Exhibit 99(c)
ITEM 8. FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareowners of Alliant Energy Corporation:
We have audited the accompanying consolidated balance sheets and statements
of capitalization of Alliant Energy Corporation and subsidiaries (the
"Company") as of December 31, 2002 and 2001, and related consolidated
statements of income, cash flows and changes in common equity for each of the
three years in the period ended December 31, 2002. Our audit also included
the supplemental schedule listed in Exhibit 99(d). These financial
statements and the supplemental schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the supplemental schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
2002 and 2001, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America.
Also, in our opinion, such supplemental schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
As discussed in Note 10 to the consolidated financial statements, on July 1,
2000, the Company changed its method of accounting for derivative instruments to
adopt Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended ("SFAS 133"), and
on January 1, 2001, the Company's equity method investees changed their
method of accounting for derivative instruments to adopt SFAS 133.
As discussed in Note 10 to the consolidated financial statements, in 2003 the
Company adopted EITF Issue 02-3, "Issues Involved in Accounting for
Derivative Contracts Held for Trading Purposes and Contracts Involved in
Energy Trading and Risk Management Activities," that required energy trading
contracts to be reported net in the income statement for all periods
presented.
/s/ DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
March 18, 2003
(June 3, 2003 as to the classification of SmartEnergy as discontinued
operations described in Notes 1 and 16 and the reclassification of energy
trading revenues to a net basis of reporting described in Notes 1 and 10)
22
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
Operating revenues:
Electric utility $1,752,534 $1,756,556 $1,648,036
Gas utility 393,986 487,877 414,948
Non-regulated and other 291,822 325,072 207,991
----------------- ----------------- -----------------
2,438,342 2,569,505 2,270,975
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 303,625 310,689 288,621
Purchased power 362,501 403,166 294,818
Cost of utility gas sold 248,994 360,911 278,734
Other operation and maintenance 777,938 772,842 678,277
Depreciation and amortization 309,589 302,377 296,732
Taxes other than income taxes 103,865 102,136 97,823
----------------- ----------------- -----------------
2,106,512 2,252,121 1,935,005
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Operating income 331,830 317,384 335,970
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 186,527 185,599 168,149
Interest income from loans to discontinued operations, net (16,923) (10,041) (7,195)
Equity (income) loss from unconsolidated investments 12,825 (18,799) (19,468)
Allowance for funds used during construction (7,696) (11,144) (8,761)
Preferred dividend requirements of subsidiaries 6,172 6,720 6,713
Impairment of available-for-sale securities of McLeodUSA Inc. 27,218 - -
Gain on reclassification of investment - - (321,349)
Miscellaneous, net (6,150) (14,933) (39,214)
----------------- ----------------- -----------------
201,973 137,402 (221,125)
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 129,857 179,982 557,095
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Income taxes 42,401 51,823 226,180
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 87,456 128,159 330,915
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Income from discontinued operations, net of tax (Note 16) 19,425 57,071 51,039
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of changes in
accounting principle, net of tax 106,881 185,230 381,954
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting principle, net of tax - (12,868) 16,708
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $106,881 $172,362 $398,662
================= ================= =================
- ---------------------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding (basic) 90,897 80,498 79,003
================= ================= =================
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings per average common share (basic):
Income from continuing operations $0.97 $1.59 $4.19
Income from discontinued operations 0.21 0.71 0.65
Cumulative effect of changes in accounting principle - (0.16) 0.21
----------------- ----------------- -----------------
Net income $1.18 $2.14 $5.05
================= ================= =================
- ---------------------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding (diluted) 90,959 80,636 79,193
================= ================= =================
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings per average common share (diluted):
Income from continuing operations $0.97 $1.59 $4.18
Income from discontinued operations 0.21 0.71 0.64
Cumulative effect of changes in accounting principle - (0.16) 0.21
----------------- ----------------- -----------------
Net income $1.18 $2.14 $5.03
================= ================= =================
- ---------------------------------------------------------------------------------------------------------------------------------
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.
23
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 2002 2001
- -------------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Utility:
Electric plant in service $5,295,381 $5,123,781
Gas plant in service 613,122 597,494
Other plant in service 530,456 517,938
Accumulated depreciation (3,573,407) (3,374,867)
----------------- -----------------
Net plant 2,865,552 2,864,346
Construction work in progress 263,096 111,069
Other, net 68,340 62,194
----------------- -----------------
Total utility 3,196,988 3,037,609
----------------- -----------------
Non-regulated and other, net:
International 171,179 157,743
Non-regulated generation 156,699 60,411
Integrated Services 73,983 79,202
Investments 54,303 56,647
Corporate Services and other 75,282 49,071
----------------- -----------------
Total non-regulated and other 531,446 403,074
----------------- -----------------
3,728,434 3,440,683
----------------- -----------------
- -------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 62,859 67,886
Restricted cash 9,610 34,386
Accounts receivable:
Customer, less allowance for doubtful accounts of $4,364 and $7,186 69,413 36,112
Unbilled utility revenues 50,624 71,388
Other, less allowance for doubtful accounts of $845 and $319 60,107 72,761
Income tax refunds receivable 97,469 25,401
Production fuel, at average cost 63,126 54,707
Materials and supplies, at average cost 58,603 54,401
Gas stored underground, at average cost 62,797 57,114
Regulatory assets 46,076 19,632
Assets of discontinued operations (Note 16) 969,291 564,841
Other 74,314 61,511
----------------- -----------------
1,624,289 1,120,140
----------------- -----------------
- -------------------------------------------------------------------------------------------------------------------
Investments:
Investments in unconsolidated foreign entities 373,816 508,145
Nuclear decommissioning trust funds 344,892 332,953
Investment in ATC and other 217,992 243,804
----------------- -----------------
936,700 1,084,902
----------------- -----------------
- -------------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 302,365 241,973
Deferred charges and other 409,607 350,227
----------------- -----------------
711,972 592,200
----------------- -----------------
- -------------------------------------------------------------------------------------------------------------------
Total assets $7,001,395 $6,237,925
================= =================
- -------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
24
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
December 31,
CAPITALIZATION AND LIABILITIES 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Capitalization (See Consolidated Statements of Capitalization):
Common stock - $0.01 par value - authorized 200,000,000 shares;
outstanding 92,304,220 and 89,682,334 shares, respectively $923 $897
Additional paid-in capital 1,293,919 1,239,793
Retained earnings 758,187 832,293
Accumulated other comprehensive loss (209,943) (152,434)
Shares in deferred compensation trust - 239,467 and 71,958 shares
at an average cost of $28.80 and $30.68 per share, respectively (6,896) (2,208)
-------------------- --------------------
Total common equity 1,836,190 1,918,341
-------------------- --------------------
Cumulative preferred stock of subsidiaries, net 205,063 113,953
Long-term debt (excluding current portion) 2,609,803 2,429,941
-------------------- --------------------
4,651,056 4,462,235
-------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 46,591 10,506
Variable rate demand bonds 55,100 55,100
Commercial paper 195,500 68,389
Other short-term borrowings 113,721 84,318
Accounts payable 282,855 218,778
Accrued taxes 105,521 86,757
Liabilities of discontinued operations (Note 16) 138,251 64,961
Other 184,771 167,644
-------------------- --------------------
1,122,310 756,453
-------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 630,625 613,491
Accumulated deferred investment tax credits 54,375 59,398
Pension and other benefit obligations 181,010 96,496
Environmental liabilities 48,730 45,144
Other 269,864 161,597
-------------------- --------------------
1,184,604 976,126
-------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Minority interest 43,425 43,111
-------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 11)
- ---------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $7,001,395 $6,237,925
==================== ====================
- ---------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
25
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $106,881 $172,362 $398,662
Adjustments to reconcile net income to net cash flows from operating activities:
Income from discontinued operations, net of tax (19,425) (57,071) (51,039)
Depreciation and amortization 309,589 302,377 296,732
Other amortizations 51,567 52,724 63,214
Deferred tax expense (benefit) and investment tax (credit) 13,192 (19,937) 111,103
Losses (gains) on disposition of assets, net 123 (4,446) (11,780)
Equity loss (income) from unconsolidated investments, net 12,825 (18,799) (19,468)
Distributions from equity method investments 21,671 16,961 7,389
Non-cash valuation charges 59,463 33,706 2,897
Cumulative effect of changes in accounting principle, net of tax - 12,868 (16,708)
Gain on reclassification of investment - - (321,349)
Other (29,581) (7,753) (2,922)
Other changes in assets and liabilities:
Accounts receivable 7,424 88,567 (133,776)
Income tax refunds receivable (72,067) (5,576) (5,917)
Gas stored underground (5,683) (15,755) (18,208)
Accounts payable 37,997 (55,872) 96,012
Accrued taxes 18,764 11,392 3,392
Manufactured gas plants insurance refunds - (21,541) -
Other 42,598 (50,861) (5,144)
----------------- ----------------- -----------------
Net cash flows from operating activities 555,338 433,346 393,090
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Common stock dividends (180,987) (158,231) (157,964)
Proceeds from issuance of common stock 56,066 288,553 1,069
Proceeds from issuance of preferred stock of subsidiary 144,602 - -
Redemption of preferred stock of subsidiary (56,389) - -
Net change in Resources' credit facility (383,610) 63,110 181,652
Proceeds from issuance of exchangeable senior notes - - 402,500
Proceeds from issuance of other long-term debt 300,023 513,530 107,747
Reductions in other long-term debt (20,818) (145,359) (53,572)
Net change in commercial paper and other short-term borrowings 200,145 (320,449) 147,277
Net change in loans to discontinued operations 37,467 (49,006) (87,112)
Other (24,262) (31,073) (28,534)
----------------- ----------------- -----------------
Net cash flows from financing activities 72,237 161,075 513,063
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities (404,736) (340,789) (304,656)
Non-regulated businesses (218,242) (332,183) (529,675)
Corporate Services and other (33,774) (40,019) (11,123)
Nuclear decommissioning trust funds (22,923) (22,100) (22,100)
Proceeds from formation of ATC and other asset dispositions 27,643 107,934 30,890
Other 19,430 (27,404) (32,589)
----------------- ----------------- -----------------
Net cash flows used for investing activities (632,602) (654,561) (869,253)
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (5,027) (60,140) 36,900
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 67,886 128,026 91,126
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $62,859 $67,886 $128,026
================= ================= =================
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid during the period for:
Interest $184,135 $180,351 $158,850
================= ================= =================
Income taxes, net of refunds $30,649 $70,895 $117,226
================= ================= =================
Noncash investing and financing activities:
Capital lease obligations incurred and other $19,101 $19,967 $20,419
================= ================= =================
- -----------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
26
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
2002 2001
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Common equity $1,836,190 $1,918,341
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net (Note 7(b)) 205,063 113,953
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------
Long-term debt:
First Mortgage Bonds:
7.75%, due 2004 62,000 62,000
1.85% variable rate at December 31, 2002 to 7.6% fixed rate, due 2005 88,000 88,000
7-1/4% to 8%, due 2007 52,450 52,450
1.6% variable rate at December 31, 2002, due 2014 8,500 8,500
1.85% to 2.1% variable rate at December 31, 2002, due 2015 30,600 30,600
8-5/8%, due 2021 20,000 20,000
7-5/8%, due 2023 94,000 94,000
8.6%, due 2027 70,000 70,000
----------------- -----------------
425,550 425,550
Collateral Trust Bonds:
7.25%, due 2006 60,000 60,000
6-7/8%, due 2007 55,000 55,000
6%, due 2008 50,000 50,000
5.5% to 7%, due 2023 69,400 69,400
----------------- -----------------
234,400 234,400
Pollution Control Revenue Bonds:
5.75% to 6.35%, partially retired in 2002, due 2003 to 2012 14,930 15,490
2.8% variable rate at December 31, 2002 to 6.35% fixed rate, due 2003 to 2023 10,100 10,100
4.05% to 4.30% through 2004 fixed/variable rate, due 2005 to 2023 25,900 25,900
----------------- -----------------
50,930 51,490
Other long-term debt:
Senior notes, 9.75%, due 2013 300,000 -
Senior notes, 7%, due 2011 300,000 300,000
Senior notes, 7.375%, due 2009 250,000 250,000
Senior notes, 8.59%, due 2004 24,000 24,000
Exchangeable senior notes, 7.25% through February 2003, 2.5% thereafter, due 2030 402,500 402,500
Senior debentures, 6-5/8% to 6-3/4%, due 2009 to 2011 335,000 335,000
Debentures, 5.7% to 7-5/8%, due 2007 to 2010 265,000 265,000
Whiting credit facility, 3.63% at December 31, 2002, due 2005 185,000 -
Subordinated deferrable interest debentures, 7-7/8%, due 2025 50,000 50,000
Multifamily housing revenue bonds, 1.75% variable rate at December 31, 2002, due 2036 34,075 34,075
Multifamily housing revenue bonds, 7% to 7.55%, due 2003 to 2024 4,755 4,841
Resources' credit facility, 3% to 3.45% at December 31, 2001, retired in 2002 - 383,610
Other, 1% to 11.34%, due 2003 to 2045 223,841 88,814
----------------- -----------------
3,085,051 2,849,280
----------------- -----------------
Less:
Current maturities (46,591) (10,506)
Variable rate demand bonds (55,100) (55,100)
Unamortized debt discount, net (373,557) (353,733)
----------------- -----------------
Total long-term debt (excluding current portion) 2,609,803 2,429,941
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------
Total capitalization $4,651,056 $4,462,235
================= =================
- --------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
27
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)
2000:
Beginning balance (a) $790 $942,408 $577,464 $634,903 $- $2,155,565
Net income 398,662 398,662
Unrealized holding losses on securities, 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 on derivatives due to cumulative
effect of a change in accounting principle,
net of tax of ($4,693) (6,582) (6,582)
Other unrealized holding losses on derivatives, 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 on securities, net of tax of ($240,579) (343,285) (343,285)
Less: reclassification adjustment for gains
included in net income, net of tax of $-- 259 259
---------- -------------
Net unrealized losses on securities (343,544) (343,544)
---------- -------------
Foreign currency translation adjustments (66,830) (66,830)
---------- -------------
Minimum pension liability adjustments, net of tax of ($11,022) (16,378) (16,378)
---------- -------------
Unrealized holding losses on derivatives, net of tax of ($1,569) (1,003) (1,003)
Less: reclassification adjustment for losses included
in net income, net of tax of ($2,078) (3,454) (3,454)
---------- -------------
Net unrealized gains on qualifying derivatives 2,451 2,451
---------- -------------
Total comprehensive loss (251,939)
Common stock dividends (158,231) (158,231)
Common stock issued 107 292,289 (1,357) 291,039
----------- ----------- --------- ---------- ---------- -------------
Ending balance 897 1,239,793 832,293 (152,434) (2,208) 1,918,341
2002:
Net income 106,881 106,881
Unrealized holding losses on securities, net of tax of ($8,544) (11,069) (11,069)
Less: reclassification adjustment for losses
included in net income, net of tax of ($14,393) (23,146) (23,146)
---------- -------------
Net unrealized gains on securities 12,077 12,077
---------- -------------
Foreign currency translation adjustments, net of tax (37,785) (37,785)
---------- -------------
Minimum pension liability adjustments, net of tax of ($18,874) (27,226) (27,226)
---------- -------------
Unrealized holding losses on derivatives, net of tax of ($2,765) (2,671) (2,671)
Less: reclassification adjustment for gains
included in net income, net of tax of $1,658 1,904 1,904
---------- -------------
Net unrealized losses on qualifying derivatives (4,575) (4,575)
---------- -------------
Total comprehensive income 49,372
Common stock dividends (180,987) (180,987)
Common stock issued 26 58,338 (4,688) 53,676
Redemption of preferred stock of subsidiary (4,212) (4,212)
----------- ----------- --------- ---------- ---------- -------------
Ending balance $923 $1,293,919 $758,187 ($209,943) ($6,896) $1,836,190
=========== =========== ========= ========== ========== =============
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Accumulated other comprehensive income (loss) at December 31, 1999 consisted of $644,481 of net unrealized gains on securities
and ($9,578) of foreign currency translation adjustments.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
28
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 Jan. 1, 2002, IPC merged
with and into IESU and IESU changed its name to IP&L. Since IPC and IESU
were both wholly-owned operating subsidiaries of Alliant Energy, the
transaction had no impact on the consolidated financial statements. IP&L and
WP&L are utility subsidiaries that are engaged principally in the generation,
transmission, distribution and sale of electric energy; the purchase,
distribution, transportation and sale of natural gas; and the provision of
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, Non-regulated
Generation, Integrated Services, Investments 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. Alliant Energy is, however,
currently in the process of selling its investments in Australia. Non-regulated
Generation intends to build or acquire a portfolio of competitive electric
generating assets in select business areas of the U.S. Integrated Services
provides a wide range of energy and environmental services for commercial,
industrial, institutional, educational and governmental customers. Investments
includes ownership of an oil and gas production company, transportation
companies, affordable-housing properties and various other investments. Alliant
Energy is, however, currently in the process of selling its oil and gas and
affordable housing businesses. Energy Technologies invests in leading-edge
energy technologies, such as microturbines, fuel cells, solar concepts and
wind turbines. Mass Marketing has interests in energy marketing businesses.
