UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 19992002
-----------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission Name of Registrant, State of Incorporation, IRS Employer
File Address of Principal Executive Offices and Identification
Number Telephone Number Number
- ---------- -------------------------------------------- ------------------
1-9894 ALLIANT ENERGY CORPORATION 39-1380265
(a Wisconsin corporation)
222 West Washington Avenue
Madison, Wisconsin 53703
Telephone (608)252-3311
0-4117-1 IES UTILITIES INC.
Commission Name of Registrant, State of Incorporation, IRS Employer
File Number Address of Principal Executive Offices and Telephone Number Identification Number
- ----------- ----------------------------------------------------------- ---------------------
1-9894 ALLIANT ENERGY CORPORATION 39-1380265
(a Wisconsin corporation)
4902 N. Biltmore Lane
Madison, Wisconsin 53718
Telephone (608)458-3311
0-4117-1 INTERSTATE POWER AND LIGHT COMPANY 42-0331370
(an Iowa corporation)
Alliant Energy Tower
Cedar Rapids, Iowa 52401
Telephone (319)786-4411
0-337 WISCONSIN POWER AND LIGHT COMPANY 39-0714890
(a Wisconsin corporation)
4902 N. Biltmore Lane
Madison, Wisconsin 53718
Telephone (608)458-3311
This combined Form 10-K is separately filed by Alliant Energy Tower
Cedar Rapids, Iowa 52401
Telephone (319)398-4411
0-337 WISCONSIN POWER AND LIGHT COMPANY 39-0714890
(aCorporation,
Interstate Power and Light Company and Wisconsin corporation)
222 West Washington Avenue
Madison,Power and Light Company.
Information contained in the Form 10-K relating to Interstate Power and Light
Company and Wisconsin 53703
Telephone (608)252-3311Power 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.
Securities registered pursuant to Section 12 (b) of the Act:
Name of Each
Exchange on Which
Title of Class Registered
---------------------------- -----------------------
Name of Each
Title of Class Exchange on Which Registered
-------------- ----------------------------
Alliant Energy Corporation Common Stock, $.01 Par Value New York Stock Exchange
Alliant Energy Corporation Common Stock Purchase Rights New York Stock Exchange
Interstate Power and Light Company 7-7/8% Quarterly Debt Capital Securities New York Stock Exchange
Corporation
Alliant Energy Common Stock Purchase Rights New York Stock Exchange
Corporation
IES Utilities Inc. 7-7/8% Quarterly Debt New York Stock Exchange
Capital Securities
(Subordinated Deferrable Interest Debentures)
Wisconsin Power and Light Company 4.50% Preferred Stock, No Par Value American Stock Exchange
Light Company Par Value
Securities registered pursuant to Section 12 (g) of the Act: Title of Class
--------------
IES Utilities Inc. 4.80% Cumulative Preferred Stock, Par Value $50 per share
Wisconsin Power
and Light Company Preferred Stock (Accumulation without Par Value)
Light Company
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) have been subject to such
filing requirements for the past 90 days. Yes [X] No[No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [ ]
This combined Form 10-K is separately filedIndicate by check mark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act).
Alliant Energy Corporation IES Utilities Inc. and WisconsinYes [X] No [ ]
Interstate Power and Light Company.
Information contained in the annual report relating toCompany Yes [ ] No [X]
Wisconsin Power and Light Company and IES Utilities Inc. is filed by such registrant on
its own behalf. Each of Wisconsin Power and Light Company and IES
Utilities Inc. makes no representation as to information relating to
registrants other than itself.Yes [ ] No [X]
The aggregate market value of the voting and non-voting common equity held by
nonaffiliates as of January 31, 2000:June 28, 2002:
Alliant Energy Corporation $2.34$2.32 billion
IES Utilities Inc.Interstate Power and Light Company $--
Wisconsin Power and Light Company $--
Number of shares outstanding of each class of common stock as of January
31, 2000:
Alliant Energy Common Stock, $.01 par value, 79,000,744
Corporation shares outstanding
IES Utilities Inc. Common Stock,Feb. 28, 2003:
Alliant Energy Corporation Common stock, $0.01 par value, 92,658,243 shares outstanding
Interstate Power and Light Company Common stock, $2.50 par value, 13,370,788 shares outstanding (all of which
are owned beneficially and of record by Alliant Energy Corporation)
Wisconsin Power and Light Company Common stock, $5 par value, 13,236,601 shares outstanding (all of which are
owned beneficially and of record by Alliant Energy Corporation)
Wisconsin Power and Common Stock, $5 par value, 13,236,601 shares
Light Company outstanding (all of which are owned
beneficially and of record by Alliant Energy
Corporation)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statements relating to Alliant Energy Corporation's 2000 Annual Meeting of Shareowners and
Wisconsin Power and Light Company's 20002003 Annual MeetingMeetings of Shareowners are,
or will be upon filing with the Securities and Exchange Commission, be
incorporated by reference into Part III hereof.
2
TABLE OF CONTENTS
Page
Number
------
Part I
Item 1. Business 6
Item 2. Properties 20
Item 3. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Part II
Item 5. Market for Registrants' Common Equity and
Related Stockholder Matters 24
Item 6. Selected Financial Data 25
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 27
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 56
Item 8. Financial Statements and Supplementary Data 56
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 116
Part III
Item 10. Directors and Executive Officers of the Registrants 116
Item 11. Executive Compensation 120
Item 12. Security Ownership of Certain Beneficial
Owners and Management 120
Item 13. Certain Relationships and Related Transactions 120
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 121
Signatures 130
TABLE OF CONTENTS
Page
Number
------
Part I
Item 1. Business 6
Item 2. Properties 23
Item 3. Legal Proceedings 25
Item 4. Submission of Matters to a Vote of Security Holders 26
Executive Officers of the Registrants 26
Part II
Item 5. Market for Registrants' Common Equity and Related Stockholder
Matters 29
Item 6. Selected Financial Data 30
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 32
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56
Item 8. Financial Statements and Supplementary Data 56
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure 124
Part III
Item 10. Directors and Executive Officers of the Registrants 124
Item 11. Executive Compensation 124
Item 12. Security Ownership of Certain Beneficial Owners and Management 125
Item 13. Certain Relationships and Related Transactions 126
Item 14. Controls and Procedures 126
Part IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 126
Signatures 134
Certifications 137
Exhibit Index 143
3
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes of this
report are defined below:
Abbreviation or Acronym Definition
- ----------------------- --------------------------------------------
ADEQ Arkansas Department of Environmental Quality
AFUDC Allowance for Funds Used During Construction
Alliant Energy Alliant Energy Corporation
ANR ANR Pipeline
APB Accounting Principles Board Opinion
ATC American Transmission Company, LLC
Btu British Thermal Unit
Capital Square Capital Square Financial Corporation
Cargill Cargill Incorporated
CEMS Continuous Emission Monitoring System
CIPCO Central Iowa Power Cooperative
Corporate Services Alliant Energy Corporate Services, Inc.
CWIP Construction Work-In-Progress
DAEC Duane Arnold Energy Center
DOE United States Department of Energy
Dth Dekatherm
EAC Energy Adjustment Clause
EDS Electronic Data Systems Corporation
EITF Emerging Issues Task Force
EPA United States Environmental Protection Agency
ERISA Employee Retirement Income Security Act of 1974,
as amended
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
ICC Illinois Commerce Commission
IES IES Industries Inc.
IESU IES Utilities Inc.
International Alliant Energy International, Inc.
Investments Alliant Energy Investments, Inc.
IPC Interstate Power Company
IRS Internal Revenue Service
ISCO Alliant Energy Industrial Services, Inc.
ISO Independent System Operator
IUB Iowa Utilities Board
Kewaunee Kewaunee Nuclear Power Plant
KW Kilowatt
KWH Kilowatt-Hour
LTEIP Long-Term Equity Incentive Plan
MAIN Mid-America Interconnected Network, Inc.
MAPP Mid-Continent Area Power Pool
McLeod McLeodUSA Incorporated
4
Abbreviation or Acronym Definition
- ----------------------- ------------------------------------------------
MD&A Management's Discussion and Analysis of Financial
Condition and Results of Operations
MG&E Madison Gas & Electric Company
MGP Manufactured Gas Plants
MPUC Minnesota Public Utilities Commission
MW Megawatt
MWH Megawatt-Hour
NEIL Nuclear Electric Insurance Limited
NEPA National Energy Policy Act of 1992
NERC North American Electric Reliability Council
NGPL Natural Gas Pipeline Co. of America
NMC Nuclear Management Company, LLC
NNG Northern Natural Gas Company
NOPR Notice of Proposed Rulemaking
NOx Nitrogen Oxides
NRC Nuclear Regulatory Commission
NSP Northern States Power Company
NYMEX New York Mercantile Exchange
OCA Office of Consumer Advocate
PCB Polychlorinated Biphenyl
PGA Purchased Gas Adjustment
PRP Potentially Responsible Party
PSCW Public Service Commission of Wisconsin
PUHCA Public Utility Holding Company Act of 1935
Resources Alliant Energy Resources, Inc.
RTO Regional Transmission Organization
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
SkyGen SkyGen Energy LLC
SO2 Sulfur Dioxide
South Beloit South Beloit Water, Gas and Electric Company
SOS Standard Offer Service
Transportation Alliant Energy Transportation, Inc.
U.S. United States
USEC United States Enrichment Corporation
WDNR Wisconsin
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes of this report are defined below:
Abbreviation or Acronym Definition
- ----------------------- ----------
AFUDC Allowance for Funds Used During Construction
Alliant Energy Alliant Energy Corporation
ANR ANR Pipeline
APB Accounting Principles Board Opinion
ATC American Transmission Company LLC
Btu British Thermal Unit
CAA Clean Air Act
Calpine Calpine Corporation
Capstone Capstone Turbine Corporation
Cargill Cargill Incorporated
Cargill-Alliant Cargill-Alliant, LLC
CIPCO Central Iowa Power Cooperative
Corporate Services Alliant Energy Corporate Services, Inc.
DAEC Duane Arnold Energy Center
DNR Department of Natural Resources
DOE U.S. Department of Energy
Dth Dekatherm
EAC Energy Adjustment Clause
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization
EIP 2002 Equity Incentive Plan
EITF Emerging Issues Task Force
EITF Issue 02-3 Issues Related to Accounting for Contracts Involved in Energy Trading and Risk
Management Activities
EITF Issue 98-10 Accounting for Contracts Involved in Energy Trading and Risk Management Activities
Enermetrix Enermetrix, Inc.
EPA U.S. Environmental Protection Agency
EPS Earnings Per Average Common Share
EWG Exempt Wholesale Generator
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
FIN FASB Interpretation No.
FIN 45 Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others
FIN 46 Consolidation of Variable Interest Entities
FUCO Foreign Utility Company
GAAP Accounting Principles Generally Accepted in the U.S.
ICC Illinois Commerce Commission
IES IES Industries Inc.
IESU IES Utilities Inc.
Integrated Services Alliant Energy Integrated Services Company
International Alliant Energy International, Inc.
Investments Alliant Energy Investments, Inc.
IPC Interstate Power Company
IP&L Interstate Power and Light Company
IRS Internal Revenue Service
ISO Independent System Operator
IUB Iowa Utilities Board
Kewaunee Kewaunee Nuclear Power Plant
KV Kilovolt
KW Kilowatt
KWh Kilowatt-hour
4
Abbreviation or Acronym Definition
- ----------------------- ----------
LTEIP Long-Term Equity Incentive Plan
MAIN Mid-America Interconnected Network, Inc.
MAPP Mid-Continent Area Power Pool
McLeod McLeodUSA Incorporated
MD&A Management's Discussion and Analysis of Financial Condition and Results of Operations
MG&E Madison Gas & Electric Company
MGP Manufactured Gas Plants
Moody's Moody's Investors Service
MPUC Minnesota Public Utilities Commission
MW Megawatt
MWh Megawatt-hour
NEIL Nuclear Electric Insurance Limited
NEPA National Energy Policy Act of 1992
NERC North American Electric Reliability Council
NGPL Natural Gas Pipeline Co. of America
NMC Nuclear Management Company, LLC
NNG Northern Natural Gas Company
NOx Nitrogen Oxides
NRC Nuclear Regulatory Commission
NWPA Nuclear Waste Policy Act of 1982
PSCW Public Service Commission of Wisconsin
PUHCA Public Utility Holding Company Act of 1935
Resources Alliant Energy Resources, Inc.
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
SFAS 115 Accounting for Certain Investments in Debt and Equity Securities
SFAS 133 Accounting for Derivative Instruments and Hedging Activities
SFAS 143 Accounting for Asset Retirement Obligations
SmartEnergy SmartEnergy, Inc.
South Beloit South Beloit Water, Gas and Electric Company
Southern Hydro Southern Hydro Partnership
STB U.S. Surface Transportation Board
Synfuel Alliant Energy Synfuel LLC
TBD To Be Determined
TRANSLink TRANSLink Transmission Company LLC
Transportation Alliant Energy Transportation, Inc.
U.S. United States of America
WEPCO Wisconsin Electric Power Company
Whiting Whiting Petroleum Corporation
WP&L Wisconsin Power and Light Company
WPLH WPL Holdings, Inc.
WPSC Wisconsin Public Service Corporation
WUHCA Wisconsin Utility Holding Company Act
5
FORWARD-LOOKING STATEMENTS
Refer to the "Forward-Looking Statements" section in Item 7. MD&A for information and disclaimers
regarding forward-looking statements contained in this Annual Report on Form
10-K.
PART I
This Annual Report on Form 10-K includes information relating to Alliant
Energy, IESUIP&L and WP&L (as well as IPC, Resources and Corporate Services). Where
appropriate, information relating to a specific entity has been segregated and
labeled as such. At Dec. 31, 2002, the assets and liabilities of Alliant
Energy's oil and gas (Whiting), Australian (including Southern Hydro) and
affordable housing businesses were classified as held for sale. The operating
results for these non-regulated businesses for all periods presented have been
separately classified and reported as discontinued operations in Alliant
Energy's Consolidated Financial Statements and Notes to Consolidated Financial
Statements included in this Annual Report. Refer to Note 16 of Alliant Energy's
"Notes to Consolidated Financial Statements" for additional information. On Jan.
1, 2002, IPC merged with and into IESU and IESU changed its name to IP&L. IP&L's
Consolidated Financial Statements and Notes to Consolidated Financial Statements
included in this Annual Report illustrate the impact of the merger as if it had
occurred as of Jan. 1, 2000.
ITEM 1. BUSINESS
A. GENERAL
- ----------
Alliant Energy was formed as the result of a three-way merger involvingIn April 1998, IES, WPLH IES and IPC that was completed a merger resulting in April 1998.Alliant
Energy. The primary first tier subsidiaries of Alliant Energy include: IP&L,
WP&L, IESU, IPC, Resources and Corporate Services. Among various other regulatory
constraints, Alliant Energy is operating as a registered public utility
holding company subject to the limitations imposed by PUHCA. Alliant Energy
was incorporated in Wisconsin in 1981. A brief description of the primary
first-tier subsidiaries of Alliant Energy is as follows:
1) IESUIP&L - incorporated in Iowa in 1925 as Iowa Railway and Light
Corporation. IESUIP&L is a public utility engaged principally in the generation,
transmission, distribution and sale of electric energy; the purchase,
distribution, transportation and sale of natural gas; and the provision of
steam services in selective markets, in the State of Iowa.Iowa, Minnesota and Illinois. In
Iowa, non-exclusive franchises, which cover the use of streets and alleys for
public utility facilities in incorporated communities, are granted for a
maximum of twenty-five25 years by a majority vote of local qualified residents. At DecemberDec.
31, 1999, IESU2002, IP&L supplied electric and gas service to approximately 345,000526,284 and 181,000234,853
(excluding transportation and other) customers, respectively. In 1999, 19982002, 2001
and 1997, IESU2000, IP&L had no single customer for which electric, gas and/or gassteam
sales accounted for 10% or more of IESU'sIP&L's consolidated revenues.
2) WP&L - incorporated in Wisconsin in 1917 as the Eastern Wisconsin Electric
Company, is a public utility engaged principally in the generation, transmission,
distribution and sale of electric energy; the purchase, distribution,
transportation and sale of natural gas; and the provision of water services
in selective markets. Nearly all of WP&L's customers are located in south
and central Wisconsin. WP&L operates in municipalities pursuant to permits
of indefinite duration, which are regulated by Wisconsin law. At DecemberDec. 31,
1999,2002, WP&L supplied electric and gas service to approximately 407,000430,406 and 162,000170,123
(excluding transportation and other) customers, respectively. WP&L also has approximately 19,000had
19,527 water customers. In 1999, 19982002, 2001 and 1997,2000, WP&L had no single customer
for which electric, gas and/or gaswater sales accounted for 10% or more of
WP&L's consolidated revenues. WPL Transco LLC is a wholly-owned subsidiary of
WP&L and holds WP&L's investment in ATC. WP&L also owns all of the
outstanding capital stock of South Beloit, a public utility supplying
electric, gas and water service, principally in Winnebago County, Illinois,
which was incorporated in 1908.
WP&L also owns varying interests in several other subsidiaries and
investments which are not material to WP&L's operations.
3) IPC - incorporated in 1925 under the laws of the State of Delaware.
IPC is a public utility engaged principally in the generation,
transmission, distribution and sale of electric energy and the purchase,
distribution, transportation and sale of natural gas in the States of
Iowa, Minnesota and Illinois. At December 31, 1999, IPC provided
electric and gas service to approximately 167,000 and 50,000 customers,
respectively. In 1999, 1998 and 1997, IPC had no single customer for
which electric and/or gas sales accounted for 10% or more of IPC's
consolidated revenues.
6
4) RESOURCES - incorporated in 1988 in Wisconsin, and the majority of Alliant
Energy's non-regulated investments are organized under Resources. Resources'
significant wholly-owned subsidiaries at Dec. 31, 2002 include ISCO,
International,
Alliant Energy Generation, Inc., Integrated Services, Investments,
Transportation, Whiting and Capital Square. These
businesses include domestic and international energy products and
services businesses; industrial services, which includes environmental,
engineering and transportation services; investments in affordable
housing initiatives; and investments in various other strategic
initiatives. Alliant Energy also has a 50% ownership interest in a joint
venture, which is managed by Resources, with Cargill, named
Cargill-Alliant LLC.
5)SmartEnergy. Refer to "D. Information Relating
to Non-regulated Operations" for additional details.
4) CORPORATE SERVICES - subsidiary formed to provide administrative services
to Alliant Energy and its subsidiaries as required under PUHCA.
6
Refer to Note 1413 of the "Notes to Consolidated Financial Statements" for
a further discussion of Alliant Energy's business segments.segments, which information is incorporated
herein by reference.
B. INFORMATION RELATING TO ALLIANT ENERGY ON A CONSOLIDATED BASIS
- -----------------------------------------------------------------1) EMPLOYEES
As of DecemberDec. 31, 1999,2002, Alliant Energy had the following employees (full-time
and part-time):
Number of
Bargaining Number of
Number of Unit Bargaining
Employees Employees Agreements
----------- -------------- -----------
IESU 1,809 1,112 6
WP&L 1,586 1,473 1
IPC 612 506 3
Resources 997 85 5
Corporate Services 1,213 -- --
----------- -------------- -----------
Alliant Energy Total 6,217 3,176 15
===========
Percentage
Number of Number of of Workforce
Number of Bargaining Unit Bargaining Covered by
Employees Employees Agreements Agreements
------------- ----------------- -------------- ----------------
IP&L 1,692 1,426 7 84%
WP&L 1,541 1,456 1 94%
Resources:
International (a) 3,135 -- -- --
Integrated Services 647 -- -- --
Investments (a) 246 81 5 33%
Other 83 -- -- --
Corporate Services 1,626 -- -- --
------------- ----------------- --------------
8,970 2,963 13 33%
============= ================= ==============
===========
Refer to the "Other Matters - Labor Issues" section in Item 7. MD&A for
additional discussion
(a) Includes employees of Alliant Energy's collectivediscontinued operations, which
represented approximately 2% of total employees at Dec. 31, 2002.
In 2003, five bargaining agreements.agreements expire representing approximately 51% of
employees covered under bargaining agreements and 17% of total Alliant Energy
employees. Alliant Energy has not experienced any significant work stoppage
problems in the past. While negotiations have commenced, Alliant Energy is
currently unable to predict the outcome of these negotiations.
2) CAPITAL EXPENDITURE AND INVESTMENT AND FINANCING PLANS
Refer to the "Liquidity and Capital Resources" sectionResources - Construction and Acquisition
Expenditures" in Item 7. MD&A for a discussion of anticipated construction and
acquisition expenditures for 2000-20042003-2005. Refer to "C. Information Relating to
Domestic Utility Operations - 1) Electric Utility Operations - Power Supply"
for information related to IP&L's and details regardingWP&L's plans for the financingdevelopment of future capital
requirements.new
electric generation in Iowa and Wisconsin, respectively.
3) REGULATION
Alliant Energy operates as a registered public utility holding company
subject to regulation by the SEC under PUHCA. Alliant Energy and its
subsidiaries are subject to the regulatory provisions of PUHCA, including
provisions relating to the issuance and sales of securities, acquisitions and
sales of certain utility properties, acquisitions and retention of interests
in non-utility businesses and the services provided by Corporate Services to
Alliant Energy and its subsidiaries.
Alliant Energy is subject to regulation by the PSCW. The PSCW regulates,
among other things, the type and amount of Alliant Energy's investments in
non-utility businesses. WP&L is also subject to regulation by the PSCW as to
retail utility rates and service, accounts, issuance and use of proceeds of
securities, certain additions and extensions to facilities and in other
respects. WP&L is generally required to file a rate case with the PSCW at least every
two years with requests for rate relief based on a forward-looking test year period.
However, as one of the conditions for
approval of the merger, the PSCW has required WPIP&L to freeze on a
post-merger basis retail electric, natural gas and water rates for a
period of four years.
7
IESU and IPC operateoperates under the jurisdiction of the IUB. The IUB has authority to
regulate rates and standards of service, to prescribe accounting requirements
and to approve the location and construction of electric generating
facilities having a capacity in excess of 25,000 KW. Requests for rate
relief are based on historical test periods, adjusted for certain known and
measurable changes. The IUB must decide on requests for rate relief within
10 months of the date of the application for which relief is filed or the
interim prices granted become permanent. Interim rates, if allowed, are
permitted to become effective, subject to refund, no later than 90 days after
the rate increase application is filed.
Notwithstanding this process, IESU and IPC agreed
to a four-year price cap effective with the merger as part of the merger
approval process.
IPC7
IP&L is also subject to regulation by the MPUC. Requests for rate relief can
be based on either historical or projected data. The MPUC must reach a final
decision within 10 months. Interim rates are permitted. The MPUC also has
jurisdiction to approve IPC'sIP&L's capital structure on an annual basis. In
addition, IP&L and South Beloit and IPC are subject to regulation by the ICC for
retail utility rates and service, accounts, issuance and use of proceeds of
securities, certain additions and extensions to facilities and in other
respects. Requests for rate relief must be decided within 11 months.
The FERC has jurisdiction under the Federal Power Act over certain of the
electric utility facilities and operations, wholesale rates and accounting
practices of IESU, WPIP&L and IPC,WP&L, and in certain other respects. In addition,
certain natural gas facilities and operations of the companiesIP&L and WP&L are subject to
the jurisdiction of the FERC under the Natural Gas Act.
With respect to environmental matters, the EPA administers certain federal
statutes and has delegated the administration of other environmental
initiatives to the applicable state environmental agencies. In addition, the
state agencies have jurisdiction over air and water quality standards
associated with fossil fuel firedcertain electric generation and the level and flow of water,
safety and other matters pertaining to hydroelectric generation.
WPIP&L and IESUWP&L are directly and indirectly subject to the jurisdiction of the
NRC, with respect to DAEC and Kewaunee, in the case of WP&L and the DAEC in the case of IESU,respectively, and to the jurisdiction
of the DOE with respect to the disposal of nuclear fuel and other radioactive
wastes from KewauneeDAEC and Kewaunee.
At Dec. 31, 2002, Alliant Energy's remaining investment authority under the
DAEC.100% of consolidated retained earnings PUHCA order was approximately $200
million of future EWG and/or FUCO investments with financings that have
recourse to the parent company in addition to certain commitments already
made.
The electricity industry in Brazil, as it relates to Alliant Energy's
unconsolidated investments, is regulated by the Brazilian federal government,
acting through the Ministry of Mines and Energy, which has exclusive
authority over the electricity sector through regulatory powers assigned to
it. Regulatory policy for the sector is implemented by an autonomous
national electric energy agency (Agencia Nacional de Energia Eletrica or
"ANEEL"), which delegates certain functions to agencies based in certain
states of Brazil. However, ANEEL cannot delegate any authority regarding
tariffs to state agencies. In January 2003, a new Minister of Mines and
Energy was appointed thus the comprehensive review of the regulatory process
and policies that was underway in 2002 has ceased and a new plan has since
been announced. This plan includes a pooling of generation so that all
companies will have access to lower energy prices, use of a different
inflation index for purposes of tariff setting and aid from the national
development bank. Although details of the plan are unknown at this time,
Alliant Energy believes the plan will not have a material adverse impact on
Alliant Energy's investments in Brazil.
Refer to Item 7.Note 2 of Alliant Energy's "Notes to Consolidated Financial
Statements" and "Rates and Regulatory Matters" in MD&A for additional
information regarding regulation and Alliant Energy'sutility rate matters.
4) STRATEGIC ACTIONS
Refer to "Strategic Actions" in MD&A for a discussion of various strategic
actions Alliant Energy is taking to strengthen its financial profile.
C. INFORMATION RELATING TO DOMESTIC UTILITY OPERATIONS
- ---------------------------------------------
Alliant Energy realized 55%50%, 40%44%, 3%4% and 2% of its 2002 electric utility
revenues in 1999 in Iowa, Wisconsin, Minnesota and Illinois, respectively.
Approximately 90%91% of the electric revenues were regulated by the respective
state commissions while the other 10%9% were regulated by
the FERC. Alliant Energy
realized 57%50%, 37%44%, 3% and 3% of its 2002 gas utility revenues in Iowa,
Wisconsin, Minnesota and Illinois, respectively, during
the same period.
IESUrespectively.
IP&L realized 100%91%, 7% and 2% of its 2002 electric and gas utility retail revenues in 1999 in Iowa.Iowa,
Minnesota and Illinois, respectively. Approximately 95%96% of theIP&L's 2002
electric revenues in 1999 were regulated by the IUBrespective state commissions while
the other 5%4% were regulated by the FERC. IP&L realized 93%, 5% and 2% of its
2002 gas utility revenues in Iowa, Minnesota and Illinois, respectively.
WP&L realized 98% of its 2002 electric utility revenues in 1999 in Wisconsin and 2%
8
in Illinois. Approximately 84% of theWP&L's 2002 electric revenues in 1999 were
regulated by the PSCW or the ICC while the other 16% were regulated by the FERC.
WP&L realized 96%97% of its 2002 gas utility revenues in 1999 in
Wisconsin and 4%3% in
Illinois during the same period. IPC realized 75%,
19% and 6% of its electric utility revenues in 1999 in Iowa, Minnesota
and Illinois, respectively. Approximately 92% of the electric revenues
were regulated by the respective state commissions while the other 8%
were regulated by the FERC. IPC realized 69%, 23% and 8% of its gas
utility revenues in Iowa, Minnesota and Illinois, respectively, during
the same period.
UTILITY INDUSTRY OUTLOOK
Refer to the "Utility Industry Outlook" section in Item 7. MD&A for a
discussion of various competitive issues impacting utility operations.
8
Illinois.
1) ELECTRIC UTILITY OPERATIONS
General As of December 31, 1999, Alliant Energy's utility subsidiaries provided
electricity to approximately 919,000 retail customers in approximately
1,358 communities- The utilities provide electric service in Iowa, southern and
central Wisconsin, southern Minnesota and northern and northwestern
Illinois and southern Minnesota.Illinois. The approximate number of electric retail customers and communities and wholesale customers served forby each
of the individual utilitiesutility at DecemberDec. 31, 19992002 was as follows:
Retail Communities Wholesale
Customers Served Customers
---------- ------------ --------------
IESU 345,000 525 5
WP&L 407,000 599 28
IPC 167,000 234 10
Electric
Retail Customers Wholesale Customers Other Customers Communities Served
----------------- ----------------------- -------------------- ----------------------
IP&L 524,956 10 1,318 760
WP&L 428,390 30 1,986 602
----------------- ----------------------- -------------------- ----------------------
953,346 40 3,304 1,362
================= ======================= ==================== ======================
2002 electric utility operations accounted for 78.4%, 83.3%80% and 86.0%81% of operating
revenues and 92.6%, 89.9%90% and 91.6%90% of operating income for IESU,IP&L and WP&L,
and IPC, respectively, for the year ended December 31, 1999.respectively.
Electric sales are seasonal to some extent with the annual peak normally
occurring in the summer months. In 1999,2002, the maximum peak hour demands for
IP&L and WP&L were 3,097 MW on July 8, 2002 and 2,674 MW on Aug. 1, 2002,
respectively. In 2002, the maximum peak hour demand for IESUAlliant Energy was
1,990 MW and occurred on July 27, 1999. For WP&L and IPC,
the maximum peak hour demands were 2,3975,729 MW on July 23, 19998, 2002, which was the coincident peak of the entire Alliant
Energy system. IP&L and 1,015 MWWP&L are members of the MAIN Regional Reliability
Council which is one of the 10 regional members of NERC. Each regional
member of NERC is responsible for maintaining reliability in its area through
coordination of planning and operations.
In 2001, IP&L and five other electric utility companies filed an application
with FERC to create TRANSLink, a for-profit, transmission-only company. In
April 2002, FERC conditionally approved the formation of TRANSLink and
TRANSLink's participation in the Midwest ISO. In June 2002, TRANSLink
Development Co. LLC was formed to oversee the start-up activities for
TRANSLink. In the fourth quarter of 2002, three additional electric utility
companies joined TRANSLink. Current plans call for IP&L to contribute
transmission assets of 69 KV and greater, which have an estimated net book
value of approximately $226 million (as of Dec. 31, 2002), to TRANSLink in
exchange for a yet to be determined combination of a corresponding ownership
interest in TRANSLink and cash. IP&L filed for the necessary state approvals
in the fourth quarter of 2002. TRANSLink is currently expected to be
operational in the third quarter of 2003 and will be the transmission network
provider to approximately 7.7 million customers in 13 states.
The PSCW issued a final ruling in October 2002 regarding incremental electric
transmission costs, which allows Wisconsin utilities, including WP&L, to
continue to defer any such costs related to retail service for five years
with deferred amounts included in future base rate cases. During this
period, changes in electric transmission costs will have no material impact
on July 29, 1999, respectively.
IESUWP&L's results of operations.
WP&L, including South Beloit, transferred its transmission assets with no
gain or loss (approximate net book value of $186 million) to a
transmission-only company, ATC, on Jan. 1, 2001. WP&L received a tax-free
cash distribution of $75 million from ATC and had a $112 million equity
investment in ATC, with an ownership percentage of approximately 26.6% at
Dec. 31, 2002. This transfer has not resulted in a significant impact on
WP&L's financial condition or results of operations since FERC allows ATC to
earn a return on the contributed assets comparable to the return formerly
allowed WP&L by the PSCW and FERC. In addition, incremental start-up and
ongoing transmission costs are being recovered in rates. During 2002, ATC
returned approximately 80% of its earnings to the equity holders and,
although no assurance can be given, Alliant Energy anticipates ATC will
continue with this policy in the future. ATC realizes its revenues from the
provision of transmission services to both participants in ATC as well as
non-participants. ATC is a transmission-owning member of the Midwest ISO and
the MAIN Regional Reliability Council.
IP&L maintains and operates transmission and substation facilities connecting
with its high voltage transmission systems pursuant to a non-cancelable
operation agreement (the Operating Agreement) with CIPCO. The Operating
9
Agreement, which will terminate on DecemberDec. 31, 2035, provides for the joint use
of certain transmission facilities of IESUIP&L and CIPCO. Alliant EnergyIP&L has transmission
interconnections at various locations with twelvenine other transmission owning
utilities in the Midwest. WP&L transferred its transmission and substation
facilities to ATC on Jan. 1, 2001 and ATC has transmission interconnections
at various locations. These interconnections enhance the overall reliability
of the Alliant Energy transmission system and provide access to multiple
sources of economic and emergency power and energy.
IESU and IPC are currently full members of MAPP. WP&L is a member of the
MAPP Regional Transmission Group. MAPP is one of the ten regional
members of the NERC. Each regional member of NERC is responsible for
maintaining reliability in its area through coordination of planning and
operations. WP&L is also a full member of MAIN, another regional member
of NERC. IESU and IPC are currently exploring the possibility of
transitioning from the MAPP reliability region to MAIN so all of Alliant
Energy will belong to the same reliability region. Alliant Energy is
unable to predict the outcome of this issue at this time.
Refer to the "Utility Industry Outlook" section in Item 7. MD&A for
additional information regarding the future of Alliant Energy's
transmission business. Refer to Item 2. "Properties" for additional information regarding electric
facilities.
9
properties.
Fuel The average cost of fuel per million Btu's used for electric generation
by IESU, WP&L and IPC for the years 1999, 1998 and 1997 was as follows:
Nuclear Coal All Fuels
------------- ------------- ------------
IESU - 1999 $0.581 $0.899 $0.914
- 1998 0.605 0.885 0.887
- 1997 0.650 0.958 0.945
WP&L - 1999 0.431 1.144 1.034
- 1998 0.450 1.171 1.085
- 1997 0.450 1.175 1.129
IPC - 1999 N/A 1.273 1.320
- 1998 N/A 1.287 1.344
- 1997 N/A 1.340 1.414 Refer to the Electric Operating Information tables for details on the
sources of electric energy for Alliant Energy, IESUIP&L and WP&L during 1995from 1998 to
1999.2002. The average cost of fuel per million Btu's used for electric
generation was as follows:
IP&L WP&L
---------------------------------------- ----------------------------------------
2002 2001 2000 2002 2001 2000
---------------------------------------- ----------------------------------------
Coal $1.067 $0.991 $0.981 $1.262 $1.146 $1.152
Nuclear 0.572 0.608 0.594 0.457 0.423 0.424
All Fuels 1.032 1.046 1.014 1.234 1.158 1.115
Coal - Alliant Energy, through Corporate Services, as an agent of IESU,IP&L and WP&L, and IPC, has negotiated
several agreementsentered
into contracts with different suppliers to ensure that a specified supply of
coal is available at known prices for the respective utilitiesIP&L and WP&L for calendar years 2000, 2001, and 2002.2003 through 2006.
These contracts in combination
with existing agreements, provide for a portfolio of coal supplies that cover
approximately 100%94%, 60%68%, 49% and 10%23% of the threetotal utilities' estimated coal
supply needs for the years 20002003 through 2002,2006, respectively. Management believes this
portfolio of coal supplies represents a reasonable balance between ensuring an adequate supplythe risks
of insufficient supplies and ensuring thatthose associated with larger open positions
subject to price volatility in the prices paid for coal is at the then current market conditions.markets. Remaining coal requirements
will be met from either future contracts or purchases in the spot market.
The majority of the coal utilized by Alliant EnergyIP&L and WP&L is from the Wyoming Powder
River Basin. A majority of this coal is transported by rail-car directly
from Wyoming to Alliant Energy'sIP&L's and WP&L's generating facilities,stations, with the remainder
transported from Wyoming to the Mississippi River by rail-car and then via
barges to the final destination. As protection against interruptions in coal
deliveries, Alliant Energy maintainsIP&L and WP&L maintain average coal inventories at its generating stations of 4030 to 50 days
for generating stations with year-round deliveries and 30 to 150 days
(depending upon time of the year) for generating stations with seasonal
deliveries.
Alliant Energy anticipates that its averageAverage delivered fossil fuel costs will likelyare expected to increase in the future
due to price/rate structures and adjustment provisions in existing coal and
transportation contracts. Price adjustment provisions
in existingcontracts and recent coal market trends. Existing coal
contracts with terms of greater than one year have fixed future year prices
that generally reflect recent upward market trends. Other factors which may
impact coal prices are primarily based onrelated to changes in various indices (e.g. U.S. Department of Labor Statistics Producer Price Indicesassociated laws and
Consumer Price Indices). Other factors which impact coal price
adjustment provisions are mine labor agreementsregulations. For example, sulfur dioxide and NOx emission restrictions and
other environmental limitations on generating stations have increased
significantly and proposed additional restrictions (including some for
mercury emissions), if enacted, changes
in various lawswill likely further increase the difficulty
and regulations.cost of obtaining adequate coal supplies. Rate adjustment provisions in
transportation contracts are primarily based on changes in the Rail Cost
Adjustment Factor as published by the U.S. Surface Transportation Board.
In addition, fuel sulfur restrictions and other environmental limitations
have increased significantly and will likely further increase the
difficulty and cost of obtaining adequate coal supplies. SeeSTB. Refer to Note 1(j) for discussion
of IP&L's and WP&L's rate recovery of fuel costs, Note 10(a) for information
on coal derivatives and Note 11(b) for details relating to coal purchase
commitments in the "Notes to Consolidated Financial Statements" for a discussionStatements."
Purchased-Power - During 2002, approximately 23% and 30% of the utilities' rate recovery of fuel costs.IP&L's and WP&L's
total MWh requirements, respectively, were met through purchased-power.
Refer to Note 12(b)Notes 3 and 11(b) of the "Notes to Consolidated Financial
Statements" for details relating to Alliant Energy's coal purchasepurchased-power commitments.
10
Purchased Power
During the year ended December 31, 1999, approximately 25.0%, 25.0% and
32.3% of IESU's, WP&L's and IPC's total MWH requirements, respectively,
were met through purchased power. Refer to Note 12(b) of the "Notes to
Consolidated Financial Statements" for details relating to purchase power
commitments.
Nuclear
General - Alliant Energy owns interests in two nuclear facilities, - -------
KewauneeDAEC and
DAEC.Kewaunee. DAEC, a 580 MW (net capacity) boiling water reactor plant, is
operated by the NMC under contract to IP&L, which has a 70% ownership
interest in the plant. The owners of DAEC are responsible for the
decommissioning of the plant. The DAEC operating license expires in 2014.
Kewaunee, a 532 MW (net capacity) pressurized water reactor plant, is
operated by the NMC under contract to WPSC and is jointly owned by WPSC (41.2%(59%),
10
and WP&L (41.0%(41%). WPSC and MG&E (17.8%).WP&L are responsible for the decommissioning of the
plant. The Kewaunee operating license expires in 2013. DAEC,WPSC is considering
whether or not to seek extension of the operating license to 2033.
Alliant Energy Nuclear LLC, a 535 MW (net capacity) boiling water reactor plant, is
operated by IESU whichnon-utility subsidiary of Alliant Energy, has a
70%20% ownership interest in the plant.NMC. The DAEC operating license expires in 2014. See Item 7. MD&A "Liquiditypurpose of the NMC is to consolidate
operation of the nuclear plants owned by the NMC partners and Capital Resources - Capital Requirements - Nuclear Facilities"to provide
similar capability for a
discussionother nuclear plant operators and owners.
Consolidation of an agreement between WPSCoperation by the NMC is expected to sustain long-term
safety, optimize reliability and MG&E regarding future
ownershipimprove the operational performance of Kewaunee as well as Alliant Energy's participation in the
NMC.nuclear generating plants. The NMC currently operates eight nuclear
generating units at six sites. The NMC partners continue to individually own
their plants through their utility subsidiaries, are entitled to energy
generated at the plants and retain the financial obligations for the safe
operation, maintenance and decommissioning of the plants.
As co-owners of nuclear generating units, IESUIP&L and WP&L are subject to the
jurisdiction of the NRC. The NRC has broad supervisory and regulatory
jurisdiction over the construction and operation of nuclear reactors,
particularly with regard to public health, safety and environmental
considerations. The operation and design of nuclear power plants is under
constant review by the NRC. IESU and WP&L have complied
with and are currently complying with all NRC requests for data relating
to these reviews. As a result of such reviews, further changes in
operations or modifications of equipment may be required, the cost of
which cannot currently be estimated. IESU'sIP&L's and WP&L's anticipated nuclear-related
construction expenditures for 2000-20042003-2005 are approximately $59$70 million and $35$32
million, respectively.
ReferKewaunee is subject to "Liquidityadditional inspections related to reactor vessel head
cracking found at other pressurized water reactor plants. After evaluating
the cost of continued required inspections of the existing reactor vessel
head, WPSC and Capital Resources - Capital Requirements"WP&L have submitted a construction authorization request to
the PSCW for replacement of the reactor vessel head. The replacement is
scheduled to occur during the fall 2004 refueling outage at a total cost of
approximately $20 million (WP&L's share is approximately $8 million). In
2001, a steam generator replacement was completed at Kewaunee.
On Feb. 25, 2002, the NRC issued an order to all licensees formalizing their
requirements for additional security resulting from the Sept. 11, 2001
terrorist attacks on the U.S. Prior to this order, the additional security
measures were voluntary based on NRC guidance. The NMC, as operator of DAEC
and Kewaunee, responded to the NRC and has fully implemented the additional
security measures. The issue of cost recovery for DAEC is being addressed in
Item 7. MD&AIP&L's pending retail rate case. In December 2001, the PSCW authorized WP&L
to defer incremental costs for a further
discussion.
Undersecurity measures and insurance premiums
related to the Sept. 11, 2001 terrorist attacks. WP&L began deferring the
increased costs in December 2001 and the issue of cost recovery is being
addressed in WP&L's pending 2003 retail rate case.
In 2000, the NRC issued expanded performance measures, which raised several
areas of concern with Kewaunee's operations. Addressing the NRC's concerns
and ensuring that Kewaunee operates in accordance with current industry and
regulatory standards resulted in additional operating costs. WP&L has
deferred $5.5 million of such costs at Dec. 31, 2002. The incremental and
deferred amounts are currently being collected in WP&L's 2002 retail rate
increase.
Public liability for nuclear accidents is governed by the Price-Anderson Amendments Act
of 1988 (1988 Act)as amended (Act), IESU and WP&L
currently have the benefitwhich sets a statutory limit of public$9.55 billion for
liability coverage which would
compensateto the public for a single nuclear power plant incident and
requires nuclear power plant operators to provide financial protection for
this amount. As required, IP&L provides this financial protection for a
nuclear incident at DAEC through a combination of liability insurance
($300 million) and industry-wide retrospective payment plans ($9.25 billion).
Under the industry-wide plan, each operating licensed nuclear reactor in the
event of an accident at a commercial nuclear
power plant. The 1988 Act permits such coverage to rise with increased
availability of nuclear insurance and the changing number of operating
nuclear plantsU.S. is subject to retroactive premium assessments. The 1988 Act
provides for inflation indexing (Consumer Price Index every fifth year)
of the retroactive premium assessments.
As an outgrowth of the Three Mile Island Nuclear Power Plant experience,
nuclear plant owners have initiated a cooperative insurance program
designed to help cover business interruption expenses for participating
utilities arising from a possible nuclear plant event. IESU and WP&L are
participants in this program. This type of insurance is an industry
response intended to lessen the cost burden on customersassessment in the event of a lengthynuclear incident at any
nuclear plant shutdown.in the U.S. IP&L, as a 70% owner of DAEC, could be assessed a
maximum of $61.7 million per nuclear incident, with a maximum of $7 million
per incident per year, if losses relating to the incident exceeded $300
million. These limits are subject to adjustments for changes in the number
of participants and inflation in future years. Similarly, WP&L, as a 41%
owner of Kewaunee, is subject to an overall assessment of approximately $36.1
million per incident, not to exceed $4.1 million payable in any given year.
The Act expired on Aug. 1, 2002, with no impact to IP&L or WP&L as existing
nuclear power plants are covered under the insurance system of the Act for
the remainder of their operating lives. It is anticipated that extension or
renewal of the Act will apply only to new construction. Currently there is
legislation pending in the U.S. Congress that includes extensions of the Act,
increasing the statutory limit for liability to the public for a single
nuclear power plant incident and increasing the maximum annual assessment per
incident.
11
IP&L and WP&L are members of NEIL, which provides $1.5 billion of insurance
coverage for DAEC and $1.8 billion for Kewaunee on certain property losses
for property damage, decontamination and premature decommissioning. The
proceeds from such insurance, however, must first be used for reactor
stabilization and site decontamination before they can be used for plant
repair and premature decommissioning. NEIL also provides separate coverage
for additional expenses incurred during certain outages. Owners of nuclear
generating stations insured through NEIL are subject to retroactive premium
adjustments if losses exceed accumulated reserve funds. NEIL's accumulated
reserve funds are currently sufficient to more than cover its exposure in the
event of a single incident under the primary and excess property damage or
additional expense coverages. However, IP&L could be assessed annually a
maximum of $3.3 million for NEIL primary property, $3.2 million for NEIL
excess property and $2.4 million for NEIL additional expenses if losses
exceed the accumulated reserve funds. WP&L could be assessed annually a
maximum of $1.7 million for NEIL primary property, $3.3 million for NEIL
excess property and $1.0 million for NEIL additional expense coverage. IP&L
and WP&L are not currently aware of any losses that they believe are likely
to result in an assessment.
In the unlikely event of a catastrophic loss at KewauneeDAEC or DAEC,Kewaunee, the amount of
insurance available may not be adequate to cover property damage,
decontamination and premature decommissioning. Uninsured losses, to the
extent not recovered through rates, would be borne by WPIP&L or IESUWP&L, as the
case may be, and could have a material adverse effect on their financial
condition and results of operations.
ReferThe NWPA assigned responsibility to Note 12(e)the DOE to establish a facility for the
ultimate disposition of high level waste and spent nuclear fuel and authorized
the DOE to enter into contracts with parties for the disposal of such material
beginning in 1998, in exchange for payments by contract holders. IP&L (for DAEC)
and WPSC (for Kewaunee) entered into such contracts and have made the agreed
payments to the Nuclear Waste Fund held by the U.S. Treasury. The companies were
subsequently notified by the DOE that it was not able to begin acceptance of
spent nuclear fuel by the 1998 deadline. Furthermore, the DOE has experienced
significant delays in its efforts and material acceptance is now expected to
occur no earlier than 2010 with the possibility of further delay being likely.
Alliant Energy continues to monitor and evaluate its options for recovery of
damages due to the DOE's delay in accepting spent nuclear fuel. The DOE is
currently preparing an application to license a permanent spent fuel storage
facility in the Yucca Mountain area of Nevada.
The NWPA also assigned responsibility for interim storage of spent nuclear
fuel to generators of such spent nuclear fuel, such as IP&L and WPSC. In
accordance with this responsibility, IP&L and WPSC have been and will
continue storing spent nuclear fuel on site at DAEC and Kewaunee,
respectively, until removal of all spent nuclear fuel by the DOE to its
permanent repository occurs. Interim storage activities at reactor sites,
regardless of DOE delays or acceptance schedules, will extend after final
reactor shutdown. Construction of a dry cask storage facility by IP&L at
DAEC has been completed and transfer of used fuel into the facility is
expected to begin in 2003. The storage facility will provide assurance that
both the operating and post-shutdown storage needs of DAEC are satisfied.
Kewaunee has sufficient fuel storage capacity to store all of the "Notes to Consolidated
Financial Statements"fuel it
will generate through 2009. No decisions have been made concerning
additional storage capacity needed beyond 2009.
The Low-Level Radioactive Waste Policy Amendments Act of 1985 mandates that
each state must take responsibility for a further discussionthe storage of low-level radioactive
waste produced within its borders. The States of Iowa and Wisconsin are
members of the nuclear insurance
issue.six-state Midwest Interstate Low-Level Radioactive Waste
Compact (Compact), which is responsible for development of any new disposal
capability within the Compact member states. Disposal facilities located
near Barnwell, South Carolina and Clive, Utah continue to accept the
low-level waste from DAEC and Kewaunee, -thereby minimizing the amount of
low-level waste stored on-site. Given technological advances, waste
compaction and the reduction in the amount of waste generated, DAEC and
Kewaunee each have on-site storage capability sufficient to store low-level
waste expected to be generated over at least the next 10 years. While the
operators of DAEC and Kewaunee are unable to predict how long these
facilities will continue to accept their waste, continuing access to these
facilities expands their on-site storage capability indefinitely.
WPSC purchases uranium concentrates, conversion services,
- -------- enrichment
services, and fabrication services for nuclear fuel assemblies at Kewaunee.
New fuel assemblies replace used assemblies that are removed from the reactor
every 18 months and placed in storage at the plant site pending removal by
the DOE. Uranium concentrates, conversion services, and enrichment services
are purchased at spot market prices, through a bid process, or using existing
contracts. Conversion services are complete for the nuclear fuel reloadsreload
scheduled in 2000, 2001 and 2003. AWPSC has contracted for a fixed quantity of enrichment
12
services are contracted through the year 2004. Additional enrichment services will be acquired under
aan existing contract which is
in effect for the life of the plant or by purchases on the spot market. FuelWPSC has contracted
for fuel fabrication services are contracted well intofor the next decade and
contain contractual clauses covering force majeure and termination
provisions. Asix reloads. WPSC's uranium
inventory policy requires thatis to maintain sufficient inventory exist for up to two reactor reloads of
fuel. As of DecemberAt Dec. 31, 1999, 983,0002002, approximately 160,000 pounds of yellowcake (a
processed form of uranium ore) or its equivalent werewas held in inventory for
the plant. DAEC - A contract forEach refueling requires approximately 500,000 pounds of
yellowcake. In 2003, approximately 825,000 pounds of yellowcake will be
acquired to meet the requirements of the inventory policy.
Uranium and enrichment services and enriched uranium product
- ----
was signed withfor the USEC in 1995. This contract is effective through
11
September of 2001. Fabrication of the nuclear fuel is being performed by
General Electric Company for fuel through the 2011Spring 2003 refueling of DAEC.
IESUoutage at DAEC
have been completed. IP&L believes that an ample supply of uranium and
enrichment services will be available in the future and intends to purchasecontinue
its strategy of purchasing such uranium and enrichment services as necessary
on the spot market and/or via medium length (less than five years) contracts
to supplement its current
contracts and meet its generation requirements. These sources of supply will be used to
meet delivery requirements for an early 2005 refueling outage. Arrangements
for the fabrication of nuclear fuel are in place through the 2011 refueling
of DAEC.
Additional discussions of various other nuclear issues relating to KewauneeDAEC and
DAECKewaunee are included in Item 7. MD&ANotes 1, 3, 9, 10(c), 11(e), 11(f) and 12 of the
"Notes to Consolidated Financial Statements."
Power Supply - Wisconsin enacted electric reliability legislation in 1998
(Wisconsin Reliability Act) with the goal of assuring reliable electric
energy for Wisconsin. The law allows the construction of merchant power
plants in the state and streamlines the regulatory approval process for
building new generation and transmission facilities. The PSCW is authorized
to order construction of new transmission facilities, based on the findings
of its regional transmission constraint study, through Dec. 31, 2004. In
October 2001, the PSCW approved the construction of a 345 KV transmission
line, which will improve transmission import capabilities in Wisconsin.
Re-approval of the project due to significant cost increases is expected
during the summer of 2003 by the PSCW. WP&L notes that it may take time for
new transmission and power plant projects to be approved and built in
Wisconsin.
In 2000, WP&L and Calpine announced an agreement whereby Calpine would build,
own and operate a 600 MW natural gas-fired combined cycle power plant in
Wisconsin at WP&L's Rock River plant (Riverside project). WP&L has entered
into a purchased-power agreement for 453 MW of this plant's output, which is
anticipated to be available prior to the time of the 2004 summer peak
demand. Construction began in September 2002 and is expected to assist WP&L
in meeting its growing demands for electricity, to place a greater reliance
on generation physically located in Wisconsin versus power purchased from
outside of Wisconsin and to help WP&L maintain the required 18% reserve
margin in Wisconsin.
The Iowa Legislature passed a bill in 2001 to encourage construction of new
generating facilities in Iowa. In 2001, Alliant Energy's subsidiaries
announced their interest in developing new electric generation capacity in
Iowa and Wisconsin over the next 10 years with an estimated investment of
$2.5 billion. IP&L announced a willingness to develop up to 1,200 MW of new
electric generation over the next 10 years. Currently, Alliant Energy's
Power Iowa plan includes adding approximately 550 MW of natural gas-fired
generation (500 MW by 2004), 100 MW of capacity generated from renewable
energy sources by December 2003, researching options for an additional
500-600 MW of generation and increases in energy efficiency through energy
conservation and process improvements at various commercial and industrial
customer locations. In January 2003, the IUB approved IP&L's siting
certificate for a 500 MW natural gas-fired plant in Mason City, Iowa and
construction began. In addition, in December 2002, IP&L began purchasing
approximately 57 MW of capacity from a wind generation facility in Iowa. In
Wisconsin, Alliant Energy's current plans are to install approximately 800 MW
of additional electric generation over the next 10 years, including
approximately 500-700 MW of base and/or intermediate generation and
approximately 100-300 MW of simple-cycle gas generation.
WP&L currently anticipates meeting its 2003 power supply requirements,
including the required 18% reserve margin, through a variety of incremental
power supply resources which include, but are not limited to, renegotiated
purchased-power contracts from current suppliers utilizing existing firm
transmission rights to replace currently expiring purchased-power contracts
and additional power purchases from existing generating units located within
and outside of Wisconsin. The largest challenge that WP&L faces in securing
power supply resources necessary to meet its 2003 requirements is the lack of
available incremental firm transmission service to import additional power
13
supply resources into WP&L's load-serving area from bulk power supply sources
outside of Wisconsin. While Alliant Energy currently expects to meet utility
customer demands in 2003, unanticipated reliability issues could still arise
in the event of unexpected power plant outages, transmission system outages
or extended periods of extremely hot weather.
Refer to "Other Matters"Liquidity and Capital Resources - Power Supply"Construction and Acquisition
Expenditures" in Item 7. MD&A for a discussion
of power supply concerns.additional information.
Electric Environmental Matters - Alliant Energy is regulated in environmental
matters by a number of federal, state and local agencies. Such regulations
are the result of a number of environmental laws passed by the U.S. Congress,
state legislatures and local governments and enforced by federal, state and
local agencies. The laws impacting Alliant Energy's operations include, but
are not limited to, the Clean Water Act; Safe Drinking Water Act; Clean Air Act,Water Act; CAA, as
amended by the Clean Air ActCAA Amendments of 1990; National Environmental Policy Act;
Toxic Substances Control Act; Emergency Planning and Community Right-to-Know
Act; Resource Conservation and Recovery Act; Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (CERCLA), as amended by the Superfund Amendments
and Reauthorization Act of 1986; Nuclear Waste Policy Act of 1982;1980; NWPA; Occupational Safety
and Health Act; and the National Energy Policy Act of
1992.NEPA. Alliant Energy regularly obtains federal, state
and local permits to assure compliance with the environmental protection laws
and regulations. Costs associated with such compliance have increased in
recent years and are expected to increase moderately in the future.
In February 2003, WP&L's Columbia Energy Center (Columbia) received a Notice
of Violation from the Wisconsin DNR for exceeding limits in its Wisconsin
Pollutant Discharge Elimination System permit, which requires Columbia to
sample its discharge to test for acute and chronic toxicity. In its most
recent permit, Columbia was to identify what was causing the toxicity issue
through an evaluation and develop a reduction plan. The evaluation was
performed and Columbia developed a reduction plan that identified carbon
dioxide injection as the treatment to reduce the aluminum concentrations.
The Wisconsin DNR did not approve this method of treatment and directed
Columbia to revise the reduction plan, at which time Columbia began
evaluating a number of treatment alternatives and physical evaluation. WP&L
has been working with the Wisconsin DNR to resolve this issue. While it is
possible that the Wisconsin DNR may subsequently seek to impose a civil
penalty, WP&L believes it can resolve this issue to the Wisconsin DNR's
satisfaction in a manner that will not have a material adverse effect on its
financial condition or results of operations.
Refer to "Other Matters"Liquidity and Capital Resources - Environmental" in Item 7. MD&A and Note
1211(e) of the "Notes to Consolidated Financial Statements" for a further
discussion of electric environmental matters.
