UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
This combined Form 10-Q is separately filed by Alliant Energy Corporation, Interstate Power and Light Company and Wisconsin Power and Light Company. Information contained in the Form 10-Q relating to Interstate Power and Light Company and Wisconsin Power and Light Company is filed by such registrant on its own behalf. Each of Interstate Power and Light Company and Wisconsin Power and Light Company makes no representation as to information relating to registrants other than itself.
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ALLIANT ENERGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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ALLIANT ENERGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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ALLIANT ENERGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)
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ALLIANT ENERGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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The interim condensed consolidated financial statements included herein have been prepared by Alliant Energy, without audit, pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements include Alliant Energy and its consolidated subsidiaries (including IP&L, WP&L, Resources and Corporate Services). These financial statements should be read in conjunction with the financial statements and the notes thereto included in Alliant Energy’s, IP&L’s and WP&L’s latest combined Annual Report on Form 10-K.
Alliant Energy’s comprehensive income (loss), and the components of other comprehensive income (loss), net of taxes, for the three and six months ended June 30 were as follows (in thousands):
Certain financial information relating to Alliant Energy’s significant business segments is as follows. Intersegment revenues were not material to Alliant Energy’s operations.
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* Int’l = International ** ISCO = Integrated Services
The provisions for income taxes for earnings from continuing operations are based on the estimated annual effective tax rate, which differs from the federal statutory rate of 35% principally due to state income taxes, the impact of foreign income and associated taxes, tax credits, effects of utility rate making and certain non-deductible expenses. The provisions for income taxes from continuing operations for the three and six months ended June 30, 2004 were also significantly different from the federal statutory rate of 35% due to the goodwill impairment charge recorded in the second quarter of 2004. Alliant Energy anticipates a significant portion of the temporary difference resulting from the goodwill impairment charge will more likely than not reverse in the form of a capital loss for tax purposes. Given Alliant Energy’s current capital loss carryforward position and the likelihood regarding its ability to utilize the capital loss related to this goodwill impairment charge before it expires, Alliant Energy recorded a valuation allowance against deferred tax assets of approximately $14 million in the second quarter of 2004 related to this issue.
Alliant Energy utilizes derivative instruments to manage its exposures to various market risks as described in Alliant Energy’s, IP&L’s and WP&L’s combined Annual Report on Form 10-K for the year ended Dec. 31, 2003. The following information supplements, and should be read in conjunction with, Note 10(a) in Alliant Energy’s “Notes to Consolidated Financial Statements” in the Form 10-K for the year ended Dec. 31, 2003.
A reconciliation of the weighted average common shares outstanding used in the basic and diluted EPS calculation for the three and six months ended June 30 was as follows:
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Alliant Energy completed the sale of its Australian, affordable housing and SmartEnergy, Inc. businesses in the second, third and third quarters of 2003, respectively. In the fourth quarter of 2003, Alliant Energy completed an initial public offering of WPC, leaving Alliant Energy with an approximate 6% ownership interest in WPC that is accounted for under the cost method as of June 30, 2004. As a result of additional common stock issued by WPC in 2004, Alliant Energy currently holds approximately 5% of the common shares of WPC. The operating results for these non-regulated businesses for the three and six months ended June 30, 2003 have been separately classified and reported as discontinued operations in Alliant Energy’s Condensed Consolidated Financial Statements.
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In 2004, Alliant Energy adopted revised FIN 46 guidance (FIN 46R). The entities that Alliant Energy consolidated as a result of this guidance did not have a material impact on its financial condition or results of operations. After making an ongoing exhaustive effort, Alliant Energy concluded that for the Riverside and RockGen power plants, it is unable to obtain the information necessary from the counterparties to these tolling and purchased-power agreements, respectively, to determine whether the counterparties are variable interest entities and if Alliant Energy is the primary beneficiary. The counterparties sell some or all of their generating capacity to WP&L, and can sell their energy output to both WP&L and IP&L. The Riverside plant was placed in service in June 2004. In the second quarter of 2004, WP&L and IP&L incurred costs (excluding fuel costs) related to the Riverside contract of $7.2 million and $0.1 million, respectively. WP&L incurred costs related to the RockGen contract of approximately $6.0 million and $23.3 million for the three and six months ended June 30, 2004, and $4.4 million and $16.7 million for the three and six months ended June 30, 2003, respectively. Alliant Energy's maximum exposure to loss from these contracts is undeterminable due to the inability to obtain the necessary information to complete such evaluation.
Pursuant to SFAS 143, “Accounting for Asset Retirement Obligations” (SFAS 143), a reconciliation of the changes in asset retirement obligations associated with long-lived assets is as follows (in millions):
The components of Alliant Energy’s qualified and non-qualified pension benefits and other postretirement benefits costs for the three and six months ended June 30 were as follows (in thousands):
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In March 2004, WP&L discontinued its participation in Alliant Energy’s combined utility customer accounts receivable sale program. WP&L had no receivables sold and no short-term debt outstanding at the time it discontinued its participation in the program. In May 2004, Alliant Energy reduced the maximum amount of receivables that can be sold in the program from $250 million to $175 million, all of which may be sold by IP&L. At June 30, 2004 and Dec. 31, 2003, Alliant Energy had sold $101 million (all at IP&L) and $176 million ($126 million at IP&L and $50 million at WP&L) of domestic utility customer accounts receivable, respectively.
WP&L has signed a definitive agreement to sell its 41% ownership interest in Kewaunee to a subsidiary of Dominion Resources, Inc. (Dominion). Pending various regulatory approvals, including the PSCW, the transaction is expected to be completed in 2004. Approval has already been obtained from the Federal Trade Commission, Nuclear Regulatory Commission, IUB, Illinois Commerce Commission and MPUC, and certain approvals have been obtained from the Federal Energy Regulatory Commission.
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In the second quarter of 2004, Alliant Energy recorded a SFAS 142, “Goodwill and Other Intangible Assets” (SFAS 142), pre-tax non-cash goodwill impairment charge of $43 million related to two of its Integrated Services businesses, primarily due to less favorable market conditions. The fair value of the goodwill was estimated using a combination of the expected discounted future cash flows and market value indicators. The impairment charge was recorded in “Goodwill impairment charge” in continuing operations in Alliant Energy’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2004. In July 2004, Alliant Energy announced its intent to divest these two businesses and one other business within its Integrated Services business platform. These businesses did not qualify as assets held for sale as of June 30, 2004, however, Alliant Energy expects these businesses will be reported as assets held for sale and discontinued operations in the third or fourth quarter of 2004.
