UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 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)
4902 N. Biltmore Lane
Madison, Wisconsin 53718-2132
Telephone (608)458-3311
0-4117-1 INTERSTATE POWER AND LIGHT COMPANY 42-0331370
(an Iowa corporation)
Alliant Energy Tower
Cedar Rapids, Iowa 52401
Telephone (319)786-4411
IES Utilities Inc.
------------------
(Former name of Interstate Power and Light Company)
0-337 WISCONSIN POWER AND LIGHT COMPANY 39-0714890
(a Wisconsin corporation)
4902 N. Biltmore Lane
Madison, Wisconsin 53718-2132
Telephone (608)458-3311
Securities registered pursuant to Section 12 (b) of the Act:
Name of Each
Title of Class Exchange on Which Registered
-------------- ----------------------------
Alliant Energy Corporation Common Stock, $.01 Par Value New York Stock Exchange
Alliant Energy Corporation Common Stock Purchase Rights New York Stock Exchange
Interstate Power and Light Company 7-7/8% Quarterly Debt Capital Securities New York Stock Exchange
(Subordinated Deferrable Interest Debentures)
Wisconsin Power and Light Company 4.50% Preferred Stock, No Par Value American Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
Title of Class
--------------
Interstate Power and Light Company 4.80% Cumulative Preferred Stock, Par Value $50 per share
Wisconsin Power and Light Company Preferred Stock (Accumulation without Par Value)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) have been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [X]
This combined Form 10-K is separately filed by Alliant Energy Corporation,
Interstate Power and Light Company and Wisconsin Power and Light Company.
Information contained in the annual report relating to Interstate Power and
Light Company and Wisconsin Power and Light Company is filed by such
registrant on its own behalf. Each of Interstate Power and Light Company and
Wisconsin Power and Light Company makes no representation as to information
relating to registrants other than itself.
The aggregate market value of the voting and non-voting common equity held by
nonaffiliates as of January 31, 2002:
Alliant Energy Corporation $2.66 billion
Interstate Power and Light Company $--
Wisconsin Power and Light Company $--
Number of shares outstanding of each class of common stock as of January 31,
2002:
Alliant Energy Corporation Common Stock, $0.01 par value, 89,780,585 shares outstanding
Interstate Power and Light Company Common Stock, $2.50 par value, 13,370,788 shares outstanding (all of which
are owned beneficially and of record by Alliant Energy Corporation)
Wisconsin Power and Light Company Common Stock, $5 par value, 13,236,601 shares outstanding (all of which are
owned beneficially and of record by Alliant Energy Corporation)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statements relating to Alliant Energy Corporation's
2002 Annual Meeting of Shareowners and Wisconsin Power and Light Company's
2002 Annual Meeting of Shareowners are, or will be upon filing with the
Securities and Exchange Commission, incorporated by reference into Part III
hereof.
2
TABLE OF CONTENTS
Page
Number
------
Part I
Item 1. Business 6
Item 2. Properties 25
Item 3. Legal Proceedings 30
Item 4. Submission of Matters to a Vote of Security Holders 31
Executive Officers of the Registrants 31
Part II
Item 5. Market for Registrants' Common Equity and Related Stockholder
Matters 35
Item 6. Selected Financial Data 36
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 38
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 63
Item 8. Financial Statements and Supplementary Data 63
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure 136
Part III
Item 10. Directors and Executive Officers of the Registrants 136
Item 11. Executive Compensation 136
Item 12. Security Ownership of Certain Beneficial Owners and Management 137
Item 13. Certain Relationships and Related Transactions 137
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 137
Signatures 147
Exhibit Index 150
3
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes of this report
are defined below:
Abbreviation or Acronym Definition
- ----------------------- ----------
AFUDC Allowance for Funds Used During Construction
Alliant Energy Alliant Energy Corporation
ANR ANR Pipeline
APB Accounting Principles Board Opinion
ATC American Transmission Company, LLC
BOE Barrels of Oil Equivalent
Btu British Thermal Unit
CAA Clean Air Act
Calpine Calpine Corporation
Capital Square Capital Square Financial Corporation
Capstone Capstone Turbine Corporation
Cargill Cargill Incorporated
Cargill-Alliant Cargill-Alliant, LLC
CIPCO Central Iowa Power Cooperative
Corporate Services Alliant Energy Corporate Services, Inc.
DAEC Duane Arnold Energy Center
DD&A Depletion, Depreciation and Amortization
DNR Department of Natural Resources
DOE U.S. Department of Energy
Dth Dekatherm
EAC Energy Adjustment Clause
Enron Enron Corporation
EPA U.S. Environmental Protection Agency
EPS Earnings Per Average Common Share
EWG Exempt Wholesale Generator
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
FUCO Foreign Utility Company
ICC Illinois Commerce Commission
IES IES Industries Inc.
IESU IES Utilities Inc.
Integrated Services Alliant Energy Integrated Services Company
International Alliant Energy International, Inc.
Investments Alliant Energy Investments, Inc.
IPC Interstate Power Company
IP&L Interstate Power and Light Company
IRS Internal Revenue Service
ISO Independent System Operator
IUB Iowa Utilities Board
Kewaunee Kewaunee Nuclear Power Plant
KV Kilovolt
KW Kilowatt
KWh Kilowatt-hour
4
Abbreviation or Acronym Definition
- ----------------------- ----------
LTEIP Long-Term Equity Incentive Plan
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
MG&E Madison Gas & Electric Company
MGP Manufactured Gas Plants
MPUC Minnesota Public Utilities Commission
MW Megawatt
MWh Megawatt-hour
NEIL Nuclear Electric Insurance Limited
NEPA National Energy Policy Act of 1992
NERC North American Electric Reliability Council
NGL Natural Gas Liquid
NGPL Natural Gas Pipeline Co. of America
NMC Nuclear Management Company, LLC
NNG Northern Natural Gas Company
NOx Nitrogen Oxides
NRC Nuclear Regulatory Commission
Panda Energy Panda Energy International, Inc.
Peak Pacific Peak Pacific Investment Company, Ltd.
PRP Potentially Responsible Party
PSCW Public Service Commission of Wisconsin
PUHCA Public Utility Holding Company Act of 1935
Resources Alliant Energy Resources, Inc.
RTO Regional Transmission Organization
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
SFAS 133 Accounting for Derivative Instruments and Hedging Activities
South Beloit South Beloit Water, Gas and Electric Company
Southern Hydro Southern Hydro Partnership
STB U.S. Surface Transportation Board
TRANSLink TRANSLink Transmission Company LLC
Transportation Alliant Energy Transportation, Inc.
Union Pacific Union Pacific Railroad
U.S. United States
WEPCO Wisconsin Electric Power Company
Whiting Whiting Petroleum Corporation
WNRB Wisconsin Natural Resources Board
WP&L Wisconsin Power and Light Company
WPLH WPL Holdings, Inc.
WPSC Wisconsin Public Service Corporation
WUHCA Wisconsin Utility Holding Company Act
5
FORWARD-LOOKING STATEMENTS
Refer to "Forward-Looking Statements" in Item 7 MD&A for information and
disclaimers regarding forward-looking statements contained in this Annual
Report on Form 10-K.
PART I
This Annual Report on Form 10-K includes information relating to Alliant
Energy, IP&L and WP&L (as well as Resources and Corporate Services). Where
appropriate, information relating to a specific entity has been segregated
and labeled as such. On January 1, 2002, the merger of IPC with and into
IESU was completed. In connection with the merger, IESU, as the surviving
corporation, changed its name to IP&L. Given that the merger had not yet
been consummated at the end of 2001, the financial statements and notes
thereto included in this Annual Report on Form 10-K for IP&L are those of
IESU on a stand-alone basis. In addition, the historical information
included in MD&A and other portions of this Annual Report on Form 10-K
focuses primarily on IESU. The portions of MD&A that are prospective in
nature generally reflect a discussion of IP&L operations on a post-merger
basis. Certain additional information relating to the merger is included in
a Current Report on Form 8-K, as amended, dated January 1, 2002, filed by
IP&L with the SEC.
ITEM 1. BUSINESS
A. GENERAL
In April 1998, IES, WPLH and IPC completed a merger resulting in Alliant
Energy. The primary first tier subsidiaries of Alliant Energy include: IP&L,
WP&L, Resources and Corporate Services. Among various other regulatory
constraints, Alliant Energy is operating as a registered public utility
holding company subject to the limitations imposed by PUHCA. Alliant Energy
was incorporated in Wisconsin in 1981. Refer to "Utility Industry Review" in
Item 7 MD&A for additional information regarding Alliant Energy's utility
subsidiaries. A brief description of the primary first-tier subsidiaries of
Alliant Energy is as follows:
1) IP&L
a. IESU - incorporated in Iowa in 1925 as Iowa Railway and Light
Corporation. IESU is a public utility engaged principally in the generation,
transmission, distribution and sale of electric energy; the purchase,
distribution, transportation and sale of natural gas; and the provision of
steam services in selective markets, in the State of Iowa. In Iowa,
non-exclusive franchises, which cover the use of streets and alleys for
public utility facilities in incorporated communities, are granted for a
maximum of twenty-five years by a majority vote of local qualified
residents. At December 31, 2001, IESU supplied electric and gas service to
349,150 and 182,874 customers, respectively. In 2001, 2000 and 1999, IESU
had no single customer for which electric, gas and/or steam sales accounted
for 10% or more of IESU's consolidated revenues. Refer to Note 19 of IESU's
"Notes to Consolidated Financial Statements" in Item 8 for information related
to the merger of IPC with and into IESU.
b. IPC - incorporated in 1925 under the laws of the State of Delaware. IPC
was a public utility engaged principally in the generation, transmission,
distribution and sale of electric energy and the purchase, distribution,
transportation and sale of natural gas in the States of Iowa, Minnesota and
Illinois. At December 31, 2001, IPC provided electric and gas service to
168,685 and 50,494 customers, respectively. In 2001, 2000 and 1999, IPC had
no single customer for which electric and/or gas sales accounted for 10% or
more of IPC's consolidated revenues.
6
2) WP&L - incorporated in Wisconsin in 1917 as Eastern Wisconsin Electric
Company, is a public utility engaged principally in the generation,
distribution and sale of electric energy; the purchase, distribution,
transportation and sale of natural gas; and the provision of water services
in selective markets. Nearly all of WP&L's customers are located in south
and central Wisconsin. WP&L operates in municipalities pursuant to permits
of indefinite duration which are regulated by Wisconsin law. At December 31,
2001, WP&L supplied electric and gas service to 421,608 and 167,209
customers, respectively. WP&L also had 19,318 water customers. In 2001,
2000 and 1999, WP&L had no single customer for which electric, gas and/or
water sales accounted for 10% or more of WP&L's consolidated revenues. WPL
Transco LLC is a wholly-owned subsidiary of WP&L and holds WP&L's investment
in ATC. WP&L also owns all of the outstanding capital stock of South Beloit,
a public utility supplying electric, gas and water service, principally in
Winnebago County, Illinois, which was incorporated in 1908.
3) RESOURCES - incorporated in 1988 in Wisconsin, the majority of Alliant
Energy's non-regulated investments are organized under Resources. Resources'
significant wholly-owned subsidiaries at December 31, 2001 include
International, Alliant Energy Generation, Inc., Integrated Services,
Investments, Whiting and Transportation. Resources also has a 95 percent
ownership interest in SmartEnergy, Inc., an energy services company operating
in deregulated markets. Refer to "D. Information Relating to Non-regulated
Operations" for additional details.
4) CORPORATE SERVICES - subsidiary formed to provide administrative services
to Alliant Energy and its subsidiaries as required under PUHCA.
Refer to Note 14 of the "Notes to Consolidated Financial Statements" in Item
8 for further discussion of business segments, which information is
incorporated herein by reference.
B. INFORMATION RELATING TO ALLIANT ENERGY ON A CONSOLIDATED BASIS
1) EMPLOYEES
As of December 31, 2001, Alliant Energy had the following employees
(full-time and part-time):
Percentage
Number of Number of of Workforce
Number of Bargaining Unit Bargaining Covered by
Employees Employees Agreements Agreements
------------- ----------------- -------------- ----------------
IESU (a) 1,104 917 4 83%
WP&L 1,554 1,469 1 95%
IPC 576 502 3 87%
Resources:
International 2,750 -- -- --
Integrated Services 730 -- -- --
Investments:
Whiting 97 -- -- --
Other 152 82 5 54%
Other 67 -- -- --
Corporate Services (a) 1,555 -- -- --
------------- ----------------- --------------
8,585 2,970 13 35%
============= ================= ==============
(a) All non-bargaining employees of IESU and Corporate Services at DAEC were
transferred to the NMC in 2001. Bargaining unit employees of IESU covered
under two bargaining agreements at DAEC were also transferred to the NMC in
2001.
In 2002, three bargaining agreements expire representing approximately 31% of
employees covered under bargaining agreements and 11% of total Alliant Energy
employees. Alliant Energy has not experienced any significant work stoppage
problems in the past. While negotiations have commenced, Alliant Energy is
currently unable to predict the outcome of these negotiations.
7
2) CAPITAL EXPENDITURE AND INVESTMENT AND FINANCING PLANS
Refer to "Liquidity and Capital Resources - Construction and Acquisition
Expenditures" in Item 7 MD&A for discussion of anticipated construction and
acquisition expenditures for 2002-2006 and details regarding the financing of
future capital requirements. Refer to "C. Information Relating to Utility
Operations - Electric Utility Operations - Power Supply" for information
related to IP&L's and WP&L's plans for the development of new electric
generation in Iowa and Wisconsin, respectively.
3) REGULATION
Alliant Energy operates as a registered public utility holding company
subject to regulation by the SEC under PUHCA. Alliant Energy and its
subsidiaries are subject to the regulatory provisions of PUHCA, including
provisions relating to the issuance and sales of securities, acquisitions and
sales of certain utility properties, acquisitions and retention of interests
in non-utility businesses and the services provided by Corporate Services to
Alliant Energy and its subsidiaries.
Alliant Energy is subject to regulation by the PSCW. The PSCW regulates,
among other things, the type and amount of Alliant Energy's investments in
non-utility businesses. WP&L is also subject to regulation by the PSCW as to
retail utility rates and service, accounts, issuance and use of proceeds of
securities, certain additions and extensions to facilities and in other
respects. WP&L is generally required to file a rate case with the PSCW every
two years based on a forward-looking test year period. However, as one of
the conditions for approval of the 1998 merger which formed Alliant Energy,
the PSCW has required, with certain exception, that WP&L freeze for four
years on a post-merger basis retail electric, natural gas and water rates.
The last of the rate freezes will expire in April 2002. WP&L filed retail
and wholesale base rate increase requests in 2001 and the first quarter of
2002, respectively. Refer to "Utility Industry Review - Rates and Regulatory
Matters" in Item 7 MD&A for further discussion.
IP&L operates under the jurisdiction of the IUB. The IUB has authority to
regulate rates and standards of service, to prescribe accounting requirements
and to approve the location and construction of electric generating
facilities having a capacity in excess of 25,000 KW. Requests for rate
relief are based on historical test periods, adjusted for certain known and
measurable changes. The IUB must decide on requests for rate relief within
10 months of the date of the application for which relief is filed or the
interim prices granted become permanent. Interim rates, if allowed, are
permitted to become effective, subject to refund, no later than 90 days after
the rate increase application is filed. Notwithstanding this process, IESU
and IPC agreed to a four-year price cap expiring April 2002 as part of the
approval of the April 1998 merger forming Alliant Energy. IP&L plans on
filing electric and natural gas base rate cases with the IUB in the Spring
and Fall of 2002, respectively.
IP&L is also subject to regulation by the MPUC. Requests for rate relief can
be based on either historical or projected data. The MPUC must reach a final
decision within 10 months. Interim rates are permitted. The MPUC also has
jurisdiction to approve IP&L's capital structure on an annual basis. In
addition, IP&L and South Beloit are subject to regulation by the ICC for
retail utility rates and service, accounts, issuance and use of proceeds of
securities, certain additions and extensions to facilities and in other
respects. Requests for rate relief must be decided within 11 months.
FERC has jurisdiction under the Federal Power Act over certain of the
electric utility facilities and operations, wholesale rates and accounting
practices of IP&L and WP&L, and in certain other respects. In addition,
certain natural gas facilities and operations of the companies are subject to
the jurisdiction of FERC under the Natural Gas Act.
With respect to environmental matters, the EPA administers certain federal
statutes and has delegated the administration of other environmental
initiatives to the applicable state environmental agencies. In addition, the
state agencies have jurisdiction over air and water quality standards
associated with fossil fuel fired electric generation and the level and flow
of water, safety and other matters pertaining to hydroelectric generation.
8
WP&L and IP&L are indirectly and directly subject to the jurisdiction of the
NRC, with respect to Kewaunee and DAEC, respectively, and to the jurisdiction
of the DOE with respect to the disposal of nuclear fuel and other radioactive
wastes from Kewaunee and DAEC.
In the U.S., the oil and gas industry is extensively regulated at all levels
of government and such regulations are constantly reviewed, changed and
extended. Violation of the statutes, subject to the type of violation, can
result in a material financial burden to an independent oil and gas
producer.
The electricity industry in Brazil, as it relates to Alliant Energy's
investments, is regulated by the Brazilian federal government, acting through
the Ministry of Mines and Energy, which has exclusive authority over the
electricity sector through regulatory powers assigned to it. Regulatory
policy for the sector is implemented by an autonomous national electric
energy agency (Agencia Nacional de Energia Eletrica or "ANEEL"), which
delegates certain functions to agencies based in certain states of Brazil.
However, ANEEL cannot delegate any authority regarding tariffs to state
agencies.
A comprehensive review of the regulatory process and policies in Brazil is
currently being undertaken by the Brazilian government. Alliant Energy is
unable to predict the outcome of such review.
Alliant Energy's Brazil investments were among the companies involved in a
settlement reached in the fourth quarter of 2001 between the Brazil
government and the distribution companies related to the economic resolution
of the impacts of electricity rationing, the recovery of past costs and the
prices allowed for sales of excess generation into the spot market. In
connection with the settlement reached with the government, Alliant Energy's
Brazil investments recorded an asset related to legislation allowing the
companies to collect these 2001 revenues in future rates. Such revenues have
already been recognized in earnings.
Refer to "Utility Industry Review" in Item 7 MD&A for additional information
regarding regulation and utility rate matters.
C. INFORMATION RELATING TO UTILITY OPERATIONS
Alliant Energy realized 53%, 42%, 3% and 2% of its 2001 electric utility
revenues in Iowa, Wisconsin, Minnesota and Illinois, respectively.
Approximately 89% of the electric revenues were regulated by the respective
state commissions while the other 11% were regulated by FERC. Alliant Energy
realized 53%, 41%, 3% and 3% of its 2001 gas utility revenues in Iowa,
Wisconsin, Minnesota and Illinois, respectively.
IESU realized 100% of its 2001 electric and gas utility revenues in Iowa.
Approximately 94% of the 2001 electric revenues were regulated by the IUB
while the other 6% were regulated by FERC. WP&L realized 98% of its 2001
electric utility revenues in Wisconsin and 2% in Illinois. Approximately 83%
of the 2001 electric revenues were regulated by the PSCW or the ICC while the
other 17% were regulated by FERC. WP&L realized 97% of its 2001 gas utility
revenues in Wisconsin and 3% in Illinois. IPC realized 74%, 20% and 6% of
its 2001 electric utility revenues in Iowa, Minnesota and Illinois,
respectively. Approximately 96% of the 2001 electric revenues were regulated
by the respective state commissions while the other 4% were regulated by
FERC. IPC realized 66%, 24% and 10% of its 2001 gas utility revenues in
Iowa, Minnesota and Illinois, respectively.
9
1) ELECTRIC UTILITY OPERATIONS
General - The utilities provide electric service in Iowa, southern and
central Wisconsin, northern and northwestern Illinois and southern
Minnesota. The number of electric customers and communities served by each
utility at December 31, 2001 was as follows:
Retail Customers Wholesale Customers Other Customers Communities Served
----------------- ----------------------- -------------------- ----------------------
IESU 348,701 5 444 525
WP&L 419,643 29 1,936 600
IPC 167,775 9 901 234
----------------- ----------------------- -------------------- ----------------------
936,119 43 3,281 1,359
================= ======================= ==================== ======================
2001 electric utility operations accounted for 74%, 78% and 83% of operating
revenues and 92%, 97% and 95% of operating income for IESU, WP&L and IPC,
respectively.
Electric sales are seasonal to some extent with the annual peak normally
occurring in the summer months. In 2001, the maximum peak hour demands for
IESU, WP&L and IPC were 2,144 MW on August 1, 2001; 2,696 MW on July 31,
2001; and 1,015 MW on July 31, 2001, respectively. In 2001, the maximum peak
hour demand for Alliant Energy was 5,677 MW on July 31, 2001, which was the
coincident peak of the entire Alliant Energy system.
IP&L maintains and operates transmission and substation facilities connecting
with its high voltage transmission systems pursuant to a non-cancelable
operation agreement (the Operating Agreement) with CIPCO. The Operating
Agreement, which will terminate on December 31, 2035, provides for the joint
use of certain transmission facilities of IP&L and CIPCO. Alliant Energy has
transmission interconnections at various locations with eight other
transmission owning utilities in the Midwest. These interconnections enhance
the overall reliability of the Alliant Energy transmission system and provide
access to multiple sources of economic and emergency power and energy.
IP&L and WP&L are members of the MAIN reliability region which is one of the
ten regional members of NERC. Each regional member of NERC is responsible
for maintaining reliability in its area through coordination of planning and
operations.
Refer to "Utility Industry Review" in Item 7 MD&A for additional information
regarding Alliant Energy's transmission business. Refer to Item 2 Properties
for additional information regarding electric facilities.
Fuel - Refer to the Electric Operating Information tables for details on the
sources of electric energy for Alliant Energy, IESU and WP&L from 1997 to
2001. The average cost of fuel per million Btu's used for electric generation
was as follows:
Nuclear Coal All Fuels
------------- ------------- ------------
IESU - 2001 $0.608 $0.926 $0.979
- 2000 0.594 0.925 0.953
- 1999 0.581 0.899 0.914
WP&L - 2001 0.423 1.146 1.158
- 2000 0.424 1.152 1.115
- 1999 0.431 1.144 1.034
IPC - 2001 N/A 1.091 1.194
- 2000 N/A 1.062 1.146
- 1999 N/A 1.273 1.320
Coal - Alliant Energy, through its subsidiaries (Corporate Services, IESU,
WP&L and IPC), has entered into contracts with different suppliers to ensure
that a specified supply of coal is available at known prices for the
respective utilities for calendar years 2002 through 2006. These contracts,
in combination with existing agreements, provide for a portfolio of coal
10
supplies that cover approximately 98%, 77%, 44%, 27% and 6% of the total
utilities' estimated coal supply needs for the years 2002 through 2006,
respectively. Management believes this portfolio of coal supplies represents
a reasonable balance between the risks of insufficient supplies and those
associated with larger open positions subject to price volatility in the coal
markets. Remaining coal requirements will be met from either future
contracts or purchases in the spot market.
The majority of the coal utilized by the utility subsidiaries is from the
Wyoming Powder River Basin. A majority of this coal is transported by
rail-car directly from Wyoming to the utility subsidiaries' generating
facilities, with the remainder transported from Wyoming to the Mississippi
River by rail-car and then via barges to the final destination. As
protection against interruptions in coal deliveries, the utility subsidiaries
maintain average coal inventories at their generating stations of 20 to 40
days for stations with year-round deliveries and 20 to 150 days (depending
upon time of the year) for stations with seasonal deliveries.
Average fossil fuel costs are expected to increase in the future due to
price/rate structures and adjustment provisions in existing coal and
transportation contracts and recent coal market trends. Most existing coal
contracts with terms of greater than one year have fixed future year prices
that reflect recent upward market trends. WP&L has a coal contract with a
price adjustment provision based on changes in various indices (e.g. U.S.
Department of Labor Statistics Producer Price Indices and Consumer Price
Indices) and changes in mine labor agreements. Other factors which may
impact coal prices are related to changes in various associated laws and
regulations. Rate adjustment provisions in transportation contracts are
primarily based on changes in the Rail Cost Adjustment Factor as published by
the STB (refer to "Utility Industry Review - Rates and Regulatory Matters -
WP&L" in Item 7 MD&A for information regarding a rate case with the STB). In
addition, fuel sulfur restrictions and other environmental limitations have
increased significantly and will likely further increase the difficulty and
cost of obtaining adequate coal supplies. Refer to Note 1(j) for discussion
of the utilities' rate recovery of fuel costs, Note 10(a) for information on
coal derivatives and Note 11(b) for details relating to coal purchase
commitments in the "Notes to Consolidated Financial Statements" in Item 8.
Purchased-Power - During 2001, approximately 24%, 29% and 30% of IESU's,
WP&L's and IPC's total MWh requirements, respectively, were met through
purchased-power. Refer to Notes 3 and 11(b) of the "Notes to Consolidated
Financial Statements" in Item 8 for details relating to purchased-power
commitments.
Nuclear - Alliant Energy owns interests in two nuclear facilities, Kewaunee
and DAEC. Kewaunee, a 532 MW (net capacity) pressurized water reactor plant,
is operated by the NMC under contract to WPSC and is jointly owned by WPSC
(59%) and WP&L (41%). In September 2001, WPSC acquired MG&E's 17.8% share of
Kewaunee. WPSC and WP&L are responsible for the decommissioning of the
plant. The Kewaunee operating license expires in 2013. DAEC, a 580 MW (net
capacity) boiling water reactor plant, is operated by the NMC under contract
to IP&L which has a 70% ownership interest in the plant. In November 2001,
the net capacity of DAEC was increased from 535 MW to 580 MW as a result of
modifications to the plant. The DAEC operating license expires in 2014.
Alliant Energy Nuclear LLC, a non-utility subsidiary of Alliant Energy, has a
20% ownership interest in the NMC. The purpose of the NMC is to consolidate
operation of the nuclear plants owned by the NMC partners and to provide
similar capability for other nuclear plant operators and owners.
Consolidation of operation is expected to sustain long-term safety, optimize
reliability and improve the operational performance of the nuclear generating
plants. The NMC currently operates eight nuclear generating units at six
sites. The NMC partners continue to individually own their plants through
their utility subsidiaries, are entitled to energy generated at the plants
and retain the financial obligations for the safe operation, maintenance and
decommissioning of the plants.
As co-owners of nuclear generating units, IP&L and WP&L are subject to the
jurisdiction of the NRC. The NRC has broad supervisory and regulatory
jurisdiction over the construction and operation of nuclear reactors,
particularly with regard to public health, safety and environmental
considerations. The operation and design of nuclear power plants is under
constant review by the NRC. IP&L's and WP&L's anticipated nuclear-related
construction expenditures for 2002-2006 are approximately $54 million and $16
million, respectively. Refer to "Utility Industry Review - Rates and
Regulatory Matters - WP&L" in Item 7 MD&A for additional information
regarding the operations of Kewaunee.
11
In December 2001, a scheduled outage for refueling and steam generator
replacement was completed at Kewaunee. The total cost of replacing the steam
generators was approximately $121 million, with WP&L's share of the cost
being approximately $50 million. The remaining depreciable life of Kewaunee,
of which WP&L is a co-owner, is based on the PSCW approved revised
end-of-life of 2010.
On February 25, 2002, the NRC issued an order to all licensees formalizing
their requirements for additional security resulting from the September 11,
2001 terrorist attack on the U.S. Prior to this order, the additional
security measures were voluntary based on NRC guidance. The NMC, as operator
of DAEC and Kewaunee, responded to the NRC and will have the additional
security measures fully implemented by August 31, 2002. The issue of cost
recovery for DAEC will be addressed in IP&L's future base rate case
proceedings. In December 2001, the PSCW authorized WP&L to defer incremental
costs for security measures and insurance premiums related to the September
11, 2001 terrorist attacks. WP&L began deferring the increased costs in
December 2001 and the issue of cost recovery will be addressed in WP&L's
future base rate case proceedings.
Public liability for nuclear accidents is governed by the Price-Anderson Act
of 1988 as amended (Act), which sets a statutory limit of $9.5 billion for
liability to the public for a single nuclear power plant incident and
requires nuclear power plant operators to provide financial protection for
this amount. As required, IP&L provides this financial protection for a
nuclear incident at DAEC through a combination of liability insurance
($200 million) and industry-wide retrospective payment plans ($9.3 billion).
Under the industry-wide plan, each operating licensed nuclear reactor in the
U.S. is subject to an assessment in the event of a nuclear incident at any
nuclear plant in the U.S. The owners of DAEC could be assessed a maximum of
$88.1 million per nuclear incident, with a maximum of $10 million per
incident per year (of which IP&L's 70% ownership portion would be
approximately $61.7 million and $7 million, respectively) if losses relating
to the incident exceeded $200 million. These limits are subject to
adjustments for changes in the number of participants and inflation in future
years. Similarly, WP&L, as a 41% owner of Kewaunee, is subject to an overall
assessment of approximately $36.1 million per incident, not to exceed $4.1
million payable in any given year. The Act expires on August 1, 2002.
Currently there is legislation in Congress that includes extensions of the
Act, increasing the statutory limit for liability to the public for a single
nuclear power plant incident and increasing the maximum annual assessment per
incident.
IP&L and WP&L are members of NEIL, which provides $1.5 billion of insurance
coverage for DAEC and $1.8 billion for Kewaunee on certain property losses
for property damage, decontamination and premature decommissioning. The
proceeds from such insurance, however, must first be used for reactor
stabilization and site decontamination before they can be used for plant
repair and premature decommissioning. NEIL also provides separate coverage
for additional expenses incurred during certain outages. Owners of nuclear
generating stations insured through NEIL are subject to retroactive premium
adjustments if losses exceed accumulated reserve funds. NEIL's accumulated
reserve funds are currently sufficient to more than cover its exposure in the
event of a single incident under the primary and excess property damage or
additional expense coverages. However, IP&L could be assessed annually a
maximum of $2.9 million for NEIL primary property, $3.2 million for NEIL
excess property and $2.4 million for NEIL additional expenses if losses
exceed the accumulated reserve funds. WP&L could be assessed annually a
maximum of $1.7 million for NEIL primary property, $3.4 million for NEIL
excess property and $1.0 million for NEIL additional expense coverage. IP&L
and WP&L are not currently aware of any losses that they believe are likely
to result in an assessment.
In the event of a catastrophic loss at Kewaunee or DAEC, the amount of
insurance available may not be adequate to cover property damage,
decontamination and premature decommissioning. Uninsured losses, to the
extent not recovered through rates, would be borne by WP&L or IP&L, as the
case may be, and could have a material adverse effect on those entities'
financial condition and results of operations.
The Nuclear Waste Policy Act of 1982 assigned responsibility to the DOE to
establish a facility for the ultimate disposition of high level waste and
spent nuclear fuel and authorized the DOE to enter into contracts with
parties for the disposal of such material beginning in January 1998, in
exchange for payments by contract holders. IESU and WP&L entered into such
contracts and have made the agreed payments to the Nuclear Waste Fund held by
the U.S. Treasury. The companies were subsequently notified by the DOE that
it was not able to begin acceptance of spent nuclear fuel by the January 31,
1998 deadline. Furthermore, the DOE has experienced significant delays in
12
its efforts and material acceptance is now expected to occur no earlier than
2010 with the possibility of further delay being likely. Alliant Energy
continues to monitor and evaluate its options for recovery of damages due to
the DOE's delay in accepting spent nuclear fuel.
The Nuclear Waste Policy Act of 1982 also assigned responsibility for interim
storage of spent nuclear fuel to generators of such spent nuclear fuel, such
as IP&L and WP&L. In accordance with this responsibility, IP&L and WP&L have
been and will continue storing spent nuclear fuel on site at DAEC and
Kewaunee, respectively, since plant operations began and until removal of all
spent nuclear fuel by the DOE to its permanent repository occurs. Interim
storage activities at reactor sites, regardless of DOE delays, will extend
after final reactor shutdown. Planning has begun for construction of a dry
cask storage facility by IP&L at DAEC to provide assurance that both the
operating and post-shutdown storage needs are satisfied. Including minor
modifications completed in 2001, Kewaunee has sufficient fuel storage
capacity to store all of the fuel it will generate through the end of the NRC
license life in 2013, however, no decisions have been made concerning
post-shutdown storage needs.
The Low-Level Radioactive Waste Policy Amendments Act of 1985 mandates that
each state must take responsibility for the storage of low-level radioactive
waste produced within its borders. The States of Iowa and Wisconsin are
members of the six-state Midwest Interstate Low-Level Radioactive Waste
Compact (Compact) which is responsible for development of any new disposal
capability within the Compact member states. In 1997, the Compact
commissioners voted to discontinue work on a proposed waste disposal facility
in the State of Ohio because the expected cost of such a facility was
comparably higher than other options currently available. Dwindling waste
volumes due to increased operational efficiencies at nuclear facilities and
continued access to existing disposal facilities were also reasons cited for
the decision. Disposal facilities located near Barnwell, South Carolina and
Clive, Utah continue to accept the low-level waste and IP&L and WP&L
currently ship the waste each produces to such sites, thereby minimizing the
amount of low-level waste stored on-site. Given technological advances,
waste compaction and the reduction in the amount of waste generated, DAEC and
Kewaunee each have on-site storage capability sufficient to store low-level
waste expected to be generated over at least the next ten years. While
Alliant Energy is unable to predict how long these facilities will continue
to accept its waste, continuing access to these facilities expands Alliant
Energy's on-site storage capability indefinitely.
WPSC purchases uranium concentrates, conversion services, enrichment
services, and fabrication services for nuclear fuel assemblies at Kewaunee.
New fuel assemblies replace used assemblies that are removed from the reactor
every 18 months and placed in storage at the plant site pending removal by
the DOE. Uranium concentrates, conversion services, and enrichment services
are purchased at spot market prices, through a bid process, or using existing
contracts. Conversion services are complete for the nuclear fuel reload
scheduled in 2003. WPSC has contracted for a fixed quantity of enrichment
services through the year 2004. Additional enrichment services will be
acquired under an existing contract or by purchases on the spot market. WPSC
has contracted for fuel fabrication services for the next six reloads. The
NMC's uranium inventory policy is to maintain sufficient inventory for up to
two reloads of fuel. At December 31, 2001, approximately 563,000 pounds of
yellowcake (a processed form of uranium ore) or its equivalent were held in
inventory for the plant. Each refueling requires approximately 450,000
pounds of yellowcake. In 2002, approximately 350,000 pounds of yellowcake
will be acquired to meet the requirements of the inventory policy.
A contract for enrichment services and enriched uranium product for DAEC with
the U.S. Enrichment Corporation was effective through September 2001 and has
been extended through the next delivery date, which is expected to be
November 2002. Fabrication of the nuclear fuel is being performed by General
Electric Company for fuel through the 2011 refueling of DAEC. IP&L believes
that an ample supply of uranium and enrichment services will be available in
the future and intends to purchase such uranium and enrichment services as
necessary on the spot market and/or via medium length (less than five years)
contracts to supplement its current contracts and meet its generation
requirements.
Additional discussions of various other nuclear issues relating to Kewaunee
and DAEC are included in Notes 1, 3, 9, 10(c), 11(e), 11(f) and 12 of the
"Notes to Consolidated Financial Statements" in Item 8.
13
Power Supply - Wisconsin enacted electric reliability legislation in 1998
(Wisconsin Reliability Act) with the goal of assuring reliable electric
energy for Wisconsin. The law allows the construction of merchant power
plants in the state and streamlines the regulatory approval process for
building new generation and transmission facilities. The PSCW is authorized
to order construction of new transmission facilities, based on the findings
of its regional transmission constraint study, through December 31, 2004. In
October 2001, the PSCW approved the construction of a 345 KV transmission
line which will improve transmission import capabilities in Wisconsin. WP&L
notes that it may take time for new transmission and power plant projects to
be approved and built in Wisconsin.
In 2000, WP&L and Calpine announced an agreement whereby Calpine would build,
own and operate a 600 MW natural gas-fired power plant in Wisconsin at WP&L's
Rock River plant. WP&L has entered into a purchased-power agreement for 453
MW of the new plant's output. The plant's full output (including simple-cycle
and combined-cycle) is anticipated to be available in 2004. The construction
of the facility is expected to assist WP&L in meeting its growing demands for
electricity, to place a greater reliance on generation physically located in
Wisconsin versus power purchased from outside of Wisconsin and to help WP&L
maintain the required 18 percent reserve margin in Wisconsin.
The Iowa Legislature passed a bill in 2001 to encourage construction of new
generating facilities in Iowa.
In Wisconsin, the PSCW hired a consultant to perform a market power analysis
for Wisconsin and the Upper Peninsula of Michigan electric markets. In
December 2000, the PSCW issued a report indicating the study "provides a
useful starting point for the analysis of potential horizontal market power
problems in Wisconsin." The PSCW stated that complete and immediate
wholesale and retail deregulation as simulated in the study is not in the
public interest at this time, especially in light of the developments in
California. The PSCW also stated that more transmission is needed and
contracts between generators and customers may be an effective form of market
power mitigation and that horizontal market power issues are a complex
subject that will require further study before actions to mitigate market
power are considered. Finally, the PSCW indicated that the primary focus
should be on taking the necessary steps to add new infrastructure to ensure
continued electric system reliability and low electricity rates in
Wisconsin.
In 2001, Alliant Energy's subsidiaries announced their interest in developing
new electric generation capacity in Iowa and Wisconsin over the next 10 years
with an estimated investment of $2.5 billion. IESU announced a willingness
to develop up to 1,200 MW of new electric generation over the next 10 years.
Currently, Alliant Energy's Power Iowa plan includes adding 500 MW of natural
gas-fired generation by 2004 (approximately 300 MW of this could be available
by the summer of 2003 in the form of simple-cycle generating capacity), 100
MW of additional renewable generating capacity between 2002 and 2003, 600 MW
of coal-fired generation by 2007 and increases in energy efficiency through
energy conservation and process improvements at various commercial and
industrial customer locations. In Wisconsin, WP&L announced plans to develop
up to 800 MW of new electric 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 investment. It
is also uncertain whether Alliant Energy would own the generating plants or
purchase the power from plants that were owned by an independent entity.
While Alliant Energy currently expects to meet utility customer demands in
2002, unanticipated reliability issues could still arise in the event of
unexpected power plant outages, transmission system outages or extended
periods of extremely hot weather.
Refer to "Utility Industry Review" and "Liquidity and Capital Resources -
Construction and Acquisition Expenditures" in Item 7 MD&A for additional
information.
14
Electric Environmental Matters - Alliant Energy is regulated in environmental
matters by a number of federal, state and local agencies. Such regulations
are the result of a number of environmental laws passed by the U.S. Congress,
state legislatures and local governments and enforced by federal, state and
local agencies. The laws impacting Alliant Energy's operations include, but
are not limited to, the Safe Drinking Water Act; Clean Water Act; CAA, as
amended by the CAA Amendments of 1990; National Environmental Policy Act;
Toxic Substances Control Act; Emergency Planning and Community Right-to-Know
Act; Resource Conservation and Recovery Act; Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986; Nuclear Waste Policy Act of 1982;
Occupational Safety and Health Act; and NEPA. Alliant Energy regularly
obtains federal, state and local permits to assure compliance with the
environmental protection laws and regulations. Costs associated with such
compliance have increased in recent years and are expected to increase
moderately in the future.
WP&L was notified by the EPA that it was a PRP with respect to the MIG/DeWane
Landfill Superfund Site. WP&L was in an alternate dispute resolution process
to allocate liability associated with the investigation and remediation of
the site. WP&L has reached a tentative agreement in principle, resolving its
liability for this site, and has recorded the necessary provision for such
liability on its financial statements at December 31, 2001. IPC was notified
by the EPA that it was a PRP with respect to the Missouri Electric Works,
Inc. (MEW) site in Cape Girardeau, Missouri. IPC was served with a complaint
filed by the MEW Site Trust Fund; has reached a tentative agreement in
principle, resolving the allegations contained in the complaint; and has
recorded the necessary provision for such liability on its financial
statements at December 31, 2001.
Refer to "Nuclear," "Liquidity and Capital Resources - Environmental" in Item
7 MD&A and Note 11(e) of the "Notes to Consolidated Financial Statements" in
Item 8 for further discussion of electric environmental matters.
15
Alliant Energy Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Operating Information (Utility Only) 2001 2000 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $599,074 $567,283 $541,714 $532,676 $521,574
Commercial 373,145 349,019 329,487 317,704 307,941
Industrial 543,471 501,155 476,140 477,241 455,912
------------------------------------------------------------------------
Total from ultimate customers 1,515,690 1,417,457 1,347,341 1,327,621 1,285,427
Sales for resale 184,507 173,148 155,801 199,128 192,346
Other 56,359 57,431 45,796 40,693 37,980
------------------------------------------------------------------------
Total $1,756,556 $1,648,036 $1,548,938 $1,567,442 $1,515,753
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Sales (000s MWh):
Residential 7,344 7,161 7,024 6,826 6,851
Commercial 5,464 5,364 5,260 4,943 4,844
Industrial 12,469 13,092 13,036 12,718 12,320
------------------------------------------------------------------------
Total from ultimate customers 25,277 25,617 25,320 24,487 24,015
Sales for resale 4,936 4,906 5,566 7,189 6,768
Other 168 174 162 158 161
------------------------------------------------------------------------
Total 30,381 30,697 31,048 31,834 30,944
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers (End of Period):
Residential 807,754 799,603 790,669 781,127 772,100
Commercial 125,539 123,833 122,509 121,027 119,463
Industrial 2,826 2,773 2,730 2,618 2,555
Other 3,324 3,316 3,282 3,267 3,281
------------------------------------------------------------------------
Total 939,443 929,525 919,190 908,039 897,399
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Electric Data:
Maximum peak hour demand (MW) 5,677 5,397 5,233 5,228 5,045
Sources of electric energy (000s MWh):
Coal and gas 18,662 19,139 19,078 19,119 17,423
Purchased power 8,727 8,058 8,619 10,033 10,660
Nuclear 4,116 4,675 4,362 4,201 3,874
Other 452 427 528 504 565
------------------------------------------------------------------------
Total 31,957 32,299 32,587 33,857 32,522
========================================================================
Revenue per KWh from ultimate customers (cents) 6.00 5.53 5.32 5.42 5.35
- ------------------------------------------------------------------------------------------------------------------------------------
16
IES Utilities Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Operating Information 2001 2000 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $248,271 $236,084 $230,422 $232,662 $227,496
Commercial 194,187 182,068 176,251 168,672 162,626
Industrial 201,430 188,734 181,740 181,369 177,890
------------------------------------------------------------------------
Total from ultimate customers 643,888 606,886 588,413 582,703 568,012
Sales for resale 42,331 31,046 28,479 45,453 25,719
Other 14,707 13,527 11,058 11,267 10,539
------------------------------------------------------------------------
Total $700,926 $651,459 $627,950 $639,423 $604,270
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Sales (000s MWh):
Residential 2,801 2,742 2,685 2,661 2,682
Commercial 2,747 2,701 2,658 2,465 2,378
Industrial 4,809 5,053 5,072 4,872 4,743
------------------------------------------------------------------------
Total from ultimate customers 10,357 10,496 10,415 9,998 9,803
Sales for resale 1,075 1,044 1,392 1,763 794
Other 38 40 40 42 43
------------------------------------------------------------------------
Total 11,470 11,580 11,847 11,803 10,640
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers (End of Period):
Residential 297,094 295,747 293,433 290,348 288,387
Commercial 50,921 50,498 49,952 49,489 48,962
Industrial 686 706 715 705 711
Other 449 448 449 479 442
------------------------------------------------------------------------
Total 349,150 347,399 344,549 341,021 338,502
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Electric Data:
Maximum peak hour demand (MW) 2,144 2,067 1,990 1,965 1,854
Sources of electric energy (000s MWh):
Coal and gas 6,316 6,675 6,543 6,417 5,499
Purchased power 2,874 2,243 3,104 3,385 2,789
Nuclear 2,697 3,117 2,548 2,682 2,904
Other 163 172 226 199 164
------------------------------------------------------------------------
Total 12,050 12,207 12,421 12,683 11,356
========================================================================
Revenue per KWh from ultimate customers (cents) 6.22 5.78 5.65 5.83 5.79
- ------------------------------------------------------------------------------------------------------------------------------------
17
Wisconsin Power and Light Company
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Operating Information 2001 2000 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $248,128 $229,668 $213,496 $198,770 $199,633
Commercial 138,269 127,199 116,947 108,724 107,132
Industrial 207,791 190,085 171,118 162,771 152,073
------------------------------------------------------------------------
Total from ultimate customers 594,188 546,952 501,561 470,265 458,838
Sales for resale 131,187 115,715 102,751 128,536 160,917
Other 28,075 29,524 22,295 15,903 14,388
------------------------------------------------------------------------
Total $753,450 $692,191 $626,607 $614,704 $634,143
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Sales (000s MWh):
Residential 3,318 3,151 3,111 2,964 2,974
Commercial 2,122 2,031 1,980 1,898 1,878
Industrial 4,538 4,688 4,570 4,493 4,256
------------------------------------------------------------------------
Total from ultimate customers 9,978 9,870 9,661 9,355 9,108
Sales for resale 3,524 3,228 3,252 4,492 5,824
Other 61 63 54 59 60
------------------------------------------------------------------------
Total 13,563 13,161 12,967 13,906 14,992
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers (End of Period):
Residential 368,246 362,178 355,691 350,334 343,637
Commercial 50,407 49,350 48,696 47,857 46,823
Industrial 990 974 947 909 855
Other 1,965 1,923 1,893 1,860 1,875
------------------------------------------------------------------------
Total 421,608 414,425 407,227 400,960 393,190
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Electric Data:
Maximum peak hour demand (MW) 2,696 2,508 2,397 2,292 2,253
Sources of electric energy (000s MWh):
Coal and gas 8,319 8,074 8,186 8,916 8,587
Purchased power 4,132 4,017 3,436 3,923 5,744
Nuclear 1,419 1,558 1,814 1,519 970
Other 281 248 288 288 355
------------------------------------------------------------------------
Total 14,151 13,897 13,724 14,646 15,656
========================================================================
Revenue per KWh from ultimate customers (cents) 5.95 5.54 5.19 5.03 5.04
- ------------------------------------------------------------------------------------------------------------------------------------
18
2) GAS UTILITY OPERATIONS
The utilities provide gas service in Iowa, southern and central Wisconsin,
northern and northwestern Illinois and southern Minnesota. The number of gas
customers and communities served by each utility at December 31, 2001 was as
follows:
Transportation and
Retail Customers Other Customers Communities Served
------------------- ---------------------- -----------------------
IESU 182,723 151 212
WP&L 166,706 503 233
IPC 50,432 62 41
------------------- ---------------------- -----------------------
399,861 716 486
=================== ====================== =======================
2001 gas utility operations accounted for 23%, 21% and 17% of operating
revenues and 4%, 2% and 5% of operating income for IESU, WP&L and IPC,
respectively. These operations include providing gas services to retail and
transportation customers.
In providing gas commodity service to retail customers, Corporate Services
administers a diversified portfolio of transportation and storage contracts
on behalf of each of the three utilities. Transportation contracts with NNG,
NGPL and ANR allow access to gas supplies located in the U.S. and Canada.
Non-traditional arrangements provide the utilities with gas delivered
directly to their service territories. The maximum daily delivery capacity
of the individual utilities for 2001 was as follows (in Dths):
NNG NGPL ANR Non-Traditional Total
--------------- -------------- --------------- ----------------- ---------------
IESU 143,996 63,014 61,737 15,000 283,747
WP&L 75,056 -- 146,467 54,400 275,923
IPC 54,395 24,918 -- 5,000 84,313
IP&L and WP&L maintain purchase agreements with over 40 suppliers of natural
gas from all gas producing regions of the U.S. and Canada. The majority of
the gas supply contracts are for terms of six months or less, with the
remaining supply contracts having terms up to two years. The utilities' gas
supply commitments are index-based.
In addition to sales of natural gas to retail customers, IP&L and WP&L
provide transportation service to commercial and industrial customers by
moving customer-owned gas through their distribution systems to the
customers' meter. Revenues are collected for this service pursuant to
transportation tariffs.
The gas sales of the utility subsidiaries follow a seasonal pattern. There
is an annual base load of gas used for cooking, heating and other purposes,
with a large heating peak occurring during the winter season. Natural gas
obtained from producers, marketers and brokers, as well as gas in storage, is
utilized to meet the peak heating season requirements. Storage contracts
allow the utilities to purchase gas in the summer, store the gas in
underground storage fields and deliver it in the winter. Gas storage met
approximately 21%, 10% and 16% of IESU's, WP&L's and IPC's annual gas
requirements in 2001, respectively.
Refer to Note 1(j) for information relating to utility natural gas cost
recovery, Note 10(a) for information on natural gas derivatives and Note
11(b) for discussion of natural gas commitments in the "Notes to Consolidated
Financial Statements" in Item 8.
Gas Environmental Matters - Refer to Note 11(e) of the "Notes to Consolidated
Financial Statements" in Item 8 for discussion of gas environmental
matters.
19
Alliant Energy Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Operating Information (Utility Only) 2001 2000 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $270,248 $245,697 $185,090 $175,603 $225,542
Commercial 141,121 127,104 89,118 85,842 115,858
Industrial 31,262 27,752 21,855 20,204 27,393
Transportation/other 45,246 14,395 18,256 13,941 25,114
-----------------------------------------------------------------
Total $487,877 $414,948 $314,319 $295,590 $393,907
=================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Sales (000s Dths):
Residential 29,580 32,026 30,309 28,378 33,894
Commercial 18,055 19,696 18,349 17,760 21,142
Industrial 5,344 5,350 5,963 5,507 6,217
Transportation/other 48,539 43,931 46,954 52,389 56,719
-----------------------------------------------------------------
Total 101,518 101,003 101,575 104,034 117,972
=================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers at End of Period (Excluding Transportation/Other):
Residential 353,430 351,990 347,533 342,586 337,956
Commercial 45,480 44,654 44,289 43,825 43,316
Industrial 951 953 1,037 982 963
-----------------------------------------------------------------
Total 399,861 397,597 392,859 387,393 382,235
=================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Gas Data:
Revenue per Dth sold (excluding transportation/other) $8.35 $7.02 $5.42 $5.45 $6.02
Purchased gas costs per Dth sold (excluding transportation/other) $6.31 $4.88 $3.30 $3.22 $4.23
- ------------------------------------------------------------------------------------------------------------------------------------
20
IES Utilities Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Operating Information 2001 2000 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $126,833 $117,132 $88,302 $86,821 $110,663
Commercial 65,029 57,671 40,459 39,928 54,383
Industrial 17,814 15,377 11,543 10,422 13,961
Transportation/other 10,593 6,001 5,521 4,108 4,510
-------------------------------------------------------------------
Total $220,269 $196,181 $145,825 $141,279 $183,517
===================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Sales (000s Dths):
Residential 13,888 14,829 13,778 13,803 16,317
Commercial 8,341 8,753 8,077 8,272 9,602
Industrial 3,423 3,063 3,291 3,089 3,318
Transportation/other 10,609 10,061 10,236 11,316 10,321
-------------------------------------------------------------------
Total 36,261 36,706 35,382 36,480 39,558
===================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers at End of Period (Excluding Transportation/Other):
Residential 160,015 160,357 158,705 157,135 155,859
Commercial 22,344 21,751 21,661 21,530 21,431
Industrial 364 365 383 398 399
-------------------------------------------------------------------
Total 182,723 182,473 180,749 179,063 177,689
===================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Gas Data:
Revenue per Dth sold (excluding transportation/other) $8.17 $7.14 $5.58 $5.45 $6.12
Purchased gas cost per Dth sold (excluding transportation/other) $6.21 $5.12 $3.51 $3.36 $4.33
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin Power and Light Company
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Operating Information 2001 2000 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $107,673 $96,204 $69,662 $65,173 $84,513
Commercial 58,658 54,512 35,570 33,898 45,456
Industrial 8,907 8,581 6,077 5,896 8,378
Transportation/other 31,625 5,855 9,461 6,770 17,536
-------------------------------------------------------------------
Total $206,863 $165,152 $120,770 $111,737 $155,883
===================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Sales (000s Dths):
Residential 11,754 12,769 12,070 10,936 12,770
Commercial 7,572 8,595 7,771 7,285 8,592
Industrial 1,197 1,476 1,520 1,422 1,714
Transportation/other 16,866 13,680 13,237 12,948 17,595
-------------------------------------------------------------------
Total 37,389 36,520 34,598 32,591 40,671
===================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers at End of Period (Excluding Transportation/Other):
Residential 148,365 146,690 144,015 141,065 137,827
Commercial 17,831 17,583 17,380 17,058 16,653
Industrial 510 513 576 506 488
-------------------------------------------------------------------
Total 166,706 164,786 161,971 158,629 154,968
===================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Gas Data:
Revenue per Dth sold (excluding transportation/other) $8.54 $6.97 $5.21 $5.34 $6.00
Purchased gas cost per Dth sold (excluding transportation/other) $6.47 $4.69 $3.00 $3.13 $4.30
- ------------------------------------------------------------------------------------------------------------------------------------
21
D. INFORMATION RELATING TO NON-REGULATED OPERATIONS
Resources is key to Alliant Energy's plan to increase shareowner value by
growing the non-regulated side of its business through partnerships and
investments in generation projects, oil and gas investments, international
markets and other strategic initiatives. Resources strives to provide growth
through a diverse portfolio of businesses that function in different
geographic areas and business disciplines. This diversity helps to minimize
the risks of a downturn in any one market. Resources manages its
wholly-owned subsidiaries and additional investments through distinct
platforms: Investments, Non-regulated Generation and Trading, International,
Integrated Services, Energy Technologies and Mass Marketing. There was no
single customer whose revenues were ten percent or more of Resources'
consolidated revenues.
