Susan Gille - IR Pat Kampling - President and CEO Robert Durian - VP and CFO.

Nicholas Campanella - Merrill Lynch Ashar Khan - Visium Angie Storozynski - Macquarie Greg Reiss - Millennium.

Thank you for holding, ladies and gentlemen, and welcome to Alliant Energy's Third Quarter 2017 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. And I would now like to turn the call over to your host, Susan Gille, Manager of Investor Relations at Alliant Energy..

Good morning. I would like to thank all of you on the call and webcast for joining us today. We appreciate your participation. With me here today are Pat Kampling, Chairman, President and Chief Executive Officer and Robert Durian, Vice President, CFO and Treasurer; as well as other members of the senior management team.

Following prepared remarks by Pat and Robert, we will have time to take questions from the investment community. We issued a news release last night, announcing Alliant Energy's third quarter and year-to-date financial results. We updated our 2017 earnings guidance range and announced 2018 earnings guidance and common stock dividend target.

This release, as well as supplemental slides that will be referenced during today's call, are available on the investor page of our website at www.alliantenergy.com. Before we begin, I need to remind you that the remarks we make on this call and our answers to your questions include forward-looking statements.

These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters discussed in Alliant Energy's press release issued last night and in our filings with the Securities and Exchange Commission. We disclaim any obligation to update these forward-looking statements.

In addition, this presentation contains non-GAAP financial measures. The reconciliation between the non-GAAP and GAAP measures are provided in our investor presentation, which are available on our website at www.alliantenergy.com. At this point, I'll turn the call over to Pat..

Thanks, Sue. Good morning, and thank you for joining us today. Yesterday, we issued a press release, which included third quarter and year-to-date financial results, updated our 2017 earnings guidance range and announced our 2018 earnings guidance and common stock dividend target.

It also provided our annual capital expenditure plan through 2021 and our current estimated total CapEx for 2022 through 2026. Before the quarter, I am pleased to report that excessive mild temperatures, our results were according to plan. Like many others in the region, we experienced a very cool summer, which followed a very warm winter.

This negatively impacted our year-to-date earnings by $0.06 per share. As in the past, this is the quarter that we update this year's earnings guidance to include the temperature impacts for the first nine months.

So the new guidance is now -- has a midpoint of $1.93 per share, which is $0.06 per share lower than the midpoint of earnings guidance provided for 2017 last November. Robert will provide details for the quarter later in the call. Let me now focus on 2018, which you will be pleased with.

We announced a 6% increase in our targeted 2018 common dividend to $1.34 per share. We also announced a 6% increase of earnings guidance with a midpoint of $2.11 per share.

As shown on slide 2, the 6% increase is based on temperature-normalized earnings for 2017 of $1.99 per share and not the revised 2017 guidance that includes this year's negative temperature impact.

I also want to reaffirm that our long-term earnings growth objective remains at 5% to 7%, and our dividend payout ratio remains at 60% to 70% of consolidated earnings. We also issued our 2017 to 2021 capital expenditure plan totaling $6.9 billion, as shown on slide 3.

In addition, we provided a walk from the previous plan to our current plan on Slide 4. As you can see, the CapEx increase is driven mostly by the additional 300 megawatts of wind that we've been discussing with you. This increase was partially offset by lower maintenance expenditures in generation.

Our updated capital expenditure plan includes 1,200 megawatts of wind energy. Under current tax law, we expect all of the wind projects to qualify for the 100% federal production tax credits. Also, our CapEx plan includes additional lead beyond 2020, which we anticipate would be a combination of grid enhancements, solar and natural gas generation.

And as energy technologies evolve, we will continue to evaluate our investment plans to best serve the needs of our customers. Approximately one half of our $11.9 billion, 10-year capital plan is for enhancing our electric and gas distribution systems, including smart meter deployment in Iowa.

Our customers and communities expect us to not only maintain a safe and highly reliable system, but now expect us to adapt to a system that is more interactive and dynamic. We continue to make exciting progress on the development of our wind expansion.

Our existing utility wind portfolio includes owned wind farms of 568 megawatts, plus approximately 600 megawatts of renewable purchase power agreements. Our plans to reach 1,200 megawatts of new wind generation will more than double renewable energy for our customers.