In January 2003, Alliant Energy committed to a plan to sell SmartEnergy, an
internet-based energy retailer, and Alliant Energy is in the process of
disbanding its Mass Marketing business unit. Corporate Services is the
subsidiary formed to provide administrative services to Alliant Energy and
its subsidiaries as required under PUHCA.
At Dec. 31, 2002, the assets and liabilities of Alliant Energy's oil and gas
(Whiting), Australian (including Southern Hydro), affordable housing and
SmartEnergy businesses were classified as held for sale. The operating
results for these non-regulated businesses for all periods presented have
been separately classified and reported as discontinued operations in Alliant
Energy's Consolidated Financial Statements and Notes to Consolidated
Financial Statements. Refer to Note 16 for additional information.
The consolidated financial statements reflect investments in controlled
subsidiaries on a consolidated basis. All significant intercompany balances
and transactions, other than certain energy-related transactions affecting
the utility subsidiaries, have been eliminated from the consolidated
financial statements. Such energy-related transactions not eliminated are
made at prices that approximate market value and the associated costs are
recoverable from customers through the rate making process. The consolidated
financial statements are prepared in conformity with GAAP, which give
recognition to the rate making and accounting practices of FERC and state
commissions having regulatory jurisdiction. The preparation of the
consolidated financial statements requires management to make estimates and
assumptions that affect: a) the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the
financial statements; and b) the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Certain prior period amounts have been reclassified on a basis
consistent with the current year presentation.
Unconsolidated investments for which Alliant Energy has at least a 20%
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) loss 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 the investee's other comprehensive income
(loss), which is included in "Accumulated other comprehensive loss" on the
Consolidated Balance Sheets. Investments that do not meet the criteria for
consolidation or the equity method of accounting are accounted for under the
cost method. Refer to Note 9 for discussion of Alliant Energy's cost method
investments that are marked-to-market in accordance with SFAS 115.
29
(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.
(c) Regulatory Assets and Liabilities - 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 credits allowed in the rate making process in different
periods than for non-regulated entities. These are deferred as regulatory
assets or accrued as regulatory liabilities and are recognized in the
Consolidated Statements of Income at the time they are reflected in rates.
As of Dec. 31, 2002, IP&L and WP&L had approximately $7 million and $6
million, respectively, of regulatory assets that were not earning returns.
At Dec. 31, 2002 and 2001, regulatory assets and liabilities were comprised
of the following items (in millions):
Regulatory Assets Regulatory Liabilities
----------------------- -------------------------
2002 2001 2002 2001
---------- --------- ----------- ----------
Tax-related (Note 1(d)) $177.6 $115.3 $83.8 $15.1
Environmental-related 64.9 63.1 5.1 5.2
Energy efficiency program costs 46.7 39.9 -- --
Other 59.2 43.3 22.3 11.4
---------- --------- ----------- ----------
$348.4 $261.6 $111.2 $31.7
========== ========= =========== ==========
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 GAAP for
continued accounting as regulatory assets during such recovery period. In
addition, each utility subsidiary would be required to determine any
impairment of other assets and write-down such assets to their fair value.
(d) Income Taxes - Alliant Energy is subject to the provisions of SFAS 109,
"Accounting for Income Taxes," and follows the liability method of accounting
for deferred income taxes, which requires the establishment of deferred tax
assets and liabilities, as appropriate, for all temporary differences between
the tax basis of assets and liabilities and the amounts reported in the
consolidated financial statements. Deferred taxes are recorded using
currently enacted tax rates.
Except as noted below, income tax expense includes provisions for deferred
taxes to reflect the tax effects of temporary differences between the time
when certain costs are recorded in the accounts and when they are deducted
for tax return purposes. As temporary differences reverse, the related
accumulated deferred income taxes are reversed to income. Investment tax
credits have been deferred and are subsequently credited to income over the
average lives of the related property. Other tax credits reduce income tax
expense in the year claimed and are generally related to nonconventional fuel
and research and development.
Consistent with Iowa rate making practices for IP&L, deferred tax expense is
not recorded for certain temporary differences (primarily related to utility
property, plant and equipment). As the deferred taxes become payable (over
periods exceeding 30 years for some generating plant differences) they are
recovered through rates. Accordingly, IP&L has recorded deferred tax
liabilities and regulatory assets for certain temporary differences, as
identified in Note 1(c). In Wisconsin, the PSCW has allowed rate recovery of
deferred taxes on all temporary differences since August 1991. WP&L
established a regulatory asset associated with those temporary differences
occurring prior to August 1991 that will be recovered in future rates through
2007.
(e) Common Shares Outstanding - A reconciliation of the weighted average
common shares outstanding used in the basic and diluted earnings per share
calculation was as follows:
Weighted average common shares outstanding: 2002 2001 2000
-------------- ------------- -------------
Basic earnings per share calculation 90,896,885 80,497,823 79,002,643
Effect of dilutive securities 62,177 138,006 190,134
-------------- ------------- -------------
Diluted earnings per share calculation 90,959,062 80,635,829 79,192,777
============== ============= =============
30
In 2002, 2001 and 2000, 3,338,978, 1,501,854, and 1,358,597 options,
respectively, to purchase shares of common stock, with average exercise
prices of $29.67, $31.08, and $30.27, respectively, were excluded from the
calculation of diluted earnings per share as the exercise prices were greater
than the average market price.
(f) Temporary Cash Investments and Restricted Cash - Temporary cash
investments are stated at cost, which approximates market value, and are
considered cash equivalents for the Consolidated Balance Sheets and the
Consolidated Statements of Cash Flows. These investments consist of
short-term liquid investments that have maturities of less than 90 days from
the date of acquisition. At Dec. 31, 2002 and 2001, restricted cash was
primarily related to borrowing requirements for the construction of various
power plants in China.
(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:
IP&L WP&L
--------------------------------- ---------------------------------
2002 2001 2000 2002 2001 2000
---------- ----------- ---------- ---------- ----------- ----------
Electric 3.4% 3.5% 3.5% 3.6% 3.7% 3.6%
Gas 2.9% 3.6% 3.5% 4.1% 4.1% 4.1%
(h) Property, Plant and Equipment - Utility plant (other than acquisition
adjustments) is recorded at original cost, which includes overhead,
administrative costs and AFUDC. At Dec. 31, 2002 and 2001, IP&L had $22.0
million and $23.2 million, respectively, of acquisition adjustments, net of
accumulated amortization, included in utility plant ($4.9 million and $5.2
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:
2002 2001 2000
------------ ----------- -----------
IP&L 6.9% 7.7% 6.6%
WP&L 2.6% 7.9% 10.8%
Non-regulated property, plant and equipment is recorded at original cost.
The majority of the non-regulated property, plant and equipment is
depreciated using the straight-line method over periods ranging from five to
20 years. Upon retirement or sale of property and equipment, the cost and
related accumulated depreciation are removed from the accounts and any gain
or loss is included in "Miscellaneous, net" in the Consolidated Statements of
Income. Ordinary retirements of utility plant, including removal costs less
salvage value, are charged to accumulated depreciation upon removal from
utility plant accounts and no gain or loss is recognized.
(i) Operating Revenues - Revenues from IP&L and WP&L are primarily from the
sale and delivery of electricity and natural gas and are recorded under the
accrual method of accounting and recognized upon delivery. Revenues from
Alliant Energy's non-regulated businesses are primarily from the sale of
energy or services and are recognized based on output delivered or services
provided as specified under contract terms. Alliant Energy accrues revenues
for services rendered but unbilled at month-end. In 2000, Alliant Energy
recorded an increase of $10 million at WP&L in the estimate of utility
services rendered but unbilled at month-end due to the implementation of
refined estimation processes. Revenues and expenses from non-regulated gas
marketing contracts that are designated as trading are reported on a net
basis in the Consolidated Statements of Income.
(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 regulatory asset or liability,
pending automatic reflection in future billings to customers. At IP&L,
purchased-power capacity costs are not recovered from electric customers
through EACs. Recovery of these costs must be addressed in base rates in a
formal rate proceeding.
31
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 3% higher than the estimated
costs used to establish rates. Any collections in excess of costs incurred
will be refunded, with interest. Accordingly, WP&L has established a reserve
due to overcollection of past fuel and purchased-power costs and expects to
refund such amount in 2003. WP&L has a gas performance incentive which
includes a sharing mechanism whereby 50% of all gains and losses relative to
current commodity prices, as well as other benchmarks, are retained by WP&L,
with the remainder refunded to or recovered from customers.
(k) Nuclear Refueling Outage Costs - 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 most recently 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. Refer to Note 3 for additional information on DAEC's nuclear
fuel lease.
(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,
including gains and losses on intercompany foreign currency transactions
which are long-term in nature, and which Alliant Energy does not intend to
settle in the foreseeable future, have been recorded in "Accumulated other
comprehensive loss" on Alliant Energy's Consolidated Balance Sheets.
(n) Derivative Financial Instruments - Alliant Energy uses derivative
financial instruments to hedge exposures to fluctuations in interest rates,
certain electric and gas 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. The majority of
Alliant Energy's derivative transactions are in its regulated domestic
utility business and based on the fuel and natural gas cost recovery
mechanisms in place, as well as other specific regulatory authorizations,
changes in fair market values of such derivatives generally have no impact on
Alliant Energy's results of operations. 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. 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.
(o) Accounting for Stock Options - At Dec. 31, 2002, Alliant Energy had two
stock-based incentive compensation plans, which are described more fully in
Note 6(b). Alliant Energy accounts for stock options issued under these
plans under the recognition and measurement principles of APB 25, "Accounting
for Stock Issued to Employees." No stock-based compensation cost is
reflected in net income in Alliant Energy's Consolidated Statements of
Income, as all options granted under those plans had an exercise price equal
to the quoted market price of the underlying common stock on the date of
grant. Alliant Energy adopted the disclosure provisions of SFAS 148
32
"Accounting for Stock-Based Compensation - Transition and Disclosure, an
amendment of SFAS 123," effective for financial statements for fiscal years
ending after Dec. 15, 2002. The effect on net income and EPS if Alliant
Energy had applied the fair value recognition provisions of SFAS 123,
"Accounting for Stock-Based Compensation," to the stock options issued under
these plans was as follows (in thousands):
2002 2001 2000
------------- ------------- -------------
Net income, as reported $106,881 $172,362 $398,662
Less: stock-based compensation expense, net of tax 2,541 2,446 1,284
------------- ------------- -------------
Pro forma net income $104,340 $169,916 $397,378
============= ============= =============
EPS (basic):
As reported $1.18 $2.14 $5.05
Pro forma $1.15 $2.11 $5.03
EPS (diluted):
As reported $1.18 $2.14 $5.03
Pro forma $1.15 $2.11 $5.02
(p) Pension Plan - For the defined benefit pension plan sponsored by
Corporate Services, Alliant Energy allocates pension costs and contributions
to IP&L, WP&L, Resources and the parent company based on labor costs of plan
participants and any additional minimum pension liability based on each
group's funded status.