Investments - invests in businesses supporting Alliant Energy's strategic
focus. Investments is a holding company whose primary wholly-owned
subsidiaries include Heartland Properties, Inc. (HPI) and Iowa Land and
Building Company (Iowa Land). HPI is responsible for performing asset
management and facilitating the development and financing of high quality,
affordable housing in Alliant Energy's utility service territory.
Investments and HPI have an ownership interest in approximately 87 such
properties. Capital Square provides mortgage-banking services to facilitate
HPI's financing efforts in the affordable housing market. Iowa Land is
organized to pursue real estate and economic development activities in IP&L's
service territory. Investments also has direct and indirect equity interests
in various real estate ventures, primarily concentrated in Cedar Rapids, and
holds other passive investments including an equity interest in McLeod.
Refer to "Other Matters - Other Future Considerations" in Item 7 MD&A and
Note 9 of Alliant Energy's "Notes to Consolidated Financial Statements" in
Item 8 for further discussion of the McLeod investment. Investments also
manages other wholly-owned subsidiaries of Resources including Transportation
and Whiting. Transportation is a holding company whose wholly-owned
subsidiaries include the Cedar Rapids and Iowa City Railway Company
(CRANDIC), IEI Barge Services, Inc. (Barge), Williams Bulk Transfer Inc.
(Williams) and Transfer Services, Inc. (Transfer). CRANDIC is a short-line
railway that renders freight service between Cedar Rapids and Iowa City.
Barge provides barge terminal and hauling service on the Mississippi River.
Williams' and Transfer's operations include transloading and storage
services. Whiting, an oil and gas production company, was incorporated in
Delaware in 1980. Whiting realized approximately 40% and 60% of its 2001
revenues from oil and gas, respectively. Whiting sells gas to a variety of
customers including pipelines, utilities, industrial users and local
distribution companies in the U.S. Whiting does not own gathering or
pipeline facilities for the transportation of gas and must pay the purchasers
or processors of the gas for this service. Whiting sells its oil to
refiners, re-marketers and other companies in the U.S. There was no single
customer whose revenues were ten percent or more of Whiting's consolidated
revenues. During 2001, Whiting entered into fixed-price contracts for
approximately 50 percent of its production. Whiting is faced with
competition from major oil and gas companies with significant financial
resources and other independent operators attempting to acquire prospective
oil and gas leases, producing oil and gas properties and other mineral
interests. Refer to Item 2 and Notes 13 and 14 of Alliant Energy's "Notes to
Consolidated Financial Statements" in Item 8 for additional information on
Whiting.
Non-regulated Generation and Trading - Resources recently formed a new
subsidiary, Alliant Energy Generation, Inc., to build a portfolio of
competitive generating assets across the U.S., focusing primarily on the
Upper Midwest. This portfolio will be built through a combination of
strategic acquisitions, partnerships and development projects. Alliant
Energy will only execute non-regulated generation projects if management
believes Alliant Energy's required returns on the projects can be achieved.
The generation market has experienced dramatic volatility recently and
Alliant Energy believes it will be better positioned by being diligent and
patient in waiting for the right opportunities to build its portfolio of
non-regulated generation projects. Alliant Energy and international
commodity trader Cargill are partners in the joint venture Cargill-Alliant,
an electricity-trading company. In an increasingly volatile market, this
endeavor helps utilities, municipalities, cooperative wholesale customers and
large retail customers in competitive markets reduce their electricity costs
and better manage their energy risks. Additionally, Cargill-Alliant connects
with another market segment by providing fuel supply management (coal, oil
and natural gas), plant operations assistance and risk-management
consultation. The initial term of the electricity-trading joint venture
expires in October 2002. Discussions between Alliant Energy and Cargill are
underway as to the future plans for the venture. Refer to "Other Matters -
Other Future Considerations" in Item 7 MD&A for additional information on
Cargill-Alliant and Alliant Energy's non-regulated generation project.
22
International - has invested in energy generation and distribution companies
and projects in growing markets throughout the world. Currently,
International has investments in Brazil, China, New Zealand and Australia and
a loan to a development project in Mexico. International has focused on
these locations because of its belief that they offer a growing demand for
energy and are receptive to foreign investment. International also has
developed partnerships with other entities that have intimate knowledge of
each local market's business trends and customs. Refer to Note 9 of Alliant
Energy's "Notes to Consolidated Financial Statements" in Item 8 for
additional information related to Alliant Energy's investments in foreign
entities.
Integrated Services - provides a wide range of energy and environmental
services for commercial, industrial and institutional customers. Services under
the Integrated Services umbrella include energy infrastructure, energy
procurement, environmental engineering and construction management, energy
planning, and gas management. Integrated Services is a holding company for
Cogenex Corporation (Cogenex), Energy Performance Services, Inc. (Energy
Performance), Industrial Energy Applications, Inc. (IEA), Heartland Energy
Group, Inc. (HEG), RMT, Inc. (RMT), Alliant Energy Integrated Services Company -
Energy Management L.L.C. (Energy Management) and Alliant Energy Integrated
Services Company - Energy Solutions L.L.C.(Energy Solutions). Cogenex, Energy
Performance and IEA provide business customers with on-site energy services. HEG
offers commodities-based energy services primarily related to supplying natural
gas and owns several natural gas and oil gathering systems in Texas. RMT is a
Madison, Wisconsin based environmental and engineering consulting company that
serves clients nationwide in a variety of industrial market segments. RMT
specializes in consulting on solid and hazardous waste management, ground water
quality protection, industrial design and hygiene engineering, and air and water
pollution control. Energy Management provides energy procurement services
through an Internet-based nationwide energy network. Energy Solutions provides
energy consulting services to commercial, industrial and institutional
customers.
Energy Technologies - Resources has invested in energy technologies by
purchasing equity interests in Capstone, a microturbine producer, and a
venture capital fund specializing in emerging energy-technology companies
called Nth Power Technologies Fund II, LP. These ventures allow Alliant
Energy to provide its customers with new technologies that are smaller in
scale than more traditional generation technologies, such as microturbines,
fuel cells, solar concepts and wind turbines.
Mass Marketing - focused on developing and marketing energy-related products
and services that enhance customers' comfort, security and lifestyles. Key
programs include a home-appliance-repair protection plan, as well as
home-protection and energy-efficiency products. This division has an on-line
storefront catalog business full of energy-smart products
(powerhousecatalog.com). In addition, Resources holds a 95 percent interest
in SmartEnergy, Inc., which is an Internet-based company that sells
electricity and gas to residential customers in deregulated markets.
23
E. FUTURE EARNINGS OUTLOOK
Alliant Energy currently estimates that adjusted earnings for 2002 will be in
the range of $2.45 to $2.65 per diluted share. Adjusted earnings are
reported (accounting principles generally accepted in the U.S.) earnings
excluding non-cash SFAS 133 valuation charges related to Alliant Energy's
obligation under certain 30-year exchangeable senior notes and the valuation
of electricity derivatives of one of Alliant Energy's foreign affiliates
(Southern Hydro). Such guidance does not reflect the impact of potential
asset valuation charges (some of which may be incurred in the first quarter
of 2002) or gains or losses realized from potential sales of non-strategic
assets. Drivers for Alliant Energy's earnings estimates include, but are not
limited to:
o Weather conditions in its domestic and international utility service
territories
o Ability of its utility subsidiaries to recover their operating costs,
and to earn a reasonable rate of return, in current and future rate
proceedings
o Economic development and sales growth in its utility service territories
o Cost control and operational efficiencies in its utility operations
o Ability to recover its purchased power and fuel costs, both domestically
and internationally
o Profitability of its Brazil investments as well as the continued growth
in earnings from its China investments
o Improved earnings from Whiting from current levels, including the
continued recovery and stability of oil and gas prices and continued
successful execution of its acquisition strategy
o Continued improved profitability of its other non-regulated businesses
as a whole, including the Integrated Services and Generation and Trading
business units
o Other stable business conditions, including an improving economy
Alliant Energy will likely record asset valuation charges in the first
quarter of 2002 relating to the value of its McLeod, Capstone and/or
Enermetrix, Inc. investments as some or all of these investments may meet the
accounting definition as an other than temporary decline in value as of the
end of the first quarter. Alliant Energy is currently unable to estimate
what charges it may incur as it will be performing the necessary impairment
analyses in early April as part of its first quarter closing process.
Alliant Energy will exclude any valuation charge related to its McLeod
investment from its adjusted earnings per share as it has also excluded net
income of over $40 million from sales of McLeod stock in its presentation of
adjusted earnings in previous years. Alliant Energy does not plan to exclude
any valuation charges it may incur related to its $10 million investments in
both Capstone and Enermetrix, Inc. from adjusted earnings per share. Refer
to Item 7 "Other Matters - Other Future Considerations" for details regarding
these potential asset valuation charges.
Alliant Energy continues to evaluate the sale of certain non-strategic assets
and it is possible that gains may be realized later in 2002 from such sales
that could offset some or all of the asset valuation charges it may incur in
2002. Any proceeds from these potential asset sales could also supplement
Alliant Energy's cash generated from operations and external financings as
the primary sources of its future capital requirements. Also, potential
sales of non-strategic assets would enable Alliant Energy to continue
sharpening its strategic focus on its core business.
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 in generation projects, oil and gas
investments, international markets and other strategic initiatives. Alliant
Energy realized 15 and 10 percent of its adjusted earnings from its
non-regulated businesses in 2001 and 2000, respectively, and its goal is to
have such businesses contribute more than 25 percent of its adjusted earnings
within the next three years. Alliant Energy believes that successful
implementation of these strategies will contribute significantly to Alliant
Energy achieving its targeted long-term annual growth rate of 7 to 10 percent
in adjusted earnings.
24
ITEM 2. PROPERTIES
WP&L
WP&L's principal electric generating stations at December 31, 2001, were as
follows:
Name and Location Primary Fuel 2001 Summer Capability
of Station Type in KWs
- ----------------------------------------------------------- --------------- --------------------------------------
Kewaunee Nuclear Power Plant, Kewaunee, WI Nuclear 205,200 (1)
Nelson Dewey Generating Station, Cassville, WI Coal 223,820
Edgewater Generating Station #3, Sheboygan, WI Coal 76,750
Edgewater Generating Station #4, Sheboygan, WI Coal 230,610 (2)
Edgewater Generating Station #5, Sheboygan, WI Coal 307,010 (3)
Columbia Energy Center, Portage, WI Coal 496,070 (4)
-------------
Total Coal 1,334,260
Blackhawk Generating Station, Beloit, WI Gas 54,500
Rock River Generating Station, Beloit, WI Gas 153,390
Rock River Combustion Turbine, Beloit, WI Gas 159,060
South Fond du Lac Combustion Turbine
Units 2 and 3, Fond du Lac, WI Gas 166,870
Sheepskin Combustion Turbine, Edgerton, WI Gas 38,400
-------------
Total Gas 572,220
Kilbourn Hydro Plant, Wisconsin Dells, WI Hydro 8,000
Prairie du Sac Hydro Plant, Prairie du Sac, WI Hydro 17,000
Petenwell/Castle Rock Hydro Plants,
Wisconsin Rapids, WI Hydro 7,000 (5)
-------------
Total Hydro 32,000
-------------
Total generating capability 2,143,680
=============
All KWs shown below represent the 2001 summer generating capability.
(1) Represents WP&L's 41% ownership interest in this 500,490 KW
generating station, which is operated by WPSC.
(2) Represents WP&L's 68.2% ownership interest in this 338,140 KW generating
station, which is operated by WP&L.
(3) Represents WP&L's 75% ownership interest in this 409,350 KW generating
station, which is operated by WP&L.
(4) Represents WP&L's 46.2% ownership interest in this 1,073,750 KW
generating station, which is operated by WP&L.
(5) Represents WP&L's 33.3% ownership interest in this 21,000 KW hydro
plant, which is operated by Wisconsin River Power Company. In the fourth
quarter of 2001, WP&L's ownership interest increased to 50%.
WP&L owns 160 substations located adjacent to the communities served,
substantially all located in Wisconsin. WP&L's transmission assets were
transferred to ATC in 2001. Substantially all of WP&L's facilities are
suitable for their intended use and are held subject to the lien of its First
Mortgage Bond indenture. Refer to "Utility Industry Review - Overview" in
Item 7 MD&A for information related to WP&L's investment in ATC.
25
IESU
IESU's principal electric generating stations at December 31, 2001, were as
follows:
Name and Location Primary Fuel 2001 Summer Capability
of Station Type in KWs
- ----------------------------------------------------------- --------------- ---------------------------------------
Duane Arnold Energy Center, Palo, Iowa Nuclear 364,000 (1)
Ottumwa Generating Station, Ottumwa, Iowa Coal 344,380 (2)
Prairie Creek Station, Cedar Rapids, Iowa Coal 217,000
Sutherland Station, Marshalltown, Iowa Coal 139,000
Sixth Street Station, Cedar Rapids, Iowa Coal 65,000
Burlington Generating Station, Burlington, Iowa Coal 214,870
George Neal Unit 3, Sioux City, Iowa Coal 144,200 (3)
-------------
Total Coal 1,124,450
Marshalltown Combustion Turbines, Marshalltown, Iowa Oil 216,400
Centerville Combustion Turbines, Centerville, Iowa Oil 62,000
Diesel Stations, all in Iowa Oil 12,000
-------------
Total Oil 290,400
Grinnell Station, Grinnell, Iowa Gas 30,000
Agency Street Combustion Turbines,
West Burlington, Iowa Gas 76,700
Burlington Combustion Turbines, Burlington, Iowa Gas 68,000
Red Cedar Combustion Turbine, Cedar Rapids, IA Gas 22,700
-------------
Total Gas 197,400
-------------
Total generating capability 1,976,250
=============
All KWs shown below represent the 2001 summer generating capability.
(1) Represents IESU's 70% ownership interest in this 520,000 KW
generating station, which is operated by IESU. In the fourth
quarter of 2001, the net capacity of DAEC increased to 580,000 KW
as a result of generating station modifications.
(2) Represents IESU's 48% ownership interest in this 717,460 KW
generating station, which is operated by IESU.
(3) Represents IESU's 28% ownership interest in this 515,000 KW
generating station, which is operated by MidAmerican Energy Company.
IESU owns 4,459 miles of electric transmission lines and 578 substations,
substantially all located in Iowa. IESU's principal properties are suitable
for their intended use and are held subject to liens of indentures relating
to its bonds.
26
IPC
IPC's principal electric generating stations at December 31, 2001, were as
follows:
Name and Location Primary Fuel 2001 Summer Capability
of Station Type in KWs
- ------------------------------------------------------------------ --------------- -----------------------------------
Dubuque Units 2, 3 and 4, Dubuque, IA Coal 78,300
M. L. Kapp Plant Units 1 and 2, Clinton, IA Coal 233,220
Lansing Units 1, 2, 3 and 4, Lansing, IA Coal 319,140
George Neal Unit 4, Sioux City, IA Coal 138,640 (1)
Louisa Unit 1, Louisa, IA Coal 28,000 (2)
-------------
Total Coal 797,300
Fox Lake Plant Units 1, 2 and 3, Sherburn, MN Gas 111,050
Montgomery Combustion Turbine Unit 1, Montgomery, MN Oil 20,120
Fox Lake Plant Combustion Turbine Unit 4, Sherburn, MN Oil 20,200
Lime Creek Plant Combustion Turbine
Units 1 and 2, Mason City, IA Oil 74,420
Dubuque Diesel Units 1 and 2, Dubuque, IA Oil 4,500
Hills Diesel Units 1 and 2, Hills, MN Oil 3,690
Lansing Diesel Units 1 and 2, Lansing, IA Oil 2,000
-------------
Total Oil 124,930
-------------
Total generating capability 1,033,280
=============
All KWs shown below represent the 2001 summer generating capability.
(1) Represents IPC's 21.5% ownership interest in this 644,000 KW
generating station, which is operated by MidAmerican Energy Company.
(2) Represents IPC's 4% ownership interest in this 700,000 KW
generating station, which is operated by MidAmerican Energy Company.
IPC owns 2,600 miles of electric transmission lines and 221 substations
located in Iowa, Illinois and Minnesota. Substantially all of IPC's
facilities are suitable for their intended use and are subject to the lien of
its bond indenture securing its outstanding First Mortgage Bonds.
Whiting
General - All of Whiting's properties consist of interests in developed and
- -------
undeveloped oil and gas leases located in the continental U.S. These
interests permit Whiting to drill for and produce oil, gas and NGLs from
specific areas. Whiting's typical ownership interest receives revenue and
pays operating and capital costs on the wells. Ownership of oil and gas
wells are grouped by regions as follows: 1) Gulf Coast, which includes
Louisiana, Texas and offshore Louisiana and Texas; 2) Mid Continent, which
includes Oklahoma, Arkansas, Kansas and Michigan; and 3) Rocky Mountains,
which includes Colorado, New Mexico, Wyoming, Montana, North Dakota and South
Dakota.
Proved Reserves and Estimated Future Net Revenues - Proved reserves are those
- -------------------------------------------------
quantities of oil, gas and NGLs that geological and engineering data
demonstrate with reasonable certainty to be recoverable in the future from
known reservoirs under existing economic and operating conditions. Estimates
of proved reserves are strictly technical judgments and are not knowingly
influenced by attitudes of conservatism or optimism. Ryder Scott Company,
L.P., Independent Petroleum Engineers, estimated approximately 60% of
Whiting's proved reserves. Whiting's reservoir engineering group estimated
the remainder of the reserves. All reserve estimates were prepared using
standard geological and engineering methods generally accepted by the
petroleum industry and in accordance with SEC guidelines. Refer to Note 13
of Alliant Energy's "Notes to Consolidated Financial Statements" in Item 8
27
for more information. The following table sets forth Whiting's estimated
proved reserves, estimated future net revenues and 10% present value thereof
as of December 31, 2001 and excludes federal and state income taxes
attributable to such future net revenues (in thousands):
Pre-tax future Pre-tax 10%
Oil (barrels) Gas (Dth) BOE (1) net revenue present value
---------------------------------------------------------------------------
Proved developed reserves 10,708 136,817 33,849 $277,998 $180,826
Proved undeveloped reserves 4,098 90,703 19,215 146,122 63,815
---------------------------------------------------------------------------
Total proved reserves 14,806 227,520 53,064 $424,120 $244,641
===========================================================================
(1) Gas reserves are converted to BOE at the rate of six Dth per one barrel
of oil, based upon the approximate relative energy content of gas to oil.
This rate is not necessarily indicative of the relationship of gas to oil
prices.
The prices used for calculating the estimated future net revenues
attributable to proved reserves do not necessarily reflect market prices for
oil and gas subsequent to December 31, 2001. There is no assurance that all
of the proved reserves will be produced and sold within the estimated periods
or that prices used will be realized.
The process of estimating oil and gas reserves is complex and requires
significant subjective opinions in the evaluation of geological, engineering
and economic data. The data for each reservoir may change dramatically over
a period of time as a result of drilling and development activity and changes
in production techniques and equipment. Thus, there may be material changes
and revisions to these estimates in the future.
Production, Revenue and Price History - The following table presents the
- -------------------------------------
historical information about net sales volumes for gas and oil, produced gas
and oil sales prices and production costs per equivalent barrel for the years
ended December 31 (in thousands):
2001 2000 1999
------------- ------------ ------------
Net sales volume - Gas (Dth):
Gulf Coast 10,221 8,714 11,821
Mid Continent 7,693 6,625 4,713
Rocky Mountains 1,837 1,566 1,381
------------- ------------ ------------
19,751 16,905 17,915
============= ============ ============
Net sales volume - Oil (barrels):
Gulf Coast 302 486 503
Mid Continent 157 181 212
Rocky Mountains 1,628 895 602
------------- ------------ ------------
2,087 1,562 1,317
============= ============ ============
Gas - Average product prices:
Gulf Coast $4.23 $3.93 $2.37
Mid Continent 3.30 2.97 2.27
Rocky Mountains 3.76 3.43 2.02
Combined 3.82 3.51 2.23
Oil - Average product prices:
Gulf Coast $24.77 $27.68 $17.37
Mid Continent 23.49 27.28 15.83
Rocky Mountains 23.71 26.51 12.19
Combined 23.85 26.96 14.75
28
2001 2000 1999
------------- ------------ ------------
Production Cost per BOE:
Gulf Coast $6.01 $6.22 $6.36
Mid Continent 7.85 7.50 5.00
Rocky Mountains 7.59 7.48 4.81
Combined 7.07 6.93 5.55
Acreage - The following table summarizes gross and net developed and
- -------
undeveloped acreage at December 31, 2001 by region (net acreage is Whiting's
percentage ownership of gross acreage). Acreage in which Whiting's interest
is limited to royalty and overriding royalty interests is excluded.
Developed Undeveloped Total
----------------------- ---------------------- ---------------------
Gross Net Gross Net Gross Net
----------------------- ---------------------- ---------------------
Gulf Coast 149,676 57,202 8,514 7,218 158,190 64,420
Mid Continent 171,048 56,796 -- -- 171,048 56,796
Rocky Mountains 140,541 67,010 292,878 92,689 433,419 159,699
----------------------- ---------------------- ---------------------
461,265 181,008 301,392 99,907 762,657 280,915
======================= ====================== =====================
Productive Wells - The following table presents Whiting's ownership at
- ----------------
December 31, 2001 in gas and oil wells by region (a net well is Whiting's
percentage ownership of a gross well):
Gas Oil Total
-------------------- -------------------- ---------------------
Gross Net Gross Net Gross Net
-------------------- -------------------- ---------------------
Gulf Coast 588 183 94 59 682 242
Mid Continent 931 357 291 119 1,222 476
Rocky Mountains 86 16 763 181 849 197
-------------------- -------------------- ---------------------
1,605 556 1,148 359 2,753 915
==================== ==================== =====================
Drilling Activity - Whiting is engaged in numerous drilling activities on
- -----------------
properties presently owned and intends to drill or develop other properties
acquired in the future. For 2001, Whiting's drilling activities were focused
in Louisiana and North Dakota, though there was drilling throughout the
Whiting properties. The following table sets forth the results of Whiting's
drilling activity from development wells for the last three years.
Gulf Coast Mid Continent Rocky Mountains Total
----------------------- ----------------------- ----------------------- ------------------------
2001 2000 1999 2001 2000 1999 2001 2000 1999 2001 2000 1999
----------------------- ----------------------- ----------------------- ------------------------
Gross:
Productive 22 15 5 3 1 14 31 4 18 56 20 37
Dry 6 4 -- -- 2 2 2 1 -- 8 7 2
----------------------- ----------------------- ----------------------- ------------------------
28 19 5 3 3 16 33 5 18 64 27 39
======================= ======================= ======================= ========================
Net:
Productive 10.5 5.5 2.7 1.0 0.2 4.1 8.1 0.1 1.6 19.6 5.9 8.4
Dry 1.9 3.0 -- -- 0.3 0.5 1.9 0.1 -- 3.8 3.4 0.4
----------------------- ----------------------- ----------------------- ------------------------
12.4 8.5 2.7 1.0 0.5 4.6 10.0 0.2 1.6 23.4 9.3 8.8
======================= ======================= ======================= ========================
Whiting's drilling activities from exploratory wells are located in the Gulf
Coast region only and consisted of one productive gross well (0.2 net) for
2001. Whiting is the operator of 532 gross wells (404 net) of its 2,753
gross wells (915 net). As operator, Whiting receives reimbursement for
direct expenses incurred in the performance of its duties as well as monthly
per-well overhead reimbursement.
Significant Properties - Significant properties owned by Whiting include the
- ----------------------
following: Gulf Coast (Dos Hermanos, Dougherty and Yoakum); Mid Continent
(Michigan Antrum Properties and Putman Oswego); and Rocky Mountains (Eland
Unit and Fryburg).
29
Resources Other Properties
Resources' other principal properties at December 31, 2001 were as follows:
Investments, excluding Whiting - HPI provides affordable housing in the
Midwest and has a majority ownership in approximately 87 properties with a
December 31, 2001 net book value of approximately $137 million. CRANDIC
has 112 railroad track miles all located within Iowa.
International - owns eight combined heat and power facilities located in
China with an aggregate generating capacity of approximately 450 MW.
Integrated Services - offers standby generation, cogeneration, steam
production and propane air systems and owns an interest in natural gas
gathering systems and an oil gathering system, which had 400 miles and 213
miles, respectively, of pipeline in Texas.
ITEM 3. LEGAL PROCEEDINGS
Alliant Energy
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 appealed the lower court's rulings to the 7th Circuit Court of
Appeals. In January 2002, the 7th Circuit reversed the district court's
decision and remanded the case back to the district court for hearing. The
trial is scheduled to be held in May 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 could have petitioned the U.S. Supreme Court to
hear the case; such petition had to be filed by the end of December 2001.
The federal government decided not to pursue the ruling in favor of Alliant
Energy of the U.S. Court of Appeals for the Eighth Circuit with respect to
these two tax issues. As a result, Alliant Energy recorded the applicable
tax and interest income in the fourth quarter of 2001 related to these
events. An additional potential refund remains a contested issue.
IP&L
IP&L has appealed to the Iowa State Board of Tax Review, an agency of the
State of Iowa, regarding assessments of Iowa property tax made by the
Director of the Iowa Department of Revenue and Finance. The appeals involve
assessments for the years 1994 through 1998 and seek reduction of the
assessments reflecting the true value of the operating property of the
companies. At the present time, IP&L cannot predict what impact, if any, the
appeals process will have on its financial condition or results of
operations.
30
WP&L
In the second quarter of 1999, WP&L received a demand for arbitration from
MG&E pursuant to the terms of joint plant operating agreements between the
parties regarding issues of ownership and operation of the Columbia Energy
Center. In March 2001, an arbitration panel issued its decision upholding
WP&L's position that the plant was well-operated and maintained and in
compliance with the terms of the joint plant operating agreements. MG&E
moved the state court to certify the arbitration decision, which the court
did in December 2001. In February 2002, MG&E filed a motion in the court
challenging the sufficiency of resolutions passed by Alliant Energy in
conjunction with the arbitration decision. WP&L and Alliant Energy believe
that motion is without merit. The motion is currently pending.
Refer to "Liquidity and Capital Resources - Environmental" in Item 7 MD&A for
information related to an EPA investigation regarding WP&L's major coal-fired
generating units in Wisconsin.
Environmental Matters
The information required by Item 3 with regards to environmental matters is
included in "C. Information Relating to Utility Operations - Electric Utility
Operations" in Item 1 Business, "Liquidity and Capital Resources -
Environmental" in Item 7 MD&A and Note 11(e) of the "Notes to Consolidated
Financial Statements" in Item 8, which information is incorporated herein by
reference.
Rate Matters
The information required by Item 3 with regards to rate matters is included
in "Utility Industry Review - Rates and Regulatory Matters" in Item 7 MD&A,
which information is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANTS
- -------------------------------------
The executive officers of Alliant Energy, IP&L and WP&L as of the date of
this filing are as follows (figures following the names represent the
officer's age as of December 31, 2001):
Executive Officers of Alliant Energy
Erroll B. Davis, Jr., 57, was elected Chairman of the Board effective April
- --------------------
2000, has served as President and Chief Executive Officer (CEO) since 1990
and has been a board member since 1988.
William D. Harvey, 52, was elected Executive Vice President-Generation
- -----------------
effective April 1998. Prior thereto, he served as Senior Vice President
since 1993 at WP&L.
James E. Hoffman, 48, was elected Executive Vice President-Business
- ----------------
Development effective April 1998. Prior thereto, he served as Executive Vice
President since 1996 at IES and Executive Vice President-Customer Service &
Energy Delivery from 1995 to 1997 at IESU.
Eliot G. Protsch, 48, was elected Executive Vice President-Energy Delivery
- ----------------
effective April 1998. Prior thereto, he served as Senior Vice President
since 1993 at WP&L.
Barbara J. Swan, 50, was elected Executive Vice President and General Counsel
- ---------------
effective October 1998. She previously served as Vice President-General
Counsel from 1994 to 1998 at WP&L.
Thomas M. Walker, 54, was elected Executive Vice President and Chief
- ----------------
Financial Officer (CFO) effective April 1998. Prior thereto, he served as
Executive Vice President and CFO since 1996 at IES and IESU.
Pamela J. Wegner, 54, was elected Executive Vice President-Shared Solutions
- ----------------
effective October 1998. She previously served as Vice President-Information
Services and Administration from 1994 to 1998 at WP&L.
Edward M. Gleason, 61, has served as Vice President-Treasurer and Corporate
- -----------------
Secretary since 1993.
31
Dundeana K. Doyle, 43, was elected Vice President-Infrastructure Security
- -----------------
effective January 2002. She previously served as Vice President-Customer
Operations since December 2000 at IESU and WP&L, Vice President-Customer
Services and Operations from 1999 to 2000 at IESU and WP&L, Vice
President-Customer Operations from 1998 to 1999 at IESU, Vice
President-Customer Services from 1998 to 1999 at WP&L and Assistant Vice
President-Field Operations from 1997 to 1998 at IESU.
John E. Kratchmer, 39, was elected Corporate Controller and Chief Accounting
- -----------------
Officer effective October 2000. He previously served as Assistant Controller
since April 1998 and as Manager of Financial Reporting and Property from 1996
to 1998 at IES.
NOTE: None of the executive officers listed above is related to any member
of the Board of Directors or nominee for director or any other executive
officer.
Mr. Davis has an employment agreement with Alliant Energy pursuant to which
his term of office is established. All other executive officers have no
definite terms of office and serve at the pleasure of the Board of Directors.
Additional Officers of Alliant Energy
Joan M. Thompson, 44, was elected Assistant Controller effective June 2000.
- ----------------
She previously served as Manager-IESU and IPC Accounting since February 1999,
Manager-IESU Accounting from 1998 to 1999, and Manager of Taxes and Payroll
from 1994 to 1998 at IES.
Linda J. Wentzel, 53, was elected Assistant Corporate Secretary effective May
- ----------------
1998. She previously served as Executive Administrative Assistant since 1995
at Alliant Energy.
Enrique Bacalao, 52, was elected Assistant Treasurer effective November
- ---------------
1998. Prior to joining Alliant Energy, he was Vice President, Corporate
Banking from 1995 to 1998 at the Chicago Branch of The Industrial Bank of
Japan, Limited.
Eric D. Mott, 34, was elected Assistant Treasurer effective December 2001.
- ------------
He previously served as Manager-Investor Relations and Trust Fund Investment
Management since December 2000, Senior Treasury Analyst from 1998 to 2000,
and Senior Cost Analyst from 1996 to 1998 at Alliant Energy.
Executive Officers of IP&L
Erroll B. Davis, Jr., 57, was elected Chairman of the Board effective April
- ---------------
2000 and CEO effective April 1998. Mr. Davis is also an officer of Alliant
Energy and WP&L.
Eliot G. Protsch, 48, was elected President effective April 1998. Mr.
- ----------------
Protsch is also an officer of Alliant Energy and WP&L.
William D. Harvey, 52, was elected Executive Vice President-Generation
- -----------------
effective October 1998. Mr. Harvey is also an officer of Alliant Energy and
WP&L.
Barbara J. Swan, 50, was elected Executive Vice President and General Counsel
- ---------------
effective October 1998. Ms. Swan is also an officer of Alliant Energy and
WP&L.
Thomas M. Walker, 54, was elected Executive Vice President and CFO in 1996.
- ----------------
Mr. Walker is also an officer of Alliant Energy and WP&L.
Pamela J. Wegner, 54, was elected Executive Vice President-Shared Solutions
- ----------------
effective October 1998. Ms. Wegner is also an officer of Alliant Energy and
WP&L.
32
Vern A. Gebhart, 48, was elected Vice President-Customer Operations effective
- ---------------
January 2002. He previously served as Managing Director-Strategic Projects
and Capital Control since 2000 at Alliant Energy, Director-Strategic Projects
and Capital Control from 1998 to 2000 at Alliant Energy and
Director-Strategic Projects and Capital Control from 1997 to 1998 at IES.
Mr. Gebhart is also an officer of WP&L.
Edward M. Gleason, 61, was elected Vice President-Treasurer and Corporate
- -----------------
Secretary effective April 1998. Mr. Gleason is also an officer of Alliant
Energy and WP&L.
Dundeana K. Doyle, 43, was elected Vice President-Infrastructure Security
- -----------------
effective January 2002. Ms. Langer is also an officer of Alliant Energy and
WP&L.
Daniel L. Mineck, 53, was elected Vice President-Performance Engineering and
- ----------------
Environmental effective October 1998. He previously served as Assistant Vice
President-Corporate Engineering since 1996. Mr. Mineck is also an officer of
WP&L.
Kim K. Zuhlke, 48, was elected Vice President-Engineering, Sales and
- -------------
Marketing effective September 1999. He previously served as Vice
President-Customer Operations since October 1998. Mr. Zuhlke is also an
officer of WP&L.
John E. Kratchmer, 39, was elected Corporate Controller and Chief Accounting
- -----------------
Officer effective October 2000. Mr. Kratchmer is also an officer of Alliant
Energy and WP&L.
NOTE: None of the executive officers listed above is related to any member
of the Board of Directors or nominee for director or any other executive
officer.
Mr. Davis has an employment agreement with Alliant Energy pursuant to which
his term of office is established. All other executive officers have no
definite terms of office and serve at the pleasure of the Board of Directors.
Additional Officers of IP&L
Daniel L. Siegfried, 42, was elected Assistant Corporate Secretary effective
- -------------------
April 1998. He also serves as Senior Attorney for Alliant Energy.
Previously he served as Senior Environmental Counsel from 1992 to 1998 at
IES.
Linda J. Wentzel, 53, was elected Assistant Corporate Secretary effective May
- ----------------
1998. Ms. Wentzel is also an officer of Alliant Energy and WP&L.
Enrique Bacalao, 52, was elected Assistant Treasurer effective November 1998.
- ---------------
Mr. Bacalao is also an officer of Alliant Energy and WP&L.
Steven F. Price, 49, was elected Assistant Treasurer effective April 1998.
- ---------------
Mr. Price is also an officer of WP&L.
Executive Officers of WP&L
Erroll B. Davis, Jr., 57, was elected Chairman of the Board effective April
- --------------------
2000 and CEO effective April 1998. He previously served as President and CEO
of WP&L since 1988 and has been a board member of WP&L since 1984. Mr. Davis
is also an officer of Alliant Energy and IP&L.
William D. Harvey, 52, was elected President effective April 1998. He
- -----------------
previously served as Senior Vice President since 1993 at WP&L. Mr. Harvey is
also an officer of Alliant Energy and IP&L.
Eliot G. Protsch, 48, was elected Executive Vice President-Energy Delivery
- ----------------
effective October 1998. He previously served as Senior Vice President from
1993 to 1998 at WP&L. Mr. Protsch is also an officer of Alliant Energy and
IP&L.
33
Barbara J. Swan, 50, was elected Executive Vice President and General Counsel
- ---------------
effective October 1998. She previously served as Vice President-General
Counsel from 1994 to 1998 at WP&L. Ms. Swan is also an officer of Alliant
Energy and IP&L.
Thomas M. Walker, 54, was elected Executive Vice President and CFO effective
- ----------------
October 1998. Mr. Walker is also an officer of Alliant Energy and IP&L.
Pamela J. Wegner, 54, was elected Executive Vice President-Shared Solutions
- ----------------
effective October 1998. She previously served as Vice President-Information
Services and Administration from 1994 to 1998 at WP&L. Ms. Wegner is also an
officer of Alliant Energy and IP&L.
Vern A. Gebhart, 48, was elected Vice President-Customer Operations effective
- ---------------
January 2002. Mr. Gebhart is also an officer of IP&L.
Edward M. Gleason, 61, was elected Vice President-Treasurer and Corporate
- -----------------
Secretary effective April 1998. He previously served as Controller,
Treasurer, and Corporate Secretary since 1996. Mr. Gleason is also an
officer of Alliant Energy and IP&L.
Dundeana K. Doyle, 43, was elected Vice President-Infrastructure Security
- -----------------
effective January 2002. Ms. Langer is also an officer of Alliant Energy and
IP&L.
Daniel L. Mineck, 53, was elected Vice President-Performance Engineering and
- ----------------
Environmental effective April 1998. Mr. Mineck is also an officer of IP&L.
Kim K. Zuhlke, 48, was elected Vice President-Engineering, Sales & Marketing
- -------------
effective September 1999. He previously served as Vice President-Customer
Operations since April 1998 at WP&L and since October 1998 at IESU and as
Vice President-Customer Services and Sales from 1993 to 1998 at WP&L. Mr.
Zuhlke is also an officer of IP&L.
John E. Kratchmer, 39, was elected Corporate Controller and Chief Accounting
- -----------------
Officer effective October 2000. Mr. Kratchmer is also an officer of Alliant
Energy and IP&L.
NOTE: None of the executive officers listed above is related to any member
of the Board of Directors or nominee for director or any other executive
officer.
Mr. Davis has an employment agreement with Alliant Energy pursuant to which
his term of office is established. All other executive officers have no
definite terms of office and serve at the pleasure of the Board of Directors.
Additional Officers of WP&L
Linda J. Wentzel, 53, was elected Assistant Corporate Secretary effective May
- ----------------
1998. She previously served as Executive Administrative Assistant since 1995
at Alliant Energy. Ms. Wentzel is also an officer of Alliant Energy and IP&L.
Enrique Bacalao, 52, was elected Assistant Treasurer effective November
- ---------------
1998. Mr. Bacalao is also an officer of Alliant Energy and IP&L.
Steven F. Price, 49, was elected Assistant Treasurer effective April 1998.
- ---------------
He previously served as Assistant Corporate Secretary since 1992 at Alliant
Energy and WP&L and as Assistant Treasurer since 1992 at Alliant Energy. Mr.
Price is also an officer of IP&L.
34
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Alliant Energy's common stock trades on the New York Stock Exchange under the
symbol "LNT." Quarterly sales price ranges and dividends with respect to
Alliant Energy's common stock were as follows:
2001 2000
--------------------------------------------- ---------------------------------------------
Quarter High Low Dividend High Low Dividend
------- ---- --- -------- ---- --- --------
First $33.20 $28.75 $0.50 $37.75 $26.44 $0.50
Second 32.67 28.20 0.50 31.88 25.75 0.50
Third 31.49 27.90 0.50 31.25 26.13 0.50
Fourth 32.29 27.50 0.50 32.13 28.63 0.50
Year 33.20 27.50 2.00 37.75 25.75 2.00
Stock closing price at December 31, 2001: $30.36
Although Alliant Energy's practice has been to pay common stock dividends
quarterly, the timing of payment and amount of future dividends are
necessarily dependent upon earnings, financial requirements and other factors.
At December 31, 2001, there were approximately 58,288 holders of record of
Alliant Energy's stock including underlying holders in Alliant Energy's
Shareowner Direct Plan.
Alliant Energy is the sole common shareowner of all 13,370,788 shares of IP&L
common stock currently outstanding. During both 2001 and 2000, IESU declared
dividends on its common stock of $59 million to its parent. Under certain
circumstances, IP&L has the right under terms of its subordinated deferrable
interest debentures to extend interest payments for periods not to exceed 20
consecutive quarters. It is IP&L's current intent not to exercise such right.
In the event IP&L did exercise this right, it would limit IP&L's ability to pay
dividends, among other things.
Alliant Energy is the sole common shareowner of all 13,236,601 shares of WP&L
common stock currently outstanding. During 2001, WP&L paid dividends on its
common stock of $60 million to its parent (includes dividends from an equity
method investment). WP&L did not declare common stock dividends during 2000
due to management of its capital structure. WP&L's common stock dividends
are restricted to the extent that such dividend would reduce the common stock
equity ratio to less than 25%. Also the PSCW ordered that it must approve
the payment of dividends by WP&L to Alliant Energy that are in excess of the
level forecasted in the rate order if such dividends would reduce WP&L's
average common equity ratio below 52% of total capitalization. The dividends
paid by WP&L to Alliant Energy since the rate order was issued have not
exceeded such level.
Alliant Energy's utility subsidiaries each have common stock dividend payment
restrictions based on their respective bond indentures and the terms of their
preferred stock. In addition, IP&L's ability to pay common stock dividends
is restricted based on requirements associated with sinking funds.
35
ITEM 6. SELECTED FINANCIAL DATA
Alliant Energy Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Information 2001 (1) 2000 (2) 1999 (3) 1998 (4) 1997
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands except for per share data)
Income Statement Data:
Operating revenues $2,777,340 $2,404,984 $2,127,973 $2,130,874 $2,300,627
Income before cumulative effect of a change in accounting
principle, net of tax 185,230 381,954 196,581 96,675 144,578
Cumulative effect of a change in accounting principle, net of tax (12,868) 16,708 -- -- --
Net income 172,362 398,662 196,581 96,675 144,578
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Data:
Earnings per average common share - diluted:
Income before cumulative effect of a change in
accounting principle $2.30 $4.82 $2.51 $1.26 $1.90
Cumulative effect of a change in accounting principle ($0.16) $0.21 -- -- --
Net income $2.14 $5.03 $2.51 $1.26 $1.90
Common shares outstanding at year-end (000s) 89,682 79,010 78,984 77,630 76,481
Dividends declared per common share $2.00 $2.00 $2.00 $2.00 $2.00
Market value per share at year-end $30.36 $31.88 $27.50 $32.25 $33.13
Book value per share at year-end (5) $21.39 $25.79 $27.29 $20.69 $21.24
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Financial Data:
Construction and acquisition expenditures $818,363 $1,066,464 $478,573 $372,058 $328,040
Total assets at year-end (5) $6,247,682 $6,733,766 $6,075,683 $4,959,337 $4,923,550
Long-term obligations, net $2,586,044 $2,128,496 $1,660,558 $1,713,649 $1,604,305
Times interest earned before income taxes (6) 2.32X 4.61X 3.38X 2.25X 2.90X
Capitalization ratios:
Common equity (5) 43% 50% 57% 49% 51%
Preferred stock 2% 3% 3% 4% 3%
Long-term debt, excluding current portion 55% 47% 40% 47% 46%
------------------------------------------------------------------
Total 100% 100% 100% 100% 100%
==================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Includes $21 million ($0.26 per diluted share) and $2 million ($0.02 per diluted share) of non-cash SFAS 133 valuation charges
related to Alliant Energy's exchangeable senior notes and electricity derivatives of a foreign affiliate of Alliant Energy,
respectively.
(2) Includes $204 million ($2.58 per diluted share) of non-cash net income related to Alliant Energy's adoption of SFAS 133 and
$16 million ($0.20 per diluted share) of net income from gains on sales of McLeod stock.
(3) Includes $25 million ($0.32 per diluted share) of net income from gains on sales of McLeod stock.
(4) Results reflect the recording of $54 million of pre-tax merger-related charges.
(5) Alliant Energy adjusts the carrying value of its investments in McLeod to its estimated fair value, pursuant to the applicable
accounting rules. At December 31, 2001, 2000, 1999, 1998 and 1997, the carrying amount reflected an unrealized gain (loss) of
approximately ($13) million, $543 million, $1.1 billion, $291 million and $299 million, respectively, with a net of tax
increase (decrease) to common equity of ($9) million, $317 million, $640 million, $170 million and $175 million, respectively.
(6) Represents income before income taxes plus preferred dividend requirements of subsidiaries plus interest expense divided by
interest expense.
36
IESU Year Ended December 31,
- ----
2001 2000 1999 1998 1997
--------------------------------------------------------------------------------
(in thousands)
Operating revenues $953,325 $876,006 $800,696 $806,930 $813,978
Earnings available for common stock 69,990 73,509 65,532 60,996 57,879
Cash dividends declared on common stock 58,634 58,633 87,951 18,840 56,000
Total assets 1,778,295 1,819,306 1,755,808 1,788,978 1,768,929
Long-term obligations, net 732,439 597,167 641,559 677,804 688,719
Alliant Energy was the sole common shareowner of all 13,370,788 shares of
IESU's common stock outstanding. Effective January 1, 2002, Alliant Energy is
the sole common shareowner of all 13,370,788 shares of IP&L's common stock
outstanding. As such, earnings per share data is not disclosed herein. The
1998 financial results reflect the recording of $17 million of pre-tax
merger-related charges.
WP&L Year Ended December 31,
- ----
2001 2000 1999 1998 1997
-------------------------------------------------------------------------------
(in thousands)
Operating revenues $965,353 $862,381 $752,505 $731,448 $794,717
Earnings available for common stock 70,180 68,126 67,520 32,264 67,924
Cash dividends declared on common stock 60,449 -- 58,353 58,341 58,343
Total assets 1,879,882 1,857,024 1,766,135 1,685,150 1,664,604
Long-term obligations, net 523,183 569,309 471,648 471,554 420,414
Alliant Energy is the sole common shareowner of all 13,236,601 shares of
WP&L's common stock outstanding. As such, earnings per share data is not
disclosed herein. The 1998 financial results reflect the recording of $17
million of pre-tax merger-related charges.
37
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 "Other Matters - Other
Future Considerations" and in Item 1 E. "Future Earnings Outlook;" weather
effects on sales and revenues; general economic and political conditions in
Alliant Energy's domestic service territories; federal, state and
international regulatory or governmental actions, including issues associated
with the deregulation of the domestic utility industry and the ability to
obtain adequate and timely rate relief; 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; 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 and with
environmental compliance generally; 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; improved profitability of Alliant Energy's Brazil
investments, as well as continued growth in earnings from its China
investments; continued strong earnings from Whiting, including the recovery
and stability of oil and gas prices; continued improved profitability of
Alliant Energy's other non-regulated businesses as a whole, including the
Integrated Services and Generation and Trading business units; no material
permanent declines in the fair market value of, or expected cash flows from,
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 Alliant Energy has investments in; and
changes in the rate of inflation. Alliant Energy assumes no obligation, and
disclaims any duty, to update the forward-looking statements in this report.
UTILITY INDUSTRY REVIEW
Overview - Alliant Energy has two primary utility subsidiaries, IP&L and
- --------
WP&L. IP&L was formed as a result of the merger of IPC with and into IESU
effective January 1, 2002. WP&L has one utility subsidiary, South Beloit.
As a public utility holding company with significant utility assets, Alliant
Energy competes in an ever-changing utility industry. Electric energy
generation, transmission and distribution are in a period of fundamental
change resulting from legislative, regulatory, economic and technological
changes. These changes impact competition in the electric wholesale and
retail markets as customers of electric utilities are being offered
alternative suppliers. Such competitive pressures could result in electric
utilities losing customers and incurring stranded costs (i.e., assets and
other costs rendered unrecoverable as the result of competitive pricing)
which would be borne by security holders if the costs cannot be recovered
from customers.
Alliant Energy's utility subsidiaries are currently subject to regulation by
FERC, and state regulation in Iowa, Wisconsin, Minnesota and Illinois. FERC
regulates competition in the electric wholesale power generation market and
each state regulates whether to permit retail competition, the terms of such
retail competition and the recovery of any portion of stranded costs that are
ultimately determined to have resulted from retail competition. Alliant
Energy cannot predict the timing of a restructured electric industry or the
impact on its financial condition or results of operations but does believe
it is well-positioned to compete in a deregulated competitive market.
Although Alliant Energy ultimately believes that the electric industry will
be deregulated, the pace of deregulation in its primary retail electric
service territories has been delayed due to events related to Enron and
California's restructured electric utility industry.
38
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. WP&L received a tax-free cash distribution of $75 million from ATC
and had a $110 million equity investment in ATC, with an ownership percentage
of approximately 26.5 percent at December 31, 2001. This transfer has not
resulted in a significant impact on WP&L's financial condition or results of
operations since FERC allows ATC to earn a return on the contributed assets
comparable to the return formerly allowed WP&L by the PSCW and FERC. During
2001, ATC returned approximately 80 percent of its earnings to the equity
holders and, although no assurance can be given, Alliant Energy anticipates
ATC will continue with this policy in the future. ATC realizes its revenues
from the provision of transmission services to both participants in ATC as
well as non-participants. ATC is a transmission-owning member of the Midwest
ISO and the MAIN Regional Reliability Council.
In 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 second
quarter of 2002. The participants have requested that FERC expedite
consideration of the application so that TRANSLink could commence operations
in January 2003. Current plans call for IP&L to contribute its transmission
assets, which have an estimated net book value of approximately $317 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.
Alliant Energy complied with provisions of a FERC order requiring utilities
to voluntarily turn over operational control of their transmission systems to
a regional entity by the end of 2001 by WP&L's transfer of its transmission
assets to ATC and the participation of IESU, WP&L and IPC in the Midwest ISO,
which was given RTO status in December 2001. The Midwest ISO began providing
security coordination functions in December 2001 and began offering
transmission service in the first quarter of 2002 and IP&L and WP&L now
receive all of their transmission services from the Midwest ISO.
Rates and Regulatory Matters
- ----------------------------
Overview - As part of its merger approval, FERC accepted a proposal by
Alliant Energy's utility subsidiaries which provides for a four-year freeze
on wholesale electric prices beginning with the effective date of the April
1998 merger forming Alliant Energy. Each of the utilities also agreed with
their respective state commissions to provide customers a four-year retail
electric and gas price freeze (the ICC granted IPC and South Beloit a
three-year price freeze), with certain exceptions, which commenced on the
effective date of the April 1998 merger. As a result, the last of the price
freezes impacting Alliant Energy's utility subsidiaries will expire in April
2002.
WP&L - In 2000, the NRC issued expanded performance measures which raised
several areas of concern with Kewaunee's operations. Kewaunee is a nuclear
facility in which WP&L has a 41 percent ownership interest. Addressing the
NRC's concerns and ensuring that Kewaunee operates in accordance with current
industry and regulatory standards resulted in additional operating costs to
WP&L in 2001 of approximately $8 million and WP&L is expected to incur an
additional $21 million of incremental costs in 2002 through 2005. In April
2001, the PSCW approved the deferral of such incremental costs incurred after
March 27, 2001 (WP&L has deferred $5.5 million of such costs at December 31,
2001). In July 2001, WP&L requested a one-time $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 the
remainder of the additional operating costs related to Kewaunee will be
recovered through future base rate filings with the PSCW.
