (began operations 5/02) (13) -- --
Brazil (23) (4) 3
Other 2 (1) (3)
------------- ------------- -------------
($13) $19 $19
============= ============= =============
* Majority of investments are accounted for under the consolidation method.
| 2003 | 2002 | 2001 | |||||
| ATC | ($16 | ) | ($14 | ) | ($15 | ) | |
| Brazil | (9 | ) | 23 | 4 | |||
| New Zealand | (8 | ) | (4 | ) | -- | ||
| WRPC | (5 | ) | (3 | ) | (1 | ) | |
| Cargill-Alliant (sold in 2002) | -- | (1 | ) | (7 | ) | ||
| Synfuel (began operations 5/02) | 20 | 13 | -- | ||||
| Other | (1 | ) | (1 | ) | -- | ||
| ($19 | ) | $13 | ($19 | ) | |||
Equity income from unconsolidated investments increased $32 million and decreased $32 million in 2002.2003 and 2002, respectively. The differencesimproved results for Brazil during 2003 were primarily due to: rate increases implemented at all five of the Brazil operating companies throughout 2003; an increase in incomeelectric sales volumes of approximately 7% in 2003 compared to 2002; foreign currency transaction gains of $2.4 million and losses of $6.5 million during 2003 and 2002, respectively, related to approximately $40 million in debt at one of the Brazilian operating companies; and charges of $7.7 million during 2002 resulting from the receipt of regulatory orders related to the recovery of various costs. The lower 2002 results from the Brazil investments were also due to higher interest expense at the Brazil operating companies, partially offset by an approximate 5% increase in electric sales volumes during 2002 (a drought-driven rationing program was in place for seven months in 2001 and only two months in 2002). The 2001 Brazil results included a charge related to the impacts of a settlement reached between the Brazilian government and the distribution companies on the economic resolution of various cost recovery issues. The increased earnings from New Zealand during the three years2003 were largelyprimarily due to higher energy prices and gains on asset sales in 2003. The 2002 increased earnings from New Zealand were primarily due to the 2001 results being depressed becausenegative impacts of drought conditions. The lower earningsconditions in 2002 and 2001 at Cargill-Alliant were
impacted by fewer weather-related trading opportunities and less volatile
market prices. Refer to "Liquidity and Capital Resources - Sales of
Non-strategic Assets" for discussion relating to Alliant Energy's sale of
this investment in 2002.2001. In the second quarter of 2002, Synfuel a direct
subsidiary of Resources, purchased an equity interest in a synthetic fuel processing facility. The synthetic fuel project generates operating losses at its fuel processing facility, which are more than offset by tax credits and the tax benefit of the losses the project generates. All tax benefits are included in "Income taxes"“Income taxes” in Alliant Energy'sEnergy’s Consolidated Statements of Income. The lower 2002 results from the Brazil investments were largely dueRefer to losses incurred by Alliant Energy's investment in a gas-fired generating
plant, charges incurred in 2002 related to the recovery“Other Matters — Other Future Considerations” for further discussion of the impacts of
rationing and other prior costs and higher interest expense. The loss from
the generating plant was due to the impact of a significant decline in the
currency ratestax credits associated with the debt issuedSynfuel investment.
31
AFUDC increased $13.0 million in 2003, primarily due to financeongoing construction of the plantEmery plant. Preferred dividend requirements of subsidiaries increased $10.7 million in 2003 due to an increase in the aggregate amount of preferred stock outstanding at IP&L and a depressed wholesale energy market in 2002. Increased electric sales volumes
in 2002 compared to 2001, largely due to the impacts of the drought-driven
rationing program that was in place for approximately seven months in 2001
compared to only two months in 2002, partially offset the lower Brazil
earnings. The 2001 Brazil results included a charge related to the impacts
of a settlement reached between the Brazilian government and the distribution
companies on the economic resolution of various cost recovery issues.
37
Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for discussion of the asset valuation charges recorded by Alliant Energy in 2002 related to its McLeod available-for-sale securities.
On July 1, 2000, Alliant Energy adopted SFAS 133 for its consolidated
entities. Related to the adoption, Alliant Energy recorded a $321.3 million
pre-tax gain from the designation of a portion of Alliant Energy's McLeod
holdings as trading securities. This gain related to the unrealized
appreciation in value of approximately 27% of Alliant Energy's McLeod
holdings that were designated as trading as of the adoption date.
Miscellaneous, net income decreased $12.7increased $22.9 million and $26.7decreased $4.7 million in 2003 and 2002, and 2001, respectively. The 2002 decrease wasrespectively, largely due to the recording of pre-tax asset valuation charges of $10 million and $9 million related to Alliant Energy'sEnergy’s investments in Enermetrix, Inc. ($8.5 million in 2002) and Energy Technologies ($2.8 million in 2003 and Enermetrix investments,
respectively,$10.3 million in 2002). The 2003 increase was also due to improvements in the non-cash valuation adjustments related to Alliant Energy’s McLeod trading securities, foreign currency transaction gains and gains from asset sales realized in 2003. These items were partially offset by lower interest income from loans to discontinued operations due to asset sales during 2003. The 2002 decrease was also impacted by lower interest income (the 2001 results included $10 million from tax settlements), a pre-tax goodwill impairment charge of $7 million at
SmartEnergy and gains from asset sales realized in 2001. These decreases
were partially offset by2001 and lower pre-tax, non-cash SFAS 133 valuation charges of $29 million, related to the net change in the value of the McLeod trading securities and the derivative component of Resources'Resources’ exchangeable senior notes,notes. Refer to Note 1(p) of Alliant Energy’s “Notes to Consolidated Financial Statements” for further discussion.
Income Taxes —The effective income tax rates for Alliant Energy’s continuing operations were 28.9%, 31.2% and increased earnings on WP&L's nuclear decommissioning trust fund.
The27.8% in 2003, 2002 and 2001, decrease was largely due to higher pre-tax, non-cash SFAS 133
valuation chargesrespectively. Alliant Energy recorded tax benefits of $33$6.4 million in 2001 related to the net changea court ruling on a federal tax case. Refer to Note 5of Alliant Energy’s “Notes to Consolidated Financial Statements” for additional information.
Income from Discontinued Operations — Refer to “Overview” and Note 16 of Alliant Energy’s “Notes to Consolidated Financial Statements” for discussion of Alliant Energy’s discontinued operations.
Cumulative Effect of Changes in the value of
the McLeod trading securities and the derivative component of Resources'
exchangeable senior notes, reduced nuclear decommissioning trust fund
earnings and lower gains from asset sales. These decreases were partially
offset by higher interest income, including the $10 million from tax
settlements in 2001.Accounting Principles — In 2003, Alliant Energy realized $0,recorded after-tax charges of $4 million and $2 million of income from weather hedges in 2002, 2001 and 2000, respectively.
Refer to Note 10(a) of Alliant Energy's "Notes to Consolidated Financial
Statements" for additional information related to the exchangeable senior
notes embedded derivative, the McLeod trading securities and the cumulative effect of changes in accounting principle.
Income Taxes - The effective income tax rates for Alliant Energy's continuing
- ------------
operations were 30.5%, 27.6%principles related to the adoption on Jan. 1, 2003 of SFAS 143 and 40.1% in 2002, 2001EITF Issue 02-3 within WPC and 2000,Integrated Services, respectively. Refer to Note 5Notes 10(d) and 10(a) of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for additional information.
Income from Discontinued Operations - The 2002 decreasefurther information on the EITF Issue 02-3 charge and for discussion of $28 million in
- -----------------------------------
income from discontinued operations was largely due to lower earnings from
Alliant Energy's oil and gas (Whiting) business due to lower prices, higher
operating expenses and lower gains from dispositions of oil and gas
properties in 2002 compared to 2001. Tax adjustments recorded in 2002
related to Alliant Energy's decision to sell its Australian (Southern Hydro)
and affordable housing businesses also contributed to the lower income. The
2002 decrease was partially offset by higher oil and gas sales volumes at
Whiting and higher earnings from Southern Hydro due to increased generation
and sales of renewable energy credits earned through the generation of
hydropower. The 2001 increase in income was largely due to non-cash SFAS 133
incomecharge incurred in 2001 related to the valuationfor a cumulative effect of electricity derivatives at
Southern Hydro and higher earnings from Whiting which resulted from higher
gas prices earliera change in 2001, increased oil and gas sales volumes and income
from a reduction in the estimated dismantlement cost of an offshore oil and
gas platform. The 2001 increase was partially offset by approximately $16
million of income from gains on the sale of 1.3 million shares of McLeod in
2000 by Alliant Energy's affordable housing business. Refer to Note 16 of
Alliant Energy's "Notes to Consolidated Financial Statements" for further
discussion of Alliant Energy's discontinued operations.
accounting principle, respectively.
IP&L RESULTS OF OPERATIONS
Overview - —IP&L's&L’s earnings available for common stock decreased $0.9 million and $6.6 million - --------in 2003 and $5.1 million in 2002, respectively. The 2003 decrease was primarily due to increased other operation and 2001, respectively.maintenance, depreciation and amortization, and preferred dividend expenses, largely offset by higher electric and gas margins, lower property taxes and higher AFUDC. The 2002 decrease was primarily due to increased operating expenses, a higher effective income tax rate and lower interest income, partially offset by higher electric and gas margins. The 2001 decrease was primarily due to increased operating expenses
and lower electric and gas margins, partially offset by a lower effective
income tax rate and higher interest income.
38
Electric Utility Margins - —Electric margins and MWh sales for IP&L were as - ------------------------
follows (in thousands):
| Revenues and Costs | MWhs Sold | ||||||||||||||||||||
| 2003 | 2002 | * | 2001 | ** | 2003 | 2002 | * | 2001 | ** | ||||||||||||
| Residential | $367,681 | $355,072 | 4 | % | $350,946 | 1 | % | 4,155 | 4,184 | (1 | %) | 4,026 | 4 | % | |||||||
| Commercial | 239,362 | 229,639 | 4 | % | 234,876 | (2 | %) | 3,496 | 3,392 | 3 | % | 3,342 | 1 | % | |||||||
| Industrial | 327,838 | 315,494 | 4 | % | 335,680 | (6 | %) | 7,750 | 7,843 | (1 | %) | 7,931 | (1 | %) | |||||||
| Total from retail | |||||||||||||||||||||
| customers | 934,881 | 900,205 | 4 | % | 921,502 | (2 | %) | 15,401 | 15,419 | -- | 15,299 | 1 | % | ||||||||
| Sales for resale | 40,249 | 34,513 | 17 | % | 53,320 | (35 | %) | 1,299 | 1,151 | 13 | % | 1,412 | (18 | %) | |||||||
| Other | 31,852 | 30,136 | 6 | % | 28,284 | 7 | % | 102 | 103 | (1 | %) | 107 | (4 | %) | |||||||
| Total revenues/sales | 1,006,982 | 964,854 | 4 | % | 1,003,106 | (4 | %) | 16,802 | 16,673 | 1 | % | 16,818 | (1 | %) | |||||||
| Electric production | |||||||||||||||||||||
| fuel and purchased- | |||||||||||||||||||||
| power expense | 320,852 | 299,274 | 7 | % | 357,140 | (16 | %) | ||||||||||||||
| Margin | $686,130 | $665,580 | 3 | % | $645,966 | 3 | % | ||||||||||||||
| * | Reflects the % change from 2002 to 2003. ** Reflects the % change from 2001 |
32
Electric margin increased $20.6 million, or 3%, and $19.6 million, or 3%, for 2003 and decreased $4.1 million,
or 1%, for 2002, and 2001, respectively. The 2002 increase wasrespectively, primarily due to the impact of the interim retail rate increase,increases implemented during 2003 and 2002, including increased revenues to recover a significant portion of IP&L’s increased operating expenses, lower purchased-power capacity costs more favorable weather conditionsof $6 million, and increased sales resulting from continued modest retail customer growth. These increasesHigher sales to non-retail customers also contributed to the 2003 increase, which was partially offset by the impact of milder weather conditions in 2003 compared to 2002 and a sluggish economy. Also contributing to the 2002 increase were more favorable weather conditions in 2002 compared to 2001. The 2002 increase was partially offset by reduced energy conservation revenues of $10 million and the impacts of a sluggish economy.
The 2001 decrease was primarily due to reduced energy conservation revenues
of $5 million and lower sales largely due to impacts of a slowing economy,
partially offset by decreased purchased-power capacity costs and continued
retail customer growth. For both 2002 and 2001, the reduced energy
conservation revenues(which were largely offset by lower energy conservation expenses.
expenses).
Gas Utility Margins - —Gas margins and Dth sales for IP&L were as follows (in - -------------------
thousands):
| Revenues and Costs | Dths Sold | ||||||||||||||||||||
| 2003 | 2002 | * | 2001 | ** | 2003 | 2002 | * | 2001 | ** | ||||||||||||
| Residential | $173,598 | $124,237 | 40 | % | $162,575 | (24 | %) | 19,074 | 18,068 | 6 | % | 17,826 | 1 | % | |||||||
| Commercial | 88,057 | 61,222 | 44 | % | 82,463 | (26 | %) | 11,408 | 10,774 | 6 | % | 10,483 | 3 | % | |||||||
| Industrial | 24,595 | 18,197 | 35 | % | 22,355 | (19 | %) | 3,911 | 4,070 | (4 | %) | 4,147 | (2 | %) | |||||||
| Transportation/other | 8,299 | 11,239 | (26 | %) | 13,621 | (17 | %) | 29,182 | 28,814 | 1 | % | 31,673 | (9 | %) | |||||||
| Total revenues/sales | 294,549 | 214,895 | 37 | % | 281,014 | (24 | %) | 63,575 | 61,726 | 3 | % | 64,129 | (4 | %) | |||||||
| Cost of gas sold | 209,817 | 138,875 | 51 | % | 207,088 | (33 | %) | ||||||||||||||
| Margin | $84,732 | $76,020 | 11 | % | $73,926 | 3 | % | ||||||||||||||
| * | Reflects the % change from 2002 to 2003. ** Reflects the % change from 2001 |
Gas revenues and cost of gas sold were unusually highhigher in 2003 and 2001 as compared to 2002 due to the increased natural gas prices in the first half of 2001. Such fluctuationsprices. These increases alone had no impact on IP&L's&L’s gas margin given its rate recovery mechanism for gas costs. Gas margin increased $8.7 million, or 11%, and $2.1 million, or 3%, for 2003 and decreased $4.3
million, or 5%, for 2002, and 2001, respectively. The 2002 increase wasrespectively, primarily due to the impact of the interima retail rate increase andimplemented during 2002. Also contributing to the 2003 increase were increased sales, primarily due to slightly more favorable weather conditions during the heating season in 2003 compared to 2002. Also contributing to the 2002 increase was the negative impact high gas prices in early 2001 had on gas consumption during that period, partially offset by reduced energy conservation revenues of $4 million. The 2001 decrease was largely due to lower retail sales primarily
related to unusually high gas prices earlier in 2001 as some customers either
chose alternative fuel sources or used less natural gas, the impact of the
slowing economy and reduced energy conservation revenues. For both 2002 and
2001, the reduced energy conservation revenuesmillion (which were largely offset by lower energy conservation expenses.
expenses).
Refer to Note 1(j) 1(i)of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for information relating to utility fuel and natural gas cost recovery. Refer
Steam and Other Revenues — Steam and other revenues increased $7.0 million and decreased $5.8 million for 2003 and 2002, respectively. The 2003 increase was primarily due to Note 2 of Alliant Energy's "Notesincreased construction management revenues from WindConnect™. The 2002 decrease was primarily due to Consolidated
Financial Statements"lower non-commodity products and "Ratesservices revenues. These 2003 and Regulatory Matters" for discussion of
IP&L's rate filings.
2002 variances were largely offset by variances in other operation and maintenance expenses.
Other Operating Expenses - —Other operation and maintenance expenses increased - ------------------------
$16.6$23.1 million and $14.2$8.0 million for 2003 and 2002, respectively. The 2003 increase was largely due to higher employee and 2001, respectively.retiree benefits (primarily compensation, medical and pension costs), WindConnect™ and steam production fuel costs. These items were partially offset by decreased transmission and distribution and generation expenses. The 2002 increase was primarilylargely due to increased fossil and nuclear generation, employee benefit and energy deliveryretiree benefits and transmission and distribution expenses. These increasesitems were partially offset by lower expenses for energy conservation, expenses of $11 millionnon-commodity products and decreased uncollectible customer account balances. The 2001 increase was
primarily due to higher transmission wheeling and other energy delivery
costs, fossil and nuclear generation costsservices and uncollectible customer account 39
balancesbalances.
Depreciation and amortization expense increased $17.3 million and decreased $2.4 million for 2003 and 2002, respectively. The 2003 increase was largely due to the unusually high gas prices earlier in 2001higher amortization of software of $7 million, property additions and a
downturn in the economy. These increases were partially offset by one-time
fees in 2000 relatedincreased contributions of $4 million to the transfer from the MAPP reliability region to the
MAIN region and a decrease of $3 million in energy conservation expenses.
Depreciation and amortization expenses decreased $2.4 million and increased
$5.0 million for 2002 and 2001, respectively.nuclear decommissioning trust fund. The 2002 decrease was primarilylargely due to a $14 million reduction in depreciation expense from implementation of lower depreciation rates on Jan. 1, 2002, resulting from an updated depreciation study, largely offset by property additions. The 2001
increase was primarily
Taxes other than income taxes decreased $13.8 million for 2003 largely due to decreased property additionstaxes, related to a 2003 property tax settlement and amortizationexpiration of software.
provisions which required additional payments in the early years of the revised property tax regulations in Iowa. Refer to “Alliant Energy Results of Operations — Other Operating Expenses” for further discussion.
33
Interest Expense and Other - Miscellaneous, net — AFUDC increased $11.6 million for 2003 due to ongoing construction of the Emery plant. Interest income and other decreased $3.9 million
- --------------------------
and increased $6.0$5.6 million for 2002 and 2001, respectively, primarilylargely due to higher interest income in 2001 and income from weather hedges in 2001. IP&L realizedrealizing $5 million and $4 million in interest income from tax settlements in 2001 and 2000, respectively. The 2002 decrease was partially offset by
higher income from sales of non-commodity products and services.
2001.
Income Taxes - —The effective income tax rates were 40.7%41.4%, 40.7% and 35.1% in 2003, 2002 and 38.7% in
- ------------
2002, 2001, and 2000, respectively. Refer to Note 5 of IP&L's "Notes&L’s “Notes to Consolidated Financial Statements"Statements” for additional information.
Preferred Dividend Requirements —Preferred dividend requirements increased $10.7 million for 2003 due to an increase in the aggregate amount of preferred stock outstanding and a higher dividend rate.
WP&L RESULTS OF OPERATIONS
Overview - —WP&L's&L’s earnings available for common stock increased $34.0 million and $7.4 million - --------in 2003 and $2.1 million in 2002, and 2001, respectively. The 2002 increase wasrespectively, primarily due to higher electric and gas margins, partially offset by increased operating expenses. The 2001 increase was primarily due to higher
electric margins and a lower effective income tax rate, partially offset by
increased operating expenses and lower gas margins.
Electric Utility Margins - —Electric margins and MWh sales for WP&L were as - ------------------------
follows (in thousands):
| Revenues and Costs | MWhs Sold | ||||||||||||||||||||
| 2003 | 2002 | * | 2001 | ** | 2003 | 2002 | * | 2001 | ** | ||||||||||||
| Residential | $316,893 | $271,875 | 17 | % | $248,128 | 10 | % | 3,410 | 3,432 | (1 | %) | 3,318 | 3 | % | |||||||
| Commercial | 170,342 | 146,726 | 16 | % | 138,269 | 6 | % | 2,167 | 2,150 | 1 | % | 2,122 | 1 | % | |||||||
| Industrial | 243,770 | 211,310 | 15 | % | 207,791 | 2 | % | 4,595 | 4,454 | 3 | % | 4,538 | (2 | %) | |||||||
| Total from retail | |||||||||||||||||||||
| customers | 731,005 | 629,911 | 16 | % | 594,188 | 6 | % | 10,172 | 10,036 | 1 | % | 9,978 | 1 | % | |||||||
| Sales for resale | 155,573 | 125,822 | 24 | % | 131,187 | (4 | %) | 4,196 | 3,654 | 15 | % | 3,524 | 4 | % | |||||||
| Other | 23,508 | 31,947 | (26 | %) | 28,075 | 14 | % | 82 | 94 | (13 | %) | 61 | 54 | % | |||||||
| Total revenues/sales | 910,086 | 787,680 | 16 | % | 753,450 | 5 | % | 14,450 | 13,784 | 5 | % | 13,563 | 2 | % | |||||||
| Electric production | |||||||||||||||||||||
| fuel and purchased- | |||||||||||||||||||||
| power expense | 409,742 | 352,539 | 16 | % | 338,028 | 4 | % | ||||||||||||||
| Margin | $500,344 | $435,141 | 15 | % | $415,422 | 5 | % | ||||||||||||||
| * | Reflects the % change from 2002 to 2003. ** Reflects the % change from 2001 |
Electric production
fuels expense 132,492 120,722 10% 113,208 7%
Purchased-power expense 217,209 217,306 -- 146,939 48%
---------- ----------- -----------
Margin $437,979 $415,422 5% $432,044 (4%)
========== =========== ===========
* Reflects the percent change from 2001 to 2002. ** Reflects the percent
change from 2000 to 2001.
Due to the formation of ATC on Jan. 1, 2001, the wheeling expenses from ATC
included in electric margin in 2002 and 2001 were offset by equity income
(WP&L accounts for its investment in ATC under the equity method), reduced
other operation and maintenance expenses and lower depreciation expense,
resulting in no significant net income impact due to the formation of ATC.
On a comparable basis, electric margin increased $22.6$65.2 million, or 15%, and $19.7 million, or 5%, for 2003 and $13.8 million, or 3%, during 2002, and 2001, respectively. The 2002 increase
wasrespectively, primarily due to the implementation of various rate increases induring 2003 and 2002, including increased revenues to recover a significant portion of WP&L’s increased operating expenses and increased sales from continued modest retail customer growthgrowth. Also contributing to the 2003 increase were the impact of WP&L implementing seasonal rates in 2003 for the first time, lower purchased-power and fuel costs impacting margin and higher sales to non-retail customers. These items were partially offset by lower energy conservation revenues and the impact of milder weather conditions in 2003 compared to 2002. Also contributing to the 2002 increase were more favorable weather conditions in 2002 compared to 2001, partially offset by the sluggish economy. The 2001
increase was primarily due
In April 2003, WP&L implemented seasonal electric rates that are designed to result in higher rates for the peak demand period from June 1 through Sept. 30 and lower purchased-power and fuel costs impacting
margin,rates in all other periods during each calendar year. As a result, total annual revenues are not expected to be impacted significantly. However, given the seasonal rates were not implemented in 2003 until April, the impact of seasonal rates increased residential and commercial sales due to more favorable
weather conditionselectric margins by approximately $6 million in 20012003 compared to 2000 and continued retail customer
growth. These items2002 when no seasonal rates were partially offset by $10 millionin effect. As a result, the first quarter of income recorded2004 margins are expected to be negatively impacted in 2000 for a change in estimate of utility services rendered but unbilled at
month-end duecomparison to the implementation of2003 margin for the same period by a refined estimation process and lower
industrial sales, largely due to impacts of a slowing economy.
40
34
Gas Utility Margins - —Gas margins and Dth sales for WP&L were as follows (in - -------------------
thousands):
| Revenues and Costs | Dths Sold | ||||||||||||||||||||
| 2003 | 2002 | * | 2001 | ** | 2003 | 2002 | * | 2001 | ** | ||||||||||||
| Residential | $137,060 | $94,509 | 45 | % | $107,673 | (12 | %) | 12,797 | 12,863 | (1 | %) | 11,754 | 9 | % | |||||||
| Commercial | 74,594 | 50,121 | 49 | % | 58,658 | (15 | %) | 8,539 | 8,574 | -- | 7,572 | 13 | % | ||||||||
| Industrial | 9,606 | 6,980 | 38 | % | 8,907 | (22 | %) | 1,182 | 1,303 | (9 | %) | 1,197 | 9 | % | |||||||
| Transportation/other | 51,117 | 27,481 | 86 | % | 31,625 | (13 | %) | 19,796 | 18,572 | 7 | % | 16,866 | 10 | % | |||||||
| Total revenues/sales | 272,377 | 179,091 | 52 | % | 206,863 | (13 | %) | 42,314 | 41,312 | 2 | % | 37,389 | 10 | % | |||||||
| Cost of gas sold | 186,285 | 110,119 | 69 | % | 153,823 | (28 | %) | ||||||||||||||
| Margin | $86,092 | $68,972 | 25 | % | $53,040 | 30 | % | ||||||||||||||
| * | Reflects the % change from 2002 to 2003. ** Reflects the % change from 2001 |
Gas revenues and cost of gas sold were unusually highhigher in 2003 and 2001 as compared to 2002 due to the
large increase inincreased natural gas prices in the first half of 2001. Due to
WP&L's rate recovery mechanisms for gas costs, theseprices. These increases alone had little impact on WP&L’s gas margin.margin given its rate recovery mechanism for gas costs. Gas margin increased $17.1 million, or 25%, and $15.9 million, or 30%, for 2003 and decreased $5.0 million, or 9%, during 2002, and 2001, respectively. The 2002
increase was largelyrespectively, primarily due to the implementationimpact of a rate increase inincreases implemented during 2003 and 2002, improved resultsperformance of $3 million from WP&L's&L’s performance-based commodity cost recovery program (benefits are shared by ratepayers and shareowners), and continued modest retail customer growth andgrowth. The 2002 increase was also due to the negative impact high gas prices in early 2001 had on gas consumption during that period. The 2001
decrease was largely due to lower retail sales primarily related to unusually
high gas prices earlier in 2001 as some customers either chose alternative
fuel sources or used less natural gas, the impact of the slowing economy and
lower results from WP&L's performance-based commodity cost recovery program.
Refer to Note 1(j) 1(i)of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for information relating to utility fuel and natural gas cost recovery. Refer
Other Revenues — Other revenues increased $11.8 million and decreased $10.6 million for 2003 and 2002, respectively. The 2003 increase was primarily due to Note 2 of Alliant Energy's "Notesincreased revenues from WindConnect™. The 2002 decrease was primarily due to Consolidated
Financial Statements"decreased non-commodity products and "Ratesservices revenues. These 2003 and Regulatory Matters" for discussion of
WP&L's rate filings.
Other Operating Expenses - Due to the formation of ATC2002 variances were largely offset by variances in 2001, WP&L incurred
- ------------------------
$10 million ofother operation and maintenance expenses in 2000 that were not
incurred in 2001. On a comparable basis, otherexpenses.
Other Operating Expenses — Other operation and maintenance expenses increased $29.2$52.9 million and $7.6$28.7 million for 2003 and 2002, respectively. The 2003 increase was largely due to increases in the amortization of deferred costs that are now being recovered in rates, employee and 2001,
respectively.retiree benefits (primarily compensation, medical and pension costs), WindConnect™ and nuclear expenses. The increased nuclear expenses resulted primarily from a planned refueling outage at Kewaunee in 2003. There was no refueling outage in 2002. These items were partially offset by lower fossil generation expenses. The 2002 increase was largely due to higher fossil generation, employee benefit,and retiree benefits, energy conservation, and energy deliverytransmission and distribution expenses, and higher regulatory amortization, partially offset by decreased non-commodity products and services expenses. A significant portion of these cost increases are being recovered as a result of the rate increases implemented during 2003 and 2002.
Depreciation and amortization expense decreased $3.8 million and $12.3 million for 2003 and 2002, respectively. The 2001 increase2003 decrease was primarily due to higher nuclear operating costs (partially
due to a planned refueling outage at Kewaunee in the fourth quarter of 2001),
higher uncollectible customer account balances largely due to the unusually
high gas prices earlier in the year and higher other administrative and
general costs. These items werelower software amortizations, partially offset by decreased fossil plant
maintenance expenses.
Depreciation and amortization expenses increased $7.1 million and decreased
$10.8 million for 2002 and 2001, respectively.property additions. The 2002 increasedecrease was largely due to higher regulatory and software amortizations. Increased earnings on
the nuclear decommissioning trust fund were largely offset by lower decommissioning expense based on reduced retail funding levels. The 2001
decrease was primarily due to the impact of the formation of ATC and
decreased earnings on the nuclear decommissioning trust fund,levels, partially offset by increasedhigher software amortizations.
Interest Expense and Other —Interest expense due to property additions. The accounting for
earnings on the nuclear decommissioning trust funds results in no net income
impact. Interest income is increased for earnings on the trust fund, which
is offset in depreciation expense.
Taxes other than income taxes increaseddecreased $2.3 million and $3.3 million for 20012003 and 2002, respectively. The 2003 decrease was largely due to increased gross receipts and payroll taxes.
Interest Expense and Other - Interest expense decreased $3.3 million inlower average borrowings outstanding. The 2002 - --------------------------decrease was largely due to lower average interest rates on the outstanding borrowings. Interest
income increased $13.5 million and decreased $5.0 million in 2002 and 2001,
respectively, due to differences in earnings on the nuclear decommissioning
trust fund. Equity income from unconsolidated investments increased $15.0$3.7 million in 2001, largelyfor 2003 due to ATC beginning operations on Jan. 1, 2001.
Miscellaneous, net income decreased $7.3 million in 2002 primarily due to
lower income from sales of non-commodity productshigher earnings at WRPC and services and income
realized from weather hedges in 2001.
ATC.
Income Taxes - —The effective income tax rates were 35.6%36.4%, 35.6% and 35.9% in 2003, 2002 and 37.5% in
- ------------
2002, 2001, and 2000, respectively. Refer to Note 5 of WP&L's "Notes&L’s “Notes to Consolidated Financial Statements"Statements” for additional information.
41
LIQUIDITY AND CAPITAL RESOURCES
Overview - Alliant Energy's recent and proposed financing activities have
- --------
been and will be undertaken against a backdrop of increased market concerns
about general economic conditions and corporate governance issues as well as
risks associated with particular sectors of the economy, including the energy
industry. As a result of these factors, capital markets have become more
restrictive. The commercial paper market, for example, has become more
limited for many companies in terms of the amounts of available capital and
the corresponding maturities. Medium- and long-term debt markets have become
sensitive to increased credit ratings volatility and to a heightened
perception of liquidity risk in the energy sector. As a result, investors
have become more selective and have differentiated among otherwise comparable
issuers in a way that has made the financing process more challenging. In
response to these changing market conditions, Alliant Energy is working
closely with its financial advisors and others to access the capital it needs
to operate its businesses. — Based on its strongexpected operating cash flows, coupled with actions Alliant Energy has taken and expects to take to strengthen its balance sheet, Alliant Energy currently believes it will be able to secure the capital it requires to implement its refinedupdated strategic plan. Alliant Energy believes its ability to secure additional capital will behas been significantly enhanced by the completionsuccessful execution of the strategic actions addressedit announced in "Strategic Actions," including the
divestiture of selected businesses.
November 2002. Refer to “Strategic Overview — November 2002 Plan” for further discussion.
35
Alliant Energy'sEnergy’s capital requirements are primarily attributable to its
utility subsidiaries' construction and acquisition programs Resources'
acquisition and investment opportunities and its debt maturities. Cash flows from Alliant Energy'sEnergy’s utility subsidiaries anticipate financing their constructionare expected to cover dividends and capital expenditures including new electricrelated to infrastructure and reliability investments. The capital expenditures associated with building additional generation facilities, during 2003-2005are expected to total $650 million through internally generated funds supplemented, when necessary, by outside
financing. Funding for Resources' acquisition2010 and investment expenditures
over that same period of time isare expected to be accomplished with a
combination offinanced largely through external financings, sales of assets andsupplemented by internally generated funds. In order to balance its capital structure, Alliant Energy may periodically issue additional common equity as well as debt.
Cash Flows — Selected information from Alliant Energy’s, IP&L’s and WP&L’s Consolidated Statements of Cash Flows was as follows (in thousands):
| Alliant Energy | IP&L | WP&L | |||||||||||||||||||
| Cash flows from (used for): | 2003 | 2002 | 2001 | 2003 | 2002 | 2001 | 2003 | 2002 | 2001 | ||||||||||||
| Operating activities | $419,990 | $555,338 | $433,346 | $321,918 | $250,430 | $305,948 | $138,495 | $223,750 | $135,886 | ||||||||||||
| Financing activities | 34,080 | 72,237 | 161,075 | 206,155 | 6,286 | (102,086 | ) | (11,595 | ) | (27,685 | ) | (19,176 | ) | ||||||||
| Investing activities | (274,648 | ) | (632,602 | ) | (654,561 | ) | (532,087 | ) | (250,727 | ) | (203,838 | ) | (108,402 | ) | (187,795 | ) | (116,832 | ) | |||
In 2003, Alliant Energy’s cash flows from operating activities decreased $135 million primarily due to changes in working capital caused largely by changes in the levels of accounts receivable sold and higher inventory balances, partially offset by higher net income. Cash flows from financing activities decreased $38 million primarily due to changes in the amounts of debt and preferred stock issued and retired, partially offset by proceeds from a 2003 common equity offering and lower common stock dividends due to the dividend reduction implemented in 2003. Cash flows used for investing activities decreased $358 million primarily due to proceeds from asset sales, partially offset by construction and acquisition expenditures associated with the construction of the Emery plant. In 2002, Alliant Energy’s cash flows from operating activities increased $122 million primarily due to changes in working capital. Cash flows from financing activities decreased $89 million primarily due to proceeds from the issuance of common stock in 2001, partially offset by a net increase in the amount of preferred stock outstanding at IP&L. Cash flows used for investing activities decreased $22 million primarily due to lower construction and acquisition expenditures, partially offset by proceeds received in 2001 from the transfer of WP&L’s transmission assets to ATC.
In 2003, IP&L’s cash flows from operating activities increased $71 million primarily due to changes in working capital caused largely by changes in the levels of accounts receivable sold. Cash flows from financing activities increased $200 million primarily due to a higher capital contribution from Alliant Energy in 2003 compared to 2002 and changes in the amount of debt and preferred stock issued and retired. Cash flows used for investing activities increased $281 million primarily due to construction and acquisition expenditures associated with the construction of the Emery plant. In 2002, IP&L’s cash flows from operating activities decreased $56 million primarily due to changes in working capital caused largely by changes in the levels of accounts receivable sold. Cash flows used for financing activities decreased $108 million due to a net increase in the amount of preferred stock outstanding and a capital contribution of $60 million by Alliant Energy. Cash flows used for investing activities increased $47 million due to increased levels of construction expenditures.
In 2003, WP&L’s cash flows from operating activities decreased $85 million primarily due to changes in working capital, partially offset by higher net income. Cash flows used for financing activities decreased $16 million primarily due to a higher capital contribution from Alliant Energy in 2003 compared to 2002, partially offset by changes in the amount of debt issued and retired. Cash flows used for investing activities decreased $79 million primarily due to proceeds from the sale of WP&L’s water utility serving the Beloit area and lower contributions to its nuclear decommissioning trust fund. In 2002, WP&L’s cash flows from operating activities increased $88 million due to changes in working capital and cash flows used for investing activities increased $71 million primarily due to proceeds received from the transfer of WP&L’s transmission assets to ATC in 2001.
Certain Regulatory Approvals/Requirements —PUHCA— In 2001, Alliant Energy and Resources received SEC approval under an Omnibus Financing Order for their ongoing program of external financing, credit support arrangements and other related proposals for the period through Dec. 31, 2004. Among other things, the approval authorized Alliant Energy, directly or through financing subsidiaries, to issue common and preferred stock, unsecured long-term debt securities and other equity-linked securities up to an amount of $1.5 billion; to provide guarantees and credit support for obligations of its subsidiaries up to an amount of $3 billion; to enter into hedging transactions to manage interest rate costs and risk exposure; and to increase its aggregate investment limit in EWGs and FUCOs to 100% of consolidated retained earnings. The approval, among other things, also authorized Resources to provide guarantees and credit support for obligations of non-utility subsidiaries up to an amount of $600 million outstanding at any one time and to spend up to $800 million to
construct or acquire energy assets that are incidental to the energy
marketing and oil and gas productions of its subsidiaries. Alliant Energy's
ability to undertake any such financings contemplated by the SEC's order is
dependent on its ability to access the capital markets as described above.
Cash Flows - Selected information from Alliant Energy's, IP&L's and WP&L's
- ----------
Consolidated Statements of Cash Flows was as follows (in thousands):
Alliant Energy IP&L WP&L
---------------------------------- --------------------------------- --------------------------------
Cash flows from (used for): 2002 2001 2000 2002 2001 2000 2002 2001 2000
---------------------------------- --------------------------------- --------------------------------
Operating activities $544,040 $426,111 $393,090 $250,430 $305,948 $267,564 $223,750 $135,886 $174,060
Financing activities 84,090 170,525 513,063 6,286 (102,086) (77,716) (27,685) (19,176) 987
Investing activities (632,658) (656,262) (869,253) (250,727) (203,838) (189,862) (187,795) (116,832) (174,880)
In 2002, Alliant Energy's cash flows from operating activities increased
primarily due to changes in working capital; cash flows from financing
activities decreased primarily due to proceeds from the issuance of common
stock in 2001, partially offset by a net increase in the amount of preferred
stock outstanding at IP&L; and cash flows used for investing activities
decreased primarily due to lower construction and acquisition expenditures
partially offset by proceeds received in 2001 from the transfer of WP&L's
transmission assets to ATC. In 2001, Alliant Energy's cash flows from
financing activities decreased primarily due to net changes in amount of debt
issued and retired, partially offset by proceeds from the issuance of common
stock in 2001; and cash flows used for investing activities decreased
primarily due to lower non-regulated investments.
In 2002, IP&L's cash flows from operating activities decreased primarily due
to changes in working capital; cash flows used for financing activities
decreased due to a net increase in the amount of preferred stock outstanding
and a capital contribution of $60 million by Alliant Energy; and cash flows
used for investing activities increased due to increased levels of
construction expenditures. In 2001, IP&L's cash flows from operating
42
activities increased primarily due to changes in working capital; cash flows
used for financing activities increased due to the net changes in the amount
of debt issued and retired; and cash flows used for investing activities
increased due to higher levels of construction expenditures. In 2002, WP&L's
cash flows from operating activities increased due to changes in working
capital; and cash flows used for investing activities increased primarily due
to proceeds received from the transfer of WP&L's transmission assets to ATC
in 2001. In 2001, WP&L's cash flows from operating activities decreased due
to changes in working capital; cash flows used for financing activities
increased due to common stock dividends paid in 2001 as no dividends were
declared in 2000 due to management of WP&L's capital structure, partially
offset by a capital contribution of $35 million by Alliant Energy and changes
in debt issued and retired; cash flows used for investing activities
decreased in 2001 primarily due to proceeds received from the transfer of
WP&L's transmission assets to ATC.
Common Equity - In November 2002, Alliant Energy announced its intentions to
- -------------
raise approximately $200 million to $300 million of common equity in 2003,
dependent on market conditions. The proceeds are expected to be used to fund
the Power Iowa initiative and other regulated domestic utility needs. The
PSCW has indicated it will require an additional equity infusion by Alliant
Energy into WP&L during 2003. Alliant Energy anticipates the final PSCW
order, which is expected to be issued in the second quarter of 2003, will
also include a customer refund provision if the timing and/or amount of the
equity infusion differs from the assumptions included in the WP&L rate case.
Preferred Stock - In September 2002, IP&L redeemed all of its then
- ---------------
outstanding shares of preferred stock at an aggregate redemption price of
$58.3 million. In December 2002, IP&L issued six million shares of preferred
stock at $25.00 per share in a private placement. IP&L used the net proceeds
of approximately $145 million to repay its short-term debt and for general
corporate purposes, including to fund capital expenditures and to repay other
debt.
Debt - time.
36
In June 2002, Alliant Energy received approval (through(valid through Dec. 31, 2004)
- ---- from the SEC to issue and sell up to an aggregate amount of $1 billion of short-term debt outstanding at any one time and to guarantee short-term borrowings by Resources in an aggregate amount that would not exceed $700 million at any one time in addition to its other guarantee authority.authority granted in the Omnibus Financing Order discussed previously. In addition,October 2002, IP&L received SEC approval (valid through Dec. 31, 2004) to issue short-term debt in a principal amount which would not at any one time exceed $300 million. Alliant Energy discontinued
the useIssuance of its utility money pool in 2002 anddebt securities by WP&L and IP&L are now meeting
any short-term borrowing needs by issuing commercial paper and borrowing on
bank linesis exempt from regulation under provisions of credit, respectively.PUHCA.
In 2004, Alliant Energy and certain of its subsidiaries are party to various credit facilitieswill file appropriate applications with the SEC for renewal of financing, guarantee and other borrowing arrangements, some of which are summarized below. In
additionauthority required to the specific covenants detailed below under the 364-day revolving
credit agreements, Alliant Energy's facilities and borrowing arrangements
contain various customary terms and conditions, including required
capitalization, net worth and interest coverage requirements, maintenance
requirements related to bonded property and cross-default provisions. At
Dec. 31, 2002,accommodate its financing needs. Alliant Energy and its subsidiaries were in compliance with
the financial ratios and covenant requirements under their respective credit
facilities and borrowing arrangements. The aggregate borrowing capacity
under short-term credit agreements of Alliant Energy and its subsidiaries at
Dec. 31, 2002 was $845 million. At Dec. 31, 2002, the total amount borrowed
under these facilities was $281 million leaving unused capacity of $564
million. In addition, Resources had a $250 million standby credit facility
at Dec. 31, 2002 as discussed below. There are no borrowings currently
outstanding underexpects that such facility. Alliant Energy also had $28 million of
short-term borrowings outstanding at Dec. 31, 2002 related to various
generation projects in China.
In October 2002, Alliant Energy completed the syndication of three 364-day
revolving credit facilities totaling $915 million, available for direct
borrowing or to support commercial paper, which replaced the former
facilities that totaled $900 million in borrowing availability. The three
facilities consist of a $565 million facility for Alliant Energy (at the
parent company level), which was reduced to $450 million at the end of 2002,
a $200 million facility for IP&L and a $150 million facility for WP&L.
Availability under the Alliant Energy credit facilityauthority will be further reducedgranted by the proceeds of asset sales in excess of 5% of Alliant Energy's
consolidated assets in any 12-month period commencing October 2002 and up to
$50 million from the proceeds of an issuance of equity securities in excess
of $300 million. These new credit facility agreements contain various
covenants, including the following:
43
Covenant Description Covenant Requirement Status at Dec. 31, 2002
- ------------------------------------------ ------------------------- --------------------------
Alliant Energy:
Consolidated debt-to-capital ratio * Less than 65% 59.6%
Consolidated net worth * At least $1.4 billion $1.8 billion
EBITDA interest coverage ratio * At least 2.5x 3.6x
IP&L debt-to-capital ratio Less than 58% 47.9%
WP&L debt-to-capital ratio Less than 58% 40.7%
* In compliance with the agreements, results of discontinued operations have
been included in the covenant calculations.
The debt component of the capital ratios includes long- and short-term debt
(excluding trade payables), capital lease obligations, letters of credit and
guarantees of the foregoing and unfunded vested benefits under pension
plans. The equity component excludes accumulated other comprehensive income
(loss). SEC on a timely basis.
Alliant Energy is also subject to a PUHCA requirement whereby Alliant Energy'sEnergy’s common equity balance must be at least 30% of its total consolidated capitalization, including short-term debt. Alliant Energy'sEnergy’s common equity ratio as of Dec. 31, 2002,2003, as computed under suchthis requirement, was 35.8%46.8%.
In December 2002, Resources secured a 364-day $250 million standby credit
facility. Designed as a bridge to enhance Alliant Energy's short-term
liquidity position until it receives the expected proceeds from the assets it
plans to sell in 2003, the availability under the facility is reduced by
amounts realized on such asset sales.
State Regulatory Agencies — At Dec. 31, 2002, there were no
borrowings outstanding under this credit facility. Also in December 2002,
Whiting finalized a secured revolving $200 million credit facility which will
mature in December 2005. At Dec. 31, 2002, Whiting had $185 million of
borrowings outstanding under this facility at an interest rate of 3.63%,
which was included in "Long-term debt" on Alliant Energy's Consolidated
Balance Sheet.
Information regarding commercial paper and bank facility borrowings at Dec.
31, 2002 was as follows (dollars in millions):
Alliant Energy (Parent) WP&L
-------------------------- -------------
Commercial paper outstanding $135.5 $60.0
Weighted average maturity
of commercial paper 2 days 34 days
Discount rates on commercial paper 1.95% 1.6%
Bank facility borrowings $85.0 --
Interest rates on bank facility borrowings 2.3-2.4% --
As a result of the Moody's downgrade of Alliant Energy's commercial paper in
January 2003, to P-3, Alliant Energy's ability to issue commercial paper at
the parent company level has been reduced, requiring greater reliance on bank
lines. In addition to funding working capital needs, the availability of
short-term financing provides the companies flexibility in the issuance of
long-term securities. The level of short-term borrowing fluctuates based on
seasonal corporate needs, the timing of long-term financing and capital
market conditions. At Dec. 31, 2002, IP&L and WP&L were authorized by the applicable federal orappropriate state regulatory agencies to issue short-term debt of $180$250 million and $240 million, respectively. The $240 million borrowing authority for WP&L includes $85 million for general corporate purposes, an additional $100 million should WP&L no longer sell its utility receivables and an additional $55 million should WP&L need to repurchase its variable rate demand bonds.
Shelf Registrations — In December 2002,2003, Alliant Energy and Resources, issued $300in a joint filing, and IP&L filed shelf registrations. The joint filing relates to proposed offerings, from time to time, of an aggregate amount of up to $400 million of 9.75%Alliant Energy’s common stock, stock purchase contracts, and stock purchase units; and Resources’ senior notes due
2013 in a private placement. The notes are unconditionally guaranteedunsecured debt securities inclusive of the full and unconditional guarantee by Alliant Energy.Energy of Resources’ debt securities. A total of $68 million of securities remains available under the joint shelf registration. The IP&L shelf registration relates to proposed offerings, from time to time, of an aggregate of up to $150 million of preferred stock, senior unsecured debt securities and collateral trust bonds. A total of $110 million of securities remains available under the IP&L shelf registration.
Cash and Temporary Cash Investments — As of December 31, 2003, Alliant Energy and its subsidiaries had approximately $242 million of cash and temporary cash investments, of which approximately $67 millionconsisted of deposits in foreign bank accounts. Due to Alliant Energy electing permanent investment of earnings for federal income tax purposes for certain foreign subsidiaries, a majority of the cash held in foreign banks cannot be repatriated without material tax obligations. Alliant Energy plans to use a portion of this cash held in foreign bank accounts to invest in future capital projects in China.
Sale of Accounts Receivable — Refer to Note 4 of the “Notes to Consolidated Financial Statements” for information on Alliant Energy’s sale of accounts receivable program.
Short-term Debt — Alliant Energy and its subsidiaries are party to various credit facilities and other borrowing arrangements. In September 2003, Alliant Energy completed the syndication of three 364-day revolving credit facilities (facilities) totaling $650 million ($200 million for Alliant Energy at the parent company level, $250 million for IP&L and $200 million for WP&L), available for direct borrowing or to support commercial paper. Alliant Energy has the option to convert these facilities into one-year term loans. The facility at the parent company level is used to fund Resources used the proceeds to repay short-term debt.
At Dec. 31, 2002,and Corporate Services as well as its own needs. It is expected that Alliant Energy, IP&L and WP&L had $783will be able to renew or replace these facilities on favorable terms when they mature in 2004. In addition to funding working capital needs, the availability of short-term financing provides the companies flexibility in the issuance of long-term securities. The level of short-term borrowing fluctuates based on seasonal corporate needs, the timing of long-term financings and capital market conditions. Information regarding commercial paper at Dec. 31, 2003 and during 2003 was as follows (dollars in millions):
| Alliant | Parent | |||
| Energy | Company | IP&L | WP&L | |
| Commercial paper: | ||||
| Amount outstanding at Dec. 31, 2003 | $107.5 | $-- | $107.5 | $-- |
| Weighted average maturity at Dec. 31, 2003 | 13 days | N/A | 13 days | N/A |
| Discount rates at Dec. 31, 2003 | 1.20-1.22% | N/A | 1.20-1.22% | N/A |
| Available capacity at Dec. 31, 2003 | $542.5 | $200.0 | $142.5 | $200.0 |
| Average daily amount outstanding during 2003 | $187.7 | $97.4 | $60.5 | $29.8 |
| Maximum daily amount outstanding during 2003 | $346.5 | $215.0 | $190.0 | $84.5 |
37
Alliant Energy’s, IP&L’s and WP&L’s credit facility agreements contain various covenants, including the following:
| Covenant | Status at | |
| Covenant Description (*) | Requirement | Dec. 31, 2003 |
| Alliant Energy: | ||
| Consolidated debt-to-capital ratio | Less than 65% | 48.7% |
| Consolidated net worth | At least $1.4 billion | $2.4 billion |
| EBITDA interest coverage ratio | At least 2.5x | 3.6x |
| IP&L debt-to-capital ratio | Less than 58% | 47.3% |
| WP&L debt-to-capital ratio | Less than 58% | 29.9% |
| (*) | In compliance with the agreements, results of discontinued operations have been included in the covenant calculations. |
The debt component of the capital ratios includes long- and short-term debt (excluding non-recourse debt and trade payables), capital lease obligations, letters of credit and guarantees of the foregoing and unfunded vested benefits under qualified pension plans. The equity component excludes accumulated other comprehensive income (loss). The EBITDA component of the interest coverage ratio is calculated by adding back depreciation and amortization expense to operating income.
Alliant Energy’s credit facility contains a cross default provision providing it is a default under the credit facility if the majority-owned subsidiaries of Alliant Energy default on debt totaling $25 million $175or more. A default by a minority-owned affiliate would not create a cross default. A default by Alliant Energy or Resources would not be a cross default for WP&L or IP&L, nor would a default by either of the utilities create a cross default for the other utility.
Alliant Energy’s, IP&L’s and WP&L’s credit facilities contain negative pledge provisions, which generally prohibit placing liens on any of the property of Alliant Energy or its subsidiaries with certain exceptions, including among others, for the issuance of secured debt under first mortgage bond indentures by IP&L and WP&L, non-recourse project financing, purchase money liens, and liens on the ownership interests in or assets of foreign subsidiaries to secure not more than $200 million aggregate principal amount of foreign debt.
Alliant Energy’s, IP&L’s and $255WP&L’s credit facilities contain material adverse change (MAC) clauses. Before each extension of credit (each borrowing under the facilities), each borrower must represent and warrant that no MAC has occurred since December 31, 2002. A MAC is defined as a change that would create: (1) a MAC in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), condition (financial or otherwise) or prospects of the borrower or the borrower and its subsidiaries taken as a whole; (2) a material impairment of the ability of the borrower to perform its obligations under a credit facility agreement to which it is a party; or (3) a MAC upon the legality, validity, binding effect or enforceability against the borrower of any credit agreement to which it is a party.
Alliant Energy’s, IP&L’s and WP&L’s credit facilities contain provisions that require, during the term of the facilities, any proceeds from asset sales, with certain exclusions, in excess of 5% of their respective consolidated assets in any 12-month period be used to reduce commitments under their respective facilities. Exclusions include, among others, certain inter-company sales, certain sale and lease-back transactions and the WPC IPO.
Long-term Debt — In September 2003, IP&L issued $100 million respectively,of 5.875% unsecured senior debentures due 2018 and used the majority of the net proceeds to redeem $27.5 million of its 7.25% first mortgage bonds, $20 million of its 8.625% first mortgage bonds and $50 million of its 7.875% subordinated deferrable interest debentures. In October 2003, IP&L completed a $100 million issuance of 6.45% unsecured senior debentures due 2033 and used the majority of the net proceeds to redeem $94.0 million of its 7.625% first mortgage bonds.
In the fourth quarter of 2003, a portion of the proceeds from the WPC IPO were used to retire approximately $96 million of long-term debt, that will mature
priorconsisting of $24 million of Alliant Energy’s 8.59% senior notes (at parent company), $17.5 million of Resources’ 7% senior notes, $39 million of Resources’ 7.375% senior notes and $15 million of Resources’ 9.75% senior notes. Premiums of approximately $0.10 per share were incurred in the fourth quarter of 2003 related to Dec. 31, 2007. The $783 million atthese long-term debt repurchases. Alliant Energy representsestimates it will incur $0.04 to $0.08 per share of debt repayment premiums in 2004 related to additional long-term debt maturitiesrepurchases by Resources. Refer to “Strategic Overview — November 2002 Plan” for additional discussion of $47Alliant Energy’s debt reduction and other strategic actions to strengthen its financial profile.
In September 2003, WP&L retired $70 million in 2003, $106 million in 2004, $337
million in 2005, $68 million in 2006 and $225 million in 2007.of its 8.6% first mortgage bonds due 2027 largely from proceeds of a capital contribution from Alliant Energy.
38
Refer to “Contractual Obligations” for the timing of Alliant Energy’s long-term debt maturities. Depending upon market conditions, it is currently anticipated that a majority of the maturing debt will be refinanced with the issuance of long-term securities. 44
Refer to "Construction and Acquisition Expenditures" for information
regarding a credit facility Resources entered into in February 2003 relating
to the purchase of a non-regulated power plant. Refer to Note 8 of the "Notes“Notes to Consolidated Financial Statements"Statements” for additional information on short- and long-term debt.
Preferred Stock — In September 2003, IP&L issued 1.6 million shares of 7.10% cumulative preferred stock at a price to the public of $25.00 per share in a public offering and received proceeds of approximately $38.7 million, which were used to reduce short-term debt.
Common Equity— Refer to “Strategic Overview — November 2002 Plan” for discussion of a common equity offering completed by Alliant Energy in July 2003. Subject to market and other conditions, Alliant Energy intends to sell additional equity in 2004. These equity sales may involve traditional underwritten offerings, continuous equity offerings or other transactions. The purpose of these equity sales would be to fund, among other things, the recently announced domestic generation build-out program. In addition to such common equity offerings, Alliant Energy also issues new common shares through its Shareowner Direct (dividend reinvestment and stock purchase plan) and 401(k) Savings Plans and generally uses the proceeds from these issuances to assist in funding construction and acquisition expenditures and for general corporate purposes.
Credit Ratings and Balance Sheet - — Access to the long- and short-term capital
- -------------------------------- and credit markets, and costs of obtaining external financing, are dependent on creditworthiness. Alliant Energy is committed to taking the necessary steps required to maintain stronginvestment-grade credit ratings and to strengthen itsa strong balance sheet. Refer to "Strategic Actions"“Strategic Overview — November 2002 Plan” for a discussion of specific actions
being taken in this regard. Although Alliant Energy believes suchthe actions will enable ittaken in 2003 to strengthen its balance sheet andwill enable it to maintain stronginvestment-grade credit ratings, no assurance can be given that it will be able to maintain its existing credit ratings. If Alliant Energy'sEnergy’s credit ratings are downgraded in the future, then Alliant Energy'sEnergy’s borrowing costs may increase and its access to capital markets may be limited. If access to capital markets becomes significantly constrained, then Alliant Energy'sEnergy’s results of operations and financial condition could be materially adversely affected. In December 2002Alliant Energy’s current credit ratings and outlook that were affirmed in January 2003,2004 by both Standard & Poor'sPoor’s and Moody's,
respectively, issued revised credit ratingsMoody’s are as follows (long-term debt ratings only apply to senior debt):
| Standard & Poor's | Moody's | ||
| IP&L | Secured long-term debt | A- | A3 |
| Unsecured long-term debt | BBB | Baa1 | |
| Commercial paper | A-2 | P-2 | |
| Corporate/issuer | BBB+ | Baa1 | |
| WP&L | Secured long-term debt | A | A1 |
| Unsecured long-term debt | BBB+ | A2 | |
| Commercial paper | A-2 | P-1 | |
| Corporate/issuer | A- | A2 | |
| Resources (a) | Unsecured long-term debt | BBB | Baa3 |
| Commercial paper | Not rated | P-3 | |
| Corporate/issuer | BBB+ | Not rated | |
| Alliant Energy | Unsecured long-term debt | BBB | Not rated |
| Commercial paper | A-2 | P-3 | |
| Corporate/issuer | BBB+ | Not rated | |
| All Entities | Outlook | Negative | Stable |
| (a) | Resources' debt is fully and unconditionally guaranteed by Alliant Energy. |
Ratings Triggers - —The long-term debt of Alliant Energy and its subsidiaries
- ---------------- is not subject to any repayment requirements as a result of explicit credit rating downgrades or so-called "ratings“ratings triggers." However,” Pre-existing ratings triggers in certain lease agreements do contain such ratings triggers. The threshold for these
triggers varies among the applicable leases. If the payments were accelerated under all the affected leases it would result in accelerated
payments of approximately $45 million. In addition, the amount of proceeds
available to IP&L and WP&L from their sale of utility customer accounts
receivable programs could be reduced in the aggregate by approximately $20
million in the event of certain credit rating downgrades at the Alliant
Energy parent company level.eliminated during 2003. However, Alliant Energy and its subsidiaries are also parties to various agreements, including purchased-power agreements, fuel contracts, accounts receivable sale contracts and corporate guarantees that may be deemed to be in default in the
event of certainare dependent on maintaining investment-grade credit rating downgrades.ratings. In the event of such a default,downgrade below investment-grade, Alliant Energy or its subsidiaries may be ableneed to cure the default in a
number of ways, including postingprovide credit support, such as letters of credit or cash collateral equal to the amount of the exposure, unwindingor may need to unwind the contract or payingpay the underlying obligation. Sale of Accounts Receivable - ReferBoth IP&L and WP&L are party to Note 4 of Alliant Energy's "Notes to
- ---------------------------
Consolidated Financial Statements" for information on Alliant Energy's sale
of accounts receivable sale agreements that provide that any respective utility downgraded below investment-grade becomes ineligible to sell receivables under the program. In the event of downgrades below investment-grade, management believes the credit facilities at Alliant Energy, IP&L and WP&L provide sufficient liquidity to cover counterparty credit support or collateral requirements under the various purchased-power, fuel and receivables sales agreements.
39
Off-Balance Sheet Arrangements - — Alliant Energy utilizes off-balance sheet synthetic operating leases to
- ------------------------------ finance its corporate headquarters, corporate aircraft, certain utility railcars and a utility radio dispatch system. Synthetic leases provide favorable financing rates to Alliant Energy while allowing it to maintain operating control of its leased assets. SeveralRefer to Note 3 of Alliant Energy's
synthetic leases involve the use of unconsolidated structured finance or
variable interest entities.“Notes to Consolidated Financial Statements” for future minimum lease payments under, and residual value guarantees by Alliant Energy, has guarantees outstanding
related to the residual value of these synthetic leases. Alliant Energy does
not currently anticipateEnergy’s credit facility agreements prohibit it from entering into any additional synthetic leases. Alliant Energy also uses variable interestspecial purpose entities for its limited recourse utility sale of accounts receivable program whereby IP&L and WP&L use proceeds from the sale of the accounts receivable and unbilled revenues to maintain flexibility in their capital structures, take advantage of favorable short-term interest rates and finance a portion of their long-term cash needs. The sale of 45
IfRefer to Note 4 of the “Notes to Consolidated Financial Statements” for aggregate proceeds from the sale of accounts receivable. While Alliant Energy does not have any reason to believe this program would be discontinued, if this financing alternative were not available, IP&L and WP&L anticipate they would have enough short-term borrowing capacity to compensate. Refer to "Ratings Triggers"“Ratings Triggers” for the impact of certain credit rating downgrades on Alliant EnergyIP&L and its subsidiariesWP&L related to these synthetic
leases andthe accounts receivable sales program. Beginning in the third quarterAlliant Energy has reviewed these entities during its implementation of 2003, under FIN 46, itfor those entities that are considered to be special-purpose entities, and determined that consolidation of these entities is reasonably
possible thatnot required. Alliant Energy could be considered the primary beneficiarycontinues to evaluate non-special purpose entities that may require consolidation as of certain variable interest entities utilized for its synthetic lease
financings and receivable sales program and could be required to consolidate
the operating results and associated assets and liabilitiesMarch 31, 2004.
Sales of the variable
interest entities in its financial statements. Non-strategic Assets —Alliant Energy is currently pursuing the sales in 2004 of its interest in its Kewaunee facility, its remaining interest of 1.1 million shares in WPC and its water utilities serving the process of evaluating the potential impacts of FIN 46.Ripon and South Beloit areas. Alliant Energy also continues to divest other less material assets and will continue reviewing other ways to narrow its strategic focus and business platforms. The proceeds realized from these asset sales are expected to be available for debt reduction and other general corporate purposes.
Credit Risk — Alliant Energy’s subsidiaries have limited credit exposure from electric and natural gas sales and non-performance of contractual obligations by its counterparties. Alliant Energy maintains credit risk oversight and sets limits and policies with regards to its counterparties, which management believes minimizes its overall credit risk exposure. However, there is alsono assurance that such policies will protect Alliant Energy against all losses from non-performance by counterparties.
Construction and Acquisition Expenditures —Capital expenditures, investments and financing plans are continually reviewed, approved and updated as part of Alliant Energy’s ongoing strategic planning and budgeting processes. In addition, material capital expenditures and investments are subject to a rigorous cross-functional review prior to approval. Changes in Alliant Energy’s anticipated construction and acquisition expenditures may result from a number of reasons including economic conditions, regulatory requirements, ability to obtain adequate and timely rate relief, the level of Alliant Energy’s profitability, Alliant Energy’s desire to maintain investment-grade credit ratings and reasonable capitalization ratios, variations in sales, changing market conditions and new opportunities. Alliant Energy believes its capital control processes adequately reduce the risks associated with large capital expenditures and investments. Alliant Energy currently evaluatinganticipates construction and acquisition expenditures during 2004 and 2005 as follows (in millions):
| 2004 | 2005 | |
| Domestic utility business: | ||
| IP&L utility infrastructure and reliability investments | $252 | $262 |
| IP&L Power Iowa (Emery) | 80 | -- |
| WP&L utility infrastructure and reliability investments | 228 | 248 |
| Non-regulated Generation in support of domestic | ||
| utility generation plan (Sheboygan Falls project) | 50 | 30 |
| China (anticipated to be funded with internally generated cash or non-recourse financings) | 50 | 35 |
| Other non-regulated (primarily synthetic fuel/energy services) | 40 | 35 |
| $700 | $610 | |
Alliant Energy has not yet entered into contractual commitments relating to the structuremajority of its synthetic leasesanticipated capital expenditures. As a result, Alliant Energy does have discretion with regard to the level of capital expenditures eventually incurred and receivable sales programit closely monitors and updates such estimates on an ongoing basis based on numerous economic and other factors. Refer to determine if these structures can be modified to
qualify“Strategic Overview — Updated Strategic Plan” for off-balance sheet treatment under FIN 46.
a further discussion of Alliant Energy’s domestic generation plan.
