UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
------------------
or
[ ] 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)
222 West Washington Avenue
Madison, Wisconsin 53703
Telephone (608)252-3311
0-4117-1 IES UTILITIES INC. 42-0331370
(an Iowa corporation)
Alliant Energy Tower
Cedar Rapids, Iowa 52401
Telephone (319)398-4411
0-337 WISCONSIN POWER AND LIGHT COMPANY 39-0714890
(a Wisconsin corporation)
222 West Washington Avenue
Madison, Wisconsin 53703
Telephone (608)252-3311
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
registrants were required to file such reports), and (2) have been subject
to such filing requirements for the past 90 days. Yes X No
------- -------
This combined Form 10-Q is separately filed by Alliant Energy Corporation,
IES Utilities Inc. and Wisconsin Power and Light Company. Information
contained in the quarterly report relating to IES Utilities Inc. and
Wisconsin Power and Light Company is filed by such registrant on its own
behalf. Each of IES Utilities Inc. and Wisconsin Power and Light Company
makes no representation as to information relating to registrants other than
itself.
Number of shares outstanding of each class of common stock as of October 31,
2001:
Alliant Energy Corporation Common stock, $.01 par value, 79,522,785 shares outstanding
IES Utilities Inc. 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)
CONTENTS
Page
----
Part I. Financial Information 4
Item 1. Consolidated Financial Statements 4
Alliant Energy Corporation:
---------------------------
Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 2001 and 2000 4
Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000 5
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2001 and 2000 7
Notes to Consolidated Financial Statements 8
IES Utilities Inc.:
-------------------
Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 2001 and 2000 16
Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000 17
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2001 and 2000 19
Notes to Consolidated Financial Statements 20
Wisconsin Power and Light Company:
----------------------------------
Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 2001 and 2000 22
Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000 23
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2001 and 2000 25
Notes to Consolidated Financial Statements 26
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 28
Item 3. Quantitative and Qualitative Disclosures About Market Risk 42
Part II. Other Information 42
Item 1. Legal Proceedings 42
Item 6. Exhibits and Reports on Form 8-K 43
Signatures 43
2
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes of this combined Form 10-Q are defined below:
Abbreviation or Acronym Definition
- ----------------------- ----------
Alliant Energy...................................... Alliant Energy Corporation
ATC................................................. American Transmission Company, LLC
Capstone............................................ Capstone Turbine Corporation
Cargill-Alliant..................................... Cargill-Alliant, L.L.C.
Corporate Services.................................. Alliant Energy Corporate Services, Inc.
DAEC................................................ Duane Arnold Energy Center
Dth................................................. Dekatherm
EAC................................................. Energy Adjustment Clause
FASB................................................ Financial Accounting Standards Board
FERC................................................ Federal Energy Regulatory Commission
IESU................................................ IES Utilities Inc.
IPC................................................. Interstate Power Company
IRS................................................. Internal Revenue Service
IUB................................................. Iowa Utilities Board
Kewaunee............................................ Kewaunee Nuclear Power Plant
MAIN................................................ Mid-America Interconnected Network, Inc.
MAPP................................................ Mid-Continent Area Power Pool
McLeod.............................................. McLeodUSA Incorporated
MD&A................................................ Management's Discussion and Analysis of Financial
Condition and Results of Operations
MW.................................................. Megawatt
MWh................................................. Megawatt-Hour
NRC................................................. Nuclear Regulatory Commission
OCA................................................. Office of Consumer Advocate
PGA................................................. Purchased Gas Adjustment
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
South Beloit........................................ South Beloit Water, Gas & Electric Company
STB................................................. U.S. Surface Transportation Board
TRANSLink........................................... TRANSLink Transmission Co. LLC
Union Pacific....................................... Union Pacific Railroad
U.S. ............................................... United States
Whiting............................................. Whiting Petroleum Corporation
WP&L................................................ Wisconsin Power and Light Company
WUHCA............................................... Wisconsin Utility Holding Company Act
3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
Operating revenues:
Electric utility $519,851 $480,763 $1,367,281 $1,248,228
Gas utility 42,979 41,369 396,229 226,156
Non-regulated and other 103,435 81,060 367,309 226,755
--------------- -------------- -------------- --------------
666,265 603,192 2,130,819 1,701,139
--------------- -------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 94,894 80,605 248,040 213,990
Purchased power 108,177 85,553 318,024 222,690
Cost of utility gas sold 23,660 22,660 303,984 136,642
Other operation and maintenance 194,663 168,522 629,845 526,562
Depreciation and amortization 85,502 79,625 256,278 233,506
Taxes other than income taxes 25,643 26,206 83,628 79,171
--------------- -------------- -------------- --------------
532,539 463,171 1,839,799 1,412,561
--------------- -------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------------------------
Operating income 133,726 140,021 291,020 288,578
--------------- -------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 46,169 45,040 143,500 127,452
Equity income from unconsolidated investments (11,688) (9,890) (30,766) (12,598)
Allowance for funds used during construction (3,373) (2,186) (8,845) (6,825)
Preferred dividend requirements of subsidiaries 1,680 1,679 5,040 5,035
Gain on reclassification of investments - (321,349) - (321,349)
Gain on sale of McLeodUSA Inc. stock - - - (10,206)
Miscellaneous, net 8,518 (8,216) 3,412 (27,948)
--------------- -------------- -------------- --------------
41,306 (294,922) 112,341 (246,439)
--------------- -------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 92,420 434,943 178,679 535,017
--------------- -------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------------------------
Income taxes 30,135 175,403 59,709 213,879
--------------- -------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of a change in
accounting principle, net of tax 62,285 259,540 118,970 321,138
--------------- -------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of a change in accounting
principle, net of tax - 16,708 - 16,708
--------------- -------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $62,285 $276,248 $118,970 $337,846
=============== ============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding - basic 79,240 79,004 79,107 79,001
=============== ============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings per average common share - basic:
Income before cumulative effect of a change
in accounting principle $0.79 $3.29 $1.50 $4.07
Cumulative effect of a change in accounting principle - 0.21 - 0.21
--------------- -------------- -------------- --------------
Net income $0.79 $3.50 $1.50 $4.28
=============== ============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding - diluted 79,350 79,160 79,241 79,202
=============== ============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings per average common share - diluted:
Income before cumulative effect of a change
in accounting principle $0.78 $3.28 $1.50 $4.06
Cumulative effect of a change in accounting principle - 0.21 - 0.21
--------------- -------------- -------------- --------------
Net income $0.78 $3.49 $1.50 $4.27
=============== ============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends declared per common share $0.50 $0.50 $1.50 $1.50
=============== ============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
4
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30,
2001 December 31,
ASSETS (Unaudited) 2000
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Utility -
Plant in service -
Electric $5,005,456 $5,203,069
Gas 589,134 574,390
Other 507,042 474,116
------------------ ------------------
6,101,632 6,251,575
Less - Accumulated depreciation 3,340,599 3,296,546
------------------ ------------------
2,761,033 2,955,029
Construction work in progress 178,534 130,856
Nuclear fuel, net of amortization 58,532 61,935
------------------ ------------------
2,998,099 3,147,820
Other property, plant and equipment, net of accumulated
depreciation and amortization of $205,654 and $209,072, respectively 808,640 571,487
------------------ ------------------
3,806,739 3,719,307
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 92,542 148,415
Restricted cash 49,951 3,512
Accounts receivable:
Customer, less allowance for doubtful accounts
of $6,591 and $3,762, respectively 44,417 122,895
Unbilled utility revenues 47,556 124,515
Other, less allowance for doubtful accounts
of $800 and $484, respectively 40,356 45,829
Production fuel, at average cost 46,882 46,627
Materials and supplies, at average cost 58,208 55,930
Gas stored underground, at average cost 61,092 41,359
Prepaid gross receipts tax 18,609 23,088
Regulatory assets 14,879 29,348
Other 74,517 69,463
------------------ ------------------
549,009 710,981
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
Investments:
Investment in available-for-sale securities of McLeodUSA Inc. 31,121 569,951
Investment in trading securities of McLeodUSA Inc. 12,039 220,912
Investments in unconsolidated foreign entities 526,099 507,655
Nuclear decommissioning trust funds 316,546 307,940
Other 221,549 132,203
------------------ ------------------
1,107,354 1,738,661
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 278,917 270,779
Deferred charges and other 306,992 294,038
------------------ ------------------
585,909 564,817
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $6,049,011 $6,733,766
================== ==================
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
5
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
September 30,
2001 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 2000
- ------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Capitalization:
Common stock - $0.01 par value - authorized 200,000,000 shares;
outstanding 79,420,078 and 79,010,114 shares, respectively $794 $790
Additional paid-in capital 961,659 947,504
Retained earnings 818,629 818,162
Accumulated other comprehensive income (loss) (177,187) 271,867
Shares in deferred compensation trust - 69,466 and 28,825 shares
at an average cost of $30.75 and $29.52 per share, respectively (2,136) (851)
------------------ ------------------
Total common equity 1,601,759 2,037,472
------------------ ------------------
Cumulative preferred stock of subsidiaries, net 113,912 113,790
Long-term debt (excluding current portion) 2,206,782 1,910,116
------------------ ------------------
3,922,453 4,061,378
------------------ ------------------
- ------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 10,696 92,477
Variable rate demand bonds 55,100 55,100
Commercial paper 310,420 283,885
Notes payable 50,030 50,067
Other short-term borrowings 99,202 110,783
Accounts payable 252,163 296,959
Accrued taxes 110,801 87,484
Other 167,444 177,580
------------------ ------------------
1,055,856 1,154,335
------------------ ------------------
- ------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 681,974 931,675
Accumulated deferred investment tax credits 60,336 67,364
Pension and other benefit obligations 69,823 65,399
Environmental liabilities 62,532 64,532
Derivative liability 2,093 181,925
Other 193,944 207,158
------------------ ------------------
1,070,702 1,518,053
------------------ ------------------
- ------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $6,049,011 $6,733,766
================== ==================
- ------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
6
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30,
2001 2000
- --------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $118,970 $337,846
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization 256,278 233,506
Amortization of nuclear fuel 13,344 13,907
Amortization of deferred energy efficiency expenditures 16,109 19,065
Deferred tax expense (benefits) and investment tax credits (19,444) 117,229
Gains on dispositions of assets, net (7,013) (18,390)
Gain on reclassification of investments - (321,349)
Cumulative effect of a change in accounting principle, net of tax - (16,708)
Equity income from unconsolidated investments, net (30,766) (12,598)
Other 28,471 10,568
Other changes in assets and liabilities:
Accounts receivable 160,910 (11,137)
Gas stored underground (19,733) (22,782)
Accounts payable (38,291) (6,474)
Accrued taxes 23,317 40,484
Benefit obligations and other (25,590) 3,725
-------------------- ---------------------
Net cash flows from operating activities 476,562 366,892
-------------------- ---------------------
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Common stock dividends declared (118,503) (118,475)
Proceeds from issuance of common stock 11,403 817
Net change in Resources' credit facility 248,500 51,652
Proceeds from issuance of exchangeable senior notes - 402,500
Proceeds from issuance of other long-term debt 205,392 118,649
Reductions in other long-term debt (146,678) (63,282)
Net change in other short-term borrowings (136,713) (28,550)
Other (39,773) (24,112)
-------------------- ---------------------
Net cash flows from financing activities 23,628 339,199
-------------------- ---------------------
- --------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Utility operations (254,267) (212,440)
Non-regulated businesses and other (376,067) (564,568)
Nuclear decommissioning trust funds (19,879) (19,879)
Proceeds from formation of ATC and other asset dispositions 110,534 69,355
Other (16,384) (20,959)
-------------------- ---------------------
Net cash flows used for investing activities (556,063) (748,491)
-------------------- ---------------------
- --------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and temporary cash investments (55,873) (42,400)
-------------------- ---------------------
- --------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 148,415 113,669
-------------------- ---------------------
- --------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $92,542 $71,269
==================== =====================
- --------------------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid during the period for:
Interest $142,900 $111,202
==================== =====================
Income taxes $56,673 $61,298
==================== =====================
Noncash investing and financing activities:
Capital lease obligations incurred and other $19,759 $338
==================== =====================
- --------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
7
ALLIANT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The interim consolidated financial statements included herein have been
prepared by Alliant Energy, without audit, pursuant to the rules and
regulations of the SEC. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted, although management believes that the disclosures
are adequate to make the information presented not misleading. The
consolidated financial statements include Alliant Energy and its
consolidated subsidiaries (including IESU, WP&L, IPC, Resources and
Corporate Services). These financial statements should be read in
conjunction with the financial statements and the notes thereto included
in Alliant Energy's, IESU's and WP&L's latest Annual Report on Form 10-K.
In the opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of (a) the
consolidated results of operations for the three and nine months ended
September 30, 2001 and 2000, (b) the consolidated financial position at
September 30, 2001 and December 31, 2000, and (c) the consolidated
statement of cash flows for the nine months ended September 30, 2001 and
2000, have been made. Because of the seasonal nature of Alliant Energy's
utility operations, results for the three and nine months ended September
30, 2001 are not necessarily indicative of results that may be expected
for the year ending December 31, 2001.