We forecast that almost 30% of Alliant Energy's rated electric capacity would be from renewable sources by 2024. Let me now share with you some of the key activities underway to expand our energy resources.

In August, we filed a new advanced rate-making principal application, or RPU, with Iowa Utilities Board to request approval for up to 500 megawatts of additional utility-owned wind. In the RPU, we requested the same return equity of 11% that was approved in the last proceeding.

We also requested a cost cap of $1,780 per kilowatt including AFUDC and transmission, which is lower than the cost cap approved in the last proceeding. We expect approval in the first quarter of 2018. In construction, we'll soon begin at our Upland Prairie Wind Farm.

We are also making good progress on acquiring additional wind farms, which is all part of our 1,000-megawatt wind expansion in Iowa. Our forecast assumes that 300 megawatts will be in service in 2019, and the remaining 700 megawatts of wind will be placed in service in 2020.

Recently, we signed an agreement with We Energies to purchase a stake in the forward wind energy center, along with WPS and MG&E. We will file a joint application with the PSCW for the purchase of this Wisconsin wind farm before year-end.

If approved, customers are expected to realize a savings from the transfer of this wind farm for an existing purchase power agreement to utility-owned. We anticipate closing in the spring of 2018, subject to regulatory approvals. WPL's share of the facility will be 55 megawatts, with a purchase price of approximately $74 million.

This purchase is included in the capital expenditure plan we released last evening, which calls for a total of 200 megawatts of additional wind investment for WP&L. We are also completing our evaluations from the request for proposal for additional wind energy options to benefit our Wisconsin customers.

We anticipate filing a request for additional wind investments with the Public Service Commission before the year-end. We are very fortunate that we serve customers in a region where wind energy is economic and abundant, and I must thank our support of rural communities and farm families that are great partners in fueling our future.

We cannot do this without them. Moving on to our gas-generation investments, we are in the early stages of making good progress with Wisconsin's West Riverside Energy Center. We expect that West Riverside will be in service by early 2020.

Its output will be approximately 730 megawatts, and our share of the total anticipated project cost is approximately $640 million, including AFUDC and transmission. The three electric cooperatives that signed letters of intent to acquire approximately 65 megawatts of West Riverside have received PSCW approval.

We expect FERC approval of the wholesale supply agreement within the coming months. These co-ops have been WPL's wholesale customers for decades, and we are delighted that they'll be our partners in West Riverside. Solar generation is the newest addition to our energy mix.

We are excited about our collaboration on two solar projects with the city of Dubuque, which are now producing energy for our customers. These projects are in addition to our 300 existing solar facilities located at our Rock River campus, our running laboratory at our Lansing headquarters and the Indian Creek Nature Center in Cedar Rapids, Iowa.

Solar investments, such as these, will help meet our customers' growing interest in cleaner and distributed forms of energy. We are also planning to install solar at West Riverside Energy Center in Southern Wisconsin and Marshalltown Generating Station in Central Iowa.

Before I wrap up, I would like to briefly address the tax reform bill released in Congress yesterday. It's too early for us to know the potential impacts of tax reform on our company and customers, especially given that changes are expected in the coming weeks.

We will remain involved in the process and will continue to advocate for our customers for the economic growth in the communities we are privileged to serve. I would also like to take this opportunity to thank our dedicated employees for the storm recovery assistance not only at home, but also in Florida.

I'm extremely proud of their quick response and great customer care during challenging restoration efforts, all while keeping safety top of mind.

With Veterans Day just a week away, I would like to take a moment and pay tribute to the approximately 400 proud veterans that work here at Alliant Energy and to those veterans that are on the call with us today.

I also want to extend my thanks to appreciation to all the military families for everything they do while their loved ones are away from home. Let me summarize my key focus areas for 2017 and 2018. Our dedicated employees delivered solid third quarter results and will deliver on full year financial and operating objectives.

Our plan continues to provide the 5% to 7% earnings growth and 60% to 70% common dividend payout target. We expect to complete our large construction projects on time and at or below budget and in a very safe manner.