The other (income) and deductions included in “Interest income and other” in Alliant Energy’s Condensed Consolidated Statements of Income for the three and six months ended June 30 were as follows (in millions):
In May 2004, Emery was placed in service and resulted in an increase in “Domestic utility — Electric plant in service” and a corresponding decrease in “Construction work in progress — Emery generating facility” on Alliant Energy’s Condensed Consolidated Balance Sheet as of June 30, 2004.
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 Alliant Energy subsidiaries are guarantors of Resources’ debt securities. Alliant Energy’s condensed consolidating financial statements are as follows:
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Alliant Energy Corporation Condensed Consolidating Statements of Income for the Three Months Ended June 30, 2004 and 2003
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Alliant Energy Corporation Condensed Consolidating Statements of Income for the Six Months Ended June 30, 2004 and 2003
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Alliant Energy Corporation Condensed Consolidating Balance Sheet as of June 30, 2004
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Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2003
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Alliant Energy Corporation Condensed Consolidating Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003
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INTERSTATE POWER AND LIGHT COMPANYCONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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INTERSTATE POWER AND LIGHT COMPANYCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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INTERSTATE POWER AND LIGHT COMPANYCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)
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INTERSTATE POWER AND LIGHT COMPANYCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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The interim condensed consolidated financial statements included herein have been prepared by IP&L, without audit, pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements include IP&L and its consolidated subsidiaries. IP&L is a direct subsidiary of Alliant Energy. These financial statements should be read in conjunction with the financial statements and the notes thereto included in IP&L’s latest Annual Report on Form 10-K.
For the three and six months ended June 30, 2004 and 2003, IP&L had no other comprehensive income, thus IP&L’s comprehensive income was equal to its earnings available for common stock for all periods.
Certain financial information relating to IP&L’s significant business segments is as follows. Intersegment revenues were not material to IP&L’s operations.
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The components of IP&L’s qualified pension benefits and other postretirement benefits costs for the three and six months ended June 30 were as follows (in thousands):
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WISCONSIN POWER AND LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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WISCONSIN POWER AND LIGHT COMPANYCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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WISCONSIN POWER AND LIGHT COMPANYCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)
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WISCONSIN POWER AND LIGHT COMPANYCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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The interim condensed consolidated financial statements included herein have been prepared by WP&L, without audit, pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements include WP&L and its consolidated subsidiaries. WP&L is a direct subsidiary of Alliant Energy. These financial statements should be read in conjunction with the financial statements and the notes thereto included in WP&L’s latest Annual Report on Form 10-K.
WP&L’s comprehensive income, and the components of other comprehensive loss, net of taxes, for the three and six months ended June 30 were as follows (in thousands):
Certain financial information relating to WP&L’s significant business segments is as follows. Gas revenues included $5 million for both the three months ended June 30, 2004 and 2003, and $15 million and $22 million for the six months ended June 30, 2004 and 2003, respectively, for sales to the electric segment. All other intersegment revenues were not material to WP&L’s operations.
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The components of WP&L’s qualified pension benefits and other postretirement benefits costs for the three and six months ended June 30 were as follows (in thousands):
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The primary first tier subsidiaries of Alliant Energy include: IP&L, WP&L, Resources and Corporate Services. Among various other regulatory constraints, Alliant Energy is operating as a registered public utility holding company subject to the limitations imposed by PUHCA. This MD&A includes information relating to Alliant Energy, IP&L and WP&L (as well as Resources and Corporate Services). Where appropriate, information relating to a specific entity has been segregated and labeled as such. The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements included in this report as well as the financial statements, notes and MD&A included in Alliant Energy’s, IP&L’s and WP&L’s latest combined Annual Report on Form 10-K.
Statements contained in this report that are not of historical fact are forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. Some, but not all, of the risks and uncertainties include: weather effects on sales and revenues; economic and political conditions in Alliant Energy’s domestic and international service territories; federal, state and international regulatory or governmental actions, including the impact of potential energy-related legislation in Congress, the ability to obtain adequate and timely rate relief to allow for, among other things, the recovery of operating costs and the earning of reasonable rates of return in current and future rate proceedings, as well as the payment of expected levels of dividends; unanticipated construction and acquisition expenditures; unanticipated issues in connection with Alliant Energy’s construction of new generating facilities; issues related to the supply of purchased electricity and price thereof, including the ability to recover purchased-power and fuel costs in a timely manner through rates; issues related to electric transmission, including recovery of costs incurred, and federal legislation and regulation affecting such transmission; risks related to the operations of Alliant Energy’s nuclear facilities and unanticipated issues relating to the pending sale of Alliant Energy’s interest in Kewaunee; costs associated with Alliant Energy’s environmental remediation efforts and with environmental compliance generally; developments that adversely impact Alliant Energy’s ability to implement its strategic plan; the amount of premiums incurred in connection with Alliant Energy’s planned debt reductions; improved results from Alliant Energy’s Brazil investments in 2004 compared to prior years; improved results from Alliant Energy’s other non-regulated businesses as a whole, including successful resolution of the development of Alliant Energy’s Laguna del Mar project in Mexico and recovery of the loan receivable related thereto; stable foreign exchange rates; no material permanent declines in the fair value of, or expected cash flows from, Alliant Energy’s investments; Alliant Energy’s ability to continue cost controls and operational efficiencies; Alliant Energy’s ability to identify and successfully complete proposed acquisitions and development projects; Alliant Energy’s ability to report the businesses it is in the process of divesting within its Integrated Services business unit as assets held for sale and discontinued operations in the second half of 2004 and to divest these businesses in a timely fashion; access to technological developments; employee workforce factors, including changes in key executives, collective bargaining agreements or work stoppages; continued access to the capital markets; the ability to successfully complete ongoing tax audits and appeals with no material impact on Alliant Energy’s earnings or cash flows; inflation rates; and factors listed in “Other Matters — Other Future Considerations.” Alliant Energy assumes no obligation, and disclaims any duty, to update the forward-looking statements in this report.