2. Alliant Energy's comprehensive income (loss), and the components of other
comprehensive loss, net of taxes, for the three and nine months ended
September 30 were as follows (in thousands):
Three Months Nine Months
-------------------------------- -----------------------------
2001 2000 2001 2000
------------- --------------- -------------- ------------
Net income $62,285 $276,248 $118,970 $337,846
Other comprehensive loss:
Unrealized losses on securities:
Unrealized holding losses arising during (105,306) (63,414)
period, net of tax (1) (132,251) (335,391)
Less: adjustment for gain on reclassification of
investments included in net income, net of tax (2) -- 187,296 -- 187,296
Less: reclassification adjustment for other gains
included in net income, net of tax 12 238 12 6,566
------------- --------------- -------------- ------------
Net unrealized losses on securities (105,318) (319,785) (335,403) (257,276)
------------- --------------- -------------- ------------
Foreign currency translation adjustments (45,557) (22,335) (115,352) (40,553)
------------- --------------- -------------- ------------
Unrealized gains (losses) on derivatives qualified
as hedges:
Unrealized holding losses arising during period due
to cumulative effect of a change in accounting
principle, net of tax -- (6,582) -- (6,582)
Other unrealized holding gains (losses) arising
during period, net of tax 11,591 (177) (573) (177)
Less: reclassification adjustment for gains (losses)
included in net income, net of tax 1,508 (3,535) (2,274) (3,535)
------------- --------------- -------------- ------------
Net unrealized gains (losses) on qualifying derivatives 10,083 (3,224) 1,701 (3,224)
------------- --------------- -------------- ------------
Other comprehensive loss (140,792) (345,344) (449,054) (301,053)
------------- --------------- -------------- ------------
Comprehensive income (loss) ($78,507) ($69,096) ($330,084) $36,793
============= =============== ============== ============
(1) Primarily due to quarterly adjustments to the estimated fair value of
Alliant Energy's investments in available-for-sale securities of McLeod
and Capstone.
8
(2) With the adoption of SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities," on July 1, 2000, Alliant Energy recorded
pre-tax net income of $321 million in the third quarter of 2000,
relating to the unrealized appreciation in value of the 15.6 million
shares of its McLeod stock holdings that it reclassified from
available-for-sale to trading securities.
3. Various differences exist between segment reporting information for the
non-regulated businesses and Resources' information in Alliant Energy's
condensed consolidating financial statements in Note 9 due to Alliant
Energy's investment in Cargill-Alliant being recorded on Alliant Energy's
parent-only books for legal reporting, but included with the non-regulated
businesses information for segment reporting (Alliant Energy considers
this business as part of its non-regulated businesses for management
reporting). The "Net income (loss)" line item was impacted. The "Net
income (loss)" line item is not allocated to the electric and gas segments
for management reporting purposes and therefore is included in "Other
Regulated Domestic Utilities." Intersegment revenues were not material
to Alliant Energy's operations. Certain financial information relating to
Alliant Energy's significant business segments is as follows:
Regulated Domestic Utilities Non- Alliant
------------------------------------------------ regulated Energy
Electric Gas Other Total Businesses Other Consolidated
---------------------------------------------------------------------------------------
(in thousands)
Three Months Ended September 30, 2001
-------------------------------------
Operating revenues $519,851 $42,979 $8,883 $571,713 $96,031 ($1,479) $666,265
Operating income (loss) 132,753 (6,092) 2,474 129,135 4,731 (140) 133,726
Net income (loss) 69,514 69,514 (4,429) (2,800) 62,285
Three Months Ended September 30, 2000
-------------------------------------
Operating revenues $480,763 $41,369 $8,507 $530,639 $73,255 ($702) $603,192
Operating income (loss) 143,962 (2,938) 1,613 142,637 (2,704) 88 140,021
Net income (loss) 68,378 68,378 208,038 (168) 276,248
Nine Months Ended September 30, 2001
------------------------------------
Operating revenues $1,367,281 $396,229 $28,297 $1,791,807 $342,831 ($3,819) $2,130,819
Operating income 249,036 8,292 4,955 262,283 28,191 546 291,020
Net income (loss) 124,907 124,907 329 (6,266) 118,970
Nine Months Ended September 30, 2000
------------------------------------
Operating revenues $1,248,228 $226,156 $24,085 $1,498,469 $204,559 ($1,889) $1,701,139
Operating income (loss) 268,834 11,167 4,133 284,134 4,490 (46) 288,578
Net income (loss) 127,487 127,487 213,898 (3,539) 337,846
Resources' (i.e., the non-regulated businesses) assets decreased $543
million during the first nine months of 2001, primarily due to the
decrease in market value of its investment in McLeod, which was partially
offset by additional non-regulated investments during 2001. Non-regulated
net income (loss) for the three and nine months ended September 30, 2001
included after-tax charges to net income of $12.6 million and $19.6
million, respectively, for non-cash valuation adjustments related to
Alliant Energy's obligation under certain 30-year exchangeable senior
notes. Net income for the three and nine months ended September 30, 2000
included $204 million (primarily all at Alliant Energy's non-regulated
businesses) relating to Alliant Energy's adoption of a new accounting
pronouncement, SFAS 133, on July 1, 2000.
4. The provisions for income taxes are based on the estimated annual
effective tax rate, which differs from the federal statutory rate of 35
percent principally due to state income taxes, the impact of foreign income
and associated taxes, tax credits, effects of utility rate making and
certain non-deductible expenses.
9
5. In January 2001, Resources acquired a stake in another Brazilian electric
utility. As of September 30, 2001, the total investment in this Brazilian
electric utility was approximately $93 million, of which approximately $60
million was paid in January 2001 and the remainder is expected to be paid
by the end of the first quarter of 2002. This investment is accounted for
under the equity method of accounting.
WP&L, including South Beloit, transferred its transmission assets with no
gain or loss (approximate net book value of $186 million) to ATC on
January 1, 2001. In the second quarter of 2001, WP&L received cash of $75
million and at September 30, 2001, had a $106 million equity investment in
ATC, with an ownership percentage of approximately 26.5 percent. WP&L
accounts for its investment in ATC under the equity method.
6. Alliant Energy continues to utilize derivative instruments to manage its
exposures to various market risks as described in Alliant Energy's, IESU's
and WP&L's Annual Report on Form 10-K for the year ended December 31,
2000. The following information supplements, and should be read in
conjunction with, Note 10(a) in Alliant Energy's "Notes to Consolidated
Financial Statements" in the 2000 Annual Report on Form 10-K.
For the nine months ended September 30, 2001, income of $2.1 million was
recognized relating to the amount of hedge ineffectiveness in accordance
with SFAS 133. As of September 30, 2001, the maximum length of time over
which Alliant Energy is hedging its exposure to the variability in future
cash flows for forecasted transactions is six months and Alliant Energy
estimates that income of $5.1 million will be reclassified from
accumulated other comprehensive income into earnings within the twelve
months between October 1, 2001 and September 30, 2002 as the hedged
transactions affect earnings.
Included in "Miscellaneous, net" in Alliant Energy's Consolidated
Statements of Income for the nine months ended September 30, 2001 was
expense of $208.9 million related to the change in value of the McLeod
trading securities, partially offset by income of $179.8 million related
to the change in value of the derivative component of the exchangeable
senior notes.
7. In March 2001, IESU issued $200 million of senior unsecured debentures at a
fixed interest rate of 6-3/4%, due 2011. IESU used the net proceeds to
repay short- and long-term debt.
8. A reconciliation of the weighted average common shares outstanding used in
the basic and diluted earnings per share calculation for the three and
nine months ended September 30 was as follows:
Three Months Nine Months
------------------------------- -------------------------------
2001 2000 2001 2000
------------- -------------- ------------- -------------
Weighted average common shares outstanding:
Basic earnings per share calculation 79,240,093 79,003,569 79,107,304 79,000,683
Effect of dilutive securities 109,964 156,164 133,965 201,033
Diluted earnings per share calculation 79,350,057 79,159,733 79,241,269 79,201,716
For the nine months ended September 30, 2001 and 2000, 1,368,801 and
1,644,377 options, respectively, to purchase shares of common stock, with
an average exercise price of $31.20 and $30.15, respectively, were
excluded from the calculation of diluted earnings per share as the
exercise prices were greater than the average market price.
9. Alliant Energy has fully and unconditionally guaranteed the payment of
principal and interest on various debt issued by Resources and, as a
result, is required to present condensed consolidating financial
statements. No other Alliant Energy subsidiaries are guarantors of
Resources' debt issuances. Alliant Energy's condensed consolidating
financial statements are as follows:
10
Alliant Energy Corporation
Condensed Consolidating Statements of Income
Three Months Ended September 30, 2001 and 2000
(in thousands) Other Consolidated
Alliant Energy Alliant Energy Consolidating Alliant
Parent Company Resources Subsidiaries Adjustments Energy
-------------------------------------------------------------------
Three Months Ended September 30, 2001
- -------------------------------------
Operating revenues:
Electric utility $- $- $519,851 $- $519,851
Gas utility - - 42,979 - 42,979
Non-regulated and other - 96,031 82,432 (75,028) 103,435
-------------------------------------------------------------------
- 96,031 645,262 (75,028) 666,265
-------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 94,894 - 94,894
Purchased power - - 108,177 - 108,177
Cost of utility gas sold - - 23,660 - 23,660
Other operation and maintenance 589 71,650 195,369 (72,945) 194,663
Depreciation and amortization - 16,148 69,354 - 85,502
Taxes other than income taxes - 3,502 24,081 (1,940) 25,643
-------------------------------------------------------------------
589 91,300 515,535 (74,885) 532,539
-------------------------------------------------------------------
Operating income (loss) (589) 4,731 129,727 (143) 133,726
-------------------------------------------------------------------
Interest expense and other:
Interest expense 2,658 16,508 28,607 (1,604) 46,169
Equity income from unconsolidated investments (2,964) (6,198) (2,526) - (11,688)
Allowance for funds used during construction - - (3,373) - (3,373)
Preferred dividend requirements of subsidiaries - - 1,680 - 1,680
Miscellaneous, net (63,986) 12,475 (4,754) 64,783 8,518
-------------------------------------------------------------------
(64,292) 22,785 19,634 63,179 41,306
-------------------------------------------------------------------
Income (loss) before income taxes 63,703 (18,054) 110,093 (63,322) 92,420
-------------------------------------------------------------------
Income tax expense (benefit) 1,418 (11,699) 40,559 (143) 30,135
-------------------------------------------------------------------
Net income (loss) $62,285 ($6,355) $69,534 ($63,179) $62,285
===================================================================
Three Months Ended September 30, 2000
- -------------------------------------
Operating revenues:
Electric utility $- $- $480,763 $- $480,763
Gas utility - - 41,369 - 41,369
Non-regulated and other - 73,255 72,214 (64,409) 81,060
-------------------------------------------------------------------
- 73,255 594,346 (64,409) 603,192
-------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 80,605 - 80,605
Purchased power - - 85,553 - 85,553
Cost of utility gas sold - - 22,660 - 22,660
Other operation and maintenance 182 61,022 170,222 (62,904) 168,522
Depreciation and amortization - 11,425 68,200 - 79,625
Taxes other than income taxes - 3,512 23,869 (1,175) 26,206
-------------------------------------------------------------------
182 75,959 451,109 (64,079) 463,171
-------------------------------------------------------------------
Operating income (loss) (182) (2,704) 143,237 (330) 140,021
-------------------------------------------------------------------
Interest expense and other:
Interest expense 4,672 14,754 30,421 (4,807) 45,040
Equity income from unconsolidated investments (7,322) (2,534) (34) - (9,890)
Allowance for funds used during construction - - (2,186) - (2,186)
Preferred dividend requirements of subsidiaries - - 1,679 - 1,679
Gain on reclassification of investments - (321,349) - - (321,349)
Miscellaneous, net (275,031) (5,800) (3,843) 276,458 (8,216)
-------------------------------------------------------------------
(277,681) (314,929) 26,037 271,651 (294,922)
-------------------------------------------------------------------
Income (loss) before income taxes 277,499 312,225 117,200 (271,981) 434,943
-------------------------------------------------------------------
Income tax expense (benefit) 1,251 125,619 48,863 (330) 175,403
-------------------------------------------------------------------
Income (loss) before cumulative effect of a
change in accounting principle, net of tax 276,248 186,606 68,337 (271,651) 259,540
-------------------------------------------------------------------
Cumulative effect of a change in accounting principle, net of tax - 16,673 35 - 16,708
-------------------------------------------------------------------
Net income (loss) $276,248 $203,279 $68,372 ($271,651) $276,248
===================================================================
11
Alliant Energy Corporation
Condensed Consolidating Statements of Income
Nine Months Ended September 30, 2001 and 2000
(in thousands) Other Consolidated
Alliant Energy Alliant Energy Consolidating Alliant
Parent Company Resources Subsidiaries Adjustments Energy
-------------------------------------------------------------------
Nine Months Ended September 30, 2001
- ------------------------------------
Operating revenues:
Electric utility $- $- $1,367,281 $- $1,367,281
Gas utility - - 396,229 - 396,229
Non-regulated and other - 342,831 220,959 (196,481) 367,309
-------------------------------------------------------------------
- 342,831 1,984,469 (196,481) 2,130,819
-------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 248,040 - 248,040
Purchased power - - 318,024 - 318,024
Cost of utility gas sold - - 303,984 - 303,984
Other operation and maintenance 893 254,233 564,541 (189,822) 629,845
Depreciation and amortization - 48,266 208,012 - 256,278
Taxes other than income taxes - 12,141 77,963 (6,476) 83,628
-------------------------------------------------------------------
893 314,640 1,720,564 (196,298) 1,839,799
-------------------------------------------------------------------
Operating income (loss) (893) 28,191 263,905 (183) 291,020
-------------------------------------------------------------------
Interest expense and other:
Interest expense 10,513 51,822 89,903 (8,738) 143,500
Equity income from unconsolidated investments (8,058) (11,690) (11,018) - (30,766)
Allowance for funds used during construction - - (8,845) - (8,845)
Preferred dividend requirements of subsidiaries - - 5,040 - 5,040
Miscellaneous, net (124,149) 12,764 (14,010) 128,807 3,412
-------------------------------------------------------------------
(121,694) 52,896 61,070 120,069 112,341
-------------------------------------------------------------------
Income (loss) before income taxes 120,801 (24,705) 202,835 (120,252) 178,679
-------------------------------------------------------------------
Income tax expense (benefit) 1,831 (19,797) 77,858 (183) 59,709
-------------------------------------------------------------------
Net income (loss) $118,970 ($4,908) $124,977 ($120,069) $118,970
===================================================================
Nine Months Ended September 30, 2000
- ------------------------------------
Operating revenues:
Electric utility $- $- $1,248,228 $- $1,248,228
Gas utility - - 226,156 - 226,156
Non-regulated and other - 204,559 203,381 (181,185) 226,755
-------------------------------------------------------------------
- 204,559 1,677,765 (181,185) 1,701,139
-------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 213,990 - 213,990
Purchased power - - 222,690 - 222,690
Cost of utility gas sold - - 136,642 - 136,642
Other operation and maintenance 596 160,907 540,147 (175,088) 526,562
Depreciation and amortization - 29,260 204,246 - 233,506
Taxes other than income taxes - 9,902 74,419 (5,150) 79,171