(q) Asset Valuations - Long-lived assets, excluding goodwill and regulatory
assets, are reviewed for possible impairment whenever events or changes in
circumstances indicate the carrying value of the assets may not be
recoverable. Impairment is indicated if the carrying value of an asset
exceeds its undiscounted future cash flows. An impairment charge is
recognized equal to the amount the carrying value exceeds the asset's fair
value. The fair value is determined by the use of quoted market prices,
appraisals, or the use of other valuation techniques such as expected
discounted future cash flows.
Goodwill represents the excess of the purchase price over the fair value of
the identifiable net tangible and intangible assets acquired in a business
combination. Effective January 1, 2002 with the adoption of SFAS 142,
"Goodwill and Other Intangible Assets," goodwill is required to be evaluated
for impairment at least annually and more frequently if indicators of
impairment exist. If the fair value of a reporting unit is less than its
carrying value, including goodwill, an impairment charge may be necessary.
The fair value of reporting units is determined by utilizing a combination of
market value indicators and expected discounted future cash flows. Refer to
Note 14 for additional information.
If events or circumstances indicate the carrying value of investments
accounted for under the equity method of accounting may not be recoverable,
potential impairment is assessed by comparing the future anticipated cash
flows from these investments to their carrying values. The estimated fair
value less cost to sell of assets held for sale are compared each reporting
period to their carrying values. Impairment charges are recorded for equity
method investments and assets held for sale if the carrying value of such
asset exceeds the future anticipated cash flows or the estimated fair value
less cost to sell, respectively.
(2) UTILITY RATE MATTERS
In 2002, IP&L filed electric and gas rate cases in Iowa. Interim rates,
subject to refund, were granted for $15 million and $17 million for electric
and gas, respectively. IP&L expects final rates to be in place in June 2003
for the electric case and July 2003 for the gas case. Although it is
possible that final rates could be lower than interim rates, IP&L does not
believe this to be probable and therefore has not recorded any reserves
related to potential refund obligations.
In 2002 and 2001, WP&L had an electric fuel cost recovery mechanism that
required WP&L to refund any overcollection of fuel and purchased-power
costs. WP&L has recorded the necessary reserve for refunds at Dec. 31, 2002
and 2001. In 2002, WP&L filed a rate case with FERC related to its electric
wholesale customers. An interim rate increase, subject to refund, of $6
million annually was granted effective April 2002. The case was subsequently
settled with final rates of $3 million annually. At Dec. 31, 2002, WP&L
recorded a reserve for the difference between interim and final rates.
33
(3) LEASES
IP&L has a capital lease covering its 70% undivided interest in nuclear fuel
purchased for DAEC. Annual nuclear fuel lease expenses (included in
"Electric and steam production fuels" in the Consolidated Statements of
Income) for 2002, 2001 and 2000 were $15.5 million, $14.1 million and $16.0
million, respectively. Alliant Energy's operating lease rental expenses,
which include certain purchased-power agreements, for 2002, 2001 and 2000
were $44.5 million, $40.2 million and $24.5 million, respectively. The
purchased-power agreements total below includes $463 million and $78 million,
respectively, related to a new plant (Riverside) currently under development
and the RockGen plant, both in Wisconsin. The Riverside plant is expected to
be placed in-service in 2004. The synthetic leases relate to the financing
of the corporate headquarters, corporate aircraft, utility railcars and a
utility radio dispatch system that were not included on Alliant Energy's
Consolidated Balance Sheets. Alliant Energy has guaranteed the residual
value of its synthetic leases totaling $76 million in the aggregate. The
guarantees extend through the maturity of each respective underlying lease
with remaining terms up to 13 years. Residual value guarantees have been
included in the future minimum lease payments noted in the table below (in
millions):
2003 2004 2005 2006 2007 Thereafter Total
--------------------------------------------------------------------
Operating leases:
Certain purchased-power agreements $18.7 $51.8 $66.3 $67.6 $69.0 $308.6 $582.0
Synthetic leases 10.0 12.1 19.3 24.6 49.0 31.0 146.0
Other 15.8 11.8 8.9 6.0 5.2 44.2 91.9
--------------------------------------------------------------------
Total operating leases $44.5 $75.7 $94.5 $98.2 $123.2 $383.8 $819.9
====================================================================
Present
Less: value of net
amount minimum
representing capital lease
2003 2004 2005 2006 2007 Thereafter Total interest payments
------- -------- -------- ------- -------- ------------ -------- -------------- --------------
Capital leases $15.1 $15.8 $9.8 $35.5 $1.7 $1.2 $79.1 $9.3 $69.8
In January 2003, the FASB issued FIN 46 which addresses consolidation by
business enterprises of variable interest entities, commonly referred to as
"special purpose entities." FIN 46 requires consolidation where there is a
controlling financial interest in a variable interest entity or where the
variable interest entity does not have sufficient equity at risk to finance
its activities without additional subordinated financial support from other
parties. Alliant Energy will apply the provisions of FIN 46 prospectively
for all variable interest entities created after Jan. 31, 2003. For variable
interest entities created before Jan. 31, 2003, Alliant Energy will be
required to consolidate all variable interest entities in which it is the
primary beneficiary beginning in the third quarter of 2003. It is reasonably
possible the implementation of FIN 46 will require that certain variable
interest entities associated with these synthetic leases be included on
Alliant Energy's Consolidated Balance Sheets. Alliant Energy is in the
process of analyzing each synthetic lease in accordance with FIN 46. Alliant
Energy does not anticipate the adoption of FIN 46 will have a material impact
on its results of operations given it estimates the fair market value of the
underlying assets is not materially less than the remaining lease obligations
at Dec. 31, 2002.
(4) UTILITY ACCOUNTS RECEIVABLE
Utility customer accounts receivable, including unbilled revenues, arise
primarily from the sale of electricity and natural gas. At Dec. 31, 2002 and
2001, 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 utility
customer accounts receivable sale program whereby IP&L and WP&L may sell up
to a combined maximum amount of $250 million (there are no individual
subsidiary limits) of their respective accounts receivable to a third-party
financial institution on a limited recourse basis through wholly-owned and
consolidated variable interest 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 2006 and is
subject to annual renewal or renegotiation for a longer period thereafter.
Under terms of the agreement, the third-party financial institution purchases
the receivables initially for the face amount. On a monthly basis, this
sales price is adjusted, resulting in payments to the third-party financial
institution of an amount that varies based on interest rates and length of
time the sold receivables remain outstanding. Collections on sold
receivables are used to purchase additional receivables from the utility
subsidiaries.
34
At Dec. 31, 2002 and 2001, Alliant Energy had sold $202 million and $178
million of receivables, respectively. In 2002, 2001 and 2000, Alliant Energy
received $2.3 billion, $2.2 billion and $1.6 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 $4.2 million,
$7.9 million and $9.0 million in 2002, 2001 and 2000, respectively.
Alliant Energy and its utility subsidiaries account for the sale of accounts
receivable to the third-party financial institution as sales under SFAS 140,
"Accounting 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. Beginning
in the third quarter of 2003 under FIN 46, it is reasonably possible that
Alliant Energy could be considered the primary beneficiary given the current
structure of the variable interest entities related to the program, and could
be required to consolidate the operating results and associated assets and
liabilities of the variable interest entities in its financial statements.
Based on the receivables sold at Dec. 31, 2002, consolidation of the variable
interest entities would have resulted in an additional $202 million in
accounts receivable and related debt recorded on Alliant Energy's
Consolidated Balance Sheet. Alliant Energy is currently evaluating the
structure of its receivable sales program to determine if this structure can
be modified to qualify for off-balance sheet treatment under FIN 46.
(5) INCOME TAXES
The components of income taxes for Alliant Energy were as follows (in
millions):
2002 2001 2000
------------- ------------- -------------
Current tax expense:
Federal $21.7 $52.1 $92.1
State 21.6 16.2 24.0
Deferred tax expense (benefit):
Federal 20.8 (9.1) 97.6
State (2.5) (5.6) 18.0
Foreign tax expense 5.5 4.2 0.2
Amortization of investment tax credits (5.2) (5.2) (4.5)
Research and development tax credits (4.5) -- --
Nonconventional fuel credits (14.9) (0.5) (0.9)
Other tax credits (0.1) (0.3) (0.3)
------------- ------------- -------------
$42.4 $51.8 $226.2
============= ============= =============
Included in "Cumulative effect of changes in accounting principle, net of
tax" in the Consolidated Statements of Income for 2001 and 2000 was income tax
(benefit) expense 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 Jan. 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 from continuing
operations before income taxes and preferred dividend requirements of
subsidiaries.
2002 2001 2000
------------- ------------- --------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefits 8.5 5.5 6.6
Foreign operations 6.5 (0.7) --
Adjustment of prior period taxes 0.9 (11.4) (0.6)
Effect of rate making on property related differences 0.1 2.3 0.9
Research and development tax credits (3.3) -- --
Amortization of investment tax credits (3.8) (3.0) (1.0)
Nonconventional fuel credits (11.0) (0.3) (0.2)
Other items, net (1.7) 0.4 (0.6)
------------- ------------- --------------
Overall effective income tax rate 31.2% 27.8% 40.1%
============= ============= ==============
35
The accumulated deferred income tax (assets) and liabilities included on the
Consolidated Balance Sheets at Dec. 31 arise from the following temporary
differences (in millions):
2002 2001
------------- -------------
Property related $647.4 $548.8
Exchangeable senior notes 140.8 129.7
Decommissioning (33.1) (28.6)
Other (124.5) (36.4)
------------- -------------
$630.6 $613.5
============= =============
At Dec. 31, 2002, 2001 and 2000, Alliant Energy had not recorded U.S. tax
provisions of approximately $16.3 million, $6.8 million and $3.8 million,
respectively, relating to approximately $46.6 million, $19.5 million and
$10.9 million, respectively, of unremitted earnings from foreign investments
as these earnings are expected to be reinvested indefinitely.
U.S. and foreign sources of income (loss) from continuing operations before
income taxes were as follows (in millions):
2002 2001 2000
------------- ------------- ------------
U.S. sources $132.8 $159.0 $543.7
Foreign sources (2.9) 21.0 13.4
------------- ------------- ------------
Income from continuing operations before income taxes $129.9 $180.0 $557.1
============= ============= ============
(6) BENEFIT PLANS
(a) Pension Plans and Other Postretirement Benefits - Alliant Energy has
several non-contributory defined benefit pension plans that cover a
significant number 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 Sept. 30 were as follows:
Qualified Pension Benefits Other Postretirement Benefits
-------------------------------------- ------------------------------------
2002 2001 2000 2002 2001 2000
------------ ------------- ----------- ---------- ---------- -----------
Discount rate 6.75% 7.25% 8.00% 6.75% 7.25% 8.00%
Expected return on plan assets 9% 9% 9% 9% 9% 9%
Rate of compensation increase 3.5-4.5% 3.5-4.5% 3.5-4.5% 3.5% 3.5% 3.5%
Medical cost trend on covered charges:
Initial trend rate N/A N/A N/A 10.8% 12.0% 9.0%
Ultimate trend rate N/A N/A N/A 5% 5% 5%
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
------------------------------------ ----------------------------------
2002 2001 2000 2002 2001 2000
---------- ---------- -------- --------- --------- ---------
Service cost $12.9 $11.0 $11.1 $5.5 $4.0 $3.7
Interest cost 39.7 38.2 36.7 12.7 10.6 9.8
Expected return on plan assets (41.8) (48.5) (45.7) (5.5) (6.1) (5.3)
Amortization of:
Transition obligation (asset) (2.0) (2.4) (2.4) 3.7 3.7 3.9
Prior service cost 2.7 2.7 2.6 (0.3) (0.3) (0.3)
Actuarial loss (gain) 2.1 (1.5) (1.0) 0.5 (1.5) (1.9)
---------- ---------- -------- --------- --------- ---------
$13.6 ($0.5) $1.3 $16.6 $10.4 $9.9
========== ========== ======== ========= ========= =========
36
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 1% change in the medical trend
rates for 2002, holding all other assumptions constant, would have the
following effects (in millions):
1% Increase 1% Decrease
-------------- ---------------
Effect on total of service and interest cost components $1.9 ($1.7)
Effect on postretirement benefit obligation $19.4 ($17.3)
A reconciliation of the funded status of Alliant Energy's plans to the
amounts recognized on Alliant Energy's Consolidated Balance Sheets at Dec. 31
was as follows (in millions):
Qualified Pension Benefits Other Postretirement Benefits
----------------------------- --------------------------------
2002 2001 2002 2001
------------ ------------- ------------- --------------
Change in benefit obligation:
Net benefit obligation at beginning of year $553.3 $483.6 $174.5 $130.7
Service cost 12.9 11.0 5.5 4.0
Interest cost 39.7 38.2 12.7 10.6
Plan participants' contributions -- -- 1.8 1.9
Plan amendments 1.1 -- (0.9) --
Actuarial loss 33.0 56.6 34.3 40.7
Gross benefits paid (31.5) (36.1) (12.2) (13.4)
------------ ------------- ------------- --------------
Net benefit obligation at end of year 608.5 553.3 215.7 174.5
------------ ------------- ------------- --------------
Change in plan assets:
Fair value of plan assets at beginning of year 483.3 556.3 73.8 83.0
Actual return on plan assets (25.1) (36.9) (7.2) (6.8)
Employer contributions 40.0 -- 11.1 9.1
Plan participants' contributions -- -- 1.8 1.9
Gross benefits paid (31.5) (36.1) (12.2) (13.4)
------------ ------------- ------------- --------------
Fair value of plan assets at end of year 466.7 483.3 67.3 73.8
------------ ------------- ------------- --------------
Funded status at end of year (141.8) (70.0) (148.4) (100.7)
Unrecognized net actuarial loss 172.1 74.2 63.4 16.8
Unrecognized prior service cost 19.9 21.5 (0.9) (0.9)
Unrecognized net transition obligation (asset) (1.4) (3.3) 36.7 41.1
------------ ------------- ------------- --------------
Net amount recognized at end of year $48.8 $22.4 ($49.2) ($43.7)
============ ============= ============= ==============
Amounts recognized on the Consolidated
Balance Sheets consist of:
Prepaid benefit cost $70.4 $45.5 $2.3 $2.1
Accrued benefit cost (21.6) (23.1) (51.5) (45.8)
Additional minimum liability (90.0) (36.1) -- --
Intangible asset 16.5 8.7 -- --
Accumulated other comprehensive loss 73.5 27.4 -- --
------------ ------------- ------------- --------------
Net amount recognized at measurement date 48.8 22.4 (49.2) (43.7)
------------ ------------- ------------- --------------
Contributions paid after 9/30 and prior to 12/31 -- -- 4.0 2.5
------------ ------------- ------------- --------------
Net amount recognized at 12/31 $48.8 $22.4 ($45.2) ($41.2)
============ ============= ============= ==============
37
The benefit obligation and fair value of plan assets for the postretirement
welfare plans with benefit obligations in excess of plan assets were $213.9
million and $64.3 million, respectively, at Sept. 30, 2002 and $167.8 million
and $64.5 million, respectively, at Sept. 30, 2001. 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 $452.4 million, $418.8 million and $313.2 million,
respectively, at Sept. 30, 2002 and $293.9 million, $283.7 million and $225.7
million, respectively, at Sept. 30, 2001. Alliant Energy's net periodic
benefit cost is primarily included in "Other operation and maintenance" in
the Consolidated Statements of Income. For the various Alliant Energy
pension and postretirement plans, Alliant Energy common stock represented
less than 1% of total plan investments at Dec. 31, 2002 and 2001.