We will continue working with our regulators, consumer advocates, environmental groups, neighboring utilities and customers in a collaborative manner; continue focus on serving our customers and being good partners in our communities, while reshaping the organization to be leaner and faster; and we will continue to manage the company to strike the balance between capital investment, operational and financial discipline and cost impact to customers.

Thank you for your interest in Alliant Energy. And I'll now turn the call over to Robert..

Good morning, everyone. We released third quarter 2017 earnings last night with our GAAP earnings of $0.73 per share and our non-GAAP earnings of $0.75 per share.

The difference is a $0.02 per share non-recurring charge from write-downs of regulatory assets due to the recent proposed settlement reached with the major intervening parties and IPL's retail electric rate review.

Our non-GAAP earnings of $0.75 per share were $0.05 lower than non-GAAP earnings in the third quarter of 2016, primarily due to the impacts on electric sales of cooler summer temperatures in our service territory compared to last year.

IPL interim retail electric base rates and new WPL retail electric and gas base rates continue to contribute to higher earnings in the third quarter of 2017.

However, as expected, these increased earnings were offset by the impacts of higher depreciation expense from rate base additions, including the Marshalltown facility, AFUDC earned on Marshalltown in 2016 and higher energy efficiency cost recovery amortizations at WPL.

A summary of the quarter-over-quarter earnings drivers can be found on slides 5, 6 and 7. Turning to our updated 2017 earnings guidance. Our non-GAAP temperature-normalized earnings generated through the first three quarters of this year have been consistent with our original earnings guidance, allowing us to narrow the range.

The updated 2017 earnings guidance range is $1.89 to $1.97 per share. The change to the midpoint of our updated earnings guidance is due to the $0.06 of losses from the impact on electric and gas sales of the much milder temperatures in our service territory during the first three quarters of 2017.

Excluding the impacts of these much milder temperatures, we continue to see modest sales growth in our service territories, driven by increased sales through our commercial and industrial segments. Through the first three quarters of this year, temperature-normalized sales, excluding the impact of leap year, increased approximately 0.5%.

Now, let's review our 2018 earnings guidance. Last night, we issued our consolidated 2018 earnings guidance range of $2.04 to $2.18 per share. A walk from the midpoint of the 2017 non-GAAP temperature-normalized EPS range to the midpoint of the 2018 earnings guidance range is shown on slide 8.

The key drivers of the 6% growth in EPS are infrastructure investments in our core utility business, reflecting WPL's 2018 approved electric and gas retail rates; and IPL's final electric retail rates as proposed in the settlement currently under review by the Iowa Utilities Board.

IPL's interim rates will remain in effect until the IUB approve final rates by issuing a written decision expected sometime in the first quarter of 2018. Also, IPL plans to file a retail gas rate review next year to recover investments in this gas distribution system since its last gas rate review filed in 2012.

We are forecasting IPL's interim gas base rates will go into effect in the second quarter of 2018. The 2018 guidance range assumes normal temperatures and retail electric sales growth of approximately 1% when compared to temperature-normalized 2017 sale.

Similar to this year's increase in sales, we expect most of the electric sales growth for next year to come from commercial and industrial classes. Slide 9 has been provided to assist you in modeling the effective tax rates for IPL, WPL and AEC, including the impact of the tax benefit riders for 2017 and 2018.

We estimate a consolidated effective tax rate of 15% for 2017 and 24% for 2018. This 9% year-over-year increase is primarily related to changes in tax credits, associated with IPL's tax benefit riders. Please note that the tax benefit riders have no impact on annual earnings.

Also, to assist you in modeling, we would like to provide you with information concerning the assumed MISO ROE's embedded and forecasted ATC investment earnings. The 2017 earnings forecast assumes an ROE of 10.82% through the end of this year. For 2018, earnings forecast assumes an ROE of 10.2%.

We currently expect FERC will resolve the second MISO ROE complaint sometime in the first half of 2018. Finally, we have forecasted a flat O&M trend in 2017 through 2018 as we continue to focus on cost controls for the benefit of our customers.

The forecasted flat O&M trend excludes the fluctuations we expect from energy efficiency cost recovery amortizations, which were included in WPL's most recent electric and gas rate order. Turning to our financing plans.

Our current forecast continues to anticipate strong cash flows from the earnings generated by the business and extension of bonus depreciation reductions through 2019.