-------------------------------------------------------------------
596 200,069 1,392,134 (180,238) 1,412,561
-------------------------------------------------------------------
Operating income (loss) (596) 4,490 285,631 (947) 288,578
-------------------------------------------------------------------
Interest expense and other:
Interest expense 12,164 38,221 90,408 (13,341) 127,452
Equity income from unconsolidated investments (9,922) (2,354) (322) - (12,598)
Allowance for funds used during construction - - (6,825) - (6,825)
Preferred dividend requirements of subsidiaries - - 5,035 - 5,035
Gain on reclassification adjustment - (321,349) - - (321,349)
Gain on sale of McLeodUSA Inc. stock - (10,206) - . - (10,206)
Miscellaneous, net (344,528) (11,094) (20,595) 348,269 (27,948)
-------------------------------------------------------------------
(342,286) (306,782) 67,701 334,928 (246,439)
-------------------------------------------------------------------
Income (loss) before income taxes 341,690 311,272 217,930 (335,875) 535,017
-------------------------------------------------------------------
Income tax expense (benefit) 3,844 120,496 90,486 (947) 213,879
-------------------------------------------------------------------
Income (loss) before cumulative effect of a
change in accounting principle, net of tax 337,846 190,776 127,444 (334,928) 321,138
-------------------------------------------------------------------
Cumulative effect of a change in accounting principle, net of tax - 16,673 35 - 16,708
-------------------------------------------------------------------
Net income (loss) $337,846 $207,449 $127,479 ($334,928) $337,846
===================================================================
12
Alliant Energy Corporation
Condensed Consolidating Balance Sheet
As of September 30, 2001
(in thousands)
Alliant Other
Energy Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
-------------------------------------------------------------------
ASSETS
Property, plant and equipment:
Utility -
Plant in service -
Electric $- $- $5,005,456 $- $5,005,456
Other - - 1,096,176 - 1,096,176
-------------------------------------------------------------------
- - 6,101,632 - 6,101,632
Less - Accumulated depreciation - - 3,340,599 - 3,340,599
Construction work in progress - - 178,534 - 178,534
Nuclear fuel, net of amortization - - 58,532 - 58,532
Other property, plant and equipment, net - 767,328 41,423 (111) 808,640
-------------------------------------------------------------------
- 767,328 3,039,522 (111) 3,806,739
-------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 6,668 61,906 23,968 - 92,542
Restricted cash - 48,895 1,056 - 49,951
Accounts receivable, net 53,106 92,463 116,531 (129,771) 132,329
Income tax refunds receivable 3,169 18,786 665 - 22,620
Production fuel, at average cost - 2,828 44,054 - 46,882
Materials and supplies, at average cost - 5,912 52,296 - 58,208
Gas stored underground, at average cost - 17,079 44,013 - 61,092
Regulatory assets - - 14,879 - 14,879
Derivative asset - 250 10,389 - 10,639
Other 52,503 29,982 86,326 (108,944) 59,867
-------------------------------------------------------------------
115,446 278,101 394,177 (238,715) 549,009
-------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,722,255 - - (1,722,255) -
Investment in available-for-sale securities of McLeodUSA Inc. - 31,121 - - 31,121
Investment in trading securities of McLeodUSA Inc. - 12,039 - - 12,039
Other 33,298 579,227 451,682 (13) 1,064,194
-------------------------------------------------------------------
1,755,553 622,387 451,682 (1,722,268) 1,107,354
-------------------------------------------------------------------
-------------------------------------------------------------------
Deferred charges and other - 101,974 483,935 - 585,909
-------------------------------------------------------------------
Total assets $1,870,999 $1,769,790 $4,369,316 ($1,961,094) $6,049,011
===================================================================
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock and additional paid-in capital $962,453 $232,743 $753,442 ($986,185) $962,453
Retained earnings 818,629 169,104 744,271 (913,375) 818,629
Accumulated other comprehensive income (loss) (177,187) (182,258) 5,071 177,187 (177,187)
Shares in deferred compensation trust (2,136) - - - (2,136)
-------------------------------------------------------------------
Total common equity 1,601,759 219,589 1,502,784 (1,722,373) 1,601,759
-------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net - - 113,912 - 113,912
Long-term debt (excluding current portion) 24,000 854,749 1,328,033 - 2,206,782
-------------------------------------------------------------------
1,625,759 1,074,338 2,944,729 (1,722,373) 3,922,453
-------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds - 10,136 560 - 10,696
Other short-term borrowings - 99,202 - - 99,202
Accrued taxes - 12,313 98,488 - 110,801
Derivative liability - - 1,373 - 1,373
Other 243,116 310,762 518,621 (238,715) 833,784
-------------------------------------------------------------------
243,116 432,413 619,042 (238,715) 1,055,856
-------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income tax expense (benefit) (5,728) 178,179 509,523 - 681,974
Minority interest - 50,850 - - 50,850
Derivative liability - 2,093 - - 2,093
Other 7,852 31,917 296,022 (6) 335,785
-------------------------------------------------------------------
2,124 263,039 805,545 (6) 1,070,702
-------------------------------------------------------------------
Total capitalization and liabilities $1,870,999 $1,769,790 $4,369,316 ($1,961,094) $6,049,011
===================================================================
13
Alliant Energy Corporation
Condensed Consolidating Balance Sheet
As of December 31, 2000
(in thousands)
Alliant Other
Energy Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
-------------------------------------------------------------------
ASSETS
Property, plant and equipment:
Utility -
Plant in service -
Electric $- $- $5,203,069 $- $5,203,069
Other - - 1,048,506 - 1,048,506
-------------------------------------------------------------------
- - 6,251,575 - 6,251,575
Less - Accumulated depreciation - - 3,296,546 - 3,296,546
Construction work in progress - - 130,856 - 130,856
Nuclear fuel, net of amortization - - 61,935 - 61,935
Other property, plant and equipment, net - 553,911 17,687 (111) 571,487
-------------------------------------------------------------------
- 553,911 3,165,507 (111) 3,719,307
-------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 574 133,957 13,884 - 148,415
Restricted cash - 2,866 646 - 3,512
Accounts receivable, net 2,955 113,261 274,103 (97,080) 293,239
Income tax refunds receivable 3,236 9,343 5,160 - 17,739
Production fuel, at average cost - 1,379 45,248 - 46,627
Materials and supplies, at average cost - 2,086 53,844 - 55,930
Gas stored underground, at average cost - 2,983 38,376 - 41,359
Regulatory assets - - 29,348 - 29,348
Derivative asset - 1,744 1,984 - 3,728
Other 217,392 16,222 53,035 (215,565) 71,084
-------------------------------------------------------------------
224,157 283,841 515,628 (312,645) 710,981
-------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,884,976 - - (1,884,976) -
Investment in available-for-sale securities of McLeodUSA Inc. - 569,951 - - 569,951
Investment in trading securities of McLeodUSA Inc. - 220,912 - - 220,912
Other 30,511 579,803 337,484 - 947,798
-------------------------------------------------------------------
1,915,487 1,370,666 337,484 (1,884,976) 1,738,661
-------------------------------------------------------------------
-------------------------------------------------------------------
Deferred charges and other - 104,339 460,478 - 564,817
-------------------------------------------------------------------
Total assets $2,139,644 $2,312,757 $4,479,097 ($2,197,732) $6,733,766
===================================================================
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock and additional paid-in capital $948,294 $232,684 $753,392 ($986,076) $948,294
Retained earnings 818,266 174,012 724,889 (899,005) 818,162
Accumulated other comprehensive income (loss) - 276,591 (4,724) - 271,867
Shares in deferred compensation trust (851) - - - (851)
-------------------------------------------------------------------
Total common equity 1,765,709 683,287 1,473,557 (1,885,081) 2,037,472
-------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net - - 113,790 - 113,790
Long-term debt (excluding current portion) 24,000 731,736 1,154,380 - 1,910,116
-------------------------------------------------------------------
1,789,709 1,415,023 2,741,727 (1,885,081) 4,061,378
-------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds - 10,917 81,560 - 92,477
Other short-term borrowings - 110,783 - - 110,783
Accrued taxes - 21,916 65,568 - 87,484
Derivative liability - 142 10,096 - 10,238
Other 347,566 102,647 715,785 (312,645) 853,353
-------------------------------------------------------------------
347,566 246,405 873,009 (312,645) 1,154,335
-------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income tax expense (benefit) (6,415) 411,614 526,476 - 931,675
Minority interest - 23,341 - - 23,341
Derivative liability - 181,925 - - 181,925
Other 8,784 34,449 337,885 (6) 381,112
-------------------------------------------------------------------
2,369 651,329 864,361 (6) 1,518,053
-------------------------------------------------------------------
Total capitalization and liabilities $2,139,644 $2,312,757 $4,479,097 ($2,197,732) $6,733,766
===================================================================
14
Alliant Energy Corporation
Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2001 and 2000
(in thousands)
Other Consolidated
Alliant Energy Alliant Energy Consolidating Alliant
Parent Company Resources Subsidiaries Adjustments Energy
-------------------------------------------------------------------
Nine Months Ended September 30, 2001
- ------------------------------------
Net cash flows from (used for) operating activities $56,850 $107,219 $437,602 ($125,109) $476,562
-------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends declared (118,503) - (105,595) 105,595 (118,503)
Net change in Resources' credit facility - 248,500 - - 248,500
Proceeds from issuance of other long-term debt - 5,392 200,000 - 205,392
Reductions in other long-term debt - (10,568) (136,110) - (146,678)
Net change in other short-term borrowings (92,465) (44,248) - - (136,713)
Other 174,827 (40,374) (167,754) 4,931 (28,370)
-------------------------------------------------------------------
Net cash flows from (used for) financing activities (36,141) 158,702 (209,459) 110,526 23,628
-------------------------------------------------------------------
Cash flows from (used for) investing activities:
Construction and acquisition expenditures:
Utility operations - - (254,267) - (254,267)
Non-regulated businesses and other - (376,067) - - (376,067)
Proceeds from formation of ATC and other asset dispositions - 35,891 74,643 - 110,534
Other (14,615) 2,204 (38,435) 14,583 (36,263)
-------------------------------------------------------------------
Net cash flows from (used for) investing activities (14,615) (337,972) (218,059) 14,583 (556,063)
-------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 6,094 (72,051) 10,084 - (55,873)
-------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 574 133,957 13,884 - 148,415
-------------------------------------------------------------------
Cash and temporary cash investments at end of period $6,668 $61,906 $23,968 $- $92,542
===================================================================
Supplemental cash flows information:
Cash paid (refunded) during the period for:
Interest $10,270 $46,987 $85,643 $- $142,900
===================================================================
Income taxes $1,702 ($10,131) $65,102 $- $56,673
===================================================================
Noncash investing and financing activities:
Capital lease obligations incurred and other $- $- $19,759 $- $19,759
===================================================================
Nine Months Ended September 30, 2000
- ------------------------------------
Net cash flows from (used for) operating activities $338,501 $31,658 $336,696 ($339,963) $366,892
-------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends declared (118,475) - (60,255) 60,255 (118,475)
Net change in Resources' credit facility - 51,652 - - 51,652
Proceeds from issuance of exchangeable senior notes - 402,500 - - 402,500
Proceeds from issuance of other long-term debt - 18,649 100,000 - 118,649
Reductions in other long-term debt - (12,086) (51,196) - (63,282)
Net change in other short-term borrowings (28,570) 20 - - (28,550)
Other 54,199 (13,252) (67,882) 3,640 (23,295)
-------------------------------------------------------------------
Net cash flows from (used for) financing activities (92,846) 447,483 (79,333) 63,895 339,199
-------------------------------------------------------------------
Cash flows from (used for) investing activities:
Construction and acquisition expenditures:
Utility operations - - (212,440) - (212,440)
Non-regulated businesses and other - (556,438) (8,130) - (564,568)
Proceeds from dispositions of assets 2,281 64,947 2,127 - 69,355
Other (276,112) 665 (41,459) 276,068 (40,838)
-------------------------------------------------------------------
Net cash flows from (used for) investing activities (273,831) (490,826) (259,902) 276,068 (748,491)
-------------------------------------------------------------------
Net decrease in cash and temporary cash investments (28,176) (11,685) (2,539) - (42,400)
-------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 28,647 65,086 19,936 - 113,669
-------------------------------------------------------------------
Cash and temporary cash investments at end of period $471 $53,401 $17,397 $- $71,269
===================================================================
Supplemental cash flows information:
Cash paid (refunded) during the period for:
Interest $11,610 $29,525 $70,067 $- $111,202
===================================================================
Income taxes ($7,557) ($9,361) $78,216 $- $61,298
===================================================================
Noncash investing and financing activities:
Capital lease obligations incurred $- $- $338 $- $338
===================================================================
15
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Electric utility $217,749 $202,899 $557,975 $496,934
Gas utility 19,314 20,893 177,743 107,767
Steam 7,445 7,126 24,478 20,298
--------------- --------------- ----------------- ---------------
244,508 230,918 760,196 624,999
--------------- --------------- ----------------- ---------------
- -------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 41,785 26,806 106,709 88,440
Purchased power 30,998 28,324 107,441 59,464
Cost of gas sold 11,478 13,253 136,701 68,291
Other operation and maintenance 57,952 48,160 175,491 158,865
Depreciation and amortization 27,441 26,856 82,517 80,555
Taxes other than income taxes 9,915 11,630 33,121 35,562
--------------- --------------- ----------------- ---------------
179,569 155,029 641,980 491,177
--------------- --------------- ----------------- ---------------
- -------------------------------------------------------------------------------------------------------------------------------
Operating income 64,939 75,889 118,216 133,822
--------------- --------------- ----------------- ---------------
- -------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 13,045 12,613 39,080 38,208
Allowance for funds used during construction (1,793) (764) (4,372) (1,827)
Miscellaneous, net (2,031) 305 (6,419) (5,861)
--------------- --------------- ----------------- ---------------
9,221 12,154 28,289 30,520
--------------- --------------- ----------------- ---------------
- -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 55,718 63,735 89,927 103,302
--------------- --------------- ----------------- ---------------
- -------------------------------------------------------------------------------------------------------------------------------
Income taxes 18,452 26,373 31,789 43,285
--------------- --------------- ----------------- ---------------
- -------------------------------------------------------------------------------------------------------------------------------
Net income 37,266 37,362 58,138 60,017
--------------- --------------- ----------------- ---------------
- -------------------------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 229 229 686 686
--------------- --------------- ----------------- ---------------
- -------------------------------------------------------------------------------------------------------------------------------
Earnings available for common stock $37,037 $37,133 $57,452 $59,331
=============== =============== ================= ===============
- -------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
16
IES UTILITIES INC.