Alliant Energy sponsors several non-qualified pension plans that cover
certain current and former key employees. At both Dec. 31, 2002 and 2001,
the funded balances of such plans totaled approximately $4 million, none of
which consisted of Alliant Energy common stock. Alliant Energy's pension
benefit obligation under these plans was $38.2 million and $34.4 million at
Dec. 31, 2002 and 2001, respectively. Alliant Energy's pension expense under
these plans was $4.3 million, $3.4 million, and $3.6 million in 2002, 2001
and 2000, respectively.
Alliant Energy has various life insurance policies that cover certain key
employees and directors. At Dec. 31, 2002 and 2001, the cash surrender value
of these investments was $32 million and $30 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 Dec. 31,
2002 and 2001, the fair market value of the trusts totaled approximately $4.9
million and $2.2 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 $9.2
million, $8.2 million, and $8.1 million in 2002, 2001 and 2000,
respectively.
(b) Equity Incentive Plans - In 2002, Alliant Energy shareowners approved
the EIP that permits the grant of incentive stock options, non-qualified
stock options, stock appreciation rights, restricted stock, restricted stock
units, performance shares and performance units to key employees. At Dec.
31, 2002, non-qualified stock options were outstanding under this plan. The
maximum number of shares of Alliant Energy common stock that may be issued
under the plan is 4 million.
Alliant Energy also has an LTEIP that permits the grant of incentive stock
options, non-qualified stock options, restricted stock, performance shares
and performance units to key employees. At Dec. 31, 2002, non-qualified
stock options, restricted stock and performance shares were outstanding. The
maximum number of shares of Alliant Energy common stock that may be issued
under the plan is 3.8 million. This plan expires January 2004, at which time
no further grants may be made under this plan.
Options granted to date under the plans were granted at the quoted market
price of the shares on the date of grant, vest over three years and expire no
later than 10 years after the grant date. Options become fully vested upon
retirement and remain exercisable at any time prior to their expiration date,
or for three years after the effective date of the retirement, whichever
period is shorter. Participants' options 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:
2002 2001 2000
------------------------- ------------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------------------------- ------------------------- -----------------------
Outstanding at beginning of year 2,917,229 $30.03 2,265,862 $29.67 1,543,028 $30.32
Options granted 945,863 27.79 721,072 31.14 899,094 28.59
Options exercised -- -- (42,432) 29.87 (15,486) 30.03
Options forfeited (20,956) 29.41 (27,273) 30.07 (160,774) 29.90
-------------- ------------- ------------
Outstanding at end of year 3,842,136 29.48 2,917,229 30.03 2,265,862 29.67
============== ============= ============
Exercisable at end of year 2,242,187 29.93 1,593,047 29.94 962,073 30.12
38
The range of exercise prices for the options outstanding at Dec. 31, 2002 was
$27.50 to $31.56. The weighted-average remaining contractual life of
outstanding options at Dec. 31, 2002, 2001 and 2000 was 7.4 years, 7.7 years
and 8.3 years, respectively. The value of the options granted during the
year using the Black-Scholes pricing method was as follows:
2002 2001 2000
------------- ------------ ------------
Value of options $9.14 $4.30 $7.71
Volatility 40.6% 18.9% 32.7%
Risk free interest rate 5.0% 5.0% 5.7%
Expected life 10 years 10 years 10 years
Expected dividend yield 6.0% 6.6% 6.3%
At Dec. 31, 2002 and 2001, Alliant Energy had 1,745 and 61,137 shares of
restricted stock 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 $0.2 million, $0.6 million and $0.6 million in 2002, 2001 and
2000, 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 zero to
two, based on the performance criteria. Performance shares have an intrinsic
value equal to the quoted market price of a share on the date of grant.
Pursuant to APB 25, Alliant Energy accrues the plan expense over the
three-year period the services are performed and recognized (income) expense
of ($1.6) million, $2.4 million and $0.4 million in 2002, 2001 and 2000,
respectively.
(7) COMMON AND PREFERRED STOCK
(a) Common Stock - The number of shares of common stock issued by Alliant
Energy under its various stock plans was as follows:
2002 2001 2000
---------------- ---------------- ----------------
Beginning balance 89,682,334 79,010,114 78,984,014
Shares issued:
Public offering -- 9,775,000 --
Shareowner Direct Plan 1,877,032 668,379 5,666
401(k) Savings Plan 689,336 161,239 --
Equity incentive plans 55,518 67,602 20,434
---------------- ---------------- ----------------
Ending balance 92,304,220 89,682,334 79,010,114
================ ================ ================
In November 2001, Alliant Energy completed a public offering of its common
stock generating net proceeds of approximately $263 million which were used
to repay short-term debt. From January 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. In 2000, 5,666
shares of common stock were issued related to an adjustment of a prior
acquisition of oil and gas properties. At Dec. 31, 2002 and 2001, Alliant
Energy had a total of 6.8 million and 2.6 million shares, respectively,
available for issuance in the aggregate, pursuant to its Shareowner Direct
Plan, LTEIP, EIP and 401(k) Savings Plan.
Alliant Energy has a Shareowner Rights Plan whereby rights will be
exercisable only if a person or group acquires, or announces a tender offer
to acquire, 15% or more of Alliant Energy'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% 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% ownership threshold to not less than
10%.
Alliant Energy's utility subsidiaries each have dividend payment restrictions
based on their respective bond indentures, the terms of their outstanding
preferred stock and state regulatory limitations applicable to them. WP&L's
39
preferred stock restricts dividends to the extent that such dividend would
reduce the common stock equity ratio to less than 25%. In its September 2002
rate order, the PSCW stated it must approve the payment of dividends by WP&L
to Alliant Energy in excess of the level forecasted in the order ($62 million
annually) if such dividends would reduce WP&L's common equity ratio below
44.67% of total capitalization. In accordance with the IUB order authorizing
the IP&L merger, IP&L must inform the IUB if its common equity ratio falls
below 42% of total capitalization. As of Dec. 31, 2002, Alliant Energy's
utility subsidiaries were in compliance with all such dividend restrictions.
In 2002, 11 non-employee directors received 1,000 shares each of Alliant
Energy common stock through the Shareowner Direct Plan as part of the
directors' compensation program, for a total of approximately $337,000. In
2001, 14 non-employee directors received up to 1,000 shares each of Alliant
Energy common stock through the Shareowner Direct Plan, 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.
(b) Preferred Stock - In September 2002, IP&L redeemed all of its then
outstanding shares of preferred stock. In December 2002, IP&L issued six
million shares of preferred stock at $25.00 per share in a private
placement. IP&L used the net proceeds of approximately $145 million to repay
its short-term debt and for general corporate purposes, including to fund
capital expenditures and to repay other debt. The fair market value of
Alliant Energy's cumulative preferred stock of subsidiaries, based upon the
market yield of similar securities and quoted market prices, at Dec. 31, 2002
and 2001 was $198 million and $99 million, respectively. Information related
to the carrying value of Alliant Energy's cumulative preferred stock of
subsidiaries, net at Dec. 31 was as follows (in millions):
2002 2001
------------ -------------
Par/Stated Authorized Shares Mandatory
Value Shares Outstanding Series Redemption
----- ------ ----------- ------ ----------
$25 16,000,000 6,000,000 8.375% No $150.0 $--
$100 * 449,765 4.40% - 6.20% No 45.0 45.0
$25 * 599,460 6.50% No 15.0 15.0
$50 466,406 ** 366,406 4.30% - 6.10% No -- 18.3
$50 *** 216,381 4.36% - 7.76% No -- 10.8
$50 *** 545,000 6.40% $50 / share -- 27.3
------------ -------------
210.0 116.4
Less: unamortized expenses (4.9) (2.4)
------------ -------------
$205.1 $114.0
============ =============
* 3,750,000 authorized shares in total. ** Fully retired in 2002.
*** 2,000,000 authorized shares in total, fully retired in 2002.
(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.
Alliant Energy discontinued the use of its utility money pool in 2002 and
WP&L and IP&L are now meeting any short-term borrowing needs they have by
issuing commercial paper and borrowing on its bank lines of credit,
respectively. At Dec. 31, 2001, IP&L and WP&L had money pool borrowings of
$38.0 million and $90.8 million, respectively. Information regarding
short-term debt was as follows (dollars in millions):
2002 2001
---------------- -------------
At Dec. 31:
Commercial paper outstanding $195.5 $68.4
Discount rates on commercial paper 1.6-1.9% 2.4-3.2%
Bank facility borrowings $85.0 $--
Interest rates on bank facility borrowings 2.3-2.4% N/A
Short-term borrowings at foreign subsidiaries $28.7 $84.3
Interest rates on foreign short-term borrowings 5.3-6.9% 5.6-6.9%
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $337.9 $274.1
Average interest rates on short-term debt 2.7% 4.8%
40
(b) Long-Term Debt - The former IESU indentures securing its First Mortgage
and Collateral Trust Bonds constitute direct first mortgage liens and a
second lien while First Mortgage Bonds remain outstanding, respectively, upon
substantially all tangible public utility property of IP&L (excluding those
of the former IPC). WP&L's and the former IPC's First Mortgage Bonds are
secured by substantially all of their utility plant. IP&L, WP&L and
Resources also maintain indentures relating to the issuance of unsecured debt
securities.
In December 2002, Resources issued $300 million of 9.75% senior notes due
2013 in a private placement. The notes are unconditionally guaranteed by
Alliant Energy. Resources used the proceeds to repay short-term debt. In
November 2001, Resources issued $300 million of senior notes at a fixed
interest rate of 7%, due 2011. The notes are fully and unconditionally
guaranteed by Alliant Energy. Resources used the proceeds to repay other
Resources' debt. In March 2001, IP&L issued $200 million of senior unsecured
debentures at a fixed interest rate of 6-3/4%, due 2011. IP&L used the
proceeds to repay short- and long-term debt.
Debt maturities for 2003 to 2007 are $47 million, $106 million, $337 million,
$68 million and $225 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 Dec. 31, 2002 and 2001 was $2.7
billion and $2.5 billion, respectively. The fair market value, based upon
the market yield of similar securities and quoted market prices, at Dec. 31,
2002 and 2001 was $2.9 billion and $2.6 billion, respectively.
(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 IP&L and WP&L are subject to regulation, any
gains or losses related to the difference between the carrying amount and the
fair value of their financial instruments may not be realized by Alliant
Energy's shareowners. Information relating to various investments held by
Alliant Energy at Dec. 31 that are marked-to-market as a result of SFAS 115
were as follows (in millions):
2002 2001
---------------------------------- -----------------------------------
Unrealized Unrealized
Carrying/Fair Gains, Net of Carrying/Fair Gains/(Losses),
Value Tax Value Net of Tax
----------------- ---------------- ---------------- ------------------
Available-for-sale securities:
Nuclear decommissioning trust funds:
Debt securities $206 $9 $191 $3
Equity securities 139 13 142 42
Total 345 22 333 45
Investment in McLeod 2 -- 14 (9)
Various other investments 19 3 23 1
Trading securities:
Investment in McLeod 1 (a) 6 (a)
(a) Adjustments to the trading securities are reflected in earnings in the
"Miscellaneous, net" line in the Consolidated Statements of Income.
Nuclear Decommissioning Trust Funds - At Dec. 31, 2002, $114 million, $43
million and $49 million of the debt securities mature in 2003-2010, 2011-2020
and 2021-2049, respectively. The fair value of the nuclear decommissioning
trust funds was, as reported by the trustee, adjusted for the tax effect of
unrealized gains and losses. Net unrealized holding gains were recorded as
part of accumulated provision for depreciation of related plant assets. The
funds realized gains from the sales of securities of $10.4 million, $2.0
million and $5.0 million in 2002, 2001 and 2000, respectively (cost of the
investments based on specific identification was $111.1 million, $169.8
million and $213.4 million, respectively, and proceeds from the sales were
$121.5 million, $171.8 million and $218.4 million, respectively).