Alliant Energy’s domestic utility business is its core business and the sole growth platform within its strategic plan. The strategic plan is concentrated on building and maintaining the generation and infrastructure necessary to provide Alliant Energy’s domestic utility customers with safe, reliable and environmentally sound energy service. Alliant Energy’s strategic plan also includes focusing on the profitability and cash flows of its remaining non-regulated businesses which will serve as ongoing business platforms. The following is an update related to recent activities of Alliant Energy’s domestic utility generation plan:
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Alliant Energy also continues to evaluate the performance of all its businesses, both utility and non-regulated, and is focused on taking actions to increase the returns earned on invested capital in all of its businesses. Alliant Energy is committed to streamlining its portfolio of businesses to only those that can provide meaningful earnings and cash flows for shareowners and those it is prepared to invest the capital needed to reach the scale necessary to generate such earnings and cash flows. Consistent with this strategic focus, Alliant Energy announced in July 2004 its intent to divest the following businesses within its Integrated Services business platform:
Alliant Energy is in the early stages of developing its divestiture plan for these businesses and intends to complete the divestitures within a year and expects the results of these businesses will qualify for reporting as assets held for sale and discontinued operations in the third or fourth quarter of 2004. Alliant Energy intends to apply any proceeds from the divestiture of these businesses toward debt reduction at Resources. The net income (loss) from these businesses included in Alliant Energy’s consolidated income (loss) from continuing operations were ($46.1) million and ($0.9) million for the three months ended June 30, 2004 and 2003, and ($48.3) million and $1.3 million for the six months ended June 30, 2004 and 2003, respectively. Both the three and six months ended June 30, 2004 included ($40.3) million of SFAS 142 after-tax non-cash goodwill impairment charges. Refer to Note 13 of Alliant Energy’s “Notes to Condensed Consolidated Financial Statements” for additional information regarding the goodwill impairment charges.
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A summary of the regulatory environment is included in the combined Form 10-K filed by Alliant Energy, IP&L and WP&L for the year ended Dec. 31, 2003. Set forth below are recent developments relating to the regulatory environment.
Details of Alliant Energy’s rate cases impacting its historical and future results of operations are as follows (dollars in millions):
Interim rate relief is implemented, subject to refund, pending determination of final rates. The final rate relief granted replaces the amount of interim rate relief granted.
Since the final increase was lower than the interim relief granted, a refund to customers was made in 2003.
The regulatory process in Wisconsin enables WP&L to adjust its request, either up or down, in response to fuel cost changes since the interim order. WP&L has experienced modest increases in its fuel and purchased-power costs since the interim order was issued. WP&L continues to monitor these costs and will update the record in the rate proceeding as allowed.
IP&L requested interim rate relief of approximately $106 million. In July 2004, a non-unanimous settlement agreement was filed with the IUB proposing resolution of all revenue requirement issues in the case. A majority of the parties to the case signed the settlement agreement including IP&L, the Iowa Office of Consumer Advocate, and certain other customers and/or customer groups. The parties agreed to an increase in IP&L’s annual Iowa electric rates of $107 million ($9 million more than the revenues granted in the IUB’s interim order) and a return on equity for capital unrelated to Emery of 10.7%. Capital related to Emery will continue to earn a return on equity of 12.23% consistent with the ratemaking principles granted by the IUB in 2002. The elements in the settlement agreement are subject to approval by the IUB. A decision by the IUB on the settlement is expected in the first quarter of 2005. The filing of the settlement agreement does not impact interim rates.
With the exception of recovering a return on IP&L’s Emery plant, which is a large component of IP&L’s retail Iowa electric rate case filed in March 2004, a significant portion of the rate increases included in the previous table reflect the recovery of increased costs incurred by IP&L and WP&L, or costs they expect to incur. Thus, the increase in revenues related to these rate increases have not resulted or are not expected to result in a corresponding increase in net income.
In March 2004, a new ratemaking law was enacted in Iowa. The new law allows utilities to place in effect interim rates, subject to refund, without review by the IUB within ten days of filing a general rate increase request. The law also allows the IUB to consider known and measurable changes in costs and revenues occurring within nine months from the end of the historical test year in setting final rates in a rate case. Both of these changes are designed to mitigate regulatory lag in Iowa ratemaking, which uses a historical versus projected test year in setting rates. IP&L does not expect this new law to have any impact on its pending retail electric rate case in Iowa as it is only expected to impact future Iowa rate cases.
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Unless otherwise noted, all “per share” references in the Results of Operations section refer to earnings perdiluted share.
Overview — Second Quarter Results — Alliant Energy’s net income (loss) and EPS for the second quarter were as follows (dollars in millions; totals may not foot due to rounding):
The increase in domestic utility income from continuing operations was primarily due to higher electric and gas margins. The decline in Alliant Energy’s non-regulated results from continuing operations was primarily due to a SFAS 142 after-tax non-cash goodwill impairment charge of $40 million in the second quarter of 2004 and lower results from its International and Integrated Services business units, partially offset by an $8 million reduction in interest expense resulting from Alliant Energy’s continuing debt reduction program.
Domestic Utility Electric Margins — Electric margins and MWh sales for Alliant Energy for the three months ended June 30 were as follows (in thousands):
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Electric margins and MWh sales for Alliant Energy for the six months ended June 30 were as follows (in thousands):
Electric margins increased $22.3 million, or 8%, and $45.4 million, or 9%, for the three- and six-month periods, respectively, primarily due to the impact of various rate increases implemented in 2003 and 2004 and an increase in retail sales resulting from continued customer and other sales growth of 3% and 2%, respectively. The six-month increase was also due to the impact on the comparison of a significant under-recovery of purchased-power and fuel costs at WP&L in the first quarter of 2003, partially offset by the impact of seasonal rates at WP&L, implemented for the first time in April 2003. Electric margins in 2004 were also negatively impacted by higher than anticipated purchased-power and fuel costs at WP&L. WP&L filed a fuel-only rate case in the first quarter of 2004 and an interim rate increase of approximately $16 million was implemented in late March 2004. Weather had a modest downward impact on electric margins for the three- and six-month periods in 2004 and 2003.
In April 2003, WP&L implemented seasonal electric rates that are designed to result in higher rates for the peak demand period from June 1 through Sept. 30 and lower rates in all other periods during each calendar year. As a result, total annual revenues are not expected to be impacted significantly. However, the margins for the six-months ended June 30, 2004, were approximately $7 million lower than the same period in 2003, all other things being equal, given the seasonal rates were not yet effective in the first quarter of 2003.