CONSOLIDATED BALANCE SHEETS
September 30,
2001 December 31,
ASSETS (Unaudited) 2000
- --------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Utility -
Plant in service -
Electric $2,294,947 $2,253,695
Gas 228,993 221,949
Steam 59,554 59,416
Common 163,903 146,536
----------------- -----------------
2,747,397 2,681,596
Less - Accumulated depreciation 1,470,701 1,392,766
----------------- -----------------
1,276,696 1,288,830
Construction work in progress 97,974 58,352
Leased nuclear fuel, net of amortization 40,732 45,836
----------------- -----------------
1,415,402 1,393,018
Other property, plant and equipment, net of accumulated
depreciation and amortization of $2,552 and $2,239, respectively 5,894 6,189
----------------- -----------------
1,421,296 1,399,207
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 7,916 6,755
Temporary cash investments with associated companies 56,777 -
Accounts receivable:
Customer, less allowance for doubtful accounts
of $2,538 and $587, respectively - 54,660
Associated companies 1,932 2,696
Other, less allowance for doubtful accounts
of $676 and $373, respectively 6,028 17,329
Production fuel, at average cost 10,356 11,088
Materials and supplies, at average cost 24,612 26,232
Gas stored underground, at average cost 16,477 19,290
Adjustment clause balances - 14,776
Regulatory assets 6,851 14,839
Prepayments and other 3,181 3,442
----------------- -----------------
134,130 171,107
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 114,852 112,172
Other 6,281 6,276
----------------- -----------------
121,133 118,448
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 115,849 117,574
Deferred charges and other 15,496 12,970
----------------- -----------------
131,345 130,544
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------
Total assets $1,807,904 $1,819,306
================= =================
- --------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
17
IES UTILITIES INC.
CONSOLIDATED BALANCE SHEETS (Continued)
September 30,
2001 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 2000
- --------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
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 279,042 279,042
Retained earnings 281,305 267,829
Accumulated other comprehensive loss - (18)
------------------ -----------------
Total common equity 593,774 580,280
------------------ -----------------
Cumulative preferred stock 18,320 18,320
Long-term debt (excluding current portion) 694,407 469,771
------------------ -----------------
1,306,501 1,068,371
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 560 81,560
Capital lease obligations 15,060 12,651
Notes payable to associated companies - 101,095
Accounts payable 32,225 65,898
Accounts payable to associated companies 24,340 30,375
Accrued taxes 68,984 48,069
Other 35,662 39,764
------------------ -----------------
176,831 379,412
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 212,684 224,164
Accumulated deferred investment tax credits 22,954 25,063
Environmental liabilities 27,597 29,521
Capital lease obligations 25,672 33,185
Pension and other benefit obligations 24,596 26,884
Other 11,069 32,706
------------------ -----------------
324,572 371,523
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,807,904 $1,819,306
================== =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
18
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30,
2001 2000
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $58,138 $60,017
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 82,517 80,555
Amortization of leased nuclear fuel 9,186 10,281
Amortization of deferred energy efficiency expenditures 9,237 10,611
Deferred tax benefits and investment tax credits (8,437) (8,656)
Refueling outage provision (5,819) 7,372
Other (531) 144
Other changes in assets and liabilities:
Accounts receivable 66,725 (3,622)
Gas stored underground 2,813 (12,357)
Accounts payable (36,127) 4,250
Accrued taxes 20,915 19,193
Adjustment clause balances 23,365 1,538
Manufactured gas plants insurance refunds (21,541) -
Benefit obligations and other (14,409) 6,293
----------------- ------------------
Net cash flows from operating activities 186,032 175,619
----------------- ------------------
- --------------------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends declared (43,976) (43,975)
Preferred stock dividends (686) (686)
Proceeds from issuance of long-term debt 200,000 -
Reductions in long-term debt (84,110) (51,196)
Net change in short-term borrowings (101,095) 20,058
Principal payments under capital lease obligations (6,198) (8,611)
Other 9,801 (229)
----------------- ------------------
Net cash flows used for financing activities (26,264) (84,639)
----------------- ------------------
- --------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (94,782) (85,123)
Nuclear decommissioning trust funds (4,506) (4,506)
Other (2,542) (456)
----------------- ------------------
Net cash flows used for investing activities (101,830) (90,085)
----------------- ------------------
- --------------------------------------------------------------------------------------------------------------------
Net increase in cash and temporary cash investments 57,938 895
----------------- ------------------
- --------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 6,755 5,720
----------------- ------------------
- --------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $64,693 $6,615
================= ==================
- --------------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid during the period for:
Interest $41,501 $30,912
================= ==================
Income taxes $24,387 $31,562
================= ==================
Noncash investing and financing activities - Capital lease obligations
incurred and other $19,759 $338
================= ==================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
19
IES UTILITIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except as modified below, the Alliant Energy Notes to Consolidated
Financial Statements are incorporated by reference insofar as they relate
to IESU.
1. The interim consolidated financial statements included herein have been
prepared by IESU, without audit, pursuant to the rules and regulations of
the SEC. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted,
although management believes that the disclosures are adequate to make the
information presented not misleading. IESU is a subsidiary of Alliant
Energy. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in IESU's latest
Annual Report on Form 10-K.
In the opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of (a) the
consolidated results of operations for the three and nine months ended
September 30, 2001 and 2000, (b) the consolidated financial position at
September 30, 2001 and December 31, 2000, and (c) the consolidated
statement of cash flows for the nine months ended September 30, 2001 and
2000, have been made. Because of the seasonal nature of IESU's
operations, results for the three and nine months ended September 30, 2001
are not necessarily indicative of results that may be expected for the
year ending December 31, 2001.
2. IESU's comprehensive income, and the components of other comprehensive
income, net of taxes, for the three and nine months ended September 30
were as follows (in thousands):
Three Months Nine Months
------------------------------- -------------------------------
2001 2000 2001 2000
-------------- --------------- -------------- ---------------
Earnings available for common stock $37,037 $37,133 $57,452 $59,331
Other comprehensive income:
Unrealized gains on derivatives qualified as hedges:
Unrealized holding gains arising during
period due to cumulative effect of a change
in accounting principle, net of tax -- 51 -- 51
Other unrealized holding losses
arising during period, net of tax -- (43) -- (43)
Reclassification adjustment for losses included
in earnings available for common stock related
to derivatives qualified as hedges, net of tax -- -- 18 --
-------------- --------------- -------------- ---------------
Net unrealized gains on qualifying derivatives -- 8 18 8
-------------- --------------- -------------- ---------------
Other comprehensive income -- 8 18 8
-------------- --------------- -------------- ---------------
Comprehensive income $37,037 $37,141 $57,470 $59,339
============== =============== ============== ===============
20
3. Certain financial information relating to IESU's significant business
segments is presented below. Intersegment revenues were not material
to IESU's operations.
Electric Gas Other Total
-------------------------------------------------------
(in thousands)
Three Months Ended September 30, 2001
-------------------------------------
Operating revenues $217,749 $19,314 $7,445 $244,508
Operating income (loss) 66,312 (3,329) 1,956 64,939
Earnings available for common stock 37,037 37,037
Three Months Ended September 30, 2000
-------------------------------------
Operating revenues $202,899 $20,893 $7,126 $230,918
Operating income (loss) 75,638 (854) 1,105 75,889
Earnings available for common stock 37,133 37,133
Nine Months Ended September 30, 2001
------------------------------------
Operating revenues $557,975 $177,743 $24,478 $760,196
Operating income 108,747 5,585 3,884 118,216
Earnings available for common stock 57,452 57,452
Nine Months Ended September 30, 2000
------------------------------------
Operating revenues $496,934 $107,767 $20,298 $624,999
Operating income 126,415 4,568 2,839 133,822
Earnings available for common stock 59,331 59,331
4. 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 is
currently expected to be effective January 1, 2002.
21
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Electric utility $207,462 $183,088 $576,150 $518,575
Gas utility 19,351 15,169 169,588 89,970
Water 1,437 1,378 3,818 3,787
--------------- --------------- --------------- ---------------
228,250 199,635 749,556 612,332
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric production fuels 34,609 33,198 97,876 83,699
Purchased power 62,065 41,299 165,231 113,119
Cost of gas sold 10,193 6,431 132,270 51,398
Other operation and maintenance 44,745 41,855 135,452 142,039
Depreciation and amortization 32,552 32,655 97,398 97,631
Taxes other than income taxes 7,860 7,285 24,719 21,913
--------------- --------------- --------------- ---------------
192,024 162,723 652,946 509,799
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Operating income 36,226 36,912 96,610 102,533
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 11,013 11,191 33,539 33,327
Equity income from unconsolidated investments (2,472) (50) (10,819) (341)
Allowance for funds used during construction (1,414) (1,154) (3,854) (4,304)
Miscellaneous, net (3,087) (1,067) (4,391) (7,208)
--------------- --------------- --------------- ---------------
4,040 8,920 14,475 21,474
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 32,186 27,992 82,135 81,059
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Income taxes 12,332 10,445 31,464 30,343
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of a change
in accounting principle, net of tax 19,854 17,547 50,671 50,716
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of a change in accounting
principle, net of tax - 35 - 35
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Net income 19,854 17,582 50,671 50,751
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 827 827 2,483 2,483
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Earnings available for common stock $19,027 $16,755 $48,188 $48,268
=============== =============== =============== ===============
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
22
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
September 30,
2001 December 31,
ASSETS (Unaudited) 2000
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Utility -
Plant in service -
Electric $1,746,287 $2,007,974
Gas 279,265 273,457
Water 31,059 29,869
Common 236,955 223,921
----------------- ------------------
2,293,566 2,535,221
Less - Accumulated depreciation 1,320,095 1,380,723
----------------- ------------------
973,471 1,154,498
Construction work in progress 61,680 59,133
Nuclear fuel, net of amortization 17,800 16,099
----------------- ------------------
1,052,951 1,229,730
Other property, plant and equipment, net of accumulated
depreciation and amortization of $195 for both periods 594 369
----------------- ------------------
1,053,545 1,230,099
----------------- ------------------
- ---------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 8,723 2,584
Accounts receivable:
Customer 12,358 51,769
Associated companies 1,366 2,211
Other 9,598 13,865
Production fuel, at average cost 15,083 17,811
Materials and supplies, at average cost 21,802 21,639
Gas stored underground, at average cost 23,850 13,876
Prepaid gross receipts tax 18,609 23,088
Derivative asset 9,624 252
Other 4,152 6,145
----------------- ------------------
125,165 153,240
----------------- ------------------
- ---------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 201,694 195,768
Other 120,181 14,362
----------------- ------------------
321,875 210,130
----------------- ------------------
- ---------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 98,933 88,721
Deferred charges and other 188,861 174,834
----------------- ------------------
287,794 263,555
----------------- ------------------
- ---------------------------------------------------------------------------------------------------------------
Total assets $1,788,379 $1,857,024
================= ==================
- ---------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
23
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (Continued)
September 30,
2001 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 2000
- --------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Capitalization:
Common stock - $5 par value - authorized 18,000,000 shares;
13,236,601 shares outstanding $66,183 $66,183
Additional paid-in capital 229,597 229,516
Retained earnings 374,450 371,602
Accumulated other comprehensive income (loss) 5,071 (4,708)
------------------ -----------------
Total common equity 675,301 662,593
------------------ -----------------
Cumulative preferred stock 59,963 59,963
Long-term debt (excluding current portion) 468,051 514,209
------------------ -----------------
1,203,315 1,236,765
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Variable rate demand bonds 55,100 55,100
Notes payable to associated companies 47,057 29,244
Accounts payable 82,712 120,155
Accounts payable to associated companies 34,139 32,442
Other 33,768 36,266
------------------ -----------------
252,776 273,207
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 219,400 222,819
Accumulated deferred investment tax credits 25,330 29,472
Customer advances 33,776 34,815
Environmental liabilities 8,012 7,564
Other 45,770 52,382
------------------ -----------------
332,288 347,052
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,788,379 $1,857,024
================== =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
24
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30,
2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $50,671 $50,751
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 97,398 97,631
Amortization of nuclear fuel 4,158 3,626
Deferred tax benefits and investment tax credits (9,235) (9,614)
Equity income from unconsolidated investments, net (10,819) (341)
Other (3,913) (7,368)
Other changes in assets and liabilities:
Accounts receivable 44,523 8,114
Accounts payable (34,445) (13,237)
Benefit obligations and other 3,412 (2,030)
--------------------- ---------------------
Net cash flows from operating activities 141,750 127,532
--------------------- ---------------------
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends (45,340) -
Preferred stock dividends (2,483) (2,483)
Proceeds from issuance of long-term debt - 100,000
Reductions in long-term debt (47,000) -
Net change in short-term borrowings 17,813 (100,189)
Other (2,725) (1,319)
--------------------- ---------------------
Net cash flows used for financing activities (79,735) (3,991)
--------------------- ---------------------
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (102,035) (92,521)
Nuclear decommissioning trust funds (15,373) (15,373)
Proceeds from formation of ATC 74,643 -
Other (13,111) (13,366)
--------------------- ---------------------
Net cash flows used for investing activities (55,876) (121,260)
--------------------- ---------------------
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and temporary cash investments 6,139 2,281
--------------------- ---------------------
- -------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 2,584 3,555
--------------------- ---------------------
- -------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $8,723 $5,836
===================== =====================
- -------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid during the period for:
Interest $34,627 $30,087
===================== =====================
Income taxes $32,792 $35,686
===================== =====================
- -------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
25
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except as modified below, the Alliant Energy Notes to Consolidated
Financial Statements are incorporated by reference insofar as they relate
to WP&L.