41
Investment in McLeod - Alliant Energy has investments in the common stock of
McLeod, a telecommunications company. In accordance with SFAS 115, the
carrying values of the investments are adjusted to estimated fair value based
upon McLeod's closing price at the end of each quarter. Changes in fair
value of investments designated as available-for-sale securities are reported
in other comprehensive income, and impact current earnings when gains or
losses are realized through sale or if a decline in value is determined to be
"other-than-temporary." Changes in fair value of investments designated as
trading securities are reflected in earnings in the "Miscellaneous, net" line
in the Consolidated Statements of Income.
Upon the adoption of SFAS 133 in 2000 for the embedded derivative related to
McLeod stock in Resources' exchangeable senior notes (refer to Note 10(a) for
additional information), Alliant Energy designated a portion of its McLeod
investments as trading securities. As result of this change in designation
to trading securities, in 2000, Alliant Energy reclassified $321.3 million of
unrealized appreciation ($187.3 million after-tax) from accumulated other
comprehensive income to net income. In 2000, Alliant Energy recognized
miscellaneous income of $23.8 million for pre-tax gains realized upon sales
of McLeod available-for-sale securities, for which the appreciation was
previously reflected in accumulated other comprehensive income.
On Jan. 31, 2002, McLeod filed a pre-negotiated plan of reorganization in a
Chapter 11 bankruptcy proceeding and the trading of McLeod's common stock was
suspended by Nasdaq. Consequently, Alliant Energy discontinued accounting
for its investment in McLeod under the provisions of SFAS 115 and reduced the
cost basis of its investments to the last quoted market price on Jan. 30,
2002. In June 2002, Alliant Energy received from McLeod under its plan of
reorganization an initial distribution of approximately 3.3 million shares of
new common stock and classified 0.9 million and 2.4 million shares (0.1
million shares were received by discontinued operations) as trading and
available-for-sale securities, respectively. With the receipt of the new
McLeod common shares and the resumption of trading on Nasdaq, Alliant Energy
resumed accounting for its McLeod investments under SFAS 115 and adjusted its
cost basis to the quoted market price on the date the shares were received.
As a result of these events, Alliant Energy recognized pre-tax impairment
charges in 2002 for available-for-sale securities totaling $27.2 million.
Investments in Foreign Entities - The geographic concentration of Alliant
Energy's significant continuing foreign investments at Dec. 31 was as follows
(in millions):
Brazil China New Zealand Mexico Total
--------- ---------- --------------- ---------- ---------
2002
- ----
Unconsolidated $214 $19 $86 $55 $374
Consolidated -- 161 -- -- 161
--------- ---------- --------------- ---------- ---------
Total $214 $180 $86 $55 $535
========= ========== =============== ========== =========
2001
- ----
Unconsolidated $378 $21 $68 $41 $508
Consolidated -- 146 -- -- 146
--------- ---------- --------------- ---------- ---------
Total $378 $167 $68 $41 $654
========= ========== =============== ========== =========
Brazil - Resources holds a non-controlling interest in five Brazilian
- ------
electric utility companies through several direct investments accounted for
under the equity method of accounting. At Dec. 31, 2002 and 2001, Resources'
direct investments included a 49.9% direct ownership interest in GIPAR, S.A.,
an electric utility holding company; a 39.4% direct ownership interest in
Companhia Forca e Luz Cataguazes - Leopoldina, S.A. (Cataguazes), an electric
utility; a 45.6% direct ownership interest in Energisa, S.A., an energy
development company; a 49.9% direct ownership interest in Pbpart - SE 1
Ltda., an electric utility holding company; and a 50.0% (49.7% at Dec. 31,
2001) direct ownership interest in Usina Termeletrica de Juiz de Fora S.A., a
thermal power plant.
China - Resources' consolidated investments included a controlling interest
- -----
in Peak Pacific Investment Company, Ltd., a company that develops investment
opportunities in generation infrastructure projects in China, and Anhui New
Energy Heat & Power Co., Ltd., a combined heat and power facility.
Resources' 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.
42
New Zealand - Resources' investments included a 20.4% ownership interest in
- -----------
TrustPower Ltd., a New Zealand hydro and wind generation utility company,
which is accounted for under the equity method and several other smaller
investments accounted for under the cost method.
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.
Investment in ATC - At Dec. 31, 2002 and 2001, WP&L had ownership interests
in ATC of approximately 26.6% and 26.5%, respectively, and accounts for this
investment under the equity method. Pursuant to various agreements, WP&L
receives a range of transmission services from ATC. WP&L provides operation,
maintenance, and various transitional and construction services to ATC. WP&L
and ATC also bill each other for use of shared facilities owned by each
party. ATC billed WP&L $38.7 million and $36.4 million in 2002 and 2001,
respectively. WP&L billed ATC $18.1 million and $18.4 million in 2002 and
2001, respectively, and recorded equity earnings of $14.3 million and $14.6
million in 2002 and 2001, respectively.
Unconsolidated Equity Investments - Summary financial information from
Alliant Energy's unconsolidated equity investments' financial statements is
as follows (in millions):
2002 * 2001 2000
------------ ------------ ----------
Operating revenues $1,440.6 $2,214.1 $1,194.3
Operating income 159.8 138.2 42.5
Net income (loss) 36.6 52.1 69.7
As of Dec. 31:
Current assets 383.0 454.5
Non-current assets 1,976.4 2,117.0
Current liabilities 435.9 519.3
Non-current liabilities 505.1 557.0
Minority interest 133.4 213.5
* Alliant Energy's investment in Cargill-Alliant was sold in 2002.
(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 for
non-regulated entities in earnings unless specific hedge accounting criteria
are met. For IP&L and WP&L, changes in the derivatives' fair values are
generally recorded as regulatory assets or liabilities. The PSCW issued a
letter to WP&L in August 2002 authorizing accounting for its derivatives in
such manner.
At Dec. 31, 2002 and 2001, Alliant Energy had $6.4 million and $6.0 million,
respectively, of derivative assets included in "Other current assets" on its
Consolidated Balance Sheets and $9.1 million and $1.2 million, respectively,
of derivative liabilities included in "Other current liabilities" on its
Consolidated Balance Sheets. At Dec. 31, 2001, Alliant Energy also had $0.4
million of derivative liabilities included in "Other long-term liabilities
and deferred credits" on its Consolidated Balance Sheets.
In the first quarter of 2001, Alliant Energy recorded a net loss of $12.9
million (all related to discontinued operations) for a cumulative effect of a
change in accounting principle representing the impact of adopting SFAS 133
as of Jan. 1, 2001 at Alliant Energy'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 Dec. 31,
2000, and the carrying values of these electricity derivative contracts as
determined in accordance with SFAS 133 as of Jan. 1, 2001.
43
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 (due in 2030) under the
applicable accounting principles in effect at June 30, 2000, and the carrying
values of the debt and embedded derivative components of the notes as
determined in accordance with SFAS 133 as of July 1, 2000. Transition
adjustments relating to Alliant Energy's other derivative instruments had no
material impact on net income.
During 2001 and 2000, $0.1 million of net gains (includes $0.1 million of net
losses from discontinued operations) and $6.7 million of net losses (includes
$1.3 million of net losses from discontinued operations), respectively,
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 Dec.
31, 2001 and 2000, respectively.
Cash Flow Hedging Instruments - During 2002 and 2001, 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. IP&L and WP&L 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.
In 2002 and 2001, a net loss of $0.1 million (includes a net gain of $0.1
million from discontinued operations) and a net gain of $2.0 million
(includes a net gain of $2.1 million from discontinued operations),
respectively, were recognized relating to the amount of hedge ineffectiveness
in accordance with SFAS 133. In 2002 and 2001, 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 (all continuing operations) into earnings as a result of the
discontinuance of hedges. At Dec. 31, 2002, the maximum length of time over
which Alliant Energy hedged its exposure to the variability in future cash
flows for forecasted transactions was six months (three months for continuing
operations) and Alliant Energy estimated that losses of $3.3 million
(includes losses of $3.5 million for discontinued operations) will be
reclassified from accumulated other comprehensive income (loss) into earnings
in 2003 as the hedged transactions affect earnings.
Other Derivatives Not Designated in Hedge Relationships - Alliant Energy's
- -------------------------------------------------------
derivatives that were not designated in hedge relationships during 2002
and/or 2001 included the embedded derivative component of Resources'
exchangeable senior notes, electricity price collars, and physical coal and
gas contracts not designated in hedge relationships.
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
initial value of the notes into debt and derivative components. The payment
feature tied to McLeod stock is considered an embedded derivative under SFAS
133 that must be accounted for as a separate derivative instrument. This
component is classified as a derivative liability on the Consolidated Balance
Sheets. Subsequent changes in the fair value of the option are reflected as
increases or decreases in Alliant Energy'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 embedded 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 2002, 2001 and 2000 was
expense of $5.0 million, $215.1 million and $102.5 million, respectively,
related to the change in value of the McLeod trading securities, partially
offset by income of $0.4 million, $181.6 million and $101.8 million,
respectively, related to the change in value of the derivative component of
the exchangeable senior notes.
44
Electricity price collars were used to manage utility energy costs during
supply/demand imbalances. Physical coal and gas contracts that do not
qualify for the normal purchase and sale exception were used to manage the
price of anticipated coal and gas purchases and sales.
(b) Weather Derivatives - Alliant Energy uses weather derivatives to reduce
the impact of weather volatility on its natural gas sales volumes. In 2002
and 2001, Corporate Services, as agent for IP&L and WP&L, entered into
non-exchange traded options based on heating degree days in which Corporate
Services receives payment from the counterparty if actual heating degree days
are less than the strike price in the contract. Corporate Services paid
premiums to enter into these contracts, which are amortized to expense over
the contract period. Alliant Energy has used the intrinsic value method to
account for these weather derivatives.
(c) Nuclear Decommissioning Trust Fund Investments - Historically, WP&L has
entered into combinations of options to mitigate the effect of significant
market fluctuations on its common stock investments in its nuclear
decommissioning trust funds. The derivative transactions are designed to
protect the portfolio'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. Alliant Energy adopted EITF Issue 02-3 effective Jan.
1, 2003 for all contracts that were in place and storage gas acquired prior
to Oct. 25, 2002 and is reporting energy trading contracts on a net rather
than gross basis in the income statement for all periods presented as a
result of adopting EITF Issue 02-3.
(11) COMMITMENTS AND CONTINGENCIES
(a) Construction and Acquisition Expenditures - Certain commitments have
been made in connection with 2003 capital expenditures. During 2003, total
construction and acquisition expenditures relating to continuing operations
are estimated to be approximately $820 million.
(b) Purchased-Power, Coal and Natural Gas Contracts - Alliant Energy,
through its subsidiaries Corporate Services, IP&L and WP&L, has entered into
purchased-power, coal and natural gas supply, transportation and storage
contracts. Certain purchased-power commitments are considered operating
leases and are therefore not included here, but are included in Note 3. The
natural gas supply commitments are all index-based. Alliant Energy expects
to supplement its coal and natural gas supplies with spot market purchases as
needed. The table includes commitments for "take-or-pay" contracts which
result in dollar commitments with no associated tons or Dths. At Dec. 31,
2002, Alliant Energy's minimum commitments were as follows (dollars and Dths
in millions; MWhs and tons in thousands):
Purchased-power Coal Natural gas
----------------------- ------------------------- -------------------------
Dollars MWhs Dollars Tons Dollars Dths
---------- --------- ---------- ---------- ----------- ----------
2003 $114.5 2,752 $81.1 9,889 $90.7 6
2004 15.5 361 57.6 9,301 36.5 --
2005 2.0 -- 40.2 6,130 26.0 --
2006 2.0 -- 12.7 898 15.0 --
2007 0.1 -- 3.6 -- 14.7 --
Thereafter 0.4 -- -- -- 26.4 --
(c) Legal Proceedings - Alliant Energy is involved in legal and
administrative proceedings before various courts and agencies with respect to
matters arising in the ordinary course of business. Although unable to
predict the outcome of these matters, Alliant Energy believes that
appropriate reserves have been established and final disposition of these
actions will not have a material adverse effect on its financial condition or
results of operations.
(d) Guarantees and Commitments - At Dec. 31, 2002 and 2001, Alliant Energy
had guarantees outstanding to support unconsolidated affiliate and
third-party financing arrangements of approximately $4 million and $14
million, respectively. Such guarantees are not included on Alliant Energy's
Consolidated Balance Sheets. At Dec. 31, 2002, the remaining term of the
45
guarantees and the underlying debt was five years. Refer to Note 3 for
discussion of Alliant Energy's residual value guarantees of its synthetic
leases.
In the third quarter of 2002, Alliant Energy sold its 50% ownership interest
in its Cargill-Alliant electricity-trading joint venture to Cargill. Under
the purchase and sale agreement ("Agreement"), Alliant Energy agreed to
indemnify Cargill from expenses resulting from the breach of the
representations and warranties made by Alliant Energy as of the closing date,
and for the breach of its obligations under the Agreement. While the
indemnification does not include a maximum limit, Alliant Energy believes the
likelihood of having to make any material cash payments under this
indemnification is remote. At Dec. 31, 2002, there were no claims related to
the indemnification.
In November 2002, the FASB issued FIN 45 which requires disclosures by a
guarantor about its obligations under certain guarantees that it has issued.
FIN 45 also requires recognizing, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The recognition and measurement provisions of FIN 45 are
effective on a prospective basis for guarantees issued or modified after Dec.
31, 2002. Alliant Energy does not anticipate FIN 45 will have a material
impact on its financial condition or results of operations.