Domestic Utility Gas Margins — Gas margins and Dth sales for Alliant Energy for the three months ended June 30 were as follows (in thousands):
Gas margins and Dth sales for Alliant Energy for the six months ended June 30 were as follows (in thousands):
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Gas margins increased $3.9 million, or 15%, and decreased $1.5 million, or 2%, for the three- and six-month periods, respectively. The three-month increase was primarily due to a $2 million rate refund reserve recorded in the second quarter of 2003 at IP&L and improved results of $1 million from WP&L’s performance-based commodity cost recovery program (benefits are shared by ratepayers and shareowners). The six-month decrease was primarily due to lower sales, which were partially due to milder weather conditions in the first quarter of 2004 compared with the same period in 2003, primarily offset by improved results of $3 million from WP&L’s performance-based commodity cost recovery program.
Refer to “Rates and Regulatory Matters” for discussion of various electric and gas rate filings.
Domestic Utility Other Revenues — Other revenues for the domestic utilities decreased $5.1 million and $9.1 million for the three- and six-month periods, respectively, due to lower construction management revenues from WindConnect™ due to the current uncertainty regarding extension of the federal renewable energy production tax credit. The decrease was largely offset by lower other operation and maintenance expenses related to the WindConnect™ program.
Non-regulated Revenues— Details regarding Alliant Energy’s non-regulated revenues for the three and six months ended June 30 were as follows (in thousands):
The decreased Integrated Services revenues for the three- and six-month periods were primarily due to decreased gas revenues at Alliant Energy’s natural gas marketing business, NGE, including reduced sales opportunities as a result of less volatility in gas prices and higher sales to electric generating facilities used during peak demand in the second quarter of 2003. The increased International revenues for the three- and six-month periods were primarily due to the acquisition of an additional combined heat and power facility in China in the second quarter of 2003 and increased production at its generating facilities in China.
Other Operating Expenses— Other operation and maintenance expense for the domestic utilities decreased $15.8 million and $8.6 million for the three- and six-month periods, respectively, primarily due to the impact at WP&L of a planned refueling outage at Kewaunee in the second quarter of 2003 (there was no such outage in 2004), lower expenses for WindConnect™ and decreases in transmission and distribution costs. These items were partially offset by increases in employee and retiree benefits (comprised of compensation, medical and pension costs).
Non-regulated operation and maintenance expenses for the three and six months ended June 30 were as follows (in thousands):
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The Integrated Services and International variances for the three- and six-month periods were largely driven by the same factors impacting the revenue variances discussed previously. The International increase for the three- and six-month periods was also impacted by higher coal and related costs for its generating facilities in China. Refer to “Other Matters — Other Future Considerations — China” for additional discussion.
The goodwill impairment charge in the second quarter of 2004 was a SFAS 142 pre-tax non-cash charge Alliant Energy recorded to write-off $43 million of the $44 million of goodwill on the balance sheets of the Integrated Services businesses Alliant Energy intends to divest. Refer to Note 13 of Alliant Energy’s “Notes to Condensed Consolidated Financial Statements” for further details. Depreciation and amortization expense increased $6.8 million and $12.2 million for the three- and six-month periods, respectively, primarily due to utility property additions, including the Emery plant. Taxes other than income taxes increased $4.9 million and $5.1 million for the three- and six-month periods, respectively, primarily due to increased gross receipts and property taxes.
Interest Expense and Other— Interest expense decreased $11.2 million and $22.2 million for the three- and six-month periods, respectively, primarily due to lower average borrowings as a result of debt retirements within Alliant Energy’s non-regulated businesses in 2003 and 2004, and credit facility fees incurred at Resources in 2003. The impact of additional equity issued during the last 12 months and various debt refinancings also contributed to the decrease.
Loss on early extinguishment of debt in the first quarter of 2004 includes debt repayment premiums and charges for the unamortized debt expenses related to long-term debt retirements of $20 million of senior notes at Resources.
Equity (income) loss from Alliant Energy’s unconsolidated investments for the three and six months ended June 30 was as follows (in thousands):
The lower equity income from Alliant Enegy’s Brazil investments for the three-month period was primarily due to the impact of foreign currency transaction gains (losses) of ($1.0) million and $2.5 million recorded in the second quarters of 2004 and 2003, respectively, and higher operating, litigation-related and interest expenses at the Brazilian operating companies. These items were partially offset by the impact of rate increases implemented at the Brazilian operating companies. The higher equity income from the Brazil investments for the six-month period was primarily due to rate increases implemented at the Brazilian operating companies and a gain of $5.1 million (representing Alliant Energy’s allocated portion of the total gain) realized in the first quarter of 2004 from the sale of two hydroelectric plants, partially offset by the reasons described previously for the three-month decrease. The increased equity income from New Zealand for the six-month period was primarily due to higher electric margins resulting from higher energy prices.
Allowance for funds used during construction (AFUDC) increased $1.2 million and $4.4 million for the three- and six-month periods, respectively, primarily due to construction of the Emery plant.
Interest income and other decreased $6.8 million and $11.4 million for the three- and six-month periods, respectively, largely due to lower foreign currency transaction gains/losses, lower non-cash valuation adjustments related to Alliant Energy’s McLeod trading securities, gains from sales of modest investments in New Zealand in the second quarter of 2003 and lower interest income. The lower interest income for the six-month period was primarily due to the elimination of loans to discontinued operations due to asset sales during 2003. Refer to Note 14 of Alliant Energy’s “Notes to Condensed Consolidated Financial Statements” for further details.
Income Taxes — The effective income tax rates were 47.1% for the six-month period ended June 30, 2004, compared with 28.4% and 29.4% for the three- and six-month periods, respectively, ended June 30, 2003. The effective tax rate for the three-month period ended June 30, 2004 is not meaningful given the insignificant amount of pre-tax loss from continuing operations in such period. The 2004 three- and six-month income taxes were negatively impacted by the tax treatment related to the goodwill impairment charge recorded in the second quarter. Refer to Note 4 of Alliant Energy’s “Notes to Condensed Consolidated Financial Statements” for further details.
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Loss from Discontinued Operations — Refer to Note 7 of Alliant Energy’s “Notes to Condensed Consolidated Financial Statements” for discussion of Alliant Energy’s discontinued operations.
Cumulative Effect of Changes in Accounting Principles — In the first quarter of 2003, Alliant Energy recorded after-tax charges of $4 million and $2 million for the cumulative effect of changes in accounting principles related to the adoption on Jan. 1, 2003 of SFAS 143 and Emerging Issues Task Force Issue 02-3, “Issues Related to Accounting for Contracts Involved in Energy Trading and Risk Management Activities” within WPC and Integrated Services, respectively.