1214
Alliant Energy Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Electric Operating Information (Utility Only) 2002 2001 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $626,947 $599,074 $567,283 $541,714 $532,676
$521,574 $506,784 $509,970
Commercial 376,365 373,145 349,019 329,487 317,704
307,941 296,345 290,990
Industrial 526,804 543,471 501,155 476,140 477,241
455,912 428,726 412,711
--------------------------------------------------------------------------------------------------------------------------------------------------
Total from ultimate customers 1,530,116 1,515,690 1,417,457 1,347,341 1,327,621 1,285,427 1,231,855 1,213,671
Sales for resale 160,335 184,507 173,148 155,801 199,128
192,346 181,365 143,726
Other 62,083 56,359 57,431 45,796 40,693
37,980 27,155 24,271
--------------------------------------------------------------------------------------------------------------------------------------------------
Total $1,752,534 $1,756,556 $1,648,036 $1,548,938 $1,567,442
$1,515,753 $1,440,375 $1,381,668
==================================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Electric Sales (000s MWH)MWh):
Residential 7,616 7,344 7,161 7,024 6,826
6,851 6,826 6,860
Commercial 5,542 5,464 5,364 5,260 4,943
4,844 4,720 4,661
Industrial 12,297 12,469 13,092 13,036 12,718
12,320 11,666 11,360
--------------------------------------------------------------------------------------------------------------------------------------------------
Total from ultimate customers 25,455 25,277 25,617 25,320 24,487 24,015 23,212 22,881
Sales for resale 4,805 4,936 4,906 5,566 7,189
6,768 7,459 5,001
Other 197 168 174 162 158
161 161 163
-------------------------------------------------------------------------------------------------------------------------------------------------
Total 30,457 30,381 30,697 31,048 31,834
30,944 30,832 28,045
==================================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Customers (End of Period):
Residential 822,229 807,754 799,603 790,669 781,127
772,100 762,665 751,998
Commercial 128,212 125,539 123,833 122,509 121,027
119,463 117,846 116,228
Industrial 2,905 2,826 2,773 2,730 2,618
2,555 2,472 2,418
Other 3,344 3,324 3,316 3,282 3,267
3,281 3,207 2,749
--------------------------------------------------------------------------------------------------------------------------------------------------
Total 956,690 939,443 929,525 919,190 908,039
897,399 886,190 873,393
==================================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Other Selected Electric Data:
Maximum peak hour demand (MW) (1)5,729 5,677 5,397 5,233 5,228 5,045 4,953 5,032
Sources of electric energy (000s MWH)MWh):
Coal and gas 18,349 18,662 19,139 19,078 19,119
17,423 17,014 17,606
Purchased power 8,596 8,727 8,058 8,619 10,033
10,660 10,895 7,416
Nuclear 5,012 4,116 4,675 4,362 4,201
3,874 4,054 4,166
Other 379 452 427 528 504
565 392 349
--------------------------------------------------------------------------------------------------------------------------------------------------
Total 32,336 31,957 32,299 32,587 33,857
32,522 32,355 29,537
==================================================================================================================================================
Revenue per KWHKWh from ultimate customers (in cents)(cents) 6.01 6.00 5.53 5.32 5.42
5.35 5.31 5.30
- -----------------------------------------------------------------------------------------------------------------------------------
(1) 1999 data represents the coincident peak of the entire Alliant Energy system. 1998 to 1995 data represents a summation
of the individual peak demands of IESU, WP&L and IPC thus they do not represent the coincident peak of the entire
Alliant Energy system.------------------------------------------------------------------------------------------------------------------------------------
1315
IES Utilities Inc.Interstate Power and Light Company
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Electric Operating Information 2002 2001 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):------------------------------------------------------------------------------------------------------------------------------------
Residential $230,422 $232,662 $227,496 $213,838 $217,351
Commercial 176,251 168,672 162,626 153,163 150,722
Industrial 181,740 181,369 177,890 160,477 148,529
-----------------------------------------------------------------------
Total from ultimate customers 588,413 582,703 568,012 527,478 516,602
Sales for resale 28,479 45,453 25,719 37,384 35,356
Other 11,058 11,267 10,539 9,411 8,513
-----------------------------------------------------------------------
Total $627,950 $639,423 $604,270 $574,273 $560,471
=======================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
Electric Sales (000s MWH):
Residential 2,685 2,661 2,682 2,642 2,690
Commercial 2,658 2,465 2,378 2,315 2,296
Industrial 5,072 4,872 4,743 4,436 4,248
-----------------------------------------------------------------------
Total from ultimate customers 10,415 9,998 9,803 9,393 9,234
Sales for resale 1,392 1,763 794 1,746 1,586
Other 40 42 43 46 50
-----------------------------------------------------------------------
Total 11,847 11,803 10,640 11,185 10,870
=======================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
Customers (End of Period):
Residential 293,433 290,348 288,387 286,315 284,154
Commercial 49,952 49,489 48,962 48,593 48,196
Industrial 715 705 711 703 695
Other 449 479 442 437 444
-----------------------------------------------------------------------
Total 344,549 341,021 338,502 336,048 333,489
=======================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
Other Selected Electric Data:
Maximum peak hour demand (MW) 1,990 1,965 1,854 1,833 1,824
Sources of electric energy (000s MWH):
Coal and gas 6,543 6,417 5,499 4,936 5,759
Purchased power 3,104 3,385 2,789 4,177 3,013
Nuclear 2,548 2,682 2,904 2,753 2,611
Other 226 199 164 44 24
-----------------------------------------------------------------------
Total 12,421 12,683 11,356 11,910 11,407
=======================================================================
Revenue per KWH from ultimate customers (in cents) 5.65 5.83 5.79 5.62 5.59
- -----------------------------------------------------------------------------------------------------------------------------------
14
Wisconsin Power and Light Company
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Operating Information
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $213,496 $198,770 $199,633 $201,690 $199,850$355,072 $350,946 $337,615 $328,218 $333,906
Commercial 116,947 108,724 107,132 105,319 102,129229,639 234,876 221,820 212,540 208,980
Industrial 171,118 162,771 152,073 143,734 140,562315,494 335,680 311,070 305,022 314,470
------------------------------------------------------------------------
Total from ultimate customers 501,561 470,265 458,838 450,743 442,541900,205 921,502 870,505 845,780 857,356
Sales for resale 102,751 128,536 160,917 131,836 97,35034,513 53,320 57,433 53,050 70,592
Other 22,295 15,903 14,388 6,903 6,43330,136 28,284 27,907 23,501 24,790
------------------------------------------------------------------------
Total $626,607 $614,704 $634,143 $589,482 $546,324$964,854 $1,003,106 $955,845 $922,331 $952,738
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Sales (000s MWH)MWh):
Residential 3,111 2,964 2,974 2,980 2,9384,184 4,026 4,010 3,913 3,862
Commercial 1,980 1,898 1,878 1,814 1,7733,392 3,342 3,333 3,280 3,045
Industrial 4,570 4,493 4,256 3,986 3,8737,843 7,931 8,404 8,466 8,225
------------------------------------------------------------------------
Total from ultimate customers 9,661 9,355 9,108 8,780 8,58415,419 15,299 15,747 15,659 15,132
Sales for resale 3,252 4,492 5,824 5,246 3,1091,151 1,412 1,678 2,314 2,697
Other 54 59 60 57 54103 107 111 108 99
------------------------------------------------------------------------
Total 12,967 13,906 14,992 14,083 11,74716,673 16,818 17,536 18,081 17,928
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers (End of Period):
Residential 355,691 350,334 343,637 336,933 329,643446,202 439,508 437,425 434,978 430,793
Commercial 48,696 47,857 46,823 45,669 44,73076,856 75,132 74,483 73,813 73,170
Industrial 947 909 855 815 7951,898 1,836 1,799 1,783 1,709
Other 1,893 1,860 1,875 1,820 1,3421,328 1,359 1,393 1,389 1,407
------------------------------------------------------------------------
Total 407,227 400,960 393,190 385,237 376,510526,284 517,835 515,100 511,963 507,079
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Electric Data:
Maximum peak hour demand (MW) 2,397 2,292 2,253 2,124 2,1973,097 3,104 3,021 2,930 2,902
Sources of electric energy (000s MWH)MWh):
Coal and gas 8,186 8,916 8,587 8,687 8,32310,219 10,343 11,065 10,892 10,203
Purchased power 3,436 3,923 5,744 4,494 2,2274,134 4,595 4,041 5,183 6,110
Nuclear 1,814 1,519 970 1,301 1,5553,202 2,697 3,117 2,548 2,682
Other 288 288 355 303 308127 171 179 240 216
------------------------------------------------------------------------
Total 13,724 14,646 15,656 14,785 12,41317,682 17,806 18,402 18,863 19,211
========================================================================
Revenue per KWHKWh from ultimate customers (in cents) 5.19 5.03 5.04 5.13 5.16(cents) 5.84 6.02 5.53 5.40 5.67
- ------------------------------------------------------------------------------------------------------------------------------------
1516
Wisconsin Power and Light Company
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Operating Information 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $271,875 $248,128 $229,668 $213,496 $198,770
Commercial 146,726 138,269 127,199 116,947 108,724
Industrial 211,310 207,791 190,085 171,118 162,771
------------------------------------------------------------------------
Total from ultimate customers 629,911 594,188 546,952 501,561 470,265
Sales for resale 125,822 131,187 115,715 102,751 128,536
Other 31,947 28,075 29,524 22,295 15,903
------------------------------------------------------------------------
Total $787,680 $753,450 $692,191 $626,607 $614,704
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Sales (000s MWh):
Residential 3,432 3,318 3,151 3,111 2,964
Commercial 2,150 2,122 2,031 1,980 1,898
Industrial 4,454 4,538 4,688 4,570 4,493
------------------------------------------------------------------------
Total from ultimate customers 10,036 9,978 9,870 9,661 9,355
Sales for resale 3,654 3,524 3,228 3,252 4,492
Other 94 61 63 54 59
------------------------------------------------------------------------
Total 13,784 13,563 13,161 12,967 13,906
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers (End of Period):
Residential 376,027 368,246 362,178 355,691 350,334
Commercial 51,356 50,407 49,350 48,696 47,857
Industrial 1,007 990 974 947 909
Other 2,016 1,965 1,923 1,893 1,860
------------------------------------------------------------------------
Total 430,406 421,608 414,425 407,227 400,960
========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Electric Data:
Maximum peak hour demand (MW) 2,674 2,696 2,508 2,397 2,292
Sources of electric energy (000s MWh):
Coal and gas 8,130 8,319 8,074 8,186 8,916
Purchased power 4,462 4,132 4,017 3,436 3,923
Nuclear 1,810 1,419 1,558 1,814 1,519
Other 252 281 248 288 288
------------------------------------------------------------------------
Total 14,654 14,151 13,897 13,724 14,646
========================================================================
Revenue per KWh from ultimate customers (cents) 6.28 5.95 5.54 5.19 5.03
- ------------------------------------------------------------------------------------------------------------------------------------
17
2) GAS UTILITY OPERATIONS
As of December 31, 1999, Alliant Energy's utility subsidiaries provided
retail naturalThe utilities provide gas service to approximately 393,000 customers in
approximately 488 communities in Iowa, southern and central Wisconsin,
southern Minnesota and northern and northwestern Illinois and southern Minnesota.Illinois. The approximate number of gas
customers and communities served forby each of the
individual utilitiesutility at DecemberDec. 31, 19992002 was as
follows:
Gas Customers Communities Served
---------------- ----------------------
IESU 181,000 212
WP&L 162,000 235
IPC 50,000 41
Gas
Transportation and
Retail Customers Other Customers Communities Served
------------------- ---------------------- -----------------------
IP&L 234,853 219 253
WP&L 170,123 254 233
------------------- ---------------------- -----------------------
404,976 473 486
=================== ====================== =======================
2002 gas utility operations accounted for 18.2%, 16.0%18% and 14.0%18% of operating revenues
and 5.2%, 8.9%7% and 8.4%9% of operating income for IESU,IP&L and WP&L, and
IPC, respectively, for the year ended December 31, 1999. These
operationswhich
include providing gas services to transportationretail and retailtransportation customers.
In providing gas commodity service to retail customers, Alliant EnergyCorporate Services
administers a diversified portfolio of transportation and storage contracts
on behalf of each of the three utilities.IP&L and WP&L. Transportation contracts with NNG, NGPL and ANR
allow access to gas supplies located in the U.S. and Canada. Non-traditional arrangementsArrangements
with Firm Citygate Supplies (FCS) provide IESUIP&L and WP&L with gas delivered
directly to their service territories. The maximum daily delivery capacity
of the individual utilities for the year ended
December 31, 19992002 was as follows:follows (in Dths):
NNG NGPL ANR Non-TraditionalFCS Total
--------------- -------------- --------------- ----------------- ---------------
IESU 143,996 Dth 62,619 DthIP&L 198,641 89,932 61,737 Dth 11,500 Dth 279,852 Dth22,000 372,310
WP&L 75,056 Dth90,056 -- 132,124 Dth 46,400 Dth 253,580 Dth
IPC 52,595 Dth 29,750 Dth -- -- 82,345 Dth146,467 34,000 270,523
IESU, WPIP&L and IPCWP&L maintain purchase agreements with over 5030 suppliers of natural
gas from all gas producing regions of the U.S. and Canada. Approximately halfThe majority of
the gas supply contracts are for terms of six months or less, with the
remaining supply contracts having terms up to two years. The utilities' gas
supply commitments are index-based.
In addition to sales of natural gas to retail customers, IESU, WPIP&L and IPCWP&L
provide transportation service to commercial and industrial customers by
moving customer-owned gas through Alliant Energy'stheir distribution systemsystems to the
customers' meter. Revenues are collected for this service pursuant to
transportation tariffs.
The gas sales of the utility subsidiariesIP&L and WP&L follow a seasonal pattern. There is an annual
base load of gas used for cooking, heating and other purposes, with a large
heating peak occurring during the winter season. Producers,Natural gas obtained from
producers, marketers and brokers, as well as gas in storage, contracts, supply
natural gasis utilized to
meet the peak heating season requirements. Storage contracts allow the utilitiesIP&L and
WP&L to purchase gas in the summer, store the gas in underground storage
fields and deliver it in the winter. Gas storage met approximately 19%, 26%20% and
25%16% of IESU's, WPIP&L's and IPC'sWP&L's annual gas requirements in 1999,2002, respectively.
Refer to Note 1(j) for information relating to utility natural gas cost
recovery, Note 10(a) for information on natural gas derivatives and Note
11(b) for discussion of natural gas commitments in the "Notes to Consolidated
Financial Statements."
Gas Environmental Matters - Refer to Note 11(e) of the "Notes to Consolidated
Financial Statements" for a discussion of Alliant Energy's rate recovery mechanisms for its
natural gas costs and Note 12(b) of the "Notes to Consolidated Financial
Statements" for a discussion of Alliant Energy's gas commitments.
Gas Environmental Matters
Refer to Note 12(f) of the "Notes to Consolidated Financial Statements"
for a discussion of gas environmental matters.
1618
Alliant Energy Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Operating Information (Utility Only) 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Operating Revenues (000s):
Residential $218,746 $270,248 $245,697 $185,090 $175,603
$225,542 $216,268 $179,761
Commercial 111,343 141,121 127,104 89,118 85,842
115,858 108,187 87,951
Industrial 25,177 31,262 27,752 21,855 20,204
27,393 27,569 30,462
Transportation/other 38,720 45,246 14,395 18,256 13,941
25,114 23,931 21,952
------------------------------------------------------------------------------------------------------------------------------------
Total $393,986 $487,877 $414,948 $314,319 $295,590
$393,907 $375,955 $320,126
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Sales (000s Dekatherms)Dths):
Residential 30,931 29,580 32,026 30,309 28,378
33,894 37,165 33,827
Commercial 19,348 18,055 19,696 18,349 17,760
21,142 22,613 20,599
Industrial 5,373 5,344 5,350 5,963 5,507
6,217 6,856 6,381
Transportation/other 47,386 48,539 43,931 46,954 52,389
56,719 55,240 54,267
------------------------------------------------------------------------------------------------------------------------------------
Total 103,038 101,518 101,003 101,575 104,034
117,972 121,874 115,074
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers at End of Period (Excluding Transportation/Other):
Residential 358,384 353,430 351,990 347,533 342,586
337,956 331,919 326,005
Commercial 45,793 45,480 44,654 44,289 43,825
43,316 42,658 42,095
Industrial 799 951 953 1,037 982
963 1,022 1,059
------------------------------------------------------------------------------------------------------------------------------------
Total 404,976 399,861 397,597 392,859 387,393
382,235 375,599 369,159
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Gas Data:
Revenue per dekathermDth sold (excluding transportation/other) $6.38 $8.35 $7.02 $5.42 $5.45 $6.02 $5.28 $4.90
Purchased gas costs per dekathermDth sold (excluding transportation/other) $4.02 $6.31 $4.88 $3.30 $3.22 $4.23 $3.61 $3.31
- ------------------------------------------------------------------------------------------------------------------------------------
1719
IES Utilities Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995Interstate Power and Light Company
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Operating Information 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Operating Revenues (000s):
Residential $88,302 $86,821 $110,663 $97,708 $84,562$124,237 $162,575 $149,493 $115,428 $110,430
Commercial 40,459 39,928 54,383 46,966 40,39061,222 82,463 72,592 53,548 51,944
Industrial 11,543 10,422 13,961 12,256 8,79018,197 22,355 19,171 15,778 14,308
Transportation/other 5,521 4,108 4,510 3,934 3,550
-------------------------------------------------------------------11,239 13,621 8,540 8,795 7,171
------------------------------------------------------------------
Total $145,825 $141,279 $183,517 $160,864 $137,292
===================================================================$214,895 $281,014 $249,796 $193,549 $183,853
==================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Sales (000s Dekatherms)Dths):
Residential 13,778 13,803 16,317 17,680 16,30218,068 17,826 19,257 18,239 17,442
Commercial 8,077 8,272 9,602 10,323 9,53410,774 10,483 11,101 10,578 10,475
Industrial 3,291 3,089 3,318 3,796 3,0984,070 4,147 3,874 4,443 4,085
Transportation/other 10,236 11,316 10,321 10,341 10,871
-------------------------------------------------------------------28,814 31,673 30,251 33,717 39,441
------------------------------------------------------------------
Total 35,382 36,480 39,558 42,140 39,805
===================================================================61,726 64,129 64,483 66,977 71,443
==================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers at End of Period (Excluding Transportation/Other):
Residential 158,705 157,135 155,859 154,457 152,873206,808 205,065 205,300 203,518 201,521
Commercial 21,661 21,530 21,431 21,364 21,19327,607 27,649 27,071 26,909 26,767
Industrial 383 398 399 417 404
-------------------------------------------------------------------438 441 440 461 476
------------------------------------------------------------------
Total 180,749 179,063 177,689 176,238 174,470
===================================================================234,853 233,155 232,811 230,888 228,764
==================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Gas Data:
Revenue per dekathermDth sold (excluding transportation/other) $5.58 $5.45 $6.12 $4.94 $4.62$6.19 $8.24 $7.05 $5.55 $5.52
Purchased gas cost per dekathermDth sold (excluding transportation/other) $3.51 $3.36 $4.33 $3.27 $3.15$4.11 $6.20 $4.89 $3.41 $3.20
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin Power and Light Company
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Operating Information 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (000s):
Residential $94,509 $107,673 $96,204 $69,662 $65,173
$84,513 $90,382 $70,382
Commercial 50,121 58,658 54,512 35,570 33,898
45,456 46,703 35,411
Industrial 6,980 8,907 8,581 6,077 5,896
8,378 11,410 17,984
Transportation/other 27,481 31,625 5,855 9,461 6,770
17,536 17,132 15,388
-------------------------------------------------------------------------------------------------------------------------------------
Total $179,091 $206,863 $165,152 $120,770 $111,737
$155,883 $165,627 $139,165
=====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Sales (000s Dekatherms)Dths):
Residential 12,863 11,754 12,769 12,070 10,936
12,770 14,297 12,690
Commercial 8,574 7,572 8,595 7,771 7,285
8,592 9,167 8,245
Industrial 1,303 1,197 1,476 1,520 1,422
1,714 1,997 2,144
Transportation/other 18,572 16,866 13,680 13,237 12,948
17,595 18,567 16,870
-------------------------------------------------------------------------------------------------------------------------------------
Total 41,312 37,389 36,520 34,598 32,591
40,671 44,028 39,949
=====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Customers at End of Period (Excluding Transportation/Other):
Residential 151,576 148,365 146,690 144,015 141,065
137,827 133,580 129,576
Commercial 18,186 17,831 17,583 17,380 17,058
16,653 16,083 15,724
Industrial 361 510 513 576 506
488 529 566
-------------------------------------------------------------------------------------------------------------------------------------
Total 170,123 166,706 164,786 161,971 158,629
154,968 150,192 145,866
=====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Gas Data:
Revenue per dekathermDth sold (excluding transportation/other) $6.67 $8.54 $6.97 $5.21 $5.34 $6.00 $5.83 $5.36
Purchased gas cost per dekathermDth sold (excluding transportation/other) $3.89 $6.47 $4.69 $3.00 $3.13 $4.30 $4.12 $3.64
- ------------------------------------------------------------------------------------------------------------------------------------
1820
D. INFORMATION RELATING TO NON-REGULATED OPERATIONS
- ---------------------------------------------------
Resources ismanages a holding company whoseportfolio of wholly-owned subsidiaries at
December 31, 1999 included Investments, Transportation, Capital Square,
International and ISCO. Resources is managedadditional
investments through five distinct platforms: International, Non-regulated
Generation, Integrated Services, Investments International, Industrial Services,
Cargill-Alliant and Mass Markets.
Investments Platform - Investments is a holding company whose primary
wholly-owned subsidiaries include Heartland Properties, Inc. (HPI), Iowa
LandEnergy Technologies. In
November 2002, Alliant Energy announced its commitment to pursue the sale of,
or other exit strategies for, Whiting, its investments in Australia and Building Company (Iowa Land) and Village Lakeshares Inc.
(Lakeshares). HPI is responsible for performing asset management and
facilitating the development and financing of high quality,its
affordable housing in Alliant Energy's utility service territory. HPI has a
majority ownership interest in approximately 60 such properties. Capital
Square provides mortgage-banking services to facilitate HPI's development
and financing efforts in the affordable housing market. Iowa Land is
organized to pursue real estate and economic development activities in
IESU's service territory. Lakeshares is a holding company for resort
properties in Iowa. Investments also has direct and indirect equity
interests in various real estate ventures, primarily concentrated in
Cedar Rapids, and holds other passive investments including an equity
interest in McLeod.business. Refer to Note 10 of the16 in Alliant Energy's "Notes to
Consolidated Financial Statements" for additional information. Resources
intends to focus on its International and Non-regulated Generation businesses
as its primary long-term strategic platforms and will continue reviewing for
ways to narrow its strategic focus and business platforms.
International - has invested in energy generation and distribution companies
and projects in select growing markets. Currently, International has
investments in Brazil, China and New Zealand and a further discussionloan to a development
project in Mexico. International has focused on these locations because of
the McLeodits belief that they offer a growing demand for energy and are receptive to
foreign investment. Whiting is organized to purchase, develop and produce crude oil and
natural gas. (Although Whiting is a wholly-owned subsidiary of ISCO,
Whiting is identified under the Investments platform for management
purposes.) Transportation is a holding company whose wholly-owned
subsidiaries include the Cedar Rapids and Iowa City Railway Company
(CRANDIC), Williams Bulk Transfer Inc. (Williams) and Transfer Services,
Inc. (Transfer). CRANDIC is a short-line railway that renders freight
service between Cedar Rapids and Iowa City. Williams' and Transfer's
operations include transloading and storage services. TransportationInternational also has a 75% equity investment in IEI Barge Services, Inc. (Barge)
which provides barge terminaldeveloped partnerships with other
entities that have intimate knowledge of each local market's business trends
and hauling service on the Mississippi
River.
International Platform - International is a holding company for
Resources' international investments whose wholly-owned subsidiaries
include Alliant International New Zealand Limited (New Zealand),customs. In addition, Alliant Energy Australia Pty Ltd. (Australia), Grandelight Holding Ltd.
(Grandelight), Interstate Energy Corporation Pte Ltd. (IECP), Alliant
Energy Renewable Resources Ltd. (AERR), Alliant Energy Brazil, Inc.
(Brazil) and Alliant Energy de Mexico L.L.C. (Mexico). New Zealand has
equity investments in several New Zealand utility entities. Australia has an equity investmentthat
it is in a holding company whose primary investments
are infrastructure and utility companies in Australia. Grandelight has a
67% equity investment in Peak Pacific Investment Company Ltd. (Peak
Pacific). Peak Pacific has been formed to develop investment
opportunities in generation infrastructure projects in China. IECP has a
50% equity investment in two individual cogeneration facilities in
China. AERR has been formed for the purposeprocess of investing in
international renewable resource projects. Mexico is organized to
provide utility-related services to a resort community in Mexico, of
which International has an investment in secured debentures.selling. Refer to Note 169 of theAlliant Energy's "Notes
to Consolidated Financial Statements" for a
discussion ofadditional information related to
Alliant Energy's investmentinvestments in Brazil completedforeign entities.
Non-regulated Generation - Alliant Energy Generation, Inc., was formed to
build a portfolio of competitive generating assets across the U.S., focusing
primarily on the Upper Midwest. Alliant Energy expects to build this
portfolio through a combination of strategic acquisitions, partnerships and
development projects. Given the status of the current non-regulated
generation market, Alliant Energy's initial investments in early
2000.
Industrialthis market will
focus on facilities with underlying long-term purchased-power agreements.
While Alliant Energy believes there are strong acquisition opportunities in
the existing non-regulated generation market, it will continue to be patient,
prudent and diligent in its pursuit of such opportunities. Synfuel has an
equity interest in a synthetic fuel processing facility. The synthetic fuel
project generates operating losses at its fuel processing facility, which are
more than offset by tax credits and the tax benefit of the losses generated.
Refer to "Liquidity and Capital Resources - Construction and Acquisition
Expenditures" in MD&A for additional information including an announcement in
February 2003 regarding the purchase of a generation facility.
Integrated Services Platform - ISCO isprovides a holding companywide range of energy and environmental
services for Resources'commercial, industrial, service companies whose primary wholly-owned subsidiaries
includeinstitutional, educational and
governmental customers. It offers large energy users an array of services to
maximize customers' productivity, profitability and energy efficiency, and
provides solutions for waste remediation and other environmental engineering
and consulting services. Integrated Services includes: Cogenex Corporation
(Cogenex), Industrial Energy Applications, Inc. (IEA), Heartland Energy
Group, Inc. (HEG) and, RMT, Inc. (RMT) and Alliant Energy Integrated Services
Company - Energy Solutions L.L.C. (Energy Solutions). Cogenex and IEA
offers facilities-basedprovide business customers with on-site energy services for customers, including standby generation,
cogeneration, steam production and propane air systems. IEA also
provides energy consulting services for customers and owns natural gas
and oil gathering systems, both in Texas.services. HEG offers
commodities-based energy services primarily related to supplying natural gas.gas
and owns several natural gas and oil gathering systems in Texas. RMT is a
Madison, Wisconsin basedan
environmental and engineering consulting company that serves clients
nationwide in a variety of industrial market segments. RMTsegments and specializes in
consulting on solid and hazardous waste management, ground water quality
protection, industrial design and hygiene engineering, and air and water
pollution control. Cargill-Alliant PlatformRMT is marketing SmartBurn, which is a large-scale
emissions-reducing program for coal-burning facilities, to other U.S.
companies. Energy Solutions provides energy consulting services to
commercial, industrial and institutional customers.
Investments - subsidiaries and investments include Transportation and
Investments. Transportation is a holding company whose wholly-owned
subsidiaries include the Cedar Rapids and Iowa City Railway Company
(CRANDIC), which is a short-line railway that provides freight service
between Cedar Rapids and Iowa City; IEI Barge Services, Inc. (Barge), which
provides barge terminal and hauling services on the Mississippi River; and
Williams Bulk Transfer Inc. (Williams) and Transfer Services, Inc.
(Transfer), which provide transfer and storage services. Investments is a
holding company whose primary wholly-owned subsidiary includes Iowa Land and
Building Company (Iowa Land) which is organized to pursue real estate and
economic development activities in IP&L's service territory. Investments
also has direct and indirect equity interests in various small real estate
and economic development ventures, primarily concentrated in Cedar Rapids,
Iowa, and holds other passive investments, including an equity interest in
McLeod, an integrated telecommunications and services provider. Alliant
Energy alsois in the process of selling Whiting and its affordable housing
business.
21
Energy Technologies - Resources has invested in energy technologies by
purchasing equity interests in Capstone, a 50% ownership
interest, which Resources manages,microturbine producer; Nth Power
Technologies Fund II, LP, a venture capital fund specializing in emerging
energy-technology companies; and several other modest investments in emerging
energy technology businesses. These ventures allow Alliant Energy to provide
its customers with new technologies that are smaller in scale than more
traditional generation technologies, such as microturbines, fuel cells, solar
concepts and wind turbines.
Mass Marketing has held interests in energy marketing businesses. In January
2003, Alliant Energy committed to a joint ventureplan to sell SmartEnergy, an
internet-based retailer, and Alliant Energy is in the process of disbanding
its Mass Marketing business unit.
E. DISCLOSURE CONCERNING WEBSITE ACCESS TO REPORTS
Alliant Energy makes its periodic and current reports, and amendments to
those reports, available, free of charge, on its website at
www.alliantenergy.com/investors on the same day as such material is
electronically filed with, Cargill, named
Cargill-Alliant,or furnished to, market electricity and risk management services to
wholesale customers.
Mass Markets Platform - Mass marketsthe SEC. Alliant Energy is not
including the information contained on its website as a business unitpart of, Resources
which provides products and services designed to meet the comfort,
security and productivity needs of residential and small commercial
customers.
19or
incorporating it by reference into, this Annual Report on Form 10-K.
22
ITEM 2. PROPERTIES
WPIP&L
WPIP&L's principal electric generating stations at DecemberDec. 31, 1999,2002, were as
follows:
Name and Location Primary Fuel 19992002 Summer Capability
of Station Type in KilowattsKWs
- ------------------------------------------------------------------------------------------------------------------------ --------------- -----------------------------------------
Kewaunee Nuclear Power Plant, Kewaunee, WI Nuclear 207,100 (1)
Nelson Dewey Generating Station, Cassville, WI Coal 226,000
Edgewater Generating Station #3, Sheboygan, WI Coal 76,000
Edgewater Generating Station #4, Sheboygan, WI Coal 237,300 (2)
Edgewater Generating Station #5, Sheboygan, WI Coal 306,000 (3)
Columbia Energy Center, Portage, WI Coal 494,400 (4)
-------------
Total Coal 1,339,700
Blackhawk Generating Station, Beloit, WI Gas 58,000
Rock River Generating Station, Beloit, WI Gas 164,000
Rock River Combustion Turbine, Beloit, WI Gas 148,000
South Fond du Lac Combustion Turbine
Units 2 and 3, Fond du Lac, WI Gas 169,000
Sheepskin Combustion Turbine, Edgerton, WI Gas 37,000
-------------
Total Gas 576,000
Kilbourn Hydro Plant, Wisconsin Dells, WI Hydro 9,000
Prairie du Sac Hydro Plant, Prairie du Sac, WI Hydro 30,000
Petenwell/Castle Rock Hydro Plants,
Wisconsin Rapids, WI Hydro 13,300 (5)
Shawano Hydro, Shawano, WI Hydro 409
-------------
Total Hydro 52,709
-------------
Total generating capability 2,175,509
=============
All KWs shown below represent the 1999 summer generating capability.
(1) Represents WP&L's 41% ownership interest in this 505,000 KW generating station, which is operated by WPSC.
(2) Represents WP&L's 68.2% ownership interest in this 348,000 KW generating station, which is operated by WP&L.
(3) Represents WP&L's 75% ownership interest in this 408,000 KW generating station, which is operated by WP&L.
(4) Represents WP&L's 46.2% ownership interest in this 1,070,000 KW generating station, which is operated by WP&L.
(5) Represents WP&L's 33.3% ownership interest in this 40,000 KW hydro plant, which is operated by Wisconsin River
Power Company.
WP&L owns 2,787 miles of electric transmission lines and 279 substations located
adjacent to the communities served, of which substantially all are in Wisconsin.
Substantially all of WP&L's facilities are subject to the lien of its First
Mortgage Bond indenture and are suitable for their intended use.
20
IESU
IESU's principal electric generating stations at December 31, 1999, were
as follows:
Name and Location Primary Fuel 1999 Summer Capability
of Station Type in Kilowatts
- -------------------------------------------------- ---- --------------- ------------------------------------------------------------------------------
Duane Arnold Energy Center, Palo, IowaIA Nuclear 364,000393,050 (1)
Ottumwa Generating Station, Ottumwa, IowaIA Coal 324,000 (2)345,690(2)
Prairie Creek Station, Cedar Rapids, IowaIA Coal 214,750194,560
Sutherland Station, Marshalltown, IowaIA Coal 143,000142,700
Sixth Street Station, Cedar Rapids, IowaIA Coal 65,00049,510
Burlington Generating Station, Burlington, IowaIA Coal 211,800215,060
George Neal Unit 3, Sioux City, IowaIA Coal 144,200 (3)
-------------144,200(3)
George Neal Unit 4, Sioux City, IA Coal 138,640(4)
Dubuque Units 2, 3 and 4, Dubuque, IA Coal 77,070
M. L. Kapp Plant Units 1 and 2, Clinton, IA Coal 238,300
Lansing Units 1, 2, 3 and 4, Lansing, IA Coal 317,130
Louisa Unit 1, Louisa, IA Coal 28,000(5)
-----------
Total Coal 1,102,750
Peaking1,890,860
Marshalltown Combustion Turbines, Marshalltown, IowaIA Oil 216,400167,500
Centerville Combustion Turbines, Centerville, IowaIA Oil 62,00053,660
Montgomery Combustion Turbine Unit 1, Montgomery, MN Oil 20,210
Fox Lake Plant Combustion Turbine Unit 4, Sherburn, MN Oil 20,070
Lime Creek Plant Combustion Turbine Units 1 and 2,
Mason City, IA Oil 72,960
Diesel Stations, all in IowaIA/MN Oil 8,300
-------------18,350
-----------
Total Oil 286,700352,750
Grinnell Station, Grinnell, IowaIA Gas 30,00025,630
Agency Street Combustion Turbines, West Burlington, IowaIA Gas 76,70066,990
Burlington Combustion Turbines, Burlington, IowaIA Gas 68,00066,730
Red Cedar Combustion Turbine, Cedar Rapids, IA Gas 22,700
-------------17,380
Fox Lake Plant Units 1, 2 and 3, Sherburn, MN Gas 106,870
-----------
Total Gas 197,400
-------------283,600
------------
Total generating capability 1,950,850
=============
All KWs shown below represent the 1999 summer generating capability.
(1) Represents IESU's 70% ownership interest in this 520,000 KW generating station, which is operated by IESU.
(2) Represents IESU's 48% ownership interest in this 675,000 KW generating station, which is operated by IESU.
(3) Represents IESU's2,920,260
============
All KWs shown below represent the 2002 summer generating capability.
(1) Represents IP&L's 70% ownership interest in this 561,500 KW generating
station, which is operated by IP&L.
(2) Represents IP&L's 48% ownership interest in this 720,190 KW generating
station, which is operated by IP&L.
(3) Represents IP&L's 28% ownership interest in this 515,000 KW generating
station, which is operated by MidAmerican Energy Company.
IESU(4) Represents IP&L's 21.5% ownership interest in this 644,000 KW generating
station, which is operated by MidAmerican Energy Company.
(5) Represents IP&L's 4% ownership interest in this 700,000 KW generating
station, which is operated by MidAmerican Energy Company.
IP&L owns 4,4487,068 miles of electric transmission lines and 578801 substations,
substantially all located in Iowa. IESU'sIowa, Minnesota and Illinois. IP&L's principal
properties are suitable for their intended use and are held subject to the
liens of indentures relating to its bonds.
2123
IPC
IPC'sWP&L
WP&L's principal electric generating stations at DecemberDec. 31, 1999,2002, were as
follows:
Name and Location Primary Fuel 19992002 Summer Capability
of Station Type in KilowattsKWs
- ------------------------------------------------------------------------------------------------------------------------ --------------- ---------------------------------------------------------------------------
Dubuque Units 2, 3 and 4, Dubuque, IAKewaunee Nuclear Power Plant, Kewaunee, WI Nuclear 217,300 (1)
Nelson Dewey Generating Station, Cassville, WI Coal 81,500
M. L. Kapp Plant Units 1 and 2, Clinton, IA222,460
Edgewater Generating Station #3, Sheboygan, WI Coal 254,900
Lansing Units 1, 2, 3 and 4, Lansing, IA76,000
Edgewater Generating Station #4, Sheboygan, WI Coal 321,000
George Neal Unit 4, Sioux City, IA230,520 (2)
Edgewater Generating Station #5, Sheboygan, WI Coal 141,900 (1)
Louisa Unit 1, Louisa, IA314,340 (3)
Columbia Energy Center, Portage, WI Coal 28,400 (2)502,130 (4)
-------------
Total Coal 827,700
Fox Lake Plant1,345,450
Blackhawk Generating Station, Beloit, WI Gas 54,500
Rock River Generating Station, Beloit, WI Gas 147,830
Rock River Combustion Turbine, Beloit, WI Gas 150,330
South Fond du Lac Combustion Turbine
Units 1, 2 and 3, Sherburn, MNFond du Lac, WI Gas 113,500
Montgomery167,670
Sheepskin Combustion Turbine, Unit 1, Montgomery, MN Oil 22,200
Fox Lake Plant Combustion Turbine Unit 4, Sherburn, MN Oil 21,300
Lime Creek Plant Combustion Turbine
Units 1 and 2, Mason City, IA Oil 70,400
Dubuque Diesel Units 1 and 2, Dubuque, IA Oil 4,600
Hills Diesel Units 1 and 2, Hills, MN Oil 4,000
Lansing Diesel Units 1 and 2, Lansing, IA Oil 2,000
New Albin Diesel Unit 1, New Albin, IA Oil 700Edgerton, WI Gas 37,920
-------------
Total Oil 125,200Gas 558,250
Kilbourn Hydro Plant, Wisconsin Dells, WI Hydro 7,000
Prairie du Sac Hydro Plant, Prairie du Sac, WI Hydro 15,000
Petenwell/Castle Rock Hydro Plants,
Wisconsin Rapids, WI Hydro 6,000 (5)
-------------
Total Hydro 28,000
-------------
Total generating capability 1,066,4002,149,000
=============
All KWs shown below represent the 1999 summer generating capability.
(1) Represents IPC's 21.5% ownership interest in this 660,000 KW generating station, which is operated by
MidAmerican Energy Company.
(2) Represents IPC's 4% ownership interest in this 710,000 KW generating station, which is operated by
MidAmerican Energy Company.
IPCAll KWs shown below represent the 2002 summer generating capability.
(1) Represents WP&L's 41% ownership interest in this 530,000 KW
generating station, which is operated by WPSC.
(2) Represents WP&L's 68.2% ownership interest in this 338,000 KW generating
station, which is operated by WP&L.
(3) Represents WP&L's 75% ownership interest in this 419,120 KW generating
station, which is operated by WP&L.
(4) Represents WP&L's 46.2% ownership interest in this 1,086,860 KW
generating station, which is operated by WP&L.
(5) WP&L has a 50% ownership interest in this 18,000 KW hydro plant, which
is operated by Wisconsin River Power Company, but has a contract to
purchase only one-third of the plant's output.
WP&L owns 2,562 miles of electric transmission lines and 224158 distribution substations located adjacent to the communities
served, substantially all located in Iowa, Illinois and Minnesota.Wisconsin. WP&L's transmission assets
were transferred to ATC in 2001. Substantially all of IPC'sWP&L's facilities are
suitable for their intended use and are held subject to the lien of its bond indenture securing IPC's outstanding First
Mortgage Bonds and are suitableBond indenture. Refer to "C. Information Relating to Domestic
Utility Operations - 1) Electric Utility Operations - General" in "Business"
for their intended use.information related to WP&L's investment in ATC.
24
Resources
Resources' principal properties as of Decemberat Dec. 31, 19992002 were as follows:
Whiting1. International - owns oilnine combined heat and gas properties at various locations within the
U.S. Proven developed reserves were 9.6 million barrelspower facilities located in
China with an aggregate generating capacity of oilapproximately 475 MW.
2. Non-regulated Generation - turbines and 97.4 million Dth of gas.
HPIrelated generation equipment for
use in future generation projects.
3. Integrated Services - provides affordable housing in Wisconsin and the Midwest and
has a majority ownership in approximately 60 properties.
IEA - offers standby generation, cogeneration, steam production
and propane air systems. IEA'ssystems and owns an interest in an oil gathering system
and natural gas gathering system and oil
gathering systemsystems, which had 66500 miles and 188213 miles,
respectively, of pipeline in Texas.
4. Investments - CRANDIC - has 107112 railroad track miles all located within
Iowa.
Investments - has real estate ventures with 248,000 square feet of
office space primarily in Cedar Rapids, Iowa.
22
ITEM 3. LEGAL PROCEEDINGS
Alliant Energy
On July 15, 1999, the PSCW found thatIn October 2000, Alliant Energy was inand WP&L filed a federal lawsuit seeking
declaratory relief regarding whether certain provisions of WUHCA are
unconstitutional as a violation of the PSCW's merger order because after Alliant Energy exercised its right
to withdraw frominterstate commerce and equal protection
provisions of the Midwest ISO, it had no proposal on file with the
PSCW either to be in an ISO or to spin off its transmission assets
(Alliant Energy has subsequently rejoined the Midwest ISO). The PSCW
deferred consideration of any remedies. BothU.S. Constitution. Alliant Energy and WP&L are challenging
the intervenorsprovisions of WUHCA which restrict ownership in utility holding companies,
limit the investments those companies can make and place significant
restrictions on companies that invest in Wisconsin utility holding companies.
Alliant Energy and WP&L also requested that the court consider the
constitutionality of issues related to the asset cap on non-utility investments
imposed by WUHCA. Alliant Energy and WP&L were seeking only declaratory relief
and not damages in the proceeding hadlitigation. In February 2001, the lawsuit was dismissed
based on lack of allegations of "injury in fact." Alliant Energy and WP&L
filed a motion for reconsideration with the court, which was denied in April
2001. Alliant Energy and WP&L appealed the PSCW'slower court's rulings to the 7th
Circuit Court of Appeals. In January 2002, the 7th Circuit reversed the
district court's decision and remanded the case back to the district court for
hearing. In May 2002, the district judge granted the state's motion for
summary judgment and dismissed Alliant Energy's and WP&L's case. Alliant
Energy and WP&L appealed the district court's decision to the Dane County7th Circuit Court
howeverof Appeals in June 2002. Briefing of the intervenors have since withdrawn
their appeal.appeal has been completed, with a
decision expected in the second quarter of 2003. Alliant Energy's appeal is still pending.Energy and WP&L
cannot currently predict the outcome of this litigation.
Alliant Energy received an adverse ruling in 1999 from a U.S. district court judge
dealing with an income tax refund claim Alliant Energy filed relating to
capital losses disallowed under audit by the IRS. The district court judge also
disallowed certain related deductions allowed by the IRS as an offset againstto reduce a tax
refund due to Alliant Energy.Energy related to another tax issue. Alliant Energy has
appealed the district court's ruling and such appeal
is pending. The IRS hasthe government appealed the decision
which led to the tax refund due to Alliant EnergyEnergy. In June 2001, the U.S.
Court of Appeals for the 8th Circuit ruled in Alliant Energy's favor with
respect to both tax issues. In July 2001, the government filed a petition
for rehearing with the U.S. Court of Appeals related to the capital losses
allowed in the 8th Circuit opinion. The 8th Circuit denied the appeal in
September 2001 and this appeal is also pending.remanded the case back to the district court for entry of
judgment. The federal government decided not to pursue the ruling in favor
of Alliant Energy believesof the resolutionU.S. Court of Appeals for the 8th Circuit with
respect to these issuestwo tax issues. As a result, Alliant Energy recorded the
applicable tax benefit and interest income in the fourth quarter of 2001
related to these events. An additional potential refund of approximately $14
million, plus interest, was also being contested by the government. However,
the district court ruled in favor of the federal government in July 2002 on
such issue. Alliant Energy has appealed the most recent district court
decision. An adverse decision on appeal would not result in Alliant Energy
recording any charges to earnings as the potential refund simply represents a
gain contingency. Subsequently, the government filed a cross appeal, which
it later decided not to pursue and voluntarily moved for its dismissal.
Alliant Energy is awaiting a decision from the 8th Circuit Court of Appeals.
IP&L
IP&L has appealed to the Iowa State Board of Tax Review, an agency of the
State of Iowa, regarding assessments of Iowa property tax made by the
Director of the Iowa Department of Revenue and Finance. The appeals involve
assessments for the years 1994 through 1998 and seek reduction of the
assessments reflecting the true value of the operating property of the
companies. At the present time, IP&L cannot predict what impact, if any, the
appeals process will not have a material
adverse impact on its financial condition or results of
operations.
25
WP&L In the second quarter of 1999, WP&L received a demand for arbitration
from MG&E pursuant to the terms of joint plant operating agreements
between the parties regarding issues of ownership and operation of the
Columbia Energy Center. In September 1999, a Wisconsin Circuit Court
judge ruled that some of MG&E's claims were arbitrable. The parties have
selected the arbitrators and the procedural schedule is being developed.
WP&L believes MG&E's claims are without merit and will be vigorously
defending its position.- None
Environmental Matters
The information required by Item 3 with regards to environmental matters is
included in Notes 12(f)"C. Information Relating to Domestic Utility Operations - 1)
Electric Utility Operations" in "Business," "Liquidity and 12(g)Capital Resources
- - Environmental" in MD&A and Note 11(e) of Item 8.the "Notes to Consolidated
Financial Statements," and "Other Matters - Environmental" in Item 7.
MD&A, which information is incorporated herein by reference.
Rate Matters
The information required by Item 3 with regards to rate matters is included
in "LiquidityNote 2 of Alliant Energy's "Notes to Consolidated Financial Statements"
and Capital Resources - Rates"Rates and Regulatory Matters" in Item 7. MD&A, which information is incorporated
herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.IP&L
At IP&L's annual meeting of shareowners held on Oct. 9, 2002, Alan B. Arends,
Katharine C. Lyall, Singleton B. McAllister and Anthony R. Weiler were
elected as directors of IP&L for terms expiring in 2005. 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 2002 annual meeting: Erroll B. Davis, Jr., Lee Liu, Robert W.
Schlutz and Wayne H. Stoppelmoor, with terms expiring in 2003; and Jack B.
Evans, Joyce L. Hanes, David A. Perdue and Judith D. Pyle, with terms
expiring in 2004.
EXECUTIVE OFFICERS OF THE REGISTRANTS
Information relating to the- -------------------------------------
The executive officers of Alliant Energy, IP&L and WP&L as of the date of
this filing are as follows (figures following the names represent the
officer's age as of Dec. 31, 2002):
Executive Officers of Alliant Energy
Erroll B. Davis, Jr., 58, was elected Chairman of the Board effective April
- ---------------
2000, has served as President and Chief Executive Officer (CEO) since 1990
and has been a board member since 1988.
William D. Harvey, 53, was elected Executive Vice President (EVP)-Generation
- -----------------
effective April 1998.
James E. Hoffman, 49, was elected EVP-Business Development effective April
- ----------------
1998.
Eliot G. Protsch, 49, was elected EVP-Energy Delivery effective April 1998.
- ----------------
Barbara J. Swan, 51, was elected EVP and General Counsel effective October
- ---------------
1998. She previously served as Vice President (VP)-General Counsel from 1994
to 1998 at WP&L.
Thomas M. Walker, 55, was elected EVP and Chief Financial Officer (CFO)
- ----------------
effective April 1998.
Pamela J. Wegner, 55, was elected EVP-Shared Solutions effective October
- ----------------
1998. She previously served as VP-Information Services and Administration
from 1994 to 1998 at WP&L.
Dundeana K. Doyle, 44, was elected VP-Infrastructure Security effective
- -----------------
January 2002. She previously served as VP-Customer Operations since December
2000 at IESU and WP&L, VP-Customer Services and Operations from 1999 to 2000
at IESU and WP&L, VP-Customer Operations from 1998 to 1999 at IESU and
VP-Customer Services from 1998 to 1999 at WP&L.
Thomas L. Hanson, 49, was elected VP and Treasurer effective April 2002. He
- ----------------
previously served as Managing Director-Generation Services since 2001 and
General Manager-Business and Financial Performance, Generation from 1998 to
2001.
John E. Kratchmer, 40, was elected VP-Controller and Chief Accounting Officer
- -----------------
effective October 2002. He previously served as Corporate Controller and
Chief Accounting Officer since October 2000 and Assistant Controller from
1998 to 2000.
Barbara A. Siehr, 51, was elected VP-Financial Planning and Strategic
- ----------------
Projects effective October 2002. She previously served as Managing
Director-Operations and Operations Services since December 2000, General
Manager-Operations East from 1999 to 2000 and General
Manager-Engineering/Operations Services from 1998 to 1999.
26
F. J. Buri, 48, was elected Corporate Secretary effective April 2002. He
- ----------
previously served as Senior Attorney since June 1999. Prior to joining
Alliant Energy, he was General Counsel and Secretary from 1996 to 1999 at
Universal Savings Bank, N.A.
None of the executive officers listed above is included in Item 10.related to any member of the
Board of Directors or nominee for director or any other executive officer.
Mr. Davis has an employment agreement with Alliant Energy pursuant to which
his term of office is established. All other executive officers have no
definite terms of office and serve at the pleasure of the Board of Directors.
Additional Officers of Alliant Energy
Enrique Bacalao, 53, was elected Assistant Treasurer effective November
- ---------------
1998. Prior to joining Alliant Energy, he was VP, Corporate Banking from
1995 to 1998 at the Chicago Branch of The Industrial Bank of Japan, Limited.
Eric D. Mott, 35, was elected Assistant Treasurer effective December 2001.
- ------------
He previously served as Manager-Investor Relations and Trust Fund Investment
Management since December 2000 and Senior Treasury Analyst from 1998 to 2000.
Joan M. Thompson, 45, was elected Assistant Controller effective June 2000.
- ----------------
She previously served as Manager-IESU and IPC Accounting since February 1999
and Manager-IESU Accounting from 1998 to 1999.
Patricia L. Reininger, 50, was elected Assistant Corporate Secretary
- ---------------------
effective January 2003. She previously served as Executive Administrative
Assistant since August 2000. Prior to joining Alliant Energy, she was
Assistant to the Chairperson and Assistant Corporate Secretary from 1993 to
1999 at Sentry Insurance.
Executive Officers of IP&L
Erroll B. Davis, Jr., 58, was elected Chairman of the Registrants.
23Board effective April
- ---------------
2000 and CEO effective April 1998. Mr. Davis is also an officer of Alliant
Energy and WP&L.
Eliot G. Protsch, 49, was elected President effective April 1998. Mr.
- ----------------
Protsch is also an officer of Alliant Energy and WP&L.
William D. Harvey, 53, was elected EVP-Generation effective October 1998.
- -----------------
Mr. Harvey is also an officer of Alliant Energy and WP&L.
Barbara J. Swan, 51, was elected EVP and General Counsel effective October
- ---------------
1998. Ms. Swan is also an officer of Alliant Energy and WP&L.
Thomas M. Walker, 55, was elected EVP and CFO in 1996. Mr. Walker is also an
- ----------------
officer of Alliant Energy and WP&L.
Pamela J. Wegner, 55, was elected EVP-Shared Solutions effective October
- ----------------
1998. Ms. Wegner is also an officer of Alliant Energy and WP&L.
Dundeana K. Doyle, 44, was elected VP-Infrastructure Security effective
- -----------------
January 2002. Ms. Doyle is also an officer of Alliant Energy and WP&L.
Vern A. Gebhart, 49, was elected VP-Customer Operations effective January
- ---------------
2002. He previously served as Managing Director-Strategic Projects and
Capital Control since 2000 and Director-Strategic Projects and Capital
Control from 1998 to 2000 at Alliant Energy. Mr. Gebhart is also an officer
of WP&L.
Thomas L. Hanson, 49, was elected VP and Treasurer effective April 2002. Mr.
- ----------------
Hanson is also an officer of Alliant Energy and WP&L.
John E. Kratchmer, 40, was elected VP-Controller and Chief Accounting Officer
- -----------------
effective October 2002. Mr. Kratchmer is also an officer of Alliant Energy
and WP&L.
Daniel L. Mineck, 54, was elected VP-Performance Engineering and
- ----------------
Environmental effective October 1998. He previously served as Assistant
VP-Corporate Engineering since 1996. Mr. Mineck is also an officer of WP&L.
Barbara A. Siehr, 51, was elected VP-Financial Planning and Strategic
- ----------------
Projects effective October 2002. Ms. Siehr is also an officer of Alliant
Energy and WP&L.
Kim K. Zuhlke, 49, was elected VP-Engineering, Sales and Marketing effective
- -------------
September 1999. He previously served as VP-Customer Operations since October
1998. Mr. Zuhlke is also an officer of WP&L.
F. J. Buri, 48, was elected Corporate Secretary effective April 2002. Mr.
- ----------
Buri is also an officer of Alliant Energy and WP&L.
None of the executive officers listed above is related to any member of the
Board of Directors or nominee for director or any other executive officer.
Mr. Davis has an employment agreement with Alliant Energy pursuant to which
27
his term of office is established. All other executive officers have no
definite terms of office and serve at the pleasure of the Board of Directors.
Additional Officers of IP&L
Enrique Bacalao, 53, was elected Assistant Treasurer effective November 1998.
- ---------------
Mr. Bacalao is also an officer of Alliant Energy and WP&L.
Steven F. Price, 50, was elected Assistant Treasurer effective April 1998.
- ---------------
Mr. Price is also an officer of WP&L.
Patricia L. Reininger, 50, was elected Assistant Corporate Secretary
- ---------------------
effective January 2003. Ms. Reininger is also an officer of Alliant Energy
and WP&L.
Daniel L. Siegfried, 43, was elected Assistant Corporate Secretary effective
- -------------------
April 1998. He also serves as Senior Attorney for Alliant Energy.
Executive Officers of WP&L
Erroll B. Davis, Jr., 58, was elected Chairman of the Board effective April
- --------------------
2000 and CEO effective April 1998. Mr. Davis is also an officer of Alliant
Energy and IP&L.
William D. Harvey, 53, was elected President effective April 1998. Mr.
- -----------------
Harvey is also an officer of Alliant Energy and IP&L.
Eliot G. Protsch, 49, was elected EVP-Energy Delivery effective October
- ----------------
1998. He previously served as Senior VP from 1993 to 1998 at WP&L. Mr.
Protsch is also an officer of Alliant Energy and IP&L.
Barbara J. Swan, 51, was elected EVP and General Counsel effective October
- ---------------
1998. She previously served as VP-General Counsel from 1994 to 1998 at
WP&L. Ms. Swan is also an officer of Alliant Energy and IP&L.
Thomas M. Walker, 55, was elected EVP and CFO effective October 1998. Mr.
- ----------------
Walker is also an officer of Alliant Energy and IP&L.
Pamela J. Wegner, 55, was elected EVP-Shared Solutions effective October
- ----------------
1998. She previously served as VP-Information Services and Administration
from 1994 to 1998 at WP&L. Ms. Wegner is also an officer of Alliant Energy
and IP&L.
Dundeana K. Doyle, 44, was elected VP-Infrastructure Security effective
- -----------------
January 2002. Ms. Doyle is also an officer of Alliant Energy and IP&L.
Vern A. Gebhart, 49, was elected VP-Customer Operations effective January
- ---------------
2002. Mr. Gebhart is also an officer of IP&L.
Thomas L. Hanson, 49, was elected VP and Treasurer effective April 2002. Mr.
- ----------------
Hanson is also an officer of Alliant Energy and IP&L.
John E. Kratchmer, 40, was elected VP-Controller and Chief Accounting Officer
- -----------------
effective October 2002. Mr. Kratchmer is also an officer of Alliant Energy
and IP&L.
Daniel L. Mineck, 54, was elected VP-Performance Engineering and
- ----------------
Environmental effective April 1998. Mr. Mineck is also an officer of IP&L.
Barbara A. Siehr, 51, was elected VP-Financial Planning and Strategic
- ----------------
Projects effective October 2002. Ms. Siehr is also an officer of Alliant
Energy and IP&L.
Kim K. Zuhlke, 49, was elected VP-Engineering, Sales & Marketing effective
- -------------
September 1999. He previously served as VP-Customer Operations since April
1998 at WP&L and since October 1998 at IESU and as VP-Customer Services and
Sales from 1993 to 1998 at WP&L. Mr. Zuhlke is also an officer of IP&L.
F. J. Buri, 48, was elected Corporate Secretary effective April 2002. Mr.
- ----------
Buri is also an officer of Alliant Energy and IP&L.
None of the executive officers listed above is related to any member of the
Board of Directors or nominee for director or any other executive officer.
Mr. Davis has an employment agreement with Alliant Energy pursuant to which
his term of office is established. All other executive officers have no
definite terms of office and serve at the pleasure of the Board of Directors.
Additional Officers of WP&L
Enrique Bacalao, 53, was elected Assistant Treasurer effective November
- ---------------
1998. Mr. Bacalao is also an officer of Alliant Energy and IP&L.
Steven F. Price, 50, was elected Assistant Treasurer effective April 1998.
- ---------------
Mr. Price is also an officer of IP&L.