(e) Environmental Liabilities - Alliant Energy had recorded the following
environmental liabilities, and regulatory assets associated with certain of
these liabilities, at Dec. 31 (in millions):
Environmental liabilities 2002 2001 Regulatory assets 2002 2001
- ------------------------- ----------- ----------- ----------------- ----------- -----------
MGP sites $49.3 $43.9 MGP sites $54.1 $50.2
NEPA 6.6 8.2 NEPA 7.9 9.7
Other 0.2 0.4 Other 2.9 3.2
----------- ----------- ----------- -----------
$56.1 $52.5 $64.9 $63.1
=========== =========== =========== ===========
MGP Sites - IP&L and WP&L have current or previous ownership interests in 43
- ---------
and 14 sites, respectively, previously associated with the production of gas
for which they may be liable for investigation, remediation and monitoring
costs relating to the sites. IP&L and WP&L have received letters from state
environmental agencies requiring no further action at eight and five sites,
respectively. IP&L and WP&L are working pursuant to the requirements of
various federal and state agencies to investigate, mitigate, prevent and
remediate, where necessary, the environmental impacts to property, including
natural resources, at and around the sites in order to protect public health
and the environment.
IP&L and WP&L record environmental liabilities based upon periodic studies,
most recently updated in the third quarter of 2002, 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 $37 million to $64 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 IP&L has been successful in obtaining
approval to recover such costs in rates in Minnesota. The IUB has permitted
utilities to recover prudently incurred costs. Regulatory assets have been
recorded by IP&L and WP&L, which reflect the probable future rate recovery,
where applicable. Considering the current rate treatment, and assuming no
material change therein, IP&L and WP&L believe that the clean-up costs
incurred for these MGP sites will not have a material adverse effect on their
respective financial conditions or results of operations.
Settlement has been reached with all of IP&L's and WP&L's insurance carriers
regarding reimbursement for their MGP-related costs. Insurance recoveries
available at Dec. 31, 2002 for IP&L and WP&L were $4.5 million and $2.1
million, respectively. Pursuant to their applicable rate making treatment,
IP&L has recorded its recoveries in "Other long-term liabilities and deferred
credits" and WP&L has recorded its recoveries as an offset against its
46
regulatory assets. In February 2001, the IUB issued an order directing IP&L
to refund its insurance recoveries related to former IESU MGP sites. Under
the refund plan, IP&L returned 90% of the recoveries to customers of the
former IESU in 2001 and retained 10%.
NEPA - NEPA requires owners of nuclear power plants to pay a special
- ----
assessment into a "Uranium 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 through EACs and fuel
costs, respectively, over the period the costs are assessed. Alliant Energy
continues to pursue relief from this assessment through litigation.
(f) Decommissioning of DAEC and Kewaunee - The IUB, in its interim electric
rate order effective July 2002, allows IP&L to recover $11 million annually
for its share of the cost to decommission DAEC. FERC, in its most recent
interim wholesale rate order effective April 2002, allows WP&L to recover $3
million annually for its share of the cost to decommission Kewaunee. Both
interim orders are subject to refund, pending determination of final rates.
The PSCW, in an order effective Jan. 1, 2002, eliminated WP&L's recovery from
retail customers for the cost to decommission Kewaunee, due to the trust fund
being adequately funded. Decommissioning expense is included in
"Depreciation and amortization" in the Consolidated Statements of Income and
the cumulative amount is included in "Accumulated depreciation" on the
Consolidated Balance Sheets to the extent recovered through rates.
Additional information relating to the decommissioning of DAEC and Kewaunee
was as follows (dollars in millions):
DAEC Kewaunee
------------------------- ----------------------
Assumptions relating to current rate recovery amounts:
Alliant Energy's share of estimated decommissioning cost $374.3 $263.2
Year dollars in 2002 2002
Method to develop estimate Site-specific study Site-specific study
Annual inflation rate 4.20% 6.50%
Decommissioning method Prompt dismantling Prompt dismantling
and removal and removal
Year decommissioning to commence 2014 2013
After-tax return on external investments:
Qualified 7.10% 6.12%
Non-qualified 4.70% 5.14%
External trust fund balance at Dec. 31, 2002 $121.2 $223.7
Internal reserve at Dec. 31, 2002 $21.7 $--
After-tax earnings on external trust funds in 2002 $3.8 $19.7
The interim rate recovery amounts for DAEC only include an inflation estimate
through 2005. Both IP&L and WP&L are funding all rate recoveries for
decommissioning into external trust funds and funding on a tax-qualified
basis to the extent possible. In accordance with their respective regulatory
requirements, IP&L and WP&L 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.
SFAS 143, which provides accounting and disclosure requirements for
retirement obligations associated with long-lived assets, was adopted by
Alliant Energy on Jan. 1, 2003. SFAS 143 requires that the present value of
retirement costs for which Alliant Energy has a legal obligation be recorded
as liabilities with an equivalent amount added to the asset cost. The
liability is accreted to its present value each period and the capitalized
cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity settles the obligation for its
recorded amount or incurs a gain or loss. The adoption of SFAS 143 will have
no impact on IP&L's and WP&L's earnings, as the effects will be offset by the
establishment of regulatory assets or liabilities pursuant to SFAS 71.
Alliant Energy has completed a detailed assessment of the specific
applicability and implications of SFAS 143. The scope of SFAS 143 as it
relates to Alliant Energy primarily includes decommissioning costs for DAEC
and Kewaunee. It also applies to a smaller extent to several other regulated
and non-regulated assets including, but not limited to, active ash landfills,
water intake facilities, underground storage tanks, groundwater wells,
transmission and distribution equipment, easements, leases and the
dismantlement of certain hydro facilities. Other than DAEC and Kewaunee,
Alliant Energy's asset retirement obligations as of Jan. 1, 2003 are not
significant.
47
Prior to January 2003, IP&L and WP&L recorded nuclear decommissioning charges
in accumulated depreciation on their Consolidated Balance Sheets. Upon
adoption of SFAS 143, IP&L and WP&L will reverse approximately $125 million
and $175 million, respectively, previously recorded in accumulated
depreciation and will record liabilities of approximately $250 million and
$175 million, respectively. The difference between amounts previously
recorded and the net SFAS 143 liability will be deferred as a regulatory
asset and is expected to approximate $125 million and $0 for IP&L and WP&L,
respectively.
IP&L and WP&L have previously recognized removal costs as a component of
depreciation expense and accumulated depreciation for other non-nuclear
assets in accordance with regulatory rate recovery. As of Dec. 31, 2002,
IP&L and WP&L estimate that they have approximately $250 million and $150
million, respectively, of such regulatory liabilities recorded in
"Accumulated depreciation" on their Consolidated Balance Sheets.
(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 Dec. 31, 2002 was as follows
(dollars in millions):
Accumulated Construction
Fuel Ownership Plant in Provision for Work-In-
Type Interest % Service Depreciation Progress
---------- ----------------- --------------- --------------- ----------------
IP&L
- ----
DAEC Nuclear 70.0 $543.3 $318.5 $25.2
Ottumwa Coal 48.0 190.9 118.2 0.7
Neal Unit 4 Coal 21.5 85.3 59.4 0.2
Neal Unit 3 Coal 28.0 59.9 36.9 1.9
Louisa Unit 1 Coal 4.0 25.0 14.9 0.1
--------------- --------------- ----------------
904.4 547.9 28.1
--------------- --------------- ----------------
WP&L
- ----
Edgewater Unit 5 Coal 75.0 234.8 112.9 0.4
Columbia Energy Center Coal 46.2 187.5 110.3 1.6
Kewaunee Nuclear 41.0 172.6 120.9 6.8
Edgewater Unit 4 Coal 68.2 60.0 36.1 1.6
--------------- --------------- ----------------
654.9 380.2 10.4
--------------- --------------- ----------------
$1,559.3 $928.1 $38.5
=============== =============== ================
(13) 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 includes 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 "Total Regulated Domestic Utilities."
o Non-regulated businesses - represents the operations of Resources, its
subsidiaries and Alliant Energy's investment in Cargill-Alliant (sold in
2002), and is broken down into two segments: a) International (Int'l) and
b) other, which includes the operations of the Integrated Services,
Investments, Non-regulated Generation and Energy Technologies business
units described in Note 1(a); the operations of Resources (the
non-regulated holding company); and any non-regulated
reconciling/eliminating entries.
o Other - includes the operations of Alliant Energy (the parent company)
and Corporate Services, as well as any Alliant Energy parent company
reconciling/eliminating entries.
48
Intersegment revenues were not material to Alliant Energy's operations and
there was no single customer whose revenues were 10% 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):
Regulated Domestic Utilities Non-regulated Businesses
--------------------------------------- ------------------------------- Alliant Energy
Electric Gas Other Total Int'l Other Total Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
2002
- ----
Operating revenues $1,752.5 $394.0 $37.2 $2,183.7 $103.2 $158.1 $261.3 ($6.7) $2,438.3
Depreciation and amortization 250.6 27.9 3.9 282.4 11.2 16.0 27.2 -- 309.6
Operating income (loss) 299.2 26.2 8.2 333.6 9.7 (11.0) (1.3) (0.5) 331.8
Interest expense, net of AFUDC 100.0 44.9 31.6 76.5 2.3 178.8
Interest income from loans to
discontinued operations, net -- (6.0) (10.9) (16.9) -- (16.9)
Equity (income) loss from
unconsolidated investments (17.6) 17.1 13.3 30.4 -- 12.8
Preferred dividends 6.2 -- -- -- -- 6.2
Impairment of available-for-sale
securities of McLeodUSA Inc. -- -- 27.2 27.2 -- 27.2
Miscellaneous, net (27.9) 3.4 18.9 22.3 (0.6) (6.2)
Income tax expense (benefit) 107.1 (12.1) (48.3) (60.4) (4.3) 42.4
Income from continuing operations 165.8 (37.6) (42.8) (80.4) 2.1 87.5
Income from discontinued
operations, net of tax -- 10.5 8.9 19.4 -- 19.4
Net income (loss) 165.8 (27.1) (33.9) (61.0) 2.1 106.9
Total assets 3,676.5 574.9 474.8 4,726.2 1,009.6 1,250.8 2,260.4 14.8 7,001.4
Investments in equity method
subsidiaries 125.1 -- -- 125.1 297.1 29.1 326.2 0.3 451.6
Construction and acquisition
expenditures 371.3 28.6 4.8 404.7 65.5 152.8 218.3 33.8 656.8
- ------------------------------------------------------------------------------------------------------------------------------------
Regulated Domestic Utilities Non-regulated Businesses
---------------------------------------- ------------------------------ Alliant Energy
Electric Gas Other Total Int'l Other Total Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
2001
- ----
Operating revenues $1,756.6 $487.9 $37.1 $2,281.6 $85.4 $208.1 $293.5 ($5.6) $2,569.5
Depreciation and amortization 245.6 28.8 3.2 277.6 8.3 16.5 24.8 -- 302.4
Operating income (loss) 306.1 11.2 7.5 324.8 7.4 (12.9) (5.5) (1.9) 317.4
Interest expense, net of AFUDC 100.5 54.6 9.5 64.1 9.8 174.4
Interest income from loans to
discontinued operations, net -- (0.1) (9.9) (10.0) -- (10.0)
Equity (income) loss from
unconsolidated investments (15.6) 4.1 (7.2) (3.1) (0.1) (18.8)
Preferred dividends 6.7 -- -- -- -- 6.7
Miscellaneous, net (25.9) (2.8) 18.4 15.6 (4.6) (14.9)
Income tax expense (benefit) 94.2 (22.7) (11.3) (34.0) (8.4) 51.8
Income from continuing operations 164.9 (25.7) (12.4) (38.1) 1.4 128.2
Income from discontinued
operations, net of tax -- 11.3 45.8 57.1 -- 57.1
Cumulative effect of a change in
accounting principle, net of tax -- (12.9) -- (12.9) -- (12.9)
Net income (loss) 164.9 (27.3) 33.4 6.1 1.4 172.4
Total assets 3,336.6 506.4 465.0 4,308.0 858.6 995.9 1,854.5 75.4 6,237.9
Investments in equity method
subsidiaries 119.2 -- -- 119.2 448.3 32.6 480.9 -- 600.1
Construction and acquisition
expenditures 298.7 36.9 5.2 340.8 173.0 159.2 332.2 40.0 713.0
- ------------------------------------------------------------------------------------------------------------------------------------
49
Regulated Domestic Utilities Non-regulated Businesses
---------------------------------------- ------------------------------- Alliant Energy
Electric Gas Other Total Int'l Other Total Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
2000
- ----
Operating revenues $1,648.0 $415.0 $33.4 $2,096.4 $ -- $177.3 $177.3 ($2.7) $2,271.0
Depreciation and amortization 252.6 27.7 3.1 283.4 3.7 9.6 13.3 -- 296.7
Operating income (loss) 330.6 26.6 4.5 361.7 (7.8) (18.1) (25.9) 0.2 336.0
Interest expense, net of AFUDC 103.1 38.8 9.0 47.8 8.5 159.4
Interest income from loans to
discontinued operations, net -- -- (7.2) (7.2) -- (7.2)
Equity income from
unconsolidated investments (0.5) (5.8) (13.2) (19.0) -- (19.5)
Preferred dividends 6.7 -- -- -- -- 6.7
Gain on reclassification of
investments -- -- (321.3) (321.3) -- (321.3)
Miscellaneous, net (23.3) (8.9) (4.3) (13.2) (2.7) (39.2)
Income tax expense 107.9 (14.2) 132.2 118.0 0.3 226.2
Income from continuing operations 167.8 (17.7) 186.7 169.0 (5.9) 330.9
Income from discontinued
operations, net of tax -- (0.5) 51.6 51.1 -- 51.1
Cumulative effect of a change in
accounting principle, net of tax -- -- 16.7 16.7 -- 16.7
Net income (loss) 167.8 (18.2) 255.0 236.8 (5.9) 398.7
Total assets 3,402.2 554.4 427.2 4,383.8 631.0 1,702.3 2,333.3 16.7 6,733.8
Investments in equity method
subsidiaries 6.5 -- -- 6.5 389.0 29.5 418.5 -- 425.0
Construction and acquisition
expenditures 265.9 35.8 3.0 304.7 395.6 134.1 529.7 11.1 845.5
- ------------------------------------------------------------------------------------------------------------------------------------
Products and Services
- ---------------------
Non-regulated and Other Revenues
- -----------------------------------------------------------------------------------------
Integrated
Year Services International Investments Other Total
- -----------------------------------------------------------------------------------------
(in millions)
2002 $133.8 $103.2 $26.1 $28.7 $291.8
2001 192.7 85.4 26.6 20.4 325.1
2000 163.6 -- 28.5 15.9 208.0
(14) GOODWILL AND OTHER INTANGIBLE ASSETS
Alliant Energy adopted SFAS 142 on Jan. 1, 2002, which resulted in goodwill
no longer being subject to amortization. Had SFAS 142 been adopted Jan. 1,
2000, net income for 2001 and 2000 would have increased $4 million and $1
million, respectively, and basic and diluted EPS would have increased $0.05
and $0.02 per share, respectively. Certain information regarding net
goodwill and other intangible assets included on Alliant Energy's
Consolidated Balance Sheets at Dec. 31 was as follows (in millions):
2002 2001
------------- -------------
Net goodwill
Deferred charges and other (consolidated investments) $57 $56
Investments in unconsolidated foreign entities (equity method investments) 9 7
Net other intangible assets
Deferred charges and other (consolidated investments) 19 20
Investments in unconsolidated foreign entities (equity method investments) 22 35
Investment in ATC and other (equity method investments) 25 --
50
(15) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
All "per share" references refer to earnings per diluted share. Summation of
the individual quarters may not equal annual totals due to rounding.