40
Contractual Obligations - — Alliant Energy'sEnergy’s long-term contractual cash
- ----------------------- obligations as of Dec. 31, 20022003 were as follows (in millions):
2003 2004 2005 2006 2007 Thereafter Total
-------- --------- ------- --------- ------- ------------ ---------
Long-term debt (Note 8) and
capital lease obligations (Note 3) $62 $122 $347 $104 $227 $2,303 $3,165
Operating leases (Note 3) 45 76 95 99 123 384 822
Purchase obligations (Note 11(b)) 286 110 68 30 18 27 539
-------- --------- ------- --------- ------- ------------ ---------
$393 $308 $510 $233 $368 $2,714 $4,526
======== ========= ======= ========= ======= ============ =========
IP&L's long-term contractual cash obligations as of Dec. 31, 2002 were as follows (in millions):
2003 2004 2005 2006 2007 Thereafter Total
-------- --------- ------- --------- ------- ------------ ---------
Long-term debt (Note 8) and
capital lease obligations (Note 3) $20 $16 $13 $96 $109 $663 $917
Operating leases (Note 3) 9 7 10 3 3 33 65
Purchase obligations (Note 11(b)) 99 25 14 6 4 -- 148
-------- --------- ------- --------- ------- ------------ ---------
$128 $48 $37 $105 $116 $696 $1,130
======== ========= ======= ========= ======= ============ =========
WP&L's long-term contractual cash obligations as of Dec. 31, 2002 were as follows (in millions):
2003 2004 2005 2006 2007 Thereafter Total
-------- --------- ------- --------- ------- ------------ ---------
Long-term debt (Note 8) $-- $62 $88 $-- $105 $269 $524
Operating leases (Note 3) 27 61 75 76 76 335 650
Purchase obligations (Note 11(b)) 86 47 26 15 15 27 216
-------- --------- ------- --------- ------- ------------ ---------
$113 $170 $189 $91 $196 $631 $1,390
======== ========= ======= ========= ======= ============ =========
| 2004 | 2005 | 2006 | 2007 | 2008 | Thereafter | Total | |
| Long-term debt (Note 8(b)) | $69 | $102 | $69 | $199 | $196 | $1,985 | $2,620 |
| Capital leases (Note 3) | 17 | 14 | 40 | 6 | 5 | 1 | 83 |
| Operating leases (Note 3) | 82 | 103 | 106 | 132 | 77 | 326 | 826 |
| Purchase obligations: | |||||||
| Purchased-power and fuel commitments (Note 11(b)) | 242 | 147 | 118 | 76 | 39 | 164 | 786 |
| Other (Note 11(b)) | 26 | -- | -- | -- | -- | -- | 26 |
| $436 | $366 | $333 | $413 | $317 | $2,476 | $4,341 | |
IP&L’s long-term contractual cash obligations as of Dec. 31, 2003 were as follows (in millions):
| 2004 | 2005 | 2006 | 2007 | 2008 | Thereafter | Total | |
| Long-term debt (Note 8(b)) | $-- | $3 | $60 | $80 | $52 | $645 | $840 |
| Capital leases (Note 3) | 17 | 13 | 40 | 6 | 5 | 1 | 82 |
| Operating leases (Note 3) | 9 | 12 | 6 | 5 | 5 | 39 | 76 |
| Purchase obligations: | |||||||
| Purchased-power and fuel commitments (Note 11(b)) | 83 | 54 | 49 | 32 | 7 | 33 | 258 |
| Other (Note 11(b)) | 8 | -- | -- | -- | -- | -- | 8 |
| $117 | $82 | $155 | $123 | $69 | $718 | $1,264 | |
WP&L’s long-term contractual cash obligations as of Dec. 31, 2003 were as follows (in millions):
| 2004 | 2005 | 2006 | 2007 | 2008 | Thereafter | Total | |
| Long-term debt (Note 8(b)) | $62 | $88 | $-- | $105 | $60 | $139 | $454 |
| Operating leases (Note 3) | 63 | 79 | 80 | 80 | 68 | 259 | 629 |
| Purchase obligations: | |||||||
| Purchased-power and fuel commitments (Note 11(b)) | 67 | 31 | 30 | 28 | 21 | 76 | 253 |
| Other (Note 11(b)) | 6 | -- | -- | -- | -- | -- | 6 |
| $198 | $198 | $110 | $213 | $149 | $474 | $1,342 | |
At Dec. 31, 2002,2003, long-term debt and capital lease obligations as noted in the previous tables were included on the respective Consolidated Balance Sheets. The long-term debt amounts exclude reductions related to unamortized debt discounts. Purchased-power and fuel commitments represent normal business contracts used to ensure adequate purchased-power, coal and natural gas supplies and to minimize exposure to market price fluctuations. Other purchase obligations represent individual commitments incurred during the normal course of business which exceeded $1 million at Dec. 31, 2003. Alliant Energy has entered into various coal and purchased-power commitments that have not yet been directly assigned to IP&L and WP&L. Such commitments are included in the Alliant Energy purchase obligations but are not included in the IP&L or WP&L purchase obligations. In connection with their construction and acquisition programs, Alliant Energy, IP&L and WP&L also enter into commitments related to such programs on an ongoing basis; these amounts are not reflected in the previous tables. Refer to “Construction and Acquisition Expenditures” for additional information. In addition, at Dec. 31, 2002,2003, there were various other long-term liabilities and deferred credits included on the respective Consolidated Balance Sheets that, due to the nature of the liabilities, the timing of payments cannot be estimated and are therefore excluded from the tables. Operating leases and purchase obligations are amounts committed under
contract which were not recorded on the respective Consolidated Balance
Sheets at Dec. 31, 2002, in accordance with GAAP. Purchase obligations
represent normal business contracts usedRefer to ensure adequate purchased-power,
coal and natural gas supplies and to minimize exposure to market price
fluctuations. In connection with Alliant Energy's, IP&L's and WP&L's
construction and acquisition programs, they also enter into commitments
related to such programs on an ongoing basis.
Sales of Non-strategic Assets - In the third quarter of 2002, Alliant Energy
- -----------------------------
completed the sale of its 50% ownership interest in its Cargill-Alliant
electricity-trading joint venture to Cargill. The sale proceeds were
approximately $19.3 million, the book value of Alliant Energy's shareNote 6(a) of the joint venture. As noted earlier, the strategic actions currently being
executed by Alliant Energy will focus on additional potential sales of
non-strategic assets, among other items. Refer to "Strategic Actions,"
"Other Matters - Other Future Considerations" and Note 16 of Alliant Energy's
"Notes“Notes to Consolidated Financial Statements"Statements” for additional discussion onanticipated 2004 pension and other postretirement benefit funding amounts, which are not included in the potential impact of future asset sales.
Credit Risk - Credit risk is inherent in previous tables.
Environmental —Alliant Energy's operations and
- -----------
relates to the risk of loss resulting from non-performance of contractual
obligations by a counterparty. Alliant Energy maintains credit risk
46
oversight and sets limits and policies with regards to its counterparties,
which management believes minimizes its overall credit risk exposure.
However, there is no assurance that such policies will protect Alliant Energy
against all losses from non-performance by counterparties.
Environmental - Alliant Energy'sEnergy’s pollution abatement programs are subject to
- ------------- continuing review and are periodically revised due to changes in environmental regulations, construction plans and escalation of construction costs. While management cannot precisely forecastAlliant Energy continually evaluates the effectimpact of potential future environmental regulations on operations, it has taken steps to anticipate the
future while also meeting the requirements of current environmental
regulations.
Alliant Energy's facilities are subject tointernational, federal, state and federal requirementslocal environmental rulemakings on its operations. While the final outcome of the CAA, including meeting ambient air quality standards. As a result of a
new rate-of-progressthese rule developed by the Wisconsin DNR, and based on
existing technology,makings cannot be predicted, Alliant Energy estimates the total aggregatebelieves that required capital investments necessaryand/or modifications resulting from them could be significant, but expects that prudent expenses incurred by IP&L and WP&L to comply withlikely would be recovered in rates from its customers. The environmental rulemaking process continually evolves and the new rules will be
approximately $19 million in 2003 through 2007. Alliant Energy is also
currently addressing various other potential federal and state environmental
rulemakings and activities, including: 1) proposed revisions to the Wisconsin
Administrative Code concerning the amount of heatfollowing are major emerging issues that WP&L's generating
stations can discharge into Wisconsin waters which could potentially have a significant impact on WP&L's operation ofAlliant Energy’s operations.
41
Air Quality — With regard to current environmental rules, Alliant Energy’s Edgewater facility spent $21 million from 1999 to 2003 to improve its combustion performance. This facility now meets the 2008 Wisconsin generating facilities; 2)
potential new rules that may be pursued by the EPA and the states in the
Alliant Energy service territory related to various air emissions; 3) the
multiple requests DNR NOx compliance goal.
WP&L also has receivedresponded to multiple data requests from the EPA, related to the historical operation of WP&L'sand associated air permitting for certain major Wisconsin coal-fired generating units, whichunits. Similar requests have been the precursor to penalties and additional capital expenditures requiring installation of air pollution controls at other utilities. However, WP&L has received no response in this regard from the EPA related to information submitted.
The 1990 CAA Amendments mandate preservation of air quality through existing regulations and periodic reviews to ensure adequacy of these provisions based on scientific data. In 1997, the EPA revised National Ambient Air Quality Standards (NAAQS) for ozone and fine particulate matter. In December 2003, the EPA proposed an Interstate Air Quality Rule related to transport of these emissions that would require significant upgrades to power plants. This rule would reduce the current level of nationwide sulfur dioxide emissions approximately 40% by 2010 and 70% by 2015, and NOx emission levels 50% by 2015. Additional reduction requirements may also be imposed at the state level for those areas that are in some
cases involving similar requestsnon-attainment with NAAQS.
In 2000, the EPA determined that regulation of hazardous air pollutant emissions from coal-fired and oil-fired electric utility steam generating units was necessary. Under an existing settlement agreement, Maximum Achievable Control Technology requirements or alternative regulations must be implemented by Dec. 15, 2004. Accordingly, the EPA has published rules for comment requiring control of mercury from coal-fired and nickel from oil-fired generating units. The impact of these regulations on IP&L’s and WP&L’s generating facilities is subject to the control level mandated in the final rules. In 2001, the Wisconsin DNR also independently developed proposed mercury emission control rules that could require reductions from Wisconsin generating facilities of 40% by 2010 and 80% by 2015. These rules have been sent back to the Wisconsin DNR for revision by the Wisconsin legislature due to the pending federal mercury regulations.
In December 2003, the State Environmental Protection Agency of China issued a regulation requiring thermal power plants to lower emissions to meet new limits for particulate, sulfur and nitrous oxide from coal- and oil-fired boilers. Facilities are required to meet the first phase of this emission standard by 2005 and the second phase by 2010. Alliant Energy is currently reviewing the impact of this new regulation on its China business.
Alliant Energy is also currently monitoring various other electric generating facilities; 4)
thepotential international, federal, state and local environmental rulemakings and activities, including, but not limited to: litigation of federal New Source Review reforms published by the EPA in December 2002; 5)Reforms; Regional Haze evaluations for Best Available Retrofit Technology; and several other legislative and regulatory proposals regarding the control of emissions of air pollutants and greenhouse gases from a variety of sources, including generating facilities;facilities.
Water Quality — In 2002, the EPA published a proposed regulation under the Clean Water Act referred to as “316(b)” that is anticipated to be finalized in 2004. This rule would require existing large power plants with cooling water intake structures to ensure that the location, design, construction, and 6)capacity of cooling water intake structures reflect the July 2002best technology available for minimizing adverse environmental impacts to fish and other aquatic life. Alliant Energy is also currently evaluating proposed revisions to the Wisconsin Administrative Code concerning the amount of heat that WP&L’s generating stations can discharge into Wisconsin waters.
Land and Solid Waste — Alliant Energy is monitoring possible significant land and solid waste regulatory changes. This includes a potential EPA regulation for management of coal combustion product in landfills and surface impoundments that could require installation of monitoring wells at some facilities and an ongoing expanded groundwater monitoring program. Compliance with the polychlorinated biphenols (PCB) Fix-it Rule/Persistent Organic Pollutants Treaty could possibly require replacement of all electrical equipment containing PCB insulating fluid which is a substance known to be harmful to human health. The Wisconsin Department of Commerce is proposing new rules related to flammable, combustible and hazardous liquids stored in above-ground storage tanks in which the main financial impact would be from a secondary containment requirement for all hazardous materials tanks and for hazardous material unloading areas. In addition, in December 2003, at the request fromof the Wisconsin DNR, that WP&L submitsubmitted a written plan for facility closure of the Rock River Generating Station landfill and clean-up of itsthe support ponds and all areas where coal combustion waste is present. Alliant Energy cannot
presently predict the final outcome of these proposals or actions, but
believes that required capital investments and/or modifications resulting
from them could be significant. Alliant Energy believes that prudent
expenses incurred by IP&L and WP&L likely would be recovered in rates from
its customers.
Refer to Note 11(e) of the "Notes“Notes to Consolidated Financial Statements"Statements” and “Business” for further discussion of environmental matters.
Construction and Acquisition Expenditures - Capital expenditures, investments
- -----------------------------------------
and financing plans are continually reviewed, approved and updated as part of
Alliant Energy's ongoing strategic planning and annual budgeting processes.
In addition, material capital expenditures and investments are subject to a
rigorous cross-functional review prior to approval. Changes in Alliant
Energy's anticipated construction and acquisition expenditures may result from
a number of reasons including economic conditions, regulatory requirements,
ability to obtain adequate and timely rate relief, the level of Alliant
Energy's profitability, Alliant Energy's desire to maintain strong credit
ratings and reasonable capitalization ratios, variations in sales, changing
market conditions and new opportunities. As noted in "Strategic Actions,"
Alliant Energy recently reduced its anticipated construction and acquisition
expenditure levels in order to strengthen its balance sheet. Alliant Energy
believes its capital control processes adequately reduce the risks associated
with large capital expenditures and investments.
Alliant Energy currently anticipates construction and acquisition
expenditures as follows (in millions):
42
OTHER MATTERS
Market Risk Sensitive Instruments and Positions -— Alliant Energy'sEnergy’s primary
- ----------------------------------------------- market risk exposures are associated with interest rates, commodity prices, equity prices and currency exchange rates. Alliant Energy has risk management policies to monitor and assist in controlling these market risks and uses derivative instruments to manage some of the exposures.
Interest Rate Risk -— Alliant Energy is exposed to risk resulting from changes in interest rates as a result of its issuance of variable-rate debt, utility customer accounts receivable sale program and variable-rate leasing agreements. Alliant Energy manages its interest rate risk by limiting its variable interest rate exposure and by continuously monitoring the effects of market changes on interest rates. Alliant Energy also periodically uses interest rate swap and interest rate forward agreements to assist in the management of its interest exposure. In the event of significant interest rate fluctuations, management would take actions to minimize the effect of such changes on Alliant Energy'sEnergy’s results of operations and financial condition. Assuming no change in Alliant Energy's,Energy’s, IP&L's&L’s and WP&L's&L’s consolidated financial structure, if variable interest rates were to average 100 basis points higher (lower) in 20032004 than in 2002,2003, interest expense and pre-tax earnings would increase (decrease) by approximately $9.4$5.3 million, $1.5$2.9 million and $2.5$1.2 million, respectively. These amounts were determined by considering the impact of a hypothetical 100 basis point increase (decrease) in interest rates on Alliant Energy's,Energy’s, IP&L's&L’s and WP&L's&L’s consolidated variable-rate debt held, the amount outstanding under the utility customer accounts receivable sale program and variable-rate lease balances at Dec. 31, 2002.
2003.
Commodity Risk -— Non-trading - —Alliant Energy is exposed to the impact of market fluctuations in the commodity price and transportation costs of electricityelectric and natural gas products it markets. Alliant Energy employs established policies and procedures to manage its risks associated with these market fluctuations including the use of various commodity derivatives. Alliant Energy'sEnergy’s exposure to commodity price risks in its utility business is significantly mitigated by the current rate making structures in place for the recovery of its electric fuel and purchased energy costs as well as its cost of natural gas purchased for resale. Refer to Note 1(j)1(i) of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for further discussion.
WP&L periodically utilizes commodity derivative instruments to reduce the impact of price fluctuations on electric fuel and purchased energy costs needed to meet its power supply requirements. Under PSCW rules, WP&L can also seek rate increases if it experiences an extraordinary increase in the cost of electric fuel and purchased energy costs or if the annual costs are more than 3% higher than the estimated costs used to establish rates. Such rules were revised effective for 2003 for WP&L and significantly reduce the regulatory lag for Wisconsin utilities and customers related to the timing of changes in rates for increased or decreased fuel and purchased energy costs. Based on these revised rules, WP&L does not anticipate any significant earnings exposure related to fuel and purchased energy costs.
WP&L periodically utilizes natural gas commodity derivative instruments to reduce the impact of price fluctuations on natural gas purchased and injected into storage during the summer months and withdrawn and sold at current market prices during the winter months. The natural gas commodity swaps in place approximate the forecasted storage withdrawal plan during this period. Therefore, market price fluctuations that result in an increase or decrease in the value of the physical commodity are substantially offset by changes in the value of the natural gas commodity swaps. To the extent actual storage withdrawals vary from
forecasted withdrawals, WP&L has physical commodity price exposure. A 10%
48
2002. 2003. To the extent actual storage withdrawals vary from forecasted withdrawals, WP&L has physical gas price exposure.
IP&L also utilizes natural gas commodity derivative instruments to mitigate the risk of rising prices. Since the IUB allows for the prudently incurred costs associated with these instruments and the underlying supply of natural gascommodities to be recovered from ratepayers, IP&L does not have significant commodity risk exposure.
NG Energy utilizes natural gas commodity derivative instruments to reduce the impact of natural gas price fluctuations on physical natural gas sales from storage. These natural gas commodity swaps and forward sales contracts are entered into at the same time and for the same volumes that are purchased and injected into storage, thereby minimizing natural gas commodity risk exposure. Whiting, currently accounted for as a discontinued operation, is exposed to
market risk in the pricing of its oil and gas production. Historically,
prices received for oil and gas production have been volatile because of
seasonal weather patterns, supply and demand factors, transportation
availability and price, and general economic conditions. Worldwide political
developments have historically also had an impact on oil prices. Whiting
periodically utilizes oil and gas swaps, costless collars and long-term
delivery contracts to mitigate the impact of oil and gas price fluctuations.
Historically, Alliant Energy has hedged or contracted approximately 50% of
its oil and gas volumes. The actual level of hedging or contracting utilized
is based on management's assessment of the prudency of hedging given current
market conditions and other factors and is reviewed on an ongoing basis.
Based on Whiting's estimated oil andthe volume of natural gas sales in 2003, and the hedging and
delivery contracts outstanding for such period,from storage at NG Energy, a sustained 10% increase (decrease) in oil and gas prices would impact Alliant Energy's pre-tax 2003
earnings by approximately $9.9 million.
Southern Hydro, currently accounted for as a discontinued operation, owns and
operates hydroelectric generation facilities in the state of Victoria in
Australia. These generation facilities operate as peaking units. Under the
rules of the Australian market, Southern Hydro must sell all of its
production into a spot market in which the price changes every five minutes
and is setof natural gas would not have a significant impact on Alliant Energy’s results of operations or financial condition. Refer to Note 10(a) of Alliant Energy’s “Notes to Consolidated Financial Statements” for additional information concerning the averageimpact of each half hour. Electricity prices in this
market can and have been very volatile. In order to manage the electricity
commodity price risk associated with anticipated sales into the spot market,
Southern Hydro enters into a variety of electricity derivative contracts with
terms of up to five years. The value of these derivative instruments can
change significantly as a result of changes in forward electricity prices.
These instruments do not qualify for hedge accounting under SFAS 133.
Accordingly, per GAAP, changes in the fair value of these derivatives, which
are non-cash valuation adjustments, must be reported in Southern Hydro's149 on NG Energy’s earnings. Alliant Energy believes Southern Hydro's ownership of the physical
generating facilities that are not marked-to-market, combined with the
electricity derivative contracts, act as an economic hedge to volatile
electricity prices, such that Southern Hydro's net economic exposure to
volatile electricity prices over the next five years is managed within
reasonable limits. Southern Hydro manages market risks inherent in its
business through established derivative trading and risk management policies
and tools. The principal tool utilized in managing the risks associated with
volatile prices is a five to 40-day Earnings-at-Risk (EAR) model which
calculates EAR to a 95% confidence level. At December 31, 2002, the
estimated EAR for Southern Hydro for expected earnings in 2003 was
approximately $0.9 million.
Equity Price Risk -— IP&L and WP&L maintain trust funds to fund their anticipated nuclear decommissioning costs. At Dec. 31, 20022003 and 2001,2002, these funds were invested primarily in domestic equity and debt instruments. Fluctuations in equity prices or interest rates willdo not affect Alliant Energy'sEnergy’s consolidated results of operations as such fluctuations are recorded
in equally offsetting amounts of investment income and depreciation (WP&L) or
interest (IP&L) expense when they are realized.operations. In 2001, WP&L entered into a four-year hedge on equity assets in its nuclear decommissioning trust fund. In January 2004, WP&L liquidated all of its qualified decommissioning trust fund assets into money market funds as a result of the pending Kewaunee sale. Refer to NoteNotes 10(c) and 17 of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for further discussion. Refer to “Critical Accounting Policies — Accounting for Pensions and Other Postretirement Benefits” for the impact on Alliant Energy’s pension and other postretirement benefit costs of changes in the rate of returns earned by its plan assets, which include equity securities.
43
Currency Risk -— Alliant Energy has investments in various countries where the net investments are not hedged, including Australia, Brazil, China and New Zealand. As a result, these investments are subject to currency exchange risk with fluctuations in currency exchange rates. At Dec. 31, 2002,2003, Alliant Energy had a cumulative foreign currency translation loss, net of any tax benefits realized, of $165$81 million, which related to decreases in the value of the Brazil real of $152$92 million and increases in the value of the New Zealand dollar of $11 million and
Australian dollar of $2 million in relation to the U.S. dollar. This loss is recorded in "Accumulated“Accumulated other comprehensive loss"loss” on Alliant Energy'sEnergy’s Consolidated Balance Sheets. Based on Alliant Energy'sEnergy’s investments at Dec. 31, 2002,2003, a 10% sustained increase/decrease over the next 12 months in the foreign exchange rates of Australia, Brazil, China and New Zealand would result in a corresponding increase/decrease in the cumulative foreign currency translation loss of $57$48 million. Alliant Energy'sEnergy’s equity income (loss) from its foreign investments is also impacted by fluctuations in currency exchange rates. In addition,At Dec. 31, 2003, Alliant Energy hasalso had currency exchange risk associated with approximately $40 million of debt outstanding at one of the debt issued to finance a thermal plant constructed
by Alliant Energy and its Brazilian partners. In 2002,operating companies. Alliant Energy recorded pre-tax chargesequity income of $2.4 million and equity losses of $6.5 million in 2003 and 2002, respectively, related to its share of the foreign currency transaction gains/losses on such debt. Based on the loan balance and 49
2002,2003, a 10% change in the currency rates would result in a $1.9$2.9 million after-tax increase (decrease)pre-tax increase/decrease in net income.
In addition, Alliant Energy has currency exchange risk associated with approximately $30 million of payables at a Canadian subsidiary within Alliant Energy’s Integrated Services business. In 2003, Alliant Energy recorded pre-tax income of $3.2 million related to the foreign currency transaction gains on such payables. In November 2003, Alliant Energy acquired an option to protect $11 million of its exposure against declines in currency rates while still retaining the opportunity to participate in the benefits of increases in currency rates. Based on the payables balance, option and currency rates at Dec. 31, 2003, a 10% increase and 10% decrease in the currency rates would result in a $3.0 million pre-tax increase and $2.2 million pre-tax decrease in income, respectively.
Refer to Notes 1(n)1(l) and 10 of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for further discussion of Alliant Energy'sEnergy’s derivative financial instruments.
Accounting Pronouncements - On Oct. 25, 2002, the EITF reached a consensus on
- -------------------------
EITF Issue 02-3. Alliant Energy's natural gas trading business, NG Energy
Trading, LLC (NG Energy), is impacted by EITF Issue 02-3, which requires that
all sales of energy and the related cost of energy purchased under contracts
that meet the definition of energy trading contracts under EITF Issue 98-10
and that are derivatives under SFAS 133 must be reflected on a net basis in
the income statement for all periods presented. Under the guidance of EITF
Issue 98-10, Alliant Energy reported its energy trading contracts and related
gas in storage at fair market value, and reported related revenues and
expenses on a gross basis in the income statement. EITF Issue 02-3 also
rescinded EITF Issue 98-10 on a prospective basis. Accordingly, any new
contracts entered into after Oct. 25, 2002 must be reported on a historical
cost basis rather than at fair market value unless the contract meets the
definition of a derivative under SFAS 133. Alliant Energy adopted EITF Issue
02-3 on Jan. 1, 2003 for all contracts that were in place and storage gas
acquired prior to Oct. 25, 2002, and will reclassify prior period trading
contracts on a net basis in the income statement for 2003. The impact of
transitioning from reporting inventory and existing contracts that are not
derivatives under SFAS 133 at fair value to historical cost will be reported
in net income in the first quarter of 2003 and is not expected to be material
due to the relatively small size of the NG Energy business. Had Alliant
Energy presented its trading activities in the income statement on a net
basis rather than a gross basis, for 2002, 2001 and 2000, "Non-regulated and
other" revenues and "Other operation and maintenance" expenses would have
both decreased $125 million, $49 million and $9 million, respectively, with
no impact on net income.
In November 2002, the FASB issued FIN 45 which requires disclosures by a
guarantor about its obligations under certain guarantees that it has issued.
FIN 45 also requires recognizing, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The recognition and measurement provisions of FIN 45 are
effective on a prospective basis for guarantees issued or modified after Dec.
31, 2002. The disclosure requirements of FIN 45 are effective for financial
statements of interim or annual periods ending after Dec. 15, 2002. Alliant
Energy does not anticipate FIN 45 will have a material impact on its
financial condition or results of operations. Refer to Note 11(d) of Alliant
Energy's "Notes to Consolidated Financial Statements" for additional
information on guarantees. — In January 2003, the FASB issued FIN 46 which addresses consolidation by business enterprises of variable interest entities. FIN 46 requires consolidation where there is a controlling financial interest in a variable interest entity or where the variable interest entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties. Alliant Energy adopted FIN 46, related to those entities that are considered to be special-purpose entities, on Dec. 31, 2003 with no material impact on its financial condition or results of operations. Alliant Energy continues to evaluate tolling arrangements, renewable energy entities and any other non-special purpose entities, to determine if they require consolidation under the revised FIN 46 guidance issued by the FASB in December 2003. Alliant Energy will apply the provisions of FIN 46 prospectively for all variable interest entities
created after Jan.the revised guidance as of March 31, 2003. For variable interest entities created before
Jan. 31, 2003, 2004.
Alliant Energy will be required to consolidate all entities in
which it is a primary beneficiary beginning in the third quarter of 2003. It
is reasonably possible the implementation of FIN 46 will require that certain
variable interest entities be includedadopted SFAS 143 on Alliant Energy's Consolidated
Balance Sheets. Refer to Notes 3 and 4 of Alliant Energy's "Notes to
Consolidated Financial Statements" for additional information on variable
interest entities related to synthetic leases and the utility customer
accounts receivable sale program, respectively.
SFAS 143,Jan. 1, 2003, which provides accounting and disclosure requirements for retirement obligations associated with long-lived assets was effective Jan.
1, 2003. SFAS 143 requires that the present value(AROs). Refer to Note 18 of retirement costsAlliant Energy’s “Notes to Consolidated Financial Statements” for which additional information.
Alliant Energy has a legal obligation be recorded as liabilities with
an equivalent amount addedadopted SFAS 149 for contracts entered into or modified after June 30, 2003, except for certain implementation issues and certain provisions of forward purchase and sale contracts and for hedging relationships designated after June 30, 2003. Refer to the asset cost. The liability is accretedNote 10(a) of Alliant Energy’s “Notes to its present value each period and the capitalized cost is depreciated over
the useful life of the related asset. Upon settlement of the liability, an
entity settles the obligationConsolidated Financial Statements” for its recorded amount or incurs a gain or
loss. The adoption of SFAS 143 will have no impact on IP&L's and WP&L's
earnings, as the effects will be offset by the establishment of regulatory
assets or liabilities pursuant to SFAS 71, "Accounting for the Effects of
Certain Types of Regulation."
Alliant Energy has completed a detailed assessment of the specific
applicability and implications of SFAS 143. The scope of SFAS 143 as it
relates to Alliant Energy primarily includes decommissioning costs for DAEC
and Kewaunee. It also applies to a smaller extent to several other regulated
and non-regulated assets including, but not limited to, active ash landfills,
water intake facilities, underground storage tanks, groundwater wells,
50
transmission and distribution equipment, easements, leases and the
dismantlement of certain hydro facilities. Other than DAEC and Kewaunee,
Alliant Energy's asset retirement obligations as of Jan. 1,additional information.
In May 2003, are not
significant.
Prior to January 2003, IP&L and WP&L recorded nuclear decommissioning charges
in accumulated depreciation on their Consolidated Balance Sheets. Upon
adoption of SFAS 143, IP&L and WP&L will reverse approximately $125 million
and $175 million, respectively, previously recorded in accumulated
depreciation and will record liabilities of approximately $250 million and
$175 million, respectively. The difference between amounts previously
recorded and the net SFAS 143 liability will be deferred as a regulatory
asset and is expected to approximate $125 million and $0 for IP&L and WP&L,
respectively.
IP&L and WP&L have previously recognized removal costs as a component of
depreciation expense and accumulated depreciation for other non-nuclear
assets in accordance with regulatory rate recovery. As of Dec. 31, 2002,
IP&L and WP&L estimate that they have approximately $250 million and $150
million, respectively, of such regulatory liabilities recorded in
"Accumulated depreciation" on their Consolidated Balance Sheets.
In 2001, the FASB issued SFAS 144, "Accounting150, “Accounting for the Impairment or
DisposalCertain Financial Instruments with Characteristics of Long-Lived Assets"Both Liabilities and Equity,” which replaced SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
SFAS 144 also applies to discontinued operations. SFAS 144 requires that those
long-lived assets classified as held for sale be measured at the lower of their
carrying amount or the fair value less cost to sell, and that no depreciation,
depletion and amortization shall be recorded while an asset is classified as
held for sale. Discontinued operations are no longer measured at net realizable
value or include amounts for operating losses that have not yet occurred. SFAS
144 also broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from the rest
of the entity and that will be eliminated from the ongoing operations of the
entity in a planned disposal transaction that is probable of being completed
within one year. If the criteriaissuer to classify operationsoutstanding free-standing financial instruments within its scope as held for sale are
subsequently no longer met,a liability on its balance sheet even though the assets classified as held for sale shall be
reclassified as held and used in the period the held for sale criteria are no
longer met.instruments have characteristics of equity. Alliant Energy adopted SFAS 144150 on JanuaryJuly 1, 2002. Refer2003 with no material impact on its financial condition or results of operations. Alliant Energy continues to Note 16evaluate the implications of FSP No. FAS 150-3, “Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests under FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” issued in November 2003, which defers the effective date for applying the provisions of SFAS 150 for certain mandatorily redeemable non-controlling interests.
44
In December 2003, the President signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act). The Act introduces a prescription drug benefit under Medicare Part D, as well as a federal subsidy to sponsors of retiree health care benefit plans, that provide a benefit that is at least actuarially equivalent to Medicare Part D. As permitted by FSP No. FAS 106-1, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” Alliant Energy's "NotesEnergy has elected to defer reflecting the effect of the Act on postretirement net periodic benefit cost and the accumulated postretirement benefit obligation in the Consolidated Financial Statements"Statements, since specific authoritative guidance on the accounting for additional
information aboutthe federal subsidy is pending and that guidance, when issued, could require Alliant Energy's applicationEnergy to change previously reported information. Alliant Energy is currently evaluating the effect of SFAS 144 in the fourth quarter
of 2002 as relates to various assets it is planning to sell.
Act on its other postretirement benefits expense.
Alliant Energy does not expect the various other new accounting pronouncements not mentioned above that were effective in 20022003 to have a material impact on Alliant Energy'sits results of operations or financial condition.
Critical Accounting Policies - —Based on historical experience and various - ----------------------------
other factors,Alliant Energy believes the policies identified below are critical to its business and the understanding of its results of operations as they require critical estimates be made based on the assumptions and judgment of management. The preparation of consolidated financial statements requires management to make various estimates and assumptions that affect revenues, expenses, assets, liabilities and the disclosure of contingencies. The results of these estimates and judgments form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and judgments. Alliant Energy'sEnergy’s management has discussed these critical accounting policies with the Audit Committee of its Board of Directors. Refer to Note 1 of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for a discussion of Alliant Energy'sEnergy’s accounting policies and the estimates and assumptions used in the preparation of the consolidated financial statements.
Regulatory Assets and Liabilities - —Alliant Energy'sEnergy’s domestic utility business is regulated by various federal and state regulatory agencies. As a result, the regulated utilities qualifyit qualifies for the application of SFAS 71.71, “Accounting for the Effects of Certain Types of Regulation.” SFAS 71 recognizes that the actions of a regulator can provide reasonable assurance of the existence of an asset or liability. Regulatory assets or liabilities arise as a result of a difference between GAAP and the accounting principles imposed by the regulatory agencies. Regulatory assets generally represent incurred costs that have been deferred as they are probable of recovery in customer rates. Regulatory liabilities generally represent obligations to make refunds to customers for various reasons.
Alliant Energy'sEnergy’s utility subsidiaries recognize regulatory assets and liabilities in accordance with the rulings of their federal and state regulators and future regulatory rulings may impact the carrying value and accounting treatment of Alliant Energy'sEnergy’s regulatory assets and liabilities. Alliant Energy periodically assesses whether the regulatory assets are probable of future recovery by considering factors such as regulatory environment changes, recent rate orders issued by the applicable regulatory agencies and the status of any pending or potential deregulation legislation. The assumptions and judgments used by regulatory authorities continue to have an impact on the recovery of costs, the rate of return on 51
Energy'sEnergy’s results of operations. Refer to Note 1(c) of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for further discussion.
Asset Valuations -
—
Long-Lived Assets - — Alliant Energy'sEnergy’s Consolidated Balance Sheets include
- ----------------- significant long-lived assets, which are not subject to recovery under SFAS 71. As a result, Alliant Energy must generate future cash flows from such assets in a non-regulated environment to ensure the carrying value is not impaired. ManySome of these assets are the result of capital investments which have been made in recent years and have not yet reached a mature life cycle. Alliant Energy assesses the carrying amount and potential impairment of these assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors Alliant Energy considers in determining if an impairment review is necessary include a significant underperformance of the assets relative to historical or projected future operating results, a significant change in Alliant Energy'sEnergy’s use of the acquired assets or business strategy related to such assets, and significant negative industry or economic trends. When Alliant Energy determines an impairment review is necessary, a comparison is made between the expected undiscounted future cash flows and the carrying amount of the asset. If the carrying amount of the asset is the larger of the two balances, an impairment loss is recognized equal to the amount the carrying amount of the asset exceeds the fair value of the asset. The fair value is determined by the use of quoted market prices, appraisals, or the use of valuation techniques such as expected discounted future cash flows. Alliant Energy must make assumptions regarding these estimated future cash flows and other factors to determine the fair value of the respective assets.
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At Dec. 31, 2003, Resources’ Non-regulated Generation business owned $96 million of generation equipment consisting of two gas turbines and one steam turbine. Alliant Energy has made payments of $156 millionplans to deploy the two gas turbines ($75 million) in a 300 MW natural gas-fired power plant outside Sheboygan Falls, Wisconsin and continues to review for turbines and related
generation equipment at Dec. 31, 2002 and has also entered into commitments
for an additional $84 million. Alliant Energy expects to utilize
approximately $124 million of such equipment in its first Power Iowa
generation project and is currently reviewing various other potential generation projects to utilize the remaining $116 million of equipment.steam turbine ($21 million). As a result, Alliant Energy has assessed the recoverability of the $116$96 million equipment cost compared to the future anticipated cash flows from thethese generation projects under review.projects. The future anticipated cash flows isare a significant estimate. Alliant Energy has no current intentions to sell any of this equipment. If a decision was made to sell such equipment, the recoverability of the equipment cost would be assessed by comparing the future anticipated sales proceeds to the carrying value of the equipment.
Investments - — Alliant Energy'sEnergy’s Consolidated Balance Sheets include
- ----------- investments in several available-for-sale securities accounted for in accordance with SFAS 115. Alliant Energy monitors any unrealized losses from such investments to determine if the loss is considered to be a temporary or permanent decline. The determination as to whether the investment is temporarily versus permanently impaired requires considerable judgment. When the investment is considered permanently impaired, the previously recorded unrealized loss would be recorded directly to the income statement as a realized loss. In 2002, Alliant Energy incurred pre-tax valuation charges under the provisions of SFAS 115 of $27 million and $10 million related to its McLeod and Energy Technologies investments, respectively, in 2002.respectively. Alliant Energy'sEnergy’s Consolidated Balance Sheets also contain various other investments that are evaluated for recoverability when indicators of impairment may exist. Refer to Note 9 of Alliant Energy’s “Notes to Consolidated Financial Statements” for further information related to Alliant Energy’s investments accounted for in accordance with SFAS 115.
Resources holds a non-controlling interest in five Brazilian electric utility companies accounted for under the equity method of accounting. The recoverability of these equity method investments is assessed by comparing the future anticipated local currency cash flows from these investments and the local currency carrying value of these investments. The future anticipated cash flows currently include anticipated periodic distributions that, when aggregated, exceed the carrying value of these investments. The future anticipated cash flows representsrepresent a significant estimate. The $214$283 million carrying value of Alliant Energy'sEnergy’s Brazil investments has been reduced by $210$162 million of pre-tax cumulative foreign currency translation losses. The net of tax balance of $152$92 million has been recorded in "Accumulated“Accumulated other comprehensive loss"loss” on Alliant Energy'sEnergy’s Consolidated Balance Sheet at Dec. 31, 2002.2003. Cumulative foreign currency translation losses are reflected in Alliant Energy'sEnergy’s results of operations only if the related investment is sold or substantially liquidated. If Alliant Energy would decide to exit these Brazil investments in the future, the recoverability of these equity method investments would be assessed by comparing the future anticipated sales proceeds to the carrying value. Alliant Energy has no current intention of
exiting these Brazil investments.
Resources'
Resources’ investment in Mexico consists primarily of a loan receivable (including accrued interest income) from a Mexican development company.company aggregating approximately $79 million at Dec. 31, 2003. The proceeds from the loan have been used by the Mexican development company to complete substantially all of the construction and development of the infrastructure of a master planned resort community. The loan accrues interest at 8.75% and is secured by a first lien on the undeveloped land ofparcels to be developed for the resortmaster planned community. Repayment of the loan principal and interest will be based on a portion of the proceeds from the sales, performed by the Mexican development company, of real estate lots in the resort
52
the ability to sellsale of real estate. The recoverability of this loan receivable is currently assessed by comparing the fair value of the undeveloped land of the resort community used to secure the loan and the carrying value of the loan including accrued interest income. Based on aninterest. An updated, independent appraisal completed in the fourth quarter of 2003 indicated that indicated the fair value of the collateral, was
less thanwhich is a significant estimate, exceeded the carrying value of the loan balance plusand accrued interest at Dec. 31, 2003, by a modest amount. Notwithstanding the developers’ expectations regarding the development of the project and the impending lot sales, Alliant Energy recorded ahas expressed concerns with the developers regarding the pace of the project and its marketing efforts. Alliant Energy is providing options to the developers to hasten the marketing and sales of the lots of the master planned community and to ensure faster recovery of its secured loan. If the development of the project and related real estate sales are not successfully executed, it is possible that Alliant Energy could incur material asset valuation allowance of approximately $7 million in the second quarter of 2002
and ceased accruingcharges and/or be required to discontinue recording interest income on the loan. Based on an updated
independent appraisal, Alliant Energy reversed the valuation allowanceloan in the fourth quarter of 2002 and resumed accruing interest income on the loan. The
fair value of such collateral is a significant estimate.future. Refer to Note 9 of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements"Statements” for additional information concerning Alliant Energy'sEnergy’s investments in Brazil and Mexico.
Alliant Energy announced its intentions to sell various businesses in
November 2002 and is currently accounting for them as assets held for sale
and discontinued operations. The estimated sales proceeds, less costs to
sell, for each business exceeded the carrying value of each business as of
Dec. 31, 2002. Alliant Energy will continue to monitor the estimated sales
proceeds of its assets held for sale as they relate to the respective
carrying values. Refer to Note 16 of Alliant Energy's "Notes to Consolidated
Financial Statements" for additional information.
Goodwill - As a result of the adoption of — In accordance with SFAS 142, "Goodwill and Other
- --------
Intangible Assets," on Jan. 1, 2002, Alliant Energy is required to evaluate its goodwill for impairment at least annually and more frequently when indicators of impairment may exist. At Dec. 31, 2002,2003, Alliant Energy had $66$56 million of net goodwill (including $41 million $10 million and $9$10 million within its Cogenex China and SmartEnergyChina reporting units, respectively) on its Consolidated Balance Sheet. If the fair value of a reporting unit is less than its carrying value, including goodwill, a goodwill impairment charge may be necessary. Alliant Energy estimates the fair value of its reporting units utilizing a combination of market value indicators and the expected discounted future cash flows. This process requires the use of significant management estimates and judgments regarding cash flow assumptions from future sales, operating costs and discount rates over an indefinite life. Alliant Energy'sEnergy’s cash flow assumptions are derived using a combination of historical trends, internal budgets, strategic plans and other market information. Each reporting unit is evaluated separately based on the nature of its operations and therefore the assumptions vary by reporting unit relative to its applicable circumstances. To determine its discount rates, Alliant Energy utilizes the capital asset pricing model which is based upon market comparables adjusted for company-specific risk. In the event market comparables are not available, Alliant Energy utilizes expected industry returns based upon published information. In the fourth quarterRefer to Note 14 of 2002,
Alliant Energy recorded a pre-tax goodwill impairment charge relatedEnergy’s “Notes to SmartEnergy of $7 million.
Consolidated Financial Statements” for further discussion.
46
Derivative Financial Instruments - —Alliant Energy uses derivative financial instruments to hedge exposures to fluctuations in interest rates, certain commodity prices, certain currency rates, volatility in a portion of natural gas sales volumes due to weather and to mitigate the equity price volatility associated with certain investments in equity securities. Alliant Energy does not use such instruments for speculative purposes. To account for these derivative instruments in accordance with the applicable accounting rules, Alliant Energy must determine the fair value of its derivatives. In accordance with SFAS 133, the fair value of all derivative instruments are recognized as either assets or liabilities in the balance sheet with the changes in their value recognized in earnings for the non-regulated businesses, unless specific hedge accounting criteria are met. For IP&L and WP&L, changes in the derivatives fair values are generally recorded as regulatory assets or liabilities. If an established, quoted market exists for the underlying commodity of the derivative instrument, Alliant Energy uses the quoted market price to value the derivative instrument. For other derivatives, Alliant Energy estimates the value based upon other quoted prices or acceptable valuation methods. Alliant Energy also reviews the nature of its contracts for the purchase and sale of non-financial assets to assess whether the contracts meet the definition of a derivative and the requirements to follow hedge accounting as allowed by the applicable accounting rules. The determination of derivative status and valuations involves considerable judgment.
The
SFAS 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133. Although SFAS 149 is expected to result in more energy contracts in Alliant Energy’s domestic utility business qualifying as derivatives, changes in the fair value of these derivatives are generally reported as changes in regulatory assets and liabilities rather than being reported currently in earnings, based on the regulatory treatment. SFAS 149 will likely result in more earnings volatility at NG Energy given the majority of its derivatives may not qualify for hedge accounting. Additionally, Alliant Energy'sEnergy has some commodity purchase and sales contracts that have been designated, and qualify for, the normal purchase and sale exception. Based on this designation, these contracts are not accounted for as derivative instruments.
A number of Alliant Energy’s derivative transactions are in its regulated
domestic utility business and are based on the fuel and natural gas cost recovery mechanisms in place, as well as other specific regulatory authorizations,authorizations. As a result, changes in fair market values of such derivatives generally have no impact on Alliant Energy'sEnergy’s results of operations. Alliant Energy does have an embedded derivative within its exchangeable senior notes that is impacted by the value of McLeod stock. Changes in the fair value of this derivative impact Alliant Energy'sEnergy’s results of operations and the changes did have a material impact on Alliant Energy'sEnergy’s 2001 results of operations. However, given a significant decline in the value of the McLeod stock, Alliant Energy does not expect changes in the fair value of this derivative to have a material impact on Alliant Energy'sEnergy’s results of operations in the foreseeable future. In
53
addition,Refer to Notes 10(d) and 10(a) of Alliant Energy hasEnergy’s “Notes to Consolidated Financial Statements” for a small investment in a gas trading business.
Such business accounted for allfurther discussion of its trading transactions under EITF Issue
98-10 through 2002 and adopted the provisionsimpacts of EITF Issue 02-3 and SFAS 149, respectively, on Jan. 1,
2003 (and for new transactions after Oct. 25, 2002). However, due to the insignificant size of this business, Alliant Energy does not expect this
accounting change to have a material impact on Alliant Energy's results of
operations in the future.
derivatives entered into by NG Energy.
Unbilled Revenues -— Unbilled revenues are primarily associated with Alliant Energy'sEnergy’s utility operations. Energy sales to individual customers are based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, amounts of energy delivered to customers since the date of the last meter reading are estimated and the corresponding estimated unbilled revenue is recorded. The unbilled revenue estimate is based on daily generationsystem demand volumes, estimated customer usage by class, weather impacts, line losses and the most recent customer rates. Such process involves the use of various estimates, thus significant changes in the estimates could have a material impact on Alliant Energy'sEnergy’s results of operations.
Accounting for Pensions - and Other Postretirement Benefits —Alliant Energy accounts for pensions and other postretirement benefits under SFAS 87, "Employers'“Employers’ Accounting for Pensions."Pensions” and SFAS 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” respectively. Under these rules, certain assumptions are made which represent significant estimates. There are many factors involved in determining an entity'sentity’s pension and other postretirement liabilities and costs each period including assumptions regarding employee demographics (including age, life expectancies, and compensation levels), discount rates, assumed rate of returns and funding. Changes made to the plan provisions may also impact current and future pension and other postretirement costs. Alliant Energy'sEnergy’s assumptions are supported by historical data and reasonable projections and are reviewed annually with an outside actuary firm and an investment consulting firm. As of Dec. 31, 2002,2003, Alliant Energy was using a 6.75%6% discount rate to calculate benefit obligations and a 9% annual rate of return on investments. In selecting an assumed discount rate, Alliant Energy reviews various corporate Aa bond indices. The 9% annual rate of return is consistent with Alliant Energy'sEnergy’s historical returns and is based on projected long-term equity and bond returns, maturities and asset allocations. A 100 basis point change in the discount rate would result in approximate changes of $79$102 million and $23 million in Alliant Energy’s pension and other postretirement benefit obligations and $7 million in Alliant Energy's qualified pension benefit
obligation and pension$2 million in expense, respectively. A 100 basis point change in the rate of return would result in an approximate change of $4$5 million and $1 million in qualified pension expense.
and other postretirement benefit expense, respectively. Refer to Note 6(a) of Alliant Energy’s “Notes to Consolidated Financial Statements” for discussion of the impact of a change in the medical trend rates.
47
Income Taxes — Alliant Energy accounts for income taxes under SFAS 109, “Accounting for Income Taxes.” Under these rules, certain assumptions are made which represent significant estimates. There are many factors involved in determining an entity’s income tax assets, liabilities, benefits and expense each period. These factors include assumptions regarding Alliant Energy’s future taxable income and its ability to utilize tax credits and loss carryovers as well as the impacts from the completion of audits of the tax treatment of certain transactions. Alliant Energy’s assumptions are supported by historical data and reasonable projections and are reviewed quarterly by management. Significant changes in these assumptions could have a material impact on Alliant Energy’s financial condition and results of operations. Refer to Note 5 of Alliant Energy’s “Notes to Consolidated Financial Statements” for further discussion.
Other Future Considerations -— In addition to items discussed earlier in MD&A, - ---------------------------
the following items could impact Alliant Energy'sEnergy’s future financial condition or results of operations:
Asset Sales - It is possible Alliant Energy could record material gains,
losses, accounting adjustments or other charges and/or income related to its
planned asset divestitures discussed in "Strategic Actions." Alliant Energy
is not able to predict or estimate what such items may be at this time.
Refer to Note 16 of Alliant Energy's "Notes to Consolidated Financial
Statements" for additional information.
Alliant Energy announced in March 2003 that it entered into an agreement with
New Zealand-based Meridian Energy Limited for the sale of Alliant Energy's
Australian investment, primarily made up of Alliant Energy's ownership of
Southern Hydro. The sale price will be approximately $350 million. This
amount includes the repayment of approximately $145 million in debt in
Australia. On an after-tax basis, the sale will result in net cash proceeds
to Alliant Energy of approximately $165 million. The transaction is expected
to close by the end of April 2003 and is subject to customary closing
conditions.
Retirement Benefits - Alliant Energy's qualified pension and other
postretirement benefit expenses for 2003 are currently expected to be
approximately $18 million higher than in 2002, primarily due to unfavorable
asset returns, a reduction in the discount rate used to value plan benefit
obligations and expected increases in retiree medical costs. Alliant Energy
will pursue the possible recovery of the utility portion of these cost
increases, which represents a significant majority of the increase, in any
rate filings it has in its various jurisdictions
Exchangeable Senior Notes - — At Dec. 31, 2002,2003, the carrying amount of the debt component of Resources'Resources’ exchangeable senior notes was $40.1$37.9 million, consisting of the par value of $402.5 million, less unamortized debt discount of $362.4$364.6 million. The terms of the exchangeable senior notes requirerequired Resources to pay interest on the par value of the notes at 7.25% from February 2000 to February 2003, and at 2.5% thereafter until maturity in February 2030. As explained in Note 10(a) of Alliant Energy's "NotesEnergy’s “Notes to Consolidated Financial Statements,"” Resources accounted for the net proceeds from the issuance of the notes as two separate components, a debt component and an embedded derivative component. In accordance with SFAS 133, Alliant Energy determined the initial carrying value of the debt component by subtracting the fair value of the derivative component from the net proceeds realized from the issuance of the exchangeable senior notes. This resulted in a very low initial carrying amount of the debt component which results in the recording of interest expense at an effective rate of 26.8% of the 54
2002,2003, interest expense on the notes was $13.2$10.2 million. Interest payments in excess of interest expense are recorded as a reduction of the carrying amount of the debt component. As a result of the higher interest payments for the first three years, the carrying amount of the debt component declined until it reached $37.8 million in February 2003, and then gradually increases over the next 27 years to the ultimate repayment amount of $402.5 million in 2030. Interest expense on the debt component of the notes will be $10.2 million in 2004, 2005 and 2006.
The interest deductions Alliant Energy has taken on its federal tax returns related to Resources’ exchangeable notes are currently under audit by the IRS. Alliant Energy believes these interest deductions comply with the Internal Revenue Code, however, if Alliant Energy receives an adverse ruling related to these interest deductions it could have a material impact on its results of operations.
Brazil — In the fourth quarter of 2003, the Brazilian electric utility companies Alliant Energy holds unconsolidated investments in completed the restructuring of approximately $245 million, as converted from local currency to U.S. dollars, of short- and long-term debt into new long-term debentures and commercial loans. The Brazilian electric utility companies have also arranged for the restructuring of the approximately $40 million loan for the joint venture gas-fired generating facility (Juiz de Fora) in which Alliant Energy holds a 50% direct ownership interest. Alliant Energy does not expect these debt restructurings will have a material impact on its 2004 earnings as the primary changes relate to extending the debt repayment dates. However, interest rates in general have been declining in Brazil, which would have a favorable impact on the comparison of Alliant Energy’s 2004 and 2005.2003 earnings, should the average 2004 rates remain lower than the average 2003 rates.
To complete earlier plans, the Juiz de Fora facility is scheduled for a 20-MW expansion from a single cycle to a combined cycle facility at an estimated cost of $24 million. If the existing McLeod shares would everJuiz de Fora combined cycle construction is not completed as anticipated, the future performance obligations of this generation asset might be cancelled, the notes would remain
outstanding until maturity.
Enterprise Resource Planning (ERP) System - Alliant Energy implemented a new
ERP system in October 2002 which will result in annual amortization expense
of approximately $11 million for five years.significantly adversely affected. In such an event, Alliant Energy is seekingnot required to invest any additional capital in Brazil, however, it could lead to material asset valuation charges with respect to Alliant Energy’s investment in the Juiz de Fora facility.
Alliant Energy continues to closely monitor the financial performance of its Brazilian investments. While such performance improved significantly in 2003, and Alliant Energy expects continued improvements in 2004, Alliant Energy believes more can be done to hasten the rate recoveryof improvement — particularly in regard to controlling costs and reduction of debt — and this has been a source of dispute with its Brazilian partners. Alliant Energy believes the potential of the utility portionBrazilian market is significant and it is discussing with its Brazilian partners various alternatives in order to strengthen and secure its investments in this market. Alliant Energy continues its ongoing review of options related to its Brazilian investments. Alliant Energy cannot currently predict the amortized expensesultimate outcome of these reviews and discussions.
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Synfuel — In June 2003, the IRS announced it was reviewing the scientific validity of test procedures and results used by companies claiming tax credits for producing synthetic fuels from coal and may withdraw such credits for operations that fail to meet federal standards which representsrequire, among other things, a significant majoritychemical change to occur in the process. In October 2003, the IRS stated this review was complete and that the test procedures and results used by taxpayers for chemical change are scientifically valid if the procedures are applied in a consistent and unbiased manner. Since the second quarter of 2002, Alliant Energy has been an investor in a synthetic fuel facility and continued to record these tax credits as of Dec. 31, 2003. Currently, the amortized expenses.
55
49
Quantitative and Qualitative Disclosures About Market Risk are reported under "Other“Other Matters -— Market Risk Sensitive Instruments and Positions"Positions” in MD&A.
INDEX TO FINANCIAL STATEMENTS
| Alliant Energy | Page Number |
| Alliant Energy | 51 |
| Independent Auditors' Report | 52 |
| Consolidated Statements of Income for the Years Ended Dec. 31, 2003, 2002 | 53 |
| Consolidated Balance Sheets as of Dec. 31, | 54 |
| Consolidated Statements of Cash Flows for the Years Ended Dec. 31, 2003, 2002 | 56 |
| Consolidated Statements of Capitalization as of Dec. 31, | 57 |
| Consolidated Statements of Changes in Common Equity for the Years Ended | |
| Dec. 31, 2003, 2002 | 58 |
| Notes to Consolidated Financial Statements | 59 |
| IP&L | |
| Independent Auditors' Report | 91 |
| Consolidated Statements of Income for the Years Ended Dec. 31, 2003, 2002 | 92 |
| Consolidated Balance Sheets as of Dec. 31, | 93 |
| Consolidated Statements of Cash Flows for the Years Ended Dec. 31, 2003, 2002 | 95 |
| Consolidated Statements of Capitalization as of Dec. 31, | 96 |
| Consolidated Statements of Changes in Common Equity for the Years Ended | |
| Dec. 31, 2003, 2002 | 97 |
| Notes to Consolidated Financial Statements | 98 |
| WP&L | |
| Independent Auditors' Report | 106 |
| Consolidated Statements of Income for the Years Ended Dec. 31, 2003, 2002 | 107 |
| Consolidated Balance Sheets as of Dec. 31, | 108 |
| Consolidated Statements of Cash Flows for the Years Ended Dec. 31, 2003, 2002 | 110 |
| Consolidated Statements of Capitalization as of Dec. 31, | 111 |
| Consolidated Statements of Changes in Common Equity for the Years Ended | |
| Dec. 31, 2003, 2002 | 112 |
| Notes to Consolidated Financial Statements | 113 |
Refer to Note 15 of Alliant Energy's,Energy’s, IP&L's&L’s and WP&L's "Notes&L’s “Notes to Consolidated Financial Statements"Statements” for the quarterly financial data required by Item 8.
56
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ALLIANT ENERGY CORPORATION REPORT ON THE FINANCIAL INFORMATION
Alliant Energy Corporation management is responsible for the information and representations contained in the financial statements and in other sections of this Annual Report. The consolidated financial statements that follow have been prepared in accordance with accounting principles generally accepted in the United States of America. In addition to selecting appropriate accounting principles, management is responsible for the manner of presentation and for the reliability of the financial information. In fulfilling that responsibility, it is necessary for management to make estimates based on currently available information and judgments of current conditions and circumstances.
Through a well-developed system of internal controls, management seeks to ensure the integrity and objectivity of the financial information presented in this report. This system of internal controls is designed to provide reasonable assurance that the assets of the company are safeguarded and that the transactions are executed according to management'smanagement’s authorizations and are recorded in accordance with the appropriate accounting principles.
The Board of Directors participates in the financial information reporting process through its Audit Committee.
/s/
/s/ Erroll B. Davis, Jr.
- ------------------------
Erroll B. Davis, Jr.
Chairman President and Chief Executive Officer
/s/ Thomas M. Walker
- --------------------
Thomas M. Walker
/s/ Eliot G. Protsch
Eliot G. Protsch
Senior Executive Vice President and Chief Financial Officer
/s/
/s/ John E. Kratchmer
- ---------------------
John E. Kratchmer
Vice President-Controller and Chief Accounting Officer
March 18, 2003
57
51
To the Board of Directors and Shareowners of Alliant Energy Corporation:
We have audited the accompanying consolidated balance sheets and statements of capitalization of Alliant Energy Corporation and subsidiaries (the "Company") as of December 31, 2003 and 2002, and 2001, andthe related consolidated statements of income, cash flows and changes in common equity for each of the three years in the period ended December 31, 2002.2003. Our auditaudits also included the supplementalfinancial statement schedule listed in Item 15(a)(2). These financial statements and the supplementalfinancial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the supplementalfinancial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20022003 and 2001,2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20022003, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such supplementalfinancial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
As discussed in Note 1018 to the consolidated financial statements, on JulyJanuary 1, 2000,2003, the Company changed its method of accounting for derivative instruments to adoptadopted Statement of Financial Accounting Standards No. 133,143, "Accounting for Derivative Instruments and Hedging Activities,Asset Retirement Obligations." as amended ("SFAS 133"), and
on January 1, 2001, the Company's equity method investees changed their
method of accounting for derivative instruments to adopt SFAS 133.