Patricia L. Reininger, 50, was elected Assistant Corporate Secretary
- ---------------------
effective January 2003. Ms. Reininger is also an officer of Alliant Energy
and IP&L.
28
PART II
ITEM 5. MARKET FOR REGISTRANT'SREGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Alliant Energy's common stock trades on the New York Stock Exchange under the
symbol "LNT." Quarterly sales price ranges and dividends with respect to
Alliant Energy's common stock were as follows (amounts for periods prior
to the consummation of the merger represent data for WPLH):follows:
1999 1998
-------------------------------------------- -------------------------------------------2002 2001
----------------------------------------- ---------------------------------------
Quarter High Low Dividend High Low Dividend
------- ---- --- -------- ---- --- --------
First $32 3/8 $26 3/8$31.01 $28.67 $0.50 $33 7/8 $31 1/2$33.20 $28.75 $0.50
Second 30 7/8 26 1/230.85 24.75 0.50 35 3/8 29 5/832.67 28.20 0.50
Third 30 1/16 26 3/425.77 16.35 0.50 32 1/8 2831.49 27.90 0.50
Fourth 28 13/16 25 3/1619.89 14.28 0.50 34 29 3/432.29 27.50 0.50
----------- ----------- ------------- ----------- ----------- -----------
Year $32 3/8 $25 3/16 $2.00 $35 3/8 $28 $2.00
=========== =========== ============= =========== =========== ===========31.01 14.28 2.00 33.20 27.50 2.00
Stock closing price at DecemberDec. 31, 1999: $27 1/22002: $16.55
Although Alliant Energy's practice has been to pay cash dividends on its
common stock dividends quarterly, the timing of payment and amount of future dividends
are necessarily dependent upon future earnings, capital requirements, general
financial requirementscondition, general business conditions, the ability of Alliant
Energy's subsidiaries to pay dividends and other factors. Effective with the
dividend declared and paid in the first quarter of 2003, Alliant Energy
reduced its targeted annual common stock dividend from $2.00 to $1.00 per
share.
At DecemberDec. 31, 1999,2002, there were approximately 66,88655,470 holders of record of
Alliant Energy's stock, including underlying holders in Alliant Energy's Shareowner
Direct Plan.
Alliant Energy is the sole common shareowner of all 13,370,788 shares of IESU Common StockIP&L
common stock currently outstanding. During 1999, 19982002 and 1997, IESU
declared2001, IP&L paid dividends
on its common stock of $88 million, $19$82 million and $56$80 million, respectively, to its
parent. No dividend payments were made in
the last three quarters of 1998 due to merger-related tax considerations.
As a result, the dividend payment in the first quarter of 1999 was larger
than IESU's historical quarterly payment. IESUUnder certain circumstances, IP&L has the right under the
terms of its
Subordinated Deferrable Interest Debentures, so long as an
Event of Default (as defined therein) has not occurred and is not
continuing,subordinated deferrable interest debentures to extend the interest payment period at any time and from timepayments for
periods not to time on the Subordinated Deferrable Interest Debentures to a period not
exceedingexceed 20 consecutive quarters. If IESU exercises itsIt is IP&L's current intent not
to exercise such right. In the event IP&L did exercise this right, it would
limit IP&L's ability to extend
the interest payment period, IESU may not, during any such extended
interest payment period, declare or pay dividends, on, or redeem, purchase
or acquire, or make any liquidation payment with respect to, any of its
capital stock or make any guarantee payment with respect to the foregoing.
IESU does not intend to exercise its right to extend the interest payment
period.among other things.
Alliant Energy is the sole common shareowner of all 13,236,601 shares of WP&L
common stock currently outstanding. During 1999, 1998both 2002 and 1997,2001, WP&L paid
dividends on its common stock of $58$60 million each year to its parent. WP&L's common stock dividends
are restricted to the extent that such dividendsdividend would reduce the common stock
equity ratio to less than 25%. Under rate order UR-110, theThe PSCW has ordered that it must approve the
payment of dividends by WP&L to Alliant Energy that are in excess of the
level forecasted in the rate order ($58.362 million), if such dividends would
reduce WP&L's average common equity ratio below 52.00%44.67% of total
capitalization. The dividends paid by WP&L to Alliant Energy since the rate
order was issued have not exceeded the level forecasted in the rate
order.
Alliant Energy's utility subsidiariessuch level. IP&L and WP&L each have
common stock dividend payment restrictions based on their respective bond
indentures and articlesthe terms of incorporation. Each utility has restrictions on the payment of common
stock dividends that are commonly found withtheir preferred stock.
In addition,
IESU's and IPC's ability to pay common stock dividends is restricted based
on requirements associated with sinking funds.
2429
ITEM 6. SELECTED FINANCIAL DATA
Alliant Energy Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Information 2002 (1) 2001 (1) 2000 (1) 1999 (1)(2) 1998 (2) 1997 1996 1995(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Information
(Dollars(dollars in thousands, except for per share data)
- ------------------------------------------------------------------------------------------------------------------------------------
Income Statement Data:
Income Statement Data:
Operating revenues $2,197,963 $2,130,874 $2,300,627 $2,232,840 $1,976,807
Operating expenses 1,821,428 1,847,572 1,964,244 1,867,401 1,611,875
Operating income 376,535 283,302 336,383 365,439 364,932$2,608,812 $2,624,676 $2,279,674 $2,048,158 $2,053,318
Income from continuing operations 76,269 126,245 330,915 154,334 95,437
Income from discontinued operations, net of tax 30,612 58,985 51,039 42,247 1,238
Income before cumulative effect of changes in accounting
principle, net of tax 106,881 185,230 381,954 196,581 96,675
144,578 157,088 159,157
Discontinued operationsCumulative effect of changes in accounting principle, net of tax -- (12,868) 16,708 -- --
-- (1,297) (13,186)
Net income 106,881 172,362 398,662 196,581 96,675 144,578 155,791 145,971
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Data:
Weighted average common shares outstanding (000s) 78,352 76,912 76,210 75,481 74,680
Return on average common equity (3) 10.5% 6.0% 9.5% 11.0% 10.5%
Per Share Data:
Income from continuing operations $2.51 $1.26 $1.90 $2.08 $2.13
Discontinued operations -- -- -- ($0.02) ($0.18)
Earnings per average common share (basic and diluted)(diluted):
Income from continuing operations $0.84 $1.57 $4.18 $1.98 $1.24
Income from discontinued operations $0.34 $0.73 $0.64 $0.53 $0.02
Cumulative effect of changes in accounting principle -- ($0.16) $0.21 -- --
Net income $1.18 $2.14 $5.03 $2.51 $1.26
$1.90 $2.06 $1.95Common shares outstanding at year-end (000s) 92,304 89,682 79,010 78,984 77,630
Dividends declared per common share (4) $2.00 $2.00 $2.00 $1.97 $1.94$2.00 $2.00
Market value per share at year-end $16.55 $30.36 $31.88 $27.50 $32.25
Book value at year-end (3) $27.29 $20.69 $21.24 $18.91 $18.70
Market valueper share at year-end (4) $27.50 $32.25 $33.13 $28.13 $30.63$19.89 $21.39 $25.79 $27.29 $20.69
- ------------------------------------------------------------------------------------------------------------------------------------
Other Selected Financial Data:
Construction and acquisition expenditures $478,573 $372,058 $328,040 $412,274 $375,184$656,792 $713,061 $845,454 $418,371 $313,033
Total assets at year-end (3)(4) $7,001,395 $6,237,925 $6,733,766 $6,075,683 $4,959,337 $4,923,550 $4,639,826 $4,476,406
Long-term obligations, net $2,784,216 $2,586,044 $2,128,496 $1,660,558 $1,713,649 $1,604,305 $1,444,355 $1,357,755
Times interest earned before income taxes (5) 3.38X 2.25X 2.90X 3.38X 3.36X1.64X 1.99X 4.35X 3.05X 2.40X
Capitalization Ratios:ratios:
Common equity (3)(4) 39% 43% 50% 57% 49%
51% 52% 51%
Preferred and preference stock 5% 2% 3% 4% 3% 4% 4%
Long-term debt, excluding current portion 56% 55% 47% 40% 47%
46% 44% 45%
-------------------------------------------------------------------------------------------------------------------------------------
Total 100% 100% 100% 100% 100%
=====================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
(1) The 1999 financial results reflect pre-tax gains of $40 million realized from sales of McLeod stock.
(2) The 1998 financial results reflect the recording of $54 million of pre-tax merger-related charges.
(3) In the third quarter of 1997, Alliant Energy began adjusting the carrying value of its investments in McLeod to its estimated
fair value, pursuant to the applicable accounting rules. At December 31, 1999, the adjustment reflected an unrealized gain of
approximately $1.1 billion with a net of tax increase to common equity of $640 million. At December 31, 1998, the adjustment
reflected an unrealized gain of approximately $291 million with a net of tax increase to common equity of $170 million.
(4) Represents data for WPLH for periods prior to the consummation of the merger.================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Refer to "MD&A - Alliant Energy Results of Operations" for a discussion of
the 2002, 2001 and 2000 results of operations.
(2) Includes $25 million ($0.32 per diluted share) of net income from gains on
sales of McLeod stock.
(3) Results reflect the recording of $54 million of pre-tax merger-related
charges.
(4) Alliant Energy adjusts the carrying value of its investments in McLeod to
its estimated fair value, pursuant to the applicable accounting rules. At
December 31, 2002, 2001, 2000, 1999 and 1998, the carrying amount reflected an
unrealized gain (loss) of approximately $1 million, ($13) million, $543 million,
$1.1 billion and $291 million, respectively, with a net of tax increase
(decrease) to common equity of $0.4 million, ($9) million, $317 million, $640
million and $170 million, respectively.
(5) Represents income from continuing operations before income taxes plus
preferred dividend requirements of subsidiaries plus interest expense divided
by interest expense.
2530
IESU
Year Ended December 31,IP&L 2002 2001 2000 1999 1998
1997 1996 1995
--------------------------------------------------------------------------------- ---- -----------------------------------------------------------------------------
(in thousands)
Operating revenues $800,696 $806,930 $813,978 $754,979 $709,826$1,211,608 $1,316,250 $1,234,007 $1,142,801 $1,162,819
Earnings available for common stock 65,532 60,996 57,879 62,815 58,36488,015 94,656 99,724 93,896 77,278
Cash dividends declared on common stock 87,951 18,840 56,000 44,000 43,00081,790 80,340 80,339 120,509 27,612
Total assets 1,755,808 1,788,978 1,768,929 1,765,044 1,697,8032,738,406 2,426,314 2,524,802 2,415,068 2,446,315
Long-term obligations, net 641,559 677,804 688,719 560,199 517,538
The 1998 financial results reflect the recording of $17902,243 922,941 792,323 836,486 872,517
Alliant Energy is the sole common shareowner of all 13,370,788 shares of
IP&L's common stock outstanding. As such, earnings per share data is not
disclosed herein. The 1998 financial results reflect the recording of $31
million of pre-tax merger-related charges.
WP&L Year Ended December 31,2002 2001 2000 1999 1998
1997 1996 1995
-------------------------------------------------------------------------------- ---- ------------------------------------------------------------------------------
(in thousands)
Operating revenues $972,078 $965,353 $862,381 $752,505 $731,448 $794,717 $759,275 $689,672
Earnings available for common stock 77,614 70,180 68,126 67,520 32,264 67,924 79,175 75,342
Cash dividends declared on common stock 59,645 60,449 -- 58,353 58,341
58,343 66,087 56,778
Total assets 1,984,597 1,875,800 1,857,024 1,766,135 1,685,150 1,664,604 1,677,814 1,641,165
Long-term obligations, net 471,648 471,554 420,414 370,634 375,574523,308 523,183 569,309 471,648 471,554
Alliant Energy is the sole common shareowner of all 13,236,601 shares of
WP&L's common stock outstanding. As such, earnings per share data is not
disclosed herein. The 1998 financial results reflect the recording of $17
million of pre-tax merger-related charges.
2631
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Alliant Energy was formed as the result of a three-way merger involving WPLH,
IES and IPC that was completed in April 1998. The primary first tier
subsidiaries of Alliant Energy include: WP&L, IESU, IPC, Resources and
Corporate Services. Among various other regulatory constraints, Alliant
Energy is operating as a registered public utility holding company subject to
the limitations imposed by PUHCA. This MD&A includes information relating to
Alliant Energy, IESU and WP&L (as well as IPC, Resources and Corporate
Services). Where appropriate, information relating to a specific entity has
been segregated and labeled as such.
FORWARD-LOOKING STATEMENTS
Statements contained in this report (including MD&A) that are not of historical fact are
forward-looking statements intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of
1995. From time to time, Alliant Energy, IESU or WP&L may make
other forward-looking statements within the meaning of the federal securities
laws that involve judgments, assumptions and other uncertainties beyond the
control of such companies. These forward-looking statements may include,
among others, statements concerning revenue and cost trends, cost recovery,
cost reduction strategies and anticipated outcomes, pricing strategies,
changes in the utility industry, planned capital expenditures, financing needs
and availability, statements of expectations, beliefs, future plans and
strategies, anticipated events or trends and similar comments concerning
matters that are not historical facts. Investors and other users of the
forward-looking statements are cautioned that such statements are not a
guarantee of future performance and that suchSuch 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 includeinclude: factors listed in "Other Matters - Other Future
Considerations;" weather effects on sales and revenues, competitive factors, generalrevenues; economic and
political conditions in the relevantAlliant Energy's domestic and international service
territory,territories; federal, state and stateinternational regulatory or governmentgovernmental
actions, including issues associated with the deregulationability to obtain adequate and timely rate relief,
including recovery of the utility industry,operating costs and earning reasonable rates of return,
and to pay expected levels of dividends; Alliant Energy's proposed asset
divestitures at expected values and on expected timelines; unanticipated
construction and acquisition expenditures,expenditures; issues related to strandedthe supply of
purchased electricity and price thereof including the ability to recover
purchased-power and fuel costs and the recovery thereof,through rates; risks related to the operations
of Alliant Energy's nuclear facilities, unanticipatedfacilities; costs associated with certainAlliant
Energy's environmental remediation efforts being undertaken byand with environmental compliance
generally; developments that adversely impact Alliant Energy, unanticipated issues
relatingEnergy's ability to
establishing a transmission company,implement its strategic plan; improved results from Alliant Energy's Brazil
investments and no material adverse changes in the rates allowed by the
Brazilian regulators; improved performance by Alliant Energy's other
non-regulated businesses as a whole; no material permanent declines in the
fair market value of, or expected cash flows from, Alliant Energy's
investment in McLeod,investments; continued access to the capital markets; 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; access to technological developments,developments; employee
workforce factors, including changes in key executives, collective bargaining
agreements or work stoppages, political, legal and economic conditions in
foreign countries Alliant Energy has investments instoppages; and changes in the rate of inflation. UTILITY INDUSTRY OUTLOOKAlliant
Energy assumes no obligation, and disclaims any duty, to update the
forward-looking statements in this report.
STRATEGIC ACTIONS
In November 2002, Alliant Energy's Board of Directors approved five strategic
actions designed to maintain a strong credit profile for Alliant Energy,
strengthen its balance sheet and position Alliant Energy for improved
long-term financial performance. The five strategic actions, which signaled
a shift to less aggressive growth targets driven primarily by Alliant
Energy's utility operations, included:
1. A commitment to pursue the sale of, or other exit strategies for, a
number of non-regulated businesses, including Alliant Energy's oil and
gas (Whiting), Australian (including Southern Hydro) and affordable housing
businesses. For accounting purposes, such businesses
have been classified as available for sale, and the
operating results of these businesses have been
separately classified and reported as discontinued operations, in Alliant
Energy's Consolidated Financial Statements. Alliant Energy anticipates
strengthening its liquidity position by up to $800 million to $1 billion
from reductions in consolidated debt and increasing its cash and
temporary cash investment balances as a result of these transactions.
The amount of proceeds ultimately received from these divestitures, and
the timing of the completion of the transactions, are subject to a
variety of factors, including the transaction structures Alliant Energy
utilizes to exit these businesses. In January 2003, Alliant Energy also
decided to sell SmartEnergy which was classified as held and used, and
its operating results were included in continuing operations, in Alliant
Energy's Consolidated Financial Statements. Refer to Note 16 of Alliant
Energy's "Notes to Consolidated Financial Statements" for further
discussion.
2. A reduction in Alliant Energy's targeted annual common stock divided
from $2.00 per share to $1.00 per share, effective with the dividend
declared and paid in the first quarter of 2003.
3. Reductions in Alliant Energy's aggregated anticipated 2002 and 2003
construction and acquisition expenditures by approximately $400 million.
4. A plan to raise approximately $200 to $300 million of common equity in
2003, dependent on market conditions. Alliant Energy expects to direct
the majority of the proceeds towards additional capital investments in
its regulated domestic utilities.
5. The implementation of additional cost control measures to be
accomplished through Alliant Energy's new Six Sigma program, the
operation of its new enterprise resource planning system that was placed
in service in October 2002 and by a heightened focus on operating its
domestic utility business in a manner that aligns operating expenses with
the revenues granted in its various rate filings.
32
Alliant Energy is continuing in its efforts to implement these strategic
actions. Refer to "Other Matters - Other Future Considerations - Asset
Sales" for discussion of an agreement Alliant Energy recently entered into
related to the sale of its Australian business.
RATES AND REGULATORY MATTERS
Overview - Alliant Energy has two primary utility subsidiaries, IP&L and
- --------
WP&L. IP&L was formed as a result of the merger of IPC with and into IESU
effective Jan. 1, 2002. WP&L has one utility subsidiary, South Beloit.
As a public utility holding company with significant utility assets, Alliant
Energy competes in an ever-changing utility industry. Set forth below is an overview of this
evolving marketplace.
Electric energy
generation, transmission and distribution are in a period of fundamental
change in the manner in which customers obtain, and energy
suppliers provide, energy services. Asresulting from legislative, regulatory, economic and technological
changes. These changes occur,impact competition in the electric wholesale and
retail markets as customers of electric utilities are facing increased numbers
ofbeing offered
alternative suppliers. Such competitive pressures could result in loss ofelectric
utilities losing customers and an incurrence ofincurring stranded costs (i.e., assets and
other costs rendered unrecoverable as the result of competitive pricing). To,
which would be borne by security holders if the extent
stranded costs cannot be recovered
from customers, they would be borne by
security holders.
Across the nation, approximately half of the states (including Illinois) have
passed legislation or issued regulatory rulings granting customers the right
to choose their electric energy supplier. Legislation that would allow
customers to choose their electric energy supplier is expected to be
introduced in Iowa in 2000. At the federal level, a number of proposals to
restructure the electric industrycustomers.
Alliant Energy's utility subsidiaries are currently under consideration. However,
there continuessubject to be a lack of consensus over how restructuring should be
implementedregulation by
FERC, and how much control the federal government should have over this
process. Until one of the proposals gains significant bipartisan support,
there is unlikely to be final federal action to either facilitate or force
states to open electricity markets to competition.
27
Alliant Energy realized 55%, 40%, 3% and 2% of its electric utility revenues
in 1999state regulation in Iowa, Wisconsin, Minnesota and Illinois, respectively.
Approximately 90% of the electric revenues were regulated by the respective
state commissions while the other 10% were regulated by the FERC. Alliant
Energy realized 57%, 37%, 3% and 3% of its gas utility revenues in Iowa,
Wisconsin, Minnesota and Illinois, respectively, during the same period.
IESU realized 100% of its electric and gas utility retail revenues in 1999 in
Iowa. Approximately 95% of the electric revenues in 1999 were regulated by
the IUB while the other 5% were regulated by the FERC. WP&L realized 98% of
its electric utility revenues in 1999 in Wisconsin and 2% in Illinois. Approximately 84% of the electric revenues in 1999 were regulated by the PSCW
or the ICC while the other 16% were regulated by the FERC. WP&L realized 96%
of its gas utility revenues in 1999 in Wisconsin and 4% in Illinois.
Federal Regulation
IESU, WP&L and IPC are subject to regulation by the FERC. NEPA addresses
several matters designed to promoteFERC
regulates competition in the electric wholesale power generation market. FERC has issued final rules (FERC Orders 888/888-Amarket and
889/889-A) requiring electric utilities to open their transmission lines
to other wholesale buyers and sellers of electricity. In response to FERC
Orders 888 and 888-A, Corporate Services, on behalf of IESU, WP&L and IPC, has
filed Open Access Transmission Tariffs that comply with the orders. In
response to FERC Orders 889 and 889-A, IESU, WP&L and IPC are participating in
a regional Open Access Same-Time Information System.
FERC Order 888 permits utilities to seek recovery of legitimate, prudent and
verifiable stranded costs associated with providing open access transmission
services. FERC does not have jurisdiction over retail distribution and,
consequently, the final FERC rules do not provide for the recovery of stranded
costs resulting from retail competition. The various states retain
jurisdiction over the question ofeach state regulates whether to permit retail competition, the terms of such
retail competition and the recovery of any portion of stranded costs that are
ultimately determined to have resulted from retail competition. In May 1999, FERC issued a NOPR concerning the development of RTOs. The
proposed rules outline the requirements for utilities to voluntarily turn over
control of their transmission system to a regional entity either by leasing
the system to an RTO or by outright divestiture. In December 1999, FERC
issued Order 2000 which implemented the proposed rules with minor
modifications. FERC's timeline is to have the RTOs in operation by the end of
2001. Alliant
Energy is involved with other utilities and industry groups in
reviewing Order 2000 and has submitted a joint petition to FERC seeking
further clarification of the operating and ownership limitations that will be
imposed on the RTOs. Alliant Energy's current plans to contribute its
Wisconsin transmission assets to ATC, in exchange for an equity interest, and
participate in the Midwest ISO are expected to comply with the provisions of
Order 2000.
Alliant Energy and the utility subsidiaries cannot predict the long-term
consequences of these rules on their financial condition or results of
operations.
State Regulation
Iowa - IESU and IPC are subject to regulation by the IUB. The IUB has been
- ----
reviewing all forms of competition in the electric utility industry for
several years. A group comprised of the IUB, Alliant Energy, MidAmerican
Energy Company, rural electric cooperatives, municipal utilities and Iowans
for Choice in Electricity (a diverse group of industrial customers, marketers,
such as Enron, and a low income customer representative, among others)
endorsed a bill to allow for such competition that was introduced in the Iowa
Legislature in March 1999. The bill was opposed by the OCA, which is charged
by Iowa law with representation of all consumers generally. While the bill
did not pass, by operation of House rules, it was re-referred to the House
Commerce Committee and was again inserted into the legislative process in the
Second Regular Session of the 78th General Assembly (2000). As of March 1,
2000, the bill has been approved by both the Iowa House and Senate Commerce
Committees and will be addressed by the legislature in full.
The bill would allow choice of electric suppliers for all customers on October
1, 2002. It would freeze IESU's and IPC's Iowa regulated prices at January
2000 levels. It would allow, however, for investor-owned utilities to propose
28
increases due to exogenous factors (for example, environmental compliance
costs) in the generation cost component. Assigned service territories would
be maintained for the delivery function. Delivery prices would be regulated,
with the option available to propose performance based rate making. Prices
for generation and other retail services would not be regulated, except for
SOS pricing starting October 2002 for all residential customers and
non-residential customers with annual usage of fewer than 75,000 KWHs.
Pricing for SOS would initially be at levels equivalent to prices as they
exist today and would remain at such levels until at least December 31, 2005
for SOS customers. The IUB would be able to terminate SOS if it were to
determine several conditions existed, including, most importantly, that
effective competition existed such that regulation was no longer necessary.
If the IUB continues SOS past December 31, 2005, then prices would be based
upon competitive bids. There are no price protections for non-residential
customers with usage greater than 75,000 KWH annually, with the exception of
transitional service. Transitional service would exist for no longer than one
year, until October 1, 2003, at prices the IUB determines to be "just and
reasonable." Currently existing automatic fuel adjustment clauses for
recovery of fuel costs would be eliminated no later than October 2002. A
"nuclear-only" fuel adjustment would be permitted with increased prices
effective if an electric company's nuclear plant is not operational due to
exogenous factors.
Transition or stranded cost is the difference between the revenues that would
have been collected pursuant to an electric company's revenue requirement
existing as of January 1, 2000, and market prices for the period 2002 through
2005. These differences would be afforded 80% recovery in the first twelve
months of choice, with 70%, 60%, and 50% in each subsequent twelve-month
period. Effective October 1, 2006, transition cost recovery would end. In
lieu of accepting this transition cost recovery mechanism, an electric utility
would be entitled under the proposed legislation to elect to divest itself of
its generation assets, including power supply contracts. In such case, the
utility would be given an opportunity to be "made whole" for recovery of
embedded costs with the possibility for shareowners to retain 50% of the
amount realized from the sale of the assets beyond the sum of depreciated book
value and unfunded decommissioning. A divestiture plan would be filed with
the IUB no later than January 1, 2001, with IUB approval or modification by
July 1, 2001. The utility would have until September 30, 2001 to revoke its
election.
Costs of start-up, including computer systems and employee transition costs,
would be recoverable over a ten-year period, as approved by the IUB. The
difference between regulatory assets and liabilities would be fully
recoverable as a delivery charge. Nuclear decommissioning costs would be
fully recoverable. While Alliant Energy supports the proposed legislation in
its current form, it is unable to predict if this legislation will be enacted
in 2000, what modifications, if any, may be made to the proposed bill or what
actions Alliant Energy may take in response to the legislation should it be
enacted.
In the first quarter of 1999, the IUB conducted workshops concerning the
unbundling of natural gas rates for all Iowa customers as well as allowing
choice of the supplier of the natural gas for the small volume natural gas
customers. IESU's and IPC's natural gas costs are a "flow-through cost item"
in that they are automatically reflected in future billings to customers.
Such collections are reconciled on an annual basis to ensure that they neither
over- nor under-collect their actual gas commodity costs. Consequently,
Alliant Energy does not currently realize any margins or income with respect
to its provision of the gas commodity. Alliant Energy expects to continue to
be made whole for such gas costs if the gas rates are unbundled. Even if
Alliant Energy's gas commodity sales were to decline in a customer choice
environment, its margins and income would not be expected to be impacted by
such decreases in commodity sales. The delivery function of Alliant Energy's
gas business in Iowa will likely continue to be regulated on a cost of service
basis, as currently is the case. As a result, assuming no significant change
in the regulatory posture, the delivery function would continue to generate
comparable margins and income to that currently generated, regardless of what
entity provides the gas commodity to the customer. On March 3, 2000, the IUB
issued an order indicating that the IUB prefers to allow each utility to
design a tariff in order to remove barriers to a competitive option for small
volume customers. The IUB will also seek comments from the utility companies
before approving any tariff filings.
Wisconsin - WP&L is subject to regulation by the PSCW. The PSCW's inquiries
- ---------
into the future structure of the natural gas and electric utility industries
are ongoing. The stated goal of the PSCW regarding natural gas service is "to
accommodate competition but not create it." The PSCW has followed a measured
approach to restructuring the natural gas industry in Wisconsin. The PSCW has
determined that customer classes will be deregulated (i.e., the gas utility
would no longer have an obligation to procure gas commodity for customers, but
29
would still have a delivery obligation) in a step-wise manner, after each
class has been demonstrated to have a sufficient number of gas suppliers
available. The short-term goals of the PSCW's electric restructuring process
are to ensure reliability of the state's electric system and developmenttiming of a robust wholesalerestructured electric market. The long-term goal is to establish
prerequisite safeguards to protect customers prior to allowing retail customer
choice. There are no other restructuring working groups currently active in
Wisconsin.
In May 1998, the PSCW reactivated Docket No. 05-BU-101 with the objective of
examining the degree of separation which should be required as a matter of
policy between utility and non-utility activities involving the various state
utilities. Final hearings were held in February 2000 and the PSCW ruled that
utilities can continue to offer non-utility services to customers and
affiliates and that utilities must continue to fully allocate their costs to
such non-utility activities.
It is anticipated that there will be legislative proposals introduced in the
2001-2002 legislative session on issues dealing with restructuring of the
electric utility industry. It is not possible to predict at this time the
scopeindustry or the
possibility of enactment of such proposals.
"Reliability 2000" legislation was enacted in Wisconsin in 1999. This
legislation included, among other items, a relaxation of the non-utility asset
limitations included in the WUHCA and the formation of a Wisconsin
transmission company for those Wisconsin utility holding companies who elect
to take advantage of the new asset cap law. Alliant Energy has agreed to
contribute WP&L's transmission assets to the transmission company (American
Transmission Company, or ATC) in exchange for an equity interest in ATC. WP&L
made several federal and state regulatory filings and commitments in the
fourth quarter of 1999 relating to its participation in ATC.
ATC's sole business will be to provide reliable, economic transmission service
to all customers in a fair and equitable manner. ATC will plan, construct,
operate, maintain and expand transmission facilities it will own to provide
for adequate and reliable transmission of power. It will provide comparable
service to all customers, including Alliant Energy, and it will support
effective competition in energy markets without favoring any market
participant. Formation of the company will require federal and state
regulatory approvals. ATC will be regulated by FERC for all rate terms and
conditions of service. ATC will be a transmission-owning member of the
Midwest ISO and will transfer operational control of the transmission systems
to the Midwest ISO.
ATC will be a public utility, as defined under Wisconsin law, with a board of
directors comprised of one representative from each utility having at least a
10% ownership interest in ATC. Smaller utilities could combine their
transmission assets with others to reach the minimum level for board
membership. In addition, the shareowners of ATC will select four at-large
directors that can not be employed or engaged in energy businesses.
The PSCW has not yet determined the exact scope of the assets that must be
transferred to the ATC. Pending the final determination by the PSCW, WP&L
estimates it will transfer approximately $150 million in plant assets at net
book value to the ATC when it becomes operational in late 2000. Alliant
Energy is also reviewing the possible contribution of IESU's and IPC's
transmission assets to ATC as well. Alliant Energy estimates the net book
value of such plant assets to approximate $220 million. While Alliant Energy
will realize its proportionate share of ATC's earnings, it is not yet known
what the overall financial impact of Alliant Energy's participation in ATC
will be.
Minnesota - IPC is subject to regulation by the MPUC. The MPUC established an
- ---------
Electric Competition Working Group in April 1995. On October 28, 1997, the
Working Group issued a report and recommendations on retail competition. The
MPUC reviewed the report and directed its staff to develop an electric utility
restructuring plan and timeline. The MPUC has recently solicited comments on
restructuring principles from stakeholders in the process. It does not appear
that any comprehensive restructuring legislation will be passed in 2000. The
MPUC has also initiated Docket E-999/CI-1261 to investigate the appropriate
classification of transmission assets in Minnesota.
Illinois - WP&L and IPC are subject to regulation by the ICC. In December
- --------
1997, the State of Illinois passed electric deregulation legislation requiring
customer choice of electric suppliers for non-residential customers with loads
of four MW or larger and for approximately one-third of all other
non-residential customers starting October 1, 1999. All remaining
non-residential customers will be eligible for customer choice beginning
30
December 31, 2000 and all residential customers will be eligible for customer
choice beginning May 1, 2002. The new legislation is not expected to have a
significant impact on Alliant Energy'sits financial condition or results of operations given the relatively small size of Alliant Energy's Illinois
operations. As of December 31, 1999, no eligiblebut does believe
it is well-positioned to compete in a deregulated competitive market.
Although Alliant Energy customer had
selected anotherultimately believes that the electric supplier.
Accounting Implications
Eachindustry will
be deregulated, the pace of the utilities complies with the provisions of SFAS 71, "Accounting for
the Effects of Certain Types of Regulation." SFAS 71 provides that
rate-regulated public utilities record certain costs and credits allowedderegulation in its primary retail electric
service territories has been delayed due to more recent developments in the
rate making process in different periods than for non-regulated entities.
These are deferred as regulatory assets or regulatory liabilities and are
recognized inindustry.
Certain Recent Developments - In July 2002, FERC issued a notice of proposed
- ---------------------------
rules intended to standardize the consolidated statements of income at the time they are
reflected in rates. If a portion of the utility subsidiaries' operations
becomes no longer subject to the provisions of SFAS 71 as a result of
competitive restructurings or otherwise, a write-down of related regulatory
assets and possibly other charges would be required, unless some form of
transition cost recovery is established by the appropriate regulatory body
that would meet the requirements under generally accepted accounting
principles for continued accounting as regulatory assets during such recovery
period. In addition, each utility subsidiary would be required to determine
any impairment of other assets and write-down any impaired assets to their
fair value. The utility subsidiaries believe they currently meet the
requirements of SFAS 71 and will continue to monitor and assess this as the
various utilitywholesale electric market, which has
generated significant industry restructuring initiatives progress.
Positioning for a Competitive Environment
Alliant Energy and its subsidiaries cannot currently predict the long-term
consequences of the competitive and restructuring issues described above on
their financial condition or results of operations. The major objective is to
allow the company to compete successfully in a competitive, deregulated
utility industry. The strategy for dealing with these emerging issues
includes seeking growth opportunities, forming strategic alliances with other
energy-related businesses, continuing to offer quality customer service,
initiating ongoing cost reductions and productivity enhancements and
developing new products and services.
As competitive forces shape the energy-services industry, energy providers are
being challenged to increase growth and profits. Because Alliant Energy
expects consumption of electricity and natural gas to grow only modestly
within Alliant Energy's domestic utility service territories, Alliant Energy
has entered several energy-services markets that it expects will provide
opportunities for new sources of growth. Alliant Energy, through its
subsidiary Resources, has established new distinct platforms to complement its
existing non-regulated investments, which are designed to meet customer
needs. These platforms and existing investments include:
Investments: Resources' existing investments include an oil and gas
-----------
production company, a short-line railroad, a barge company, an
affordable housing company, various real estate joint ventures and an
equity stake in an independent telecommunications provider.
International: International is a partner in developing, or seeking to
-------------
develop, energy generation and infrastructure in New Zealand, Australia,
China, Mexico and Brazil, markets which have been selected because of
their growth potential.
Industrial Services: ISCO is a provider of energy and environmental
--------------------
services designed to maximize productivity for industrial and large
commercial customers. This platform consists of four units: Energy
Planning; Energy Management; Energy Applications, which provides
facilities-based and commodities-based energy solutions; and RMT, Inc.,
an environmental management and engineering firm with offices throughout
the U.S. and the United Kingdom.
Cargill-Alliant: Alliant Energy has an energy-trading joint venture with
---------------
Cargill that combines the risk-management and commodity trading
expertise of Cargill with Alliant Energy's low-cost electricity
generation and transmission business experience. Cargill-Alliant
officially began operations in 1997 and has an initial term though
October 2002. The term automatically renews for successive five-year
periods unless either party notifies the other at least one year prior
to the then expiring term.
Mass Markets: Resources is a provider of products and services designed
-------------
to meet the comfort, security and productivity needs of residential and
small commercial customers. Resources currently offers home appliance
and furnace warranties and a variety of home energy, safety and security
products through its "Power House" catalog. Such products are marketed
directly to customers, through the mail with the catalog and over the
Internet. Resources expects to continue pursuing opportunities in these
markets, which it believes has a growth potential as industry
deregulation allows more customers to choose their energy suppliers in
an open market.
31
discussion. Although Alliant Energy believes
that eachstandardization of the wholesale electric market is appropriate and
would benefit market participants, there may be significant changes to the
proposed rules before they are adopted. Therefore, Alliant Energy cannot
determine the impact the final rules will have on its results of operations
or financial condition.
Alliant Energy's merger-related price freezes expired in April 2002 in all of
its primary domestic utility jurisdictions and it is currently addressing the
recovery of its utility cost increases through numerous rate filings. WP&L
has received final orders in two of its rate cases and IP&L and WP&L
currently have four other rate cases pending. Details of these platforms provide prospectsrate cases
are as follows (dollars in millions):
Expected
Interim Interim Final Final Final
Utility Filing Increase Increase Effective Increase Effective Effective
Case Type Date Requested Granted (1) Date Granted Date Date Notes
- -------------- ------- -------------- ----------- ------------ ----------- ---------- ----------- ----------------- -------
WP&L:
2002 retail E/G/W Aug. 2001 $104 $49 April 2002 $82 Sept. 2002 N/A (2)
2003 retail E/G/W May 2002 101 TBD TBD TBD TBD April 2003
2004 retail E/G/W March 2003 65 TBD TBD TBD TBD Jan. 2004
Wholesale E Feb. 2002 6 6 April 2002 3 Jan. 2003 N/A (3)
IP&L retail E March 2002 82 15 July 2002 TBD TBD June 2003 (4)
IP&L retail G July 2002 20 17 Oct. 2002 TBD TBD July 2003
----------- ------------ ----------
Total $378 $87 $85
=========== ============ ==========
(1) Interim rate relief is implemented, subject to refund, pending
determination of final rates.
(2) In its September 2002 final order, the PSCW increased the authorized
return on common equity from 11.7% to 12.3%.
(3) In the fourth quarter of 2002, WP&L reached a settlement agreement with
certain wholesale customers for growth both individuallyan annual increase of $3 million and collectively asa
refund of amounts previously collected in excess of the competitive energy-services
marketplace evolves. Alliant Energysettlement. The
settlement agreement was approved by FERC in January 2003. At Dec. 31,
2002, WP&L had reserved all amounts related to the anticipated refund.
33
(4) In accordance with the interim rate relief rules in Iowa, IP&L only
requested interim rate relief of $22 million.
A significant portion of the rate increases included in the previous table
reflect the recovery of anticipated increased costs incurred by IP&L and
WP&L, or costs they expect to incur, thus the increase in revenues related to
these cost increases would not result in a corresponding increase in income.
IP&L, WP&L and South Beloit are currently in the process of determining what
other rate case filings may be necessary in 2003.
WP&L's retail electric rates are based on annual forecasted fuel and
purchased-power costs. Under PSCW rules, WP&L can seek emergency rate
increases if the annual costs are more than 3% higher than the estimated
costs used to establish rates. For 2001 and 2002, any collections in excess
of costs incurred must be refunded, with interest. Accordingly, WP&L has
established a reserve due to overcollection of past fuel and purchased-power
costs and expects to refund such amount in 2003. The final ruling from the
PSCW could result in an increase or decrease to the reserve that these strategieshas been
recorded.
The PSCW has issued new rules relating to the collection of fuel and
purchased-power costs by Wisconsin utilities, including WP&L. The new rules
and related procedures are intended, among other things, to significantly
reduce regulatory lag for the utilities and customers related to the timing
of the recovery of increased or decreased fuel and purchased-power costs.
Purchased-power capacity costs will contribute significantly to its annual earnings growth targetnow be included in base rates. A process
will also exist whereby the utilities can seek deferral treatment of
4-6% from its
business operations. Resources iscapacity, transmission and emergency costs between base rate cases. The new
rules are expected to contribute 25%be implemented for WP&L with its pending 2003 retail
rate case.
In 2002, IP&L filed with the IRS for a change in method of such earnings
withinaccounting for tax
purposes for 1987 through 2001 that would allow a current deduction related
to mixed service costs. Such costs had previously been capitalized and
depreciated for tax purposes over the next 3-5 years.appropriate tax lives. This change
would create a significant current tax benefit which has not been reflected
in IP&L's results of operations pending a decision from the IUB on the
required rate making treatment of the benefit. There would be no material
negative impact on IP&L's results of operations or financial position should
the IUB and/or IRS reject IP&L's proposal.
ALLIANT ENERGY RESULTS OF OPERATIONS
Unless otherwise noted, all "per share" references in the Results of
Operations section refer to earnings per diluted share. Refer to Note 1(a)
of Alliant Energy's "Notes to Consolidated Financial Statements" for
discussion of the various components of Alliant Energy's business.
Alliant Energy Overview - Alliant Energy's earningsEPS for each of the last three years2002, 2001 and 2000 were
- -----------------------
as - --------
follows (in thousands, except per share amounts):follows:
1999 1998 1997
-------------- ------------- --------------2002 2001 2000
---------- --------- ----------
Income from continuing operations $0.84 $1.57 $4.18
Income from discontinued operations 0.34 0.73 0.64
Cumulative effect of changes in accounting principle -- (0.16) 0.21
---------- --------- ----------
Net income $196,581 $96,675 $144,578
Average number of common shares outstanding 78,352 76,912 76,210
Earnings per average common share (basic and diluted) $2.51 $1.26 $1.90
Pre-tax merger expenses -- $54,045 $2,448$1.18 $2.14 $5.03
========== ========= ==========
The significant increaseIncome from continuing operations in 2002 and 2001 included $0.46 per share
and $0.26 per share, respectively, of valuation charges incurred in its
non-regulated businesses. Income from continuing operations in 2000 included
$2.37 per share of non-cash income related to Alliant Energy's 1999adoption of
SFAS 133. In addition to the higher valuation charges, the lower 2002 income
from continuing operations was primarily the result of lower earnings from
Alliant Energy's non-regulated businesses. This was primarily due to a net
loss of $47 million from Alliant Energy's Brazil investments in 2002,
compared to 1998
was due to increaseda net loss of $24 million in 2001, lower earnings from Alliant
Energy's Mass Marketing business and higher interest expense. Improved
results from Alliant Energy's China and New Zealand businesses partially
offset the lower non-regulated operations of $0.60 per share
(of which $0.32 per share was attributable to sales of McLeod stock),results. Income from Alliant Energy's
domestic utility business increased slightly in 2002 as higher electric and
natural gas margins from utility operations and lower utility
operation and maintenance expenses. Higher depreciation (excluding hedge
losses in WP&L's nuclear decommissioning trust fund) and interestwere largely offset by increased operating expenses
partially offset these items. The 1998 results also included approximately
$54 million of pre-tax merger-related expenses ($0.45 per share).
The 1999 utility earnings were $161.1 million ($2.06 per share) compared to
$109.5 million ($1.42 per share) for 1998. The increase in utility earnings
resulted primarily from higher electric and natural gas margins ($0.24 and
$0.04 per share, respectively), lower operation and maintenance expenses
($0.09 per share) and income realized from weather hedges ($0.04 per share).
Higher depreciation (excluding hedge losses in WP&L's nuclear decommissioning
trust fund) and interest expenses ($0.10 and $0.02 per share, respectively) and a higher
effective income tax rate ($0.02 per share) partially offset
these items. The 1998 utility results included approximately $0.42 per share
of merger-related expenses.
Resources reported net income of $37.8 million ($0.48 per share) in 1999
compared to a net loss of $8.9 million (($0.12) per share) for 1998. The 1999
earnings included gains realized from several asset sales, including
approximately 7% of Alliant Energy's investment in McLeod ($0.32 per share),
oil and gas properties at Whiting ($0.08 per share) and certain New Zealand
electric distribution investments ($0.05 per share). Earnings from Alliant
Energy's electricity trading joint venture ($0.06 per share), improved
operating results from Whiting ($0.03 per share) and improved earnings from
Alliant Energy's other non-regulated businesses ($0.03 per share) also
contributed to the increased earnings. The 1998 results for Resources also
included merger-related expenses ($0.03 per share).
The 1998 utility earnings were $109.5 million compared to $152.5 million for
1997. The decrease in 1998 utility earnings resulted primarily from
merger-related expenses, higher purchased-power and transmission costs at
WP&L, a 15.7% decrease in retail natural gas sales largely due to milder
weather conditions in 1998 compared to 1997, a $9 million regulatory asset
write-off at IESU, increased expenses for Year 2000 readiness efforts, higher
insurance-related expenses and increased depreciation expenses. These
decreases were partially offset by a 2% increase in retail electricity sales
volumes, largely due to continued economic growth within Alliant Energy's
service territory, lower purchased-power capacity costs at IESU and IPC,
reduced employee benefits costs and lower costs in 1998 due to merger-related
operating efficiencies. A loss incurred on the disposition of an investment
in 1997 at IESU also enhanced the 1998 earnings compared to 1997.
32rate.
34
Resources reported net losses of $8.9 million and $4.0 million in 1998 and
1997, respectively. The increased loss in 1998 was due to merger-related
expenses, lower oil and gas prices at Whiting, continuing expenses for new
business development in international and domestic markets, higher interest
expense to fund Alliant Energy's growth and a modest loss from Alliant
Energy's electricity trading joint venture. A tax benefit realized in 1997
from a donation of securities to Alliant Energy's charitable foundation also
contributed to the lower earnings in 1998 compared to 1997. Increased
earnings from Alliant Energy's industrial services businesses as well as gains
realized on asset sales partially offset these items.Domestic Electric Utility OperationsMargins - Electric margins and MWHMWh sales for
- ---------------------------------
Alliant - ----------------------------
Energy for 1999, 1998 and 1997 were as follows:follows (in thousands):
Revenues and Costs MWHsMWhs Sold
(in thousands) (in thousands)
--------------------------------------------------------------------------------------------------------- --------------------------------------------
1999 19982002 2001 * 19972000 ** 1999 19982002 2001 * 19972000 **
------------ ------------ ------- ----------- ----- --------------------- ------ ------- --------- ------- --------- -------- ------
Residential $541,714 $532,676 2% $521,574 2% 7,024 6,826$626,947 $599,074 5% $567,283 6% 7,616 7,344 4% 7,161 3%
6,851 --
Commercial 329,487 317,704 4% 307,941 3% 5,260 4,943 6% 4,844376,365 373,145 1% 349,019 7% 5,542 5,464 1% 5,364 2%
Industrial 476,140 477,241 -- 455,912 5% 13,036 12,718 3% 12,320 3%526,804 543,471 (3%) 501,155 8% 12,297 12,469 (1%) 13,092 (5%)
------------ ------------ ----------------------- ------- --------- --------- --------
Total from ultimate
customers 1,347,341 1,327,6211,530,116 1,515,690 1% 1,285,427 3% 25,320 24,487 3% 24,015 2%1,417,457 7% 25,455 25,277 1% 25,617 (1%)
Sales for resale 155,801 199,128 (22%160,335 184,507 (13%) 192,346 4% 5,566 7,189 (23%173,148 7% 4,805 4,936 (3%) 6,768 6%4,906 1%
Other 45,796 40,693 13% 37,980 7% 162 158 3% 16162,083 56,359 10% 57,431 (2%) 197 168 17% 174 (3%)
------------ ------------ ----------------------- ------- --------- ---------
--------
Total revenues 1,548,938 1,567,442revenues/sales 1,752,534 1,756,556 -- 1,648,036 7% 30,457 30,381 -- 30,697 (1%)
1,515,753 3% 31,048 31,834 (2%) 30,944 3%======= ========= ========= ========
Electric production
fuels expense 247,136 283,866 (13%286,474 292,002 (2%) 265,105 7%
Purchased power271,073 8%
Purchased-power expense 255,446 255,332 -- 256,306 --362,501 403,166 (10%) 294,818 37%
------------ ------------ -----------------------
Margin $1,046,356 $1,028,244 2% $994,342 3%$1,103,559 $1,061,388 4% $1,082,145 (2%)
============ ============ ===========
* Reflects the % change from 1998 to 1999.
** Reflects the % change from 1997 to 1998.============
Electric* Reflects the percent change from 2001 to 2002. ** Reflects the percent
change from 2000 to 2001.
To comply with FERC regulatory requirements governing transmission systems,
WP&L transferred its transmission assets to ATC on Jan. 1, 2001, in exchange
for cash and an equity ownership in ATC. The wheeling expenses from ATC
included in electric margin in 2002 and 2001 were offset by equity income
(WP&L accounts for its investment in ATC under the equity method), reduced
other operation and maintenance expenses and lower depreciation expense,
resulting in no significant net income impact due to the formation of ATC.
On a comparable basis, electric margin increased $18.1$42.2 million, or 2%4%, and
$33.9$9.6 million, or 3%1%, for 19992002 and 1998,2001, respectively. The 19992002 increase was
primarily due to separate
$15 million annualthe impact of rate adjustmentsincreases implemented at WP&L in July 1998 and March
1999 to recover higher2002, more
favorable weather conditions, lower purchased-power and transmissionfuel costs and
continued modest retail customer growth. These increases were partially
offset by reduced energy conservation revenues (which were largely offset by
lower energy conservation expense) and the impact of a sluggish economy. The
2001 increase was primarily due to lower purchased-power and fuel costs
impacting margin, increased residential and commercial sales due to more
favorable $9weather conditions in 2001 compared to 2000 and continued retail
customer growth. These items were partially offset by $10 million of income
recorded in 2000 for a change in estimate of Alliant Energy'sWP&L's utility services rendered
but unbilled at month-end based on refinements made to Alliant Energy's estimation
process in 1999 and an increase in retail sales of 3% due to more favorable
weather conditions and economic growth in the service territory. Partially
offsetting these increases were reduced recoveries of approximately $14
million in concurrent and previously deferred expenditures for Iowa-mandated
energy efficiency programs, lower sales to off-system and wholesale customers,
higher purchased-power capacity costs in Iowa and $3.2 million of revenues
collected from WP&L customers in 1998 for a surcharge related to Kewaunee.
The recovery for energy efficiency programs in Iowa is in accordance with IUB
orders (a portion of these recoveries is offset as they are also amortized to
expense in other operation expense). The lower sales to off-system and
wholesale customers were primarily due to lower wholesale customer contractual
commitments and transmission constraints.
The increase in electric margin for 1998 was primarily due to the increased
recoveryimplementation of $26 million of concurrenta refined estimation
process and previously deferred expenditures for
Iowa-mandated energy efficiency programs, reduced purchased-power capacity
costs at IESU and IPC, higherlower industrial sales, volumes to retail customers and WP&L's
reliance on more costly purchased-power in the first six months of 1997largely due to various power plant outages, particularly Kewaunee. The increased sales
volumes were primarily due to continued economic growth within the Alliant
Energy service territory. These increases were partially offset byimpacts of a lower
margin at WP&L and a rate decrease implemented at IPC in 1997. The lower
margin at WP&L was due to the regulatory lag associated with the rate recovery
of higher purchased-power and transmission costs, a rate decrease implemented
in 1997 and lower off-system sales income.
33
IESU's and IPC's electric tariffs include EAC's that are designed to currently
recover the costs of fuel and the energy portion of purchased-power billings
(see Note 1(j) of the "Notes to Consolidated Financial Statements" for
discussion of the EAC).slowing
economy.
Gas Utility OperationsMargins - Gas margins and Dth sales for Alliant Energy for
- ----------------------
1999, 1998 and 1997 were as
follows:- -------------------
follows (in thousands):
Revenues and Costs DekathermsDths Sold
(in thousands) (in thousands)---------------------------------------------------- --------------------------------------------------
-----------------------------------------------
1999 19982002 2001 * 19972000 ** 1999 19982002 2001 * 19972000 **
----------- ---------- ----------------- -------- ----------- ------- --------- --------- ----------------- ---------- -------- ---------- --------
Residential $185,090 $175,603$218,746 $270,248 (19%) $245,697 10% 30,931 29,580 5% $225,542 (22%) 30,309 28,378 7% 33,894 (16%32,026 (8%)
Commercial 89,118 85,842 4% 115,858 (26%111,343 141,121 (21%) 18,349 17,760 3% 21,142 (16%127,104 11% 19,348 18,055 7% 19,696 (8%)
Industrial 21,855 20,204 8% 27,393 (26%25,177 31,262 (19%) 5,963 5,507 8% 6,217 (11%)27,752 13% 5,373 5,344 1% 5,350 --
Transportation/other 18,256 13,941 31% 25,114 (44%38,720 45,246 (14%) 46,954 52,389 (10%14,395 214% 47,386 48,539 (2%) 56,719 (8%)43,931 10%
----------- ----------- ----------- ---------- -----------
--------- ------------------- ----------
Total revenues 314,319 295,590 6% 393,907 (25%revenues/sales 393,986 487,877 (19%) 101,575 104,034 (2%) 117,972 (12%)
========= =========414,948 18% 103,038 101,518 1% 101,003 1%
========== ========== ==========
Cost of utility gas sold 180,519 166,453 8% 259,222 (36%248,994 360,911 (31%) 278,734 29%
----------- --------------------- -----------
Margin $133,800 $129,137 4% $134,685 (4%$144,992 $126,966 14% $136,214 (7%)
=========== ========== =========== * Reflects the % change from 1998 to 1999.
** Reflects the % change from 1997 to 1998.===========
* Reflects the percent change from 2001 to 2002. ** Reflects the percent
change from 2000 to 2001.
Gas margin increased $4.7 million, or 4%,revenues and decreased $5.5 million, or 4%,
for 1999 and 1998, respectively. The 1999 increase was primarily due to
higher retail sales due to customer growth and more favorable weather
conditions in 1999. The sales increase was partially offset by decreased
recoveries of $2.6 million from the recovery of concurrent and previously
deferred energy efficiency expenditures for Iowa-mandated energy efficiency
program costs in accordance with IUB orders (a portion of these recoveries is
offset as they are also amortized to expense in other operation expense).
Refer to "Interest Expense and Other" for a discussion of income realized from
two gas weather hedges at WP&L in 1999. The decrease in gas margin in 1998
was primarily due to a 12% decrease in Dth sales, largely due to milder
weather, and a rate reduction implemented in April 1997 at WP&L. An increase
in revenues of $6.3 million from the recovery of energy efficiency
expenditures in Iowa and gas cost adjustments at IPC partially offset the
sales decrease.
IESU's and IPC's gas tariffs include PGA clauses that are designed to
currently recover the cost of utility gas sold (see Note 1(j)were unusually high in 2001 due to
increased natural gas prices in the first half of the "Notes2001. Due to Consolidated Financial Statements"Alliant
Energy's rate recovery mechanisms for a discussion of the PGA).
Non-regulatedgas costs, these price differences alone
had little impact on gas margin. Gas margin increased $18.0 million, or 14%,
and Other Revenues - Non-regulateddecreased $9.2 million, or 7%, for 2002 and other revenues for 1999,
- --------------------------------
1998 and 1997 were as follows (in millions):
1999 1998 1997
--------- --------- ---------
ISCO $196 $127 $245
Oil and gas (Whiting) 63 65 69
Steam 28 27 29
Transportation 22 22 21
Other 26 27 27
--------- --------- ---------
$335 $268 $391
========= ========= =========2001, respectively. The revenues for ISCO increased significantly in 1999 primarily2002
increase was largely due to the second quarter 1999 acquisitionimpact of an oil gatheringseveral rate increases implemented
in 2002, improved results from WP&L's performance-based commodity cost
recovery program (which are shared by ratepayers and transportation
businessshareowners), continued
modest retail customer growth and the negative impact high gas prices in
Texas and increased demand for environmental and engineering
services. Suchearly 2001 had on gas consumption during that period. These increases were
partially offset by reduced activity in the
energy marketing business. The revenues for ISCO declined significantly in
1998 compared to 1997 primarily due to decreased low-margin gas marketing
activities and the transfer of the electricity trading business to the Cargill
joint venture in July 1997. Alliant Energy's investment in the joint venture
is accounted for under the equity method of accounting.
34
Other Operating Expenses - Other operation expenses for 1999, 1998 and 1997
- --------------------------
were as follows (in millions):
1999 1998 1997
---------- --------- ---------
Utility - IESU / WP&L / IPC $366 $421 $358
ISCO 183 117 239
Oil and gas (Whiting) 35 38 40
Transportation 8 8 8
Other 32 36 37
---------- --------- ---------
$624 $620 $682
========== ========= =========
Other operation expenses at the utility subsidiaries decreased $55 million in
1999 primarily due to the nonrecurrence of $34 million of merger-related
expenses incurred in 1998, lower energy efficiency expenses of $17 million in
Iowa, a 1998 write-off of $9 million of certain employee benefits related
regulatory assets at IESU, decreased transmission and distribution expenses,
lower operating costs at Alliant Energy's generating plants, reduced
insurance-related expenses and lower costs in 1999 due to merger-related
operating efficiencies. The merger-related expenses were primarily for
employee retirements ($15 million), separations ($13 million) and relocations
($4 million). These decreases were partially offset by higher costs for
employee incentive compensation, energy conservation expense at WP&L and
employee benefits.
Other operation expenses at ISCO increased $66 million in 1999 primarily due
to expenses associated with the acquisition of the oil gathering and
transportation business and the increased demand for environmental and
engineering services, partially offset by lower operation expenses in the
energy marketing business. Other operation expenses at ISCO decreased $122
million in 1998 primarily due to the formation of the Cargill joint venture.
Other operation expenses at the utility subsidiaries increased $63 million in
1998 primarily due to the merger-related expenses, increased energy efficiency
expenses in Iowa, the regulatory asset write-off at IESU, higher
administrative and general expenses at WP&L, higher insurance-related expenses
and increased expenses for Year 2000 readiness efforts. The increase was
partially offset by reduced employee benefit expenses, reduced energy
conservation expense at WP&L, lower costs resulting from merger-related
operating efficiencies and reduced nuclear operation expenses at IESU. The
regulatory asset write-off resulted from IESU assessing in the fourth quarter
of 1998 how certain employee benefit costs were recovered in the rate making
process in Iowa. Based on such review, IESU concluded it could no longer meet
the required "probable" standard for SFAS 71.