2002 2001
---------------------------------------- ---------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
---------- --------- --------- --------- ---------- --------- -------- --------
(in millions, except per share data)
Operating revenues $571.4 $544.5 $659.4 $663.0 $784.9 $567.7 $623.9 $593.0
Operating income 63.9 60.4 132.4 75.1 69.4 54.3 125.2 68.5
Income (loss) from continuing operations (7.8) (5.5) 46.6 54.1 18.6 8.6 53.2 47.8
Income (loss) from discontinued
operations, net of tax 17.5 11.8 (1.9) (8.0) 3.5 29.1 16.1 8.3
Cumulative effect of a change in
accounting principle, net of tax -- -- -- -- (12.9) -- -- --
Net income 9.7 6.3 44.7 46.1 9.2 37.7 69.3 56.1
EPS:
Income (loss) from continuing operations (0.09) (0.06) 0.51 0.61 0.23 0.11 0.67 0.57
Income (loss) from discontinued
operations 0.20 0.13 (0.02) (0.10) 0.05 0.37 0.20 0.09
Cumulative effect of a change in
accounting principle -- -- -- -- (0.16) -- -- --
Net income 0.11 0.07 0.49 0.51 0.12 0.48 0.87 0.66
(16) DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
Alliant Energy announced in November 2002 and January 2003 its commitment to
pursue the sale of, or other exit strategies for, certain non-regulated
businesses in 2003. Alliant Energy applied the provisions of SFAS 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," to certain of
its assets which were held for sale. SFAS 144 requires that a long-lived asset
classified as held for sale be measured at the lower of its carrying amount or
fair value, less costs to sell, and to cease depreciation, depletion and
amortization. At Dec. 31, 2002, Alliant Energy's oil and gas (Whiting),
Australian (including Southern Hydro), affordable housing and SmartEnergy
businesses were classified as held for sale. Alliant Energy currently plans to
complete the sales by year-end. The operating results for these businesses have
been separately classified and reported as discontinued operations in Alliant
Energy's Consolidated Financial Statements. A summary of the components of
discontinued operations in Alliant Energy's Consolidated Statements of Income
was as follows (in thousands):
2002 2001 2000
-------------- ------------ -------------
Operating revenues $231,027 $158,575 $125,310
Operating expenses 195,624 105,935 80,224
Interest expense and other 22,810 (12,448) (18,589)
-------------- ------------ -------------
Income before income taxes 12,593 65,088 63,675
Income tax expense (benefit) (6,832) 8,017 12,636
-------------- ------------ -------------
Income from discontinued operations, net of tax $19,425 $57,071 $51,039
============== ============ =============
Alliant Energy's Australian business enters into electricity derivative
contracts that have not been designated as hedges (as defined by SFAS 133) to
manage the electricity commodity price risk associated with anticipated sales
into the spot market. Approximately $16 million of income is included in
"Interest expense and other" for both 2002 and 2001 in the previous table
related to the change in the fair value of these electricity derivative
contracts during these respective periods. In 2000, Alliant Energy's
affordable housing business sold a portion of its investment in McLeod,
resulting in a pre-tax gain of approximately $24 million included in
"Interest expense and other" in the previous table. At Dec. 31, 2002, Alliant
Energy's affordable housing business owned approximately 0.1 million shares
of McLeod. "Income tax expense (benefit)" in the previous table includes
approximately $10 million, $10 million and $7 million of affordable housing
51
tax credits earned by Alliant Energy's affordable housing business during
2002, 2001 and 2000, respectively. These tax credits had a significant
impact on the effective tax rate of Alliant Energy's discontinued operations.
In the fourth quarter of 2002, Alliant Energy recorded a SFAS 142 after-tax
non-cash goodwill impairment charge related to SmartEnergy of $4.5 million
primarily due to less favorable market conditions.
A summary of the components of assets and liabilities of discontinued
operations on Alliant Energy's Consolidated Balance Sheets at Dec. 31 was as
follows (in thousands):
2002 2001
------------- ------------
Assets of discontinued operations:
Property, plant and equipment, net $644,910 $422,114
Current assets 113,866 58,586
Investments 6,824 60,442
Deferred charges and other 203,691 23,699
------------- ------------
Total assets of discontinued operations $969,291 $564,841
============= ============
Liabilities of discontinued operations:
Current liabilities $73,344 $38,488
Other long-term liabilities and deferred credits 64,783 26,206
Minority interest 124 267
------------- ------------
Total liabilities of discontinued operations 138,251 64,961
------------- ------------
Net assets of discontinued operations $831,040 $499,880
============= ============
In March 2002, Alliant Energy acquired a controlling interest in Southern
Hydro and therefore changed from the equity method of accounting to the
consolidation method at such time. At Dec. 31, 2002, SmartEnergy had $9
million of net goodwill.
A summary of the components of cash flows for discontinued operations for the
years ended Dec. 31 was as follows (in thousands):
2002 2001 2000
------------- ------------ ------------
Net cash flows from operating activities $72,820 $44,327 $44,844
Net cash flows from financing activities 153,087 41,529 99,338
Net cash flows used for investing activities (215,638) (88,752) (145,573)
------------- ------------ ------------
Net increase (decrease) in cash and temporary cash investments 10,269 (2,896) (1,391)
Cash and temporary cash investments at beginning of period 5,775 8,671 10,062
------------- ------------ ------------
Cash and temporary cash investments at end of period $16,044 $5,775 $8,671
============= ============ ============
Supplemental cash flows information:
Cash paid during the period for:
Interest $14,704 $6,355 $4,878
============= ============ ============
Income taxes, net of refunds ($9,002) ($3,331) ($331)
============= ============ ============
(17) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Alliant Energy has fully and unconditionally guaranteed the payment of
principal and interest on various debt securities issued by Resources and, as
a result, is required to present condensed consolidating financial
statements. No other Alliant Energy subsidiaries are guarantors of
Resources' debt securities. Alliant Energy's condensed consolidating
financial statements are as follows:
52
Alliant Energy Corporation Condensed Consolidating Statements of Income for the Years Ended December 31, 2002 and 2001
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
--------------------------------------------------------------------
Year Ended December 31, 2002 (in thousands)
- ----------------------------
Operating revenues:
Electric utility $- $- $1,752,534 $- $1,752,534
Gas utility - - 393,986 - 393,986
Non-regulated and other - 261,349 356,286 (325,813) 291,822
--------------------------------------------------------------------
- 261,349 2,502,806 (325,813) 2,438,342
--------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 303,570 55 303,625
Purchased power - - 362,501 - 362,501
Cost of utility gas sold - - 248,994 - 248,994
Other operation and maintenance 2,116 229,213 846,988 (300,379) 777,938
Depreciation and amortization 7 27,214 288,577 (6,209) 309,589
Taxes other than income taxes - 6,146 99,031 (1,312) 103,865
--------------------------------------------------------------------
2,123 262,573 2,149,661 (307,845) 2,106,512
--------------------------------------------------------------------
Operating income (loss) (2,123) (1,224) 353,145 (17,968) 331,830
--------------------------------------------------------------------
Interest expense and other:
Interest expense 5,640 76,475 116,344 (11,932) 186,527
Interest income from loans to discontinued operations, net - (16,923) - - (16,923)
Equity (income) loss from unconsolidated investments (941) 31,337 (17,571) - 12,825
Allowance for funds used during construction - - (8,480) 784 (7,696)
Preferred dividend requirements of subsidiaries - - 6,172 - 6,172
Impairment of available-for-sale securities of McLeodUSA Inc. - 27,218 - - 27,218
Miscellaneous, net (109,236) 20,848 (17,167) 99,405 (6,150)
--------------------------------------------------------------------
(104,537) 138,955 79,298 88,257 201,973
--------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 102,414 (140,179) 273,847 (106,225) 129,857
--------------------------------------------------------------------
Income tax expense (benefit) (4,467) (60,149) 107,959 (942) 42,401
--------------------------------------------------------------------
Income (loss) from continuing operations 106,881 (80,030) 165,888 (105,283) 87,456
--------------------------------------------------------------------
Income from discontinued operations, net of tax - 19,425 - - 19,425
--------------------------------------------------------------------
Net income (loss) $106,881 ($60,605) $165,888 ($105,283) $106,881
====================================================================
Year Ended December 31, 2001
- ----------------------------
Operating revenues:
Electric utility $- $- $1,756,556 $- $1,756,556
Gas utility - - 487,877 - 487,877
Non-regulated and other - 293,440 310,520 (278,888) 325,072
--------------------------------------------------------------------
- 293,440 2,554,953 (278,888) 2,569,505
--------------------------------------------------------------------
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 3,609 267,316 772,246 (270,329) 772,842
Depreciation and amortization - 24,786 277,591 - 302,377
Taxes other than income taxes - 6,849 103,408 (8,121) 102,136
--------------------------------------------------------------------
3,609 298,951 2,228,011 (278,450) 2,252,121
--------------------------------------------------------------------
Operating income (loss) (3,609) (5,511) 326,942 (438) 317,384
--------------------------------------------------------------------
Interest expense and other:
Interest expense 14,281 64,091 117,707 (10,480) 185,599
Interest income from loans to discontinued operations, net - (10,041) - - (10,041)
Equity (income) loss from unconsolidated investments (7,237) 4,138 (15,700) - (18,799)
Allowance for funds used during construction - - (11,144) - (11,144)
Preferred dividend requirements of subsidiaries - - 6,720 - 6,720
Miscellaneous, net (177,151) 15,590 (30,285) 176,913 (14,933)
--------------------------------------------------------------------
(170,107) 73,778 67,298 166,433 137,402
--------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 166,498 (79,289) 259,644 (166,871) 179,982
--------------------------------------------------------------------
Income tax expense (benefit) (5,864) (36,517) 94,642 (438) 51,823
--------------------------------------------------------------------
Income (loss) from continuing operations 172,362 (42,772) 165,002 (166,433) 128,159
--------------------------------------------------------------------
Income from discontinued operations, net of tax - 57,071 - - 57,071
--------------------------------------------------------------------
Income before cumulative effect of a change in
accounting principle, net of tax 172,362 14,299 165,002 (166,433) 185,230
--------------------------------------------------------------------
Cumulative effect of a change in accounting principle, net of tax - (12,868) - - (12,868)
--------------------------------------------------------------------
Net income $172,362 $1,431 $165,002 ($166,433) $172,362
====================================================================
53
Alliant Energy Corporation Condensed Consolidating Statement of Income for the Year Ended December 31, 2000
Alliant Energy Other Consolidated
Parent Alliant Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
--------------------------------------------------------------------
Operating revenues: (in thousands)
Electric utility $- $- $1,648,036 $- $1,648,036
Gas utility - - 414,948 - 414,948
Non-regulated and other - 177,253 294,507 (263,769) 207,991
--------------------------------------------------------------------
- 177,253 2,357,491 (263,769) 2,270,975
--------------------------------------------------------------------
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 703 183,773 751,888 (258,087) 678,277
Depreciation and amortization - 13,350 283,382 - 296,732
Taxes other than income taxes - 6,069 98,379 (6,625) 97,823
--------------------------------------------------------------------
703 203,192 1,995,822 (264,712) 1,935,005
--------------------------------------------------------------------
Operating income (loss) (703) (25,939) 361,669 943 335,970
--------------------------------------------------------------------
Interest expense and other:
Interest expense 17,350 47,832 121,250 (18,283) 168,149
Interest income from loans to discontinued operations, net - (7,195) - - (7,195)
Equity income from unconsolidated investments (14,653) (4,311) (504) - (19,468)
Allowance for funds used during construction - - (8,761) - (8,761)
Preferred dividend requirements of subsidiaries - - 6,713 - 6,713
Gain on reclassification of investment - (321,349) - - (321,349)
Miscellaneous, net (407,484) (13,234) (31,790) 413,294 (39,214)
--------------------------------------------------------------------
(404,787) (298,257) 86,908 395,011 (221,125)
--------------------------------------------------------------------
Income from continuing operations before income taxes 404,084 272,318 274,761 (394,068) 557,095
--------------------------------------------------------------------
Income taxes 5,422 112,820 106,996 942 226,180
--------------------------------------------------------------------
Income from continuing operations 398,662 159,498 167,765 (395,010) 330,915
--------------------------------------------------------------------
Income from discontinued operations, net of tax - 51,039 - - 51,039
--------------------------------------------------------------------
Income before cumulative effect of a change in
accounting principle, net of tax 398,662 210,537 167,765 (395,010) 381,954
--------------------------------------------------------------------
Cumulative effect of a change in accounting principle, net of tax - 16,673 35 - 16,708
--------------------------------------------------------------------
Net income $398,662 $227,210 $167,800 ($395,010) $398,662
====================================================================
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2002
Alliant Energy Other Consolidated
ASSETS Parent Alliant Energy Consolidating Alliant
Property, plant and equipment: Company Resources Subsidiaries Adjustments Energy
--------------------------------------------------------------------------------
Utility: (in thousands)
Electric plant in service $- $- $5,295,381 $- $5,295,381
Gas plant in service - - 613,122 - 613,122
Other plant in service - - 530,456 - 530,456
Accumulated depreciation - - (3,573,407) - (3,573,407)