Overview — Second Quarter Results — Earnings available for common stock increased $3.9 million, primarily due to higher electric margins partially offset by increased other operating expenses.
Electric Margins —Electric margins and MWh sales for IP&L for the three months ended June 30 were as follows (in thousands):
Electric margins and MWh sales for IP&L for the six months ended June 30 were as follows (in thousands):
Electric margins increased $15.7 million, or 11%, and $14.6 million, or 5%, for the three- and six-month periods, respectively, primarily due to the impact of various rate increases implemented in 2003 and 2004, including increased revenues to recover a significant portion of IP&L’s increased operating expenses, increased retail sales resulting from continued customer and other sales growth and lower purchased-power capacity costs. Weather had a modest downward impact on electric margins for the three- and six-month periods in 2004 and 2003.
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Gas Margins — Gas margins and Dth sales for IP&L for the three months ended June 30 were as follows (in thousands):
Gas margins and Dth sales for IP&L for the six months ended June 30 were as follows (in thousands):
Gas margin increased $1.3 million, or 10%, and decreased $3.2 million, or 7%, for the three- and six-month periods, respectively. The three-month increase was primarily due to a $2 million rate refund reserve recorded in the second quarter of 2003. The six-month decrease was primarily due to lower sales, which were partially due to slightly milder weather in the first quarter of 2004 compared to the same period in 2003.
Refer to “Rates and Regulatory Matters” for discussion of IP&L’s electric and gas rate filings.
Steam and Other Revenues— Steam and other revenues decreased $2.6 million for the six-month period primarily due to lower construction management revenues from WindConnect™, due to the current uncertainty regarding extension of the federal renewable energy production tax credit. The decrease was largely offset by lower other operation and maintenance expenses related to IP&L’s WindConnect™ program.
Other Operating Expenses— Other operation and maintenance expenses increased $1.4 million and $4.9 million for the three- and six-month periods, respectively, primarily due to increases in employee and retiree benefits (comprised of compensation, medical and pension costs), partially offset by lower transmission and distribution costs. The six-month increase was also partially offset by lower expenses for WindConnect™. Depreciation and amortization expense increased $6.5 million and $13.3 million for the three- and six-month periods, respectively, primarily due to property additions, including the Emery plant.
Interest Expense and Other— AFUDC increased $1.1 million and $4.8 million for the three- and six-month periods, respectively, due to construction of the Emery plant.
Income Taxes — The effective income tax rates were 43.5% and 42.3% for the three- and six-month periods ended June 30, 2004, respectively, compared with 40.8% and 39.6% for the same periods last year. The increases for the three- and six-month periods were primarily due to increases in property-related temporary differences for which deferred tax expense is not recorded pursuant to rate making principles. The six-month increase was also due to a decrease in the Alliant Energy tax benefit allocated to IP&L pursuant to the provisions of PUHCA.
Overview — Second Quarter Results — Earnings available for common stock increased $11.3 million, primarily due to lower other operating expenses and higher electric and gas margins.
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Electric Margins —Electric margins and MWh sales for WP&L for the three months ended June 30 were as follows (in thousands):
Electric margins and MWh sales for WP&L for the six months ended June 30 were as follows (in thousands):
Electric margins increased $6.6 million, or 5%, and $30.8 million, or 14%, for the three- and six-month periods, respectively, primarily due to the implementation of rate increases in 2003 and 2004 and increased retail sales resulting from continued customer and other sales growth. The six-month increase was also due to the impact on the comparison of a significant under-recovery of purchased-power and fuel costs in the first quarter of 2003, partially offset by the impact of implementing seasonal rates in 2003. Electric margins in 2004 were also negatively impacted by higher than anticipated fuel and purchased-power costs. WP&L filed a fuel-only rate case in the first quarter of 2004 and an interim rate increase of approximately $16 million was implemented in late March 2004. Weather had a modest downward impact on electric margins for the three- and six-month periods in 2004 and 2003. Refer to “Alliant Energy Results of Operations” for further discussion of seasonal electric rates.
Gas Margins — Gas margins and Dth sales for WP&L for the three months ended June 30 were as follows (in thousands):
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Gas margins and Dth sales for WP&L for the six months ended June 30 were as follows (in thousands):
Gas margins increased $2.6 million, or 20%, and $1.7 million, or 4%, for the three- and six-month periods, respectively, primarily due to improved results of $1 million and $3 million, respectively, from WP&L’s performance-based commodity cost recovery program (benefits are shared by ratepayers and shareowners). The six-month increase was partially offset by lower sales, due to milder weather conditions in the first quarter of 2004 compared with the same period in 2003.
Refer to “Rates and Regulatory Matters” for discussion of WP&L’s electric and gas rate filings.
Other Revenues —Other revenues decreased $6.0 million and $6.4 million for the three- and six-month periods, respectively, primarily due to lower construction management revenues from WindConnect™ due to the current uncertainty regarding extension of the federal renewable energy production tax credit. The decrease was largely offset by lower other operation and maintenance expenses related to WP&L’s WindConnect™ program.
Other Operating Expenses— Other operation and maintenance expenses decreased $15.4 million and $11.8 million for the three- and six-month periods, respectively, primarily due to the impact of a planned refueling outage at Kewaunee in the second quarter of 2003 (there was no such outage in 2004), lower expenses for WindConnect™ and decreases in the amortization of deferred costs recovered in rates. These items were partially offset by increases in employee and retiree benefits (comprised of compensation, medical and pension costs). Taxes other than income taxes increased $2.5 million and $3.1 million for the three- and six-month periods, respectively, primarily due to increased gross receipts taxes.
Interest Expense and Other— Interest expense decreased $2.5 million and $3.8 million for the three- and six-month periods, respectively, primarily due to lower average borrowings.
Income Taxes — The effective income tax rates were 38.6% and 38.4% for the three- and six-month periods ended June 30, 2004, respectively, compared with 37.9% and 34.7%, respectively, for the same periods last year. The increase for the six-month period was primarily due to a decrease in the Alliant Energy tax benefit allocated to WP&L pursuant to the provisions of PUHCA.