The 1999 decrease in maintenance expenses was primarily due to reduced nuclear
and transmission and distribution maintenance expenses. Such decreases were
partially offset by increased expenses for Alliant Energy's Year 2000
readiness program and higher expenses at Alliant Energy's fossil-fueled
generating plants. Maintenance expenses were flat in 1998 primarily due to
reduced expenses at fossil-fueled plants, which were virtually offset by
increased maintenance at the nuclear plants.
Depreciation and amortization expense decreased $0.4 million and increased
$19.8 million in 1999 and 1998, respectively. The 1999 decrease was primarily
due to reduced earnings in WP&L's nuclear decommissioning trust fund (offset
entirely in "Miscellaneous, net"), lower depletion expense at Whiting and the
$3.2 million Kewaunee surcharge in 1998 at WP&L (recorded in depreciation and
amortization expense with a corresponding increase in revenues resulting in no
earnings impact). These items(which were largely
offset by increases in
depreciation expenselower energy conservation expenses). The 2001 decrease was largely
due to utility property additions. The increaselower retail sales primarily related to the unusually high gas prices
in 1998
was due to utility property additionsearly 2001 as some customers either chose alternative fuel sources or used
less natural gas, the impact of the slowing economy and the Kewaunee surcharge.losses associated
with performance-based commodity costs at WP&L. Alliant Energy realized
35
Interest Expense and Other - Interest expense increased $6.9pre-tax income of $0, $4.0 million and $6.8
- --------------------------$2 million in 1999 and 1998, respectively, due to higher utility and
non-regulated borrowings. Also contributing to the 1999 increase was higher
nuclear decommissioning trust fund interest expense at IESU, which was offset
entirely in "Miscellaneous, net." Contributing to the 1998 increase was an
adjustment to decrease interest expense in 1997 relating to a tax audit
settlement at WP&L.
The accounting for earnings on the nuclear decommissioning trust funds results
in no net income impact. Miscellaneous, net income increases for earnings on
the nuclear decommissioning funds at both WP&L and IESU. In accordance with
their respective regulatory requirements, the corresponding offset is recorded
through depreciation expense at WP&L and interest expense at IESU.
Alliant Energy sold approximately 7% (1.4 million shares, as adjusted for
McLeod's 2-for-1 stock split in July 1999) of its investment in McLeod in
1999, resulting in pre-tax gains of approximately $40 million.
Miscellaneous, net income increased $35.2 million and decreased $13.2 million
in 1999 and 1998, respectively. The 1999 increase was due to the following
factors:
(a) $17 million of merger-related expenses incurred in 1998 for the services
of Alliant Energy's advisors and costs related to Alliant Energy's
merger-related name change.
(b) Gains of $10 million and $6 million realized from the sales of several
oil and gas properties at Whiting and certain New Zealand electric
distribution investments, respectively.
(c) A $7 million increase in pre-tax earnings from Alliant Energy's
electricity trading joint venture.
(d) $5 million of income realized from weather hedges at WP&L. Refer to
Note 11(d) of the "Notes to Consolidated Financial Statements" for a
further discussion.
(e) These items were partially offset by a decrease of $11 millionit had
in earnings on Alliant Energy's nuclear decommissioning trust funds.
The 1998 decreaseplace in miscellaneous, net income was due to the merger-related
expenses2002, 2001 and a modest loss from Alliant Energy's electricity trading joint
venture, partially offset by gains on asset sales2000, respectively, which is recorded in
1998. The 1997 results
also included a loss incurred on the disposition of an investment at IESU.
Income Taxes - The effective income tax rates for Alliant Energy were 37.2%,
- -------------
36.0% and 35.1% in 1999, 1998 and 1997, respectively. See Note 6 of the
"Notes to Consolidated Financial Statements" for a discussion of the changes.
IESU RESULTS OF OPERATIONS
Overview - IESU's earnings available for common stock increased $4.5 million
- ---------
and $3.1 million in 1999 and 1998, respectively. The increased earnings for
1999 were primarily due to $17 million of merger-related expenses in 1998, a
$9 million regulatory asset write-off in 1998, a change in estimate of IESU's
unbilled revenues and reduced maintenance expenses. Such increases were
partially offset by higher depreciation and amortization expense, increased
administrative and general expenses and a higher effective income tax rate.
The increased earnings for 1998 were primarily due to a 2% increase in retail
electric sales volumes, largely due to continued economic growth in IESU's
service territory, lower purchased-power capacity costs, reduced employee
benefits costs and lower costs in 1998 due to merger-related operating
efficiencies. A loss incurred on the disposition of an investment in 1997
also improved 1998 earnings compared to 1997. Partially offsetting the higher
1998 earnings were merger-related expenses, the regulatory asset write-off
described above, decreased retail natural gas sales resulting from milder
weather, increased depreciation and amortization expenses and increased
expenses for Year 2000 readiness efforts.
36
Electric Utility Operations - Electric margins and MWH sales for IESU for
- ---------------------------
1999, 1998 and 1997 were as follows:
Revenues and Costs MWHs Sold
(in thousands) (in thousands)
-------------------------------------------------- --------------------------------------------
1999 1998 * 1997 ** 1999 1998 * 1997 **
---------- ---------- ------- ----------- ------ -------- --------- ------- -------- ------
Residential $230,422 $232,662 (1%) $227,496 2% 2,685 2,661 1% 2,682 (1%)
Commercial 176,251 168,672 4% 162,626 4% 2,658 2,465 8% 2,378 4%
Industrial 181,740 181,369 -- 177,890 2% 5,072 4,872 4% 4,743 3%
---------- ---------- ----------- -------- --------- --------
Total from ultimate
customers 588,413 582,703 1% 568,012 3% 10,415 9,998 4% 9,803 2%
Sales for resale 28,479 45,453 (37%) 25,719 77% 1,392 1,763 (21%) 794 122%
Other 11,058 11,267 (2%) 10,539 7% 40 42 (5%) 43 (2%)
---------- ---------- -----------
-------- --------- --------
Total revenues 627,950 639,423 (2%) 604,270 6% 11,847 11,803 -- 10,640 11%
======== ========= ========
Electric production
fuels expense 80,079 99,362 (19%) 92,891 7%
Purchased power
expense 82,402 71,637 15% 74,098 (3%)
---------- ---------- -----------
Margin $465,469 $468,424 (1%) $437,281 7%
========== ========== ===========
* Reflects the % change from 1998 to 1999.
** Reflects the % change from 1997 to 1998.
Electric margin decreased $3.0 million, or 1%, and increased $31.1 million, or
7%, for 1999 and 1998, respectively. The 1999 decrease was primarily due to
reduced recoveries of approximately $4 million in concurrent and previously
deferred expenditures for Iowa-mandated energy efficiency programs and
increased purchased-power capacity costs. The recovery for energy efficiency
programs in Iowa is in accordance with IUB orders (a portion of these
recoveries is offset as they are also amortized to expense in other operation
expense). Sales for resale decreased significantly in 1999 primarily due to
various resale customers of IESU selecting another utility as their
electricity provider effective in early 1999. The loss of such customers has
not had a material impact on IESU's electric margins. Sales to retail
customers increased primarily due to continued economic growth in IESU's
service territory and more favorable weather conditions. The 1999 electric
margin also benefited from a favorable $5 million change in estimate of IESU's
utility services rendered but unbilled at month-end based on refinements made
to IESU's estimation process in 1999.
The 1998 increase was primarily due to the increased recovery of approximately
$15 million of concurrent and previously deferred expenditures for
Iowa-mandated energy efficiency programs, increases in sales volumes to retail
customers due to economic growth"Miscellaneous, net" in the service territory and reduced
purchased-power capacity costs. Sales for resale increased significantly for
1998 as a resultConsolidated Statements of the implementation of a merger-related joint sales
agreement during the second quarter of 1998 (off-system sales revenues are
passed through IESU's energy adjustment clause and therefore have no impact on
electric margin). Refer to "Liquidity and Capital Resources - Rates and
Regulatory Matters" for a further discussion.
IESU's electric tariffs include EAC's that are designed to currently recover
the costs of fuel and the energy portion of purchased-power billings.Income.
Refer to Note 1(j) of Alliant Energy's "Notes to Consolidated Financial
Statements" for information relating to utility fuel and natural gas cost
recovery. Refer to Note 2 of Alliant Energy's "Notes to Consolidated
Financial Statements" and "Rates and Regulatory Matters" for discussion of
various rate filings.
Non-regulated and Other Revenues - Details regarding Alliant Energy's
- --------------------------------
non-regulated and other revenues are as follows (in millions):
2002 2001 2000
------------- ------------- -------------
Integrated Services $259 $242 $172
International 103 85 --
Mass Marketing 47 7 1
Investments 26 27 29
Other (includes eliminations) 27 19 15
------------- ------------- -------------
$462 $380 $217
============= ============= =============
The 2002 Integrated Services increase was primarily due to higher natural gas
sales, partially offset by decreased gas prices and lower energy services
revenues. The increased International revenues for 2002 were primarily due
to the EAC.
37
Gas Utility Operations2001 acquisitions of additional combined heat and power facilities in
China. Mass Marketing revenues for 2002 increased due to the fourth quarter
2001 acquisition of a controlling interest in SmartEnergy, an energy services
company operating in competitive energy markets. The 2001 Integrated
Services increase was primarily due to acquisitions in the third and fourth
quarters of 2000 of various energy services businesses. The 2001
International increase resulted from the December 2000 change from the equity
method of accounting to the consolidation method for an investment in China
and the addition of five combined heat and power facilities to Alliant
Energy's China portfolio during the fifteen months prior to Dec. 31, 2001.
Other Operating Expenses - Gas marginsOther operation and Dth sales for IESU for 1999, 1998 and
- ----------------------
1997maintenance expenses were as
follows:
Revenues and Costs Dekatherms Sold
(in thousands) (in thousands)
------------------------------------------------ -------------------------------------------
1999 1998 * 1997 ** 1999 1998 * 1997 **
--------- --------- ------ ----------- ------- ------- ------- ------- -------- --------
Residential $88,302 $86,821 2% $110,663 (22%) 13,778 13,803 -- 16,317 (15%)
Commercial 40,459 39,928 1% 54,383 (27%) 8,077 8,272 (2%) 9,602 (14%)
Industrial 11,543 10,422 11% 13,961 (25%) 3,291 3,089 7% 3,318 (7%)
Transportation/other 5,521 4,108 34% 4,510 (9%) 10,236 11,316 (10%) 10,321 10%
--------- --------- -----------
------- ------- --------
Total revenues 145,825 141,279 3% 183,517 (23%) 35,382 36,480 (3%) 39,558 (8%)
======= ======= ========
Cost of gas sold 88,308 84,642 4% 126,631 (33%)
--------- --------- -----------
Margin $57,517 $56,637 2% $56,886 --
========= ========= ===========
* Reflects the % change from 1998 to 1999.
** Reflects the % change from 1997 to 1998.
Gas margin increased $0.9 million, or 2%, and decreased $0.2 million for 1999
and 1998, respectively.- ------------------------
follows (in millions):
2002 2001 2000
------------- ------------- -------------
Utility $555 $509 $497
Integrated Services 242 229 158
International 83 69 4
Mass Marketing 57 8 2
Investments 15 16 18
Other (includes eliminations) 5 (3) 8
------------- ------------- -------------
$957 $828 $687
============= ============= =============
The 19992002 utility increase was primarily due to increased retail sales from more favorable weather conditions in 1999. The decrease in
1998 was primarily from reduced sales as a result of milder weather, which was
substantially offset by the increased recovery of $4.2 million of concurrentfossil and previously deferred energy efficiency expenditures for Iowa-mandated
energy efficiency program costs in accordance with IUB orders (a portion of
these recoveries is offset as they are also amortized to expense in other
operation expenses).
IESU's gas tariffs include PGA clauses that are designed to currently recover
the cost of gas sold. Refer to Alliant Energy's Note 1(j) of the "Notes to
Consolidated Financial Statements" for discussion of the PGA.
Other Operating Expenses - IESU's other operation expenses decreased $13.5
- ------------------------
million and increased $26.5 million for 1999 and 1998, respectively. The 1999
decrease was primarily due to $10.5 million of merger-related expenses in
1998, a $9 million regulatory asset write-off in 1998, a $4 million decrease
in energy efficiency expenses and merger-related operating efficiencies
realized in 1999. The merger-related expenses were primarily for employee
retirements, separations and relocations. The regulatory asset write-off
resulted from IESU assessing in the fourth quarter of 1998 how certainnuclear
generation, employee benefit costs were recovered in the rate making process in Iowa.
Based on such review, IESU concluded it could no longer meet the required
"probable" standard for SFAS 71. Such decreases wereand energy delivery expenses, partially offset
by increased costs for employee incentive compensationlower energy conservation expenses and higher employee
benefit costs.decreased uncollectible customer
account balances. Alliant Energy is addressing these cost increases in
various utility rate proceedings that are currently pending. The 19982001
utility increase was primarily due to higher merger-related
expenses,transmission wheeling and other
costs in Alliant Energy's energy delivery business unit, increased energy efficiency expenses,nuclear
operating costs (partially due to a planned refueling outage at Kewaunee in
2001), higher uncollectible customer account balances largely due to the
regulatory asset write-off
mentioned aboveunusually high gas prices earlier in the year and increased Year 2000 readiness costs.higher costs in the
generation business unit. These itemsincreases were partially offset by lower nuclear operation expenses, reduced employee pensionthe
impact of the formation of ATC earlier in 2001, as discussed in "Domestic
Electric Utility Margins."
The Integrated Services, International and benefit costs and lower costs resulting from merger-related operating
efficiencies.
Maintenance expenses decreased $3.5Mass Marketing variances were
largely driven by the same factors impacting the revenue variances discussed
previously. The Mass Marketing 2002 increase was also impacted by increases
in the provisions for uncollectible accounts at SmartEnergy in 2002. Charges
of $5 million and $1.8$2 million are included in 1999"Other" in 2002 and 1998,
respectively.2001,
respectively, for cancelled generation projects in Alliant Energy's
Non-regulated Generation business unit. The decrease in 1999 was primarily due to reduced nuclear
maintenance expenses and lower transmission and distribution maintenance
expenses, partially offset by increased Year 2000 readiness costs and higher
fossil-fueled maintenance expenses. The decrease in 1998 was due to reduced
fossil-fueled maintenance expenses, which were partially offset by higher
nuclear maintenance expenses.
Depreciation and amortization expenses increased $7.1 million and $4.2 million
for 1999 and 1998, respectively, primarily due to property additions and
amortization of software.
38
Interest Expense and Other - Interest expense decreased $0.5 million and $0.4
- --------------------------
million in 1999 and 1998, respectively. The 1999 decrease was primarily due
to lower average amounts of debt outstanding which2001 Integrated Services
increase was partially offset by highera one-time charge of $4 million related to a
loss on a contract in 2000.
Depreciation and amortization expense increased $8.0 million and $5.9 million
in 2002 and 2001, respectively. Contributing to both increases were utility
property additions, acquisitions at the non-regulated businesses and
36
increased regulatory and software amortizations. Increased earnings on the
WP&L nuclear decommissioning trust fund interestalso contributed to the 2002
increase. The 2002 increase was partially offset by lower expenses due to: a
decrease of $14 million from implementation of lower depreciation rates at
IP&L on Jan. 1, 2002, resulting from an updated depreciation study; lower
decommissioning expense whichbased on reduced retail funding levels at WP&L; and
the elimination of $5 million of goodwill amortization expense in compliance
with new accounting rules effective in 2002. The 2001 increase was partially
offset entirelyby the impact of the formation of ATC in "Miscellaneous, net.2001, as discussed in
"Domestic Electric Utility Margins," and lower earnings on the WP&L nuclear
decommissioning trust fund. The accounting for earnings on the nuclear
decommissioning trust fundsfund results in no net income impact. Miscellaneous,
net income increases for earnings on the trust fund and the corresponding
offset is recorded through depreciation expense at WP&L.
Taxes other than income taxes increased $2.1 million and $4.4 million in 2002
and 2001, respectively, primarily due to increased property taxes in 2002 and
increased gross receipts and payroll taxes in 2001.
Interest Expense and Other - Interest expense increased $0.9 million and
- --------------------------
$17.5 million in 2002 and 2001, respectively. Both increases were impacted
by higher non-regulated borrowings, partially offset by the impact of lower
interest rates on Alliant Energy's variable rate borrowings. The 2002
increase was also partially offset by lower short-term debt borrowings at the
Alliant Energy parent level, largely due to the impact of proceeds received
in November 2001 from a common equity offering.
Alliant Energy recorded income tax and associated interest income of $0.13
per share in 2001 related to a ruling in a tax refund case. The federal
government decided in the fourth quarter of 2001 not to pursue the ruling in
favor of Alliant Energy by the U.S. Court of Appeals for the 8th Circuit
dealing with capital losses disallowed under audit by the IRS and certain
related deductions. An additional potential refund of approximately $14
million, plus interest, remains a contested issue in this case. Alliant
Energy cannot offer any assurance it will be successful in obtaining this
additional refund and has not recognized any income for the potential
additional refund.
Equity income (loss) from Alliant Energy's unconsolidated investments was as
follows (in millions):
2002 2001 2000
------------- -------------- -------------
ATC (began operations 1/01) $14 $15 $--
New Zealand 4 -- 3
China* 2 2 1
Cargill-Alliant (sold in 2002) 1 7 15
Synfuel (began operations 5/02) (13) -- --
Brazil (23) (4) 3
Other 2 (1) (3)
------------- ------------- -------------
($13) $19 $19
============= ============= =============
* Majority of investments are accounted for under the consolidation method.
Equity income from unconsolidated investments decreased $32 million in 2002.
The differences in income from New Zealand during the three years were
largely due to the 2001 results being depressed because of drought
conditions. The lower earnings in 2002 and 2001 at Cargill-Alliant were
impacted by fewer weather-related trading opportunities and less volatile
market prices. Refer to "Liquidity and Capital Resources - Sales of
Non-strategic Assets" for discussion relating to Alliant Energy's sale of
this investment in 2002. In the second quarter of 2002, Synfuel, a direct
subsidiary of Resources, purchased an equity interest in a synthetic fuel
processing facility. The synthetic fuel project generates operating losses
at its fuel processing facility, which are more than offset by tax credits
and the tax benefit of the losses the project generates. All tax benefits
are included in "Income taxes" in Alliant Energy's Consolidated Statements of
Income. The lower 2002 results from the Brazil investments were largely due
to losses incurred by Alliant Energy's investment in a gas-fired generating
plant, charges incurred in 2002 related to the recovery of the impacts of
rationing and other prior costs and higher interest expense. The loss from
the generating plant was due to the impact of a significant decline in the
currency rates associated with the debt issued to finance the plant and a
depressed wholesale energy market in 2002. Increased electric sales volumes
in 2002 compared to 2001, largely due to the impacts of the drought-driven
rationing program that was in place for approximately seven months in 2001
compared to only two months in 2002, partially offset the lower Brazil
earnings. The 2001 Brazil results included a charge related to the impacts
of a settlement reached between the Brazilian government and the distribution
companies on the economic resolution of various cost recovery issues.
37
Refer to Note 9 of Alliant Energy's "Notes to Consolidated Financial
Statements" for discussion of the asset valuation charges recorded by Alliant
Energy in 2002 related to its McLeod available-for-sale securities.
On July 1, 2000, Alliant Energy adopted SFAS 133 for its consolidated
entities. Related to the adoption, Alliant Energy recorded a $321.3 million
pre-tax gain from the designation of a portion of Alliant Energy's McLeod
holdings as trading securities. This gain related to the unrealized
appreciation in value of approximately 27% of Alliant Energy's McLeod
holdings that were designated as trading as of the adoption date.
Miscellaneous, net income increased $6.4decreased $12.7 million and decreased $0.3$26.7 million for 1999in 2002
and 1998,2001, respectively. The increase2002 decrease was due to the recording of
pre-tax asset valuation charges of $10 million and $9 million related to
Alliant Energy's Energy Technologies and Enermetrix investments,
respectively, lower interest income (the 2001 results included $10 million
from tax settlements), a pre-tax goodwill impairment charge of $7 million at
SmartEnergy and gains from asset sales realized in 1999 resulted primarily from
$6.02001. These decreases
were partially offset by lower pre-tax, non-cash SFAS 133 valuation charges
of $29 million, related to the net change in the value of merger-related expensesthe McLeod trading
securities and the derivative component of Resources' exchangeable senior
notes, and increased earnings on WP&L's nuclear decommissioning trust fund.
The 2001 decrease was largely due to higher pre-tax, non-cash SFAS 133
valuation charges of $33 million related to the net change in 1998the value of
the McLeod trading securities and higherthe derivative component of Resources'
exchangeable senior notes, reduced nuclear decommissioning trust fund
earnings whichand lower gains from asset sales. These decreases were partially
offset by a gain on
an asset salehigher interest income, including the $10 million from tax
settlements in 1998.2001. Alliant Energy realized $0, $4 million and $2 million
of income from weather hedges in 2002, 2001 and 2000, respectively.
Refer to Note 10(a) of Alliant Energy's "Notes to Consolidated Financial
Statements" for additional information related to the exchangeable senior
notes embedded derivative, the McLeod trading securities and the cumulative
effect of changes in accounting principle.
Income Taxes - The 1998effective income tax rates for Alliant Energy's continuing
- ------------
operations were 30.5%, 27.6% and 40.1% in 2002, 2001 and 2000, respectively.
Refer to Note 5 of Alliant Energy's "Notes to Consolidated Financial
Statements" for additional information.
Income from Discontinued Operations - The 2002 decrease resulted primarilyof $28 million in
- -----------------------------------
income from merger-relateddiscontinued operations was largely due to lower earnings from
Alliant Energy's oil and gas (Whiting) business due to lower prices, higher
operating expenses which were substantiallyand lower gains from dispositions of oil and gas
properties in 2002 compared to 2001. Tax adjustments recorded in 2002
related to Alliant Energy's decision to sell its Australian (Southern Hydro)
and affordable housing businesses also contributed to the lower income. The
2002 decrease was partially offset by higher oil and gas sales volumes at
Whiting and higher earnings from Southern Hydro due to increased generation
and sales of renewable energy credits earned through the loss incurred
on dispositiongeneration of
hydropower. The 2001 increase in income was largely due to non-cash SFAS 133
income in 2001 related to the valuation of electricity derivatives at
Southern Hydro and higher earnings from Whiting which resulted from higher
gas prices earlier in 2001, increased oil and gas sales volumes and income
from a reduction in the estimated dismantlement cost of an investmentoffshore oil and
gas platform. The 2001 increase was partially offset by approximately $16
million of income from gains on the sale of 1.3 million shares of McLeod in
19972000 by Alliant Energy's affordable housing business. Refer to Note 16 of
Alliant Energy's "Notes to Consolidated Financial Statements" for further
discussion of Alliant Energy's discontinued operations.
IP&L RESULTS OF OPERATIONS
Overview - IP&L's earnings available for common stock decreased $6.6 million
- --------
and $5.1 million in 2002 and 2001, respectively. The 2002 decrease was
primarily due to increased operating expenses, a higher effective income tax
rate and lower interest income, partially offset by higher electric and gas
margins. The 2001 decrease was primarily due to increased operating expenses
and lower electric and gas margins, partially offset by a lower effective
income tax rate and higher interest income.
38
Electric Utility Margins - Electric margins and MWh sales for IP&L were as
- ------------------------
follows (in thousands):
Revenues and Costs MWhs Sold
--------------------------------------------------- ---------------------------------------------
2002 2001 * 2000 ** 2002 2001 * 2000 **
---------- ------------ -------- ---------- ------- -------- --------- -------- -------- -------
Residential $355,072 $350,946 1% $337,615 4% 4,184 4,026 4% 4,010 --
Commercial 229,639 234,876 (2%) 221,820 6% 3,392 3,342 1% 3,333 --
Industrial 315,494 335,680 (6%) 311,070 8% 7,843 7,931 (1%) 8,404 (6%)
---------- ------------ ---------- -------- --------- --------
Total from ultimate
customers 900,205 921,502 (2%) 870,505 6% 15,419 15,299 1% 15,747 (3%)
Sales for resale 34,513 53,320 (35%) 57,433 (7%) 1,151 1,412 (18%) 1,678 (16%)
Other 30,136 28,284 7% 27,907 1% 103 107 (4%) 111 (4%)
---------- ------------ ---------- -------- --------- --------
Total revenues/sales 964,854 1,003,106 (4%) 955,845 5% 16,673 16,818 (1%) 17,536 (4%)
======== ========= ========
Electric production
fuels expense 153,982 171,280 (10%) 157,865 8%
Purchased-power expense 145,292 185,860 (22%) 147,879 26%
---------- ------------ ----------
Margin $665,580 $645,966 3% $650,101 (1%)
========== ============ ==========
* Reflects the percent change from 2001 to 2002. ** Reflects the percent
change from 2000 to 2001.
Electric margin increased $19.6 million, or 3%, and decreased $4.1 million,
or 1%, for 2002 and 2001, respectively. The 2002 increase was primarily due
to the impact of the interim retail rate increase, lower purchased-power
capacity costs, more favorable weather conditions and continued modest retail
customer growth. These increases were partially offset by reduced energy
conservation revenues of $10 million and the impacts of a sluggish economy.
The 2001 decrease was primarily due to reduced energy conservation revenues
of $5 million and lower sales largely due to impacts of a slowing economy,
partially offset by decreased purchased-power capacity costs and continued
retail customer growth. For both 2002 and 2001, the reduced energy
conservation revenues were largely offset by lower energy conservation
expenses.
Gas Utility Margins - Gas margins and Dth sales for IP&L were as follows (in
- -------------------
thousands):
Revenues and Costs Dths Sold
-------------------------------------------------- -------------------------------------------
2002 2001 * 2000 ** 2002 2001 * 2000 **
---------- ---------- -------- ----------- ------- --------- -------- ------- -------- -------
Residential $124,237 $162,575 (24%) $149,493 9% 18,068 17,826 1% 19,257 (7%)
Commercial 61,222 82,463 (26%) 72,592 14% 10,774 10,483 3% 11,101 (6%)
Industrial 18,197 22,355 (19%) 19,171 17% 4,070 4,147 (2%) 3,874 7%
Transportation/other 11,239 13,621 (17%) 8,540 59% 28,814 31,673 (9%) 30,251 5%
---------- ---------- ----------- --------- -------- --------
Total revenues/sales 214,895 281,014 (24%) 249,796 12% 61,726 64,129 (4%) 64,483 (1%)
========= ======== ========
Cost of gas sold 138,875 207,088 (33%) 171,603 21%
---------- ---------- -----------
Margin $76,020 $73,926 3% $78,193 (5%)
========== ========== ===========
* Reflects the percent change from 2001 to 2002. ** Reflects the percent
change from 2000 to 2001.
Gas revenues and cost of gas sold were unusually high in 2001 due to the
increased natural gas prices in the first half of 2001. Such fluctuations
alone had no impact on IP&L's gas margin given its rate recovery mechanism
for gas costs. Gas margin increased $2.1 million, or 3%, and decreased $4.3
million, or 5%, for 2002 and 2001, respectively. The 2002 increase was
primarily due to the impact of the interim retail rate increase and the
negative impact high gas prices in early 2001 had on gas consumption during
that period, partially offset by reduced energy conservation revenues of $4
million. The 2001 decrease was largely due to lower retail sales primarily
related to unusually high gas prices earlier in 2001 as some customers either
chose alternative fuel sources or used less natural gas, the impact of the
slowing economy and reduced energy conservation revenues. For both 2002 and
2001, the reduced energy conservation revenues were largely offset by lower
energy conservation expenses.
Refer to Note 1(j) of Alliant Energy's "Notes to Consolidated Financial
Statements" for information relating to utility fuel and natural gas cost
recovery. Refer to Note 2 of Alliant Energy's "Notes to Consolidated
Financial Statements" and "Rates and Regulatory Matters" for discussion of
IP&L's rate filings.
Other Operating Expenses - Other operation and maintenance expenses increased
- ------------------------
$16.6 million and $14.2 million for 2002 and 2001, respectively. The 2002
increase was primarily due to increased fossil and nuclear generation,
employee benefit and energy delivery expenses. These increases were
partially offset by lower energy conservation expenses of $11 million and
decreased uncollectible customer account balances. The 2001 increase was
primarily due to higher transmission wheeling and other energy delivery
costs, fossil and nuclear generation costs and uncollectible customer account
39
balances largely due to the unusually high gas prices earlier in 2001 and a
gaindownturn in the economy. These increases were partially offset by one-time
fees in 2000 related to the transfer from the MAPP reliability region to the
MAIN region and a decrease of $3 million in energy conservation expenses.
Depreciation and amortization expenses decreased $2.4 million and increased
$5.0 million for 2002 and 2001, respectively. The 2002 decrease was
primarily due to a $14 million reduction in depreciation expense from
implementation of lower depreciation rates on Jan. 1, 2002, resulting from an
asset saleupdated depreciation study, largely offset by property additions. The 2001
increase was primarily due to property additions and amortization of
software.
Interest Expense and Other - Miscellaneous, net income decreased $3.9 million
- --------------------------
and increased $6.0 million for 2002 and 2001, respectively, primarily due to
higher interest income in 1998.2001 and income from weather hedges in 2001. IP&L
realized $5 million and $4 million in interest income from tax settlements in
2001 and 2000, respectively. The 2002 decrease was partially offset by
higher income from sales of non-commodity products and services.
Income Taxes - The effective income tax rates were 42.6%40.7%, 40.1%35.1% and 41.8%38.7% in
- ------------
1999, 19982002, 2001 and 1997,2000, respectively. SeeRefer to Note 65 of theIP&L's "Notes to
Consolidated Financial Statements" for a discussion of the changes.additional information.
WP&L RESULTS OF OPERATIONS
Overview - WP&L's earnings available for common stock increased $35.3$7.4 million
- -----------------
and decreased $35.7$2.1 million in 19992002 and 1998,2001, respectively. The increased
earnings for 1999 were2002 increase was
primarily due to $17.3 million of merger-related
expenses in 1998, higher electric and natural gas margins, reduced other
operation and maintenance expenses and income realized from weather hedges.
Such increases were partially offset by
increased depreciation and
amortization expense (excluding hedge losses in WP&L's nuclear decommissioning
trust fund) and higher interest expense.operating expenses. The decreased earnings for 1998 were2001 increase was primarily due to merger-related expenses, higher
purchased-power and
transmission costs, higher depreciation and amortization expenses, decreased
retail natural gas sales largely due to milder weather, higher
insurance-related expenses, higher interest expenseelectric margins and a higherlower effective income tax rate. These decreases wererate, partially offset by
a 3% increase in retail
electric sales volumes, largely due to continued economic growth in the
service territory, reduced employee pension and benefit costsincreased operating expenses and lower costs
in 1998 due to merger-related operating efficiencies.gas margins.
Electric Utility OperationsMargins - Electric margins and MWHMWh sales for WP&L for
- ---------------------------
1999, 1998 and 1997 were as
follows:- ------------------------
follows (in thousands):
Revenues and Costs MWHsMWhs Sold
(in thousands) (in thousands)
--------------------------------------------------- -------------------------------------------
1999 19982002 2001 * 19972000 ** 1999 19982002 2001 * 19972000 **
---------- --------------------- ------- ----------- -------- -------- -------- ------- -------- -------
Residential $213,496 $198,770 7% $199,633 -- 3,111 2,964$271,875 $248,128 10% $229,668 8% 3,432 3,318 3% 3,151 5%
2,974 --
Commercial 116,947 108,724 8% 107,132146,726 138,269 6% 127,199 9% 2,150 2,122 1% 1,980 1,8982,031 4%
1,878 1%
Industrial 171,118 162,771 5% 152,073 7% 4,570 4,493211,310 207,791 2% 4,256 6%190,085 9% 4,454 4,538 (2%) 4,688 (3%)
---------- --------------------- ----------- -------- -------- ---------------
Total from ultimate
customers 501,561 470,265 7% 458,838 2% 9,661 9,355 3% 9,108 3%629,911 594,188 6% 546,952 9% 10,036 9,978 1% 9,870 1%
Sales for resale 102,751 128,536 (20%125,822 131,187 (4%) 160,917 (20%115,715 13% 3,654 3,524 4% 3,228 9%
Other 31,947 28,075 14% 29,524 (5%) 3,252 4,492 (28%) 5,824 (23%)
Other 22,295 15,903 40% 14,388 11% 54 59 (8%) 60 (2%94 61 54% 63 (3%)
---------- --------------------- ----------- -------- -------- ---------------
Total revenues 626,607 614,704revenues/sales 787,680 753,450 5% 692,191 9% 13,784 13,563 2% 634,143 (3%) 12,967 13,906 (7%) 14,992 (7%)13,161 3%
======== ======== ===============
Electric production
fuels expense 110,521 120,485 (8%) 116,812 3%
Purchased power132,492 120,722 10% 113,208 7%
Purchased-power expense 107,598 113,936 (6%) 125,438 (9%)
----------217,209 217,306 -- 146,939 48%
---------- ----------- -----------
Margin $408,488 $380,283 7% $391,893 (3%$437,979 $415,422 5% $432,044 (4%)
========== ========== =========== * Reflects the % change from 1998 to 1999.
** Reflects the % change from 1997 to 1998.===========
Electric* Reflects the percent change from 2001 to 2002. ** Reflects the percent
change from 2000 to 2001.
Due to the formation of ATC on Jan. 1, 2001, the wheeling expenses from ATC
included in electric margin in 2002 and 2001 were offset by equity income
(WP&L accounts for its investment in ATC under the equity method), reduced
other operation and maintenance expenses and lower depreciation expense,
resulting in no significant net income impact due to the formation of ATC.
On a comparable basis, electric margin increased $28.2$22.6 million, or 7%5%, and
decreased $11.6$13.8 million, or 3%, during 19992002 and 1998,2001, respectively. The 19992002 increase
was primarily due to separate $15 million annualthe implementation of various rate adjustments implemented at WP&Lincreases in 39
July 19982002,
continued modest retail customer growth and March 1999more favorable weather conditions
in 2002 compared to recover higher2001, partially offset by the sluggish economy. The 2001
increase was primarily due to lower purchased-power and transmission
costs. An increase in retailfuel costs impacting
margin, increased residential and commercial sales of 3% due to more favorable
weather conditions in 2001 compared to 2000 and economic growth within WP&L's service territory also contributed to the
increase. Partially offsetting the 1999 increase were lower sales to
off-system and wholesale customers due to transmission constraints and
decreased contractual commitments and $3.2 million of revenues collected in
1998 for a surcharge related to Kewaunee.
The 1998 decline in margin was due to regulatory lag associated with rate
recovery of higher purchased-power and transmission costs, a rate decrease of
2.4% implemented in April 1997 and lower off-system sales income.continued retail customer
growth. These items were partially offset by WP&L's reliance on more costly purchased-power$10 million of income recorded
in the
first six months2000 for a change in estimate of 1997utility services rendered but unbilled at
month-end due to various power plant outages, particularly
Kewaunee,the implementation of a refined estimation process and lower
industrial sales, largely due to impacts of a 3% increase in retail sales.slowing economy.
40
Gas Utility OperationsMargins - Gas margins and Dth sales for WP&L for 1999, 1998 and
- ----------------------
1997 were as follows:follows (in
- -------------------
thousands):
Revenues and Costs DekathermsDths Sold
(in thousands) (in thousands)
----------------------------------------------- ----------------------------------------
1999 1998-------------------------------------------------- --------------------------------------------
2002 2001 * 19972000 ** 1999 19982002 2001 * 19972000 **
--------- ---------- ------ ---------- ------------------ --------- --------- -------- --------- -------- ------- -------- ------ ------- ---------------
Residential $69,662 $65,173 7% $84,513 (23%$94,509 $107,673 (12%) 12,070 10,936 10% 12,770 (14%$96,204 12% 12,863 11,754 9% 12,769 (8%)
Commercial 35,570 33,898 5% 45,456 (25%) 7,771 7,285 7% 8,59250,121 58,658 (15%) 54,512 8% 8,574 7,572 13% 8,595 (12%)
Industrial 6,077 5,896 3% 8,378 (30%6,980 8,907 (22%) 1,520 1,422 7% 1,714 (17%8,581 4% 1,303 1,197 9% 1,476 (19%)
Transportation/other 9,461 6,770 40% 17,536 (61%27,481 31,625 (13%) 13,237 12,9485,855 440% 18,572 16,866 10% 13,680 23%
--------- ----------- --------- --------- -------- --------
Total revenues/sales 179,091 206,863 (13%) 165,152 25% 41,312 37,389 10% 36,520 2%
17,595 (26%)
--------- ---------- ----------
------- -------- -------
Total revenues 120,770 111,737 8% 155,883 (28%) 34,598 32,591 6% 40,671 (20%)
================ ======== ===============
Cost of gas sold 64,073 61,409 4% 99,267 (38%110,119 153,823 (28%) 107,131 44%
--------- ---------- --------------------- ---------
Margin $56,697 $50,328 13% $56,616 (11%$68,972 $53,040 30% $58,021 (9%)
========= ========== ==========
* Reflects the % change from 1998 to 1999.
** Reflects the % change from 1997 to 1998.=========== =========
* Reflects the percent change from 2001 to 2002. ** Reflects the percent
change from 2000 to 2001.
Gas revenues and cost of gas sold were unusually high in 2001 due to the
large increase in natural gas prices in the first half of 2001. Due to
WP&L's rate recovery mechanisms for gas costs, these increases alone had
little impact on gas margin. Gas margin increased $6.4$15.9 million, or 13%30%, and
declined $6.3decreased $5.0 million, or 11%9%, during 19992002 and 1998,2001, respectively. The 19992002
increase was largely due to increased
sales resultingthe implementation of a rate increase in 2002,
improved results from WP&L's performance-based commodity cost recovery
program, continued modest retail customer growth of approximately 2% and more favorable
weather conditionsthe negative impact high
gas prices in 1999.early 2001 had on gas consumption during that period. The 19982001
decrease was primarilylargely due to a
reductionlower retail sales primarily related to unusually
high gas prices earlier in sales resulting2001 as some customers either chose alternative
fuel sources or used less natural gas, the impact of the slowing economy and
lower results from milder weather and an average retail rate
reduction of 2.2% implemented in April 1997. Refer to Note 1(i) of Alliant
Energy's "Notes to Consolidated Financial Statements" for discussion of an
accounting change implemented in 1998. Refer to "Interest Expense and Other"
for a discussion of income realized from two gas weather hedges in 1999.WP&L's performance-based commodity cost recovery program.
Refer to Note 1(j) of Alliant Energy's "Notes to Consolidated Financial
Statements" for ainformation relating to utility fuel and natural gas cost
recovery. Refer to Note 2 of Alliant Energy's "Notes to Consolidated
Financial Statements" and "Rates and Regulatory Matters" for discussion of
a gas cost adjustment mechanism in place at
WP&L. The impact on the results of operations from such mechanism was not
significant in any of the periods presented.&L's rate filings.
Other Operating Expenses - Other operation expenses decreased $17.2 millionDue to the formation of ATC in 2001, WP&L incurred
- ------------------------
$10 million of operation and maintenance expenses in 2000 that were not
incurred in 2001. On a comparable basis, other operation and maintenance
expenses increased $12.3$29.2 million and $7.6 million for 19992002 and 1998,2001,
respectively. The 1999
decrease2002 increase was primarilylargely due to $11.2 million of merger-related expenses in 1998
forhigher fossil generation,
employee retirements, separations and relocations, reduced
insurance-related expenses, lower operating costs at WP&L's generating plants,
lower transmission and distribution expenses and lower costs due to
merger-related operating efficiencies. Such items were partially offset by
increased costs forbenefit, energy conservation, employee incentive compensation and employee benefitsenergy delivery expenses. The
19982001 increase was primarily due to merger-related expenses, higher insurance-related expensesnuclear operating costs (partially
due to a planned refueling outage at Kewaunee in the fourth quarter of 2001),
higher uncollectible customer account balances largely due to the unusually
high gas prices earlier in the year and an increase inhigher other administrative and
general expenses. Such items were partially offset
by reduced employee pension and benefits expenses, reduced conservation
expense and lower costs from merger-related operating efficiencies.
Maintenance expenses decreased $4.3 million in 1999. The decrease was
primarily due to lower nuclear expenses and reduced transmission and
distribution maintenance expenses. Such decreases were partially offset by
increased expenses associated with Year 2000 readiness efforts.
40
Depreciation and amortization expense decreased $6.2 million and increased
$14.9 million for 1999 and 1998, respectively. The 1999 decrease was due to
reduced earnings in the nuclear decommissioning trust fund (offset entirely in
"Miscellaneous, net") and the $3.2 million Kewaunee surcharge in 1998.costs. These items were partially offset by decreased fossil plant
maintenance expenses.
Depreciation and amortization expenses increased $7.1 million and decreased
$10.8 million for 2002 and 2001, respectively. The 2002 increase was largely
due to higher regulatory and software amortizations. Increased earnings on
the nuclear decommissioning trust fund were largely offset by lower
decommissioning expense based on reduced retail funding levels. The 2001
decrease was primarily due to the impact of property additions. The 1998
increase wasthe formation of ATC and
decreased earnings on the nuclear decommissioning trust fund, partially
offset by increased expense due to property additions, higher Kewaunee depreciation (refer to
"Liquidity and Capital Resources - Capital Requirements - Nuclear Facilities"
for additional information) and the Kewaunee surcharge.additions. The accounting for
earnings on the nuclear decommissioning trust funds results in no net income
impact. Miscellaneous, netInterest income is increased for earnings on the trust fund, which
is offset in depreciation expense.
Taxes other than income taxes increased $3.3 million for 2001 due to
increased gross receipts and payroll taxes.
Interest Expense and Other - Interest expense decreased $3.3 million in 2002
- --------------------------
due to lower average interest rates on the outstanding borrowings. Interest
income increased $4.4$13.5 million and $4.0
- --------------------------decreased $5.0 million in 19992002 and 1998, respectively. The 1999 increase was primarily2001,
respectively, due to higher short-term borrowings and the 1998 increase was primarily due to an
adjustment to decrease interest expensedifferences in 1997 relating to a tax audit
settlement and increased borrowings during 1998.
Miscellaneous, net income decreased $3.0 million and $2.7 million in 1999 and
1998, respectively. The 1999 decrease was primarily due to lower earnings on the nuclear decommissioning
trust fund, partially offset by $6.1fund. Equity income from unconsolidated investments increased $15.0
million of
merger-related expenses in 1998 and pre-tax2001, largely due to ATC beginning operations on Jan. 1, 2001.
Miscellaneous, net income of $5decreased $7.3 million recognized in 1999 associated with the settlement of gas weather hedges. See Note 11(d) of
the "Notes to Consolidated Financial Statements" for additional information
relating to the gas weather hedges. The 1998 decrease was2002 primarily due to
merger-related expenses, which was partially offset by higher earnings on the
nuclear decommissioning trust fund.lower income from sales of non-commodity products and services and income
realized from weather hedges in 2001.
Income Taxes - The effective income tax rates were 39.2%35.6%, 41.0%35.9% and 37.0%37.5% in
- -------------
1999, 1998------------
2002, 2001 and 1997,2000, respectively. SeeRefer to Note 65 of theWP&L's "Notes to
Consolidated Financial Statements" for a discussion of the changes.additional information.
41
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities atOverview - Alliant Energy decreased $45 million
for the year ended December 31, 1999, compared with the same period in 1998,
primarily due to changes in working capital. Cash flows used forEnergy's recent and proposed financing activities decreased $161 million forhave
- --------
been and will be undertaken against a backdrop of increased market concerns
about general economic conditions and corporate governance issues as well as
risks associated with particular sectors of the year ended December 31, 1999,
compared witheconomy, including the same period in 1998, primarily asenergy
industry. As a result of changesthese factors, capital markets have become more
restrictive. The commercial paper market, for example, has become more
limited for many companies in terms of the amounts of available capital and
the corresponding maturities. Medium- and long-term debt markets have become
sensitive to increased credit ratings volatility and to a heightened
perception of liquidity risk in the amount of debt outstanding. Cash flows used for investing activities
increased $39 million for the year ended December 31, 1999, compared with the
same period in 1998, due to increased levels of construction and acquisition
expenditures, which were partially offset by increased proceeds from
dispositions of assets.
Cash flows from operating activities at IESU decreased $44 million for the
year ended December 31, 1999, compared with the same period in 1998, primarily
due to changes in working capital. Cash flows used for financing activities
increased $71 million for the year ended December 31, 1999, compared with the
same period in 1998, due to increased common stock dividends in 1999 as no
dividend payments were made in the last three quarters of 1998 due to
merger-related tax considerations.energy sector. As a result, investors
have become more selective and have differentiated among otherwise comparable
issuers in a way that has made the dividend paymentfinancing process more challenging. In
response to these changing market conditions, Alliant Energy is working
closely with its financial advisors and others to access the capital it needs
to operate its businesses. Based on its strong cash flows coupled with
actions Alliant Energy expects to take to strengthen its balance sheet,
Alliant Energy currently believes it will be able to secure the capital it
requires to implement its refined strategic plan. Alliant Energy believes
its ability to secure additional capital will be significantly enhanced by
the completion of the actions addressed in "Strategic Actions," including the
first quarterdivestiture of 1999 was larger than IESU's historical quarterly payment.
Cash flows used for investing activities decreased $6 million for the year
ended December 31, 1999, compared with the same period in 1998, due to
decreased levels of construction expenditures.
Cash flows from operating activities at WP&L decreased $14 million for the
year ended December 31, 1999, compared with the same period in 1998, primarily
due to changes in working capital, partially offset by higher net income.
Cash flows used for financing activities decreased $34 million for the year
ended December 31, 1999, compared with the same period in 1998, primarily due
to a capital contribution of $30 million fromselected businesses.
Alliant Energy. Cash flows used
for investing activities increased $17 million for the year ended December 31,
1999, compared with the same period in 1998, primarily due to increased
construction expenditures.
Future Considerations
TheEnergy's capital requirements of Alliant Energy are primarily attributable to its
utility subsidiaries' construction and acquisition programs, Resources'
acquisition and investment opportunities and its debt maturitiesmaturities. Alliant
Energy's utility subsidiaries anticipate financing their construction
expenditures, including new electric generation facilities, during 2003-2005
through internally generated funds supplemented, when necessary, by outside
financing. Funding for Resources' acquisition and business opportunitiesinvestment expenditures
over that same period of Resources. Ittime is anticipatedexpected to be accomplished with a
combination of external financings, sales of assets and internally generated
funds.
In 2001, Alliant Energy and Resources received SEC approval for their ongoing
program of external financing, credit support arrangements and other related
proposals for the period through Dec. 31, 2004. Among other things, the
approval authorized Alliant Energy directly or through financing subsidiaries
to issue common and preferred stock, unsecured long-term debt securities and
other equity-linked securities up to an amount of $1.5 billion; to provide
guarantees and credit support for obligations of its subsidiaries up to an
amount of $3 billion; to enter into hedging transactions to manage interest
rate costs and risk exposure; and to increase its aggregate investment limit
in EWGs and FUCOs to 100% of consolidated retained earnings. The approval,
among other things, also authorized Resources to provide guarantees and
credit support for obligations of non-utility subsidiaries up to an amount of
$600 million outstanding at any one time and to spend up to $800 million to
construct or acquire energy assets that futureare incidental to the energy
marketing and oil and gas productions of its subsidiaries. Alliant Energy's
ability to undertake any such financings contemplated by the SEC's order is
dependent on its ability to access the capital markets as described above.
Cash Flows - Selected information from Alliant Energy's, IP&L's and WP&L's
- ----------
Consolidated Statements of Cash Flows was as follows (in thousands):
Alliant Energy IP&L WP&L
---------------------------------- --------------------------------- --------------------------------
Cash flows from (used for): 2002 2001 2000 2002 2001 2000 2002 2001 2000
---------------------------------- --------------------------------- --------------------------------
Operating activities $544,040 $426,111 $393,090 $250,430 $305,948 $267,564 $223,750 $135,886 $174,060
Financing activities 84,090 170,525 513,063 6,286 (102,086) (77,716) (27,685) (19,176) 987
Investing activities (632,658) (656,262) (869,253) (250,727) (203,838) (189,862) (187,795) (116,832) (174,880)
In 2002, Alliant Energy's cash flows from operating activities increased
primarily due to changes in working capital; cash flows from financing
activities decreased primarily due to proceeds from the issuance of common
stock in 2001, partially offset by a net increase in the amount of preferred
stock outstanding at IP&L; and cash flows used for investing activities
decreased primarily due to lower construction and acquisition expenditures
partially offset by proceeds received in 2001 from the transfer of WP&L's
transmission assets to ATC. In 2001, Alliant Energy's cash flows from
financing activities decreased primarily due to net changes in amount of debt
issued and retired, partially offset by proceeds from the issuance of common
stock in 2001; and cash flows used for investing activities decreased
primarily due to lower non-regulated investments.
In 2002, IP&L's cash flows from operating activities decreased primarily due
to changes in working capital; cash flows used for financing activities
decreased due to a net increase in the amount of preferred stock outstanding
and a capital contribution of $60 million by Alliant Energy; and cash flows
used for investing activities increased due to increased levels of
construction expenditures. In 2001, IP&L's cash flows from operating
42
activities increased primarily due to changes in working capital; cash flows
used for financing activities increased due to the net changes in the amount
of debt issued and retired; and cash flows used for investing activities
increased due to higher levels of construction expenditures. In 2002, WP&L's
cash flows from operating activities increased due to changes in working
capital; and cash flows used for investing activities increased primarily due
to proceeds received from the transfer of WP&L's transmission assets to ATC
in 2001. In 2001, WP&L's cash flows from operating activities decreased due
to changes in working capital; cash flows used for financing activities
increased due to common stock dividends paid in 2001 as no dividends were
declared in 2000 due to management of WP&L's capital structure, partially
offset by a capital contribution of $35 million by Alliant Energy and changes
in debt issued and retired; cash flows used for investing activities
decreased in 2001 primarily due to proceeds received from the transfer of
WP&L's transmission assets to ATC.
Common Equity - In November 2002, Alliant Energy announced its intentions to
- -------------
raise approximately $200 million to $300 million of common equity in 2003,
dependent on market conditions. The proceeds are expected to be used to fund
the Power Iowa initiative and other regulated domestic utility needs. The
PSCW has indicated it will require an additional equity infusion by Alliant
Energy into WP&L during 2003. Alliant Energy anticipates the final PSCW
order, which is expected to be issued in the second quarter of 2003, will
also include a customer refund provision if the timing and/or amount of the
equity infusion differs from the assumptions included in the WP&L rate case.
Preferred Stock - In September 2002, IP&L redeemed all of its then
- ---------------
outstanding shares of preferred stock at an aggregate redemption price of
$58.3 million. In December 2002, IP&L issued six million shares of preferred
stock at $25.00 per share in a private placement. IP&L used the net proceeds
of approximately $145 million to repay its short-term debt and for general
corporate purposes, including to fund capital expenditures and to repay other
debt.
Debt - In June 2002, Alliant Energy received approval (through Dec. 31, 2004)
- ----
from the SEC to issue and sell up to an aggregate amount of $1 billion of
short-term debt outstanding at any one time and to guarantee borrowings by
Resources in an aggregate amount that would not exceed $700 million at any
one time in addition to its other guarantee authority. In addition, IP&L
received SEC approval to issue short-term debt in a principal amount which
would not at any one time exceed $300 million. Alliant Energy discontinued
the use of its utility money pool in 2002 and WP&L and IP&L are now meeting
any short-term borrowing needs by issuing commercial paper and borrowing on
bank lines of credit, respectively.
Alliant Energy and its subsidiaries are party to various credit facilities
and other borrowing arrangements, some of which are summarized below. In
addition to the specific covenants detailed below under the 364-day revolving
credit agreements, Alliant Energy's facilities and borrowing arrangements
contain various customary terms and conditions, including required
capitalization, net worth and interest coverage requirements, maintenance
requirements related to bonded property and cross-default provisions. At
Dec. 31, 2002, Alliant Energy and its subsidiaries were in compliance with
the financial ratios and covenant requirements under their respective credit
facilities and borrowing arrangements. The aggregate borrowing capacity
under short-term credit agreements of Alliant Energy and its subsidiaries at
Dec. 31, 2002 was $845 million. At Dec. 31, 2002, the total amount borrowed
under these facilities was $281 million leaving unused capacity of $564
million. In addition, Resources had a $250 million standby credit facility
at Dec. 31, 2002 as discussed below. There are no borrowings currently
outstanding under such facility. Alliant Energy also had $28 million of
short-term borrowings outstanding at Dec. 31, 2002 related to various
generation projects in China.
In October 2002, Alliant Energy completed the syndication of three 364-day
revolving credit facilities totaling $915 million, available for direct
borrowing or to support commercial paper, which replaced the former
facilities that totaled $900 million in borrowing availability. The three
facilities consist of a $565 million facility for Alliant Energy (at the
parent company level), which was reduced to $450 million at the end of 2002,
a $200 million facility for IP&L and a $150 million facility for WP&L.
Availability under the Alliant Energy credit facility will be metfurther reduced
by cash generated
from operations, salethe proceeds of investments and external financing. The levelasset sales in excess of cash generated from operations is partially dependent upon economic
41
conditions, legislative activities, environmental matters and timely
regulatory recovery of utility costs. Alliant Energy's liquidity and capital
resources will be affected by costs associated with environmental and
regulatory issues. Emerging competition in the utility industry could also
impact Alliant Energy's liquidity and capital resources, as discussed
previously in the "Utility Industry Outlook" section.
Alliant Energy had certain off-balance sheet financial guarantees and
commitments outstanding at December 31, 1999. They generally consist of
third-party borrowing arrangements and lending commitments, guarantees of
financial performance of syndicated affordable housing properties and
guarantees relating to Alliant Energy's electricity trading joint venture.
Refer to Note 12(d) of the "Notes to Consolidated Financial Statements" for
additional details.
Under PUHCA, certain investments of Alliant Energy in exempt wholesale
generators and foreign utility companies are limited to 50%5% of Alliant Energy's
consolidated retained earnings.assets in any 12-month period commencing October 2002 and up to
$50 million from the proceeds of an issuance of equity securities in excess
of $300 million. These new credit facility agreements contain various
covenants, including the following:
43
Covenant Description Covenant Requirement Status at Dec. 31, 2002
- ------------------------------------------ ------------------------- --------------------------
Alliant Energy:
Consolidated debt-to-capital ratio * Less than 65% 59.6%
Consolidated net worth * At least $1.4 billion $1.8 billion
EBITDA interest coverage ratio * At least 2.5x 3.6x
IP&L debt-to-capital ratio Less than 58% 47.9%
WP&L debt-to-capital ratio Less than 58% 40.7%
* In compliance with the agreements, results of discontinued operations have
been included in the covenant calculations.
The debt component of the capital ratios includes long- and short-term debt
(excluding trade payables), capital lease obligations, letters of credit and
guarantees of the foregoing and unfunded vested benefits under pension
plans. The equity component excludes accumulated other comprehensive income
(loss). Alliant Energy is pursuing making the
necessary regulatory filings requesting an increase in this limitation. Under
WUHCA, there historically was an asset cap provision that had generally
limited non-utility assets inalso subject to a utility holding company to 25% of utility
assets. This provision limitedPUHCA requirement whereby
Alliant Energy's abilitycommon equity balance must be at least 30% of its total
consolidated capitalization, including short-term debt. Alliant Energy's
common equity ratio as of Dec. 31, 2002, as computed under such requirement,
was 35.8%.
In December 2002, Resources secured a 364-day $250 million standby credit
facility. Designed as a bridge to make additional
investmentsenhance Alliant Energy's short-term
liquidity position until it receives the expected proceeds from the assets it
plans to sell in its non-utility businesses. The Reliability 2000 legislation
that was enacted in Wisconsin in 1999 provides Wisconsin utility holding
companies significant asset cap relief once they meet certain conditions
relating to2003, the formation of a transmission company, as discussed in the
"Utility Industry Outlook" section. Alliant Energy believes it has met all
such conditions and is now operatingavailability under the new law. Under the provisions
of the new law, assets related to the provision of various energy-related,
environmental engineering and telecommunications services arefacility is reduced by
amounts realized on such asset sales. At Dec. 31, 2002, there were no
longer
includedborrowings outstanding under this credit facility. Also in the calculation of either utility or non-utility assets.
Alliant Energy expects to pursue various potential business development
opportunities, including international as well as domestic investments, and is
devoting resources to such efforts. Foreign investments may carryDecember 2002,
Whiting finalized a higher
level of risk than Alliant Energy's traditional domestic utility investments
or Resources' domestic investments. Such risks could include foreign
government actions, foreign economic and currency risks and others. It is
anticipated that Alliant Energysecured revolving $200 million credit facility which will
strive to select investments where the
international and other risks are both understood and manageable.mature in December 2005. At DecemberDec. 31, 1999, Resources2002, Whiting had approximately $198$185 million of
investments in foreign
entities. At December 31, 1999, IESU, WP&L and IPC did not have any foreign
investments.