/s/
/s/ DELOITTE & TOUCHE LLP
- -------------------------
Milwaukee, Wisconsin
March 18, 2003
58
52
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
| Year Ended December 31, | |||||||
| 2003 | 2002 | 2001 | |||||
| (in thousands, except per share amounts) | |||||||
| Operating revenues: | |||||||
| Domestic utility: | |||||||
| Electric | $1,917,068 | $1,752,534 | $1,756,556 | ||||
| Gas | 566,926 | 393,986 | 487,877 | ||||
| Other | 104,194 | 85,415 | 101,894 | ||||
| Non-regulated | 539,999 | 254,655 | 287,903 | ||||
| 3,128,187 | 2,486,590 | 2,634,230 | |||||
| Operating expenses: | |||||||
| Domestic utility: | |||||||
| Electric production fuel and purchased power | 730,594 | 651,813 | 695,168 | ||||
| Cost of gas sold | 396,102 | 248,994 | 360,911 | ||||
| Other operation and maintenance | 701,784 | 623,240 | 586,550 | ||||
| Non-regulated operation and maintenance | 493,457 | 223,389 | 259,021 | ||||
| Depreciation and amortization | 305,074 | 282,098 | 294,339 | ||||
| Taxes other than income taxes | 89,442 | 103,865 | 102,136 | ||||
| 2,716,453 | 2,133,399 | 2,298,125 | |||||
| Operating income | 411,734 | 353,191 | 336,105 | ||||
| Interest expense and other: | |||||||
| Interest expense | 207,150 | 182,741 | 182,008 | ||||
| Loss on early extinguishment of debt | 16,864 | - | - | ||||
| Equity (income) loss from unconsolidated investments | (19,121 | ) | 12,825 | (18,799 | ) | ||
| Allowance for funds used during construction | (20,719 | ) | (7,696 | ) | (11,144 | ) | |
| Preferred dividend requirements of subsidiaries | 16,891 | 6,172 | 6,720 | ||||
| Impairment of available-for-sale securities of McLeodUSA Inc. | - | 27,218 | - | ||||
| Miscellaneous, net | (20,859 | ) | 2,074 | (2,662 | ) | ||
| 180,206 | 223,334 | 156,123 | |||||
| Income from continuing operations before income taxes | 231,528 | 129,857 | 179,982 | ||||
| Income taxes | 71,827 | 42,401 | 51,823 | ||||
| Income from continuing operations | 159,701 | 87,456 | 128,159 | ||||
| Income from discontinued operations, net of tax (Note 16) | 29,825 | 19,425 | 57,071 | ||||
| Income before cumulative effect of changes in accounting principles | 189,526 | 106,881 | 185,230 | ||||
| Cumulative effect of changes in accounting principles, net of tax | (5,983 | ) | - | (12,868 | ) | ||
| Net income | $183,543 | $106,881 | $172,362 | ||||
| Average number of common shares outstanding (basic) | 101,366 | 90,897 | 80,498 | ||||
| Average number of common shares outstanding (diluted) | 101,544 | 90,959 | 80,636 | ||||
| Earnings per average common share (basic and diluted): | |||||||
| Income from continuing operations | $1.57 | $0.97 | $1.59 | ||||
| Income from discontinued operations | 0.30 | 0.21 | 0.71 | ||||
| Cumulative effect of changes in accounting principles | (0.06 | ) | - | (0.16 | ) | ||
| Net income | $1.81 | $1.18 | $2.14 | ||||
| Dividends declared per common share | $1.00 | $2.00 | $2.00 | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
53
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
| December 31, | |||||
| ASSETS | 2003 | 2002 | |||
| (in thousands) | |||||
| Property, plant and equipment: | |||||
| Domestic utility: | |||||
| Electric plant in service | $5,707,478 | $5,295,381 | |||
| Gas plant in service | 646,439 | 613,122 | |||
| Other plant in service | 538,340 | 530,456 | |||
| Accumulated depreciation | (2,985,285 | ) | (2,791,891 | ) | |
| Net plant | 3,906,972 | 3,647,068 | |||
| Construction work in progress: | |||||
| Emery generating facility | 304,332 | 10,651 | |||
| Other | 152,684 | 252,445 | |||
| Other, less accumulated depreciation (accum. depr.) of $3,242 and $2,952 | 68,611 | 68,340 | |||
| Total domestic utility | 4,432,599 | 3,978,504 | |||
| Non-regulated and other: | |||||
| Non-regulated Generation, less accum. depr. of $3,380 and $73 | 204,480 | 156,699 | |||
| International, less accum. depr. of $33,708 and $20,737 | 198,875 | 171,179 | |||
| Integrated Services, less accum. depr. of $32,903 and $31,021 | 60,617 | 73,983 | |||
| Other Investments, less accum. depr. of $26,179 and $24,108 | 53,819 | 54,303 | |||
| Corporate Services and other, less accum. depr. of $25,283 and $9,427 | 68,415 | 75,282 | |||
| Total non-regulated and other | 586,206 | 531,446 | |||
| 5,018,805 | 4,509,950 | ||||
| Current assets: | |||||
| Cash and temporary cash investments | 242,281 | 62,859 | |||
| Restricted cash | 11,418 | 9,610 | |||
| Accounts receivable: | |||||
| Customer, less allowance for doubtful accounts of $5,522 and $4,364 | 80,664 | 69,413 | |||
| Unbilled utility revenues | 83,385 | 50,624 | |||
| Other, less allowance for doubtful accounts of $786 and $845 | 94,733 | 60,107 | |||
| Income tax refunds receivable | 20,878 | 97,469 | |||
| Production fuel, at average cost | 54,148 | 63,126 | |||
| Materials and supplies, at average cost | 60,518 | 58,603 | |||
| Gas stored underground, at average cost | 90,964 | 62,797 | |||
| Regulatory assets | 61,777 | 46,076 | |||
| Assets of discontinued operations (Note 16) | - | 969,291 | |||
| Other | 82,137 | 105,487 | |||
| 882,903 | 1,655,462 | ||||
| Investments: | |||||
| Investments in unconsolidated foreign entities | 481,525 | 373,816 | |||
| Nuclear decommissioning trust funds | 381,524 | 344,892 | |||
| Investment in ATC and other | 260,511 | 217,992 | |||
| 1,123,560 | 936,700 | ||||
| Other assets: | |||||
| Regulatory assets | 339,261 | 302,365 | |||
| Deferred charges and other | 410,917 | 409,607 | |||
| 750,178 | 711,972 | ||||
| Total assets | $7,775,446 | $7,814,084 | |||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
54
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
| December 31, | |||||
| CAPITALIZATION AND LIABILITIES | 2003 | 2002 | |||
| (in thousands, except share amounts) | |||||
| Capitalization (See Consolidated Statements of Capitalization): | |||||
| Common stock - $0.01 par value - authorized 200,000,000 shares; | |||||
| outstanding 110,962,910 and 92,304,220 shares | $1,110 | $923 | |||
| Additional paid-in capital | 1,643,572 | 1,293,919 | |||
| Retained earnings | 840,417 | 758,187 | |||
| Accumulated other comprehensive loss | (106,415 | ) | (209,943 | ) | |
| Shares in deferred compensation trust - 264,673 and 239,467 shares | |||||
| at an average cost of $27.84 and $28.80 per share | (7,370 | ) | (6,896 | ) | |
| Total common equity | 2,371,314 | 1,836,190 | |||
| Cumulative preferred stock of subsidiaries, net | 243,803 | 205,063 | |||
| Long-term debt, net (excluding current portion) | 2,123,298 | 2,609,803 | |||
| 4,738,415 | 4,651,056 | ||||
| Current liabilities: | |||||
| Current maturities and sinking funds | 69,281 | 46,591 | |||
| Variable rate demand bonds | 55,100 | 55,100 | |||
| Commercial paper | 107,500 | 195,500 | |||
| Other short-term borrowings | 21,495 | 113,721 | |||
| Accounts payable | 309,816 | 282,855 | |||
| Accrued interest | 43,962 | 34,819 | |||
| Accrued taxes | 70,835 | 105,521 | |||
| Liabilities of discontinued operations (Note 16) | - | 138,251 | |||
| Other | 176,120 | 149,952 | |||
| 854,109 | 1,122,310 | ||||
| Other long-term liabilities and deferred credits: | |||||
| Accumulated deferred income taxes | 702,648 | 661,798 | |||
| Accumulated deferred investment tax credits | 49,085 | 54,375 | |||
| Regulatory liabilities | 632,230 | 94,300 | |||
| Asset retirement obligations (Note 18) | 345,680 | - | |||
| Pension and other benefit obligations | 188,324 | 181,010 | |||
| Cost of removal obligations | - | 781,516 | |||
| Other | 212,413 | 224,294 | |||
| 2,130,380 | 1,997,293 | ||||
| Minority interest | 52,542 | 43,425 | |||
| Commitments and contingencies (Note 11) | |||||
| Total capitalization and liabilities | $7,775,446 | $7,814,084 | |||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
55
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | |||||||
| 2003 | 2002 | 2001 | |||||
| (in thousands) | |||||||
| Cash flows from operating activities: | |||||||
| Net income | $183,543 | $106,881 | $172,362 | ||||
| Adjustments to reconcile net income to net cash flows from operating activities: | |||||||
| Income from discontinued operations, net of tax | (29,825 | ) | (19,425 | ) | (57,071 | ) | |
| Depreciation and amortization | 305,074 | 282,098 | 294,339 | ||||
| Other amortizations | 73,716 | 51,567 | 52,724 | ||||
| Deferred tax expense (benefit) and investment tax credits | 59,133 | 13,192 | (19,937 | ) | |||
| Equity (income) loss from unconsolidated investments, net | (19,121 | ) | 12,825 | (18,799 | ) | ||
| Distributions from equity method investments | 24,252 | 21,671 | 16,961 | ||||
| Non-cash valuation charges | 11,035 | 59,463 | 33,706 | ||||
| Cumulative effect of changes in accounting principles, net of tax | 5,983 | - | 12,868 | ||||
| Other | (12,821 | ) | (8,473 | ) | (4,693 | ) | |
| Other changes in assets and liabilities: | |||||||
| Accounts receivable | (52,638 | ) | (16,576 | ) | 64,567 | ||
| Sale of utility accounts receivable | (26,000 | ) | 24,000 | 24,000 | |||
| Gas stored underground | (28,167 | ) | (5,683 | ) | (15,755 | ) | |
| Accounts payable | (16,415 | ) | 37,997 | (55,872 | ) | ||
| Accrued taxes | (34,686 | ) | 18,764 | 11,392 | |||
| Other | (23,073 | ) | (22,963 | ) | (77,446 | ) | |
| Net cash flows from operating activities | 419,990 | 555,338 | 433,346 | ||||
| Cash flows from financing activities: | |||||||
| Common stock dividends | (101,313 | ) | (180,987 | ) | (158,231 | ) | |
| Proceeds from issuance of common stock | 345,606 | 56,066 | 288,553 | ||||
| Proceeds from issuance of preferred stock of subsidiary | 38,738 | 144,602 | - | ||||
| Redemption of preferred stock of subsidiary | - | (56,389 | ) | - | |||
| Net change in Resources' credit facility | - | (383,610 | ) | 63,110 | |||
| Proceeds from issuance of other long-term debt | 338,623 | 300,023 | 513,530 | ||||
| Reductions in other long-term debt | (367,783 | ) | (20,818 | ) | (145,359 | ) | |
| Net change in commercial paper and other short-term borrowings | (180,226 | ) | 200,145 | (320,449 | ) | ||
| Net change in loans with discontinued operations | (10,574 | ) | 37,467 | (49,006 | ) | ||
| Other | (28,991 | ) | (24,262 | ) | (31,073 | ) | |
| Net cash flows from financing activities | 34,080 | 72,237 | 161,075 | ||||
| Cash flows used for investing activities: | |||||||
| Construction and acquisition expenditures: | |||||||
| Domestic utility business | (580,808 | ) | (405,761 | ) | (340,789 | ) | |
| Non-regulated businesses | (248,517 | ) | (218,242 | ) | (332,183 | ) | |
| Corporate Services and other | (9,568 | ) | (32,749 | ) | (40,019 | ) | |
| Nuclear decommissioning trust funds | (14,091 | ) | (22,923 | ) | (22,100 | ) | |
| Proceeds from asset sales | 523,045 | 27,643 | 107,934 | ||||
| Other | 55,291 | 19,430 | (27,404 | ) | |||
| Net cash flows used for investing activities | (274,648 | ) | (632,602 | ) | (654,561 | ) | |
| Net increase (decrease) in cash and temporary cash investments | 179,422 | (5,027 | ) | (60,140 | ) | ||
| Cash and temporary cash investments at beginning of period | 62,859 | 67,886 | 128,026 | ||||
| Cash and temporary cash investments at end of period | $242,281 | $62,859 | $67,886 | ||||
| Supplemental cash flows information: | |||||||
| Cash paid during the period for: | |||||||
| Interest | $198,582 | $184,135 | $180,351 | ||||
| Income taxes, net of refunds | $17,488 | $30,649 | $70,895 | ||||
| Noncash investing and financing activities: | |||||||
| Debt repaid directly by buyer in the sale of Australian business | $127,595 | $- | $- | ||||
| Debt assumed by buyer of affordable housing business | $87,986 | $- | $- | ||||
| Capital lease obligations incurred and other | $14,801 | $19,101 | $19,967 | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
56
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CAPITALIZATION
| December 31, | |||||||||||
| 2003 | 2002 | ||||||||||
| (in thousands) | |||||||||||
| Common equity (See Consolidated Balance Sheets) | $2,371,314 | $1,836,190 | |||||||||
| Cumulative preferred stock of subsidiaries, net (Note 7(b)) | 243,803 | 205,063 | |||||||||
| Long-term debt: | |||||||||||
| Domestic utility: | |||||||||||
| First Mortgage Bonds: | |||||||||||
| 7.75%, due 2004 | 62,000 | 62,000 | |||||||||
| 1.73% variable rate at Dec. 31, 2003 to 7.6% fixed rate, due 2005 | 88,000 | 88,000 | |||||||||
| 8% at Dec. 31, 2003, due 2007, partially retired in 2003 | 25,000 | 52,450 | |||||||||
| 1.37% variable rate at Dec. 31, 2003, due 2014 | 8,500 | 8,500 | |||||||||
| 1.29% to 1.73% variable rate at Dec. 31, 2003, due 2015 | 30,600 | 30,600 | |||||||||
| 7-5/8%, retired in 2003 | - | 94,000 | |||||||||
| 8.6%, retired in 2003 | - | 70,000 | |||||||||
| 8-5/8%, retired in 2003 | - | 20,000 | |||||||||
| 214,100 | 425,550 | ||||||||||
| Collateral Trust Bonds: | |||||||||||
| 7.25%, due 2006 | 60,000 | 60,000 | |||||||||
| 6-7/8%, due 2007 | 55,000 | 55,000 | |||||||||
| 6%, due 2008 | 50,000 | 50,000 | |||||||||
| 5.5% to 7%, due 2023 | 69,400 | 69,400 | |||||||||
| 234,400 | 234,400 | ||||||||||
| Pollution Control Revenue Bonds: | |||||||||||
| 2.5% to 4.2% through 2004, due 2005 to 2023 | 25,900 | 25,900 | |||||||||
| 6.25% to 6.35%, due 2009 to 2012, partially retired in 2003 | 12,250 | 14,930 | |||||||||
| 2.4% variable rate at Dec. 31, 2003, due 2010, partially retired in 2003 | 7,700 | 10,100 | |||||||||
| 45,850 | 50,930 | ||||||||||
| Other long-term debt: | |||||||||||
| Debentures, 7%, due 2007 | 105,000 | 105,000 | |||||||||
| Debentures, 5.7%, due 2008 | 60,000 | 60,000 | |||||||||
| Senior debentures, 6-5/8%, due 2009 | 135,000 | 135,000 | |||||||||
| Debentures, 7-5/8%, due 2010 | 100,000 | 100,000 | |||||||||
| Senior debentures, 6-3/4%, due 2011 | 200,000 | 200,000 | |||||||||
| Senior debentures, 5.875%, due 2018 | 100,000 | - | |||||||||
| Senior debentures, 6.45%, due 2033 | 100,000 | - | |||||||||
| Subordinated deferrable interest debentures, 7-7/8%, retired in 2003 | - | 50,000 | |||||||||
| Total domestic utility | 1,294,350 | 1,360,880 | |||||||||
| Non-regulated and other: | |||||||||||
| Senior notes, 4.55%, due 2008 | 75,000 | - | |||||||||
| Senior notes, 7.375%, due 2009, partially retired in 2003 | 210,955 | 250,000 | |||||||||
| Alliant Energy Neenah, LLC credit facility, 2.69% | |||||||||||
| at Dec. 31, 2003, due 2010 | 55,139 | - | |||||||||
| Senior notes, 7%, due 2011, partially retired in 2003 | 282,500 | 300,000 | |||||||||
| Senior notes, 9.75%, due 2013, partially retired in 2003 | 285,000 | 300,000 | |||||||||
| Exchangeable senior notes, 2.5%, due 2030 | 402,500 | 402,500 | |||||||||
| Senior notes, 8.59%, retired in 2003 | - | 24,000 | |||||||||
| WPC credit facility, 3.63% at Dec. 31, 2002 (a) | - | 185,000 | |||||||||
| Multifamily housing revenue bonds, 1.75% variable rate to 7.55% | |||||||||||
| at Dec. 31, 2002 (b) | - | 38,830 | |||||||||
| Other, 1% to 6.70%, due 2004 to 2010 (c) | 14,943 | 223,841 | |||||||||
| Total non-regulated and other | 1,326,037 | 1,724,171 | |||||||||
| 2,620,387 | 3,085,051 | ||||||||||
| Less: | |||||||||||
| Current maturities | (69,281 | ) | (46,591 | ) | |||||||
| Variable rate demand bonds | (55,100 | ) | (55,100 | ) | |||||||
| Unamortized debt discount, net | (372,708 | ) | (373,557 | ) | |||||||
| Total long-term debt, net (excluding current portion) | 2,123,298 | 2,609,803 | |||||||||
| Total capitalization | $4,738,415 | $4,651,056 | |||||||||
| (a) | Not included on Alliant Energy's Consolidated Balance Sheet at Dec. 31, 2003 as a result of the WPC IPO. |
| (b) | Balance at Dec. 31, 2002 |
| (c) | Balance at |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
57
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
| Accumulated | Shares in | ||||||||||||
| Additional | Other | Deferred | Total | ||||||||||
| Common | Paid-In | Retained | Comprehensive | Compensation | Common | ||||||||
| Stock | Capital | Earnings | Income (Loss) | Trust | Equity | ||||||||
| (in thousands) | |||||||||||||
| 2001: | |||||||||||||
| Beginning balance (a) | $790 | $947,504 | $818,162 | $271,867 | ($851 | ) | $2,037,472 | ||||||
| Net income | 172,362 | 172,362 | |||||||||||
| Unrealized holding losses on securities, net of tax of ($240,579) | (343,285 | ) | (343,285 | ) | |||||||||
| Less: reclassification adjustment for gains | |||||||||||||
| included in net income, net of tax of $-- | 259 | 259 | |||||||||||
| Net unrealized losses on securities | (343,544 | ) | (343,544 | ) | |||||||||
| Foreign currency translation adjustments | (66,830 | ) | (66,830 | ) | |||||||||
| Minimum pension liability adjustments, net of tax of ($11,022) | (16,378 | ) | (16,378 | ) | |||||||||
| Unrealized holding losses on derivatives, net of tax of ($1,569) | (1,003 | ) | (1,003 | ) | |||||||||
| Less: reclassification adjustment for losses included | |||||||||||||
| in net income, net of tax of ($2,078) | (3,454 | ) | (3,454 | ) | |||||||||
| Net unrealized gains on qualifying derivatives | 2,451 | 2,451 | |||||||||||
| Total comprehensive loss | (251,939 | ) | |||||||||||
| Common stock dividends | (158,231 | ) | (158,231 | ) | |||||||||
| Common stock issued | 107 | 292,289 | (1,357 | ) | 291,039 | ||||||||
| Ending balance | 897 | 1,239,793 | 832,293 | (152,434 | ) | (2,208 | ) | 1,918,341 | |||||
2002: | |||||||||||||
| Net income | 106,881 | 106,881 | |||||||||||
| Unrealized holding losses on securities, net of tax of ($8,544) | (11,069 | ) | (11,069 | ) | |||||||||
| Less: reclassification adjustment for losses | |||||||||||||
| included in net income, net of tax of ($14,393) | (23,146 | ) | (23,146 | ) | |||||||||
| Net unrealized gains on securities | 12,077 | 12,077 | |||||||||||
| Foreign currency translation adjustments, net of tax | (37,785 | ) | (37,785 | ) | |||||||||
| Minimum pension liability adjustments, net of tax of ($18,874) | (27,226 | ) | (27,226 | ) | |||||||||
| Unrealized holding losses on derivatives, net of tax of ($2,765) | (2,671 | ) | (2,671 | ) | |||||||||
| Less: reclassification adjustment for gains | |||||||||||||
| included in net income, net of tax of $1,658 | 1,904 | 1,904 | |||||||||||
| Net unrealized losses on qualifying derivatives | (4,575 | ) | (4,575 | ) | |||||||||
| Total comprehensive income | 49,372 | ||||||||||||
| Common stock dividends | (180,987 | ) | (180,987 | ) | |||||||||
| Common stock issued | 26 | 58,338 | (4,688 | ) | 53,676 | ||||||||
| Redemption of preferred stock of subsidiary | (4,212 | ) | (4,212 | ) | |||||||||
| Ending balance | 923 | 1,293,919 | 758,187 | (209,943 | ) | (6,896 | ) | 1,836,190 | |||||
2003: | |||||||||||||
| Net income | 183,543 | 183,543 | |||||||||||
| Unrealized holding gains on securities, net of tax of $6,467 | 11,203 | 11,203 | |||||||||||
| Less: reclassification adjustment for gains | |||||||||||||
| included in net income, net of tax of $1,420 | 2,408 | 2,408 | |||||||||||
| Net unrealized gains on securities | 8,795 | 8,795 | |||||||||||
| Foreign currency translation adjustments, net of tax | 83,646 | 83,646 | |||||||||||
| Minimum pension liability adjustments, net of tax of $4,279 | 6,291 | 6,291 | |||||||||||
| Unrealized holding losses on derivatives, net of tax of ($886) | (1,655 | ) | (1,655 | ) | |||||||||
| Less: reclassification adjustment for losses | |||||||||||||
| included in net income, net of tax of ($3,802) | (6,451 | ) | (6,451 | ) | |||||||||
| Net unrealized gains on qualifying derivatives | 4,796 | 4,796 | |||||||||||
| Total comprehensive income | 287,071 | ||||||||||||
| Common stock dividends | (101,313 | ) | (101,313 | ) | |||||||||
| Common stock issued | 187 | 349,653 | (474 | ) | 349,366 | ||||||||
| Ending balance | $1,110 | $1,643,572 | $840,417 | ($106,415 | ) | ($7,370 | ) | $2,371,314 | |||||
| (a) | Accumulated other comprehensive income (loss) at |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
58
ALLIANT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General - —The consolidated financial statements include the accounts of Alliant Energy and its consolidated subsidiaries. Alliant Energy is an investor-owned public utility holding company, whose primary subsidiaries are IP&L, WP&L, Resources and Corporate Services. On Jan. 1, 2002, IPC merged
with and into IESU and IESU changed its name to IP&L. Since IPC and IESU
were both wholly-owned operating subsidiaries of Alliant Energy, the
transaction had no impact on the consolidated financial statements. IP&L and WP&L are utility subsidiaries that are engaged principally in the generation, transmission (IP&L only), distribution and sale of electric energy; and the purchase, distribution, transportation and sale of natural gas; and the provision of
steam and water servicesgas in Iowa, Wisconsin, Minnesota and Illinois. Resources (through its numerous direct and indirect subsidiaries) is comprised of variousfour primary business units: International,platforms: Non-regulated Generation, International, Integrated Services Investments and Energy Technologies.Other Investments. Non-regulated Generation owns a 309-MW, non-regulated, tolled, natural gas-fired power plant in Neenah, Wisconsin and intends to support the development, financing and construction of generation to meet the needs of Alliant Energy’s domestic utility business. International holds interests in global partnershipsvarious businesses to develop energy generation, delivery and infrastructure in growing international markets, including Australia, Brazil, China and New Zealand. Alliant Energy is,
however, currently in the process of selling its investments in Australia.
Non-regulated Generation intends to build or acquire a portfolio of
competitive electric generating assets in select business areas of the U.S. Integrated Services provides a wide range of energy and environmental services for commercial, industrial, institutional, educational and governmental customers. Other Investments includes ownership of an oil and gas
production company, transportation companies, affordable-housing propertiesan equity interest in a synthetic fuel processing facility, Alliant Energy’s loan receivable from a Mexican development company and related utility operations and various other investments. Alliant Energy is, however, currently in the
process of selling its oil and gas and affordable housing businesses. Energy
Technologies invests in leading-edge energy technologies, such as
microturbines, fuel cells, solar concepts and wind turbines. Mass Marketing
has interests in energy marketing businesses. In January 2003, Alliant
Energy committed to a plan to sell SmartEnergy, an internet-based energy
retailer, and Alliant Energy is in the process of disbanding its Mass
Marketing business unit. Corporate Services is the subsidiary formed to provide administrative services to Alliant Energy and its subsidiaries as required under PUHCA.
At Dec. 31, 2002, the assets and liabilities of Alliant Energy'sEnergy’s oil and gas (Whiting)(WPC), Australian (including Southern Hydro), affordable housing and affordable housingSmartEnergy businesses were classified as held for sale. In 2003, Alliant Energy completed the sale of the Australian, affordable housing and SmartEnergy businesses, as well as the sale of over 94% of the WPC stock. The operating results for these non-regulated businesses for all periods presented have been separately classified and reported as discontinued operations in Alliant Energy'sEnergy’s Consolidated Financial Statements and Notes to Consolidated Financial Statements. Refer to Note 16 for additional information.
The consolidated financial statements reflect investments in controlled subsidiaries on a consolidated basis. FIN 46, issued by the FASB in January 2003, requires consolidation where there is a controlling financial interest in a variable interest entity or where the variable interest entity does not have sufficient equity risk to finance its activities without additional subordinated financial support from other parties. All significant intercompany balances and transactions, other than certain energy-related transactions affecting the utility subsidiaries, have been eliminated from the consolidated financial statements. Such energy-related transactions not eliminated are made at prices that approximate market value and the associated costs are recoverable from customers through the rate making process. The consolidated financial statements are prepared in conformity with GAAP, which give recognition to the rate making and accounting practices of FERC and state commissions having regulatory jurisdiction. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect: a) the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements; and b) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain prior period amounts have been reclassified on a basis consistent with the current year presentation. The most significant reclassifications relate to the reporting of accumulated costs of removal which are non-legal retirement obligations and accumulated decommissioning costs accrued prior to January 1, 2003. Previously, these costs were included as components of “Accumulated Depreciation” but in accordance with recent SEC guidance are now shown in “Cost of removal obligations” on the Consolidated Balance Sheet at Dec. 31, 2002.
Unconsolidated investments for which Alliant Energy has at least adoes not control, but does have the ability to exercise significant influence over operating and financial policies (generally, 20% non-controllingto 50% voting interestinterest), are generally accounted for under the equity method of accounting. These investments are stated at acquisition cost, increased or decreased for Alliant Energy'sEnergy’s equity in net income or loss, which is included in "Equity“Equity (income) loss from unconsolidated investments"investments” in the Consolidated Statements of Income and decreased for any dividends received. These investments are also increased or decreased for Alliant Energy'sEnergy’s proportionate share of the investee'sinvestee’s other comprehensive income (loss), which is included in "Accumulated“Accumulated other comprehensive loss"loss” on the Consolidated Balance Sheets. Investments that do not meet the criteria for consolidation or the equity method of accounting are accounted for under the cost method. Refer to Note 9 for discussion of Alliant Energy's cost method
investments that are marked-to-market in accordance with SFAS 115.
65
(b) Regulation - —Alliant Energy is a registered public utility holding company subject to regulation by the SEC under PUHCA. The utility subsidiaries are subject to regulation under PUHCA, FERC and their respective state regulatory commissions.
59
(c) Regulatory Assets and Liabilities - —Alliant Energy is subject to the provisions of SFAS 71, "Accounting“Accounting for the Effects of Certain Types of Regulation,"” which provides that rate-regulated public utilities record certain costs and credits allowed in the rate making process in different periods than for non-regulated entities. These are deferred as regulatory assets or accrued as regulatory liabilities and are recognized in the Consolidated Statements of Income at the time they are reflected in rates. As of Dec. 31, 2003 and 2002, IP&L had $24 million and $7 million and WP&L had approximately $7 million and $6 million respectively, of regulatory assets that were not earning returns.returns, respectively. At Dec. 31, 20022003 and 2001,2002, regulatory assets and liabilities were comprised of the following items (in millions):
Regulatory Assets Regulatory Liabilities
----------------------- -------------------------
2002 2001 2002 2001
---------- --------- ----------- ----------
Tax-related (Note 1(d)) $177.6 $115.3 $83.8 $15.1
Environmental-related 64.9 63.1 5.1 5.2
Energy efficiency program costs 46.7 39.9 -- --
Other 59.2 43.3 22.3 11.4
---------- --------- ----------- ----------
$348.4 $261.6 $111.2 $31.7
========== ========= =========== ==========
| Regulatory Assets | Regulatory Liabilities | ||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||
| Tax-related (Note 1(d)) | $187 | .2 | $177 | .6 | $92 | .0 | $83 | .8 | |
| Environmental-related (Note 11(e)) | 58 | .6 | 64 | .9 | 5 | .2 | 5 | .1 | |
| Energy efficiency program costs | 36 | .8 | 46 | .7 | -- | -- | |||
| Asset retirement obligations (Note 18) | 28 | .8 | -- | -- | -- | ||||
| Cost of removal obligations | -- | -- | 535 | .8 | -- | ||||
| Other | 89 | .6 | 59 | .2 | 16 | .9 | 22 | .3 | |
| $401 | .0 | $348 | .4 | $649 | .9 | $111 | .2 | ||
Alliant Energy believes it is probable that any differences between expenses for legal AROs calculated under SFAS 143 and expenses recovered currently in rates will be recoverable in future rates, and is deferring the difference of $28.8 million ($20.5 million at IP&L and $8.3 million at WP&L) as a regulatory asset. Alliant Energy also collects in rates future removal costs for many assets that do not have an associated legal ARO. Alliant Energy records a liability for the estimated amounts it has collected in rates for these future removal costs less amounts spent on removal activities. At Dec. 31, 2003 and 2002, non-legal removal obligations of $535.8 million ($325.9 million at IP&L and $209.9 million at WP&L) and $497.1 million ($298.0 million at IP&L and $199.1 million at WP&L) were recorded in “Regulatory liabilities” and “Cost of removal obligations,” respectively, on the Consolidated Balance Sheets.
If a portion of the utility subsidiaries'subsidiaries’ operations becomes no longer subject to the provisions of SFAS 71 as a result of competitive restructuring or otherwise, a write-down of related regulatory assets would be required, unless some form of transition cost recovery is established by the appropriate regulatory body that would meet the requirements under GAAP for continued accounting as regulatory assets during such recovery period. In addition, each utility subsidiary would be required to determine any impairment of other assets and write-down such assets to their fair value.
(d) Income Taxes - —Alliant Energy is subject to the provisions of SFAS 109, "Accounting“Accounting for Income Taxes,"” and follows the liability method of accounting for deferred income taxes, which requires the establishment of deferred tax assets and liabilities, as appropriate, for all temporary differences between the tax basis of assets and liabilities and the amounts reported in the consolidated financial statements. Deferred taxes are recorded using currently enacted tax rates.
Except as noted below, income tax expense includes provisions for deferred taxes to reflect the tax effects of temporary differences between the time when certain costs are recorded in the accounts and when they are deducted for tax return purposes. As temporary differences reverse, the related accumulated deferred income taxes are reversed to income. Investment tax credits have been deferred and are subsequently credited to income over the average lives of the related property. Other tax credits reduce income tax expense in the year claimed and are generally related to nonconventional fuel and research and development.
Consistent with Iowa rate making practices for IP&L, deferred tax expense is not recorded for certain temporary differences (primarily related to utility property, plant and equipment). because rates are reduced for the current tax benefits. As the deferred taxes become payable (over periods exceeding 30 years for some generating plant differences) they are recovered through rates. Accordingly, IP&L has recorded deferred tax liabilities and regulatory assets for certain temporary differences, as identified in Note 1(c). In Wisconsin, the PSCW has allowed rate recovery of deferred taxes on all temporary differences since August 1991. WP&L established a regulatory asset associated with those temporary differences occurring prior to August 1991 that will be recovered in future rates through 2007.
(e) Common Shares Outstanding -— A reconciliation of the weighted average common shares outstanding used in the basic and diluted earnings per share calculation was as follows:
Weighted average common shares outstanding: 2002 2001 2000
-------------- ------------- -------------
Basic earnings per share calculation 90,896,885 80,497,823 79,002,643
Effect of dilutive securities 62,177 138,006 190,134
-------------- ------------- -------------
Diluted earnings per share calculation 90,959,062 80,635,829 79,192,777
============== ============= =============
66
| Weighted average common shares outstanding: | 2003 | 2002 | 2001 |
| Basic earnings per share calculation | 101,365,877 | 90,896,885 | 80,497,823 |
| Effect of dilutive securities | 178,510 | 62,177 | 138,006 |
| Diluted earnings per share calculation | 101,544,387 | 90,959,062 | 80,635,829 |
60
In 2003, 2002 and 2001, 3,799,938, 3,338,978, and 2000, 3,338,978, 1,501,854 and 1,358,597 options, respectively, to purchase shares of common stock, with average exercise prices of $28.68, $29.67, $31.08, and $30.27,$31.08, respectively, were excluded from the calculation of diluted earnings per share as the exercise prices were greater than the average market price.
(f) Temporary Cash Investments and Restricted Cash - —Temporary cash investments are stated at cost, which approximates market value, and are considered cash equivalents for the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows. These investments consist of short-term liquid investments that have maturities of less than 90 days from
the date of acquisition. Atdays. Alliant Energy’s short-term restricted cash at Dec. 31, 20022003 and 2001, restricted cash was2002 primarily related to borrowing requirements for the construction of various power plants in China. (g) DepreciationAt Dec. 31, 2003, Alliant Energy also had $6.7 million of Utilitylong-term restricted cash related to borrowing requirements for the acquisition and maintenance of Resources’ 309-MW, non-regulated, tolled, natural gas-fired power plant in Neenah, Wisconsin, which was acquired in 2003.
(g) Property, Plant and Equipment -— Domestic utility plant (other than acquisition adjustments) is recorded at original cost, which includes overhead, administrative costs and AFUDC. At Dec. 31, 2003 and 2002, IP&L had $20.8 million and $22.0 million, respectively, of acquisition adjustments, net of accumulated amortization, included in utility plant ($4.6 million and $4.9 million, respectively, of such balances are currently being recovered in IP&L’s rates). The utility
subsidiariesaggregate AFUDC recovery rates, computed in accordance with the prescribed regulatory formula, were as follows:
| 2003 | 2002 | 2001 | |
| IP&L | 7.9% | 6.9% | 7.7% |
| WP&L | 9.5% | 2.6% | 7.9% |
IP&L and WP&L use a combination of remaining life, straight-line and sum-of-the-years-digits depreciation methods as approved by their respective regulatory commissions. The remaining life of DAEC, of which IP&L is a co-owner, is based on the NRC license end-of-life of 2014. The remaining depreciable life of Kewaunee, of which WP&L is a co-owner, is based on the PSCW approved revised end-of-life of 2010. Depreciation expense related to the decommissioning of DAEC and Kewaunee is discussed in Note 11(f). The average rates of depreciation for electric and gas properties, consistent with current rate making practices, were as follows:
| IP&L | WP&L | |||||
| 2003 | 2002 | 2001 | 2003 | 2002 | 2001 | |
| Electric | 3.3% | 3.4% | 3.5% | 3.7% | 3.6% | 3.7% |
| Gas | 2.7% | 2.9% | 3.6% | 4.0% | 4.1% | 4.1% |
Nuclear fuel for DAEC is leased. Annual nuclear fuel lease expenses include the cost of fuel, based on the quantity of heat produced for electric generation, plus the lessor’s interest costs related to fuel in the reactor and Equipment - Utility plant (other than acquisition
adjustments)administrative expenses. Nuclear fuel for Kewaunee is recorded at its original cost which includes overhead,
administrative costs and AFUDC. At Dec. 31, 2002 and 2001, IP&L had $22.0
million and $23.2 million, respectively,is amortized to expense based upon the quantity of acquisition adjustments, net ofheat produced for electric generation. This accumulated amortization included in utility plant ($4.9 million and $5.2
million, respectively,assumes spent nuclear fuel will have no residual value. Estimated future disposal costs of such balancesfuel are currently being recovered in
IP&L's rates). The aggregate gross AFUDC recovery rates, computed in
accordance with the prescribed regulatory formula, were as follows:
2002 2001 2000
------- ------- -------
IP&L 6.9% 7.7% 6.6%
WP&L 2.6% 7.9% 10.8%
expensed based on KWhs generated. Refer to Note 3 for additional information on DAEC’s nuclear fuel lease.
Non-regulated property, plant and equipment is recorded at original cost. The majority of the non-regulated property, plant and equipment is depreciated using the straight-line method over periods ranging from five10 to 2032 years. Upon retirement or sale of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in "Miscellaneous, net" in the Consolidated Statements of Income. Ordinary retirements of utility plant including removal costs lessand salvage value are netted and charged to accumulated depreciation upon removal from utility plant accounts and no gain or loss is recognized. (i)Removal costs reduce the regulatory liability previously established.
(h) Operating Revenues -— Revenues from IP&L and WP&L are primarily from the
sale and delivery of electricityelectric and natural gas sales and deliveries and are recorded under the accrual method of accounting and recognized upon delivery. Revenues from Alliant Energy'sEnergy’s non-regulated businesses are primarily from the sale of energy or services and are recognized based on output delivered or services provided as specified under contract terms. Alliant Energy’s non-regulated businesses also account for the revenues of certain contracts on the percentage of completion method. Alliant Energy accrues revenues for services rendered but unbilled at month-end. In 2000, Alliant Energy
recorded an increase of $10 million at WP&LRevenues and expenses from non-regulated gas marketing contracts that are designated as trading are reported on a net basis in the estimateConsolidated Statements of utility
services rendered but unbilled at month-end dueIncome. Refer to Note 10(d) for discussion of energy-trading contracts. Certain of Alliant Energy’s subsidiaries serve as collection agents for sales or various other taxes and record revenues on a net basis. The revenues do not include the implementationcollection of refined estimation processes.
(j)the aforementioned taxes.
61
(i) Domestic Utility Fuel Cost Recovery -— IP&L's&L’s retail tariffs provide for subsequent adjustments to its electric and natural gas rates for changes in the cost of fuel, purchased energy and natural gas purchased for resale. Changes in the under/over collection of these costs are reflected in "Electric“Electric production fuel and steam production fuels"purchased power” and "Cost“Cost of utility gas sold"sold” in the Consolidated Statements of Income. The cumulative effects are reflected on the Consolidated Balance Sheets as a current regulatory asset or liability, pending automatic reflection in future billings to customers. At IP&L, purchased-power capacity costs are not recovered from electric customers through EACs. Recovery of these costs must be addressed in base rates in a formal rate proceeding.
WP&L's&L’s retail electric rates are based on annual forecasted fuel and purchased-power costs. Under PSCW rules, WP&L can seek emergency rate increases if it experiences an extraordinary increase in these costs or if the annual costs are more than 3% higher than the estimated 67
Any collections in excess of costs incurred
will be refunded, with interest. Accordingly, WP&L has established a reserve
due to overcollection of past fuel and purchased-power costs and expects to
refund such amount in 2003. WP&L has a gas performance incentive which includes a sharing mechanism whereby 50% of all gains and losses relative to current commodity prices, as well as other benchmarks, are retained by WP&L, with the remainder refunded to or recovered from customers.
(k) Nuclear Refueling Outage Costs -
(j) Generating Facility Outages —The IUB allows IP&L to collect, as part of its base revenues, funds to offset other operation and maintenance expenditures incurred during refueling outages at DAEC. These costs include incremental internal labor costs, contractor labor and materials directly related to activities performed during the outage. As these revenues are collected, an equivalent amount is charged to other operation and maintenance expense with a corresponding credit to a reserve. During a refueling outage, the reserve is reversed to offset the refueling outage expenditures. Operating expenses incurred during refueling outages at Kewaunee are expensed by WP&L as incurred. Scheduled refuelingThe maintenance costs incurred during outages occurred most recently atfor Alliant Energy’s various other generating facilities are also expensed as incurred. The timing of the DAEC and Kewaunee in Spring and late 2001,
respectively. The next scheduled refueling outages at DAECduring 2001-2003 and Kewauneeanticipated refueling outages for 2004-2006 are anticipated to commence in Spring 2003.
(l) Nuclear Fuel - Nuclear fuel for DAEC is leased. Annual nuclear fuel
lease expenses include the cost of fuel, based on the quantity of heat
produced for the generation of electricity, plus the lessor's interest costs
related to fuel in the reactor and administrative expenses. Nuclear fuel for
Kewaunee is recorded at its original cost and is amortized to expense based
upon the quantity of heat produced for the generation of electricity. This
accumulated amortization assumes spent nuclear fuel will have no residual
value. Estimated future disposal costs of such fuel are expensed based on
KWhs generated. Refer to Note 3 for additional information on DAEC's nuclear
fuel lease.
(m)as follows:
| 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |
| DAEC | Spring | None | Spring | None | Spring | None |
| Kewaunee | Fall | None | Spring | Fall | None | Spring |
(k) Translation of Foreign Currency - —Assets and liabilities of international investments, where the local currency is the functional currency, have been translated at year-end exchange rates and related income statement results have been translated using average exchange rates prevailing during the year. Adjustments resulting from translation, including gains and losses on intercompany foreign currency transactions which are long-term in nature, and which Alliant Energy does not intend to settle in the foreseeable future, have been recorded in "Accumulated“Accumulated other comprehensive loss"loss” on Alliant Energy'sEnergy’s Consolidated Balance Sheets.
(n)
(l) Derivative Financial Instruments - —Alliant Energy uses derivative financial instruments to hedge exposures to fluctuations in interest rates, certain electric and gas commodity prices, certain currency rates and volatility in a portion of natural gas sales volumes due to weather. Alliant Energy also utilizes derivatives to mitigate the equity price volatility associated with certain investments in equity securities. Alliant Energy does not use such instruments for speculative purposes. The fair value of all derivatives are recorded as assets or liabilities on the Consolidated Balance Sheets and gains and losses related to derivatives that are designated as, and qualify as hedges, are recognized in earnings when the underlying hedged item or physical transaction is recognized in income. Gains and losses related to derivatives that do not qualify for, or are not designated in hedge relationships, are recognized in earnings immediately. The majorityA number of Alliant Energy'sEnergy’s derivative transactions are in its regulated domestic utility business and based on the fuel and natural gas cost recovery mechanisms in place, as well as other specific regulatory authorizations, changes in fair market values of such derivatives generally have no impact on Alliant Energy'sEnergy’s results of operations. Alliant Energy has a number ofsome commodity purchase and sales contracts that have been designated, and qualify for, the normal purchase and sale exception in SFAS 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities - an Amendment
of SFAS 133." Basedbased on this designation, these contracts are not accounted for as derivative instruments.
Alliant Energy is exposed to losses related to financial instruments in the event of counterparties'counterparties’ non-performance. Alliant Energy has established controls to determine and monitor the creditworthiness of counterparties in order to mitigate its exposure to counterparty credit risk. Alliant Energy is not aware of any material exposure to counterparty credit risk.risk related to its derivative financial instruments. Refer to Note 10 for further discussion of Alliant Energy'sEnergy’s derivative financial instruments.
(o)
62
(m) Accounting for Stock Options -— At Dec. 31, 2002,2003, Alliant Energy had two stock-based incentive compensation plans, which are described more fully in Note 6(b). Alliant Energy accounts for stock options issued under these plans under the recognition and measurement principles of APB 25, "Accounting“Accounting for Stock Issued to Employees."” No stock-based compensation cost is reflected in net income in Alliant Energy'sEnergy’s Consolidated Statements of Income, as all options granted under those plans had an exercise price equal to the quoted market price of the underlying common stock on the date of grant. Alliant Energy adopted the disclosure provisions of SFAS 148
"Accounting for Stock-Based Compensation - Transition and Disclosure, an
amendment of SFAS 123," effective for financial statements for fiscal years
68
ending after Dec. 15, 2002. The effect on net income and EPS if Alliant Energy had applied the fair value recognition provisions of SFAS 123, "Accounting“Accounting for Stock-Based Compensation,"” to the stock options issued under these plans was as follows (in thousands):
2002 2001 2000
------------- ------------- -------------
Net income, as reported $106,881 $172,362 $398,662
Less: stock-based compensation expense, net of tax 2,541 2,446 1,284
------------- ------------- -------------
Pro forma net income $104,340 $169,916 $397,378
============= ============= =============
EPS (basic):
As reported $1.18 $2.14 $5.05
Pro forma $1.15 $2.11 $5.03
EPS (diluted):
As reported $1.18 $2.14 $5.03
Pro forma $1.15 $2.11 $5.02
(p)
| 2003 | 2002 | 2001 | |
| Net income, as reported | $183,543 | $106,881 | $172,362 |
| Less: stock-based compensation expense, net of tax | 2,044 | 2,541 | 2,446 |
| Pro forma net income | $181,499 | $104,340 | $169,916 |
| EPS (basic and diluted): | |||
| As reported | $1.81 | $1.18 | $2.14 |
| Pro forma | $1.79 | $1.15 | $2.11 |
(n) Pension Plan - —For the defined benefit pension plan sponsored by Corporate Services, Alliant Energy allocates pension costs and contributions to IP&L, WP&L, Resources and the parent company based on labor costs of plan participants and any additional minimum pension liability based on each group'sgroup’s funded status.
(q)
(o) Asset Valuations -— Long-lived assets, excluding goodwill and regulatory assets, are reviewed for possible impairment whenever events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Impairment is indicated if the carrying value of an asset exceeds its undiscounted future cash flows. An impairment charge is recognized equal to the amount the carrying value exceeds the asset'sasset’s fair value. The fair value is determined by the use of quoted market prices, appraisals, or the use of other valuation techniques such as expected discounted future cash flows. The estimated fair value, less cost to sell assets held for sale, is compared each reporting period to their carrying values. Impairment charges are recorded for assets held for sale if the carrying value of such asset exceeds the estimated fair value less cost to sell.
Goodwill represents the excess of the purchase price over the fair value of the identifiable net tangible and intangible assets acquired in a business combination. Effective January 1, 2002In accordance with the adoption of SFAS 142, "Goodwill
and Other Intangible Assets," goodwill is required to be evaluated for impairment at least annually and more frequently if indicators of impairment exist. If the fair value of a reporting unit is less than its carrying value, including goodwill, an impairment charge may be necessary. The fair value of reporting units is determined by utilizing a combination of market value indicators and expected discounted future cash flows. Refer to Note 14 for additional information.
If events or circumstances indicate the carrying value of investments accounted for under the equity method of accounting may not be recoverable, potential impairment is assessed by comparing the future anticipated cash flows from these investments to their carrying values. The estimated fair
value less costIf an impairment is indicated, a charge is recognized equal to sell of assets held for sale are compared each reporting
period to their carrying values. Impairment charges are recorded for equity
method investments and assets held for sale ifthe amount the carrying value of such
asset exceeds the future anticipated cash flows or the estimatedinvestment’s fair value
less cost to sell, respectively.
value.
(p) Miscellaneous, net — The other (income) and deductions included in “Miscellaneous, net” in Alliant Energy’s Consolidated Statements of Income are as follows (in millions):
| 2003 | 2002 | 2001 | |||||
| Interest income: | |||||||
| From loans to discontinued operations | ($3 | .8) | ($16 | .9) | ($10 | .0) | |
| Other | (14 | .0) | (12 | .8) | (23 | .7) | |
| Valuation charges/(income): | |||||||
| Unconsolidated investments | 2 | .8 | 18 | .8 | -- | ||
| McLeod trading securities (Note 10(a)) | (0 | .6) | 5 | .0 | 215 | .1 | |
| Derivative component of Resources' exchangeable | |||||||
| senior notes (Note 10(a)) | -- | (0 | .4) | (181 | .6) | ||
| (Gains) losses on asset sales, net | (5 | .8) | 0 | .1 | (4 | .4) | |
| Currency transaction (gains) losses, net | (5 | .6) | 0 | .7 | (0 | .4) | |
| Minority interest of subsidiaries' net earnings | 4 | .8 | 5 | .2 | 4 | .9 | |
| Other | 1 | .3 | 2 | .4 | (2 | .6) | |
| ($20 | .9) | $2 | .1 | ($2 | .7) | ||
63
(2) DOMESTIC UTILITY RATE MATTERS
In 2002, IPFebruary 2004, WP&L filed electric and gas rate cases in Iowa. Interim rates,
subjectreceived approval from the PSCW to refund were granted for $15$5.3 million and $17 million for electric
andto its natural gas respectively. IP&L expects final ratescustomers as relates to be in place in June 2003
for the electric case and July 2003 forits annual performance under the gas case. Although it is
possible that final rates could be lower than interim rates, IP&L does not
believe this to be probable and thereforeperformance incentive. The PSCW has not recorded any reserves
related to potentialyet audited the refund obligations.
In 2002 and 2001,calculation, but agreed with WP&L had an electric fuel cost recovery mechanism that
required WP&L&L’s request to refund any overcollectionapproximately 80% of fuelthe total refund amount at this time. This refund was completed in February 2004 and purchased-power
costs. WP&L has recorded the necessary reserve for refunds at Dec. 31, 2002remainder of the refund will be completed after the PSCW completes their audit and 2001. In 2002, WP&L filedissues a rate case with FERC related to its electric
wholesale customers. An interim rate increase, subject to refund, of $6
million annually was granted effective April 2002. The case was subsequently
settled with final rates of $3 million annually.ruling. At Dec. 31, 2002,2003, WP&L recorded a reservehad reserves for the difference between interim and final rates.
69
(3) LEASES
IP&L has a capital lease covering its 70% undivided interest in nuclear fuel purchased for DAEC. Annual nuclear fuel lease expenses (included in "Electric“Electric production fuel and steam production fuels"purchased power” in the Consolidated Statements of Income) for 2003, 2002 and 2001 and 2000 were $12.7 million, $15.5 million $14.1 million and $16.0$14.1 million, respectively. Alliant Energy'sEnergy’s operating lease rental expenses, which include certain purchased-power agreements, for 2003, 2002 and 2001 and 2000
were $45.1$46.3 million, $40.4$44.5 million and $24.5$40.2 million, respectively. The purchased-power agreements total below includes $463$464 million and $78$69 million
respectively, related to a new plant (Riverside) currently under developmentthe Riverside and the RockGen plant, bothplants, respectively, in Wisconsin. The Riverside plant is expected to be placed in-service in 2004. Alliant Energy continues to evaluate Riverside, RockGen and other tolling arrangements, renewable energy entities and any other non-special purpose entities, to determine if they require consolidation under the revised FIN 46 guidance issued by the FASB in December 2003. Alliant Energy will apply the provisions of the revised guidance as of March 31, 2004. The synthetic leases relate to the financing of the corporate headquarters, corporate aircraft, utility railcars and a utility radio dispatch system that weresystem. These leases do not meet the consolidation requirements per FIN 46 and are not included on Alliant Energy'sEnergy’s Consolidated Balance Sheets. Alliant Energy has guaranteed the residual value of its synthetic leases totaling $76$75 million in the aggregate. The guarantees extend through the maturity of each respective underlying lease with remaining terms up to 1312 years. Residual value guarantees have been included in the future minimum lease payments noted in the table below (in millions):
| 2004 | 2005 | 2006 | 2007 | 2008 | Thereafter | Total | |||||||||
| Operating leases: | |||||||||||||||
| Certain purchased-power agreements | $52 | .6 | $69 | .5 | $70 | .9 | $72 | .2 | $64 | .8 | $235 | .0 | $565 | .0 | |
| Synthetic leases | 11 | .5 | 18 | .8 | 24 | .5 | 50 | .2 | 3 | .9 | 26 | .6 | 135 | .5 | |
| Other | 17 | .7 | 14 | .5 | 11 | .1 | 9 | .2 | 8 | .2 | 64 | .9 | 125 | .6 | |
| Total operating leases | $81 | .8 | $102 | .8 | $106 | .5 | $131 | .6 | $76 | .9 | $326 | .5 | $826 | .1 | |
| Less: | Present value | Gross | |||||||||||||||||||
| amount | of net | assets | |||||||||||||||||||
| repre- | minimum | under | |||||||||||||||||||
| There | senting | capital lease | lease at | ||||||||||||||||||
| 2004 | 2005 | 2006 | 2007 | 2008 | -after | Total | interest | payments | 12-31-03 | ||||||||||||
| Capital leases: | |||||||||||||||||||||
| Nuclear fuel (IP&L) | $15 | .4 | $12 | .0 | $11 | .2 | $5 | .6 | $4 | .6 | $1 | .1 | $49 | .9 | $5 | .2 | $44 | .7 | $75.5 | ||
| Office building (IP&L) | 1 | .5 | 1 | .5 | 28 | .8 | -- | -- | -- | 31 | .8 | 3 | .8 | 28 | .0 | 15.7 | (a) | ||||
| Other | 0 | .2 | 0 | .1 | 0 | .2 | 0 | .2 | 0 | .2 | 0 | .9 | 1 | .8 | 0 | .5 | 1 | .3 | 1.4 | ||
| Total capital leases | $17 | .1 | $13 | .6 | $40 | .2 | $5 | .8 | $4 | .8 | $2 | .0 | $83 | .5 | $9 | .5 | $74 | .0 | $92.6 | ||
| (a) | The difference between the gross assets under the lease and the present value of the net |
(4) UTILITYSALES OF ACCOUNTS RECEIVABLE
Utility
Domestic utility customer accounts receivable, including unbilled revenues, arise primarily from the sale of electricityelectric and natural gas.gas sales. At Dec. 31, 20022003 and 2001,2002, the utility subsidiaries were serving a diversified base of residential, commercial and industrial customers and did not have any significant concentrations of credit risk.
Alliant Energy'sEnergy’s utility subsidiaries participate in a combined utility customer accounts receivable sale program whereby IP&L and WP&L may sell up to a combined maximum amount of $250 million (there are no individual subsidiary limits) of their respective accounts receivable to a third-party financial institution on a limited recourse basis through wholly-owned and consolidated variable interestspecial purpose entities. Corporate Services acts as a collection agent for the buyer and receives a fee for collection services
that approximates fair value.services. The agreement expires in April 2006 and is subject to annual renewal or renegotiation for a longer period thereafter. Under terms of the agreement, the third-party financial institution purchases the receivables initially for the face amount. On a monthly basis, this sales price is adjusted, resulting in payments to the third-party financial institution of an amount that varies based on interest rates and length of time the sold receivables remain outstanding. Collections on sold receivables are used to purchase additional receivables from the utility subsidiaries.
70
64
At Dec. 31, 2003 and 2002, Alliant Energy had sold $176 million and $202 million of receivables, respectively. In 2003, 2002 and 2001, Alliant Energy had sold $202 million and $178
million of receivables, respectively. In 2002, 2001 and 2000, Alliant Energy
received $1.8 billion, $2.3 billion $2.2 billion and $1.6$2.2 billion, respectively, in aggregate proceeds from the sale of accounts receivable. The utility subsidiaries use proceeds from the sale of accounts receivable and unbilled revenues to maintain flexibility in their capital structures, take advantage of favorable short-term rates and finance a portion of their long-term cash needs. Alliant Energy paid fees associated with these sales of $2.6 million, $4.2 million and $7.9 million in 2003, 2002 and $9.0 million in 2002, 2001, and 2000, respectively.
Alliant Energy and its utility subsidiaries account for the sale of accounts receivable to the third-party financial institution as sales under SFAS 140, "Accounting“Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."Liabilities” which do not require consolidation per the guidelines of FIN 46. Retained receivables are available to the third-party financial institution to pay any fees or expenses due it, and to absorb all credit losses incurred on any of the sold receivables. Beginning
in the third quarter of 2003 under FIN 46, it is reasonably possible that
Alliant Energy could be considered the primary beneficiary given the current
structure of the variable interest entities related to the program, and could
be required to consolidate the operating results and associated assets and
liabilities of the variable interest entitiesResources also sells receivables in its financial statements.
Based on the receivables sold at Dec. 31, 2002, consolidation of the variable
interest entities would have resulted in anIntegrated Services business that allows financing without incurring additional $202 million in
accounts receivable and related debt recorded on Alliant Energy's
Consolidated Balance Sheet. Alliant Energy is currently evaluating the
structure of its receivable sales program to determine if this structure can
be modified to qualify for off-balance sheet treatment under FIN 46.
debt.
(5) INCOME TAXES
The components of income taxes for Alliant Energy were as follows (in millions):
2002 2001 2000
------------- ------------- -------------
Current tax expense:
Federal $19.4 $51.3 $92.1
State 21.6 16.2 24.0
Deferred tax expense (benefit):
Federal 16.8 (9.3) 97.6
State (2.5) (5.6) 18.0
Foreign tax expense 5.5 4.2 0.2
Amortization of investment tax credits (5.2) (5.2) (4.5)
Research and development tax credits (4.5) -- --
Nonconventional fuel credits (14.9) (0.5) (0.9)
Other tax credits (0.1) (0.3) (0.3)
------------- ------------- -------------
$36.1 $50.8 $226.2
============= ============= =============
| 2003 | 2002 | 2001 | |||||
| Current tax expense: | |||||||
| Federal | $19 | .2 | $21 | .7 | $52 | .1 | |
| State | 12 | .7 | 21 | .6 | 16 | .2 | |
| Deferred tax expense (benefit): | |||||||
| Federal | 62 | .3 | 20 | .8 | (9 | .1) | |
| State | 0 | .5 | (2 | .5) | (5 | .6) | |
| Foreign tax expense | 8 | .2 | 5 | .5 | 4 | .2 | |
| Research and development tax credits | (1 | .1) | (4 | .5) | -- | ||
| Amortization of investment tax credits | (5 | .1) | (5 | .2) | (5 | .2) | |
| Nonconventional fuel credits | (23 | .1) | (14 | .9) | (0 | .5) | |
| Other tax credits | (1 | .8) | (0 | .1) | (0 | .3) | |
| $71 | .8 | $42 | .4 | $51 | .8 | ||
Included in "Cumulative“Cumulative effect of changes in accounting principle,principles, net of tax"tax” in the Consolidated Statements of Income for 2003 and 2001 and 2000 waswere income tax (benefit) expensebenefits of ($5.5)$3.8 million and $9.8$5.5 million, respectively, related to the adoption of EITF Issue 02-3 and SFAS 143 by Alliant Energy on Jan. 1, 2003, and the adoption of SFAS 133 by an equity method foreign affiliate of Alliant Energy on Jan. 1, 2001, respectively. Refer to Note 16 for discussion of taxes associated with Alliant Energy’s discontinued operations.
Alliant Energy’s subsidiaries calculate income tax provisions using the separate return methodology. Separate return amounts are adjusted to reflect state apportionment benefits net of federal tax and bythe fact that PUHCA prohibits the retention of tax benefits at the parent level. Any difference between the separate return methodology and the actual consolidated return is allocated as prescribed in Alliant Energy's consolidated subsidiaries on
July 1, 2000, respectively.
Energy’s tax allocation agreement.
The overall effective income tax rates shown in the following table were computed by dividing total income tax expense by income from continuing operations before income taxes and preferred dividend requirements of subsidiaries.
| 2003 | 2002 | 2001 | |||||
| Statutory federal income tax rate | 35 | .0% | 35 | .0% | 35 | .0% | |
| Effect of rate making on property related differences | 4 | .0 | 0 | .1 | 2 | .3 | |
| State income taxes, net of federal benefits | 3 | .2 | 8 | .5 | 5 | .5 | |
| Research and development tax credits | (0 | .4) | (3 | .3) | -- | ||
| Adjustment of prior period taxes | (0 | .6) | 0 | .9 | (11 | .4) | |
| Amortization of investment tax credits | (2 | .1) | (3 | .8) | (3 | .0) | |
| Foreign operations | (2 | .7) | 6 | .5 | (0 | .7) | |
| Nonconventional fuel credits | (9 | .2) | (11 | .0) | (0 | .3) | |
| Other items, net | 1 | .7 | (1 | .7) | 0 | .4 | |
| Overall effective income tax rate | 28 | .9% | 31 | .2% | 27 | .8% | |
65
The accumulated deferred income tax (assets) and liabilities included on the Consolidated Balance Sheets at Dec. 31 arise from the following temporary differences (in millions):
2002 2001
------------- -------------
Property related $647.2 $548.8
Exchangeable senior notes 140.8 129.7
Decommissioning (33.1) (28.6)
Other (128.5) (42.3)
------------- -------------
$626.4 $607.6
============= =============
| 2003 | 2002 | ||||||||||||
| Deferred | Deferred Tax | Deferred | Deferred Tax | ||||||||||
| Tax Assets | Liabilities | Net | Tax Assets | Liabilities | Net | ||||||||
| Property related | ($37 | .2) | $711 | .0 | $673 | .8 | ($45 | .1) | $692 | .5 | $647 | .4 | |
| Exchangeable senior notes | -- | 153 | .7 | 153 | .7 | -- | 140 | .8 | 140 | .8 | |||
| Capital loss carryover | (37 | .6) | -- | (37 | .6) | (34 | .4) | -- | (34 | .4) | |||
| Decommissioning related | (30 | .1) | -- | (30 | .1) | (33 | .1) | -- | (33 | .1) | |||
| Other | (67 | .4) | 1 | .8 | (65 | .6) | (90 | .1) | -- | (90 | .1) | ||
| Total | ($172 | .3) | $866 | .5 | $694 | .2 | ($202 | .7) | $833 | .3 | $630 | .6 | |
| 2003 | 2002 | ||||||||||||
| Other current assets | ($8 | .4) | ($31 | .2) | |||||||||
| Accumulated deferred income taxes | 702 | .6 | 661 | .8 | |||||||||
| Total deferred tax liabilities | $694 | .2 | $630 | .6 | |||||||||
At Dec. 31, 2003, Alliant Energy had the following tax carryforwards: alternative minimum tax credits of $31.6 million, capital losses of $107.4 million, net operating losses (primarily state) of $422.9 million, and general business credits of $17.7 million. The alternative minimum tax credit carryforwards can be carried forward indefinitely. The majority of the capital loss carryforwards expire in 2007. The net operating loss carryforwards have expiration dates ranging from 2004 to 2023. The general business credit carryforwards have expiration dates ranging from 2022 to 2023. Due to the uncertainty of the realization of certain tax carryforwards, Alliant Energy has established valuation allowances of $35.8 million and $21.4 million as of Dec. 31, 2003 and 2002, 2001respectively. At Dec. 31, 2003 and 2000,2002, $19.6 million and $16.3 million, respectively, of these valuation allowances have been recorded to “Accumulated other comprehensive loss” on Alliant Energy’s Consolidated Balance Sheets and relate to unrealized tax benefits on certain foreign currency translation losses that are subject to capital loss carryover limitations.
At Dec. 31, 2003, 2002 and 2001, Alliant Energy had not recorded U.S. tax provisions of approximately$19.2 million, $16.3 million and $6.8 million and $3.8 million,
respectively, relating to approximately$54.9 million, $46.6 million and $19.5 million and
$10.9 million, respectively, of unremitted earnings from foreign investments, respectively, as these earnings are expected to be reinvested indefinitely.
U.S. and foreign sources of income (loss) from continuing operations before income taxes were as follows (in millions):
| 2003 | 2002 | 2001 | |||||
| U.S. sources | $174 | .9 | $132 | .8 | $159 | .0 | |
| Foreign sources | 56 | .6 | (2 | .9) | 21 | .0 | |
| Income from continuing operations before income taxes | $231 | .5 | $129 | .9 | $180 | .0 | |
66
(6) BENEFIT PLANS
(a) Pension Plans and Other Postretirement Benefits -— Alliant Energy has severalvarious non-contributory defined benefit pension plans that cover a significant number of its employees. Benefits are based on the employees'employees’ years of service and compensation. Alliant Energy also provides certain postretirement health care and life benefits to eligible retirees. In general, the health care plans are contributory with participants'participants’ contributions adjusted regularly and the life insurance plans are non-contributory. The weighted-average assumptions for qualified and non-qualified pension benefits and other postretirement benefits at the measurement date of Sept. 30 were as follows:
Qualified Pension Benefits Other Postretirement Benefits
-------------------------------------- ------------------------------------
2002 2001 2000 2002 2001 2000
------------ ------------- ----------- ---------- ---------- -----------
Discount rate 6.75% 7.25% 8.00% 6.75% 7.25% 8.00%
Expected return on plan assets 9% 9% 9% 9% 9% 9%
Rate of compensation increase 3.5-4.5% 3.5-4.5% 3.5-4.5% 3.5% 3.5% 3.5%
Medical cost trend on covered charges:
Initial trend rate N/A N/A N/A 10.8% 12.0% 9.0%
Ultimate trend rate N/A N/A N/A 5% 5% 5%
| Pension Benefits | Other Postretirement Benefits | ||||||||||||
| 2003 | 2002 | 2001 | 2003 | 2002 | 2001 | ||||||||
| Discount rate for benefit obligations | 6 | % | 6.75 | % | 7.25 | % | 6 | % | 6.75 | % | 7.25 | % | |
| Discount rate for net periodic cost | 6.75 | % | 7.25 | % | 8 | % | 6.75 | % | 7.25 | % | 8 | % | |
| Expected return on plan assets | 9 | % | 9 | % | 9 | % | 9 | % | 9 | % | 9 | % | |
| Rate of compensation increase | 3.5-4.5 | % | 3.5-4.5 | % | 3.5-4.5 | % | 3.5 | % | 3.5 | % | 3.5 | % | |
| Medical cost trend on covered charges: | |||||||||||||
| Initial trend rate | N/A | N/A | N/A | 9.5 | % | 10.8 | % | 12 | % | ||||
| Ultimate trend rate | N/A | N/A | N/A | 5 | % | 5 | % | 5 | % | ||||
The expected return on plan assets was determined by analysis of historical and forecasted asset class returns as well as actual returns for the plan over the past 10 years. An adjustment to the returns to account for active management is also made in the analysis. The obligations are viewed as long-term commitments and a long-term approach is used when determining the expected rate of return on assets, which is reviewed on an annual basis.
The components of Alliant Energy'sEnergy’s qualified and non-qualified pension benefits and other postretirement benefits costs were as follows (in millions):
| Pension Benefits | Other Postretirement Benefits | ||||||||||||
| 2003 | 2002 | 2001 | 2003 | 2002 | 2001 | ||||||||
| Service cost | $16 | .1 | $13 | .7 | $11 | .6 | $7 | .6 | $5 | .5 | $4 | .0 | |
| Interest cost | 43 | .6 | 42 | .1 | 40 | .4 | 14 | .7 | 12 | .7 | 10 | .6 | |
| Expected return on plan assets | (40 | .6) | (41 | .8) | (48 | .5) | (5 | .4) | (5 | .5) | (6 | .1) | |
| Amortization of: | |||||||||||||
| Transition obligation (asset) | (0 | .5) | (2 | .0) | (2 | .4) | 3 | .7 | 3 | .7 | 3 | .7 | |
| Prior service cost | 3 | .2 | 3 | .2 | 3 | .2 | (0 | .3) | (0 | .3) | (0 | .3) | |
| Actuarial loss (gain) | 8 | .7 | 2 | .7 | (1 | .4) | 2 | .6 | 0 | .5 | (1 | .5) | |
| $30 | .5 | $17 | .9 | $2 | .9 | $22 | .9 | $16 | .6 | $10 | .4 | ||
The assumed medical trend rates are critical assumptions in determining the service and interest cost and accumulated postretirement benefit obligation related to postretirement benefitbenefits costs. A 1% change in the medical trend rates for 2002,2003, holding all other assumptions constant, would have the following effects (in millions):
| 1% Increase | 1% Decrease | ||||
| Effect on total of service and interest cost components | $2 | .5 | ($2 | .2) | |
| Effect on postretirement benefit obligation | $24 | .8 | ($21 | .8) | |
67
A reconciliation of the funded status of Alliant Energy'sEnergy’s qualified and non-qualified pension benefit and other postretirement benefit plans to the amounts recognized on Alliant Energy'sEnergy’s Consolidated Balance Sheets at Dec. 31 was as follows (in millions):
| Pension Benefits | Other Postretirement Benefits | ||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||
| Change in projected benefit obligation: | |||||||||
| Net projected benefit obligation at beginning of year | $646 | .7 | $587 | .8 | $215 | .7 | $174 | .5 | |
| Service cost | 16 | .1 | 13 | .7 | 7 | .6 | 5 | .5 | |
| Interest cost | 43 | .6 | 42 | .1 | 14 | .7 | 12 | .7 | |
| Plan participants' contributions | -- | -- | 1 | .9 | 1 | .8 | |||
| Plan amendments | 1 | .7 | 1 | .1 | (19 | .1) | (0 | .9) | |
| Actuarial loss | 47 | .8 | 36 | .0 | 34 | .6 | 34 | .3 | |
| Gross benefits paid | (34 | .9) | (34 | .0) | (13 | .0) | (12 | .2) | |
| Net projected benefit obligation at end of year | 721 | .0 | 646 | .7 | 242 | .4 | 215 | .7 | |
| Change in plan assets: | |||||||||
| Fair value of plan assets at beginning of year | 466 | .7 | 483 | .3 | 67 | .3 | 73 | .8 | |
| Actual return on plan assets | 86 | .2 | (25 | .1) | 9 | .9 | (7 | .2) | |
| Employer contributions | 12 | .6 | 42 | .5 | 12 | .2 | 11 | .1 | |
| Plan participants' contributions | -- | -- | 1 | .9 | 1 | .8 | |||
| Gross benefits paid | (34 | .9) | (34 | .0) | (13 | .0) | (12 | .2) | |
| Fair value of plan assets at end of year | 530 | .6 | 466 | .7 | 78 | .3 | 67 | .3 | |
| Funded status at end of year | (190 | .4) | (180 | .0) | (164 | .1) | (148 | .4) | |
| Unrecognized net actuarial loss | 175 | .2 | 181 | .8 | 90 | .9 | 63 | .4 | |
| Unrecognized prior service cost | 22 | .4 | 23 | .9 | (4 | .6) | (0 | .9) | |
| Unrecognized net transition obligation (asset) | (0 | .8) | (1 | .3) | 17 | .9 | 36 | .7 | |
| Net amount recognized at end of year | $6 | .4 | $24 | .4 | ($59 | .9) | ($49 | .2) | |
| Amounts recognized on the Consolidated | |||||||||
| Balance Sheets consist of: | |||||||||
| Prepaid benefit cost | $60 | .1 | $70 | .4 | $2 | .2 | $2 | .3 | |
| Accrued benefit cost | (53 | .7) | (46 | .0) | (62 | .1) | (51 | .5) | |
| Additional minimum liability | (77 | .1) | (90 | .0) | -- | -- | |||
| Intangible asset | 14 | .2 | 16 | .5 | -- | -- | |||
| Accumulated other comprehensive loss | 62 | .9 | 73 | .5 | -- | -- | |||
| Net amount recognized at measurement date | 6 | .4 | 24 | .4 | (59 | .9) | (49 | .2) | |
| Contributions paid after 9/30 and prior to 12/31 | 0 | .6 | 0 | .5 | 6 | .7 | 4 | .0 | |
| Net amount recognized at 12/31 | $7 | .0 | $24 | .9 | ($53 | .2) | ($45 | .2) | |
The funded status of the qualified pension plans based on the projected benefit obligation at beginning of year $553.3 $483.6 $174.5 $130.7
Service cost 12.9 11.0 5.5 4.0
Interest cost 39.7 38.2 12.7 10.6
Plan participants' contributions -- -- 1.8 1.9
Plan amendments 1.1 -- (0.9) --
Actuarial loss 33.0 56.6 34.3 40.7
Gross benefits paid (31.5) (36.1) (12.2) (13.4)
------------ ------------- ------------- --------------
Net benefit obligation at end of year 608.5 553.3 215.7 174.5
------------ ------------- ------------- --------------
Change in plan assets:
Fair value of plan assets at beginning of year 483.3 556.3 73.8 83.0
Actual return on plan assets (25.1) (36.9) (7.2) (6.8)
Employer contributions 40.0 -- 11.1 9.1
Plan participants' contributions -- -- 1.8 1.9
Gross benefits paid (31.5) (36.1) (12.2) (13.4)
------------ ------------- ------------- --------------
Fair value of plan assets at end of year 466.7 483.3 67.3 73.8
------------ ------------- ------------- --------------
Funded status at end of year (141.8) (70.0) (148.4) (100.7)
Unrecognized net actuarial loss 172.1 74.2 63.4 16.8
Unrecognized prior service cost 19.9 21.5 (0.9) (0.9)
Unrecognized net transition obligation (asset) (1.4) (3.3) 36.7 41.1
------------ ------------- ------------- --------------
Net amount recognized at end of year $48.8 $22.4 ($49.2) ($43.7)
============ ============= ============= ==============
Amounts recognized on the Consolidated
Balance Sheets consist of:
Prepaid benefit cost $70.4 $45.5 $2.3 $2.1
Accrued benefit cost (21.6) (23.1) (51.5) (45.8)
Additional minimum liability (90.0) (36.1) -- --
Intangible asset 16.5 8.7 -- --
Accumulated other comprehensive loss 73.5 27.4 -- --
------------ ------------- ------------- --------------
Net amount recognized at measurement date 48.8 22.4 (49.2) (43.7)
------------ ------------- ------------- --------------
Contributions paid after 9/30 and prior to 12/31 -- -- 4.0 2.5
------------ ------------- ------------- --------------
Net amount recognized at 12/31 $48.8 $22.4 ($45.2) ($41.2)
============ ============= ============= ==============
| Pension Benefits | Other Postretirement Benefits | ||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||
| Accumulated benefit obligation | $663 | .2 | $596 | .9 | $242 | .4 | $215 | .7 | |
| Plans with accumulated benefit obligations in excess | |||||||||
| of plan assets: | |||||||||
| Accumulated benefit obligation | 497 | .5 | 453 | .8 | 240 | .7 | 213 | .9 | |
| Fair value of plan assets | 355 | .6 | 313 | .2 | 75 | .1 | 64 | .3 | |
| Plans with projected benefit obligations in excess | |||||||||
| of plan assets: | |||||||||
| Projected benefit obligations | 721 | .0 | 646 | .7 | N/A | N/A | |||
| Fair value of plan assets | 530 | .6 | 466 | .7 | N/A | N/A | |||
68
Alliant Energy'sEnergy’s net periodic benefit cost is primarily included in "Other“Domestic utility — other operation and maintenance"maintenance” in theAlliant Energy’s Consolidated Statements of Income. Alliant Energy calculates the fair value of plan assets by using the straight market value of assets approach.