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
39
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 has
deferred $5.9 million of such costs at December 31, 2001). In December 2001,
WP&L filed a request for interim rate relief related to such filings of
approximately $63 million ($41 million for retail electric, $21 million for
natural gas and $1 million for water rates) to be effective on April 14,
2002. The interim level is generally based on PSCW staff adjustments
recommended in a recently completed audit. Reductions in purchased-power and
fuel costs since the initial filing constituted a significant portion of such
adjustments. As a result, these adjustments would have no impact on WP&L's
financial condition or results of operations. WP&L expects final rates to be
implemented in the third quarter of 2002 and to be set at levels higher than
the interim levels, but significantly lower than the original request,
although no assurance can be given. Also, in February 2002, WP&L filed a
$6.2 million request with FERC for new wholesale electric base rates. WP&L
also plans to file a base rate increase request with the PSCW in the second
quarter of 2002 for its 2003 and 2004 rates. At this time, there are no
plans for filing a new base rate case in Illinois for South Beloit.
In December 2001, the PSCW authorized WP&L to defer incremental costs for
security measures and insurance premiums related to the September 11, 2001
terrorist attacks. WP&L began deferring the increased costs in December 2001
and the issue of cost recovery will be addressed in WP&L's future base rate
case proceedings.
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 2001, which was replaced with a $58 million final increase
effective June 2001. Two customer groups filed an appeal to a Wisconsin
state court, challenging certain portions of the final order. This matter is
still pending in state court. The final order included a refund provision
for costs collected in rates that are in excess of actual costs incurred. In
March 2002, WP&L filed with the PSCW to refund approximately $4 million to
customers based on lower than projected fuel and purchased-power costs in
2001. The refund amount ultimately provided by WP&L is subject to PSCW
approval. WP&L had recorded the necessary reserve for the 2001 refund at
December 31, 2001. In addition, in March 2002 WP&L filed with and received
approval from the PSCW for a decrease in retail electric rates of approximately
$19 million based on lower fuel and purchased-power costs.
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 payments from Union Pacific in 2001 of $4 million, covering the
period from January 1, 2000 through October 22, 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 also be
reviewed by the PSCW in conjunction with WP&L's 2001 fuel refund filing.
In connection with a statewide docket to investigate compliance issues
associated with the EPA's NOx emission reductions, in 1999 the PSCW
authorized deferral of all incremental NOx compliance costs excluding
internal labor and replacement purchased-power costs. The PSCW approved
WP&L's compliance plans and granted a 10-year straight-line depreciation
method for NOx compliance investments. WP&L has deferred $3.0 million of
costs at December 31, 2001 and anticipates recovery of these costs beginning
with the base rate increase request filed in 2001. The depreciation lives
will be reviewed every two years.
IP&L - IP&L plans on filing electric and natural gas base rate cases with the
IUB in the Spring and Fall of 2002, respectively. The electric base rate
case will include requests for recovery of its investments in its
infrastructure that are intended to enable IP&L to continue delivering
reliable utility service. IP&L has not yet determined the extent of rate
relief it will seek. IP&L currently has no plans for filing new base rate
cases in Illinois or Minnesota.
40
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, hearings were held in November 2001 and
final briefs were filed in January 2002. The outcome of this process cannot
be predicted, but could potentially result in a refund of past collections by
IP&L to its customers.
ALLIANT ENERGY RESULTS OF OPERATIONS
All "per share" references in the Results of Operations section refer to
earnings per diluted share. Refer to Note 1(a) of Alliant Energy's "Notes to
Consolidated Financial Statements" in Item 8 for discussion of the various
components of Alliant Energy's business.
Overview - Alliant Energy's EPS for 2001, 2000 and 1999 were as follows:
- --------
2001 2000 * 1999
---------- ---------- ---------
EPS per accounting principles generally accepted in the U.S. $2.14 $5.03 $2.51
Plus: EPS related to non-cash SFAS 133 valuation charges:
30-year exchangeable senior notes 0.26 -- --
Electricity derivatives of a foreign affiliate of Alliant Energy 0.02 -- --
Less: EPS related to income from Alliant Energy's adoption of SFAS 133 -- 2.58 --
Less: EPS related to gains on sales of McLeod stock -- 0.20 0.32
---------- ---------- ---------
Adjusted EPS $2.42 $2.26 $2.19
========== ========== =========
* Components do not foot to total due to rounding.
The 2001 increase in adjusted earnings was primarily due to an increase from
Alliant Energy's non-regulated businesses of $0.14 per share ($0.36 and $0.22
per share in 2001 and 2000, respectively). Contributing to the increase were
higher earnings from Alliant Energy's Investments business unit of $0.24 per
share, led by record earnings from Alliant Energy's oil and gas business, and
the impact of lower short-term interest rates. These items were partially
offset by lower earnings from Alliant Energy's non-regulated Generation and
Trading ($0.10 per share), International ($0.08 per share) and Integrated
Services ($0.04 per share) business units. Earnings from utility operations
decreased $0.07 per share ($2.05 and $2.12 per share in 2001 and 2000,
respectively) due to increased operating expenses and lower gas margins,
partially offset by a lower effective income tax rate, higher electric
margins, a reduction of net interest expense and increased steam margins.
Income of $0.13 per share ($0.08 and $0.05 per share at the parent company
and IP&L, respectively) from the resolution of a significant tax case Alliant
Energy had pursued for years also contributed to the 2001 increase in
adjusted earnings.
Alliant Energy's transactions with Enron had a modest negative impact on
Alliant Energy's electric and gas utility margins. Weather did not have a
material impact on Alliant Energy's 2001 utility results as the benefits from
a colder than normal first quarter, high humidity levels for a portion of the
summer and income realized from a weather hedge Alliant Energy had in place
in the fourth quarter largely offset the impact of an extremely mild fourth
quarter.
In the previous table, all of the adjustments to EPS per accounting
principles generally accepted in the U.S. were recorded at Alliant Energy's
non-regulated businesses. The increased earnings from Alliant Energy's oil
and gas business (Whiting) resulted from higher gas prices earlier in 2001,
increased oil and gas sales volumes and income of $0.07 per share from a
reduction in the estimated dismantlement cost of an offshore oil and gas
platform, partially offset by higher operating and interest expenses.
Increased earnings from Alliant Energy's affordable housing business also
contributed to higher earnings from the Investments business unit. The lower
earnings from Alliant Energy's non-regulated Generation and Trading business
unit were the result of less volatile market prices, fewer weather-related
trading opportunities in 2001 and charges for development costs from a
merchant plant project that was canceled in 2001 that failed to meet Alliant
Energy's required returns. The decreased income from the International
business unit was due to lower results from Alliant Energy's Brazil and New
41
Zealand/Australian investments, partially offset by increased income from
Alliant Energy's investments in China. Refer to "Interest Expense and Other"
for discussion of the results from Alliant Energy's investments in Brazil and
New Zealand/Australia. The increase for China was largely due to the
addition of five combined heat and power facilities to Alliant Energy's China
portfolio in the last fifteen months. The lower results from the Integrated
Services business unit were largely due to impacts of the slowing economy and
transactions its gas marketing business had with Enron, partially offset by a
one-time charge related to a loss on a contract in 2000.
Alliant Energy incurred charges of $0.04 per share in 2001 as a result of
Enron's fourth quarter bankruptcy filing.
The increase in adjusted earnings for 2000 was primarily due to increased
earnings at Whiting and Alliant Energy's non-regulated Generation and Trading
business unit, partially offset by higher interest expense to fund Alliant
Energy's strategic growth initiatives and the dilutive effect of Alliant
Energy's January 2000 investment in several Brazilian utilities. Within the
utility business, increased electric margins were offset by higher operating
expenses.
Electric Utility Operations - Electric margins and MWh sales for Alliant
- ---------------------------
Energy for 2001, 2000 and 1999 were as follows (in thousands):
Revenues and Costs MWhs Sold
------------------------------------------------------ --------------------------------------------
2001 2000 * 1999 ** 2001 2000 * 1999 **
------------ ------------ ------- ------------ ------ ------- --------- ------- --------- --------
Residential $599,074 $567,283 6% $541,714 5% 7,344 7,161 3% 7,024 2%
Commercial 373,145 349,019 7% 329,487 6% 5,464 5,364 2% 5,260 2%
Industrial 543,471 501,155 8% 476,140 5% 12,469 13,092 (5%) 13,036 --
------------ ------------ ------------ ------- --------- ---------
Total from ultimate
customers 1,515,690 1,417,457 7% 1,347,341 5% 25,277 25,617 (1%) 25,320 1%
Sales for resale 184,507 173,148 7% 155,801 11% 4,936 4,906 1% 5,566 (12%)
Other 56,359 57,431 (2%) 45,796 25% 168 174 (3%) 162 7%
------------ ------------ ------------ ------- --------- ---------
Total revenues/sales 1,756,556 1,648,036 7% 1,548,938 6% 30,381 30,697 (1%) 31,048 (1%)
======= ========= =========
Electric production
fuels expense 292,002 271,073 8% 247,136 10%
Purchased-power expense 403,166 294,818 37% 255,446 15%
------------ ------------ ------------
Margin $1,061,388 $1,082,145 (2%) $1,046,356 3%
============ ============ ============
* Reflects the percent change from 2000 to 2001. ** Reflects the percent change from 1999 to 2000.
Due to the formation of ATC on January 1, 2001, electric margin in 2001
included wheeling expenses from ATC of $30 million. Such expenses were
offset by equity income (WP&L accounts for its investment in ATC under the
equity method), reduced other operation and maintenance expenses and lower
depreciation expense, resulting in no significant net income impact due to
the formation of ATC. On a comparable basis, electric margin increased $9.6
million, or 1 percent, and $35.8 million, or 3 percent, for 2001 and 2000,
respectively. The 2001 increase was primarily due to lower purchased-power
and fuel costs impacting margin, increased residential and commercial sales
due to more favorable weather conditions in 2001 compared to 2000 and
continued retail customer growth. These items were partially offset by $10
million of income recorded in 2000 for a change in estimate of WP&L's utility
services rendered but unbilled at month-end and lower industrial sales,
largely due to impacts of a slowing economy.
The 2000 increase was primarily due to increased sales to retail customers
due to continued economic growth in Alliant Energy's utility subsidiaries'
service territories, the favorable $10 million change in estimate of WP&L's
utility services rendered but unbilled at month-end, increased energy
conservation revenues and increased capacity sales. These items were
partially offset by higher purchased-power and fuel costs and the impact of
milder weather conditions on electric margin in 2000 compared to 1999. The
1999 margin also included a favorable $9 million change in estimate of IESU's
and IPC's utility services rendered but unbilled at month-end in Iowa.
42
Refer to Note 1(j) of Alliant Energy's "Notes to Consolidated Financial
Statements" in Item 8 for information relating to utility fuel cost
recovery. Refer to "Utility Industry Review - Rates and Regulatory Matters"
for discussion of an IUB fuel investigation and various rate filings.
Gas Utility Operations - Gas margins and Dth sales for Alliant Energy for
- ----------------------
2001, 2000 and 1999 were as follows (in thousands):
Revenues and Costs Dths Sold
---------------------------------------------------- --------------------------------------------------
2001 2000 * 1999 ** 2001 2000 * 1999 **
------------ ----------- ------- ----------- ------- ---------- ---------- -------- ---------- --------
Residential $270,248 $245,697 10% $185,090 33% 29,580 32,026 (8%) 30,309 6%
Commercial 141,121 127,104 11% 89,118 43% 18,055 19,696 (8%) 18,349 7%
Industrial 31,262 27,752 13% 21,855 27% 5,344 5,350 -- 5,963 (10%)
Transportation/other 45,246 14,395 214% 18,256 (21%) 48,539 43,931 10% 46,954 (6%)
------------ ----------- ----------- ---------- ---------- ----------
Total revenues/sales 487,877 414,948 18% 314,319 32% 101,518 101,003 1% 101,575 (1%)
========== ========== ==========
Cost of utility gas sold 360,911 278,734 29% 180,519 54%
------------ ----------- -----------
Margin $126,966 $136,214 (7%) $133,800 2%
============ =========== ===========
* Reflects the percent change from 2000 to 2001. ** Reflects the percent change from 1999 to 2000.
Gas revenues and cost of utility gas sold increased significantly for 2001
and 2000 due to the large increase in natural gas prices in the first half of
2001 and last half of 2000. Due to Alliant Energy's rate recovery mechanisms
for gas costs, these increases alone had little impact on gas margin. Gas
margin decreased $9.2 million, or 7 percent, and increased $2.4 million, or 2
percent, for 2001 and 2000, respectively. The 2001 decrease was largely due
to lower retail sales primarily related to unusually high gas prices earlier
in 2001 as some customers either chose alternative fuel sources or used less
natural gas, the impact of the slowing economy and losses associated with
current commodity costs at WP&L, which are shared by ratepayers and
shareowners. The 2000 increase in gas margin was largely due to more
favorable weather conditions in the 2000 heating season compared to 1999.
Alliant Energy realized pre-tax income of $4.0 million, $2.2 million and $5.1
million from weather hedges it had in place in 2001, 2000 and 1999,
respectively, which is recorded in "Miscellaneous, net" in the Consolidated
Statements of Income.
Refer to Note 1(j) of Alliant Energy's "Notes to Consolidated Financial
Statements" in Item 8 for information relating to utility natural gas cost
recovery.
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 2001, 2000 and 1999 are as follows:
Non-regulated and other revenues (in millions): 2001 2000 1999
-------------- -------------- --------------
Integrated Services $242 $172 $126
Investments:
Whiting 135 94 63
Other 45 44 47
International 85 -- --
Other 26 32 29
-------------- -------------- --------------
$533 $342 $265
============== ============== ==============
Whiting's volumes sold (in thousands):
Oil (barrels) 2,087 1,562 1,317
Gas (Dth) 19,751 16,905 17,915
Whiting's average product prices (excludes hedging activity):
Oil $23.85 $26.96 $14.75
Gas $3.82 $3.51 $2.23
43
The 2001 Integrated Services increase was primarily due to acquisitions in
the third and fourth quarters of 2000 of various energy services businesses.
Although gas prices were high at the beginning of 2001, these prices began to
decline throughout the year. Whiting mitigated some of the impact of the
decrease in prices in the latter half of 2001 by using physical forward
contracts to lock in a portion of its volumes at prices higher than the
prevailing market prices. The higher sales volumes in 2001 at Whiting were
largely due to its continued acquisitions of proven reserves. The 2001
International increase resulted from the December 2000 change from the equity
method of accounting to the consolidation method for an investment in China
and the addition of five combined heat and power facilities to Alliant
Energy's China portfolio in the last fifteen months. The 2000 Integrated
Services increase was primarily due to various business acquisitions in 2000,
increased activity in Alliant Energy's energy marketing business and greater
demand for environmental and engineering services. Refer to Note 13 of
Alliant Energy's "Notes to Consolidated Financial Statements" in Item 8 for
additional information on Whiting.
Other Operating Expenses - Other operation and maintenance expenses for 2001,
2000 and 1999 were as follows (in millions):
2001 2000 1999
------------- ------------- -------------
Utility $509 $497 $477
Integrated Services 229 158 114
Investments:
Whiting 47 37 35
Other 27 29 28
International 70 5 7
Other 6 9 8
------------- ------------- -------------
$888 $735 $669
============= ============= =============
The 2001 utility increase was primarily due to higher transmission wheeling
and other costs in Alliant Energy's energy delivery business unit, increased
nuclear operating costs (partially due to a planned refueling outage at
Kewaunee in 2001), higher uncollectible customer account balances largely due
to the unusually high gas prices earlier in the year and higher costs in the
generation business unit. Such increases were partially offset by the impact
of the formation of ATC earlier in 2001, as discussed in "Electric Utility
Operations." The 2000 utility increase was primarily due to a planned
refueling outage at Kewaunee, higher expenses in the energy delivery and
generation business units, increases in administrative and general expenses
and higher energy conservation expenses. These increases were partially
offset by expenses incurred in 1999 relating to Alliant Energy's Year 2000
program.
The 2001 Integrated Services increase was primarily due to the acquisitions
of the various energy services businesses, partially offset by a one-time
charge of $4 million related to a loss on a contract in 2000. The increase
at Whiting was largely due to the increased production volumes. The
International increase was largely due to the December 2000 change in
accounting method for the China investment and the new power facilities. The
2000 Integrated Services increase was primarily due to increased expenses
from the energy marketing business, the 2000 business acquisitions and the
one-time charge of $4 million.
Depreciation and amortization expense increased $11.8 million and $43.2
million in 2001 and 2000, respectively. Contributing to both increases were
acquisitions at the non-regulated businesses and utility property additions.
The 2001 increase was partially offset by a $9 million reduction in the
estimated dismantlement cost of an offshore oil and gas platform at Whiting
and the impact of the formation of ATC earlier in 2001, as discussed in
"Electric Utility Operations." The lower dismantlement cost was due to the
successful efforts to have the facility designated as a permanent facility,
therefore reducing the amount of dismantlement required. Earnings on the
WP&L nuclear decommissioning trust fund also partially offset the 2001
increase, but contributed to the 2000 increase (approximately $20 million).
The accounting for earnings on the nuclear decommissioning trust fund results
in no net income impact. Miscellaneous, net income increases for earnings on
the trust fund and the corresponding offset is recorded through depreciation
expense at WP&L.
44
Taxes other than income taxes increased $5.9 million in 2001 primarily due to
increased gross receipts, payroll and oil and gas production taxes.
Interest Expense and Other - Alliant Energy recorded income tax and
- --------------------------
associated interest income of $0.13 per share in 2001 related to a ruling in
a tax refund case. The federal government decided in the fourth quarter of
2001 not to pursue the ruling in favor of Alliant Energy by the U.S. Court of
Appeals for the Eighth Circuit dealing with capital losses disallowed under
audit by the IRS and certain related deductions. An additional potential
refund remains a contested issue in this case. Alliant Energy cannot offer
any assurance it will be successful in obtaining this additional refund and
has not recognized any income for the potential additional refund.
Interest expense increased $16.9 million and $37.4 million in 2001 and 2000,
respectively. Contributing to both increases were higher non-regulated
borrowings to fund a large portion of its strategic growth initiatives as
Alliant Energy had non-regulated construction and acquisition expenditures of
$478 million and $762 million in 2001 and 2000, respectively. Partially
offsetting the 2001 increase was the impact of lower interest rates on
Alliant Energy's variable rate borrowings. Also contributing to the 2000
increase were higher utility borrowings and higher interest rates associated
with short-term debt outstanding.
Equity income (loss) from Alliant Energy's unconsolidated investments for
2001, 2000 and 1999 was as follows (in millions):
2001 2000 1999
------------- ------------- -------------
New Zealand/Australia $17 $3 $--
ATC (began operations 1/01/01) 15 -- --
Cargill-Alliant 7 15 5
China 2 1 (1)
Brazil (4) 3 --
Other (1) (3) (1)
------------- ------------- -------------
$36 $19 $3
============= ============= =============
Equity income from unconsolidated investments increased $17 million and $16
million in 2001 and 2000, respectively. The 2001 New Zealand/Australia
increase was primarily due to $16 million of pre-tax non-cash SFAS 133
valuation income from Southern Hydro, partially offset by the impact of a
drought in New Zealand in 2001. The lower earnings in 2001 at Alliant
Energy's electricity-trading joint venture were due to less volatile market
prices and fewer weather-related trading opportunities in 2001. The majority
of Alliant Energy's investment in China is accounted for under the
consolidation method. The lower results from Alliant Energy's Brazil
investments in 2001 were largely due to lower sales related to a severe
drought; impacts of a settlement reached in the fourth quarter of 2001
between the Brazil government and the distribution companies related to the
economic resolution of the impacts of rationing, the recovery of past costs
and the prices allowed for sales of excess generation into the spot market;
commercial energy losses; higher uncollectible customer account balances; and
higher interest expense. In connection with the settlement reached with the
government, Alliant Energy's Brazil investments recorded an asset (Alliant
Energy's share was approximately $35 million) related to legislation allowing
the companies to collect these revenues in future rates. Such revenues have
already been recognized in earnings. As a result of the Brazil drought in
2001, the government implemented a significant electricity rationing program
in June 2001 given that the large majority of generation in Brazil is
hydroelectric. Brazil has recently been receiving significant rainfall
resulting in the hydro plant water levels returning to more normal levels.
Accordingly, the government completely lifted the rationing requirements
effective March 1, 2002. Alliant Energy and its Brazilian partners are also
executing a plan designed to achieve significant reductions in commercial
energy losses and enhanced collection of customer receivables. The 2000
increase in equity income from unconsolidated investments was primarily due
to the increased earnings from Alliant Energy's electricity-trading joint
venture due to more weather-related trading opportunities in 2000 and
earnings from investments made in Brazil and New Zealand/Australia in 2000.
45
On July 1, 2000, Alliant Energy adopted SFAS 133 for its consolidated
entities. Related to the adoption, Alliant Energy recorded a $321.3 million
pre-tax gain from the designation of a portion of Alliant Energy's McLeod
holdings as trading securities. This gain related to the unrealized
appreciation in value of approximately 27 percent of Alliant Energy's McLeod
holdings that were designated as trading as of the adoption date.
In 2000 and 1999, Alliant Energy sold approximately 1.3 million and 4.3
million shares, respectively, of its investment in McLeod, resulting in
pre-tax gains of approximately $24 million and $40 million, respectively.
Miscellaneous, net income decreased $21.8 million and increased $14.1 million
in 2001 and 2000, respectively. The 2001 decrease was largely due to higher
non-cash SFAS 133 valuation charges of $33 million related to the net change
in the value of the McLeod trading securities and the derivative component of
Resources' exchangeable senior notes, reduced nuclear decommissioning trust
fund earnings and lower gains from asset sales. The decreases were partially
offset by higher interest income, including $10 million and $4 million from
tax settlements in 2001 and 2000, respectively. Alliant Energy realized $4.0
million, $2.2 million and $5.1 million of income from weather hedges in 2001,
2000 and 1999, respectively. The 2000 increase was primarily due to a change
of $102 million in the value of the derivative component of Resources'
exchangeable senior notes and increased interest income (including nuclear
decommissioning trust fund earnings and $4 million recognized from a tax
settlement at IESU), partially offset by a decrease of $103 million in the
value of the McLeod trading securities and a decrease of $4 million in gains
from sales of certain investments at Whiting and New Zealand.
Refer to Note 10(a) of Alliant Energy's "Notes to Consolidated Financial
Statements" in Item 8 for additional information related to the exchangeable
senior notes embedded derivative, the McLeod trading securities and the
cumulative effect of a change in accounting principle.
Income Taxes - The effective income tax rates for Alliant Energy were 23.8
- ------------
percent, 38.1 percent and 37.2 percent in 2001, 2000 and 1999, respectively.
Refer to Note 5 of Alliant Energy's "Notes to Consolidated Financial
Statements" in Item 8 for additional information.
IESU RESULTS OF OPERATIONS
Overview - IESU's earnings available for common stock decreased $3.5 million
- --------
and increased $8.0 million in 2001 and 2000, respectively. The 2001 decrease
was primarily due to increased other operation and maintenance expenses and
lower electric and gas margins, partially offset by a lower effective income
tax rate and higher interest income. The 2000 increase was primarily due to
reduced other operation and maintenance expenses, higher electric and gas
margins and a lower effective income tax rate, partially offset by increased
depreciation and amortization expense. Higher interest income, largely due
to a tax settlement realized in 2000, also contributed to the 2000 increase.
Weather did not have a material impact on IESU's 2001 results as the benefits
from a colder than normal first quarter, high humidity levels for a portion
of the summer and income realized from a weather hedge IESU had in place in
the fourth quarter largely offset the impact of an extremely mild fourth
quarter.
46
Electric Utility Operations - Electric margins and MWh sales for IESU for
- ---------------------------
2001, 2000 and 1999 were as follows (in thousands):
Revenues and Costs MWhs Sold
--------------------------------------------------- ---------------------------------------------
2001 2000 * 1999 ** 2001 2000 * 1999 **
---------- ----------- ------- ----------- ------- -------- --------- -------- -------- -------
Residential $248,271 $236,084 5% $230,422 2% 2,801 2,742 2% 2,685 2%
Commercial 194,187 182,068 7% 176,251 3% 2,747 2,701 2% 2,658 2%
Industrial 201,430 188,734 7% 181,740 4% 4,809 5,053 (5%) 5,072 --
---------- ----------- ----------- -------- --------- --------
Total from ultimate
customers 643,888 606,886 6% 588,413 3% 10,357 10,496 (1%) 10,415 1%
Sales for resale 42,331 31,046 36% 28,479 9% 1,075 1,044 3% 1,392 (25%)
Other 14,707 13,527 9% 11,058 22% 38 40 (5%) 40 --
---------- ----------- ----------- -------- --------- --------
Total revenues/sales 700,926 651,459 8% 627,950 4% 11,470 11,580 (1%) 11,847 (2%)
======== ========= ========
Electric production
fuels expense 114,550 100,816 14% 80,079 26%
Purchased-power expense 127,588 83,575 53% 82,402 1%
---------- ----------- -----------
Margin $458,788 $467,068 (2%) $465,469 --
========== =========== ===========
* Reflects the percent change from 2000 to 2001. ** Reflects the percent change from 1999 to 2000.
Electric margin decreased $8.3 million, or 2%, and increased $1.6 million for
2001 and 2000, respectively. The 2001 decrease was primarily due to
increased purchased-power capacity costs, reduced recoveries of $4 million in
concurrent and previously deferred expenditures for Iowa-mandated energy
efficiency expenditures and lower industrial sales largely due to impacts of
a slowing economy. The recovery for energy efficiency programs in Iowa is in
accordance with IUB orders (a portion of these recoveries is offset as they
are also amortized to expense in other operation and maintenance expense).
These items were partially offset by increased residential and commercial
sales due to more favorable weather conditions in 2001 compared to 2000 and
continued retail customer growth.
The 2000 increase was primarily due to increased sales to retail customers
due to continued economic growth in IESU's service territory, partially
offset by the impact of a 1999 change in estimate of utility services
rendered but unbilled at month-end of approximately $5 million, milder
weather conditions in 2000 compared to 1999 and reduced recoveries of $3.8
million in concurrent and previously deferred expenditures for Iowa-mandated
energy efficiency programs.
Refer to Note 1(j) of Alliant Energy's "Notes to Consolidated Financial
Statements" in Item 8 for information relating to utility fuel cost
recovery. Refer to "Utility Industry Review - Rates and Regulatory Matters -
IP&L" for information on IP&L's rate matters.
Gas Utility Operations - Gas margins and Dth sales for IESU for 2001, 2000
- ----------------------
and 1999 were as follows (in thousands):
Revenues and Costs Dths Sold
------------------------------------------------- -------------------------------------------
2001 2000 * 1999 ** 2001 2000 * 1999 **
---------- ---------- ------- ---------- ------- --------- ------- ------ -------- --------
Residential $126,833 $117,132 8% $88,302 33% 13,888 14,829 (6%) 13,778 8%
Commercial 65,029 57,671 13% 40,459 43% 8,341 8,753 (5%) 8,077 8%
Industrial 17,814 15,377 16% 11,543 33% 3,423 3,063 12% 3,291 (7%)
Transportation/other 10,593 6,001 77% 5,521 9% 10,609 10,061 5% 10,236 (2%)
---------- ---------- ---------- --------- ------- --------
Total revenues/sales 220,269 196,181 12% 145,825 35% 36,261 36,706 (1%) 35,382 4%
========= ======= ========
Cost of gas sold 164,747 136,352 21% 88,308 54%
---------- ---------- ----------
Margin $55,522 $59,829 (7%) $57,517 4%
========== ========== ==========
* Reflects the percent change from 2000 to 2001. ** Reflects the percent change from 1999 to 2000.
47
Gas revenues and cost of gas sold increased significantly for 2001 and 2000
due to the large increase in natural gas prices in the first half of 2001 and
last half of 2000. Such increases alone had no impact on IESU's gas margin
given its rate recovery mechanism for gas costs. Gas margin decreased $4.3
million, or 7%, and increased $2.3 million, or 4%, for 2001 and 2000,
respectively. The 2001 decrease was largely due to lower retail sales
primarily related to unusually high gas prices earlier in 2001 as some
customers either chose alternative fuel sources or used less natural gas, the
impact of the slowing economy and decreased energy efficiency recoveries.
The 2000 increase was largely due to more favorable weather conditions.
Refer to Note 1(j) of Alliant Energy's "Notes to Consolidated Financial
Statements" in Item 8 for information relating to natural gas cost recovery.
Other Operating Expenses - IESU's other operation and maintenance expenses
- ------------------------
increased $15.7 million and decreased $7.2 million for 2001 and 2000,
respectively. The 2001 increase was primarily due to higher: transmission
wheeling and other energy delivery costs; maintenance costs at IESU's
fossil-plants; uncollectible customer account balances largely due to the
unusually high gas prices earlier in the year and a downturn in the economy;
and nuclear operating costs. These items were partially offset by a decrease
of $3.7 million in energy efficiency expenses and one-time fees in 2000
related to the transfer from the MAPP reliability region to the MAIN region.
The 2000 decrease was primarily due to a decrease of $3.5 million in energy
efficiency expenses, expenses incurred in 1999 relating to IESU's Year 2000
program and lower employee benefits costs. These items were partially offset
by higher nuclear operating costs and the one-time fees related to the
transfer from the MAPP reliability region to the MAIN region in 2000.
Depreciation and amortization expenses increased $2.4 million and $7.0
million for 2001 and 2000, respectively, primarily due to property additions
and amortization of software.
Interest Expense and Other - Miscellaneous, net income increased $7.7 million
- --------------------------
and $1.3 million for 2001 and 2000, respectively. The 2001 increase was
primarily due to higher interest income and income from a weather hedge IESU
had in place in the fourth quarter of 2001. IESU realized $5 million and $4
million in interest income from tax settlements in 2001 and 2000,
respectively. In 2000, the tax settlement interest income was partially
offset by lower other interest income.
Income Taxes - The effective income tax rates were 33.9%, 40.2% and 42.6% in
- ------------
2001, 2000 and 1999, respectively. Refer to Note 5 of IESU's "Notes to
Consolidated Financial Statements" in Item 8 for additional information.
WP&L RESULTS OF OPERATIONS
Overview - WP&L's earnings available for common stock increased $2.1 million
- --------
and $0.6 million in 2001 and 2000, respectively. The 2001 increase was
primarily due to higher electric margins and a lower effective income tax
rate, partially offset by increased operating expenses and lower gas
margins. The 2000 increase was primarily due to higher electric margins and
a reduced effective income tax rate, largely offset by increased operation
and maintenance, depreciation and amortization and interest expenses.
Weather did not have a material impact on WP&L's 2001 results as the benefits
from a colder than normal first quarter, high humidity levels for a portion
of the summer and income realized from a weather hedge WP&L had in place in
the fourth quarter largely offset the impact of an extremely mild fourth
quarter.
48
Electric Utility Operations - Electric margins and MWh sales for WP&L for
- ---------------------------
2001, 2000 and 1999 were as follows (in thousands):
Revenues and Costs MWhs Sold
--------------------------------------------------- -------------------------------------------
2001 2000 * 1999 ** 2001 2000 * 1999 **
---------- ----------- ------- ----------- -------- -------- -------- ------- -------- -------
Residential $248,128 $229,668 8% $213,496 8% 3,318 3,151 5% 3,111 1%
Commercial 138,269 127,199 9% 116,947 9% 2,122 2,031 4% 1,980 3%
Industrial 207,791 190,085 9% 171,118 11% 4,538 4,688 (3%) 4,570 3%
---------- ----------- ----------- -------- -------- -------
Total from ultimate
customers 594,188 546,952 9% 501,561 9% 9,978 9,870 1% 9,661 2%
Sales for resale 131,187 115,715 13% 102,751 13% 3,524 3,228 9% 3,252 (1%)
Other 28,075 29,524 (5%) 22,295 32% 61 63 (3%) 54 17%
---------- ----------- ----------- -------- -------- -------
Total revenues/sales 753,450 692,191 9% 626,607 10% 13,563 13,161 3% 12,967 1%
======== ======== =======
Electric production
fuels expense 120,722 113,208 7% 110,521 2%
Purchased-power expense 217,306 146,939 48% 107,598 37%
---------- ----------- -----------
Margin $415,422 $432,044 (4%) $408,488 6%
========== =========== ===========
* Reflects the percent change from 2000 to 2001. ** Reflects the percent change from 1999 to 2000.
Due to the formation of ATC on January 1, 2001, electric margin in 2001
included wheeling expenses from ATC of $30 million. Such expenses were
offset by equity income (WP&L accounts for its investment in ATC under the
equity method), reduced other operation and maintenance expenses and lower
depreciation expense, resulting in no significant net income impact due to
the formation of ATC. On a comparable basis, electric margin increased $13.8
million, or 3%, and $23.6 million, or 6%, during 2001 and 2000,
respectively. The 2001 increase was primarily due to lower purchased-power
and fuel costs impacting margin, increased residential and commercial sales
due to more favorable weather conditions in 2001 compared to 2000 and
continued retail customer growth. These items were partially offset by $10
million of income recorded in 2000 for a change in estimate of utility
services rendered but unbilled at month-end and lower industrial sales,
largely due to impacts of a slowing economy.
The 2000 increase was primarily due to increased sales to retail customers
due to continued economic growth in WP&L's service territory, the favorable
$10 million change in estimate of utility services rendered but unbilled at
month-end and increased energy conservation revenues. These items were
partially offset by the impact of milder weather conditions in 2000 compared
to 1999 and higher purchased-power and fuel costs.
Refer to Note 1(j) of Alliant Energy's "Notes to Consolidated Financial
Statements" in Item 8 for information relating to utility fuel cost
recovery. Refer to "Utility Industry Review - Rates and Regulatory Matters -
WP&L" for information on WP&L's rate filings.
Gas Utility Operations - Gas margins and Dth sales for WP&L for 2001, 2000
- ----------------------
and 1999 were as follows (in thousands):
Revenues and Costs Dths Sold
------------------------------------------------ ------------------------------------------
2001 2000 * 1999 ** 2001 2000 * 1999 **
---------- --------- ------- --------- -------- -------- -------- ------- -------- -------
Residential $107,673 $96,204 12% $69,662 38% 11,754 12,769 (8%) 12,070 6%
Commercial 58,658 54,512 8% 35,570 53% 7,572 8,595 (12%) 7,771 11%
Industrial 8,907 8,581 4% 6,077 41% 1,197 1,476 (19%) 1,520 (3%)
Transportation/other 31,625 5,855 440% 9,461 (38%) 16,866 13,680 23% 13,237 3%
---------- --------- --------- -------- -------- --------
Total revenues/sales 206,863 165,152 25% 120,770 37% 37,389 36,520 2% 34,598 6%
======== ======== ========
Cost of gas sold 153,823 107,131 44% 64,073 67%
---------- --------- ---------
Margin $53,040 $58,021 (9%) $56,697 2%
========== ========= =========
* Reflects the percent change from 2000 to 2001. ** Reflects the percent change from 1999 to 2000.
49
Gas revenues and cost of gas sold increased significantly for 2001 and 2000
due to the large increase in natural gas prices in the first half of 2001 and
last half of 2000. Due to WP&L's rate recovery mechanisms for gas costs,
these increases alone had little impact on gas margin. Gas margin decreased
$5.0 million, or 9%, and increased $1.3 million, or 2%, during 2001 and 2000,
respectively. The 2001 decrease was largely due to lower retail sales
primarily related to unusually high gas prices earlier in 2001 as some
customers either chose alternative fuel sources or used less natural gas, the
impact of the slowing economy and losses associated with current commodity
costs, which are shared by ratepayers and shareowners. The 2000 increase was
largely due to more favorable weather conditions in the 2000 heating season
compared to 1999, partially offset by reduced energy conservation revenues.
WP&L realized pre-tax income of $2 million, $2 million and $5 million from
weather hedges it had in place in 2001, 2000 and 1999, respectively, which is
recorded in "Miscellaneous, net" in WP&L's Consolidated Statements of
Income. Refer to Note 1(j) of Alliant Energy's "Notes to Consolidated
Financial Statements" in Item 8 for information relating to natural gas cost
recovery.
Other Operating Expenses - Due to the formation of ATC in 2001, WP&L incurred
- ------------------------
$10 million of operation and maintenance expenses in 2000 that were not
incurred in 2001. On a comparable basis, other operation and maintenance
expenses increased $7.6 million and $16.8 million for 2001 and 2000,
respectively. The 2001 increase was primarily due to higher nuclear
operating costs (partially due to a planned refueling outage at Kewaunee in
the fourth quarter of 2001), higher uncollectible customer account balances
largely due to the unusually high gas prices earlier in the year and higher
other administrative and general costs. These items were partially offset by
decreased fossil-plant maintenance expenses. The 2000 increase was primarily
due to a planned refueling outage at Kewaunee, higher expenses in the energy
delivery business unit, increased energy conservation expense and increased
maintenance expenses. The 2000 increases were partially offset by expenses
incurred in 1999 relating to WP&L's Year 2000 program.
Depreciation and amortization expense decreased $10.8 million and increased
$26.9 million for 2001 and 2000, respectively. The 2001 decrease was
primarily due to the impact of the formation of ATC and decreased earnings on
the nuclear decommissioning trust fund, partially offset by increased expense
due to property additions. The 2000 increase was primarily due to increased
earnings in the nuclear decommissioning trust fund of approximately $20
million, property additions and higher amortization expense. The accounting
for earnings on the nuclear decommissioning trust funds results in no net
income impact. Miscellaneous, net income is increased for earnings on the
trust fund, which is offset in depreciation expense.
Taxes other than income taxes increased $3.3 million for 2001 due to
increased gross receipts and payroll taxes.
Interest Expense and Other - Interest expense increased $3.7 million in 2000
- --------------------------
due to higher interest rates and borrowings outstanding.
Equity income from unconsolidated investments increased $15.0 million for
2001, largely due to ATC beginning operations on January 1, 2001.
Miscellaneous, net income decreased $3.5 million and increased $18.4 million
in 2001 and 2000, respectively, primarily due to differences in earnings in
the nuclear decommissioning trust fund. WP&L realized $2 million, $2 million
and $5 million of income from weather hedges in 2001, 2000 and 1999,
respectively.
Income Taxes - The effective income tax rates were 35.9%, 37.5% and 39.2% in
- ------------
2001, 2000 and 1999, respectively. Refer to Note 5 of WP&L's "Notes to
Consolidated Financial Statements" in Item 8 for additional information.
50
LIQUIDITY AND CAPITAL RESOURCES
Overview - Given Alliant Energy's financing flexibility, including access to
- --------
both the debt and equity securities markets, management believes it has the
necessary financing capabilities in place to adequately finance its capital
requirements for the foreseeable future. Alliant Energy's capital
requirements are primarily attributable to Resources' acquisition and
investment opportunities, its utility subsidiaries' construction and
acquisition programs and its debt maturities. Alliant Energy expects to meet
its future capital requirements with cash generated from operations, sales of
assets and external financings. The level of cash generated from operations
is partially dependent on economic conditions, legislative activities and
timely regulatory recovery of utility costs. Liquidity and capital resources
are also affected by costs associated with environmental and regulatory
issues.
In October 2001, Alliant Energy and Resources received SEC approval for their
ongoing program of external financing, credit support arrangements and other
related proposals for the period through December 31, 2004. Among other
things, the approval authorized Alliant Energy directly or through financing
subsidiaries to issue common and preferred stock, unsecured long-term debt
securities and other equity-linked securities up to an amount of $1.5
billion; to provide guarantees and credit support for obligations of its
subsidiaries up to an amount of $3 billion; to enter into hedging
transactions to manage interest rate costs and risk exposure; and to increase
its aggregate investment limit in EWGs and FUCOs to 100 percent of
consolidated retained earnings. The approval, among other things, also
authorized Resources to provide guarantees and credit support for obligations
of non-utility subsidiaries up to an amount of $600 million outstanding at
any one time and to expend up to $800 million to construct or acquire energy
assets that are incidental to the energy marketing and oil and gas
productions of its subsidiaries.
Based on current expectations, Alliant Energy plans to invest approximately
$4 billion in various capital projects and investments in 2002-2006,
including domestic and international acquisitions, generation projects and
environmental compliance initiatives. These various investments are
described in detail below.
Cash Flows - In 2001, Alliant Energy's cash flows from financing activities
- ----------
decreased $408 million primarily due to net changes in amount of debt issued
and retired, partially offset by proceeds from the issuance of common stock
in 2001; and cash flows used for investing activities decreased $272 million
primarily due to lower non-regulated investments. In 2000, Alliant Energy's
cash flows from financing activities increased $507 million primarily as a
result of $402.5 million of exchangeable senior notes issued to fund
investments in the non-regulated businesses, including a $347 million
investment in Brazil.
In 2001, IESU's cash flows from operating activities decreased $22 million
primarily due to customer refunds associated with MGP insurance proceeds;
cash flows used for financing activities decreased $39 million primarily due
to net changes in the amount of debt issued and retired; and cash flows used
for investing activities increased $16 million due to increased levels of
construction expenditures. In 2000, IESU's cash flows from operating
activities increased $49 million due to changes in working capital. IESU's
cash flows used for financing activities decreased $17 million primarily due
to increased common stock dividends in 1999 as no dividend payments were made
in the last three quarters of 1998 due to merger-related tax considerations.
As a result, the dividend payment in the first quarter of 1999 was larger
than IESU's historical quarterly payment. Cash flows used for investing
activities increased $13 million in 2000 due to increased levels of
construction expenditures.
In 2001, WP&L's cash flows from operating activities decreased $40 million
due to changes in working capital. In 2001, WP&L's cash flows used for
financing activities increased $14 million due to common stock dividends paid
in 2001 as no dividends were declared in 2000 due to management of WP&L's
capital structure, partially offset by a capital contribution of $35 million
by the parent company and changes in debt issued and retired. Cash flows
used for investing activities decreased $57 million in 2001 due to proceeds
received from the transfer of WP&L's transmission assets to ATC which were
partially offset by increased levels of construction expenditures. In 2000,
WP&L's cash flows used for financing activities increased $20 million due to
51
changes in debt issued and retired and a capital contribution of $30 million
in 1999 from the parent company, partially offset by no common stock
dividends declared in 2000 due to management of its capital structure.
Equity - In November 2001, Alliant Energy completed a public offering of
- ------
9.775 million shares of its common stock at a price per share to the public
of $28.00. The net proceeds of approximately $263 million were used to repay
short-term debt.
Long-Term Debt - At December 31, 2001, Resources had available $450 million
- --------------
of committed bank lines of credit extending through October 2003 for direct
borrowing or to support commercial paper, of which $384 million of commercial
paper was outstanding. Commitment fees are paid to maintain this facility
and there were no conditions restricting the unused credit at December 31,
2001. Currently, Resources anticipates this facility will be renewed upon
expiration.
This credit facility agreement, as well as the $150 million facility
discussed below in "Short-Term Debt," contains various covenants, including
requirements that Alliant Energy maintain a consolidated debt-to-capital
ratio of less than 65 percent and a consolidated net worth of at least $1.4
billion. The debt component of the capital ratio includes long- and
short-term debt, as well as guarantees and capital lease obligations, and the
common equity component excludes accumulated other comprehensive income
(loss). Alliant Energy's debt-to-capital ratio and net worth at December 31,
2001 were 58 percent and $1.92 billion, respectively.
At December 31, 2001, Alliant Energy, IESU and WP&L had $685 million, $93
million and $150 million, respectively, of long-term debt that will mature
prior to December 31, 2006. Depending on market conditions, it is
anticipated that a majority of the maturing debt will be refinanced with the
issuance of long-term securities.
Refer to Note 8(b) of the "Notes to Consolidated Financial Statements" in
Item 8 for additional information on long-term debt, including issuances by
Resources and IESU in 2001.
Short-Term Debt - At December 31, 2001, Resources had available $150 million
- ---------------
of committed bank lines of credit extending through October 2002 for direct
borrowing or to support commercial paper, none of which was outstanding at
December 31, 2001. Commitment fees are paid to maintain this facility and
there were no conditions restricting the unused credit at December 31, 2001.
Currently, Resources anticipates this facility will be renewed upon
expiration.
At December 31, 2001, Alliant Energy also had $300 million of committed bank
lines of credit extending through October 2002 available for direct borrowing
or to support commercial paper, of which $68 million of commercial paper was
outstanding. Commitment fees are paid to maintain these lines and there were
no conditions restricting the unused lines of credit at December 31, 2001.
Alliant Energy anticipates that this facility will be renewed upon
expiration. Alliant Energy has agreements with several financial
institutions to periodically borrow from uncommitted "as-offered" credit
lines in lieu of commercial paper. There are no commitment fees associated
with these agreements and there were no borrowings outstanding under these
agreements at December 31, 2001.
In addition to funding working capital needs, the availability of short-term
financing provides the companies flexibility in the issuance of long-term
securities. The level of short-term borrowing fluctuates based on seasonal
corporate needs, the timing of long-term financing and capital market
conditions. At December 31, 2001, IESU, WP&L and IPC were authorized by the
applicable federal or state regulatory agency to issue short-term debt of
$150 million, $240 million and $75 million, respectively.
Alliant Energy anticipates that short-term debt will continue to be available
at reasonable costs due to current ratings by credit rating services. Refer
to Note 8(a) of Alliant Energy's "Notes to Consolidated Financial Statements"
in Item 8 for additional information on short-term debt, including
information on the utility money pool.
52
Debt Ratings - Access to the long-term and short-term capital and credit
- ------------
markets, and costs of external financing, are dependent on creditworthiness.
The debt ratings of Alliant Energy and certain subsidiaries by Moody's and
Standard & Poor's were as follows at December 31, 2001:
Moody's Standard & Poor's
-------------- --------------------
IESU Secured long-term debt A1 A
Unsecured long-term debt A2 BBB+
WP&L Secured long-term debt Aa2 A+
Unsecured long-term debt Aa3 A-
IPC Secured long-term debt A1 A
Resources Commercial paper (a) P-2 A-2
Unsecured long-term debt (a) Baa1 BBB+
Alliant Energy Commercial paper (b) P-2 A-2
(a) Resources' debt is fully and unconditionally guaranteed by Alliant
Energy.
(b) IP&L and WP&L participate in a utility money pool that is funded, as
needed, through the issuance of commercial paper by Alliant Energy.
Interest expense and other fees are allocated based on borrowing amounts.
The PSCW has restricted WP&L from lending money to non-utility affiliates
and non-Wisconsin utilities. As a result, WP&L can only borrow money from
the utility money pool.
Ratings Triggers - The long-term debt of Alliant Energy and its subsidiaries
- ----------------
is not subject to any repayment requirements as a result of credit rating
downgrades or so-called "ratings triggers." However, certain lease
agreements of Alliant Energy do contain such ratings triggers. The threshold
for these triggers varies among the applicable leases. If the payments were
accelerated under all the affected leases it would result in accelerated
payments of less than $100 million.
Sale of Accounts Receivable - Refer to Note 4 of the "Notes to Consolidated
- ---------------------------
Financial Statements" in Item 8 for information on Alliant Energy's sale of
accounts receivable program.
Financial Guarantees and Commitments - At December 31, 2001, Alliant Energy
- ------------------------------------
had certain off-balance sheet financial guarantees and commitments
outstanding related to Alliant Energy's electricity-trading joint venture and
unconsolidated affiliate and third-party financing arrangements. Refer to
Note 11(d) of Alliant Energy's "Notes to Consolidated Financial Statements"
in Item 8 for additional information.
Alliant Energy has various synthetic leases related to the financing of its
corporate headquarters, corporate aircraft, certain utility railcars and a
utility radio dispatch system. Certain financings involve the use of
unconsolidated structured finance or special purpose entities. Alliant
Energy believes these financings are not material to its liquidity or capital
resources. Alliant Energy also uses several consolidated special purpose
entities for its utility sale of accounts receivable program. Alliant Energy
does not use special purpose entities for any other purpose. These
financings are all fully reported in Notes 3 and 4 of the "Notes to
Consolidated Financial Statements" in Item 8.
Credit Risk - Credit risk is inherent in Alliant Energy's operations and
- -----------
relates to the risk of loss resulting from non-performance of contractual
obligations by a counterparty. Alliant Energy maintains credit risk
oversight and sets limits and policies with regards to its counterparties,
which management believes minimizes its overall credit risk exposure.
However, there is no assurance that such policies will protect Alliant Energy
against all losses from non-performance by counterparties.
Although Alliant Energy had modest contracts with Enron, their bankruptcy has
had an insignificant impact on Alliant Energy's day-to-day operations. In
the fourth quarter of 2001, Alliant Energy recorded a pre-tax charge of $5
million related to outstanding contracts with Enron. Alliant Energy has
replaced certain Enron contracts by entering into contracts with
credit-worthy counterparties where deemed necessary.
53
Environmental - Alliant Energy's pollution abatement programs are subject to
- -------------
continuing review and are periodically revised due to changes in
environmental regulations, construction plans and escalation of construction
costs. While management cannot precisely forecast the effect of future
environmental regulations on operations, it has taken steps to anticipate the
future while also meeting the requirements of current environmental
regulations.
Wisconsin facilities are subject to state and federal requirements of the
CAA, including meeting ambient air quality standards. Based on modeling
conducted under the CAA by the Wisconsin DNR, an eastern portion of Wisconsin
along Lake Michigan, in which WP&L's Edgewater Generating Station is located,
has been designated as non-attainment with respect to the one-hour ozone air
quality standard. The Wisconsin DNR has developed a rate-of-progress (ROP)
rule to bring the area into attainment with the standard. The rule requires
Edgewater Generating Station to meet annual NOx emission reductions beginning
in May 2003 and ending in May 2007. Thereafter, the May 2007 ozone emission
standard will apply to the facility. The Wisconsin DNR will determine the
success of the ROP rule through modeling. To date, the modeling data still
indicates the area is non-attainment with the one-hour ozone standard
although recent data indicates the air quality is improving. Based on
existing technology, Alliant Energy estimates the capital investments
required to meet the ROP rule through 2007 will be approximately $15
million.
Alliant Energy is also pursuing voluntary NOx reductions and has developed a
unique and cost effective technology to reduce NOx emissions from power
generating facilities. The DOE has awarded Alliant Energy a $2.5 million
federal grant for its innovation for leading edge clean coal
technologies.
Revisions to the Wisconsin Administrative Code have been proposed that could
have a significant impact on WP&L's operation of its Wisconsin generating
facilities. The proposed revisions would affect the amount of heat that
WP&L's generating stations can discharge into Wisconsin waters. WP&L cannot
presently predict the final outcome of the revisions but believes that, as
the revisions are currently proposed, capital investments and/or
modifications required to meet the proposed discharge limits could be
significant.
In 2000, the EPA made a regulatory determination in favor of controlling
Hazardous Air Pollutant Emissions (HAPs) (including mercury) from electric
utilities, which was challenged by utility industry groups in two lawsuits
filed in February 2001. The court has since ruled in favor of the EPA in
both cases. The EPA is currently developing regulations that are expected to
be in place by 2004, with a compliance deadline of 2007. Although the level
of control of mercury and other HAPs from generating plants is uncertain at
this time, Alliant Energy believes that capital investments and/or
modifications that may be required to control these emissions could be
significant.
Also in 2000, the WNRB voted to allow the Wisconsin DNR to proceed with
rulemaking to reduce mercury emissions. WP&L and the other Wisconsin Utility
Association members have recommended to the WNRB a workable state-level
mercury emissions control program that protects reliability and does not
disadvantage Wisconsin when federal mercury rules are later developed. The
Wisconsin DNR issued the proposed rule in May 2001, which is expected to be
modified in late 2002. Alliant Energy cannot presently predict the final
outcome of the regulation, but believes that required capital investments
and/or modifications to achieve compliance with the regulation could be
significant.