On February 1, 2000, Resources completed a private placement of exchangeable
senior notes due 2030, which were issued in the original aggregate principal
amount of $402.5 million. The exchangeable senior notes haveborrowings outstanding under this facility at an interest rate of 7.25% through February 15, 2003 and 2.5% thereafter. The exchangeable
senior notes are exchangeable for cash based upon a percentage of the value of
McLeod Class A Common Stock. Alliant Energy has agreed to fully and
unconditionally guarantee the payment of principal and interest on the
exchangeable senior notes. The proceeds will be used to repay commercial
paper issued to capitalize Resources' wholly-owned exempt telecommunications
company and, indirectly through an internal transfer of assets, to assist3.63%,
which was included in funding the recent investment in Brazil, as well as for general corporate
purposes.
The exchangeable senior notes may have certain accounting consequences for
Alliant Energy that may affect reported earnings. As disclosed in Note 10 of
the "Notes to Consolidated Financial Statements," Alliant Energy records its
investment in McLeod stock at its fair value, with changes in fair value, net
of income tax effects, recorded directly to the common equity section of the
Consolidated Balance Sheets as a component of "Accumulated other comprehensive
income." Any such changes in fair value are reflected in current earnings
only at the time they are actually realized through a sale. However,
applicable accounting rules require Alliant Energy to record in its
Consolidated Statements of Income any increase or decrease in the settlement
value (i.e., the amount payable upon maturity) of the exchangeable senior
notes that results from changes in the market value of McLeod stock. The
settlement value of the exchangeable senior notes at any point in time is
generally (assuming no deferrals of interest payments) the higher of: (a) the
original principal amount plus accrued interest less cash dividends or other
distributions on the McLeod stock; or (b) the current market value of the
shares of McLeod stock attributable to the exchangeable senior notes.
Accordingly, any increase or decrease in the settlement value of the
exchangeable senior notes will be recorded as subtractions from, or additions
to, Alliant Energy's reported net income.
42
The market price of the McLeod stock has been volatile and has fluctuated over
a wide range since the initial public offering. A significant increase in the
market value of McLeod stock would significantly decrease Alliant Energy's
reported net income. Similarly, a significant decrease in the market value of
McLeod stock would significantly increase Alliant Energy's reported net
income, subject to the condition that the settlement value of the exchangeable
senior notes will not be reduced below the original principal amount plus
accrued interest less cash dividends or other distributions on the McLeod
stock. These increases and decreases in reported investment income in Alliant
Energy's Consolidated Statements of Income will be non-cash in nature and will
be reflected"Long-term debt" on Alliant Energy's Consolidated
Balance SheetsSheet.
Information regarding commercial paper and bank facility borrowings at Dec.
31, 2002 was as increases and
decreasesfollows (dollars in long-term debt. Alliant Energy would recognizemillions):
Alliant Energy (Parent) WP&L
-------------------------- -------------
Commercial paper outstanding $135.5 $60.0
Weighted average maturity
of commercial paper 2 days 34 days
Discount rates on commercial paper 1.95% 1.6%
Bank facility borrowings $85.0 --
Interest rates on bank facility borrowings 2.3-2.4% --
As a non-cash charge
to net income of approximately $3.3 million for each $1/share increase in
McLeod's stock price above $77.23/share as relates to the 5.2 million shares
of McLeod stock attributable to the exchangeable senior notes. This impact on
earnings will be mitigated somewhat once Alliant Energy adopts SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities," as discussed
further below.
Alliant Energy may choose to adopt SFAS 133 early. See "Other Matters -
Accounting Pronouncements" for additional information relating to SFAS 133.
SFAS 133 will require Alliant Energy to split the valueresult of the exchangeable
senior notes into a debt component and a derivative component. Any changes in
the fair value of the derivative component subsequent to the SFAS 133 adoption
date will be reflected as an increase or decrease in Alliant Energy's reported
net income. At the date of initial adoption, SFAS 133 provides Alliant Energy
a one-time ability to transfer anyMoody's downgrade of Alliant Energy's available-for-sale
securities, including a portion of its shares of McLeod stock,commercial paper in
January 2003 to the trading
category. At the date of any such transfer from available-for-sale to
trading, Alliant Energy would recognize in income the appreciation in the
shares transferred. Although Alliant Energy is not required to hold a number
of shares of McLeod stock equal to the number of exchangeable senior notes
outstanding, if Alliant Energy does so and if Alliant Energy elects to make
this transfer from available-for-sale to trading, changes subsequent to the
SFAS 133 adoption date in the fair value of the shares of McLeod stock so
transferred will be reflected as an increase or decrease in Alliant Energy's
reported net income. Changes in the market value of the McLeod stock are
expected to at least partially offset changes in the fair value of the
derivative component of the exchangeable senior notes; however, there may be
periods with significant non-cash increases or decreases to Alliant Energy's
net income pertaining to the exchangeable senior notes and the related shares
of McLeod stock.
On January 25, 2000, Resources acquired a stake in four Brazilian electric
utilities serving more than 820,000 customers for a total investment of
approximately $347 million. As part of this investment, Resources acquired a
49.1% ownership interest in Companhia Forca e Luz Cataguazes-Leopoldina
(Cataguazes), an electric utility. Cataguazes owns a majority stake in CENF,
another electric utility company, as well as a majority interest in Energisa
S.A., an energy development company. As part of the same investment,
Resources directly acquired a 45.6% interest in Energisa S.A. itself, which
holds majority stakes in two regulated utilities (Energipe and Celb). As part
owner of Cataguazes, Resources will hold both indirect and direct interests in
Energisa S.A. The investment is anticipated to dilute Alliant Energy's
earnings per share by approximately 3% in 2000, with positive contributions to
earnings expected in subsequent years. Resources, through its wholly owned
subsidiary, International, initially financed the Brazil investment with cash
made available through the internal transfer of existing non-regulated
corporate assets. Resources has entered into a shareholders agreement with
the Brazilian companies, which would allow it to name two directors to the
boards of each company and its subsidiaries. The agreement will also provide
Resources with a role in selecting each company's management team, along with
voting rights relating to critical issues at the Brazilian companies and their
subsidiaries. The investment will be accounted for under the equity method.
Alliant Energy entered into an agreement in November 1998, as amended, with
McLeod wherebyP-3, Alliant Energy's ability to sell the McLeod stock is subject to
various restrictions. The agreement provides that until December 31, 2001,
Alliant Energy and its affiliates generally may not sell or otherwise dispose
of shares of McLeod stock beneficially owned by Alliant Energy and its
affiliates, other than to a subsidiary of Alliant Energy, without the prior
written consent of the Board of Directors of McLeod. However, the amended
agreement provides that the Board of Directors of McLeod may permit Alliant
Energy and its affiliates to sell a specified number of shares of McLeod stock
per quarter during specified time periods. In addition, if Alliant Energy and
its affiliates are not provided the opportunity to sell, on an annual basis,
an aggregate number of shares of McLeod stock equal to 15% of the shares of
McLeod stock owned by Alliant Energy and its affiliates as of December 31,
1998, then Alliant Energy may terminate the amended November 1998 agreement.
43
In the first quarter of 2000, the Alliant Energy Board of Directors approved a
draft Agreement and Plan of Merger to merge IESU and IPC. The new company
will be named Interstate Power and Light Company and it is anticipated the
merger will be completed by late 2000 or early 2001. Alliant Energy expects
to be able to achieve cost savings and enhanced customer service from the
merger.
Financing and Capital Structure
Access to the long-term and short-term capital and credit markets, and costs
of external financing, are dependent on creditworthiness. The debt ratings of
Alliant Energy and certain subsidiaries by Moody's and Standard & Poor's are
as follows:
Moody's Standard & Poor's
----------------- -------------------
IESU - Secured long-term debt A2 A+
- Unsecured long-term debt A3 A
WP&L - Secured long-term debt Aa2 AA
- Unsecured long-term debt Aa3 A+
IPC - Secured long-term debt A1 A+
Resources - Commercial paper (a) P1 A1
- Unsecured long-term debt (a) A3 A
Alliant Energy - Commercial paper (b) P1 A1
(a) Resources' debt is fully and unconditionally guaranteed by Alliant Energy.
(b) IESU, WP&L and IPC participate in a utility money pool that is funded,
as needed, through the issuance ofissue commercial paper by Alliant Energy.
Interest expense and other fees are allocated based on borrowing amounts.
The PSCW has restricted WP&L from lending money to non-utility affiliates
and non-Wisconsin utilities. As a result, WP&L is prohibited from lending
money toat
the utility money pool but is able to borrow money from the
utility money pool.
On November 9, 1999, Resources issued $250 million of 7-3/8% senior notes due
2009 in a private placement. The notes are fully and unconditionally
guaranteed by Alliant Energy. The net proceeds from the debt offering have
been used to repay outstanding commercial paper, as it becomes due, thatparent company level has been backed by Resources' 3-Year Credit Agreement.
Other than periodic sinking fund requirements, which will not require
additional cash expenditures, the following long-term debt (in millions) will
mature prior to December 31, 2004:
IESU WP&L Alliant Energy-Parent Resources IPC Total
- ---------------------------------------------------------------------------
$137.4 $63.9 $24.0 $12.6 $1.0 $238.9
Depending upon market conditions, it is currently anticipated that a majority
of the maturing debt will be refinanced with the issuance of long-term
securities.
On August 24, 1999, WP&L filed an application with the PSCW for authority to
issue up to $100 million of debentures for the purpose of refinancing existing
debt. Approval was granted in February 2000 and the senior unsecured
debentures were issued in March 2000 at a fixed interest rate of 7-5/8%, due
2010. The amount of short-term borrowings authorized by the PSCW will be
reduced, by the same $100 million.
On November 25, 1998, IESU and IPC received authority from the SEC under PUHCA
to issue $200 million and $80 million of long-term debt securities,
respectively. The companies continually evaluate their future financing needs
and will make any necessary regulatory filings as needed.
The various charter provisions of the entities identified below authorize and
limit the aggregate amount of additional shares of Cumulative Preferred Stock
and Cumulative Preference Stock that may be issued. At December 31, 1999, the
companies could have issued the following additional shares of Cumulative
Preferred or Preference Stock:
IESU WP&L IPC
-----------------------------------
Cumulative Preferred 100,000 2,700,775 1,238,619
Cumulative Preference 700,000 -- 2,000,000
44
For interim financing, IESU, WP&L and IPC were authorized by the applicable
federal or state regulatory agency to issue short-term debt at December 31,
1999 as follows (in millions):
IESU WP&L IPC
-----------------------------
Regulatory authorization $150 $128 $50
Short-term debt outstanding - money pool $57 $126 $39
At December 31, 1999, there was no short-term debt outstanding with external
parties at the utility subsidiaries.requiring greater reliance on bank
lines. In addition to the $222 million of
commercial paper Alliant Energy issued to fund the utility money pool and $139
million of commercial paper at Resources, Alliant Energy had an additional $64
million of short-term debt outstanding at December 31, 1999. In addition to
providing for ongoingfunding working capital needs, thisthe availability of
short-term financing provides the companies flexibility in the issuance of
long-term securities. The level of short-term borrowing fluctuates based on
seasonal corporate needs, the timing of long-term financing and capital
market conditions. ToAt Dec. 31, 2002, IP&L and WP&L were authorized by the
applicable federal or state regulatory agencies to issue short-term debt of
$180 million and $240 million, respectively. The $240 million borrowing
authority for WP&L includes $85 million for general corporate purposes, an
additional $100 million should WP&L no longer sell its utility receivables
and an additional $55 million should WP&L need to repurchase its variable
rate demand bonds.
In December 2002, Resources issued $300 million of 9.75% senior notes due
2013 in a private placement. The notes are unconditionally guaranteed by
Alliant Energy. Resources used the proceeds to repay short-term debt.
At Dec. 31, 2002, Alliant Energy, IP&L and WP&L had $783 million, $175
million and $255 million, respectively, of long-term debt that will mature
prior to Dec. 31, 2007. The $783 million at Alliant Energy represents
long-term debt maturities of $47 million in 2003, $106 million in 2004, $337
million in 2005, $68 million in 2006 and $225 million in 2007. Depending
upon market conditions, it is currently anticipated that a majority of the
maturing debt will be refinanced with the issuance of long-term securities.
44
Refer to "Construction and Acquisition Expenditures" for information
regarding a credit facility Resources entered into in February 2003 relating
to the purchase of a non-regulated power plant. Refer to Note 8 of the
"Notes to Consolidated Financial Statements" for additional
information on short- and long-term debt.
Credit Ratings and Balance Sheet - Access to the long- and short-term capital
- --------------------------------
and credit markets, and costs of external financing, are dependent on
creditworthiness. Alliant Energy is committed to taking the necessary steps
required to maintain flexibility in its capital structurestrong credit ratings and to take
advantagestrengthen its balance
sheet. Refer to "Strategic Actions" for a discussion of favorable short-term rates, IESUspecific actions
being taken in this regard. Although Alliant Energy believes such actions
will enable it to strengthen its balance sheet and maintain strong credit
ratings, no assurance can be given that it will be able to maintain its
existing credit ratings. If Alliant Energy's credit ratings are downgraded
in the future, then Alliant Energy's borrowing costs may increase and its
access to capital markets may be limited. If access to capital markets
becomes significantly constrained, then Alliant Energy's results of
operations and financial condition could be materially adversely affected.
In December 2002 and January 2003, Standard & Poor's and Moody's,
respectively, issued revised credit ratings as follows (long-term debt
ratings only apply to senior debt):
Standard & Poor's Moody's
--------------------- --------------
IP&L Secured long-term debt A- A3
Unsecured long-term debt BBB Baa1
Commercial paper A-2 P-2
Corporate BBB+ Baa1
WP&L Secured long-term debt A A1
Unsecured long-term debt BBB+ A2
Commercial paper A-2 P-1
Corporate A- A2
Resources (a) Unsecured long-term debt BBB Baa3
Commercial paper A-2 P-3
Corporate BBB+ Baa3
Alliant Energy Unsecured long-term debt BBB Not rated
Commercial paper A-2 P-3
Corporate BBB+ Not rated
All Entities Outlook Negative Stable
(a) Resources' debt is fully and unconditionally guaranteed by Alliant
Energy.
Ratings Triggers - The long-term debt of Alliant Energy and its subsidiaries
- ----------------
is not subject to any repayment requirements as a result of credit rating
downgrades or so-called "ratings triggers." However, certain lease
agreements do contain such ratings triggers. The threshold for these
triggers varies among the applicable leases. If the payments were
accelerated under all the affected leases it would result in accelerated
payments of approximately $45 million. In addition, the amount of proceeds
available to IP&L and WP&L from their sale of utility customer accounts
receivable programs could be reduced in the aggregate by approximately $20
million in the event of certain credit rating downgrades at the Alliant
Energy parent company level. Alliant Energy and its subsidiaries are also
parties to various agreements, including purchased-power agreements, fuel
contracts and corporate guarantees that may be deemed to be in default in the
event of certain credit rating downgrades. In the event of such a default,
Alliant Energy or its subsidiaries may be able to cure the default in a
number of ways, including posting letters of credit equal to the amount of
the exposure, unwinding the contract or paying the obligation.
Sale of Accounts Receivable - Refer to Note 4 of Alliant Energy's "Notes to
- ---------------------------
Consolidated Financial Statements" for information on Alliant Energy's sale
of accounts receivable program.
Off-Balance Sheet Arrangements - Alliant Energy utilizes synthetic leases to
- ------------------------------
finance its corporate headquarters, corporate aircraft, certain utility
railcars and a utility radio dispatch system. Synthetic leases provide
favorable financing rates to Alliant Energy while allowing it to maintain
operating control of its leased assets. Several of Alliant Energy's
synthetic leases involve the use of unconsolidated structured finance or
variable interest entities. Alliant Energy has guarantees outstanding
related to the residual value of these synthetic leases. Alliant Energy does
not currently anticipate entering into any additional synthetic leases.
Alliant Energy also uses variable interest entities for its utility sale of
accounts receivable program whereby IP&L and WP&L use proceeds from the sale
of the accounts receivable and unbilled revenues to maintain flexibility in
their capital structures, take advantage of favorable short-term interest
rates and finance a portion of their long-term cash needs. Alliant Energy anticipates thatThe sale of
45
accounts receivables generates a significant amount of short-term debt
will continue to be available at reasonable costs due to current ratings by
independent utility analysts and credit rating services.
In December 1999, Alliant Energy, IESU, WPfinancing
for IP&L and IPC filed an application with
the SEC for approval of a combined accounts receivable program whereby each
utility will sell their respective receivables through wholly-owned special
purpose entities to an affiliatedWP&L. If this financing entity, which in turn will sell
the receivables to an outside investor. The new program would replace the
existing programs for IESUalternative were not available, IP&L
and WP&L anticipate they would have enough short-term borrowing capacity to
compensate. Refer to "Ratings Triggers" for the impact of credit rating
downgrades on Alliant Energy and would functionits subsidiaries related to these synthetic
leases and accounts receivable sales program.
Beginning in the samethird quarter of 2003, under FIN 46 it is reasonably
possible that Alliant Energy could be considered the primary beneficiary of
certain variable interest entities utilized for its synthetic lease
financings and receivable sales program and could be required to consolidate
the operating results and associated assets and liabilities of the variable
interest entities in most
respects. Approvalsits financial statements. Alliant Energy is in the
process of evaluating the potential impacts of FIN 46. Alliant Energy is
also currently evaluating the structure of its synthetic leases and
receivable sales program to determine if these structures can be modified to
qualify for off-balance sheet treatment under FIN 46.
Contractual Obligations - Alliant Energy's long-term contractual cash
- -----------------------
obligations as of Dec. 31, 2002 were as follows (in millions):
2003 2004 2005 2006 2007 Thereafter Total
-------- --------- ------- --------- ------- ------------ ---------
Long-term debt (Note 8) and
capital lease obligations (Note 3) $62 $122 $347 $104 $227 $2,303 $3,165
Operating leases (Note 3) 45 76 95 99 123 384 822
Purchase obligations (Note 11(b)) 286 110 68 30 18 27 539
-------- --------- ------- --------- ------- ------------ ---------
$393 $308 $510 $233 $368 $2,714 $4,526
======== ========= ======= ========= ======= ============ =========
IP&L's long-term contractual cash obligations as of Dec. 31, 2002 were as follows (in millions):
2003 2004 2005 2006 2007 Thereafter Total
-------- --------- ------- --------- ------- ------------ ---------
Long-term debt (Note 8) and
capital lease obligations (Note 3) $20 $16 $13 $96 $109 $663 $917
Operating leases (Note 3) 9 7 10 3 3 33 65
Purchase obligations (Note 11(b)) 99 25 14 6 4 -- 148
-------- --------- ------- --------- ------- ------------ ---------
$128 $48 $37 $105 $116 $696 $1,130
======== ========= ======= ========= ======= ============ =========
WP&L's long-term contractual cash obligations as of Dec. 31, 2002 were as follows (in millions):
2003 2004 2005 2006 2007 Thereafter Total
-------- --------- ------- --------- ------- ------------ ---------
Long-term debt (Note 8) $-- $62 $88 $-- $105 $269 $524
Operating leases (Note 3) 27 61 75 76 76 335 650
Purchase obligations (Note 11(b)) 86 47 26 15 15 27 216
-------- --------- ------- --------- ------- ------------ ---------
$113 $170 $189 $91 $196 $631 $1,390
======== ========= ======= ========= ======= ============ =========
At Dec. 31, 2002, long-term debt and capital lease obligations as noted in
the previous tables were included on the respective Consolidated Balance
Sheets. In addition, at Dec. 31, 2002, there were various other long-term
liabilities and deferred credits included on the respective Consolidated
Balance Sheets that, due to the nature of the liabilities, the timing of
payments cannot be estimated and are therefore excluded from the SECtables.
Operating leases and purchase obligations are amounts committed under
contract which were not recorded on the necessary state commissions are
expectedrespective Consolidated Balance
Sheets at Dec. 31, 2002, in accordance with GAAP. Purchase obligations
represent normal business contracts used to ensure adequate purchased-power,
coal and natural gas supplies and to minimize exposure to market price
fluctuations. In connection with Alliant Energy's, IP&L's and WP&L's
construction and acquisition programs, they also enter into commitments
related to such programs on an ongoing basis.
Sales of Non-strategic Assets - In the secondthird quarter of 2000.
Resources2002, Alliant Energy
- -----------------------------
completed the sale of its 50% ownership interest in its Cargill-Alliant
electricity-trading joint venture to Cargill. The sale proceeds were
approximately $19.3 million, the book value of Alliant Energy's share of the
joint venture. As noted earlier, the strategic actions currently being
executed by Alliant Energy will focus on additional potential sales of
non-strategic assets, among other items. Refer to "Strategic Actions,"
"Other Matters - Other Future Considerations" and Note 16 of Alliant Energy's
"Notes to Consolidated Financial Statements" for additional discussion on the
potential impact of future asset sales.
Credit Risk - Credit risk is inherent in Alliant Energy's operations and
- -----------
relates to the risk of loss resulting from non-performance of contractual
obligations by a partycounterparty. Alliant Energy maintains credit risk
46
oversight and sets limits and policies with regards to a revolving 3-Year Credit Agreement with various
banking institutions. The agreement extends through October 2000, with
one-year extensions available upon agreementits counterparties,
which management believes minimizes its overall credit risk exposure.
However, there is no assurance that such policies will protect Alliant Energy
against all losses from non-performance by counterparties.
Environmental - Alliant Energy's pollution abatement programs are subject to
- -------------
continuing review and are periodically revised due to changes in
environmental regulations, construction plans and escalation of construction
costs. While management cannot precisely forecast the parties. Unused borrowing
availability under this agreement iseffect of future
environmental regulations on operations, it has taken steps to anticipate the
future while also usedmeeting the requirements of current environmental
regulations.
Alliant Energy's facilities are subject to support Resources'
commercial paper program. A combined maximumstate and federal requirements of
$450 million of borrowings
under this agreement and the commercial paper program may be outstanding at
any one time. Interest rates and maturities are set at the time of
borrowing. The rates are based upon quoted market prices and the maturities
are less than one year. At December 31, 1999, Resources had $139 million of
commercial paper outstanding and backed by its 3-Year Credit Agreement with
discount rates ranging from 5.90%-6.32%. Resources intends to continue
issuing commercial paper backed by this facility, and no conditions existed at
December 31, 1999, that would prevent the issuance of commercial paper or
direct borrowings on its bank lines.CAA, including meeting ambient air quality standards. As a result of a
new rate-of-progress rule developed by the Wisconsin DNR, and based on
existing technology, Alliant Energy had been
classifying this debt as long-term. However, since this agreement expiresestimates the total aggregate capital
investments necessary by WP&L to comply with the new rules will be
approximately $19 million in October 2000, beginning in October 1999 this debt (including commercial paper
backed by this facility) was classified as short-term.
In October 1999, Resources extended its revolving 364-Day Credit Agreement
with various banking institutions2003 through October 2000. The unborrowed
portion of this agreement2007. Alliant Energy is also
usedcurrently addressing various other potential federal and state environmental
rulemakings and activities, including: 1) proposed revisions to support Resources' commercial paper
program. A combined maximumthe Wisconsin
Administrative Code concerning the amount of $150 millionheat that WP&L's generating
stations can discharge into Wisconsin waters which could have a significant
impact on WP&L's operation of borrowings under this
agreement and commercial paper backed by this facilityits Wisconsin generating facilities; 2)
potential new rules that may be outstanding at
any one time. Interest rates and maturities are set atpursued by the time of
borrowing. The rates are based upon quoted market pricesEPA and the maturities
are less than one year. There were no borrowings outstanding under this
facility at December 31, 1999 and no conditions existed that would preventstates in the
issuance of commercial paper or direct borrowings under this agreement.
In addition to the aforementioned borrowing capability under Resources' credit
agreements,
Alliant Energy has $250 million of committed bank lines of credit,
of which none was utilized at December 31, 1999, available for direct
borrowing orservice territory related to support commercial paper. Commitment fees are paid to
maintain these lines and there are no conditions which restrictvarious air emissions; 3) the
unused
lines of credit. From time to time, Alliant Energy may borrow from banks and
other financial institutions on uncommitted "as-offered" credit lines in lieu
of commercial paper, andmultiple requests WP&L has agreements with several financial institutions
for such borrowings. There are no commitment fees associated with these
agreements and there were no borrowings outstanding under these agreements at
December 31, 1999.
45
Alliant Energy made a filing with the SEC in February 1999 under PUHCA to
provide Alliant Energy with, among other things, broad authorization over the
next three years to issue stock and debt, provide guarantees, acquire
energy-related assets and enter into interest rate hedging transactions.
Approval of the filing was received from the SEC in August 1999.
GivenEPA related to the above financing flexibility, including Alliant Energy's accesshistorical
operation of WP&L's major coal-fired generating units, which requests have
been the precursor to both the debtpenalties and equity securities markets, management believes it has the
necessary financing capabilities in place to adequately finance itsadditional capital requirements in some
cases involving similar requests to other electric generating facilities; 4)
the New Source Review reforms published by the EPA in December 2002; 5)
several other legislative and regulatory proposals regarding the control of
emissions of air pollutants and greenhouse gases from a variety of sources,
including generating facilities; and 6) the July 2002 request from the
Wisconsin DNR that WP&L submit a written plan for facility closure of the
foreseeable future.
Capital Requirements
GeneralRock River Generating Station landfill and clean-up of its support ponds and
all areas where coal combustion waste is present. Alliant Energy cannot
presently predict the final outcome of these proposals or actions, but
believes that required capital investments and/or modifications resulting
from them could be significant. Alliant Energy believes that prudent
expenses incurred by IP&L and WP&L likely would be recovered in rates from
its customers.
Refer to Note 11(e) of the "Notes to Consolidated Financial
Statements" for further discussion of environmental matters.
Construction and Acquisition Expenditures - Capital expenditure and investmentexpenditures, investments
- -----------------------------------------
and financing plans are continually reviewed, approved and updated as part of
Alliant Energy's ongoing strategic planning and annual budgeting processes.
In addition, material capital expenditures and investments are subject - -------
to continuala
rigorous cross-functional review prior to approval. Changes in Alliant
Energy's anticipated construction and change. The capital expenditure and investment
programsacquisition expenditures may be revised significantly asresult from
a resultnumber of many considerations,reasons including changes in economic conditions, variations in actual sales and load
growth compared to forecasts,regulatory requirements, of environmental, nuclear and other
regulatory authorities, acquisition and business combination opportunities,
the availability of alternate energy and purchased-power sources, the
ability to obtain adequate and timely rate relief, escalationsthe level of Alliant
Energy's profitability, Alliant Energy's desire to maintain strong credit
ratings and reasonable capitalization ratios, variations in construction costssales, changing
market conditions and conservation and energy efficiency programs.
Construction and acquisition expenditures fornew opportunities. As noted in "Strategic Actions,"
Alliant Energy for the year
ended December 31, 1999 and 1998 were $479 million and $372 million,
respectively. Alliant Energy'srecently reduced its anticipated construction and acquisition
expenditure levels in order to strengthen its balance sheet. Alliant Energy
believes its capital control processes adequately reduce the risks associated
with large capital expenditures for 2000 are estimated to be approximately $939 million,
consisting of approximately $484 million for energy-related international
investments, $319 million in its utility operations and $136 million for new
business development initiatives at Resources. The significant increase ininvestments.
Alliant Energy currently anticipates construction and acquisition
expenditures as follows (in millions):
2003 2004-2005
------------- -------------
Domestic utility:
IP&L utility infrastructure and reliability investments $230 $560
IP&L Power Iowa program* 220 80
WP&L utility infrastructure and reliability investments 160 410
Non-regulated domestic generation 130 10
Other non-regulated business development 80 70
------------- -------------
Total from continuing operations 820 1,130
Discontinued operations 80 --
------------- -------------
Total $900 $1,130
============= =============
* Excludes approximately $109 million in international investments relates
to Resources' recent investment in Brazil. See "Liquidity2003 for potential purchase of
turbines and Capital
Resources - Future Considerations" for informationrelated equipment from affiliates.
47
Alliant Energy has not entered into contractual commitments relating to the
Brazil
investment.majority of its anticipated capital expenditures. As a result, Alliant
Energy's anticipated utility construction and acquisition
expenditures for 2000 is made up of 46% for electric transmission and
distribution, 23% for electric generation, 17% for information technology and
14% for miscellaneous electric, gas, water and steam projects. TheEnergy does have discretion as to the eventual level of 2000 domesticcapital expenditures
incurred and international investments could vary significantly from theit closely monitors and updates such estimates noted here depending on actual investment opportunities, timing of
the opportunities and the receipt of regulatory approvals to exceed
limitations in place under PUHCA. It is expected that Alliant Energy will
spend approximately $1.4 billionan ongoing
basis based on utility construction and acquisition
expenditures during 2001-2004, including expenditures to comply with NOx
emissions reductions in Wisconsin as discussed in "Other Matters -
Environmental." It is expected that Resources will invest in energy products
and services in domestic and international markets, industrial services
initiativesnumerous economic and other strategic initiatives during 2001-2004.
IESU's construction and acquisition expendituresfactors.
In September 2002, the IUB approved a settlement agreement establishing
advance rate making principles for the years ended December
31, 1999 and 1998 were $107 million and $115 million, respectively. IESU's
anticipated construction and acquisition expenditures for 2000 are estimatedproposed 500 MW natural gas-fired
plant IP&L plans to be approximately $115 million, of which 45% is for electric transmission
and distribution, 26% for electric generation, 15% for information technology
and the remaining 14% represents miscellaneous electric, gas, steam and
general expenditures. IESU's levels of utility construction and acquisition
expenditures are projected to be $127 millionconstruct in 2001, $117 million in 2002,
$118 million in 2003 and $123 million in 2004.
WP&L's construction and acquisition expenditures for the years ended December
31, 1999 and 1998 were $132 million and $117 million, respectively. WP&L's
anticipated construction and acquisition expenditures for 2000 are estimated
to be approximately $143 million, of which 45% is for electric transmission
and distribution, 25% for electric generation, 15% for information technology
and the remaining 15% represents miscellaneous electric, gas, water and
general expenditures. WP&L's construction and acquisition expenditures are
projected to be $166 million in 2001, $181 million in 2002, $192 million in
2003 and $136 million in 2004, which include expenditures to comply with NOx
emissions reductions as discussed in "Other Matters - Environmental."
Alliant Energy anticipates financing utility construction expenditures during
2000-2004 through internally generated funds supplemented, when required, by
outside financing. Funding of Resources' construction and acquisition
expenditures over that same period of time is expected to be completed with a
combination of external financings, sales of investments and internally
generated funds.
46
Nuclear Facilities - Alliant Energy owns interests in two nuclear facilities,
- --------------------
Kewaunee and DAEC. Kewaunee, a 532 MW pressurized water reactor plant, is
operated by WPSC and is jointly owned by WPSC (41.2%), WP&L (41.0%), and MG&E
(17.8%). The Kewaunee operating license expires in 2013. DAEC, a 535 MW
boiling water reactor plant, is operated by IESU which has a 70% ownership
interest in the plant. The DAEC operating license expires in 2014.
On April 7, 1998, the PSCW approved WPSC's application for replacement of the
two steam generators at Kewaunee. The total cost of replacing the steam
generators will be approximately $90.7 million, with WP&L's share of the cost
being approximately $37.2 million. The replacement work originally planned
for the spring of 2000 is now scheduled for the fall of 2001 and will take
approximately 60 days. The delay is attributable to the inability of the
steam generator manufacturer to meet the spring 2000 delivery schedule.
Delays in meeting the delivery schedule did not allow for steam generator
replacement to occur prior to the start of the summer weather in 2000.
Therefore, the decision was made to store the steam generators after they are
received and wait until the next scheduled refueling outage in the fall of
2001. It is anticipated that the delay will not adversely impact the
reliability of Kewaunee in the interim. Plans to shutdown the plant for a
spring 2000 refueling remain unchanged.
On July 2, 1998, the PSCW approved an agreement between the owners of Kewaunee
which provides for WPSC to assume the 17.8% Kewaunee ownership share currently
held by MG&E prior to work beginning on the replacement of steam generators.
On September 29, 1998, WPSC and MG&E finalized an arrangement in which WPSC
will acquire MG&E's 17.8% share of Kewaunee. This agreement, the closing of
which is contingent upon regulatory approval and the steam generator
replacement in the fall of 2001, will give WPSC 59.0% ownership in Kewaunee.
After the change in ownership, WPSC and WP&L will be responsible for the
decommissioning of the plant. WPSC and WP&L are discussing revisions to the
joint power supply agreement which will govern operation of the plant after
the ownership change takes place. Prior to the July 2, 1998 PSCW decision,
the PSCW had directed the owners of Kewaunee to record depreciation and
decommissioning cost levels based on an expected plant end-of-life of 2002
versus a license end-of-life of 2013. This was prompted by the uncertainty
regarding the expected useful life of the plant without steam generator
replacement. This level of depreciation will remain in effect until the steam
generator replacement is completed at which time the entire plant will be
depreciated over 8.5 years using an accelerated method.
In February 1999, Alliant Energy, NSP, WPSC and WEPCO announced the formation
of the NMC to sustain long-term safety, optimize reliability and improve the
operational performance of their nuclear generating plants. Combined, the NMC
members operate seven nuclear generating units at five plants. In October
1999, Alliant Energy received approval from the SEC, under PUHCA, to form
Alliant Energy Nuclear LLC, whose purpose is solely to invest in the NMC.
Such investment has been made and Alliant Energy Nuclear LLC now has a 25%
ownership interest in the NMC. In November 1999, the NMC members applied to
the NRC to allow the NMC to operate the plants owned or co-owned by the four
utilities. Applications to the PSCW, MPUC and the SEC to allow the purchase
of operating services were also made at that time. These approvals are
required if the applicable utilities choose to transfer their operating
license to, and take operating services from, the NMC. As presently proposed,
the NMC would operate the plants, but the utilities would continue to own
their plants, be entitled to energy generated at the plants and retain the
financial obligations for the safe operation, maintenance and decommissioning
of the plants.
For additional information related to Kewaunee and DAEC, see Notes 1, 3, 10,
12 and 13 of the "Notes to Consolidated Financial Statements." Refer to the
"Other Matters - Environmental" section for a discussion of various issues
impacting Alliant Energy's future capital requirements.
Rates and Regulatory Matters
FERC - In November 1997,Mason City, Iowa as part of its merger approval, FERC acceptedPower Iowa
initiative to develop new electric generation capacity in Iowa. The
settlement establishes, among other things, a - ------
proposal by IESU, WPset depreciation period whereby
IP&L is ensured of recovering the estimated $400 million cost of its
investment over 28 years based on a fixed 12.23% return on the common equity
component. In January 2003, the IUB approved IP&L's siting certificate for
the Mason City plant and IPC, which provides for a four-year freeze on
wholesale electric prices beginning withconstruction began. The plant is scheduled to be in
service prior to the effective date2004 summer peak demand.
Given the status of the merger.
In associationcurrent non-regulated generation market, Alliant
Energy's initial investments in this market will focus on facilities with
the merger, IESU, WP&L and IPC entered into a System
Coordination and Operating Agreement which became effective with the
consummation of the merger. The agreement, which has been approved by the
FERC, provides a contractual basis for coordinated planning, construction,
operation and maintenance of the interconnected electric generation and
47
transmission systems of the three utility companies. In addition, the
agreement allows the interconnected system to be operated as a single control
area with off-system capacity sales and purchases made to market excess system
capability or to meet system capability deficiencies. Such sales and
purchasesunderlying long-term purchased-power agreements. While Alliant Energy
believes there are allocated among the three utility companies based on procedures
includedexcellent acquisition opportunities in the agreement. The procedures were approved by both the FERC and
all state regulatory bodies having jurisdiction over these sales.
IESU - In September 1997, IESU agreed with the IUB to provide Iowa customers a
- ----
four-year retail electric and gas price freeze commencing on the effective
date of the merger. The agreement excluded price changes due to
government-mandated programs (such as energy efficiency cost recovery), the
electric fuel adjustment clause and PGA clause and unforeseen dramatic changes
in operations. In addition, the price freeze does not preclude a review by
either the IUB or OCA into whether IESU is exceeding a reasonable return on
common equity. Refer to the "Utility Industry Outlook" section for a
discussion of legislation introduced in Iowa regarding restructuring the
electric utility industry.
In the first quarter of 2000, the OCA requested certain financial information
related to the electric utility operations within the state of Iowa for IESU.
IESU is in the process of preparing responses to the data requests. While
IESU cannot predict the outcome of this process, such data requests could lead
to an effort by the OCA to seek an electric rate reduction for IESU in Iowa.
IESU has received similar requests from the OCA in the past.
Under provisions of the IUB rules, IESU is currently recovering the costsexisting
non-regulated generation market, it
has incurred for its energy efficiency programs. Generally, the costs
incurred through July 1997 are being recovered over various four-year
periods. Statutory changes implemented by the IUB in 1997 allowed IESU to
begin concurrent recovery of its prospective expenditures on August 1, 1997.
The implementation of these changes will gradually eliminate the regulatory
asset that was created under the prior rate making mechanism as these costs
are recovered.
WP&L - In connection with its approval of the merger, the PSCW accepted a WP&L
- ----
proposal to freeze rates for four years commencing on the effective date of
the merger. A re-opening of an investigation into WP&L's rates during the
rate freeze period, for both cost increases and decreases, may occur only for
single events that are not merger-related and have a revenue requirement
impact of $4.5 million or more. In addition, the electric fuel adjustment
clause and PGA clause are not affected by the rate freezes.
In February 2000, the PSCW issued an order allowing WP&L to defer certain
incremental costs it incurs after February 16, 2000 relating to the development
of the ATC.
The retail electric rates are based in part on forecasted fuel and
purchased-power costs. Under PSCW rules, Wisconsin utilities can seek
emergency rate increases if the annual costs are more than 3% higher than the
estimated costs used to establish rates. In March 1998, WP&L requested an
electric rate increase to cover purchased-power and transmission costs that
had increased due to transmission constraints and electric reliability
concerns in the Midwest. Effective July 16, 1998, the PSCW granted a retail
electric rate increase of $14.8 million annually. In November 1998, WP&L
requested an electric rate increase to cover additional increases in
purchased-power and transmission costs. In early March 1999, the PSCW granted
a retail electric rate increase of $14.5 million annually. If WP&L's earnings
exceed its authorized return on equity, the incremental revenues collected
causing the excessive return are subject to refund. In December 1999, WP&L
requested a $26 million retail electric rate increase to reflect higher
purchased power costs and to cover transmission costs that have increased due
to transmission constraints. While the most current request is still pending,
WP&L anticipates receiving an order in the second quarter of 2000.
In May 1998, the PSCW approved the deferral by WP&L of certain costs
associated with its Year 2000 program. In November 1998, WP&L filed for rate
recovery of the Wisconsin retail portion of its Year 2000 costs. In
accordance with the order received from the PSCW, WP&L began deferring its
Year 2000 project costs, other than internal labor and associated overheads.
In November 1999, the PSCW allowed WP&L rate recovery of $6.3 million of its
Year 2000 program expenditures, but it denied rate recovery of the first $4.5
million. These costs were expensed in 1999. The PSCW's decision has been
appealed by certain intervenors in Dane County district court and such appeal
is pending.
48
In January 1999, WP&L made a filing with the PSCW proposing to begin
deferring, on January 1, 1999, all costs associated with the EPA's required
NOx emission reductions. In connection with a statewide docket to investigate
compliance issues associated with the EPA's NOx emission reductions, on March
30, 1999, the PSCW authorized deferral of all non-labor related costs incurred
after March 30, 1999. However, the utilities are not allowed to defer costs
of replacement power associated with NOx compliance. WP&L requested expedited
approval to start construction of NOx reduction investments at several
generating units operated by WP&L and in the third quarter of 1999 received
approval from the PSCW for limited NOx related expenditures at one of its
generating units. WP&L has also requested recovery of all the NOx reduction
costs through a surcharge mechanism. In March 2000, the PSCW issued an order
approving WP&L's NOx compliance plans and granted the recovery of costs
incurred to comply with EPA NOx regulations over ten years using a
straight-line depreciation method. Recovery of such costs will begin with
rate changes after the rate freeze expires. The depreciation lives will be
reviewed every two years. Refer to the "Other Matters - Environmental"
section for a further discussion of the NOx issue.
In rate order UR-110, the PSCW approved new rates effective April 29, 1997.
On average, WP&L's retail electric rates under the new rate order declined by
2.4% and retail gas rates declined by 2.2%.
Refer to "Capital Requirements - Nuclear Facilities" for a discussion of
several PSCW rulings regarding Kewaunee.
IPC - In September 1997, IPC agreed with the IUB to provide Iowa customers a
- ---
four-year retail electric and gas price freeze commencing on the effective
date of the merger. The agreement excluded price changes due to
government-mandated programs (such as energy efficiency cost recovery), the
electric fuel adjustment clause and PGA clause and unforeseen dramatic changes
in operations. In addition, the price freeze does not preclude a review by
either the IUB or OCA into whether IPC is exceeding a reasonable return on
common equity. IPC also agreed with the MPUC and ICC to four-year and
three-year rate freezes, respectively, commencing on the effective date of the
merger. Refer to the "Utility Industry Outlook" section for a discussion of
legislation introduced in Iowa regarding restructuring the electric utility
industry.
IPC is also recovering its energy efficiency costs in Iowa in a similar manner
as IESU and began its concurrent cost recovery in October 1997.
Assuming capture of the merger-related synergies and no significant
legislative or regulatory changes negatively affecting its utility
subsidiaries, Alliant Energy does not expect the merger-related electric and
gas price freezes to have a material adverse effect on its financial condition
or results of operations.
OTHER MATTERS
Year 2000
Alliant Energy had no significant embedded equipment, computer system or other
malfunctions during the critical December 31, 1999 to January 1, 2000 date
rollover or the February 28, 2000 to February 29, 2000 date rollover. Alliant
Energy will continue to monitorbe patient, prudent and
diligent in its pursuit of such opportunities. Consistent with this
approach, in February 2003, Resources announced the purchase of a 309 MW,
non-regulated, natural gas-fired power plant in Wisconsin for any supply chain issues into the second
quarter$109 million,
which Resources financed with a $73 million 8-year secured credit facility,
which is non-recourse to Alliant Energy. At Feb. 28, 2003, Resources had $60
million of 2000.
Alliant Energy's historical Year 2000 project expenditures were as follows
(incremental costs, in millions):
Description Total IESU WP&L Other
- -------------------------------------------- ------------- ----------- ----------- ------------
Costs incurred from 1/1/98 - 12/31/98 $8.7 $4.8 $3.2 $0.7
Costs incurred from 1/1/99 - 12/31/99 18.6 7.6 7.1 3.9
------------- ----------- ----------- ------------
Total $27.3 $12.4 $10.3 $4.6
============= =========== =========== ============
In addition, Alliant Energy estimates it incurred $7borrowings outstanding under this facility, at an interest rate of
approximately 5%, and an $11 million and $3 million in
1999 and 1998, respectively,letter of costs for internal labor and associated
overheads. Alliant Energy does not expectcredit related to incur any significant
incremental costs in 2000 on its Year 2000 readiness program. Refer to
"Liquidity and Capital Resources - Rates and Regulatory Matters" for a discussionpurchased-
power agreement. The entire power output of the filing WP&L made with the PSCW for rate recovery of a
portion of its Year 2000 program costs.
49
Labor Issues
The status of the collective bargaining agreements at each of the utilities at
December 31, 1999 was as follows:
IESU WP&L IPC
----------------------
Number of collective bargaining agreements 6 1 3
Percentage of workforce covered by agreements 61% 93% 83%
The collective bargaining agreements at Alliant Energy cover approximately 51%
of all Alliant Energy employees. In 1999, eight agreements expired and four
of these agreements have been ratified and four are still being negotiated
(three at IPC and one at IESU). The agreements still being negotiated have
been extended and represent 42% of employees coveredfacility is sold under
bargaining
agreements and 22% of total Alliant Energy employees. In 2000, two contracts
expire representing approximately 1% of employees covered under bargaining
agreements and less than 1% of total Alliant Energy employees. Alliant Energy
has not experienced any significant work stoppage problems in the past. While
negotiations are continuing, Alliant Energy is currently unablecontract to predict the
outcome of these negotiations.Milwaukee-based We Energies through June 2008.
OTHER MATTERS
Market Risk Sensitive Instruments and Positions - Alliant Energy's primary
- -----------------------------------------------
market risk exposures are associated with interest rates, commodity prices,
equity prices and currency exchange rates. Alliant Energy has risk
management policies to monitor and assist in controlling these market risks
and uses derivative instruments to manage some of the exposures.
Interest Rate Risk - Alliant Energy is exposed to risk resulting from changes
- ------------------
in interest rates as a result of its issuance of variable-rate debt.debt, utility
customer accounts receivable sale program and variable-rate leasing
agreements. Alliant Energy manages its interest rate risk by limiting its
variable interest rate exposure and by continuously monitoring the effects of
market changes inon interest rates. Alliant Energy has also historically useduses interest rate
swap and interest rate forward agreements to assist in the management of its
interest exposure. If variable interest rates were to average 1% higher
(lower) in 2000 than in 1999, interest expense and pre-tax earnings would
increase (decrease) by approximately $5.1 million. Comparatively, if variable
interest rates had averaged 1% higher (lower) in 1999 than in 1998, interest
expense and pre-tax earnings would have increased (decreased) by approximately
$4.5 million. These amounts were determined by considering the impact of a
hypothetical 1% increase (decrease) in interest rates on the variable-rate
debt and related derivative instruments held by Alliant Energy as of December
31, 1999 and 1998. In the event of significant interest rate fluctuations,
management would take actions to minimize the effect of such changes on
Alliant Energy's results of operations. However, due to the uncertainty of
the specific actions that would be takenoperations and their possible effects, the
sensitivity analysis assumesfinancial condition. Assuming no
change in Alliant Energy's, IP&L's and WP&L's consolidated financial
structure.structure, if variable interest rates were to average 100 basis points higher
(lower) in 2003 than in 2002, interest expense and pre-tax earnings would
increase (decrease) by approximately $9.4 million, $1.5 million and $2.5
million, respectively. These amounts were determined by considering the
impact of a hypothetical 100 basis point increase (decrease) in interest
rates on Alliant Energy's, IP&L's and WP&L's consolidated variable-rate debt
held, the amount outstanding under the utility customer accounts receivable
sale program and variable-rate lease balances at Dec. 31, 2002.
Commodity Risk - Non-trading - Alliant Energy is exposed to the impact of
- ----------------------------
market fluctuations in the commodity price and transportation costs of
electricity and natural gas and oil products it markets. Alliant Energy employs
established policies and procedures to manage its risks associated with these
market fluctuations including the use of various commodity derivatives.
Alliant Energy's exposure to commodity price risks in its utility business is
significantly mitigated by the current rate making structures in place for
the recovery of its electric fuel and purchased energy costs as well as its
cost of natural gas purchased for resale. Refer to Note 1(j) of theAlliant
Energy's "Notes to Consolidated Financial Statements" for a further
discussion.
From time to time, WP&L periodically utilizes gas commodity swap arrangements for the
purpose of mitigatingderivative instruments to reduce the
impact of price fluctuations on gas purchased and injected into storage
during the summer months and withdrawn and sold at current market prices
during the winter months. The gas commodity swaps in place approximate the
forecasted storage withdrawal plan during this period. Therefore, market
price fluctuations that result in an increase or decrease in the value of the
physical commodity are substantially offset by changes in the value of the
gas commodity swaps. To the extent actual storage withdrawals vary from
forecasted withdrawals, WP&L has physical commodity price exposure. A 10%
increase/decrease48
increase (decrease) in the price of gas would not have an insignificanta significant impact
on the combined fair market value of the gas in storage and related swap
arrangements in place at Dec. 31, 2002. IP&L also utilizes natural gas
commodity derivative instruments to mitigate the risk of rising prices.
Since the IUB allows for the prudently incurred costs associated with these
instruments and the underlying supply of natural gas to be recovered from
ratepayers, IP&L does not have significant natural gas commodity risk
exposure.
Whiting, currently accounted for as of December 31, 1999 and
1998.
Whitinga discontinued operation, is exposed to
market risk in the pricing of its oil and gas production. Historically,
prices received for oil and gas production have been volatile because of
seasonal weather patterns, supply and demand factors, transportation
availability and price, and general economic conditions. 50
Worldwide political
developments have historically also had an impact on oil prices. Periodically, Alliant EnergyWhiting
periodically utilizes oil and gas swaps, costless collars and forwardlong-term
delivery contracts to mitigate the impact of oil and gas price fluctuations.
Historically, Alliant Energy has hedged or contracted approximately 50% of
its oil and gas volumes. The actual level of hedging or contracting utilized
is based on management's assessment of the prudency of hedging given current
market conditions and other factors and is reviewed on an ongoing basis.
Based on Whiting's estimated gasoil and crude oilgas sales in 2000,2003, and the swapshedging and
forwarddelivery contracts outstanding for such period, a sustained 10% increase
(decrease) in place at December 31, 1999, a 10% increase/decrease inoil and gas and
crude oil prices for that period would impact Alliant Energy's pre-tax 20002003
earnings by approximately $3.8$9.9 million.
A 10% increase/decreaseSouthern Hydro, currently accounted for as a discontinued operation, owns and
operates hydroelectric generation facilities in the state of Victoria in
Australia. These generation facilities operate as peaking units. Under the
rules of the Australian market, Southern Hydro must sell all of its
production into a spot market in which the price changes every five minutes
and is set on the average of each half hour. Electricity prices during 1999 wouldin this
market can and have impacted Alliant Energy's 1999 pre-tax earnings by
approximately $3.0 million as relatesbeen very volatile. In order to manage the electricity
commodity price risk associated with anticipated sales into the spot market,
Southern Hydro enters into a variety of electricity derivative contracts with
terms of up to five years. The value of these derivative instruments outstanding during 1999.
Commodity Risk - Trading -can
change significantly as a result of changes in forward electricity prices.
These instruments do not qualify for hedge accounting under SFAS 133.
Accordingly, per GAAP, changes in the fair value of these derivatives, which
are non-cash valuation adjustments, must be reported in Southern Hydro's
earnings. Alliant Energy is exposed to market risks through
- --------------
its electricity commodity trading business, which is primarily conducted
through Alliant Energy's 50/50 joint venture with Cargill. The joint
venture's trading activities principally consist of marketing and trading
over-the-counter forward contracts for the purchase and sale of electricity.
The majoritybelieves Southern Hydro's ownership of the forwardphysical
generating facilities that are not marked-to-market, combined with the
electricity derivative contracts, represent commitmentsact as an economic hedge to purchase or
sellvolatile
electricity at fixed prices, insuch that Southern Hydro's net economic exposure to
volatile electricity prices over the future and require settlement by
physical delivery of electricity or are netted out in accordance with industry
trading standards. The market prices used to determine fair values reflect
the joint ventures' best estimate considering various factors, including
closing exchanges and over-the-counter quotations, time value and volatility
factors. The joint venturenext five years is managed within
reasonable limits. Southern Hydro manages the market risks inherent in its
trading
activitiesbusiness through established derivative trading and risk management policies
and tools. The principal tool utilized in managing the risks associated with
volatile prices is a one-day variance/covariance
value-at-riskfive to 40-day Earnings-at-Risk (EAR) model with assessment adjustments made based on weather,
transmission availability, generation outages and other factors. The
estimated one-day market Value at Risk (VAR) for the joint venture as ofwhich
calculates EAR to a 95% confidence level. At December 31, 1999 and 19982002, the
estimated EAR for Southern Hydro for expected earnings in 2003 was
$0.3 million and $0.7 million, respectively,
which were calculated with a 99% confidence level. The low, average and high
VAR in 1999 were $0.1 million, $0.3 million and $1.5 million, respectively.approximately $0.9 million.
Equity Price Risk - Alliant Energy maintainsIP&L and WP&L maintain trust funds at IESU and WP&L to - -----------------
fund itstheir
anticipated nuclear decommissioning costs. As of DecemberAt Dec. 31, 19992002 and 1998,2001, these
funds were invested primarily in domestic equity and debt instruments.
WP&L has entered into an equity collar that uses options to
mitigate the effect of significant market fluctuations on its common stock
investments. Alliant Energy's exposure to fluctuationsFluctuations in equity prices or interest rates will not affect itsAlliant
Energy's consolidated results of operations as such fluctuations are recorded
in equally offsetting amounts of investment income and depreciation (WP&L) or
interest (IESU)(IP&L) expense when they are realized. At December 31, 1999 and 1998, Alliant Energy had an investmentIn 2001, WP&L entered into a
four-year hedge on equity assets in the stock
of McLeod, a publicly traded telecommunications company, valued at $1,124
million and $320 million, respectively. A 10% increase (decrease) in the
quoted market price at December 31 would have increased (decreased) the value
of the investment at December 31, 1999 and 1998 by approximately $112 million
and $32 million, respectively.its nuclear decommissioning trust fund.
Refer to Note 1010(c) of theAlliant Energy's "Notes to Consolidated Financial
Statements" for a discussion of how Alliant Energy accounts for its
investment in McLeod.
At December 31, 1999 and 1998, Alliant Energy had various investments,
accounted for under the cost method of accounting, in publicly traded utility
companies in New Zealand and Australia which were valued at $97 million and $3
million, respectively. A 10% increase (decrease) in the quoted market prices
at December 31 would have increased (decreased) the value of the investment at
December 31, 1999 and 1998 by approximately $9.7 million and $0.3 million,
respectively.further discussion.
Currency Risk - Alliant Energy has investments in various countries where the
- --------------
net investments are not hedged, including Australia, Brazil, China and New
Zealand, and Singapore.Zealand. As a result, these investments are subject to currency exchange
risk with fluctuations in currency exchange rates. At DecemberDec. 31, 1999 and 1998,2002, Alliant
Energy had a cumulative foreign currency translation loss, net of $9.6any tax
benefits realized, of $165 million, and $7.1 million, respectively, recorded in
"Accumulated other comprehensive income" on its Consolidated Balance Sheets
that primarilywhich related to decreases in value of
the Brazil real of $152 million, New Zealand dollar of $11 million and
Australian dollar of $2 million in relation to the U.S. Dollar.dollar. This loss is
recorded in "Accumulated other comprehensive loss" on Alliant Energy's
Consolidated Balance Sheets. Based on Alliant Energy's investments at DecemberDec.
31, 1999 and 1998,2002, a 10% sustained increase/decrease over the next twelve12 months in the
foreign exchange rates of Australia, Brazil, China and New Zealand and Singapore would
decrease/increaseresult in a corresponding increase/decrease in the cumulative foreign
currency translation loss of $57 million. Alliant Energy's equity income
(loss) from its foreign investments is also impacted by $17.2fluctuations in
currency exchange rates. In addition, Alliant Energy has currency exchange
risk associated with the debt issued to finance a thermal plant constructed
by Alliant Energy and its Brazilian partners. In 2002, Alliant Energy
recorded pre-tax charges of $6.5 million related to its share of the foreign
currency transaction losses on such debt. Based on the loan balance and
$6.449
currency rates at Dec. 31, 2002, a 10% change in the currency rates would
result in a $1.9 million respectively.after-tax increase (decrease) in net income.
Refer to Notes 1(n) and 1110 of theAlliant Energy's "Notes to Consolidated
Financial Statements" for a further discussion of Alliant Energy's derivative
financial instruments.
51
Accounting Pronouncements In June 1998,- On Oct. 25, 2002, the FASB issued SFAS 133. The Statement establishes accounting
and reporting standards requiring that every derivative instrument be recordedEITF reached a consensus on
the balance sheet as either an asset or liability measured at its fair
value. The Statement- -------------------------
EITF Issue 02-3. Alliant Energy's natural gas trading business, NG Energy
Trading, LLC (NG Energy), is impacted by EITF Issue 02-3, which requires that
changes inall sales of energy and the derivative's fair valuerelated cost of energy purchased under contracts
that meet the definition of energy trading contracts under EITF Issue 98-10
and that are derivatives under SFAS 133 must be recognized currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allowsreflected on a derivative's gains and
losses to offset related results on the hedged itemnet basis in
the income statement for all periods presented. Under the guidance of EITF
Issue 98-10, Alliant Energy reported its energy trading contracts and requires thatrelated
gas in storage at fair market value, and reported related revenues and
expenses on a company must formally document, designate, and assessgross basis in the effectiveness of transactions that receive hedge accounting.