Postretirement benefit plans are funded via specific assets within certain retirement plans (401(h) assets) as well as VEBA trusts. The asset allocation of the 401(h) assets mirrors the pension plan assets and the asset allocation of the VEBA trusts are reflected in the table below under “Other Postretirement Plans.” The asset allocation for Alliant Energy’s pension and other postretirement benefit plans at Sept. 30, 2003 and 2002, and the pension plan target allocation for 2003 were as follows:
| Pension Plans | Other Postretirement Plans | ||||
| Target | Percentage of Plan | Percentage of Plan Assets | |||
| Allocation | Assets at Sept. 30 | at Sept. 30 | |||
| Asset Category | 2003 | 2003 | 2002 | 2003 | 2002 |
| Equity securities | 50-65% | 61% | 55% | 47% | 40% |
| Debt securities | 25-40% | 33% | 35% | 41% | 44% |
| Other | 0-5% | 6% | 10% | 12% | 16% |
| 100% | 100% | 100% | 100% | ||
For the various Alliant Energy pension and postretirement plans, Alliant Energy common stock represented less than 1% of total plan investmentsassets at Dec. 31, 20022003 and 2001.
2002. Alliant Energy’s plan assets are managed by outside investment managers. Alliant Energy’s investment strategy and its policies employed with respect to pension and postretirement assets is to combine both preservation of principal, and prudent and reasonable risk-taking to protect the integrity of the assets in meeting the obligations to the participants while achieving the optimal return possible over the long-term. It is recognized that risk and volatility are present to some degree with all types of investments; however, high levels of risk are minimized at the total fund level. This is accomplished through diversification by asset class, number of investments, and sector and industry limits when applicable.
For the pension plans, the mix among asset classes is controlled by long-term asset allocation targets. The assets are viewed as long-term with moderate liquidity needs. Historical performance results and future expectations suggest that equity securities will provide higher total investment returns than debt securities over a long-term investment horizon. Consistent with the goals to maximize returns and minimize risk over the long-term, the pension plans have a long-term investment posture more heavily weighted towards equity holdings. The asset allocation mix is monitored quarterly and appropriate action is taken as needed to rebalance the assets within the prescribed range. Assets related to postretirement plans are viewed as long-term. A balanced mix of both equity and debt securities are utilized to maximize returns and minimize risk over the long-term.
Prohibited investment vehicles related to the pension and postretirement plans include, but may not be limited to, direct ownership of real estate, real estate investment trusts, private placements, unregistered or restricted stock, options and futures unless specifically approved, margin trading, oil and gas limited partnerships, commodities, short selling, commercial mortgage obligations and securities of the managers’ firms or affiliate firms.
Alliant Energy estimates that funding for the pension and postretirement benefit plans for 2004 will be approximately $60 million and $15 million, respectively.
In December 2003, the President signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act). The Act introduces a prescription drug benefit under Medicare Part D, as well as a federal subsidy to sponsors several non-qualified pensionof retiree health care benefit plans, that cover
certain currentprovide a benefit that is at least actuarially equivalent to Medicare Part D. As permitted by FSP No. FAS 106-1, “Accounting and former key employees. At both Dec. 31, 2002Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and 2001,
the funded balancesModernization Act of such plans totaled approximately $4 million, none of
which consisted of2003,” Alliant Energy common stock. Alliant Energy's pensionhas elected to defer reflecting the effect of the Act on postretirement net periodic benefit cost and the accumulated postretirement benefit obligation under these plans was $38.2 millionin the Consolidated Financial Statements, since specific authoritative guidance on the accounting for the federal subsidy is pending and $34.4 million at
Dec. 31, 2002 and 2001, respectively.that guidance, when issued, could require Alliant Energy's pension expense under
these plans was $4.3 million, $3.4 million, and $3.6 million in 2002, 2001
and 2000, respectively.
Energy to change previously reported information. Alliant Energy is currently evaluating the effect of the Act on its other postretirement benefits expense.
Alliant Energy has various life insurance policies that cover certain key employees and directors. At Dec. 31, 20022003 and 2001,2002, the cash surrender value of these investments was $32$35 million and $30$32 million, respectively. Under Alliant Energy'sEnergy’s deferred compensation plans, certain key employees and directors can defer part or all of their current compensation in company stock or interest accounts, which are held in grantor trusts. At Dec. 31, 20022003 and 2001,2002, the fair market value of the trusts totaled approximately $4.9$7.6 million and $2.2$4.9 million, respectively, the majority of which consisted of Alliant Energy common stock. A significant number of Alliant Energy employees also participate in defined contribution pension plans (401(k) and Employee Stock Ownership plans). Alliant Energy'sEnergy’s contributions to the plans,401(k) plan, which are based on the participants'participants’ level of contribution, were $8.0 million, $9.2 million, and $8.2 million in 2003, 2002 and $8.1 million in 2002, 2001, respectively. For the Alliant Energy 401(k) plan, Alliant Energy common stock represented 22.6% and 2000,
respectively.
18.2% of total plan assets at Dec. 31, 2003 and 2002.
69
(b) Equity Incentive Plans - In 2002, —Alliant Energy shareowners approved
thehas an EIP that permits the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units to key employees. At Dec. 31, 2002,2003, non-qualified stock options were outstanding under this plan. The maximum number of shares of Alliant Energy common stock that may be issued under the plan is 4 million. Alliant Energy also hashad an LTEIP, that permits the grant of incentive stock
options, non-qualified stock options, restricted stock, performance sharesunder which no awards may be granted after January 2004, and performance units to key employees. At Dec. 31, 2002,under which non-qualified stock options, restricted stock and performance shares were outstanding. The
maximum number of shares of Alliant Energy common stock that may be issued
under the plan is 3.8 million. This plan expires January 2004,outstanding at which time
no further grants may be made under this plan.
Dec. 31, 2003.
Options granted to date under the plans were granted at the quoted market price of the shares on the date of grant, vest over three years and expire no later than 10 years after the grant date. Options become fully vested upon retirement and remain exercisable at any time prior to their expiration date, or for three years after the effective date of the retirement, whichever period is shorter. Participants'Options become fully vested upon death or disability and remain exercisable at any time prior to their expiration date, or for one year after the effective date of the death or disability, whichever period is shorter. Participants’ options that are not vested become forfeited when participants leave Alliant Energy and their vested options expire after three months. A summary of the stock option activity was as follows:
| 2003 | 2002 | 2001 | |||||||||||
| Weighted | Weighted | Weighted | |||||||||||
| Average | Average | Average | |||||||||||
| Exercise | Exercise | Exercise | |||||||||||
| Shares | Price | Shares | Price | Shares | Price | ||||||||
| Outstanding at beginning of year | 3,842,136 | $29 | .48 | 2,917,229 | $30 | .03 | 2,265,862 | $29 | .67 | ||||
| Options granted | 957,200 | 16 | .82 | 945,863 | 27 | .79 | 721,072 | 31 | .14 | ||||
| Options exercised | -- | -- | -- | -- | (42,432 | ) | 29 | .87 | |||||
| Options forfeited | (582,622 | ) | 28 | .49 | (20,956 | ) | 29 | .41 | (27,273 | ) | 30 | .07 | |
| Outstanding at end of year | 4,216,714 | 26 | .74 | 3,842,136 | 29 | .48 | 2,917,229 | 30 | .03 | ||||
| Exercisable at end of year | 2,514,908 | 29 | .68 | 2,242,187 | 29 | .93 | 1,593,047 | 29 | .94 | ||||
The weighted-average remaining contractual life of outstanding options at Dec. 31, 2003, 2002 and 2001 and 2000 was 7.1 years, 7.4 years and 7.7 years, and 8.3 years, respectively. Additional information as of Dec. 31, 2003 is as follows:
| Options Outstanding | Options Exercisable | ||||
| Range of | Weighted Average | Weighted Average | Weighted Average | ||
| Exercise Prices | Options | Exercise Price | Remaining Contractual Life | Options | Exercise Price |
| $16.82 | 907,714 | $16.82 | 9 years | 6,228 | $16.82 |
| $27.50-$31.56 | 3,309,000 | 29.46 | 7 years | 2,508,680 | 29.71 |
The value of the options granted during the year using the Black-Scholes pricing method was as follows:
| 2003 | 2002 | 2001 | |
| Value of options | $1.94 | $9.14 | $4.30 |
| Volatility | 22.8% | 40.6% | 18.9% |
| Risk free interest rate | 3.5% | 5.0% | 5.0% |
| Expected life | 7 years | 10 years | 10 years |
| Expected dividend yield on date of grant | 5.9% | 6.0% | 6.6% |
At Dec. 31, 20022003 and 2001,2002, Alliant Energy had 1,745 and 61,137 shares of restricted stock outstanding, respectively.outstanding. Any unvested shares of restricted stock become fully vested upon retirement. Participants'Participants’ unvested restricted stock is forfeited when the participant leaves Alliant Energy. Compensation cost is measured at the date of the award based on the fixed number of shares awarded and the market price of the shares at the award date. Compensation cost, which is recognized ratably over the three-year restriction period, was $0, $0.2 million, $0.6 million and $0.6 million in 2003, 2002 and 2001, and
2000, respectively.
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The payout to key employees of Corporate Services for performance shares granted through 2002 is contingent upon achievement over a three-year period of specified earnings
per shareEPS growth and total return to shareowners of Alliant Energy compared with an investor-owned utility peer group.group (TSR), and for performance shares granted in 2003 is contingent solely upon TSR. The payout to key employees of Resources is contingent upon achievement over a three-year period of specified Resources earnings per shareEPS growth. Performance shares are paid out in shares of Alliant Energy'sEnergy’s common stock or a combination of cash and stock and are modified by a performance multiplier, which ranges from zero to two, based on the performance criteria. Performance shares have an intrinsic value equal to the quoted market price of a share on the date of grant.payout. Pursuant to APB 25, Alliant Energy accrues the plan expense over the three-year period the services are performed and recognized (income) expense of $4.1 million, ($1.6) million and $2.4 million in 2003, 2002 and $0.4 million in 2002, 2001, and 2000,
respectively.
(7) COMMON AND PREFERRED STOCK
(a) Common Stock -— The number of shares of common stock issued by Alliant Energy under its various stock plans was as follows:
2002 2001 2000
---------------- ---------------- ----------------
Beginning balance 89,682,334 79,010,114 78,984,014
Shares issued:
Public offering -- 9,775,000 --
Shareowner Direct Plan 1,877,032 668,379 5,666
401(k) Savings Plan 689,336 161,239 --
Equity incentive plans 55,518 67,602 20,434
---------------- ---------------- ----------------
Ending balance 92,304,220 89,682,334 79,010,114
================ ================ ================
| 2003 | 2002 | 2001 | |
| Beginning balance | 92,304,220 | 89,682,334 | 79,010,114 |
| Shares issued: | |||
| Public offering | 17,250,000 | -- | 9,775,000 |
| Shareowner Direct Plan | 970,445 | 1,877,032 | 668,379 |
| 401(k) Savings Plan | 438,245 | 689,336 | 161,239 |
| Equity incentive plans | -- | 55,518 | 67,602 |
| Ending balance | 110,962,910 | 92,304,220 | 89,682,334 |
In July 2003, Alliant Energy completed a public offering of its common stock generating net proceeds of $318 million, which were used to make capital contributions to WP&L of $200 million and IP&L of $118 million in support of their respective generation and reliability initiatives. In November 2001, Alliant Energy completed a public offering of its common stock generating net proceeds of approximately $263 million which were used to repay short-term debt. From January 20002001 to June 2001, Alliant Energy satisfied its requirements under the Shareowner Direct Plan (dividend reinvestment and stock purchase plan) by acquiring Alliant Energy common stock on the open market, rather than through original issue. In 2000, 5,666
shares of common stock were issued related to an adjustment of a prior
acquisition of oil and gas properties. At Dec. 31, 20022003 and 2001,2002, Alliant Energy had a total of 6.84.7 million and 2.66.8 million shares, respectively, available for issuance in the aggregate, pursuant to its Shareowner Direct Plan, LTEIP, EIP and 401(k) Savings Plan.
Alliant Energy has a Shareowner Rights Plan whereby rights will be exercisable only if a person or group acquires, or announces a tender offer to acquire, 15% or more of Alliant Energy'sEnergy’s common stock. Each right will initially entitle shareowners to buy one-half of one share of Alliant Energy'sEnergy’s common stock. The rights will only be exercisable in multiples of two at an initial price of $95.00 per full share, subject to adjustment. If any shareowner acquires 15% or more of the outstanding common stock of Alliant Energy, each right (subject to limitations) will entitle its holder to purchase, at the right'sright’s then current exercise price, a number of common shares of Alliant Energy or of the acquirer having a market value at the time of twice the right'sright’s per full share exercise price. The Board of Directors is also authorized to reduce the 15% ownership threshold to not less than 10%.
Alliant Energy's utility subsidiaries
IP&L and WP&L each have dividend payment restrictions based on their respective bond indentures, the terms of their outstanding preferred stock and state regulatory limitations applicable to them. WP&L's
75
preferred stock restricts dividends to the extent that such dividend would
reduce the common stock equity ratio to less than 25%. In its September 2002December 2003 rate order, the PSCW stated it must approve the paymentWP&L may not pay annual common stock dividends, including pass-through of subsidiary dividends, by WP&Lin excess of $89 million to Alliant Energy in excess of the level forecasted in the order ($62 million
annually) if such dividends would reduce WP&L's&L’s actual average common equity ratio, on a regulatory financial basis, is or will fall below 44.67%the authorized level of total capitalization.54.01%. In accordance with the IUB order authorizing the IP&L merger, IP&L must inform the IUB if its common equity ratio falls below 42% of total capitalization. As of Dec. 31, 2002, Alliant Energy's
utility subsidiaries2003, IP&L and WP&L were in compliance with all such dividend restrictions.
In 2003, 2002 and 2001, 13, 11 non-employee directors received 1,000 shares each of Alliant
Energy common stock through the Shareowner Direct Plan as part of the
directors' compensation program, for a total of approximately $337,000. In
2001,and 14 non-employee directors receivedvoluntarily elected to purchase up to 1,000, 1,000 and up to 1,000 shares each of Alliant Energy common stock through the Shareowner Direct Plan utilizing cash compensation received as part of the directors’ compensation program, for a total of approximately $338,000. In 2000, 12 non-employee directors received up to
$20,000 each in Alliant Energy common stock, for a total of approximately
$222,000.
$181,000, $337,000 and $338,000, respectively.
(b) Preferred Stock -— In September 2002, IP&L redeemed all of its then
outstanding shares of preferred stock. In December 2002,2003, IP&L issued six1.6 million shares of preferred stock at $25.00 per share in a private
placement. IP&L used thepublic offering and received net proceeds of approximately $145 million to repay
its short-term debt and for general corporate purposes, including to fund
capital expenditures and to repay other debt.$39 million. The fair market value of Alliant Energy'sEnergy’s cumulative preferred stock of subsidiaries, based upon the market yield of similar securities and quoted market prices, at Dec. 31, 2003 and 2002 and 2001 was $198$286 million and $99$198 million, respectively. Information related to the carrying value of Alliant Energy'sEnergy’s cumulative preferred stock of subsidiaries, net (none are mandatorily redeemable) at Dec. 31 was as follows (in millions):
2002 2001
------------ -------------
Par/Stated Authorized Shares Mandatory
Value Shares Outstanding Series Redemption
----- ------ ----------- ------ ----------
$25 16,000,000 6,000,000 8.375% No $150.0 $--
$100 * 449,765 4.40% - 6.20% No 45.0 45.0
$25 * 599,460 6.50% No 15.0 15.0
$50 466,406 ** 366,406 4.30% - 6.10% No -- 18.3
$50 *** 216,381 4.36% - 7.76% No -- 10.8
$50 *** 545,000 6.40% $50 / share -- 27.3
------------ -------------
210.0 116.4
Less: unamortized expenses (4.9) (2.4)
------------ -------------
$205.1 $114.0
============ =============
* 3,750,000 authorized shares in total.
** Fully retired in 2002.
*** 2,000,000 authorized shares in total, fully retired in 2002.
71
| Liquidation Preference/ | Authorized | Shares | |||||||||
| Stated Value | Shares | Outstanding | Series | 2003 | 2002 | ||||||
| $25 | * | 6,000,000 | 8.375% | $150 | .0 | $150 | .0 | ||||
| $25 | * | 1,600,000 | 7.10% | 40 | .0 | -- | |||||
| $100 | ** | 449,765 | 4.40% - 6.20% | 45 | .0 | 45 | .0 | ||||
| $25 | ** | 599,460 | 6.50% | 15 | .0 | 15 | .0 | ||||
| 250 | .0 | 210 | .0 | ||||||||
| Less: discount | (6 | .2) | (4 | .9) | |||||||
| $243 | .8 | $205 | .1 | ||||||||
| * 16,000,000 authorized shares in total. ** 3,750,000 authorized shares in total. | |||||||||||
(8) DEBT
(a) Short-Term Debt -— To provide short-term borrowing flexibility and security for commercial paper outstanding, Alliant Energy and its subsidiaries maintain committed bank lines of credit, all of which most require a fee.
Alliant Energy discontinued the use of its utility money pool in 2002 and
WP&L and IP&L are now meeting any short-term borrowing needs they have by
issuing commercial paper and borrowing on its bank lines of credit,
respectively. At Dec. 31, 2001, IP&L and WP&L had money pool borrowings of
$38.0 million and $90.8 million, respectively. Information regarding short-term debt was as follows (dollars in millions):
2002 2001
---------------- -------------
At Dec. 31:
Commercial paper outstanding $195.5 $68.4
Discount rates on commercial paper 1.6-1.9% 2.4-3.2%
Bank facility borrowings $85.0 $--
Interest rates on bank facility borrowings 2.3-2.4% N/A
Short-term borrowings at foreign subsidiaries $28.7 $84.3
Interest rates on foreign short-term borrowings 5.3-6.9% 5.6-6.9%
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $337.9 $274.1
Average interest rates on short-term debt 2.7% 4.8%
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| 2003 | 2002 | |
| At Dec. 31: | ||
| Commercial paper outstanding | $107.5 | $195.5 |
| Discount rates on commercial paper | 1.2% | 1.6-1.9% |
| Bank facility borrowings | $-- | $85.0 |
| Interest rates on bank facility borrowings | N/A | 2.3-2.4% |
| Other borrowings (primarily at foreign subsidiaries) | $21.5 | $28.7 |
| Interest rates on other borrowings | 5.3-10.8% | 5.3-6.9% |
| For the year ended: | ||
| Average amount of short-term debt | ||
| (based on daily outstanding balances) | $269.8 | $337.9 |
| Average interest rates on short-term debt | 2.6% | 2.7% |
(b) Long-Term Debt - The former IESU— Substantially all of IP&L’s utility plant is pledged as collateral under one or more of several outstanding indentures. These indentures securing itssecure IP&L’s Collateral Trust and First Mortgage and Collateral Trust Bonds constitute direct first mortgage liens and a
second lien while First Mortgage Bonds remain outstanding, respectively, upon
substantially all tangible public utility property of IP&L (excluding those
of the former IPC).Bonds. WP&L's and the former IPC's&L’s First Mortgage Bonds are secured by substantially all of theirits utility plant. IP&L, WP&L and Resources also maintain indentures relatingrelated to the issuance of unsecured debt securities.
In October 2003 and September 2003, IP&L issued $100 million and $100 million of 6.45% and 5.875% unsecured senior debentures due 2033 and 2018, respectively, and used the majority of the net proceeds to redeem long-term debt. In December 2002, Resources issued $300 million of 9.75% senior notes due 2013 in a private placement. The notes are unconditionally guaranteed by
Alliant Energy. Resourcesand used the proceeds to repay short-term debt. In
November 2001, Resources issued $300 million of senior notes at a fixed
interest rate of 7%, due 2011. The notes are fully and unconditionally
guaranteed by
Alliant Energy. Resources usedEnergy utilized the proceeds from its non-regulated asset sales in 2003 to repay other
Resources' debt. In March 2001, IP&L issued $200 millionreduce short-term debt outstanding and also retired various “Non-regulated and other” long-term debt as noted on Alliant Energy’s Consolidated Statements of senior unsecured
debentures at a fixed interest rate of 6-3/4%, due 2011. IP&L used the
proceeds to repay short- and long-term debt.
Capitalization.
Debt maturities for 20032004 to 20072008 are $47$69 million, $106$102 million, $337$69 million, $68$199 million and $225$196 million, respectively. Depending upon market conditions, it is currently anticipated that a majority of the maturing debt will be refinanced with the issuance of long-term securities.
The carrying value of Alliant Energy'sEnergy’s long-term debt (including current maturities and variable rate demand bonds) at Dec. 31, 2003 and 2002 and 2001 was $2.7$2.2 billion and $2.5$2.7 billion, respectively. The fair market value, based upon the market yield of similar securities and quoted market prices, at Dec. 31, 2003 and 2002 was $2.6 billion and 2001 was $2.9 billion, respectively.
Alliant Energy has fully and $2.6 billion, respectively.
unconditionally guaranteed the payment of principal and interest on various debt securities issued by Resources. No other Alliant Energy subsidiaries are guarantors of Resources’ debt securities. Alliant Energy does not have any intercompany debt cross-collateralizations or intercompany debt guarantees.
72
(9) INVESTMENTS AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of Alliant Energy'sEnergy’s current assets and current liabilities approximates fair value because of the short maturity of such financial instruments. Since IP&L and WP&L are subject to regulation, any gains or losses related to the difference between the carrying amount and the fair value of their financial instruments may not be realized by Alliant Energy'sEnergy’s shareowners. Information relating to various investments held by Alliant Energy at Dec. 31 that are marked-to-market as a result of SFAS 115 werewas as follows (in millions):
2002 2001
---------------------------------- -----------------------------------
Unrealized Unrealized
Carrying/Fair Gains, Net of Carrying/Fair Gains/(Losses),
Value Tax Value Net of Tax
----------------- ---------------- ---------------- ------------------
Available-for-sale securities:
Nuclear decommissioning trust funds:
Debt securities $206 $9 $191 $3
Equity securities 139 13 142 42
Total 345 22 333 45
Investment in McLeod 2 -- 14 (9)
Various other investments 19 3 23 1
Trading securities:
Investment in McLeod 1 (a) 6 (a)
(a) Adjustments to the trading securities are reflected in earnings in the
"Miscellaneous, net" line in the Consolidated Statements of Income.
Nuclear Decommissioning Trust Funds - At Dec. 31, 2002, $114 million, $43
million and $49 million of the debt securities mature in 2003-2010, 2011-2020
and 2021-2049, respectively. The fair value of the nuclear decommissioning
trust funds was, as reported by the trustee, adjusted for the tax effect of
unrealized gains and losses. Net unrealized holding gains were recorded as
part of accumulated provision for depreciation of related plant assets. The
funds realized gains from the sales of securities of $10.4 million, $2.0
million and $5.0 million in 2002, 2001 and 2000, respectively (cost of the
investments based on specific identification was $111.1 million, $169.8
million and $213.4 million, respectively, and proceeds from the sales were
$121.5 million, $171.8 million and $218.4 million, respectively).
77
Investment in McLeod - Alliant Energy has investments in the common stock of
McLeod, a telecommunications company.
| 2003 | 2002 | ||||||||
| Unrealized | Unrealized | ||||||||
| Carrying/Fair | Gains, Net of | Carrying/Fair | Gains, Net of | ||||||
| Value | Tax | Value | Tax | ||||||
| Available-for-sale securities: | |||||||||
| Nuclear decommissioning trust funds: | |||||||||
| Debt securities | $215 | $6 | $206 | $9 | |||||
| Equity securities | 167 | 39 | 139 | 13 | |||||
| Total | 382 | 45 | 345 | 22 | |||||
| WPC | 20 | 2 | N/A | N/A | |||||
| Various other investments | 29 | 11 | 21 | 4 | |||||
| Trading securities (McLeod) | 1 | N/A | 1 | N/A | |||||
In accordance with SFAS 115, the carrying values of the investments are adjusted to estimated fair value based upon McLeod's closing pricemarket values at the end of each quarter. Changes in fair value of investments designated as available-for-sale securities are reported in other comprehensive income, and impact current earnings when gains or losses are realized through sale or if a decline in value is determined to be "other-than-temporary."“other-than-temporary.” Changes in fair value of investments designated as trading securities are reflected in earnings in the "Miscellaneous, net"“Miscellaneous, net” line in the Consolidated Statements of Income.
Upon
Nuclear Decommissioning Trust Funds —At Dec. 31, 2003, $110 million, $65 million and $40 million of the adoptiondebt securities mature in 2004-2010, 2011-2020 and 2021-2040, respectively. The fair value of SFAS 133 in 2000the nuclear decommissioning trust funds, as reported by the trustee, was adjusted for the embedded derivativetax effect of unrealized gains and losses. In 2003, net unrealized holding gains were recorded as part of regulatory liabilities or as an offset to regulatory assets related to AROs (recorded in 2002 as part of cost of removal obligations). The funds realized gains (losses) from the sales of securities of ($6.0) million, $10.4 million and $2.0 million in 2003, 2002 and 2001, respectively (cost of the investments based on specific identification was $385.6 million, $111.1 million and $169.8 million, respectively, and proceeds from the sales were $379.6 million, $121.5 million and $171.8 million, respectively). In January 2004, WP&L liquidated all of its qualified decommissioning assets into money market funds as a result of the pending Kewaunee sale.
Investment in McLeod stock in Resources' exchangeable senior notes (refer to Note 10(a) for
additional information), —Alliant Energy designated a portion of its McLeodhas investments as trading securities. As result of this change in designation
to trading securities, in 2000, Alliant Energy reclassified $321.3 million of
unrealized appreciation ($187.3 million after-tax) from accumulated other
comprehensive income to net income. In 2000, Alliant Energy recognized
miscellaneous income of $23.8 million for pre-tax gains realized upon salesthe common stock of McLeod, available-for-sale securities, for which the appreciation was
previously reflected in accumulated other comprehensive income.a telecommunications company. On Jan. 31, 2002, McLeod filed a pre-negotiated plan of reorganization in a Chapter 11 bankruptcy proceeding and the trading of McLeod'sMcLeod’s common stock was suspended by Nasdaq. Consequently, Alliant Energy discontinued accounting for its investment in McLeod under the provisions of SFAS 115 and reduced the cost basis of its investments to the last quoted market price on Jan. 30, 2002. In June 2002, Alliant Energy received from McLeod under its plan of reorganization an initial distribution of approximately 3.3 million shares of new common stock and classified 0.9 million and 2.4 million shares (0.1
million shares were received by discontinued operations) as trading and available-for-sale securities, respectively. With the receipt of the new McLeod common shares and the resumption of trading on Nasdaq, Alliant Energy resumed accounting for its McLeod investments under SFAS 115 and adjusted its cost basis to the quoted market price on the date the shares were received. As a result of these events, Alliant Energy recognized pre-tax impairment charges in 2002 for available-for-sale securities totaling $27.2 million.
Investments in Foreign Entities -— The geographic concentration of Alliant Energy'sEnergy’s significant continuing foreign investments at Dec. 31 was as follows (in millions):
Brazil China New Zealand Mexico Total
--------- ---------- --------------- ---------- ---------
2002
- ----
Unconsolidated $214 $19 $86 $55 $374
Consolidated -- 161 -- -- 161
--------- ---------- --------------- ---------- ---------
Total $214 $180 $86 $55 $535
========= ========== =============== ========== =========
2001
- ----
Unconsolidated $378 $21 $68 $41 $508
Consolidated -- 146 -- -- 146
--------- ---------- --------------- ---------- ---------
Total $378 $167 $68 $41 $654
========= ========== =============== ========== =========
| Brazil | China | New Zealand | Mexico | Total | |
| 2003 | |||||
| Unconsolidated | $283 | $17 | $103 | $79 | $482 |
| Consolidated | -- | 178 | -- | -- | 178 |
| Total | $283 | $195 | $103 | $79 | $660 |
| 2002 | |||||
| Unconsolidated | $214 | $19 | $86 | $55 | $374 |
| Consolidated | -- | 161 | -- | -- | 161 |
| Total | $214 | $180 | $86 | $55 | $535 |
73
Brazil - — Resources holds a non-controlling interest in five Brazilian
- ------ electric utility companies through several direct investments accounted for under the equity method of accounting. At Dec. 31, 2003 and 2002, and 2001, Resources'Resources’ direct investments included a 49.9% direct ownership interest in GIPAR, S.A., an electric utility holding company; a 39.4% direct ownership interest in Companhia Forca e Luz Cataguazes -— Leopoldina, S.A. (Cataguazes), an electric utility; a 45.6% direct ownership interest in Energisa, S.A., an energy development company; a 49.9% direct ownership interest in Pbpart -— SE 1 Ltda., an electric utility holding company; and a 50.0% (49.7% at Dec. 31,
2001) direct ownership interest in Usina Termeletrica de Juiz de Fora S.A., a thermal power plant. The increase in Alliant Energy’s foreign investments in Brazil from Dec. 31, 2002 to Dec. 31, 2003 is largely due to the impacts of changes in the Brazil currency exchange rate.
China - Resources' — Resources’ consolidated investments included a controlling interest
- ----- in Peak Pacific Investment Company, Ltd., a company that develops investment opportunities in generation infrastructure projects in China, and Anhui New Energy Heat & Power Co., Ltd., a combined heat and power facility. Resources'Resources’ unconsolidated investments included a 50.0% ownership interest in Jiaxing JIES Power & Heat Co., Ltd. and a 30.0% ownership interest in Tongxiang TIES Power & Heat Co., Ltd. Both of these combined heat and power facilities are accounted for under the equity method.
78
New Zealand - Resources' — Resources’ investments included a 20.4%23.8% ownership interest in - -----------
TrustPower Ltd., a New Zealand hydro and wind generation utility company,
which is accounted for under the equity method, and several other smaller investments accounted for under the cost method. Based on the exchange rates and trading prices at Dec. 31, 2003 and 2002, the TrustPower Ltd. investment carrying value was $81 million and $65 million, respectively, and the market value was $157 million and $69 million, respectively.
Mexico - Resources' — Resources’ investment in Mexico consisted of a loan receivable
- ------ (including accrued interest income) from a Mexican development company. Under provisions of the loan, Resources has agreed to lend up to $65 million to support the Mexican development company to build the utility infrastructure of a master planned resort community near the Baja peninsula.community. The loan accrues interest at 8.75% and is secured by a first lien on the undeveloped land parcels of the resortmaster planned community. Repayment of the loan principal and interest will be based on a portion of the proceeds from the sales, performed by the Mexican development company, of real estate lots in the resortmaster planned community and therefore is dependent on the successful development of the project and the ability to sellsale of real estate. Additionally, in the third quarter of 2003, Alliant Energy may also
realize royalty incomeServicios de Mexico, S. de R. L. de C. V. and Alliant Energy Operaciones de Mexico S. de R. L. de C. V. began operations in Mexico and provide contract services solely to the resort community’s utility company, which are paid monthly on the real estate sales once the loan is repaid.
a cost-plus basis.
Investment in ATC - —At Dec. 31, 20022003 and 2001,2002, WP&L had ownership interests in ATC of approximately 26.6%25% and 26.5%27%, respectively, and accounts for this investment under the equity method. At Dec. 31, 2003 and 2002, the carrying value of WP&L’s investment in ATC was $121 million and $112 million, respectively. Pursuant to various agreements, WP&L receives a range of transmission services from ATC. WP&L provides operation, maintenance, and various transitional and construction services to ATC. WP&L and ATC also bill each other for use of shared facilities owned by each party. ATC billed WP&L $41.3 million, $38.7 million and $36.4 million in 2003, 2002 and 2001, respectively. WP&L billed ATC $12.4 million, $18.1 million and $18.4 million in 2003, 2002 and 2001, respectively, and recorded equity earnings of $16.2 million, $14.3 million and $14.6 million in 2003, 2002 and 2001, respectively.
Unconsolidated Equity Investments - —Summary financial information from Alliant Energy'sEnergy’s unconsolidated equity investments'investments’ financial statements is as follows (in millions):
2002 * 2001 2000
------------ ------------ ----------
Operating revenues $1,440.6 $2,214.1 $1,194.3
Operating income 159.8 138.2 42.5
Net income (loss) 36.6 52.1 69.7
As of Dec. 31:
Current assets 383.0 454.5
Non-current assets 1,976.4 2,117.0
Current liabilities 435.9 519.3
Non-current liabilities 505.1 557.0
Minority interest 133.4 213.5
* Alliant Energy's investment in Cargill-Alliant was sold in 2002.
| 2003 | 2002 * | 2001 | |
| Operating revenues | $1,804.9 | $1,440.6 | $2,214.1 |
| Operating income | 220.4 | 159.8 | 138.2 |
| Net income | 19.8 | 36.6 | 52.1 |
| As of Dec. 31: | |||
| Current assets | 395.1 | 383.0 | |
| Non-current assets | 2,488.5 | 1,976.4 | |
| Current liabilities | 452.4 | 435.9 | |
| Non-current liabilities | 815.4 | 505.1 | |
| Minority interest | 172.8 | 133.4 | |
| * Alliant Energy's investment in Cargill-Alliant was sold in 2002. | |||
(10) DERIVATIVE FINANCIAL INSTRUMENTS
(a) Accounting for Derivative Instruments and Hedging Activities - —Alliant Energy records derivative instruments at fair value on the balance sheet as assets or liabilities and changes in the derivatives'derivatives’ fair values for non-regulated entities in earnings unless specific hedge accounting criteria are met. For IP&L and WP&L, changes in the derivatives'derivatives’ fair values are generally recorded as regulatory assets or liabilities. The PSCW issued a
letter to WP&L in August 2002 authorizing accounting for its derivatives in
such manner.
At Dec. 31, 20022003 and 2001,2002, Alliant Energy had $6.4$15.4 million and $6.5$6.4 million
respectively, of derivative assets included in "Other“Other current assets"assets” on its Consolidated Balance Sheets and $9.1$17.1 million and $3.6 million, respectively,
of derivative liabilities included in "Other current liabilities" on its
Consolidated Balance Sheets. At Dec. 31, 2001, Alliant Energy also had $0.4$9.1 million of derivative liabilities included in "Other long-term liabilities
and deferred credits"“Other current liabilities” on its Consolidated Balance Sheets.
Sheets, respectively.
74
In the first quarter of 2001, Alliant Energy recorded a net loss of $12.9 million (all related to discontinued operations) for a cumulative effect of a change in accounting principle representing the impact of adopting SFAS 133 as of Jan. 1, 2001 at Alliant Energy'sEnergy’s equity method investees. This transition adjustment represents Alliant Energy'sEnergy’s share of the difference between the carrying amount of Southern Hydro's electricityHydro’s electric derivative contracts under the applicable accounting principles in effect at Dec. 31, 2000, and the carrying values of these electricityelectric derivative contracts as determined in accordance with SFAS 133 as of Jan. 1, 2001. In the third quarter of 2000, Alliant Energy recorded net income of $16.7
millionsold its Southern Hydro business in 2003.
In April 2003, the FASB issued SFAS 149, which amends and clarifies accounting for a cumulative effect of a change in accounting principle
representing the impact of adopting SFAS 133 as of July 1, 2000 at Alliant
79
Energy's consolidated subsidiaries. This transition adjustment was primarily
the result of the difference between the carrying amount of Resources'
exchangeable senior notes issued in February 2000 (due in 2030) under the
applicable accounting principles in effect at June 30, 2000, and the carrying
values of the debt and embedded derivative components of the notes as
determined in accordance with SFAS 133 as of July 1, 2000. Transition
adjustments relating to Alliant Energy's other derivative instruments, had no
material impact on net income.
During 2001including certain derivative instruments embedded in other contracts, and 2000, $0.1 million of net gains (includes $0.1 million of net
losses from discontinued operations) and $6.7 million of net losses (includes
$1.3 million of net losses from discontinued operations), respectively,
includedfor hedging activities under SFAS 133. Although SFAS 149 is expected to result in more energy contracts in Alliant Energy’s domestic utility business qualifying as derivatives, changes in the cumulative effectfair value of a changethese derivatives are generally reported as changes in accounting principle
componentregulatory assets and liabilities rather than being reported currently in earnings, based on the regulatory treatment. SFAS 149 will likely result in more earnings volatility at NG Energy given the majority of accumulated other comprehensive income (loss) were reclassified
into earnings, resulting in remaining balances of $0 and $0.1 million at Dec.
31, 2001 and 2000, respectively.
its derivatives may not qualify for hedge accounting.
Cash Flow Hedging Instruments - — During 2003 and/or 2002, and 2001, Alliant Energy held
- ----------------------------- various derivative instruments designated as cash flow hedging instruments. WP&L utilized natural gas commodity financial swap arrangements to reduce the impact of price fluctuations on natural gas purchased and injected into storage during the summer months and withdrawn and sold at current market prices during the winter months pursuant to the natural gas cost incentive sharing mechanism with customers in Wisconsin. IP&L andNG Energy utilizes natural gas commodity derivative instruments to reduce the impact of natural gas price fluctuations on physical natural gas sales from storage. WP&L utilized physical coal purchase contracts, some of which did not qualify for the normal purchase and sale exception, to manage the price of anticipated coal purchases and sales. Treasury rate locks and interest rate swaps were used by Resources to mitigate risk associated with movements in the 10 year treasury yield used to price $300 million of Resources’ senior notes issued in November 2001 and a portion of long-term debt used to finance the 309-MW, non-regulated, tolled, natural gas-fired power plant in Neenah, Wisconsin purchased by Resources in February 2003.
In 2003 and 2002, $0 and 2001, a net loss of $0.1 million, (includes a net gain of $0.1
million from discontinued operations) and a net gain of $2.0 million
(includes a net gain of $2.1 million from discontinued operations), respectively, were recognized relating to the amount of hedge ineffectiveness in accordance with SFAS 133. In 20022003 and 2001,2002, Alliant Energy did not exclude any components of the derivative instruments'instruments’ gain or loss from the assessment of hedge effectiveness and in 20012003, Alliant Energy reclassified a lossnet gains of $0.9$2.9 million (all continuing operations) into earnings as a result of the discontinuance of hedges. At Dec. 31, 2002,2003, the maximum length of time over which Alliant Energy hedged its exposure to the variability in future cash flows for forecasted transactions was sixeight months (three months for continuing
operations) and Alliant Energy estimated that losses of $3.3 million
(includes losses of $3.5 million for discontinued operations)an insignificant amount will be reclassified from accumulated other comprehensive income (loss)loss into earnings in 20032004 as the hedged transactions affect earnings.
Other Derivatives Not Designated in Hedge Relationships - — Alliant Energy's
- -------------------------------------------------------Energy’s derivatives that were not designated in hedge relationships during 20022003 and/or 20012002 included the embedded derivative component of Resources'Resources’ exchangeable senior notes, electricity price collars,notes; electric, coal, gas and physical coaloil contracts; and gas contracts not designated in hedge relationships.
a foreign currency option.
At maturity, the holders of Resources'Resources’ exchangeable senior notes are paid the higher of the principal amount of the notes or an amount based on the value of McLeod common stock. SFAS 133 requires that Alliant Energy split the initial value of the notes into debt and derivative components. The payment feature tied to McLeod stock is considered an embedded derivative under SFAS 133 that must be accounted for as a separate derivative instrument. This component is classified as a derivative liability on the Consolidated Balance Sheets. Subsequent changes in the fair value of the option are reflected as increases or decreases in Alliant Energy'sEnergy’s reported net income. The carrying amount of the host debt security, classified as long-term debt, is adjusted for amortization of the debt discount in accordance with the interest method as prescribed by APB 21, "Interest“Interest on Receivables and Payables."
”
Changes in the fair value of the McLeod shares designated as trading are reflected as increases or decreases in Alliant Energy'sEnergy’s net income. These trading gains or losses are expected to correspond with, and partially offset, changes in the intrinsic value of the embedded derivative component of Resources'Resources’ exchangeable senior notes. Changes in the time value portion of the derivative component will result in non-cash increases or decreases to Alliant Energy'sEnergy’s net income. IncludedRefer to Note 1(p) for the valuation charges (income) recorded in "Miscellaneous, net" in Alliant
Energy's Consolidated Statements of Income for2003, 2002 2001 and 2000 was
expense of $5.0 million, $215.1 million and $102.5 million, respectively,2001 related to the change in value ofexchangeable senior notes and the McLeod trading securities, partially
offset by income of $0.4 million, $181.6 million and $101.8 million,
respectively, related to the change in value of the derivative component of
the exchangeable senior notes.
80
Electricity price collarssecurities.
Electric contracts were used to manage utility energy costs during supply/demand imbalances. Physical coalCoal, gas and gasoil contracts that do not qualify for the normal purchase and sale exception were used to manage the price of anticipated coal, gas and gasoil purchases and sales. The foreign currency option was used to mitigate fluctuations in Canadian currency rates. Refer to Note 10(d) for additional information on NG Energy’s derivatives.
75
(b) Weather Derivatives - —Alliant Energy uses weather derivatives to reduce the impact of weather volatility on its domestic utility natural gas sales volumes. In 20022003 and 2001,2002, Corporate Services, as agent for IP&L and WP&L, entered into non-exchange traded options based on heating degree days in which Corporate Services receives payment from the counterparty if actual heating degree days are less than the strike price in the contract. Corporate Services paid premiums to enter into these contracts, which are amortized to expense over the contract period. Alliant Energy has used the intrinsic value method to account for these weather derivatives.
(c) Nuclear Decommissioning Trust Fund Investments - —Historically, WP&L has entered into combinations of options to mitigate the effect of significant market fluctuations on its common stock investments in its nuclear decommissioning trust funds. The derivative transactions are designed to protect the portfolio'sportfolio’s value while allowing the funds to earn a total return modestly in excess of long-term expectations over the hedge period. FairIn 2003, fair value changes of these instruments dodid not impact net income as they arewere recorded as equally offsetting changes in the investment in nuclear decommissioning trust funds and accumulated depreciation.
regulatory liabilities or, for AROs, as an offset to regulatory assets (in 2002 as an offset to cost of removal obligations).
(d) Energy-trading Contracts -— Resources is the majority owner of a natural gas marketing operation,business, NG Energy. NG Energy Trading, LLC (NG). NG enters into financial and physical contracts for the sale, purchase, storage, transportation and loan of natural gas. NG Energy accounts for all its positions,
including gas in storage at estimated fair value, with changesthe weighted average cost of gas. NG Energy is impacted by EITF Issue 02-3, which requires that all sales of energy and the related cost of energy purchased under contracts that meet the definition of energy trading contracts and that are derivatives under SFAS 133, must be reflected on a net basis in fair value
reported in earnings.the income statement for all periods presented. Alliant Energy adopted EITF Issue 02-3 effectiveon Jan. 1, 2003 for all of NG Energy’s trading contracts that were in place and storage gas acquired prior to Oct. 25, 2002, and will reclassifyreclassified prior period trading contracts on a net basis in the income statement. The impact of transitioning from reporting inventory and existing contracts that were not derivatives under SFAS 133 at fair value to historical cost resulted in a cumulative effect charge of $2.1 million (net of a deferred tax benefit of $1.4 million) in the first quarter of 2003. Any new contracts entered into after Oct. 25, 2002 have been reported on a historical cost basis rather than at fair market value unless the contract meets the definition of a derivative. Commencing Jan. 1, 2003, NG Energy has very few contracts that are accounted for as derivatives under SFAS 133 and that are also classified as trading contracts, therefore almost all of its sales of energy and cost of sales in 2003 are reported on a gross basis. Because substantially all of its contracts prior to 2003 were classified as trading contracts under EITF Issue 98-10, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities," primarily all of its sales of energy and cost of sales for 2002 and 2001 are reported on a net basis. NG Energy recorded gas revenues and gas costs on Alliant Energy’s Consolidated Statements of Income commencing in January 2003.
as follows (in millions):
| 2003 | 2002 | 2001 | |
| Non-regulated operating revenues | $209 | $6 | $1 |
| Non-regulated operation and maintenance expenses | 204 | -- | -- |
(11)COMMITMENTS AND CONTINGENCIES
(a) Construction and Acquisition Expenditures - —Certain commitments have been made in connection with 20032004 capital expenditures. During 2003,2004, total construction and acquisition expenditures relating to continuing operations
are estimated to be approximately $820 million.
$700 million (unaudited).
(b) Purchased-Power, Coal and Natural Gas Contracts - Purchase Obligations —Alliant Energy, through its subsidiaries Corporate Services, IP&L and WP&L, has entered into purchased-power, coal and natural gas supply, transportation and storage contracts. Certain purchased-power commitments are considered operating leases and are therefore not included here, but are included in Note 3. The natural gas supply commitments are all index-based. Alliant Energy expects to supplement its coal and natural gas supplies with spot market purchases as needed. The table includes commitments for "take-or-pay"“take-or-pay” contracts which result in dollar commitments with no associated tons or Dths. At Dec. 31, 2002,2003, Alliant Energy'sEnergy’s minimum commitments related to its domestic utility business were as follows (dollars and Dths in millions; MWhs and tons in thousands):
Purchased-power Coal Natural gas
----------------------- ------------------------- -------------------------
Dollars MWhs Dollars Tons Dollars Dths
---------- --------- ---------- ---------- ----------- ----------
2003 $114.5 2,752 $81.1 9,889 $90.7 6
2004 15.5 361 57.6 9,301 36.5 --
2005 2.0 -- 40.2 6,130 26.0 --
2006 2.0 -- 12.7 898 15.0 --
2007 0.1 -- 3.6 -- 14.7 --
Thereafter 0.4 -- -- -- 26.4 --
| Purchased-power | Coal | Natural gas | ||||
| Dollars | MWhs | Dollars | Tons | Dollars | Dths | |
| 2004 | $38.4 | 1,032 | $109.9 | 11,905 | $84.7 | 5 |
| 2005 | 2.3 | -- | 85.0 | 8,596 | 52.8 | -- |
| 2006 | 2.3 | -- | 59.4 | 6,110 | 51.4 | -- |
| 2007 | 0.1 | -- | 33.2 | 2,685 | 39.0 | -- |
| 2008 | 0.1 | -- | 19.0 | 1,078 | 16.1 | -- |
| Thereafter | 0.2 | -- | 68.6 | 153 | 40.0 | -- |
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In addition, Alliant Energy, through its non-regulated business, has entered into coal and natural gas supply, transportation and storage contracts. At Dec. 31, 2003, Alliant Energy’s minimum fuel commitments related to its non-regulated business were $8.9 million, $6.6 million, $4.9 million, $3.8 million, $3.8 million and $55.1 million for 2004, 2005, 2006, 2007, 2008, and 2009 and thereafter, respectively.
Also, at Dec. 31, 2003, Alliant Energy’s other purchase obligations, which represent individual commitments incurred during the normal course of business which exceeded $1 million at Dec. 31, 2003, were $26.4 million for 2004. This excludes lease obligations which are included in Note 3.
(c) Legal Proceedings - —Alliant Energy is involved in legal and administrative proceedings before various courts and agencies with respect to matters arising in the ordinary course of business. Although unable to predict the outcome of these matters, Alliant Energy believes that appropriate reserves have been established and final disposition of these actions will not have a material adverse effect on its financial condition or results of operations.
(d) Guarantees — In accordance with the provisions of FIN 45, "Guarantor's Accounting and Commitments - AtDisclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others," as of Dec. 31, 20022003 and 2001,2002, Alliant Energy had guarantees outstanding to support unconsolidated affiliate and third-party financing arrangements of approximately $4$5 million and $14$4 million, respectively. Such guarantees are not included on Alliant Energy'sEnergy’s Consolidated Balance Sheets. At Dec. 31, 2002,2003, the maximum remaining term of the guarantees and the underlying debt was five10 years. Refer to Note 3 for discussion of Alliant Energy'sEnergy’s residual value guarantees of its synthetic leases.
81
In the third quarter of 2002, Alliant Energy sold its 50% ownership interest
in its Cargill-Alliant electricity-trading joint venture to Cargill.
Under the purchase and sale agreement ("Agreement"),(Meridian Agreement) with Meridian Energy Limited (Meridian) relating to the sale of Alliant Energy’s Australian business, Alliant Energy agreed to indemnify Cargill from expensesMeridian for losses resulting from the breach of the representations and warranties made by Alliant Energy as of the closing date, and for the breach of its obligations under the Meridian Agreement. WhileBased on exchange rates as of Dec. 31, 2003, the indemnification does not include a maximum limit,is limited to $223 million until July 2004, and will then be reduced to $64 million until October 2007. Alliant Energy believes the likelihood of having to make any material cash payments under this indemnification is remote. At Dec. 31, 2002, there were no claims related to
Alliant Energy provided certain indemnifications associated with the indemnification.
In November 2002,sale of its affordable housing business for losses resulting from breach of the FASB issued FIN 45 which requires disclosuresrepresentations and warranties made by a
guarantor aboutAlliant Energy as of the closing date, for the breach of its obligations under certain guaranteesthe sale agreement and for its obligations for periods prior to the date of sale. The indemnifications are limited to $11 million in aggregate and expire in July 2005. Alliant Energy also retains any tax obligations that it has issued.
FIN 45 also requires recognizing,may arise from its ownership prior to the date of sale. Alliant Energy believes the likelihood of having to make any material cash payments under these indemnifications is remote.
Alliant Energy continues to guarantee the abandonment obligations of WPC under the Point Arguello partnership agreements. As of Dec. 31, 2003, the guarantee does not include a maximum limit, but is currently estimated at approximately $4 million, which is the inception of a guarantee, a
liability for the fairpresent value of the obligation undertaken in issuing the
guarantee. The recognition and measurement provisions of FIN 45 are
effective on a prospective basis for guarantees issued or modified after Dec.
31, 2002.abandonment liability. Alliant Energy does not anticipate FIN 45believes that no payments will have a material
impact on its financial condition or results of operations.
be made under this guarantee.
(e) Environmental Liabilities - —Alliant Energy had recorded the following environmental liabilities, and regulatory assets associated with certain of these liabilities, at Dec. 31 (in millions):
Environmental liabilities 2002 2001 Regulatory assets 2002 2001
- ------------------------- ----------- ----------- ----------------- ---------- -----------
MGP sites $49.3 $43.9 MGP sites $54.1 $50.2
NEPA 6.6 8.2 NEPA 7.9 9.7
Other 0.2 0.4 Other 2.9 3.2
----------- ----------- ----------- -----------
$56.1 $52.5 $64.9 $63.1
=========== =========== =========== ===========
| Environmental liabilities | 2003 | 2002 | Regulatory assets | 2003 | 2002 | |
| MGP sites | $45.5 | $49.3 | MGP sites | $51.1 | $54.1 | |
| NEPA | 5.0 | 6.6 | NEPA | 6.2 | 7.9 | |
| Other | 0.1 | 0.2 | Other | 1.3 | 2.9 | |
| $50.6 | $56.1 | $58.6 | $64.9 | |||
MGP Sites - —IP&L and WP&L have current or previous ownership interests in 43
- --------- and 14 sites, respectively, previously associated with the production of gas for which they may be liable for investigation, remediation and monitoring costs relating to the sites. IP&L and WP&L have received letters from state environmental agencies requiring no further action at eightnine and fivesix sites, respectively. IP&L and WP&L are working pursuant to the requirements of various federal and state agencies to investigate, mitigate, prevent and remediate, where necessary, the environmental impacts to property, including natural resources, at and around the sites in order to protect public health and the environment.
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IP&L and WP&L record environmental liabilities based upon periodic studies, most recently updated in the third quarter of 2002,2003, related to the MGP sites. Such amounts are based on the best current estimate of the remaining amount to be incurred for investigation, remediation and monitoring costs for those sites where the investigation process has been or is substantially completed, and the minimum of the estimated cost range for those sites where the investigation is in its earlier stages. It is possible that future cost estimates will be greater than current estimates as the investigation process proceeds and as additional facts become known. The amounts recognized as liabilities are reduced for expenditures made and are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their fair value. Management currently estimates the range of remaining costs to be incurred for the investigation, remediation and monitoring of all utility
subsidiaryIP&L’s and WP&L’s sites to be approximately $37$34 million to $64$61 million.
Under the current rate making treatment approved by the PSCW, the MGP expenditures of WP&L, net of any insurance proceeds, are deferred and collected from gas customers over a five-yearfour-year period after neweffective with rates are
implemented.set to recover such amounts. The MPUC also allows the deferral of MGP-related costs applicable to the Minnesota sites and IP&L has been successful in obtaining approval to recover such costs in rates in Minnesota. The IUB has permitted utilities to recover prudently incurred costs. Regulatory assets have been recorded by IP&L and WP&L, which reflect the probable future rate recovery, where applicable. Considering the current rate treatment, and assuming no material change therein, IP&L and WP&L believe that the clean-up costs incurred for these MGP sites will not have a material adverse effect on their respective financial conditions or results of operations. Settlement has been reached with all of IP&L's&L’s and WP&L's&L’s insurance carriers regarding reimbursement for their MGP-related costs. Insurance recoveries
available at Dec. 31, 2002 for IP&L and WP&L were $4.5 million and $2.1
million, respectively. Pursuant to their applicable rate making treatment,
IP&L has recorded its recoveries in "Other long-term liabilities and deferred
credits" and WP&L has recorded its recoveries as an offset against its
regulatory assets. In February 2001, the IUB issued an order directing IP&L
to refund its insurance recoveries related to former IESU MGP sites. Under
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the refund plan, IP&L returned 90% of the recoveries to customers of the
former IESU in 2001 and retained 10%.
NEPA - —NEPA requires owners of nuclear power plants to pay a special - ----
assessment into a "Uranium“Uranium Enrichment Decontamination and Decommissioning Fund."” The assessment is based upon uranium enrichment services provided in conjunction with prior nuclear fuel purchases. IP&L and WP&L recover theelected to pay their assessment in 15 annual installments. The costs associated with this assessment for IP&L and WP&L are being recovered through EACs and fuel costs, respectively, over the period the costs are assessed.respectively. The final installment payment is scheduled to be made in fall 2006. Alliant Energy continues to pursue relief from this assessment through litigation.
(f) Decommissioning of DAEC and Kewaunee The current- The IUB,—Decommissioning expense is included in its interim electric
rate order effective July“Depreciation and amortization” in the Consolidated Statements of Income and the cumulative amount for 2003 is included in “Regulatory liabilities” or, for AROs, is netted in “Regulatory assets” on the Consolidated Balance Sheets. For 2002, allows IP&L to recover $11 million annually
for its sharethe cumulative amount is included in “Cost of the cost to decommission DAEC. FERC, in its most recent
interim wholesale rate order effective April 2002, allows WP&L to recover $3
million annually for its share of the cost to decommission Kewaunee. Both
interim orders are subject to refund, pending determination of final rates.removal obligations.” The PSCW, in an order effective Jan. 1, 2002, eliminated WP&L's&L’s recovery from retail customers for the cost to decommission Kewaunee, due to the trust fund being adequately funded. Decommissioning expense is included in
"Depreciation and amortization" in the Consolidated Statements of Income and
the cumulative amount is included in "Accumulated depreciation" on the
Consolidated Balance Sheets to the extent recovered through rates.
Additional information relating to the decommissioning of DAEC and Kewaunee was as follows (dollars in millions):
DAEC Kewaunee
------------------------- ----------------------
Assumptions relating to DAEC Kewaunee Assumptions relating to current rate recovery amounts (1): Alliant Energy's share of estimated decommissioning cost $374.3 $263.2 Year dollars in 2002 2002 Method to develop estimate Site-specific study Site-specific study Annual inflation rate 4.30% 6.50% Decommissioning method Prompt dismantling Prompt dismantling and removal and removal Year decommissioning to commence 2014 2013 After-tax return on external investments: Qualified 7.10% 6.12% Non-qualified 4.70% 5.14% Current annual rate recovery: Iowa $10.6 N/A Minnesota (interim rates effective July 2003, subject to refund) $1.0 N/A FERC -- $2.9 External trust fund balance at Dec. 31, 2003 $147.9 $233.7 Internal reserve at Dec. 31, 2003 $21.7 $-- After-tax earnings (losses) on external trust funds in 2003 $4.1 ($4.7) (1) Information for DAEC and Kewaunee is related to their most recent IUB order and FERC settlement, respectively. rate recovery amounts:
Alliant Energy's share of estimated decommissioning cost $374.3 $263.2
Year dollars in 2002 2002
Method to develop estimate Site-specific study Site-specific study
Annual inflation rate 4.20% 6.50%
Decommissioning method Prompt dismantling Prompt dismantling
and removal and removal
Year decommissioning to commence 2014 2013
After-tax return on external investments:
Qualified 7.10% 6.12%
Non-qualified 4.70% 5.14%
External trust fund balance at Dec. 31, 2002 $121.2 $223.7
Internal reserve at Dec. 31, 2002 $21.7 $--
After-tax earnings on external trust funds in 2002 $3.8 $19.7
The interim rate recovery amounts for DAEC only include an inflation estimate through 2005.for three years. Both IP&L and WP&L are funding all rate recoveries for decommissioning into external trust funds and funding on a tax-qualified basis to the extent possible. In accordance with their respective regulatory
requirements, IP&L and WP&L record2003, the earnings on the external trust funds
as interest income with a corresponding entry to interest expense at IP&L and
to depreciation expense at WP&L. The earnings accumulate in the external trust fund balances and as an offset to regulatory assets for ARO related earnings or regulatory liabilities for non-ARO related earnings. Refer to Note 17 for information regarding the pending sale of WP&L's interest in accumulated depreciation on utility plant.Kewaunee and Note 18 for information related to the impact of SFAS 143, which provides accounting143.
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(g) Credit Risk -Alliant Energy's subsidiaries have limited credit exposure from electric and disclosure requirements for
retirementnatural gas sales and non-performance of contractual obligations associated with long-lived assets, was adopted by its counterparties. Alliant Energy on Jan. 1, 2003. SFAS 143 requiresmaintains credit risk oversight and sets limits and policies with regards to its counterparties, which management believes minimizes its overall credit risk exposure. However, there is no assurance that the present value of
retirement costs for whichsuch policies will protect Alliant Energy has a legal obligation be recorded
as liabilities with an equivalent amount added to the asset cost. The
liability is accreted to its present value each period and the capitalized
cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity settles the obligation for its
recorded amount or incurs a gain or loss. The adoption of SFAS 143 will have
no impact on IP&L's and WP&L's earnings, as the effects will be offsetagainst all losses from non-performance by the
establishment of regulatory assets or liabilities pursuant to SFAS 71.
Alliant Energy has completed a detailed assessment of the specific
applicability and implications of SFAS 143. The scope of SFAS 143 as it
relates to Alliant Energy primarily includes decommissioning costs for DAEC
and Kewaunee. It also applies to a smaller extent to several other regulated
and non-regulated assets including, but not limited to, active ash landfills,
water intake facilities, underground storage tanks, groundwater wells,
transmission and distribution equipment, easements, leases and the
dismantlement of certain hydro facilities. Other than DAEC and Kewaunee,
Alliant Energy's asset retirement obligations as of Jan. 1, 2003 are not
significant.
83
Prior to January 2003, IP&L and WP&L recorded nuclear decommissioning charges
in accumulated depreciation on their Consolidated Balance Sheets. Upon
adoption of SFAS 143, IP&L and WP&L will reverse approximately $125 million
and $175 million, respectively, previously recorded in accumulated
depreciation and will record liabilities of approximately $250 million and
$175 million, respectively. The difference between amounts previously
recorded and the net SFAS 143 liability will be deferred as a regulatory
asset and is expected to approximate $125 million and $0 for IP&L and WP&L,
respectively.
IP&L and WP&L have previously recognized removal costs as a component of
depreciation expense and accumulated depreciation for other non-nuclear
assets in accordance with regulatory rate recovery. As of Dec. 31, 2002,
IP&L and WP&L estimate that they have approximately $250 million and $150
million, respectively, of such regulatory liabilities recorded in
"Accumulated depreciation" on their Consolidated Balance Sheets.
counterparties.
(12) JOINTLY-OWNED ELECTRIC UTILITY PLANT
Under joint ownership agreements with other Iowa and Wisconsin utilities, the
utility subsidiariesIP&L and WP&L have undivided ownership interests in jointly-owned electric generating stations. IP&L also has joint ownership agreements related to transmission facilities. Each of the respective owners is responsible for the financing of its portion of the construction costs. KWh generation and operating expenses are divided on the same basis as ownership with each owner reflecting its respective costs in its Consolidated Statements of Income. Information relative to the utility subsidiaries'IP&L's and WP&L's ownership interest in these facilities at Dec. 31, 20022003 was as follows (dollars in millions):
Accumulated Construction
Fuel Ownership Plant in Provision for Work-In-
Type Interest % Service Depreciation Progress
---------- ----------------- --------------- --------------- ----------------
IP&L
- ----
DAEC Nuclear 70.0 $543.3 $318.5 $25.2
Ottumwa Coal 48.0 190.9 118.2 0.7
Neal Unit 4 Coal 21.5 85.3 59.4 0.2
Neal Unit 3 Coal 28.0 59.9 36.9 1.9
Louisa Unit 1 Coal 4.0 25.0 14.9 0.1
--------------- --------------- ----------------
904.4 547.9 28.1
--------------- --------------- ----------------
WP&L
- ----
Edgewater Unit 5 Coal 75.0 234.8 112.9 0.4
Columbia Energy Center Coal 46.2 187.5 110.3 1.6
Kewaunee Nuclear 41.0 172.6 120.9 6.8
Edgewater Unit 4 Coal 68.2 60.0 36.1 1.6
--------------- --------------- ----------------
654.9 380.2 10.4
--------------- --------------- ----------------
$1,559.3 $928.1 $38.5
=============== =============== ================
| Accumulated | Construction | ||||
| Fuel | Ownership | Plant in | Provision for | Work In | |
| Type | Interest % | Service | Depreciation | Progress | |
| IP&L | |||||
| DAEC | Nuclear | 70.0 | $576.4 | $336.4 | $7.1 |
| Ottumwa | Coal | 48.0 | 193.8 | 122.5 | 1.1 |
| Neal Unit 4 | Coal | 25.7 | 90.1 | 61.5 | 1.9 |
| Neal Unit 3 | Coal | 28.0 | 62.1 | 37.4 | 0.7 |
| Louisa Unit 1 | Coal | 4.0 | 25.3 | 15.6 | 0.1 |
| 947.7 | 573.4 | 10.9 | |||
| WP&L | |||||
| Edgewater Unit 5 | Coal | 75.0 | 237.0 | 120.7 | 0.8 |
| Columbia Energy Center | Coal | 46.2 | 192.5 | 118.5 | 2.5 |
| Kewaunee | Nuclear | 41.0 | 175.8 | 127.6 | 7.7 |
| Edgewater Unit 4 | Coal | 68.2 | 66.8 | 39.5 | 1.7 |
| 672.1 | 406.3 | 12.7 | |||
| $1,619.8 | $979.7 | $23.6 | |||
Refer to Note 17 for information regarding the pending sale of WP&L’s interest in Kewaunee.