Alliant Energy currently does not expect to make any significant federal income tax payments through 2021, with additional tax payment reductions expected after 2021 due to the tax credits from wind investments included in our plan.

This forecast is based on current federal net operating losses and credit carryforward positions as well as future amounts of bonus depreciation expected to be taken on federal income tax returns over the next few years. There have been no material changes to our 2017 financing plan.

In August, we entered into a new 5-year $1 billion master credit facility. And in October, we completed the issuance of $300 million of long-term debt at WPL. Our 2017 plan continues to assume we will issue up to $250 million of long-term debt at IPL later this year.

Our 2018 financing plan assumes we will issue long-term debt of up to $700 million at IPL, which includes refinancing $350 million of long-term debt maturing in 2018. We also plan to issue up to $1 billion of debt at Alliant Energy finance, which includes refinancing $595 million of term loans maturing next year.

Finally, our plan assumes we will issue up to $200 million of new common equity in 2018 through a combination of an ATM program and our share on the direct program. The financing plan will allow us to maintain the capital structures at IPL and WPL included in the most recent retail rate decision.

We may adjust these financing plans as deemed prudent, if market conditions warrant and as our external financing needs continue to be reassessed. Finally, for our regulatory schedule. We have several current and planned regulatory dockets of note for 2017 and 2018, which we have summarized on slide 10.

For IPL, we await a decision concerning the retail electric base rate review filed in April of this year. We anticipate an oral decision from the IUB before the end of this year and a written decision early in 2018.

Also, we expect a decision from the Iowa Utilities Board concerning the advanced rate-making principals for the second 500-megawatt of wind investment for our Iowa customers at the end of the first quarter of next year. For WPL, we plan to submit a retail electric and gas rate review filing for test years 2019 and 2020 next year.

The rate filing will seek recovery of the West Riverside gas facility currently under construction. We very much appreciate your continued support of our company, and look forward to meeting with many of you at the EEI finance conference next week.

For your convenience, we have already posted on our website the EEI investor presentation, which details the separate IPL and WPL updated capital expenditures through 2021 as well as updated rate base and construction work-in-progress estimates. At this time, I'll turn the call back over to the operator to facilitate the question-and-answer session..

[Operator Instructions] And we'll take our first question from Nicholas Campanella with Merrill Lynch..

I was just curious given the 2018 guidance, what earned ROE does that reflect at your base electric businesses for WPL and IPL, respectively?.

Yes. This is Robert, Nick. It will be close to our authorized returns. They're both roughly in that 10% range..

Got it. And then I apologize if you touched on it already, but the wind expansion proposal, it seems that you're past the settlement deadline.

Is there still an ability to settle prior to the hearing? Or do you see it playing out fully?.

At this point, we see it playing out fully. We're still, of course, having active dialog with all the parties. But at this point, we see it as being fully litigated. So we'll expect a decision in early 2018..

Got it. And then just real quick, last question on the financing, I think you said $200 million of equity in '18.

Is there any way that we should kind of be thinking about your forward needs kind of 3-year, your forecast period through 2021?.

Yes. This is Robert again, Nick. The way I would look at it is we're trying to maintain the capital structures approved or included in our most recent rate reviews. And so given the height in CapEx that we see in 2018 and 2019, we should expect some modest level of common equity there..

And we'll go to our next question from Ashar Khan with Visium..

Pat, can I ask you the -- 2020 rate base is a huge move-up based on the slides deck you provided in the EEI deck.

Can you just remind us, in terms of rate activity, will there be new rate cases in effect for you, so you would be earning on that higher rate base, which steps up significantly from '19 to '20? Could you just remind us on the rate case time frame in the Iowa and Wisconsin jurisdictions, if you can?.

Yes. Ashar, this is Robert. Yes, I'm assuming you're pointing to the slides that we posted for the EEI finance conference. And as you will note, the IPL specifically increased about $900 million from 2019 to 2020. And a lot of that's the wind expansion that we're proposing to put into service in early 2020.

And, so yes, that would require us to go in for a rate review with a test year 2019 rate review at this point in time. And so assuming we cannot get to some type of settlement agreement before then, that's what our current plan assumes. And then if you turn over to the WPL increase, you'll see about a $500 million increase from '19 to 2020.