1. The interim consolidated financial statements included herein have been
prepared by WP&L, without audit, pursuant to the rules and regulations of
the SEC. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted,
although management believes that the disclosures are adequate to make the
information presented not misleading. The consolidated financial
statements include WP&L and its consolidated subsidiaries, including WPL
Transco LLC and South Beloit. WP&L is a subsidiary of Alliant Energy.
These financial statements should be read in conjunction with the
financial statements and the notes thereto included in WP&L's latest
Annual Report on Form 10-K.
In the opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of (a) the
consolidated results of operations for the three and nine months ended
September 30, 2001 and 2000, (b) the consolidated financial position at
September 30, 2001 and December 31, 2000, and (c) the consolidated
statement of cash flows for the nine months ended September 30, 2001 and
2000, have been made. Because of the seasonal nature of WP&L's
operations, results for the three and nine months ended September 30, 2001
are not necessarily indicative of results that may be expected for the
year ending December 31, 2001.
2. WP&L's comprehensive income, and the components of other comprehensive
income (loss), net of taxes, for the three and nine months ended September
30 were as follows (in thousands):
Three Months Nine Months
------------------------------ -------------------------------
2001 2000 2001 2000
------------- -------------- ------------- ---------------
Earnings available for common stock $19,027 $16,755 $48,188 $48,268
Other comprehensive income (loss):
Unrealized gains (losses) on derivatives qualified
as hedges:
Unrealized holding losses arising during period
due to cumulative effect of a change in
accounting principle, net of tax -- (642) -- (642)
Other unrealized holding gains (losses) arising
during period, net of tax 3,756 (747) 5,557 (747)
Less: reclassification adjustment for losses
included in earnings available for common
stock, net of tax (456) (68) (4,222) (68)
------------- -------------- ------------- ---------------
Net unrealized gains (losses) on qualifying derivatives 4,212 (1,321) 9,779 (1,321)
------------- -------------- ------------- ---------------
Other comprehensive income (loss) 4,212 (1,321) 9,779 (1,321)
------------- -------------- ------------- ---------------
Comprehensive income $23,239 $15,434 $57,967 $46,947
============= ============== ============= ===============
26
3. Certain financial information relating to WP&L's significant business
segments is presented below. Intersegment revenues were not material to
WP&L's operations.
Electric Gas Other Total
--------------------------------------------------------
(in thousands)
Three Months Ended September 30, 2001
-------------------------------------
Operating revenues $207,462 $19,351 $1,437 $228,250
Operating income (loss) 38,800 (3,092) 518 36,226
Earnings available for common stock 19,027 19,027
Three Months Ended September 30, 2000
-------------------------------------
Operating revenues $183,088 $15,169 $1,378 $199,635
Operating income (loss) 38,436 (2,032) 508 36,912
Earnings available for common stock 16,755 16,755
Nine Months Ended September 30, 2001
------------------------------------
Operating revenues $576,150 $169,588 $3,818 $749,556
Operating income (loss) 95,636 (97) 1,071 96,610
Earnings available for common stock 48,188 48,188
Nine Months Ended September 30, 2000
------------------------------------
Operating revenues $518,575 $89,970 $3,787 $612,332
Operating income 95,232 6,007 1,294 102,533
Earnings available for common stock 48,268 48,268
27
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The primary first tier subsidiaries of Alliant Energy include: IESU, WP&L,
IPC, 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. This MD&A includes
information relating to Alliant Energy, IESU and WP&L (as well as IPC,
Resources and Corporate Services). Where appropriate, information relating to
a specific entity has been segregated and labeled as such. The following
discussion and analysis should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements included in
this report as well as the financial statements, notes and MD&A included in
Alliant Energy's, IESU's and WP&L's latest Annual Report on Form 10-K.
FORWARD-LOOKING STATEMENTS
Statements contained in this report (including MD&A) 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 the "Outlook" section;
weather effects on sales and revenues; general economic conditions in the
utility subsidiaries' service territories; federal, state and international
regulatory or government actions, including issues associated with the
deregulation of the domestic utility industry and the setting of rates and
recovery of costs; unanticipated construction and acquisition expenditures;
issues related to stranded costs and the recovery thereof; unanticipated
issues related to the supply of purchased electricity and price thereof;
adverse fluctuations in the price of oil and natural gas; unexpected issues
related to the operations of Alliant Energy's nuclear facilities;
unanticipated costs associated with certain environmental remediation efforts
being undertaken by Alliant Energy; Alliant Energy's ability to successfully
implement its growth strategy, including the acquisition and operation of
foreign companies; unanticipated developments that adversely impact Alliant
Energy's strategy to grow its non-regulated businesses; Alliant Energy's
ability to identify and successfully complete acquisitions and development
projects; material changes in the value of Alliant Energy's investments;
technological developments; employee workforce factors, including changes in
key executives, collective bargaining agreements or work stoppages;
political, legal, economic and exchange rate conditions in foreign countries
in which Alliant Energy has investments; and changes in the rate of inflation.
UTILITY INDUSTRY REVIEW
A summary of the current regulatory environment is included in the Form 10-K
filed by Alliant Energy, IESU and WP&L for the year ended December 31, 2000.
Set forth below are several developments relating to such regulatory
environment that have occurred since the start of the current year.
Overview - In September 2001, six electric utility companies, including IESU
- --------
and IPC, filed an application with FERC to create TRANSLink, a for-profit,
transmission-only company. A ruling is expected from FERC in the first
quarter of 2002. The participants have requested that FERC expedite
consideration of the application so that TRANSLink could commence operations
by 2002. Current plans call for IESU and IPC to contribute their
transmission assets, which have an estimated book value of $300 million, to
TRANSLink in exchange for a corresponding ownership interest in TRANSLink.
The TRANSLink proposal is subject to receipt of all required federal and
state regulatory approvals.
Rates and Regulatory Matters - In 2000, the NRC raised several areas of concern
- ----------------------------
with Kewaunee's operations. Addressing the concerns is expected to result in
additional operating costs to WP&L in 2001 and 2002 through 2005 of
approximately $7 million and $25 million, respectively. In April 2001,
the PSCW approved the deferral of such incremental costs incurred
after March 27, 2001. In July 2001, WP&L requested a $19 million retail
electric rate increase from the PSCW to recover a portion of the costs
associated with the increased Kewaunee operating costs and costs associated
with the replacement of the steam generators at Kewaunee. WP&L expects that
28
the remainder of the additional operating costs related to Kewaunee will be
recovered through future base rate filings with the PSCW.
The last of the price freezes impacting Alliant Energy's utility
subsidiaries, which stem from the 1998 three-way merger, will expire
in the second quarter of 2002. In August 2001, WP&L filed
a $114 million base rate increase request with the PSCW related to its
investments in reliability, customer service, technology and environmental
upgrades, as well as investments in its infrastructure. In September 2001,
WP&L filed a request with the PSCW to consolidate the $19 million request for
increased Kewaunee operating costs with the new base rate increase request of
$114 million. These filings apply to retail electric ($105 million), natural
gas ($26 million) and water ($2 million) rates. Also in September 2001, WP&L
filed a request with the PSCW, along with three other Wisconsin utilities,
for an increase in rates of $16 million for incremental costs associated
with the start-up and ongoing operations of ATC. WP&L expects that any rate
increases from these filings will be effective on or around April 15, 2002.
WP&L cannot provide any assurance that the PSCW will grant the requested rate
increases or, if granted, that the rate increases will be at the requested
levels. WP&L also plans to file a request in late November 2001 for new
wholesale electric base rates. IESU and IPC are in the process of reviewing
whether they will need to file electric and/or gas base rate cases with the IUB
in the first half of 2002. At this time, there are no plans for filing new
base rate cases in Illinois or Minnesota.
In April 2001 and July 2001, the OCA requested certain financial information
from IESU and IPC, respectively, related to the electric utility operations
within the state of Iowa. IESU and IPC filed their responses with the OCA
and cannot predict the outcomes of this process, although such data requests
could lead to an effort by the OCA to seek an electric rate reduction for
IESU and/or IPC in Iowa.
In January 2001, the IUB issued an order requiring IESU and IPC to file a
joint fuel procurement plan in May 2001 for the purpose of evaluating the
reasonableness of the Iowa utilities' fuel procurement contracts. This
filing was completed in May 2001 and hearings were held in early November 2001.
IESU and IPC are still responding to data requests from the IUB. IESU and IPC
cannot predict the outcome of this process, which could potentially result
in a refund.
In December 2000, WP&L requested a $73 million annual retail electric rate
increase from the PSCW to cover increases in WP&L's 2001 fuel and
purchased-power costs. The PSCW approved a $46 million interim increase
effective February 8, 2001, which was replaced with a $58 million final
increase effective June 19, 2001. The final order includes a refund
provision for costs collected in rates that are in excess of actual costs
incurred. Two customer groups filed an appeal to the state court, challenging
certain portions of the final order.
WP&L believed Union Pacific was charging an excessive rate for transporting
low-sulfur coal from the Powder River Basin to the Edgewater Generating
Station located in Sheboygan, Wisconsin. To contest the rate, WP&L filed a
rate case with the STB and upon the expiration of the existing contract,
began moving coal under a tariff rate beginning January 1, 2000. Following
the STB's initial decision, WP&L, as part of a negotiated settlement,
received payment from Union Pacific in November 2001 of $3.9 million, which
covers the period from January 2000 through August 2001. While
WP&L and Union Pacific have agreed upon future rates, both
parties have filed petitions for reconsideration with the STB on certain
aspects of its decision, which could impact the final amount received by
WP&L. The refund amount will be reviewed by the PSCW in conjunction with
WP&L's fuel adjustment clause. WP&L did not record anything related to this
settlement in its results of operations for the nine months ended
September 30, 2001.
Alliant Energy complies with the provisions of SFAS 71, "Accounting for the
Effects of Certain Types of Regulation." SFAS 71 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. If a portion of the utility's
operations no longer complies with SFAS 71, a write-down of related
regulatory assets and possibly other charges would be required, unless some
form of transition cost recovery is established by the appropriate regulatory
body that meets the requirements under generally accepted accounting
principles for continued accounting as regulatory assets during such recovery
period. In addition, each utility would be required to determine any
29
impairment of other assets and write-down any impaired assets to their fair
value. Alliant Energy believes its utility subsidiaries currently meet the
requirements of SFAS 71.
ALLIANT ENERGY RESULTS OF OPERATIONS
Unless otherwise noted, all "per share" references in the Results of
Operations section refer to earnings per diluted share.
Overview - Third Quarter Results - Alliant Energy reported net income of
- --------------------------------
$62.3 million, or $0.78 per share, for the third quarter of 2001, compared to
net income of $276.2 million, or $3.49 per share, for the third quarter of
2000. Both periods included non-cash valuation adjustments related to
Alliant Energy's obligation under certain 30-year exchangeable senior notes --
charges of $0.16 per share and $0.02 per share in the third quarters of 2001
and 2000, respectively. In addition, net income for the third quarter of
2000 included $204 million of non-cash net income, or $2.58 per share,
relating to Alliant Energy's adoption of SFAS 133 on July 1, 2000. Excluding
such items, third quarter 2001 and 2000 earnings were $0.94 per share and
$0.93 per share, respectively. The increase in earnings as adjusted was
primarily due to higher electric utility margins, a lower effective income
tax rate and higher earnings from Alliant Energy's non-regulated operations,
largely offset by increased utility operating expenses.
Third quarter 2001 utility earnings were $69.5 million ($0.88 per share)
compared to $68.4 million ($0.86 per share) for the same period in 2000. The
increase was primarily due to an increase in electric margin and a lower
effective income tax rate, which were virtually offset by increased operating
expenses.