(13) SEGMENTS OF BUSINESSAlliant Energy'sEnergy’s principal business segmentsbusinesses are:
o Regulated domestic utilities - consists of IP&L and WP&L, serving
customers in Iowa, Wisconsin, Minnesota and Illinois, and includes three
segments: a) electric operations; b) gas operations; and c) other, which
includes the steam and water businesses
| o | Domestic utility business —includes IP&L and WP&L, serving customers in Iowa, Wisconsin, Minnesota and Illinois, and Alliant Energy’s investments in NMC and TRANSLink (investment has been fully reserved as of Dec. 31, 2003). The domestic utility business is broken down into three segments: a) electric operations, including the impacts of NMC and TRANSLink; b) gas operations; and c) other, which includes the steam business, water business, various other energy-related products and services including construction management services for wind farms and the unallocated portions of the utility business. Various line items in the following tables are not allocated to the electric and gas segments for management reporting purposes and therefore are included in “Total Domestic Utility Business.” |
| o | Non-regulated businesses — represents the operations of Resources, its subsidiaries and Alliant Energy’s investment in Cargill-Alliant (sold in 2002), and is broken down into three segments: a) International (Int’l); b) Integrated Services (ISCO); and c) other, which includes the operations of the Non-regulated Generation and Other Investments business platforms described in Note 1(a); the operations of Resources (the non-regulated holding company); and any non-regulated reconciling/eliminating entries. |
| o | Other — includes the operations of Alliant Energy (the parent company) and Corporate Services, as well as any Alliant Energy parent company reconciling/eliminating entries. |
Alliant Energy’s administrative support services are directly charged to the applicable segment where practicable. In all other cases, administrative support services are allocated to the electricapplicable segment based on Alliant Energy’s corporate services agreements, as prepared and gas segments for management reporting
purposes and therefore are included in "Total Regulated Domestic Utilities."
o Non-regulated businesses - represents the operations of Resources, its
subsidiaries and Alliant Energy's investment in Cargill-Alliant (sold in
2002), and is broken down into two segments: a) International (Int'l) and
b) other, which includes the operations of the Integrated Services,
Investments, Non-regulated Generation, Energy Technologies and Mass
Marketing business units described in Note 1(a); the operations of
Resources (the non-regulated holding company); and any non-regulated
reconciling/eliminating entries.
o Other - includes the operations of Alliant Energy (the parent company)
and Corporate Services, as well as any Alliant Energy parent company
reconciling/eliminating entries.
84
Energy'sEnergy’s operations and there was no single customer whose revenues were 10% or more of Alliant Energy'sEnergy’s consolidated revenues. Refer to Note 9 for a breakdown of Alliant Energy'sEnergy’s international investments by country. Certain financial information relating to Alliant Energy'sEnergy’s significant business segments, and products and services and geographic information was as follows (in millions):
Regulated Domestic Utilities Non-regulated Businesses
-------------------------------------- ------------------------------- Alliant Energy
Electric Gas Other Total Int'l Other Total Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
2002
- ----
Operating revenues $1,752.5 $394.0 $37.2 $2,183.7 $103.2 $328.6 $431.8 ($6.7) $2,608.8
Depreciation and amortization 250.6 27.9 3.9 282.4 11.2 17.0 28.2 -- 310.6
Operating income (loss) 299.2 26.2 8.2 333.6 9.7 (21.1) (11.4) (0.5) 321.7
Interest expense, net of AFUDC 100.0 44.9 31.6 76.5 2.3 178.8
Interest income from loans to
discontinued operations, net -- (6.0) (10.0) (16.0) -- (16.0)
Equity (income) loss from
unconsolidated investments (17.6) 17.1 13.3 30.4 -- 12.8
Preferred dividends 6.2 -- -- -- -- 6.2
Impairment of available-for-sale
securities of McLeodUSA Inc. -- -- 27.2 27.2 -- 27.2
Miscellaneous, net (27.9) 3.4 25.4 28.8 (0.6) 0.3
Income tax expense (benefit) 107.1 (12.1) (54.6) (66.7) (4.3) 36.1
Income from continuing operations 165.8 (37.6) (54.0) (91.6) 2.1 76.3
Income from discontinued
operations, net of tax -- 10.5 20.1 30.6 -- 30.6
Net income (loss) 165.8 (27.1) (33.9) (61.0) 2.1 106.9
Total assets 3,676.5 574.9 474.8 4,726.2 1,009.6 1,250.8 2,260.4 14.8 7,001.4
Investments in equity method
subsidiaries 125.1 -- -- 125.1 297.1 29.1 326.2 0.3 451.6
Construction and acquisition
expenditures 371.3 28.6 4.8 404.7 65.5 152.8 218.3 33.8 656.8
- ------------------------------------------------------------------------------------------------------------------------------------
Regulated Domestic Utilities Non-regulated Businesses
--------------------------------------- ------------------------------ Alliant Energy
Electric Gas Other Total Int'l Other Total Other Consolidated
- -----------------------------------------------------------------------------------------------------------------------------------
2001
- ----
Operating revenues $1,756.6 $487.9 $37.1 $2,281.6 $85.4 $263.3 $348.7 ($5.6) $2,624.7
Depreciation and amortization 245.6 28.8 3.2 277.6 8.3 16.7 25.0 -- 302.6
Operating income (loss) 306.1 11.2 7.5 324.8 7.4 (13.3) (5.9) (1.9) 317.0
Interest expense, net of AFUDC 100.5 54.6 9.6 64.2 9.8 174.5
Interest income from loans to
discontinued operations, net -- (0.1) (9.8) (9.9) -- (9.9)
Equity (income) loss from
unconsolidated investments (15.6) 4.1 (7.2) (3.1) (0.1) (18.8)
Preferred dividends 6.7 -- -- -- -- 6.7
Miscellaneous, net (25.9) (2.8) 20.7 17.9 (4.6) (12.6)
Income tax expense (benefit) 94.2 (22.7) (12.3) (35.0) (8.4) 50.8
Income from continuing operations 164.9 (25.7) (14.3) (40.0) 1.4 126.3
Income from discontinued
operations, net of tax -- 11.3 47.7 59.0 -- 59.0
Cumulative effect of a change in
accounting principle, net of tax -- (12.9) -- (12.9) -- (12.9)
Net income (loss) 164.9 (27.3) 33.4 6.1 1.4 172.4
Total assets 3,336.6 506.4 465.0 4,308.0 858.6 995.9 1,854.5 75.4 6,237.9
Investments in equity method
subsidiaries 119.2 -- -- 119.2 448.3 32.6 480.9 -- 600.1
Construction and acquisition
expenditures 298.7 36.9 5.2 340.8 173.0 159.3 332.3 40.0 713.1
- -----------------------------------------------------------------------------------------------------------------------------------
85
Regulated Domestic Utilities Non-regulated Businesses
---------------------------------------- ------------------------------- Alliant Energy
Electric Gas Other Total Int'l Other Total Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
2000
- ----
Operating revenues $1,648.0 $415.0 $33.4 $2,096.4 $ -- $186.0 $186.0 ($2.7) $2,279.7
Depreciation and amortization 252.6 27.7 3.1 283.4 3.7 9.6 13.3 -- 296.7
Operating income (loss) 330.6 26.6 4.5 361.7 (7.8) (18.1) (25.9) 0.2 336.0
Interest expense, net of AFUDC 103.1 38.8 9.0 47.8 8.5 159.4
Interest income from loans to
discontinued operations, net -- -- (7.2) (7.2) -- (7.2)
Equity income from
unconsolidated investments (0.5) (5.8) (13.2) (19.0) -- (19.5)
Preferred dividends 6.7 -- -- -- -- 6.7
Gain on reclassification of
investments -- -- (321.3) (321.3) -- (321.3)
Miscellaneous, net (23.3) (8.9) (4.3) (13.2) (2.7) (39.2)
Income tax expense 107.9 (14.2) 132.2 118.0 0.3 226.2
Income from continuing operations 167.8 (17.7) 186.7 169.0 (5.9) 330.9
Income from discontinued
operations, net of tax -- (0.5) 51.6 51.1 -- 51.1
Cumulative effect of a change in
accounting principle, net of tax -- -- 16.7 16.7 -- 16.7
Net income (loss) 167.8 (18.2) 255.0 236.8 (5.9) 398.7
Total assets 3,402.2 554.4 427.2 4,383.8 631.0 1,702.3 2,333.3 16.7 6,733.8
Investments in equity method
subsidiaries 6.5 -- -- 6.5 389.0 29.5 418.5 -- 425.0
Construction and acquisition
expenditures 265.9 35.8 3.0 304.7 395.6 134.1 529.7 11.1 845.5
- ------------------------------------------------------------------------------------------------------------------------------------
Products and Services
- ---------------------
Non-regulated and Other Revenues
- -----------------------------------------------------------------------------------------------------------
Integrated
Year Services International Mass Marketing Investments Other Total
- -----------------------------------------------------------------------------------------------------------
(in millions)
2002 $258.8 $103.2 $46.9 $26.1 $27.3 $462.3
2001 241.9 85.4 6.8 26.6 19.5 380.2
2000 172.3 -- 0.7 28.5 15.2 216.7
79
| Domestic Utility Business | Non-regulated Businesses | Alliant | |||||||||||||||||||
| Energy | |||||||||||||||||||||
| Electric | Gas | Other | Total | Int'l | ISCO | Other | Total | Other | Consolidated | ||||||||||||
| 2003 | |||||||||||||||||||||
| Operating revenues | $1,917 | .1 | $566 | .9 | $104 | .2 | $2,588 | .2 | $117 | .5 | $382 | .3 | $46 | .1 | $545 | .9 | ($5 | .9) | $3,128 | .2 | |
| Depreciation and amortization | 238 | .8 | 25 | .7 | 3 | .8 | 268 | .3 | 15 | .1 | 8 | .7 | 12 | .9 | 36 | .7 | 0 | .1 | 305 | .1 | |
| Operating income (loss) | 363 | .6 | 42 | .4 | 2 | .5 | 408 | .5 | 11 | .6 | 4 | .1 | (11 | .2) | 4 | .5 | (1 | .3) | 411 | .7 | |
| Interest expense, net of AFUDC | 82 | .6 | 52 | .1 | 10 | .4 | 35 | .8 | 98 | .3 | 5 | .5 | 186 | .4 | |||||||
| Loss on early extinguishment | |||||||||||||||||||||
| of debt | -- | -- | -- | 15 | .2 | 15 | .2 | 1 | .7 | 16 | .9 | ||||||||||
| Equity (income) loss from | |||||||||||||||||||||
| unconsolidated investments | (20 | .9) | (18 | .1) | (0 | .3) | 20 | .2 | 1 | .8 | -- | (19 | .1) | ||||||||
| Preferred dividends | 16 | .9 | -- | -- | -- | -- | -- | 16 | .9 | ||||||||||||
| Miscellaneous, net | (3 | .5) | (2 | .3) | (8 | .2) | (7 | .8) | (18 | .3) | 0 | .9 | (20 | .9) | |||||||
| Income tax expense (benefit) | 136 | .2 | (16 | .7) | 0 | .5 | (50 | .6) | (66 | .8) | 2 | .4 | 71 | .8 | |||||||
| Income (loss) from continuing | |||||||||||||||||||||
| operations | 197 | .2 | (3 | .4) | 1 | .7 | (24 | .0) | (25 | .7) | (11 | .8) | 159 | .7 | |||||||
| Income (loss) from discontinued | |||||||||||||||||||||
| operations, net of tax | -- | 44 | .7 | -- | (14 | .9) | 29 | .8 | -- | 29 | .8 | ||||||||||
| Cumulative effect of changes in | |||||||||||||||||||||
| accounting principles, net of tax | -- | -- | (2 | .1) | (3 | .9) | (6 | .0) | -- | (6 | .0) | ||||||||||
| Net income (loss) | 197 | .2 | 41 | .3 | (0 | .4) | (42 | .8) | (1 | .9) | (11 | .8) | 183 | .5 | |||||||
| Total assets | 5,007 | .5 | 671 | .3 | 393 | .0 | 6,071 | .8 | 751 | .6 | 283 | .9 | 557 | .7 | 1,593 | .2 | 110 | .4 | 7,775 | .4 | |
| Investments in equity method | |||||||||||||||||||||
| subsidiaries | 137 | .0 | -- | -- | 137 | .0 | 380 | .1 | 1 | .7 | 23 | .7 | 405 | .5 | -- | 542 | .5 | ||||
| Construction and acquisition | |||||||||||||||||||||
| expenditures | 649 | .5 | 37 | .2 | 3 | .0 | 689 | .7 | 24 | .3 | 4 | .9 | 219 | .3 | 248 | .5 | (99 | .3) | 838 | .9 | |
| Domestic Utility Business | Non-regulated Businesses | Alliant | |||||||||||||||||||
| Energy | |||||||||||||||||||||
| Electric | Gas | Other | Total | Int'l | ISCO | Other | Total | Other | Consolidated | ||||||||||||
| 2002 | |||||||||||||||||||||
| Operating revenues | $1,752 | .5 | $394 | .0 | $85 | .4 | $2,231 | .9 | $99 | .7 | $133 | .8 | $27 | .9 | $261 | .4 | ($6 | .7) | $2,486 | .6 | |
| Depreciation and amortization | 225 | .0 | 26 | .1 | 3 | .8 | 254 | .9 | 11 | .2 | 9 | .1 | 6 | .9 | 27 | .2 | -- | 282 | .1 | ||
| Operating income (loss) | 320 | .1 | 26 | .2 | 9 | .0 | 355 | .3 | 11 | .3 | 2 | .0 | (14 | .9) | (1 | .6) | (0 | .5) | 353 | .2 | |
| Interest expense, net of AFUDC | 96 | .2 | 39 | .0 | 8 | .4 | 29 | .1 | 76 | .5 | 2 | .3 | 175 | .0 | |||||||
| Equity (income) loss from | |||||||||||||||||||||
| unconsolidated investments | (17 | .6) | 17 | .1 | (0 | .1) | 13 | .4 | 30 | .4 | -- | 12 | .8 | ||||||||
| Preferred dividends | 6 | .2 | -- | -- | -- | -- | -- | 6 | .2 | ||||||||||||
| Impairment of available-for-sale | |||||||||||||||||||||
| securities of McLeodUSA Inc. | -- | -- | -- | 27 | .2 | 27 | .2 | -- | 27 | .2 | |||||||||||
| Miscellaneous, net | (2 | .4) | 4 | .9 | 8 | .3 | (8 | .1) | 5 | .1 | (0 | .6) | 2 | .1 | |||||||
| Income tax expense (benefit) | 107 | .1 | (12 | .1) | (6 | .0) | (42 | .3) | (60 | .4) | (4 | .3) | 42 | .4 | |||||||
| Income (loss) from continuing | |||||||||||||||||||||
| operations | 165 | .8 | (37 | .6) | (8 | .6) | (34 | .2) | (80 | .4) | 2 | .1 | 87 | .5 | |||||||
| Income from discontinued | |||||||||||||||||||||
| operations, net of tax | -- | 10 | .5 | -- | 8 | .9 | 19 | .4 | -- | 19 | .4 | ||||||||||
| Net income (loss) | 165 | .8 | (27 | .1) | (8 | .6) | (25 | .3) | (61 | .0) | 2 | .1 | 106 | .9 | |||||||
| Total assets | 4,472 | .2 | 642 | .5 | 383 | .4 | 5,498 | .1 | 955 | .1 | 270 | .5 | 1,037 | .6 | 2,263 | .2 | 52 | .8 | 7,814 | .1 | |
| Investments in equity method | |||||||||||||||||||||
| subsidiaries | 125 | .4 | -- | -- | 125 | .4 | 297 | .1 | 1 | .7 | 27 | .4 | 326 | .2 | -- | 451 | .6 | ||||
| Construction and acquisition | |||||||||||||||||||||
| expenditures | 372 | .4 | 28 | .6 | 4 | .8 | 405 | .8 | 65 | .5 | 14 | .2 | 138 | .6 | 218 | .3 | 32 | .7 | 656 | .8 | |
80
| Domestic Utility Business | Non-regulated Businesses | Alliant | |||||||||||||||||||
| Energy | |||||||||||||||||||||
| Electric | Gas | Other | Total | Int'l | ISCO | Other | Total | Other | Consolidated | ||||||||||||
| 2001 | |||||||||||||||||||||
| Operating revenues | $1,756 | .6 | $487 | .9 | $101 | .8 | $2,346 | .3 | $77 | .1 | $192 | .6 | $23 | .8 | $293 | .5 | ($5 | .6) | $2,634 | .2 | |
| Depreciation and amortization | 238 | .1 | 28 | .2 | 3 | .2 | 269 | .5 | 8 | .3 | 13 | .0 | 3 | .5 | 24 | .8 | -- | 294 | .3 | ||
| Operating income (loss) | 313 | .6 | 11 | .2 | 14 | .1 | 338 | .9 | 9 | .1 | (0 | .5) | (9 | .5) | (0 | .9) | (1 | .9) | 336 | .1 | |
| Interest expense, net of AFUDC | 97 | .0 | 54 | .4 | 11 | .2 | (1 | .5) | 64 | .1 | 9 | .8 | 170 | .9 | |||||||
| Equity (income) loss from | |||||||||||||||||||||
| unconsolidated investments | (15 | .6) | 4 | .1 | (0 | .6) | (6 | .6) | (3 | .1) | (0 | .1) | (18 | .8) | |||||||
| Preferred dividends | 6 | .7 | -- | -- | -- | -- | -- | 6 | .7 | ||||||||||||
| Miscellaneous, net | (8 | .3) | (1 | .0) | (2 | .8) | 14 | .0 | 10 | .2 | (4 | .6) | (2 | .7) | |||||||
| Income tax expense (benefit) | 94 | .2 | (22 | .7) | (3 | .3) | (8 | .0) | (34 | .0) | (8 | .4) | 51 | .8 | |||||||
| Income (loss) from continuing | |||||||||||||||||||||
| operations | 164 | .9 | (25 | .7) | (5 | .0) | (7 | .4) | (38 | .1) | 1 | .4 | 128 | .2 | |||||||
| Income from discontinued | |||||||||||||||||||||
| operations, net of tax | -- | 11 | .3 | -- | 45 | .8 | 57 | .1 | -- | 57 | .1 | ||||||||||
| Cumulative effect of a change in | |||||||||||||||||||||
| accounting principle, net of tax | -- | (12 | .9) | -- | -- | (12 | .9) | -- | (12 | .9) | |||||||||||
| Net income (loss) | 164 | .9 | (27 | .3) | (5 | .0) | 38 | .4 | 6 | .1 | 1 | .4 | 172 | .4 | |||||||
| Total assets | 4,014 | .1 | 557 | .6 | 470 | .1 | 5,041 | .8 | 817 | .8 | 254 | .3 | 782 | .4 | 1,854 | .5 | 75 | .4 | 6,971 | .7 | |
| Investments in equity method | |||||||||||||||||||||
| subsidiaries | 119 | .2 | -- | -- | 119 | .2 | 448 | .3 | 1 | .1 | 31 | .5 | 480 | .9 | -- | 600 | .1 | ||||
| Construction and acquisition | |||||||||||||||||||||
| expenditures | 298 | .7 | 36 | .9 | 5 | .2 | 340 | .8 | 173 | .0 | 31 | .5 | 127 | .7 | 332 | .2 | 40 | .0 | 713 | .0 | |
Products and Services —In 2003, Alliant Energy’s domestic utility electric and gas revenues represented 67% and 19% of consolidated operating revenues, respectively. No other products or services represented more than 10% of Alliant Energy’s consolidated operating revenues in 2003.
| Non-regulated and other - Long Lived Assets | |||
| Year | Domestic | Foreign | Total |
| (in millions) | |||
| 2003 | $386.7 | $199.5 | $586.2 |
| 2002 | 359.8 | 171.6 | 531.4 |
| 2001 | 196.3 | 157.9 | 354.2 |
(14) GOODWILL AND OTHER INTANGIBLE ASSETS
Alliant Energy adopted SFAS 142 on Jan. 1, 2002, which resulted in goodwill no longer being subject to amortization. Had SFAS 142 been adopted Jan. 1, 2000,2001, net income for 2001 and 2000 would have increased $4 million and $1 million, respectively, and basic and diluted EPS would have increased $0.05 and $0.02 per share,
respectively.share. Alliant Energy continues to monitor its equity method investments in accordance with APB 18, "The Equity Method of Accounting for Investments in Common Stock." Certain information regarding net goodwill and other intangible assets included on Alliant Energy'sEnergy’s Consolidated Balance Sheets at Dec. 31 was as follows (in millions):
2002 2001
----------- -----------
Net goodwill
Deferred charges and other (consolidated investments) $66 $66
Investments in unconsolidated foreign entities (equity method investments) 9 7
Net other intangible assets
Deferred charges and other (consolidated investments) 19 20
Investments in unconsolidated foreign entities (equity method investments) 22 35
Investment in ATC and other (equity method investments) 25 --
| 2003 | 2002 | |
| Net goodwill: | ||
| Deferred charges and other (consolidated investments): | ||
| Integrated Services | $46 | $47 |
| International | 10 | 10 |
| Investments in unconsolidated foreign entities (equity method investments) | ||
| International | 17 | 9 |
| Net other intangible assets: | ||
| Deferred charges and other (consolidated investments) | 19 | 19 |
| Investments in unconsolidated foreign entities (equity method investments) | 26 | 22 |
| Investment in ATC and other (equity method investments) | 20 | 25 |
In JanuaryFebruary 2003, Alliant Energy committed toResources acquired 100% of an entity that owns a plan to sell its interest309-MW, non-regulated, tolled, natural gas-fired power plant in SmartEnergy by year-end. In the fourth quarter of 2002, Alliant Energy
recorded a SFAS 142 after-tax non-cash goodwill impairment charge related to
SmartEnergy of $4.5 million primarily due to less favorable market
conditions. The fair value of SmartEnergy's goodwill was estimated using a
combinationNeenah, Wisconsin for $109 million. Substantially all of the expected discounted future cash flowspurchase price was allocated to property, plant and market value
86
indicators. The impairment charge was recordedequipment and resulted in continuing operations,
"Miscellaneous, net," in Alliant Energy's Consolidated Statement of Income for
2002.
no goodwill from this acquisition.
81
(15) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
All "per share"“per share” references refer to earnings perdiluted share. Summation of the individual quarters may not equal annual totals due to rounding.
2002 2001
---------------------------------------- ---------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
---------- --------- --------- --------- ---------- --------- -------- --------
(in millions, except per share data)
Operating revenues $608.6 $570.9 $709.4 $719.9 $805.6 $571.0 $631.1 $617.0
Operating income 63.1 58.7 128.3 71.6 69.4 54.3 125.2 68.1
Income (loss) from continuing operations (8.4) (6.7) 43.9 47.5 18.6 8.6 53.2 45.8
Income (loss) from discontinued
operations, net of tax 18.1 13.1 0.8 (1.4) 3.5 29.1 16.1 10.3
Cumulative effect of a change in
accounting principle, net of tax -- -- -- -- (12.9) -- -- --
Net income 9.7 6.3 44.7 46.1 9.2 37.7 69.3 56.1
EPS:
Income (loss) from continuing operations (0.09) (0.07) 0.48 0.52 0.23 0.11 0.67 0.54
Income (loss) from discontinued
operations 0.20 0.14 0.01 (0.01) 0.05 0.37 0.20 0.12
Cumulative effect of a change in
accounting principle -- -- -- -- (0.16) -- -- --
Net income 0.11 0.07 0.49 0.51 0.12 0.48 0.87 0.66
| 2003 | 2002 | ||||||||||||||||
| March 31 | June 30 | Sept. 30 | Dec. 31 | March 31 | June 30 | Sept. 30 | Dec. 31 | ||||||||||
| (in millions, except per share data) | |||||||||||||||||
| Operating revenues | $908 | .2 | $659 | .5 | $779 | .1 | $781 | .4 | $583 | .0 | $553 | .8 | $674 | .1 | $675 | .7 | |
| Operating income | 76 | .9 | 58 | .2 | 165 | .6 | 110 | .9 | 69 | .2 | 59 | .5 | 131 | .7 | 92 | .9 | |
| Income (loss) from continuing operations | 14 | .6 | 11 | .8 | 85 | .2 | 48 | .1 | (7 | .8) | (5 | .5) | 46 | .6 | 54 | .1 | |
| Income (loss) from discontinued | |||||||||||||||||
| operations, net of tax | (9 | .1) | 20 | .4 | 18 | .0 | 0 | .5 | 17 | .5 | 11 | .8 | (1 | .9) | (8 | .0) | |
| Cumulative effect of changes in | |||||||||||||||||
| accounting principles, net of tax | (6 | .0) | -- | -- | -- | -- | -- | -- | -- | ||||||||
| Net income (loss) | (0 | .5) | 32 | .2 | 103 | .2 | 48 | .6 | 9 | .7 | 6 | .3 | 44 | .7 | 46 | .1 | |
| EPS: | |||||||||||||||||
| Income (loss) from continuing operations | 0 | .16 | 0 | .13 | 0 | .78 | 0 | .43 | (0 | .09) | (0 | .06) | 0 | .51 | 0 | .59 | |
| Income (loss) from discontinued | |||||||||||||||||
| operations | (0 | .10) | 0 | .22 | 0 | .16 | 0 | .01 | 0 | .20 | 0 | .13 | (0 | .02) | (0 | .09) | |
| Cumulative effect of changes in | |||||||||||||||||
| accounting principles | (0 | .07) | -- | -- | -- | -- | -- | -- | -- | ||||||||
| Net income (loss) | (0 | .01) | 0 | .35 | 0 | .94 | 0 | .44 | 0 | .11 | 0 | .07 | 0 | .49 | 0 | .50 | |
(16) DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
Alliant Energy announced in November 2002 its commitment to pursue the sale of, or other exit strategies for, certain non-regulated businesses induring 2003.
In the fourth quarter of 2002, Alliant Energy applied the provisions of SFAS 144, "Accounting“Accounting for the Impairment or Disposal of Long-Lived Assets,"” to certain of its assets which were held for sale. SFAS 144 requires that a long-lived asset classified as held for sale be measured at the lower of its carrying amount or fair value, less costs to sell, and to cease depreciation, depletion and amortization. At Dec. 31, 2002, the assets and liabilities of Alliant Energy'sEnergy’s oil and gas (Whiting)(WPC), Australian (including Southern Hydro) and, affordable housing and SmartEnergy businesses have beenwere classified as held for sale. Alliant Energy currently
plans to complete the sales by year-end. The operating results for these non-regulated businesses for all periods presented have been separately classified and reported as discontinued operations in Alliant Energy'sEnergy’s Consolidated Financial Statements.
Alliant Energy completed the sale of its Australian, affordable housing and SmartEnergy businesses in the second, third and third quarters of 2003, respectively. In the fourth quarter of 2003, Alliant Energy completed an IPO of WPC, leaving Alliant Energy with an approximate 6% ownership interest in WPC that is accounted for under the cost method as of Dec. 31, 2003.
Prior to the IPO, Alliant Energy and WPC entered into a tax separation and indemnification agreement pursuant to which Alliant Energy and WPC made tax elections with the effect that the tax basis of the assets of WPC’s consolidated tax group were increased based on the sales price of WPC’s shares in the IPO. This increase will be included in income in the consolidated federal income tax return filed by Alliant Energy. WPC has agreed to pay Resources 90% of any tax benefits realized annually due to the increase in tax basis for years ending on or prior to Dec. 31, 2013. Such tax benefits will generally be calculated by comparing WPC’s actual taxes to the taxes that would have been owed by WPC had the increase in basis not occurred. In 2014, WPC will be obligated to pay Resources the present value of the remaining tax benefits assuming all such tax benefits will be realized in future years. As of the IPO closing date, Resources recorded a receivable from WPC based on the estimated present value of the payments expected from WPC. As of Dec. 31, 2003, Resources estimated the present value of these anticipated future tax benefits from WPC was approximately $30 million and has recorded this as a receivable from WPC in “Deferred charges and other” on Alliant Energy’s Consolidated Balance Sheets.
82
A summary of the components of discontinued operations in Alliant Energy'sEnergy’s Consolidated Statements of Income was as follows (in thousands):
| 2003 | 2002 | 2001 | |||||
| Operating revenues | $187,677 | $231,027 | $158,575 | ||||
| Operating expenses (a) | 101,084 | 195,624 | 105,935 | ||||
| Interest expense and other (pre-tax numbers): | |||||||
| Gain on sale of Australian business | (72,115 | ) | -- | -- | |||
| Loss on sale of affordable housing business | 60,685 | -- | -- | ||||
| Loss on sale of oil and gas business (a) | 16,696 | -- | -- | ||||
| Loss on sale of SmartEnergy business | 13,645 | -- | -- | ||||
| Southern Hydro SFAS 133 income | (14,689 | ) | (16,081 | ) | (15,570 | ) | |
| Other | 17,949 | 38,891 | 3,122 | ||||
| Income before income taxes | 64,422 | 12,593 | 65,088 | ||||
| Income tax expense (benefit) | 34,597 | (6,832 | ) | 8,017 | |||
| Income from discontinued operations, net of tax | $29,825 | $19,425 | $57,071 | ||||
| (a) | Operating expenses |
Alliant Energy'sEnergy’s Australian business entersentered into electricityelectric derivative contracts that havewere not been designated as hedges (as defined by SFAS 133) to manage the electricityelectric commodity price risk associated with anticipated sales into the spot market. Approximately $16 million ofSFAS 133 income is included in
"Interest expense and other" for both 2002 and 2001 in the previous table related toreflects the change in the fair value of these electricityelectric derivative contracts during these respective periods.contracts. In 2000, Alliant Energy's
affordable housing business sold a portion of its investment in McLeod,
resulting in a pre-tax gain of approximately $24 million included in
"Interest expense and other" in the previous table. At Dec. 31, 2002, Alliant Energy's affordable housing business owned approximately 0.1Energy recorded a SFAS 142 after-tax non-cash goodwill impairment charge related to SmartEnergy of $4.5 million shares
of McLeod. "Incomeprimarily due to less favorable market conditions. “Income tax expense (benefit)"” in the previous table includes approximately $10$3 million, $10 million and $7$10 million of affordable housing
87
Energy'sEnergy’s affordable housing business during 2003, 2002 2001 and 2000,2001, respectively. These tax credits, along with 2003 income tax impacts of the sales transactions, had a significant impact on the effective tax rate of Alliant Energy'sEnergy’s discontinued operations.
A summary of the components of assets and liabilities of discontinued operations on Alliant Energy'sEnergy’s Consolidated Balance SheetsSheet at Dec. 31, 2002 was as follows (in thousands):
| 2002 | |||
| Assets of discontinued operations: | |||
| Property, plant and equipment, net | $644,910 | ||
| Current assets | 113,866 | ||
| Investments | 6,824 | ||
| Deferred charges and other | 203,691 | ||
| Total assets of discontinued operations | $969,291 | ||
| Liabilities of discontinued operations: | |||
| Current liabilities | $73,344 | ||
| Other long-term liabilities and deferred credits | 64,783 | ||
| Minority interest | 124 | ||
| Total liabilities of discontinued operations | 138,251 | ||
| Net assets of discontinued operations | $831,040 | ||
83
A summary of the components of cash flows for discontinued operations for the years ended Dec. 31 was as follows (in thousands):
| 2003 | 2002 | 2001 | |||||
| Net cash flows from operating activities | $61,015 | $72,820 | $44,327 | ||||
| Net cash flows from (used for) financing activities | (43,228 | ) | 153,087 | 41,529 | |||
| Net cash flows used for investing activities | (33,831 | ) | (215,638 | ) | (88,752 | ) | |
| Net increase (decrease) in cash and temporary cash investments | (16,044 | ) | 10,269 | (2,896 | ) | ||
| Cash and temporary cash investments at beginning of period | 16,044 | 5,775 | 8,671 | ||||
| Cash and temporary cash investments at end of period | $-- | $16,044 | $5,775 | ||||
| Supplemental cash flows information: | |||||||
| Cash paid (refunded) during the period for: | |||||||
| Interest | $19,517 | $14,704 | $6,355 | ||||
| Income taxes, net of refunds | ($34,618 | ) | ($9,002 | ) | ($3,331 | ) | |
(17) PENDING SALE OF WP&L’S INTEREST IN KEWAUNEE
WP&L has signed a definitive agreement to sell its 41% ownership interest in Kewaunee to Richmond, Va.-based Dominion Energy Kewaunee, Inc. (Dominion), a subsidiary of Dominion Resources, Inc. Joint owner of Kewaunee, WPSC, also agreed to sell its 59% ownership interest in Kewaunee to Dominion. Pending various regulatory approvals, including the PSCW and NRC, the transaction is expected to be completed by fall 2004. WP&L anticipates that, based on an expected Nov. 1, 2004 closing date, it will receive approximately $90 million in cash and retain ownership of the trust assets contained in one of the two decommissioning funds it has established to cover the eventual decommissioning of Kewaunee. The fund that will be retained had an after-tax value of $67.3 million on Dec. 31, 2003. The gross cash proceeds from the sale are expected to slightly exceed WP&L’s carrying value of the assets being sold. WP&L has requested deferral of any gain and related costs from the PSCW. Because any gain realized and the retained decommissioning fund will likely be returned to customers in future rate filings, WP&L does not expect this transaction will have a significant impact on its operating results. Dominion will assume responsibility for the eventual decommissioning of Kewaunee and WP&L is required to provide qualified decommissioning trust assets of at least $160.7 million on an after-tax basis. The after-tax value of the qualified fund was $166.3 million on Dec. 31, 2003. In January 2004, WP&L liquidated all of the qualified decommissioning assets into money market funds as a result of the pending Kewaunee sale. At the closing of the sale, WP&L will enter into a long-term purchased-power agreement with Dominion to purchase energy and capacity equivalent to the amounts received had current ownership continued. The purchased-power agreement, which also will require regulatory approval, will extend through 2013 when the plant’s current operating license will expire.
(18) ASSET RETIREMENT OBLIGATIONS
Alliant Energy adopted SFAS 143 on Jan. 1, 2003, which provides accounting and disclosure requirements for AROs associated with long-lived assets. SFAS 143 requires that when an asset is placed in service the present value of retirement costs for which Alliant Energy has a legal obligation must be recorded as liabilities with an equivalent amount added to the asset cost. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity settles the obligation for its recorded amount or incurs a gain or loss.
The scope of SFAS 143 as it relates to Alliant Energy primarily includes decommissioning costs for DAEC and Kewaunee. The differences between the estimated decommissioning costs disclosed in Note 11(f) for DAEC and Kewaunee and the recorded SFAS 143 liability are primarily related to fuel management costs, non-nuclear demolition costs and the timing of future cash flows. It also applies to a smaller extent to several other domestic utility and non-regulated assets including, but not limited to, active ash landfills, water intake facilities, underground storage tanks, groundwater wells, transmission and distribution equipment, easements, leases and the dismantlement of certain hydro facilities. Other than DAEC and Kewaunee, Alliant Energy’s current AROs are not significant. A reconciliation of the changes in the AROs is depicted below (in millions):
| IP&L | WP&L | Total | |||||
| Balance at Jan. 1, 2003 | $180 | $175 | $355 | ||||
| Accretion expense | 11 | 13 | 24 | ||||
| Change in cash flow estimates | (33 | ) | -- | (33 | ) | ||
| Balance at Dec. 31, 2003 | $158 | $188 | $346 | ||||
84
If SFAS 143 had been adopted as of Jan. 1, 2001, IP&L and WP&L would have recorded ARO SFAS 143 liabilities of $180 million and $175 million at Dec. 31, 2002 and $168 million and $161 million at Dec. 31, 2001, respectively. Refer to Note 17 for information regarding the pending sale of WP&L’s interest in Kewaunee.
Upon adoption of SFAS 143, Alliant Energy also recognized a $3.9 million impact as a cumulative effect of a change in accounting principle at WPC (in the fourth quarter of 2003, Alliant Energy completed an IPO of WPC).
At Dec. 31, 2002, prior to the adoption of SFAS 143, Alliant Energy recorded $284.4 million ($121.2 million at IP&L and $163.2 million at WP&L) of legal AROs in “Cost of removal obligations” on the Consolidated Balance Sheet.
(19) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Alliant Energy has fully and unconditionally guaranteed the payment of principal and interest on various debt securities issued by Resources and, as a result, is required to present condensed consolidating financial statements. No other Alliant Energy subsidiaries are guarantors of Resources'Resources’ debt securities. Alliant Energy'sEnergy’s condensed consolidating financial statements are as follows:
85
Alliant Energy Corporation Condensed Consolidating Statements of Income for the Years Ended December 31, 2003 and 2002
| Alliant Energy | Other Alliant | Consolidated | |||||||||
| Parent | Energy | Consolidating | Alliant | ||||||||
| Company | Resources | Subsidiaries | Adjustments | Energy | |||||||
| Year Ended December 31, 2003 | (in thousands) | ||||||||||
| Operating revenues: | |||||||||||
| Domestic utility: | |||||||||||
| Electric | $- | $- | $1,917,068 | $- | $1,917,068 | ||||||
| Gas | - | - | 566,926 | - | 566,926 | ||||||
| Other | - | - | 104,194 | - | 104,194 | ||||||
| Non-regulated | - | 545,925 | 331,208 | (337,134 | ) | 539,999 | |||||
| - | 545,925 | 2,919,396 | (337,134 | ) | 3,128,187 | ||||||
| Operating expenses: | |||||||||||
| Domestic utility: | |||||||||||
| Electric production fuel and purchased power | - | - | 730,594 | - | 730,594 | ||||||
| Cost of gas sold | - | - | 396,102 | - | 396,102 | ||||||
| Other operation and maintenance | - | - | 701,784 | - | 701,784 | ||||||
| Non-regulated operation and maintenance | 2,685 | 498,158 | 287,677 | (295,063 | ) | 493,457 | |||||
| Depreciation and amortization | 38 | 36,739 | 284,597 | (16,300 | ) | 305,074 | |||||
| Taxes other than income taxes | 9 | 6,502 | 90,271 | (7,340 | ) | 89,442 | |||||
| 2,732 | 541,399 | 2,491,025 | (318,703 | ) | 2,716,453 | ||||||
| Operating income (loss) | (2,732 | ) | 4,526 | 428,371 | (18,431 | ) | 411,734 | ||||
| Interest expense and other: | |||||||||||
| Interest expense | 9,115 | 98,338 | 106,033 | (6,336 | ) | 207,150 | |||||
| Loss on early extinguishment of debt | 1,633 | 15,231 | - | - | 16,864 | ||||||
| Equity (income) loss from unconsolidated investments | - | 1,790 | (20,911 | ) | - | (19,121 | ) | ||||
| Allowance for funds used during construction | - | - | (20,839 | ) | 120 | (20,719 | ) | ||||
| Preferred dividend requirements of subsidiaries | - | - | 16,891 | - | 16,891 | ||||||
| Miscellaneous, net | (198,601 | ) | (18,279 | ) | 12,659 | 183,362 | (20,859 | ) | |||
| (187,853 | ) | 97,080 | 93,833 | 177,146 | 180,206 | ||||||
| Income (loss) from continuing operations before income taxes | 185,121 | (92,554 | ) | 334,538 | (195,577 | ) | 231,528 | ||||
| Income tax expense (benefit) | 1,578 | (66,877 | ) | 138,219 | (1,093 | ) | 71,827 | ||||
| Income (loss) from continuing operations | 183,543 | (25,677 | ) | 196,319 | (194,484 | ) | 159,701 | ||||
| Income from discontinued operations, net of tax | - | 29,825 | - | - | 29,825 | ||||||
| Income before cumulative effect of changes in | |||||||||||
| accounting principles | 183,543 | 4,148 | 196,319 | (194,484 | ) | 189,526 | |||||
| Cumulative effect of changes in accounting principles, net of tax | - | (5,983 | ) | - | - | (5,983 | ) | ||||
| Net income (loss) | $183,543 | ($1,835 | ) | $196,319 | ($194,484 | ) | $183,543 | ||||
| Year Ended December 31, 2002 | |||||||||||
| Operating revenues: | |||||||||||
| Domestic utility: | |||||||||||
| Electric | $- | $- | $1,752,534 | $- | $1,752,534 | ||||||
| Gas | - | - | 393,986 | - | 393,986 | ||||||
| Other | - | - | 85,415 | - | 85,415 | ||||||
| Non-regulated | - | 261,349 | 319,119 | (325,813 | ) | 254,655 | |||||
| - | 261,349 | 2,551,054 | (325,813 | ) | 2,486,590 | ||||||
| Operating expenses: | |||||||||||
| Domestic utility: | |||||||||||
| Electric production fuel and purchased power | - | - | 651,813 | - | 651,813 | ||||||
| Cost of gas sold | - | - | 248,994 | - | 248,994 | ||||||
| Other operation and maintenance | - | - | 623,240 | - | 623,240 | ||||||
| Non-regulated operation and maintenance | 2,116 | 229,571 | 292,026 | (300,324 | ) | 223,389 | |||||
| Depreciation and amortization | 7 | 27,214 | 261,086 | (6,209 | ) | 282,098 | |||||
| Taxes other than income taxes | - | 6,146 | 99,031 | (1,312 | ) | 103,865 | |||||
| 2,123 | 262,931 | 2,176,190 | (307,845 | ) | 2,133,399 | ||||||
| Operating income (loss) | (2,123 | ) | (1,582 | ) | 374,864 | (17,968 | ) | 353,191 | |||
| Interest expense and other: | |||||||||||
| Interest expense | 5,640 | 76,475 | 112,558 | (11,932 | ) | 182,741 | |||||
| Equity (income) loss from unconsolidated investments | (941 | ) | 31,337 | (17,571 | ) | - | 12,825 | ||||
| Allowance for funds used during construction | - | - | (8,480 | ) | 784 | (7,696 | ) | ||||
| Preferred dividend requirements of subsidiaries | - | - | 6,172 | - | 6,172 | ||||||
| Impairment of available-for-sale securities of McLeodUSA Inc. | - | 27,218 | - | - | 27,218 | ||||||
| Miscellaneous, net | (109,236 | ) | 3,567 | 8,338 | 99,405 | 2,074 | |||||
| (104,537 | ) | 138,597 | 101,017 | 88,257 | 223,334 | ||||||
| Income (loss) from continuing operations before income taxes | 102,414 | (140,179 | ) | 273,847 | (106,225 | ) | 129,857 | ||||
| Income tax expense (benefit) | (4,467 | ) | (60,149 | ) | 107,959 | (942 | ) | 42,401 | |||
| Income (loss) from continuing operations | 106,881 | (80,030 | ) | 165,888 | (105,283 | ) | 87,456 | ||||
| Income from discontinued operations, net of tax | - | 19,425 | - | - | 19,425 | ||||||
| Net income (loss) | $106,881 | ($60,605 | ) | $165,888 | ($105,283 | ) | $106,881 | ||||
86
Alliant Energy Corporation Condensed Consolidating Statement of Income for the Year Ended December 31, 2001
| Alliant Energy | Other Alliant | Consolidated | |||||||||
| Parent | Energy | Consolidating | Alliant | ||||||||
| Company | Resources | Subsidiaries | Adjustments | Energy | |||||||
| (in thousands) | |||||||||||
| Operating revenues: | |||||||||||
| Domestic utility: | |||||||||||
| Electric | $- | $- | $1,756,556 | $- | $1,756,556 | ||||||
| Gas | - | - | 487,877 | - | 487,877 | ||||||
| Other | - | - | 101,894 | - | 101,894 | ||||||
| Non-regulated | - | 293,440 | 273,351 | (278,888 | ) | 287,903 | |||||
| - | 293,440 | 2,619,678 | (278,888 | ) | 2,634,230 | ||||||
| Operating expenses: | |||||||||||
| Domestic utility: | |||||||||||
| Electric production fuel and purchased power | - | - | 695,168 | - | 695,168 | ||||||
| Cost of gas sold | - | - | 360,911 | - | 360,911 | ||||||
| Other operation and maintenance | - | - | 586,550 | - | 586,550 | ||||||
| Non-regulated operation and maintenance | 3,609 | 262,618 | 263,123 | (270,329 | ) | 259,021 | |||||
| Depreciation and amortization | - | 24,786 | 269,553 | - | 294,339 | ||||||
| Taxes other than income taxes | - | 6,849 | 103,408 | (8,121 | ) | 102,136 | |||||
| 3,609 | 294,253 | 2,278,713 | (278,450 | ) | 2,298,125 | ||||||
| Operating income (loss) | (3,609 | ) | (813 | ) | 340,965 | (438 | ) | 336,105 | |||
| Interest expense and other: | |||||||||||
| Interest expense | 14,281 | 64,091 | 114,116 | (10,480 | ) | 182,008 | |||||
| Equity (income) loss from unconsolidated investments | (7,237 | ) | 4,138 | (15,700 | ) | - | (18,799 | ) | |||
| Allowance for funds used during construction | - | - | (11,144 | ) | - | (11,144 | ) | ||||
| Preferred dividend requirements of subsidiaries | - | - | 6,720 | - | 6,720 | ||||||
| Miscellaneous, net | (177,151 | ) | 10,247 | (12,671 | ) | 176,913 | (2,662 | ) | |||
| (170,107 | ) | 78,476 | 81,321 | 166,433 | 156,123 | ||||||
| Income (loss) from continuing operations before income taxes | 166,498 | (79,289 | ) | 259,644 | (166,871 | ) | 179,982 | ||||
| Income tax expense (benefit) | (5,864 | ) | (36,517 | ) | 94,642 | (438 | ) | 51,823 | |||
| Income (loss) from continuing operations | 172,362 | (42,772 | ) | 165,002 | (166,433 | ) | 128,159 | ||||
| Income from discontinued operations, net of tax | - | 57,071 | - | - | 57,071 | ||||||
| Income before cumulative effect of a change in | |||||||||||
| accounting principle | 172,362 | 14,299 | 165,002 | (166,433 | ) | 185,230 | |||||
| Cumulative effect of a change in accounting principle, net of tax | - | (12,868 | ) | - | - | (12,868 | ) | ||||
| Net income | $172,362 | $1,431 | $165,002 | ($166,433 | ) | $172,362 | |||||
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2003
| Alliant Energy | Other | Consolidated | |||||||||
| Parent | Alliant Energy | Consolidating | Alliant | ||||||||
| Company | Resources | Subsidiaries | Adjustments | Energy | |||||||
| (in thousands) | |||||||||||
| ASSETS | |||||||||||
| Property, plant and equipment: | |||||||||||
| Domestic utility: | |||||||||||
| Electric plant in service | $- | $- | $5,707,478 | $- | $5,707,478 | ||||||
| Other plant in service | - | - | 1,184,779 | - | 1,184,779 | ||||||
| Accumulated depreciation | - | - | (2,985,285 | ) | - | (2,985,285 | ) | ||||
| Construction work in progress: | |||||||||||
| Emery generating facility | - | - | 304,332 | - | 304,332 | ||||||
| Other | - | - | 152,684 | - | 152,684 | ||||||
| Other, net | - | - | 68,611 | - | 68,611 | ||||||
| Total domestic utility | - | - | 4,432,599 | - | 4,432,599 | ||||||
| Non-regulated and other, net: | |||||||||||
| Non-regulated Generation | - | 204,480 | - | - | 204,480 | ||||||
| Other | - | 313,118 | 68,719 | (111 | ) | 381,726 | |||||
| Total non-regulated and other | - | 517,598 | 68,719 | (111 | ) | 586,206 | |||||
| - | 517,598 | 4,501,318 | (111 | ) | 5,018,805 | ||||||
| Current assets: | |||||||||||
| Cash and temporary cash investments | 35,776 | 144,361 | 62,144 | - | 242,281 | ||||||
| Accounts receivable, net | 6,581 | 90,442 | 225,783 | (64,024 | ) | 258,782 | |||||
| Income tax refunds receivable | 9,127 | 7,122 | 51,927 | (47,298 | ) | 20,878 | |||||
| Gas stored underground, at average cost | - | 41,666 | 49,298 | - | 90,964 | ||||||
| Regulatory assets | - | - | 61,777 | - | 61,777 | ||||||
| Other | 4,456 | 49,432 | 157,991 | (3,658 | ) | 208,221 | |||||
| 55,940 | 333,023 | 608,920 | (114,980 | ) | 882,903 | ||||||
| Investments: | |||||||||||
| Consolidated subsidiaries | 2,324,030 | - | 10 | (2,324,040 | ) | - | |||||
| Investments in unconsolidated foreign entities | - | 481,525 | - | - | 481,525 | ||||||
| Other | 12,422 | 86,440 | 543,173 | - | 642,035 | ||||||
| 2,336,452 | 567,965 | 543,183 | (2,324,040 | ) | 1,123,560 | ||||||
| Deferred charges and other | 4,146 | 174,614 | 613,446 | (42,028 | ) | 750,178 | |||||
| Total assets | $2,396,538 | $1,593,200 | $6,266,867 | ($2,481,159 | ) | $7,775,446 | |||||
87
Alliant Energy Corporation Condensed Consolidating Balance Sheet (Continued) as of December 31, 2003
| Alliant Energy | Other Alliant | Consolidated | |||||||||
| Parent | Energy | Consolidating | Alliant | ||||||||
| Company | Resources | Subsidiaries | Adjustments | Energy | |||||||
| CAPITALIZATION AND LIABILITIES | (in thousands) | ||||||||||
| Capitalization: | |||||||||||
| Common stock and additional paid-in capital | $1,644,682 | $232,743 | $1,274,663 | ($1,507,406 | ) | $1,644,682 | |||||
| Retained earnings | 840,417 | 113,004 | 810,149 | (923,153 | ) | 840,417 | |||||
| Accumulated other comprehensive loss | (106,415 | ) | (69,102 | ) | (37,313 | ) | 106,415 | (106,415 | ) | ||
| Shares in deferred compensation trust | (7,370 | ) | - | - | - | (7,370 | ) | ||||
| Total common equity | 2,371,314 | 276,645 | 2,047,499 | (2,324,144 | ) | 2,371,314 | |||||
| Cumulative preferred stock of subsidiaries, net | - | - | 243,803 | - | 243,803 | ||||||
| Long-term debt, net (excluding current portion) | - | 874,079 | 1,249,219 | - | 2,123,298 | ||||||
| 2,371,314 | 1,150,724 | 3,540,521 | (2,324,144 | ) | 4,738,415 | ||||||
| Current liabilities: | |||||||||||
| Current maturities and sinking funds | - | 7,281 | 62,000 | - | 69,281 | ||||||
| Commercial paper | - | - | 107,500 | - | 107,500 | ||||||
| Other short-term borrowings | - | 21,833 | 905 | (1,243 | ) | 21,495 | |||||
| Accrued interest | 2,499 | 18,077 | 23,386 | - | 43,962 | ||||||
| Accrued taxes | 5,549 | 46,421 | 66,163 | (47,298 | ) | 70,835 | |||||
| Other | 14,001 | 124,456 | 469,018 | (66,439 | ) | 541,036 | |||||
| 22,049 | 218,068 | 728,972 | (114,980 | ) | 854,109 | ||||||
| Other long-term liabilities and deferred credits: | |||||||||||
| Regulatory liabilities | - | - | 632,230 | - | 632,230 | ||||||
| Asset retirement obligations | - | - | 345,680 | - | 345,680 | ||||||
| Other | 3,175 | 171,866 | 1,019,464 | (42,035 | ) | 1,152,470 | |||||
| 3,175 | 171,866 | 1,997,374 | (42,035 | ) | 2,130,380 | ||||||
| Minority interest | - | 52,542 | - | - | 52,542 | ||||||
| Total capitalization and liabilities | $2,396,538 | $1,593,200 | $6,266,867 | ($2,481,159 | ) | $7,775,446 | |||||
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2002
| Alliant Energy | Other | Consolidated | |||||||||
| Parent | Alliant Energy | Consolidating | Alliant | ||||||||
| Company | Resources | Subsidiaries | Adjustments | Energy | |||||||
| ASSETS | (in thousands) | ||||||||||
| Property, plant and equipment: | |||||||||||
| Domestic utility: | |||||||||||
| Electric plant in service | $- | $- | $5,295,381 | $- | $5,295,381 | ||||||
| Other plant in service | - | - | 1,143,578 | - | 1,143,578 | ||||||
| Accumulated depreciation | - | - | (2,791,891 | ) | - | (2,791,891 | ) | ||||
| Construction work in progress: | |||||||||||
| Emery generating facility | - | - | 10,651 | - | 10,651 | ||||||
| Other | - | - | 252,445 | - | 252,445 | ||||||
| Other, net | - | - | 68,340 | - | 68,340 | ||||||
| Total domestic utility | - | - | 3,978,504 | - | 3,978,504 | ||||||
| Non-regulated and other, net: | |||||||||||
| Non-regulated Generation | - | 156,699 | - | - | 156,699 | ||||||
| Other | - | 299,355 | 75,503 | (111 | ) | 374,747 | |||||
| Total non-regulated and other | - | 456,054 | 75,503 | (111 | ) | 531,446 | |||||
| - | 456,054 | 4,054,007 | (111 | ) | 4,509,950 | ||||||
| Current assets: | |||||||||||
| Cash and temporary cash investments | 4 | 47,236 | 15,619 | - | 62,859 | ||||||
| Accounts receivable, net | 9,034 | 78,590 | 210,728 | (118,208 | ) | 180,144 | |||||
| Income tax refunds receivable | 18,175 | 72,882 | 6,412 | - | 97,469 | ||||||
| Gas stored underground, at average cost | - | 26,668 | 36,129 | - | 62,797 | ||||||
| Regulatory assets | - | - | 46,076 | - | 46,076 | ||||||
| Assets of discontinued operations | - | 969,291 | - | - | 969,291 | ||||||
| Other | 245,423 | 54,444 | 181,723 | (244,764 | ) | 236,826 | |||||
| 272,636 | 1,249,111 | 496,687 | (362,972 | ) | 1,655,462 | ||||||
| Investments: | |||||||||||
| Consolidated subsidiaries | 1,817,341 | - | 10 | (1,817,351 | ) | - | |||||
| Investments in unconsolidated foreign entities | - | 373,816 | - | - | 373,816 | ||||||
| Other | 11,660 | 56,357 | 494,867 | - | 562,884 | ||||||
| 1,829,001 | 430,173 | 494,877 | (1,817,351 | ) | 936,700 | ||||||
| Deferred charges and other | - | 127,834 | 611,721 | (27,583 | ) | 711,972 | |||||
| Total assets | $2,101,637 | $2,263,172 | $5,657,292 | ($2,208,017 | ) | $7,814,084 | |||||
88
Alliant Energy Corporation Condensed Consolidating Statements of Income for the Years Ended December 31, 2002 and 2001
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
--------------------------------------------------------------------
Year Ended December 31, 2002 (in thousands)
- ----------------------------
Operating revenues:
Electric utility $- $- $1,752,534 $- $1,752,534
Gas utility - - 393,986 - 393,986
Non-regulated and other - 431,819 356,286 (325,813) 462,292
--------------------------------------------------------------------
- 431,819 2,502,806 (325,813) 2,608,812
--------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 303,570 55 303,625
Purchased power - - 362,501 - 362,501
Cost of utility gas sold - - 248,994 - 248,994
Other operation and maintenance 2,116 408,419 846,988 (300,379) 957,144
Depreciation and amortization 7 28,242 288,577 (6,209) 310,617
Taxes other than income taxes - 6,517 99,031 (1,312) 104,236
--------------------------------------------------------------------
2,123 443,178 2,149,661 (307,845) 2,287,117
--------------------------------------------------------------------
Operating income (loss) (2,123) (11,359) 353,145 (17,968) 321,695
--------------------------------------------------------------------
Interest expense and other:
Interest expense 5,640 76,486 116,344 (11,932) 186,538
Interest income from loans to discontinued operations, net - (15,959) - - (15,959)
Equity (income) loss from unconsolidated investments (941) 31,337 (17,571) - 12,825
Allowance for funds used during construction - - (8,480) 784 (7,696)
Preferred dividend requirements of subsidiaries - - 6,172 - 6,172
Impairment of available-for-sale securities of McLeodUSA Inc. - 27,218 - - 27,218
Miscellaneous, net (109,236) 27,218 (17,167) 99,405 220
--------------------------------------------------------------------
(104,537) 146,300 79,298 88,257 209,318
--------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 102,414 (157,659) 273,847 (106,225) 112,377
--------------------------------------------------------------------
Income tax expense (benefit) (4,467) (66,442) 107,959 (942) 36,108
--------------------------------------------------------------------
Income (loss) from continuing operations 106,881 (91,217) 165,888 (105,283) 76,269
--------------------------------------------------------------------
Income from discontinued operations, net of tax - 30,612 - - 30,612
--------------------------------------------------------------------
Net income (loss) $106,881 ($60,605) $165,888 ($105,283) $106,881
====================================================================
Year Ended December 31, 2001
- ----------------------------
Operating revenues:
Electric utility $- $- $1,756,556 $- $1,756,556
Gas utility - - 487,877 - 487,877
Non-regulated and other - 348,611 310,520 (278,888) 380,243
--------------------------------------------------------------------
- 348,611 2,554,953 (278,888) 2,624,676
--------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 310,689 - 310,689
Purchased power - - 403,166 - 403,166
Cost of utility gas sold - - 360,911 - 360,911
Other operation and maintenance 3,609 322,599 772,246 (270,329) 828,125
Depreciation and amortization - 25,052 277,591 - 302,643
Taxes other than income taxes - 6,897 103,408 (8,121) 102,184
--------------------------------------------------------------------
3,609 354,548 2,228,011 (278,450) 2,307,718
--------------------------------------------------------------------
Operating income (loss) (3,609) (5,937) 326,942 (438) 316,958
--------------------------------------------------------------------
Interest expense and other:
Interest expense 14,281 64,096 117,707 (10,480) 185,604
Interest income from loans to discontinued operations, net - (9,938) - - (9,938)
Equity (income) loss from unconsolidated investments (7,237) 4,138 (15,700) - (18,799)
Allowance for funds used during construction - - (11,144) - (11,144)
Preferred dividend requirements of subsidiaries - - 6,720 - 6,720
Miscellaneous, net (177,151) 18,026 (30,285) 176,913 (12,497)
--------------------------------------------------------------------
(170,107) 76,322 67,298 166,433 139,946
--------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 166,498 (82,259) 259,644 (166,871) 177,012
--------------------------------------------------------------------
Income tax expense (benefit) (5,864) (37,573) 94,642 (438) 50,767
--------------------------------------------------------------------
Income (loss) from continuing operations 172,362 (44,686) 165,002 (166,433) 126,245
--------------------------------------------------------------------
Income from discontinued operations, net of tax - 58,985 - - 58,985
--------------------------------------------------------------------
Income before cumulative effect of a change in
accounting principle, net of tax 172,362 14,299 165,002 (166,433) 185,230
--------------------------------------------------------------------
Cumulative effect of a change in accounting principle, net of tax - (12,868) - - (12,868)
--------------------------------------------------------------------
Net income $172,362 $1,431 $165,002 ($166,433) $172,362
====================================================================
Alliant Energy Corporation Condensed Consolidating Balance Sheet (Continued) as of December 31, 2002
| Alliant Energy | Other Alliant | Consolidated | |||||||||
| Parent | Energy | Consolidating | Alliant | ||||||||
| Company | Resources | Subsidiaries | Adjustments | Energy | |||||||
| CAPITALIZATION AND LIABILITIES | (in thousands) | ||||||||||
| Capitalization: | |||||||||||
| Common stock and additional paid-in capital | $1,294,842 | $232,743 | $906,261 | ($1,139,004 | ) | $1,294,842 | |||||
| Retained earnings | 758,187 | 114,838 | 773,556 | (888,394 | ) | 758,187 | |||||
| Accumulated other comprehensive loss | (209,943 | ) | (166,947 | ) | (42,996 | ) | 209,943 | (209,943 | ) | ||
| Shares in deferred compensation trust | (6,896 | ) | - | - | - | (6,896 | ) | ||||
| Total common equity | 1,836,190 | 180,634 | 1,636,821 | (1,817,455 | ) | 1,836,190 | |||||
| Cumulative preferred stock of subsidiaries, net | - | - | 205,063 | - | 205,063 | ||||||
| Long-term debt, net (excluding current portion) | 24,000 | 1,290,205 | 1,295,598 | - | 2,609,803 | ||||||
| 1,860,190 | 1,470,839 | 3,137,482 | (1,817,455 | ) | 4,651,056 | ||||||
| Current liabilities: | |||||||||||
| Current maturities and sinking funds | - | 41,511 | 5,080 | - | 46,591 | ||||||
| Commercial paper | 135,500 | - | 60,000 | - | 195,500 | ||||||
| Other short-term borrowings | 85,000 | 194,482 | 79,003 | (244,764 | ) | 113,721 | |||||
| Accrued interest | 2,496 | 8,726 | 23,597 | - | 34,819 | ||||||
| Accrued taxes | 9,743 | 13,655 | 82,123 | - | 105,521 | ||||||
| Liabilities of discontinued operations | - | 138,251 | - | - | 138,251 | ||||||
| Other | 5,457 | 168,206 | 432,452 | (118,208 | ) | 487,907 | |||||
| 238,196 | 564,831 | 682,255 | (362,972 | ) | 1,122,310 | ||||||
| Other long-term liabilities and deferred credits: | |||||||||||
| Regulatory liabilities | - | - | 94,300 | - | 94,300 | ||||||
| Cost of removal obligations | - | - | 781,516 | - | 781,516 | ||||||
| Other | 3,251 | 184,077 | 961,739 | (27,590 | ) | 1,121,477 | |||||
| 3,251 | 184,077 | 1,837,555 | (27,590 | ) | 1,997,293 | ||||||
| Minority interest | - | 43,425 | - | - | 43,425 | ||||||
| Total capitalization and liabilities | $2,101,637 | $2,263,172 | $5,657,292 | ($2,208,017 | ) | $7,814,084 | |||||
Alliant Energy Corporation Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2003
| Alliant Energy | Other Alliant | Consolidated | |||||||||
| Parent | Energy | Consolidating | Alliant | ||||||||
| Company | Resources | Subsidiaries | Adjustments | Energy | |||||||
| (in thousands) | |||||||||||
| Net cash flows from (used for) operating activities | $199,469 | ($58,253 | ) | $490,149 | ($211,375 | ) | $419,990 | ||||
| Cash flows from (used for) financing activities: | |||||||||||
| Common stock dividends | (101,313 | ) | - | (159,725 | ) | 159,725 | (101,313 | ) | |||
| Proceeds from issuance of common stock | 345,606 | - | - | - | 345,606 | ||||||
| Proceeds from issuance of preferred stock of subsidiary | - | - | 38,738 | - | 38,738 | ||||||
| Proceeds from issuance of other long-term debt | - | 63,623 | 275,000 | - | 338,623 | ||||||
| Reductions in other long-term debt | (24,000 | ) | (77,253 | ) | (266,530 | ) | - | (367,783 | ) | ||
| Net change in commercial paper and other short-term borrowings | 23,020 | (172,649 | ) | (30,597 | ) | - | (180,226 | ) | |||
| Other | (3,395 | ) | (16,363 | ) | 331,703 | (351,510 | ) | (39,565 | ) | ||
| Net cash flows from (used for) financing activities | 239,918 | (202,642 | ) | 188,589 | (191,785 | ) | 34,080 | ||||
| Cash flows from (used for) investing activities: | |||||||||||
| Construction and acquisition expenditures: | |||||||||||
| Domestic utility business | - | - | (689,655 | ) | 108,847 | (580,808 | ) | ||||
| Non-regulated businesses | - | (248,517 | ) | - | - | (248,517 | ) | ||||
| Corporate Services and other | (50 | ) | - | (9,518 | ) | - | (9,568 | ) | |||
| Proceeds from asset sales | - | 610,171 | 21,721 | (108,847 | ) | 523,045 | |||||
| Other | (403,565 | ) | (3,634 | ) | 45,239 | 403,160 | 41,200 | ||||
| Net cash flows from (used for) investing activities | (403,615 | ) | 358,020 | (632,213 | ) | 403,160 | (274,648 | ) | |||
| Net increase in cash and temporary cash investments | 35,772 | 97,125 | 46,525 | - | 179,422 | ||||||
| Cash and temporary cash investments at beginning of period | 4 | 47,236 | 15,619 | - | 62,859 | ||||||
| Cash and temporary cash investments at end of period | $35,776 | $144,361 | $62,144 | $ - | $242,281 | ||||||
| Supplemental cash flows information: | |||||||||||
| Cash paid (refunded) during the period for: | |||||||||||
| Interest | $9,112 | $85,421 | $104,049 | $ - | $198,582 | ||||||
| Income taxes, net of refunds | ($27,291 | ) | ($86,638 | ) | $131,417 | $ - | $17,488 | ||||
| Noncash investing and financing activities: | |||||||||||
| Debt repaid directly by buyer in the sale of Australian business | $ - | $127,595 | $ - | $ - | $127,595 | ||||||
| Debt assumed by buyer of affordable housing business | $ - | $87,986 | $ - | $ - | $87,986 | ||||||
| Capital lease obligations incurred | $ - | $ - | $14,801 | $ - | $14,801 | ||||||
89
Alliant Energy Corporation Condensed Consolidating Statement of Income for the Year Ended December 31, 2000
Alliant Energy Other Consolidated
Parent Alliant Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
----------------------------------------------------------------------
Operating revenues: (in thousands)
Electric utility $- $- $1,648,036 $- $1,648,036
Gas utility - - 414,948 - 414,948
Non-regulated and other - 185,952 294,507 (263,769) 216,690
----------------------------------------------------------------------
- 185,952 2,357,491 (263,769) 2,279,674
----------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 288,621 - 288,621
Purchased power - - 294,818 - 294,818
Cost of utility gas sold - - 278,734 - 278,734
Other operation and maintenance 703 192,472 751,888 (258,087) 686,976
Depreciation and amortization - 13,350 283,382 - 296,732
Taxes other than income taxes - 6,069 98,379 (6,625) 97,823
----------------------------------------------------------------------
703 211,891 1,995,822 (264,712) 1,943,704
----------------------------------------------------------------------
Operating income (loss) (703) (25,939) 361,669 943 335,970
----------------------------------------------------------------------
Interest expense and other:
Interest expense 17,350 47,832 121,250 (18,283) 168,149
Interest income from loans to discontinued operations, net - (7,195) - - (7,195)
Equity income from unconsolidated investments (14,653) (4,311) (504) - (19,468)
Allowance for funds used during construction - - (8,761) - (8,761)
Preferred dividend requirements of subsidiaries - - 6,713 - 6,713
Gain on reclassification of investment - (321,349) - - (321,349)
Miscellaneous, net (407,484) (13,234) (31,790) 413,294 (39,214)
----------------------------------------------------------------------
(404,787) (298,257) 86,908 395,011 (221,125)
----------------------------------------------------------------------
Income from continuing operations before income taxes 404,084 272,318 274,761 (394,068) 557,095
----------------------------------------------------------------------
Income taxes 5,422 112,820 106,996 942 226,180
----------------------------------------------------------------------
Income from continuing operations 398,662 159,498 167,765 (395,010) 330,915
----------------------------------------------------------------------
Income from discontinued operations, net of tax - 51,039 - - 51,039
----------------------------------------------------------------------
Income before cumulative effect of a change in
accounting principle, net of tax 398,662 210,537 167,765 (395,010) 381,954
----------------------------------------------------------------------
Cumulative effect of a change in accounting principle, net of tax - 16,673 35 - 16,708
----------------------------------------------------------------------
Net income $398,662 $227,210 $167,800 ($395,010) $398,662
======================================================================
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2002
Alliant Energy Other Consolidated
Parent Alliant Energy Consolidating Alliant
ASSETS Company Resources Subsidiaries Adjustments Energy
Property, plant and equipment: ----------------------------------------------------------------------
Utility: (in thousands)
Electric plant in service $- $- $5,295,381 $- $5,295,381
Gas plant in service - - 613,122 - 613,122
Other plant in service - - 530,456 - 530,456
Accumulated depreciation - - (3,573,407) - (3,573,407)
Construction work in progress - - 263,096 - 263,096
Other, net - - 68,340 - 68,340
----------------------------------------------------------------------
Total utility - - 3,196,988 - 3,196,988
----------------------------------------------------------------------
Non-regulated and other, net:
Non-regulated generation - 156,699 - - 156,699
Other - 300,128 75,503 (111) 375,520
----------------------------------------------------------------------
Total non-regulated and other - 456,827 75,503 (111) 532,219
----------------------------------------------------------------------
- 456,827 3,272,491 (111) 3,729,207
----------------------------------------------------------------------
Current assets:
Income tax refunds receivable 18,175 72,882 6,412 - 97,469
Regulatory assets - - 46,076 - 46,076
Assets of discontinued operations - 944,328 - - 944,328
Other 254,461 219,028 489,181 (436,395) 526,275
----------------------------------------------------------------------
272,636 1,236,238 541,669 (436,395) 1,614,148
----------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,817,341 - 10 (1,817,351) -
Investments in unconsolidated foreign entities - 373,816 - - 373,816
Other 11,660 56,357 494,867 - 562,884
----------------------------------------------------------------------
1,829,001 430,173 494,877 (1,817,351) 936,700
----------------------------------------------------------------------
Deferred charges and other - 137,202 611,721 (27,583) 721,340
----------------------------------------------------------------------
Total assets $2,101,637 $2,260,440 $4,920,758 ($2,281,440) $7,001,395
======================================================================
Alliant Energy Corporation Condensed Consolidating Statements of Cash Flows for the Years Ended December 31, 2002 and 2001