SFAS 133 is effective for fiscal years beginningincome statement. EITF Issue 02-3 also
rescinded EITF Issue 98-10 on a prospective basis. Accordingly, any new
contracts entered into after June 15, 2000 andOct. 25, 2002 must be applied to (a)reported on a historical
cost basis rather than at fair market value unless the contract meets the
definition of a derivative instruments and (b) certain derivative
instruments embedded in hybridunder SFAS 133. Alliant Energy adopted EITF Issue
02-3 on Jan. 1, 2003 for all contracts that were in place and storage gas
acquired prior to Oct. 25, 2002, and will reclassify prior period trading
contracts on a net basis in the income statement for 2003. The impact of
transitioning from reporting inventory and existing contracts that are not
derivatives under SFAS 133 at fair value to historical cost will be reported
in net income in the first quarter of 2003 and is not expected to be material
due to the relatively small size of the NG Energy business. Had Alliant
Energy presented its trading activities in the income statement on a net
basis rather than a gross basis, for 2002, 2001 and 2000, "Non-regulated and
other" revenues and "Other operation and maintenance" expenses would have
both decreased $125 million, $49 million and $9 million, respectively, with
no impact on net income.
In November 2002, the FASB issued acquiredFIN 45 which requires disclosures by a
guarantor about its obligations under certain guarantees that it has issued.
FIN 45 also requires recognizing, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The recognition and measurement provisions of FIN 45 are
effective on a prospective basis for guarantees issued or
substantively modified after DecemberDec.
31, 1998 (effective dates noted2002. The disclosure requirements of FIN 45 are as
amended by SFAS 137). Alliant Energy has organized a cross-functional project
team to assist in implementing SFAS 133. The team consists of both Alliant
Energy employees and a consultant that has been engaged to support the
project. The team has begun to inventory financial instruments, commodity
contracts and other commitments with the purpose of identifying and assessing
all of Alliant Energy's derivatives. Although the impact of implementing SFAS
133 has not yet been quantified, it could increase volatility in earnings and
other comprehensive income. Alliant Energy is analyzing various alternatives
relating to the possible early adoption of SFAS 133 in 2000. SFAS 133 may
only be adopted on the first day of any quarter prior to the required adoption
date.
Accountingeffective for Obligations Associated with the Retirement of Long-Lived Assets
The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry, including IESU and WP&L, regarding
the recognition, measurement and classification of decommissioning costs for
nuclear generating stations in financial
statements of electric utilities. In
response to these questions, the FASB has a project on its agenda to review
the accounting for obligations associated with the retirement of long-lived
assets, including decommissioning of nuclear power plants. If current
electric utility industry accounting practices for nuclear power plant
decommissioning are changed, theinterim or annual provision for decommissioning could
increase relative to 1999, and the estimated cost for decommissioning could be
recorded as a liability (rather than as accumulated depreciation), with
recognition of an increase in the cost of the related nuclear power plant.
Assuming no significant change in regulatory treatment, IESU and WP&L do not
believe that such changes, if required, would have an adverse effect on their
financial condition or results of operations due to their ability to recover
decommissioning costs through rates.
Inflationperiods ending after Dec. 15, 2002. Alliant
Energy IESU and WP&L dodoes not expect the effects of inflation at
current levels to have a significant effect on their financial condition or
results of operations.
Environmental
The pollution abatement programs of IESU, WP&L, IPC and Resources are subject
to continuing review and are revised from time to time due to changes in
environmental regulations, changes in construction plans and escalation of
construction costs. While management cannot precisely forecast the effect of
future environmental regulations on Alliant Energy's operations, it has taken
steps to anticipate the future while also meeting the requirements of current
environmental regulations.
The Clean Air Act Amendments of 1990 (Act) require emission reductions of SO2,
NOx and other air pollutants to achieve reductions of atmospheric chemicals
believed to cause acid rain. IESU, WP&L and IPC have met the provisions of
Phase I of the Act and Phase II of the Act. The Act also governs SO2
allowances, which are defined as an authorization for an owner to emit one ton
of SO2 into the atmosphere. IESU, WP&L and IPC are reviewing their options to
ensure theyFIN 45 will have sufficient allowances to offset their emissions in the
future and believe that the potential costs of complying with these provisions
of Title IV of the Act will not have a material adverse impact on their
financial condition or results of operations.
The Act and other federal laws also require the EPA to study and regulate, if
necessary, additional issues that potentially affect the electric utility
industry, including emissions relating to ozone transport, mercury and
particulate control as well as modifications to the PCB rules. In July 1997,
52
the EPA issued final rules that would tighten the National Ambient Air Quality
Standards for ozone and particulate matter emissions and in June 1998, the EPA
modified the PCB rules. Alliant Energy cannot predict the long-term
consequences of these rules on its
financial condition or results of operations. Refer to Note 11(d) of Alliant
Energy's "Notes to Consolidated Financial Statements" for additional
information on guarantees.
In October 1998,January 2003, the EPAFASB issued FIN 46 which addresses consolidation by
business enterprises of variable interest entities. FIN 46 requires
consolidation where there is a final rule requiring 22 states, including
Wisconsin,controlling financial interest in a variable
interest entity or where the variable interest entity does not have
sufficient equity at risk to modify their state implementation plans to address the ozone
transport issue. However, on May 25, 1999, a federal appeals court delayed
indefinitely the implementation of the rule. On March 3, 2000, the federal
appeals court affirmed EPA's NOx rule for the affected states. However, the
court found that the EPA had failed to explain how Wisconsin contributes
significantly to non-attainment in anyfinance its activities without additional
subordinated financial support from other state thus it has vacated the
rule as relates to Wisconsin. Given the EPA could still appeal this decision,
andparties. Alliant Energy is still reviewingwill apply
the recent court order,provisions of FIN 46 prospectively for all variable interest entities
created after Jan. 31, 2003. For variable interest entities created before
Jan. 31, 2003, Alliant Energy is unable to predict the final outcome of this issue. The implementation of
the rule would likely require WP&L to reduce its NOx emissions at all of its
plants to a fleet average of .15 lbs/mmbtu by 2003. WP&L is following this
issue closely and continues to evaluate various options to meet the emission
levels. Based on existing technology, the preliminary estimates indicate that
capital investments wouldwill be in the range of $150 million to $215 million.
Refer to the "Liquidity and Capital Resources - Rates and Regulatory Matters"
section for a discussion of a filing WP&L made with the PSCW regarding seeking
rate recovery of these costs.
Revisions to the Wisconsin Administrative Code have been proposed that could
have a significant impact on WP&L's operation of the Rock River Generating
Station in Beloit, Wisconsin. The proposed revisions will affect the amount
of heat that the generating station can discharge into the Rock River. WP&L
cannot presently predict the final outcome of the rule, but believes that, as
the rule is currently proposed, the capital investments and/or modifications required to meet the proposed discharge limits could be significant.
On February 28, 1998, the EPA issued the final report to Congress on the Study
of Hazardous Air Pollutant Emissions from Electric Utility Steam Generating
Units regarding hazardous air pollutant emissions from electric utilities (the
HAPs report). The HAPs report concluded that mercury emissions from
coal-fired generating plants wereconsolidate all entities in
which it is a concern. However, the EPA does not
believe it has sufficient information regarding such emissions. To remedy
this lack of information, the EPA required IESU, WP&L, IPC and all other
applicable electric utilities in the U.S. to start collecting information
regarding the types and amount of mercury emitted as of January 1, 1999. To
better understand mercury emissions, the EPA required WP&L to conduct stack
tests at several of its generating stations. Both stations selected have
completed their stack testing. Although the control of mercury emissions from
generating plants is uncertain at this time, Alliant Energy believes that the
capital investments and/or modifications required to control mercury emissions
could be significant.
Pursuant to an internal review of operations in 1998, IPC discovered that Unit
No. 6 at its generating facility in Dubuque, Iowa required a Clean Air Act
Acid Rain permit and CEMS. IPC has informed its environmental regulators and
has installed the CEMS and obtained the permit. Pursuant to its internal
review, IPC also identified and disclosed to regulators a potentially similar
situation at its Lansing, Iowa generating facility. In the second quarter of
1999, the EPA determined that Lansing units 1 and 2 are affected units.
Therefore,primary beneficiary beginning in the third quarter of 1999, IPC installed2003. It
is reasonably possible the CEMS at bothimplementation of these facilitiesFIN 46 will require that certain
variable interest entities be included on Alliant Energy's Consolidated
Balance Sheets. Refer to Notes 3 and in December 1999 IPC submitted its certification4 of Alliant Energy's "Notes to
Consolidated Financial Statements" for additional information on variable
interest entities related to synthetic leases and the utility customer
accounts receivable sale program, respectively.
SFAS 143, which provides accounting and disclosure requirements for
retirement obligations associated with long-lived assets, was effective Jan.
1, 2003. SFAS 143 requires that the present value of retirement costs for
which Alliant Energy has a legal obligation be recorded as liabilities with
an equivalent amount added to the EPAasset cost. The liability is accreted to
its present value each period and the capitalized cost is depreciated over
the useful life of the related asset. Upon settlement of the liability, an
entity settles the obligation for its recorded amount or incurs a gain or
loss. The adoption of SFAS 143 will have no impact on IP&L's and WP&L's
earnings, as the effects will be offset by the establishment of regulatory
assets or liabilities pursuant to SFAS 71, "Accounting for the Lansing facility. IPCEffects of
Certain Types of Regulation."
Alliant Energy has receivedcompleted a settlement offerdetailed assessment of the specific
applicability and implications of SFAS 143. The scope of SFAS 143 as it
relates to Alliant Energy primarily includes decommissioning costs for DAEC
and Kewaunee. It also applies to a smaller extent to several other regulated
and non-regulated assets including, but not limited to, active ash landfills,
water intake facilities, underground storage tanks, groundwater wells,
50
transmission and distribution equipment, easements, leases and the
dismantlement of certain hydro facilities. Other than DAEC and Kewaunee,
Alliant Energy's asset retirement obligations as of Jan. 1, 2003 are not
significant.
Prior to January 2003, IP&L and WP&L recorded nuclear decommissioning charges
in accumulated depreciation on their Consolidated Balance Sheets. Upon
adoption of SFAS 143, IP&L and WP&L will reverse approximately $125 million
and $175 million, respectively, previously recorded in accumulated
depreciation and will record liabilities of approximately $250 million and
$175 million, respectively. The difference between amounts previously
recorded and the net SFAS 143 liability will be deferred as a regulatory
asset and is expected to approximate $125 million and $0 for IP&L and WP&L,
respectively.
IP&L and WP&L have previously recognized removal costs as a component of
depreciation expense and accumulated depreciation for other non-nuclear
assets in accordance with regulatory rate recovery. As of Dec. 31, 2002,
IP&L and WP&L estimate that they have approximately $250 million and $150
million, respectively, of such regulatory liabilities recorded in
"Accumulated depreciation" on their Consolidated Balance Sheets.
In 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" which replaced SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
SFAS 144 also applies to discontinued operations. SFAS 144 requires that those
long-lived assets classified as held for sale be measured at the lower of their
carrying amount or the fair value less cost to sell, and that no depreciation,
depletion and amortization shall be recorded while an asset is classified as
held for sale. Discontinued operations are no longer measured at net realizable
value or include amounts for operating losses that have not yet occurred. SFAS
144 also broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from the EPA, dated December 3, 1999, to settlerest
of the matter for $550,000. IPC has since
responded with a counter offerentity and negotiations continue.
On February 4, 1999, Whiting received a Notice of Violation letterthat will be eliminated from the ADEQ, citing Whiting for flaring sour gas in excessongoing operations of permit limits and not
having a valid permit. In June 1999, the
ADEQ sent Whiting a Consent
Administrative Order proposing a voluntary civil penalty of $225,000 for
Whiting's alleged emission violations. The consent agreement was finalized on
November 9, 1999, resultingentity in a civil penaltyplanned disposal transaction that is probable of $99,000, Whiting performing
two mitigation projects, installing an air monitorbeing completed
within one year. If the criteria to runclassify operations as held for one full yearsale are
subsequently no longer met, the assets classified as held for sale shall be
reclassified as held and submitting a Title V permit.
WP&L has been notified byused in the EPA thatperiod the held for sale criteria are no
longer met. Alliant Energy adopted SFAS 144 on January 1, 2002. Refer to Note 16
of Alliant Energy's "Notes to Consolidated Financial Statements" for additional
information about Alliant Energy's application of SFAS 144 in the fourth quarter
of 2002 as relates to various assets it is a PRP with respectplanning to environmental impacts identified atsell.
Alliant Energy does not expect the MIG/DeWane Landfill Superfund Site.
WP&L is participatingvarious other new accounting
pronouncements not mentioned above that were effective in the initiation of an alternate dispute resolution
process2002 to allocate liability associated with the investigation and
remediation of the site. Management believes that any likely action resulting
from this matter will not have a
material adverse effect on WP&L's financial
condition or results of operations.
53
IPC has been notified by the EPA that it is a PRP with respect to
environmental impacts identified at the Missouri Electric Works, Inc. (MEW)
site in Cape Girardeau, Missouri. IPC has been served with a complaint filed
by the MEW Site Trust Fund, the PRP group involved in investigating and
remediating the site, for response costs incurred by the PRP group. IPC
believes that it is not liable as a PRP for this site because it did not
arrange for the disposal of any waste materials at the site. IPC has filed an
answer to the complaint, discovery is ongoing and settlement discussions
continue.
WP&L has been notified by Monroe County, Wisconsin that it is a PRP with
respect to environmental impacts identified at the Monroe County Interim
Landfill in Sparta, Wisconsin. WP&L has provided a summary of records and
documents relating to waste disposal at the landfill to Monroe County. WP&L
cannot currently estimate what liability, if any, it may have with respect to
this site.
A global treaty has been negotiated that could require reductions of
greenhouse gas emissions from utility plants. In November 1998, the U.S.
signed the treaty and agreed with the other countries to resolve all remaining
issues by the end of 2000. At this time, management is unable to predict
whether the U.S. Congress will ratify the treaty. Given the uncertainty of
the treaty ratification and the ultimate terms of the final regulations,
management cannot currently estimate the impact the implementation of the
treaty would have on Alliant Energy's operations.
The Low-Level Radioactive Waste Policy Amendments Actresults of 1985 mandates that
each state must take responsibility foroperations or financial
condition.
Critical Accounting Policies - Based on historical experience and various
- ----------------------------
other factors, Alliant Energy believes the storage of low-level radioactive
waste produced withinpolicies identified below are
critical to its borders. The States of Iowa and Wisconsin are
members of the six-state Midwest Interstate Low-Level Radioactive Waste
Compact (Compact) which is responsible for development of any new disposal
capability within the Compact member states. In June 1997, the Compact
commissioners voted to discontinue work on a proposed waste disposal facility
in the State of Ohio because the expected cost of such a facility was
comparably higher than other options currently available. Dwindling waste
volumes and continued access to existing disposal facilities were also reasons
cited for the decision. A disposal facility located near Barnwell, South
Carolina continues to accept the low-level waste and IESU and WP&L currently
ship the waste each produces to such site, thereby minimizing the amount of
low-level waste stored on-site. Given technological advances, waste
compactionbusiness and the reduction inunderstanding of its results of operations
as they require critical estimates be made based on the amountassumptions and
judgment of waste generated, DAECmanagement. The preparation of consolidated financial statements
requires management to make various estimates and Kewaunee each have on-site storage capability sufficient to store low-level
waste expected to be generated over at leastassumptions that affect
revenues, expenses, assets, liabilities and the next ten years. While
Alliant Energy is unable to predict how longdisclosure of contingencies.
The results of these estimates and judgments form the Barnwell facility will
continue to accept its waste, continuing access to this facility expandsbasis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates and judgments. Alliant Energy's on-site storage capability indefinitely.
See Notes 12(f) and 12(g)management has discussed these
critical accounting policies with the Audit Committee of theits Board of
Directors. Refer to Note 1 of Alliant Energy's "Notes to Consolidated
Financial Statements" for a further discussion of Alliant Energy's environmental issues.
Power Supply
Wisconsin enacted electric reliability legislationaccounting
policies and the estimates and assumptions used in 1998 (Wisconsin
Reliability Act)the preparation of the
consolidated financial statements.
Regulatory Assets and Liabilities - Alliant Energy's domestic utility
business is regulated by various federal and state regulatory agencies. As a
result, the regulated utilities qualify for the application of SFAS 71. SFAS
71 recognizes that the actions of a regulator can provide reasonable
assurance of the existence of an asset or liability. Regulatory assets or
liabilities arise as a result of a difference between GAAP and the accounting
principles imposed by the regulatory agencies. Regulatory assets generally
represent incurred costs that have been deferred as they are probable of
recovery in customer rates. Regulatory liabilities generally represent
obligations to make refunds to customers for various reasons.
Alliant Energy's utility subsidiaries recognize regulatory assets and
liabilities in accordance with the goalrulings of assuring reliabletheir federal and state
regulators and future regulatory rulings may impact the carrying value and
accounting treatment of Alliant Energy's regulatory assets and liabilities.
Alliant Energy periodically assesses whether the regulatory assets are
probable of future recovery by considering factors such as regulatory
environment changes, recent rate orders issued by the applicable regulatory
agencies and the status of any pending or potential deregulation
legislation. The assumptions and judgments used by regulatory authorities
continue to have an impact on the recovery of costs, the rate of return on
51
invested capital and the timing and amount of assets to be recovered by
rates. A change in these assumptions may result in a material impact on
Alliant Energy's results of operations. Refer to Note 1(c) of Alliant
Energy's "Notes to Consolidated Financial Statements" for further discussion.
Asset Valuations -
Long-Lived Assets - Alliant Energy's Consolidated Balance Sheets include
- -----------------
significant long-lived assets, which are not subject to recovery under SFAS
71. As a result, Alliant Energy must generate future cash flows from such
assets in a non-regulated environment to ensure the carrying value is not
impaired. Many of these assets are the result of capital investments which
have been made in recent years and have not yet reached a mature life cycle.
Alliant Energy assesses the carrying amount and potential impairment of these
assets whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Factors Alliant Energy considers in
determining if an impairment review is necessary include a significant
underperformance of the assets relative to historical or projected future
operating results, a significant change in Alliant Energy's use of the
acquired assets or business strategy related to such assets, and significant
negative industry or economic trends. When Alliant Energy determines an
impairment review is necessary, a comparison is made between the expected
undiscounted future cash flows and the carrying amount of the asset. If the
carrying amount of the asset is the larger of the two balances, an impairment
loss is recognized equal to the amount the carrying amount of the asset
exceeds the fair value of the asset. The fair value is determined by the use
of quoted market prices, appraisals, or the use of valuation techniques such
as expected discounted future cash flows. Alliant Energy must make
assumptions regarding these estimated future cash flows and other factors to
determine the fair value of the respective assets.
Alliant Energy has made payments of $156 million for turbines and related
generation equipment at Dec. 31, 2002 and has also entered into commitments
for an additional $84 million. Alliant Energy expects to utilize
approximately $124 million of such equipment in its first Power Iowa
generation project and is currently reviewing various other potential
generation projects to utilize the remaining $116 million of equipment. As a
result, Alliant Energy has assessed the recoverability of the $116 million
equipment cost compared to the future anticipated cash flows from the
generation projects under review. The future anticipated cash flows is a
significant estimate. Alliant Energy has no current intentions to sell any
of this equipment. If a decision was made to sell such equipment, the
recoverability of the equipment cost would be assessed by comparing the
future anticipated sales proceeds to the carrying value of the equipment.
Investments - Alliant Energy's Consolidated Balance Sheets include
- -----------
investments in several available-for-sale securities accounted for in
accordance with SFAS 115. Alliant Energy monitors any unrealized losses from
such investments to determine if the loss is considered to be a temporary or
permanent decline. The determination as to whether the investment is
temporarily versus permanently impaired requires considerable judgment. When
the investment is considered permanently impaired, the previously recorded
unrealized loss would be recorded directly to the income statement as a
realized loss. Alliant Energy incurred pre-tax valuation charges under the
provisions of SFAS 115 of $27 million and $10 million related to its McLeod
and Energy Technologies investments, respectively, in 2002. Alliant Energy's
Consolidated Balance Sheets also contain various other investments that are
evaluated for recoverability when indicators of impairment may exist.
Resources holds a non-controlling interest in five Brazilian electric energyutility
companies accounted for Wisconsin.under the equity method of accounting. The
law allowsrecoverability of these equity method investments is assessed by comparing
the constructionfuture anticipated local currency cash flows from these investments and
the carrying value of merchant power plantsthese investments. The future anticipated cash flows
currently include anticipated periodic distributions that, when aggregated,
exceed the carrying value of these investments. The future anticipated cash
flows represents a significant estimate. The $214 million carrying value of
Alliant Energy's Brazil investments has been reduced by $210 million of
pre-tax cumulative foreign currency translation losses. The net of tax
balance of $152 million has been recorded in "Accumulated other comprehensive
loss" on Alliant Energy's Consolidated Balance Sheet at Dec. 31, 2002.
Cumulative foreign currency translation losses are reflected in Alliant
Energy's results of operations only if the related investment is sold or
substantially liquidated. If Alliant Energy would decide to exit these
Brazil investments in the statefuture, the recoverability of these equity method
investments would be assessed by comparing the future anticipated sales
proceeds to the carrying value. Alliant Energy has no current intention of
exiting these Brazil investments.
Resources' investment in Mexico consists of a loan receivable (including
accrued interest income) from a Mexican development company. The loan
accrues interest at 8.75% and streamlinesis secured by the regulatory approval processundeveloped land of the
resort community. Repayment of the loan principal and interest will be based
on a portion of the proceeds from the sales of real estate in the resort
52
community and therefore is dependent on the successful development of the
project and the ability to sell real estate. The recoverability of this loan
receivable is currently assessed by comparing the fair value of the
undeveloped land of the resort community used to secure the loan and the
carrying value of the loan including accrued interest income. Based on an
independent appraisal that indicated the fair value of the collateral was
less than the loan balance plus accrued interest, Alliant Energy recorded a
valuation allowance of approximately $7 million in the second quarter of 2002
and ceased accruing interest income on the loan. Based on an updated
independent appraisal, Alliant Energy reversed the valuation allowance in the
fourth quarter of 2002 and resumed accruing interest income on the loan. The
fair value of such collateral is a significant estimate. Refer to Note 9 of
Alliant Energy's "Notes to Consolidated Financial Statements" for building new
generationadditional
information concerning Alliant Energy's investments in Brazil and transmission facilities.Mexico.
Alliant Energy announced its intentions to sell various businesses in
November 2002 and is currently accounting for them as assets held for sale
and discontinued operations. The estimated sales proceeds, less costs to
sell, for each business exceeded the carrying value of each business as of
Dec. 31, 2002. Alliant Energy will continue to monitor the estimated sales
proceeds of its assets held for sale as they relate to the respective
carrying values. Refer to Note 16 of Alliant Energy's "Notes to Consolidated
Financial Statements" for additional information.
Goodwill - As a requirementresult of the legislation,adoption of SFAS 142, "Goodwill and Other
- --------
Intangible Assets," on Jan. 1, 2002, Alliant Energy is required to evaluate
its goodwill for impairment at least annually and more frequently when
indicators of impairment may exist. At Dec. 31, 2002, Alliant Energy had $66
million of net goodwill (including $41 million, $10 million and $9 million
within its Cogenex, China and SmartEnergy reporting units, respectively) on
its Consolidated Balance Sheet. If the PSCW completedfair value of a regional transmission constraint study. The PSCWreporting unit is
authorized to order constructionless than its carrying value, including goodwill, a goodwill impairment
charge may be necessary. Alliant Energy estimates the fair value of new transmission facilities,its
reporting units utilizing a combination of market value indicators and the
expected discounted future cash flows. This process requires the use of
significant management estimates and judgments regarding cash flow
assumptions from future sales, operating costs and discount rates over an
indefinite life. Alliant Energy's cash flow assumptions are derived using a
combination of historical trends, internal budgets, strategic plans and other
market information. Each reporting unit is evaluated separately based on the
findingsnature of its constraint study, through December 31, 2004.
On September 24, 1997,operations and therefore the PSCW ordered WP&L and two other Wisconsin utilitiesassumptions vary by reporting unit
relative to arrange for additional electric capacity to help maintain reliable service
for their customers. In July 1998,its applicable circumstances. To determine its discount rates,
Alliant Energy and SkyGen announced an
agreement whereby SkyGen would build, own and operate a power plant in
Wisconsin capable of producing up to 450 MW of electricity. Underutilizes the agreement,capital asset pricing model which is based upon
market comparables adjusted for company-specific risk. In the event market
comparables are not available, Alliant Energy will purchase the capacity to meet the electric
needs of its utility customers, as outlined by the Wisconsin Reliability Act.
A third party filed an appeal to the EPA Appeals Board on the issue of NOx
mitigation.utilizes expected industry
returns based upon published information. In the fourth quarter of 1999,2002,
Alliant Energy recorded a pre-tax goodwill impairment charge related to
SmartEnergy of $7 million.
Derivative Financial Instruments - Alliant Energy uses derivative financial
instruments to hedge exposures to fluctuations in interest rates, certain
commodity prices, volatility in a portion of natural gas sales volumes due to
weather and to mitigate the WDNR issuedequity price volatility associated with certain
investments in equity securities. Alliant Energy does not use such
instruments for speculative purposes. To account for these derivative
instruments in accordance with the applicable accounting rules, Alliant
Energy must determine the fair value of its derivatives. In accordance with
SFAS 133, the fair value of all derivative instruments are recognized as
either assets or liabilities in the balance sheet with the changes in their
value recognized in earnings for the non-regulated businesses, unless
specific hedge accounting criteria are met. For IP&L and WP&L, changes in
the derivatives fair values are generally recorded as regulatory assets or
liabilities. If an established, quoted market exists for the underlying
commodity of the derivative instrument, Alliant Energy uses the quoted market
price to value the derivative instrument. For other derivatives, Alliant
Energy estimates the value based upon other quoted prices or acceptable
valuation methods. Alliant Energy also reviews the nature of its contracts
for the purchase and sale of non-financial assets to assess whether the
contracts meet the definition of a revised air
permit which was appealed againderivative and the requirements to follow
hedge accounting as allowed by the third party. In March 2000,applicable accounting rules. The
determination of derivative status and valuations involves considerable
judgment.
The majority of Alliant Energy's derivative transactions are in its regulated
domestic utility business and based on the EPA
deniedfuel and natural gas cost recovery
mechanisms in place, as well as other specific regulatory authorizations,
changes in fair market values of such derivatives generally have no impact on
Alliant Energy's results of operations. Alliant Energy does have an embedded
derivative within its exchangeable senior notes that is impacted by the third party's final appeal which finalizesvalue
of McLeod stock. Changes in the air permitting
processfair value of this derivative impact Alliant
Energy's results of operations and allows for constructionthe changes did have a material impact on
Alliant Energy's 2001 results of operations. However, given a significant
decline in the value of the plant.
The EPA appeal process resultedMcLeod stock, Alliant Energy does not expect
changes in the SkyGen project being delayed untilfair value of this derivative to have a material impact on
Alliant Energy's results of operations in the summer of 2001.foreseeable future. In
53
addition, Alliant Energy has made other contractual commitmentsa small investment in a gas trading business.
Such business accounted for all of its trading transactions under EITF Issue
98-10 through 2002 and adopted the provisions of EITF Issue 02-3 on Jan. 1,
2003 (and for new transactions after Oct. 25, 2002). However, due to 54
ensure an 18% reserve margin in 2000, as required for Wisconsin. Partthe
insignificant size of this effort includes purchased power contractsbusiness, Alliant Energy does not expect this
accounting change to have a material impact on Alliant Energy's results of
operations in the future.
Unbilled Revenues - Unbilled revenues are primarily associated with Alliant
Energy's utility operations. Energy sales to individual customers are based
on the reading of their meters, which occurs on a systematic basis throughout
the month. At the end of each month, amounts of energy delivered to
customers since the date of the last meter reading are estimated and the
corresponding estimated unbilled revenue is recorded. The unbilled revenue
estimate is based on daily generation volumes, estimated customer usage by
class, weather impacts, line losses and the most recent customer rates. Such
process involves the use of various estimates, thus significant changes in
the estimates could have a material impact on Alliant Energy's results of
operations.
Accounting for Pensions - Alliant Energy accounts for pensions under SFAS 87,
"Employers' Accounting for Pensions." Under these rules, certain assumptions
are made which represent significant estimates. There are many factors
involved in determining an entity's pension liabilities and costs each period
including assumptions regarding employee demographics (including age, life
expectancies, compensation levels), discount rates, assumed rate of returns
and funding. Changes made to the plan provisions may also impact current and
future pension costs. Alliant Energy's assumptions are supported by
historical data and reasonable projections and are reviewed annually with an
outside actuary firm and an investment consulting firm. As of Dec. 31, 2002,
Alliant Energy was using a 6.75% discount rate and a 9% annual rate of return
on investments. In selecting an assumed discount rate, Alliant Energy
reviews various corporate Aa bond indices. The 9% annual rate of return is
consistent with Alliant Energy's historical returns and is based on projected
long-term equity and bond returns, maturities and asset allocations. A 100
basis point change in the discount rate would result in approximate changes
of $79 million and $7 million in Alliant Energy's qualified pension benefit
obligation and pension expense, respectively. A 100 basis point change in
the rate of return would result in an approximate change of $4 million in
qualified pension expense.
Other Future Considerations - In addition to items discussed earlier in MD&A,
- ---------------------------
the following items could impact Alliant Energy's future financial condition
or results of operations:
Asset Sales - It is possible Alliant Energy could record material gains,
losses, accounting adjustments or other charges and/or income related to its
planned asset divestitures discussed in "Strategic Actions." Alliant Energy
is not able to predict or estimate what such items may be at higher costs thanthis time.
Refer to Note 16 of Alliant Energy's "Notes to Consolidated Financial
Statements" for additional information.
Alliant Energy announced in March 2003 that it entered into an agreement with
New Zealand-based Meridian Energy Limited for the SkyGen
power, including purchasing power from 54 portable diesel generators thatsale of Alliant Energy's
Australian investment, primarily made up of Alliant Energy's ownership of
Southern Hydro. The sale price will be located at various substation locations within WP&L's service territory.
These higher costs are includedapproximately $350 million. This
amount includes the repayment of approximately $145 million in a rate increase requesteddebt in
Australia. On an after-tax basis, the sale will result in net cash proceeds
to Alliant Energy of approximately $165 million. The transaction is expected
to close by WP&L in
December 1999 as discussed in "Liquiditythe end of April 2003 and Capital Resourcesis subject to customary closing
conditions.
Retirement Benefits - RatesAlliant Energy's qualified pension and Regulatory Matters - WP&L."
IESU and IPCother
postretirement benefit expenses for 2003 are currently exploringexpected to be
approximately $18 million higher than in 2002, primarily due to unfavorable
asset returns, a reduction in the possibility of transitioning from the
MAPP reliability regiondiscount rate used to MAIN so all ofvalue plan benefit
obligations and expected increases in retiree medical costs. Alliant Energy
will belongpursue the possible recovery of the utility portion of these cost
increases, which represents a significant majority of the increase, in any
rate filings it has in its various jurisdictions
Exchangeable Senior Notes - At Dec. 31, 2002, the carrying amount of the debt
component of Resources' exchangeable senior notes was $40.1 million,
consisting of the par value of $402.5 million, less unamortized debt discount
of $362.4 million. The terms of the exchangeable senior notes require
Resources to pay interest on the par value of the notes at 7.25% from
February 2000 to February 2003, and at 2.5% thereafter until maturity in
February 2030. As explained in Note 10(a) of Alliant Energy's "Notes to
Consolidated Financial Statements," Resources accounted for the net proceeds
from the issuance of the notes as two separate components, a debt component
and an embedded derivative component. In accordance with SFAS 133, Alliant
Energy determined the initial carrying value of the debt component by
subtracting the fair value of the derivative component from the net proceeds
realized from the issuance of the exchangeable senior notes. This resulted
in a very low initial carrying amount of the debt component which results in
the recording of interest expense at an effective rate of 26.8% of the
54
carrying amount of the debt component. For 2002, interest expense on the
notes was $13.2 million. Interest payments in excess of interest expense are
recorded as a reduction of the carrying amount of the debt component. As a
result of the higher interest payments for the first three years, the
carrying amount of the debt component declined until it reached $37.8 million
in February 2003, and then gradually increases over the next 27 years to the
same reliability region.ultimate repayment amount of $402.5 million in 2030. Interest expense on the
debt component of the notes will be $10.2 million in 2003, 2004 and 2005. If
the existing McLeod shares would ever be cancelled, the notes would remain
outstanding until maturity.
Enterprise Resource Planning (ERP) System - Alliant Energy implemented a new
ERP system in October 2002 which will result in annual amortization expense
of approximately $11 million for five years. Alliant Energy is unable to predictseeking rate
recovery of the outcomeutility portion of this issue at this time.
Alliant Energy notes that it will take time for new transmission and power
plant projects to be approved and built in Wisconsin. While Alliant Energy
currently expects to meet customer demands in 2000, unanticipated reliability
issues could still arise in the event Wisconsin experiences unexpected power
plant outages, transmission system outages or extended periodsamortized expenses which represents a
significant majority of extremely
hot weather.the amortized expenses.
55
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market Risk are reported under
Item 7. MD&A "Other Matters - Market Risk Sensitive Instruments and Positions."Positions" in MD&A.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Alliant Energy Page Number
- -------------- -----------
Report of Management 57
Report of Independent Public AccountantsAuditors' Report 58
Consolidated Statements of Income for the Years Ended DecemberDec. 31, 1999, 19982002, 2001 and 19972000 59
Consolidated Balance Sheets as of DecemberDec. 31, 19992002 and 19982001 60
Consolidated Statements of Cash Flows for the Years Ended DecemberDec. 31, 1999, 19982002, 2001 and 19972000 62
Consolidated Statements of Capitalization as of DecemberDec. 31, 19992002 and 19982001 63
Consolidated Statements of Changes in Common Equity for the Years Ended
DecemberDec. 31, 1999, 19982002, 2001 and 1997 652000 64
Notes to Consolidated Financial Statements 66
IESU65
IP&L
- ----
Independent Auditors' Report of Independent Public Accountants 8894
Consolidated Statements of Income and Retained Earnings for the Years Ended DecemberDec. 31, 1999, 19982002, 2001 and 1997 892000 95
Consolidated Balance Sheets as of DecemberDec. 31, 19992002 and 1998 902001 96
Consolidated Statements of Cash Flows for the Years Ended DecemberDec. 31, 1999, 19982002, 2001 and 1997 922000 98
Consolidated Statements of Capitalization as of DecemberDec. 31, 19992002 and 1998 932001 99
Consolidated Statements of Changes in Common Equity for the Years Ended
Dec. 31, 2002, 2001 and 2000 100
Notes to Consolidated Financial Statements 94101
WP&L
- ----
Independent Auditors' Report of Independent Public Accountants 102109
Consolidated Statements of Income and Retained Earnings for the Years Ended DecemberDec. 31, 1999, 19982002, 2001 and 1997 1032000 110
Consolidated Balance Sheets as of DecemberDec. 31, 19992002 and 1998 1042001 111
Consolidated Statements of Cash Flows for the Years Ended DecemberDec. 31, 1999, 19982002, 2001 and 1997 1062000 113
Consolidated Statements of Capitalization as of DecemberDec. 31, 19992002 and 1998 1072001 114
Consolidated Statements of Changes in Common Equity for the Years Ended
Dec. 31, 2002, 2001 and 2000 115
Notes to Consolidated Financial Statements 108116
Refer to Note 15 of Alliant Energy's, IESU'sIP&L's and WP&L's "Notes to
Consolidated Financial Statements" for the quarterly financial data required
by this Item.Item 8.
56
ALLIANT ENERGY CORPORATION REPORT ON THE FINANCIAL INFORMATION
Alliant Energy Corporation management is responsible for the information and
representations contained in the financial statements and in other sections
of this Annual Report. The consolidated financial statements that follow
have been prepared in accordance with accounting principles generally
accepted accounting principles.in the United States of America. In addition to selecting
appropriate accounting principles, management is responsible for the manner
of presentation and for the reliability of the financial information. In
fulfilling that responsibility, it is necessary for management to make
estimates based on currently available information and judgments of current
conditions and circumstances.
Through a well-developed system of internal controls, management seeks to
ensure the integrity and objectivity of the financial information presented
in this report. This system of internal controls is designed to provide
reasonable assurance that the assets of the company are safeguarded and that
the transactions are executed according to management's authorizations and
are recorded in accordance with the appropriate accounting principles.
The Board of Directors participates in the financial information reporting
process through its Audit Committee.
/s/ Erroll B. Davis, Jr.
- ------------------------
Erroll B. Davis, Jr.
Chairman, President and Chief Executive Officer
/s/ Thomas M. Walker
- --------------------
Thomas M. Walker
Executive Vice President and Chief Financial Officer
/s/ Daniel A. Doyle
Daniel A. DoyleJohn E. Kratchmer
- ---------------------
John E. Kratchmer
Vice President -President-Controller and Chief Accounting and Financial Planning Officer
January 28, 2000March 18, 2003
57
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTSAUDITORS' REPORT
To the Board of Directors and Shareowners of Alliant Energy Corporation:
We have audited the accompanying consolidated balance sheets and statements
of capitalization of Alliant Energy Corporation (a Wisconsin
Corporation) and subsidiaries (the
"Company") as of December 31, 19992002 and 1998,2001, and the related consolidated
statements of income, cash flows and changes in common equity for each of the
three years in the period ended December 31, 1999.2002. Our audit also included
the supplemental schedule listed in Item 15(a)(2). These financial
statements and the supplemental schedule
referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the supplemental schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted auditing
standards.in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, thesuch consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Alliant
Energy Corporation and subsidiariesthe Company as of December 31,
19992002 and 1998,2001, and the results of theirits operations and theirits cash flows for each
of the three years in the period ended December 31,1999,31, 2002 in conformity with
accounting principles generally accepted accounting principles.
Our audit was made forin the purposeUnited States of forming anAmerica.
Also, in our opinion, onsuch supplemental schedule, when considered in relation
to the basic consolidated financial statements taken as a whole. The schedule listed in Item
14(a)(2) is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our
opinion,whole, presents
fairly states in all material respects the financial data
required to beinformation set forth thereintherein.
As discussed in relationNote 10 to the basic financial statements, takenon July 1, 2000, the
Company changed its method of accounting for derivative instruments to adopt
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as a whole.amended ("SFAS 133"), and
on January 1, 2001, the Company's equity method investees changed their
method of accounting for derivative instruments to adopt SFAS 133.
/s/ ARTHUR ANDERSENDELOITTE & TOUCHE LLP
ARTHUR ANDERSEN LLP- -------------------------
Milwaukee, Wisconsin
January 28, 2000March 18, 2003
58
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1999 1998 19972002 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
Operating revenues:
Electric utility $1,548,938 $1,567,442 $1,515,753$1,752,534 $1,756,556 $1,648,036
Gas utility 314,319 295,590 393,907393,986 487,877 414,948
Non-regulated and other 334,706 267,842 390,967462,292 380,243 216,690
----------------- ----------------- ------------------
2,197,963 2,130,874 2,300,627-----------------
2,608,812 2,624,676 2,279,674
----------------- ----------------- -----------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 262,305 297,685 280,558303,625 310,689 288,621
Purchased power 255,446 255,332 256,306362,501 403,166 294,818
Cost of utility gas sold 180,519 166,453 259,222248,994 360,911 278,734
Other operation 623,687 620,234 681,977
Maintenance 115,414 122,737 123,121and maintenance 957,144 828,125 686,976
Depreciation and amortization 279,088 279,505 259,663310,617 302,643 296,732
Taxes other than income taxes 104,969 105,626 103,397104,236 102,184 97,823
----------------- ----------------- ------------------
1,821,428 1,847,572 1,964,244-----------------
2,287,117 2,307,718 1,943,704
----------------- ----------------- -----------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating income 376,535 283,302 336,383321,695 316,958 335,970
----------------- ----------------- -----------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 136,229 129,363 122,563186,538 185,604 168,149
Interest income from loans to discontinued operations, net (15,959) (9,938) (7,195)
Equity (income) loss from unconsolidated investments 12,825 (18,799) (19,468)
Allowance for funds used during construction (7,292) (6,812) (5,274)(7,696) (11,144) (8,761)
Preferred dividend requirements of subsidiaries 6,706 6,699 6,693
Gains on sales6,172 6,720 6,713
Impairment of available-for-sale securities of McLeodUSA Inc. stock (40,272)27,218 - -
Gain on reclassification of investment - - (321,349)
Miscellaneous, net (35,903) (736) (13,910)220 (12,497) (39,214)
----------------- ----------------- ------------------
59,468 128,514 110,072-----------------
209,318 139,946 (221,125)
----------------- ----------------- -----------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 317,067 154,788 226,311112,377 177,012 557,095
----------------- ----------------- -----------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income taxes 120,486 58,113 81,73336,108 50,767 226,180
----------------- ----------------- -----------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 76,269 126,245 330,915
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Income from discontinued operations, net of tax (Note 16) 30,612 58,985 51,039
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of changes in
accounting principle, net of tax 106,881 185,230 381,954
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting principle, net of tax - (12,868) 16,708
----------------- ----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $196,581 $96,675 $144,578$106,881 $172,362 $398,662
================= ================= ===================================
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding 78,352 76,912 76,210(basic) 90,897 80,498 79,003
================= ================= ===================================
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Earnings per average common share (basic and diluted) $2.51 $1.26 $1.90(basic):
Income from continuing operations $0.84 $1.57 $4.19
Income from discontinued operations 0.34 0.73 0.65
Cumulative effect of changes in accounting principle - (0.16) 0.21
----------------- ----------------- -----------------
Net income $1.18 $2.14 $5.05
================= ================= ===================================
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding (diluted) 90,959 80,636 79,193
================= ================= =================
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings per average common share (diluted):
Income from continuing operations $0.84 $1.57 $4.18
Income from discontinued operations 0.34 0.73 0.64
Cumulative effect of changes in accounting principle - (0.16) 0.21
----------------- ----------------- -----------------
Net income $1.18 $2.14 $5.03
================= ================= =================
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends declared per common share $2.00 $2.00 $2.00
================= ================= =================
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
59
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 1999 19982002 2001
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Utility -
PlantUtility:
Electric plant in service -
Electric $5,032,675 $4,866,152$5,295,381 $5,123,781
Gas 540,874 515,074plant in service 613,122 597,494
Other 458,547 409,711
---------------- ----------------
6,032,096 5,790,937
Less -plant in service 530,456 517,938
Accumulated depreciation 3,077,459 2,852,605(3,573,407) (3,374,867)
----------------- ----------------
----------------
2,954,637 2,938,332Net plant 2,865,552 2,864,346
Construction work in progress 119,276 119,032
Nuclear fuel,263,096 111,069
Other, net of amortization 54,363 44,31668,340 62,194
----------------- ----------------
Total utility 3,196,988 3,037,609
----------------- ----------------
3,128,276 3,101,680
Other property, plantNon-regulated and equipment, net of accumulated
depreciationother, net:
International 171,179 157,743
Non-regulated generation 156,699 60,411
Integrated Services 73,983 79,202
Investments 54,303 56,647
Corporate Services and amortization of $184,722other 76,055 50,566
----------------- ----------------
Total non-regulated and $178,248, respectively 357,758 355,100other 532,219 404,569
----------------- ----------------
----------------
3,486,034 3,456,780
----------------3,729,207 3,442,178
----------------- ----------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 113,669 31,82763,872 68,400
Restricted cash 9,686 34,421
Accounts receivable:
Customer, less allowance for doubtful accounts of $2,253$12,721 and $2,518, respectively 67,299 47,952$8,340 81,277 43,411
Unbilled utility revenues 48,033 55,01450,624 71,388
Other, less allowance for doubtful accounts of $954$845 and $490, respectively 30,095 26,054
Notes receivable, less allowance for doubtful
accounts of $153 and $120, respectively 6,328 13,392$319 60,107 72,912
Income tax refunds receivable 14,611 14,82697,469 25,401
Production fuel, at average cost 49,657 54,14063,126 54,707
Materials and supplies, at average cost 52,440 53,49058,603 54,401
Gas stored underground, at average cost 23,151 26,01362,797 57,114
Regulatory assets 33,439 30,796
Prepaid gross receipts tax 20,864 22,22246,076 19,632
Assets of discontinued operations (Note 16) 944,328 540,187
Other 26,400 15,94176,183 66,882
----------------- ----------------
----------------
485,986 391,667
----------------1,614,148 1,108,856
----------------- ----------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Investments:
InvestmentInvestments in McLeodUSA Inc. 1,123,790 320,280unconsolidated foreign entities 373,816 508,145
Nuclear decommissioning trust funds 271,258 225,803
Investments344,892 332,953
Investment in foreign entities 198,055 68,882
Other 59,866 54,776ATC and other 217,992 243,804
----------------- ----------------
----------------
1,652,969 669,741
----------------936,700 1,084,902
----------------- ----------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 263,610 284,467302,365 241,973
Deferred charges and other 187,084 156,682418,975 360,016
----------------- ----------------
----------------
450,694 441,149
----------------721,340 601,989
----------------- ----------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total assets $6,075,683 $4,959,337
================$7,001,395 $6,237,925
================= ================
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
60
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
December 31,
CAPITALIZATION AND LIABILITIES 1999 19982002 2001
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See Consolidated Statements of Capitalization):
Common stock $790 $776- $0.01 par value - authorized 200,000,000 shares;
outstanding 92,304,220 and 89,682,334 shares, respectively $923 $897
Additional paid-in capital 942,408 905,1301,293,919 1,239,793
Retained earnings 577,464 537,372758,187 832,293
Accumulated other comprehensive income 634,903 163,017loss (209,943) (152,434)
Shares in deferred compensation trust - 239,467 and 71,958 shares
at an average cost of $28.80 and $30.68 per share, respectively (6,896) (2,208)
------------------ ------------------
Total common equity 2,155,565 1,606,2951,836,190 1,918,341
------------------ ------------------
Cumulative preferred stock of subsidiaries, net 113,638 113,498205,063 113,953
Long-term debt (excluding current portion) 1,486,765 1,543,1312,637,803 2,457,941
------------------ ------------------
3,755,968 3,262,9244,679,056 4,490,235
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 54,795 63,41446,591 10,506
Variable rate demand bonds 55,100 56,97555,100
Commercial paper 374,673 64,500
Notes payable 50,046 51,784
Capital lease obligations 13,321 11,978195,500 68,389
Other short-term borrowings 113,721 84,318
Accounts payable 191,149 204,297286,690 221,823
Accrued taxes 78,825 84,921106,015 87,099
Liabilities of discontinued operations (Note 16) 134,999 60,913
Other 115,716 111,685187,902 174,224
------------------ ------------------
933,625 649,5541,126,518 762,372
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 1,018,482 691,624626,417 607,552
Accumulated deferred investment tax credits 71,857 77,31354,375 59,398
Pension and other benefit obligations 181,010 96,496
Environmental liabilities 65,327 68,399
Customer advances 38,096 37,171
Capital lease obligations 26,041 13,75548,730 45,144
Other 166,287 158,597241,864 133,617
------------------ ------------------
1,386,090 1,046,8591,152,396 942,207
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Minority interest 43,425 43,111
------------------ ------------------
- ------------------------------------------------------------------------------------------------------------------
Commitments and Contingenciescontingencies (Note 12)11)
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $6,075,683 $4,959,337$7,001,395 $6,237,925
================== ==================
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
61
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1999 1998 19972002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $196,581 $96,675 $144,578$106,881 $172,362 $398,662
Adjustments to reconcile net income to net cash flows from operating activities:
Income from discontinued operations, net of tax (30,612) (58,985) (51,039)
Depreciation and amortization 279,088 279,505 259,663
Amortization of nuclear fuel 17,494 17,869 18,308
Amortization of deferred energy efficiency expenditures 25,435 27,083 15,786310,617 302,643 296,732
Other amortizations 51,567 52,724 63,214
Deferred taxestax expense (benefit) and investment tax credits (16,258) (27,720) (11,661)
Refueling outage provision (5,150) (4,001) 9,290
Impairment of oil and gas properties 3,276 9,678 9,902
Impairment of regulatory assets - 8,969 -
Gain(credit) 9,145 (20,099) 111,103
Losses (gains) on dispositiondispositions of assets, net (61,667) (6,505) (1,463)123 (4,446) (11,780)
Equity loss (income) from unconsolidated investments, net 12,825 (18,799) (19,468)
Distributions from equity method investments 21,671 16,961 7,389
Non-cash valuation charges 66,379 33,706 2,897
Cumulative effect of changes in accounting principle, net of tax - 12,868 (16,708)
Gain on reclassification of investment - - (321,349)
Other 902 2,889 6,931(29,594) (5,297) (2,922)
Other changes in assets and liabilities:
Accounts receivable (16,407) 15,349 18,638
Notes3,010 79,470 (133,776)
Income tax refunds receivable 7,064 10,018 (3,621)
Production fuel 4,483 (13,484) 2,814(72,067) (6,485) (5,917)
Gas stored underground (5,683) (15,755) (18,208)
Accounts payable (13,148) 11,663 (27,726)38,788 (52,827) 96,012
Accrued taxes (6,096) 5,998 13,375
Benefit obligations and other 7,532 33,776 8,67518,915 11,734 3,392
Manufactured gas plants insurance refunds - (21,541) -
Other 42,075 (52,123) (5,144)
-------------- ----------------------------- --------------
Net cash flows from operating activities 423,129 467,762 463,489544,040 426,111 393,090
-------------- ----------------------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends declared (156,489) (140,679) (145,631)
Dividends payable 13 (15,458) 285(180,987) (158,231) (157,964)
Proceeds from issuance of common stock 36,491 33,832 15,53556,066 288,553 1,069
Proceeds from issuance of preferred stock of subsidiary 144,602 - -
Redemption of preferred stock of subsidiary (56,389) - -
Net change in Resources' credit facility (113,657) 70,492 9,908(383,610) 63,110 181,652
Proceeds from issuance of exchangeable senior notes - - 402,500
Proceeds from issuance of other long-term debt 281,299 77,544 295,000300,023 513,530 107,747
Reductions in other long-term debt (95,520) (27,663) (146,590)(20,818) (145,359) (53,572)
Net change in commercial paper and other short-term borrowings 169,587 (40,216) (109,884)
Principal payments under capital lease obligations (12,887) (13,250) (12,964)200,145 (320,449) 147,277
Net change in loans to discontinued operations 49,320 (39,556) (87,112)
Other (5,744) (2,333) (2,410)
-------------- --------------(24,262) (31,073) (28,534)
---------------- --------------- --------------
Net cash flows from (used for) financing activities 103,093 (57,731) (96,751)
-------------- --------------84,090 170,525 513,063
---------------- --------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Utility (285,668) (269,133) (256,760)Regulated domestic utilities (404,736) (340,789) (304,656)
Non-regulated businesses (192,905) (102,925) (71,280)
Deferred energy efficiency expenditures - - (13,344)(218,282) (332,253) (529,675)
Corporate Services and other (33,774) (40,019) (11,123)
Nuclear decommissioning trust funds (22,923) (22,100) (20,305) (17,435)(22,100)
Proceeds from dispositionformation of assets 93,443 16,677 15,993
Shared savings program (35,846) (27,780) (17,610)ATC and other asset dispositions 27,644 107,934 30,890
Other (1,304) (2,067) (1,790)
-------------- --------------19,413 (29,035) (32,589)
---------------- --------------- --------------
Net cash flows used for investing activities (444,380) (405,533) (362,226)
-------------- --------------(632,658) (656,262) (869,253)
---------------- --------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 81,842 4,498 4,512
-------------- --------------(4,528) (59,626) 36,900
---------------- --------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 31,827 27,329 22,817
-------------- --------------68,400 128,026 91,126
---------------- --------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $113,669 $31,827 $27,329
============== ==============$63,872 $68,400 $128,026
================ =============== ==============
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flowflows information:
Cash paid during the period for:
Interest $130,214 $126,376 $117,255
============== ==============$184,146 $180,356 $158,850
================ =============== ==============
Income taxes, $141,150 $84,916 $69,272
============== ==============net of refunds $29,359 $70,895 $117,226
================ =============== ==============
Noncash investing and financing activities:
Capital lease obligations incurred $25,040 $1,426 $16,781
============== ==============and other $19,101 $19,967 $20,419
================ =============== ==============
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
62
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
1999 19982002 2001
- --------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Common equity:
Common stock - $.01 par value - authorized 200,000,000 shares;
outstanding 78,984,014 and 77,630,043 shares, respectively $790 $776
Additional paid-in capital 942,408 905,130
Retained earnings 577,464 537,372
Accumulated other comprehensive income 634,903 163,017
----------------equity $1,836,190 $1,918,341
-----------------
2,155,565 1,606,295
---------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock of subsidiaries:
Par/Stated Authorized Shares Mandatory
Value Shares Outstanding Series Redemption
$ 100 * 449,765 4.40%subsidiaries, net (Note 7(b)) 205,063 113,953
----------------- -----------------
- 6.20% No 44,977 44,977
$ 25 * 599,460 6.50% No 14,986 14,986
$ 50 466,406 366,406 4.30% - 6.10% No 18,320 18,320
$ 50 ** 216,381 4.36% - 7.76% No 10,819 10,819
$ 50 ** 545,000 6.40% Yes *** 27,250 27,250
---------------- -----------------
116,352 116,352
Less: unamortized expenses (2,714) (2,854)
---------------- -----------------
113,638 113,498
---------------- -----------------
* 3,750,000 authorized shares in total
** 2,000,000 authorized shares in total
*** $53.20 mandatory redemption price
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Long-term debt:
IES Utilities Inc. -First Mortgage Bonds:
7.75%, due 2004 62,000 62,000
1.85% variable rate at December 31, 2002 to 7.6% fixed rate, due 2005 88,000 88,000
7-1/4% to 8%, due 2007 52,450 52,450
1.6% variable rate at December 31, 2002, due 2014 8,500 8,500
1.85% to 2.1% variable rate at December 31, 2002, due 2015 30,600 30,600
8-5/8%, due 2021 20,000 20,000
7-5/8%, due 2023 94,000 94,000
8.6%, due 2027 70,000 70,000
----------------- -----------------
425,550 425,550
Collateral Trust Bonds:
7.65% series, due 2000 50,000 50,000
7.25% series,, due 2006 60,000 60,000
6-7/8% series,, due 2007 55,000 55,000
6% series,, due 2008 50,000 50,000
5.5% to 7% series,, due 2023 50,000 50,000
5.5% series, due 2023 19,400 19,400
----------------69,400 69,400
----------------- 284,400 284,400
First Mortgage-----------------
234,400 234,400
Pollution Control Revenue Bonds:
Series Y, 8-5/8%5.75% to 6.35%, due 2001 60,000 60,000
Series Z, 7.6%,partially retired in 1999 - 50,000
9-1/8% series,2002, due 2001 21,000 21,000
7-1/4% series, due 2007 30,000 30,000
---------------- -----------------
111,000 161,000
Pollution control obligations:
5.75%, due serially 20002003 to 2003 2,996 3,136
Variable2012 14,930 15,490
2.8% variable rate (5.45% at December 31, 1999)2002 to 6.35% fixed rate, due 2003 to 2023 10,100 10,100
4.05% to 4.30% through 2004 fixed/variable rate, due 2005 to 2023 25,900 25,900
----------------- -----------------
50,930 51,490
Other long-term debt:
Senior notes, 9.75%, due 20002013 300,000 -
Senior notes, 7%, due 2011 300,000 300,000
Senior notes, 7.375%, due 2009 250,000 250,000
Senior notes, 8.59%, due 2004 24,000 24,000
Exchangeable senior notes, 7.25% through February 2003, 2.5% thereafter, due 2030 402,500 402,500
Senior debentures, 6-5/8% to 6-3/4%, due 2009 to 2011 335,000 335,000
Debentures, 5.7% to 7-5/8%, due 2007 to 2010 11,100 11,100
Variable/fixed rate series 1998 (4.25% through 2003),265,000 265,000
Whiting credit facility, 3.63% at December 31, 2002, due 2023 10,000 10,000
---------------- -----------------
24,096 24,2362005 185,000 -
Subordinated Deferrable Interest Debentures,deferrable interest debentures, 7-7/8%, due 2025 50,000 50,000
Senior Debentures, 6-5/8%Multifamily housing revenue bonds, 1.75% variable rate at December 31, 2002, due 2036 34,075 34,075
Multifamily housing revenue bonds, 7% to 7.55%, due 2009 135,000 135,000
----------------2003 to 2024 4,755 4,841
Resources' credit facility, 3% to 3.45% at December 31, 2001, retired in 2002 - 383,610
Other, 1% to 11.34%, due 2003 to 2045 251,841 116,814
----------------- -----------------
3,113,051 2,877,280
----------------- -----------------
Less:
Current maturities (46,591) (10,506)
Variable rate demand bonds (55,100) (55,100)
Unamortized debt discount, net (373,557) (353,733)
----------------- -----------------
Total IES Utilities Inc. 604,496 654,636
----------------long-term debt (excluding current portion) 2,637,803 2,457,941
----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------
Total capitalization $4,679,056 $4,490,235
================= =================
- --------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
63
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CAPITALIZATION (Continued)
December 31,
1999 1998CHANGES IN COMMON EQUITY
Accumulated
Other Shares in
Additional Comprehensive Deferred Total
Common Paid-In Retained Income Compensation Common
Stock Capital Earnings (Loss) Trust Equity
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Wisconsin Power and Light Company
2000:
Beginning balance (a) $790 $942,408 $577,464 $634,903 $- $2,155,565
Net income 398,662 398,662
Unrealized holding losses on securities, net of tax of ($77,853) (105,292) (105,292)
Less: adjustment for gain on reclassification of investments
included in net income, net of tax of $134,053 187,296 187,296
Less: reclassification adjustment for other gains included
in net income, net of tax of $8,426 16,370 16,370
---------- ------------
Net unrealized losses on securities (308,958) (308,958)
---------- ------------
Foreign currency translation adjustments (50,400) (50,400)
---------- ------------
Unrealized holding losses on derivatives due to cumulative
effect of a change in accounting principle, net of
tax of ($4,693) (6,582) (6,582)
Other unrealized holding losses on derivatives, net of
tax of ($2,560) (3,427) (3,427)
Less: reclassification adjustment for losses included
in net income, net of tax of ($4,502) (6,331) (6,331)
---------- ------------
Net unrealized losses on qualifying derivatives (3,678) (3,678)
---------- ------------
Total comprehensive income 35,626
Common stock dividends (157,964) (157,964)
Common stock issued 5,096 (851) 4,245
----------- ----------- --------- ---------- -------- ------------
Ending balance 790 947,504 818,162 271,867 (851) 2,037,472
2001:
Net income 172,362 172,362
Unrealized holding losses on securities, net of
tax of ($240,579) (343,285) (343,285)
Less: reclassification adjustment for gains
included in net income, net of tax of $-- 259 259
---------- ------------
Net unrealized losses on securities (343,544) (343,544)
---------- ------------
Foreign currency translation adjustments (66,830) (66,830)
---------- ------------
Minimum pension liability adjustments, net of tax of ($11,022) (16,378) (16,378)
---------- ------------
Unrealized holding losses on derivatives, net of
tax of ($1,569) (1,003) (1,003)
Less: reclassification adjustment for losses included
in net income, net of tax of ($2,078) (3,454) (3,454)
---------- ------------
Net unrealized gains on qualifying derivatives 2,451 2,451
---------- ------------
Total comprehensive loss (251,939)
Common stock dividends (158,231) (158,231)
Common stock issued 107 292,289 (1,357) 291,039
----------- ----------- --------- ---------- -------- ------------
Ending balance 897 1,239,793 832,293 (152,434) (2,208) 1,918,341
2002:
Net income 106,881 106,881
Unrealized holding losses on securities, net of tax of ($8,544) (11,069) (11,069)
Less: reclassification adjustment for losses
included in net income, net of tax of ($14,393) (23,146) (23,146)
---------- ------------
Net unrealized gains on securities 12,077 12,077
---------- ------------
Foreign currency translation adjustments, net of tax (37,785) (37,785)
---------- ------------
Minimum pension liability adjustments, net of tax of ($18,874) (27,226) (27,226)
---------- ------------
Unrealized holding losses on derivatives, net of tax of ($2,765) (2,671) (2,671)
Less: reclassification adjustment for gains
included in net income, net of tax of $1,658 1,904 1,904
---------- ------------
Net unrealized losses on qualifying derivatives (4,575) (4,575)
---------- ------------
Total comprehensive income 49,372
Common stock dividends (180,987) (180,987)
Common stock issued 26 58,338 (4,688) 53,676
Redemption of preferred stock of subsidiary (4,212) (4,212)
--------- ----------- --------- ---------- -------- ------------
Ending balance $923 $1,293,919 $758,187 ($209,943) ($6,896) $1,836,190
========= =========== ========= ========== ======== ============
- First Mortgage Bonds:
1984 Series A, variable rate (5.00%------------------------------------------------------------------------------------------------------------------------------------
(a) Accumulated other comprehensive income (loss) at December 31, 1999), due 2014 $8,500 $8,500
1988 Series A, variable rate (5.60% at December 31, 1999), due 2015 14,600 14,600
1990 Series V, 9.3%, due 2025 27,000 27,000
1991 Series A-D, variable rate (4.75% at December 31, 1999), due 2000 to 2015 33,875 33,875
1992 Series W, 8.6%, due 2027 90,000 90,000
1992 Series X, 7.75%, due 2004 62,000 62,000
1992 Series Y, 7.6%, due 2005 72,000 72,000
----------------- ----------------
307,975 307,975
Unsecured Debt:
Debentures, 7%, due 2007 105,000 105,000
Debentures, 5.7%, due 2008 60,000 60,000
----------------- ----------------
Total Wisconsin Power1999 consisted of $644,481 of net unrealized gains on securities
and Light Company 472,975 472,975
----------------- ----------------
Interstate Power Company -
First Mortgage Bonds:
8% series, due 2007 25,000 25,000
8-5/8% series, due 2021 25,000 25,000
7-5/8% series, due 2023 94,000 94,000
----------------- ----------------
144,000 144,000
Pollution Control Revenue Bonds:
6-3/8%, retired in 1999 - 10,950
5.75%, due 2003 1,000 1,000
6.25%, due 2009 1,000 1,000
6.30%, due 2010 5,600 5,600
6.35%, due 2012 5,650 5,650
Variable/fixed rate series 1998 (4.30% through 2003), due 2005 to 2008 4,950 4,950
Variable/fixed rate series 1999 (4.05% through 2004), due 2010 3,250 -
Variable/fixed rate series 1999 (4.20% through 2004), due 2013 7,700 -
----------------- ----------------
29,150 29,150
----------------- ----------------
Total Interstate Power Company 173,150 173,150
----------------- ----------------
Alliant Energy Resources, Inc. -
Credit facility - 252,505
7-3/8% senior notes, due 2009 250,000 -
Multifamily Housing Revenue Bonds issued by various housing and
community development authorities, 4.75% - 7.55%, due 2000 to 2036 34,095 35,494
Other subsidiaries' debt, 0% - 10.75%, due 2000 to 2042 45,926 57,579
----------------- ----------------
Total Alliant Energy Resources, Inc. 330,021 345,578
----------------- ----------------
Alliant Energy Corporation -
8.59% senior notes, due 2004 24,000 24,000
----------------- ----------------
1,604,642 1,670,339
----------------- ----------------
Less:
Current maturities (54,795) (63,414)
Variable rate demand bonds (55,100) (56,975)
Unamortized debt premium and (discount), net (7,982) (6,819)
----------------- ----------------
Total long-term debt 1,486,765 1,543,131
----------------- ----------------
- ---------------------------------------------------------------------------------------------------------------------------
Total capitalization $3,755,968 $3,262,924
================= ================
- ---------------------------------------------------------------------------------------------------------------------------($9,578) of foreign currency translation adjustments.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
64
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Common
Stock Capital Earnings Income (Loss) Equity
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
1997:
Beginning balance (a) $758 $850,848 $582,429 ($809) $1,433,226
Comprehensive income:
Net income 144,578 144,578
Other comprehensive income (loss):
Unrealized gains on securities, net of tax (b) 174,688 174,688
Foreign currency translation adjustments (20) (20)
Minimum pension liability adjustment, net of tax (c) (347) (347)
-------------
Total comprehensive income 318,899
Common stock dividends (145,631) (145,631)
Common stock issued 7 18,138 18,145
Treasury stock (83) (83)
-------------- ------------- ------------- --------------- -------------
Ending balance 765 868,903 581,376 173,512 1,624,556
1998:
Comprehensive income:
Net income 96,675 96,675
Other comprehensive income (loss):
Unrealized losses on securities, net of tax (b) (4,589) (4,589)
Foreign currency translation adjustments (7,062) (7,062)
Minimum pension liability adjustment, net of tax (c) 1,156 1,156
-------------
Total comprehensive income 86,180
Common stock dividends (140,679) (140,679)
Common stock issued 11 36,263 36,274
Treasury stock (36) (36)
-------------- ------------- ------------- --------------- -------------
Ending balance 776 905,130 537,372 163,017 1,606,295
1999:
Comprehensive income:
Net income 196,581 196,581
Other comprehensive income (loss):
Unrealized gains on securities:
Unrealized holding gains arising
during period, net of tax (b) 499,668 499,668
Less: reclassification adjustment for gains
included in net income, net of tax of $14,986 (25,286) (25,286)
--------------- -------------
Net unrealized gains 474,382 474,382
--------------- -------------
Foreign currency translation adjustments (2,496) (2,496)
-------------
Total comprehensive income 668,467
Common stock dividends (156,489) (156,489)
Common stock issued 14 37,278 37,292
-------------- ------------- ------------- --------------- -------------
Ending balance $790 $942,408 $577,464 $634,903 $2,155,565
============== ============= ============= =============== =============
- -----------------------------------------------------------------------------------------------------------------------------------
(a) The beginning accumulated other comprehensive income (loss) balance was all
related to Alliant Energy's minimum pension liability adjustment.