The non-regulated businesses reported net income(loss) of ($4.4) million, or
($0.06) per share, in the third quarter of 2001, compared to $208.0 million,
or $2.63 per share, in the third quarter of 2000. These amounts include the
non-cash valuation charges and the non-cash net income relating to Alliant
Energy's adoption of SFAS 133. Excluding these adjustments, net income was
$8.2 million, or $0.10 per share, in the third quarter of 2001 compared to
net income of $5.3 million, or $0.07 per share, in the third quarter of
2000. Improved results from the Integrated Services business unit of $0.02
per share were largely due to a one-time charge related to a loss on a
contract in the third quarter of 2000. Higher income from the Investments
business unit of $0.01 per share was from Alliant Energy's oil and gas
operations and was largely due to increased sales volumes as a result of the
continued acquisition of additional oil and gas producing properties.
Improved results from the International business unit of $0.01 per share were
due to increased earnings from Alliant Energy's China and Australian
investments, partially offset by lower earnings from Alliant Energy's New
Zealand investments. The impact of lower interest rates on Resources'
variable rate borrowings also contributed to the increased earnings. These
items were partially offset by lower earnings from Alliant Energy's
generation and trading business unit due to fewer weather-related trading
opportunities in the third quarter of 2001.
Electric Utility Operations - Electric margins and MWh sales for Alliant
- ---------------------------
Energy for the three months ended September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold
----------------------------------------- ----------------------------------------
2001 2000 Change 2001 2000 Change
--------------- -------------- --------- -------------- -------------- ----------
Residential $188,406 $171,160 10% 2,186 2,059 6%
Commercial 110,576 102,705 8% 1,493 1,467 2%
Industrial 157,131 140,647 12% 3,198 3,320 (4%)
--------------- -------------- -------------- --------------
Total from ultimate customers 456,113 414,512 10% 6,877 6,846 --
Sales for resale 48,530 52,452 (7%) 1,278 1,253 2%
Other 15,208 13,799 10% 39 40 (3%)
--------------- -------------- -------------- --------------
Total revenues/sales 519,851 480,763 8% 8,194 8,139 1%
============== ==============
Electric production fuels expense 91,256 76,432 19%
Purchased power expense 108,177 85,553 26%
--------------- --------------
Margin $320,418 $318,778 1%
=============== ==============
30
Electric margins and MWh sales for Alliant Energy for the nine months ended
September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold
----------------------------------------- ----------------------------------------
2001 2000 Change 2001 2000 Change
--------------- -------------- --------- ------------- --------------- ----------
Residential $473,127 $434,100 9% 5,706 5,416 5%
Commercial 291,051 264,229 10% 4,153 4,004 4%
Industrial 421,281 379,400 11% 9,398 9,807 (4%)
--------------- -------------- ------------- ---------------
Total from ultimate customers 1,185,459 1,077,729 10% 19,257 19,227 --
Sales for resale 143,736 130,063 11% 3,780 3,618 4%
Other 38,086 40,436 (6%) 126 129 (2%)
--------------- -------------- ------------- ---------------
Total revenues/sales 1,367,281 1,248,228 10% 23,163 22,974 1%
============= ===============
Electric production fuels expense 232,957 202,145 15%
Purchased power expense 318,024 222,690 43%
--------------- --------------
Margin $816,300 $823,393 (1%)
=============== ==============
Electric margin increased $1.6 million, or 1%, and decreased $7.1 million, or
1%, for the three- and nine-month periods, respectively. The three-month
increase was primarily related to increased residential and commercial sales
due to more favorable weather conditions in the third quarter of 2001
compared to the same period in 2000 and continued retail customer growth.
Higher energy conservation revenues also contributed to the three-month
increase. These items were partially offset by lower industrial sales. The
nine-month decrease was primarily due to $10 million of income recorded in
the second quarter of 2000 for a change in estimate of WP&L's utility
services rendered but unbilled at month-end and lower industrial sales.
These items were partially offset by the impact of customer growth and
favorable weather conditions in 2001 compared to 2000, which contributed to
increased sales to higher-margin residential and commercial customers.
Due to the formation of ATC on January 1, 2001, electric margin for the three
and nine months ended September 30, 2001 included expenses of $7 million and
$21 million, respectively. Such expenses were offset by equity income,
reduced other operation and maintenance expenses and lower depreciation
expense, resulting in no significant net income impact due to the formation
of ATC. Refer to Note 5 of Alliant Energy's "Notes to Consolidated Financial
Statements" in Item 1. for additional information related to ATC.
IESU's and IPC's electric tariffs include EAC's that are designed to
currently recover the costs of fuel and the energy portion of purchased-power
billings. Under PSCW rules, WP&L can seek emergency rate increases if the
annual fuel and purchased-power costs are more than three percent higher than
the estimated costs used to establish rates. Refer to "Utility Industry
Review - Rates and Regulatory Matters" for discussion of an IUB fuel
investigation and various WP&L rate filings.
Gas Utility Operations - Gas margins and Dth sales for Alliant Energy for the
- ----------------------
three months ended September 30 were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- -----------------------------------
2001 2000 Change 2001 2000 Change
------------- --------------- --------- ------------ ----------- ----------
Residential $17,097 $21,662 (21%) 1,941 2,153 (10%)
Commercial 8,784 12,512 (30%) 1,459 1,761 (17%)
Industrial 3,972 5,273 (25%) 943 1,009 (7%)
Transportation/other 13,126 1,922 583% 11,890 9,409 26%
------------- --------------- ------------- -----------
Total revenues/sales 42,979 41,369 4% 16,233 14,332 13%
============ ===========
Cost of utility gas sold 23,660 22,660 4%
------------- ---------------
Margin $19,319 $18,709 3%
============= ===============
31
Gas margins and Dth sales for Alliant Energy for the nine months ended
September 30 were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- -----------------------------------
2001 2000 Change 2001 2000 Change
------------- ---------------- -------- ------------ ------------ ---------
Residential $217,991 $133,870 63% 21,166 19,580 8%
Commercial 114,549 67,548 70% 12,731 12,194 4%
Industrial 24,005 15,823 52% 3,465 3,595 (4%)
Transportation/other 39,684 8,915 345% 36,487 31,411 16%
------------- ---------------- ------------ ------------
Total revenues/sales 396,229 226,156 75% 73,849 66,780 11%
============ ============
Cost of utility gas sold 303,984 136,642 122%
------------- ----------------
Margin $92,245 $89,514 3%
============= ================
Gas revenues and cost of utility gas sold increased significantly for the
nine-month period due to the large increase in natural gas prices in the
first and second quarters of 2001. Gas margin increased $0.6 million, or 3%,
and $2.7 million, or 3%, for the three- and nine-month periods,
respectively. The nine-month increase was primarily due to more favorable
weather conditions in 2001 compared to 2000, partially offset by a negative
impact from higher natural gas costs, as some customers either chose
alternative fuel sources or used less natural gas, and losses associated with
current commodity costs at WP&L, which are shared by ratepayers and
shareowners.
IESU's and IPC's gas tariffs include PGA clauses that are designed to
currently recover the cost of utility gas sold.
Non-regulated and Other Revenues - Details regarding Alliant Energy's
- --------------------------------
non-regulated and other revenues and data relating to Whiting's oil and gas
operations for the three and nine months ended September 30 were as follows:
Three Months Nine Months
------------------------------- -------------------------------
Non-regulated and other revenues (in thousands): 2001 2000 2001 2000
-------------- --------------- --------------- --------------
Integrated Services $43,891 $32,046 $176,301 $96,428
Investments:
Whiting (oil and gas) 30,594 29,412 109,725 75,212
Other 10,944 11,565 33,520 32,642
International 16,752 -- 32,693 --
Other 1,254 8,037 15,070 22,473
-------------- --------------- --------------- --------------
$103,435 $81,060 $367,309 $226,755
============== =============== =============== ==============
Whiting's volumes sold (in thousands):
Oil (barrels) 509 391 1,606 1,119
Gas (thousand cubic feet) 5,369 4,523 14,151 12,414
Whiting's product prices:
Oil $24.48 $28.56 $24.89 $26.58
Gas $3.07 $3.69 $4.30 $3.28
The increased Integrated Services revenues were due to acquisitions in the
third and fourth quarters of 2000 of various energy services businesses and
higher natural gas prices in the first and second quarters of 2001. Ongoing
acquisitions of additional oil and gas properties had a significant impact on
the increased Whiting sales volumes. The 2001 International revenues
resulted from the December 2000 change from the equity method of accounting
to the consolidation method for an investment in China.
32
Other Operating Expenses - Other operation and maintenance expenses for the
- ------------------------
three and nine months ended September 30 were as follows (in thousands):
Three Months Nine Months
------------------------------ ------------------------------
2001 2000 2001 2000
------------- -------------- -------------- -------------
Utility $124,349 $108,291 $379,976 $367,497
Integrated Services 41,470 39,867 167,112 101,385
Investments:
Whiting (oil and gas) 11,771 9,823 34,867 26,555
Other 6,613 7,279 20,711 21,800
International 14,896 1,316 31,025 3,539
Other (includes eliminations) (4,436) 1,946 (3,846) 5,786
------------- -------------- -------------- -------------
$194,663 $168,522 $629,845 $526,562
============= ============== ============== =============
Other operation and maintenance expenses at the utility subsidiaries
increased $16.1 million and $12.5 million for the three- and nine-month
periods, respectively, primarily due to higher costs in Alliant Energy's
energy delivery and generation business units (certain increases were timing
differences), increased uncollectible customer account balances and costs
associated with the implementation of Alliant Energy's e-business strategy.
Also contributing to the three-month increase were higher operating costs at
Kewaunee. Such increases were partially offset by the impact of the
formation of ATC earlier in 2001, as discussed in "Electric Utility
Operations."
The Integrated Services increases were primarily due to the acquisitions of
the various energy services businesses and the higher natural gas costs in
the first and second quarters of 2001, partially offset by a one-time charge
related to a loss on a contract in the third quarter of 2000. The increase
at Whiting was primarily due to the increased production volumes. The
International increases were primarily due to the December 2000 change in
accounting method for the China investment.
Depreciation and amortization expense increased $5.9 million and $22.8
million for the three- and nine-month periods, respectively, primarily due to
utility property additions, acquisitions at the non-regulated businesses and
the December 2000 change in accounting method for the China investment. Such
increases were partially offset by the impact of the formation of ATC earlier
in 2001, as discussed in "Electric Utility Operations."
Taxes other than income taxes increased $4.5 million for the nine-month
period primarily due to increased payroll and gross receipts taxes.
Interest Expense and Other - Interest expense increased $1.1 million and
- --------------------------
$16.0 million for the three- and nine-month periods, respectively, primarily
due to higher non-regulated borrowings to fund Alliant Energy's strategic
growth initiatives, partially offset by the impact of lower interest rates on
Alliant Energy's variable rate borrowings.
Equity income (loss) from Alliant Energy's unconsolidated investments for the
three and nine months ended September 30 was as follows (in thousands):
Three Months Nine Months
---------------------------- ----------------------------
2001 2000 2001 2000
------------- ------------- -------------- ------------
ATC $2,210 $-- $10,236 $--
Cargill-Alliant 2,964 7,321 8,058 9,922
Australia/New Zealand 2,829 656 7,752 2,024
China 942 194 3,333 442
Brazil 3,185 1,837 1,890 1,098
Other (442) (118) (503) (888)
------------- ------------- -------------- ------------
$11,688 $9,890 $30,766 $12,598
============= ============= ============== ============
33
Equity income from unconsolidated investments increased $1.8 million and
$18.2 million for the three- and nine-month periods, respectively, primarily
due to ATC beginning operations on January 1, 2001, increased earnings in
China largely due to the addition of a combined heat and power facility to
Alliant Energy's China portfolio in the first quarter of 2001 and non-cash
income from the valuation of certain Australian energy agreements. These
items were partially offset by reduced income at Alliant Energy's electricity
trading joint venture due to fewer weather-related trading opportunities in
the third quarter of 2001 and lower earnings from Alliant Energy's New
Zealand investments due to the impact of a drought in New Zealand. In spite
of the drought conditions in Brazil, Alliant Energy realized slight increases
in equity earnings from its Brazilian investments in both periods.
On July 1, 2000, Alliant Energy adopted SFAS 133. Related to the adoption,
Alliant Energy recorded a $321.3 million gain related to 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.
Alliant Energy sold 450,000 shares of its investment in McLeod in the first
quarter of 2000, resulting in a pre-tax gain of $10.2 million, or $0.08 per
share.
Miscellaneous, net income decreased $16.7 million and $31.4 million for the
three- and nine-month periods largely due to higher non-cash valuation
charges of $16.0 million and $27.1 million related to the net change in the
value of the McLeod trading securities and the derivative component of
Resources' exchangeable senior notes, respectively. Lower gains from asset
sales also contributed to both decreases while income realized in 2000 from a
weather hedge also impacted the nine-month comparison. The three-month
decrease was partially offset by higher interest income.
Income Taxes - The effective income tax rates were 32.0% and 32.5% for the
- ------------
three- and nine-month periods ended September 30, 2001, compared with 40.2%
and 39.6% for the same periods last year, respectively. The decrease for
both periods was primarily due to the impact of the adoption of SFAS 133 in
the third quarter of 2000 and increased income tax benefits from Alliant
Energy's China and Brazil investments. Also contributing to the nine-month
decrease were higher tax credits.
IESU RESULTS OF OPERATIONS
Overview - Third Quarter Results - Earnings available for common stock
- --------------------------------
decreased $0.1 million for the three months ended September 30, 2001,
compared with the same period in 2000, primarily due to higher other
operation and maintenance expenses, offset by a lower effective income tax
rate and reduced property taxes.