Cash Flows for the Six-Month Periods — Selected information from Alliant Energy’s, IP&L’s and WP&L’s respective Condensed Consolidated Statements of Cash Flows for the six months ended June 30 was as follows (in thousands):
Alliant Energy’s cash flows from operating activities increased $52 million, primarily due to higher net income at WP&L and changes in working capital, including lower gas storage balances and timing of collections and payables, partially offset by changes in the level of accounts receivable sold; cash flows used for financing activities increased $30 million, primarily due to changes in the amount of debt issued and retired, partially offset by proceeds from Alliant Energy’s continuous equity offering program in the second quarter of 2004; and cash flows used for investing activities increased $79 million, primarily due to proceeds received from the sale of Alliant Energy’s Australian business in April 2003, partially offset by the 2003 acquisition by Resources of a 309 MW, non-regulated, tolled, natural gas-fired power plant in Neenah, Wisconsin, and other decreases in non-regulated construction and acquisition expenditures. IP&L’s cash flows used for financing activities increased $100 million, primarily due to changes in the amount of debt issued and retired, partially offset by capital contributions of $50 million from Alliant Energy; and cash flows used for investing activities decreased $101 million, primarily due to lower construction and acquisition expenditures associated with the construction of the Emery plant. WP&L’s cash flows from operating activities increased $14 million, primarily due to higher net income and changes in working capital; cash flows used for financing activities increased $20 million due to higher common stock dividends and net changes in the amount of debt issued and retired; and cash flows used for investing activities increased $12 million, primarily due to increased levels of construction expenditures.
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Certain Regulatory Approvals/Requirements — PUHCA — Alliant Energy is subject to a PUHCA requirement whereby Alliant Energy’s common equity balance must be at least 30% of its total consolidated capitalization, including short-term debt. Alliant Energy’s common equity ratio as of June 30, 2004, as computed under this requirement, was 46.9%.
State Regulatory Agencies — In March 2004, IP&L received the necessary regulatory authorization to increase short-term borrowings from $250 million to $300 million. In March 2004, WP&L discontinued its utility customer accounts receivable sale program, increasing its short-term borrowing authority granted by the PSCW to $185 million for general corporate purposes and an additional $55 million should WP&L need to repurchase its variable rate demand bonds.
Shelf Registrations— In 2004, Alliant Energy, IP&L and WP&L each filed separate shelf registrations with the SEC. Alliant Energy’s shelf registration became effective in April 2004 and allows Alliant Energy flexibility to offer from time to time up to an aggregate of $300 million of common stock, stock purchase contracts and stock purchase units. IP&L’s shelf registration became effective in April 2004 and allows IP&L flexibility to offer from time to time up to an aggregate of $210 million of preferred stock, senior unsecured debt securities and collateral trust bonds. WP&L’s shelf registration became effective in April 2004 and allows WP&L flexibility to offer from time to time up to an aggregate of $150 million of its preferred stock, senior unsecured debt securities and first mortgage bonds. Alliant Energy, IP&L and WP&L had $254 million, $85 million and $50 million remaining available under their respective shelf registrations at August 5, 2004.
Cash and Temporary Cash Investments — As of June 30, 2004, Alliant Energy and its subsidiaries had approximately $189 million of cash and temporary cash investments, of which approximately $73 million consisted of deposits in foreign bank accounts. Due to Alliant Energy electing permanent reinvestment of earnings for federal income tax purposes for certain foreign subsidiaries within its China business platform, a majority of the cash held in foreign banks cannot be repatriated without material tax obligations. Alliant Energy plans to use a portion of this cash held in foreign bank accounts to invest in future capital projects in China.
Sale of Accounts Receivable— Refer to Note 11 of Alliant Energy’s “Notes to Condensed Consolidated Financial Statements” for information on WP&L’s discontinuance of participation in the utility customer accounts receivable sale program and a reduction in the maximum amount of receivables that can be sold in the program.
Short-term Debt — Information regarding commercial paper at June 30, 2004 was as follows (dollars in millions):
In July 2004, Alliant Energy completed the syndication of three revolving credit facilities totaling $650 million ($100 million for Alliant Energy at the parent company level, $300 million for IP&L and $250 million for WP&L), which support commercial paper and are available for direct borrowings. The combined total amount of the new facilities remains the same as the former facilities, however, $100 million of the borrowing capability has been shifted from the parent company to IP&L and WP&L to support the continued focus on the domestic utility business as the primary source of future capital needs. The facility at the parent company is used to fund Resources and Corporate Services as well as its own needs. These new facilities replaced the former facilities which were to expire in September 2004. These new facilities are designed to be five-year facilities with the length of the facilities still being subject to various state and federal regulatory approvals given the term is longer than a 364-day facility. With the exception of the consolidated net worth covenant, which has been removed, the new credit facility agreements contain similar covenants as the former credit facility agreements, including the following:
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The cross default provisions, negative pledge provisions and material adverse change clauses of the new credit facilities are less restrictive than those of the former credit facilities. Alliant Energy’s, IP&L’s and WP&L’s new credit facilities contain provisions that require, during the term of the facilities, any proceeds from asset sales, with certain exclusions, in excess of 20% of their respective consolidated assets be used to reduce commitments under their respective facilities. Exclusions include, among others, certain sale and lease-back transactions and any potential sales of Alliant Energy’s nuclear, transmission or international assets.
Long-term Debt— In August 2004, WP&L issued $100 million of 6.25% senior debentures due 2034 and used the proceeds to repay short-term debt, including $62 million incurred in connection with the repayment at maturity of 7.25% first mortgage bonds in June 2004, and for general corporate purposes. IP&L issued $25 million and $100 million of 6.30% senior debentures due 2034 in August 2004 and May 2004, respectively, and used the proceeds to repay short-term debt primarily incurred in the construction of the Emery plant and for general corporate purposes. All of these long-term debt issuances were executed in connection with WP&L’s and IP&L’s respective shelf registrations discussed previously. In February 2004, Resources retired $10.0 million of its 9.75% senior notes and $9.5 million of its 7% senior notes, incurring approximately $0.03 per share of debt repayment premiums.
Common Equity— In connection with Alliant Energy's 2004 shelf registration discussed previously, it is Alliant Energy's current intent to issue up to $150 million of new common stock during 2004. Alliant Energy has entered into a sales agreement with Cantor Fitzgerald & Co., under which Alliant Energy may sell from time to time up to 7.5 million shares of its common stock. During the second quarter of 2004, Alliant Energy issued approximately 1.6 million shares of new common stock and received approximately $37 million in net proceeds under this shelf registration and sales agreement. In the third quarter of 2004, Alliant Energy has issued approximately 0.3 million additional shares and received approximately $8 million in net proceeds through August 5, 2004 under this shelf registration and sales agreement. Refer to "Shelf Registrations" for additional information.