In December 2000 and February 2001, the EPA requested certain information
relating to the historical operation of WP&L's major coal-fired generating
units in Wisconsin. WP&L has responded to both requests and has not yet
received a response from the EPA. In some cases involving similar EPA
requests from other electric generating facilities, penalties and capital
expenditures have resulted. The U.S. Department of Justice is currently
conducting a review of this enforcement initiative to assess whether it is
consistent with the CAA. In addition, on a broader basis, the EPA is
assessing the impact of investments in utility generation capacity, energy
efficiency and environmental protection, as well as assessing proposed
multi-pollutant legislation. Results of these reviews are expected in
mid-2002. Alliant Energy cannot presently predict what impact, if any, these
54
issues may have on its financial condition or results of operations.
However, any required remedial action resulting from these matters could be
significant.
Refer to Note 11(e) of Alliant Energy's "Notes to Consolidated Financial
Statements" in Item 8 for further discussion of environmental matters.
Construction and Acquisition Expenditures - Capital expenditures, investments
- -----------------------------------------
and financing plans are continually reviewed, approved and updated as part of
Alliant Energy's ongoing strategic planning and annual budgeting processes.
In addition, material capital expenditures and investments are subject to a
rigorous cross-functional review prior to approval. Changes in Alliant
Energy's anticipated construction and acquisition expenditures may result from
a number of reasons including economic conditions, regulatory requirements,
ability to obtain adequate and timely rate relief, the level of Alliant
Energy's profitability, Alliant Energy's desire to maintain investment-grade
credit ratings and reasonable capitalization ratios, variations in sales,
changing market conditions and new opportunities. Alliant Energy believes
its capital control processes adequately reduce the risks associated with
large capital expenditures and investments. Alliant Energy's utility
subsidiaries anticipate financing their construction expenditures, including
new electric generation facilities, during 2002-2006 through internally
generated funds supplemented, when necessary, by outside financing. Funding
for Resources' construction and acquisition expenditures over that same
period of time is expected to be accomplished with a combination of external
financings, sales of assets and internally generated funds. Alliant Energy
believes it has a strong financial position that provides it the ability to
issue external financings at competitive rates.
Alliant Energy currently anticipates 2002 construction and acquisition
expenditures will be approximately $800 million, consisting of $400 million
for its utility operations, $170 million for oil and gas investments, $100
million for non-regulated generation investments, $55 million for
energy-related international investments and $75 million for other business
development initiatives at Resources. During 2003-2006, Alliant Energy
currently anticipates construction and acquisition expenditures of
approximately $1.9 billion for its utility operations, $960 million for
non-regulated generation investments, $260 million for oil and gas
investments, $200 million for energy-related international investments and
$310 million for other business development initiatives at Resources. These
amounts do not include any potential capital expenditures Alliant Energy may
make for its Power Iowa domestic generation program given the uncertainty of
such investments, including if Alliant Energy would own the generating plants
or purchase the power from plants that were owned by an independent entity.
IP&L currently anticipates 2002 utility construction and acquisition
expenditures will be approximately $242 million. During 2003-2006, IP&L
currently anticipates to spend approximately $1.2 billion for utility
construction and acquisition expenditures. These amounts do not include any
potential capital expenditures IP&L may make for its Power Iowa domestic
generation program given the uncertainty of such investments, including if
IP&L would own the generating plants or purchase the power from plants that
were owned by an independent entity. WP&L currently anticipates 2002 utility
construction and acquisition expenditures will be approximately $158
million. During 2003-2006, WP&L currently anticipates to spend approximately
$674 million for utility construction and acquisition expenditures.
Alliant Energy expects to pursue various potential domestic and international
business development opportunities and is devoting resources to such
efforts. International investments may carry a higher level of risk than
Alliant Energy's traditional domestic utility or non-regulated investments.
Such risks could include foreign government actions, economic and currency
risks and others. However, Alliant Energy will strive to select investments
where risks are both understood and manageable.
Previously, aggregate investments of Alliant Energy in EWGs and FUCOs were
limited to 50 percent of Alliant Energy's consolidated retained earnings
under PUHCA. In May 2001, Alliant Energy filed an application with the SEC
to request, among other things, aggregate investment authority 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
55
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
certifications (one of the four certifications needed has been received thus
far). At December 31, 2001, Alliant Energy's remaining investment authority
under the 100 percent of consolidated retained earnings order was
approximately $50 million of future EWG and/or FUCO investments in addition
to certain commitments already made. If Alliant Energy is unable to attain
the increase to $1.75 billion in aggregate investment authority, it could
limit its ability to finance additional investments in EWGs and FUCOs with
financings that have recourse to the parent company.
Under WUHCA, there is an asset cap provision that limits certain non-utility
assets in a utility holding company to 25 percent of utility assets. Under
the provisions of the law, assets related to the provision of various
energy-related, environmental engineering and telecommunications services are
not included in the calculation of either utility or non-utility assets.
OTHER MATTERS
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.
Interest Rate Risk - Alliant Energy is exposed to risk resulting from changes
in interest rates as a result of its issuance of variable-rate debt and its
utility accounts receivable sale program. Alliant Energy manages its
interest rate risk by limiting its variable interest rate exposure and by
continuously monitoring the effects of market changes on interest rates.
Alliant Energy has also historically used interest rate swap and interest
rate forward agreements to assist in the management of its interest
exposure. In the event of significant interest rate fluctuations, management
would take actions to minimize the effect of such changes on Alliant Energy's
results of operations and financial condition. Assuming no change in Alliant
Energy's, IP&L's and WP&L's consolidated financial structure, if variable
interest rates were to average 100 basis points higher (lower) in 2002 than
in 2001, interest expense and pre-tax earnings would increase (decrease) by
approximately $8.1 million, $1.0 million and $1.4 million, respectively.
These amounts were determined by considering the impact of a hypothetical 100
basis points increase (decrease) in interest rates on Alliant Energy's,
IP&L's and WP&L's consolidated variable-rate debt held and the amount
outstanding under their accounts receivable sale program at December 31,
2001.
Commodity Risk - Non-trading - Alliant Energy is exposed to the impact of
market fluctuations in the commodity price and transportation costs of
electricity, natural gas and oil products it markets. Alliant Energy employs
established policies and procedures to manage its risks associated with these
market fluctuations including the use of various commodity derivatives.
Alliant Energy's exposure to commodity price risks in its utility business is
significantly mitigated by the current rate making structures in place for
the recovery of its electric fuel and purchased energy costs as well as its
cost of natural gas purchased for resale. Refer to Note 1(j) of Alliant
Energy's "Notes to Consolidated Financial Statements" in Item 8 for further
discussion.
WP&L periodically utilizes gas commodity derivative instruments to reduce the
impact of price fluctuations on gas purchased and injected into storage
during the summer months and withdrawn and sold at current market prices
during the winter months. The gas commodity swaps in place approximate the
forecasted storage withdrawal plan during this period. Therefore, market
price fluctuations that result in an increase or decrease in the value of the
physical commodity are substantially offset by changes in the value of the
gas commodity swaps. To the extent actual storage withdrawals vary from
forecasted withdrawals, WP&L has physical commodity price exposure. A 10
percent increase (decrease) in the price of gas would not have a significant
impact on the combined fair market value of the gas in storage and related
swap arrangements in place at December 31, 2001.
56
IP&L also utilizes natural gas commodity derivative instruments to mitigate
the risk of rising prices. Since the IUB allows for the prudently incurred
costs associated with these instruments and the underlying supply of natural
gas to be recovered from ratepayers, IP&L does not have significant natural
gas commodity risk exposure.
Whiting is exposed to market risk in the pricing of its oil and gas
production. Historically, prices received for oil and gas production have
been volatile because of seasonal weather patterns, supply and demand
factors, transportation availability and price, and general economic
conditions. Worldwide political developments have historically also had an
impact on oil prices. Whiting periodically utilizes oil and gas swaps,
forward contracts and options to mitigate the impact of oil and gas price
fluctuations. Historically, Alliant Energy has hedged approximately 50
percent of its oil and gas volumes. The actual level of hedging utilized is
based on management's assessment of the prudency of hedging given current
market conditions and other factors and is reviewed on an ongoing basis.
Whiting mitigated some of the impact of the decrease in prices in the latter
half of 2001 by locking in a portion of its volumes at prices higher than the
prevailing market prices. Based on Whiting's estimated oil and gas sales in
2002, and the forward contracts outstanding for such period, a sustained 10
percent increase (decrease) in oil and gas prices would impact Alliant
Energy's pre-tax 2002 earnings by approximately $7.2 million.
Southern Hydro, a foreign affiliate of Alliant Energy accounted for under the
equity method of accounting, owns and operates hydroelectric generation
facilities in the state of Victoria in Australia. These generation
facilities operate as peaking units. Under the rules of the Australian
market, Southern Hydro must sell all of its production into a spot market in
which the price changes every five minutes and is set on the average of each
half hour. Electricity prices in this market can and have been very
volatile. In order to manage the electricity commodity price risk associated
with anticipated sales into the spot market, Southern Hydro enters into a
variety of electricity derivative contracts with terms of up to five years.
The value of these derivative instruments can change significantly as a
result of changes in forward electricity prices. These instruments do not
qualify for hedge accounting under SFAS 133. Accordingly, per accounting
principles generally accepted in the U.S., changes in the fair value of these
derivatives, which are non-cash valuation adjustments, must be reported in
Southern Hydro's earnings. Alliant Energy believes Southern Hydro's
ownership of the physical generating facilities that are not
marked-to-market, combined with the electricity derivative contracts, act as
an economic hedge to volatile electricity prices, such that Southern Hydro's
net economic exposure to volatile electricity prices over the next five years
is managed within reasonable limits. Southern Hydro manages market risks
inherent in its business through established derivative trading and risk
management policies and tools. The principal tool utilized in managing the
risks associated with volatile prices is a five-day Earnings-at-Risk (EAR)
model which calculates EAR to a 95 percent confidence level. At December 31,
2001, the estimated EAR for Southern Hydro for expected earnings in 2002 was
approximately $1 million.
Commodity Risk - Trading - Alliant Energy is exposed to market risks through
its electricity-trading business, which is primarily conducted through
Alliant Energy's 50/50 joint venture with Cargill. The joint venture's
trading activities principally consist of marketing and trading
over-the-counter forward contracts for the purchase and sale of electricity.
The majority of the forward contracts represent commitments to purchase or
sell electricity at fixed prices in the future and require settlement by
physical delivery of electricity or are netted out in accordance with
industry trading standards. The market prices used to determine fair values
reflect the joint venture's best estimate considering various factors,
including closing exchanges and over-the-counter quotations, time value,
volatility and credit risk factors. The joint venture manages the market
risks inherent in its trading activities through established trading and risk
management policies and tools. The principal tool utilized is a one-day
variance/covariance Value-at-Risk (VAR) model with assessment adjustments
made based on weather, transmission availability, generation outages and
other factors. The estimated one-day market VAR for the joint venture at
December 31, 2001 was $0.6 million, which was calculated with a 99 percent
confidence level. The low, average and high VAR in 2001 were $0.2 million,
$0.7 million and $1.7 million, respectively.
57
Alliant Energy does have a gas marketing business that engages in gas trading
activities. However, Alliant Energy does not deem such activities to be
material.
Equity Price Risk - IP&L and WP&L maintain trust funds to fund their
anticipated nuclear decommissioning costs. At December 31, 2001 and 2000,
these funds were invested primarily in domestic equity and debt instruments.
Fluctuations in equity prices or interest rates will not affect Alliant
Energy's consolidated results of operations as such fluctuations are recorded
in equally offsetting amounts of investment income and depreciation (WP&L) or
interest (IP&L) expense when they are realized. In February 2001, WP&L
entered into a four-year hedge on equity assets in its nuclear
decommissioning trust fund. Refer to Note 10(c) of Alliant Energy's "Notes
to Consolidated Financial Statements" in Item 8 for further discussion.
At December 31, 2001 and 2000, Alliant Energy had an investment in the stock
of McLeod, a publicly traded telecommunications company, valued at $21
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. Refer to Note 10(a) of Alliant Energy's "Notes to Consolidated
Financial Statements" in Item 8 for further discussion. A 10 percent
increase (decrease) in the quoted market price at December 31, 2001 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 $6 million at December 31, 2001). At December 31, 2001, the
McLeod available-for-sale securities were valued at $15 million. A 10
percent increase (decrease) in the quoted market price at December 31, 2001
would have increased (decreased) the value of the investment of the
available-for-sale securities by $1.5 million.
At December 31, 2001 and 2000, Alliant Energy had various other investments,
accounted for under the cost method of accounting, which were valued at $24
million and $52 million, respectively. Refer to Note 9 of Alliant Energy's
"Notes to Consolidated Financial Statements" in Item 8 for additional
information. A 10 percent increase (decrease) in the quoted market prices at
December 31 would have increased (decreased) the value of these investments
at December 31, 2001 by approximately $2.4 million.
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 December 31, 2001,
Alliant Energy had a cumulative foreign currency translation loss of $127
million - related to decreases in value of the Brazil real of $88 million,
New Zealand dollar of $28 million and Australian dollar of $11 million in
relation to the U.S. dollar - recorded in "Accumulated other comprehensive
income (loss)" on its Consolidated Balance Sheets. The cumulative foreign
currency translation loss at December 31, 2000 was $60 million. Based on
Alliant Energy's investments at December 31, 2001, 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 $50 million. Alliant
Energy's equity income from its foreign investments is also impacted by
fluctuations in currency exchange rates.
Refer to Notes 1(n) and 10 of Alliant Energy's "Notes to Consolidated
Financial Statements" in Item 8 for further discussion of Alliant Energy's
derivative financial instruments.
Accounting Pronouncements - In July 2001, the FASB issued SFAS 141, "Business
- -------------------------
Combinations," and SFAS 142, "Goodwill and Other Intangible Assets." SFAS
141 requires that all business combinations be accounted for using the
purchase method. Use of the pooling-of-interests method is no longer
allowed. The provisions of SFAS 141 were effective for all business
combinations initiated after June 30, 2001. SFAS 142 addresses the method of
accounting for acquired goodwill and other intangible assets upon, and
subsequent to, the date of the acquisition. Among other provisions, SFAS 142
eliminates the amortization of goodwill and replaces it with periodic
assessments of the realization of the recorded goodwill and other intangible
assets. Alliant Energy's adoption of SFAS 142 will result in the elimination
of approximately $4 million of after-tax goodwill amortization in 2002 that
58
was incurred in 2001. Alliant Energy did not incur goodwill or other
intangible assets impairment charges upon its adoption of SFAS 142.
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 IP&L 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 adopted SFAS 144 on January 1, 2002. Alliant Energy expects that the
implementation of SFAS 144 will not have a material impact on its financial
condition or results of operations.
Critical Accounting Policies - Alliant Energy believes the policies
- ----------------------------
identified below are critical to Alliant Energy's business and the
understanding of its results of operations. The impact and any associated
risks related to these policies on Alliant Energy's business are discussed
throughout MD&A where applicable. Refer to Note 1 of Alliant Energy's "Notes
to Consolidated Financial Statements" in Item 8 for detailed discussion on
the application of these and other accounting policies. The preparation of
the consolidated financial statements requires management to make estimates
and assumptions that affect: a) the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements; and b) the reported amounts of revenues and
expenses during the reporting period. Alliant Energy evaluates its estimates
on an ongoing basis and bases them on a combination of historical experience
and various other assumptions that are believed to be reasonable under the
circumstances. Actual results could differ from those estimates. Alliant
Energy's critical accounting policies that affect its more significant
judgments and estimates used in the preparation of its consolidated financial
statements are as follows:
Regulatory Assets and Liabilities - SFAS 71, "Accounting for the Effects of
Certain Types of Regulation," requires rate-regulated public utilities to
record certain costs and credits allowed in the rate making process in
different periods than for non-regulated entities. These costs and credits
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. Alliant Energy's utility subsidiaries recognize
regulatory assets and liabilities in accordance with rulings of their federal
and state regulators and future regulatory rulings may impact the carrying
value and accounting treatment of Alliant Energy's regulatory assets and
liabilities. Alliant Energy evaluates and revises the accounting for its
regulatory assets and liabilities on an ongoing basis, and as new regulatory
orders are issued, to properly account for its activities under SFAS 71.
Derivative Financial Instruments - Alliant Energy uses derivative financial
instruments to hedge exposures to fluctuations in interest rates, certain
commodity prices, volatility in a portion of natural gas sales volumes due to
weather and to mitigate the equity price volatility associated with certain
investments in equity securities. Alliant Energy does not use such
instruments for speculative purposes. To account for these derivative
instruments in accordance with the applicable accounting rules, Alliant
Energy must determine the fair value of its derivatives. If an established,
quoted market exists for the underlying commodity of the derivative
instrument, Alliant Energy uses the quoted market price to value the
derivative instrument. For other derivatives, Alliant Energy estimates the
value based upon other quoted prices or acceptable valuation methods.
Alliant Energy also reviews the nature of its contracts for the purchase and
sale of non-financial assets to assess whether the contracts meet the
definition of a derivative and the requirements to follow hedge accounting as
allowed by the applicable accounting rules. The determination of derivative
59
status and valuations involves considerable judgment. Alliant Energy reviews
the accounting for and subsequent valuation of its derivative instruments on
an ongoing basis.
Unbilled Revenues - Alliant Energy accrues revenues for utility services
rendered but unbilled at month-end. The monthly accrual process includes the
development of various significant estimates, including the amount of natural
gas and electricity used by each customer class and the associated revenues
generated. Significant fluctuations in energy demand for the unbilled period
or changes in the composition of Alliant Energy's customer classes could
impact the accuracy of the unbilled revenues estimate. Alliant Energy
updates the calculation each month and performs a detailed review of the
estimate each quarter.
Valuation of Assets - Alliant Energy's balance sheet has significant
long-lived assets which are not subject to recovery under SFAS 71. As a
result, Alliant Energy must generate future cash flows from such assets in a
non-regulated environment to ensure the carrying value is not impaired. Many
of these assets are the result of capital investments which have been made in
recent years and have not yet reached a mature life cycle. Alliant Energy
assesses the carrying amount and potential impairment of these long-lived
assets whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Factors Alliant Energy considers in
determining if an impairment review is necessary include a significant
underperformance of the assets relative to historical or projected future
operating results, a significant change in Alliant Energy's use of the
acquired assets or business strategy related to such assets and significant
negative industry or economic trends. When Alliant Energy determines an
impairment review is necessary, a comparison is made between the expected
undiscounted future cash flows and the carrying amount of the asset. If the
carrying amount of the asset is the larger of the two balances, an impairment
loss is recognized by the amount the carrying amount of the asset exceeds the
fair value of the asset. The fair value is determined by the use of quoted
market prices, appraisals or the use of valuation techniques such as expected
discounted future cash flows. Alliant Energy must make assumptions
regarding these estimated future cash flows and other factors to determine
the fair value of the respective assets.
Alliant Energy's balance sheet includes investments in several
available-for-sale securities accounted for in accordance with SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities." Alliant
Energy monitors any unrealized losses from such investments to determine if
the loss is considered to be a temporary or permanent decline. The
determination as to whether the investment is temporarily versus permanently
impaired requires considerable judgment. When the investment is considered
permanently impaired, the previously recorded unrealized loss would be
recorded directly to the income statement as a realized loss.
As a result of the adoption of SFAS 142 on January 1, 2002, Alliant Energy
will be required to perform annual assessments of its goodwill for impairment
by applying fair-value-based tests. Alliant Energy will be required to make
various assumptions regarding these tests.
Environmental Contingencies - Alliant Energy has recorded various
environmental liabilities as noted in Note 11(e) of Alliant Energy's "Notes
to Consolidated Financial Statements" in Item 8. Such environmental
liabilities are estimated based upon historical experience and periodic
analyses of its various environmental remediation sites. Such analyses
estimate the environmental liability based on the best current estimate of
the remaining amount to be incurred for investigation, remediation and
monitoring costs for those sites where the investigation process has been or
is substantially completed and the minimum of the estimated cost range for
those sites where the investigation is in its earlier stages. It is possible
that future cost estimates will be greater than current estimates as the
investigation process proceeds, additional facts become known, or additional
sites are identified and the liabilities are updated once such information
becomes available. For Alliant Energy's utility subsidiaries, changes in
cost estimates may be offset through rate recovery.
60
Other Future Considerations - In addition to items discussed earlier in MD&A,
- ---------------------------
the following items could impact Alliant Energy's future financial condition
or results of operations:
The initial five-year term of Alliant Energy's electricity-trading joint
venture with Cargill expires in October 2002. On February 28, 2002, Alliant
Energy received a notice from Cargill pursuant to the terms of the joint
venture agreement that will result in the parties attempting to renegotiate
the terms of the agreement. If such negotiations are unsuccessful,
discussions regarding the sale of their share of the joint venture by one
party to the other or the termination of the joint venture would commence.
Alliant Energy would not expect to incur a material charge against earnings
should the venture be terminated. At this time, Alliant Energy cannot
predict the outcome of these discussions or the future of the venture. Refer
to "Results of Operations - Interest Expense and Other" for details of the
pre-tax earnings Alliant Energy realized from the joint venture in 2001, 2000
and 1999.
Alliant Energy's pension and other postretirement benefit expenses for 2002
are expected to be approximately $21 million higher than in 2001, primarily
due to unfavorable asset returns, a reduction in the discount rate used to
value plan benefits and expected increases in retiree medical costs. The
utility portion of these cost increases will be addressed in rate filings in
Wisconsin, Iowa and with FERC in 2002.
While the value of Alliant Energy's investment in McLeod decreased
significantly in 2001, the McLeod stock traded above Alliant Energy's basis
in its investment in available-for-sale McLeod securities as late as the last
week of November 2001. McLeod announced in the first quarter of 2002 that it
had filed a pre-negotiated plan of reorganization through a Chapter 11
bankruptcy petition. The trading of McLeod's common stock has subsequently
been suspended by Nasdaq. Alliant Energy will be reviewing for the possible
impairment of its investment in McLeod in the first quarter of 2002. Alliant
Energy's basis in its available-for-sale McLeod securities is $28.4 million.
Refer to Note 9 of Alliant Energy's "Notes to Consolidated Financial
Statements" in Item 8 for discussion of how Alliant Energy accounts for its
investment in McLeod.
At December 31, 2001, the carrying amount of the debt component of Resources'
exchangeable senior notes was $56.1 million, consisting of the par value of
$402.5 million, less unamortized debt discount of $346.4 million. The terms
of the exchangeable senior notes require Resources to pay interest on the par
value of the notes at 7.25% from February 2000 to February 2003, and at 2.5%
thereafter until maturity in February 2030. As explained in Note 10(a) of
Alliant Energy's "Notes to Consolidated Financial Statements" in Item 8,
Resources accounted for the net proceeds from the issuance of the notes as
two separate components, a debt component and an embedded derivative
component. In accordance with SFAS 133, Alliant Energy determined the
initial carrying value of the debt component by subtracting the fair value of
the derivative component from the net proceeds realized from the issuance of
the exchangeable senior notes. This resulted in a very low initial carrying
amount of the debt component which results in the recording of interest
expense at an effective rate of 26.8% of the carrying amount of the debt
component. For 2001, interest expense on the notes was $16.9 million.
Interest payments in excess of interest expense are recorded as a reduction
of the carrying amount of the debt component. As a result of the higher
interest payments for the first three years, the carrying amount of the debt
component will decline until it reaches $37.8 million in February 2003, and
will then gradually increase over the next 27 years to the ultimate repayment
amount of $402.5 million in 2030. Interest expense on the debt component of
the notes will be $13.2 million, $10.2 million and $10.2 million in 2002,
2003 and 2004, respectively. The repayment terms of the exchangeable senior
notes are not affected by the recent bankruptcy filing of McLeod. If the
existing McLeod shares should be cancelled upon emergence from bankruptcy,
the notes would remain outstanding until maturity.
At December 31, 2001 and 2000, Resources had a loan receivable (including
accrued interest income) from a Mexican development company of $41 million
and $18 million, respectively. Under provisions of the loan, Resources has
agreed to lend up to $65 million to support the development of a resort
community near the Baja peninsula in Mexico. The loan accrues interest at
8.75% and is secured by the undeveloped land of the resort community.
Repayment of the loan principal and interest will be based on a portion of
the proceeds received from the sales of real estate in the resort community
and therefore is dependent on the successful development of the project and
61
the ability to sell real estate. Alliant Energy may also realize royalty
income on the real estate sales once the loan is repaid.
In October 2001, Alliant Energy announced an agreement with Panda Energy, to
jointly develop and operate a 1,100 MW natural gas combined-cycle power plant
in western Michigan. Construction of the facility is currently delayed due
to construction costs and project timing, but development activities for the
facility continue. Alliant Energy will only execute the Panda Energy and
other non-regulated generation projects if management believes Alliant
Energy's required returns on the projects can be achieved. The generation
market has experienced dramatic volatility recently and Alliant Energy
believes it will be better positioned by being diligent and patient in
waiting for the right opportunities to build its portfolio of non-regulated
generation projects. Alliant Energy has made payments of $54 million for
turbines and related equipment at December 31, 2001 which are included in
Non-regulated and other property, plant and equipment on the Consolidated
Balance Sheets. Alliant Energy has also entered into commitments for an
additional $178 million and expects to use such turbines and related
equipment for the Panda Energy and/or other generation projects. Alliant
Energy has also incurred approximately $7 million of development costs
related to the Panda Energy project and the majority of such costs would have
to be written off should the project ultimately be canceled.
Alliant Energy has a $10 million investment in Enermetrix, Inc., an energy
technology start-up enterprise, that is accounted for under the cost method.
The Board of Directors of Enermetrix, Inc. has been undergoing discussions
during 2002 as to the strategic options for the future of the business,
including certain business combinations, various company restructurings,
continuing the business as-is or liquidating the company. Alliant Energy is
currently unable to predict the outcome of such discussions but it will be
performing an impairment review of this investment in the first quarter of
2002. As a result, Alliant Energy could incur a charge as soon as the first
quarter of 2002 based on the outcome of the Enermetrix, Inc. Board decisions
or the impairment review.
Alliant Energy has a $10 million investment in Capstone, a publicly-traded
microturbine producer, that is accounted for under the cost method. The
common stock of Capstone has traded below Alliant Energy's cost basis of
$6.67 per share since late September 2001 (the March 26, 2002 closing price was
$3.41 per share). As a result, Alliant Energy could incur a charge as soon as
the first quarter of 2002 for an other-than-temporary decline in the value of
its Capstone investment.
The carrying values of Alliant Energy's oil and gas properties can be
particularly sensitive to pricing changes in the near term. Such carrying
values are also impacted by, among other things, production rates, production
costs and acquisitions and sales of properties. Based on recent gas prices,
Alliant Energy could incur impairment charges on its gas properties as soon
as the first quarter of 2002.
WP&L has provided energy conservation services to its customers for many
years through a program called Shared Savings. WP&L earns incentives that
are recoverable in rates for assisting customers that make building or
equipment improvements to reduce energy usage. As a result of legislative
changes, this program may be reduced or eliminated in Wisconsin effective
January 1, 2003. Alliant Energy is aggressively pursuing both regulatory and
legislative changes to retain some or all of the net income from this program
in Wisconsin. If such efforts are unsuccessful, Alliant Energy would
experience a reduction in net income in 2003 of approximately $0.10 per share
compared to income realized in 2001. Alliant Energy is also pursuing the
development of additional demand-side management related programs within
Alliant Energy's service territory to replace or increase this net income.
Alliant Energy realized $6.6 million of tax credits from its oil and gas
business in 2001. Based on current tax legislation, such credits will no
longer be available effective January 1, 2003.
62
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market Risk are reported under
"Other Matters - Market Risk Sensitive Instruments and Positions" in Item 7
MD&A.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Alliant Energy Page Number
- -------------- -----------
Report of Management 64
Report of Independent Public Accountants 65
Consolidated Statements of Income for the Years Ended
December 31, 2001, 2000 and 1999 66
Consolidated Balance Sheets as of December 31, 2001 and 2000 67
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2001, 2000 and 1999 69
Consolidated Statements of Capitalization as of December 31, 2001 and 2000 70
Consolidated Statements of Changes in Common Equity for the Years Ended
December 31, 2001, 2000 and 1999 71
Notes to Consolidated Financial Statements 72
IESU
- ----
Report of Independent Public Accountants 106
Consolidated Statements of Income for the Years Ended
December 31, 2001, 2000 and 1999 107
Consolidated Balance Sheets as of December 31, 2001 and 2000 108
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2001, 2000 and 1999 110
Consolidated Statements of Capitalization as of December 31, 2001 and 2000 111
Consolidated Statements of Changes in Common Equity for the Years Ended
December 31, 2001, 2000 and 1999 112
Notes to Consolidated Financial Statements 113
WP&L
- ----
Report of Independent Public Accountants 121
Consolidated Statements of Income for the Years Ended
December 31, 2001, 2000 and 1999 122
Consolidated Balance Sheets as of December 31, 2001 and 2000 123
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2001, 2000 and 1999 125
Consolidated Statements of Capitalization as of December 31, 2001 and 2000 126
Consolidated Statements of Changes in Common Equity for the Years Ended
December 31, 2001, 2000 and 1999 127
Notes to Consolidated Financial Statements 128
Refer to Note 16 of Alliant Energy's, IESU's and WP&L's "Notes to
Consolidated Financial Statements" for the quarterly financial data required
by Item 8.
63
ALLIANT ENERGY CORPORATION REPORT ON THE FINANCIAL INFORMATION
Alliant Energy Corporation management is responsible for the information
and representations contained in the financial statements and in other
sections of this Annual Report. The consolidated financial statements
that follow have been prepared in accordance with accounting principles
generally accepted in the United States. In addition to selecting
appropriate accounting principles, management is responsible for the
manner of presentation and for the reliability of the financial
information. In fulfilling that responsibility, it is necessary for
management to make estimates based on currently available information
and judgments of current conditions and circumstances.
Through a well-developed system of internal controls, management seeks
to ensure the integrity and objectivity of the financial information
presented in this report. This system of internal controls is designed
to provide reasonable assurance that the assets of the company are
safeguarded and that the transactions are executed according to
management's authorizations and are recorded in accordance with the
appropriate accounting principles.
The Board of Directors participates in the financial information
reporting process through its Audit Committee.
/s/ Erroll B. Davis, Jr.
- ------------------------
Erroll B. Davis, Jr.
Chairman, President and Chief Executive Officer
/s/ Thomas M. Walker
- --------------------
Thomas M. Walker
Executive Vice President and Chief Financial Officer
/s/ John E. Kratchmer
- ---------------------
John E. Kratchmer
Corporate Controller and Chief Accounting Officer
January 25, 2002
64
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareowners of Alliant Energy Corporation:
We have audited the accompanying consolidated balance sheets and statements
of capitalization of Alliant Energy Corporation (a Wisconsin Corporation) and
subsidiaries as of December 31, 2001 and 2000, and the related consolidated
statements of income, cash flows and changes in common equity for each of the
three years in the period ended December 31, 2001. These financial
statements and the supplemental schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and supplemental schedule based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alliant Energy Corporation
and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14(a)(2)
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
- -----------------------
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 25, 2002
65
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
Operating revenues:
Electric utility $1,756,556 $1,648,036 $1,548,938
Gas utility 487,877 414,948 314,319
Non-regulated and other 532,907 342,000 264,716
--------------- --------------- ----------------
2,777,340 2,404,984 2,127,973
--------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 310,689 288,621 262,305
Purchased power 403,166 294,818 255,446
Cost of utility gas sold 360,911 278,734 180,519
Other operation and maintenance 887,733 734,675 669,111
Depreciation and amortization 334,149 322,334 279,088
Taxes other than income taxes 110,668 104,746 104,969
--------------- --------------- ----------------
2,407,316 2,023,928 1,751,438
--------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
Operating income 370,024 381,056 376,535
--------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 190,472 173,614 136,229
Equity income from unconsolidated investments (35,882) (19,138) (3,008)
Allowance for funds used during construction (11,144) (8,761) (7,292)
Preferred dividend requirements of subsidiaries 6,720 6,713 6,706
Gain on reclassification of investments - (321,349) -
Gains on sales of McLeodUSA Inc. stock - (23,773) (40,272)
Miscellaneous, net (25,212) (47,020) (32,895)
--------------- --------------- ----------------
124,954 (239,714) 59,468
--------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
Income before income taxes 245,070 620,770 317,067
--------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
Income taxes 59,840 238,816 120,486
--------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
Income before cumulative effect of a change in
accounting principle, net of tax 185,230 381,954 196,581
--------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
Cumulative effect of a change in accounting
principle, net of tax (12,868) 16,708 -
--------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------
Net income $172,362 $398,662 $196,581
=============== =============== ================
- ----------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding - basic 80,498 79,003 78,352
=============== =============== ================
- ----------------------------------------------------------------------------------------------------------------
Earnings per average common share - basic:
Income before cumulative effect of a change
in accounting principle $2.30 $4.84 $2.51
Cumulative effect of a change in accounting principle (0.16) 0.21 -
--------------- --------------- ----------------
Net income $2.14 $5.05 $2.51
=============== =============== ================
- ----------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding - diluted 80,636 79,193 78,395
=============== =============== ================
- ----------------------------------------------------------------------------------------------------------------
Earnings per average common share - diluted:
Income before cumulative effect of a change
in accounting principle $2.30 $4.82 $2.51
Cumulative effect of a change in accounting principle (0.16) 0.21 -
--------------- --------------- ----------------
Net income $2.14 $5.03 $2.51
=============== =============== ================
- ----------------------------------------------------------------------------------------------------------------
Dividends declared per common share $2.00 $2.00 $2.00
=============== =============== ================
- ----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
66
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 2001 2000
- ---------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Utility:
Electric plant in service $5,123,781 $5,203,069
Gas plant in service 597,494 574,390
Other plant in service 517,938 474,116
Accumulated depreciation (3,374,867) (3,296,546)
--------------- ---------------
Net plant 2,864,346 2,955,029
Construction work in progress 111,069 130,856
Nuclear fuel, net of amortization 54,811 61,935
Other, net 7,383 6,834
--------------- ---------------
Total utility 3,037,609 3,154,654
--------------- ---------------
Non-regulated and other:
Investments:
Whiting (oil and gas) 396,860 353,372
Affordable housing, transportation and other 253,121 255,953
International 169,522 52,627
Integrated Services 104,740 100,692
Non-regulated generation, Corporate Services and other 116,229 8,646
Accumulated depreciation, depletion and amortization (215,284) (206,637)
--------------- ---------------
Total non-regulated 825,188 564,653
--------------- ---------------
3,862,797 3,719,307
--------------- ---------------
- ---------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 86,618 148,415
Restricted cash 43,726 3,512
Accounts receivable:
Customer, less allowance for doubtful accounts
of $8,598 and $3,762, respectively 66,192 122,895
Unbilled utility revenues 71,388 124,515
Other, less allowance for doubtful accounts
of $319 and $484, respectively 73,855 45,829
Notes receivable, less allowance for doubtful
accounts of $386 and $484, respectively 13,650 9,968
Production fuel, at average cost 54,707 46,627
Materials and supplies, at average cost 54,401 55,930
Gas stored underground, at average cost 57,114 41,359
Other 105,191 111,931
--------------- ---------------
626,842 710,981
--------------- ---------------
- ---------------------------------------------------------------------------------------------------------
Investments:
Investments in unconsolidated foreign entities 572,555 507,655
Nuclear decommissioning trust funds 332,953 307,940
Investment in available-for-sale securities of McLeodUSA Inc. 14,954 569,951
Investment in trading securities of McLeodUSA Inc. 5,785 220,912
Other 228,274 132,203
--------------- ---------------
1,154,521 1,738,661
--------------- ---------------
- ---------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 241,973 270,779
Deferred charges and other 361,549 294,038
--------------- ---------------
603,522 564,817
--------------- ---------------
- ---------------------------------------------------------------------------------------------------------
Total assets $6,247,682 $6,733,766
=============== ===============
- ---------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
67
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
December 31,
CAPITALIZATION AND LIABILITIES 2001 2000
- ------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See Consolidated Statements of Capitalization):
Common stock $897 $790
Additional paid-in capital 1,239,793 947,504
Retained earnings 832,293 818,162
Accumulated other comprehensive income (loss) (152,434) 271,867
Shares in deferred compensation trust (2,208) (851)
------------------ ------------------
Total common equity 1,918,341 2,037,472
------------------ ------------------
Cumulative preferred stock of subsidiaries, net 113,953 113,790
Long-term debt (excluding current portion) 2,457,941 1,910,116
------------------ ------------------
4,490,235 4,061,378
------------------ ------------------
- ------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 10,506 92,477
Variable rate demand bonds 55,100 55,100
Commercial paper 68,389 283,885
Notes payable 15 50,067
Other short-term borrowings 84,318 110,783
Accounts payable 245,480 296,959
Accrued taxes 90,413 87,484
Other 185,516 177,580
------------------ ------------------
739,737 1,154,335
------------------ ------------------
- ------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 632,472 931,675
Accumulated deferred investment tax credits 59,398 67,364
Pension and other benefit obligations 96,496 65,399
Environmental liabilities 49,144 64,532
Derivative liability 358 181,925
Other 136,464 183,817
------------------ ------------------
974,332 1,494,712
------------------ ------------------
- ------------------------------------------------------------------------------------------------------------------
Minority interest 43,378 23,341
------------------ ------------------
- ------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 11)
- ------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $6,247,682 $6,733,766
================== ==================
- ------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
68
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $172,362 $398,662 $196,581
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization 334,149 322,334 279,088
Amortization of nuclear fuel 17,256 18,933 17,494
Amortization of deferred energy efficiency expenditures 17,032 25,609 25,435
Deferred tax expense (benefits) and investment tax (credits) (3,606) 115,045 (16,258)
Gains on dispositions of assets, net (16,119) (43,148) (61,667)
Equity income from unconsolidated investments, net (35,882) (19,138) (3,008)
Distributions from equity method investments 18,021 8,032 2,828
Non-cash valuation charges from exchangeable senior notes
and McLeodUSA Inc. trading securities 33,561 707 -
Cumulative effect of a change in accounting principle, net of tax 12,868 (16,708) -
Gain on reclassification of investments - (321,349) -
Other (9,539) (1,821) 2,036
Other changes in assets and liabilities:
Accounts receivable 81,804 (147,812) (16,407)
Income tax refunds receivable (11,735) (3,128) 215
Gas stored underground (15,755) (18,208) 2,862
Accounts payable (56,848) 105,810 (13,148)
Manufactured gas plants insurance refunds (21,541) - -
Benefit obligations and other (35,740) 16,061 9,906
----------------- ----------------- -----------------
Net cash flows from operating activities 480,288 439,881 425,957
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Common stock dividends declared (158,231) (157,964) (156,489)
Proceeds from issuance of common stock 288,553 1,069 36,491
Net change in Resources' credit facility 63,110 181,652 (113,657)
Proceeds from issuance of exchangeable senior notes - 402,500 -
Proceeds from issuance of other long-term debt 519,543 121,525 281,299
Reductions in other long-term debt (147,261) (64,837) (95,520)
Net change in other short-term borrowings (332,037) 156,990 169,587
Other (32,449) (31,244) (18,618)
----------------- ----------------- -----------------
Net cash flows from financing activities 201,228 609,691 103,093
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities (340,789) (304,656) (285,668)
Non-regulated businesses and other (477,574) (761,808) (192,905)
Nuclear decommissioning trust funds (22,100) (22,100) (22,100)
Proceeds from formation of ATC and other asset dispositions 127,810 111,509 93,443
Other (30,660) (37,771) (39,978)
----------------- ----------------- -----------------
Net cash flows used for investing activities (743,313) (1,014,826) (447,208)
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (61,797) 34,746 81,842
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 148,415 113,669 31,827
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $86,618 $148,415 $113,669
================= ================= =================
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Cash paid during the period for:
Interest $186,706 $163,728 $130,214
================= ================= =================
Income taxes $67,564 $116,895 $141,150
================= ================= =================
Noncash investing and financing activities:
Capital lease obligations incurred and other $19,967 $20,419 $25,040
================= ================= =================
- ----------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
69
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
2001 2000
- -------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Common equity:
Common stock - $0.01 par value - authorized 200,000,000 shares;
outstanding 89,682,334 and 79,010,114 shares, respectively $897 $790
Additional paid-in capital 1,239,793 947,504
Retained earnings 832,293 818,162
Accumulated other comprehensive income (loss) (152,434) 271,867
Shares in deferred compensation trust - 71,958 and 28,825 shares
at an average cost of $30.68 and $29.52 per share, respectively (2,208) (851)
-------------- -----------------
Total common equity 1,918,341 2,037,472
-------------- -----------------
- -------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net (Note 7(b)) 113,953 113,790
-------------- -----------------
- -------------------------------------------------------------------------------------------------------------------------
Long-term debt:
First Mortgage Bonds:
8-5/8% to 9-1/8%, retired in 2001 - 81,000
9.3%, retired in 2001 - 27,000
7.75%, due 2004 62,000 62,000
1.9% variable rate at December 31, 2001 to 7.6%, due 2005 88,000 88,000
7-1/4% to 8%, due 2007, partially retired in 2001 52,450 55,000
1.7% variable rate at December 31, 2001, due 2014 8,500 8,500
1.85% to 1.9% variable rate at December 31, 2001, due 2015 30,600 30,600
8-5/8%, due 2021, partially retired in 2001 20,000 25,000
7-5/8%, due 2023 94,000 94,000
8.6%, due 2027, partially retired in 2001 70,000 90,000
-------------- -----------------
425,550 561,100
Collateral Trust Bonds:
7.25%, due 2006 60,000 60,000
6-7/8%, due 2007 55,000 55,000
6%, due 2008 50,000 50,000
5.5% to 7%, due 2023 69,400 69,400
-------------- -----------------
234,400 234,400
Pollution Control Revenue Bonds:
1.8% variable rate at December 31, 2001 to 6.35%, due 2002 to 2023 51,490 52,050
Other long-term debt:
Senior notes, 7% to 8.59%, due 2004 to 2011 574,000 274,000
Exchangeable senior notes, 7.25% through February 2003, 2.5% thereafter, due 2030 402,500 402,500
Credit facility, 3% to 3.45% at December 31, 2001 383,610 320,500
Senior debentures, 6-5/8% to 6-3/4%, due 2009 to 2011 335,000 135,000
Debentures, 5.7% to 7-5/8%, due 2007 to 2010 265,000 265,000
Subordinated deferrable interest debentures, 7-7/8%, due 2025 50,000 50,000
Multifamily housing revenue bonds, 1.8% variable rate at
December 31, 2001 to 7.55%, due 2002 to 2036 38,916 33,366
Other, 0% to 10.75%, due 2002 to 2045 116,814 71,793
-------------- -----------------
2,877,280 2,399,709
-------------- -----------------
Less:
Current maturities (10,506) (92,477)
Variable rate demand bonds (55,100) (55,100)
Unamortized debt discount, net (353,733) (342,016)
-------------- -----------------
Total long-term debt (excluding current portion) 2,457,941 1,910,116
-------------- -----------------
- -------------------------------------------------------------------------------------------------------------------------
Total capitalization $4,490,235 $4,061,378
============== =================
- -------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
70
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
Accumulated Shares in
Additional Other Deferred Total
Common Paid-In Retained Comprehensive Compensation Common
Stock Capital Earnings Income (Loss) Trust Equity
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
1999:
Beginning balance (a) $776 $905,130 $537,372 $163,017 $- $1,606,295
Net income 196,581 196,581
Unrealized holding gains arising
during period, net of tax of $351,314 499,668 499,668
Less: reclassification adjustment for gains
included in net income, net of tax of $14,986 25,286 25,286
------------- ------------
Net unrealized gains on securities 474,382 474,382
------------- ------------
Foreign currency translation adjustments (2,496) (2,496)
------------- ------------
Total comprehensive income 668,467
Common stock dividends (156,489) (156,489)
Common stock issued 14 37,278 37,292
-------- ----------- ---------- ------------- ------------- ------------
Ending balance 790 942,408 577,464 634,903 - 2,155,565
2000:
Net income 398,662 398,662
Unrealized holding losses arising
during period, net of tax of ($77,853) (105,292) (105,292)
Less: adjustment for gain on reclassification of
investments included in net income, net of tax
of $134,053 187,296 187,296
Less: reclassification adjustment for other gains
included in net income, net of tax of $8,426 16,370 16,370
------------- ------------
Net unrealized losses on securities (308,958) (308,958)
------------- ------------
Foreign currency translation adjustments (50,400) (50,400)
------------- ------------
Unrealized holding losses arising during period
due to cumulative effect of a change in
accounting principle, net of tax of ($4,693) (6,582) (6,582)
Other unrealized holding losses arising during
period, net of tax of ($2,560) (3,427) (3,427)
Less: reclassification adjustment for losses
included in net income, net of tax of ($4,502) (6,331) (6,331)
------------- ------------
Net unrealized losses on qualifying derivatives (3,678) (3,678)
------------- ------------
Total comprehensive income 35,626
Common stock dividends (157,964) (157,964)
Common stock issued 5,096 (851) 4,245
-------- ----------- ---------- ------------- ------------- ------------
Ending balance 790 947,504 818,162 271,867 (851) 2,037,472
2001:
Net income 172,362 172,362
Unrealized holding losses arising
during period, net of tax of ($240,579) (343,285) (343,285)
Less: reclassification adjustment for gains
included in net income, net of tax of $-- 259 259
------------- ------------
Net unrealized losses on securities (343,544) (343,544)
------------- ------------
Foreign currency translation adjustments (66,830) (66,830)
------------- ------------
Minimum pension liability adjustments,
net of tax of ($11,022) (16,378) (16,378)
------------- ------------
Unrealized holding losses arising during
period, net of tax of ($1,569) (1,003) (1,003)
Less: reclassification adjustment for losses
included in net income, net of tax of ($2,078) (3,454) (3,454)
------------- ------------
Net unrealized gains on qualifying derivatives 2,451 2,451
------------- ------------
Total comprehensive loss (251,939)
Common stock dividends (158,231) (158,231)
Common stock issued 107 292,289 (1,357) 291,039
-------- ----------- ---------- ------------- ------------- ------------
Ending balance $897 $1,239,793 $832,293 ($152,434) ($2,208) $1,918,341
======== =========== ========== ============= ============= ============
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Accumulated other comprehensive income (loss) at December 31, 1998 consisted of $170,099 of net unrealized gains on securities
and ($7,082) of foreign currency translation adjustments.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
71
ALLIANT ENERGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General - The consolidated financial statements include the accounts of
Alliant Energy and its consolidated subsidiaries. Alliant Energy is an
investor-owned public utility holding company, whose primary subsidiaries are
IP&L, WP&L, Resources and Corporate Services. On January 1, 2002, IPC merged
with and into IESU and IESU changed its name to IP&L. IP&L and WP&L are
utility subsidiaries that are engaged principally in the generation,
transmission, distribution and sale of electric energy; the purchase,
distribution, transportation and sale of natural gas; and steam and water
services in Iowa, Wisconsin, Minnesota and Illinois. Resources (through its
numerous direct and indirect subsidiaries) is comprised of various business
units: International, Integrated Services, Investments, Non-regulated
Generation and Trading, Mass Marketing and Energy Technologies.
International holds interests in global partnerships to develop energy
generation, delivery and infrastructure in growing international markets,
including Australia, Brazil, China and New Zealand. Integrated Services
provides a wide range of energy and environmental services for commercial,
industrial, institutional, educational and governmental customers.
Investments includes ownership of an oil and gas production company,
transportation companies, affordable-housing properties and various other
investments. Non-regulated Generation and Trading plans to acquire and
construct a portfolio of domestic non-regulated generation assets and holds
Alliant Energy's electricity-trading joint venture with Cargill. Mass
Marketing focuses on developing and marketing energy-related products and
services. Energy Technologies holds investments in emerging energy
technology companies. Corporate Services is the subsidiary formed to provide
administrative services to Alliant Energy and its subsidiaries as required
under PUHCA.
The consolidated financial statements reflect investments in controlled
subsidiaries on a consolidated basis. All significant intercompany balances
and transactions, other than certain energy-related transactions affecting
the utility subsidiaries, have been eliminated from the consolidated
financial statements. Such energy-related transactions are made at prices
that approximate market value and the associated costs are recoverable from
customers through the rate making process. The consolidated financial
statements are prepared in conformity with accounting principles generally
accepted in the U.S., which give recognition to the rate making and
accounting practices of FERC and state commissions having regulatory
jurisdiction. The preparation of the consolidated financial statements
requires management to make estimates and assumptions that affect: a) the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements; and b) the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Certain prior period
amounts have been reclassified on a basis consistent with the current year
presentation.
Unconsolidated investments for which Alliant Energy has at least a 20 percent
non-controlling voting interest are generally accounted for under the equity
method of accounting. These investments are stated at acquisition cost,
increased or decreased for Alliant Energy's equity in net income or loss,
which is included in "Equity income from unconsolidated investments" in the
Consolidated Statements of Income and decreased for any dividends received.
These investments are also increased or decreased for Alliant Energy's
proportionate share of other comprehensive income, which is included in
"Accumulated other comprehensive income (loss)" on the Consolidated Balance
Sheets. Investments that do not meet the criteria for consolidation or the
equity method of accounting are accounted for under the cost method. Refer
to Note 9 for discussion of Alliant Energy's cost method investments that are
marked-to-market as a result of SFAS 115, "Accounting for Certain Investments
in Debt and Equity Securities."
(b) Regulation - Alliant Energy is a registered public utility holding
company subject to regulation by the SEC under PUHCA. The utility
subsidiaries are subject to regulation under PUHCA, FERC and their respective
state regulatory commissions (IUB, PSCW, MPUC and ICC).
(c) Regulatory Assets - Alliant Energy is subject to the provisions of SFAS
71, "Accounting for the Effects of Certain Types of Regulation," which
provides that rate-regulated public utilities record certain costs and
72
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. At December 31, 2001 and
2000, regulatory assets were comprised of the following items (in millions):
2001 2000
---------- ----------
Tax-related (Note 1(d)) $115.3 $154.2
Environmental liabilities (Note 11(e)) 63.1 66.8
Energy efficiency program costs 39.9 51.6
Other 41.3 27.5
---------- ----------
$259.6 $300.1
========== ==========
If a portion of the utility subsidiaries' operations becomes no longer
subject to the provisions of SFAS 71 as a result of competitive restructuring
or otherwise, a write-down of related regulatory assets would be required,
unless some form of transition cost recovery is established by the
appropriate regulatory body that would meet the requirements under accounting
principles generally accepted in the U.S. for continued accounting as
regulatory assets during such recovery period. In addition, each utility
subsidiary would be required to determine any impairment of other assets and
write-down such assets to their fair value.
(d) Income Taxes - Alliant Energy follows the liability method of accounting
for deferred income taxes, which requires the establishment of deferred tax
assets and liabilities, as appropriate, for all temporary differences between
the tax basis of assets and liabilities and the amounts reported in the
consolidated financial statements. Deferred taxes are recorded using
currently enacted tax rates.
Except as noted below, income tax expense includes provisions for deferred
taxes to reflect the tax effects of temporary differences between the time
when certain costs are recorded in the accounts and when they are deducted
for tax return purposes. As temporary differences reverse, the related
accumulated deferred income taxes are reversed to income. Investment tax
credits have been deferred and are subsequently credited to income over the
average lives of the related property. Tax credits reduce income tax expense
in the year claimed and include affordable housing and oil, gas and alternate
fuel tax credits.
Consistent with Iowa rate making practices for IP&L, deferred tax expense is
not recorded for certain temporary differences (primarily related to utility
property, plant and equipment). As the deferred taxes become payable (over
periods exceeding 30 years for some generating plant differences) they are
recovered through rates. Accordingly, IP&L has recorded deferred tax
liabilities and regulatory assets for certain temporary differences, as
identified in Note 1(c). In Wisconsin, the PSCW has allowed rate recovery of
deferred taxes on all temporary differences since August 1991. WP&L
established a regulatory asset associated with those temporary differences
occurring prior to August 1991 that will be recovered in future rates through
2007.