| Alliant Energy | Other Alliant | Consolidated | |||||||||
| Parent | Energy | Consolidating | Alliant | ||||||||
| Company | Resources | Subsidiaries | Adjustments | Energy | |||||||
| Year Ended December 31, 2002 | (in thousands) | ||||||||||
| Net cash flows from operating activities | $107,594 | $100,414 | $458,785 | ($111,455 | ) | $555,338 | |||||
| Cash flows from (used for) financing activities: | |||||||||||
| Common stock dividends | (180,987 | ) | - | (141,435 | ) | 141,435 | (180,987 | ) | |||
| Proceeds from issuance of common stock | 56,066 | - | - | - | 56,066 | ||||||
| Proceeds from issuance of preferred stock of subsidiary | - | - | 144,602 | - | 144,602 | ||||||
| Redemption of preferred stock of subsidiary | - | - | (56,389 | ) | - | (56,389 | ) | ||||
| Net change in Resources' credit facility | - | (383,610 | ) | - | - | (383,610 | ) | ||||
| Proceeds from issuance of other long-term debt | - | 300,023 | - | - | 300,023 | ||||||
| Reductions in other long-term debt | - | (20,258 | ) | (560 | ) | - | (20,818 | ) | |||
| Net change in commercial paper and other short-term borrowings | 76,106 | 153,795 | (31,695 | ) | 1,939 | 200,145 | |||||
| Other | 1,417 | 21,707 | 105,431 | (115,350 | ) | 13,205 | |||||
| Net cash flows from (used for) financing activities | (47,398 | ) | 71,657 | 19,954 | 28,024 | 72,237 | |||||
| Cash flows used for investing activities: | |||||||||||
| Construction and acquisition expenditures: | |||||||||||
| Domestic utility business | - | - | (405,761 | ) | - | (405,761 | ) | ||||
| Non-regulated businesses | - | (218,242 | ) | - | - | (218,242 | ) | ||||
| Corporate Services and other | (50 | ) | - | (32,699 | ) | - | (32,749 | ) | |||
| Proceeds from asset sales | 19,349 | 8,294 | - | - | 27,643 | ||||||
| Other | (85,872 | ) | 24,876 | (27,867 | ) | 85,370 | (3,493 | ) | |||
| Net cash flows used for investing activities | (66,573 | ) | (185,072 | ) | (466,327 | ) | 85,370 | (632,602 | ) | ||
| Net increase (decrease) in cash and temporary cash investments | (6,377 | ) | (13,001 | ) | 12,412 | 1,939 | (5,027 | ) | |||
| Cash and temporary cash investments at beginning of period | 6,381 | 60,237 | 3,207 | (1,939 | ) | 67,886 | |||||
| Cash and temporary cash investments at end of period | $4 | $47,236 | $15,619 | $- | $62,859 | ||||||
| Supplemental cash flows information: | |||||||||||
| Cash paid (refunded) during the period for: | |||||||||||
| Interest | $5,244 | $74,922 | $103,969 | $- | $184,135 | ||||||
| Income taxes, net of refunds | ($2,183 | ) | ($44,743 | ) | $77,575 | $- | $30,649 | ||||
| Noncash investing and financing activities: | |||||||||||
| Capital lease obligations incurred | $- | $- | $19,101 | $- | $19,101 | ||||||
| Year Ended December 31, 2001 | |||||||||||
| Net cash flows from (used for) operating activities | $155,559 | ($2,855 | ) | $453,795 | ($173,153 | ) | $433,346 | ||||
| Cash flows from (used for) financing activities: | |||||||||||
| Common stock dividends | (158,231 | ) | - | (140,789 | ) | 140,789 | (158,231 | ) | |||
| Proceeds from issuance of common stock | 288,553 | - | - | - | 288,553 | ||||||
| Net change in Resources' credit facility | - | 63,110 | - | - | 63,110 | ||||||
| Proceeds from issuance of other long-term debt | - | 313,530 | 200,000 | - | 513,530 | ||||||
| Reductions in other long-term debt | - | (9,249 | ) | (136,110 | ) | - | (145,359 | ) | |||
| Net change in commercial paper and other short-term borrowings | (265,496 | ) | (54,953 | ) | - | - | (320,449 | ) | |||
| Other | 46,777 | (79,118 | ) | (16,850 | ) | (30,888 | ) | (80,079 | ) | ||
| Net cash flows from (used for) financing activities | (88,397 | ) | 233,320 | (93,749 | ) | 109,901 | 161,075 | ||||
| Cash flows used for investing activities: | |||||||||||
| Construction and acquisition expenditures: | |||||||||||
| Domestic utility business | - | - | (340,789 | ) | - | (340,789 | ) | ||||
| Non-regulated businesses | - | (332,183 | ) | - | - | (332,183 | ) | ||||
| Corporate Services | - | - | (40,019 | ) | - | (40,019 | ) | ||||
| Proceeds from asset sales | - | 32,117 | 75,817 | - | 107,934 | ||||||
| Other | (61,355 | ) | 4,553 | (54,015 | ) | 61,313 | (49,504 | ) | |||
| Net cash flows used for investing activities | (61,355 | ) | (295,513 | ) | (359,006 | ) | 61,313 | (654,561 | ) | ||
| Net increase (decrease) in cash and temporary cash investments | 5,807 | (65,048 | ) | 1,040 | (1,939 | ) | (60,140 | ) | |||
| Cash and temporary cash investments at beginning of period | 574 | 125,285 | 2,167 | - | 128,026 | ||||||
| Cash and temporary cash investments at end of period | $6,381 | $60,237 | $3,207 | ($1,939 | ) | $67,886 | |||||
| Supplemental cash flows information: | |||||||||||
| Cash paid (refunded) during the period for: | |||||||||||
| Interest | $12,461 | $60,767 | $107,123 | $- | $180,351 | ||||||
| Income taxes, net of refunds | ($10,258 | ) | ($32,015 | ) | $113,168 | $- | $70,895 | ||||
| Noncash investing and financing activities: | |||||||||||
| Capital lease obligations incurred and other | $- | $- | $19,967 | $- | $19,967 | ||||||
90
Alliant Energy Corporation Condensed Consolidating Balance Sheet (Continued) as of December 31, 2002
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES (in thousands)
Capitalization:
Common stock and additional paid-in capital $1,294,842 $232,743 $906,261 ($1,139,004) $1,294,842
Retained earnings 758,187 114,838 773,556 (888,394) 758,187
Accumulated other comprehensive loss (209,943) (166,947) (42,996) 209,943 (209,943)
Shares in deferred compensation trust (6,896) - - - (6,896)
------------------------------------------------------------------------------
Total common equity 1,836,190 180,634 1,636,821 (1,817,455) 1,836,190
------------------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net - - 205,063 - 205,063
Long-term debt (excluding current portion) 24,000 1,290,205 1,323,598 - 2,637,803
------------------------------------------------------------------------------
1,860,190 1,470,839 3,165,482 (1,817,455) 4,679,056
------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds - 41,511 5,080 - 46,591
Commercial paper 135,500 - 60,000 - 195,500
Other short-term borrowings 85,000 194,482 79,003 (244,764) 113,721
Accounts payable 1,534 61,503 223,653 - 286,690
Accrued taxes 9,743 14,149 82,123 - 106,015
Liabilities of discontinued operations - 134,999 - - 134,999
Other 6,419 122,395 305,819 (191,631) 243,002
------------------------------------------------------------------------------
238,196 569,039 755,678 (436,395) 1,126,518
------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income tax expense (benefit) (3,198) 137,263 492,352 - 626,417
Pension and other benefit obligations 6,328 4,348 170,334 - 181,010
Other 121 35,526 336,912 (27,590) 344,969
------------------------------------------------------------------------------
3,251 177,137 999,598 (27,590) 1,152,396
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Minority interest - 43,425 - - 43,425
------------------------------------------------------------------------------
Total capitalization and liabilities $2,101,637 $2,260,440 $4,920,758 ($2,281,440) $7,001,395
==============================================================================
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2001
ASSETS
Property, plant and equipment:
Utility:
Electric plant in service $- $- $5,123,781 $- $5,123,781
Gas plant in service - - 597,494 - 597,494
Other plant in service - - 517,938 - 517,938
Accumulated depreciation - - (3,374,867) - (3,374,867)
Construction work in progress - - 111,069 - 111,069
Other, net - - 62,194 - 62,194
------------------------------------------------------------------------------
Total utility - - 3,037,609 - 3,037,609
------------------------------------------------------------------------------
Non-regulated and other, net:
Non-regulated generation - 60,411 - - 60,411
Other - 295,255 49,014 (111) 344,158
------------------------------------------------------------------------------
Total non-regulated and other - 355,666 49,014 (111) 404,569
------------------------------------------------------------------------------
- 355,666 3,086,623 (111) 3,442,178
------------------------------------------------------------------------------
Current assets:
Income tax refunds receivable 7,552 11,438 6,411 - 25,401
Regulatory assets - - 19,632 - 19,632
Assets of discontinued operations - 540,187 - - 540,187
Other 180,962 231,008 337,582 (225,916) 523,636
------------------------------------------------------------------------------
188,514 782,633 363,625 (225,916) 1,108,856
------------------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,793,737 - - (1,793,737) -
Investments in unconsolidated foreign entities - 508,145 - - 508,145
Other 32,814 66,028 477,929 (14) 576,757
------------------------------------------------------------------------------
1,826,551 574,173 477,929 (1,793,751) 1,084,902
------------------------------------------------------------------------------
Deferred charges and other 3,661 120,005 511,537 (33,214) 601,989
------------------------------------------------------------------------------
Total assets $2,018,726 $1,832,477 $4,439,714 ($2,052,992) $6,237,925
==============================================================================
91
Alliant Energy Corporation Condensed Consolidating Balance Sheet (Continued) as of December 31, 2001
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES (in thousands)
Capitalization:
Common stock and additional paid-in capital $1,240,690 $232,743 $789,002 ($1,021,745) $1,240,690
Retained earnings 832,293 175,443 749,102 (924,545) 832,293
Accumulated other comprehensive loss (152,434) (140,137) (12,297) 152,434 (152,434)
Shares in deferred compensation trust (2,208) - - - (2,208)
------------------------------------------------------------------
Total common equity 1,918,341 268,049 1,525,807 (1,793,856) 1,918,341
------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net - - 113,953 - 113,953
Long-term debt (excluding current portion) 24,000 1,105,792 1,328,149 - 2,457,941
------------------------------------------------------------------
1,942,341 1,373,841 2,967,909 (1,793,856) 4,490,235
------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds - 9,946 560 - 10,506
Commercial paper 68,389 - - - 68,389
Other short-term borrowings - 84,318 - - 84,318
Accounts payable - 35,969 185,949 (95) 221,823
Accrued taxes - 9,712 77,387 - 87,099
Liabilities of discontinued operations - 60,913 - - 60,913
Other 4,341 46,670 404,134 (225,821) 229,324
------------------------------------------------------------------
72,730 247,528 668,030 (225,916) 762,372
------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income tax expense (benefit) (4,033) 152,196 459,389 - 607,552
Pension and other benefit obligations 7,555 3,539 85,402 - 96,496
Other 133 12,262 258,984 (33,220) 238,159
------------------------------------------------------------------
3,655 167,997 803,775 (33,220) 942,207
------------------------------------------------------------------
------------------------------------------------------------------
Minority interest - 43,111 - - 43,111
------------------------------------------------------------------
Total capitalization and liabilities $2,018,726 $1,832,477 $4,439,714 ($2,052,992) $6,237,925
==================================================================
Alliant Energy Corporation Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2002
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
------------------------------------------------------------------
(in thousands)
Net cash flows from operating activities $107,594 $89,116 $458,785 ($111,455) $544,040
------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (180,987) - (141,435) 141,435 (180,987)
Proceeds from issuance of common stock 56,066 - - - 56,066
Proceeds from issuance of preferred stock of subsidiary - - 144,602 - 144,602
Redemption of preferred stock of subsidiary - - (56,389) - (56,389)
Net change in Resources' credit facility - (383,610) - - (383,610)
Proceeds from issuance of other long-term debt - 300,023 - - 300,023
Reductions in other long-term debt - (20,258) (560) - (20,818)
Net change in commercial paper and other short-term borrowings 76,106 153,795 (31,695) 1,939 200,145
Net change in loans to discontinued operations - 49,320 - - 49,320
Other 1,417 (15,760) 105,431 (115,350) (24,262)
------------------------------------------------------------------
Net cash flows from (used for) financing activities (47,398) 83,510 19,954 28,024 84,090
------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities - - (404,736) - (404,736)
Non-regulated businesses - (218,282) - - (218,282)
Corporate Services and other (50) - (33,724) - (33,774)
Proceeds from dispositions of assets 19,349 8,295 - - 27,644
Other (85,872) 24,859 (27,867) 85,370 (3,510)
------------------------------------------------------------------
Net cash flows used for investing activities (66,573) (185,128) (466,327) 85,370 (632,658)
------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (6,377) (12,502) 12,412 1,939 (4,528)
------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 6,381 60,751 3,207 (1,939) 68,400
------------------------------------------------------------------
Cash and temporary cash investments at end of period $4 $48,249 $15,619 $- $63,872
==================================================================
Supplemental cash flows information:
Cash paid (refunded) during the period for:
Interest $5,244 $74,933 $103,969 $- $184,146
==================================================================
Income taxes, net of refunds ($2,183) ($46,033) $77,575 $- $29,359
==================================================================
Noncash investing and financing activities:
Capital lease obligations incurred $- $- $19,101 $- $19,101
==================================================================
92
Alliant Energy Corporation Condensed Consolidating Statements of Cash Flows for the Years Ended December 31, 2001 and 2000
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
-----------------------------------------------------------------
Year Ended December 31, 2001 (in thousands)
- ----------------------------
Net cash flows from (used for) operating activities $155,559 ($10,090) $453,795 ($173,153) $426,111
-----------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (158,231) - (140,789) 140,789 (158,231)
Proceeds from issuance of common stock 288,553 - - - 288,553
Net change in Resources' credit facility - 63,110 - - 63,110
Proceeds from issuance of other long-term debt - 313,530 200,000 - 513,530
Reductions in other long-term debt - (9,249) (136,110) - (145,359)
Net change in commercial paper and other short-term borrowings (265,496) (54,953) - - (320,449)
Net change in loans to discontinued operations - (39,556) - - (39,556)
Other 46,777 (30,112) (16,850) (30,888) (31,073)
-----------------------------------------------------------------
Net cash flows from (used for) financing activities (88,397) 242,770 (93,749) 109,901 170,525
-----------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities - - (340,789) - (340,789)
Non-regulated businesses - (332,253) - - (332,253)
Corporate Services - - (40,019) - (40,019)
Proceeds from formation of ATC and other asset dispositions - 32,117 75,817 - 107,934
Other (61,355) 2,922 (54,015) 61,313 (51,135)
-----------------------------------------------------------------
Net cash flows used for investing activities (61,355) (297,214) (359,006) 61,313 (656,262)
-----------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 5,807 (64,534) 1,040 (1,939) (59,626)
-----------------------------------------------------------------
Cash and temporary cash investments at beginning of period 574 125,285 2,167 - 128,026
-----------------------------------------------------------------
Cash and temporary cash investments at end of period $6,381 $60,751 $3,207 ($1,939) $68,400
=================================================================
Supplemental cash flows information:
Cash paid (refunded) during the period for:
Interest $12,461 $60,772 $107,123 $- $180,356
=================================================================
Income taxes, net of refunds ($10,258) ($32,015) $113,168 $- $70,895
=================================================================
Noncash investing and financing activities:
Capital lease obligations incurred and other $- $- $19,967 $- $19,967
=================================================================
Year Ended December 31, 2000
- ----------------------------
Net cash flows from (used for) operating activities $391,284 ($23,712) $427,241 ($401,723) $393,090
-----------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (157,964) - (80,340) 80,340 (157,964)
Proceeds from issuance of common stock 1,069 - - - 1,069
Net change in Resources' credit facility - 181,652 - - 181,652
Proceeds from issuance of exchangeable senior notes - 402,500 - - 402,500
Proceeds from issuance of other long-term debt - 7,747 100,000 - 107,747
Reductions in other long-term debt - (501) (53,071) - (53,572)
Net change in commercial paper and other short-term borrowings 48,060 99,217 - - 147,277
Net change in loans to discontinued operations - (87,112) - - (87,112)
Other 3,385 (13,962) (23,212) 5,255 (28,534)
-----------------------------------------------------------------
Net cash flows from (used for) financing activities (105,450) 589,541 (56,623) 85,595 513,063
-----------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities - - (304,656) - (304,656)
Non-regulated businesses - (529,675) - - (529,675)
Corporate Services and other - - (11,123) - (11,123)
Proceeds from dispositions of assets 2,281 25,273 3,336 - 30,890
Other (316,188) 8,834 (63,463) 316,128 (54,689)
-----------------------------------------------------------------
Net cash flows used for investing activities (313,907) (495,568) (375,906) 316,128 (869,253)
-----------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (28,073) 70,261 (5,288) - 36,900
-----------------------------------------------------------------
Cash and temporary cash investments at beginning of period 28,647 55,024 7,455 - 91,126
-----------------------------------------------------------------
Cash and temporary cash investments at end of period $574 $125,285 $2,167 $- $128,026
=================================================================
Supplemental cash flows information:
Cash paid (refunded) during the period for:
Interest $17,220 $44,135 $97,495 $- $158,850
=================================================================
Income taxes, net of refunds ($2,350) ($20,560) $140,136 $- $117,226
=================================================================
Noncash investing and financing activities:
Capital lease obligations incurred and other $- $- $20,419 $- $20,419
=================================================================
93
To the Board of Directors and Shareowners of Interstate Power and Light Company:
We have audited the accompanying consolidated balance sheets and statements of capitalization of Interstate Power and Light Company and subsidiaries (the "Company") as of December 31, 2003 and 2002, and 2001, andthe related consolidated statements of income, cash flows and changes in common equity for each of the three years in the period ended December 31, 2002.2003. Our auditaudits also included the supplementalfinancial statement schedule listed in Item 15(a)(2). These financial statements and the supplementalfinancial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the supplementalfinancial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20022003 and 2001,2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20022003, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such supplementalfinancial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/
As discussed in Note 18 to the consolidated financial statements, on January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations."
/s/ DELOITTE & TOUCHE LLP
- -------------------------
Milwaukee, Wisconsin
March 18, 2003
94
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Electric utility $964,854 $1,003,106 $955,845
Gas utility 214,895 281,014 249,796
Steam 31,859 32,130 28,366
----------------- ----------------- -----------------
1,211,608 1,316,250 1,234,007
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 171,133 189,967 175,413
Purchased power 145,292 185,860 147,879
Cost of gas sold 138,875 207,088 171,603
Other operation and maintenance 339,214 322,644 308,434
Depreciation and amortization 146,137 148,494 143,471
Taxes other than income taxes 64,846 62,783 62,592
----------------- ----------------- -----------------
1,005,497 1,116,836 1,009,392
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Operating income 206,111 199,414 224,615
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 67,458 68,149 67,234
Allowance for funds used during construction (5,057) (6,391) (3,396)
Miscellaneous, net (9,461) (13,377) (7,370)
----------------- ----------------- -----------------
52,940 48,381 56,468
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 153,171 151,033 168,147
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Income taxes 62,294 52,967 65,020
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Net income 90,877 98,066 103,127
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 2,862 3,410 3,403
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Earnings available for common stock $88,015 $94,656 $99,724
================= ================= =================
- -----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
95
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 2002 2001
- ----------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Electric plant in service $3,451,547 $3,344,188
Gas plant in service 326,470 316,613
Steam plant in service 59,737 59,452
Other plant in service 195,328 182,868
Accumulated depreciation (2,163,371) (2,046,756)
----------------- -----------------
Net plant 1,869,711 1,856,365
Construction work in progress 166,350 73,241
Other, net 50,529 44,110
----------------- -----------------
2,086,590 1,973,716
----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 6,076 87
Accounts receivable:
Customer, less allowance for doubtful accounts of $894 and $1,564 42,647 19,950
Associated companies 79,105 4,718
Other, less allowance for doubtful accounts of $388 and $319 27,898 25,497
Production fuel, at average cost 36,852 32,083
Materials and supplies, at average cost 28,821 29,121
Gas stored underground, at average cost 19,450 18,447
Regulatory assets 18,077 14,469
Prepayments and other 13,941 9,498
----------------- -----------------
272,867 153,870
----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 121,158 117,159
Other 13,492 15,157
----------------- -----------------
134,650 132,316
----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 199,691 132,109
Deferred charges and other 44,608 34,303
----------------- -----------------
244,299 166,412
----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------
Total assets $2,738,406 $2,426,314
================= =================
- ----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
96
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (Continued)
December 31,
CAPITALIZATION AND LIABILITIES 2002 2001
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See Consolidated Statements of Capitalization):
Common stock - $2.50 par value - authorized 24,000,000 shares;
13,370,788 shares outstanding $33,427 $33,427
Additional paid-in capital 477,701 422,461
Retained earnings 374,428 368,203
Accumulated other comprehensive loss (18,887) (2,131)
------------------ -----------------
Total common equity 866,669 821,960
------------------ -----------------
Cumulative preferred stock, not mandatorily redeemable 145,100 29,139
Cumulative preferred stock, mandatorily redeemable - 24,850
Long-term debt (excluding current portion) 855,389 860,068
------------------ -----------------
1,867,158 1,736,017
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 5,080 560
Notes payable to associated companies - 38,047
Accounts payable 83,126 49,574
Accounts payable to associated companies 41,537 21,194
Accrued interest 14,628 14,715
Accrued taxes 62,135 70,747
Accumulated refueling outage provision 13,845 5,614
Other 40,946 46,102
------------------ -----------------
261,297 246,553
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 313,308 268,010
Accumulated deferred investment tax credits 31,135 34,491
Pension and other benefit obligations 88,449 40,573
Regulatory liabilities 78,995 8,520
Environmental liabilities 39,849 38,206
Other 58,215 53,944
------------------ -----------------
609,951 443,744
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 11)
- --------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $2,738,406 $2,426,314
================== =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
97
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $90,877 $98,066 $103,127
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 146,137 148,494 143,471
Amortization of leased nuclear fuel 14,781 12,702 13,867
Amortization of deferred energy efficiency expenditures 3,956 17,032 25,610
Deferred tax benefits and investment tax credits 18,735 (15,155) (14,486)
Refueling outage provision 8,232 (3,628) 7,787
Other 641 93 1,468
Other changes in assets and liabilities:
Accounts receivable (99,485) 78,640 (57,532)
Accounts payable 30,510 (36,958) 49,111
Accrued taxes (8,612) 8,744 3,096
Adjustment clause balances (7,881) 25,962 (10,252)
Manufactured gas plants insurance refunds - (21,541) -
Other 52,539 (6,503) 2,297
--------------- --------------- ---------------
Net cash flows from operating activities 250,430 305,948 267,564
--------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (81,790) (80,340) (80,339)
Preferred stock dividends (2,862) (3,410) (3,403)
Capital contribution from parent 60,000 - -
Redemption of preferred stock (56,389) - -
Proceeds from issuance of preferred stock 144,602 - -
Proceeds from issuance of long-term debt - 200,000 -
Reductions in long-term debt (560) (89,110) (51,196)
Net change in short-term borrowings (38,047) (131,266) 73,169
Principal payments under capital lease obligations (14,328) (9,122) (15,813)
Other (4,340) 11,162 (134)
--------------- --------------- ---------------
Net cash flows from (used for) financing activities 6,286 (102,086) (77,716)
--------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (247,815) (193,757) (171,753)
Nuclear decommissioning trust funds (6,831) (6,008) (6,008)
Other 3,919 (4,073) (12,101)
--------------- --------------- ---------------
Net cash flows used for investing activities (250,727) (203,838) (189,862)
--------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 5,989 24 (14)
--------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 87 63 77
--------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $6,076 $87 $63
=============== =============== ===============
- ---------------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid during the period for:
Interest $64,430 $63,886 $57,040
=============== =============== ===============
Income taxes, net of refunds $39,024 $61,134 $82,254
=============== =============== ===============
Noncash investing and financing activities:
Capital lease obligations incurred and other $19,101 $19,967 $20,419
=============== =============== ===============
- ---------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
98
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
2002 2001
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Common equity $866,669 $821,960
------------------- --------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock:
Par/Stated Authorized Shares Mandatory
Value Shares Outstanding Series Redemption
----- ------ ----------- ------ ----------
$25 16,000,000 6,000,000 8.375% No 150,000 -
$50 * 100,000 6.10% No - 5,000
$50 * 146,406 4.80% No - 7,320
$50 * 120,000 4.30% No - 6,000
$50 ** 216,381 4.36% - 7.76% No - 10,819
$50 ** 545,000 6.40% $50 / share - 27,250
------------------- --------------------
150,000 56,389
Less: Unamortized expenses (4,900) (2,400)
------------------- --------------------
145,100 53,989
------------------- --------------------
* 466,406 authorized shares in total, fully retired in 2002. ** 2,000,000 authorized shares in total, fully retired in 2002.
- ----------------------------------------------------------------------------------------------------------------------------------
Long-term debt:
Collateral Trust Bonds:
7.25% series, due 2006 60,000 60,000
6-7/8% series, due 2007 55,000 55,000
6% series, due 2008 50,000 50,000
7% series, due 2023 50,000 50,000
5.5% series, due 2023 19,400 19,400
------------------- --------------------
234,400 234,400
First Mortgage Bonds:
7-1/4% series, due 2007 27,450 27,450
8% series, due 2007 25,000 25,000
8-5/8% series, due 2021 20,000 20,000
7-5/8% series, due 2023 94,000 94,000
------------------- --------------------
166,450 166,450
Pollution Control Revenue Bonds:
5.75%, due 2003, partially retired in 2002 2,680 3,240
6.25%, due 2009 1,000 1,000
6.30%, due 2010 5,600 5,600
6.35%, due 2012 5,650 5,650
Variable rate (2.8% at December 31, 2002), due 2003 to 2010 10,100 10,100
Variable/fixed rate series 1998 (4.25% to 4.30% through 2003), due 2005 to 2023 14,950 14,950
Variable/fixed rate series 1999 (4.05% to 4.20% through 2004), due 2010 to 2013 10,950 10,950
------------------- --------------------
50,930 51,490
Senior debentures, 6-5/8% to 6-3/4%, due 2009 to 2011 335,000 335,000
Subordinated deferrable interest debentures, 7-7/8%, due 2025 50,000 50,000
Other, 5.34% at December 31, 2002, due 2006 28,000 28,000
------------------- --------------------
864,780 865,340
------------------- --------------------
Less:
Current maturities (5,080) (560)
Unamortized debt discount, net (4,311) (4,712)
------------------- --------------------
855,389 860,068
------------------- --------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Total capitalization $1,867,158 $1,736,017
=================== ====================
- ----------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
99
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Common
Stock Capital Earnings Loss Equity
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
2000:
Beginning balance $33,427 $422,011 $334,502 $- $789,940
Earnings available for common stock 99,724 99,724
Unrealized holding gains on derivatives due to
cumulative effect of a change in accounting
principle, net of tax of $38 54 54
Other unrealized holding gains on derivatives,
net of tax of $151 212 212
Less: reclassification adjustment for gains
included in earnings available for common
stock, net of tax of $201 284 284
------------ -------------
Net unrealized losses on qualifying derivatives (18) (18)
------------ -------------
Total comprehensive income 99,706
Common stock dividends (80,339) (80,339)
Amortization of preferred stock issuance costs and other (58) (58)
------------ ------------ ------------- ------------ -------------
Ending balance 33,427 421,953 353,887 (18) 809,249
2001:
Earnings available for common stock 94,656 94,656
Reclassification adjustment for losses included
in earnings available for common stock
related to derivatives qualified as hedges,
net of tax of ($12) 18 18
Minimum pension liability adjustment, net of
tax of ($1,469) (2,131) (2,131)
-------------
Total comprehensive income 92,543
Common stock dividends (80,340) (80,340)
Amortization of preferred stock issuance costs and other 508 508
------------ ------------ ------------- ------------ -------------
Ending balance 33,427 422,461 368,203 (2,131) 821,960
2002:
Earnings available for common stock 88,015 88,015
Minimum pension liability adjustment, net of
tax of ($11,844) (16,756) (16,756)
-------------
Total comprehensive income 71,259
Common stock dividends (81,790) (81,790)
Amortization of preferred stock issuance costs and other (548) (548)
Capital contribution from parent 60,000 60,000
Redemption of preferred stock (4,212) (4,212)
------------ ------------ ------------- ------------ -------------
Ending balance $33,427 $477,701 $374,428 ($18,887) $866,669
============ ============ ============= ============ =============
- -----------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
100
91
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
| Year Ended December 31, | |||||||
| 2003 | 2002 | 2001 | |||||
| (in thousands) | |||||||
| Operating revenues: | |||||||
| Electric utility | $1,006,982 | $964,854 | $1,003,106 | ||||
| Gas utility | 294,549 | 214,895 | 281,014 | ||||
| Steam and other | 69,676 | 62,661 | 68,491 | ||||
| 1,371,207 | 1,242,410 | 1,352,611 | |||||
| Operating expenses: | |||||||
| Electric production fuel and purchased power | 320,852 | 299,274 | 357,140 | ||||
| Cost of gas sold | 209,817 | 138,875 | 207,088 | ||||
| Other operation and maintenance | 406,685 | 383,561 | 375,544 | ||||
| Depreciation and amortization | 163,401 | 146,137 | 148,494 | ||||
| Taxes other than income taxes | 51,058 | 64,846 | 62,783 | ||||
| 1,151,813 | 1,032,693 | 1,151,049 | |||||
| Operating income | 219,394 | 209,717 | 201,562 | ||||
| Interest expense and other: | |||||||
| Interest expense | 65,390 | 63,672 | 64,558 | ||||
| Allowance for funds used during construction | (16,695 | ) | (5,057 | ) | (6,391 | ) | |
| Interest income and other | (1,301 | ) | (2,069 | ) | (7,638 | ) | |
| 47,394 | 56,546 | 50,529 | |||||
| Income before income taxes | 172,000 | 153,171 | 151,033 | ||||
| Income taxes | 71,282 | 62,294 | 52,967 | ||||
| Net income | 100,718 | 90,877 | 98,066 | ||||
| Preferred dividend requirements | 13,581 | 2,862 | 3,410 | ||||
| Earnings available for common stock | $87,137 | $88,015 | $94,656 | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
92
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
| December 31, | |||||
| ASSETS | 2003 | 2002 | |||
| (in thousands) | |||||
| Property, plant and equipment: | |||||
| Electric plant in service | $3,705,472 | $3,451,547 | |||
| Gas plant in service | 345,238 | 326,470 | |||
| Steam plant in service | 60,184 | 59,737 | |||
| Other plant in service | 202,519 | 195,328 | |||
| Accumulated depreciation | (1,845,686 | ) | (1,744,176 | ) | |
| Net plant | 2,467,727 | 2,288,906 | |||
| Construction work in progress: | |||||
| Emery generating facility | 304,332 | 10,651 | |||
| Other | 85,484 | 155,699 | |||
| Other, less accumulated depreciation of $2,941 and $2,712 | 52,894 | 50,529 | |||
| 2,910,437 | 2,505,785 | ||||
| Current assets: | |||||
| Cash and temporary cash investments | 2,062 | 6,076 | |||
| Accounts receivable: | |||||
| Customer, less allowance for doubtful accounts of $1,262 and $894 | 18,035 | 42,647 | |||
| Associated companies | 2,556 | 62,705 | |||
| Other, less allowance for doubtful accounts of $145 and $388 | 51,775 | 27,898 | |||
| Income tax refunds receivable | 34,838 | 6,412 | |||
| Accumulated deferred income taxes | - | 17,494 | |||
| Production fuel, at average cost | 28,269 | 36,852 | |||
| Materials and supplies, at average cost | 30,904 | 28,821 | |||
| Gas stored underground, at average cost | 25,021 | 19,450 | |||
| Regulatory assets | 37,552 | 18,077 | |||
| Prepayments and other | 10,619 | 7,529 | |||
| 241,631 | 273,961 | ||||
| Investments: | |||||
| Nuclear decommissioning trust funds | 147,859 | 121,158 | |||
| Other | 14,233 | 13,492 | |||
| 162,092 | 134,650 | ||||
| Other assets: | |||||
| Regulatory assets | 243,317 | 199,691 | |||
| Deferred charges and other | 41,563 | 44,608 | |||
| 284,880 | 244,299 | ||||
| Total assets | $3,599,040 | $3,158,695 | |||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
93
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (Continued)
| December 31, | |||||
| CAPITALIZATION AND LIABILITIES | 2003 | 2002 | |||
| (in thousands, except share amounts) | |||||
| Capitalization (See Consolidated Statements of Capitalization): | |||||
| Common stock - $2.50 par value - authorized 24,000,000 shares; | |||||
| 13,370,788 shares outstanding | $33,427 | $33,427 | |||
| Additional paid-in capital | 646,077 | 477,701 | |||
| Retained earnings | 372,421 | 374,428 | |||
| Accumulated other comprehensive loss | (17,078 | ) | (18,887 | ) | |
| Total common equity | 1,034,847 | 866,669 | |||
| Cumulative preferred stock | 183,840 | 145,100 | |||
| Long-term debt (excluding current portion) | 837,810 | 827,389 | |||
| 2,056,497 | 1,839,158 | ||||
| Current liabilities: | |||||
| Current maturities and sinking funds | - | 5,080 | |||
| Commercial paper | 107,500 | - | |||
| Accounts payable | 124,336 | 83,126 | |||
| Accounts payable to associated companies | 22,492 | 25,137 | |||
| Accrued interest | 15,412 | 14,628 | |||
| Accrued taxes | 58,272 | 62,135 | |||
| Accumulated refueling outage provision | 4,957 | 13,845 | |||
| Other | 47,972 | 40,946 | |||
| 380,941 | 244,897 | ||||
| Other long-term liabilities and deferred credits: | |||||
| Accumulated deferred income taxes | 351,857 | 330,802 | |||
| Accumulated deferred investment tax credits | 27,614 | 31,135 | |||
| Regulatory liabilities | 404,274 | 78,995 | |||
| Asset retirement obligations | 158,322 | - | |||
| Pension and other benefit obligations | 91,925 | 88,449 | |||
| Cost of removal obligations | - | 419,195 | |||
| Other | 127,610 | 126,064 | |||
| 1,161,602 | 1,074,640 | ||||
| Commitments and contingencies (Note 11) | |||||
| Total capitalization and liabilities | $3,599,040 | $3,158,695 | |||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | |||||||
| 2003 | 2002 | 2001 | |||||
| (in thousands) | |||||||
| Cash flows from operating activities: | |||||||
| Net income | $100,718 | $90,877 | $98,066 | ||||
| Adjustments to reconcile net income to net cash | |||||||
| flows from operating activities: | |||||||
| Depreciation and amortization | 163,401 | 146,137 | 148,494 | ||||
| Amortization of leased nuclear fuel | 11,843 | 14,781 | 12,702 | ||||
| Amortization of deferred energy efficiency expenditures | 3,346 | 3,956 | 17,032 | ||||
| Deferred tax expense (benefits) and investment tax credits | 35,145 | 18,735 | (15,155 | ) | |||
| Refueling outage provision | (8,888 | ) | 8,232 | (3,628 | ) | ||
| Other | (5,633 | ) | 641 | 93 | |||
| Other changes in assets and liabilities: | |||||||
| Accounts receivable | 20,884 | (79,086 | ) | 53,640 | |||
| Sale of accounts receivable | 40,000 | (4,000 | ) | 25,000 | |||
| Income tax refunds receivable | (28,426 | ) | - | (1,251 | ) | ||
| Accounts payable | 3,448 | 31,171 | (41,885 | ) | |||
| Adjustment clause balances | (14,626 | ) | (7,881 | ) | 25,962 | ||
| Manufactured gas plants insurance refunds | - | - | (21,541 | ) | |||
| Other | 706 | 26,867 | 8,419 | ||||
| Net cash flows from operating activities | 321,918 | 250,430 | 305,948 | ||||
| Cash flows from (used for) financing activities: | |||||||
| Common stock dividends | (89,144 | ) | (81,790 | ) | (80,340 | ) | |
| Preferred stock dividends | (13,581 | ) | (2,862 | ) | (3,410 | ) | |
| Capital contribution from parent | 168,780 | 60,000 | - | ||||
| Proceeds from issuance of preferred stock | 38,738 | 144,602 | - | ||||
| Redemption of preferred stock | - | (56,389 | ) | - | |||
| Proceeds from issuance of long-term debt | 200,000 | - | 200,000 | ||||
| Reductions in long-term debt | (196,530 | ) | (560 | ) | (89,110 | ) | |
| Net change in short-term borrowings | 107,500 | (38,047 | ) | (131,266 | ) | ||
| Principal payments under capital lease obligations | (13,343 | ) | (14,328 | ) | (9,122 | ) | |
| Other | 3,735 | (4,340 | ) | 11,162 | |||
| Net cash flows from (used for) financing activities | 206,155 | 6,286 | (102,086 | ) | |||
| Cash flows used for investing activities: | |||||||
| Utility construction expenditures | (537,995 | ) | (247,815 | ) | (193,757 | ) | |
| Nuclear decommissioning trust funds | (11,215 | ) | (6,831 | ) | (6,008 | ) | |
| Other | 17,123 | 3,919 | (4,073 | ) | |||
| Net cash flows used for investing activities | (532,087 | ) | (250,727 | ) | (203,838 | ) | |
| Net increase (decrease) in cash and temporary cash investments | (4,014 | ) | 5,989 | 24 | |||
| Cash and temporary cash investments at beginning of period | 6,076 | 87 | 63 | ||||
| Cash and temporary cash investments at end of period | $2,062 | $6,076 | $87 | ||||
| Supplemental cash flows information: | |||||||
| Cash paid during the period for: | |||||||
| Interest | $65,180 | $64,430 | $63,886 | ||||
| Income taxes, net of refunds | $63,075 | $39,024 | $61,134 | ||||
| Noncash investing and financing activities: | |||||||
| Capital lease obligations incurred and other | $14,801 | $19,101 | $19,967 | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
| December 31, | |||||
| 2003 | 2002 | ||||
| (in thousands, except share amounts) | |||||
| Common equity (See Consolidated Balance Sheets) | $1,034,847 | $866,669 | |||
| Cumulative preferred stock: | |||||
| Cumulative, liquidation preference $25 per share, not mandatorily redeemable | |||||
| - authorized 16,000,000 shares: | |||||
| 8.375% series, 6,000,000 shares outstanding | 150,000 | 150,000 | |||
| 7.10% series, 1,600,000 shares outstanding | 40,000 | - | |||
| 190,000 | 150,000 | ||||
| Less: discount | (6,160 | ) | (4,900 | ) | |
| 183,840 | 145,100 | ||||
| Long-term debt: | |||||
| Collateral Trust Bonds: | |||||
| 7.25% series, due 2006 | 60,000 | 60,000 | |||
| 6-7/8% series, due 2007 | 55,000 | 55,000 | |||
| 6% series, due 2008 | 50,000 | 50,000 | |||
| 7% series, due 2023 | 50,000 | 50,000 | |||
| 5.5% series, due 2023 | 19,400 | 19,400 | |||
| 234,400 | 234,400 | ||||
| First Mortgage Bonds: | |||||
| 8% series, due 2007 | 25,000 | 25,000 | |||
| 7-5/8% series, retired in 2003 | - | 94,000 | |||
| 7-1/4% series, retired in 2003 | - | 27,450 | |||
| 8-5/8% series, retired in 2003 | - | 20,000 | |||
| 25,000 | 166,450 | ||||
| Pollution Control Revenue Bonds: | |||||
| 2.50%, due 2005 | 2,650 | 2,650 | |||
| 3.60%, due 2008 | 2,300 | 2,300 | |||
| 6.25%, due 2009 | 1,000 | 1,000 | |||
| 6.30%, due 2010 | 5,600 | 5,600 | |||
| Variable rate (2.4% at Dec. 31, 2003), due 2010, partially retired in 2003 | 7,700 | 10,100 | |||
| Variable/fixed rate series 1999 (4.05% to 4.20% through 2004), | |||||
| due 2010 to 2013 | 10,950 | 10,950 | |||
| 6.35%, due 2012 | 5,650 | 5,650 | |||
| Variable/fixed rate series 1998 (3.6% through 2008), due 2023 | 10,000 | 10,000 | |||
| 5.75%, retired in 2003 | - | 2,680 | |||
| 45,850 | 50,930 | ||||
| Senior debentures, 6-5/8%, due 2009 | 135,000 | 135,000 | |||
| Senior debentures, 6-3/4%, due 2011 | 200,000 | 200,000 | |||
| Senior debentures, 5.875%, due 2018 | 100,000 | - | |||
| Senior debentures, 6.45%, due 2033 | 100,000 | - | |||
| Subordinated deferrable interest debentures, 7-7/8%, retired in 2003 | - | 50,000 | |||
| 840,250 | 836,780 | ||||
| Less: | |||||
| Current maturities | - | (5,080 | ) | ||
| Unamortized debt discount, net | (2,440 | ) | (4,311 | ) | |
| 837,810 | 827,389 | ||||
| Total capitalization | $2,056,497 | $1,839,158 | |||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
| Accumulated | |||||||||||
| Additional | Other | Total | |||||||||
| Common | Paid-In | Retained | Comprehensive | Common | |||||||
| Stock | Capital | Earnings | Loss | Equity | |||||||
| (in thousands) | |||||||||||
| 2001: | |||||||||||
| Beginning balance (a) | $33,427 | $421,953 | $353,887 | ($18 | ) | $809,249 | |||||
| Earnings available for common stock | 94,656 | 94,656 | |||||||||
| Reclassification adjustment for losses included | |||||||||||
| in earnings available for common stock | |||||||||||
| related to derivatives qualified as hedges, | |||||||||||
| net of tax of ($12) | 18 | 18 | |||||||||
| Minimum pension liability adjustment, net of | |||||||||||
| tax of ($1,469) | (2,131 | ) | (2,131 | ) | |||||||
| Total comprehensive income | 92,543 | ||||||||||
| Common stock dividends | (80,340 | ) | (80,340 | ) | |||||||
| Amortization of preferred stock issuance | |||||||||||
| costs and other | 508 | 508 | |||||||||
| Ending balance | 33,427 | 422,461 | 368,203 | (2,131 | ) | 821,960 | |||||
2002: | |||||||||||
| Earnings available for common stock | 88,015 | 88,015 | |||||||||
| Minimum pension liability adjustment, net of | |||||||||||
| tax of ($11,844) | (16,756 | ) | (16,756 | ) | |||||||
| Total comprehensive income | 71,259 | ||||||||||
| Common stock dividends | (81,790 | ) | (81,790 | ) | |||||||
| Capital contribution from parent | 60,000 | 60,000 | |||||||||
| Redemption of preferred stock | (4,212 | ) | (4,212 | ) | |||||||
| Amortization of preferred stock issuance | |||||||||||
| costs and other | (548 | ) | (548 | ) | |||||||
| Ending balance | 33,427 | 477,701 | 374,428 | (18,887 | ) | 866,669 | |||||
2003: | |||||||||||
| Earnings available for common stock | 87,137 | 87,137 | |||||||||
| Minimum pension liability adjustment, net of | |||||||||||
| tax of $1,262 | 1,809 | 1,809 | |||||||||
| Total comprehensive income | 88,946 | ||||||||||
| Common stock dividends | (89,144 | ) | (89,144 | ) | |||||||
| Capital contribution from parent | 168,780 | 168,780 | |||||||||
| Preferred stock issuance costs | (404 | ) | (404 | ) | |||||||
| Ending balance | $33,427 | $646,077 | $372,421 | ($17,078 | ) | $1,034,847 | |||||
| (a) | Accumulated other comprehensive loss at January 1, 2001 consisted entirely of net unrealized losses on qualifying derivatives. |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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INTERSTATE POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Except as modified below, the Alliant Energy "Notes“Notes to Consolidated Financial Statements"Statements” are incorporated by reference insofar as they relate to IP&L and incorporate the disclosures relating to IP&L contained in the following notes of the Alliant Energy "Notes“Notes to Consolidated Financial Statements"Statements”:
| Summary of Significant Accounting Policies | Note 1(a) 3rd and 4th paragraphs, 1(b) |
| Leases | Note 3 |
| Sales of Accounts Receivable | Note 4 |
| Benefit Plans | Note 6(a) 1st, 2nd, 7th, 9th through 11th, and 13th paragraphs |
| Common and Preferred Stock | Note 7 |
| Debt | Note 8(a) |
| Investments | Note 9 1st paragraph |
| Derivative Financial Instruments | Note 10(a) 1st |
| Hedge Relationships" 1st and 4th | |
| Commitments and Contingencies | Note 11(b) 1st paragraph, 11(c), 11(e) "MGP Sites" and "NEPA," 11(f),11(g) |
| Jointly-Owned Electric Utility Plant | Note 12 |
| Asset Retirement Obligations | Note 18 |
The notes that follow herein set forth additional specific information for IP&L and are numbered to be consistent with the Alliant Energy "Notes“Notes to Consolidated Financial Statements."
”
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General -— The consolidated financial statements include the accounts of IP&L and its consolidated subsidiaries. IP&L is a direct subsidiary of Alliant Energy and is engaged principally in the generation, transmission, distribution and sale of electric energy; the purchase, distribution, transportation and sale of natural gas; and the provision of steam and various other energy-related services inincluding construction management services for wind farms. IP&L’s primary service territories are Iowa, Minnesota and Illinois.
The merger of IPC with and into IESU was approved by their respective shareowners in April 2001 and by the SEC in October 2001. The merger was effective Jan. 1, 2002 and IESU changed its name to IP&L. Each share of IPC
common stock outstanding was cancelled without payment and each share of IPC
preferred stock outstanding was cancelled and converted into the right to
receive one share of a new class of IESU Class A preferred stock with
substantially identical designations, rights and preferences as the
previously outstanding IPC preferred stock. IPC and IESU were both wholly-owned operating subsidiaries of Alliant Energy. As such, the transaction was accounted for as a common control merger. The consolidated financial statements and notes to consolidated financial statements illustrate the impact of the merger as if it had occurred as of Jan. 1, 2000.
2001.
(c)Regulatory Assets and Liabilities -— At Dec. 31, 20022003 and 2001,2002, regulatory assets and liabilities were comprised of the following items (in millions):
Regulatory Assets Regulatory Liabilities
----------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ---------- -----------
Tax-related $152.6 $86.3 $69.2 $--
Environmental-related 45.9 44.4 4.5 4.7
Energy efficiency program costs 8.1 6.0 -- --
Other 11.2 9.9 5.3 3.8
---------- ---------- ---------- -----------
$217.8 $146.6 $79.0 $8.5
========== ========== ========== ===========
(d) Income Taxes -
| Regulatory Assets | Regulatory Liabilities | ||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||
| Tax-related | $163 | .8 | $152 | .6 | $74 | .1 | $69 | .2 | |
| Environmental-related | 42 | .4 | 45 | .9 | 4 | .2 | 4 | .5 | |
| Asset retirement obligations | 20 | .5 | -- | -- | -- | ||||
| Energy efficiency program costs | 13 | .9 | 8 | .1 | -- | -- | |||
| Cost of removal obligations | -- | -- | 325 | .9 | -- | ||||
| Other | 40 | .3 | 11 | .2 | 3 | .9 | 5 | .3 | |
| $280 | .9 | $217 | .8 | $408 | .1 | $79 | .0 | ||
(3) LEASES
IP&L’s operating lease rental expenses for 2003, 2002 and 2001 were $9.9 million, $12.4 million and $11.7 million, respectively. The synthetic leases relate to the financing of utility railcars. These leases do not meet the consolidation requirements per FIN 46 and were not included on IP&L’s Consolidated Balance Sheets. IP&L has guaranteed the residual value of its synthetic leases totaling $7 million in the aggregate. The guarantees extend through the maturity of each respective underlying lease with remaining terms up to six years. Residual value guarantees have been included in the future minimum lease payments noted in the following table (in millions):
98
| Present | |||||||||
| Less: | value of net | ||||||||
| amount | minimum | ||||||||
| representing | capital lease | ||||||||
| 2004 | 2005 | 2006 | 2007 | 2008 | Thereafter | Total | interest | payments | |
| Operating leases | $8.8 | $7.2 | $5.8 | $4.5 | $4.3 | $37.2 | $67.8 | n/a | n/a |
| Synthetic leases | 0.4 | 5.1 | 0.3 | 0.3 | 0.3 | 2.2 | 8.6 | n/a | n/a |
| Capital leases | 16.9 | 13.5 | 40.0 | 5.6 | 4.6 | 1.1 | 81.7 | $9.0 | $72.7 |
(4) UTILITY ACCOUNTS RECEIVABLE
At Dec. 31, 2003 and 2002, IP&L had sold $126 million and $86 million of receivables, respectively. In 2003, 2002 and 2001, IP&L received $1.0 billion, $1.1 billion and $1.1 billion, respectively, in aggregate proceeds from the sale of accounts receivable. IP&L paid fees associated with these sales of $1.4 million, $2.0 million and $3.9 million in 2003, 2002 and 2001, respectively.
(5) INCOME TAXES
The components of income taxes for IP&L were as follows (in millions):
| 2003 | 2002 | 2001 | |||||
| Current tax expense: | |||||||
| Federal | $31 | .6 | $28 | .2 | $57 | .3 | |
| State | 5 | .1 | 17 | .8 | 11 | .0 | |
| Deferred tax expense (benefit): | |||||||
| Federal | 32 | .5 | 22 | .8 | (9 | .7) | |
| State | 6 | .2 | (0 | .7) | (2 | .1) | |
| Research and development tax credits | (0 | .4) | (2 | .2) | -- | ||
| Amortization of investment tax credits and other | (3 | .7) | (3 | .6) | (3 | .5) | |
| $71 | .3 | $62 | .3 | $53 | .0 | ||
Alliant Energy files a consolidated federal income tax return. Under the terms of an agreement between Alliant Energy and its subsidiaries, the subsidiaries calculate their respective federal income tax provisions and make payments to or receive payments from Alliant Energy as if they were separate taxable entities.
101
(3) LEASES
IP&L's operating lease rental expenses for 2002, 2001 and 2000 were $12.4&L realized net benefits of $8.5 million, $11.7$2.4 million and $11.6$3.9 million respectively. The synthetic leases
relaterelated to the financingstate apportionment and allocation of the utility railcars that were not included on
IP&L's Consolidated Balance Sheets. IP&L has guaranteed the residual value of
its synthetic leases totaling $6.8 millionparent tax benefits in the aggregate. The guarantees
extend through the maturity of each respective underlying lease with
remaining terms up to seven years. Residual value guarantees have been
included in the future minimum lease payments noted in the table below (in
millions):
The overall effective income tax rates shown in the following table were computed by dividing total income tax expense by income before income taxes.
| 2003 | 2002 | 2001 | |||||
| Statutory federal income tax rate | 35 | .0% | 35 | .0% | 35 | .0% | |
| Effect of rate making on property related differences | 6 | .3 | 1 | .3 | 3 | .9 | |
| State income taxes, net of federal tax benefits | 3 | .6 | 7 | .0 | 4 | .5 | |
| Adjustment of prior period taxes | 0 | .6 | 0 | .8 | (5 | .5) | |
| Amortization of investment tax credits | (2 | .1) | (2 | .2) | (2 | .5) | |
| Other items, net | (2 | .0) | (1 | .2) | (0 | .3) | |
| Overall effective income tax rate | 41 | .4% | 40 | .7% | 35 | .1% | |
99
The accumulated deferred income tax (assets) and liabilities included on the Consolidated Balance Sheets at Dec. 31 arise from the following temporary differences (in millions):
2002 2001
------------- -------------
Property related $418.9 $327.8
Other (105.6) (59.8)
------------- -------------
$313.3 $268.0
============= =============
| 2003 | 2002 | ||||||||||||
| Deferred | Deferred Tax | Deferred | Deferred Tax | ||||||||||
| Tax Assets | Liabilities | Net | Tax Assets | Liabilities | Net | ||||||||
| Property related | ($10 | .2) | $472 | .9 | $462 | .7 | ($15 | .0) | $433 | .9 | $418 | .9 | |
| Other | (108 | .4) | -- | (108 | .4) | (105 | .6) | -- | (105 | .6) | |||
| Total | ($118 | .6) | $472 | .9 | $354 | .3 | ($120 | .6) | $433 | .9 | $313 | .3 | |
| 2003 | 2002 | ||||
| Current assets - Accumulated deferred income taxes | $-- | ($17 | .5) | ||
| Current liabilities - Other | 2 | .4 | -- | ||
| Other long-term liabilities and deferred credits - | |||||
| Accumulated deferred income taxes | 351 | .9 | 330 | .8 | |
| Total deferred tax liabilities | $354 | .3 | $313 | .3 | |
(6) BENEFIT PLANS
(a) Pension Plans and Other Postretirement Benefits -— Substantially all of IP&L's&L’s employees are covered by threeseveral non-contributory defined benefit pension plans. For the defined benefit pension plan sponsored by Corporate
Services, Alliant Energy allocates pension costs and contributions to IP&L
based on labor costs of plan participants and any additional minimum pension
liability based on each group's funded status. The weighted-averageweighted average assumptions at the measurement date of Sept. 30 for IP&L’s qualified pension benefits and other postretirement benefits were as follows:
equal to the assumptions used for Alliant Energy’s pension benefits and other postretirement benefits, respectively, except for the rate of compensation increase. IP&L’s rate of compensation increase for its qualified pension benefits were 3.5% for 2003, 2002 and 2001.
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------ ---------------------------------------
2002 2001 2000 2002 2001 2000
----------- ------------------------ ----------- ----------- ---------------
Discount rate 6.75% 7.25% 8.00% 6.75% 7.25% 8.00%
Expected return on plan assets 9% 9% 9% 9% 9% 9%
Rate of compensation increase 3.5% 3.5% 3.5% N/A N/A N/A
Medical cost trend on covered charges:
Initial trend rate N/A N/A N/A 10.8% 12.0% 9.0%
Ultimate trend rate N/A N/A N/A 5% 5% 5%
The components of IP&L's&L’s qualified pension benefits and other postretirement benefits costs were as follows (in millions):
| Qualified Pension Benefits | Other Postretirement Benefits | ||||||||||||
| 2003 | 2002 | 2001 | 2003 | 2002 | 2001 | ||||||||
| Service cost | $5 | .1 | $4 | .2 | $3 | .4 | $2 | .2 | $1 | .8 | $1 | .5 | |
| Interest cost | 12 | .3 | 11 | .3 | 10 | .6 | 8 | .5 | 7 | .7 | 6 | .7 | |
| Expected return on plan assets | (11 | .5) | (12 | .8) | (14 | .4) | (3 | .9) | (4 | .0) | (4 | .5) | |
| Amortization of: | |||||||||||||
| Transition obligation (asset) | (0 | .2) | (0 | .1) | -- | 2 | .6 | 2 | .6 | 2 | .6 | ||
| Prior service cost | 1 | .3 | 1 | .3 | 1 | .3 | (0 | .2) | (0 | .2) | (0 | .2) | |
| Actuarial loss (gain) | 1 | .9 | 0 | .3 | (1 | .2) | 1 | .6 | 0 | .3 | (0 | .9) | |
| $8 | .9 | $4 | .2 | ($0 | .3) | $10 | .8 | $8 | .2 | $5 | .2 | ||
The pension benefit costbenefits costs shown abovepreviously (and in the following tables) representsrepresent only the pension benefit costbenefits costs for bargaining unit employees of IP&L covered under the bargaining unit pension plans that are sponsored by IP&L. The benefit obligations and assets associated with IP&L's&L’s non-bargaining employees who are participants in other Alliant Energy plans are reported in Alliant Energy's consolidated financial statementsEnergy’s Consolidated Financial Statements and are not reported above.previously. The pension benefit costbenefits costs for IP&L's&L’s non-bargaining employees who are now participants in other Alliant Energy plans was $4.4 million, $2.7 million and $1.2 million for 2003, 2002 and $1.9 million for 2002, 2001, and 2000, respectively. In addition, Corporate Services provides services to IP&L. The allocated pension benefitbenefits costs associated with these services waswas$3.2 million, $2.7 million and $2.1 million for 2003, 2002 and $1.9
million for 2002, 2001, and 2000, respectively. The other postretirement benefit costbenefits costs shown abovepreviously for each period (and in the following tables) representsrepresent the other postretirement benefit costbenefits costs for all IP&L employees. The allocated other postretirement benefit costbenefits costs associated with Corporate Services for IP&L was $1.5 million, $0.9 million and $0.5 million for 2003, 2002 and $0.4 million for 2002,
2001, and 2000, respectively.
103
The assumed medical trend rates are critical assumptions in determining the service and interest cost and accumulated postretirement benefit obligation related to postretirement benefitbenefits costs. A 1% change in the medical trend rates for 2002,2003, holding all other assumptions constant, would have the following effects (in millions):
| 1% Increase | 1% Decrease | ||||
| Effect on total of service and interest cost components | $1 | .3 | ($1 | .1) | |
| Effect on postretirement benefit obligation | $13 | .7 | ($12 | .0) | |
100
A reconciliation of the funded status of IP&L's&L’s plans to the amounts recognized on IP&L's&L’s Consolidated Balance Sheets at Dec. 31 was as follows (in millions):
| Qualified Pension Benefits | Other Postretirement Benefits | ||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||
| Change in projected benefit obligation: | |||||||||
| Net projected benefit obligation at beginning of year | $180 | .7 | $154 | .9 | $128 | .2 | $107 | .6 | |
| Service cost | 5 | .1 | 4 | .2 | 2 | .2 | 1 | .8 | |
| Interest cost | 12 | .3 | 11 | .3 | 8 | .5 | 7 | .7 | |
| Plan participants' contributions | -- | -- | 0 | .3 | 0 | .3 | |||
| Plan amendments | -- | 1 | .1 | (18 | .4) | -- | |||
| Actuarial loss | 19 | .1 | 16 | .3 | 19 | .2 | 17 | .6 | |
| Gross benefits paid | (7 | .5) | (7 | .1) | (7 | .5) | (6 | .8) | |
| Net projected benefit obligation at end of year | 209 | .7 | 180 | .7 | 132 | .5 | 128 | .2 | |
| Change in plan assets: | |||||||||
| Fair value of plan assets at beginning of year | 131 | .7 | 145 | .3 | 50 | .6 | 56 | .0 | |
| Actual return on plan assets | 25 | .0 | (6 | .5) | 7 | .7 | (5 | .7) | |
| Employer contributions | 4 | .4 | -- | 7 | .7 | 6 | .8 | ||
| Plan participants' contributions | -- | -- | 0 | .3 | 0 | .3 | |||
| Gross benefits paid | (7 | .5) | (7 | .1) | (7 | .5) | (6 | .8) | |
| Fair value of plan assets at end of year | 153 | .6 | 131 | .7 | 58 | .8 | 50 | .6 | |
| Funded status at end of year | (56 | .1) | (49 | .0) | (73 | .7) | (77 | .6) | |
| Unrecognized net actuarial loss | 47 | .6 | 43 | .8 | 52 | .7 | 38 | .3 | |
| Unrecognized prior service cost | 9 | .6 | 11 | .0 | (3 | .4) | (0 | .4) | |
| Unrecognized net transition obligation (asset) | (0 | .5) | (0 | .7) | 7 | .6 | 26 | .0 | |
| Net amount recognized at end of year | $0 | .6 | $5 | .1 | ($16 | .8) | ($13 | .7) | |
| Amounts recognized on the Consolidated | |||||||||
| Balance Sheets consist of: | |||||||||
| Prepaid benefit cost | $0 | .6 | $5 | .9 | $0 | .7 | $0 | .8 | |
| Accrued benefit cost | -- | (0 | .8) | (17 | .5) | (14 | .5) | ||
| Additional minimum liability | (22 | .8) | (24 | .1) | -- | -- | |||
| Intangible asset | 9 | .7 | 11 | .0 | -- | -- | |||
| Accumulated other comprehensive loss | 13 | .1 | 13 | .1 | -- | -- | |||
| Net amount recognized at measurement date | 0 | .6 | 5 | .1 | (16 | .8) | (13 | .7) | |
| Contributions paid after 9/30 and prior to 12/31 | -- | -- | 6 | .0 | 2 | .9 | |||
| Net amount recognized at 12/31 | $0 | .6 | $5 | .1 | ($10 | .8) | ($10 | .8) | |
In addition to the additional minimum liability in the previous table, above, Corporate Services allocated an additional minimum liability at Dec. 31, 2003 and 2002 of $20.1 million and $24.0 million, respectively. Included in the following table are IP&L’s accumulated benefit obligations, aggregate amounts applicable to qualified pension and other postretirement benefits with accumulated benefit obligations in excess of plan assets, as well as qualified pension plans with projected benefit obligations in excess of plan assets as of the measurement date of Sept. 30 (in millions):
| Qualified Pension Benefits | Other Postretirement Benefits | ||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||
| Accumulated benefit obligation | $175 | .8 | $150 | .7 | $132 | .5 | $128 | .2 | |
| Plans with accumulated benefit obligations in excess | |||||||||
| of plan assets: | |||||||||
| Accumulated benefit obligation | 175 | .8 | 150 | .7 | 132 | .5 | 128 | .2 | |
| Fair value of plan assets | 153 | .6 | 131 | .7 | 58 | .8 | 50 | .6 | |
| Plans with projected benefit obligations in excess | |||||||||
| of plan assets: | |||||||||
| Projected benefit obligations | 209 | .7 | 180 | .7 | N/A | N/A | |||
| Fair value of plan assets | 153 | .6 | 131 | .7 | N/A | N/A | |||
101
Postretirement benefit plans are funded via specific assets within certain retirement plans (401(h) assets) as well as VEBA trusts. The asset allocation of the 401(h) assets mirror the qualified pension plan assets and the asset allocation of the VEBA trusts are reflected in the following table under “Other Postretirement Plans.” The asset allocation for IP&L’s qualified pension and other postretirement benefit plans at Sept. 30, 2003 and 2002, and 2001 of $24.0the qualified pension plan target allocation for 2003 were as follows:
| Qualified Pension Plans | Other Postretirement Plans | ||||||||||
| Target | Percentage of Plan | Percentage of Plan Assets | |||||||||
| Allocation | Assets at Sept. 30 | at Sept. 30 | |||||||||
| Asset Category | 2003 | 2003 | 2002 | 2003 | 2002 | ||||||
| Equity securities | 50-65% | 61 | % | 55 | % | 52 | % | 45 | % | ||
| Debt securities | 25-40% | 33 | % | 35 | % | 43 | % | 48 | % | ||
| Other | 0-5% | 6 | % | 10 | % | 5 | % | 7 | % | ||
| 100 | % | 100 | % | 100 | % | 100 | % | ||||
IP&L estimates that funding for the qualified pension and postretirement benefit plans for 2004 will be approximately $18 million and $0,$11 million, respectively.