Electric Utility Operations - Electric margins and MWh sales for IESU for the
- ---------------------------
three months ended September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold
--------------------------------------- ------------------------------------
2001 2000 Change 2001 2000 Change
------------- -------------- ---------- ----------- -------------- ----------
Residential $83,039 $78,004 6% 852 822 4%
Commercial 59,245 56,326 5% 739 732 1%
Industrial 59,254 55,517 7% 1,189 1,239 (4%)
------------- -------------- ------------ --------------
Total from ultimate customers 201,538 189,847 6% 2,780 2,793 --
Sales for resale 11,925 9,378 27% 273 247 11%
Other 4,286 3,674 17% 10 10 --
------------- -------------- ------------ --------------
Total revenues/sales 217,749 202,899 7% 3,063 3,050 --
============ ==============
Electric production fuels expense 38,147 22,633 69%
Purchased power expense 30,998 28,324 9%
------------- --------------
Margin $148,604 $151,942 (2%)
============= ==============
34
Electric margins and MWh sales for IESU for the nine months ended September
30 were as follows (in thousands):
Revenues and Costs MWhs Sold
--------------------------------------- ------------------------------------
2001 2000 Change 2001 2000 Change
------------- --------------- --------- ------------- ------------- --------
Residential $199,915 $183,138 9% 2,187 2,088 5%
Commercial 153,046 138,335 11% 2,073 2,008 3%
Industrial 161,352 143,743 12% 3,622 3,754 (4%)
------------- --------------- ------------- -------------
Total from ultimate customers 514,313 465,216 11% 7,882 7,850 --
Sales for resale 32,312 21,875 48% 820 748 10%
Other 11,350 9,843 15% 29 30 (3%)
------------- --------------- ------------- -------------
Total revenues/sales 557,975 496,934 12% 8,731 8,628 1%
============= =============
Electric production fuels expense 91,626 76,595 20%
Purchased power expense 107,441 59,464 81%
------------- ---------------
Margin $358,908 $360,875 (1%)
============= ===============
Electric margin decreased $3.3 million, or 2%, and $2.0 million, or 1%, for
the three- and nine-month periods, respectively, primarily due to increased
purchased-power capacity costs and lower industrial sales, partially offset
by increased residential and commercial sales due to more favorable weather
conditions in 2001 compared to 2000 and continued retail customer growth.
IESU's electric tariffs include EAC's that are designed to currently recover
the costs of fuel and the energy portion of purchased-power billings. Refer
to "Utility Industry Review - Rates and Regulatory Matters" for discussion of
an IUB fuel investigation.
Gas Utility Operations - Gas margins and Dth sales for IESU for the three
- ----------------------
months ended September 30 were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- ------------------------------------
2001 2000 Change 2001 2000 Change
------------- ---------------- -------- ------------- ------------- --------
Residential $8,661 $10,406 (17%) 890 908 (2%)
Commercial 4,562 5,788 (21%) 703 744 (6%)
Industrial 2,869 3,840 (25%) 698 740 (6%)
Transportation/other 3,222 859 275% 2,672 2,091 28%
------------- ---------------- ------------- -------------
Total revenues/sales 19,314 20,893 (8%) 4,963 4,483 11%
============= =============
Cost of gas sold 11,478 13,253 (13%)
------------- ----------------
Margin $7,836 $7,640 3%
============= ================
Gas margins and Dth sales for IESU for the nine months ended September 30
were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- ------------------------------------
2001 2000 Change 2001 2000 Change
------------- ---------------- -------- ------------ -------------- --------
Residential $103,141 $64,262 61% 10,016 9,011 11%
Commercial 53,058 31,107 71% 5,946 5,433 9%
Industrial 12,910 9,128 41% 2,073 2,122 (2%)
Transportation/other 8,634 3,270 164% 8,130 7,194 13%
------------- ---------------- ------------ --------------
Total revenues/sales 177,743 107,767 65% 26,165 23,760 10%
============ ==============
Cost of gas sold 136,701 68,291 100%
------------- ----------------
Margin $41,042 $39,476 4%
============= ================
35
Gas revenues and cost of gas sold increased significantly for the nine-month
period due to the large increase in natural gas prices in the first and
second quarters of 2001. Such increases had no impact on IESU's gas margin
given its rate recovery mechanism for gas costs. Gas margin increased $0.2
million, or 3%, and $1.6 million, or 4%, for the three- and nine-month
periods, respectively. The nine-month increase was largely due to more
favorable weather conditions in the first quarter of 2001 compared with the
first quarter of 2000, partially offset by a negative impact from higher
natural gas costs as some customers either chose alternative fuel sources or
used less natural gas.
IESU's gas tariffs include PGA clauses that are designed to currently recover
the cost of gas sold.
Other Operating Expenses - Other operation and maintenance expenses increased
- ------------------------
$9.8 million and $16.6 million for the three- and nine-month periods,
respectively, primarily due to increased energy delivery and generation
expenses (certain increases were timing differences), increased uncollectible
customer account balances and costs associated with the implementation of
Alliant Energy's e-business strategy. The nine-month increase was partially
offset by reduced other administrative and general expenses and one-time fees
incurred in the second quarter of 2000 associated with the transfer from the
MAPP reliability region to the MAIN region.
Taxes other than income taxes decreased $1.7 million and $2.4 million for the
three- and nine-month periods, respectively, primarily due to reduced
property taxes.
Interest Expense and Other - Miscellaneous, net income increased $2.3 million
- --------------------------
and $0.6 million for the three- and nine-month periods, respectively. The
three-month increase was primarily due to income related to value-added
products and services.
Income Taxes - The effective income tax rates were 33.1% and 35.3% for the
- ------------
three and nine months ended September 30, 2001, respectively, compared with
41.4% and 41.9%, respectively, for the same periods last year. The decrease
for both periods was due to decreases in property-related temporary
differences for which deferred taxes are not provided pursuant to rate making
principles.
WP&L RESULTS OF OPERATIONS
Overview - Third Quarter Results - Earnings available for common stock
- --------------------------------
increased $2.3 million for the three months ended September 30, 2001,
compared with the same period in 2000, primarily due to higher electric
margins.
Electric Utility Operations - Electric margins and MWh sales for WP&L for the
- ---------------------------
three months ended September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold
------------------------------------- ------------------------------------
2001 2000 Change 2001 2000 Change
------------- -------------- -------- ------------- ------------- --------
Residential $71,467 $61,816 16% 964 872 11%
Commercial 38,454 34,228 12% 589 563 5%
Industrial 55,506 48,801 14% 1,173 1,201 (2%)
------------- -------------- ------------- -------------
Total from ultimate customers 165,427 144,845 14% 2,726 2,636 3%
Sales for resale 34,711 32,084 8% 951 838 13%
Other 7,324 6,159 19% 13 13 --
------------- -------------- ------------- -------------
Total revenues/sales 207,462 183,088 13% 3,690 3,487 6%
============= =============
Electric production fuels expense 34,609 33,198 4%
Purchased power expense 62,065 41,299 50%
------------- --------------
Margin $110,788 $108,591 2%
============= ==============
36
Electric margins and MWh sales for WP&L for the nine months ended September
30 were as follows (in thousands):
Revenues and Costs MWhs Sold
------------------------------------- ------------------------------------
2001 2000 Change 2001 2000 Change
------------ --------------- -------- ------------- ------------- --------
Residential $192,680 $173,925 11% 2,573 2,379 8%
Commercial 106,584 96,163 11% 1,630 1,529 7%
Industrial 157,479 142,134 11% 3,429 3,533 (3%)
------------ --------------- ------------- -------------
Total from ultimate customers 456,743 412,222 11% 7,632 7,441 3%
Sales for resale 102,583 86,102 19% 2,679 2,400 12%
Other 16,824 20,251 (17%) 46 48 (4%)
------------ --------------- ------------- -------------
Total revenues/sales 576,150 518,575 11% 10,357 9,889 5%
============= =============
Electric production fuels expense 97,876 83,699 17%
Purchased power expense 165,231 113,119 46%
------------ ---------------
Margin $313,043 $321,757 (3%)
============ ===============
Electric margin increased $2.2 million, or 2%, and decreased $8.7 million, or
3%, for the three- and nine-month periods, respectively. The three-month
increase was primarily due to increased residential and commercial sales
resulting from continued retail customer growth and more favorable weather
conditions in the third quarter of 2001 compared to the same period in 2000.
Also contributing to the three-month increase were increased energy
conservation revenues. These items were partially offset by the impact of
the formation of ATC and lower industrial sales. The nine-month decrease was
primarily due to the impact of the formation of ATC, a second quarter 2000
change in estimate of WP&L's utility services rendered but unbilled at
month-end of $10 million and lower industrial sales. These items were
partially offset by increased sales to higher-margin residential and
commercial customers from continued retail customer growth and more favorable
weather conditions in 2001 compared to 2000. Refer to "Utility Industry
Review - Rates and Regulatory Matters" for discussion of various WP&L rate
filings.
Due to the formation of ATC on January 1, 2001, electric margin for the three
and nine months ended September 30, 2001 included expenses of $7 million and
$21 million, respectively. Such expenses were offset by equity income,
reduced other operation and maintenance expenses and lower depreciation
expense, resulting in no significant net income impact due to the formation
of ATC. Refer to Note 5 of Alliant Energy's "Notes to Consolidated Financial
Statements" in Item 1. for additional information related to ATC.
Under PSCW rules, WP&L can seek emergency rate increases if the annual fuel
and purchased-power costs are more than three percent higher than the
estimated costs used to establish rates.
Gas Utility Operations - Gas margins and Dth sales for WP&L for the three
- ----------------------
months ended September 30 were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- ------------------------------------
2001 2000 Change 2001 2000 Change
-------------- --------------- -------- ------------- ------------- --------
Residential $6,199 $8,312 (25%) 797 939 (15%)
Commercial 3,371 5,604 (40%) 617 854 (28%)
Industrial 603 872 (31%) 128 144 (11%)
Transportation/other 9,178 381 2,309% 4,307 2,772 55%
-------------- --------------- ------------- -------------
Total revenues/sales 19,351 15,169 28% 5,849 4,709 24%
============= =============
Cost of gas sold 10,193 6,431 58%
-------------- ---------------
Margin $9,158 $8,738 5%
============== ===============
37
Gas margins and Dth sales for WP&L for the nine months ended September 30
were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- ------------------------------------
2001 2000 Change 2001 2000 Change
------------- ---------------- -------- ------------- ------------- --------
Residential $86,223 $52,795 63% 8,375 7,926 6%
Commercial 47,330 28,830 64% 5,280 5,321 (1%)
Industrial 7,354 4,510 63% 864 923 (6%)
Transportation/other 28,681 3,835 648% 12,861 9,613 34%
------------- ---------------- ------------- -------------
Total revenues/sales 169,588 89,970 88% 27,380 23,783 15%
============= =============
Cost of gas sold 132,270 51,398 157%
------------- ----------------
Margin $37,318 $38,572 (3%)
============= ================
Gas revenues and cost of gas sold increased significantly for the nine-month
period due to the large increase in natural gas prices in the first and
second quarters of 2001. Gas margin increased $0.4 million, or 5%, and
decreased $1.3 million, or 3%, for the three- and nine-month periods,
respectively. The nine-month decrease was primarily due to losses associated
with current commodity costs, which are shared by ratepayers
and shareowners, and the impact of higher natural gas costs as some customers
either chose alternative fuel sources or used less natural gas, partially
offset by increased natural gas sales due to more favorable weather conditions
in the first quarter of 2001 compared to the first quarter of 2000.
Other Operating Expenses - Other operation and maintenance expenses increased
- ------------------------
$2.9 million and decreased $6.6 million for the three- and nine-month
periods, respectively. The three-month increase was primarily due to
increased energy delivery expenses, higher nuclear expenses and costs
associated with the implementation of Alliant Energy's e-business strategy,
partially offset by the impact of the formation of ATC. The nine-month
decrease was primarily due to the formation of ATC and decreased fossil-plant
maintenance and nuclear expenses, partially offset by higher uncollectible
account balances, costs associated with the implementation of Alliant
Energy's e-business strategy and increased energy delivery expenses. The
lower nuclear expenses were primarily due to a planned second quarter 2000
refueling outage at Kewaunee.
Depreciation and amortization expense decreased $0.1 million and $0.2 million
for the three- and nine-month periods, respectively, due to the impact of the
formation of ATC, offset by property additions and increased earnings on the
nuclear decommissioning trust fund. 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 as depreciation expense.
Taxes other than income taxes increased $0.6 million and $2.8 million for the
three- and nine-month periods, respectively, due to increased gross receipts
and payroll taxes.
Interest Expense and Other - Equity income from unconsolidated investments
- --------------------------
increased $2.4 million and $10.5 million for the three- and nine-month
periods, respectively, largely due to ATC beginning operations on January 1,
2001.
Miscellaneous, net income increased $2.0 million and decreased $2.8 million
for the three- and nine-month periods, respectively. The three-month
increase was primarily due to increased earnings from the nuclear
decommissioning trust fund. The nine-month decrease was primarily due to
income realized from weather hedges in 2000, partially offset by increased
earnings from the nuclear decommissioning trust fund.
Income Taxes - The effective income tax rate was 38.3% for the three and nine
- ------------
months ended September 30, 2001, compared with 37.3% and 37.4%, respectively,
for the same periods last year.
38
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows for Nine-Month Periods - Alliant Energy's cash flows from
- ---------------------------------
operating activities increased $110 million primarily due to changes in
working capital; cash flows from financing activities decreased $316 million
primarily due to net changes in the amount of debt issued and retired; and
cash flows used for investing activities decreased $192 million primarily due
to lower non-regulated investments. IESU's cash flows from operating
activities increased $10 million primarily due to changes in working capital,
partially offset by a scheduled nuclear refueling outage in the second
quarter of 2001; cash flows used for financing activities decreased $58
million primarily due to net changes in the amount of debt issued and
retired. WP&L's cash flows from operating activities increased $14 million
primarily due to changes in working capital; cash flows used for financing
activities increased $76 million primarily due to net changes in the amount
of debt issued and retired and the payment of common stock dividends in 2001;
and cash flows used for investing activities decreased $65 million due to
proceeds received from the transfer of WP&L's transmission assets to ATC. WP&L
did not declare a common stock dividend in 2000 as part of the management of
its capital structure.