Credit Ratings— In May 2004, Standard & Poor’s Rating Services lowered WP&L’s secured long-term debt rating from A to A- to align it with WP&L’s corporate/issuer credit rating.
Off-Balance Sheet Arrangements — A summary of Alliant Energy’s off-balance sheet arrangements is included in the combined Form 10-K filed by Alliant Energy, IP&L and WP&L for the year ended Dec. 31, 2003 and has not changed materially from the items reported in the 2003 Form 10-K. Refer to Note 8 of Alliant Energy’s “Notes to Condensed Consolidated Financial Statements” for the impact of FIN 46R guidance on Alliant Energy’s tolling and purchased-power agreements.
Contractual Obligations— A summary of Alliant Energy’s, IP&L’s and WP&L’s contractual obligations is included in the combined Form 10-K filed by Alliant Energy, IP&L and WP&L for the year ended Dec. 31, 2003 and has not changed materially from the items reported in the 2003 Form 10-K.
Environmental — A summary of Alliant Energy’s environmental matters is included in the combined Form 10-K filed by Alliant Energy, IP&L and WP&L for the year ended Dec. 31, 2003 and has not changed materially from the items reported in the 2003 Form 10-K, except as described below.
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The Wisconsin Department of Natural Resources (DNR) independently developed proposed mercury control rules for Wisconsin generating facilities that will cap emissions beginning in 2008, followed by subsequent reductions of 40% by 2010 and 75% by 2015. These rules have been approved by the Wisconsin legislature and are expected to become effective in the second half of 2004. The Wisconsin mercury rule requirements will be superseded by federal mercury emissions standards when published. Alliant Energy is currently evaluating the expected impact of the Wisconsin rules and also continues to closely monitor the developments at the federal level related to mercury emissions standards.
Refer to “Legal Proceedings” for discussion of complaints filed against WP&L and Alliant Energy regarding the Columbia generating station.
Market Risk Sensitive Instruments and Positions — Alliant Energy’s primary market risk exposures are associated with interest rates, commodity prices, equity prices and currency exchange rates. Alliant Energy has risk management policies to monitor and assist in controlling these market risks and uses derivative instruments to manage some of the exposures. A summary of Alliant Energy’s market risks is included in Alliant Energy’s, IP&L’s and WP&L’s combined Form 10-K for the year ended Dec. 31, 2003 and have not changed materially from those reported in the 2003 Form 10-K, except as described below.
Commodity Risk — Non-trading — Refer to “Other Future Considerations — China” for discussion of higher than anticipated coal and other related costs in China.
Accounting Pronouncements— As of March 31, 2004, Alliant Energy adopted FIN 46R guidance. Refer to Note 8 of Alliant Energy’s “Notes to Condensed Consolidated Financial Statements” for additional information.
In December 2003, the President signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act). The Act introduces a prescription drug benefit under Medicare Part D, as well as a federal subsidy to sponsors of retiree health care benefit plans, that provide a benefit that is at least actuarially equivalent to Medicare Part D. In the second quarter of 2004, the FASB issued, and Alliant Energy elected early adoption of, FSP 106-2, which supersedes FSP 106-1. Refer to Note 10 of Alliant Energy’s, IP&L’s and WP&L’s “Notes to Condensed Consolidated Financial Statements” for additional information.
Critical Accounting Policies — A summary of Alliant Energy’s critical accounting policies is included in Alliant Energy’s, IP&L’s and WP&L’s combined Form 10-K for the year ended Dec. 31, 2003 and have not changed materially from those reported in the 2003 10-K. Refer to Note 13 of Alliant Energy’s “Notes to Condensed Consolidated Financial Statements” for information regarding a goodwill impairment charge recorded in the second quarter of 2004.
Other Future Considerations— A summary of Alliant Energy’s, IP&L’s and WP&L’s other future considerations is included in the combined Form 10-K filed by Alliant Energy, IP&L and WP&L for the year ended Dec. 31, 2003 and have not changed materially from those reported in the 2003 Form 10-K, except as described below. In addition to items discussed earlier in MD&A, the following items could impact Alliant Energy’s future financial condition or results of operations:
Mexico — At June 30, 2004, Resources held a secured loan receivable of approximately $82 million from an unrelated Mexican development company. The loan proceeds were used by the development company to construct substantially all the infrastructure for the initial phase of a master-planned resort community known as Laguna del Mar located near Puerto Penasco, State of Sonora, on the Sea of Cortez. Alliant Energy has concerns regarding the Mexican development company’s ability to timely complete all phases of the project, market and sell the real estate, and otherwise meet all of its obligations under the loan documents. Negotiations are currently underway between Resources and the owners of the development company to resolve this matter. Resources is evaluating its alternatives, which include possibly restructuring a role for its developers or replacing them, a transfer of ownership and control of the project to Resources or the exercise of Resources’ remedies through legal action. Effective Jan. 1, 2004, Resources ceased accruing interest income related to this loan pending resolution of this matter. If the development of the project and related real estate sales are not ultimately successfully executed, it is possible that Alliant Energy could incur material asset valuation charges in the future. Alliant Energy is unable to predict the ultimate outcome of this matter.
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Brazil — To complete earlier plans, the Juiz de Fora facility, a joint venture gas-fired generating facility in which Alliant Energy holds a 50% direct ownership interest, is scheduled for a 20 MW expansion from a single cycle to a combined cycle facility at an estimated cost of $24 million. However, initiation of the expansion construction is experiencing some delays due to disputes with Alliant Energy’s Brazilian partner regarding the financing and construction of the Juiz de Fora facility and other matters (as mentioned below). Alliant Energy is currently discussing with its partner resolution of these matters in order to ensure timely completion of the project in early 2006. If the Juiz de Fora combined-cycle construction is not completed as anticipated, the future performance obligations of this generation asset might be significantly adversely affected. In such an event, Alliant Energy is not required to invest any additional capital in Juiz de Fora; however, it could lead to material asset valuation or other charges with respect to Alliant Energy’s investment in the Juiz de Fora facility. Alliant Energy’s direct investment in the Juiz de Fora facility at June 30, 2004 was approximately $15 million.