(b) Net of tax expense (benefit) of $124,271, ($3,218) and $351,314 in 1997, 1998 and 1999, respectively.
(c) Net of tax expense (benefit) of ($243) and $808 in 1997 and 1998, respectively.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
65
ALLIANT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General - The Consolidated Financial Statementsconsolidated financial statements include the accounts of
Alliant Energy and its consolidated subsidiaries. Alliant Energy is an
investor-owned public utility holding company, incorporated in Wisconsin, whose primary subsidiaries are
IESU,IP&L, WP&L, IPC, Resources and Corporate Services. On Jan. 1, 2002, IPC merged
with and into IESU and IESU changed its name to IP&L. Since IPC and IESU
were both wholly-owned operating subsidiaries of Alliant Energy, the
transaction had no impact on the consolidated financial statements. IP&L and
WP&L and IPCare utility subsidiaries that are engaged principally in the generation,
transmission, distribution and sale of electric energy; the purchase,
distribution, transportation and sale of natural gas; and the provision of
steam and water and steam services in
selective markets. The principal markets of IESU, WP&L and IPC are located in Iowa, Wisconsin, Minnesota and Illinois.
Resources (through its numerous direct and indirect subsidiaries) is
comprised of various business units: International, Non-regulated
Generation, Integrated Services, Investments and Energy Technologies.
International holds interests in global partnerships to develop energy
generation, delivery and infrastructure in growing international markets,
including Australia, Brazil, China and New Zealand. Alliant Energy is,
however, currently in the process of selling its investments in Australia.
Non-regulated Generation intends to build or acquire a portfolio of
competitive electric generating assets in select business areas of the U.S.
Integrated Services provides a wide range of energy products and environmental
services to
domesticfor commercial, industrial, institutional, educational and
international markets; provides industrial services including
environmental, engineeringgovernmental customers. Investments includes ownership of an oil and gas
production company, transportation services;companies, affordable-housing properties
and various other investments. Alliant Energy is, however, currently in the
process of selling its oil and gas and affordable housing businesses. Energy
Technologies invests in affordable
housing initiatives;leading-edge energy technologies, such as
microturbines, fuel cells, solar concepts and investswind turbines. Mass Marketing
has interests in various other strategic initiatives.energy marketing businesses. In January 2003, Alliant
Energy committed to a plan to sell SmartEnergy, an internet-based energy
retailer, and Alliant Energy is in the process of disbanding its Mass
Marketing business unit. Corporate Services is the subsidiary formed to
provide administrative services to Alliant Energy and its subsidiaries as
required under PUHCA.
At Dec. 31, 2002, the assets and liabilities of Alliant Energy's oil and gas
(Whiting), Australian (including Southern Hydro) and affordable housing
businesses were classified as held for sale. The operating results for these
non-regulated businesses for all periods presented have been separately
classified and reported as discontinued operations in Alliant Energy's
Consolidated Financial Statements and Notes to Consolidated Financial
Statements. Refer to Note 16 for additional information.
The consolidated financial statements reflect investments in controlled
subsidiaries on a consolidated basis. All significant intercompany balances
and transactions, other than certain energy-related transactions affecting
IESU, WP&L and IPC,the utility subsidiaries, have been eliminated from the Consolidated Financial
Statements.consolidated
financial statements. Such energy-related transactions not eliminated are
made at prices that approximate market value and the associated costs are
recoverable from customers through the rate making process. The consolidated
financial statements are prepared in conformity with generally accepted accounting principles,GAAP, which give
recognition to the rate making and accounting practices of FERC and state
commissions having regulatory jurisdiction. Certain prior period amounts have
been reclassified on a basis consistent with the current year presentation.
Unconsolidated investments for which Alliant Energy has at least a 20% voting
interest are generally accounted for under the equity method of accounting.
These investments are stated at acquisition cost, increased or decreased for
Alliant Energy's equity in net income or loss, which is included in
"Miscellaneous, net" in the Consolidated Statements of Income and decreased for
any dividends received. Investments that do not meet the criteria for
consolidation or the equity method of accounting are accounted for under the
cost method.
The preparation of the
consolidated financial statements requires management to make estimates and
assumptions that affect: a) the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the
financial statements; and b) the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Certain prior period amounts have been reclassified on a basis
consistent with the current year presentation.
Unconsolidated investments for which Alliant Energy has at least a 20%
non-controlling voting interest are generally accounted for under the equity
method of accounting. These investments are stated at acquisition cost,
increased or decreased for Alliant Energy's equity in net income or loss,
which is included in "Equity (income) loss from unconsolidated investments"
in the Consolidated Statements of Income and decreased for any dividends
received. These investments are also increased or decreased for Alliant
Energy's proportionate share of the investee's other comprehensive income
(loss), which is included in "Accumulated other comprehensive loss" on the
Consolidated Balance Sheets. Investments that do not meet the criteria for
consolidation or the equity method of accounting are accounted for under the
cost method. Refer to Note 9 for discussion of Alliant Energy's cost method
investments that are marked-to-market in accordance with SFAS 115.
65
(b) Regulation - Alliant Energy is a registered public utility holding
company subject to regulation by the SEC under PUHCA. IESU, WP&L and IPCThe utility
subsidiaries are subject to regulation by theunder PUHCA, FERC and their respective
state regulatory commissions (IUB, PSCW, MPUC and ICC).commissions.
(c) Regulatory Assets and Liabilities - IESU, WP&L and IPC areAlliant Energy is subject to the
provisions of SFAS 71, "Accounting for the Effects of Certain Types of
Regulation.Regulation," SFAS 71which provides that rate-regulated public utilities record
certain costs and credits allowed in the rate making process in different
periods than for unregulatednon-regulated entities. These are deferred as regulatory
assets or accrued as regulatory liabilities and are recognized in the
Consolidated Statements of Income at the time they are reflected in rates.
At DecemberAs of Dec. 31, 19992002, IP&L and 1998,WP&L had approximately $7 million and $6
million, respectively, of regulatory assets of
$297.0 millionthat were not earning returns.
At Dec. 31, 2002 and $315.3 million, respectively,2001, regulatory assets and liabilities were comprised
of the following items (in millions):
IESU WP&L IPC
-------------------- --------------------- ------------------
1999 1998 1999 1998 1999 1998Regulatory Assets Regulatory Liabilities
----------------------- -------------------------
2002 2001 2002 2001
---------- --------- ----------- ----------
---------- -------- ---------
Tax-related (Note 1(d)) $83.0 $81.4 $43.4 $49.3 $29.7 $29.8$177.6 $115.3 $83.8 $15.1
Environmental-related 64.9 63.1 5.1 5.2
Energy efficiency program costs 22.2 39.8 7.046.7 39.9 -- 23.9 25.9
Environmental liabilities (Note 12(f)) 32.4 35.2 19.1 19.5 15.7 17.5--
Other 4.0 5.0 16.4 11.2 0.2 0.759.2 43.3 22.3 11.4
---------- --------- ----------- ----------
---------- -------- ---------
$141.6 $161.4 $85.9 $80.0 $69.5 $73.9$348.4 $261.6 $111.2 $31.7
========== ========= =========== ========== ========== ======== =========
66
Refer to the individual notes referenced above for a further discussion of
certain items reflected in regulatory assets.
If a portion of IESU's, WP&L's
or IPC'sthe utility subsidiaries' operations becomebecomes no longer
subject to the provisions of SFAS 71 as a result of competitive restructuring
or otherwise, a write-down of related regulatory assets would be required,
unless some form of transition cost recovery is established by the
appropriate regulatory body that would meet the requirements under generally accepted accounting principlesGAAP for
continued accounting as regulatory assets during such recovery period. In
addition, IESU, WP&L or IPCeach utility subsidiary would be required to determine any
impairment toof other assets and write-down such assets to their fair value.
(d) Income Taxes - Alliant Energy is subject to the provisions of SFAS 109,
"Accounting for Income Taxes," and follows the liability method of accounting
for deferred income taxes, which requires the establishment of deferred tax
assets and liabilities, as appropriate, for all temporary differences between
the tax basis of assets and liabilities and the amounts reported in the
consolidated financial statements. Deferred taxes are recorded using
currently enacted tax rates.
Except as noted below, income tax expense includes provisions for deferred
taxes to reflect the tax effects of temporary differences between the time
when certain costs are recorded in the accounts and when they are deducted
for tax return purposes. As temporary differences reverse, the related
accumulated deferred income taxes are reversed to income. Investment tax
credits have been deferred and are subsequently credited to income over the
average lives of the related property. As part of the affordable housing and
oil and gas production businesses, Alliant Energy is eligible to claim certain
tax credits. TheseOther tax credits reduce current federal taxesincome tax
expense in the year claimed and are generally related to the extent
Alliant Energy has consolidated taxes payable.nonconventional fuel
and research and development.
Consistent with Iowa rate making practices for IESU and IPC,IP&L, deferred tax expense is
not recorded for certain temporary differences (primarily related to utility
property, plant and equipment). As the deferred taxes become payable (over
periods exceeding 30 years for some generating plant differences) they are
recovered through rates. Accordingly, IESU and IPC haveIP&L has recorded deferred tax
liabilities and regulatory assets for certain temporary differences, as
identified in Note 1(c). In Wisconsin, the PSCW has allowed rate recovery of
deferred taxes on all temporary differences since August 1991. WP&L
established a regulatory asset associated with those temporary differences
occurring prior to August 1991 that will be recovered in future rates.
Alliant Energy files a consolidated federal income tax return. Under the
terms of an agreement between Alliant Energy and its subsidiaries, the
subsidiaries calculate their respective federal income tax provisions and make
payments to or receive payments from Alliant Energy as if they were separate
taxable entities.rates through
2007.
(e) Common Shares Outstanding - WeightedA reconciliation of the weighted average
common shares outstanding used to calculatein the basic and diluted earnings per share
for 1999, 1998 and 1997
werecalculation was as follows:
Weighted Average 1999 1998 1997
- -------------------------------------------------------------------- -------------average common shares outstanding: 2002 2001 2000
-------------- ------------- -------------
Common shares outstanding - basicBasic earnings per share calculation 78,352,186 76,912,219 76,209,93590,896,885 80,497,823 79,002,643
Effect of dilutive securities 42,961 16,412 2,138
Common shares - diluted62,177 138,006 190,134
-------------- ------------- -------------
Diluted earnings per share calculation 78,395,147 76,928,631 76,212,07390,959,062 80,635,829 79,192,777
============== ============= =============
66
In 1999, 1,275,3552002, 2001 and 2000, 3,338,978, 1,501,854, and 1,358,597 options,
respectively, to purchase shares of common stock, with an average exercise
priceprices of $30.55,$29.67, $31.08, and $30.27, respectively, were excluded from the
calculation of diluted earnings per share as the exercise prices were greater
than the average market price.
(f) Temporary Cash Investments and Restricted Cash - Temporary cash
investments are stated at cost, which approximates market value, and are
considered cash equivalents for the Consolidated Balance Sheets and the
Consolidated Statements of Cash Flows. These investments consist of
short-term liquid investments that have maturities of less than 90 days from
the date of acquisition. At Dec. 31, 2002 and 2001, restricted cash was
primarily related to borrowing requirements for the construction of various
power plants in China.
(g) Depreciation of Utility Property, Plant and Equipment - IESU, WP&L and
IPCThe utility
subsidiaries use a combination of remaining life, straight-line and
straight-linesum-of-the-years-digits depreciation methods as approved by their respective
regulatory commissions. The remaining life of DAEC, of which IESUIP&L is a
co-owner, is based on the NRC license end-of-life of 2014. The remaining
depreciable life of Kewaunee, of which WP&L is a co-owner, is based on the
PSCW approved revised end-of-life of 2002 (prior to May 1997 the
calculation was based on the NRC license end-of-life of 2013).2010. Depreciation
67
expense related to
the decommissioning of DAEC and Kewaunee is discussed in Note 12(h)11(f). The
average rates of depreciation for electric and gas properties, of IESU, WP&L and IPC, consistent
with current rate making practices, were as follows:
IESUIP&L WP&L
IPC
------------------------ ------------------------ -----------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------------------------ ------------------------ -------------------------------------------------------- ---------------------------------
2002 2001 2000 2002 2001 2000
---------- ----------- ---------- ---------- ----------- ----------
Electric 3.5%3.4% 3.5% 3.5% 3.6% 3.6% 3.6% 3.6% 3.6%3.7% 3.6%
Gas 2.9% 3.6% 3.5% 3.5% 3.5% 3.9% 3.8% 3.8% 3.6% 3.4% 3.4%4.1% 4.1% 4.1%
(h) Property, Plant and Equipment - Utility plant (other than acquisition
adjustments) is recorded at original cost, which includes overhead,
and
administrative costs and AFUDC. At DecemberDec. 31, 1999, IESU2002 and 2001, IP&L had $25.6$22.0
million and $23.2 million, respectively, of acquisition adjustments, net of
accumulated amortization, included in utility plant ($64.9 million and $5.2
million, respectively, of such balance isbalances are currently being recovered in
IESU'sIP&L's rates). The aggregate gross AFUDC which represents the cost during the construction period
of funds used for construction purposes, is capitalized as a component of the
cost of utility plant. The amount of AFUDC applicable to debt funds and to
other (equity) funds, a non-cash item, isrecovery rates, computed in
accordance with the prescribed FERC formula. These capitalized costs are recovered in rates as
the cost of the utility plant is depreciated. The aggregate gross rates usedregulatory formula, were as follows:
1999 1998 1997
------------ ------------ ------------
IESU2002 2001 2000
------- ------- -------
IP&L 6.9% 7.7% 6.6%
WP&L 2.6% 7.9% 8.9% 6.7%
WP&L 5.4% 5.2% 6.2%
IPC 5.3% 7.0% 6.0%
Other10.8%
Non-regulated property, plant and equipment is recorded at original cost.
The majority of the non-regulated property, plant and equipment is
depreciated using the straight-line method over periods ranging from five to
20 years. Upon retirement or sale of other property and equipment, the cost and
related accumulated depreciation are removed from the accounts and any gain
or loss is included in "Miscellaneous, net" in the Consolidated Statements of
Income.
Normal repairs, maintenance and minor items of utility plant and other
property, plant and equipment are expensed. Ordinary retirements of utility plant, including removal costs less
salvage value, are charged to accumulated depreciation upon removal from
utility plant accounts and no gain or loss is recognized.
(i) Operating Revenues - Revenues from IP&L and WP&L are primarily from the
sale and delivery of electricity and natural gas and are recorded under the
accrual method of accounting and recognized upon delivery. Revenues from
Alliant Energy's non-regulated businesses are primarily from the sale of
energy or services and are recognized based on output delivered or services
provided as specified under contract terms. Alliant Energy accrues revenues
for services rendered but unbilled at month-end in order to more properly match revenues
with expenses.month-end. In the third quarter of 1999,2000, Alliant Energy
recorded a $9an increase of $10 million increaseat WP&L in the estimate of utility
services rendered but unbilled at month-end. This change was a result ofmonth-end due to the implementation of
a refined estimation process compared with the unbilled revenues recorded at June 30,
1999 using the estimation process in effect at that time. In accordance with
an order from the PSCW, effective January 1, 1998, off-system gas sales for
WP&L are included in the Consolidated Statements of Income as a reduction of
the cost of gas sold rather than as gas revenues. Off-system gas sales at
WP&L were $12.8 million, $11.5 million and $11.1 million in 1999, 1998 and
1997, respectively.processes.
(j) Utility Fuel Cost Recovery - IESU's and IPC'sIP&L's retail tariffs provide for
subsequent adjustments to its electric and natural gas rates for changes in
the cost of fuel, and purchased energy and in the cost of natural gas purchased for resale.
Changes in the under/over collection of these costs are reflected in
"Electric and steam production fuels" and "Cost of utility gas sold" in the
Consolidated Statements of Income. The cumulative effects are reflected on
the Consolidated Balance Sheets as a current regulatory asset or current liability,
pending automatic reflection in future billings to customers. At IESU and
IPC, purchasedIP&L,
purchased-power capacity costs are not recovered from electric customers
through energy adjustment clauses.EACs. Recovery of these costs must be addressed in base rates in a
formal rate proceeding.
WP&L's retail electric rates are based in part on annual forecasted fuel and
purchased-power costs. Under PSCW rules, Wisconsin utilitiesWP&L can seek emergency rate
increases if the annual costs are more than 3% higher than the estimated
67
costs used to establish rates. Any collections in excess of costs incurred
will be refunded, with interest. Accordingly, WP&L has established a reserve
due to overcollection of past fuel and purchased-power costs and expects to
refund such amount in 2003. WP&L has a gas performance incentive which
includes a sharing mechanism whereby 40%50% of all gains and losses relative to
current commodity prices, as well as other benchmarks, are retained by WP&L,
rather thanwith the remainder refunded to or recovered from customers.
68
(k) Nuclear Refueling Outage Costs - The IUB allows IESUIP&L to collect, as part
of its base revenues, funds to offset other operation and maintenance
expenditures incurred during refueling outages at DAEC. As these revenues
are collected, an equivalent amount is charged to other operation and
maintenance expensesexpense with a corresponding credit to a reserve. During a
refueling outage, the reserve is reversed to offset the refueling outage
expenditures. Operating expenses incurred during refueling outages at
Kewaunee are expensed by WP&L as incurred. Scheduled refueling outages
occurred most recently at DAEC and Kewaunee in Spring and late 2001,
respectively. The next scheduled refueling outages at DAEC and Kewaunee are
anticipated to commence in Spring 2003.
(l) Nuclear Fuel - Nuclear fuel for DAEC is leased. Annual nuclear fuel
lease expenses include the cost of fuel, based on the quantity of heat
produced for the generation of electric energy,electricity, plus the lessor's interest costs
related to fuel in the reactor and administrative expenses. Nuclear fuel for
Kewaunee is recorded at its original cost and is amortized to expense based
upon the quantity of heat produced for the generation of electricity. This
accumulated amortization assumes spent nuclear fuel will have no residual
value. Estimated future disposal costs of such fuel are expensed based on
kilowatt-hoursKWhs generated. Refer to Note 3 for additional information on DAEC's nuclear
fuel lease.
(m) Translation of Foreign Currency - Assets and liabilities of
international investments, where the local currency is the functional
currency, have been translated at year-end exchange rates and related income
statement results have been translated using average exchange rates
prevailing during the year. Adjustments resulting from translation,
including gains and losses on intercompany foreign currency transactions
which are long-term in nature, and which Alliant Energy does not intend to
settle in the foreseeable future, have been recorded in "Accumulated other
comprehensive income.loss" on Alliant Energy's Consolidated Balance Sheets.
(n) Derivative Financial Instruments - From time to time, Alliant Energy uses derivative
financial instruments to hedge exposures to fluctuations in interest rates,
certain electric and gas commodity prices and volatility in a portion of
natural gas sales volumes due to weather. These instruments are usedAlliant Energy also utilizes
derivatives to mitigate risks and arethe equity price volatility associated with certain
investments in equity securities. Alliant Energy does not to be useduse such
instruments for speculative purposes. UnderThe fair value of all derivatives are
recorded as assets or liabilities on the deferral method of accounting,Consolidated Balance Sheets and
gains and losses related to derivatives that are designated as, and qualify
as hedges, are recognized in earnings when the underlying hedged item or
physical transaction is recognized in income. Gains and losses related to
derivatives that do not qualify for, or are not designated in hedge
relationships, are recognized in earnings immediately. The majority of
Alliant Energy's derivative transactions are in its regulated domestic
utility business and based on the fuel and natural gas cost recovery
mechanisms in place, as well as other specific regulatory authorizations,
changes in fair market values of such derivatives generally have no impact on
Alliant Energy's results of operations. Alliant Energy has a number of
commodity purchase and sales contracts that have been designated, and qualify
for, the normal purchase and sale exception in SFAS 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities - an Amendment
of SFAS 133." Based on this designation, these contracts are not accounted
for as derivative instruments.
Alliant Energy is exposed to losses related to financial instruments in the
event of counterparties' nonperformance.non-performance. Alliant Energy has established
controls to determine and monitor the creditworthiness of counterparties in
order to mitigate its exposure to counterparty credit risk. Alliant Energy
is not aware of any counterparties that will failmaterial exposure to meet their obligations.counterparty credit risk. Refer to
Note 1110 for a further discussion of Alliant Energy's derivative financial
instruments.
(2) MERGER
On April 21, 1998, IES, WPLH(o) Accounting for Stock Options - At Dec. 31, 2002, Alliant Energy had two
stock-based incentive compensation plans, which are described more fully in
Note 6(b). Alliant Energy accounts for stock options issued under these
plans under the recognition and IPC completedmeasurement principles of APB 25, "Accounting
for Stock Issued to Employees." No stock-based compensation cost is
reflected in net income in Alliant Energy's Consolidated Statements of
Income, as all options granted under those plans had an exercise price equal
to the quoted market price of the underlying common stock on the date of
grant. Alliant Energy adopted the disclosure provisions of SFAS 148
"Accounting for Stock-Based Compensation - Transition and Disclosure, an
amendment of SFAS 123," effective for financial statements for fiscal years
68
ending after Dec. 15, 2002. The effect on net income and EPS if Alliant
Energy had applied the fair value recognition provisions of SFAS 123,
"Accounting for Stock-Based Compensation," to the stock options issued under
these plans was as follows (in thousands):
2002 2001 2000
------------- ------------- -------------
Net income, as reported $106,881 $172,362 $398,662
Less: stock-based compensation expense, net of tax 2,541 2,446 1,284
------------- ------------- -------------
Pro forma net income $104,340 $169,916 $397,378
============= ============= =============
EPS (basic):
As reported $1.18 $2.14 $5.05
Pro forma $1.15 $2.11 $5.03
EPS (diluted):
As reported $1.18 $2.14 $5.03
Pro forma $1.15 $2.11 $5.02
(p) Pension Plan - For the defined benefit pension plan sponsored by
Corporate Services, Alliant Energy allocates pension costs and contributions
to IP&L, WP&L, Resources and the parent company based on labor costs of plan
participants and any additional minimum pension liability based on each
group's funded status.
(q) Asset Valuations - Long-lived assets, excluding goodwill and regulatory
assets, are reviewed for possible impairment whenever events or changes in
circumstances indicate the carrying value of the assets may not be recoverable.
Impairment is indicated if the carrying value of an asset exceeds its
undiscounted future cash flows. An impairment charge is recognized equal to the
amount the carrying value exceeds the asset's fair value. The fair value is
determined by the use of quoted market prices, appraisals, or the use of other
valuation techniques such as expected discounted future cash flows.
Goodwill represents the excess of the purchase price over the fair value of
the identifiable net tangible and intangible assets acquired in a merger forming Alliant
Energy.business
combination. Effective January 1, 2002 with the adoption of SFAS 142, "Goodwill
and Other Intangible Assets," goodwill is required to be evaluated for
impairment at least annually and more frequently if indicators of impairment
exist. If the fair value of a reporting unit is less than its carrying value,
including goodwill, an impairment charge may be necessary. The merger wasfair value of
reporting units is determined by utilizing a combination of market value
indicators and expected discounted future cash flows. Refer to Note 14 for
additional information.
If events or circumstances indicate the carrying value of investments
accounted for as a poolingunder the equity method of interestsaccounting may not be recoverable,
potential impairment is assessed by comparing the future anticipated cash
flows from these investments to their carrying values. The estimated fair
value less cost to sell of assets held for sale are compared each reporting
period to their carrying values. Impairment charges are recorded for equity
method investments and the
accompanying Consolidated Financial Statements, along with the related notes,
are presented asassets held for sale if the companiescarrying value of such
asset exceeds the future anticipated cash flows or the estimated fair value
less cost to sell, respectively.
(2) UTILITY RATE MATTERS
In 2002, IP&L filed electric and gas rate cases in Iowa. Interim rates,
subject to refund, were combined as of the earliest period
presented.
In association with the merger, Alliant Energy eliminated 167 positions in
1998. As a result, Alliant Energy recordedgranted for $15 million of expenses during
1998and $17 million for electric
and gas, respectively. IP&L expects final rates to be in "Other operation" expenseplace in June 2003
for the electric case and July 2003 for the gas case. Although it is
possible that final rates could be lower than interim rates, IP&L does not
believe this to be probable and therefore has not recorded any reserves
related to potential refund obligations.
In 2002 and 2001, WP&L had an electric fuel cost recovery mechanism that
required WP&L to refund any overcollection of fuel and purchased-power
costs. WP&L has recorded the employee separation benefitsnecessary reserve for refunds at Dec. 31, 2002
and 2001. In 2002, WP&L filed a rate case with FERC related to be paidits electric
wholesale customers. An interim rate increase, subject to the impacted employees.refund, of $6
million annually was granted effective April 2002. The bulkcase was subsequently
settled with final rates of the positions eliminated
were administrative in nature and resulted from no longer needing certain
duplicative positions given the consolidation of the three companies. The
departure dates$3 million annually. At Dec. 31, 2002, WP&L
recorded a reserve for the impacted employees varied based on the need for their
services during the transition period as well as certain other factors. The
balance of the accrual at December 31, 1999difference between interim and 1998 was $1.0 million and $5.7
million, respectively. As of December 31, 1999, all of the terminated
employees had actually left the organization. As of December 31, 1998, 156 of
the terminated employees had actually left the organization. The balance
remaining in the accrued liability at December 31, 1999 related to payments to
certain terminated executives that were being paid out over a 18-36 month
period pursuant to the terms of their respective severance agreements. The
only significant adjustments made to the liability after the initial accrual
were to reflect the actual payments of the employee separation benefits.
In association with the merger, Alliant Energy entered into a three-year
consulting agreement, which expires in the second quarter of 2001, with Wayne
Stoppelmoor, the Chief Executive Officer of IPC prior to the consummation of
the merger. Under the terms of the consulting agreement, Mr. Stoppelmoor, who
also serves as Vice Chairman of Alliant Energy's Board of Directors, receives
annual fees of $324,500, $324,500 and $200,000 for his services during the
respective periods of the agreement.final rates.
69
(3) LEASES
IESUIP&L has a capital lease covering its 70% undivided interest in nuclear fuel
purchased for DAEC. Future purchases of fuel may also be added to the fuel
lease. This lease provides for annual one-year extensions and IESU intends to
continue exercising such extensions. Interest costs under the lease are based
on commercial paper costs incurred by the lessor. IESU is responsible for the
payment of taxes, maintenance, operating cost, risk of loss and insurance
relating to the leased fuel. The lessor has a $45 million credit agreement
with a bank supporting the nuclear fuel lease. The agreement continues on a
year-to-year basis, unless either party provides at least a three-year notice
of termination; no such notice of termination has been provided by either
party. Annual nuclear fuel lease expenses (included in
"Electric and steam production fuels" in the Consolidated Statements of
Income) for 1999, 19982002, 2001 and 19972000 were $12.7$15.5 million, $14.2$14.1 million and $16.6$16.0
million, respectively. Alliant Energy's operating lease rental expenses,
which include certain purchased-power agreements, for 1999, 19982002, 2001 and 19972000
were $24.6$45.1 million, $21.6$40.4 million and $20.3$24.5 million, respectively. The
purchased-power agreements total below includes $463 million and $78 million,
respectively, related to a new plant (Riverside) currently under development
and the RockGen plant, both in Wisconsin. The Riverside plant is expected to
be placed in-service in 2004. The synthetic leases relate to the financing
of the corporate headquarters, corporate aircraft, utility railcars and a
utility radio dispatch system that were not included on Alliant Energy's
Consolidated Balance Sheets. Alliant Energy has guaranteed the residual
value of its synthetic leases totaling $76 million in the aggregate. The
guarantees extend through the maturity of each respective underlying lease
with remaining terms up to 13 years. Residual value guarantees have been
included in the future minimum lease payments by year are as followsnoted in the table below (in
millions):
Capital Operating
Year Leases Leases
- ------------------------------------------ --------------- ----------------2003 2004 2005 2006 2007 Thereafter Total
--------------------------------------------------------------------
2000 $15.6 $24.0
2001 10.6 20.1
2002 8.7 15.3
2003 4.3 12.9
2004 3.9 10.5
Thereafter 1.3 39.1
---------------
----------------
44.4 $121.9
================
Operating leases:
Certain purchased-power agreements $18.7 $51.8 $66.3 $67.6 $69.0 $308.6 $582.0
Synthetic leases 10.0 12.1 19.3 24.6 49.0 31.0 146.0
Other 16.3 12.2 9.3 6.3 5.2 44.2 93.5
--------------------------------------------------------------------
Total operating leases $45.0 $76.1 $94.9 $98.5 $123.2 $383.8 $821.5
====================================================================
Present
Less: Amount representing interest 5.0
---------------
Present value of net
amount minimum
representing capital lease
2003 2004 2005 2006 2007 Thereafter Total interest payments
$39.4
===============------- -------- -------- ------- -------- ------------ -------- -------------- --------------
Capital leases $15.1 $15.8 $9.8 $35.5 $1.7 $1.2 $79.1 $9.3 $69.8
In January 2003, the FASB issued FIN 46 which addresses consolidation by
business enterprises of variable interest entities, commonly referred to as
"special purpose entities." FIN 46 requires consolidation where there is a
controlling financial interest in a variable interest entity or where the
variable interest entity does not have sufficient equity at risk to finance
its activities without additional subordinated financial support from other
parties. Alliant Energy will apply the provisions of FIN 46 prospectively
for all variable interest entities created after Jan. 31, 2003. For variable
interest entities created before Jan. 31, 2003, Alliant Energy will be
required to consolidate all variable interest entities in which it is the
primary beneficiary beginning in the third quarter of 2003. It is reasonably
possible the implementation of FIN 46 will require that certain variable
interest entities associated with these synthetic leases be included on
Alliant Energy's Consolidated Balance Sheets. Alliant Energy is in the
process of analyzing each synthetic lease in accordance with FIN 46. Alliant
Energy does not anticipate the adoption of FIN 46 will have a material impact
on its results of operations given it estimates the fair market value of the
underlying assets is not materially less than the remaining lease obligations
at Dec. 31, 2002.
(4) UTILITY ACCOUNTS RECEIVABLE
Utility customer accounts receivable, including unbilled revenues, arise
primarily from the sale of electricity and natural gas. At DecemberDec. 31, 1999,
Alliant Energy was2002 and
2001, the utility subsidiaries were serving a diversified base of
residential, commercial and industrial customers and did not have any
significant concentrations of credit risk.
Similar accounts receivable financing arrangements exist for two of Alliant Energy's utility subsidiaries IESUparticipate in a combined utility
customer accounts receivable sale program whereby IP&L and WP&L. In both cases, the utility
subsidiaries&L may sell up
to a pre-determinedcombined maximum amount of $250 million (there are no individual
subsidiary limits) of their respective accounts receivable to a third-party
financial institution on a limited recourse basis. Accountsbasis through wholly-owned and
consolidated variable interest entities. Corporate Services acts as a
collection agent for the buyer and receives a fee for collection services
that approximates fair value. The agreement expires in April 2006 and is
subject to annual renewal or renegotiation for a longer period thereafter.
Under terms of the agreement, the third-party financial institution purchases
the receivables initially for the face amount. On a monthly basis, this
sales price is adjusted, resulting in payments to the third-party financial
institution of an amount that varies based on interest rates and length of
time the sold receivables remain outstanding. Collections on sold
receivables are used to purchase additional receivables from the utility
subsidiaries.
70
At Dec. 31, 2002 and 2001, Alliant Energy had sold $202 million and $178
million of receivables, respectively. In 2002, 2001 and 2000, Alliant Energy
received $2.3 billion, $2.2 billion and $1.6 billion, respectively, in
aggregate proceeds from the sale of accounts receivable. The utility
subsidiaries use proceeds from the sale of accounts receivable sold includeand unbilled
revenues to maintain flexibility in their capital structures, take advantage
of favorable short-term rates and finance a portion of their long-term cash
needs. Alliant Energy paid fees associated with these sales of $4.2 million,
$7.9 million and $9.0 million in 2002, 2001 and 2000, respectively.
Alliant Energy and its utility subsidiaries account for the sale of accounts
receivable to the third-party financial institution as sales under SFAS 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." Retained receivables arising from salesare available to customersthe
third-party financial institution to pay any fees or expenses due it, and to
other public,
municipal and cooperative utilities, as well as from billingsabsorb all credit losses incurred on any of the sold receivables. Beginning
in the third quarter of 2003 under FIN 46, it is reasonably possible that
Alliant Energy could be considered the primary beneficiary given the current
structure of the variable interest entities related to the co-ownersprogram, and could
be required to consolidate the operating results and associated assets and
liabilities of the jointly-owned electric generating plants operated by utility
subsidiaries of Alliant Energy. The amounts are discountedvariable interest entities in its financial statements.
Based on the receivables sold at the
then-prevailing market rate and additional administrative fees are payable
according to the activity levels undertaken. All billing and collection
functions remain the responsibilityDec. 31, 2002, consolidation of the respective utilities. Specifics of
the two agreements include (dollarsvariable
interest entities would have resulted in millions):
IESU WP&L
----------- -----------
Year agreement expires 2000 2000
Maximum amount of receivables that can be sold $65 $150
Effective 1999 all-in cost 5.58% 5.58%
Average monthly sale of receivables - 1999 $55 $73
- 1998 $63 $83
Receivables sold at December 31, 1999 $59 $67
Foran additional information on the$202 million in
accounts receivable programs, referand related debt recorded on Alliant Energy's
Consolidated Balance Sheet. Alliant Energy is currently evaluating the
structure of its receivable sales program to the
"Liquidity and Capital Resources - Financing and Capital Structure" sectiondetermine if this structure can
be modified to qualify for off-balance sheet treatment under FIN 46.
(5) INCOME TAXES
The components of MD&A.
70
(5) RESOURCES SUMMARY FINANCIAL INFORMATION
Summary financial informationincome taxes for Resources wasAlliant Energy were as follows (in
millions):
December 31, 1999 December 31, 1998
--------------------- ---------------------2002 2001 2000
------------- ------------- -------------
Current assets $132.4tax expense:
Federal $19.4 $51.3 $92.1
Non-current assets 1,716.2 777.1
Current liabilities 197.7 63.6
Non-current liabilities (excludes minority interest) 502.8 160.3
Minority interest (primarily real estate joint ventures) 7.2 6.2State 21.6 16.2 24.0
Deferred tax expense (benefit):
Federal 16.8 (9.3) 97.6
State (2.5) (5.6) 18.0
Foreign tax expense 5.5 4.2 0.2
Amortization of investment tax credits (5.2) (5.2) (4.5)
Research and development tax credits (4.5) -- --
Nonconventional fuel credits (14.9) (0.5) (0.9)
Other tax credits (0.1) (0.3) (0.3)
------------- ------------- -------------
$36.1 $50.8 $226.2
============= ============= =============
ReferIncluded in "Cumulative effect of changes in accounting principle, net of
tax" in the Consolidated Statements of Income for 2001 and 2000 was income tax
(benefit) expense of ($5.5) million and $9.8 million, respectively, related
to the "Non-regulated Businesses" columnadoption of Note 14 for summary income
statement data of Resources. Alliant Energy has not presented separate
financial statements for Resources because it is a wholly-owned subsidiarySFAS 133 by an equity method foreign affiliate of Alliant
Energy on Jan. 1, 2001 and because management has determined that such information is
not material to holders of senior notes of Resources.by Alliant Energy has
fully and unconditionally guaranteed the payment of principal and interestEnergy's consolidated subsidiaries on
the senior notes.
(6) INCOME TAXES
The components of federal and state income taxes for Alliant Energy for the
years ended December 31 were as follows (in millions):
1999 1998 1997
--------- --------- ---------
Current tax expense $142.7 $92.5 $99.6
Deferred tax expense (10.8) (22.2) (6.1)
Amortization of investment tax credits (5.5) (5.6) (5.6)
Affordable housing tax credits (5.9) (6.6) (6.2)
--------- --------- ---------
$120.5 $58.1 $81.7
========= ========= =========July 1, 2000, respectively.
The overall effective income tax rates shown below forin the years ended
December 31following table were
computed by dividing total income tax expense by income from continuing
operations before income taxes and preferred dividend requirements of
subsidiaries.
1999 1998 19972002 2001 2000
------------- ------------- -------------- -------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefits 6.4 8.0 6.4
Affordable housing tax credits (1.9) (4.1) (2.7)
Amortization of investment tax credits (1.7) (3.4) (2.4)9.7 5.6 6.6
Foreign operations 7.4 (0.8) --
Adjustment of prior period taxes (1.7) (0.4) (2.2)
Merger expenses -- 2.4 0.5
Oil and gas production credits (1.0) (1.6)1.0 (11.6) (0.6)
Property donation (0.3) (1.5) (1.1)
Effect of rate making on property related differences 2.2 1.8 1.10.1 2.3 0.9
Research and development tax credits (3.8) -- --
Amortization of investment tax credits (4.4) (3.1) (1.0)
Nonconventional fuel credits (12.6) (0.3) (0.2)
Other items, net 0.2 (0.2) 1.1(1.9) 0.5 (0.6)
------------- ------------- -------------- -------------
Overall effective income tax rate 37.2% 36.0% 35.1%30.5% 27.6% 40.1%
============= ============= ============== =============
71
The accumulated deferred income taxestax (assets) and liabilities as set forth
belowincluded on the
Consolidated Balance Sheets at DecemberDec. 31 arise from the following temporary
differences (in millions):
1999 1998
--------- ---------2002 2001
------------- -------------
Property related $669.5 $677.7
McLeod investment 455.1 121.1$647.2 $548.8
Exchangeable senior notes 140.8 129.7
Decommissioning (33.1) (28.6)
Other (106.1) (107.2)
--------- ---------
$1,018.5 $691.6
========= =========
71
Deferred tax liabilities are not recognized for temporary differences related
to investments in foreign subsidiaries(128.5) (42.3)
------------- -------------
$626.4 $607.6
============= =============
At Dec. 31, 2002, 2001 and in unconsolidated foreign
affiliates that are essentially permanent in duration. As of December 31,
1999,2000, Alliant Energy had not recorded a U.S. tax
provisionprovisions of approximately $1.4$16.3 million, $6.8 million and $3.8 million,
respectively, relating to approximately $4.1$46.6 million, $19.5 million and
$10.9 million, respectively, of unremitted earnings from two of itsforeign investments in China
as these earnings are expected to be reinvested permanently overseas in China.
(7)indefinitely.
U.S. and foreign sources of income (loss) from continuing operations before
income taxes were as follows (in millions):
2002 2001 2000
------------- ------------- ------------
U.S. sources $115.3 $156.0 $543.7
Foreign sources (2.9) 21.0 13.4
------------- ------------- ------------
Income from continuing operations before income taxes $112.4 $177.0 $557.1
============= ============= ============
(6) BENEFIT PLANS
(a) Pension Plans and Other Postretirement Benefits - Alliant Energy has
several non-contributory defined benefit pension plans that cover substantially alla
significant number of its employees whoemployees. Benefits are subject to a collective bargaining
agreement. Plan benefits are generally based on the employees'
years of service and compensation during the employees' latter years of employment. Eligible
employees of Alliant Energy that are not subject to a collective bargaining
agreement are covered by the Alliant Energy Cash Balance Pension Plan, a
non-contributory defined benefit pension plan. During each year of service,
Alliant Energy credits each participant's account with a benefit credit equal
to 5% of base pay as well as a guaranteed minimum interest credit equal to
4%. The projected unit credit actuarial cost method was used to compute
pension cost and the accumulated and projected benefit obligations. Alliant
Energy's policy is to fund all of the pension plans at an amount that is at
least equal to the minimum funding requirements mandated by the Employee
Retirement Income Security Act of 1974, as amended, and that does not exceed
the maximum tax deductible amount for the year.compensation. Alliant Energy also provides certain
other postretirement health care and life benefits to retirees, including medical benefits for retireeseligible retirees. In
general, the health care plans are contributory with participants'
contributions adjusted regularly and their spouses (and
Medicare Part B reimbursement for certain retirees) and, in some cases,
retireethe life insurance. IESU's and IPC's funding policy for other
postretirement benefits is generally to fund an amount up to the cost
calculated using SFAS 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," while WP&L's funding policy is generally to fund tax
deductible amounts up to the incurred but unclaimed paid medical claim reserve
and tax deductible amounts (if any) to the retiree medical account within the
Cash Balance Pension Plan.insurance plans are
non-contributory. The weighted-average assumptions as ofat the measurement date
of SeptemberSept. 30 arewere as follows:
Qualified Pension Benefits Other Postretirement Benefits
-------------------------------------- -----------------------------------
1999 1998 1997 1999 1998 1997------------------------------------
2002 2001 2000 2002 2001 2000
------------ ------------- --------------------- ---------- ---------- -----------
Discount rate 7.75% 6.75% 7.25% 7.75%8.00% 6.75% 7.25% 8.00%
Expected return on plan assets 9% 9% 8-9% 9% 9% 8-9%9% 9%
Rate of compensation increase 3.5-4.5% 3.5-4.5% 3.5-5.0%3.5-4.5% 3.5% 3.5% 3.5%
Medical cost trend on covered charges:
Initial trend rangerate N/A N/A N/A 7% 8% 8%10.8% 12.0% 9.0%
Ultimate trend rangerate N/A N/A N/A 5% 5-6% 5.0-6.5%
The components of Alliant Energy's qualified pension benefits and other postretirement benefits costs are5% 5%
The components of Alliant Energy's qualified pension benefits and other
postretirement benefits costs were as follows (in millions):
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------ ---------------------------------
1999 1998 1997 1999 1998 1997----------------------------------
2002 2001 2000 2002 2001 2000
---------- ---------- -------- -------- -------- --------- --------- ---------
Service cost $12.8 $13.8 $13.1$12.9 $11.0 $11.1 $5.5 $5.1 $4.7$4.0 $3.7
Interest cost 35.6 35.4 32.2 10.4 9.739.7 38.2 36.7 12.7 10.6 9.8
Expected return on plan assets (46.2) (47.2) (39.0) (5.0) (3.7) (2.6)(41.8) (48.5) (45.7) (5.5) (6.1) (5.3)
Amortization of:
Transition obligation (asset) (2.0) (2.4) (2.4) (2.4) 4.3 4.7 4.93.7 3.7 3.9
Prior service cost 2.5 2.8 2.52.7 2.7 2.6 (0.3) (0.3) (0.3)
Actuarial loss (gain) 0.2 (0.9) -- (0.8) (1.2) (0.2)2.1 (1.5) (1.0) 0.5 (1.5) (1.9)
---------- ---------- -------- -------- -------- --------
Total $2.5 $1.5 $6.4 $14.1 $14.3 $16.3--------- --------- ---------
$13.6 ($0.5) $1.3 $16.6 $10.4 $9.9
========== ========== ======== ======== ================= ========= =========
During 1998 and 1997, Alliant Energy recognized an additional $10.3 million
and $5.1 million, respectively, of costs in accordance with SFAS 88. The
charges were for severance and early retirement programs in the respective
years. In addition, during 1999, 1998 and 1997, Alliant Energy recognized
$0.5 million, $10.2 million and $1.7 million, respectively, of curtailment
charges relating to Alliant Energy's other postretirement benefits.
72
The assumed medical trend rates are critical assumptions in determining the
service and interest cost and accumulated postretirement benefit obligation
related to postretirement benefit costs. A one percent1% change in the medical trend
rates for 1999,2002, holding all other assumptions constant, would have the
following effects (in millions):
1 Percent 1 Percent1% Increase 1% Decrease
----------------------------- ---------------
Effect on total of service and interest cost components $2.5$1.9 ($2.0)1.7)
Effect on postretirement benefit obligation $14.0$19.4 ($11.6)17.3)
A reconciliation of the funded status of Alliant Energy's plans to the
amounts recognized on Alliant Energy's Consolidated Balance Sheets at DecemberDec. 31
is
presented belowwas as follows (in millions):
Qualified Pension Benefits Other Postretirement Benefits
---------------------------- -------------------------------
1999 1998 1999 1998
---------------------------------------- --------------------------------
2002 2001 2002 2001
------------ -------------- ------------- Change in benefit obligation:------------- --------------
Change in benefit obligation:
Net benefit obligation at beginning of year $528.4 $474.2 $153.3 $146.4$553.3 $483.6 $174.5 $130.7
Service cost 12.8 13.812.9 11.0 5.5 5.14.0
Interest cost 35.6 35.4 10.4 9.739.7 38.2 12.7 10.6
Plan participants' contributions -- -- 1.5 1.31.8 1.9
Plan amendments 1.1 -- (2.5) (2.5)(0.9) --
Actuarial loss (gain) (60.7) 24.8 (29.9) (3.6)
Curtailments -- (3.0) (0.3) 1.9
Special termination benefits -- 10.7 -- --33.0 56.6 34.3 40.7
Gross benefits paid (35.1) (25.0) (10.2) (7.5)
-----------(31.5) (36.1) (12.2) (13.4)
------------ ------------- ------------- -------------- -------------
Net benefit obligation at end of year 481.0 528.4 127.8 153.3
-----------608.5 553.3 215.7 174.5
------------ ------------- ------------- -------------- -------------
Change in plan assets:
Fair value of plan assets at beginning of year 506.3 529.1 55.1 50.7483.3 556.3 73.8 83.0
Actual return on plan assets 54.7 2.2 8.2 2.5(25.1) (36.9) (7.2) (6.8)
Employer contributions 40.0 -- -- 13.6 7.011.1 9.1
Plan participants' contributions -- -- 1.6 1.3
401(h) assets recognized -- -- -- 1.11.8 1.9
Gross benefits paid (35.1) (25.0) (10.2) (7.5)
-----------(31.5) (36.1) (12.2) (13.4)
------------ ------------- ------------- -------------- -------------
Fair value of plan assets at end of year 525.9 506.3 68.3 55.1
-----------466.7 483.3 67.3 73.8
------------ ------------- ------------- -------------- -------------
Funded status at end of year 44.9 (22.1) (59.5) (98.2)(141.8) (70.0) (148.4) (100.7)
Unrecognized net actuarial loss (gain) (39.0) 30.3 (39.3) (7.5)172.1 74.2 63.4 16.8
Unrecognized prior service cost 23.2 25.8 (1.5) (1.7)19.9 21.5 (0.9) (0.9)
Unrecognized net transition obligation (asset) (8.2) (10.6) 52.4 60.6
-----------(1.4) (3.3) 36.7 41.1
------------ ------------- ------------- -------------- -------------
Net amount recognized at end of year $20.9 $23.4$48.8 $22.4 ($47.9)49.2) ($46.8)
===========43.7)
============ ============= ============= ============== =============
Amounts recognized on the Consolidated
Balance Sheets consist of:
Prepaid benefit cost $39.1 $38.9 $0.6 $0.9$70.4 $45.5 $2.3 $2.1
Accrued benefit cost (18.2) (15.5) (48.5) (47.7)(21.6) (23.1) (51.5) (45.8)
Additional minimum liability -- (7.7)(90.0) (36.1) -- --
Intangible asset -- 7.716.5 8.7 -- --
-----------Accumulated other comprehensive loss 73.5 27.4 -- --
------------ ------------- ------------- -------------- -------------
Net amount recognized at measurement date 20.9 23.4 (47.9) (46.8)
-----------48.8 22.4 (49.2) (43.7)
------------ ------------- ------------- -------------- -------------
Contributions paid after 9/30 and prior to 12/31 -- -- 6.9 6.8
-----------4.0 2.5
------------ ------------- ------------- -------------- -------------
Net amount recognized at 12/31 $20.9 $23.4$48.8 $22.4 ($41.0)45.2) ($40.0)
===========41.2)
============ ============= ============= ============== =============
73
The benefit obligation and fair value of plan assets for the postretirement
welfare plans with benefit obligations in excess of plan assets were $121.3$213.9
million and $58.7$64.3 million, respectively, as of Septemberat Sept. 30, 19992002 and $146.5$167.8 million
and $45.3$64.5 million, respectively, as of Septemberat Sept. 30, 1998.2001. The projected benefit
obligation, accumulated benefit obligation and fair value of plan assets for
the qualified pension plans with accumulated benefit obligations in excess of
plan assets were $231.4$452.4 million, $225.9$418.8 million and $219.8$313.2 million,
respectively, as of Septemberat Sept. 30, 19992002 and $250.5$293.9 million, $241.1$283.7 million and $217.9$225.7
million, respectively, asat Sept. 30, 2001. Alliant Energy's net periodic
benefit cost is primarily included in "Other operation and maintenance" in
the Consolidated Statements of September 30, 1998.Income. For the various Alliant Energy
alsopension and postretirement plans, Alliant Energy common stock represented
less than 1% of total plan investments at Dec. 31, 2002 and 2001.