(e) Common Shares Outstanding - A reconciliation of the weighted average
common shares outstanding used in the basic and diluted earnings per share
calculation was as follows:
Weighted average common shares outstanding: 2001 2000 1999
------------- ------------- -------------
Basic earnings per share calculation 80,497,823 79,002,643 78,352,186
Effect of dilutive securities 138,006 190,134 42,961
Diluted earnings per share calculation 80,635,829 79,192,777 78,395,147
In 2001, 2000 and 1999, 1,501,854, 1,358,597, and 1,275,355 options,
respectively, to purchase shares of common stock, with average exercise
prices of $31.08, $30.27, and $30.55, respectively, were excluded from the
calculation of diluted earnings per share as the exercise prices were greater
than the average market price.
(f) Temporary Cash Investments and Restricted Cash - Temporary cash
investments are stated at cost, which approximates market value, and are
considered cash equivalents for the Consolidated Balance Sheets and the
73
Consolidated Statements of Cash Flows. These investments consist of
short-term liquid investments that have maturities of less than 90 days from
the date of acquisition.
At December 31, 2001, restricted cash of approximately $51 million ($44
million was classified as current and $7 million as long-term) consisted of
$34 million related to borrowing requirements for the construction of various
power plants in China; $11 million related to bond and regulatory reserves,
escrows and tenant security deposits at Alliant Energy's affordable housing
companies; and $6 million related to future oil and gas acquisitions at
Whiting.
(g) Depreciation of Utility Property, Plant and Equipment - The utility
subsidiaries use a combination of remaining life, straight-line and
sum-of-the-years-digits depreciation methods as approved by their respective
regulatory commissions. The remaining life of DAEC, of which IP&L is a
co-owner, is based on the NRC license end-of-life of 2014. The remaining
depreciable life of Kewaunee, of which WP&L is a co-owner, is based on the
PSCW approved revised end-of-life of 2010. Depreciation expense related to
the decommissioning of DAEC and Kewaunee is discussed in Note 11(f). The
average rates of depreciation for electric and gas properties, consistent
with current rate making practices, were as follows:
IESU WP&L IPC
---------------------------------- ---------------------------------- ---------------------------------
2001 2000 1999 2001 2000 1999 2001 2000 1999
---------------------------------- ---------------------------------- ---------------------------------
Electric 3.5% 3.5% 3.5% 3.7% 3.6% 3.6% 3.5% 3.5% 3.6%
Gas 3.6% 3.5% 3.5% 4.1% 4.1% 3.9% 3.6% 3.6% 3.6%
(h) Property, Plant and Equipment - Utility plant (other than acquisition
adjustments) is recorded at original cost, which includes overhead,
administrative costs and AFUDC. At December 31, 2001 and 2000, IESU had
$23.2 million and $24.4 million, respectively, of acquisition adjustments, net
of accumulated amortization, included in utility plant ($5.2 million and $5.5
million, respectively, of such balances are currently being recovered in
IP&L's rates). The aggregate gross AFUDC recovery rates, computed in
accordance with the prescribed regulatory formula, were as follows:
2001 2000 1999
------------- ------------- -------------
IESU 8.5% 6.6% 7.9%
WP&L 7.9% 10.8% 5.4%
IPC 4.4% 6.5% 5.3%
Non-regulated property, plant and equipment is recorded at original cost.
Upon retirement or sale of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any gain or loss
is included in "Miscellaneous, net" in the Consolidated Statements of
Income. Ordinary retirements of utility plant, including removal costs less
salvage value, are charged to accumulated depreciation upon removal from
utility plant accounts and no gain or loss is recognized.
(i) Operating Revenues - Alliant Energy accrues revenues for services
rendered but unbilled at month-end. In 2000 and 1999, Alliant Energy
recorded increases of $10 million (WP&L) and $9 million (IESU and IPC),
respectively, in the estimate of utility services rendered but unbilled at
month-end due to the implementation of refined estimation processes.
(j) Utility Fuel Cost Recovery - IP&L's retail tariffs provide for
subsequent adjustments to its electric and natural gas rates for changes in
the cost of fuel, purchased energy and natural gas purchased for resale.
Changes in the under/over collection of these costs are reflected in
"Electric and steam production fuels" and "Cost of utility gas sold" in the
Consolidated Statements of Income. The cumulative effects are reflected on
the Consolidated Balance Sheets as a current asset or current liability,
pending automatic reflection in future billings to customers. At IP&L,
purchased-power capacity costs are not recovered from electric customers
through EACs. Recovery of these costs must be addressed in base rates in a
formal rate proceeding.
74
WP&L's retail electric rates are based on annual forecasted fuel and
purchased-power costs. Under PSCW rules, WP&L can seek emergency rate
increases if the annual costs are more than three percent higher than the
estimated costs used to establish rates. Any collections in excess of costs
incurred in 2001 will be refunded in 2002, with interest. Accordingly, WP&L
established a reserve in 2001 due to overcollection of fuel and
purchased-power costs. WP&L has a gas performance incentive which includes a
sharing mechanism whereby 40 percent of all gains and losses relative to
current commodity prices, as well as other benchmarks, are retained by WP&L,
with the remainder refunded to or recovered from customers.
(k) Nuclear Refueling Outage Costs - The IUB allows IP&L to collect, as part
of its base revenues, funds to offset other operation and maintenance
expenditures incurred during refueling outages at DAEC. As these revenues
are collected, an equivalent amount is charged to other operation and
maintenance expense with a corresponding credit to a reserve. During a
refueling outage, the reserve is reversed to offset the refueling outage
expenditures. Operating expenses incurred during refueling outages at
Kewaunee are expensed by WP&L as incurred. Scheduled refueling outages
occurred at DAEC and Kewaunee in Spring and late 2001, respectively. The
next scheduled refueling outages at DAEC and Kewaunee are anticipated to
commence in Spring 2003.
(l) Nuclear Fuel - Nuclear fuel for DAEC is leased. Annual nuclear fuel
lease expenses include the cost of fuel, based on the quantity of heat
produced for the generation of electricity, plus the lessor's interest costs
related to fuel in the reactor and administrative expenses. Nuclear fuel for
Kewaunee is recorded at its original cost and is amortized to expense based
upon the quantity of heat produced for the generation of electricity. This
accumulated amortization assumes spent nuclear fuel will have no residual
value. Estimated future disposal costs of such fuel are expensed based on
KWhs generated.
(m) Translation of Foreign Currency - Assets and liabilities of
international investments, where the local currency is the functional
currency, have been translated at year-end exchange rates and related income
statement results have been translated using average exchange rates
prevailing during the year. Adjustments resulting from translation have been
recorded in "Accumulated other comprehensive income (loss)."
(n) Derivative Financial Instruments - Alliant Energy uses derivative
financial instruments to hedge exposures to fluctuations in interest rates,
certain commodity prices and volatility in a portion of natural gas sales
volumes due to weather. Alliant Energy also utilizes derivatives to mitigate
the equity price volatility associated with certain investments in equity
securities. Alliant Energy does not use such instruments for speculative
purposes. The fair value of all derivatives are recorded as assets or
liabilities on the Consolidated Balance Sheets and gains and losses related
to derivatives that are designated as, and qualify as hedges, are recognized
in earnings when the underlying hedged item or physical transaction is
recognized in income. Gains and losses related to derivatives that do not
qualify for, or are not designated in hedge relationships, are recognized in
earnings immediately. Alliant Energy has a number of commodity purchase and
sales contracts that have been designated, and qualify for, the normal
purchase and sale exception in SFAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an Amendment of SFAS 133."
Based on this designation, these contracts are not accounted for as
derivative instruments.
Alliant Energy is exposed to losses related to financial instruments in the
event of counterparties' non-performance. Alliant Energy has established
controls to determine and monitor the creditworthiness of counterparties in
order to mitigate its exposure to counterparty credit risk. In the fourth
quarter of 2001, Alliant Energy recorded a pre-tax charge of $5 million
related to outstanding contracts with Enron. Alliant Energy has replaced
certain Enron contracts by entering into contracts with credit-worthy
counterparties where deemed necessary. Alliant Energy is not aware of any
material exposure to counterparty credit risk.
Refer to Note 10 for further discussion of Alliant Energy's derivative
financial instruments.
75
(o) Oil and Gas Producing Activities - Whiting follows the successful
efforts method of accounting for its oil and gas properties. Under this
method of accounting, all property acquisition costs and costs of exploratory
and development wells are capitalized when incurred, pending determination of
whether the well has found proved reserves. If an exploratory well has not
found proved reserves, the costs of drilling the well and other associated
costs are charged to expense. The costs of development wells are capitalized
whether productive or non-productive.
Geological and geophysical costs on exploratory prospects and the costs of
carrying and retaining unproved properties are expensed as incurred. An
impairment is recorded to the extent that capitalized costs of unproved
properties, on a field-by-field basis, are not considered to be realizable.
DD&A of capitalized costs of proved oil and gas properties is provided on a
field-by-field basis using the units of production method based upon proved
reserves. The computation of DD&A takes into consideration the anticipated
proceeds from equipment salvage.
Whiting assesses its proved oil and gas properties for impairment whenever
events or circumstances indicate that the carrying value of the assets may
not be recoverable. The impairment test compares the expected undiscounted
future net revenues on a field-by-field basis with the related net
capitalized costs at the end of each period. When the net capitalized costs
exceed the undiscounted future net revenues, the cost of the property is
written down to fair value, which is determined using discounted future net
revenues from the producing property. During 2001, 2000 and 1999, Whiting
recorded impairment charges for proved properties of $0, $0 and $3.3 million,
respectively.
Gains and losses are recognized on sales of entire interests in proved and
unproved properties and are reported in "Miscellaneous, net." Sales of
partial interests are generally treated as recoveries of costs.
(2) MERGER
In April 1998, IES, WPLH and IPC completed a merger, accounted for as a
pooling of interests, resulting in Alliant Energy. In association with the
merger, Alliant Energy entered into a three-year consulting agreement, which
expired in the second quarter of 2001, with Wayne Stoppelmoor, the Chief
Executive Officer of IPC prior to the consummation of the merger. Under the
terms of the agreement, Mr. Stoppelmoor, who was also Vice Chairman of
Alliant Energy's Board of Directors until April 2000, received annual fees of
$324,500, $324,500 and $200,000 for his services during the respective
periods of the agreement.
(3) LEASES
IP&L has a capital lease covering its 70 percent undivided interest in
nuclear fuel purchased for DAEC. Annual nuclear fuel lease expenses
(included in "Electric and steam production fuels" in the Consolidated
Statements of Income) for 2001, 2000 and 1999 were $14.1 million, $16.0
million and $12.7 million, respectively. Alliant Energy's operating lease
rental expenses, which include certain purchased-power operating leases, for
2001, 2000 and 1999 were $42.0 million, $25.2 million and $24.6 million,
respectively. The purchased-power leases below include $33 million in 2003
and a total amount of $423 million related to a new plant (Riverside)
currently under development in Wisconsin. At December 31, 2001, Alliant
Energy's future minimum lease payments were as follows (in millions):
2002 2003 2004 2005 2006 Thereafter Total
-----------------------------------------------------------------
Operating leases:
Certain purchased-
power agreements $18.3 $51.4 $65.8 $67.2 $68.5 $290.6 $561.8
Financings using special
purpose entities 2.7 2.7 2.7 2.7 2.7 15.7 29.2
Other 24.8 25.7 24.3 20.4 15.1 35.8 146.1
-----------------------------------------------------------------
Total operating leases $45.8 $79.8 $92.8 $90.3 $86.3 $342.1 $737.1
=================================================================
76
Present
value of net
Less: minimum
amount capital
representing lease
2002 2003 2004 2005 2006 Thereafter Total interest payments
-------- ------- -------- -------- ------- ------------ --------- ------------- --------------
Capital leases $17.3 $10.6 $8.9 $2.3 $1.8 $0.6 $41.5 $3.9 $37.6
Alliant Energy has various synthetic leases related to the financing of its
corporate headquarters, corporate aircraft, certain utility railcars and a
utility radio dispatch system. Certain financings involve the use of
unconsolidated structured finance or special purpose entities. Based on the
magnitude of the amounts shown in the above table in "Financings using
special purpose entities," Alliant Energy believes these financings are not
material to its liquidity or capital resources.
(4) UTILITY ACCOUNTS RECEIVABLE
Utility customer accounts receivable, including unbilled revenues, arise
primarily from the sale of electricity and natural gas. At December 31, 2001
and 2000, the utility subsidiaries were serving a diversified base of
residential, commercial and industrial customers and did not have any
significant concentrations of credit risk.
Alliant Energy's utility subsidiaries participate in a combined accounts
receivable sale program whereby IP&L and WP&L may sell up to a combined
maximum amount of $250 million (there are no individual limits) of their
respective accounts receivable to a third-party financial institution on a
limited recourse basis through wholly-owned and consolidated special purpose
entities. Corporate Services acts as a collection agent for the buyer and
receives a fee for collection services that approximates fair value. The
agreement expires in April 2004 and is subject to annual renewal or
renegotiation for a longer period thereafter. Under terms of the agreement,
the third-party financial institution purchases the receivables initially for
the face amount. On a monthly basis, this sales price is adjusted, resulting
in payments to the third-party financial institution of an amount that varies
based on interest rates and length of time the sold receivables remain
outstanding. Collections on sold receivables are used to purchase additional
receivables from the utility subsidiaries.
At December 31, 2001 and 2000, Alliant Energy had sold $178 million and $154
million of receivables, respectively. In 2001, 2000 and 1999, Alliant Energy
received approximately $2.2 billion, $1.6 billion and $1.5 billion,
respectively, in aggregate proceeds from the sale of accounts receivable.
The utility subsidiaries use proceeds from the sale of accounts receivable
and unbilled revenues to maintain flexibility in their capital structures,
take advantage of favorable short-term rates and finance a portion of their
long-term cash needs. Alliant Energy paid fees associated with these sales
of $7.9 million, $9.0 million and $7.1 million in 2001, 2000 and 1999,
respectively.
Alliant Energy and its utility subsidiaries account for the sale of accounts
receivable to the third-party financial institution as sales under SFAS 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." Retained receivables are available to the
third-party financial institution to pay any fees or expenses due it, and to
absorb all credit losses incurred on any of the sold receivables.
77
(5) INCOME TAXES
The components of income taxes for Alliant Energy were as follows (in
millions):
2001 2000 1999
------------- ------------- -------------
Current tax expense:
Federal $57.8 $110.0 $116.9
State 17.9 26.5 29.2
Deferred tax expense (benefit):
Federal 2.5 99.8 (7.9)
State (5.6) 19.7 (2.9)
Foreign tax expense 9.3 0.4 --
Amortization of investment tax credits (5.2) (4.5) (5.5)
Oil, gas and alternative fuel credits (7.1) (6.2) (3.4)
Affordable housing tax credits (9.8) (6.9) (5.9)
------------- ------------- -------------
$59.8 $238.8 $120.5
============= ============= =============
Included in "Cumulative effect of a change in accounting principle, net of
tax" in the Consolidated Statements of Income for 2001 and 2000 was income tax
expense (benefit) of ($5.5) million and $9.8 million, respectively, related
to the adoption of SFAS 133 by an equity method foreign affiliate of Alliant
Energy on January 1, 2001 and by Alliant Energy's consolidated subsidiaries
on July 1, 2000, respectively.
The overall effective income tax rates shown in the following table were
computed by dividing total income tax expense by income before income taxes
and preferred dividend requirements of subsidiaries.
2001 2000 1999
------------- ------------- --------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefits 4.9 6.7 6.4
Effect of rate making on property related differences 1.7 0.8 2.2
Amortization of investment tax credits (2.2) (0.9) (1.7)
Oil, gas and alternative fuel credits (2.8) (1.0) (1.0)
Affordable housing tax credits (3.6) (1.1) (1.9)
Adjustment of prior period taxes (8.4) (1.0) (1.7)
Other items, net (0.8) (0.4) (0.1)
------------- ------------- --------------
Overall effective income tax rate 23.8% 38.1% 37.2%
============= ============= ==============
The accumulated deferred income tax (assets) and liabilities included on the
Consolidated Balance Sheets at December 31 arise from the following temporary
differences (in millions):
2001 2000
----------- -----------
Property related $608.9 $673.6
Exchangeable senior notes 129.7 47.8
McLeod investment 2.0 318.5
Investment tax credits (32.8) (45.8)
Other (75.3) (62.4)
----------- -----------
$632.5 $931.7
=========== ===========
At December 31, 2001, 2000 and 1999, Alliant Energy had not recorded U.S. tax
provisions of approximately $6.7 million, $4.4 million and $1.4 million,
respectively, relating to approximately $19.0 million, $12.6 million and $4.1
million, respectively, of unremitted earnings from foreign investments as
these earnings are expected to be reinvested indefinitely.
78
Domestic and foreign sources of income before income taxes were as follows
(in millions):
2001 2000 1999
------------- ------------ ------------
Domestic sources $207.6 $607.7 $307.1
Foreign sources 37.5 13.1 10.0
------------- ------------ ------------
Income before income taxes $245.1 $620.8 $317.1
============= ============ ============
(6) BENEFIT PLANS
(a) Pension Plans and Other Postretirement Benefits - Alliant Energy has
several non-contributory defined benefit pension plans that cover
substantially all of its employees. Benefits are based on the employees'
years of service and compensation. Alliant Energy also provides certain
postretirement health care and life benefits to eligible retirees. In
general, the health care plans are contributory with participants'
contributions adjusted regularly and the life insurance plans are
non-contributory.
The weighted-average assumptions at the measurement date of September 30 were
as follows:
Qualified Pension Benefits Other Postretirement Benefits
--------------------------------------- ------------------------------------
2001 2000 1999 2001 2000 1999
------------ ------------- ----------- ---------- ----------- -----------
Discount rate 7.25% 8.00% 7.75% 7.25% 8.00% 7.75%
Expected return on plan assets 9% 9% 9% 9% 9% 9%
Rate of compensation increase 3.5-4.5% 3.5-4.5% 3.5-4.5% 3.5% 3.5% 3.5%
Medical cost trend on covered charges:
Initial trend rate N/A N/A N/A 12% 9% 7%
Ultimate trend rate N/A N/A N/A 5% 5% 5%
The components of Alliant Energy's qualified pension benefits and other
postretirement benefits costs were as follows (in millions):
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------ ----------------------------------
2001 2000 1999 2001 2000 1999
---------- ---------- -------- -------- --------- ---------
Service cost $11.0 $11.1 $12.8 $4.0 $3.7 $5.5
Interest cost 38.2 36.7 35.6 10.6 9.8 10.4
Expected return on plan assets (48.5) (45.7) (46.2) (6.1) (5.3) (5.0)
Amortization of:
Transition obligation (asset) (2.4) (2.4) (2.4) 3.7 3.9 4.3
Prior service cost 2.7 2.6 2.5 (0.3) (0.3) (0.3)
Actuarial loss (gain) (1.5) (1.0) 0.2 (1.5) (1.9) (0.8)
---------- ---------- -------- -------- --------- ---------
($0.5) $1.3 $2.5 $10.4 $9.9 $14.1
========== ========== ======== ======== ========= =========
The assumed medical trend rates are critical assumptions in determining the
service and interest cost and accumulated postretirement benefit obligation
related to postretirement benefit costs. A one percent change in the medical
trend rates for 2001, holding all other assumptions constant, would have the
following effects (in millions):
1 Percent Increase 1 Percent Decrease
--------------------- ----------------------
Effect on total of service and interest cost components $1.5 ($1.4)
Effect on postretirement benefit obligation $15.2 ($13.7)
79
A reconciliation of the funded status of Alliant Energy's plans to the
amounts recognized on Alliant Energy's Consolidated Balance Sheets at
December 31 was as follows (in millions):
Qualified Pension Benefits Other Postretirement Benefits
----------------------------- ---------------------------------
2001 2000 2001 2000
------------ ------------- -------------- ---------------
Change in benefit obligation:
Net benefit obligation at beginning of year $483.6 $481.0 $130.7 $127.8
Service cost 11.0 11.1 4.0 3.7
Interest cost 38.2 36.7 10.6 9.8
Plan participants' contributions -- -- 1.9 1.6
Plan amendments -- 3.6 -- (3.8)
Actuarial loss (gain) 56.6 (13.8) 40.7 2.4
Gross benefits paid (36.1) (35.0) (13.4) (10.8)
------------ ------------- -------------- ---------------
Net benefit obligation at end of year 553.3 483.6 174.5 130.7
------------ ------------- -------------- ---------------
Change in plan assets:
Fair value of plan assets at beginning of year 556.3 525.9 83.0 68.3
Actual return on plan assets (36.9) 63.1 (6.8) 8.7
Employer contributions -- 2.3 9.1 15.2
Plan participants' contributions -- -- 1.9 1.6
Gross benefits paid (36.1) (35.0) (13.4) (10.8)
------------ ------------- -------------- ---------------
Fair value of plan assets at end of year 483.3 556.3 73.8 83.0
------------ ------------- -------------- ---------------
Funded status at end of year (70.0) 72.7 (100.7) (47.7)
Unrecognized net actuarial loss (gain) 74.2 (69.2) 16.8 (38.3)
Unrecognized prior service cost 21.5 24.2 (0.9) (1.2)
Unrecognized net transition obligation (asset) (3.3) (5.8) 41.1 44.8
------------ ------------- -------------- ---------------
Net amount recognized at end of year $22.4 $21.9 ($43.7) ($42.4)
============ ============= ============== ===============
Amounts recognized on the Consolidated
Balance Sheets consist of:
Prepaid benefit cost $45.5 $41.8 $2.1 $1.6
Accrued benefit cost (23.1) (19.9) (45.8) (44.0)
Additional minimum liability (36.1) -- -- --
Intangible asset 8.7 -- -- --
Accumulated other comprehensive loss 27.4 -- -- --
------------ ------------- -------------- ---------------
Net amount recognized at measurement date 22.4 21.9 (43.7) (42.4)
------------ ------------- -------------- ---------------
Contributions paid after 9/30 and prior to 12/31 -- -- 2.5 1.5
------------ ------------- -------------- ---------------
Net amount recognized at 12/31 $22.4 $21.9 ($41.2) ($40.9)
============ ============= ============== ===============
The benefit obligation and fair value of plan assets for the postretirement
welfare plans with benefit obligations in excess of plan assets were $167.8
million and $64.5 million, respectively, at September 30, 2001 and $124.5
million and $73.2 million, respectively, at September 30, 2000. The
projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for the qualified pension plans with accumulated benefit
obligations in excess of plan assets were $293.9 million, $283.7 million and
$225.7 million, respectively, at September 30, 2001. At September 30, 2000,
there were no qualified pension plans with accumulated benefit obligations in
excess of plan assets. For the various Alliant Energy pension and
postretirement plans, Alliant Energy common stock represented less than 1
percent of total plan investments at December 31, 2001 and 2000.
80
Alliant Energy sponsors several non-qualified pension plans that cover
certain current and former key employees. At December 31, 2001 and 2000, the
funded balances of such plans totaled approximately $4 million and $5
million, respectively, none of which consisted of Alliant Energy common
stock. Alliant Energy's pension benefit obligation under these plans was
$34.4 million and $26.2 million at December 31, 2001 and 2000, respectively.
Alliant Energy's pension expense under these plans was $3.4 million, $3.6
million, and $2.5 million in 2001, 2000 and 1999, respectively.
Alliant Energy has various life insurance policies that cover certain key
employees and directors. At December 31, 2001 and 2000, the cash surrender
value of these investments was $30 million and $27 million, respectively.
Under Alliant Energy's deferred compensation plans, certain key employees and
directors can defer part or all of their current compensation in company
stock or interest accounts, which are held in grantor trusts. At December
31, 2001 and 2000, the value of the trusts totaled approximately $2.2 million
and $1.0 million, respectively, the majority of which consisted of Alliant
Energy common stock.
A significant number of Alliant Energy employees also participate in defined
contribution pension plans (401(k) and Employee Stock Ownership plans).
Alliant Energy's contributions to the plans, which are based on the
participants' level of contribution, were $8.2 million, $8.1 million, and
$7.4 million in 2001, 2000 and 1999, respectively.
(b) Long-Term Equity Incentive Plan - Alliant Energy has an LTEIP that
permits the grant of non-qualified stock options, incentive stock options,
restricted stock, performance shares and performance units to key employees.
At December 31, 2001, non-qualified stock options, restricted stock and
performance shares were outstanding. The maximum number of shares of Alliant
Energy common stock that may be issued under the plan is 3.8 million.
Options granted to date under the plan were granted at the fair market value
of the shares on the date of grant, vest over three years and expire no later
than 10 years after the grant date. Options become fully vested upon
retirement and remain exercisable at any time prior to their expiration date,
or for three years after the effective date of the retirement, whichever
period is shorter. Participants' options that are not vested become
forfeited when participants leave Alliant Energy and their vested options
expire after three months. A summary of the stock option activity was as
follows:
2001 2000 1999
------------------------- ------------------------- ------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------------------------- ------------------------- ------------------------
Outstanding at beginning of year 2,265,862 $29.67 1,543,028 $30.32 751,084 $30.83
Options granted 721,072 31.14 899,094 28.59 824,564 29.88
Options exercised (42,432) 29.87 (15,486) 30.03 -- --
Options forfeited (27,273) 30.07 (160,774) 29.90 (32,620) 30.55
------------------------- ------------------------- ------------------------
Outstanding at end of year 2,917,229 $30.03 2,265,862 $29.67 1,543,028 $30.32
========================= ========================= ========================
Exercisable at end of year 1,593,047 $29.94 962,073 $30.12 333,782 $30.80
The range of exercise prices for the options outstanding at December 31, 2001
was $27.50 to $31.56. The value of the options granted during the year using
the Black-Scholes pricing method was as follows:
2001 2000 1999
------------ ------------ ------------
Value of options based on Black-Scholes model $4.30 $7.71 $4.71
Volatility 18.9% 32.7% 20.2%
Risk free interest rate 5.0% 5.7% 5.8%
Expected life 10 years 10 years 10 years
Expected dividend yield 6.6% 6.3% 6.7%
81
Alliant Energy follows APB 25, "Accounting for Stock Issued to Employees," to
account for stock options. No compensation cost is recognized because the
option exercise price is equal to the market price of the underlying stock on
the date of grant. Had compensation cost for the plan been determined based
on the Black-Scholes value at the grant dates for awards as prescribed by
SFAS 123, "Accounting for Stock-Based Compensation," pro forma net income and
earnings per share would have been:
2001 2000 1999
-------------- ------------ -------------
Pro forma net income (in millions) $169.3 $391.7 $192.7
Pro forma earnings per share (basic) 2.10 4.96 2.46
Pro forma earnings per share (diluted) 2.10 4.95 2.46
In 2001 and 1999, 1,745 and 65,752 shares, respectively, of restricted stock
with three-year restriction periods were awarded. At December 31, 2001 and
2000, there were 61,137 and 62,490 shares outstanding, respectively. Any
unvested shares of restricted stock become fully vested upon retirement.
Participants' unvested restricted stock is forfeited when the participant
leaves Alliant Energy. Compensation cost, which is recognized over the
three-year restriction period, was $0.6 million, $0.6 million and $0.4
million in 2001, 2000 and 1999, respectively.
The payout to key employees of Corporate Services for performance shares is
contingent upon achievement over a three-year period of specified earnings
per share growth and total return to shareowners of Alliant Energy compared
with an investor-owned utility peer group. The payout to key employees of
Resources is contingent upon achievement over a three-year period of
specified Resources earnings per share growth. Performance shares are paid
out in shares of Alliant Energy's common stock or a combination of cash and
stock and are modified by a performance multiplier, which ranges from 0 to 2,
based on the performance criteria. Performance shares have an intrinsic
value equal to the market price of a share on the date of grant. Pursuant to
APB 25, Alliant Energy accrues the plan expense over the three-year period
the services are performed and recognized $2.4 million, $0.4 million and $1.6
million of expense in 2001, 2000 and 1999, respectively.
(7) COMMON AND PREFERRED STOCK
(a) Common Stock - During 2001, 2000 and 1999, Alliant Energy issued 897,220
shares, 26,100 shares and 1,353,971 shares, respectively, of common stock
under its various stock plans. In addition, in November 2001, Alliant Energy
completed a public offering of 9.775 million shares of its common stock at a
price per share to the public of $28.00. The net proceeds of approximately
$263 million were used to repay short-term debt. From January 2000 to June
2001, Alliant Energy satisfied its requirements under the Shareowner Direct
Plan (dividend reinvestment and stock purchase plan) by acquiring Alliant
Energy common stock on the open market, rather than through original issue.
At December 31, 2001 and 2000, Alliant Energy had a total of 2.6 million and
5.0 million shares, respectively, available for issuance in the aggregate,
pursuant to its Shareowner Direct Plan, LTEIP and 401(k) Savings Plan.
Alliant Energy has a Shareowner Rights Plan whereby rights will be
exercisable only if a person or group acquires, or announces a tender offer
to acquire, 15 percent or more of Alliant Energy's common stock. Each right
will initially entitle shareowners to buy one-half of one share of Alliant
Energy's common stock. The rights will only be exercisable in multiples of
two at an initial price of $95.00 per full share, subject to adjustment. If
any shareowner acquires 15 percent or more of the outstanding common stock of
Alliant Energy, each right (subject to limitations) will entitle its holder
to purchase, at the right's then current exercise price, a number of common
shares of Alliant Energy or of the acquirer having a market value at the time
of twice the right's per full share exercise price. The Board of Directors
is also authorized to reduce the 15 percent ownership threshold to not less
than 10 percent.
Alliant Energy's utility subsidiaries each have common stock dividend
restrictions based on their respective bond indentures and articles of
incorporation, and restrictions on the payment of common stock dividends
commonly found with preferred stock. In addition, IP&L's ability to pay
common stock dividends is restricted based on requirements associated with
82
sinking funds. WP&L's common stock dividends are restricted to the extent
that such dividend would reduce the common stock equity ratio to less than 25
percent. Also the PSCW ordered that it must approve the payment of dividends
by WP&L to Alliant Energy that are in excess of the level forecasted in the
rate order ($58.3 million), if such dividends would reduce WP&L's average
common equity ratio below 52 percent of total capitalization. The dividends
paid by WP&L to Alliant Energy since the rate order was issued have not
exceeded such level.
In 2001, 14 non-employee directors received up to 1,000 shares each of
Alliant Energy common stock through the Shareowner Direct Plan as part of the
directors' compensation program, for a total of approximately $338,000. In
2000, 12 non-employee directors received up to $20,000 each in Alliant Energy
common stock, for a total of approximately $222,000. In 1999, matching
contributions of $2,500 each were made to nine non-employee directors.
(b) Preferred Stock - IP&L has outstanding 545,000 shares of 6.40%, $50 par
value preferred stock with a final redemption date of May 1, 2022. Under the
provisions of the mandatory sinking fund, beginning in 2003, IP&L is required
to redeem annually $1.4 million, or 27,250 shares of the preferred stock.
The carrying value of Alliant Energy's cumulative preferred stock of
subsidiaries at December 31, 2001 and 2000 was $114 million. The fair market
value, based upon the market yield of similar securities and quoted market
prices, at December 31, 2001 and 2000 was $99 million and $90 million,
respectively. Information related to Alliant Energy's cumulative preferred
stock of subsidiaries, net at December 31 was as follows:
2001 2000
------------ -------------
(in millions)
Par/Stated Authorized Shares Mandatory
Value Shares Outstanding Series Redemption
----- ------ ----------- ------ ----------
$100 * 449,765 4.40% - 6.20% No $45.0 $45.0
$25 * 599,460 6.50% No 15.0 15.0
$50 466,406 366,406 4.30% - 6.10% No 18.3 18.3
$50 ** 216,381 4.36% - 7.76% No 10.8 10.8
$50 ** 545,000 6.40% $50 / share 27.3 27.3
------------ -------------
116.4 116.4
Less: unamortized expenses (2.4) (2.6)
------------ -------------
$114.0 $113.8
============ =============
* 3,750,000 authorized shares in total. ** 2,000,000 authorized shares in total.
(8) DEBT
(a) Short-Term Debt - To provide short-term borrowing flexibility and
security for commercial paper outstanding, Alliant Energy and its
subsidiaries maintain bank lines of credit, of which most require a fee. The
utility subsidiaries participate in a utility money pool, which is funded, as
needed, through the issuance of commercial paper by Alliant Energy. Interest
expense and other fees are allocated based on borrowed amounts. The PSCW has
restricted WP&L from lending money to non-utility affiliates and
non-Wisconsin utilities. As a result, WP&L can only borrow money from the
utility money pool. At December 31, 2001, WP&L and IPC had money pool
borrowings of $90.8 million and $40.0 million, respectively, and IESU had
investments in the money pool of $1.9 million. At December 31, 2000, IESU,
WP&L and IPC had money pool borrowings of $101.1 million, $29.2 million and
$68.2 million, respectively. Information regarding short-term debt and lines
of credit was as follows (dollars in millions):
83
2001 2000 1999
------------- ------------- -------------
At year end:
Commercial paper outstanding $68.4 $283.9 $374.7
Discount rates on commercial paper 2.4-3.2% 6.4-6.7% 5.6-6.5%
Notes payable outstanding $-- $50.1 $50.0
Interest rates on notes payable N/A 6.5% 6.3%
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $221.6 $236.4 $185.9
Average interest rates on short-term debt 4.5% 6.5% 5.4%
(b) Long-Term Debt - IESU's indentures securing its First Mortgage Bonds and
its Collateral Trust Bonds constitute direct first mortgage liens and a
second lien while First Mortgage Bonds remain outstanding, respectively, upon
substantially all tangible public utility property. WP&L's and IPC's First
Mortgage Bonds are secured by substantially all of their utility plant. IESU
and WP&L also maintain unsecured indentures relating to the issuance of debt
securities.
Resources is party to a three-year credit agreement with various banking
institutions that extends through October 2003, with one-year extensions
available upon agreement by the parties. Unused borrowing availability under
this agreement is also used to support Resources' commercial paper program.
A combined maximum of $450 million of borrowings under this agreement and the
commercial paper program may be outstanding at any one time. Interest rates
are based on quoted market prices and maturities are set at the time of
borrowing and are less than one year. At December 31, 2001 and 2000,
Resources had $384 million and $321 million, respectively, of commercial
paper outstanding backed by this facility with interest rates ranging from
3.00% to 3.45% and 6.37% to 6.65%, respectively. Resources intends to
continue issuing commercial paper backed by this facility and no conditions
existed at December 31, 2001 that would have prevented the issuance of
commercial paper or direct borrowings under the three-year credit agreement.
In November 2001, Resources issued $300 million of senior notes at a fixed
interest rate of 7%, due 2011. The notes are fully and unconditionally
guaranteed by Alliant Energy. Resources used the proceeds to repay other
Resources' debt. 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
proceeds to repay short- and long-term debt.
In February 2000, Resources issued $402.5 million of exchangeable senior
notes due 2030, with a stated interest rate of 7.25% through February 2003
and 2.5% thereafter. The notes are exchangeable for cash based upon a
percentage of the value of McLeod Class A Common Stock. Alliant Energy has
agreed to fully and unconditionally guarantee the payment of principal and
interest on the exchangeable senior notes.
Debt maturities for 2002 to 2006 are $10.5 million, $392.9 million, $91.0
million, $97.1 million and $93.8 million, respectively. Depending upon
market conditions, it is currently anticipated that a majority of the
maturing debt will be refinanced with the issuance of long-term securities.
The carrying value of Alliant Energy's long-term debt (including current
maturities and variable rate demand bonds) at December 31, 2001 and 2000 was
$2.5 billion and $2.1 billion, respectively. The fair market value, based
upon the market yield of similar securities and quoted market prices, at
December 31, 2001 and 2000 was $2.6 billion and $2.4 billion, respectively.
84
(9) INVESTMENTS AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of Alliant Energy's current assets and current
liabilities approximates fair value because of the short maturity of such
financial instruments. Since the utility subsidiaries are subject to
regulation, any gains or losses related to the difference between the
carrying amount and the fair value of their financial instruments may not be
realized by Alliant Energy's shareowners. Information relating to various
investments held by Alliant Energy that are marked-to-market as a result of
SFAS 115 were as follows (in millions):
December 31, 2001 December 31, 2000
------------------------------- -----------------------------
Unrealized
Carrying/ Gains/ Carrying/ Unrealized
Fair (Losses), Fair Gains, Net
Value Net of Tax Value of Tax
------------------------------- -----------------------------
Available-for-sale securities:
Nuclear decommissioning trust funds:
Debt securities $191 $3 $180 $3
Equity securities 142 42 128 50
Total 333 45 308 53
Investment in McLeod 15 (9) 570 317
Various other investments 24 1 52 19
Trading securities:
Investment in McLeod 6 (a) 221 (a)
(a) Adjustments to the trading securities are reflected in earnings in the "Miscellaneous, net" line in the Consolidated
Statements of Income.
Nuclear Decommissioning Trust Funds - At December 31, 2001, $114 million, $37
million and $40 million of the debt securities mature in 2002-2010, 2011-2020
and 2021-2049, respectively. The fair value of the nuclear decommissioning
trust funds was as reported by the trustee, adjusted for the tax effect of
unrealized gains and losses. Net unrealized holding gains were recorded as
part of accumulated provision for depreciation. The funds realized
gains/(losses) from the sales of securities of $2.0 million, $5.0 million and
($7.9) million in 2001, 2000 and 1999, respectively (cost of the investments
based on specific identification was $169.8 million, $213.4 million and
$120.1 million, respectively, and proceeds from the sales were $171.8
million, $218.4 million and $112.2 million, respectively).
Investment in McLeod - At December 31, 2001 and 2000, Alliant Energy
beneficially owned 56.1 million shares of common stock in McLeod, a
telecommunications company. Alliant Energy had 40.5 million shares
classified as available-for-sale and 15.6 million shares as trading and the
cost basis of the investment was $30.5 million. Pursuant to the provisions
of SFAS 115, the carrying value of Alliant Energy's investment in McLeod is
adjusted to the estimated fair value each quarter based on the closing price
at the end of the quarter. Adjustments to the available-for-sale securities
do not impact earnings as the unrealized gains or losses, net of taxes, are
recorded directly to the common equity section of the Consolidated Balance
Sheets as a component of "Accumulated other comprehensive income (loss)." In
addition, any such gains or losses are reflected in current earnings only at
the time they are realized through a sale or if a decline in the stock price
below Alliant Energy's cost basis is determined to be
"other-than-temporary." Adjustments to the trading securities are reflected
in earnings in the "Miscellaneous, net" line in the Consolidated Statements
of Income. Alliant Energy realized pre-tax gains from the sales of McLeod
available-for-sale securities of $23.8 million and $40.3 million in 2000 and
1999, respectively (cost of the investments based on the first-in-first-out
method were $0.2 million and $0.6 million, respectively, and proceeds from
the sales were $24.0 million and $40.9 million, respectively). Alliant
Energy's ability to sell the McLeod stock was subject to various restrictions
under an agreement with McLeod that expired December 31, 2001.
85
Investments in Foreign Entities - The geographic concentration of Alliant
Energy's foreign investments at December 31 was as follows (in millions):
Brazil New Zealand/Australia China Mexico Other Total
--------- ------------------------- ---------- --------- ---------- ----------
2001
- ----
Unconsolidated $378 $124 $30 $41 $-- $573
Consolidated -- -- 146 -- -- 146
--------- ------------------------- ---------- --------- ---------- ----------
Total $378 $124 $176 $41 $-- $719
========= ========================= ========== ========= ========== ==========
2000
- ----
Unconsolidated $319 $140 $30 $18 $1 $508
Consolidated -- -- 50 -- -- 50
--------- ------------------------- ---------- --------- ---------- ----------
Total $319 $140 $80 $18 $1 $558
========= ========================= ========== ========= ========== ==========
Brazil - Resources holds interests in five Brazilian electric utilities
- ------
(Companhia Forca e Luz Cataguazes - Leopoldina, S.A. (Cataguazes), Companhia
Energetica da Borborema S.A., Companhia de Electricidade de Nova Friburgo
S.A., Empresa Energetica de Sergipe S.A. and Sociedade Anonima de
Eletrificacao da Paraiba) through several direct investments accounted for
under the equity method of accounting. At December 31, 2001 and 2000,
Resources' investments included a 49.9% direct ownership interest in GIPAR,
S.A., an electric utility holding company; a 39.4% direct ownership interest
in Cataguazes, an electric utility; and a 45.6% direct ownership interest in
Energisa, S.A., an energy development company. At December 31, 2001,
Resources' investments also included a 49.9% direct ownership interest in
Pbpart - SE 1 Ltda., an electric utility holding company, and a 49.7% direct
ownership interest in Usina Termeletrica de Juiz de Fora S.A., a thermal
power plant project. At December 31, 2001, the total investment balance
exceeded Resources' share of the underlying net equity of the applicable
investees by approximately $38 million which has been assigned to the assets
and liabilities of the investees and is being amortized over their remaining
estimated lives.
New Zealand/Australia - Resources' investments included a non-controlling
- ---------------------
69.5% ownership interest in Southern Hydro, a hydroelectric generating
company in Australia; a 20.4% ownership interest in TrustPower Ltd., a New
Zealand utility company; and a 9.3% ownership interest in Infratil Limited, a
New Zealand utility holding company. Southern Hydro and TrustPower Ltd. are
accounted for under the equity method and Infratil Limited is accounted for
under the cost method. At December 31, 2001, the investment balance exceeded
Resources' share of the underlying net equity of the above investees
accounted for under the equity method by approximately $21 million; $14
million has been assigned to the assets and liabilities of Southern Hydro and
is amortized over their estimated lives; and $7 million of goodwill at
TrustPower Ltd. which was being amortized over 20 years prior to the adoption
of SFAS 142, "Goodwill and Other Intangible Assets," on January 1, 2002.
China - Resources' consolidated investments included a 93.5% ownership
- -----
interest in Peak Pacific, a company that develops combined heat and power
generating facilities for large industrial customers. At December 31, 2001,
Peak Pacific's portfolio included five combined heat and power facilities.
At December 31, 2001, Resources' consolidated investments also included a
64.0% ownership interest in Anhui New Energy Heat & Power Co., Ltd., a
combined heat and power facility. Resources' unconsolidated investments
included a 50.0% ownership interest in Jiaxing JIES Power & Heat Co., Ltd.
and a 30.0% ownership interest in Tongxiang TIES Power & Heat Co., Ltd. Both
of these combined heat and power facilities are accounted for under the
equity method.
Mexico - Resources' investment in Mexico consisted of a loan receivable
- ------
(including accrued interest income) from a Mexican development company.
Under provisions of the loan, Resources has agreed to lend up to $65 million
to support the development of a resort community near the Baja peninsula.
The loan accrues interest at 8.75% and is secured by the undeveloped land of
the resort community. Repayment of the loan principal and interest will be
based on a portion of the proceeds from the sales of real estate in the
resort community and therefore is dependent on the successful development of
the project and the ability to sell real estate. Alliant Energy may also
realize royalty income on the real estate sales once the loan is repaid.
86
Investment in ATC - 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. WP&L received a tax-free cash
distribution of $75 million from ATC and had a $110 million equity investment
in ATC, with an ownership percentage of approximately 26.5 percent at
December 31, 2001. WP&L accounts for its investment in ATC under the equity
method.
Investment in Cargill-Alliant - Alliant Energy has a 50.0 percent ownership
interest in Cargill-Alliant, an electricity-trading business that is
accounted for under the equity method with investment balances of
approximately $22 million and $21 million at December 31, 2001 and 2000,
respectively.
Unconsolidated Equity Investments - Summary financial information from
Alliant Energy's unconsolidated equity investments' financial statements is
as follows (in millions):
Alliant Energy Ownership Alliant Energy Ownership
Less Than or Equal to 50% Greater Than 50%
------------------------------------- ---------------------------------
Income statement data (for the year ended): 2001 2000 1999 2001 2000 1999
------------ ---------- ---------- --------- ---------- ----------
Operating revenues $2,248.0 $1,196.4 $297.2 $465.4 $155.5 $0.5
Operating income 141.4 43.1 11.5 86.7 20.6 0.1
Income (loss) from continuing operations 52.2 67.6 5.9 (5.5) 6.5 (0.1)
Net income (loss) 52.2 67.6 5.9 (5.5) 6.5 (0.1)
Balance sheet data (at December 31): 2001 2000 2001 2000
------------ ---------- --------- ----------
Current assets $460.0 $519.2 $234.6 $140.9
Non-current assets 2,195.6 1,562.8 1,322.2 1,073.8
Current liabilities 528.0 613.6 329.3 241.0
Non-current liabilities (excluding
minority interest) 574.6 534.7 707.4 486.9
Minority interest 213.5 212.9 58.0 16.7
(10) DERIVATIVE FINANCIAL INSTRUMENTS
(a) Accounting for Derivative Instruments and Hedging Activities - Alliant
Energy records derivative instruments at fair value on the balance sheet as
assets or liabilities and changes in the derivatives' fair values in earnings
unless specific hedge accounting criteria are met.
In the first quarter of 2001, Alliant Energy recorded a net loss of $12.9
million for a cumulative effect of a change in accounting principle
representing the impact of adopting SFAS 133 as of January 1, 2001 at Alliant
Energy's equity method investees. This transition adjustment represents
Alliant Energy's share of the difference between the carrying amount of
Southern Hydro's electricity derivative contracts under the applicable
accounting principles in effect at December 31, 2000, and the carrying values
of these electricity derivative contracts as determined in accordance with
SFAS 133 as of January 1, 2001.
In the third quarter of 2000, Alliant Energy recorded net income of $16.7
million for a cumulative effect of a change in accounting principle
representing the impact of adopting SFAS 133 as of July 1, 2000 at Alliant
Energy's consolidated subsidiaries. This transition adjustment was primarily
the result of the difference between the carrying amount of Resources'
exchangeable senior notes issued in February 2000 under the applicable
accounting principles in effect at June 30, 2000, and the carrying values of
the debt and derivative components of the notes as determined in accordance
with SFAS 133 as of July 1, 2000. Transition adjustments relating to Alliant
Energy's other derivative instruments had no material impact on net income.
87
The consolidated financial statement impact of adopting SFAS 133 was as
follows (in millions):
Increase (Decrease)
Financial ------------------------------------
Financial Statement Account Statement July 1, 2000 January 1, 2001
- ---------------------------------------------------------- -------------------- -------------- -----------------
Investments in unconsolidated foreign entities Balance sheet $-- ($18.4)
Other assets Balance sheet 2.0 --
Other liabilities (a) Balance sheet 302.2 (5.5)
Cumulative effect of a change in accounting
principle (other comprehensive income) Balance sheet (6.6) --
Other comprehensive income (b) Balance sheet (187.3) --
Long-term debt (c) Balance sheet (310.3) --
Cumulative effect of a change in accounting principle,
net of tax Income statement 16.7 (12.9)
Pre-tax gain on transfer to trading account (d) Income statement 321.4 --
Deferred tax expense (d) Income statement 134.1 --
(a) Includes the embedded derivative component of Resources' exchangeable
senior notes of $283.7 million on July 1, 2000 and deferred income taxes
related to Southern Hydro's electricity contracts on January 1, 2001
(b) Represents net of tax reduction to other comprehensive income resulting
from classification of approximately 15.6 million shares of McLeod as
trading securities (equal to net amount of two line items in (d))
(c) Adjustment to the debt component of Resources' exchangeable senior notes
(d) Gain and tax expenses associated with the transfer of approximately 15.6
million shares of McLeod from available-for-sale securities to trading
securities
During 2001 and 2000, $0.1 million of net gains and $6.7 million of net
losses, respectively, included in the cumulative effect of a change in
accounting principle component of accumulated other comprehensive income
(loss) were reclassified into earnings, resulting in remaining balances of $0
and $0.1 million at December 31, 2001 and 2000, respectively.
Cash Flow Hedging Instruments - During 2001 and 2000, Alliant Energy held
- -----------------------------
various derivative instruments designated as cash flow hedging instruments.
WP&L utilized gas commodity financial swap arrangements to reduce the impact
of price fluctuations on gas purchased and injected into storage during the
summer months and withdrawn and sold at current market prices during the
winter months pursuant to the natural gas cost incentive sharing mechanism
with customers in Wisconsin. Alliant Energy's utility subsidiaries utilized
physical coal purchase contracts, which did not qualify for the normal
purchase and sale exception, to manage the price of anticipated coal
purchases and sales. For WP&L, these contracts are used to manage costs
within the forecasts used to set its electric rates. For IP&L, these
contracts are used to minimize customer rates in its dollar-for-dollar
recovery mechanism in Iowa. Treasury rate locks were used to mitigate risk
associated with movements in the ten-year treasury yield used to price $300
million of Resources' senior notes issued in November 2001. Interest rate
swaps were used by Southern Hydro to manage the future interest payments of
its variable rate debt. SmartEnergy, Inc., an energy services company
operating in deregulated markets, utilized electricity swaps to reduce the
impact of price fluctuations on electricity purchased to meet the
requirements of its customers.
In 2001 and 2000, net gains of $2.0 million and $0.4 million, respectively,
were recognized relating to the amount of hedge ineffectiveness in accordance
with SFAS 133. Alliant Energy did not exclude any components of the
derivative instruments' gain or loss from the assessment of hedge
effectiveness and in 2001 reclassified a loss of $0.9 million into earnings
as a result of the discontinuance of hedges. At December 31, 2001, the
maximum length of time over which Alliant Energy hedged its exposure to the
variability in future cash flows for forecasted transactions was 10 months
and Alliant Energy estimated that gains of $2.9 million will be reclassified
from accumulated other comprehensive income (loss) into earnings in 2002 as
the hedged transactions affect earnings. At December 31, 2000, the maximum
length of time over which Alliant Energy hedged its exposure to the
88
variability in future cash flows for forecasted transactions was 18 months
and Alliant Energy estimated that losses of $3.7 million would be
reclassified from accumulated other comprehensive income (loss) into earnings
in 2001 as the hedged transactions affected earnings.
Other Derivatives Not Designated in Hedge Relationships - Alliant Energy's
- -------------------------------------------------------
derivatives that were not designated in hedge relationships during 2001
and/or 2000 included the embedded derivative component of Resources'
exchangeable senior notes, oil and gas swaps and collars, electricity price
collars, physical coal contracts not designated in hedge relationships and
electricity derivative contracts at Southern Hydro.
At maturity, the holders of Resources' exchangeable senior notes are paid the
higher of the principal amount of the notes or an amount based on the value
of McLeod common stock. SFAS 133 requires that Alliant Energy split the
value of the notes into a debt component and a derivative component. The
payment feature tied to McLeod stock is considered an embedded derivative
under SFAS 133 that must be accounted for as a separate derivative
instrument. This component is classified as a "Derivative liability" on the
Consolidated Balance Sheets. Subsequent changes in the fair value of the
option are reflected as increases or decreases in Alliant Energy's reported
net income. The carrying amount of the host debt security, classified as
long-term debt, is adjusted for amortization of the debt discount in
accordance with the interest method as prescribed by APB 21, "Interest on
Receivables and Payables."
Changes in the fair value of the McLeod shares designated as trading are
reflected as increases or decreases in Alliant Energy's net income. These
trading gains or losses are expected to correspond with and partially offset
changes in the intrinsic value of the derivative component of Resources'
exchangeable senior notes. Changes in the time value portion of the
derivative component will result in non-cash increases or decreases to
Alliant Energy's net income. Included in "Miscellaneous, net" in Alliant
Energy's Consolidated Statements of Income for 2001 and 2000, was expense of
$215.1 million and $102.5 million, respectively, related to the change in
value of the McLeod trading securities, partially offset by income of $181.6
million and $101.8 million, respectively, related to the change in value of
the derivative component of the exchangeable senior notes.