104
Alliant Energy sponsors several non-qualified pension plans that cover certain current and former key employees. The pension expense allocated to IP&L for these plans was $3.1 million, $2.7 million and $2.1 million in 2003, 2002 and $2.3 million in 2002,
2001, and 2000, respectively. IP&L has various life insurance policies that cover certain key employees and directors. At both Dec. 31, 20022003 and 2001,2002, the cash surrender value of these investments was $10 million and $9 million.million, respectively. A significant number of IP&L employees also participate in defined contribution pension plans (401(k) and Employee Stock Ownership plans). IP&L's&L’s contributions to the plans, which are based on the participants'participants’ level of contribution, were $2.0 million, $2.0 million and $2.3 million in 2003, 2002 and $2.5 million in 2002, 2001, and 2000,
respectively.
(7)COMMON AND PREFERRED STOCK
(b)Preferred Stock -— The carrying value of IP&L's&L’s cumulative preferred stock at Dec. 31, 2003 and 2002 and 2001 was $145$184 million and $54$145 million, respectively. The fair market value, based upon the market yield of similar securities and quoted market prices, at Dec. 31, 2003 and 2002 was $233 million and 2001 was $150 million, and $50 million, respectively.
(8)DEBT
(a)Short-Term Debt -— Information regarding IP&L's&L’s short-term debt was as follows (dollars in millions):
2002 2001
------------- --------------
At Dec. 31:
Money pool borrowings $-- $38.0
Interest rates on money pool borrowings N/A 2.4%
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $35.2 $31.2
Average interest rates on short-term debt 2.6% 5.9%
| 2003 | 2002 | ||||
| At Dec. 31: | |||||
| Commercial paper outstanding | $107 | .5 | $-- | ||
| Discount rates on commercial paper | 1 | .2% | N/A | ||
| For the year ended: | |||||
| Average amount of short-term debt | |||||
| (based on daily outstanding balances) | $60 | .8 | $35 | .2 | |
| Average interest rates on short-term debt | 1 | .3% | 2 | .6% | |
(b) Long-Term Debt -— IP&L's&L’s debt maturities for 20032004 to 20072008 are $5.1$0, $3 million, $0, $2.7$60 million, $60.0$80 million and $107.5$52 million, respectively. The carrying value of IP&L's&L’s long-term debt (including current maturities) at Dec. 31, 2003 and 2002 and 2001 was $860$838 million and $861$832 million, respectively. The fair market value, based upon the market yield of similar securities and quoted market prices, at Dec. 31, 2003 and 2002 was $904 million and 2001 was $920 million, and $872
million, respectively.
102
(9) INVESTMENTS AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Information relating to various investments held by IP&L at Dec. 31 that are marked-to-market as a result of SFAS 115 was as follows (in millions):
2002 2001
--------------------------- --------------------------
Carrying/ Unrealized Carrying/ Unrealized
Fair Gains, Fair Gains,
Value Net of Tax Value Net of Tax
------------ -------------- ------------ -------------
Available-for-sale securities:
Nuclear decommissioning trust funds:
Debt securities $75 $4 $69 $1
Equity securities 46 8 48 19
------------ -------------- ------------ -------------
Total $121 $12 $117 $20
============ ============== ============ =============
| 2003 | 2002 | ||||||||
| Carrying/ | Unrealized | Carrying/ | Unrealized | ||||||
| Fair | Gains, | Fair | Gains, | ||||||
| Value | Net of Tax | Value | Net of Tax | ||||||
| Available-for-sale securities: | |||||||||
| Nuclear decommissioning trust funds: | |||||||||
| Debt securities | $78 | $3 | $75 | $4 | |||||
| Equity securities | 70 | 20 | 46 | 8 | |||||
| Total | $148 | $23 | $121 | $12 | |||||
Nuclear Decommissioning Trust Funds -— At Dec. 31, 2002, $392003, $34 million, $19$28 million and $17$16 million of the debt securities mature in 2003-2010,2004-2010, 2011-2020 and 2021-2035, respectively. The funds realized gains/gains (losses) from the sales of securities of $0.2 million, $0.1 million and ($0.1) million in 2003, 2002 and ($0.2) million in
2002, 2001, and 2000, respectively (cost of the investments based on specific identification was $51.7 million, $18.9 million $22.4 million and $11.3$22.4 million and proceeds from the sales were $51.9 million, $19.0 million and $22.3 million, and $11.1 million,
respectively).
105
(11) COMMITMENTS AND CONTINGENCIES
(a) Construction and Acquisition Expenditures -— Certain commitments have been made in connection with 20032004 capital expenditures. During 2003,2004, total construction and acquisition expenditures are estimated to be approximately $450 million.
$332 million (unaudited).
(b) Purchased-Power, Coal and Natural Gas Contracts - Purchase Obligations —Based on the System Coordination and Operating Agreement, Alliant Energy annually allocates purchased-power contracts to IP&L and WP&L. Such process considers factors such as resource mix, load growth and resource availability. However, for 2003,2004, system-wide purchased-power contracts of $45.1$4.4 million (1.6(0.2 million MWh) have not yet been directly assigned to IP&L and WP&L since the specific needs of each utility isare not yet known.Refer to Note 1820 for additional information. Coal contract quantities are directly assigned to specific plants at IP&L and WP&L based on various factors including projected heat input requirements, combustion compatibility and efficiency. However, for 2003-2006,2004 to 2008, system-wide coal contracts of $56.1$78.7 million (7.8(10.7 million tons), $37.5$55.1 million (7.6 million tons), $28.0$34.0 million (4.7(5.4 million tons), $12.5 million (2.1 million tons) and $8.2$6.4 million (0.9(1.0 million tons), respectively, have not yet been directly assigned to IP&L and WP&L since the specific needs of each utility isare not yet known. At Dec. 31, 2002,2003, IP&L's&L’s minimum commitments were as follows (dollars and Dths in millions; MWhs and tons in thousands):
Purchased-power Coal Natural gas
---------------------- ------------------------ -------------------------
Dollars MWhs Dollars Tons Dollars Dths
--------- --------- ---------- ---------- ----------- ----------
2003 $38.1 937 $18.0 2,078 $42.5 4
2004 7.5 142 13.1 1,714 4.2 --
2005 2.0 -- 10.9 1,386 1.0 --
2006 2.0 -- 3.2 -- 0.9 --
2007 0.1 -- 2.3 -- 1.4 --
Thereafter 0.4 -- -- -- -- --
| Purchased-power | Coal | Natural gas | |||||||||||
| Dollars | MWhs | Dollars | Tons | Dollars | Dths | ||||||||
| 2004 | $8 | .9 | 144 | $23 | .0 | 1,249 | $50 | .8 | 3 | ||||
| 2005 | 2 | .3 | -- | 22 | .3 | 1,004 | 29 | .1 | -- | ||||
| 2006 | 2 | .3 | -- | 17 | .8 | 717 | 28 | .9 | -- | ||||
| 2007 | 0 | .1 | -- | 13 | .1 | 634 | 18 | .8 | -- | ||||
| 2008 | 0 | .1 | -- | 6 | .7 | 77 | 0 | .6 | -- | ||||
| Thereafter | 0 | .2 | -- | 33 | .0 | 153 | -- | -- | |||||
Also, at Dec. 31, 2003, IP&L’s other purchase obligations, which represent individual commitments incurred during the normal course of business which exceeded $1 million at Dec. 31, 2003, were $8.3 million for 2004. This excludes lease obligations which are included in Note 3.
(e) Environmental Liabilities - —IP&L had recorded the following environmental liabilities, and regulatory assets associated with certain of these liabilities, at Dec. 31 (in millions):
Environmental Liabilities Regulatory Assets
------------------------------- -----------------------------
2002 2001 2002 2001
------------- ------------- ------------ ------------
MGP sites $42.4 $39.5 $41.1 $38.5
NEPA 4.1 5.1 4.8 5.7
Other 0.1 0.3 -- 0.2
------------- ------------- ------------ ------------
$46.6 $44.9 $45.9 $44.4
============= ============= ============ ============
| Environmental Liabilities | Regulatory Assets | ||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||
| MGP sites | $40 | .1 | $42 | .4 | $38 | .6 | $41 | .1 | |
| NEPA | 3 | .0 | 4 | .1 | 3 | .8 | 4 | .8 | |
| Other | 0 | .1 | 0 | .1 | -- | -- | |||
| $43 | .2 | $46 | .6 | $42 | .4 | $45 | .9 | ||
103
MGP Sites - — Management currently estimates the range of remaining costs to be - ---------
incurred for the investigation, remediation and monitoring of all IP&L's&L’s sites to be approximately $31$29 million to $57$54 million.
106
(13) SEGMENTS OF BUSINESS
IP&L is a regulated domestic utility, serving customers in Iowa, Minnesota and Illinois, and includes three segments: a) electric operations; b) gas operations; and c) other, which includes the operations of the steam business, various other energy-related products and services including construction management services for wind farms and the unallocated portions of the utility business. Various line items in the following tables are not allocated to the electric and gas segments for management reporting purposes and therefore are included in "Total."“Total.” Intersegment revenues were not material to IP&L's&L’s operations and there was no single customer whose revenues were 10% or more of IP&L's&L’s consolidated revenues. Certain financial information relating to IP&L's&L’s significant business segments was as follows (in millions):
Electric Gas Other Total
- ------------------------------------------------------------------------------------------------------------------------------
2002
- ----
Operating revenues $964.9 $214.9 $31.8 $1,211.6
Depreciation and amortization 133.3 10.2 2.6 146.1
Operating income 185.1 14.1 6.9 206.1
Interest expense, net of AFUDC 62.4
Miscellaneous, net (9.5)
Income tax expense 62.3
Net income 90.9
Preferred dividends 2.9
Earnings available for common stock 88.0
Total assets 2,186.6 315.4 236.4 2,738.4
Construction and acquisition expenditures 226.8 17.9 3.1 247.8
- ------------------------------------------------------------------------------------------------------------------------------
2001
- ----
Operating revenues $1,003.1 $281.0 $32.2 $1,316.3
Depreciation and amortization 134.1 12.4 2.0 148.5
Operating income 184.5 8.7 6.2 199.4
Interest expense, net of AFUDC 61.7
Miscellaneous, net (13.4)
Income tax expense 53.0
Net income 98.1
Preferred dividends 3.4
Earnings available for common stock 94.7
Total assets 2,010.1 280.7 135.5 2,426.3
Construction and acquisition expenditures 170.8 20.1 2.9 193.8
- ------------------------------------------------------------------------------------------------------------------------------
2000
- ----
Operating revenues $955.8 $249.8 $28.4 $1,234.0
Depreciation and amortization 129.7 11.8 2.0 143.5
Operating income 207.4 14.4 2.8 224.6
Interest expense, net of AFUDC 63.8
Miscellaneous, net (7.3)
Income tax expense 65.0
Net income 103.1
Preferred dividends 3.4
Earnings available for common stock 99.7
Total assets 2,055.6 328.3 140.9 2,524.8
Construction and acquisition expenditures 150.4 20.6 0.8 171.8
107
| Electric | Gas | Other | Total | ||||||
| 2003 | |||||||||
| Operating revenues | $1,007 | .0 | $294 | .5 | $69 | .7 | $1,371 | .2 | |
| Depreciation and amortization | 149 | .6 | 11 | .1 | 2 | .7 | 163 | .4 | |
| Operating income | 202 | .3 | 16 | .9 | 0 | .2 | 219 | .4 | |
| Interest expense, net of AFUDC | 48 | .7 | |||||||
| Miscellaneous, net | (1 | .3) | |||||||
| Income tax expense | 71 | .3 | |||||||
| Net income | 100 | .7 | |||||||
| Preferred dividends | 13 | .6 | |||||||
| Earnings available for common stock | 87 | .1 | |||||||
| Total assets | 3,053 | .6 | 365 | .2 | 180 | .2 | 3,599 | .0 | |
| Construction and acquisition expenditures | 516 | .5 | 19 | .9 | 1 | .6 | 538 | .0 | |
| 2002 | |||||||||
| Operating revenues | $964 | .9 | $214 | .9 | $62 | .6 | $1,242 | .4 | |
| Depreciation and amortization | 133 | .3 | 10 | .2 | 2 | .6 | 146 | .1 | |
| Operating income | 185 | .1 | 14 | .1 | 10 | .5 | 209 | .7 | |
| Interest expense, net of AFUDC | 58 | .6 | |||||||
| Miscellaneous, net | (2 | .1) | |||||||
| Income tax expense | 62 | .3 | |||||||
| Net income | 90 | .9 | |||||||
| Preferred dividends | 2 | .9 | |||||||
| Earnings available for common stock | 88 | .0 | |||||||
| Total assets | 2,633 | .7 | 344 | .0 | 181 | .0 | 3,158 | .7 | |
| Construction and acquisition expenditures | 226 | .8 | 17 | .9 | 3 | .1 | 247 | .8 | |
| 2001 | |||||||||
| Operating revenues | $1,003 | .1 | $281 | .0 | $68 | .5 | $1,352 | .6 | |
| Depreciation and amortization | 134 | .1 | 12 | .4 | 2 | .0 | 148 | .5 | |
| Operating income | 184 | .5 | 8 | .7 | 8 | .4 | 201 | .6 | |
| Interest expense, net of AFUDC | 58 | .2 | |||||||
| Miscellaneous, net | (7 | .7) | |||||||
| Income tax expense | 53 | .0 | |||||||
| Net income | 98 | .1 | |||||||
| Preferred dividends | 3 | .4 | |||||||
| Earnings available for common stock | 94 | .7 | |||||||
| Total assets | 2,372 | .8 | 307 | .0 | 138 | .7 | 2,818 | .5 | |
| Construction and acquisition expenditures | 170 | .8 | 20 | .1 | 2 | .9 | 193 | .8 | |
104
(15) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summation of the individual quarters may not equal annual totals due to rounding.
2002 2001
---------------------------------------- ---------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
---------- --------- --------- --------- ---------- --------- -------- ---------
(in millions)
Operating revenues $278.8 $269.3 $351.5 $312.0 $395.4 $303.4 $343.5 $274.0
Operating income 38.2 34.2 96.6 37.2 40.0 32.8 92.9 33.7
Net income 12.9 15.8 45.0 17.2 15.7 12.2 51.3 18.9
Earnings available for common stock 12.0 14.9 44.3 16.8 14.8 11.3 50.5 18.1
(18)
| 2003 | 2002 | ||||||||||||||||
| March 31 | June 30 | Sept. 30 | Dec. 31 | March 31 | June 30 | Sept. 30 | Dec. 31 | ||||||||||
| (in millions) | |||||||||||||||||
| Operating revenues | $377 | .3 | $288 | .5 | $352 | .1 | $353 | .3 | $284 | .4 | $275 | .5 | $361 | .2 | $321 | .4 | |
| Operating income | 54 | .3 | 25 | .7 | 86 | .4 | 53 | .1 | 37 | .5 | 36 | .1 | 98 | .2 | 37 | .9 | |
| Net income | 25 | .0 | 7 | .9 | 41 | .0 | 26 | .9 | 12 | .9 | 15 | .8 | 45 | .0 | 17 | .2 | |
| Earnings available for common stock | 21 | .6 | 4 | .7 | 37 | .7 | 23 | .0 | 12 | .0 | 14 | .9 | 44 | .3 | 16 | .8 | |
(20) RELATED PARTIES
IP&L and WP&L have entered into a System Coordination and Operating Agreement. The agreement, which has been approved by FERC, provides a contractual basis for coordinated planning, construction, operation and maintenance of the interconnected electric generation and transmission (IP&L only) systems of IP&L and WP&L. In addition, the agreement allows the interconnected system to be operated as a single entity with off-system capacity sales and purchases made to market excess system capability or to meet system capability deficiencies. Such sales and purchases are allocated among IP&L and WP&L based on procedures included in the agreement. The sales amounts allocated to IP&L were $34.9 million, $27.3 million and $40.6 million for 2003, 2002 and $41.7 million
for 2002, 2001, and 2000, respectively. The purchases allocated to IP&L were $156.9 million, $138.8 million and $183.1 million for 2003, 2002 and $134.7 million for 2002, 2001, and 2000, respectively. The procedures were approved by both FERC and all state regulatory bodies having jurisdiction over these sales. Under the agreement, IP&L and WP&L are fully reimbursed for any generation expense incurred to support the sale to an affiliate or to a non-affiliate. Any margins on sales to non-affiliates are distributed to IP&L and WP&L in proportion to each utility'sutility’s share of electric production at the time of the sale.
Pursuant to a service agreement approved by the SEC under PUHCA, IP&L receives various administrative and general services from an affiliate, Corporate Services. These services are billed to IP&L at cost based on payroll and other expenses incurred by Corporate Services for the benefit of IP&L. These costs totaled $186.8 million, $182.1 million and $149.5 million for 2003, 2002 and $146.8 million
for 2002, 2001, and 2000, respectively, and consisted primarily of employee compensation, benefits and fees associated with various professional services. At Dec. 31, 20022003 and 2001,2002, IP&L had a net intercompany payable to Corporate Services of $43.9 million and $39.1 million, and $33.6 million, respectively.
108
105
To the Board of Directors and Shareowners of Wisconsin Power and Light Company:
We have audited the accompanying consolidated balance sheets and statements of capitalization of Wisconsin Power and Light Company and subsidiaries (the "Company") as of December 31, 2003 and 2002, and 2001, andthe related consolidated statements of income, cash flows and changes in common equity for each of the three years in the period ended December 31, 2002.2003. Our auditaudits also included the supplementalfinancial statement schedule listed in Item 15(a)(2). These financial statements and the supplementalfinancial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the supplementalfinancial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20022003 and 2001,2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20022003, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such supplementalfinancial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/
As discussed in Note 18 to the consolidated financial statements, on January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations."
/s/ DELOITTE & TOUCHE LLP
- -------------------------
Milwaukee, Wisconsin
March 18, 2003
109
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Electric utility $787,680 $753,450 $692,191
Gas utility 179,091 206,863 165,152
Water 5,307 5,040 5,038
----------------- ----------------- -----------------
972,078 965,353 862,381
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric production fuels 132,492 120,722 113,208
Purchased power 217,209 217,306 146,939
Cost of gas sold 110,119 153,823 107,131
Other operation and maintenance 215,689 186,477 188,967
Depreciation and amortization 136,232 129,098 139,911
Taxes other than income taxes 32,874 32,504 29,163
----------------- ----------------- -----------------
844,615 839,930 725,319
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Operating income 127,463 125,423 137,062
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 40,202 43,483 44,644
Interest income (21,590) (8,109) (13,143)
Equity income from unconsolidated investments (17,022) (15,535) (552)
Allowance for funds used during construction (2,639) (4,753) (5,365)
Miscellaneous, net 2,864 (4,391) (2,841)
----------------- ----------------- -----------------
1,815 10,695 22,743
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 125,648 114,728 114,319
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Income taxes 44,724 41,238 42,918
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Income before cumulative effect of a change
in accounting principle, net of tax 80,924 73,490 71,401
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Cumulative effect of a change in accounting
principle, net of tax - - 35
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Net income 80,924 73,490 71,436
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 3,310 3,310 3,310
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Earnings available for common stock $77,614 $70,180 $68,126
================= ================= =================
- -----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
110
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 2002 2001
- ------------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Electric plant in service $1,843,834 $1,779,593
Gas plant in service 286,652 280,881
Water plant in service 33,062 32,497
Other plant in service 242,329 243,121
Accumulated depreciation (1,410,036) (1,328,111)
----------------- -----------------
Net plant 995,841 1,007,981
Construction work in progress 96,746 37,828
Other, net 17,811 18,085
----------------- -----------------
1,110,398 1,063,894
----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 8,577 307
Accounts receivable:
Customer, less allowance for doubtful accounts of $1,770 and $1,543 7,977 33,190
Associated companies 21,484 3,676
Other, less allowance for doubtful accounts of $458 and $- 18,191 16,571
Production fuel, at average cost 18,980 17,314
Materials and supplies, at average cost 22,133 20,669
Gas stored underground, at average cost 16,679 22,187
Regulatory assets 27,999 5,163
Prepaid gross receipts tax 27,388 25,673
Other 8,599 7,855
----------------- -----------------
178,007 152,605
----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 223,734 215,794
Investment in ATC and other 133,043 127,941
----------------- -----------------
356,777 343,735
----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 102,674 109,864
Deferred charges and other 236,741 205,702
----------------- -----------------
339,415 315,566
----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------
Total assets $1,984,597 $1,875,800
================= =================
- ------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
111
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (Continued)
December 31,
CAPITALIZATION AND LIABILITIES 2002 2001
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See Consolidated Statements of Capitalization):
Common stock - $5 par value - authorized 18,000,000 shares;
13,236,601 shares outstanding $66,183 $66,183
Additional paid-in capital 325,603 264,603
Retained earnings 399,302 381,333
Accumulated other comprehensive loss (24,108) (10,167)
------------------ -----------------
Total common equity 766,980 701,952
------------------ -----------------
Cumulative preferred stock 59,963 59,963
Long-term debt (excluding current portion) 468,208 468,083
------------------ -----------------
1,295,151 1,229,998
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Variable rate demand bonds 55,100 55,100
Commercial paper 60,000 -
Notes payable to associated companies - 90,816
Accounts payable 90,869 94,091
Accounts payable to associated companies 43,276 25,231
Accrued taxes 19,353 2,057
Regulatory liabilities 16,938 7,619
Other 29,064 25,543
------------------ -----------------
314,600 300,457
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 191,894 206,245
Accumulated deferred investment tax credits 23,241 24,907
Pension and other benefit obligations 58,921 18,175
Customer advances 36,555 34,178
Other 64,235 61,840
------------------ -----------------
374,846 345,345
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 11)
- --------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,984,597 $1,875,800
================== =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
112
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $80,924 $73,490 $71,436
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 136,232 129,098 139,911
Amortization of nuclear fuel 6,486 4,554 5,066
Amortization of deferred energy efficiency expenditures 21,179 14,361 14,361
Deferred tax benefits and investment tax credits (5,562) (6,791) (12,077)
Equity income from unconsolidated investments, net (17,022) (15,535) (552)
Distributions from equity method investments 13,199 8,450 992
Other (22,160) (10,539) (15,451)
Other changes in assets and liabilities:
Accounts receivable 5,785 14,408 (29,733)
Accounts payable (11,676) (20,549) 36,265
Accrued taxes 17,296 (1,225) (3,257)
Other (931) (53,836) (32,901)
---------------- --------------- ---------------
Net cash flows from operating activities 223,750 135,886 174,060
---------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends (59,645) (60,449) -
Preferred stock dividends (3,310) (3,310) (3,310)
Capital contribution from parent 61,000 35,000 -
Proceeds from issuance of long-term debt - - 100,000
Reductions in long-term debt - (47,000) (1,875)
Net change in short-term borrowings (30,816) 61,572 (96,505)
Other 5,086 (4,989) 2,677
---------------- --------------- ---------------
Net cash flows used for financing activities (27,685) (19,176) 987
---------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (156,921) (147,032) (131,640)
Nuclear decommissioning trust funds (16,092) (16,092) (16,092)
Proceeds from formation of ATC and other asset dispositions - 75,600 961
Other (14,782) (29,308) (28,109)
---------------- --------------- ---------------
Net cash flows used for investing activities (187,795) (116,832) (174,880)
---------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 8,270 (122) 167
---------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 307 429 262
---------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $8,577 $307 $429
================ =============== ===============
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid during the period for:
Interest $39,540 $43,237 $40,455
================ =============== ===============
Income taxes, net of refunds $35,875 $54,161 $54,676
================ =============== ===============
- ---------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
113
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
2002 2001
- -------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Common equity $766,980 $701,952
------------------ ------------------
- -------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock:
Cumulative, without par value, not mandatorily redeemable - authorized
3,750,000 shares, maximum aggregate stated value $150,000,000:
$100 stated value - 4.50% series, 99,970 shares outstanding 9,997 9,997
$100 stated value - 4.80% series, 74,912 shares outstanding 7,491 7,491
$100 stated value - 4.96% series, 64,979 shares outstanding 6,498 6,498
$100 stated value - 4.40% series, 29,957 shares outstanding 2,996 2,996
$100 stated value - 4.76% series, 29,947 shares outstanding 2,995 2,995
$100 stated value - 6.20% series, 150,000 shares outstanding 15,000 15,000
$25 stated value - 6.50% series, 599,460 shares outstanding 14,986 14,986
------------------ ------------------
59,963 59,963
------------------ ------------------
- -------------------------------------------------------------------------------------------------------------------------
Long-term debt:
First Mortgage Bonds:
1984 Series A, variable rate (1.6% at December 31, 2002), due 2014 8,500 8,500
1988 Series A, variable rate (2.1% at December 31, 2002), due 2015 14,600 14,600
1991 Series A, variable rate (1.85% at December 31, 2002), due 2015 16,000 16,000
1991 Series B, variable rate (1.85% at December 31, 2002), due 2005 16,000 16,000
1992 Series W, 8.6%, due 2027 70,000 70,000
1992 Series X, 7.75%, due 2004 62,000 62,000
1992 Series Y, 7.6%, due 2005 72,000 72,000
------------------ ------------------
259,100 259,100
Debentures, 7%, due 2007 105,000 105,000
Debentures, 5.7%, due 2008 60,000 60,000
Debentures, 7-5/8%, due 2010 100,000 100,000
------------------ ------------------
524,100 524,100
------------------ ------------------
Less:
Variable rate demand bonds (55,100) (55,100)
Unamortized debt discount, net (792) (917)
------------------ ------------------
468,208 468,083
------------------ ------------------
- -------------------------------------------------------------------------------------------------------------------------
Total capitalization $1,295,151 $1,229,998
================== ==================
- -------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
114
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Common
Stock Capital Earnings Loss Equity
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
2000:
Beginning balance $66,183 $229,438 $303,476 $-- $599,097
Earnings available for common stock 68,126 68,126
Unrealized holding losses on derivatives due to cumulative
effect of a change in accounting principle,
net of tax of ($430) (642) (642)
Other unrealized holding losses on derivatives,
net of tax of ($3,634) (5,151) (5,151)
Less: reclassification adjustment for losses
included in earnings available for common
stock, net of tax of ($769) (1,085) (1,085)
-------------- -----------
Net unrealized losses on qualifying derivatives (4,708) (4,708)
-------------- -----------
Total comprehensive income 63,418
Stock options exercised 78 78
----------- ----------- ------------ -------------- -----------
Ending balance 66,183 229,516 371,602 (4,708) 662,593
2001:
Earnings available for common stock 70,180 70,180
Minimum pension liability adjustment, net of tax of ($9,552) (14,248) (14,248)
Unrealized holding gains on derivatives,
net of tax of $3,932 5,952 5,952
Less: reclassification adjustment for losses
included in earnings available for common
stock, net of tax of ($1,676) (2,837) (2,837)
-------------- -----------
Net unrealized gains on qualifying derivatives 8,789 8,789
-------------- -----------
Total comprehensive income 64,721
Common stock dividends (60,449) (60,449)
Stock options exercised 87 87
Capital contribution from parent 35,000 35,000
----------- ----------- ------------ -------------- -----------
Ending balance 66,183 264,603 381,333 (10,167) 701,952
2002:
Earnings available for common stock 77,614 77,614
Minimum pension liability adjustment, net of tax of ($6,823) (10,177) (10,177)
Unrealized holding losses on derivatives,
net of tax of ($92) (137) (137)
Less: reclassification adjustment for gains
included in earnings available for common
stock, net of tax of $2,432 3,627 3,627
-------------- -----------
Net unrealized losses on qualifying derivatives (3,764) (3,764)
-------------- -----------
Total comprehensive income 63,673
Common stock dividends (59,645) (59,645)
Capital contribution from parent 61,000 61,000
----------- ----------- ------------ -------------- -----------
Ending balance $66,183 $325,603 $399,302 ($24,108) $766,980
=========== =========== ============ ============== ===========
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
115
106
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
| Year Ended December 31, | |||||||
| 2003 | 2002 | 2001 | |||||
| (in thousands) | |||||||
| Operating revenues: | |||||||
| Electric utility | $910,086 | $787,680 | $753,450 | ||||
| Gas utility | 272,377 | 179,091 | 206,863 | ||||
| Other | 34,518 | 22,754 | 33,403 | ||||
| 1,216,981 | 989,525 | 993,716 | |||||
| Operating expenses: | |||||||
| Electric production fuel and purchased power | 409,742 | 352,539 | 338,028 | ||||
| Cost of gas sold | 186,285 | 110,119 | 153,823 | ||||
| Other operation and maintenance | 292,554 | 239,679 | 211,006 | ||||
| Depreciation and amortization | 104,896 | 108,740 | 121,059 | ||||
| Taxes other than income taxes | 31,872 | 32,874 | 32,504 | ||||
| 1,025,349 | 843,951 | 856,420 | |||||
| Operating income | 191,632 | 145,574 | 137,296 | ||||
| Interest expense and other: | |||||||
| Interest expense | 37,873 | 40,202 | 43,483 | ||||
| Equity income from unconsolidated investments | (20,725 | ) | (17,022 | ) | (15,535 | ) | |
| Allowance for funds used during construction | (4,024 | ) | (2,639 | ) | (4,753 | ) | |
| Interest income and other | (2,209 | ) | (615 | ) | (627 | ) | |
| 10,915 | 19,926 | 22,568 | |||||
| Income before income taxes | 180,717 | 125,648 | 114,728 | ||||
| Income taxes | 65,843 | 44,724 | 41,238 | ||||
| Net income | 114,874 | 80,924 | 73,490 | ||||
| Preferred dividend requirements | 3,310 | 3,310 | 3,310 | ||||
| Earnings available for common stock | $111,564 | $77,614 | $70,180 | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
107
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
| December 31, | |||||
| ASSETS | 2003 | 2002 | |||
| (in thousands) | |||||
| Property, plant and equipment: | |||||
| Electric plant in service | $2,002,006 | $1,843,834 | |||
| Gas plant in service | 301,201 | 286,652 | |||
| Other plant in service | 275,637 | 275,391 | |||
| Accumulated depreciation | (1,139,599 | ) | (1,047,715 | ) | |
| Net plant | 1,439,245 | 1,358,162 | |||
| Construction work in progress | 67,200 | 96,746 | |||
| Other, less accumulated depreciaton of $301 and $240 | 15,717 | 17,811 | |||
| 1,522,162 | 1,472,719 | ||||
| Current assets: | |||||
| Cash and temporary cash investments | 27,075 | 8,577 | |||
| Accounts receivable: | |||||
| Customer, less allowance for doubtful accounts of $2,662 and $1,770 | 78,934 | 7,977 | |||
| Associated companies | - | 1,172 | |||
| Other, less allowance for doubtful accounts of $422 and $458 | 24,374 | 18,191 | |||
| Income tax refunds receivable | 16,795 | - | |||
| Accumulated deferred income taxes | 6,594 | 8,532 | |||
| Production fuel, at average cost | 17,655 | 18,980 | |||
| Materials and supplies, at average cost | 22,922 | 22,133 | |||
| Gas stored underground, at average cost | 24,277 | 16,679 | |||
| Regulatory assets | 24,225 | 27,999 | |||
| Prepaid gross receipts tax | 28,341 | 27,388 | |||
| Other | 7,997 | 8,599 | |||
| 279,189 | 166,227 | ||||
| Investments: | |||||
| Nuclear decommissioning trust funds | 233,665 | 223,734 | |||
| Investment in ATC and other | 144,075 | 133,043 | |||
| 377,740 | 356,777 | ||||
| Other assets: | |||||
| Regulatory assets | 95,944 | 102,674 | |||
| Deferred charges and other | 194,242 | 236,741 | |||
| 290,186 | 339,415 | ||||
| Total assets | $2,469,277 | $2,335,138 | |||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
108
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (Continued)
| December 31, | |||||
| CAPITALIZATION AND LIABILITIES | 2003 | 2002 | |||
| (in thousands, except share amounts) | |||||
| Capitalization (See Consolidated Statements of Capitalization): | |||||
| Common stock - $5 par value - authorized 18,000,000 shares; | |||||
| 13,236,601 shares outstanding | $66,183 | $66,183 | |||
| Additional paid-in capital | 525,603 | 325,603 | |||
| Retained earnings | 440,286 | 399,302 | |||
| Accumulated other comprehensive loss | (20,235 | ) | (24,108 | ) | |
| Total common equity | 1,011,837 | 766,980 | |||
| Cumulative preferred stock | 59,963 | 59,963 | |||
| Long-term debt (excluding current portion) | 336,409 | 468,208 | |||
| 1,408,209 | 1,295,151 | ||||
| Current liabilities: | |||||
| Current maturities | 62,000 | - | |||
| Variable rate demand bonds | 55,100 | 55,100 | |||
| Commercial paper | - | 60,000 | |||
| Accounts payable | 80,051 | 90,869 | |||
| Accounts payable to associated companies | 22,615 | 22,964 | |||
| Accrued taxes | 6,284 | 19,353 | |||
| Regulatory liabilities | 13,874 | 16,938 | |||
| Other | 27,196 | 29,064 | |||
| 267,120 | 294,288 | ||||
| Other long-term liabilities and deferred credits: | |||||
| Accumulated deferred income taxes | 213,652 | 200,426 | |||
| Accumulated deferred investment tax credits | 21,471 | 23,241 | |||
| Regulatory liabilities | 227,956 | 15,305 | |||
| Asset retirement obligations | 187,358 | - | |||
| Pension and other benefit obligations | 59,042 | 58,921 | |||
| Customer advances | 34,895 | 36,555 | |||
| Cost of removal obligations | - | 362,321 | |||
| Other | 49,574 | 48,930 | |||
| 793,948 | 745,699 | ||||
| Commitments and contingencies (Note 11) | |||||
| Total capitalization and liabilities | $2,469,277 | $2,335,138 | |||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
109
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | |||||||
| 2003 | 2002 | 2001 | |||||
| (in thousands) | |||||||
| Cash flows from operating activities: | |||||||
| Net income | $114,874 | $80,924 | $73,490 | ||||
| Adjustments to reconcile net income to net cash | |||||||
| flows from operating activities: | |||||||
| Depreciation and amortization | 104,896 | 108,740 | 121,059 | ||||
| Amortization of nuclear fuel | 5,691 | 6,486 | 4,554 | ||||
| Amortization of deferred energy efficiency expenditures | 43,825 | 21,179 | 14,361 | ||||
| Deferred tax expense (benefit) and investment tax credits | 21,785 | (5,562 | ) | (6,791 | ) | ||
| Equity income from unconsolidated investments, net | (20,725 | ) | (17,022 | ) | (15,535 | ) | |
| Distributions from equity method investments | 14,021 | 13,199 | 8,450 | ||||
| Other | (461 | ) | (1,175 | ) | (3,033 | ) | |
| Other changes in assets and liabilities: | |||||||
| Accounts receivable | (9,968 | ) | (1,902 | ) | 20,408 | ||
| Sale of accounts receivable | (66,000 | ) | 28,000 | (6,000 | ) | ||
| Income tax refunds receivable | (16,795 | ) | - | - | |||
| Accounts payable | (2,647 | ) | (20,540 | ) | (23,653 | ) | |
| Accrued taxes | (13,069 | ) | 17,296 | (1,225 | ) | ||
| Other | (36,932 | ) | (5,873 | ) | (50,199 | ) | |
| Net cash flows from operating activities | 138,495 | 223,750 | 135,886 | ||||
| Cash flows used for financing activities: | |||||||
| Common stock dividends | (70,580 | ) | (59,645 | ) | (60,449 | ) | |
| Preferred stock dividends | (3,310 | ) | (3,310 | ) | (3,310 | ) | |
| Capital contribution from parent | 200,000 | 61,000 | 35,000 | ||||
| Reductions in long-term debt | (70,000 | ) | - | (47,000 | ) | ||
| Net change in short-term borrowings | (60,000 | ) | (30,816 | ) | 61,572 | ||
| Other | (7,705 | ) | 5,086 | (4,989 | ) | ||
| Net cash flows used for financing activities | (11,595 | ) | (27,685 | ) | (19,176 | ) | |
| Cash flows used for investing activities: | |||||||
| Utility construction expenditures | (151,635 | ) | (156,921 | ) | (147,032 | ) | |
| Nuclear decommissioning trust funds | (2,876 | ) | (16,092 | ) | (16,092 | ) | |
| Proceeds from asset sales | 21,337 | - | 75,600 | ||||
| Other | 24,772 | (14,782 | ) | (29,308 | ) | ||
| Net cash flows used for investing activities | (108,402 | ) | (187,795 | ) | (116,832 | ) | |
| Net increase (decrease) in cash and temporary cash investments | 18,498 | 8,270 | (122 | ) | |||
| Cash and temporary cash investments at beginning of period | 8,577 | 307 | 429 | ||||
| Cash and temporary cash investments at end of period | $27,075 | $8,577 | $307 | ||||
| Supplemental cash flows information: | |||||||
| Cash paid during the period for: | |||||||
| Interest | $39,588 | $39,540 | $43,237 | ||||
| Income taxes, net of refunds | $84,256 | $35,875 | $54,161 | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
110
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
| December 31, | |||||
| 2003 | 2002 | ||||
| (in thousands, except share amounts) | |||||
| Common equity (See Consolidated Balance Sheets) | $1,011,837 | $766,980 | |||
| Cumulative preferred stock: | |||||
| Cumulative, without par value, not mandatorily redeemable - authorized | |||||
| 3,750,000 shares, maximum aggregate stated value $150,000,000: | |||||
| $100 stated value - 4.50% series, 99,970 shares outstanding | 9,997 | 9,997 | |||
| $100 stated value - 4.80% series, 74,912 shares outstanding | 7,491 | 7,491 | |||
| $100 stated value - 4.96% series, 64,979 shares outstanding | 6,498 | 6,498 | |||
| $100 stated value - 4.40% series, 29,957 shares outstanding | 2,996 | 2,996 | |||
| $100 stated value - 4.76% series, 29,947 shares outstanding | 2,995 | 2,995 | |||
| $100 stated value - 6.20% series, 150,000 shares outstanding | 15,000 | 15,000 | |||
| $25 stated value - 6.50% series, 599,460 shares outstanding | 14,986 | 14,986 | |||
| 59,963 | 59,963 | ||||
| Long-term debt: | |||||
| First Mortgage Bonds: | |||||
| 1992 Series X, 7.75%, due 2004 | 62,000 | 62,000 | |||
| 1992 Series Y, 7.6%, due 2005 | 72,000 | 72,000 | |||
| 1991 Series B, variable rate (1.73% at Dec. 31, 2003), due 2005 | 16,000 | 16,000 | |||
| 1984 Series A, variable rate (1.37% at Dec. 31, 2003), due 2014 | 8,500 | 8,500 | |||
| 1988 Series A, variable rate (1.29% at Dec. 31, 2003), due 2015 | 14,600 | 14,600 | |||
| 1991 Series A, variable rate (1.73% at Dec. 31, 2003), due 2015 | 16,000 | 16,000 | |||
| 1992 Series W, 8.6%, retired in 2003 | - | 70,000 | |||
| 189,100 | 259,100 | ||||
| Debentures, 7%, due 2007 | 105,000 | 105,000 | |||
| Debentures, 5.7%, due 2008 | 60,000 | 60,000 | |||
| Debentures, 7-5/8%, due 2010 | 100,000 | 100,000 | |||
| 454,100 | 524,100 | ||||
| Less: | |||||
| Current maturities | (62,000 | ) | - | ||
| Variable rate demand bonds | (55,100 | ) | (55,100 | ) | |
| Unamortized debt discount, net | (591 | ) | (792 | ) | |
| 336,409 | 468,208 | ||||
| Total capitalization | $1,408,209 | $1,295,151 | |||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
111
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
| Accumulated | |||||||||||
| Additional | Other | Total | |||||||||
| Common | Paid-In | Retained | Comprehensive | Common | |||||||
| Stock | Capital | Earnings | Loss | Equity | |||||||
| (in thousands) | |||||||||||
| 2001: | |||||||||||
| Beginning balance (a) | $66,183 | $229,516 | $371,602 | ($4,708 | ) | $662,593 | |||||
| Earnings available for common stock | 70,180 | 70,180 | |||||||||
| Minimum pension liability adjustment, | |||||||||||
| net of tax of ($9,552) | (14,248 | ) | (14,248 | ) | |||||||
| Unrealized holding gains on derivatives, | |||||||||||
| net of tax of $3,932 | 5,952 | 5,952 | |||||||||
| Less: reclassification adjustment for losses | |||||||||||
| included in earnings available for common | |||||||||||
| stock, net of tax of ($1,676) | (2,837 | ) | (2,837 | ) | |||||||
| Net unrealized gains on qualifying derivatives | 8,789 | 8,789 | |||||||||
| Total comprehensive income | 64,721 | ||||||||||
| Common stock dividends | (60,449 | ) | (60,449 | ) | |||||||
| Capital contribution from parent | 35,000 | 35,000 | |||||||||
| Stock options exercised | 87 | 87 | |||||||||
| Ending balance | 66,183 | 264,603 | 381,333 | (10,167 | ) | 701,952 | |||||
2002: | |||||||||||
| Earnings available for common stock | 77,614 | 77,614 | |||||||||
| Minimum pension liability adjustment, | |||||||||||
| net of tax of ($6,823) | (10,177 | ) | (10,177 | ) | |||||||
| Unrealized holding losses on derivatives, | |||||||||||
| net of tax of ($92) | (137 | ) | (137 | ) | |||||||
| Less: reclassification adjustment for gains | |||||||||||
| included in earnings available for common | |||||||||||
| stock, net of tax of $2,432 | 3,627 | 3,627 | |||||||||
| Net unrealized losses on qualifying derivatives | (3,764 | ) | (3,764 | ) | |||||||
| Total comprehensive income | 63,673 | ||||||||||
| Common stock dividends | (59,645 | ) | (59,645 | ) | |||||||
| Capital contribution from parent | 61,000 | 61,000 | |||||||||
| Ending balance | 66,183 | 325,603 | 399,302 | (24,108 | ) | 766,980 | |||||
2003: | |||||||||||
| Earnings available for common stock | 111,564 | 111,564 | |||||||||
| Minimum pension liability adjustment, | |||||||||||
| net of tax of $2,809 | 4,190 | 4,190 | |||||||||
| Unrealized holding losses on derivatives, | |||||||||||
| net of tax of ($3,543) | (5,914 | ) | (5,914 | ) | |||||||
| Less: reclassification adjustment for losses | |||||||||||
| included in earnings available for common | |||||||||||
| stock, net of tax of ($3,752) | (5,597 | ) | (5,597 | ) | |||||||
| Net unrealized losses on qualifying derivatives | (317 | ) | (317 | ) | |||||||
| Total comprehensive income | 115,437 | ||||||||||
| Common stock dividends | (70,580 | ) | (70,580 | ) | |||||||
| Capital contribution from parent | 200,000 | 200,000 | |||||||||
| Ending balance | $66,183 | $525,603 | $440,286 | ($20,235 | ) | $1,011,837 | |||||
| (a) | Accumulated other comprehensive loss at January 1, 2001 consisted entirely of net unrealized losses on qualifying derivatives. |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
112
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Except as modified below, the Alliant Energy "Notes“Notes to Consolidated Financial Statements"Statements” are incorporated by reference insofar as they relate to WP&L and incorporate the disclosures relating to WP&L contained in the following notes of the Alliant Energy "Notes“Notes to Consolidated Financial Statements"Statements”:
| Summary of Significant Accounting Policies | Note 1(a) 3rd and 4th paragraphs, 1(b) |
| Domestic Utility Rate Matters | Note 2 |
| Leases | Note 3 |
| Sales of Accounts Receivable | Note 4 |
| Benefit Plans | Note 6(a) 1st, 2nd, 7th, 9th through 11th, and 13th paragraphs |
| Common | Note |
| Debt | Note 8(a) |
| Investments | Note 9 1st paragraph, "Investment in ATC" |
| Derivative Financial Instruments | Note 10(a) 1st |
| paragraph, "Other Derivatives Not Designated in Hedge Relationships" 1st | |
| and 4th | |
| Commitments and Contingencies | Note 11(b) 1st paragraph, 11(c), 11(e) "MGP Sites" and "NEPA," 11(f), 11(g) |
| Jointly-Owned Electric Utility Plant | Note 12 |
| Pending Sale of WP&L's Interest in Kewaunee | Note 17 |
| Asset Retirement Obligations | Note 18 |
The notes that follow herein set forth additional specific information for WP&L and are numbered to be consistent with the Alliant Energy "Notes“Notes to Consolidated Financial Statements."
”
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General -— The consolidated financial statements include the accounts of WP&L and its principal consolidated subsidiaries WPL Transco LLC and South Beloit. WP&L is a direct subsidiary of Alliant Energy and is engaged principally in the generation, distribution and sale of electric energy; the purchase, distribution, transportation and sale of natural gas; and the provision of water services.and various other energy-related services including construction management services for wind farms. Nearly all of WP&L's&L’s retail customers are located in south and central Wisconsin.
(c) Regulatory Assets and Liabilities - —At Dec. 31, 20022003 and 2001,2002, regulatory assets and liabilities were comprised of the following items (in millions):
Regulatory Assets Regulatory Liabilities
---------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ----------- ----------
Energy efficiency program costs $38.6 $33.9 $-- $--
Tax-related 25.0 29.0 14.6 15.1
Environmental-related 19.0 18.7 0.6 0.5
Other 48.1 33.4 17.0 7.6
---------- ---------- ----------- ----------
$130.7 $115.0 $32.2 $23.2
========== ========== =========== ==========
(d) Income Taxes -
| Regulatory Assets | Regulatory Liabilities | ||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||
| Tax-related | $23 | .4 | $25 | .0 | $17 | .9 | $14 | .6 | |
| Energy efficiency program costs | 22 | .9 | 38 | .6 | -- | -- | |||
| Environmental-related | 16 | .2 | 19 | .0 | 1 | .0 | 0 | .6 | |
| Asset retirement obligations | 8 | .3 | -- | -- | -- | ||||
| Cost of removal obligations | -- | -- | 209 | .9 | -- | ||||
| Other | 49 | .4 | 48 | .1 | 13 | .0 | 17 | .0 | |
| $120 | .2 | $130 | .7 | $241 | .8 | $32 | .2 | ||
(3) LEASES
WP&L’s operating lease rental expenses, which include certain purchased-power agreements, for 2003, 2002 and 2001 were $25.9 million, $24.5 million and $23.4 million, respectively. The synthetic leases relate to the financing of utility railcars and a utility radio dispatch system. These leases do not meet the consolidation requirements per FIN 46 and were not included on WP&L’s Consolidated Balance Sheets. WP&L has guaranteed the residual value of its synthetic leases totaling $13 million in the aggregate. The guarantees extend through the maturity of each respective underlying lease with remaining terms up to 12 years. Residual value guarantees have been included in the future minimum lease payments noted in the following table (in millions):
113
| 2004 | 2005 | 2006 | 2007 | 2008 | Thereafter | Total | |||||||||
| Certain purchased-power agreements | $52 | .6 | $69 | .5 | $70 | .9 | $72 | .2 | $64 | .8 | $235 | .0 | $565 | .0 | |
| Synthetic leases | 7 | .9 | 7 | .9 | 7 | .8 | 6 | .8 | 2 | .6 | 22 | .8 | 55 | .8 | |
| Other | 2 | .1 | 1 | .7 | 1 | .3 | 1 | .1 | 1 | .0 | 1 | .4 | 8 | .6 | |
| $62 | .6 | $79 | .1 | $80 | .0 | $80 | .1 | $68 | .4 | $259 | .2 | $629 | .4 | ||
(4) UTILITY ACCOUNTS RECEIVABLE
At Dec. 31, 2003 and 2002, WP&L had sold $50 million and $116 million of receivables, respectively. In 2003, 2002 and 2001, WP&L received $0.8 billion, $1.2 billion and $1.1 billion, respectively, in aggregate proceeds from the sale of accounts receivable. WP&L paid fees associated with these sales of $1.2 million, $2.2 million and $4.0 million in 2003, 2002 and 2001, respectively.
(5) INCOME TAXES
The components of income taxes for WP&L were as follows (in millions):
| 2003 | 2002 | 2001 | |||||
| Current tax expense: | |||||||
| Federal | $29 | .0 | $42 | .8 | $36 | .8 | |
| State | 15 | .7 | 9 | .7 | 11 | .2 | |
| Deferred tax expense (benefit): | |||||||
| Federal | 22 | .8 | (5 | .0) | (4 | .6) | |
| State | 0 | .6 | 1 | .2 | (0 | .4) | |
| Amortization of investment tax credits | (1 | .6) | (1 | .8) | (1 | .8) | |
| Research and development tax credits | (0 | .7) | (2 | .2) | -- | ||
| $65 | .8 | $44 | .7 | $41 | .2 | ||
Alliant Energy files a consolidated federal income tax return. Under the terms of an agreement between Alliant Energy and its subsidiaries, the subsidiaries calculate their respective federal income tax provisions and make payments to or receive payments from Alliant Energy as if they were separate taxable entities.
(3) LEASES
WP&L's operating lease rental expenses, which include certain purchased-power
agreements, for 2002, 2001&L realized net benefits of $2.9 million, $0 and 2000 were $24.5 million, $23.4 million and
$7.9 million, respectively. The purchased-power agreements below include
$463 million and $78 million, respectively,$0 related to a new plant
(Riverside) currently under developmentstate apportionment and the RockGen plant, bothallocation of parent tax benefits in Wisconsin. The Riverside plant is expected to be placed in-service in 2004.
The synthetic leases relate to the financing of the utility railcars and a
utility radio dispatch system that were not included on WP&L's Consolidated
Balance Sheets. WP&L has guaranteed the residual value of its synthetic
leases totaling $14.3 million in the aggregate. The guarantees extend
through the maturity of each respective underlying lease with remaining terms
116
up to 13 years. Residual value guarantees have been included in the future
minimum lease payments noted in the table below (in millions):
2004 2005 2006 2007 Thereafter Total
-------- -------- -------- -------- -------- ----------- ---------
Certain purchased-power agreements $18.7 $51.8 $66.3 $67.6 $69.0 $308.6 $582.0
Synthetic leases 6.4 7.6 7.5 7.4 5.5 25.5 59.9
Other 2.0 1.1 1.2 1.0 1.0 2.2 8.5
-------- -------- -------- -------- -------- ----------- ---------
$27.1 $60.5 $75.0 $76.0 $75.5 $336.3 $650.4
======== ======== ======== ======== ======== =========== =========
(4) UTILITY ACCOUNTS RECEIVABLE
At Dec. 31, 2002 and 2001, WP&L had sold $116 million and $88 million of
receivables, respectively. In 2002, 2001 and 2000, WP&L received $1.2
billion, $1.1 billion and $0.9 billion, respectively, in aggregate proceeds
from the sale of accounts receivable. WP&L paid fees associated with these
sales of $2.2 million, $4.0 million and $5.0 million in 2002, 2001 and 2000,
respectively.
(5) INCOME TAXES
The components of income taxes for WP&L were as follows (in millions):
2002 2001 2000
------------- ------------- -------------
Current tax expense:
Federal $42.8 $36.8 $44.5
State 9.7 11.2 10.5
Deferred tax expense (benefit):
Federal (5.0) (4.6) (9.9)
State 1.2 (0.4) (0.3)
Amortization of investment tax credits (1.8) (1.8) (1.9)
Research and development tax credits (2.2) -- --
------------- ------------- -------------
$44.7 $41.2 $42.9
============= ============= =============
The overall effective income tax rates shown in the following table were computed by dividing total income tax expense by income before income taxes.
| 2003 | 2002 | 2001 | |||||
| Statutory federal income tax rate | 35 | .0% | 35 | .0% | 35 | .0% | |
| State income taxes, net of federal benefits | 5 | .8 | 6 | .1 | 6 | .4 | |
| Research and development tax credits | (0 | .3) | (1 | .8) | -- | ||
| Amortization of excess deferred taxes | (0 | .5) | (1 | .4) | (1 | .5) | |
| Adjustment of prior period taxes | (0 | .8) | (1 | .1) | (2 | .8) | |
| Amortization of investment tax credits | (0 | .9) | (1 | .4) | (1 | .6) | |
| Other items, net | (1 | .9) | 0 | .2 | 0 | .4 | |
| Overall effective income tax rate | 36 | .4% | 35 | .6% | 35 | .9% | |
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The accumulated deferred income tax (assets) and liabilities included on the Consolidated Balance Sheets at Dec. 31 arise from the following temporary differences (in millions):
2002 2001
--------------- ---------------
Property related $201.2 $200.8
Minimum pension liability (16.4) (9.6)
Decommissioning (25.2) (20.8)
Other 32.3 35.8
--------------- ---------------
$191.9 $206.2
=============== ===============
117
| 2003 | 2002 | ||||||||||||
| Deferred | Deferred Tax | Deferred | Deferred Tax | ||||||||||
| Tax Assets | Liabilities | Net | Tax Assets | Liabilities | Net | ||||||||
| Property related | ($14 | .3) | $216 | .0 | $201 | .7 | ($15 | .6) | $216 | .8 | $201 | .2 | |
| Minimum pension liability | (13 | .6) | -- | (13 | .6) | (16 | .4) | -- | (16 | .4) | |||
| Decommissioning | (22 | .2) | -- | (22 | .2) | (25 | .2) | -- | (25 | .2) | |||
| Other | (6 | .6) | 47 | .8 | 41 | .2 | (8 | .5) | 40 | .8 | 32 | .3 | |
| Total | ($56 | .7) | $263 | .8 | $207 | .1 | ($65 | .7) | $257 | .6 | $191 | .9 | |
| 2003 | 2002 | ||||
| Current assets - Accumulated deferred income taxes | ($6 | .6) | ($8 | .5) | |
| Other long-term liabilities and deferred credits - | |||||
| Accumulated deferred income taxes | 213 | .7 | 200 | .4 | |
| Total deferred tax (assets) and liabilities | $207 | .1 | $191 | .9 | |
(6) BENEFIT PLANS
(a) Pension Plans and Other Postretirement Benefits -— Substantially all of WP&L's&L’s employees are covered by twoseveral non-contributory defined benefit pension plans. For the defined benefit pension plan sponsored by Corporate Services,
Alliant Energy allocates pension costs and contributions to WP&L based on
labor costs of plan participants and any additional minimum pension liability
based on each group's funded status. The weighted-averageweighted average assumptions at the measurement date of Sept. 30 for WP&L’s qualified pension benefits and other postretirement benefits were as follows:
equal to the assumptions used for Alliant Energy’s pension benefits and other postretirement benefits, respectively, except for the rate of compensation increase. WP&L’s rate of compensation increase for its qualified pension benefits and its other postretirement benefits were 3.5% for 2003, 2002 and 2001.
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------- ----------------------------------------
2002 2001 2000 2002 2001 2000
------------ ----------- ------------ ----------- ------------- ---------------
Discount rate 6.75% 7.25% 8.00% 6.75% 7.25% 8.00%
Expected return on plan assets 9% 9% 9% 9% 9% 9%
Rate of compensation increase 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Medical cost trend on covered charges:
Initial trend rate N/A N/A N/A 10.8% 12.0% 9.0%
Ultimate trend rate N/A N/A N/A 5% 5% 5%
The components of WP&L's&L’s qualified pension benefits and other postretirement benefits costs were as follows (in millions):
| Qualified Pension Benefits | Other Postretirement Benefits | ||||||||||||
| 2003 | 2002 | 2001 | 2003 | 2002 | 2001 | ||||||||
| Service cost | $4 | .0 | $3 | .6 | $2 | .8 | $3 | .4 | $2 | .4 | $1 | .6 | |
| Interest cost | 10 | .6 | 10 | .1 | 9 | .2 | 5 | .2 | 4 | .4 | 3 | .6 | |
| Expected return on plan assets | (13 | .5) | (12 | .2) | (13 | .7) | (1 | .4) | (1 | .6) | (1 | .7) | |
| Amortization of: | |||||||||||||
| Transition obligation (asset) | -- | (1 | .7) | (2 | .1) | 1 | .1 | 1 | .1 | 1 | .2 | ||
| Prior service cost | 0 | .4 | 0 | .4 | 0 | .5 | -- | -- | -- | ||||
| Actuarial loss (gain) | 3 | .5 | 1 | .5 | -- | 0 | .8 | 0 | .1 | (0 | .6) | ||
| $5 | .0 | $1 | .7 | ($3 | .3) | $9 | .1 | $6 | .4 | $4 | .1 | ||
The pension benefit costbenefits costs shown abovepreviously (and in the following tables) representsrepresent only the pension benefit costbenefits costs for bargaining unit employees of WP&L covered under the bargaining unit pension plan that is sponsored by WP&L. The benefit obligations and assets associated with WP&L's&L’s non-bargaining employees who are participants in other Alliant Energy plans are reported in Alliant Energy's consolidated financial statementsEnergy’s Consolidated Financial Statements and are not reported above.previously. The pension benefitbenefits (income) costcosts for WP&L's&L’s non-bargaining employees who are now participants in other Alliant Energy plans was $1.9 million, $0.3 million and ($1.5) million for 2003, 2002 and ($1.3) million for 2002, 2001, and 2000, respectively. In addition, Corporate Services provides services to WP&L. The allocated pension benefitbenefits costs associated with these services was $1.7$2.0 million, $1.3$1.7 million and $1.3 million for 2003, 2002 2001 and 2000,2001, respectively. The other postretirement benefit costbenefits costs shown abovepreviously for each period (and in the following tables) representsrepresent the other postretirement benefit costbenefits costs for all WP&L employees. The allocated other postretirement benefit costbenefits costs associated with Corporate Services for WP&L was $0.5$0.9 million, $0.3$0.5 million and $0.3 million for 2003, 2002 and 2001, and 2000, respectively.
The assumed medical trend rates are critical assumptions in determining the service and interest cost and accumulated postretirement benefit obligation related to postretirement benefitbenefits costs. A one percent1% change in the medical trend rates for 2002,2003, holding all other assumptions constant, would have the following effects (in millions):
| 1% Increase | 1% Decrease | ||||
| Effect on total of service and interest cost components | $0 | .9 | ($0 | .8) | |
| Effect on postretirement benefit obligation | $9 | .4 | ($8 | .3) | |
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A reconciliation of the funded status of WP&L's&L’s plans to the amounts recognized on WP&L's&L’s Consolidated Balance Sheets at Dec. 31 was as follows (in millions):
| Qualified Pension Benefits | Other Postretirement Benefits | ||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||
| Change in projected benefit obligation: | |||||||||
| Net projected benefit obligation at beginning of year | $156 | .0 | $139 | .2 | $76 | .6 | $60 | .5 | |
| Service cost | 4 | .0 | 3 | .6 | 3 | .4 | 2 | .4 | |
| Interest cost | 10 | .6 | 10 | .1 | 5 | .2 | 4 | .4 | |
| Plan participants' contributions | -- | -- | 1 | .5 | 1 | .5 | |||
| Actuarial loss | 17 | .8 | 10 | .3 | 11 | .7 | 13 | .2 | |
| Gross benefits paid | (7 | .4) | (7 | .2) | (5 | .3) | (5 | .4) | |
| Net projected benefit obligation at end of year | 181 | .0 | 156 | .0 | 93 | .1 | 76 | .6 | |
| Change in plan assets: | |||||||||
| Fair value of plan assets at beginning of year | 153 | .5 | 138 | .8 | 16 | .7 | 17 | .8 | |
| Actual return on plan assets | 28 | .9 | (8 | .1) | 2 | .2 | (1 | .4) | |
| Employer contributions | -- | 30 | .0 | 4 | .4 | 4 | .2 | ||
| Plan participants' contributions | -- | -- | 1 | .5 | 1 | .5 | |||
| Gross benefits paid | (7 | .4) | (7 | .2) | (5 | .3) | (5 | .4) | |
| Fair value of plan assets at end of year | 175 | .0 | 153 | .5 | 19 | .5 | 16 | .7 | |
| Funded status at end of year | (6 | .0) | (2 | .5) | (73 | .6) | (59 | .9) | |
| Unrecognized net actuarial loss | 62 | .4 | 63 | .5 | 30 | .5 | 20 | .4 | |
| Unrecognized prior service cost | 3 | .0 | 3 | .4 | (0 | .1) | (0 | .1) | |
| Unrecognized net transition obligation | -- | -- | 10 | .3 | 11 | .5 | |||
| Net amount recognized at end of year | $59 | .4 | $64 | .4 | ($32 | .9) | ($28 | .1) | |
| Amounts recognized on the Consolidated | |||||||||
| Balance Sheets consist of: | |||||||||
| Prepaid benefit cost | $59 | .4 | $64 | .4 | $1 | .5 | $1 | .5 | |
| Accrued benefit cost | -- | -- | (34 | .4) | (29 | .6) | |||
| Net amount recognized at measurement date | 59 | .4 | 64 | .4 | (32 | .9) | (28 | .1) | |
| Contributions paid after 9/30 and prior to 12/31 | -- | -- | 0 | .4 | 1 | .0 | |||
| Net amount recognized at 12/31 | $59 | .4 | $64 | .4 | ($32 | .5) | ($27 | .1) | |
At Dec. 31, 20022003 and 2001,2002, Corporate Services allocated an additional minimum liability of $34.2 million and $41.3 million, respectively. Included in the following table are WP&L’s accumulated benefit obligations, amounts applicable to qualified pension and other postretirement benefits with accumulated benefit obligations in excess of plan assets, as well as qualified pension plans with projected benefit obligations in excess of plan assets as of the measurement date of Sept. 30 (in millions):
| Qualified Pension Benefits | Other Postretirement Benefits | ||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||
| Accumulated benefit obligation | $165 | .7 | $143 | .1 | $93 | .1 | $76 | .6 | |
| Plans with accumulated benefit obligations in excess | |||||||||
| of plan assets: | |||||||||
| Accumulated benefit obligation | -- | -- | 91 | .5 | 74 | .7 | |||
| Fair value of plan assets | -- | -- | 16 | .3 | 13 | .7 | |||
| Plans with projected benefit obligations in excess | |||||||||
| of plan assets: | |||||||||
| Projected benefit obligations | 181 | .0 | 156 | .0 | N/A | N/A | |||
| Fair value of plan assets | 175 | .0 | 153 | .5 | N/A | N/A | |||
Postretirement benefit plans are funded via specific assets within certain retirement plans (401(h) assets) as well as a VEBA trust. The asset allocation of the 401(h) assets mirror the qualified pension plan assets and the asset allocation of the VEBA trust are reflected in the following table under “Other Postretirement Plans.” The asset allocation for WP&L’s qualified pension and other postretirement benefit plans at Sept. 30, 2003 and 2002, and the qualified pension plan target allocation for 2003 were as follows:
116
| Qualified Pension Plans | Other Postretirement Plans | ||||||||||
| Target | Percentage of Plan | Percentage of Plan Assets | |||||||||
| Allocation | Assets at Sept. 30 | at Sept. 30 | |||||||||
| Asset Category | 2003 | 2003 | 2002 | 2003 | 2002 | ||||||
| Equity securities | 50-65% | 61 | % | 55 | % | 15 | % | 16 | % | ||
| Debt securities | 25-40% | 33 | % | 35 | % | 33 | % | 27 | % | ||
| Other | 0-5% | 6 | % | 10 | % | 52 | % | 57 | % | ||
| 100 | % | 100 | % | 100 | % | 100 | % | ||||
WP&L estimates that funding for the qualified pension and postretirement benefit plans for 2004 will be $0 and approximately $4 million, respectively.