And a lot of that is based on the West Riverside plant that we're currently expecting to put into service late in 2019 and early 2020, as well as some modest levels of winds on the WPL side, too. And we expect to go in for a rate review or file for a rate review sometime most likely in the second quarter of 2018 for that 2019 and 2020 test period..

Okay.

So can we assume that for the -- if we add the two rate bases together, if I'm right, $10.4 billion or so, so can we assume, based on rate activity, that we should be earning pretty much equal to our allowed ROE in that year?.

I think that's a fair assumption, yes..

And then on to that, we can add the AFUDC, right? The AFUDC is separate, right, if I understand the way you do it.

Correct?.

You are correct..

Okay, okay. And then just going back to your comments. You said that equity is only required in '18 and '19, because then the CapEx needs to go down in 2020, right? And you get the rate increases. Is that fair? So it's really these two years as we go to the 2020 time frame.

Would that be fair?.

So we only really guided just for 2018 equity needs. We haven't guided you yet on '19. But it is fair to say in the years with expensive CapEx, in order to maintain our equity ratios at the utilities, historically, we've needed to issue some common equity for those. But you're absolutely right.

As you see the CapEx starting to decline, the need for equity will definitely decline with that as well..

Okay, okay. So Pat, based on this forecast, it seems like you couldn't easily be on the high end of your growth rate, especially as you approach 2020.

Am I missing something?.

I knew you were going to say that. Robert and I would really like to get people to really just focus on the midpoint. We've been very consistent on our 5% to 7% growth targets, and we would prefer that everybody just kind of guide to the middle because that's where we've historically been and that's what we're historically planning to.

But I appreciate your enthusiasm in the organization..

And we'll take our next question from Angie Storozynski with Macquarie..

I know it's a bit early for you to actually gauge how the proposed tax reform is going to impact your wind CapEx.

But give us a sense for your projects, so especially the ones that would start operation in 2020, how would they fare under the changed safe harbor provision as you needed to demonstrate that continuous construction? And also, if there were to be a change in the PTC, how would that change the economics of these projects, of the ones actually already announced and the ones that you might be pursuing in the future?.

Sure, Angie. No, thanks for the question, and you opened the question up very appropriately. It's really too early to understand all this. As you understand, the tax reform was issued yesterday. That's what we consider the first phase of the debate.

We'll be very involved, not only in the process and the discussions, but advocating on behalf of our customers. And we know what was issued yesterday is going to change, so it's really too early for us to speculate exactly how this is going to impact our current construction program.

But I'd give you my word that we'll be very active in the debate and the discussion on all of these very important matters. And as soon as we have more clarity, we'll be definitely willing to share that with the investment community..

I understand. But is there something you could do, frankly, before the end of this year? I don't know, just hide yourselves against that construction progress of acquirement? To be honest, I have no idea what it would entail.

I mean, I don't know, any type of construction work on the sites that are cited for the future wind farms?.

Yes. Angie, I can guarantee that we're looking at all of that right now. And when we have more clarity on that, we'll definitely share it with you. So that's something that we're actively looking at right now..

And we'll go to our next question from Greg Reiss with Millennium..

Just a quick question. I know you guys said you're targeting the authorized equity [indiscernible] with the utilities.

Can you tell us kind of what the plan is for the consolidated entity? It sounds like a debt -- I guess, an equity to cap perspective?.

Sure, Greg. This is Robert. I would think of it in the context of we're trying to maintain the current credit ratings we have at the consolidated level. And so, right now, I think we're in that probably 40% to 45% equity percentage for the consolidated group. And I'd say we're going to stay pretty consistent with that..

And Ms. Gille, there are no further questions at this time..

If no more questions, this concludes our call. A replay will be available through November 10, 2017 at 888-203-1112 for US and Canada or 719-457-0820 for international. Callers should reference conference ID, 4175543 and the PIN of 9578.

In addition, an archive of the conference call and a script of the prepared remarks made on the call will be available on the Investors section of the company's website later today. We thank you for your continued support of Alliant Energy, and feel free to contact me with any follow-up questions..