Whiting is exposed to commodity price risk in the pricing of its oil and gas
production. Alliant Energy has previously utilized oil and gas swaps and
collars to mitigate the impact of oil and gas price fluctuations. At
December 31, 2001, Whiting did not have any swaps or collars outstanding.
Electricity price collars were used to manage utility energy costs during
supply/demand imbalances. Physical coal contracts that do not qualify for
the normal purchase and sale exception were used to manage the price of
anticipated coal purchases and sales. For WP&L, these contracts are used to
manage costs within the forecasts used to set its electric rates. Due to the
dollar-for-dollar fuel recovery mechanism in Iowa, changes in the fair value
of these instruments are recorded in regulatory assets/liabilities at IP&L.
Southern Hydro, a foreign affiliate of Alliant Energy accounted for under the
equity method of accounting, enters into electricity derivative contracts
which have not been designated in hedge relationships to manage the
electricity commodity price risk associated with anticipated sales into the
spot market. At December 31, 2001, these instruments were recorded at their
fair value as a component of "Investments in unconsolidated foreign entities"
on the Consolidated Balance Sheets and changes in fair value were recorded as
a component of "Equity income from unconsolidated investments" in the
Consolidated Statements of Income.
(b) Weather Derivatives - Alliant Energy uses weather derivatives to reduce
the impact of weather volatility on its natural gas sales volumes. In 2001
and 2000, Alliant Energy entered into non-exchange traded options based on
heating degree days in which Alliant Energy receives payment from the
counterparty if actual heating degree days are less than the strike price in
the contract. Alliant Energy paid premiums to enter into these contracts,
which are amortized to expense over the contract period. Alliant Energy has
used the intrinsic value method to account for these weather derivatives.
89
(c) Nuclear Decommissioning Trust Fund Investments - Historically, WP&L has
entered into combinations of options to mitigate the effect of significant
market fluctuations on its common stock investments in its nuclear
decommissioning trust funds. The derivative transactions are designed to
protect the portfolio's value while allowing the funds to earn a total return
modestly in excess of long-term expectations over the hedge period. Fair
value changes of these instruments do not impact net income as they are
recorded as equally offsetting changes in the investment in nuclear
decommissioning trust funds and accumulated depreciation.
(d) Energy-trading Contracts - Resources is the majority owner of a natural
gas marketing operation, NG Energy Trading, LLC (NG). NG enters into
financial and physical contracts for the sale, purchase, storage,
transportation and loan of natural gas. NG accounts for all its positions,
including gas in storage, at estimated fair value, with changes in fair value
reported in earnings.
(11) COMMITMENTS AND CONTINGENCIES
(a) Construction and Acquisition Program - Alliant Energy currently
anticipates 2002 construction and acquisition expenditures will be
approximately $800 million, consisting of $400 million for its utility
operations, $170 million for oil and gas investments, $100 million for
non-regulated generation investments, $55 million for energy-related
international investments and $75 million for other business development
initiatives at Resources. During 2003-2006, Alliant Energy currently
anticipates construction and acquisition expenditures of approximately $1.9
billion for its utility operations, $960 million for non-regulated generation
investments, $260 million for oil and gas investments, $200 million for
energy-related international investments and $310 million for other business
development initiatives at Resources. These amounts do not include any
potential capital expenditures Alliant Energy may make for its Power Iowa
domestic generation program given the uncertainty of such investments,
including if Alliant Energy would own the generating plants or purchase the
power from plants that were owned by an independent entity.
(b) Purchased-Power, Coal and Natural Gas Contracts - Alliant Energy,
through its subsidiaries (Corporate Services, IESU, WP&L and IPC), has
entered into purchased-power, coal and natural gas supply, transportation and
storage contracts. Certain purchased-power commitments are considered
operating leases and are therefore not included here, but are included in
Note 3. The natural gas supply commitments are all index-based. Alliant
Energy expects to supplement its coal and natural gas supplies with spot
market purchases as needed. The table includes commitments for "take-or-pay"
contracts which result in dollar commitments with no associated MWhs, tons or
Dths. Alliant Energy's minimum commitments are as follows (dollars and Dths
in millions; MWhs and tons in thousands):
Purchased-power Coal Natural gas
------------------------ ----------------------- --------------------------
Dollars MWhs Dollars Tons Dollars Dths
---------- ---------- ---------- ---------- ------------ ----------
2002 $74.9 1,015 $76.9 9,206 $76.2 9
2003 53.4 1,156 72.9 8,729 44.5 1
2004 11.8 361 46.9 4,282 15.3 --
2005 0.1 -- 32.7 3,100 12.9 --
2006 0.1 -- 11.6 898 12.4 --
(c) Legal Proceedings - Alliant Energy is involved in legal and
administrative proceedings before various courts and agencies with respect to
matters arising in the ordinary course of business. Although unable to
predict the outcome of these matters, Alliant Energy believes that
appropriate reserves have been established and final disposition of these
actions will not have a material adverse effect on its financial condition or
results of operations.
90
(d) Financial Guarantees and Commitments - As part of Alliant Energy's
electricity trading joint venture with Cargill, both Alliant Energy and
Cargill have made guarantees to certain counterparties regarding the
performance of contracts entered into by the joint venture. Revocable
guarantees of approximately $186 million and $160 million have been issued,
of which approximately $26 million and $42 million were outstanding at
December 31, 2001 and 2000, respectively. Under the terms of the joint
venture agreement, any payments required under the guarantees would be shared
by Alliant Energy and Cargill on a 50/50 basis to the extent the joint
venture is not able to reimburse the guarantor for payments made under the
guarantee.
At December 31, 2001 and 2000, Alliant Energy had issued guarantees to
support unconsolidated affiliate and third-party financing arrangements of
approximately $14 million and $21 million, respectively. Such guarantees are
not reflected in the consolidated financial statements. Management believes
the likelihood of Alliant Energy having to make any material cash payments
under these guarantees is remote.
(e) Environmental Liabilities - Alliant Energy had recorded the following
environmental liabilities, and regulatory assets associated with certain of
these liabilities, at December 31 (in millions):
Environmental liabilities 2001 2000 Regulatory assets 2001 2000
- ------------------------- ------------ ------------ ----------------- ------------ ------------
MGP sites $43.9 $48.0 MGP sites $50.2 $54.3
NEPA 8.2 10.4 NEPA 9.7 11.9
Oil and gas properties 4.0 13.0 Other 3.2 0.6
------------ ------------
Other 0.4 0.5 $63.1 $66.8
============ ============
------------ ------------
$56.5 $71.9
============ ============
MGP Sites - IESU, WP&L and IPC have current or previous ownership interests
- ---------
in 34, 14 and 9 sites, respectively, previously associated with the
production of gas for which they may be liable for investigation, remediation
and monitoring costs relating to the sites. IESU, WP&L and IPC have received
letters from state environmental agencies requiring no further action at
four, five and one site(s), respectively. The companies are working pursuant
to the requirements of various federal and state agencies to investigate,
mitigate, prevent and remediate, where necessary, the environmental impacts
to property, including natural resources, at and around the sites in order to
protect public health and the environment.
The utility subsidiaries record environmental liabilities based upon periodic
studies, most recently updated in the third quarter of 2001, related to the
MGP sites. Such amounts are based on the best current estimate of the
remaining amount to be incurred for investigation, remediation and monitoring
costs for those sites where the investigation process has been or is
substantially completed, and the minimum of the estimated cost range for
those sites where the investigation is in its earlier stages. It is possible
that future cost estimates will be greater than current estimates as the
investigation process proceeds and as additional facts become known. The
amounts recognized as liabilities are reduced for expenditures made and are
adjusted as further information develops or circumstances change. Costs of
future expenditures for environmental remediation obligations are not
discounted to their fair value. Management currently estimates the range of
remaining costs to be incurred for the investigation, remediation and
monitoring of all utility subsidiary sites to be approximately $33 million to
$58 million.
Under the current rate making treatment approved by the PSCW, the MGP
expenditures of WP&L, net of any insurance proceeds, are deferred and
collected from gas customers over a five-year period after new rates are
implemented. The MPUC also allows the deferral of MGP-related costs
applicable to the Minnesota sites and IPC has been successful in obtaining
approval to recover such costs in rates in Minnesota. The IUB has permitted
utilities to recover prudently incurred costs. Regulatory assets have been
recorded by each of the utility subsidiaries, which reflect the probable
future rate recovery, where applicable. Considering the current rate
treatment, and assuming no material change therein, the utility subsidiaries
believe that the clean-up costs incurred for these MGP sites will not have a
material adverse effect on their respective financial conditions or results
of operations.
91
Settlement has been reached with all the utility subsidiaries' insurance
carriers regarding reimbursement for their MGP-related costs. Insurance
recoveries available at December 31, 2001 for IESU, WP&L and IPC were $0,
$2.1 million and $4.7 million, respectively. Pursuant to their applicable
rate making treatment, IPC has recorded its recoveries in "Other long-term
liabilities and deferred credits" and WP&L has recorded its recoveries as an
offset against its regulatory assets. In February 2001, the IUB issued an
order directing IESU to refund its insurance recoveries from MGP sites.
Under the refund plan, IESU returned 90 percent of the recoveries to
customers in 2001 and retained 10 percent.
National Energy Policy Act of 1992 - NEPA requires owners of nuclear power
- ----------------------------------
plants to pay a special assessment into a "Uranium Enrichment Decontamination
and Decommissioning Fund." The assessment is based upon prior nuclear fuel
purchases. IP&L and WP&L recover the costs associated with this assessment
over the period the costs are assessed. Alliant Energy continues to pursue
relief from this assessment through litigation.
Oil and Gas Properties Dismantlement and Abandonment Costs - Whiting is
- ----------------------------------------------------------
responsible for certain dismantlement and abandonment costs related to
various off-shore oil and gas platforms (and related on-shore plants and
equipment), the most significant of which is located off the coast of
California. In 2001, Whiting revised its estimate for the total costs for
these properties from approximately $13 million to approximately $4 million,
which it has accrued. Whiting reduced the estimated liability primarily due
to the successful efforts to have the California facility designated as a
permanent facility, therefore significantly reducing the amount of
dismantlement required. The most significant expenditures are not expected
to be incurred until 2008.
(f) Decommissioning of DAEC and Kewaunee - Pursuant to the most recent
electric rate case orders, the IUB and PSCW allow IP&L and WP&L to recover $6
million and $16 million annually for their share of the cost to decommission
DAEC and Kewaunee, respectively. Decommissioning expense is included in
"Depreciation and amortization" in the Consolidated Statements of Income and
the cumulative amount is included in "Accumulated depreciation" on the
Consolidated Balance Sheets to the extent recovered through rates.
Additional information relating to the decommissioning of DAEC and Kewaunee
included in the most recent electric rate orders was as follows (dollars in
millions):
DAEC Kewaunee
------------------------- ----------------------
Assumptions relating to current rate recovery amounts:
Alliant Energy's share of estimated decommissioning cost $252.8 $224.9
Year dollars in 1993 2001
Method to develop estimate NRC minimum formula Site-specific study
Annual inflation rate 4.91% 5.83%
Decommissioning method Prompt dismantling Prompt dismantling
and removal and removal
Year decommissioning to commence 2014 2013
After-tax return on external investments:
Qualified 7.34% 5.62%
Non-qualified 5.80% 6.97%
External trust fund balance at December 31, 2001 $117.2 $215.8
Internal reserve at December 31, 2001 $21.7 $--
After-tax earnings on external trust funds in 2001 $3.6 $7.1
The rate recovery amounts for DAEC only include an inflation estimate through
1997. Both IP&L and WP&L are funding all rate recoveries for decommissioning
into external trust funds and funding on a tax-qualified basis to the extent
possible. All of the rate recovery assumptions and levels will be addressed
in IP&L's and WP&L's 2002 rate cases. In accordance with their respective
regulatory requirements, IP&L and WP&L record the earnings on the external
trust funds as interest income with a corresponding entry to interest expense
at IP&L and to depreciation expense at WP&L. The earnings accumulate in the
external trust fund balances and in accumulated depreciation on utility plant.
92
IP&L's 70 percent share of the estimated cost to decommission DAEC based on
the most recent site-specific study completed in 1998, and updated in 2001,
is $395 million in 2002 dollars. This study includes the costs to terminate
DAEC's NRC license, to return the site to a greenfield condition and for
spent fuel storage. IP&L's 70 percent share of the estimated cost to
decommission DAEC based on the most recent NRC minimum formula, using the
direct disposal method, is $402.9 million in 2000 dollars. The NRC minimum
formula is intended to apply only to the cost of terminating DAEC's NRC
license. The additional decommissioning expense funding requirements which
should result from these updated studies are not reflected in IP&L's rates.
(12) JOINTLY-OWNED ELECTRIC UTILITY PLANT
Under joint ownership agreements with other Iowa and Wisconsin utilities, the
utility subsidiaries have undivided ownership interests in jointly-owned
electric generating stations. IP&L also has joint ownership agreements
related to transmission facilities. Each of the respective owners is
responsible for the financing of its portion of the construction costs. KWh
generation and operating expenses are divided on the same basis as ownership
with each owner reflecting its respective costs in its Consolidated
Statements of Income. Information relative to the utility subsidiaries'
ownership interest in these facilities at December 31, 2001 was as follows
(dollars in millions):
Accumulated Construction
Fuel Ownership Plant in Provision for Work-In-
Type Interest % Service Depreciation Progress
- ------------------------------------------------------------------------------------------------------------------
IESU
- ----
Ottumwa Coal 48.0 $190.1 $113.7 $2.2
Neal Unit 3 Coal 28.0 60.0 35.3 0.3
DAEC Nuclear 70.0 543.1 298.5 7.6
-------------------------------------------------
$793.2 $447.5 $10.1
-------------------------------------------------
WP&L
- ----
Columbia Energy Center Coal 46.2 $174.3 $105.3 $1.7
Edgewater Unit 4 Coal 68.2 57.1 34.3 1.4
Edgewater Unit 5 Coal 75.0 232.2 106.2 2.5
Kewaunee Nuclear 41.0 167.3 111.3 3.7
-------------------------------------------------
$630.9 $357.1 $9.3
-------------------------------------------------
IPC
- ---
Neal Unit 4 Coal 21.5 $84.5 $56.8 $0.3
Louisa Unit 1 Coal 4.0 24.9 14.1 --
-------------------------------------------------
$109.4 $70.9 $0.3
-------------------------------------------------
$1,533.5 $875.5 $19.7
=================================================
Increases in utility plant in service balances for DAEC and Kewaunee during
2001 were largely due to projects for a power upgrade and the replacement of
the steam generators, respectively. Both projects are expected to result in
significant increases in generating capability compared to such capability
prior to undertaking such projects.
93
(13) OIL AND GAS PRODUCING ACTIVITIES
(a) Cost Information - Whiting's oil and gas activities are conducted
entirely in the U.S. Costs incurred in oil and gas producing activities were
as follows (in millions):
2001 2000 1999
-------- ------- -------
Proved property acquisition $66.0 $125.9 $21.4
Development 32.1 13.2 13.2
Exploration 0.8 1.1 1.9
Unproved property acquisition 0.1 0.3 0.3
-------- ------- -------
$99.0 $140.5 $36.8
======== ======= =======
Net capitalized costs related to Whiting's oil and gas producing activities
at December 31 were as follows (in millions):
2001 2000
-------- -------
Proved oil and gas properties $391.4 $349.4
Unproved oil and gas properties 0.7 0.7
Accumulated DD&A (110.8) (123.9)
-------- -------
Oil and gas properties, net $281.3 $226.2
======== =======
(b) Results of Operations - Whiting's results of operations for oil and gas
producing activities (excluding corporate overhead and interest costs) were
as follows (in millions):
2001 2000 1999
------------- ----------- -----------
Revenues $134.6 $94.1 $62.6
------------- ----------- -----------
Operating expenses:
DD&A 26.9 21.5 19.8
Lease operating 31.5 25.0 21.3
Production taxes 6.5 5.4 3.0
Acquisition and exploration costs 0.8 1.1 1.9
Impairment of proved oil and gas properties -- -- 3.3
------------- ----------- -----------
65.7 53.0 49.3
------------- ----------- -----------
Results of operations for oil and gas producing
activities before income taxes 68.9 41.1 13.3
Income taxes 18.7 10.6 2.0
------------- ----------- -----------
Results of operations for oil and gas producing activities $50.2 $30.5 $11.3
============= =========== ===========
Whiting sold oil and gas properties in 2001, 2000 and 1999 for total proceeds
of $19.6 million, $29.5 million and $13.0 million, respectively. In 2001,
2000 and 1999, Whiting had gains on sales of oil and gas properties of $11.7
million, $7.7 million and $10.2 million, respectively, which were recorded in
"Miscellaneous, net" in Alliant Energy's Consolidated Statements of Income
and were excluded in the results of operations data in the previous table.
(c) Reserve Quantity Information (Unaudited) - Whiting's estimates of proved
reserves and related valuations were based primarily on reports of Ryder Scott
Company, L.P., independent petroleum and geological engineers, in accordance
with the provisions of SFAS 69, "Disclosures about Oil and Gas Producing
Activities." The estimates of proved reserves are inherently imprecise and
are continually subject to revision based on production history, results of
additional exploration and development, price changes and other factors.
94
Whiting's oil and gas reserves are attributable solely to properties within
the U.S. A summary of Whiting's changes in quantities of proved (developed
and undeveloped) oil and gas reserves was as follows (in millions):
Oil (barrels) Gas (Dth)
-------------- -------------
Balance, December 31, 1999 11.9 122.6
Purchases of minerals in place 11.9 45.8
Extensions and discoveries 0.5 4.7
Sales of minerals in place (1.1) (8.8)
Production (1.6) (16.9)
Revisions of previous estimates (2.5) 10.1
-------------- -------------
Balance, December 31, 2000 19.1 157.5
Purchases of minerals in place 1.0 89.8
Extensions and discoveries 1.1 9.3
Sales of minerals in place (0.7) (6.0)
Production (2.1) (19.8)
Revisions of previous estimates (3.6) (3.3)
-------------- -------------
Balance, December 31, 2001 14.8 227.5
============== =============
Whiting's proved developed oil and gas reserves at December 31 were as
follows (in millions):
2001 2000 1999
--------- --------- --------
Oil (barrels) 11.0 14.9 9.6
Gas (Dth) 136.8 134.4 97.4
(d) Standardized Measure of Discounted Future Net Cash Flows (Unaudited) -
Whiting's standardized measure of discounted future net cash flows relating
to proved oil and gas reserves and the changes were prepared in accordance
with the provisions of SFAS 69. Future cash inflows were computed by
applying year-end prices to estimated future production. Future production
and development costs are computed by estimating the expenditures to be
incurred in producing and developing the proved oil and gas reserves at
year-end, based on year-end costs and assuming continuation of existing
economic conditions.
Future income tax expenses are calculated by applying appropriate year-end
tax rates to future pre-tax net cash flows relating to proved oil and gas
reserves, less the tax basis of properties involved. Future income tax
expenses give effect to permanent differences, tax credits and loss
carryforwards relating to the proved oil and gas reserves. Future net cash
flows are discounted at a rate of 10 percent annually to derive the
standardized measure of discounted future net cash flows. This calculation
procedure does not necessarily result in an estimate of the fair market value
or the present value of Whiting's oil and gas properties.
The standardized measure of discounted future net cash flows relating to
Whiting's proved oil and gas reserves at December 31 was as follows (in
millions):
2001 2000 1999
------------- ------------ ------------
Future cash inflows $880.9 $1,912.5 $563.7
Future production costs (379.7) (523.5) (204.7)
Future development costs (75.6) (32.8) (27.2)
Future income tax expense (62.0) (398.4) (72.7)
------------- ------------ ------------
Total future net cash flows 363.6 957.8 259.1
10 percent annual discount for estimated timing of cash flows (151.9) (438.6) (108.2)
------------- ------------ ------------
Standardized measure of discounted future net cash flows $211.7 $519.2 $150.9
============= ============ ============
95
The changes in the standardized measure of discounted future net cash flows
relating to Whiting's proved oil and gas reserves were as follows (in
millions):
2001 2000 1999
------------- ------------ ------------
Beginning balance $519.2 $150.9 $105.3
Net change in income taxes 183.1 (170.3) (25.3)
Purchases of minerals in place 84.6 241.1 28.0
Accretion of discount 73.5 19.0 11.9
Extensions, discoveries and improved recoveries 17.5 33.9 7.6
Development costs, net (3.3) 4.4 5.4
Sales of minerals in place (11.2) (18.0) (11.8)
Revisions of previous quantity estimates (16.2) (9.6) 10.5
Sale of oil and gas produced, net of production costs (87.3) (76.7) (36.6)
Net changes in prices and production costs (528.1) 359.4 55.9
Changes in production rates and other (20.1) (14.9) --
------------- ------------ ------------
Ending balance $211.7 $519.2 $150.9
============= ============ ============
Prices in effect at December 31 used in determining future net revenues
related to the standardized measure calculations, excluding hedging activity,
were as follows:
2001 2000 1999
-------------- ------------ -------------
Oil (per barrel) $16.84 $24.04 $22.43
Gas (per Dth) $2.76 $9.18 $2.40
(14) SEGMENTS OF BUSINESS
Alliant Energy's principal business segments are:
o Regulated domestic utilities - consists of IP&L and WP&L, serving
customers in Iowa, Wisconsin, Minnesota and Illinois, and is broken down
into three segments: a) electric operations; b) gas operations; and c)
other, which includes the steam and water businesses and the unallocated
portions of the utility business. Various line items in the following
tables are not allocated to the electric and gas segments for management
reporting purposes and therefore are included in "Other Regulated Domestic
Utilities."
o Non-regulated businesses - represents the operations of Resources, its
subsidiaries and Alliant Energy's investment in Cargill-Alliant, and is
broken down into two segments: a) Whiting, an oil and gas production
company; and b) other, which includes the operations of the International,
Integrated Services, Investments (excluding Whiting), Non-regulated
Generation and Trading, Mass Markets and Energy Technologies business units
described in Note 1(a); an equity stake in an independent
telecommunications provider, McLeod; the operations of Resources' parent
company; and any non-regulated reconciling/eliminating entries.
o Other - includes the operations of Alliant Energy's parent company and
Corporate Services, as well as any Alliant Energy parent company
reconciling/eliminating entries.
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 17 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 following segment reporting line items were impacted: equity (income)
loss from unconsolidated investments; income tax expense (benefit); net
income (loss); total assets; and investments in equity method subsidiaries.
Intersegment revenues were not material to Alliant Energy's operations and
there was no single customer whose revenues were 10 percent or more of
Alliant Energy's consolidated revenues. Refer to Note 9 for a breakdown of
Alliant Energy's international investments by country. Certain financial
information relating to Alliant Energy's significant business segments and
products and services was as follows (in millions):
96
Regulated Domestic Utilities Non-regulated Businesses Alliant Energy
-------------------------------------- ------------------------------
Electric Gas Other Total Whiting Other Total Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
2001
- ----
Operating revenues $1,756.6 $487.9 $37.1 $2,281.6 $134.6 $366.7 $501.3 ($5.6) $2,777.3
Depreciation and
amortization 245.6 28.8 3.2 277.6 26.9 29.6 56.5 -- 334.1
Operating income (loss) 306.1 11.2 7.5 324.8 54.1 (7.0) 47.1 (1.9) 370.0
Interest expense, net of AFUDC 100.5 100.5 10.0 59.0 69.0 9.8 179.3
Equity income from
unconsolidated investments (15.6) (15.6) -- (20.2) (20.2) (0.1) (35.9)
Preferred dividends 6.7 6.7 -- -- -- -- 6.7
Miscellaneous, net (25.9) (25.9) (11.7) 17.0 5.3 (4.6) (25.2)
Income tax expense (benefit) 94.2 94.2 15.1 (41.1) (26.0) (8.4) 59.8
Cumulative effect of a change in
accounting principle, net of tax -- -- -- (12.9) (12.9) -- (12.9)
Net income (loss) 164.9 164.9 40.7 (34.6) 6.1 1.4 172.4
Total assets 3,336.6 506.5 474.7 4,317.8 318.3 1,536.2 1,854.5 75.4 6,247.7
Investments in equity method
subsidiaries 119.2 119.2 -- 539.9 539.9 -- 659.1
Construction and acquisition
expenditures 298.7 36.9 5.2 340.8 99.6 338.0 437.6 40.0 818.4
- ------------------------------------------------------------------------------------------------------------------------------------
Regulated Domestic Utilities Non-regulated Businesses Alliant Energy
----------------------------------------- ------------------------------
Electric Gas Other Total Whiting Other Total Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
2000
- ----
Operating revenues $1,648.0 $415.0 $33.4 $2,096.4 $94.1 $217.2 $311.3 ($2.7) $2,405.0
Depreciation and
amortization 252.6 27.7 3.1 283.4 21.5 17.4 38.9 -- 322.3
Operating income (loss) 330.6 26.6 4.5 361.7 30.0 (10.8) 19.2 0.2 381.1
Interest expense, net of AFUDC 103.1 103.1 7.5 45.8 53.3 8.5 164.9
Equity income from
unconsolidated investments (0.5) (0.5) -- (18.6) (18.6) -- (19.1)
Preferred dividends 6.7 6.7 -- -- -- -- 6.7
Gain on reclassification of
investments -- -- -- (321.3) (321.3) -- (321.3)
Gains on sales of McLeod stock -- -- -- (23.8) (23.8) -- (23.8)
Miscellaneous, net (23.3) (23.3) (7.8) (13.3) (21.1) (2.7) (47.1)
Income tax expense 107.9 107.9 5.4 125.2 130.6 0.3 238.8
Cumulative effect of a change in
accounting principle, net of tax -- -- -- 16.7 16.7 -- 16.7
Net income (loss) 167.8 167.8 24.9 211.9 236.8 (5.9) 398.7
Total assets 3,402.2 554.4 427.2 4,383.8 256.5 2,076.8 2,333.3 16.7 6,733.8
Investments in equity method
subsidiaries 6.5 6.5 -- 487.3 487.3 -- 493.8
Construction and acquisition
expenditures 265.9 35.8 3.0 304.7 137.5 613.2 750.7 11.1 1,066.5
- ------------------------------------------------------------------------------------------------------------------------------------
97
Regulated Domestic Utilities Non-regulated Businesses Alliant Energy
---------------------------------------- ------------------------------
Electric Gas Other Total Whiting Other Total Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ----
Operating revenues $1,548.9 $314.3 $32.1 $1,895.3 $62.6 $172.4 $235.0 ($2.3) $2,128.0
Depreciation and
amortization 219.3 25.2 2.9 247.4 19.8 11.9 31.7 -- 279.1
Operating income (loss) 345.1 27.4 5.3 377.8 4.7 (6.0) (1.3) -- 376.5
Interest expense, net of AFUDC 100.7 100.7 5.4 19.4 24.8 3.4 128.9
Equity (income) loss from
unconsolidated investments (0.3) (0.3) -- (2.9) (2.9) 0.2 (3.0)
Preferred dividends 6.7 6.7 -- -- -- -- 6.7
Gains on sales of McLeod stock -- -- -- (40.3) (40.3) -- (40.3)
Miscellaneous, net (5.4) (5.4) (10.2) (17.4) (27.6) 0.1 (32.9)
Income tax expense (benefit) 115.0 115.0 0.5 6.4 6.9 (1.4) 120.5
Net income (loss) 161.1 161.1 9.0 28.8 37.8 (2.3) 196.6
Total assets 3,321.8 477.6 385.2 4,184.6 148.5 1,707.1 1,855.6 35.5 6,075.7
Investments in equity method
subsidiaries 5.7 5.7 -- 74.0 74.0 -- 79.7
Construction and acquisition
expenditures 246.9 35.5 3.3 285.7 35.2 156.9 192.1 0.8 478.6
- ------------------------------------------------------------------------------------------------------------------------------------
Products and Services
- ---------------------
Non-regulated and Other Revenues
- -----------------------------------------------------------------------------------------------------------
Integrated Investments
-----------------------------------
Year Services Whiting Other International Other Total
- -----------------------------------------------------------------------------------------------------------
(in millions)
2001 $241.9 $134.6 $44.7 $85.4 $26.3 $532.9
2000 172.2 94.1 44.4 -- 31.3 342.0
1999 126.0 62.6 47.4 -- 28.7 264.7
98
(15) RESTATEMENT OF PREVIOUSLY REPORTED 2001 QUARTERLY RESULTS (UNAUDITED)
Alliant Energy's originally reported results for the first three quarters of
2001 were based on the assumption that Southern Hydro's electricity
derivatives qualified for hedge accounting. Southern Hydro is a foreign
affiliate of Alliant Energy accounted for under the equity method of
accounting. Alliant Energy prepared its quarterly financial statements
during 2001 based on the independently prepared financial statements of
Southern Hydro, which treated these derivatives as qualifying for hedge
accounting under SFAS 133. Upon a further review of the accounting for such
derivatives by Alliant Energy during the fourth quarter, it was determined
the derivatives did not qualify for hedge accounting and that gains and
losses attributable to changes in the fair value of these derivatives should
have been recognized in Alliant Energy's earnings in the first three quarters
of 2001. As required by accounting principles generally accepted in the
U.S., all financial statements for the first three quarters of 2001 of
Alliant Energy were restated to reflect this change. Alliant Energy's net
income in 2000 and retained earnings at January 1, 2000 were not impacted.
Details regarding the changes were as follows (dollars in thousands, except
per share amounts):
For the Three Months Ended
------------------------------------------------------------------------------------
March 31, 2001 June 30, 2001 September 30, 2001
--------------------------- ---------------------------- ---------------------------
Originally Originally Originally
Reported Restated Reported Restated Reported Restated
------------ -------------- -------------- ------------- -------------- ------------
Income before cumulative effect of a
change in accounting principle, net of tax $33,385 $22,067 $23,300 $37,721 $62,285 $69,331
Cumulative effect of a change in
accounting principle, net of tax -- (12,868) -- -- -- --
Net income 33,385 9,199 23,300 37,721 62,285 69,331
EPS - diluted:
Income before cumulative effect of a
change in accounting principle 0.42 0.28 0.29 0.48 0.78 0.87
Cumulative effect of a change in
accounting principle -- (0.16) -- -- -- --
Net income 0.42 0.12 0.29 0.48 0.78 0.87
Retained earnings 812,058 787,872 795,863 786,098 818,629 815,910
The originally reported and restated net income (earnings per average diluted
share) for the nine months ended September 30, 2001 were $119.0 million
($1.50 per share) and $116.3 million ($1.47 per share), respectively.
99
(16) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
All "per share" references refer to earnings per diluted share.
2001 (a) 2000
-------------------------------------------- -----------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
---------- ---------- ---------- --------- -------- ---------- ---------- ---------
(in millions, except per share data)
Operating revenues $852.7 $611.8 $666.3 $646.5 $574.1 $523.9 $603.2 $703.8
Operating income 89.3 68.0 133.7 79.0 88.4 60.2 140.0 92.5
Income before cumulative effect
of a change in accounting principle,
net of tax (b)(c) 22.1 37.7 69.3 56.1 19.3 42.3 259.5 60.9
Cumulative effect of a change in
accounting principle, net of
tax (b)(c) (12.9) -- -- -- -- -- 16.7 --
Net income (b)(c) 9.2 37.7 69.3 56.1 19.3 42.3 276.2 60.9
EPS: (b)(c)
Income before cumulative effect of
a change in accounting principle 0.28 0.48 0.87 0.66 0.24 0.54 3.28 0.76
Cumulative effect of a change in
accounting principle (0.16) -- -- -- -- -- 0.21 --
Net income 0.12 0.48 0.87 0.66 0.24 0.54 3.49 0.76
(a) Summation of the individual quarters may not equal annual totals due to
rounding.
(b) The first, second, third and fourth quarters of 2001 include non-cash
SFAS 133 valuation charges of $0.03 per share, $0.06 per share, $0.16 per
share and $0.01 per share, respectively, related to Alliant Energy's
exchangeable senior notes. The first, second, third and fourth quarters of
2001 also include non-cash SFAS 133 valuation income (charges) of ($0.30)
per share, $0.21 per share, $0.13 per share and ($0.06) per share,
respectively, related to electricity derivatives of a foreign affiliate of
Alliant Energy, including the cumulative effect charge related to its
adoption of SFAS 133 on January 1, 2001.
(c) The third quarter of 2000 includes $2.58 per share of non-cash income
related to Alliant Energy's adoption of SFAS 133 on July 1, 2000. The
first and fourth quarters of 2000 include $0.09 per share and $0.11 per
share, respectively, of net income from gains on sales of McLeod stock.
(17) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
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:
100
Alliant Energy Corporation Condensed Consolidating Statements of Income for the Years Ended December 31, 2001 and 2000
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
-----------------------------------------------------------------------------
Year Ended December 31, 2001 (in thousands)
- ----------------------------
Operating revenues:
Electric utility $- $- $1,756,556 $- $1,756,556
Gas utility - - 487,877 - 487,877
Non-regulated and other - 501,275 310,520 (278,888) 532,907
-----------------------------------------------------------------------------
- 501,275 2,554,953 (278,888) 2,777,340
-----------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 310,689 - 310,689
Purchased power - - 403,166 - 403,166
Cost of utility gas sold - - 360,911 - 360,911
Other operation and maintenance 3,609 382,207 772,246 (270,329) 887,733
Depreciation and amortization - 56,558 277,591 - 334,149
Taxes other than income taxes - 15,381 103,408 (8,121) 110,668
-----------------------------------------------------------------------------
3,609 454,146 2,228,011 (278,450) 2,407,316
-----------------------------------------------------------------------------
Operating income (loss) (3,609) 47,129 326,942 (438) 370,024
-----------------------------------------------------------------------------
Interest expense and other:
Interest expense 14,281 68,964 117,707 (10,480) 190,472
Equity income from unconsolidated investments (7,237) (12,945) (15,700) - (35,882)
Allowance for funds used during construction - - (11,144) - (11,144)
Preferred dividend requirements of subsidiaries - - 6,720 - 6,720
Miscellaneous, net (177,151) 5,311 (30,285) 176,913 (25,212)
-----------------------------------------------------------------------------
(170,107) 61,330 67,298 166,433 124,954
-----------------------------------------------------------------------------
Income (loss) before income taxes 166,498 (14,201) 259,644 (166,871) 245,070
-----------------------------------------------------------------------------
Income tax expense (benefit) (5,864) (28,500) 94,642 (438) 59,840
-----------------------------------------------------------------------------
Income (loss) before cumulative effect of a change in
accounting principle, net of tax 172,362 14,299 165,002 (166,433) 185,230
-----------------------------------------------------------------------------
Cumulative effect of a change in accounting principle,
net of tax - (12,868) - - (12,868)
-----------------------------------------------------------------------------
Net income (loss) $172,362 $1,431 $165,002 ($166,433) $172,362
=============================================================================
Year Ended December 31, 2000
- ----------------------------
Operating revenues:
Electric utility $- $- $1,648,036 $- $1,648,036
Gas utility - - 414,948 - 414,948
Non-regulated and other - 311,262 294,507 (263,769) 342,000
-----------------------------------------------------------------------------
- 311,262 2,357,491 (263,769) 2,404,984
-----------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 288,621 - 288,621
Purchased power - - 294,818 - 294,818
Cost of utility gas sold - - 278,734 - 278,734
Other operation and maintenance 703 240,171 751,888 (258,087) 734,675
Depreciation and amortization - 38,952 283,382 - 322,334
Taxes other than income taxes - 12,992 98,379 (6,625) 104,746
-----------------------------------------------------------------------------
703 292,115 1,995,822 (264,712) 2,023,928
-----------------------------------------------------------------------------
Operating income (loss) (703) 19,147 361,669 943 381,056
-----------------------------------------------------------------------------
Interest expense and other:
Interest expense 17,350 53,297 121,250 (18,283) 173,614
Equity income from unconsolidated investments (14,653) (3,981) (504) - (19,138)
Allowance for funds used during construction - - (8,761) - (8,761)
Preferred dividend requirements of subsidiaries - - 6,713 - 6,713
Gain on reclassification of investments - (321,349) - - (321,349)
Gains on sales of McLeodUSA Inc. stock - (23,773) - - (23,773)
Miscellaneous, net (407,484) (21,040) (31,790) 413,294 (47,020)
-----------------------------------------------------------------------------
(404,787) (316,846) 86,908 395,011 (239,714)
-----------------------------------------------------------------------------
Income (loss) before income taxes 404,084 335,993 274,761 (394,068) 620,770
-----------------------------------------------------------------------------
Income taxes 5,422 125,456 106,996 942 238,816
-----------------------------------------------------------------------------
Income (loss) before cumulative effect of a change in
accounting principle, net of tax 398,662 210,537 167,765 (395,010) 381,954
-----------------------------------------------------------------------------
Cumulative effect of a change in accounting principle,
net of tax - 16,673 35 - 16,708
-----------------------------------------------------------------------------
Net income (loss) $398,662 $227,210 $167,800 ($395,010) $398,662
=============================================================================
101
Alliant Energy Corporation Condensed Consolidating Statement of Income for the Year Ended December 31, 1999
Alliant Energy Other Consolidated
Parent Alliant Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
---------------------------------------------------------------------
Operating revenues: (in thousands)
Electric utility $- $- $1,548,938 $- $1,548,938
Gas utility - - 314,319 - 314,319
Non-regulated and other - 235,039 274,616 (244,939) 264,716
---------------------------------------------------------------------
- 235,039 2,137,873 (244,939) 2,127,973
---------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 262,305 - 262,305
Purchased power - - 255,446 - 255,446
Cost of utility gas sold - - 180,519 - 180,519
Other operation and maintenance 286 194,577 712,943 (238,695) 669,111
Depreciation and amortization - 31,692 247,396 - 279,088
Taxes other than income taxes - 9,979 100,479 (5,489) 104,969
---------------------------------------------------------------------
286 236,248 1,759,088 (244,184) 1,751,438
---------------------------------------------------------------------
Operating income (loss) (286) (1,209) 378,785 (755) 376,535
---------------------------------------------------------------------
Interest expense and other:
Interest expense 8,230 24,871 113,177 (10,049) 136,229
Equity (income) loss from unconsolidated investments - (3,033) 25 - (3,008)
Allowance for funds used during construction - - (7,292) - (7,292)
Preferred dividend requirements of subsidiaries - - 6,706 - 6,706
Gains on sales of McLeodUSA Inc. stock - (40,272) - - (40,272)
Miscellaneous, net (203,972) (27,669) (10,341) 209,087 (32,895)
---------------------------------------------------------------------
(195,742) (46,103) 102,275 199,038 59,468
---------------------------------------------------------------------
Income (loss) before income taxes 195,456 44,894 276,510 (199,793) 317,067
---------------------------------------------------------------------
Income tax expense (benefit) (1,125) 6,562 115,805 (756) 120,486
---------------------------------------------------------------------
Net income (loss) $196,581 $38,332 $160,705 ($199,037) $196,581
=====================================================================
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2001
Alliant Energy Other Consolidated
ASSETS Parent Alliant Energy Consolidating Alliant
Property, plant and equipment: Company Resources Subsidiaries Adjustments Energy
---------------------------------------------------------------------
Utility: (in thousands)
Electric plant in service $- $- $5,123,781 $- $5,123,781
Other plant in service - - 1,115,432 - 1,115,432
Accumulated depreciation - - (3,374,867) - (3,374,867)
Construction work in progress - - 111,069 - 111,069
Nuclear fuel, net of amortization - - 54,811 - 54,811
Other, net - - 7,383 - 7,383
---------------------------------------------------------------------
Total utility - - 3,037,609 - 3,037,609
---------------------------------------------------------------------
Non-regulated and other:
International - 169,522 - - 169,522
Other - 819,690 51,371 (111) 870,950
Accumulated depreciation, depletion and amortization - (212,927) (2,357) - (215,284)
---------------------------------------------------------------------
Total non-regulated - 776,285 49,014 (111) 825,188
---------------------------------------------------------------------
- 776,285 3,086,623 (111) 3,862,797
---------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 6,381 66,012 14,225 - 86,618
Restricted cash - 42,909 817 - 43,726
Accounts receivable, net 9,372 108,522 181,973 (88,432) 211,435
Income taxes receivable 7,552 15,511 6,411 - 29,474
Production fuel, at average cost - 5,310 49,397 - 54,707
Materials and supplies, at average cost - 4,611 49,790 - 54,401
Gas stored underground, at average cost - 16,480 40,634 - 57,114
Regulatory assets - - 17,658 - 17,658
Derivative assets - 544 5,961 - 6,505
Other 168,870 27,764 39,268 (170,698) 65,204
---------------------------------------------------------------------
192,175 287,663 406,134 (259,130) 626,842
---------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,793,737 - - (1,793,737) -
Investment in available-for-sale securities of McLeodUSA Inc. - 14,954 - - 14,954
Investment in trading securities of McLeodUSA Inc. - 5,785 - - 5,785
Other 32,814 623,053 477,929 (14) 1,133,782
---------------------------------------------------------------------
1,826,551 643,792 477,929 (1,793,751) 1,154,521
---------------------------------------------------------------------
---------------------------------------------------------------------
Deferred charges and other - 124,737 478,785 - 603,522
---------------------------------------------------------------------
Total assets $2,018,726 $1,832,477 $4,449,471 ($2,052,992) $6,247,682
=====================================================================
102
Alliant Energy Corporation Condensed Consolidating Balance Sheet (Continued) as of December 31, 2001
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
---------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES (in thousands)
Capitalization:
Common stock and additional paid-in capital $1,240,690 $232,743 $789,002 ($1,021,745) $1,240,690
Retained earnings 832,293 175,443 749,102 (924,545) 832,293
Accumulated other comprehensive loss (152,434) (140,137) (12,297) 152,434 (152,434)
Shares in deferred compensation trust (2,208) - - - (2,208)
---------------------------------------------------------------------
Total common equity 1,918,341 268,049 1,525,807 (1,793,856) 1,918,341
---------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net - - 113,953 - 113,953
Long-term debt (excluding current portion) 24,000 1,105,792 1,328,149 - 2,457,941
---------------------------------------------------------------------
1,942,341 1,373,841 2,967,909 (1,793,856) 4,490,235
---------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds - 9,946 560 - 10,506
Commercial paper 68,389 - - - 68,389
Notes payable - 15 - - 15
Other short-term borrowings - 84,318 - - 84,318
Accumulated refueling outage provision - - 5,614 - 5,614
Derivative liability - 2,463 1,152 - 3,615
Other 4,474 120,367 701,569 (259,130) 567,280
---------------------------------------------------------------------
72,863 217,109 708,895 (259,130) 739,737
---------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income tax expense (benefit) (4,033) 177,116 459,389 - 632,472
Pension and other benefit obligations 7,555 3,539 85,402 - 96,496
Capital lease obligations - 35 22,171 - 22,206
Derivative liability - 358 - - 358
Other - 17,101 205,705 (6) 222,800
---------------------------------------------------------------------
3,522 198,149 772,667 (6) 974,332
---------------------------------------------------------------------
---------------------------------------------------------------------
Minority interest - 43,378 - - 43,378
---------------------------------------------------------------------
Total capitalization and liabilities $2,018,726 $1,832,477 $4,449,471 ($2,052,992) $6,247,682
=====================================================================
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2000
ASSETS
Property, plant and equipment:
Utility:
Electric plant in service $- $- $5,203,069 $- $5,203,069
Other plant in service - - 1,048,506 - 1,048,506
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, net - - 6,834 - 6,834
---------------------------------------------------------------------
Total utility - - 3,154,654 - 3,154,654
---------------------------------------------------------------------
Non-regulated and other:
International - 52,627 - - 52,627
Other - 707,424 11,350 (111) 718,663
Accumulated depreciation, depletion and amortization - (206,140) (497) - (206,637)
---------------------------------------------------------------------
Total non-regulated - 553,911 10,853 (111) 564,653
---------------------------------------------------------------------
- 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 224 98,932 194,083 - 293,239
Income taxes 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 assets - 1,744 1,984 - 3,728
Other 220,123 30,551 133,055 (312,645) 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
=====================================================================
103
Alliant Energy Corporation Condensed Consolidating Balance Sheet (Continued) as of December 31, 2000
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
--------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES (in thousands)
Capitalization:
Common stock and additional paid-in capital $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
Commercial paper 283,885 - - - 283,885
Notes payable 50,000 67 - - 50,067
Other short-term borrowings - 110,783 - - 110,783
Accumulated refueling outage provision - - 9,242 - 9,242
Derivative liability - 142 10,096 - 10,238
Other 13,681 124,496 772,111 (312,645) 597,643
--------------------------------------------------------------------
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
Pension and other benefit obligations 8,784 3,367 53,248 - 65,399
Capital lease obligations - 23 33,239 - 33,262
Derivative liability - 181,925 - - 181,925
Other - 31,059 251,398 (6) 282,451
--------------------------------------------------------------------
2,369 627,988 864,361 (6) 1,494,712
--------------------------------------------------------------------
--------------------------------------------------------------------
Minority interest - 23,341 - - 23,341
--------------------------------------------------------------------
Total capitalization and liabilities $2,139,644 $2,312,757 $4,479,097 ($2,197,732) $6,733,766
====================================================================
Alliant Energy Corporation Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2001
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
--------------------------------------------------------------------
(in thousands)
Net cash flows from (used for) operating activities $155,559 $41,471 $456,411 ($173,153) $480,288
--------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends declared (158,231) - (140,789) 140,789 (158,231)
Proceeds from issuance of common stock 288,553 - - - 288,553
Net change in Resources' credit facility - 63,110 - - 63,110
Proceeds from issuance of other long-term debt - 319,543 200,000 - 519,543
Reductions in other long-term debt - (11,151) (136,110) - (147,261)
Net change in other short-term borrowings (265,496) (66,541) - - (332,037)
Other 46,777 (30,112) (18,226) (30,888) (32,449)
--------------------------------------------------------------------
Net cash flows from (used for) financing activities (88,397) 274,849 (95,125) 109,901 201,228
--------------------------------------------------------------------
Cash flows from (used for) investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities - - (340,789) - (340,789)
Non-regulated businesses and other - (437,555) (40,019) - (477,574)
Proceeds from formation of ATC and other asset dispositions - 51,993 75,817 - 127,810
Other (61,355) 1,297 (54,015) 61,313 (52,760)
--------------------------------------------------------------------
Net cash flows from (used for) investing activities (61,355) (384,265) (359,006) 61,313 (743,313)
--------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 5,807 (67,945) 2,280 (1,939) (61,797)
--------------------------------------------------------------------
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 $6,381 $66,012 $16,164 ($1,939) $86,618
====================================================================
Supplemental cash flow information:
Cash paid (refunded) during the period for:
Interest $12,461 $67,122 $107,123 $- $186,706
====================================================================
Income taxes ($10,258) ($35,346) $113,168 $- $67,564
====================================================================
Noncash investing and financing activities:
Capital lease obligations incurred and other $- $- $19,967 $- $19,967
====================================================================
104
Alliant Energy Corporation Condensed Consolidating Statements of Cash Flows for the Years Ended December 31, 2000 and 1999
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
---------------------------------------------------------------------
Year Ended December 31, 2000 (in thousands)
- ----------------------------
Net cash flows from (used for) operating activities $391,284 $21,133 $429,187 ($401,723) $439,881
---------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends declared (157,964) - (80,340) 80,340 (157,964)
Proceeds from issuance of common stock 1,069 - - - 1,069
Net change in Resources' credit facility - 181,652 - - 181,652
Proceeds from issuance of exchangeable senior notes - 402,500 - - 402,500
Proceeds from issuance of other long-term debt - 21,525 100,000 - 121,525
Reductions in other long-term debt - (13,641) (51,196) - (64,837)
Net change in other short-term borrowings 48,060 110,805 (1,875) - 156,990
Other 3,385 (13,962) (25,922) 5,255 (31,244)
---------------------------------------------------------------------
Net cash flows from (used for) financing activities (105,450) 688,879 (59,333) 85,595 609,691
---------------------------------------------------------------------
Cash flows from (used for) investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities - - (304,656) - (304,656)
Non-regulated businesses and other - (750,687) (11,121) - (761,808)
Proceeds from dispositions of assets 2,281 105,892 3,336 - 111,509
Other (316,188) 3,654 (63,465) 316,128 (59,871)
---------------------------------------------------------------------
Net cash flows from (used for) investing activities (313,907) (641,141) (375,906) 316,128 (1,014,826)
---------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (28,073) 68,871 (6,052) - 34,746
---------------------------------------------------------------------
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 $574 $133,957 $13,884 $- $148,415
=====================================================================
Supplemental cash flow information:
Cash paid (refunded) during the period for:
Interest $17,220 $49,013 $97,495 $- $163,728
=====================================================================
Income taxes ($2,350) ($20,891) $140,136 $- $116,895
=====================================================================
Noncash investing and financing activities:
Capital lease obligations incurred and other $- $- $20,419 $- $20,419
=====================================================================
Year Ended December 31, 1999
- ----------------------------
Net cash flows from (used for) operating activities $198,701 $34,965 $402,870 ($210,579) $425,957
---------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends declared (156,489) (8,161) (178,699) 186,860 (156,489)
Proceeds from issuance of common stock 36,491 - - - 36,491
Net change in Resources' credit facility - (113,657) - - (113,657)
Proceeds from issuance of other long-term debt - 270,349 10,950 - 281,299
Reductions in other long-term debt - (34,430) (61,090) - (95,520)
Net change in other short-term borrowings 221,325 (1,738) (50,000) - 169,587
Other (216,147) (579) 168,829 29,279 (18,618)
---------------------------------------------------------------------
Net cash flows from (used for) financing activities (114,820) 111,784 (110,010) 216,139 103,093
---------------------------------------------------------------------
Cash flows from (used for) investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities - - (285,668) - (285,668)
Non-regulated businesses and other - (192,067) (838) - (192,905)
Proceeds from dispositions of assets - 90,145 3,298 - 93,443
Other (55,346) 7,327 (62,228) 48,169 (62,078)
---------------------------------------------------------------------
Net cash flows from (used for) investing activities (55,346) (94,595) (345,436) 48,169 (447,208)
---------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 28,535 52,154 (52,576) 53,729 81,842
---------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 112 12,932 72,512 (53,729) 31,827
---------------------------------------------------------------------
Cash and temporary cash investments at end of period $28,647 $65,086 $19,936 $- $113,669
=====================================================================
Supplemental cash flow information:
Cash paid (refunded) during the period for:
Interest $8,079 $22,658 $99,477 $- $130,214
=====================================================================
Income taxes ($2,993) ($3,612) $147,755 $- $141,150
=====================================================================
Noncash investing and financing activities:
Capital lease obligations incurred and other $- $- $25,040 $- $25,040
=====================================================================
105
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareowners of Interstate Power and Light Company:
We have audited the accompanying consolidated balance sheets and
statements of capitalization of IES Utilities Inc. (an Iowa corporation,
name changed to Interstate Power and Light Company effective January 1,
2002) and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of income, cash flows and changes in common
equity for each of the three years in the period ended December 31,
2001. These financial statements and the supplemental schedule referred
to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
and supplemental schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IES
Utilities Inc. and subsidiaries as of December 31, 2001 and 2000, and
the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14(a)(2)
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
- -----------------------
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 25, 2002
106
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Electric utility $700,926 $651,459 $627,950
Gas utility 220,269 196,181 145,825
Steam and other 32,130 28,366 26,921
----------------- ----------------- -----------------
953,325 876,006 800,696
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 133,237 118,364 95,247
Purchased power 127,588 83,575 82,402
Cost of gas sold 164,747 136,352 88,308
Other operation and maintenance 231,474 215,741 222,921
Depreciation and amortization 110,496 108,064 101,053
Taxes other than income taxes 44,705 46,117 49,266
----------------- ----------------- -----------------
812,247 708,213 639,197
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------
Operating income 141,078 167,793 161,499
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 52,286 50,962 51,852
Allowance for funds used during construction (5,634) (2,572) (2,366)
Miscellaneous, net (12,770) (5,070) (3,818)
----------------- ----------------- -----------------
33,882 43,320 45,668
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------
Income before income taxes 107,196 124,473 115,831
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------
Income taxes 36,292 50,050 49,385
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------
Net income 70,904 74,423 66,446
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 914 914 914
----------------- ----------------- -----------------
- ----------------------------------------------------------------------------------------------------------------
Earnings available for common stock $69,990 $73,509 $65,532
================= ================= =================
- ----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
107
IES UTILITIES INC.