Alliant Energy sponsors several non-qualified pension plans that cover certain current and former key employees. The pension expense allocated to WP&L for these plans was $1.7 million, $1.5 million and $1.0 million in 2003, 2002 and $1.2 million in 2002,
2001, and 2000, respectively. WP&L has various life insurance policies that cover certain key employees and directors. At Dec. 31, 20022003 and 2001,2002, the cash surrender value of these investments was $10$11 million and $9$10 million, respectively. A significant number of WP&L employees also participate in defined contribution pension plans (401(k) plans). WP&L's&L’s contributions to the plans, which are based on the participants'participants’ level of contribution, were $2.2$2.1 million, $2.1$2.2 million and $2.1 million in 2003, 2002 and 2001, and 2000,
respectively.
(7)COMMON AND PREFERRED STOCK
(b) Preferred Stock -— The carrying value of WP&L's&L’s cumulative preferred stock at both Dec. 31, 20022003 and 20012002 was $60 million. The fair market value, based upon the market yield of similar securities and quoted market prices, at Dec. 31, 2003 and 2002 was $53 million and 2001 was $48 million, and $49 million, respectively.
119
(8) DEBT
(a) Short-Term Debt - —Information regarding WP&L's&L’s short-term debt was as follows (dollars in millions):
2002 2001
-------------- --------------
At Dec. 31:
Commercial paper outstanding $60.0 $--
Discount rates on commercial paper 1.6% N/A
Money pool borrowings $-- $90.8
Interest rates on money pool borrowings N/A 2.4%
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $57.4 $23.8
Average interest rates on short-term debt 1.8% 3.7%
| 2003 | 2002 | ||||
| At Dec. 31: | |||||
| Commercial paper outstanding | $-- | $60 | .0 | ||
| Discount rates on commercial paper | N/A | 1 | .6% | ||
| For the year ended: | |||||
| Average amount of short-term debt | |||||
| (based on daily outstanding balances) | $29 | .8 | $57 | .4 | |
| Average interest rates on short-term debt | 1 | .4% | 1 | .8% | |
(b) Long-Term Debt -— WP&L's&L’s debt maturities for 20032004 to 20072008 are $0, $62.0$62 million, $88.0$88 million, $0, $105 million, and $105.0$60 million, respectively. The carrying value of WP&L's&L’s long-term debt (including current maturities and variable rate demand bonds) at both
Dec. 31, 2003 and 2002 was $454 million and 2001 was $523 million.million, respectively. The fair market value, based upon the market yield of similar securities and quoted market prices, at Dec. 31, 2003 and 2002 was $494 million and 2001 was $574 million, and $548 million, respectively.
(9) INVESTMENTS AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Information relating to various investments held by WP&L at Dec. 31 that are marked-to-market as a result of SFAS 115 was as follows (in millions):
2002 2001
--------------------------- --------------------------
Carrying/ Unrealized Carrying/ Unrealized
Fair Gains, Fair Gains,
Value Net of Tax Value Net of Tax
------------ -------------- ------------ -------------
Available-for-sale securities:
Nuclear decommissioning trust funds:
Debt securities $131 $5 $122 $2
Equity securities 93 5 94 23
------------ -------------- ------------ -------------
Total $224 $10 $216 $25
============ ============== ============ =============
| 2003 | 2002 | ||||||||
| Carrying/ | Unrealized | Carrying/ | Unrealized | ||||||
| Fair | Gains, | Fair | Gains, | ||||||
| Value | Net of Tax | Value | Net of Tax | ||||||
| Available-for-sale securities: | |||||||||
| Nuclear decommissioning trust funds: | |||||||||
| Debt securities | $137 | $3 | $131 | $5 | |||||
| Equity securities | 97 | 19 | 93 | 5 | |||||
| Total | $234 | $22 | $224 | $10 | |||||
117
Nuclear Decommissioning Trust Funds -— At Dec. 31, 2002, $752003, $76 million, $24$37 million and $32$24 million of the debt securities mature in 2003-2010,2004-2010, 2011-2020 and 2021-2049,2021-2040, respectively. The funds realized gains (losses) from the sales of securities of ($6.2) million, $10.3 million and $2.1 million in 2003, 2002 and $5.2 million in 2002, 2001, and
2000, respectively (cost of the investments based on specific identification was $333.9 million, $92.2 million $147.4 million and $202.1$147.4 million and proceeds from the sales were $327.7 million, $102.5 million $149.5 million and $207.3$149.5 million, respectively). In January 2004, WP&L liquidated all of the qualified decommissioning assets into money market funds as a result of the pending Kewaunee sale.
Unconsolidated Equity Investments - —Summary financial information from the financial statements of WP&L's&L’s unconsolidated equity investments' financial statementsinvestments in ATC, WRPC and Alliant Energy SPE LLC is as follows (in millions):
2002 2001 2000
---------- ----------- ----------
Operating revenues $211.7 $180.3 $5.3
Operating income 75.7 65.8 1.3
Net income 59.5 55.9 1.6
As of Dec. 31:
Current assets 44.7 59.5
Non-current assets 774.4 681.4
Current liabilities 50.8 39.3
Non-current liabilities 7.5 4.4
120
| 2003 | 2002 | 2001 | |||||
| Operating revenues | $232 | .3 | $211 | .7 | $180 | .3 | |
| Operating income | 87 | .7 | 75 | .7 | 65 | .8 | |
| Net income | 72 | .1 | 59 | .5 | 55 | .9 | |
| As of Dec. 31: | |||||||
| Current assets | 41 | .5 | 44 | .7 | |||
| Non-current assets | 947 | .2 | 774 | .4 | |||
| Current liabilities | 67 | .9 | 50 | .8 | |||
| Non-current liabilities | 14 | .6 | 7 | .5 | |||
(11) COMMITMENTS AND CONTINGENCIES
(a) Construction and Acquisition Expenditures -— Certain commitments have been made in connection with 20032004 capital expenditures. During 2003,2004, total construction and acquisition expenditures are estimated to be approximately $160 million.
$228 million (unaudited).
(b) Purchased-Power, Coal and Natural Gas Contracts -Purchase Obligations — Based on the System Coordination and Operating Agreement, Alliant Energy annually allocates purchased-power contracts to IP&L and WP&L. Such process considers factors such as resource mix, load growth and resource availability. However, for 2003,2004, system-wide purchased-power contracts of $45.1$4.4 million (1.6(0.2 million MWh) have not yet been directly assigned to IP&L and WP&L since the specific needs of each utility isare not yet known. Refer to Note 1820 for additional information. Coal contract quantities are directly assigned to specific plants at IP&L and WP&L based on various factors including projected heat input requirements, combustion compatibility and efficiency. However, for 2003-2006,2004 to 2008, system-wide coal contracts of $56.1$78.7 million (7.8(10.7 million tons), $37.5$55.1 million (7.6 million tons), $28.0$34.0 million (4.7(5.4 million tons), $12.5 million (2.1 million tons) and $8.2$6.4 million (0.9(1.0 million tons), respectively, have not yet been directly assigned to IP&L and WP&L since the specific needs of each utility isare not yet known. At Dec. 31, 2002,2003, WP&L's&L’s minimum commitments were as follows (dollars and Dths in millions; MWhs and tons in thousands):
Purchased-power Coal Natural gas
----------------------- ----------------------- -------------------------
Dollars MWhs Dollars Tons Dollars Dths
--------- ---------- --------- ---------- ----------- ----------
2003 $31.3 219 $6.9 -- $48.1 2
2004 8.0 219 6.9 -- 32.3 --
2005 -- -- 1.3 -- 25.0 --
2006 -- -- 1.3 -- 14.1 --
2007 -- -- 1.3 -- 13.3 --
Thereafter -- -- -- -- 26.4 --
| Purchased-power | Coal | Natural gas | |||||||||||
| Dollars | MWhs | Dollars | Tons | Dollars | Dths | ||||||||
| 2004 | $25 | .1 | 730 | $8 | .2 | -- | $33 | .9 | 2 | ||||
| 2005 | -- | -- | 7 | .6 | -- | 23 | .7 | -- | |||||
| 2006 | -- | -- | 7 | .6 | -- | 22 | .5 | -- | |||||
| 2007 | -- | -- | 7 | .6 | -- | 20 | .2 | -- | |||||
| 2008 | -- | -- | 5 | .9 | -- | 15 | .5 | -- | |||||
| Thereafter | -- | -- | 35 | .6 | -- | 40 | .0 | -- | |||||
Also, at Dec. 31, 2003, WP&L’s other purchase obligations, which represent individual commitments incurred during the normal course of business which exceeded $1 million at Dec. 31, 2003, were $6.0 million for 2004. This excludes lease obligations which are included in Note 3.
(e) Environmental Liabilities -— WP&L had recorded the following environmental liabilities, and regulatory assets associated with certain of these liabilities, at Dec. 31 (in millions):
Environmental Liabilities Regulatory Assets
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------- ------------ ------------
MGP sites $6.9 $4.4 $13.0 $11.7
NEPA 2.5 3.1 3.1 4.0
Other -- -- 2.9 3.0
------------ ------------- ------------ ------------
$9.4 $7.5 $19.0 $18.7
============ ============= ============ ============
| Environmental Liabilities | Regulatory Assets | ||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||
| MGP sites | $5 | .4 | $6 | .9 | $12 | .5 | $13 | .0 | |
| NEPA | 2 | .0 | 2 | .5 | 2 | .4 | 3 | .1 | |
| Other | -- | -- | 1 | .3 | 2 | .9 | |||
| $7 | .4 | $9 | .4 | $16 | .2 | $19 | .0 | ||
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MGP Sites - — Management currently estimates the range of remaining costs to be - ---------
incurred for the investigation, remediation and monitoring of all WP&L's&L’s sites to be approximately $6$5 million to $7 million.
(13) SEGMENTS OF BUSINESS
WP&L is a regulated domestic utility, serving customers in Wisconsin and Illinois, and includes three segments: a) electric operations; b) gas operations; and c) other, which includes the water business, various other energy-related products and services including construction management services for wind farms and the unallocated portions of the utility business. Various line items in the following tables are not allocated to the electric and gas segments for management reporting purposes and therefore are included in "Total."“Total.” In 2003, 2002 and 2001, gas revenues included $45 million, $22 million and $21 million, respectively, for sales to the electric segment. All other intersegment revenues were not material to WP&L's&L’s operations and there was no single customer whose revenues were 10% or more of WP&L's&L’s consolidated revenues. Certain financial information relating to WP&L's&L’s significant business segments was as follows (in millions):
121
Electric Gas Other Total
- ------------------------------------------------------------------------------------------------------------------------------
2002
- ----
Operating revenues $787.7 $179.1 $5.3 $972.1
Depreciation and amortization 117.3 17.7 1.2 136.2
Operating income 114.1 12.0 1.4 127.5
Interest expense, net of AFUDC 37.6
Interest income (21.6)
Equity income from unconsolidated investments (17.0)
Miscellaneous, net 2.9
Income tax expense 44.7
Net income 80.9
Preferred dividends 3.3
Earnings available for common stock 77.6
Total assets 1,426.7 259.5 298.4 1,984.6
Investments in equity method subsidiaries 121.7 121.7
Construction and acquisition expenditures 144.6 10.6 1.7 156.9
- ------------------------------------------------------------------------------------------------------------------------------
2001
- ----
Operating revenues $753.5 $206.9 $5.0 $965.4
Depreciation and amortization 111.5 16.4 1.2 129.1
Operating income 121.6 2.5 1.3 125.4
Interest expense, net of AFUDC 38.7
Interest income (8.1)
Equity income from unconsolidated investments (15.5)
Miscellaneous, net (4.4)
Income tax expense 41.2
Net income 73.5
Preferred dividends 3.3
Earnings available for common stock 70.2
Total assets 1,323.9 224.5 327.4 1,875.8
Investments in equity method subsidiaries 117.3 117.3
Construction and acquisition expenditures 127.9 16.8 2.3 147.0
- ------------------------------------------------------------------------------------------------------------------------------
2000
- ----
Operating revenues $692.2 $165.2 $5.0 $862.4
Depreciation and amortization 122.9 15.9 1.1 139.9
Operating income 123.2 12.2 1.7 137.1
Interest expense, net of AFUDC 39.3
Interest income (13.1)
Equity income from unconsolidated investments (0.5)
Miscellaneous, net (2.9)
Income tax expense 42.9
Net income 71.4
Preferred dividends 3.3
Earnings available for common stock 68.1
Total assets 1,344.9 226.1 286.0 1,857.0
Investments in equity method subsidiaries 4.8 4.8
Construction and acquisition expenditures 114.2 15.1 2.3 131.6
122
| Electric | Gas | Other | Total | ||||||
| 2003 | |||||||||
| Operating revenues | $910 | .1 | $272 | .4 | $34 | .5 | $1,217 | .0 | |
| Depreciation and amortization | 89 | .2 | 14 | .6 | 1 | .1 | 104 | .9 | |
| Operating income | 163 | .8 | 25 | .5 | 2 | .3 | 191 | .6 | |
| Interest expense, net of AFUDC | 33 | .8 | |||||||
| Equity income from unconsolidated investments | (20 | .7) | |||||||
| Miscellaneous, net | (2 | .2) | |||||||
| Income tax expense | 65 | .8 | |||||||
| Net income | 114 | .9 | |||||||
| Preferred dividends | 3 | .3 | |||||||
| Earnings available for common stock | 111 | .6 | |||||||
| Total assets | 1,950 | .5 | 306 | .2 | 212 | .6 | 2,469 | .3 | |
| Investments in equity method subsidiaries | 133 | .3 | -- | -- | 133 | .3 | |||
| Construction and acquisition expenditures | 133 | .0 | 17 | .4 | 1 | .2 | 151 | .6 | |
| 2002 | |||||||||
| Operating revenues | $787 | .7 | $179 | .1 | $22 | .7 | $989 | .5 | |
| Depreciation and amortization | 91 | .7 | 15 | .9 | 1 | .1 | 108 | .7 | |
| Operating income (loss) | 135 | .1 | 12 | .0 | (1 | .5) | 145 | .6 | |
| Interest expense, net of AFUDC | 37 | .6 | |||||||
| Equity income from unconsolidated investments | (17 | .0) | |||||||
| Miscellaneous, net | (0 | .6) | |||||||
| Income tax expense | 44 | .7 | |||||||
| Net income | 80 | .9 | |||||||
| Preferred dividends | 3 | .3 | |||||||
| Earnings available for common stock | 77 | .6 | |||||||
| Total assets | 1,834 | .7 | 298 | .5 | 201 | .9 | 2,335 | .1 | |
| Investments in equity method subsidiaries | 121 | .7 | -- | -- | 121 | .7 | |||
| Construction and acquisition expenditures | 144 | .6 | 10 | .6 | 1 | .7 | 156 | .9 | |
| 2001 | |||||||||
| Operating revenues | $753 | .5 | $206 | .9 | $33 | .3 | $993 | .7 | |
| Depreciation and amortization | 104 | .0 | 15 | .8 | 1 | .3 | 121 | .1 | |
| Operating income | 129 | .1 | 2 | .5 | 5 | .7 | 137 | .3 | |
| Interest expense, net of AFUDC | 38 | .7 | |||||||
| Equity income from unconsolidated investments | (15 | .5) | |||||||
| Miscellaneous, net | (0 | .6) | |||||||
| Income tax expense | 41 | .2 | |||||||
| Net income | 73 | .5 | |||||||
| Preferred dividends | 3 | .3 | |||||||
| Earnings available for common stock | 70 | .2 | |||||||
| Total assets | 1,638 | .8 | 249 | .4 | 329 | .3 | 2,217 | .5 | |
| Investments in equity method subsidiaries | 117 | .3 | -- | -- | 117 | .3 | |||
| Construction and acquisition expenditures | 127 | .9 | 16 | .8 | 2 | .3 | 147 | .0 | |
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(15) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summation of the individual quarters may not equal annual totals due to rounding.
2002 2001
---------------------------------------- ---------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
---------- --------- --------- --------- ---------- --------- -------- ---------
(in millions)
Operating revenues $229.5 $217.5 $249.0 $276.1 $317.2 $204.1 $228.3 $215.8
Operating income 24.1 28.6 35.4 39.3 37.0 23.4 36.2 28.8
Net income 15.7 12.8 19.2 33.2 19.3 11.6 19.9 22.8
Earnings available for common stock 14.9 12.0 18.3 32.4 18.4 10.7 19.0 22.0
(18)
| 2003 | 2002 | ||||||||||||||||
| March 31 | June 30 | Sept. 30 | Dec. 31 | March 31 | June 30 | Sept. 30 | Dec. 31 | ||||||||||
| (in millions) | |||||||||||||||||
| Operating revenues | $346 | .9 | $254 | .8 | $318 | .9 | $296 | .3 | $235 | .5 | $220 | .6 | $254 | .0 | $279 | .4 | |
| Operating income | 18 | .1 | 35 | .7 | 77 | .8 | 60 | .1 | 30 | .1 | 25 | .7 | 34 | .9 | 54 | .9 | |
| Net income | 10 | .1 | 19 | .9 | 47 | .4 | 37 | .5 | 15 | .7 | 12 | .8 | 19 | .2 | 33 | .2 | |
| Earnings available for common stock | 9 | .3 | 19 | .0 | 46 | .6 | 36 | .7 | 14 | .9 | 12 | .0 | 18 | .3 | 32 | .4 | |
(20) RELATED PARTIES
IP&L and WP&L have entered into a System Coordination and Operating Agreement. The agreement, which has been approved by FERC, provides a contractual basis for coordinated planning, construction, operation and maintenance of the interconnected electric generation and transmission (IP&L only) systems of IP&L and WP&L. In addition, the agreement allows the interconnected system to be operated as a single entity with off-system capacity sales and purchases made to market excess system capability or to meet system capability deficiencies. Such sales and purchases are allocated among IP&L and WP&L based on procedures included in the agreement. The sales amounts allocated to WP&L were $42.1 million, $26.9 million and $32.1 million for 2003, 2002 and $28.6 million
for 2002, 2001, and 2000, respectively. The purchases allocated to WP&L were $229.4 million, $205.8 million and $209.2 million for 2003, 2002 and $130.7 million for 2002, 2001, and 2000, respectively. The procedures were approved by both FERC and all state regulatory bodies having jurisdiction over these sales. Under the agreement, IP&L and WP&L are fully reimbursed for any generation expense incurred to support the sale to an affiliate or to a non-affiliate. Any margins on sales to non-affiliates are distributed to IP&L and WP&L in proportion to each utility'sutility’s share of electric production at the time of the sale.
Pursuant to a service agreement approved by the SEC under PUHCA, WP&L receives various administrative and general services from an affiliate, Corporate Services. These services are billed to WP&L at cost based on payroll and other expenses incurred by Corporate Services for the benefit of WP&L. These costs totaled $125.1 million, $117.7 million and $107.0 million for 2003, 2002 and $103.4 million
for 2002, 2001, and 2000, respectively, and consisted primarily of employee compensation, benefits and fees associated with various professional services. At Dec. 31, 20022003 and 2001,2002, WP&L had a net intercompany payable to Corporate Services of $36.4 million and $31.1 million, respectively.
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| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE |
None.
| ITEM 9A. | CONTROLS AND PROCEDURES |
Alliant Energy’s, IP&L’s and $32.2 million, respectively.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
WP&L’s management evaluated, with the participation of each of Alliant Energy’s, IP&L’s and WP&L’s Chief Executive Officer (CEO), Chief Financial Officer (CFO) and Disclosure Committee, the effectiveness of the design and operation of Alliant Energy’s, IP&L’s and WP&L’s disclosure controls and procedures as of the end of the year ended Dec. 31, 2003 pursuant to the requirements of the Securities Exchange Act of 1934, as amended. Based on their evaluation, the CEO and the CFO concluded that Alliant Energy’s, IP&L’s and WP&L’s disclosure controls and procedures were effective as of the end of the year ended Dec. 31, 2003.
There was no change in Alliant Energy’s, IP&L’s and WP&L’s internal control over financial reporting that occurred during the quarter ended Dec. 31, 2003 that has materially affected, or is reasonably likely to materially affect, Alliant Energy’s, IP&L’s or WP&L’s internal control over financial reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
ALLIANT ENERGY
The information required by Item 10 relating to directors and nominees for election of directors at the 20032004 Annual Meeting of Shareowners is incorporated herein by reference to the relevant information under the caption "Election“Election of Directors"Directors” in Alliant Energy'sEnergy’s Proxy Statement for the 20032004 Annual Meeting of Shareowners (the 20032004 Alliant Energy Proxy Statement), which will be filed with the SEC within 120 days after the end of Alliant Energy'sEnergy’s fiscal year. The information required by Item 10 relating to the timely filing of reports under Section 16 of the Securities Exchange Act of 1934 is incorporated herein by reference to the relevant information under the caption "Section“Section 16(a) Beneficial Ownership Reporting Compliance"Compliance” in the 20032004 Alliant Energy Proxy Statement. Information regarding executive officers of Alliant Energy may be found in Part I of this report under the caption "Executive“Executive Officers of the Registrants."
” The information required by Item 10 relating to the audit committee financial experts is incorporated herein by reference to the relevant information under the caption “Meetings and Committees of the Board” in the 2004 Alliant Energy Proxy Statement.
Alliant Energy has adopted a Code of Ethics that applies to all employees, including the CEO, Chief Operating Officer (COO), CFO and Chief Accounting Officer (CAO), as well as its Board of Directors. Alliant Energy makes its code of ethics available free of charge on its website atwww.alliantenergy.com/investors at the Corporate Governance link, and any such Code of Ethics is available in print to any shareowner who requests it from Alliant Energy’s Corporate Secretary. Alliant Energy intends to satisfy the disclosure requirements under Item 10 of Form 8-K regarding amendments to, or waivers from, the Code of Ethics by posting such information on its website atwww.alliantenergy.com/investors at the Corporate Governance link. Alliant Energy is not including the information contained on its website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.
Alliant Energy makes its Corporate Governance Principles and the written charters of the Audit Committee, Compensation and Personnel Committee and Nominating and Governance Committee of Alliant Energy’s Board of Directors available, free of charge, on its website atwww.alliantenergy.com/investors and such information is available in print to any shareowner who requests it from Alliant Energy’s Corporate Secretary. Alliant Energy is not including the information contained on its website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.
IP&L
IP&L's&L’s directors are identical to those of Alliant Energy. The information required by Item 10 relating to directors and nominees for election of directors at the 20032004 Annual Meeting of Shareowners is incorporated herein by reference to the relevant information included under the caption "Election“Election of Directors"Directors” in the 20032004 Alliant Energy Proxy Statement, which will be filed with the SEC within 120 days after the end of IP&L's&L’s fiscal year. The information required by Item 10 relating to the timely filing of reports under Section 16 of the Securities Exchange Act of 1934 is incorporated herein by reference to the relevant information under the caption "Section“Section 16(a) Beneficial Ownership Reporting Compliance"Compliance” in the 20032004 Alliant Energy Proxy Statement. Information regarding executive officers of IP&L may be found in Part I of this report under the caption "Executive“Executive Officers of the Registrants."
” The information required by Item 10 relating to the audit committee financial expert is incorporated herein by reference to the relevant information under the caption “Meetings and Committees of the Board” in the 2004 Alliant Energy Proxy Statement.
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All IP&L employees, including the CEO, COO, CFO and CAO, as well as IP&L’s Board of Directors are subject to the Alliant Energy Code of Ethics, which is available free of charge on Alliant Energy’s website atwww.alliantenergy.com/investors. IP&L intends to satisfy the disclosure requirements under Item 10 of Form 8-K regarding amendments to, or waivers from, the Code of Ethics by posting such information on Alliant Energy’s website atwww.alliantenergy.com/investors at the Corporate Governance link. IP&L is not including the information contained on Alliant Energy’s website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.
WP&L
The information required by Item 10 relating to directors and nominees for election of directors at the 20032004 Annual Meeting of Shareowners is incorporated herein by reference to the relevant information under the caption "Election“Election of Directors"Directors” in WP&L's&L’s Proxy Statement for the 20032004 Annual Meeting of Shareowners (the 20032004 WP&L Proxy Statement), which will be filed with the SEC within 120 days after the end of WP&L's&L’s fiscal year. The information required by Item 10 relating to the timely filing of reports under Section 16 of the Securities Exchange Act of 1934 is incorporated herein by reference to the relevant information under the caption "Section“Section 16(a) Beneficial Ownership Reporting Compliance"Compliance” in the 20032004 WP&L Proxy Statement. Information regarding executive officers of WP&L may be found in Part I of this report under the caption "Executive“Executive Officers of the Registrants."
” The information required by Item 10 relating to the audit committee financial expert is incorporated herein by reference to the relevant information under the caption “Meetings and Committees of the Board” in the 2004 WP&L Proxy Statement.
All WP&L employees, including the CEO, COO, CFO and CAO, as well as WP&L’s Board of Directors are subject to the Alliant Energy Code of Ethics, which is available free of charge on Alliant Energy’s website atwww.alliantenergy.com/investors. WP&L intends to satisfy the disclosure requirements under Item 10 of Form 8-K regarding amendments to, or waivers from, the Code of Ethics by posting such information on Alliant Energy’s website atwww.alliantenergy.com/investors at the Corporate Governance link. WP&L is not including the information contained on Alliant Energy’s website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.
ALLIANT ENERGY
The information required by Item 11 is incorporated herein by reference to the relevant information under the captions "Compensation“Compensation of Directors,"
"Compensation” “Compensation of Executive Officers," "Stock” “Stock Options," "Long-Term” “Long-Term Incentive Awards," "Certain Agreements"” “Certain Agreements” and "Retirement“Retirement and Employee Benefit Plans"Plans” in the 20032004 Alliant Energy Proxy Statement, which will be filed with the SEC within 120 days after the end of Alliant Energy'sEnergy’s fiscal year.
IP&L
The directors as well as the CEO and the four other most highly compensated executive officers for IP&L for which compensation information must be included are the same as for WP&L. Therefore, the information required by Item 11 is incorporated herein by reference to the relevant information under the captions "Compensation“Compensation of Directors,"
"Compensation” “Compensation of Executive Officers," "Stock” “Stock Options," "Long-Term” “Long-Term Incentive Awards," "Certain Agreements"” “Certain Agreements” and "Retirement“Retirement and Employee Benefit Plans"Plans” in the 20032004 WP&L Proxy Statement, which will be filed with the SEC within 120 days after the end of IP&L's&L’s fiscal year.
124
WP&L
The information required by Item 11 is incorporated herein by reference to the relevant information under the captions "Compensation“Compensation of Directors,"
"Compensation” “Compensation of Executive Officers," "Stock” “Stock Options," "Long-Term” “Long-Term Incentive Awards," "Certain Agreements"” “Certain Agreements” and "Retirement“Retirement and Employee Benefit Plans"Plans” in the 20032004 WP&L Proxy Statement, which will be filed with the SEC within 120 days after the end of WP&L's&L’s fiscal year.
122
ALLIANT ENERGY
Information regarding Alliant Energy'sEnergy’s equity compensation plans as of Dec. 31, 20022003 was as follows:
| (c) | |||||
| (a) | (b) | Number of securities | |||
| Number of securities | Weighted-average | remaining available for | |||
| to be issued upon | exercise price of | future issuance under | |||
| exercise of | outstanding | equity compensation plans | |||
| outstanding options, | options, warrants | (excluding securities | |||
| Plan Category | warrants and rights | and rights | reflected in column (a)) | ||
| Equity compensation plans | |||||
| approved by shareowners | 4,958,100 | (1) | $26.09 | 2,593,589 | (2) |
| Equity compensation plans not | |||||
| approved by shareowners | N/A | (3) | N/A | N/A | (4) |
| Total | 4,958,100 | $26.09 | 2,593,589 | ||
| (1) | Represents performance shares and options to purchase shares of Alliant Energy common stock granted under the Alliant Energy LTEIP and EIP. The performance shares are paid out in shares of Alliant Energy common stock or a combination of cash and stock and are modified by a performance multiplier, which ranges from zero to two, based on the performance criteria. The performance shares included in column (a) |
| (2) | All of the available |
| (3) | As of Dec. 31, 2003, there were 264,673 shares of Alliant Energy common stock outstanding |
| (4) | There is no limit on the number of shares of Alliant Energy common stock that may be issued under the KEDCP and |
Deferred Compensation Plans -— Alliant Energy maintains an unfunded KEDCP under which participants may defer up to 100% of base salary, incentive compensation and eligible supplemental executive retirement plan payments. Participants who have made the maximum allowed contribution to the Alliant Energy 401(k) Savings Plan may receive an additional credit to the deferred compensation plan. Alliant Energy also maintains an unfunded DDCP under which directors may elect to defer all or part of their retainer fee. Key employees and directors may elect to have their deferrals credited to an interest account or a company stock account, which are held in grantor trusts. Payments from the company stock account will be made in shares of Alliant Energy common stock.
The remainder of the information required by Item 12 is incorporated herein by reference to the relevant information under the caption "Ownership“Ownership of Voting Securities"Securities” in the 20032004 Alliant Energy Proxy Statement, which will be filed with the SEC within 120 days after the end of Alliant Energy’s fiscal year.
IP&L
To IP&L’s knowledge, no shareowner beneficially owned 5% or more of IP&L’s 8.375% or 7.10% Cumulative Preferred Stock as of Dec. 31, 2003. None of the directors or executive officers of IP&L own any shares of IP&L’s 8.375% or 7.10% Cumulative Preferred Stock.
WP&L
The information required by Item 12 is incorporated herein by reference to the relevant information under the caption “Ownership of Voting Securities” in the 2004 WP&L Proxy Statement, which will be filed with the SEC within 120 days after the end of WP&L’s fiscal year.
123
None.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
ALLIANT ENERGY
The information required by Item 14 is incorporated herein by reference to the relevant information under the caption "Report of the Audit Committee" in the 2004 Alliant Energy Proxy Statement, which will be filed with the SEC within 120 days after the end of Alliant Energy's fiscal year.
IP&L
To IP&L's knowledge, no shareowner beneficially owned 5% or more of IP&L's
8.375% Cumulative Preferred Stock as of Dec. 31, 2002. None of the directors
or executive officers
The principal accountant fees and services paid by Alliant Energy include those paid on behalf of IP&L own any shares of IP&L's 8.375% Cumulative
Preferred Stock.
125
WP&Land certain other Alliant Energy subsidiaries. The information required by Item 1214 is incorporated herein by reference to the relevant information under the caption "Ownership"Report of Voting Securities"the Audit Committee" in the 20032004 Alliant Energy Proxy Statement, which will be filed with the SEC within 120 days after the end of IP&L's fiscal year.
WP&L
The information required by Item 14 is incorporated herein by reference to the relevant information under the caption "Report of the Audit Committee" in the 2004 WP&L Proxy Statement, which will be filed with the SEC within 120 days after the end of WP&L's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 14. CONTROLS AND PROCEDURES
Within 90 days prior to the date of filing this Annual Report on Form 10-K,
Alliant Energy, IP&L and WP&L carried out evaluations, under the supervision
and with the participation of their management, including their CEO, CFO and
Disclosure Committee, of the effectiveness of the design and operation of
Alliant Energy's, IP&L's and WP&L's disclosure controls and procedures
pursuant to the requirements of the Securities Exchange Act of 1934, as
amended. Based on those evaluations, the CEO and the CFO concluded that
Alliant Energy's, IP&L's and WP&L's disclosure controls and procedures were
effective as of the date of such evaluation.
There have been no significant changes in Alliant Energy's, IP&L's and WP&L's
internal controls, or in other factors that could significantly affect
internal controls, subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART IV
| (a) (1) | Consolidated Financial Statements - Refer to "Index to Financial Statements" in Item 8 Financial Statements and Supplementary Data. |
| (a) (2) | Financial Statement Schedules - Schedule II. Valuation and Qualifying Accounts and Reserves |
| NOTE: All other schedules are omitted because they are not applicable or not required, or because that required information is shown either in the consolidated financial statements or in the notes thereto. |
| (a) (3) | Exhibits Required by Securities and Exchange Commission Regulation S-K - The following Exhibits are filed herewith or incorporated herein by reference. |
| 3.1 | Restated Articles of Incorporation of Alliant Energy, as amended (incorporated by reference to Exhibit 3.2 to Alliant Energy's Form 10-Q for the quarter ended June 30, 1999) |
| 3.2 | Bylaws of Alliant Energy, as amended, effective as of Jan. 30, 2001 (incorporated by reference to Exhibit 3.2 to Alliant Energy's Form 10-K for the year 2000) |
| 3.3 | Restated Articles of Incorporation of |
| 3.4 | Bylaws of WP&L, as amended, effective as of Jan. 30, 2001 (incorporated by reference to Exhibit 3.4 to WP&L's Form 10-K for the year 2000) |
| 3.5 | Restated Articles of Incorporation of IP&L |
| 3.6 | Bylaws of IP&L, as amended, effective as of Jan. 30, 2001 (incorporated by reference to Exhibit 3.6 to IP&L's Form 10-K for the year 2000) |
| 4.1 | Rights Agreement, dated Jan. 20, 1999, between Alliant Energy and Wells Fargo Bank Minnesota, N.A., successor (incorporated by reference to Exhibit 4.1 to Alliant Energy's Registration Statement on Form 8-A, dated Jan. 20, 1999) |
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| 4.2 | Indenture of Mortgage or Deed of Trust dated Aug. 1, 1941, between WP&L and U.S. Bank National Association (U.S. Bank) and Robert T. Jones, successor, as Trustees, filed as Exhibit 7(a) in File No. 2-6409, and the indentures supplemental thereto dated, respectively, Jan. 1, 1948, Sept. 1, 1948, June 1, 1950, April 1, 1951, April 1, 1952, Sept. 1, 1953, Oct. 1, 1954, March 1, 1959, May 1, 1962, Aug. 1, 1968, June 1, 1969, Oct. 1, 1970, July 1, 1971, April 1, 1974, Dec. 1, 1975, May 1, 1976, May 15, 1978, Aug. 1, 1980, Jan. 15, 1981, Aug. 1, 1984, Jan. 15, 1986, June 1, 1986, Aug. 1, 1988, Dec. 1, 1990, Sept. 1, 1991, Oct. 1, 1991, March 1, 1992, May 1, 1992, June 1, 1992 and July 1, 1992 (Second Amended Exhibit 7(b) in File No. 2-7361; Amended Exhibit 7(c) in File No. 2-7628; Amended Exhibit 7.02 in File No. 2-8462; Amended Exhibit 7.02 in File No. 2-8882; Second Amendment Exhibit 4.03 in File No. 2-9526; Amended Exhibit 4.03 in File No. 2-10406; Amended Exhibit 2.02 in File No. 2-11130; Amended Exhibit 2.02 in File No. 2-14816; Amended Exhibit 2.02 in File No. 2-20372; Amended Exhibit 2.02 in File No. 2-29738; Amended Exhibit 2.02 in File No. 2-32947; Amended Exhibit 2.02 in File No. 2-38304; Amended Exhibit 2.02 in File No. 2-40802; Amended Exhibit 2.02 in File No. 2-50308; Exhibit 2.01(a) in File No. 2-57775; Amended Exhibit 2.02 in File No. 2-56036; Amended Exhibit 2.02 in File No. 2-61439; Exhibit 4.02 in File No. 2-70534; Amended Exhibit 4.03 in File No. 2-70534; Exhibit 4.02 in File No. 33-2579; Amended Exhibit 4.03 in File No. 33-2579; Amended Exhibit 4.02 in File No. 33-4961; Exhibit 4.24 in File No. 33-45726, Exhibit 4.25 in File No. 33-45726, Exhibit 4.26 in File No. 33-45726, Exhibit 4.27 in File No. 33-45726, Exhibit 4.1 to WP&L's Form 8-K dated March 9, 1992, Exhibit 4.1 to WP&L's Form 8-K dated May 12, 1992, Exhibit 4.1 to WP&L's Form 8-K dated June 29, 1992 and Exhibit 4.1 to WP&L's Form 8-K dated July 20, 1992) |
| 4.3 | Indenture, dated as of June 20, 1997, between WP&L and U.S. Bank, as Trustee, relating to debt securities (incorporated by reference to Exhibit 4.33 to Amendment No. 2 to WP&L's Registration Statement on Form S-3 (Registration No. 33-60917)) |
| 4.4 | Officers' Certificate, dated as of June 25, 1997, creating WP&L's 7% debentures due June 15, 2007 (incorporated by reference to Exhibit 4 to WP&L's Form 8-K, dated June 25, 1997) |
| 4.5 | Officers' Certificate, dated as of Oct. 27, 1998, creating WP&L's 5.7% debentures due Oct. 15, 2008 (incorporated by reference to Exhibit 4 to WP&L's Form 8-K, dated Oct. 27, 1998) |
| 4.6 | Officers' Certificate, dated as of March 1, 2000, creating WP&L's 7-5/8% debentures due March 1, 2010 (incorporated by reference to Exhibit 4 to WP&L's Form 8-K, dated March 1, 2000) |
| 4.7 | Indenture of Mortgage and Deed of Trust, dated as of Sept. 1, 1993, between IP&L and J.P. Morgan Trust Company, National Association (J.P. Morgan Trust) as successor in interest to Bank One Trust Company, National Association (Bank One Trust), successor, as Trustee (incorporated by reference to Exhibit 4(c) to IP&L's Form 10-Q for the quarter ended Sept. 30, 1993), and the indentures supplemental thereto dated, respectively, Oct. 1, 1993, Nov. 1, 1993, March 1, 1995, Sept. 1, 1996 and April 1, 1997 (Exhibit 4(d) in IP&L's Form 10-Q dated Nov. 12, 1993, Exhibit 4(e) in IP&L's Form 10-Q dated Nov. 12, 1993, Exhibit 4(b) in IP&L's Form 10-Q dated May 12, 1995, Exhibit 4(c)(i) in IP&L's Form 8-K dated Sept. 19, 1996 and Exhibit 4(a) in IP&L's Form 10-Q dated May 14, 1997) |
| 4.8 | Indenture (For Senior Unsecured Debt Securities), dated as of Aug. 1, 1997, between IP&L and J.P. Morgan Trust as successor in interest to Bank One Trust, successor, as Trustee (incorporated by reference to Exhibit 4(j) to IP&L's Registration Statement, File No. 333-32097) |
| 4.9 | Officer's Certificate, dated as of Aug. 4, 1997, creating IP&L's 6-5/8% Senior Debentures, Series A, due 2009 (incorporated by reference to Exhibit 4.12 to IP&L's Form 10-K for the year 2000) |
| 4.10 | Officers' Certificate, dated as of March 6, 2001, creating IP&L's 6-3/4% Series B Senior Debentures due 2011 (incorporated by reference to Exhibit 4 to IP&L's Form 8-K, dated March 6, 2001) |
| 4.11 | The Original through the Nineteenth Supplemental Indentures of IP&L, successor, to JPMorgan Chase Bank and James P. Freeman, successor, as Trustee, dated Jan. 1, 1948 securing First Mortgage Bonds (incorporated by reference to Exhibits 4(b) through 4(t) to IPC's Registration Statement No. 33-59352 dated March 11, 1993) |
| 4.12 | Twentieth Supplemental Indenture of IP&L, successor, to JPMorgan Chase Bank and James P. Freeman, successor, as Trustees, dated May 15, 1993 (incorporated by reference to Exhibit 4(u) to IPC's Registration Statement No. 33-59352 dated March 11, 1993) |
125
| 4.13 | Twenty-First Supplemental Indenture of IP&L, successor, to JPMorgan Chase Bank and James P. Freeman, as Trustees, dated Dec. 31, 2001 (incorporated by reference to Exhibit 4.3 to IP&L's Form 8-K, dated Jan. 1, 2002) |
| 4.14 | Indenture, dated as of Nov. 4, 1999, among Resources, Alliant Energy, as Guarantor, and U.S. Bank, as Trustee (incorporated by reference to Exhibit 4.1 to Resources' and Alliant Energy's Registration Statement on Form S-4 (Registration No. 333-92859)), and the indentures supplemental thereto dated, respectively, Nov. 4, 1999, Feb. 1, 2000 and Nov. 15, 2001 (Exhibit 4.2 in Registration No. 333-92859, Exhibit 99.4 in Alliant Energy's Form 8-K dated Feb. 1, 2000 and Exhibit 4.4 in Resources' and Alliant Energy's Registration Statement on Form S-4 (Registration No. 333-75020)) |
| 4.14a | Fourth Supplemental Indenture, dated as of Dec. 26, 2002, among Resources, Alliant Energy, as Guarantor, and U.S. Bank, as Trustee (incorporated by reference to Exhibit 4.16a to Alliant Energy's Form 10-K for the year 2002) |
| 4.15 | Indenture (For Senior Unsecured Debt Securities), dated as of Aug. 20, 2003, between IP&L and J.P. Morgan Trust as successor in interest to Bank One Trust, as Trustee (incorporated by reference to Exhibit 4.11 to IP&L's Registration Statement on Form S-3 (Registration No. 333-108199)) |
| 4.16 | Officer's Certificate, dated Sept. 10, 2003, creating IP&L's 5.875% Senior Debentures due 2018 (incorporated by reference to Exhibit 4.1 to IP&L's Form 8-K, dated Sept. 10, 2003) |
| 4.17 | Officer's Certificate, dated Oct. 14, 2003, creating IP&L's 6.45% Senior Debentures due 2033 (incorporated by reference to Exhibit 4.1 to IP&L's Form 8-K, dated Oct. 14, 2003) |
| 10.1 | 364-Day Credit Agreement, dated as of Sept. 30, 2003, among Alliant Energy, the Banks named therein and Bank One, NA, as Administrative Agent and Letters of Credit issuing bank (incorporated by reference to Exhibit 10.1 to Alliant Energy's Form 10-Q for the quarter ended Sept. 30, 2003) |
| 10.2 | 364-Day Credit Agreement, dated as of Sept. 30, 2003, among IP&L, the Banks named therein and Bank One, NA, as Administrative Agent and Letters of Credit issuing bank (incorporated by reference to Exhibit 10.2 to IP&L's Form 10-Q for the quarter ended Sept. 30, 2003) |
| 10.3 | 364-Day Credit Agreement, dated as of Sept. 30, 2003, among WP&L, the Banks named therein and Bank One, NA, as Administrative Agent and Letters of Credit issuing bank (incorporated by reference to Exhibit 10.3 to WP&L's Form 10-Q for the quarter ended Sept. 30, 2003) |
| 10.4 | Service Agreement by and among WP&L, South Beloit, IP&L and Corporate Services (incorporated by reference to Exhibit 10.1 to Alliant Energy's Form 10-Q for the quarter ended June 30, 1998) |
| 10.5 | Service Agreement by and among Resources and Corporate Services (incorporated by reference to Exhibit 10.2 to Alliant Energy's Form 10-Q for the quarter ended June 30, 1998) |
| 10.6 | System Coordination and Operating Agreement dated April 11, 1997, among IP&L, WP&L and Corporate Services (incorporated by reference to Exhibit 10.3 to Alliant Energy's Form 10-Q for the quarter ended June 30, 1998) |
| 10.7 | Joint Power Supply Agreement among WPSC, WP&L, and MG&E, dated Feb. 2, 1967 (incorporated by reference to Exhibit 4.09 of WPSC in File No. 2-27308) |
| 10.7a | Amendment No. 1 to Joint Power Supply Agreement dated Feb. 2, 1967 among WPSC, WP&L, and MG&E (incorporated by reference to Exhibit 10.1 to WP&L's Form 10-Q for the quarter ended Sept. 30, 2001) |
| 10.8 | Joint Power Supply Agreement among WPSC, WP&L, and MG&E, dated July 26, 1973 (incorporated by reference to Exhibit 5.04A of WPSC in File No. 2-48781) |
| 10.9 | Basic Generating Agreement, Unit 4, Edgewater Generating Station, dated June 5, 1967, between WP&L and WPSC (incorporated by reference to Exhibit 4.10 of WPSC in File No. 2-27308) |
| 10.10 | Agreement for Construction and Operation of Edgewater 5 Generating Unit, dated Feb. 24, 1983, between WP&L, WEPCO and WPSC (incorporated by reference to Exhibit 10C-1 to WPSC's Form 10-K for the year 1983 (File No. 1-3016)) |
126
| 10.10a | Amendment No. 1 to Agreement for Construction and Operation of Edgewater 5 Generating Unit, dated Dec. 1, 1988 (incorporated by reference to Exhibit 10C-2 to WPSC's Form 10-K for the year 1988 (File No. 1-3016)) |
| 10.11 | Revised Agreement for Construction and Operation of Columbia Generating Plant among WPSC, WP&L, and MG&E, dated July 26, 1973 (incorporated by reference to Exhibit 5.07 of WPSC in File No. 2-48781) |
| 10.12 | Operating and Transmission Agreement between CIPCO and IP&L (incorporated by reference to Exhibit 10(q) to IP&L's Form 10-K for the year 1990) |
| 10.13 | DAEC Ownership Participation Agreement dated June 1, 1970 between CIPCO, Corn Belt Power Cooperative and IP&L (incorporated by reference to Exhibit 5(kk) to IP&L's Registration Statement, File No. 2-38674) |
| 10.14 | DAEC Operating Agreement dated June 1, 1970 between CIPCO, Corn Belt Power Cooperative and IP&L (incorporated by reference to Exhibit 5(ll) to IP&L's Registration Statement, File No. 2-38674) |
| 10.15 | DAEC Agreement for Transmission, Transformation, Switching, and Related Facilities dated June 1, 1970 between CIPCO, Corn Belt Power Cooperative and IP&L (incorporated by reference to Exhibit 5(mm) to IP&L's Registration Statement, File No. 2-38674) |
| 10.16 | Basic Generating Agreement dated April 16, 1975 between Iowa Public Service Company, Iowa Power and Light Company, Iowa-Illinois Gas and Electric Company and IP&L for the joint ownership of Ottumwa Generating Station-Unit 1 (OGS-1) (incorporated by reference to Exhibit 1 to IP&L's Form 10-K for the year 1977) |
| 10.16a | Addendum Agreement to the Basic Generating Agreement for OGS-1 dated Dec. 7, 1977 between Iowa Public Service Company, Iowa-Illinois Gas and Electric Company, Iowa Power and Light Company and IP&L for the purchase of 15% ownership in OGS-1 (incorporated by reference to Exhibit 3 to IP&L's Form 10-K for the year 1977) |
| 10.17 | Asset Contribution Agreement between ATC and WEPCO, WP&L, WPSC, MG&E, Edison Sault Electric Company and South Beloit, dated as of Dec. 15, 2000 (incorporated by reference to Exhibit 10.15 to Alliant Energy's Form 10-K for the year 2000) |
| 10.17a | Addenda to the Asset Contribution Agreement between ATC and WEPCO, WP&L, WPSC, MG&E, Edison Sault Electric Company and South Beloit, dated as of Dec. 15, 2000 (incorporated by reference to Exhibit 10.15a to Alliant Energy's Form 10-K for the year 2000) |
| 10.18 | Operating Agreement of ATC, dated as of Jan. 1, 2001 (incorporated by reference to Exhibit 10.16 to Alliant Energy's Form 10-K for the year 2000) |
| 10.19# | Alliant Energy LTEIP, as amended (incorporated by reference to Exhibit 10.1 to Alliant Energy's Form 10-Q for the quarter ended June 30, 1999) |
| 10.20# | Alliant Energy EIP (incorporated by reference to Exhibit 4.2 to Alliant Energy's Registration Statement on Form S-8 (Registration No. 333-88304)) |
| 10.21# | Alliant Energy KEDCP (incorporated by reference to Exhibit 4.2 to Alliant Energy's Registration Statement on Form S-8 (Registration No. 333-51126) |
| 10.22# | KEDCP (incorporated by reference to Exhibit 10(n) to IES's Form 10-K for the year 1987) |
| 10.22a# | Amendments to Key Employee Deferred Compensation Agreement for Key Employees (incorporated by reference to Exhibit 10(v) to IES's Form 10-Q for the quarter ended March 31, 1990) |
| 10.23# | DDCP, as amended and restated effective Jan. 1, 2000, amended Nov. 14, 2001 (incorporated by reference to Exhibit 10.22 to Alliant Energy's Form 10-K for the year 2001) |
| 10.24# | IP&L Irrevocable Trust Agreement dated April 30, 1990 (incorporated by reference to Exhibit 99.f to IPC's Form 10-K for the year 1993) |
127
| 10.25# | IP&L Irrevocable Trust Agreement dated December 1997 (incorporated by reference to Exhibit 99.7 to IPC's Form 10-K for the year 1997) |
| 10.26# | Alliant Energy Grantor Trust for Deferred Compensation Agreements (Key Employees) (incorporated by reference to Exhibit 4.4 to Alliant Energy's Registration Statement on Form S-8 (Registration No. 33-51126)) |
| 10.27# | Alliant Energy Grantor Trust for Deferred Compensation Agreements (Directors) (incorporated by reference to Exhibit 4.3 to Alliant Energy's Registration Statement on Form S-8 (Registration No. 33-51126)) |
| 10.28# | Form of Supplemental Retirement Agreement (SRA) (incorporated by reference to Exhibit 10.15 to Alliant Energy's Form 10-Q for the quarter ended June 30, 1998) |
| 10.29# | Supplemental Retirement Plan (incorporated by reference to Exhibit 10(l) to IES's Form 10-K for the year 1987) |
| 10.30# | Alliant Energy Excess Plan (incorporated by reference to Exhibit 10.33 to Alliant Energy's Form 10-K for the year 2000) |
| 10.31# | SRA by and between Alliant Energy and E.B. Davis, Jr., W.D. Harvey, J.E. Hoffman, E.G. Protsch, B.J. Swan and P.J. Wegner (incorporated by reference to Exhibit 10.5 to Alliant Energy's Form 10-Q for the quarter ended Sept. 30, 2003) |
| 10.32# | SRA by and between Alliant Energy and T.L. Hanson and J.E. Kratchmer (incorporated by reference to Exhibit 10.7 to Alliant Energy's Form 10-Q for the quarter ended Sept. 30, 2003) |
| 10.33# | Key Executive Employment and Severance Agreement (KEESA), dated March 29, 1999, by and between Alliant Energy and Erroll B. Davis, Jr. (incorporated by reference to Exhibit 10.2 to Alliant Energy's Form 10-Q for the quarter ended March 31, 1999) |
| 10.34# | KEESA, dated March 29, 1999, by and between Alliant Energy and each of J.E. Hoffman, W.D. Harvey, E.G. Protsch, P.J. Wegner and B.J. Swan (incorporated by reference to Exhibit 10.3 to Alliant Energy's Form 10-Q for the quarter ended March 31, 1999) |
| 10.35# | KEESA, dated March 29, 1999, by and between Alliant Energy and T.L. Aller; dated May 22, 2002, by and between Alliant Energy and T.L. Hanson; dated April 11, 2003, by and between Alliant Energy and J.E. Kratchmer (incorporated by reference to Exhibit 10.4 to Alliant Energy's Form 10-Q for the quarter ended March 31, 1999) |
| 10.36# | Employment Agreement by and between Alliant Energy and Erroll B. Davis, Jr., amended and restated as of March 29, 1999 (incorporated by reference to Exhibit 10.5 to Alliant Energy's Form 10-Q for the quarter ended March 31, 1999) |
| 10.37# | Executive Tenure Compensation Plan as revised November 1992 (incorporated by reference to Exhibit 10A to Alliant Energy's Form 10-K for the year 1992) |
| 10.37a# | Amendment to Executive Tenure Compensation Plan adopted Feb. 23, 1998 (incorporated by reference to Exhibit 10.19a to Alliant Energy's Form 10-Q for the quarter ended June 30, 1998) |
| 10.38# | Severance Agreement by and between Alliant Energy and Thomas M. Walker, dated Nov. 14, 2003 |
| 21 | Subsidiaries of Alliant Energy and WP&L |
| 23.1 | Independent Auditors' Consent for Alliant Energy |
| 23.2 | Independent Auditors' Consent for IP&L |
| 31.1 | Certification of the Chairman and CEO for Alliant Energy |
| 31.2 | Certification of the Senior Executive Vice President and CFO for Alliant Energy |
| 31.3 | Certification of the Chairman and CEO for IP&L |
| 31.4 | Certification of the CFO for IP&L |
128
| 31.5 | Certification of the Chairman and CEO for WP&L |
| 31.6 | Certification of the CFO for WP&L |
| 32.1 | Written Statement of the CEO and CFO Pursuant to 18 U.S.C.§1350 for Alliant Energy |
| 32.2 | Written Statement of the CEO and CFO Pursuant to 18 U.S.C.§1350 for IP&L |
| 32.3 | Written Statement of the CEO and CFO Pursuant to 18 U.S.C.§1350 for WP&L |
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the registrants agree to furnish to the SEC, upon request, any instrument defining the rights of holders of unregistered long-term debt not filed as an exhibit to this Form 10-K. No such instrument authorizes securities in excess of 10% of the total assets of Alliant Energy, WP&L or IP&L, as the case may be.
Documents incorporated by reference to filings made by Alliant Energy under the Securities Exchange Act of 1934, as amended, are under File No. 1-9894. Documents incorporated by reference to filings made by WP&L under the Securities Exchange Act of 1934, as amended, are under File No. 0-337. Documents incorporated by reference to filings made by IES under the Securities Exchange Act of 1934, as amended, are under File No. 1-9187. Documents incorporated by reference to filings made by IP&L under the 131
# -— A management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
-------------------
Alliant Energy
Alliant Energy filed a Current Report on Form 8-K, dated Dec. 26, 2002,Oct. 30, 2003, reporting (under Items 57 and 7)12) that it issued a press release announcing that Resources completed a private placement of $300 million in senior notes
in accordance with Rule 144A under the Securities Act of 1933.
Alliant Energy filed a Current Report on Form 8-K, dated Dec. 20, 2002,
reporting (under Items 5 and 7) that it issued two press releases announcing
that: 1) IP&L completed a private placement of $150 million of preferred
stock in accordance with Rule 144A under the Securities Act of 1933; and 2)
Whiting closed a revolving credit facility with a current maximum borrowing
availability of $200 million which matures on Dec. 20, 2005.
Alliant Energy filed a Current Report on Form 8-K, dated Dec. 16, 2002,
reporting (under Item 5) that, among other things, it: 1) will, as early as
the fourth quarter of 2002, be required under SFAS 144, "Accountingits earnings for the Impairment or Disposal of Long-Lived Assets," to classify the assets of
Whiting, its investments in Australiaquarter ended Sept. 30, 2003 and its affordable housing business as
held for sale and their operations as discontinued operations; 2) may also be
required to record accounting adjustments, other charges and/or income in the
fourth quarter of 2002 and/or in 2003 related to these proposed divestitures;
3) had engaged its current independent auditors, Deloitte & Touche LLP, to
reaudit its financial statements for the years ended Dec. 31, 2001 and 2000
as a result of the aforementioned reclassifications; and 4) continues to
pursue various financing transactions, the proceeds of which will be used to
repay short-term debt and for other general corporate purposes, to enhance
its liquidity position.
Alliant Energy filed a Current Report on Form 8-K, dated Nov. 22, 2002,
reporting (under Items 5 and 7) that it issued a press release announcing
that its Board of Directors approved five strategic actions designed to
maintain strong credit ratings, strengthen its balance sheet and position it
for improved long-term financial performance and providing updated 2003
earnings guidance based on these actions.
for 2003.
IP&L
IP&L filed a Current Report on Form 8-K, dated Dec. 20, 2002,Oct. 14, 2003, reporting (under Items 5 and 7) that Alliant Energy issuedit agreed to sell $100 million aggregate principal amount of its 6.45% senior debentures due 2033 in a press release announcing
that IP&L completed a private placement of $150 million of preferred stock in
accordance with Rule 144A under the Securities Act of 1933.
public offering.
WP&L -— None.
132
129
SCHEDULE II -VALUATION— VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
| Additions | |||||
| Balance, | Charged to | Charged to Other | Balance, | ||
| Description | Jan. 1 | Expense | Accounts (1) | Deductions (2) | Dec. 31 |
| (in thousands) | |||||
| Valuation and Qualifying Accounts Which are Deducted in the Balance Sheet From the Assets to Which They Apply: | |||||
| Accumulated Provision for Uncollectible Accounts: | |||||
| Alliant Energy | |||||
| Year ended Dec. 31, 2003 | $5,519 | $9,868 | $1,472 | $10,174 | $6,685 |
| Year ended Dec. 31, 2002 | 7,891 | 8,115 | 1,244 | 11,731 | 5,519 |
| Year ended Dec. 31, 2001 | 4,341 | 9,317 | 1,510 | 7,277 | 7,891 |
| IP&L | |||||
| Year ended Dec. 31, 2003 | $1,282 | $4,500 | $-- | $4,375 | $1,407 |
| Year ended Dec. 31, 2002 | 1,883 | 3,115 | -- | 3,716 | 1,282 |
| Year ended Dec. 31, 2001 | 1,316 | 7,206 | -- | 6,639 | 1,883 |
| WP&L | |||||
| Year ended Dec. 31, 2003 | $2,228 | $4,367 | $1,472 | $4,983 | $3,084 |
| Year ended Dec. 31, 2002 | 1,543 | 4,067 | 1,244 | 4,626 | 2,228 |
| Year ended Dec. 31, 2001 | 8 | 37 | 1,498 | -- | 1,543 |
| Note: The above provisions relate to various customer, notes and other receivable balances included in various line items on the respective Consolidated Balance Sheets. |
| Other Reserves: | |||||
| Accumulated Provision for Nuclear Refueling Outage Provision and Other Miscellaneous Reserves: | |||||
| Alliant Energy | |||||
| Year ended Dec. 31, 2003 | $27,583 | $12,097 | $-- | $22,318 | $17,362 |
| Year ended Dec. 31, 2002 (3) | 13,210 | 18,452 | -- | 4,079 | 27,583 |
| Year ended Dec. 31, 2001 (3) | 21,731 | 10,565 | -- | 19,086 | 13,210 |
| IP&L | |||||
| Year ended Dec. 31, 2003 | $21,021 | $9,285 | $-- | $18,969 | $11,337 |
| Year ended Dec. 31, 2002 (3) | 10,232 | 12,783 | -- | 1,994 | 21,021 |
| Year ended Dec. 31, 2001 (3) | 14,067 | 9,229 | -- | 13,064 | 10,232 |
| WP&L | |||||
| Year ended Dec. 31, 2003 | $4,853 | $1,879 | $-- | $2,021 | $4,711 |
| Year ended Dec. 31, 2002 | 2,574 | 4,011 | -- | 1,732 | 4,853 |
| Year ended Dec. 31, 2001 | 2,689 | 1,266 | -- | 1,381 | 2,574 |
| (1) | Accumulated |
| (2) | Deductions are of the nature for which the reserves were created. In the case of the accumulated provision for uncollectible accounts, deductions from this reserve are reduced by recoveries of amounts previously written off. |
| (3) | 2002 |
130
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 25th11th day of March 2003.
ALLIANT ENERGY CORPORATION
By: /s/ Erroll B. Davis, Jr.
------------------------2004.
| ALLIANT ENERGY CORPORATION | ||
| By:/s/ Erroll B. Davis, Jr. | ||
| Erroll B. Davis, Jr. | ||
| Chairman | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 25th11th day of March 2003.
2004.
| /s/ Erroll B. Davis, Jr. | Chairman, | ||
| Erroll B. Davis, Jr. | |||
| /s/ Eliot G. Protsch | Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||
| Eliot G. Protsch | |||
| /s/ John E. Kratchmer | Vice President-Controller and Chief Accounting Officer (Principal Accounting Officer) | ||
| John E. Kratchmer | |||
| /s/ Alan B. Arends | Director | /s/ David A. Perdue | Director |
| Alan B. Arends | David A. Perdue | ||
| /s/ Michael L. Bennett | Director | /s/ Judith D. Pyle | Director |
| Michael L. Bennett | Judith D. Pyle | ||
| /s/ Jack B. Evans | Director | /s/ Robert W. Schlutz | Director |
| Jack B. Evans | Robert W. Schlutz | ||
| /s/ Katharine C. Lyall | Director | /s/ Wayne H. Stoppelmoor | Director |
| Katharine C. Lyall | Wayne H. Stoppelmoor | ||
| /s/ Singleton B. McAllister | Director | /s/ Anthony R. Weiler | Director |
| Singleton B. McAllister | Anthony R. Weiler | ||
| /s/ Ann K. Newhall | Director | ||
| Ann K. Newhall | |||
131
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 25th11th day of March 2003.
INTERSTATE POWER AND LIGHT COMPANY
2004.
| INTERSTATE POWER AND LIGHT COMPANY | ||
| By: /s/ | ||
| Erroll B. Davis, Jr. | ||
| Chairman and Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 25th11th day of March 2003.
2004.
| /s/ Erroll B. Davis, Jr. | Chairman, Chief Executive Officer and Director (Principal Executive Officer) | ||
| Erroll B. Davis, Jr. | |||
| /s/ Eliot G. Protsch | Chief Financial Officer (Principal Financial Officer) | ||
| Eliot G. Protsch | |||
| /s/ John E. Kratchmer | Vice President-Controller and Chief Accounting Officer (Principal Accounting Officer) | ||
| John E. Kratchmer | |||
| /s/ Alan B. Arends | Director | /s/ David A. Perdue | Director |
| Alan B. Arends | David A. Perdue | ||
| /s/ Michael L. Bennett | Director | /s/ Judith D. Pyle | Director |
| Michael L. Bennett | Judith D. Pyle | ||
| /s/ Jack B. Evans | Director | /s/ Robert W. Schlutz | Director |
| Jack B. Evans | Robert W. Schlutz | ||
| /s/ Katharine C. Lyall | Director | /s/ Wayne H. Stoppelmoor | Director |
| Katharine C. Lyall | Wayne H. Stoppelmoor | ||
| /s/ Singleton B. McAllister | Director | /s/ Anthony R. Weiler | Director |
| Singleton B. McAllister | Anthony R. Weiler | ||
| /s/ Ann K. Newhall | Director | ||
| Ann K. Newhall | |||
132
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 25th11th day of March 2003.
WISCONSIN POWER AND LIGHT COMPANY
2004.
| WISCONSIN POWER AND LIGHT COMPANY | ||
| By: /s/ | ||
| Erroll B. Davis, Jr. | ||
| Chairman and Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 25th11th day of March 2003.
2004.
| /s/ Erroll B. Davis, Jr. | Chairman, Chief Executive Officer and Director (Principal Executive Officer) | ||
| Erroll B. Davis, Jr. | |||
| /s/ Eliot G. Protsch | Chief Financial Officer (Principal Financial Officer) | ||
| Eliot G. Protsch | |||
| /s/ John E. Kratchmer | Vice President-Controller and Chief Accounting Officer (Principal Accounting Officer) | ||
| John E. Kratchmer | |||
| /s/ Alan B. Arends | Director | /s/ David A. Perdue | Director |
| Alan B. Arends | David A. Perdue | ||
| /s/ Michael L. Bennett | Director | /s/ Judith D. Pyle | Director |
| Michael L. Bennett | Judith D. Pyle | ||
| /s/ Jack B. Evans | Director | /s/ Robert W. Schlutz | Director |
| Jack B. Evans | Robert W. Schlutz | ||
| /s/ Katharine C. Lyall | Director | /s/ Wayne H. Stoppelmoor | Director |
| Katharine C. Lyall | Wayne H. Stoppelmoor | ||
| /s/ Singleton B. McAllister | Director | /s/ Anthony R. Weiler | Director |
| Singleton B. McAllister | Anthony R. Weiler | ||
| /s/ Ann K. Newhall | Director | ||
| Ann K. Newhall | |||
133
ALLIANT ENERGY CORPORATION
INTERSTATE POWER AND LIGHT COMPANY
WISCONSIN POWER AND LIGHT COMPANY
Exhibit Index to Annual Report on Form 10-K
For the fiscal year ended Dec. 31, 2002
2003
| Exhibit | |
| Number | Description |
| 3.5 | Restated Articles of Incorporation |
| 10.38 | Severance Agreement by and between Alliant Energy |
| 21 | Subsidiaries of Alliant Energy |
| 23.1 | Independent Auditors' Consent for Alliant Energy |
| 23.2 | Independent Auditors' Consent for IP&L |
| 31.1 | Certification of the Chairman and CEO for Alliant Energy |
| 31.2 | Certification of the Senior Executive Vice President and CFO for Alliant Energy |
| 31.3 | Certification of the Chairman and CEO for IP&L |
| 31.4 | Certification of the CFO for IP&L |
| 31.5 | Certification of the Chairman and CEO for WP&L |
| 31.6 | Certification of the CFO for WP&L |
| 32.1 | Written Statement of the |
| 32.2 | Written Statement of the |
| 32.3 | Written Statement of the |
134