Equity - On November 8, 2001, Alliant Energy agreed to sell in a public
- ------
offering 8.5 million shares of its common stock at a price per share to the
public of $28.00. In addition, the underwriters for the public offering have
exercised their over-allotment option to purchase 1.275 million additional
shares of common stock at the same price per share. The public offering of
the shares is expected to close on November 15, 2001. Alliant Energy expects
to use the approximately $263.0 million of net proceeds from the offering
(including from the sale of the over-allotment shares) to repay short-term
debt.
Long-Term Debt - Refer to Note 7 of Alliant Energy's "Notes to Consolidated
- --------------
Financial Statements" in Item 1. for discussion of long-term debt issued by
IESU in March 2001.
On November 9, 2001, Resources agreed to issue $300 million
of 7% senior notes due 2011 in a private placement. The notes are fully and
unconditionally guaranteed by Alliant Energy. The private placement of the
notes is expected to close on November 15, 2001. Resources expects to use the
$297.2 million of net proceeds from the private placement to repay other
Resources' debt.
Sale of Accounts Receivable - Alliant Energy and the utility subsidiaries
- ---------------------------
received all necessary approvals in late March 2001 for a combined accounts
receivable sale program whereby IESU, WP&L and IPC sell their respective
receivables on a limited recourse basis through wholly-owned special purpose
entities to an affiliated financing entity, which in turn sells the
receivables to an outside investor. The new program became operational in
the second quarter of 2001 and replaces the previously existing programs
for IESU and WP&L. IPC did not previously have an accounts receivable sale
program. 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.
Investments - Under PUHCA, certain investments of Alliant Energy in exempt
- -----------
wholesale generators and foreign utility companies are limited to 50 percent
of Alliant Energy's consolidated retained earnings. In May 2001, Alliant
Energy filed an application with the SEC to request, among other things,
aggregate investment authority with respect to exempt wholesale generators
and foreign utility companies in the amount of $1.75 billion. In October
2001, the SEC issued an order approving an increase in Alliant Energy's
aggregate investment authority from 50 percent to 100 percent of consolidated
retained earnings and reserved its jurisdiction over the increase to $1.75
billion until further completion of the record, which is subject to the
receipt of all required state regulatory approvals.
In October 2001, Alliant Energy and Resources received SEC approval for their
on-going program of external financing, credit support agreements and other
related proposals for the period through December 31, 2004.
Construction and Acquisition Expenditures - Alliant Energy plans to invest in
- -----------------------------------------
a portfolio of domestic non-regulated generation assets through acquisition,
development and expansion, both inside and outside of the service territories
of its utility subsidiaries. Consistent with this strategy, in October 2001,
Alliant Energy announced an agreement with Panda Energy International, Inc.,
to jointly develop and operate a 1,100 MW natural gas combined-cycle power
39
plant in western Michigan. Construction of the facility is expected to begin
during the first quarter of 2002 and the facility is expected to become
operational in 2004, assuming certain conditions are satisfied. The total
cost of the project is estimated to be approximately $600 million. Alliant
Energy anticipates that at least 55 percent of the project costs will
be financed through non-recourse debt at the joint venture level, with the
remaining portion to be provided by Alliant Energy.
Alliant Energy's subsidiaries also announced their interest in developing new
electric power generation capacity in Iowa and Wisconsin over the next 10
years with an estimated investment of $2.5 billion. In Iowa, IESU announced
a willingness to develop up to 1,200 MW of new electric power generation over
the next 10 years. In Wisconsin, WP&L announced plans to develop up to 800
MW of new electric power generation over the next 10 years. The Wisconsin
plans include the addition of 500 MW of coal-fired and 100 MW of natural
gas-fired generation by 2006 and an additional 200 MW of combined-cycle gas
generation by 2011. Both the Iowa and Wisconsin proposals are subject to
various conditions, including the receipt of applicable regulatory approval
and the receipt of a reasonable return on IESU's and WP&L's investments.
Including non-regulated generation projects, Alliant Energy plans to invest
$2.0 billion over the next four years in various energy-related businesses
that it believes offer potential for future growth while enhancing shareowner
value. Alliant Energy expects these investments to include expanding its
international generation and distribution assets in Australia, Brazil, China
and New Zealand. Alliant Energy also plans to invest in its other domestic
non-regulated businesses, including its oil and gas production operations and
its integrated energy services businesses.
To help ensure electric service reliability for its customers, Alliant Energy
has announced a program called PowerPledge, which is designed to increase
Alliant Energy's power supply, upgrade existing systems and use more
renewable energy sources. Through this program, Alliant Energy's utility
subsidiaries plan to invest $1.7 billion from 2002 through 2005 in utility
infrastructure designed to improve reliability.
OTHER MATTERS
Refer to Note 4 of IESU's "Notes to Consolidated Financial Statements" in
Item 1. for discussion of a merger between IESU and IPC that is currently
expected to be effective January 1, 2002.
Market Risk Sensitive Instruments and Positions
Alliant Energy'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. Alliant Energy's market risks have not changed materially from
the market risks reported in the 2000 Form 10-K, except as noted below.
Equity Price Risk - At September 30, 2001 and December 31, 2000, Alliant
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Energy had an investment in the stock of McLeod, a publicly traded
telecommunications company, valued at $43 million and $791 million,
respectively. In addition to the equity risk associated with the investment
in McLeod, Alliant Energy also has equity risk related to the option
liability embedded within Resources' exchangeable senior notes. A 10 percent
increase (decrease) in the quoted market price at September 30, 2001 and
December 31, 2000 would not have a significant impact on net income as any
resulting increase (decrease) in the value of the option would be
substantially offset by a corresponding increase (decrease) in the value of
the McLeod shares classified as trading (valued at $12 million and $221
million at September 30, 2001 and December 31, 2000, respectively). At
September 30, 2001 and December 31, 2000, the McLeod available-for-sale
securities were valued at $31 million and $570 million, respectively. A 10
percent increase (decrease) in the quoted market price at September 30, 2001
and December 31, 2000 would have increased (decreased) the value of the
investment of the available-for-sale securities by $3 million and $57
million, respectively.
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 September 30, 2001 and
December 31, 2000, Alliant Energy had a cumulative foreign currency
translation loss of $175 million and $60 million, respectively, recorded in
40
"Accumulated other comprehensive income (loss)" on its Consolidated Balance
Sheets that primarily related to decreases in value of the Brazil real, New
Zealand dollar and Australian dollar in relation to the U.S. dollar. Based
on Alliant Energy's investments at September 30, 2001 and December 31, 2000,
a 10 percent sustained increase (decrease) over the next 12 months in the
foreign exchange rates of Australia, Brazil, China and New Zealand would
increase (decrease) the cumulative foreign currency translation loss by $44
million and $46 million, respectively.
Accounting Pronouncements
In July 2001, the FASB issued SFAS 141, "Business Combinations," which
requires that, among other things, all business combinations be accounted for
under the purchase method for business combinations initiated after June 30,
2001. Use of the pooling-of-interests method is no longer permitted.
In July 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible
Assets," which will result in goodwill no longer being amortized to earnings.
Rather, goodwill will be subject to at least an annual assessment for
impairment by applying a fair-value-based test. The amortization of goodwill
existing as of June 30, 2001 ceases upon adoption of SFAS 142, which will be
January 1, 2002 for Alliant Energy. Alliant Energy has not yet fully
quantified the impacts of SFAS 142 on its financial condition or results of
operations.
In August 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations," which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. Alliant Energy must adopt SFAS 143 no
later than January 1, 2003. With regards to the decommissioning of DAEC and
Kewaunee, SFAS 143 will require IESU and WP&L, respectively, to record at
fair value the decommissioning liability and a corresponding asset, which
will then be depreciated over the remaining expected service lives of the
plants' generating units. Currently, decommissioning amounts collected in
rates and the investment earnings are reported in accumulated depreciation.
Alliant Energy has not yet determined what other assets may have associated
retirement costs as defined by SFAS 143. Alliant Energy does not anticipate
SFAS 143 will have a material impact on its financial condition or results of
operations.
In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. Alliant
Energy must adopt SFAS 144 no later than January 1, 2002. At the present
time, Alliant Energy does not anticipate SFAS 144 will have a material impact
on its financial condition or results of operations.
OUTLOOK
Alliant Energy currently estimates that adjusted earnings for 2001 will be in
the range of $2.40 to $2.50 per diluted share and in the range of $2.50 to
$2.70 per diluted share for 2002. Drivers for Alliant Energy's 2001 and 2002
earnings estimates include, but are not limited to: normal weather conditions
in its utility service territories; continued economic development and sales
growth in its utility service territories; continued cost control and
operational efficiencies in its utility operations; ability of its utility
subsidiaries to recover their operating costs, and to earn a reasonable rate
of return, in future rate proceedings; ability to recover its purchased-power
and fuel costs, both domestically and internationally; ability to offset
start-up and growth-related interest expenses in its non-regulated businesses
with sales of non-strategic assets and to redeploy such proceeds into more
strategic earnings-generating investments; continued improved profitability
of its international investments; continued improved profitability of its
non-regulated businesses as a whole, including oil and gas, electricity
trading, integrated energy and transportation services; stable oil and gas
prices; and other stable business conditions, including a stable economy. In
addition, the estimates are further subject to future developments relating
to Alliant Energy's utility investments in Brazil.
Brazil is experiencing drought conditions which have been negatively
impacting Alliant Energy's 2001 earnings given that the large majority of
generation in Brazil is hydroelectric. However, Alliant Energy has been
mitigating a significant portion of this negative earnings impact as a result
of its ability to sell excess energy into the wholesale power market. The
Brazilian government is currently reviewing the structure of the wholesale
power market in Brazil, as well as the implications to Brazilian utilities of
the government's rationing program and various cost increases the utilities
41
have experienced since their most recent tariff adjustments. The outcomes of
this review could include, among others, any or all of the following
scenarios: 1) retroactive adjustments to decrease the wholesale market prices
at which Alliant Energy has been selling its excess energy; 2) compensation
for past losses Alliant Energy has realized due to the rationing program;
and/or 3) compensation for certain cost increases Alliant Energy has
experienced since its most recent tariff adjustments. Alliant Energy is
currently unable to predict the outcome of this review process, during what
period Alliant Energy would record any such adjustments or compensation or
what impact any such adjustments or compensation would have on Alliant
Energy's earnings. However, several of Alliant Energy's other non-regulated
businesses continue to generate strong earnings, which also should offset
some or all of the impact of the foregoing.
Alliant Energy's strategic plan includes investing in generation and
other energy-related projects; better connecting with customers through
enhanced service reliability, value-added products and services, and
e-business initiatives; and growing the non-regulated side of its business
through partnerships and acquisitions with a focus on generation projects,
select international markets and other strategic initiatives. Alliant
Energy's goal is to have its non-regulated operations contribute more than 25
percent of its adjusted earnings within the next three years and believes
that successful implementation of these strategies will contribute
significantly to Alliant Energy achieving its targeted annual growth rate of
7 to 10 percent in adjusted earnings.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market Risk are reported under
Item 2. MD&A "Other Matters - Market Risk Sensitive Instruments and
Positions."
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In an effort to grow and expand as a Wisconsin-based company, Alliant Energy
and WP&L filed a federal lawsuit in October 2000, 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 challenging the provisions of
WUHCA which 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 Energy
and WP&L also requested that the court consider the constitutionality of
issues related to the 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 was 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 have appealed the lower court's rulings to the 7th Circuit
Court of Appeals. Briefing of the appeal was completed in September 2001,
with a decision expected by Summer 2002. Alliant Energy and WP&L cannot
currently predict the outcome of this litigation.
Alliant Energy received an adverse ruling in 1999 from a U.S. district court
judge dealing with an income tax refund claim Alliant Energy filed relating
to capital losses disallowed under audit by the IRS. The district court
judge also disallowed certain related deductions allowed by the IRS as an
offset against a tax refund due to Alliant Energy. Alliant Energy appealed
the district court's ruling and the IRS appealed the decision which led to
the tax refund due to Alliant Energy. In June 2001, the U.S. Court of
Appeals for the Eighth Circuit ruled in Alliant Energy'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 Eighth Circuit opinion. The Eighth Circuit denied the appeal
in September 2001 and remanded the case back to the District Court for entry
of judgment. The government may petition the U.S. Supreme Court to hear the
case; such petition must be filed by the end of December 2001. Alliant
Energy believes the resolution of these issues will not have a material
adverse impact on its financial condition or results of operations.
42
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
---------
10.1 Amendment No. 1 to Joint Power Supply Agreement dated February 2,
1967 among Wisconsin Public Service Corporation, WP&L, and Madison
Gas & Electric Company
(b) Reports on Form 8-K:
--------------------
Alliant Energy - None.
IESU - None.
WP&L - None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Alliant
Energy Corporation, IES Utilities Inc. and Wisconsin Power and Light Company
have each duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the 14th day of November 2001.
ALLIANT ENERGY CORPORATION
- --------------------------
Registrant
By: /s/ John E. Kratchmer Corporate Controller and Chief Accounting Officer
- ------------------------- (Principal Accounting Officer and Authorized Signatory)
John E. Kratchmer
IES UTILITIES INC.
- ------------------
Registrant
By: /s/ John E. Kratchmer Corporate Controller and Chief Accounting Officer
- ------------------------- (Principal Accounting Officer and Authorized Signatory)
John E. Kratchmer
WISCONSIN POWER AND LIGHT COMPANY
- ---------------------------------
Registrant
By: /s/ John E. Kratchmer Corporate Controller and Chief Accounting Officer
- ------------------------- (Principal Accounting Officer and Authorized Signatory)
John E. Kratchmer
43