Alliant Energy continues to closely monitor the financial performance of its Brazilian investments. While such performance improved significantly in 2003, Alliant Energy believes the rate of improvement can be enhanced, particularly in regard to controlling costs and reduction of debt, and this has been a source of dispute with its Brazilian partners. In particular, Alliant Energy’s Brazilian partners want to use company funds to pay dividends in order to ensure their control over the operations. Alliant Energy is not interested in and has not sought control of the operations. However, Alliant Energy has urged that, to the extent funds are available, they would be better used to pay down debt.
Alliant Energy has been and continues to explore with various parties, including its existing Brazilian partners, all of the options available to it concerning its investments in Brazil. Alliant Energy will consider the full range of options potentially available. Consequently, Alliant Energy is unable to provide any assurances that one or more of the options under review will occur, or that implementation of any one or more of the options will not result in Alliant Energy incurring a material charge as relates to its investments in Brazil as it cannot currently predict the ultimate outcome of these reviews and discussions.
China — The generating plants included in Alliant Energy’s China portfolio are currently experiencing higher than anticipated coal and related costs due primarily to government allocations and infrastructure bottlenecks. Alliant Energy is attempting to mitigate the impact of these cost increases by working with local Chinese authorities to increase the supply of lower-cost coal, working with local Chinese power commissions to enable it to recover the higher costs through tariffs and reviewing for other ways to offset these cost increases within its operations. However, the process does require government interaction and is less formal and predictable than general fuel-related cost recovery processes within the domestic utility industry. If the price of coal and related costs were to increase (decrease) 10% compared to the average prices experienced during the 12 months ended June 30, 2004, Alliant Energy’s net income for the 12 months ended June 30, 2005 would (decrease) increase by approximately $5 million.
In addition to applying pressure on the margins currently being realized from Alliant Energy’s China operations, these cost pressures could impact the estimated fair value of Alliant Energy’s China investments. Alliant Energy has $10 million of goodwill related to its China investments on its balance sheet and if the fair value of these investments does not exceed their carrying value (including goodwill) in the future, Alliant Energy may be required to record an impairment charge related to this goodwill balance. Alliant Energy is unable to predict the future of these costs in China or the ultimate outcome of its efforts to mitigate the impact of any cost increases.
Quantitative and Qualitative Disclosures About Market Risk are reported under Item 2 MD&A “Other Matters — Market Risk Sensitive Instruments and Positions.”
Alliant Energy’s, IP&L’s and WP&L’s management evaluated, with the participation of each of Alliant Energy’s, IP&L’s and WP&L’s Chief Executive Officer (CEO), Chief Financial Officer (CFO) and Disclosure Committee, the effectiveness of the design and operation of Alliant Energy’s, IP&L’s and WP&L’s disclosure controls and procedures as of the end of the quarter ended June 30, 2004 pursuant to the requirements of the Securities Exchange Act of 1934, as amended. Based on their evaluation, the CEO and the CFO concluded that Alliant Energy’s, IP&L’s and WP&L’s disclosure controls and procedures were effective as of the end of the quarter ended June 30, 2004.
There was no change in Alliant Energy’s, IP&L’s and WP&L’s internal control over financial reporting that occurred during the quarter ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, Alliant Energy’s, IP&L’s or WP&L’s internal control over financial reporting.
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ALLIANT ENERGY & WP&L In the fourth quarter of 2003, the Wisconsin Environmental Law Advocates (WELA) filed a complaint in the U.S. District Court for the Western District of Wisconsin against WP&L and Alliant Energy alleging violations of the federal Clean Water Act at the Columbia generating station. The complaint sought certain upgrades to Columbia's wastewater treatment program, as well as unspecified penalties and attorney fees. In addition, the Wisconsin DNR has pursued enforcement of this same matter and referred the matter to the Wisconsin Department of Justice (WDOJ), who filed a complaint in the Circuit Court of Columbia County, Wisconsin. Alliant Energy, WDOJ and WELA have entered into a settlement agreement to resolve the matter, which has been accepted by the court. Under the settlement agreement, the joint owners of Columbia have agreed to pay a total of $150,000 in forfeitures, fees and other costs, plus implement certain new technical and operational requirements at the facility. Alliant Energy had established the necessary reserve for its respective costs at June 30, 2004. Alliant Energy believes that the total cost to resolve the matter and implement technical and operational requirements will not be material.
ALLIANT ENERGY At Alliant Energy’s annual meeting of shareowners held on May 21, 2004, the following individuals were elected as directors of Alliant Energy:
The following are the other directors of Alliant Energy whose terms of office continued after the 2004 annual meeting: Katharine C. Lyall, Singleton B. McAllister, and Anthony R. Weiler, with terms expiring in 2005; and Erroll B. Davis, Jr. and Robert W. Schlutz, with terms expiring in 2006. Effective as of the date of the annual meeting, Alan B. Arends and Wayne H. Stoppelmoor both retired.
Also at Alliant Energy’s annual meeting of shareowners held on May 21, 2004, the following matter was submitted to a vote of shareowners:
IP&L At IP&L’s annual meeting of shareowners held on June 1, 2004, Ann K. Newhall was elected as a director of IP&L for a term expiring in 2006; and Michael L. Bennett, Jack B. Evans, David A. Perdue, and Judith D. Pyle were elected as directors of IP&L for terms expiring in 2007. Alliant Energy voted all of the outstanding shares of common stock of IP&L (consisting of 13,370,788 shares) in favor of the election of these individuals. The following are the other directors of IP&L whose terms of office continued after the 2004 annual meeting: Katharine C. Lyall, Singleton B. McAllister, and Anthony R. Weiler, with terms expiring in 2005; and Erroll B. Davis, Jr. and Robert W. Schlutz, with terms expiring in 2006. Effective as of the date of the annual meeting, Alan B. Arends and Wayne H. Stoppelmoor both retired.
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WP&L At WP&L’s annual meeting of shareowners held on June 2, 2004, the following individuals were elected as directors of WP&L:
The following are the other directors of WP&L whose terms of office continued after the 2004 annual meeting: Katharine C. Lyall, Singleton B. McAllister, and Anthony R. Weiler, with terms expiring in 2005; and Erroll B. Davis, Jr. and Robert W. Schlutz, with terms expiring in 2006. Effective as of the date of the annual meeting, Alan B. Arends and Wayne H. Stoppelmoor both retired.
(a) Exhibits: The following Exhibits are filed herewith or incorporated by reference.
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(b) Reports on Form 8-K:
Pursuant to the requirements of the Securities Exchange Act of 1934, Alliant Energy Corporation, Interstate Power and Light Company and Wisconsin Power and Light Company have each duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on the 6th day of August 2004.
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