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 2001 2000
- ------------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Electric plant in service $2,368,520 $2,253,695
Gas plant in service 234,178 221,949
Steam plant in service 59,452 59,416
Other plant in service 166,049 146,536
Accumulated depreciation (1,490,573) (1,392,766)
------------------ -----------------
Net plant 1,337,626 1,288,830
Construction work in progress 49,263 58,352
Leased nuclear fuel, net of amortization 37,407 45,836
Other, net 6,435 6,189
------------------ -----------------
1,430,731 1,399,207
------------------ -----------------
- ------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 7,299 6,755
Temporary cash investments with associated companies 1,939 -
Accounts receivable:
Customer, less allowance for doubtful accounts
of $1,288 and $587, respectively 16,233 54,660
Associated companies 2,803 2,696
Other, less allowance for doubtful accounts
of $319 and $373, respectively 20,303 17,329
Income tax refunds receivable 6,412 -
Production fuel, at average cost 12,474 11,088
Materials and supplies, at average cost 24,223 26,232
Gas stored underground, at average cost 15,694 19,290
Adjustment clause balances - 14,776
Regulatory assets 7,851 14,839
Prepayments and other 2,901 3,442
------------------ -----------------
118,132 171,107
------------------ -----------------
- ------------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 117,159 112,172
Other 8,363 6,276
------------------ -----------------
125,522 118,448
------------------ -----------------
- ------------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 94,113 117,574
Deferred charges and other 9,797 12,970
------------------ -----------------
103,910 130,544
------------------ -----------------
- ------------------------------------------------------------------------------------------------------------------
Total assets $1,778,295 $1,819,306
================== =================
- ------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
108
IES UTILITIES INC.
CONSOLIDATED BALANCE SHEETS (Continued)
December 31,
CAPITALIZATION AND LIABILITIES 2001 2000
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See Consolidated Statements of Capitalization):
Common stock $33,427 $33,427
Additional paid-in capital 279,612 279,042
Retained earnings 279,185 267,829
Accumulated other comprehensive loss - (18)
------------------ -----------------
Total common equity 592,224 580,280
------------------ -----------------
Cumulative preferred stock 18,320 18,320
Long-term debt (excluding current portion) 694,472 469,771
------------------ -----------------
1,305,016 1,068,371
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 560 81,560
Capital lease obligations 15,278 12,651
Notes payable to associated companies - 101,095
Accounts payable 40,115 65,898
Accounts payable to associated companies 25,777 30,375
Accrued interest 12,179 10,843
Accrued taxes 53,380 48,069
Adjustment clause balances 9,490 -
Other 21,927 28,921
------------------ -----------------
178,706 379,412
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 190,821 224,164
Accumulated deferred investment tax credits 22,698 25,063
Environmental liabilities 24,350 29,521
Pension and other benefit obligations 24,277 26,884
Capital lease obligations 22,129 33,185
Other 10,298 32,706
------------------ -----------------
294,573 371,523
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 11)
- --------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,778,295 $1,819,306
================== =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
109
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $70,904 $74,423 $66,446
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 110,496 108,064 101,053
Amortization of leased nuclear fuel 12,702 13,867 11,400
Amortization of deferred energy efficiency expenditures 9,237 14,320 16,000
Deferred tax benefits and investment tax credits (11,354) (13,253) (6,399)
Refueling outage provision (3,628) 7,787 (5,150)
Other (715) 714 1,355
Other changes in assets and liabilities:
Accounts receivable 35,346 (41,995) (2,979)
Accounts payable (30,579) 37,562 (7,729)
Accrued taxes 5,311 3,810 (11,036)
Adjustment clause balances 24,266 (3,677) (14,530)
Manufactured gas plants insurance refunds (21,541) - -
Benefit obligations and other (11,182) 9,366 13,272
-------------- -------------- --------------
Net cash flows from operating activities 189,263 210,988 161,703
-------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends declared (58,634) (58,633) (87,951)
Dividends payable - - (4,840)
Preferred stock dividends (914) (914) (914)
Proceeds from issuance of long-term debt 200,000 - -
Reductions in long-term debt (84,110) (51,196) (50,140)
Net change in short-term borrowings (101,095) 44,149 56,946
Principal payments under capital lease obligations (9,122) (15,813) (12,887)
Other 10,369 - (20)
-------------- -------------- --------------
Net cash flows used for financing activities (43,506) (82,407) (99,806)
-------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (137,736) (121,116) (107,342)
Nuclear decommissioning trust funds (6,008) (6,008) (6,008)
Other 470 (422) (731)
-------------- -------------- --------------
Net cash flows used for investing activities (143,274) (127,546) (114,081)
-------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 2,483 1,035 (52,184)
-------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 6,755 5,720 57,904
-------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $9,238 $6,755 $5,720
============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Cash paid during the period for:
Interest $49,941 $43,678 $47,307
============== ============== ==============
Income taxes $42,200 $60,255 $70,779
============== ============== ==============
Noncash investing and financing activities:
Capital lease obligations incurred and other $19,967 $20,419 $25,040
============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
110
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Common equity:
Common stock - $2.50 par value - authorized 24,000,000 shares;
13,370,788 shares outstanding $33,427 $33,427
Additional paid-in capital 279,612 279,042
Retained earnings 279,185 267,829
Accumulated other comprehensive loss - (18)
------------------ ------------------
592,224 580,280
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock:
Cumulative, par value $50 per share, not mandatorily redeemable
- authorized 466,406 shares; 366,406 shares outstanding:
6.10% series, 100,000 shares outstanding 5,000 5,000
4.80% series, 146,406 shares outstanding 7,320 7,320
4.30% series, 120,000 shares outstanding 6,000 6,000
------------------ ------------------
18,320 18,320
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
Long-term debt:
Collateral Trust Bonds:
7.25% series, due 2006 60,000 60,000
6-7/8% series, due 2007 55,000 55,000
6% series, due 2008 50,000 50,000
7% series, due 2023 50,000 50,000
5.5% series, due 2023 19,400 19,400
------------------ ------------------
234,400 234,400
First Mortgage Bonds:
Series Y, 8-5/8%, retired in 2001 - 60,000
9-1/8% series, retired in 2001 - 21,000
7-1/4% series, due 2007, partially retired in 2001 27,450 30,000
------------------ ------------------
27,450 111,000
Pollution Control Revenue Bonds:
5.75%, due serially 2002 to 2003 2,240 2,800
Variable rate (1.8% to 2.9% at December 31, 2001), due 2003 to 2010 10,100 10,100
Variable/fixed rate series 1998 (4.25% through 2003), due 2023 10,000 10,000
------------------ ------------------
22,340 22,900
Senior debentures, 6-5/8% to 6-3/4%, due 2009 to 2011 335,000 135,000
Subordinated deferrable interest debentures, 7-7/8%, due 2025 50,000 50,000
Other, 5.24%, due 2006 28,000 -
------------------ ------------------
697,190 553,300
------------------ ------------------
Less:
Current maturities (560) (81,560)
Unamortized debt discount, net (2,158) (1,969)
------------------ ------------------
694,472 469,771
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total capitalization $1,305,016 $1,068,371
================== ==================
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
111
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Common
Stock Capital Earnings Income (Loss) Equity
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
1999:
Beginning balance $33,427 $279,042 $275,372 $ - $587,841
Earnings available for common stock 65,532 65,532
Common stock dividends (87,951) (87,951)
-------------- ------------- -------------- --------------- ---------------
Ending balance 33,427 279,042 252,953 - 565,422
2000:
Comprehensive income:
Earnings available for common stock 73,509 73,509
Other comprehensive income (loss):
Unrealized losses on derivatives qualified as hedges:
Unrealized holding gains arising during period
due to cumulative effect of a change in
accounting principle, net of tax of $36 51 51
Other unrealized holding gains arising during
period, net of tax of $153 215 215
Less: reclassification adjustment for gains
included in earnings available for common
stock, net of tax of $201 284 284
--------------- -------------
Net unrealized losses on qualifying derivatives (18) (18)
--------------- -------------
Total comprehensive income 73,491
Common stock dividends (58,633) (58,633)
-------------- ------------- -------------- --------------- -------------
Ending balance 33,427 279,042 267,829 (18) 580,280
2001:
Comprehensive income:
Earnings available for common stock 69,990 69,990
Other comprehensive income:
Reclassification adjustment for losses
included in earnings available for common
stock related to derivatives qualified as
hedges, net of tax of ($12) 18 18
--------------- -------------
Other comprehensive income 18 18
--------------- -------------
Total comprehensive income 70,008
Common stock dividends (58,634) (58,634)
Common stock issued 570 570
-------------- ------------- -------------- --------------- -------------
Ending balance $33,427 $279,612 $279,185 $ - $592,224
============== ============= ============== =============== =============
- ----------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
112
IES UTILITIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Except as modified below, the Alliant Energy Notes to Consolidated Financial
Statements are incorporated by reference insofar as they relate to IESU.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General - The consolidated financial statements include the accounts of
IESU and its consolidated subsidiary. IESU is a subsidiary of Alliant Energy
and is engaged principally in the generation, transmission, distribution and
sale of electric energy; the purchase, distribution, transportation and sale
of natural gas; and steam services. All of IESU's retail customers are
located in Iowa. On January 1, 2002, IPC merged with and into IESU and IESU
changed its name to IP&L.
(c) Regulatory Assets - At December 31, 2001 and 2000, regulatory assets
were comprised of the following items (in millions):
2001 2000
----------- -----------
Tax-related (Note 1(d)) $66.7 $84.7
Environmental liabilities (Note 11(e)) 30.4 35.6
Energy efficiency program costs 1.4 8.8
Other 3.5 3.3
----------- -----------
$102.0 $132.4
=========== ===========
(d) Income Taxes - Alliant Energy files a consolidated federal income tax
return. Under the terms of an agreement between Alliant Energy and its
subsidiaries, the subsidiaries calculate their respective federal income tax
provisions and make payments to or receive payments from Alliant Energy as if
they were separate taxable entities.
(i) Operating Revenues - IESU accrues revenues for services rendered but
unbilled at month-end. In 1999, IESU recorded a $5 million increase in the
estimate of utility services rendered but unbilled at month-end due to the
implementation of a refined estimation process.
(3) LEASES
IESU's operating lease rental expenses for 2001, 2000 and 1999 were $9.4
million, $9.6 million and $8.9 million, respectively. At December 31, 2001,
IESU's future minimum lease payments were as follows (in millions):
2002 2003 2004 2005 2006 Thereafter Total
-------- ------- ------- -------- -------- ------------ ---------
Operating leases $9.1 $8.6 $8.7 $6.5 $3.8 $14.2 $50.9
Present
Less: value of net
amount minimum
representing capital lease
2002 2003 2004 2005 2006 Thereafter Total interest payments
-------- ------- ------- -------- -------- ------------ --------- ------------- -------------
Capital leases $17.1 $10.5 $8.9 $2.3 $1.8 $0.6 $41.2 $3.8 $37.4
(4) UTILITY ACCOUNTS RECEIVABLE
At December 31, 2001 and 2000, IESU had sold $60 million and $65 million of
receivables, respectively. In 2001, 2000 and 1999, IESU received
approximately $0.9 billion, $0.7 billion and $0.6 billion, respectively, in
aggregate proceeds from the sale of accounts receivable. IESU paid fees
associated with these sales of $3.3 million, $4.0 million and $3.1 million in
2001, 2000 and 1999, respectively.
113
(5) INCOME TAXES
The components of income taxes for IESU were as follows (in millions):
2001 2000 1999
--------------- --------------- ---------------
Current tax expense:
Federal $39.8 $50.0 $44.2
State 8.1 13.5 11.8
Deferred tax benefit:
Federal (7.6) (8.9) (1.7)
State (1.4) (2.7) (2.1)
Amortization of investment tax credits and other (2.6) (1.8) (2.8)
--------------- --------------- ---------------
$36.3 $50.1 $49.4
=============== =============== ===============
The overall effective income tax rates shown in the following table were
computed by dividing total income tax expense by income before income taxes.
2001 2000 1999
------------- -------------- ------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefits 4.9 7.2 7.0
Effect of rate making on property related differences 4.6 4.6 5.1
Amortization of investment tax credits (2.6) (2.2) (2.2)
Adjustment of prior period taxes (7.7) (4.0) (2.7)
Other items, net (0.3) (0.4) 0.4
------------- -------------- ------------
Overall effective income tax rate 33.9% 40.2% 42.6%
============= ============== ============
The accumulated deferred income tax (assets) and liabilities included on the
Consolidated Balance Sheets at December 31 arise from the following temporary
differences (in millions):
2001 2000
-------------- ---------------
Property related $259.4 $269.8
Investment tax credits (16.1) (17.0)
Other (52.5) (28.6)
-------------- ---------------
$190.8 $224.2
============== ===============
(6) BENEFIT PLANS
(a) Pension Plans and Other Postretirement Benefits - Substantially all of
IESU's employees are covered by two non-contributory defined benefit pension
plans. Benefits are based on the employees' years of service and
compensation. IESU also provides certain postretirement health care and life
benefits to eligible retirees. In general, the health care plans are
contributory with participants' contributions adjusted regularly and the life
insurance plans are non-contributory.
114
The weighted-average assumptions at the measurement date of September 30 were
as follows:
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------ ---------------------------------------
2001 2000 1999 2001 2000 1999
----------- ---------- ------------- ----------- ----------- ---------------
Discount rate 7.25% 8.00% 7.75% 7.25% 8.00% 7.75%
Expected return on plan assets 9% 9% 9% 9% 9% 9%
Rate of compensation increase 3.5% 3.5% 3.5% N/A N/A N/A
Medical cost trend on covered charges:
Initial trend rate N/A N/A N/A 12% 9% 7%
Ultimate trend rate N/A N/A N/A 5% 5% 5%
The components of IESU's qualified pension benefits and other postretirement
benefits costs were as follows (in millions):
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------- ----------------------------------
2001 2000 1999 2001 2000 1999
--------- ----------- --------- -------- --------- ---------
Service cost $2.4 $2.4 $2.6 $1.0 $0.9 $1.5
Interest cost 8.1 7.9 7.6 3.8 3.6 4.4
Expected return on plan assets (11.5) (11.0) (10.3) (3.0) (2.6) (2.0)
Amortization of:
Transition obligation (asset) (0.2) (0.2) (0.2) 1.8 1.8 1.8
Prior service cost 1.1 1.0 0.9 -- -- --
Actuarial gain (1.2) (1.0) -- (0.9) (0.9) --
--------- ----------- --------- -------- --------- ---------
Total ($1.3) ($0.9) $0.6 $2.7 $2.8 $5.7
========= =========== ========= ======== ========= =========
The pension benefit cost shown above (and in the following tables) represents
only the pension benefit cost for bargaining unit employees of IESU covered
under the bargaining unit pension plan that is sponsored by IESU. The
benefit obligations and assets associated with IESU's non-bargaining
employees who are participants in other Alliant Energy plans are reported in
Alliant Energy's consolidated financial statements and are not reported
above. The pension benefit cost for IESU's non-bargaining employees who are
now participants in other Alliant Energy plans was $0.8 million, $1.2 million
and $0.9 million for 2001, 2000 and 1999, respectively. In addition,
Corporate Services provides services to IESU. The allocated pension benefit
costs associated with these services was $1.4 million, $1.3 million and $1.2
million for 2001, 2000 and 1999, respectively. The other postretirement
benefit cost shown above for each period (and in the following tables)
represents the other postretirement benefit cost for all IESU employees. The
allocated other postretirement benefit cost associated with Corporate
Services for IESU was $0.4 million, $0.3 million and $0.4 million for 2001,
2000 and 1999, respectively.
The assumed medical trend rates are critical assumptions in determining the
service and interest cost and accumulated postretirement benefit obligation
related to postretirement benefit costs. A one percent change in the medical
trend rates for 2001, holding all other assumptions constant, would have the
following effects (in millions):
1 Percent Increase 1 Percent Decrease
---------------------- ----------------------
Effect on total of service and interest cost components $0.6 ($0.5)
Effect on postretirement benefit obligation $6.4 ($5.7)
115
A reconciliation of the funded status of IESU's plans to the amounts
recognized on IESU's Consolidated Balance Sheets at December 31 was as
follows (in millions):
Qualified Pension Benefits Other Postretirement Benefits
----------------------------- -------------------------------
2001 2000 2001 2000
------------ ------------ ------------- -------------
Change in benefit obligation:
Net benefit obligation at beginning of year $102.5 $102.3 $48.7 $46.8
Service cost 2.4 2.4 1.0 0.9
Interest cost 8.1 7.9 3.8 3.6
Plan participants' contributions -- -- 0.3 0.4
Plan amendments -- 2.3 -- (0.6)
Actuarial loss (gain) 11.1 (6.0) 12.8 1.0
Gross benefits paid (6.6) (6.4) (4.8) (3.4)
------------ ------------ ------------- -------------
Net benefit obligation at end of year 117.5 102.5 61.8 48.7
------------ ------------ ------------- -------------
Change in plan assets:
Fair value of plan assets at beginning of year 131.2 126.1 40.4 30.3
Actual return on plan assets (8.4) 11.5 (7.0) 6.2
Employer contributions -- -- 3.9 6.9
Plan participants' contributions -- -- 0.3 0.4
Gross benefits paid (6.6) (6.4) (4.8) (3.4)
------------ ------------ ------------- -------------
Fair value of plan assets at end of year 116.2 131.2 32.8 40.4
------------ ------------ ------------- -------------
Funded status at end of year (1.3) 28.7 (29.0) (8.3)
Unrecognized net actuarial loss (gain) 1.4 (30.8) 3.4 (20.3)
Unrecognized prior service cost 9.0 10.1 (0.2) (0.2)
Unrecognized net transition obligation (asset) (1.0) (1.2) 19.4 21.2
------------ ------------ ------------- -------------
Net amount recognized at end of year $8.1 $6.8 ($6.4) ($7.6)
============ ============ ============= =============
Amounts recognized on the Consolidated
Balance Sheets consist of:
Prepaid benefit cost $8.1 $6.8 $-- $--
Accrued benefit cost -- -- (6.4) (7.6)
------------ ------------ ------------- -------------
Net amount recognized at measurement date 8.1 6.8 (6.4) (7.6)
------------ ------------ ------------- -------------
Contributions paid after 9/30 and prior to 12/31 -- -- 0.9 0.1
------------ ------------ ------------- -------------
Net amount recognized at 12/31 $8.1 $6.8 ($5.5) ($7.5)
============ ============ ============= =============
Alliant Energy sponsors several non-qualified pension plans that cover
certain current and former key employees. The pension expense allocated to
IESU for these plans was $1.2 million, $1.4 million and $0.8 million in 2001,
2000 and 1999, respectively.
IESU has various life insurance policies that cover certain key employees and
directors. At December 31, 2001 and 2000, the cash surrender value of these
investments was $6 million.
A significant number of IESU employees also participate in defined
contribution pension plans (401(k) and Employee Stock Ownership plans).
IESU's contributions to the plans, which are based on the participants' level
of contribution, were $1.7 million, $2.1 million and $2.0 million in 2001,
2000 and 1999, respectively.
116
(7) COMMON AND PREFERRED STOCK
(b) Preferred Stock - The carrying value of IESU's cumulative preferred
stock at December 31, 2001 and 2000 was $18 million. The fair market value,
based upon the market yield of similar securities and quoted market prices,
at December 31, 2001 and 2000 was $12 million and $13 million, respectively.
(8) DEBT
(a) Short-Term Debt - Information regarding IESU's short-term debt was as
follows (dollars in millions):
2001 2000 1999
------------- -------------- -------------
At year end:
Money pool borrowings $-- $101.1 $56.9
Interest rates on money pool borrowings n/a 6.6% 5.8%
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $15.7 $70.3 $15.5
Average interest rates on short-term debt 6.1% 6.5% 5.3%
(b) Long-Term Debt - IESU's debt maturities for 2002 to 2006 are $0.5
million, $4.1 million, $0, $0 and $88.0 million, respectively. The carrying
value of IESU's long-term debt (including current maturities) at December 31,
2001 and 2000 was $695 million and $551 million, respectively. The fair
market value, based upon the market yield of similar securities and quoted
market prices, at December 31, 2001 and 2000 was $699 million and $542
million, respectively.
(9) INVESTMENTS AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Information relating to various investments held by IESU that are
marked-to-market as a result of SFAS 115, "Accounting for Certain Investments
in Debt and Equity Securities," were as follows (in millions):
December 31, 2001 December 31, 2000
--------------------------- --------------------------
Carrying/ Unrealized Carrying/ Unrealized
Fair Gains, Fair Gains,
Value Net of Tax Value Net of Tax
--------------------------- --------------------------
Available-for-sale securities:
Nuclear decommissioning trust funds:
Debt securities $69 $1 $65 $1
Equity securities 48 19 47 24
--------------------------- --------------------------
Total $117 $20 $112 $25
=========================== ==========================
Nuclear Decommissioning Trust Funds - At December 31, 2001, $37 million, $16
million and $16 million of the debt securities mature in 2002-2010, 2011-2020
and 2021-2049, respectively. The fair value of the nuclear decommissioning
trust funds was as reported by the trustee, adjusted for the tax effect of
unrealized gains and losses. Net unrealized holding gains were recorded as
part of accumulated provision for depreciation. The funds realized
gains/(losses) from the sales of securities of ($0.1) million, ($0.2) million
and $2.5 million in 2001, 2000 and 1999, respectively (cost of the
investments based on specific identification was $22.4 million, $11.3 million
and $25.5 million, respectively, and proceeds from the sales were $22.3
million, $11.1 million and $28.0 million, respectively).
(11) COMMITMENTS AND CONTINGENCIES
(a) Construction and Acquisition Program - IP&L currently anticipates 2002
utility construction and acquisition expenditures will be approximately $242
million. During 2003-2006, IP&L currently anticipates to spend approximately
$1.2 billion for utility construction and acquisition expenditures. These
amounts do not include any potential capital expenditures IP&L may make for
its Power Iowa domestic generation program given the uncertainty of such
investments, including if IP&L would own the generating plants or purchase
the power from plants that were owned by an independent entity.
117
(b) Purchased-Power, Coal and Natural Gas Contracts - Alliant Energy,
through its subsidiaries (Corporate Services, IESU, WP&L and IPC), has
entered into purchased-power, coal and natural gas supply, transportation and
storage contracts. Based on the System Coordination and Operating Agreement,
Alliant Energy annually allocates purchased-power contracts to the individual
utilities. Such process considers factors such as resource mix, load growth
and resource availability. Refer to Note 18 for additional information.
Coal contract quantities are directly assigned to specific plants at the
individual utilities based on various factors including projected heat input
requirements, combustion compatibility and efficiency. However, for
2002-2006, system-wide contracts of $48.1 million (7.2 million tons), $50.0
million (7.6 million tons), $31.4 million (3.9 million tons), $22.8 million
(2.7 million tons) and $8.2 million (0.9 million tons), respectively, have
not yet been directly assigned to the individual utilities since the specific
needs of each utility is not yet known. The natural gas supply commitments
are all indexed-based. Alliant Energy expects to supplement its coal and
natural gas supplies with spot market purchases as needed. The table
includes commitments for "take or pay" contracts which result in dollar
commitments with no associated MWhs, tons, or Dths. At December 31, 2001,
IESU's minimum commitments are as follows (dollars and Dths in millions; MWhs
and tons in thousands):
Purchased-power Coal Natural gas
----------------------- ----------------------- -------------------------
Dollars MWhs Dollars Tons Dollars Dths
--------- ---------- --------- ---------- ----------- ---------
2002 $33.5 734 $11.6 586 $41.6 6
2003 32.5 876 10.9 526 18.9 --
2004 5.6 142 7.9 188 1.8 --
2005 0.1 -- 7.9 179 0.2 --
2006 0.1 -- 3.4 -- 0.1 --
(e) Environmental Liabilities - IESU had recorded the following
environmental liabilities, and regulatory assets associated with certain of
these liabilities, at December 31 (in millions):
Environmental liabilities 2001 2000 Regulatory assets 2001 2000
- ------------------------- ------------ ------------- ----------------- ------------ ------------
MGP sites $24.5 $28.0 MGP sites $24.5 $27.9
NEPA 5.1 6.8 NEPA 5.7 7.5
Other 0.3 0.3 Other 0.2 0.2
------------ ------------- ------------ ------------
$29.9 $35.1 $30.4 $35.6
============ ============= ============ ============
MGP Sites - Management currently estimates the range of remaining costs to be
- ---------
incurred for the investigation, remediation and monitoring of all IESU's
sites to be approximately $18 million to $34 million.
(14) SEGMENTS OF BUSINESS
IESU is a regulated domestic utility, serving customers in Iowa, and is
broken down into three segments: a) electric operations; b) gas operations;
and c) other, which includes the steam business and the unallocated portions
of the utility business. Various line items in the following tables are not
allocated to the electric and gas segments for management reporting purposes
and therefore are included in "Other." Intersegment revenues were not
material to IESU's operations and there was no single customer whose revenues
were 10 percent or more of IESU's consolidated revenues. Certain financial
information relating to IESU's significant business segments was as follows
(in millions):
118
Electric Gas Other Total
- ------------------------------------------------------------------------------------------------------------
2001
- ----
Operating revenues $700.9 $220.3 $32.1 $953.3
Depreciation and amortization 99.1 9.4 2.0 110.5
Operating income 129.3 5.6 6.2 141.1
Interest expense, net of AFUDC 46.7 46.7
Miscellaneous, net (12.8) (12.8)
Income tax expense 36.3 36.3
Net income 70.9 70.9
Preferred dividends 0.9 0.9
Earnings available for common stock 70.0 70.0
Total assets 1,449.6 210.0 118.7 1,778.3
Construction and acquisition expenditures 118.9 16.0 2.8 137.7
- ------------------------------------------------------------------------------------------------------------
2000
- ----
Operating revenues $651.4 $196.2 $28.4 $876.0
Depreciation and amortization 97.0 9.1 2.0 108.1
Operating income 153.7 11.3 2.8 167.8
Interest expense, net of AFUDC 48.4 48.4
Miscellaneous, net (5.1) (5.1)
Income tax expense 50.1 50.1
Net income 74.4 74.4
Preferred dividends 0.9 0.9
Earnings available for common stock 73.5 73.5
Total assets 1,465.3 239.6 114.4 1,819.3
Construction and acquisition expenditures 104.7 15.7 0.7 121.1
- ------------------------------------------------------------------------------------------------------------
1999
- ----
Operating revenues $628.0 $145.8 $26.9 $800.7
Depreciation and amortization 91.0 8.2 1.9 101.1
Operating income 149.6 8.4 3.5 161.5
Interest expense, net of AFUDC 49.5 49.5
Miscellaneous, net (3.8) (3.8)
Income tax expense 49.4 49.4
Net income 66.4 66.4
Preferred dividends 0.9 0.9
Earnings available for common stock 65.5 65.5
Total assets 1,449.2 201.1 105.5 1,755.8
Construction and acquisition expenditures 92.7 13.8 0.8 107.3
119
(16) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
2001 (a) 2000
---------------------------------------- ---------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
---------- --------- --------- --------- ---------- --------- -------- ---------
(in millions)
Operating revenues $292.0 $223.7 $244.5 $193.1 $212.1 $182.0 $230.9 $251.0
Operating income 30.8 22.5 64.9 22.9 35.5 22.4 75.9 34.0
Net income 12.7 8.2 37.3 12.8 16.1 6.5 37.4 14.4
Earnings available for common stock 12.5 8.0 37.0 12.5 15.9 6.3 37.1 14.2
(a) Summation of the individual quarters may not equal annual totals due to
rounding.
(18) RELATED PARTY ISSUES
IESU, WP&L and IPC have entered into a System Coordination and Operating
Agreement. The agreement, which has been approved by FERC, provides a
contractual basis for coordinated planning, construction, operation and
maintenance of the interconnected electric generation and transmission
systems of the three utility companies. In addition, the agreement allows
the interconnected system to be operated as a single entity with off-system
capacity sales and purchases made to market excess system capability or to
meet system capability deficiencies. Such sales and purchases are allocated
among the three utility companies based on procedures included in the
agreement. The sales amounts allocated to IESU were $26.2 million, $15.4
million and $18.1 million for 2001, 2000 and 1999, respectively. The
purchases allocated to IESU were $123.7 million, $70.6 million and $71.3
million for 2001, 2000 and 1999, respectively. The procedures were approved
by both FERC and all state regulatory bodies having jurisdiction over these
sales. Under the agreement, IESU, WP&L and IPC are fully reimbursed for any
generation expense incurred to support the sale to an affiliate or to a
non-affiliate. Any margins on sales to non-affiliates are distributed to the
three utilities in proportion to each utility's share of electric production
at the time of the sale.
Pursuant to a service agreement approved by the SEC under PUHCA, IESU
receives various administrative and general services from an affiliate,
Corporate Services. These services are billed to IESU at cost based on
payroll and other expenses incurred by Corporate Services for the benefit of
IESU. These costs totaled $100.4 million, $100.0 million and $93.9 million
for 2001, 2000 and 1999, respectively, and consisted primarily of employee
compensation, benefits and fees associated with various professional
services. At December 31, 2001 and 2000, IESU had an intercompany payable to
Corporate Services of $24.3 million and $27.9 million, respectively.
(19) SUBSEQUENT EVENT
The merger of IPC with and into IESU was approved by their respective
shareowners in April 2001 and by the SEC in October 2001. The merger was
effective January 1, 2002 and IESU changed its name to IP&L. Each share of
IPC common stock outstanding was cancelled without payment and each share of
IPC preferred stock outstanding was cancelled and converted into the right to
receive one share of a new class of IESU Class A preferred stock with
substantially identical designations, rights and preferences as the
previously outstanding IPC preferred stock. IPC and IESU were both
wholly-owned operating subsidiaries of Alliant Energy. As such, the
transaction was accounted for as a common control merger. The following
illustrates the impact of the merger if it had occurred as of January 1, 1999
(in thousands):
2001 2000 1999
--------------- ---------------- ---------------
Operating revenues $1,316,250 $1,234,007 $1,142,801
Earnings available for common stock 94,656 99,724 93,896
120
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareowners of Wisconsin Power and Light Company:
We have audited the accompanying consolidated balance sheets and
statements of capitalization of Wisconsin Power and Light Company (a
Wisconsin corporation) and subsidiaries as of December 31, 2001 and
2000, and the related consolidated statements of income, cash flows and
changes in common equity for each of the three years in the period ended
December 31, 2001. These financial statements and the supplemental
schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and supplemental schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Wisconsin
Power and Light Company and subsidiaries as of December 31, 2001 and
2000, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14(a)(2)
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
- -----------------------
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 25, 2002
121
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Electric utility $753,450 $692,191 $626,607
Gas utility 206,863 165,152 120,770
Water 5,040 5,038 5,128
----------------- ----------------- -----------------
965,353 862,381 752,505
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric production fuels 120,722 113,208 110,521
Purchased power 217,306 146,939 107,598
Cost of gas sold 153,823 107,131 64,073
Other operation and maintenance 186,477 188,967 172,131
Depreciation and amortization 129,098 139,911 113,037
Taxes other than income taxes 32,504 29,163 30,240
----------------- ----------------- -----------------
839,930 725,319 597,600
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Operating income 125,423 137,062 154,905
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 43,483 44,644 40,992
Equity income from unconsolidated investments (15,535) (552) (641)
Allowance for funds used during construction (4,753) (5,365) (4,511)
Miscellaneous, net (12,500) (15,984) 2,477
----------------- ----------------- -----------------
10,695 22,743 38,317
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 114,728 114,319 116,588
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Income taxes 41,238 42,918 45,758
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Income before cumulative effect of a change
in accounting principle, net of tax 73,490 71,401 70,830
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Cumulative effect of a change in accounting
principle, net of tax - 35 -
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Net income 73,490 71,436 70,830
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 3,310 3,310 3,310
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Earnings available for common stock $70,180 $68,126 $67,520
================= ================= =================
- -----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
122
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 2001 2000
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Electric plant in service $1,779,593 $2,007,974
Gas plant in service 280,881 273,457
Water plant in service 32,497 29,869
Other plant in service 243,121 223,921
Accumulated depreciation (1,328,111) (1,380,723)
----------------- ------------------
Net plant 1,007,981 1,154,498
Construction work in progress 37,828 59,133
Nuclear fuel, net of amortization 17,404 16,099
Other, net 681 369
----------------- ------------------
1,063,894 1,230,099
----------------- ------------------
- ---------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 4,389 2,584
Accounts receivable:
Customer 33,190 51,769
Associated companies 3,676 2,211
Other 16,571 13,865
Production fuel, at average cost 17,314 17,811
Materials and supplies, at average cost 20,669 21,639
Gas stored underground, at average cost 22,187 13,876
Prepaid gross receipts tax 25,673 23,088
Other 13,018 6,397
----------------- ------------------
156,687 153,240
----------------- ------------------
- ---------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 215,794 195,768
Investment in ATC and other 127,941 14,362
----------------- ------------------
343,735 210,130
----------------- ------------------
- ---------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 109,864 88,721
Deferred charges and other 205,702 174,834
----------------- ------------------
315,566 263,555
----------------- ------------------
- ---------------------------------------------------------------------------------------------------------------
Total assets $1,879,882 $1,857,024
================= ==================
- ---------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
123
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (Continued)
December 31,
CAPITALIZATION AND LIABILITIES 2001 2000
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See Consolidated Statements of Capitalization):
Common stock $66,183 $66,183
Additional paid-in capital 264,603 229,516
Retained earnings 381,333 371,602
Accumulated other comprehensive loss (10,167) (4,708)
------------------ -----------------
Total common equity 701,952 662,593
------------------ -----------------
Cumulative preferred stock 59,963 59,963
Long-term debt (excluding current portion) 468,083 514,209
------------------ -----------------
1,229,998 1,236,765
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Variable rate demand bonds 55,100 55,100
Notes payable to associated companies 90,816 29,244
Accounts payable 98,173 120,155
Accounts payable to associated companies 36,678 32,442
Other 35,219 36,266
------------------ -----------------
315,986 273,207
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 206,245 222,819
Accumulated deferred investment tax credits 24,907 29,472
Customer advances 34,178 34,815
Pension and other benefit obligations 18,175 -
Other 50,393 59,946
------------------ -----------------
333,898 347,052
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 11)
- --------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,879,882 $1,857,024
================== =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
124
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $73,490 $71,436 $70,830
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 129,098 139,911 113,037
Amortization of nuclear fuel 4,554 5,066 6,094
Deferred tax benefits and investment tax credits (6,791) (12,077) (12,618)
Equity income from unconsolidated investments, net (15,535) (552) (641)
Distributions from equity method investments 8,450 992 248
Other (10,539) (15,451) 3,073
Other changes in assets and liabilities:
Accounts receivable 14,408 (29,733) (13,423)
Accounts payable (20,891) 39,046 8,482
Benefit obligations and other (40,700) (21,797) (11,854)
---------------- --------------- ----------------
Net cash flows from operating activities 135,544 176,841 163,228
---------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (60,449) - (58,353)
Preferred stock dividends (3,310) (3,310) (3,310)
Proceeds from issuance of long-term debt - 100,000 -
Reductions in long-term debt (47,000) (1,875) -
Net change in short-term borrowings 61,572 (96,505) 48,950
Capital contribution from parent 35,000 - 30,000
Other (2,720) (1,242) -
---------------- --------------- ----------------
Net cash flows from (used for) financing activities (16,907) (2,932) 17,287
---------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (147,032) (131,640) (131,915)
Nuclear decommissioning trust funds (16,092) (16,092) (16,092)
Proceeds from formation of ATC and other asset dispositions 75,600 961 237
Other (29,308) (28,109) (31,001)
---------------- --------------- ----------------
Net cash flows used for investing activities (116,832) (174,880) (178,771)
---------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 1,805 (971) 1,744
---------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 2,584 3,555 1,811
---------------- --------------- ----------------
- ----------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $4,389 $2,584 $3,555
================ =============== ================
- ----------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Cash paid during the period for:
Interest $43,237 $40,455 $38,330
================ =============== ================
Income taxes $54,161 $54,676 $47,164
================ =============== ================
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
125
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
2001 2000
- -------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Common equity:
Common stock - $5 par value - authorized 18,000,000 shares;
13,236,601 shares outstanding $66,183 $66,183
Additional paid-in capital 264,603 229,516
Retained earnings 381,333 371,602
Accumulated other comprehensive loss (10,167) (4,708)
------------------ ------------------
701,952 662,593
------------------ ------------------
- -------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock:
Cumulative, without par value, not mandatorily redeemable - authorized
3,750,000 shares, maximum aggregate stated value $150,000,000:
$100 stated value - 4.50% series, 99,970 shares outstanding 9,997 9,997
$100 stated value - 4.80% series, 74,912 shares outstanding 7,491 7,491
$100 stated value - 4.96% series, 64,979 shares outstanding 6,498 6,498
$100 stated value - 4.40% series, 29,957 shares outstanding 2,996 2,996
$100 stated value - 4.76% series, 29,947 shares outstanding 2,995 2,995
$100 stated value - 6.20% series, 150,000 shares outstanding 15,000 15,000
$25 stated value - 6.50% series, 599,460 shares outstanding 14,986 14,986
------------------ ------------------
59,963 59,963
------------------ ------------------
- -------------------------------------------------------------------------------------------------------------------------
Long-term debt:
First Mortgage Bonds:
1990 Series V, 9.3%, retired in 2001 - 27,000
1984 Series A, variable rate (1.7% at December 31, 2001), due 2014 8,500 8,500
1988 Series A, variable rate (1.85% at December 31, 2001), due 2015 14,600 14,600
1991 Series A, variable rate (1.9% at December 31, 2001), due 2015 16,000 16,000
1991 Series B, variable rate (1.9% at December 31, 2001), due 2005 16,000 16,000
1992 Series W, 8.6%, due 2027, partially retired in 2001 70,000 90,000
1992 Series X, 7.75%, due 2004 62,000 62,000
1992 Series Y, 7.6%, due 2005 72,000 72,000
------------------ ------------------
259,100 306,100
Debentures, 7%, due 2007 105,000 105,000
Debentures, 5.7%, due 2008 60,000 60,000
Debentures, 7-5/8%, due 2010 100,000 100,000
------------------ ------------------
524,100 571,100
------------------ ------------------
Less:
Variable rate demand bonds (55,100) (55,100)
Unamortized debt discount, net (917) (1,791)
------------------ ------------------
468,083 514,209
------------------ ------------------
- -------------------------------------------------------------------------------------------------------------------------
Total capitalization $1,229,998 $1,236,765
================== ==================
- -------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
126
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Common
Stock Capital Earnings Income (Loss) Equity
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands)
1999:
Beginning balance $66,183 $199,438 $294,309 $ - $559,930
Earnings available for common stock 67,520 67,520
Common stock dividends (58,353) (58,353)
Capital contribution from parent 30,000 30,000
------------- ------------- ------------- --------------- ------------
Ending balance 66,183 229,438 303,476 - 599,097
2000:
Comprehensive income:
Earnings available for common stock 68,126 68,126
Other comprehensive income (loss):
Unrealized 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 of ($430) (642) (642)
Other unrealized holding losses arising during
period, net of tax of ($3,634) (5,151) (5,151)
Less: reclassification adjustment for losses
included in earnings available for common
stock, net of tax of ($769) (1,085) (1,085)
--------------- ------------
Net unrealized losses on qualifying derivatives (4,708) (4,708)
--------------- ------------
Total comprehensive income 63,418
Common stock issued 78 78
------------- ------------- ------------- --------------- ------------
Ending balance 66,183 229,516 371,602 (4,708) 662,593
2001:
Comprehensive income:
Earnings available for common stock 70,180 70,180
Other comprehensive income (loss):
Minimum pension liability adjustment,
net of tax of ($9,552) (14,248) (14,248)
Unrealized gains on derivatives qualified as hedges:
Unrealized holding gains arising during
period, net of tax of $3,932 5,952 5,952
Less: reclassification adjustment for losses
included in earnings available for common
stock, net of tax of ($1,676) (2,837) (2,837)
--------------- ------------
Net unrealized gains on qualifying derivatives 8,789 8,789
--------------- ------------
Total comprehensive income 64,721
Common stock dividends (60,449) (60,449)
Common stock issued 87 87
Capital contribution from parent 35,000 35,000
------------- ------------- ------------- --------------- ------------
Ending balance $66,183 $264,603 $381,333 ($10,167) $701,952
============= ============= ============= =============== ============
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
127
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Except as modified below, the Alliant Energy Notes to Consolidated Financial
Statements are incorporated by reference insofar as they relate to WP&L.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General - The consolidated financial statements include the accounts of
WP&L and its principal consolidated subsidiaries WPL Transco LLC and South
Beloit. WP&L is a subsidiary of Alliant Energy and is engaged principally in
the generation, distribution and sale of electric energy; the purchase,
distribution, transportation and sale of natural gas; and water services.
Nearly all of WP&L's retail customers are located in south and central
Wisconsin.
(c) Regulatory Assets - At December 31, 2001 and 2000, regulatory assets
were comprised of the following items (in millions):
2001 2000
----------- -----------
Energy efficiency program costs $33.9 $19.8
Tax-related (Note 1(d)) 29.0 37.6
Environmental liabilities (Note 11(e)) 18.7 16.6
Other 33.4 18.4
----------- -----------
$115.0 $92.4
=========== ===========
(d) Income Taxes - Alliant Energy files a consolidated federal income tax
return. Under the terms of an agreement between Alliant Energy and its
subsidiaries, the subsidiaries calculate their respective federal income tax
provisions and make payments to or receive payments from Alliant Energy as if
they were separate taxable entities.
(3) LEASES
WP&L's operating lease rental expenses, which include certain purchased-power
operating leases, for 2001, 2000 and 1999 were $23.4 million, $7.9 million
and $7.7 million, respectively. The purchased-power leases below include $33
million in 2003 and a total amount of $423 million related to a new plant
(Riverside) currently under development in Wisconsin. At December 31, 2001,
WP&L's future minimum operating lease payments were as follows (in millions):
2002 2003 2004 2005 2006 Thereafter Total
----------------------------------------------------------------
Certain purchased-
power agreements $18.3 $51.4 $65.8 $67.2 $68.5 $290.6 $561.8
Financings using special
purpose entities 2.7 2.7 2.7 2.7 2.7 15.7 29.2
Other 3.6 5.8 6.1 6.0 5.6 3.8 30.9
-----------------------------------------------------------------
$24.6 $59.9 $74.6 $75.9 $76.8 $310.1 $621.9
=================================================================
(4) UTILITY ACCOUNTS RECEIVABLE
At December 31, 2001 and 2000, WP&L had sold $88 million and $89 million of
receivables, respectively. In 2001, 2000 and 1999, WP&L received
approximately $1.1 billion, $0.9 billion and $0.9 billion, respectively, in
aggregate proceeds from the sale of accounts receivable. WP&L paid fees
associated with these sales of $4.0 million, $5.0 million and $4.0 million in
2001, 2000 and 1999, respectively.
128
(5) INCOME TAXES
The components of income taxes for WP&L were as follows (in millions):
2001 2000 1999
---------------- --------------- ---------------
Current tax expense:
Federal $36.8 $44.5 $47.3
State 11.2 10.5 11.1
Deferred tax benefit:
Federal (4.6) (9.9) (9.4)
State (0.4) (0.3) (1.3)
Amortization of investment tax credits (1.8) (1.9) (1.9)
---------------- --------------- ---------------
$41.2 $42.9 $45.8
================ =============== ===============
The overall effective income tax rates shown in the following table were
computed by dividing total income tax expense by income before income taxes.
2001 2000 1999
------------- -------------- --------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefits 6.4 6.0 6.3
Amortization of investment tax credits (1.6) (1.6) (1.6)
Adjustment of prior period taxes (2.8) (0.8) (0.3)
Amortization of excess deferred taxes (1.5) (1.3) (1.3)
Other items, net 0.4 0.2 1.1
------------- -------------- --------------
Overall effective income tax rate 35.9% 37.5% 39.2%
============= ============== ==============
The accumulated deferred income tax (assets) and liabilities included on the
Consolidated Balance Sheets at December 31 arise from the following temporary
differences (in millions):
2001 2000
--------------- ---------------
Property related $217.5 $260.5
Investment tax credits (16.7) (19.7)
Other 5.4 (18.0)
--------------- ---------------
$206.2 $222.8
=============== ===============
(6) BENEFIT PLANS
(a) Pension Plans and Other Postretirement Benefits - Substantially all of
WP&L's employees are covered by two non-contributory defined benefit pension
plans. Benefits are based on the employees' years of service and
compensation. WP&L also provides certain postretirement health care and life
benefits to eligible retirees. In general, the health care plans are
contributory with participants' contributions adjusted regularly and the life
insurance plans are non-contributory.
129
The weighted-average assumptions at the measurement date of September 30 were
as follows:
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------- ----------------------------------------
2001 2000 1999 2001 2000 1999
------------ ----------- ------------ ---------- ------------- ---------------
Discount rate 7.25% 8.00% 7.75% 7.25% 8.00% 7.75%
Expected return on plan assets 9% 9% 9% 9% 9% 9%
Rate of compensation increase 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Medical cost trend on covered charges:
Initial trend rate N/A N/A N/A 12% 9% 7%
Ultimate trend rate N/A N/A N/A 5% 5% 5%
The components of WP&L's qualified pension benefits and other postretirement
benefits costs were as follows (in millions):
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------- ----------------------------------
2001 2000 1999 2001 2000 1999
---------- ----------- --------- -------- -------- ---------
Service cost $2.8 $3.0 $3.8 $1.6 $1.4 $1.6
Interest cost 9.2 8.9 8.9 3.6 3.3 2.7
Expected return on plan assets (13.7) (12.9) (12.9) (1.7) (1.6) (1.5)
Amortization of:
Transition obligation (asset) (2.1) (2.1) (2.1) 1.2 1.2 1.2
Prior service cost 0.5 0.4 0.4 -- -- --
Actuarial loss (gain) -- -- 0.2 (0.6) (0.8) (0.9)
---------- ----------- --------- -------- -------- ---------
($3.3) ($2.7) ($1.7) $4.1 $3.5 $3.1
========== =========== ========= ======== ======== =========
The pension benefit cost shown above (and in the following tables) represents
only the pension benefit cost for bargaining unit employees of WP&L covered
under the bargaining unit pension plan that is sponsored by WP&L. The
benefit obligations and assets associated with WP&L's non-bargaining
employees who are participants in other Alliant Energy plans are reported in
Alliant Energy's consolidated financial statements and are not reported
above. The pension benefit income for WP&L's non-bargaining employees who
are now participants in other Alliant Energy plans was $1.5 million, $1.3
million and $1.8 million for 2001, 2000 and 1999, respectively. In addition,
Corporate Services provides services to WP&L. The allocated pension benefit
costs associated with these services was $1.3 million, $1.3 million and $1.2
million for 2001, 2000 and 1999, respectively. The other postretirement
benefit cost shown above for each period (and in the following tables)
represents the other postretirement benefit cost for all WP&L employees. The
allocated other postretirement benefit cost associated with Corporate
Services for WP&L was $0.3 million, $0.3 million and $0.4 million for 2001,
2000 and 1999, respectively.
The assumed medical trend rates are critical assumptions in determining the
service and interest cost and accumulated postretirement benefit obligation
related to postretirement benefit costs. A one percent change in the medical
trend rates for 2001, holding all other assumptions constant, would have the
following effects (in millions):
1 Percent Increase 1 Percent Decrease
------------------- ----------------------
Effect on total of service and interest cost components $0.5 ($0.4)
Effect on postretirement benefit obligation $4.2 ($3.9)
130
A reconciliation of the funded status of WP&L's plans to the amounts
recognized on WP&L's Consolidated Balance Sheets at December 31 was as
follows (in millions):
Qualified Pension Benefits Other Postretirement Benefits
---------------------------- ------------------------------
2001 2000 2001 2000
------------ ------------ ------------- -----------
Change in benefit obligation:
Net benefit obligation at beginning of year $115.9 $117.2 $42.3 $42.4
Service cost 2.8 3.0 1.6 1.4
Interest cost 9.2 8.9 3.6 3.3
Plan participants' contributions -- -- 1.6 1.2
Actuarial loss (gain) 18.3 (6.2) 16.6 (1.3)
Gross benefits paid (7.0) (7.0) (5.2) (4.7)
------------ ------------ ------------- -----------
Net benefit obligation at end of year 139.2 115.9 60.5 42.3
------------ ------------ ------------- -----------
Change in plan assets:
Fair value of plan assets at beginning of year 156.3 147.6 19.4 17.9
Actual return on plan assets (10.5) 15.7 (0.5) 1.5
Employer contributions -- -- 2.5 3.5
Plan participants' contributions -- -- 1.6 1.2
Gross benefits paid (7.0) (7.0) (5.2) (4.7)
------------ ------------ ------------- -----------
Fair value of plan assets at end of year 138.8 156.3 17.8 19.4
------------ ------------ ------------- -----------
Funded status at end of year (0.4) 40.4 (42.7) (22.9)
Unrecognized net actuarial loss (gain) 34.3 (8.2) 4.4 (15.0)
Unrecognized prior service cost 3.9 4.3 (0.2) (0.2)
Unrecognized net transition obligation (asset) (1.7) (3.7) 12.6 13.8
------------ ------------ ------------- -----------
Net amount recognized at end of year $36.1 $32.8 ($25.9) ($24.3)
============ ============ ============= ===========
Amounts recognized on the Consolidated
Balance Sheets consist of:
Prepaid benefit cost $36.1 $32.8 $1.3 $0.9
Accrued benefit cost -- -- (27.2) (25.2)
------------ ------------ ------------- -----------
Net amount recognized at measurement date 36.1 32.8 (25.9) (24.3)
------------ ------------ ------------- -----------
Contributions paid after 9/30 and prior to 12/31 -- -- 1.1 0.6
------------ ------------ ------------- -----------
Net amount recognized at 12/31 $36.1 $32.8 ($24.8) ($23.7)
============ ============ ============= ===========
The benefit obligation and fair value of plan assets for the postretirement
welfare plans with benefit obligations in excess of plan assets were $53.8
million and $8.5 million, respectively, as of September 30, 2001 and $37.1
million and $9.5 million, respectively, as of September 30, 2000.
Alliant Energy sponsors several non-qualified pension plans that cover
certain current and former key employees. The pension expense allocated to
WP&L for these plans was $1.0 million, $1.2 million and $0.8 million in 2001,
2000 and 1999, respectively.
WP&L has various life insurance policies that cover certain key employees and
directors. At December 31, 2001 and 2000, the cash surrender value of these
investments was $9 million and $8 million, respectively.
A significant number of WP&L employees also participate in defined
contribution pension plans (401(k) plans). WP&L's contributions to the
plans, which are based on the participants' level of contribution, were $2.1
million, $2.1 million and $2.0 million in 2001, 2000 and 1999, respectively.
131
(7) COMMON AND PREFERRED STOCK
(b) Preferred Stock - The carrying value of WP&L's cumulative preferred
stock at December 31, 2001 and 2000 was $60 million. The fair market value,
based upon the market yield of similar securities and quoted market prices,
at December 31, 2001 and 2000 was $49 million and $44 million, respectively.