Construction work in progress - - 263,096 - 263,096
Other, net - - 68,340 - 68,340
--------------------------------------------------------------------------------
Total utility - - 3,196,988 - 3,196,988
--------------------------------------------------------------------------------
Non-regulated and other, net:
Non-regulated generation - 156,699 - - 156,699
Other - 299,355 75,503 (111) 374,747
--------------------------------------------------------------------------------
Total non-regulated and other - 456,054 75,503 (111) 531,446
--------------------------------------------------------------------------------
- 456,054 3,272,491 (111) 3,728,434
--------------------------------------------------------------------------------
Current assets:
Income tax refunds receivable 18,175 72,882 6,412 - 97,469
Regulatory assets - - 46,076 - 46,076
Assets of discontinued operations - 969,291 - - 969,291
Other 254,461 204,206 489,181 (436,395) 511,453
--------------------------------------------------------------------------------
272,636 1,246,379 541,669 (436,395) 1,624,289
--------------------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,817,341 - 10 (1,817,351) -
Investments in unconsolidated foreign entities - 373,816 - - 373,816
Other 11,660 56,357 494,867 - 562,884
--------------------------------------------------------------------------------
1,829,001 430,173 494,877 (1,817,351) 936,700
--------------------------------------------------------------------------------
Deferred charges and other - 127,834 611,721 (27,583) 711,972
--------------------------------------------------------------------------------
Total assets $2,101,637 $2,260,440 $4,920,758 ($2,281,440) $7,001,395
================================================================================
54
Alliant Energy Corporation Condensed Consolidating Balance Sheet (Continued) as of December 31, 2002
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
--------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES (in thousands)
Capitalization:
Common stock and additional paid-in capital $1,294,842 $232,743 $906,261 ($1,139,004) $1,294,842
Retained earnings 758,187 114,838 773,556 (888,394) 758,187
Accumulated other comprehensive loss (209,943) (166,947) (42,996) 209,943 (209,943)
Shares in deferred compensation trust (6,896) - - - (6,896)
--------------------------------------------------------------------------------
Total common equity 1,836,190 180,634 1,636,821 (1,817,455) 1,836,190
--------------------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net - - 205,063 - 205,063
Long-term debt (excluding current portion) 24,000 1,290,205 1,295,598 - 2,609,803
--------------------------------------------------------------------------------
1,860,190 1,470,839 3,137,482 (1,817,455) 4,651,056
--------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds - 41,511 5,080 - 46,591
Commercial paper 135,500 - 60,000 - 195,500
Other short-term borrowings 85,000 194,482 79,003 (244,764) 113,721
Accounts payable 1,534 57,668 223,653 - 282,855
Accrued taxes 9,743 13,655 82,123 - 105,521
Liabilities of discontinued operations - 138,251 - - 138,251
Other 6,419 119,264 305,819 (191,631) 239,871
--------------------------------------------------------------------------------
238,196 564,831 755,678 (436,395) 1,122,310
--------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income tax expense (benefit) (3,198) 141,471 492,352 - 630,625
Pension and other benefit obligations 6,328 4,348 170,334 - 181,010
Other 121 35,526 364,912 (27,590) 372,969
--------------------------------------------------------------------------------
3,251 181,345 1,027,598 (27,590) 1,184,604
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Minority interest - 43,425 - - 43,425
--------------------------------------------------------------------------------
Total capitalization and liabilities $2,101,637 $2,260,440 $4,920,758 ($2,281,440) $7,001,395
================================================================================
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2001
ASSETS
Property, plant and equipment:
Utility:
Electric plant in service $- $- $5,123,781 $- $5,123,781
Gas plant in service - - 597,494 - 597,494
Other plant in service - - 517,938 - 517,938
Accumulated depreciation - - (3,374,867) - (3,374,867)
Construction work in progress - - 111,069 - 111,069
Other, net - - 62,194 - 62,194
--------------------------------------------------------------------------------
Total utility - - 3,037,609 - 3,037,609
--------------------------------------------------------------------------------
Non-regulated and other, net:
Non-regulated generation - 60,411 - - 60,411
Other - 293,760 49,014 (111) 342,663
--------------------------------------------------------------------------------
Total non-regulated and other - 354,171 49,014 (111) 403,074
--------------------------------------------------------------------------------
- 354,171 3,086,623 (111) 3,440,683
--------------------------------------------------------------------------------
Current assets:
Income tax refunds receivable 7,552 11,438 6,411 - 25,401
Regulatory assets - - 19,632 - 19,632
Assets of discontinued operations - 564,841 - - 564,841
Other 180,962 217,638 337,582 (225,916) 510,266
--------------------------------------------------------------------------------
188,514 793,917 363,625 (225,916) 1,120,140
--------------------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,793,737 - - (1,793,737) -
Investments in unconsolidated foreign entities - 508,145 - - 508,145
Other 32,814 66,028 477,929 (14) 576,757
--------------------------------------------------------------------------------
1,826,551 574,173 477,929 (1,793,751) 1,084,902
--------------------------------------------------------------------------------
Deferred charges and other 3,661 110,216 511,537 (33,214) 592,200
--------------------------------------------------------------------------------
Total assets $2,018,726 $1,832,477 $4,439,714 ($2,052,992) $6,237,925
================================================================================
55
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 1,300,149 - 2,429,941
------------------------------------------------------------------------------
1,942,341 1,373,841 2,939,909 (1,793,856) 4,462,235
------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds - 9,946 560 - 10,506
Commercial paper 68,389 - - - 68,389
Other short-term borrowings - 84,318 - - 84,318
Accounts payable - 32,924 185,949 (95) 218,778
Accrued taxes - 9,370 77,387 - 86,757
Liabilities of discontinued operations - 64,961 - - 64,961
Other 4,341 40,090 404,134 (225,821) 222,744
------------------------------------------------------------------------------
72,730 241,609 668,030 (225,916) 756,453
------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income tax expense (benefit) (4,033) 158,135 459,389 - 613,491
Pension and other benefit obligations 7,555 3,539 85,402 - 96,496
Other 133 12,242 286,984 (33,220) 266,139
------------------------------------------------------------------------------
3,655 173,916 831,775 (33,220) 976,126
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Minority interest - 43,111 - - 43,111
------------------------------------------------------------------------------
Total capitalization and liabilities $2,018,726 $1,832,477 $4,439,714 ($2,052,992) $6,237,925
==============================================================================
Alliant Energy Corporation Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2002
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
--------------------------------------------------------------------
(in thousands)
Net cash flows from operating activities $107,594 $100,414 $458,785 ($111,455) $555,338
--------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (180,987) - (141,435) 141,435 (180,987)
Proceeds from issuance of common stock 56,066 - - - 56,066
Proceeds from issuance of preferred stock of subsidiary - - 144,602 - 144,602
Redemption of preferred stock of subsidiary - - (56,389) - (56,389)
Net change in Resources' credit facility - (383,610) - - (383,610)
Proceeds from issuance of other long-term debt - 300,023 - - 300,023
Reductions in other long-term debt - (20,258) (560) - (20,818)
Net change in commercial paper and other short-term borrowings 76,106 153,795 (31,695) 1,939 200,145
Net change in loans to discontinued operations - 37,467 - - 37,467
Other 1,417 (15,760) 105,431 (115,350) (24,262)
--------------------------------------------------------------------
Net cash flows from (used for) financing activities (47,398) 71,657 19,954 28,024 72,237
--------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities - - (404,736) - (404,736)
Non-regulated businesses - (218,242) - - (218,242)
Corporate Services and other (50) - (33,724) - (33,774)
Proceeds from dispositions of assets 19,349 8,294 - - 27,643
Other (85,872) 24,876 (27,867) 85,370 (3,493)
--------------------------------------------------------------------
Net cash flows used for investing activities (66,573) (185,072) (466,327) 85,370 (632,602)
--------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (6,377) (13,001) 12,412 1,939 (5,027)
--------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 6,381 60,237 3,207 (1,939) 67,886
--------------------------------------------------------------------
Cash and temporary cash investments at end of period $4 $47,236 $15,619 $- $62,859
====================================================================
Supplemental cash flows information:
Cash paid (refunded) during the period for:
Interest $5,244 $74,922 $103,969 $- $184,135
====================================================================
Income taxes, net of refunds ($2,183) ($44,743) $77,575 $- $30,649
====================================================================
Noncash investing and financing activities:
Capital lease obligations incurred $- $- $19,101 $- $19,101
====================================================================
56
Alliant Energy Corporation Condensed Consolidating Statements of Cash Flows for the Years Ended December 31, 2001 and 2000
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
-----------------------------------------------------------------
Year Ended December 31, 2001 (in thousands)
- ----------------------------
Net cash flows from (used for) operating activities $155,559 ($2,855) $453,795 ($173,153) $433,346
-----------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (158,231) - (140,789) 140,789 (158,231)
Proceeds from issuance of common stock 288,553 - - - 288,553
Net change in Resources' credit facility - 63,110 - - 63,110
Proceeds from issuance of other long-term debt - 313,530 200,000 - 513,530
Reductions in other long-term debt - (9,249) (136,110) - (145,359)
Net change in commercial paper and other short-term borrowings (265,496) (54,953) - - (320,449)
Net change in loans to discontinued operations - (49,006) - - (49,006)
Other 46,777 (30,112) (16,850) (30,888) (31,073)
-----------------------------------------------------------------
Net cash flows from (used for) financing activities (88,397) 233,320 (93,749) 109,901 161,075
-----------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities - - (340,789) - (340,789)
Non-regulated businesses - (332,183) - - (332,183)
Corporate Services - - (40,019) - (40,019)
Proceeds from formation of ATC and other asset dispositions - 32,117 75,817 - 107,934
Other (61,355) 4,553 (54,015) 61,313 (49,504)
-----------------------------------------------------------------
Net cash flows used for investing activities (61,355) (295,513) (359,006) 61,313 (654,561)
-----------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 5,807 (65,048) 1,040 (1,939) (60,140)
-----------------------------------------------------------------
Cash and temporary cash investments at beginning of period 574 125,285 2,167 - 128,026
-----------------------------------------------------------------
Cash and temporary cash investments at end of period $6,381 $60,237 $3,207 ($1,939) $67,886
=================================================================
Supplemental cash flows information:
Cash paid (refunded) during the period for:
Interest $12,461 $60,767 $107,123 $- $180,351
=================================================================
Income taxes, net of refunds ($10,258) ($32,015) $113,168 $- $70,895
=================================================================
Noncash investing and financing activities:
Capital lease obligations incurred and other $- $- $19,967 $- $19,967
=================================================================
Year Ended December 31, 2000
- ----------------------------
Net cash flows from (used for) operating activities $391,284 ($23,712) $427,241 ($401,723) $393,090
-----------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (157,964) - (80,340) 80,340 (157,964)
Proceeds from issuance of common stock 1,069 - - - 1,069
Net change in Resources' credit facility - 181,652 - - 181,652
Proceeds from issuance of exchangeable senior notes - 402,500 - - 402,500
Proceeds from issuance of other long-term debt - 7,747 100,000 - 107,747
Reductions in other long-term debt - (501) (53,071) - (53,572)
Net change in commercial paper and other short-term borrowings 48,060 99,217 - - 147,277
Net change in loans to discontinued operations - (87,112) - - (87,112)
Other 3,385 (13,962) (23,212) 5,255 (28,534)
-----------------------------------------------------------------
Net cash flows from (used for) financing activities (105,450) 589,541 (56,623) 85,595 513,063
-----------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities - - (304,656) - (304,656)
Non-regulated businesses - (529,675) - - (529,675)
Corporate Services and other - - (11,123) - (11,123)
Proceeds from dispositions of assets 2,281 25,273 3,336 - 30,890
Other (316,188) 8,834 (63,463) 316,128 (54,689)
-----------------------------------------------------------------
Net cash flows used for investing activities (313,907) (495,568) (375,906) 316,128 (869,253)
-----------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (28,073) 70,261 (5,288) - 36,900
-----------------------------------------------------------------
Cash and temporary cash investments at beginning of period 28,647 55,024 7,455 - 91,126
-----------------------------------------------------------------
Cash and temporary cash investments at end of period $574 $125,285 $2,167 $- $128,026
=================================================================
Supplemental cash flows information:
Cash paid (refunded) during the period for:
Interest $17,220 $44,135 $97,495 $- $158,850
=================================================================
Income taxes, net of refunds ($2,350) ($20,560) $140,136 $- $117,226
=================================================================
Noncash investing and financing activities:
Capital lease obligations incurred and other $- $- $20,419 $- $20,419
=================================================================
57