(8) DEBT
(a) Short-Term Debt - Information regarding WP&L's short-term debt was as
follows (dollars in millions):
2001 2000 1999
-------------- -------------- --------------
At year end:
Money pool borrowings $90.8 $29.2 $125.7
Interest rates on money pool borrowings 2.4% 6.6% 5.8%
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $23.8 $25.5 $77.1
Average interest rates on short-term debt 3.7% 6.2% 5.2%
(b) Long-Term Debt - WP&L's debt maturities for 2002 to 2006 are $0, $0,
$62.0 million, $88.0 million, and $0, respectively. The carrying value of
WP&L's long-term debt (including variable rate demand bonds) at December 31,
2001 and 2000 was $523 million and $569 million, respectively. The fair
market value, based upon the market yield of similar securities and quoted
market prices, at December 31, 2001 and 2000 was $548 million and $584
million, respectively.
(9) INVESTMENTS AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Information relating to various investments held by WP&L that are
marked-to-market as a result of SFAS 115, "Accounting for Certain Investments
in Debt and Equity Securities," were as follows (in millions):
December 31, 2001 December 31, 2000
--------------------------- --------------------------
Carrying/ Unrealized Carrying/ Unrealized
Fair Gains, Fair Gains,
Value Net of Tax Value Net of Tax
--------------------------- --------------------------
Available-for-sale securities:
Nuclear decommissioning trust funds:
Debt securities $122 $2 $115 $2
Equity securities 94 23 81 26
--------------------------- --------------------------
Total $216 $25 $196 $28
=========================== ==========================
Nuclear Decommissioning Trust Funds - At December 31, 2001, $77 million, $21
million and $24 million of the debt securities mature in 2002-2010, 2011-2020
and 2021-2049, respectively. The fair value of the nuclear decommissioning
trust funds was as reported by the trustee, adjusted for the tax effect of
unrealized gains and losses. Net unrealized holding gains were recorded as
part of accumulated provision for depreciation. The funds realized
gains/(losses) from the sales of securities of $2.1 million, $5.2 million and
($10.4) million in 2001, 2000 and 1999, respectively (cost of the investments
based on specific identification was $147.4 million, $202.1 million and $94.6
million, respectively, and proceeds from the sales were $149.5 million,
$207.3 million and $84.2 million, respectively).
132
Unconsolidated Equity Investments - Summary financial information from WP&L's
unconsolidated equity investments' financial statements is as follows (in
millions):
Ownership Less Than or Equal to 50%
-----------------------------------------
2001 2000 1999
------------ ------------ ------------
Income statement data (for the year ended):
Operating revenues $212.3 $5.3 $5.6
Operating income 65.8 1.3 1.3
Net income 55.9 1.6 3.0
Balance sheet data (at December 31): 2001 2000
------------ ------------
Current assets $63.3 $19.6
Non-current assets 690.9 29.6
Current liabilities 46.1 34.1
Non-current liabilities 10.7 0.7
(11) COMMITMENTS AND CONTINGENCIES
(a) Construction and Acquisition Program - WP&L currently anticipates 2002
utility construction and acquisition expenditures will be approximately $158
million. During 2003-2006, WP&L currently anticipates to spend approximately
$674 million for utility construction and acquisition expenditures.
(b) Purchased-Power, Coal and Natural Gas Contracts - Alliant Energy,
through its subsidiaries (Corporate Services, IESU, WP&L and IPC), has
entered into purchased-power, coal and natural gas supply, transportation and
storage contracts. Certain purchased-power commitments are considered
operating leases and are therefore not included here, but are included in
Note 3. Based on the System Coordination and Operating Agreement, Alliant
Energy annually allocates purchased-power contracts to the individual
utilities. Such process considers factors such as resource mix, load growth
and resource availability. Refer to Note 18 for additional information.
Coal contract quantities are directly assigned to specific plants at the
individual utilities based on various factors including projected heat input
requirements, combustion compatibility and efficiency. However, for
2002-2006, system-wide contracts of $48.1 million (7.2 million tons), $50.0
million (7.6 million tons), $31.4 million (3.9 million tons), $22.8 million
(2.7 million tons) and $8.2 million (0.9 million tons), respectively, have
not yet been directly assigned to the individual utilities since the specific
needs of each utility is not yet known. The natural gas supply commitments
are all index-based. Alliant Energy expects to supplement its coal and
natural gas supplies with spot market purchases as needed. The table
includes commitments for "take or pay" contracts which result in dollar
commitments with no associated MWhs, tons or Dths. At December 31, 2001,
WP&L's minimum commitments are as follows (dollars and Dths in millions; MWhs
and tons in thousands):
Purchased-power Coal Natural gas
------------------------ ----------------------- --------------------------
Dollars MWhs Dollars Tons Dollars Dths
---------- ---------- ---------- ---------- ------------ ----------
2002 $36.4 219 $9.8 716 $25.4 2
2003 17.8 219 5.6 -- 21.2 1
2004 6.2 219 5.6 -- 12.9 --
2005 -- -- -- -- 12.7 --
2006 -- -- -- -- 12.3 --
133
(e) Environmental Liabilities - WP&L had recorded the following
environmental liabilities, and regulatory assets associated with certain of
these liabilities, at December 31 (in millions):
Environmental liabilities 2001 2000 Regulatory assets 2001 2000
- ------------------------- ------------ ------------- ----------------- ------------ ------------
MGP sites $4.4 $4.5 MGP sites $11.7 $11.7
NEPA 3.1 3.6 NEPA 4.0 4.4
Other -- 0.1 Other 3.0 0.5
------------ ------------- ------------ ------------
$7.5 $8.2 $18.7 $16.6
============ ============= ============ ============
MGP Sites - Management currently estimates the range of remaining costs to be
- ---------
incurred for the investigation, remediation and monitoring of all WP&L's
sites to be approximately $4 million to $5 million.
(14) SEGMENTS OF BUSINESS
WP&L is a regulated domestic utility, serving customers in Wisconsin and
Illinois, and is broken down into three segments: a) electric operations; b)
gas operations; and c) other, which includes the water business and the
unallocated portions of the utility business. Various line items in the
following tables are not allocated to the electric and gas segments for
management reporting purposes and therefore are included in "Other."
Intersegment revenues were not material to WP&L's operations and there was no
single customer whose revenues were 10 percent or more of WP&L's consolidated
revenues. Certain financial information relating to WP&L's significant
business segments was as follows (in millions):
Electric Gas Other Total
- ------------------------------------------------------------------------------------------------------------
2001
- ----
Operating revenues $753.5 $206.9 $5.0 $965.4
Depreciation and amortization 111.5 16.4 1.2 129.1
Operating income 121.6 2.5 1.3 125.4
Interest expense, net of AFUDC 38.7 38.7
Equity income from unconsolidated investments (15.5) (15.5)
Miscellaneous, net (12.5) (12.5)
Income tax expense 41.2 41.2
Net income 73.5 73.5
Preferred dividends 3.3 3.3
Earnings available for common stock 70.2 70.2
Total assets 1,323.9 224.5 331.5 1,879.9
Investments in equity method subsidiaries 117.3 117.3
Construction and acquisition expenditures 127.9 16.8 2.3 147.0
- ------------------------------------------------------------------------------------------------------------
2000
- ----
Operating revenues $692.2 $165.2 $5.0 $862.4
Depreciation and amortization 122.9 15.9 1.1 139.9
Operating income 123.2 12.2 1.7 137.1
Interest expense, net of AFUDC 39.3 39.3
Equity income from unconsolidated investments (0.5) (0.5)
Miscellaneous, net (16.0) (16.0)
Income tax expense 42.9 42.9
Net income 71.4 71.4
Preferred dividends 3.3 3.3
Earnings available for common stock 68.1 68.1
Total assets 1,344.9 226.1 286.0 1,857.0
Investments in equity method subsidiaries 4.8 4.8
Construction and acquisition expenditures 114.2 15.1 2.3 131.6
- ------------------------------------------------------------------------------------------------------------
134
Electric Gas Other Total
- ------------------------------------------------------------------------------------------------------------
1999
- ----
Operating revenues $626.6 $120.8 $5.1 $752.5
Depreciation and amortization 97.5 14.5 1.0 113.0
Operating income 139.3 13.8 1.8 154.9
Interest expense, net of AFUDC 36.5 36.5
Equity income from unconsolidated investments (0.7) (0.7)
Miscellaneous, net 2.5 2.5
Income tax expense 45.8 45.8
Net income 70.8 70.8
Preferred dividends 3.3 3.3
Earnings available for common stock 67.5 67.5
Total assets 1,310.5 200.3 255.3 1,766.1
Investments in equity method subsidiaries 5.2 5.2
Construction and acquisition expenditures 111.2 18.2 2.5 131.9
(16) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
2001 (a) 2000
---------------------------------------- ---------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
---------- --------- --------- --------- ---------- --------- -------- ---------
(in millions)
Operating revenues $317.2 $204.1 $228.3 $215.8 $218.8 $193.9 $199.6 $250.1
Operating income 37.0 23.4 36.2 28.8 40.5 25.1 36.9 34.6
Net income 19.3 11.6 19.9 22.8 21.9 11.3 17.6 20.6
Earnings available for common stock 18.4 10.7 19.0 22.0 21.0 10.5 16.8 19.8
(a) Summation of the individual quarters may not equal annual totals due to
rounding.
(18) RELATED PARTY ISSUES
IESU, WP&L and IPC have entered into a System Coordination and Operating
Agreement. The agreement, which has been approved by FERC, provides a
contractual basis for coordinated planning, construction, operation and
maintenance of the interconnected electric generation and transmission
systems of the three utility companies. In addition, the agreement allows
the interconnected system to be operated as a single entity with off-system
capacity sales and purchases made to market excess system capability or to
meet system capability deficiencies. Such sales and purchases are allocated
among the three utility companies based on procedures included in the
agreement. The sales amounts allocated to WP&L were $32.1 million, $28.6
million and $23.8 million for 2001, 2000 and 1999, respectively. The
purchases allocated to WP&L were $209.2 million, $130.7 million and $101.0
million for 2001, 2000 and 1999, respectively. The procedures were approved
by both the FERC and all state regulatory bodies having jurisdiction over
these sales. Under the agreement, IESU, WP&L and IPC are fully reimbursed
for any generation expense incurred to support a sale to an affiliate or to a
non-affiliate. Any margins on sales to non-affiliates are distributed to the
three utilities in proportion to each utility's share of electric production
at the time of the sale.
Pursuant to a service agreement approved by the SEC under PUHCA, WP&L
receives various administrative and general services from an affiliate,
Corporate Services. These services are billed to WP&L at cost based on
payroll and other expenses incurred by Corporate Services for the benefit of
WP&L. These costs totaled $107.0 million, $103.4 million and $96.5 million
for 2001, 2000 and 1999, respectively, and consisted primarily of employee
compensation, benefits and fees associated with various professional
services. At December 31, 2001 and 2000, WP&L had an intercompany payable to
Corporate Services of $33.5 million and $30.6 million, respectively.
135
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
ALLIANT ENERGY
The information required by Item 10 relating to directors and nominees for
election of directors at the 2002 Annual Meeting of Shareowners is
incorporated herein by reference to the relevant information under the
caption "Election of Directors" in Alliant Energy's Proxy Statement for the
2002 Annual Meeting of Shareowners (the 2002 Alliant Energy Proxy Statement),
which will be filed with the SEC within 120 days after the end of Alliant
Energy's fiscal year. The information required by Item 10 relating to the
timely filing of reports under Section 16 of the Securities Exchange Act of
1934 is incorporated herein by reference to the relevant information under
the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the
2002 Alliant Energy Proxy Statement. Information regarding executive
officers of Alliant Energy may be found in Part I of this report under the
caption "Executive Officers of the Registrants."
IP&L
IP&L's directors are identical to Alliant Energy. The information required
by Item 10 relating to directors and nominees for election of directors at
the 2002 Annual Meeting of Shareowners is incorporated herein by reference to
the relevant information included under the caption "Election of Directors"
in the 2002 Alliant Energy Proxy Statement, which will be filed with the SEC
within 120 days after the end of IP&L's fiscal year. The information
required by Item 10 relating to the timely filing of reports under Section 16
of the Securities Exchange Act of 1934 is incorporated herein by reference to
the relevant information under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" in the 2002 Alliant Energy Proxy Statement.
Information regarding executive officers of IP&L may be found in Part I of
this report under the caption "Executive Officers of the Registrants."
WP&L
The information required by Item 10 relating to directors and nominees for
election of directors at the 2002 Annual Meeting of Shareowners is
incorporated herein by reference to the relevant information under the
caption "Election of Directors" in WP&L's Proxy Statement for the 2002 Annual
Meeting of Shareowners (the 2002 WP&L Proxy Statement), which will be filed
with the SEC within 120 days after the end of WP&L's fiscal year. The
information required by Item 10 relating to the timely filing of reports
under Section 16 of the Securities Exchange Act of 1934 is incorporated
herein by reference to the relevant information under the caption "Section
16(a) Beneficial Ownership Reporting Compliance" in the 2002 WP&L Proxy
Statement. Information regarding executive officers of WP&L may be found in
Part I of this report under the caption "Executive Officers of the
Registrants."
ITEM 11. EXECUTIVE COMPENSATION
ALLIANT ENERGY
The information required by Item 11 is incorporated herein by reference to
the relevant information under the captions "Compensation of Directors,"
"Compensation of Executive Officers," "Stock Options," "Long-Term Incentive
Awards," "Certain Agreements" and "Retirement and Employee Benefit Plans" in
the 2002 Alliant Energy Proxy Statement, which will be filed with the SEC
within 120 days after the end of Alliant Energy's fiscal year.
136
IP&L
The directors as well as the CEO and the four other most highly compensated
executive officers for IP&L are the same as for WP&L. Therefore, the
information required by Item 11 is incorporated herein by reference to the
relevant information under the captions "Compensation of Directors,"
"Compensation of Executive Officers," "Stock Options," "Long-Term Incentive
Awards," "Certain Agreements" and "Retirement and Employee Benefit Plans" in
the 2002 WP&L Proxy Statement, which will be filed with the SEC within 120
days after the end of IP&L's fiscal year.
WP&L
The information required by Item 11 is incorporated herein by reference to
the relevant information under the captions "Compensation of Directors,"
"Compensation of Executive Officers," "Stock Options," "Long-Term Incentive
Awards," "Certain Agreements" and "Retirement and Employee Benefit Plans" in
the 2002 WP&L Proxy Statement, which will be filed with the SEC within 120
days after the end of WP&L's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ALLIANT ENERGY
The information required by Item 12 is incorporated herein by reference to
the relevant information under the caption "Ownership of Voting Securities"
in the 2002 Alliant Energy Proxy Statement, which will be filed with the SEC
within 120 days after the end of Alliant Energy's fiscal year.
IP&L
To IESU's knowledge, no shareowner beneficially owned five percent or more of
IESU's Cumulative Preferred Stock as of December 31, 2001. None of the
directors or executive officers of IESU own any shares of IESU's Cumulative
Preferred Stock.
WP&L
The information required by Item 12 is incorporated herein by reference to
the relevant information under the caption "Ownership of Voting Securities"
in the 2002 WP&L Proxy Statement, which will be filed with the SEC within 120
days after the end of WP&L's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Consolidated Financial Statements
---------------------------------
Refer to "Index to Financial Statements" in Item 8 Financial Statements and
Supplementary Data.
(a) (2) Financial Statement Schedules
-----------------------------
Schedule II. Valuation and Qualifying Accounts and Reserves
NOTE: All other schedules are omitted because they are not applicable or
not required, or because that required information is shown either in the
consolidated financial statements or in the notes thereto.
137
(a) (3) Exhibits Required by Securities and Exchange Commission Regulation S-K
----------------------------------------------------------------------
The following Exhibits are filed herewith or incorporated herein by
reference. Documents indicated by an asterisk (*) are incorporated herein
by reference.
2.1* Agreement and Plan of Merger, dated as of November 10, 1995, by and
among WPLH, IES, IPC and AMW Acquisition, Inc. (incorporated by
reference to Exhibit 2.1 to Alliant Energy's Form 8-K, dated
November 10, 1995)
2.2* Amendment No. 1 to Agreement and Plan of Merger and Stock Option
Agreements, dated May 22, 1996, by and among WPLH, IES, IPC, a
Delaware corporation, AMW Acquisition, Inc., WPLH Acquisition Co.
and IPC, a Wisconsin corporation (incorporated by reference to
Exhibit 2.1 to Alliant Energy's Form 8-K, dated May 22, 1996)
2.3* Amendment No. 2 to Agreement and Plan of Merger, dated August 16,
1996, by and among WPLH, IES, IPC, a Delaware corporation, WPLH
Acquisition Co. and IPC, a Wisconsin corporation (incorporated by
reference to Exhibit 2.1 to Alliant Energy's Form 8-K, dated August
15, 1996)
2.4* Agreement and Plan of Merger, dated as of March 15, 2000, as amended
on November 29, 2000, between IP&L (formerly IESU) and IPC
(incorporated by reference to Appendix A to the joint proxy
statement/prospectus of IP&L, dated February 13, 2001 (Registration
No. 333-53846))
3.1* Restated Articles of Incorporation of Alliant Energy, as amended
(incorporated by reference to Exhibit 3.2 to Alliant Energy's Form
10-Q for the quarter ended June 30, 1999)
3.2* Bylaws of Alliant Energy, as amended, effective as of January 30,
2001 (incorporated by reference to Exhibit 3.2 to Alliant Energy's
Form 10-K for the year 2000)
3.3* Restated Articles of Incorporation of WP&L, as amended (incorporated
by reference to Exhibit 3.1 to WP&L's Form 10-Q for the quarter
ended June 30, 1994)
3.4* Bylaws of WP&L, as amended, effective as of January 30, 2001
(incorporated by reference to Exhibit 3.4 to WP&L's Form 10-K for
the year 2000)
3.5* Amended and Restated Articles of Incorporation of IP&L (incorporated
by reference to Exhibit 3.4 to IP&L's Form 8-K, dated January 1,
2002)
3.6* Bylaws of IP&L, as amended, effective as of January 30, 2001
(incorporated by reference to Exhibit 3.6 to IP&L's Form 10-K for
the year 2000)
4.1* Indenture of Mortgage or Deed of Trust dated August 1, 1941, between
WP&L and First Wisconsin Trust Company (n/k/a U.S. Bank National
Association) and George B. Luhman (Robert T. Jones, successor), as
Trustees, filed as Exhibit 7(a) in File No. 2-6409, and the
indentures supplemental thereto dated, respectively, January 1,
1948, September 1, 1948, June 1, 1950, April 1, 1951, April 1, 1952,
September 1, 1953, October 1, 1954, March 1, 1959, May 1, 1962,
August 1, 1968, June 1, 1969, October 1, 1970, July 1, 1971,
April 1, 1974, December 1, 1975, May 1, 1976, May 15, 1978,
August 1, 1980, January 15, 1981, August 1, 1984, January 15, 1986,
June 1, 1986, August 1, 1988, December 1, 1990, September 1, 1991,
October 1, 1991, March 1, 1992, May 1, 1992, June 1, 1992 and July
1, 1992 (Second Amended Exhibit 7(b) in File No. 2-7361; Amended
Exhibit 7(c) in File No. 2-7628; Amended Exhibit 7.02 in File
No. 2-8462; Amended Exhibit 7.02 in File No. 2-8882; Second
Amendment Exhibit 4.03 in File No. 2-9526; Amended Exhibit 4.03 in
File No. 2-10406; Amended Exhibit 2.02 in File No. 2-11130; Amended
Exhibit 2.02 in File No. 2-14816; Amended Exhibit 2.02 in File
No. 2-20372; Amended Exhibit 2.02 in File No. 2-29738; Amended
Exhibit 2.02 in File No. 2-32947; Amended Exhibit 2.02 in File
No. 2-38304; Amended Exhibit 2.02 in File No. 2-40802; Amended
138
Exhibit 2.02 in File No. 2-50308; Exhibit 2.01(a) in File
No. 2-57775; Amended Exhibit 2.02 in File No. 2-56036; Amended
Exhibit 2.02 in File No. 2-61439; Exhibit 4.02 in File No. 2-70534;
Amended Exhibit 4.03 in File No. 2-70534; Exhibit 4.02 in File
No. 33-2579; Amended Exhibit 4.03 in File No. 33-2579; Amended
Exhibit 4.02 in File No. 33-4961; Exhibit 4.24 in File No. 33-45726,
Exhibit 4.25 in File No. 33-45726, Exhibit 4.26 in File
No. 33-45726, Exhibit 4.27 in File No.33-45726, Exhibit 4.1 to
WP&L's Form 8-K dated March 9, 1992, Exhibit 4.1 to WP&L's Form 8-K
dated May 12, 1992, Exhibit 4.1 to WP&L's Form 8-K dated June 29,
1992 and Exhibit 4.1 to WP&L's Form 8-K dated July 20, 1992)
4.2* Rights Agreement, dated January 20, 1999, between Alliant Energy and
Firstar Bank Milwaukee, N.A. (n/k/a U.S. Bank National Association)
(incorporated by reference to Exhibit 4.1 to Alliant Energy's
Registration Statement on Form 8-A, dated January 20, 1999)
4.3* Indenture, dated as of June 20, 1997, between WP&L and Firstar Trust
Company (n/k/a U.S. Bank National Association), as Trustee, relating
to debt securities (incorporated by reference to Exhibit 4.33 to
Amendment No. 2 to WP&L's Registration Statement on Form S-3
(Registration No. 33-60917))
4.4* Officers' Certificate, dated as of June 25, 1997, creating WP&L's 7%
debentures due June 15, 2007 (incorporated by reference to Exhibit 4
to WP&L's Form 8-K, dated June 25, 1997)
4.5* Officers' Certificate, dated as of October 27, 1998, creating
WP&L's 5.7% debentures due October 15, 2008 (incorporated by
reference to Exhibit 4 to WP&L's Form 8-K, dated October 27, 1998)
4.6* Officers' Certificate, dated as of March 1, 2000, creating WP&L's
7-5/8% debentures due March 1, 2010 (incorporated by reference to
Exhibit 4 to WP&L's Form 8-K, dated March 1, 2000)
4.7* Indenture of Mortgage and Deed of Trust, dated as of
September 1, 1993, between IP&L (formerly Iowa Electric Light and
Power Company (IE)) and The First National Bank of Chicago (Bank One
Trust Company, National Association, successor), as Trustee
(Mortgage) (incorporated by reference to Exhibit 4(c) to IP&L's Form
10-Q for the quarter ended September 30, 1993), and the indentures
supplemental thereto dated, respectively, October 1, 1993, November
1, 1993, March 1, 1995, September 1, 1996 and April 1, 1997 (Exhibit
4(d) in IP&L's Form 10-Q dated November 12, 1993, Exhibit 4(e) in
IP&L's Form 10-Q dated November 12, 1993, Exhibit 4(b) in IP&L's
Form 10-Q dated May 12, 1995, Exhibit 4(c)(i) in IP&L's Form 8-K
dated September 19, 1996 and Exhibit 4(a) in IP&L's Form 10-Q dated
May 14, 1997)
4.8* Indenture of Mortgage and Deed of Trust, dated as of August 1, 1940,
between IP&L (formerly IE) and The First National Bank of Chicago
(Bank One Trust Company, National Association, successor), Trustee
(1940 Indenture) (incorporated by reference to Exhibit 2(a) to
IP&L's Registration Statement, File No. 2-25347), and the indentures
supplemental thereto dated, respectively, March 1, 1941, July 15,
1942, August 2, 1943, August 10, 1944, November 10, 1944, August 8,
1945, July 1, 1946, July 1, 1947, December 15, 1948, November 1,
1949, November 10, 1950, October 1, 1951, March 1, 1952, November 5,
1952, February 1, 1953, May 1, 1953, November 3, 1953, November 8,
1954, January 1, 1955, November 1, 1955, November 9, 1956, November
6, 1957, November 4, 1958, November 3, 1959, November 1, 1960,
January 1, 1961, November 7, 1961, November 6, 1962, November 5,
1963, November 4, 1964, November 2, 1965, September 1, 1966,
November 30, 1966, November 7, 1967, November 5, 1968, November 1,
1969, December 1, 1970, November 2, 1971, May 1, 1972, November 7,
1972, November 7, 1973, September 10, 1974, November 5, 1975, July
1, 1976, November 1, 1976, December 1, 1977, November 1, 1978,
December 1, 1979, November 1, 1981, December 1, 1980, December 1,
1982, December 1, 1983, December 1, 1984, March 1, 1985, March 1,
1988, October 1, 1988, May 1, 1991, March 1, 1992, October 1, 1993,
November 1, 1993, March 1, 1995, September 1, 1996 and April 1, 1997
(Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
139
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 4.10 in IP&L's Form 10-K
for the year 1966, Exhibit 4.10 in IP&L's Form 10-K for the year
1966, Exhibit 4.10 in IP&L's Form 10-K for the year 1967, Exhibit
4.10 in IP&L's Form 10-K for the year 1968, Exhibit 4.10 in IP&L's
Form 10-K for the year 1969, Exhibit 1 in IP&L's Form 8-K dated
December 1970, Exhibit 2(g) in File No. 2-43131, Exhibit 1 in IP&L's
Form 8-K dated May 1972, Exhibit 2(i) in File No. 2-56078, Exhibit
2(j) in File No. 2-56078, Exhibit 2(k) in File No. 2-56078, Exhibit
2(l) in File No. 2-56078, Exhibit 1 in IP&L's Form 8-K dated July
1976, Exhibit 1 in IP&L's Form 8-K dated December 1976, Exhibit 2(o)
in File No. 2-60040, Exhibit 1 in IP&L's Form 10-Q dated June 30,
1979, Exhibit 2(q) in Form S-16 in File No. 2-65996, Exhibit 2 in
IP&L's Form 10-Q dated March 31, 1982, Exhibit 4(s) in IP&L's Form
10-K for the year 1981, Exhibit 4(t) in IP&L's Form 10-K for the
year 1982, Exhibit 4(u) in IP&L's Form 10-K for the year 1983,
Exhibit 4(v) in IP&L's Form 10-K for the year 1984, Exhibit 4(w) in
IP&L's Form 10-K for the year 1984, Exhibit 4(b) in IP&L's Form 10-Q
dated May 12, 1988, Exhibit 4(c) in IP&L's Form 10-Q dated November
10, 1988, Exhibit 4(d) in IP&L's Form 10-Q dated August 13, 1991,
Exhibit 4(c) in IP&L's Form 10-K for the year 1991, Exhibit 4(a) in
IP&L's Form 10-Q dated November 12, 1993, Exhibit 4(b) in IP&L's
Form 10-Q dated November 12, 1993, Exhibit 4(a) in IP&L's Form 10-Q
dated May 12, 1995, Exhibit 4(f) in IP&L's Form 8-K dated September
19, 1996 and Exhibit 4(b) in IP&L's Form 10-Q dated May 14, 1997)
4.9* Indenture or Deed of Trust dated as of February 1, 1923, between
IP&L (formerly IESU (successor to Iowa Southern Utilities Company
(IS) as result of merger of IS and IE)) and The Northern Trust
Company (Bank One Trust Company, National Association, successor)
and Harold H. Rockwell (Lawrence Dillard, successor), as Trustees
(1923 Indenture) (incorporated by reference to Exhibit B-1 to File
No. 2-1719), and the indentures supplemental thereto dated,
respectively, May 1, 1940, May 2, 1940, October 1, 1945, October 2,
1945, January 1, 1948, September 1, 1950, February 1, 1953, October
2, 1953, August 1, 1957, September 1, 1962, June 1, 1967, February
1, 1973, February 1, 1975, July 1, 1975, September 2, 1975, March
10, 1976, February 1, 1977, January 1, 1978, March 1, 1979, March 1,
1980, May 31, 1986, July 1, 1991, September 1, 1992 and December 1,
1994 (Exhibit B-1-k in File No. 2-4921, Exhibit B-1-l in File No.
2-4921, Exhibit 7(m) in File No. 2-8053, Exhibit 7(n) in File No.
2-8053, Exhibit 7(o) in File No. 2-8053, Exhibit 4(e) in File No.
33-3995, Exhibit 4(b) in File No. 2-10543, Exhibit 4(q) in File No.
2-10543, Exhibit 2(b) in File No. 2-13496, Exhibit 2(b) in File No.
2-20667, Exhibit 2(b) in File No. 2-26478, Exhibit 2(b) in File No.
2-46530, Exhibit 2(aa) in File No. 2-53860, Exhibit 2(bb) in File
No. 2-54285, Exhibit 2(bb) in File No. 2-57510, Exhibit 2(cc) in
File No. 2-57510, Exhibit 2(ee) in File No. 2-60276, Exhibit 2 in
File No. 0-849, Exhibit 2 in File No. 0-849, Exhibit 2 in File No.
0-849, Exhibit 4(g) in File No. 33-3995, Exhibit 4(h) in File No.
0-849, Exhibit 4(m) in File No. 0-849 and Exhibit 4(f) in File No.
0-4117-1)
4.10* Indenture (For Unsecured Subordinated Debt Securities), dated as of
December 1, 1995, between IP&L (formerly IESU) and The First
National Bank of Chicago (Bank One Trust Company, National
Association, successor), as Trustee (Subordinated Indenture)
(incorporated by reference to Exhibit 4(i) to IP&L's Amendment No. 1
to Registration Statement, File No. 33-62259)
4.11* Indenture (For Senior Unsecured Debt Securities), dated as of August
1, 1997, between IP&L (formerly IESU) and The First National Bank of
Chicago (Bank One Trust Company, National Association, successor),
as Trustee (incorporated by reference to Exhibit 4(j) to IP&L's
Registration Statement, File No. 333-32097)
140
4.12* Officer's Certificate, dated as of August 4, 1997, creating
IP&L's (formerly IESU) 6-5/8% Senior Debentures, Series A, due 2009
(incorporated by reference to Exhibit 4.12 to IP&L's Form 10-K for
the year 2000)
4.13* Officers' Certificate, dated as of March 6, 2001, creating IP&L's
(formerly IESU) 6-3/4% Series B Senior Debentures due 2011
(incorporated by reference to Exhibit 4 to IP&L's Form 8-K, dated
March 6, 2001)
4.14* The Original through the Nineteenth Supplemental Indentures of
IP&L (successor to IPC) to JPMorgan Chase Bank (formerly The Chase
Manhattan Bank) and Carl E. Buckley and C. J. Heinzelmann, as
Trustees (James P. Freeman, successor, as Trustee), dated January 1,
1948 securing First Mortgage Bonds (incorporated by reference to
Exhibits 4(b) through 4(t) to IPC's Registration Statement No.
33-59352 dated March 11, 1993)
4.15* Twentieth Supplemental Indenture of IP&L (successor to IPC) to
JPMorgan Chase Bank (formerly The Chase Manhattan Bank) and C. J.
Heinzelmann (James P. Freeman, successor), as Trustees, dated May
15, 1993 (incorporated by reference to Exhibit 4(u) to IPC's
Registration Statement No. 33-59352 dated March 11, 1993)
4.16* Twenty-First Supplemental Indenture of IP&L (successor to IPC) to
JPMorgan Chase Bank (formerly The Chase Manhattan Bank) and James P.
Freeman, as Trustees, dated December 31, 2001 (incorporated by
reference to Exhibit 4.3 to IP&L's Form 8-K, dated January 1, 2002)
4.17* Indenture, relating to Resources' debt securities, dated as of
November 4, 1999, among Resources, Alliant Energy, as Guarantor, and
Firstar Bank, N.A. (n/k/a U.S. Bank National Association), as
Trustee, (incorporated by reference to Exhibit 4.1 to Resources' and
Alliant Energy's Registration Statement on Form S-4 (Registration
No. 333-92859)), and the indentures supplemental thereto dated,
respectively, November 4, 1999, February 1, 2000 and November 15,
2001 (Exhibit 4.2 in Registration No. 333-92859, Exhibit 99.4 in
Alliant Energy's Form 8-K dated February 1, 2000 and Exhibit 4.4 in
Resources' and Alliant Energy's Registration Statement on Form S-4
(Registration No. 333-75020))
10.1* Service Agreement by and among WP&L, South Beloit, IP&L (formerly
IESU and successor to IPC), and Corporate Services (incorporated by
reference to Exhibit 10.1 to Alliant Energy's Form 10-Q for the
quarter ended June 30, 1998)
10.2* Service Agreement by and among Resources, IPC Development
Company, Inc. and Corporate Services (incorporated by reference to
Exhibit 10.2 to Alliant Energy's Form 10-Q for the quarter ended
June 30, 1998)
10.3* System Coordination and Operating Agreement dated April 11, 1997,
among IP&L (formerly IESU and successor to IPC), WP&L and Corporate
Services (incorporated by reference to Exhibit 10.3 to Alliant
Energy's Form 10-Q for the quarter ended June 30, 1998)
10.4* Joint Power Supply Agreement among WPSC, WP&L, and MG&E, dated
February 2, 1967 (incorporated by reference to Exhibit 4.09 of WPSC
in File No. 2-27308)
10.4a* Amendment No. 1 to Joint Power Supply Agreement dated February 2,
1967 among WPSC, WP&L, and MG&E (incorporated by reference to
Exhibit 10.1 to WP&L's Form 10-Q for the quarter ended September 30,
2001)
10.5* Joint Power Supply Agreement among WPSC, WP&L, and MG&E, dated
July 26, 1973 (incorporated by reference to Exhibit 5.04A of WPSC in
File No. 2-48781)
141
10.6* Basic Generating Agreement, Unit 4, Edgewater Generating Station,
dated June 5, 1967, between WP&L and WPSC (incorporated by reference
to Exhibit 4.10 of WPSC in File No. 2-27308)
10.7* Agreement for Construction and Operation of Edgewater 5
Generating Unit, dated February 24, 1983, between WP&L, WEPCO and
WPSC (incorporated by reference to Exhibit 10C-1 to WPSC's Form 10-K
for the year 1983 (File No. 1-3016))
10.7a* Amendment No. 1 to Agreement for Construction and Operation of
Edgewater 5 Generating Unit, dated December 1, 1988 (incorporated by
reference to Exhibit 10C-2 to WPSC's Form 10-K for the year 1988
(File No. 1-3016))
10.8* Revised Agreement for Construction and Operation of Columbia
Generating Plant among WPSC, WP&L, and MG&E, dated July 26, 1973
(incorporated by reference to Exhibit 5.07 of WPSC in File No.
2-48781)
10.9* Operating and Transmission Agreement between CIPCO and IP&L
(formerly IESU) (incorporated by reference to Exhibit 10(q) to
IP&L's Form 10-K for the year 1990)
10.10* DAEC Ownership Participation Agreement dated June 1, 1970 between
CIPCO, Corn Belt Power Cooperative and IP&L (formerly IESU)
(incorporated by reference to Exhibit 5(kk) to IP&L's Registration
Statement, File No. 2-38674)
10.11* DAEC Operating Agreement dated June 1, 1970 between CIPCO, Corn Belt
Power Cooperative and IP&L (formerly IESU) (incorporated by
reference to Exhibit 5(ll) to IP&L's Registration Statement, File
No. 2-38674)
10.12* DAEC Agreement for Transmission, Transformation, Switching, and
Related Facilities dated June 1, 1970 between CIPCO, Corn Belt
Power Cooperative and IP&L (formerly IESU) (incorporated by
reference to Exhibit 5(mm) to IP&L's Registration Statement, File
No. 2-38674)
10.13* Basic Generating Agreement dated April 16, 1975 between Iowa Public
Service Company, Iowa Power and Light Company, Iowa-Illinois Gas
and Electric Company and IP&L (formerly IESU) for the joint
ownership of Ottumwa Generating Station-Unit 1 (OGS-1)
(incorporated by reference to Exhibit 1 to IP&L's Form 10-K for the
year 1977)
10.13a* Addendum Agreement to the Basic Generating Agreement for OGS-1 dated
December 7, 1977 between Iowa Public Service Company, Iowa-Illinois
Gas and Electric Company, Iowa Power and Light Company and IP&L
(formerly IESU) for the purchase of 15% ownership in OGS-1
(incorporated by reference to Exhibit 3 to IP&L's Form 10-K for the
year 1977)
10.14* Second Amended and Restated Credit Agreement dated as of September
17, 1987 between Arnold Fuel, Inc. and the First National Bank of
Chicago (Bank One Trust Company, National Association, successor)
and the Amended and Restated Consent and Agreement dated as of
September 17, 1987 by IP&L (formerly IESU) (incorporated by
reference to Exhibit 10(j) to IP&L's Form 10-K for the year 1987)
10.15* Asset Contribution Agreement between ATC and WEPCO, WP&L, WPSC,
MG&E, Edison Sault Electric Company and South Beloit, dated as of
December 15, 2000 (incorporated by reference to Exhibit 10.15 to
Alliant Energy's Form 10-K for the year 2000)
10.15a* Addenda to the Asset Contribution Agreement between ATC and
WEPCO, WP&L, WPSC, MG&E, Edison Sault Electric Company and South
Beloit, dated as of December 15, 2000 (incorporated by reference to
Exhibit 10.15a to Alliant Energy's Form 10-K for the year 2000)
142
10.16* Operating Agreement of ATC, dated as of January 1, 2001
(incorporated by reference to Exhibit 10.16 to Alliant Energy's Form
10-K for the year 2000)
10.17#* Alliant Energy LTEIP, as amended (incorporated by reference to
Exhibit 10.1 to Alliant Energy's Form 10-Q for the quarter ended
June 30, 1999)
10.18#* Alliant Energy 1998 Officer Incentive Compensation Plan
(incorporated by reference to Exhibit 10.16 to Alliant Energy's Form
10-Q for the quarter ended June 30, 1998)
10.19#* Restricted Stock Agreement pursuant to the Alliant Energy LTEIP
(incorporated by reference to Exhibit 10.1 to Alliant Energy's Form
10-Q for the quarter ended March 31, 1999)
10.20#* Alliant Energy Key Employee Deferred Compensation Plan (incorporated
by reference to Exhibit 4.2 to Alliant Energy's Registration
Statement on Form S-8 dated December 1, 2000)
10.21#* Key Employee Deferred Compensation Plan (incorporated by
reference to Exhibit 10(n) to IES's Form 10-K for the year 1987)
10.21a#* Amendments to Key Employee Deferred Compensation Agreement for
Key Employees (incorporated by reference to Exhibit 10(v) to IES's
Form 10-Q for the quarter ended March 31, 1990)
10.22# Alliant Energy Deferred Compensation Plan for Directors, as amended
and restated effective January 1, 2000, amended November 14, 2001
10.23#* IP&L (successor to IPC) Irrevocable Trust Agreement dated April
30, 1990 (incorporated by reference to Exhibit 99.f to IPC's Form
10-K for the year 1993)
10.24#* IP&L (successor to IPC) Irrevocable Trust Agreement dated
December 1997 (incorporated by reference to Exhibit 99.7 to IPC's
Form 10-K for the year 1997)
10.25#* Alliant Energy Grantor Trust for Deferred Compensation Agreements
(Key Employees) (incorporated by reference to Exhibit 4.4 to Alliant
Energy's Registration Statement on Form S-8 (Registration No.
33-51126))
10.26#* Alliant Energy Grantor Trust for Deferred Compensation Agreements
(Directors) (incorporated by reference to Exhibit 4.3 to Alliant
Energy's Registration Statement on Form S-8 (Registration No.
33-51126))
10.27#* Form of Supplemental Retirement Agreement (incorporated by
reference to Exhibit 10.15 to Alliant Energy's Form 10-Q for the
quarter ended June 30, 1998)
10.28#* Supplemental Retirement Plan (incorporated by reference to
Exhibit 10(l) to IES's Form 10-K for the year 1987)
10.29#* Alliant Energy Excess Plan (incorporated by reference to Exhibit
10.33 to Alliant Energy's Form 10-K for the year 2000)
10.30#* Supplemental Retirement Agreement by and between Alliant Energy
and E.B. Davis, Jr., W.D. Harvey, J.E. Hoffman, E.G. Protsch, B.J.
Swan, P.J. Wegner and T.M. Walker (incorporated by reference to
Exhibit 10.1 to Alliant Energy's Form 10-Q for the quarter ended
March 31, 2000)
10.31#* Key Executive Employment and Severance Agreement, dated March 29,
1999, by and between Alliant Energy and Erroll B. Davis, Jr.
(incorporated by reference to Exhibit 10.2 to Alliant Energy's Form
10-Q for the quarter ended March 31, 1999)
143
10.32#* Key Executive Employment and Severance Agreement, dated March 29,
1999, by and between Alliant Energy and each of J.E. Hoffman, W.D.
Harvey, E.G. Protsch, P.J. Wegner, T.M. Walker and B.J. Swan
(incorporated by reference to Exhibit 10.3 to Alliant Energy's Form
10-Q for the quarter ended March 31, 1999)
10.33#* Key Executive Employment and Severance Agreement, dated March 29,
1999, by and between Alliant Energy and each of T.L. Aller, E.M.
Gleason, D.K. Langer, D.L. Mineck, and K.K. Zuhlke (incorporated by
reference to Exhibit 10.4 to Alliant Energy's Form 10-Q for the
quarter ended March 31, 1999)
10.34#* Employment Agreement by and between Alliant Energy and Erroll B.
Davis, Jr., amended and restated as of March 29, 1999 (incorporated
by reference to Exhibit 10.5 to Alliant Energy's Form 10-Q for the
quarter ended March 31, 1999)
10.35#* Executive Tenure Compensation Plan as revised November 1992
(incorporated by reference to Exhibit 10A to Alliant Energy's Form
10-K for the year 1992)
10.35a#* Amendment to Executive Tenure Compensation Plan adopted February
23, 1998 (incorporated by reference to Exhibit 10.19a to Alliant
Energy's Form 10-Q for the quarter ended June 30, 1998)
21 Subsidiaries of Alliant Energy
23.1 Consent of Independent Public Accountants for Alliant Energy
23.2 Consent of Independent Petroleum Engineers
99.1 Alliant Energy Letter to the SEC Regarding Independent Public
Accountants
99.2 IP&L Letter to the SEC Regarding Independent Public Accountants
99.3 WP&L Letter to the SEC Regarding Independent Public Accountants
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the registrants agree to
furnish to the SEC, upon request, any instrument defining the rights of
holders of unregistered long-term debt not filed as an exhibit to this
Form 10-K. No such instrument authorizes securities in excess of 10% of the
total assets of Alliant Energy, WP&L or IP&L, as the case may be.
Documents incorporated by reference to filings made by Alliant Energy under
the Securities Exchange Act of 1934, as amended, are under File No. 1-9894.
Documents incorporated by reference to filings made by WP&L under the
Securities Exchange Act of 1934, as amended, are under File No. 0-337.
Documents incorporated by reference to filings made by IES under the
Securities Exchange Act of 1934, as amended, are under File No. 1-9187.
Documents incorporated by reference to filings made by IP&L (formerly IESU)
under the Securities Exchange Act of 1934, as amended, are under File No.
0-4117-1. Documents incorporated by reference to filings made by IPC under
the Securities Exchange Act of 1934, as amended, are under File No. 1-3632.
# - A management contract or compensatory plan or arrangement.
144
(b) Reports on Form 8-K
-------------------
Alliant Energy
Alliant Energy filed a Current Report on Form 8-K, dated October 19, 2001,
reporting (under Item 5) that it issued a press release announcing its
earnings for the third quarter ended September 30, 2001.
Alliant Energy filed a Current Report on Form 8-K, dated November 8, 2001,
reporting (under Item 5) that it agreed to sell 8,500,000 shares of its
common stock at $28.00 per share in a public offering and grant the
underwriters an option to purchase up to 1,275,000 additional shares of
common stock at the same price per share to cover any over-allotments.
Alliant Energy filed a Current Report on Form 8-K, dated November 15, 2001,
reporting (under Item 5) that it issued a press release announcing that
Resources completed a private placement of $300 million in senior notes in
accordance with Rule 144A under the Securities Act of 1933.
IESU - None.
WP&L - None.
145
SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Additions
-----------------------------------
Balance, Charged to Charged to Other Balance,
Description January 1 Expense Accounts (1) Deductions (2) December 31
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Valuation and Qualifying Accounts Which are Deducted in the Balance Sheet From the Assets to Which They Apply:
Accumulated Provision for Uncollectible Accounts:
-------------------------------------------------
Alliant Energy
--------------
Year ended December 31, 2001 $4,730 $9,783 $2,368 $7,578 $9,303
Year ended December 31, 2000 3,360 3,779 1,616 4,025 4,730
Year ended December 31, 1999 3,128 2,909 -- 2,677 3,360
IESU
----
Year ended December 31, 2001 $960 $6,046 $-- $5,399 $1,607
Year ended December 31, 2000 1,641 1,730 -- 2,411 960
Year ended December 31, 1999 1,415 2,268 -- 2,042 1,641
WP&L
----
Year ended December 31, 2001 $8 $37 $1,498 $-- $1,543
Year ended December 31, 2000 6 2 -- -- 8
Year ended December 31, 1999 8 -- -- 2 6
Note: The above provisions relate to various customer, notes and other receivable balances included in various
line items on the respective Consolidated Balance Sheets.
Other Reserves:
Accumulated Provision for Injuries & Damages, Workers' Compensation, Litigation and Other Miscellaneous Reserves:
-----------------------------------------------------------------------------------------------------------------
Alliant Energy
--------------
Year ended December 31, 2001 $12,489 $3,047 $-- $7,940 $7,596
Year ended December 31, 2000 7,995 8,505 -- 4,011 12,489
Year ended December 31, 1999 7,458 5,479 -- 4,942 7,995
IESU
----
Year ended December 31, 2001 $3,731 $1,547 $-- $1,499 $3,779
Year ended December 31, 2000 2,618 2,234 -- 1,121 3,731
Year ended December 31, 1999 3,129 2,036 -- 2,547 2,618
WP&L
----
Year ended December 31, 2001 $2,689 $1,266 $-- $1,381 $2,574
Year ended December 31, 2000 2,994 1,282 -- 1,587 2,689
Year ended December 31, 1999 2,799 1,937 -- 1,742 2,994
Reserve for Merger-Related Employee Separation Charges:
-------------------------------------------------------
Alliant Energy
--------------
Year ended December 31, 2001 $-- $-- $-- $-- $--
Year ended December 31, 2000 968 -- -- 968 --
Year ended December 31, 1999 5,712 -- -- 4,744 968
IESU
----
Year ended December 31, 2001 $-- $-- $-- $-- $--
Year ended December 31, 2000 678 -- -- 678 --
Year ended December 31, 1999 1,893 -- -- 1,215 678
WP&L
----
Year ended December 31, 2001 $-- $-- $-- $-- $--
Year ended December 31, 2000 -- -- -- -- --
Year ended December 31, 1999 766 -- -- 766 --
(1) Accumulated provision for uncollectible accounts: In 2001, WP&L
established a provision of $1.5 million (charged to Regulatory Assets) and
Resources acquired SmartEnergy, Inc. and assumed a provision of $0.9
million. In 2000, Alliant Energy acquired EUA Cogenex Corporation and
assumed a provision of $1.6 million.
(2) Deductions are of the nature for which the reserves were created. In
the case of the accumulated provision for uncollectible accounts,
deductions from this reserve are reduced by recoveries of amounts
previously written off.
146
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 25th day
of March 2002.
ALLIANT ENERGY CORPORATION
By: /s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 25th day of March 2002.
/s/ Erroll B. Davis, Jr. Chairman, President, Chief Executive Officer and Director (Principal Executive Officer)
- -----------------------------
Erroll B. Davis, Jr.
/s/ Thomas M. Walker Executive Vice President and Chief Financial Officer (Principal Financial Officer)
- -----------------------------
Thomas M. Walker
/s/ John E. Kratchmer Corporate Controller and Chief Accounting Officer (Principal Accounting Officer)
- -----------------------------
John E. Kratchmer
/s/ Alan B. Arends Director /s/ David A. Perdue Director
- ----------------------------- --------------------------------
Alan B. Arends David A. Perdue
/s/ Jack B. Evans Director /s/ Judith D. Pyle Director
- ----------------------------- --------------------------------
Jack B. Evans Judith D. Pyle
/s/ Joyce L. Hanes Director /s/ Robert W. Schlutz Director
- ----------------------------- --------------------------------
Joyce L. Hanes Robert W. Schlutz
/s/ Lee Liu Director /s/ Wayne H. Stoppelmoor Director
- ----------------------------- --------------------------------
Lee Liu Wayne H. Stoppelmoor
/s/ Katharine C. Lyall Director /s/ Anthony R. Weiler Director
- ----------------------------- --------------------------------
Katharine C. Lyall Anthony R. Weiler
/s/ Singleton B. McAllister Director
- -----------------------------
Singleton B. McAllister
147
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 25th day
of March 2002.
INTERSTATE POWER AND LIGHT COMPANY
By: /s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 25th day of March 2002.
/s/ Erroll B. Davis, Jr. Chairman, Chief Executive Officer and Director (Principal Executive Officer)
- -----------------------------
Erroll B. Davis, Jr.
/s/ Thomas M. Walker Executive Vice President and Chief Financial Officer (Principal Financial Officer)
- -----------------------------
Thomas M. Walker
/s/ John E. Kratchmer Corporate Controller and Chief Accounting Officer (Principal Accounting Officer)
- -----------------------------
John E. Kratchmer
/s/ Alan B. Arends Director /s/ David A. Perdue Director
- ----------------------------- --------------------------------
Alan B. Arends David A. Perdue
/s/ Jack B. Evans Director /s/ Judith D. Pyle Director
- ----------------------------- --------------------------------
Jack B. Evans Judith D. Pyle
/s/ Joyce L. Hanes Director /s/ Robert W. Schlutz Director
- ----------------------------- --------------------------------
Joyce L. Hanes Robert W. Schlutz
/s/ Lee Liu Director /s/ Wayne H. Stoppelmoor Director
- ----------------------------- --------------------------------
Lee Liu Wayne H. Stoppelmoor
/s/ Katharine C. Lyall Director /s/ Anthony R. Weiler Director
- ----------------------------- --------------------------------
Katharine C. Lyall Anthony R. Weiler
/s/ Singleton B. McAllister Director
- -----------------------------
Singleton B. McAllister
148
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 25th day
of March 2002.
WISCONSIN POWER AND LIGHT COMPANY
By: /s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 25th day of March 2002.
/s/ Erroll B. Davis, Jr. Chairman, Chief Executive Officer and Director (Principal Executive Officer)
- -----------------------------
Erroll B. Davis, Jr.
/s/ Thomas M. Walker Executive Vice President and Chief Financial Officer (Principal Financial Officer)
- -----------------------------
Thomas M. Walker
/s/ John E. Kratchmer Corporate Controller and Chief Accounting Officer (Principal Accounting Officer)
- -----------------------------
John E. Kratchmer
/s/ Alan B. Arends Director /s/ David A. Perdue Director
- ----------------------------- --------------------------------
Alan B. Arends David A. Perdue
/s/ Jack B. Evans Director /s/ Judith D. Pyle Director
- ----------------------------- --------------------------------
Jack B. Evans Judith D. Pyle
/s/ Joyce L. Hanes Director /s/ Robert W. Schlutz Director
- ----------------------------- --------------------------------
Joyce L. Hanes Robert W. Schlutz
/s/ Lee Liu Director /s/ Wayne H. Stoppelmoor Director
- ----------------------------- --------------------------------
Lee Liu Wayne H. Stoppelmoor
/s/ Katharine C. Lyall Director /s/ Anthony R. Weiler Director
- ----------------------------- --------------------------------
Katharine C. Lyall Anthony R. Weiler
/s/ Singleton B. McAllister Director
- -----------------------------
Singleton B. McAllister
149
EXHIBIT INDEX
Exhibit Description
------- -----------
10.22 Alliant Energy Deferred Compensation Plan for Directors, as amended and restated effective
January 1, 2000, amended November 14, 2001
21 Subsidiaries of Alliant Energy
23.1 Consent of Independent Public Accountants for Alliant Energy
23.2 Consent of Independent Petroleum Engineers
99.1 Alliant Energy Letter to the SEC Regarding Independent Public Accountants
99.2 IP&L Letter to the SEC Regarding Independent Public Accountants
99.3 WP&L Letter to the SEC Regarding Independent Public Accountants
150