Alliant Energy sponsors several non-qualified pension plans whichthat cover
certain current and former officers.key employees. At Decemberboth Dec. 31, 19992002 and 1998,2001,
the funded balances of such plans totaled approximately $5 million.$4 million, none of
which consisted of Alliant Energy common stock. Alliant Energy's pension
benefit obligation under these plans was $28.0$38.2 million and $25.8$34.4 million at
DecemberDec. 31, 19992002 and 1998,2001, respectively. Alliant Energy's pension expense under
these plans was $2.5$4.3 million, $4.5$3.4 million, and $3.7$3.6 million in 1999, 19982002, 2001
and 1997,2000, respectively.
Alliant Energy has various life insurance policies that cover certain key
employees and directors. At Dec. 31, 2002 and 2001, the cash surrender value
of these investments was $32 million and $30 million, respectively. Under
Alliant Energy's deferred compensation plans, certain key employees and
directors can defer part or all of their current compensation in company
stock or interest accounts, which are held in grantor trusts. At Dec. 31,
2002 and 2001, the fair market value of the trusts totaled approximately $4.9
million and $2.2 million, respectively, the majority of which consisted of
Alliant Energy common stock. A significant number of Alliant Energy
employees also participate in defined contribution pension plans (401(k) and
Employee Stock Ownership plans). Alliant Energy's contributions to the
plans, which are based on the participants' level of contribution, were $7.4$9.2
million, $7.7$8.2 million, and $5.5$8.1 million in 1999, 19982002, 2001 and 1997,2000,
respectively.
(b) Long-Term Equity Incentive PlanPlans - In 2002, Alliant Energy has a long-term equity
incentive plan whichshareowners approved
the EIP that permits the grant of incentive stock options, non-qualified
stock options, incentive stock options,appreciation rights, restricted stock, restricted stock
units, performance shares and performance units to key employees. As of DecemberAt Dec.
31, 1999,2002, non-qualified stock options restricted stock, performance shares and performance units had been granted to
key employees.were outstanding under this plan. The
maximum number of shares of Alliant Energy common stock that may be issued
under the plan may not exceed 3.8 million (no awardsis 4 million.
Alliant Energy also has an LTEIP that permits the grant of incentive stock
options, non-qualified stock options, restricted stock, performance shares
and performance units to key employees. At Dec. 31, 2002, non-qualified
stock options, restricted stock and performance shares were outstanding. The
maximum number of shares of Alliant Energy common stock that may be issued
under the plan is 3.8 million. This plan expires January 2004, at which time
no further grants may be made under this plan.
Options granted on or after January 22, 2004).
Options areto date under the plans were granted at the fairquoted market
valueprice of the shares on the date of grant. The optionsgrant, vest over three years and expire no
later than 10 years after the grant date with the exception of participants that retire. Their
optionsdate. Options become fully vested upon
retirement and remain exercisable at any time prior to their expiration date,
or for three years after the effective date of the retirement, whichever
period is shorter. Participants' options that are not vested become
forfeited when the participant leavesparticipants leave Alliant Energy and their vested options
expire after three months. A summary of the stock option activity for 1999, 1998 and 1997 iswas as
follows:
1999 1998 1997
------------------------ ------------------------ ------------------------2002 2001 2000
------------------------- ------------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------------------------ ------------------------ ------------------------------------------------- ------------------------- -----------------------
Outstanding at beginning of year 751,084 $30.83 191,800 $28.98 114,150 $29.562,917,229 $30.03 2,265,862 $29.67 1,543,028 $30.32
Options granted 824,564 29.88 636,451 31.32 77,650 28.12945,863 27.79 721,072 31.14 899,094 28.59
Options exercised -- -- 28.59 -- --
(8,900)(42,432) 29.87 (15,486) 30.03
Options forfeited (32,620) 30.55 30.49 -- --
(68,267)
------------------------ ------------------------ ------------------------(20,956) 29.41 (27,273) 30.07 (160,774) 29.90
-------------- ------------- ------------
Outstanding at end of year 1,543,028 $30.32 751,084 $30.83 191,800 $28.98
======================== ======================== ========================3,842,136 29.48 2,917,229 30.03 2,265,862 29.67
============== ============= ============
Exercisable at end of year 333,782 $30.80 38,250 $27.50 -- --2,242,187 29.93 1,593,047 29.94 962,073 30.12
74
The range of exercise prices for the options outstanding at DecemberDec. 31, 19992002 was
$27.50 to $31.56. The weighted-average remaining contractual life of
outstanding options at Dec. 31, 2002, 2001 and 2000 was 7.4 years, 7.7 years
and 8.3 years, respectively. The value of the options atgranted during the
grant dateyear using the Black-Scholes pricing method iswas as follows:
1999 1998 1997
------------2002 2001 2000
------------- ------------ ------------
Value of options based on Black-Scholes model $4.71 $4.93 $3.30$9.14 $4.30 $7.71
Volatility 20.2% 21% 15%40.6% 18.9% 32.7%
Risk free interest rate 5.78% 5.75% 6.43%5.0% 5.0% 5.7%
Expected life 10 years 10 years 10 years
Expected dividend yield 6.69% 7.00% 7.00%6.0% 6.6% 6.3%
74
At Dec. 31, 2002 and 2001, Alliant Energy follows APB 25, "Accounting for Stock Issued to Employees," to
account for stock options. No compensation cost is recognized because the
option exercise price is equal to the market price of the underlying stock on
the date of grant. Had compensation cost for the plan been determined based
on the Black-Scholes value at the grant dates for awards as prescribed by SFAS
123 "Accounting for Stock-Based Compensation," pro forma net incomehad 1,745 and earnings per share would have been:
1999 1998 1997
------- -------- --------
Pro forma net income (in millions) $192.7 $93.5 $144.3
Pro forma earnings per share (basic and diluted) $2.46 $1.22 $1.89
In 1999, 65,75261,137 shares of
restricted stock were awarded, all of which were
outstanding, at December 31, 1999, and are restricted for a three-year period.respectively. Any unvested shares of
restricted stock become fully vested upon retirement. Participants' unvested
restricted stock becomesis forfeited when the participant leaves Alliant Energy. Alliant Energy follows APB 25 to account for restricted
stock.
Compensation cost, which is recognized over the three-year restriction
period, was $0.4$0.2 million, $0.6 million and $0.6 million in 1999. Prior to the merger, various restricted
stock awards were granted under the former IES Long-Term Incentive Plan. For
most of the awards, restrictions lapsed effective with the merger.
Compensation cost of $0.4 million, $1.3 million2002, 2001 and
$0.4 million was
recognized in 1999, 1998 and 1997,2000, respectively.
The payout to key employees of Corporate Services for performance units/shares is
contingent upon achievement over a three-year period of specified levels ofearnings
per share growth and total return to shareowners of Alliant Energy compared
with an investor-owned utility peer groupgroup. The payout to key employees of
Resources is contingent upon achievement over a three-year period (the payout is contingent upon achievement of
specified Resources earnings growth for key employees of Resources).per share growth. Performance units/shares are paid
out in cash or shares of Alliant Energy's common stock or a combination of cash and
stock and are modified by a performance multiplier, which ranges from 0zero to
2.00two, based on the three-year average performance criteria. Performance shares have an intrinsic
value equal to the quoted market price of a share on the date of grant
and performance units represent accumulated dividends on the shares underlying
the non-qualified stock options based on the annual dividend rate at the grant
date.grant.
Pursuant to APB 25, Alliant Energy accrues the expenses for these plansplan expense over the
three-year period the services are performed. Alliant Energyperformed and recognized $1.6(income) expense
of ($1.6) million, $0.2$2.4 million and $0.4 million of expense for these
plans in 1999, 19982002, 2001 and 1997,2000,
respectively.
(8)(7) COMMON PREFERRED AND PREFERENCEPREFERRED STOCK
(a) Common Stock - During 1999, 1998 and 1997, Alliant Energy issued
1,353,971 shares; 890,035 shares and 687,962The number of shares of common stock issued by Alliant
Energy under its various stock plans respectively.was as follows:
2002 2001 2000
---------------- ---------------- ----------------
Beginning balance 89,682,334 79,010,114 78,984,014
Shares issued:
Public offering -- 9,775,000 --
Shareowner Direct Plan 1,877,032 668,379 5,666
401(k) Savings Plan 689,336 161,239 --
Equity incentive plans 55,518 67,602 20,434
---------------- ---------------- ----------------
Ending balance 92,304,220 89,682,334 79,010,114
================ ================ ================
In addition, 260,039November 2001, Alliant Energy completed a public offering of its common
stock generating net proceeds of approximately $263 million which were used
to repay short-term debt. From January 2000 to June 2001, Alliant Energy
satisfied its requirements under the Shareowner Direct Plan (dividend
reinvestment and stock purchase plan) by acquiring Alliant Energy common
stock on the open market, rather than through original issue. In 2000, 5,666
shares of common stock were issued in
1998 in connection with therelated to an adjustment of a prior
acquisition of oil and gas properties. At DecemberDec. 31, 1999,2002 and 2001, Alliant
Energy had a total of 7.06.8 million and 2.6 million shares, respectively,
available for issuance in the aggregate, pursuant to its Shareowner Direct
Plan, Long-Term Equity
Incentive PlanLTEIP, EIP and 401(k) Savings Plan. Alliant Energy has declared a
quarterly dividend of 50 cents per share each quarter since the consummation
of the merger.
During 1998 and 1997, Alliant Energy reacquired 1,133 shares and 3,278 shares,
respectively, of its common stock on the open market. The shares were
reacquired by IES prior to the consummation of the merger and were
subsequently issued to various Alliant Energy directors and employees. At
December 31, 1999, no shares remained held as treasury stock.
Alliant Energy has a Shareowner Rights Plan whereby rights will be
exercisable only if a person or group acquires, or announces a tender offer
to acquire, 15% or more of Alliant Energy's common stock. Each right will
initially entitle shareowners to buy one-half of one share of Alliant
Energy's common stock. The rights will only be exercisable in multiples of
two at an initial price of $95.00 per full share, subject to adjustment. If
any shareowner acquires 15% or more of the outstanding common stock of
Alliant Energy, each right (subject to limitations) will entitle its holder
to purchase, at the right's then current exercise price, a number of common
shares of Alliant Energy or of the acquirer having a market value at the time
of twice the right's per full share exercise price. The Board of Directors
is also authorized to reduce the 15% thresholdsownership threshold to not less than
10%.
75
Alliant Energy's utility subsidiaries each have common stock dividend payment restrictions
based on their respective bond indentures, the terms of their outstanding
preferred stock and articles of
incorporation. Each utility has restrictions on the payment of common stock
dividends that are commonly found with preferred stock. In addition, at IESU
and IPC their abilitystate regulatory limitations applicable to pay common stock dividends is restricted based on
requirements associated with sinking funds.them. WP&L's
common75
preferred stock restricts dividends are
restricted to the extent that such dividend would
reduce the common stock equity ratio to less than 25%. Also at WP&L, inIn its September 2002
rate order, UR-110, the PSCW ordered thatstated it must approve the payment of dividends by WP&L
to Alliant Energy that are in excess of the level forecasted in the rate order ($58.3
million),62 million
annually) if such dividends would reduce WP&L's average common equity ratio below
52.00%44.67% of total capitalization. The dividends paid by WPIn accordance with the IUB order authorizing
the IP&L tomerger, IP&L must inform the IUB if its common equity ratio falls
below 42% of total capitalization. As of Dec. 31, 2002, Alliant Energy's
utility subsidiaries were in compliance with all such dividend restrictions.
In 2002, 11 non-employee directors received 1,000 shares each of Alliant
Energy sincecommon stock through the rate order was issued have not exceededShareowner Direct Plan as part of the
level forecasted
in the rate order.
Alldirectors' compensation program, for a total of approximately $337,000. In
2001, 14 non-employee directors are eligiblereceived up to receive1,000 shares each of Alliant
Energy common stock through the Shareowner Direct Plan, for a 25% matching contributiontotal of
approximately $338,000. In 2000, 12 non-employee directors received up to
$20,000 each in Alliant Energy common stock, for limited cash purchases, up to $10,000,a total of Alliant Energy's common stock through Alliant Energy's Shareowner Direct
Plan. Matching contributions of $2,500 each were made to nine directors in
1999.approximately
$222,000.
(b) Preferred and Preference Stock - In 1993, IPC issued 545,000September 2002, IP&L redeemed all of its then
outstanding shares of 6.40%, $50 par valuepreferred stock. In December 2002, IP&L issued six
million shares of preferred stock withat $25.00 per share in a final redemption dateprivate
placement. IP&L used the net proceeds of May 1,
2022. Under the provisions of the mandatory sinkingapproximately $145 million to repay
its short-term debt and for general corporate purposes, including to fund
beginning in 2003,
IPC is requiredcapital expenditures and to redeem annually $1.4 million of 6.40% preferred stock
(27,250 shares).repay other debt. The carryingfair market value of
Alliant Energy's cumulative preferred stock at December
31, 1999 and 1998 was $114 million and $113 million, respectively. The fair
market value,of subsidiaries, based upon the
market yield of similar securities and quoted market prices, at DecemberDec. 31, 19992002
and 19982001 was $97$198 million and $109$99 million, respectively. (9)Information related
to the carrying value of Alliant Energy's cumulative preferred stock of
subsidiaries, net at Dec. 31 was as follows (in millions):
2002 2001
------------ -------------
Par/Stated Authorized Shares Mandatory
Value Shares Outstanding Series Redemption
----- ------ ----------- ------ ----------
$25 16,000,000 6,000,000 8.375% No $150.0 $--
$100 * 449,765 4.40% - 6.20% No 45.0 45.0
$25 * 599,460 6.50% No 15.0 15.0
$50 466,406 ** 366,406 4.30% - 6.10% No -- 18.3
$50 *** 216,381 4.36% - 7.76% No -- 10.8
$50 *** 545,000 6.40% $50 / share -- 27.3
------------ -------------
210.0 116.4
Less: unamortized expenses (4.9) (2.4)
------------ -------------
$205.1 $114.0
============ =============
* 3,750,000 authorized shares in total.
** Fully retired in 2002.
*** 2,000,000 authorized shares in total, fully retired in 2002.
(8) DEBT
(a) Short-Term Debt - To provide short-term borrowing flexibility and
security for commercial paper outstanding, Alliant Energy maintains committedand its
subsidiaries maintain bank lines of credit, most of which most require a fee.
Alliant Energy discontinued the use of its utility money pool in 2002 and
WP&L and IP&L are at the bank prime rates, to obtainnow meeting any short-term borrowing flexibility, including pledgingneeds they have by
issuing commercial paper and borrowing on its bank lines of credit,
as security for any
commercial paper outstanding. Amounts available under these committed linesrespectively. At Dec. 31, 2001, IP&L and WP&L had money pool borrowings of
credit totaled $250$38.0 million as of December 31, 1999. Commitment fees are
paid to maintain these lines and there are no conditions which restrict the
unused lines of credit. Resources also maintains a revolving credit agreement
with various banking institutions. The unborrowed portion of this agreement
is also used to support Resources' commercial paper program. The amount
available under this agreement as of December 31, 1999, was $150 million.
Resources is also party to a revolving 3-Year Credit Agreement with various
banking institutions. The agreement extends through October 2000, with
one-year extensions available upon agreement by the parties. Unused borrowing
availability under this agreement is also used to support Resources'
commercial paper program. A combined maximum of $450$90.8 million, of borrowings
under this agreement and the commercial paper program may be outstanding at
any one time. Interest rates and maturities are set at the time of
borrowing. The rates are based upon quoted market prices and the maturities
are less than one year. At December 31, 1999, Resources had $139 million of
commercial paper outstanding and backed by its 3-Year Credit Agreement with
discount rates ranging from 5.90%-6.32%. Resources intends to continue
issuing commercial paper backed by this facility and no conditions existed at
December 31, 1999 that would prevent the issuance of commercial paper or
direct borrowings on its bank lines. As a result, Alliant Energy had been
classifying this debt as long-term. However, since this agreement expires in
October 2000, beginning in October 1999 this debt (including commercial paper
backed by this facility) is now being classified as short-term.
76
respectively. Information regarding
short-term debt iswas as follows (dollars in millions):
1999 1998 19972002 2001
---------------- ---------------- ---------------
As of year end:-------------
At Dec. 31:
Commercial paper outstanding $374.7 $64.5 $114.5
Notes payable outstanding $50.0 $51.8 $42.0$195.5 $68.4
Discount rates on commercial paper 5.60-6.50% 5.10-6.55% 5.82-5.90%1.6-1.9% 2.4-3.2%
Bank facility borrowings $85.0 $--
Interest rates on notes payable 6.30% 5.44-7.00% 5.00-5.90%bank facility borrowings 2.3-2.4% N/A
Short-term borrowings at foreign subsidiaries $28.7 $84.3
Interest rates on foreign short-term borrowings 5.3-6.9% 5.6-6.9%
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $185.9 $126.6 $211.0$337.9 $274.1
Average interest raterates on short-term debt 5.44% 5.55% 5.61%2.7% 4.8%
76
(b) Long-Term Debt - IESU's Indentures and Deeds of TrustThe former IESU indentures securing its First Mortgage
and Collateral Trust Bonds constitute direct first mortgage liens and a
second lien while First Mortgage Bonds remain outstanding, respectively, upon
substantially all tangible public utility property. IESU's Indentureproperty of IP&L (excluding those
of the former IPC). WP&L's and Deed of Trust securing
its Collateral Trust Bonds constitutes a second lien on substantially all
tangible public utility property whilethe former IPC's First Mortgage Bonds remain
outstanding. Substantiallyare
secured by substantially all of their utility plant. IP&L, WP&L's&L and
IPC's utility plant is secured
by their First Mortgage Bonds. WP&LResources also maintains an unsecured indenturemaintain indentures relating to the issuance of unsecured debt
securities.
In addition,December 2002, Resources issued $300 million of 9.75% senior notes due
2013 in a private placement. The notes are unconditionally guaranteed by
Alliant Energy's
long-term debt includesEnergy. Resources used the proceeds to repay short-term debt. In
November 2001, Resources issued $300 million of senior notes at a fixed
interest rate of 7%, due 2011. The notes are fully and unconditionally
guaranteed by Alliant Energy. Resources used the proceeds to repay other
Resources' debt. In March 2001, IP&L issued $200 million of senior unsecured
debentures notes payableat a fixed interest rate of 6-3/4%, due 2011. IP&L used the
proceeds to repay short- and revenue bonds
related to its affordable housing properties.long-term debt.
Debt maturities (excluding periodic sinking fund requirements, which will not
require additional cash expenditures) for 20002003 to 20042007 are $54.8$47 million, $84.4$106 million, $2.4$337 million,
$7.5$68 million and $89.8$225 million, respectively. Depending upon market
conditions, it is currently anticipated that a majority of the maturing debt
will be refinanced with the issuance of long-term securities.
The carrying value of Alliant Energy's long-term debt (including current
maturities and variable rate demand bonds) at DecemberDec. 31, 19992002 and 19982001 was $1,597 million$2.7
billion and $1,664 million,$2.5 billion, respectively. The fair market value, based upon
the market yield of similar securities and quoted market prices, at DecemberDec. 31,
19992002 and 19982001 was $1,561 million$2.9 billion and $1,753 million,$2.6 billion, respectively.
Refer to MD&A for a further discussion of Alliant Energy's debt.
(10)(9) INVESTMENTS AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Information relating to various investments and financial instruments held by
Alliant Energy is as follows (in millions):
December 31, 1999 December 31, 1998
------------------------------------- -----------------------------------
Gross Gross Unrealized
Carrying Fair Unrealized Carrying Fair Gains/(Losses)
Value Value Gains/(Losses) Value Value
----------- -------- ---------------- ----------- ------- -----------------
Nuclear decommissioning trust funds:
Equity securities $112 $112 $80 $98 $98 $56
Debt securities 159 159 (4) 128 128 3
Total 271 271 76 226 226 59
Investment in McLeod 1,124 1,124 1,096 320 320 291
Investments in New Zealand/Australia 125 131 11 32 44 (0.1)
The fair market value of the New Zealand/Australia investments is generally
based on quoted market prices. The difference in the carrying value and fair
value relates to investments that are not marked to market under SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities."
The carrying amount of Alliant Energy's current assets and current
liabilities approximates fair value because of the short maturity of such
financial instruments. Since IESU, WPIP&L and IPCWP&L are subject to regulation, any
gains or losses related to the difference between the carrying amount and the
fair value of itstheir financial instruments may not be realized by Alliant
Energy's shareowners. 77
Information relating to various investments held by
Alliant Energy at Dec. 31 that are marked-to-market as a result of SFAS 115
were as follows (in millions):
2002 2001
---------------------------------- -----------------------------------
Unrealized Unrealized
Carrying/Fair Gains, Net of Carrying/Fair Gains/(Losses),
Value Tax Value Net of Tax
----------------- ---------------- ---------------- ------------------
Available-for-sale securities:
Nuclear decommissioning trust funds:
Debt securities $206 $9 $191 $3
Equity securities 139 13 142 42
Total 345 22 333 45
Investment in McLeod 2 -- 14 (9)
Various other investments 19 3 23 1
Trading securities:
Investment in McLeod 1 (a) 6 (a)
(a) Adjustments to the trading securities are reflected in earnings in the
"Miscellaneous, net" line in the Consolidated Statements of Income.
Nuclear Decommissioning Trust Funds - As required by SFAS 115, IESU'sAt Dec. 31, 2002, $114 million, $43
million and WP&L's$49 million of the debt securities mature in 2003-2010, 2011-2020
and equity security investments in the nuclear decommissioning
trust funds are classified as available for sale.2021-2049, respectively. The fair market value of the nuclear decommissioning
trust funds iswas, as reported by the trustee, adjusted for the tax effect of
unrealized gains and losses. Net unrealized holding gains were recorded as
part of accumulated provision for depreciation.depreciation of related plant assets. The
funds realized gains from the sales of securities of $6.6$10.4 million, $1.2$2.0
million and $0.2$5.0 million in 1999, 19982002, 2001 and 1997,2000, respectively (cost of the
investments based on specific identification were $111.7was $111.1 million, $71.9$169.8
million and $68.6$213.4 million, respectively, and proceeds from the sales were
$121.5 million, $171.8 million and $218.4 million, respectively).
77
Investment in McLeod - Alliant Energy held 19.1 million and 20.6 million of
shares ofhas investments in the common stock (including 2.6 million unexercised vested options) inof
McLeod, a telecommunications company, at December 31, 1999 and 1998,
respectively. The cost basiscompany. In accordance with SFAS 115, the
carrying values of the investment, net of the cost to exercise
the options, was $28 million and $29 million at December 31, 1999 and 1998,
respectively. McLeod declared a 2-for-1 stock split which was effective in
July 1999 (the December 1998 shares have been adjusted for the split).
Pursuant to the provisions of SFAS 115, Alliant Energy's investment in McLeod
is considered an available-for-sale security thus the carrying value of the
investment isinvestments are adjusted to the estimated fair value each quarter based
on theupon McLeod's closing price at the end of theeach quarter. The adjustments do not impact
earningsChanges in fair
value of investments designated as the unrealized gains or losses, net of taxes,available-for-sale securities are recorded
directly to the common equity section of the Consolidated Balance Sheets and
are a component of "Accumulatedreported
in other comprehensive income." In addition, any
suchincome, and impact current earnings when gains or
losses are realized through sale or if a decline in value is determined to be
"other-than-temporary." Changes in fair value of investments designated as
trading securities are reflected in current earnings only atin the time they
are realized through a sale."Miscellaneous, net" line
in the Consolidated Statements of Income.
Upon the adoption of SFAS 133 in 2000 for the embedded derivative related to
McLeod stock in Resources' exchangeable senior notes (refer to Note 10(a) for
additional information), Alliant Energy sold approximately 7% (1.4designated a portion of its McLeod
investments as trading securities. As result of this change in designation
to trading securities, in 2000, Alliant Energy reclassified $321.3 million shares, as adjustedof
unrealized appreciation ($187.3 million after-tax) from accumulated other
comprehensive income to net income. In 2000, Alliant Energy recognized
miscellaneous income of $23.8 million for pre-tax gains realized upon sales
of McLeod available-for-sale securities, for which the appreciation was
previously reflected in accumulated other comprehensive income.
On Jan. 31, 2002, McLeod filed a pre-negotiated plan of reorganization in a
Chapter 11 bankruptcy proceeding and the trading of McLeod's common stock split) ofwas
suspended by Nasdaq. Consequently, Alliant Energy discontinued accounting
for its investment in McLeod in 1999, resulting in pre-tax gainsunder the provisions of $40.3 million (proceeds of $40.9
million less aSFAS 115 and reduced the
cost basis of $0.6 million as computed underits investments to the first-in-first-out (FIFO) method).last quoted market price on Jan. 30,
2002. In June 2002, Alliant Energy entered intoreceived from McLeod under its plan of
reorganization an agreement in November 1998,initial distribution of approximately 3.3 million shares of
new common stock and classified 0.9 million and 2.4 million shares (0.1
million shares were received by discontinued operations) as amended, withtrading and
available-for-sale securities, respectively. With the receipt of the new
McLeod whereby Alliant Energy's ability to sellcommon shares and the McLeod stock is subject to
various restrictions. The agreement provides that until December 31, 2001,resumption of trading on Nasdaq, Alliant Energy
resumed accounting for its McLeod investments under SFAS 115 and adjusted its
affiliates generally may not sell or otherwise disposecost basis to the quoted market price on the date the shares were received.
As a result of shares of McLeod stock beneficially owned bythese events, Alliant Energy and its
affiliates, other than to a subsidiary of Alliant Energy, without the prior
written consent of the Board of Directors of McLeod. However, the amended
agreement provides that the Board of Directors of McLeod may permit Alliant
Energy and its affiliates to sell a specified number of shares of McLeod stock
per quarter during specified time periods. In addition, if Alliant Energy and
its affiliates are not provided the opportunity to sell, on an annual basis,
an aggregate number of shares of McLeod stock equal to 15% of the shares of
McLeod stock owned by Alliant Energy and its affiliates as of December 31,
1998, then Alliant Energy may terminate the amended November 1998 agreement.recognized pre-tax impairment
charges in 2002 for available-for-sale securities totaling $27.2 million.
Investments in Foreign Entities - The geographic concentration of Alliant
Energy hasEnergy's significant continuing foreign investments at Dec. 31 was as follows
(in millions):
Brazil China New Zealand Mexico Total
--------- ---------- --------------- ---------- ---------
2002
- ----
Unconsolidated $214 $19 $86 $55 $374
Consolidated -- 161 -- -- 161
--------- ---------- --------------- ---------- ---------
Total $214 $180 $86 $55 $535
========= ========== =============== ========== =========
2001
- ----
Unconsolidated $378 $21 $68 $41 $508
Consolidated -- 146 -- -- 146
--------- ---------- --------------- ---------- ---------
Total $378 $167 $68 $41 $654
========= ========== =============== ========== =========
Brazil - Resources holds a non-controlling interest in foreign
entities on its Consolidated Balance Sheets that includedfive Brazilian
- ------
electric utility companies through several direct investments in
several New Zealand and Australian utility entities, investments in several
generation facilities in China and an investment in secured debentures of a
development project in Mexico. The New Zealand and Australian investments are accounted for
under the costequity method of accounting. At Dec. 31, 2002 and the2001, Resources'
direct investments included a 49.9% direct ownership interest in GIPAR, S.A.,
an electric utility holding company; a 39.4% direct ownership interest in
Companhia Forca e Luz Cataguazes - Leopoldina, S.A. (Cataguazes), an electric
utility; a 45.6% direct ownership interest in Energisa, S.A., an energy
development company; a 49.9% direct ownership interest in Pbpart - SE 1
Ltda., an electric utility holding company; and a 50.0% (49.7% at Dec. 31,
2001) direct ownership interest in Usina Termeletrica de Juiz de Fora S.A., a
thermal power plant.
China - Resources' consolidated investments included a controlling interest
- -----
in Peak Pacific Investment Company, Ltd., a company that develops investment
opportunities in generation infrastructure projects in China, and Anhui New
Energy Heat & Power Co., Ltd., a combined heat and power facility.
Resources' unconsolidated investments included a 50.0% ownership interest in
Jiaxing JIES Power & Heat Co., Ltd. and a 30.0% ownership interest in
Tongxiang TIES Power & Heat Co., Ltd. Both of these combined heat and power
facilities are accounted for under the equity method.
78
New Zealand - Resources' investments included a 20.4% ownership interest in
- -----------
TrustPower Ltd., a New Zealand hydro and wind generation utility company,
which is accounted for under the equity method and several other smaller
investments accounted for under the cost method.
Mexico - Resources' investment in Mexico consisted of a loan receivable
- ------
(including accrued interest income) from a Mexican development company.
Under provisions of the loan, Resources has agreed to lend up to $65 million
to support the development of a resort community near the Baja peninsula.
The geographic concentrationloan accrues interest at 8.75% and is secured by the undeveloped land of
these
investments at Decemberthe resort community. Repayment of the loan principal and interest will be
based on a portion of the proceeds from the sales of real estate in the
resort community and therefore is dependent on the successful development of
the project and the ability to sell real estate. Alliant Energy may also
realize royalty income on the real estate sales once the loan is repaid.
Investment in ATC - At Dec. 31, was2002 and 2001, WP&L had ownership interests
in ATC of approximately 26.6% and 26.5%, respectively, and accounts for this
investment under the equity method. Pursuant to various agreements, WP&L
receives a range of transmission services from ATC. WP&L provides operation,
maintenance, and various transitional and construction services to ATC. WP&L
and ATC also bill each other for use of shared facilities owned by each
party. ATC billed WP&L $38.7 million and $36.4 million in 2002 and 2001,
respectively. WP&L billed ATC $18.1 million and $18.4 million in 2002 and
2001, respectively, and recorded equity earnings of $14.3 million and $14.6
million in 2002 and 2001, respectively.
Unconsolidated Equity Investments - Summary financial information from Alliant
Energy's unconsolidated equity investments' financial statements is as
follows (in millions):
1999 1998
---------- ---------
New Zealand/Australia $125 $32
China 62 36
Mexico 10 --
Other 1 1
---------- ---------
$198 $69
========== =========
Refer to Note 11 for a discussion
2002 * 2001 2000
------------ ------------ ----------
Operating revenues $1,440.6 $2,214.1 $1,194.3
Operating income 159.8 138.2 42.5
Net income (loss) 36.6 52.1 69.7
As of Dec. 31:
Current assets 383.0 454.5
Non-current assets 1,976.4 2,117.0
Current liabilities 435.9 519.3
Non-current liabilities 505.1 557.0
Minority interest 133.4 213.5
* Alliant Energy's derivative financial
instruments.
(11)investment in Cargill-Alliant was sold in 2002.
(10) DERIVATIVE FINANCIAL INSTRUMENTS
Information relating to derivative financial instruments utilized by(a) Accounting for Derivative Instruments and Hedging Activities - Alliant
Energy isrecords derivative instruments at fair value on the balance sheet as
follows:
(a) Interest Rate Swapsassets or liabilities and Forward Contracts - In November 1999, Resources
terminatedchanges in the derivatives' fair values for
non-regulated entities in earnings unless specific hedge accounting criteria
are met. For IP&L and WP&L, changes in the derivatives' fair values are
generally recorded as regulatory assets or liabilities. The PSCW issued a
letter to WP&L in August 2002 authorizing accounting for its two interest rate swap agreements, each with notional amounts
78
derivatives in
such manner.
At Dec. 31, 2002 and 2001, Alliant Energy had $6.4 million and $6.5 million,
respectively, of $100derivative assets included in "Other current assets" on its
Consolidated Balance Sheets and $9.1 million and $3.6 million, respectively,
of derivative liabilities included in "Other current liabilities" on its
Consolidated Balance Sheets. At Dec. 31, 2001, Alliant Energy also had $0.4
million of debt. The agreements converted variable rate debt into
fixed ratederivative liabilities included in "Other long-term liabilities
and deferred credits" on its Consolidated Balance Sheets.
In the first quarter of 2001, Alliant Energy recorded a net loss of $12.9
million (all related to discontinued operations) for a cumulative effect of a
change in accounting principle representing the impact of adopting SFAS 133
as of Jan. 1, 2001 at Alliant Energy's equity method investees. This
transition adjustment represents Alliant Energy's share of the difference
between the carrying amount of Southern Hydro's electricity derivative
contracts under the applicable accounting principles in effect at Dec. 31,
2000, and the carrying values of these electricity derivative contracts as
determined in accordance with SFAS 133 as of Jan. 1, 2001.
In the third quarter of 2000, Alliant Energy recorded net income of $16.7
million for a cumulative effect of a change in accounting principle
representing the impact of adopting SFAS 133 as of July 1, 2000 at Alliant
79
Energy's consolidated subsidiaries. This transition adjustment was primarily
the result of the difference between the carrying amount of Resources'
exchangeable senior notes issued in February 2000 (due in 2030) under the
applicable accounting principles in effect at June 30, 2000, and the carrying
values of the debt and Resources received an insignificant settlement payment
upon termination which was recorded as an offset to interest expense. On
November 1, 1999, Resources entered into an interest rate forward contract
with a notional amount of $250 million related to the anticipated issuance of
$250 million of senior notes. The senior notes were priced on November 4,
1999, and the forward contract was settled, which resulted in a cash payment
of $2.5 million by Resources. Because the fair value of the change in the
forward contract was highly correlated to the fair value of the change in the
senior notes, the $2.5 million is being deferred as an adjustment to the
carrying valueembedded derivative components of the notes as
determined in accordance with SFAS 133 as of July 1, 2000. Transition
adjustments relating to Alliant Energy's other derivative instruments had no
material impact on net income.
During 2001 and amortized2000, $0.1 million of net gains (includes $0.1 million of net
losses from discontinued operations) and $6.7 million of net losses (includes
$1.3 million of net losses from discontinued operations), respectively,
included in the cumulative effect of a change in accounting principle
component of accumulated other comprehensive income (loss) were reclassified
into interest expense over the lifeearnings, resulting in remaining balances of the senior notes, which mature in 2009.
At December$0 and $0.1 million at Dec.
31, 1999,2001 and 2000, respectively.
Cash Flow Hedging Instruments - During 2002 and 2001, Alliant Energy held
- -----------------------------
various derivative instruments designated as cash flow hedging instruments.
WP&L had two interest rate swap agreements outstanding
(both expiring in January 2000), with an aggregate notional amount of $30
million. The agreements converted variable rate debt into fixed rate debt.
If WP&L had terminated the agreements at December 31, 1999, WP&L would have
made an insignificant payment. Settlements on these swaps occurring during
the year were recorded as a component of interest expense.
(b) Utility Gas Commodities Instruments - WP&L usesutilized gas commodity swapsfinancial swap arrangements to reduce the impact
of price fluctuations on gas purchased and injected into storage during the
summer months and withdrawn and sold at current market prices during the
winter months. The notionalmonths pursuant to the natural gas cost incentive sharing mechanism
with customers in Wisconsin. IP&L and WP&L utilized physical coal purchase
contracts, which did not qualify for the normal purchase and sale exception,
to manage the price of anticipated coal purchases and sales.
In 2002 and 2001, a net loss of $0.1 million (includes a net gain of $0.1
million from discontinued operations) and a net gain of $2.0 million
(includes a net gain of $2.1 million from discontinued operations),
respectively, were recognized relating to the amount of hedge ineffectiveness
in accordance with SFAS 133. In 2002 and 2001, Alliant Energy did not
exclude any components of the derivative instruments' gain or loss from the
assessment of hedge effectiveness and in 2001 reclassified a loss of $0.9
million (all continuing operations) into earnings as a result of the
discontinuance of hedges. At Dec. 31, 2002, the maximum length of time over
which Alliant Energy hedged its exposure to the variability in future cash
flows for forecasted transactions was six months (three months for continuing
operations) and Alliant Energy estimated that losses of $3.3 million
(includes losses of $3.5 million for discontinued operations) will be
reclassified from accumulated other comprehensive income (loss) into earnings
in 2003 as the hedged transactions affect earnings.
Other Derivatives Not Designated in Hedge Relationships - Alliant Energy's
- -------------------------------------------------------
derivatives that were not designated in hedge relationships during 2002
and/or 2001 included the embedded derivative component of Resources'
exchangeable senior notes, electricity price collars, and physical coal and
gas commodity swaps
outstanding ascontracts not designated in hedge relationships.
At maturity, the holders of December 31, 1999Resources' exchangeable senior notes are paid the
higher of the principal amount of the notes or an amount based on the value
of McLeod common stock. SFAS 133 requires that Alliant Energy split the
initial value of the notes into debt and 1998 was 1.9 million and 5.8 million
dekatherms, respectively. Unrealized gains/losses are deferred andderivative components. The payment
feature tied to McLeod stock is considered an embedded derivative under SFAS
133 that must be accounted for as hedges ofa separate derivative instrument. This
component is classified as a derivative liability on the Consolidated Balance
Sheets. Subsequent changes in the fair value of the gasoption are reflected as
increases or decreases in storage as the indexed price
WP&L pays is highly correlated to the market price that WP&L will receive from
customers under the current rate making structure. If WP&L had terminated allAlliant Energy's reported net income. The carrying
amount of the agreements existing at December 31, 1999 and 1998, WP&L would have
realized an estimated gain of $0.1 million and $0.8 million, respectively,
based on current NYMEX gas futures contractshost debt security, classified as long-term debt, is adjusted
for amortization of the proper basis
differential. Settlements of these swaps are recordeddebt discount in accordance with the interest method
as an adjustment to the
cost of gas soldprescribed by APB 21, "Interest on Receivables and Payables."
Changes in the period that coincides with the withdrawal and sale of
the hedged gas in storage.
(c) Oil and Gas Commodities Instruments - Whiting is exposed to commodity
price risk in the pricing of its oil and gas production. Alliant Energy
entered into swap transactions in the third quarter of 1999 to hedge the
ultimate sales price for approximately two-thirds of Whiting's anticipated gas
production from November 1, 1999 through December 31, 2000. At December 31,
1999, the notional amount of these swaps was 13.4 million dekatherms and the
estimated fair value was approximately $1.9 million. The fair value was
determined based on the difference between the fixed price of the swaps and
NYMEX futures prices, adjusted for the necessary basis differential. In
December 1999, Alliant Energy entered into a crude oil swap to fix Whiting's
ultimate sales price for 650 barrels per day from December 1, 1999 to December
31, 2000. At December 31, 1999, the estimated fair value of these swaps was
approximately ($0.3) million,the McLeod shares designated as determined bytrading are
reflected as increases or decreases in Alliant Energy's net income. These
trading gains or losses are expected to correspond with, and partially
offset, changes in the difference between the
fixed pricesintrinsic value of the swaps and NYMEX futures prices forembedded derivative component
of Resources' exchangeable senior notes. Changes in the appropriate
delivery locations. Alliant Energy also used commodity derivative instruments
to hedge atime value portion
of the anticipated sales of Whiting's gas production during
1999. The notional amounts of these derivative instruments was 11,530,000
dekatherms, none of which were outstanding at December 31, 1999. Thecomponent will result in non-cash increases or decreases to
Alliant Energy's net settlements of such instruments resultedincome. Included in "Miscellaneous, net" in Alliant
Energy recognizing a
pre-tax lossEnergy's Consolidated Statements of $5.2Income for 2002, 2001 and 2000 was
expense of $5.0 million, $215.1 million and $102.5 million, respectively,
related to the change in 1999. All of Whiting's gas and crude oil
swaps are treated as hedgesvalue of the anticipated salesMcLeod trading securities, partially
offset by income of Whiting's production
as the notional amounts$0.4 million, $181.6 million and fixed prices of these swaps are highly correlated
to Whiting's volumes of production and the ultimate sales prices of such
production. Settlements$101.8 million,
respectively, related to all of Whiting's swaps are recognized as
incomethe change in the periods in which the swap is settled, which coincides with the
salevalue of the hedged oilderivative component of
the exchangeable senior notes.
80
Electricity price collars were used to manage utility energy costs during
supply/demand imbalances. Physical coal and gas production.
(d)contracts that do not
qualify for the normal purchase and sale exception were used to manage the
price of anticipated coal and gas purchases and sales.
(b) Weather Derivatives - WP&LAlliant Energy uses weather derivatives to reduce
the impact of weather volatility on its natural gas sales volumes. In September 1998,2002
and 2001, Corporate Services, as agent for IP&L and WP&L, entered into
a non-exchange traded "weather collar" with a contract
period commencingoptions based on November 1, 1998 and ending on March 31, 1999. The
maximum amount to be paid or received underheating degree days in which Corporate
Services receives payment from the collar was $5,000,000. WP&L
recognized a gain in "Miscellaneous, net" on this collar of $2.5 millioncounterparty if actual heating degree days
are less than the strike price in the first quarter of 1999 upon termination ofcontract. Corporate Services paid
premiums to enter into these contracts, which are amortized to expense over
the collar. In August 1999,
WP&L entered into a non-exchange traded "weather collar" with a contract period commencing on November 1, 1999 and ending on March 31, 2000. The
maximum payment amount is $5,000,000. Pursuant to the requirements of
EITF-99-2, WP&L is accounting for this instrument usingperiod. Alliant Energy has used the intrinsic value method and recognized an unrealized gain in "Miscellaneous, net" of $2.4
million in the fourth quarter of 1999.
79
(e)to
account for these weather derivatives.
(c) Nuclear Decommissioning Trust Fund Investments - Historically, WP&L has
entered into an
equity collar that uses writtencombinations of options to mitigate the effect of significant
market fluctuations on its common stock investments in its nuclear
decommissioning trust funds. The program isderivative transactions are designed to
protect the portfolio's value while allowing the funds to earn a total return
modestly in excess of long-term expectations over the two-year hedge period, which expires
September 2000. The notional amount of the options was $78 million and $52
million at December 31, 1999 and 1998, respectively. The options are reported
at fair market value each reporting period. These fairFair
value changes of these instruments do not impact net income as they are
recorded as equally offsetting changes in the investment in nuclear
decommissioning trust funds and accumulated depreciation.
The option liability(d) Energy-trading Contracts - Resources is the majority owner of a natural
gas marketing operation, NG Energy Trading, LLC (NG). NG enters into
financial and physical contracts for the sale, purchase, storage,
transportation and loan of natural gas. NG accounts for all its positions,
including gas in storage, at estimated fair value, exceeded the premium received
by $17.8 millionwith changes in fair value
reported in earnings. Alliant Energy adopted EITF Issue 02-3 effective Jan.
1, 2003 for all contracts that were in place and $8.9 million at December 31, 1999storage gas acquired prior
to Oct. 25, 2002, and December 31, 1998,
respectively, as reported by the trustee.
(12)will reclassify prior period trading contracts on a net
basis in its Consolidated Statements of Income commencing in January 2003.
(11) COMMITMENTS AND CONTINGENCIES
(a) Construction and Acquisition ProgramExpenditures - Plans for Alliant Energy'sCertain commitments have
been made in connection with 2003 capital expenditures. During 2003, total
construction and acquisition program canexpenditures relating to continuing operations
are estimated to be found elsewhere in this report in
the "Liquidity and Capital Resources - Capital Requirements" section of MD&A.approximately $820 million.
(b) Purchased-Power, Coal and Natural Gas Contracts - Alliant Energy,
through its subsidiaries Corporate Services, IP&L and WP&L, has entered into
purchased-power, capacitycoal and coal contracts and its minimum
commitments are as follows (dollars in millions, MWHs and tons in thousands):
Coal
Purchased-Power (including
transportation)
------------------- ----------------------
Dollars MWHs Dollars Tons
-------- --------- --------- -----------
2000 $108.2 1,571 $63.2 16,227
2001 69.6 925 44.5 11,434
2002 47.0 280 19.6 5,991
2003 36.5 280 14.2 4,993
2004 25.2 219 11.7 3,878
Alliant Energy is in the process of negotiating several new coal contracts.
In addition, it expects to supplement its coal contracts with spot market
purchases to fulfill its future fossil fuel needs. Alliant Energy also has
various natural gas supply, transportation and storage
contracts outstanding.contracts. Certain purchased-power commitments are considered operating
leases and are therefore not included here, but are included in Note 3. The
minimum dekatherm commitments, in millions, for 2000-2004 are 185.6,
150.8, 133.2, 110.3 and 9.8, respectively. The minimum dollar commitments for
2000-2004, in millions, are $94.0, $70.3, $47.7, $40.0 and $3.2,
respectively. Thenatural gas supply commitments are all index-based. Alliant Energy expects
to supplement its coal and natural gas supplysupplies with spot market purchases as
needed. The table includes commitments for "take-or-pay" contracts which
result in dollar commitments with no associated tons or Dths. At Dec. 31, 2002,
Alliant Energy's minimum commitments were as follows (dollars and Dths in
millions; MWhs and tons in thousands):
Purchased-power Coal Natural gas
----------------------- ------------------------- -------------------------
Dollars MWhs Dollars Tons Dollars Dths
---------- --------- ---------- ---------- ----------- ----------
2003 $114.5 2,752 $81.1 9,889 $90.7 6
2004 15.5 361 57.6 9,301 36.5 --
2005 2.0 -- 40.2 6,130 26.0 --
2006 2.0 -- 12.7 898 15.0 --
2007 0.1 -- 3.6 -- 14.7 --
Thereafter 0.4 -- -- -- 26.4 --
(c) Information Technology ServicesLegal Proceedings - Alliant Energy has an agreement,
expiringis involved in 2004,legal and
administrative proceedings before various courts and agencies with EDS for information technology services.respect to
matters arising in the ordinary course of business. Although unable to
predict the outcome of these matters, Alliant Energy's anticipated operatingEnergy believes that
appropriate reserves have been established and capital expenditures under the agreement for
2000 are estimated to total approximately $16 million. Future costs under the
agreement are variable and are dependent upon Alliant Energy's levelfinal disposition of usagethese
actions will not have a material adverse effect on its financial condition or
results of technological services from EDS.operations.
(d) Financial Guarantees and Commitments - At Dec. 31, 2002 and 2001, Alliant Energy
has financialhad guarantees which were generally issuedoutstanding to support unconsolidated affiliate and
third-party borrowingfinancing arrangements and similar transactions, amounting to $17of approximately $4 million and $18$14
million, outstanding at December 31, 1999 and 1998, respectively. Such guarantees are not reflectedincluded on Alliant Energy's
Consolidated Balance Sheets. At Dec. 31, 2002, the remaining term of the
guarantees and the underlying debt was five years. Refer to Note 3 for
discussion of Alliant Energy's residual value guarantees of its synthetic
leases.
81
In the third quarter of 2002, Alliant Energy sold its 50% ownership interest
in its Cargill-Alliant electricity-trading joint venture to Cargill. Under
the consolidated financial statements.
Managementpurchase and sale agreement ("Agreement"), Alliant Energy agreed to
indemnify Cargill from expenses resulting from the breach of the
representations and warranties made by Alliant Energy as of the closing date,
and for the breach of its obligations under the Agreement. While the
indemnification does not include a maximum limit, Alliant Energy believes that the
likelihood of Alliant Energy having to make any material cash payments under these agreementsthis
indemnification is remote. At Dec. 31, 2002, there were no claims related to
the indemnification.
In addition, as partNovember 2002, the FASB issued FIN 45 which requires disclosures by a
guarantor about its obligations under certain guarantees that it has issued.
FIN 45 also requires recognizing, at the inception of Alliant Energy's electricity trading joint venture
with Cargill, botha guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The recognition and measurement provisions of FIN 45 are
effective on a prospective basis for guarantees issued or modified after Dec.
31, 2002. Alliant Energy and Cargill have made guarantees to certain
counterparties regarding the performance of contracts entered into by the
joint venture. Revocable guarantees of approximately $95 million and $50
million have been issued, of which approximately $20 million and $5 million
were outstanding at December 31, 1999 and 1998, respectively. Under the terms
of the joint venture agreement, any payments required under the guarantees
would be shared by Alliant Energy and Cargill on a 50/50 basis to the extent
the joint venture isdoes not able to reimburse the guarantor for payments made
under the guarantee.
80
As of December 31, 1999 and 1998, Resources had extended commitments to
provide $6.1 million and $19 million, respectively, in nonrecourse, permanent
financing to developers which were secured by affordable housing properties.
Alliant Energy anticipates other lendersanticipate FIN 45 will ultimately finance these
properties.
(e) Nuclear Insurance Programs - Public liability for nuclear accidents is
governed by the Price Anderson Act of 1988, which sets a statutory limit of
$9.5 billion for liability to the public for a single nuclear power plant
incident and requires nuclear power plant operators to provide financial
protection for this amount. As required, IESU provides this financial
protection for a nuclear incident at DAEC through a combination of liability
insurance ($200 million) and industry-wide retrospective payment plans ($9.3
billion). Under the industry-wide plan, each operating licensed nuclear
reactor in the U.S. is subject to an assessment in the event of a nuclear
incident at any nuclear plant in the U.S. The owners of DAEC could be
assessed a maximum of $88.1 million per nuclear incident, with a maximum of
$10 million per incident per year (of which IESU's 70% ownership portion would
be approximately $61.7 million and $7 million, respectively) if losses
relating to the incident exceeded $200 million. These limits are subject to
adjustments for changes in the number of participants and inflation in future
years. On a similar note, WP&L, as a 41% owner of Kewaunee, is subject to an
overall assessment of approximately $36.1 million per incident, not to exceed
$4.1 million payable in any given year.
IESU and WP&L are members of NEIL, which provides $1.9 billion of insurance
coverage for IESU and $1.8 billion for WP&L on certain property losses for
property damage, decontamination and premature decommissioning. The proceeds
from such insurance, however, must first be used for reactor stabilization and
site decontamination before they can be used for plant repair and premature
decommissioning. NEIL also provides separate coverage for additional expense
incurred during certain outages. Owners of nuclear generating stations
insured through NEIL are subject to retroactive premium adjustments if losses
exceed accumulated reserve funds. NEIL's accumulated reserve funds are
currently sufficient to more than cover its exposure in the event of a single
incident under the primary and excess property damage or additional expense
coverages. However, IESU could be assessed annually a maximum of $1.9 million
for NEIL primary property, $2.8 million for NEIL excess property and $0.5
million for NEIL additional expenses if losses exceed the accumulated reserve
funds. WP&L could be assessed annually a maximum of $1.1 million for NEIL
primary property, $1.6 million for NEIL excess property and $0.4 million for
NEIL additional expense coverage. IESU and WP&L are not aware of any losses
that they believe are likely to result in an assessment.
In the unlikely event of a catastrophic loss at Kewaunee or DAEC, the amount
of insurance available may not be adequate to cover property damage,
decontamination and premature decommissioning. Uninsured losses, to the
extent not recovered through rates, would be borne by Alliant Energy and could have a material
adverse effectimpact on Alliant Energy'sits financial condition andor results of operations.
(f)(e) Environmental Liabilities - Alliant Energy had recorded the following
environmental liabilities, and regulatory assets associated with certain of
these liabilities, as of Decemberat Dec. 31 (in millions):
1999 1998
---------------------------------------------- ----------------------------------------------
Environmental liabilities IESU WP&L IPC Resources Total IESU WP&L IPC Resources Total
------- --------- -------- ------------ ------- ------- --------- ------- ------------ -------2002 2001 Regulatory assets 2002 2001
- ------------------------- ----------- ----------- ----------------- ---------- -----------
MGP sites $24.5 $7.3 $16.2 -- $48.0 $26.6 $7.7 $17.5 -- $51.8
NEPA 7.0 4.1 -- -- 11.1 7.8 4.6 -- -- 12.4
Oil and gas
properties -- -- -- $13.0 13.0 -- -- -- $13.0 13.0
Other 0.3 0.1 0.5 0.1 1.0 0.4 -- 0.6 0.2 1.2
------- --------- -------- ------------ ------- ------- --------- ------- ------------ -------
$31.8 $11.5 $16.7 $13.1 $73.1 $34.8 $12.3 $18.1 $13.2 $78.4
======= ========= ======== ============ ======= ======= ========= ======= ============ =======
1999 1998
----------------------------------- -----------------------------------
Regulatory assets IESU WP&L IPC Total IESU WP&L IPC Total
------- ---------- ------- -------- ------- ---------- -------- -------
$49.3 $43.9 MGP sites $24.5 $14.2 $15.7 $54.4 $26.6 $14.1 $17.5 $58.2$54.1 $50.2
NEPA 7.7 4.9 -- 12.6 8.4 5.4 -- 13.86.6 8.2 NEPA 7.9 9.7
Other 0.2 -- -- 0.2 0.2 -- -- 0.2
------- ---------- ------- -------- ------- ---------- -------- -------
$32.4 $19.1 $15.7 $67.2 $35.2 $19.5 $17.5 $72.2
======= ========== ======= ======== ======= ========== ======== =======0.4 Other 2.9 3.2
----------- ----------- ----------- -----------
$56.1 $52.5 $64.9 $63.1
=========== =========== =========== ===========
Alliant Energy's significant environmental liabilities are discussed further
below.
81
Manufactured Gas PlantMGP Sites - IESU, WPIP&L and IPCWP&L have current or previous - ----------------------------
ownership interests in 34,43
- ---------
and 14 and 9 sites, respectively, previously associated with the production of gas
for which they may be liable for investigation, remediation and monitoring
costs relating to the sites. The companiesIP&L and WP&L have received letters from state
environmental agencies requiring no further action at eight and five sites,
respectively. IP&L and WP&L are working pursuant to the requirements of
various federal and state agencies to investigate, mitigate, prevent and
remediate, where necessary, the environmental impacts to property, including
natural resources, at and around the sites in order to protect public health
and the environment.
The
companies each believe that they have completed the remediation at various
sites, although they are still in the process of obtaining final approval from
the applicable environmental agencies for some of these sites.
Each company recordsIP&L and WP&L record environmental liabilities based upon periodic studies,
most recently updated in the third quarter of 1999,2002, related to the MGP
sites. Such amounts are based on the best current estimate of the remaining
amount to be incurred for investigation, remediation and monitoring costs for
those sites where the investigation process has been or is substantially
completed, and the minimum of the estimated cost range for those sites where
the investigation is in its earlier stages. It is possible that future cost
estimates will be greater than current estimates as the investigation process
proceeds and as additional facts become known. The amounts recognized as
liabilities are reduced for expenditures made and are adjusted as further
information develops or circumstances change. Costs of future expenditures
for environmental remediation obligations are not discounted to their fair
value. Management currently estimates the range of remaining costs to be
incurred for the investigation, remediation and monitoring of all Alliant Energyutility
subsidiary sites to be approximately $33$37 million to $61$64 million. IESU, WP&L and IPC currently
estimate their share of the remaining costs to be incurred to be approximately
$16 million to $33 million, $6 million to $8 million, and $11 million to $20
million, respectively.
Under the current rate making treatment approved by the PSCW, the MGP
expenditures of WP&L, net of any insurance proceeds, are deferred and
collected from gas customers over a five-year period after new rates are
implemented. The MPUC also allows the deferral of MGP-related costs
applicable to the Minnesota sites and IPCIP&L has been successful in obtaining
approval to recover such costs in rates in Minnesota. The IUB has permitted
utilities to recover prudently incurred costs. As a result, regulatoryRegulatory assets have been
recorded by each companyIP&L and WP&L, which reflect the probable future rate recovery,
where applicable. Considering the current rate treatment, and assuming no
material change therein, IESU, WPIP&L and IPCWP&L believe that the clean-up costs
incurred for these MGP sites will not have a material adverse effect on their
respective financial conditions or results of operations.
Settlement has been reached with all of IESU'sIP&L's and WP&L's insurance carriers
regarding reimbursement for itstheir MGP-related costscosts. Insurance recoveries
available at Dec. 31, 2002 for IP&L and all issues have been
resolved. IPC has settled with all but one of its insurance carriers. The
following insurance recoveriesWP&L were available as of December 31 (in millions):
1999 1998
--------- --------
IESU $18.5 $18.5
IPC 5.3 4.8
WP&L 2.1 2.1
--------- --------
$25.9 $25.4
========= ========$4.5 million and $2.1
million, respectively. Pursuant to their applicable rate making treatment,
IESU and IPC haveIP&L has recorded theirits recoveries in "Other long-term liabilities and deferred
credits" and WP&L has recorded its recoveries as an offset against its
regulatory assets. National Energy Policy ActIn February 2001, the IUB issued an order directing IP&L
to refund its insurance recoveries related to former IESU MGP sites. Under
82
the refund plan, IP&L returned 90% of 1992the recoveries to customers of the
former IESU in 2001 and retained 10%.
NEPA - NEPA requires owners of nuclear power - -----------------------------------
plants to pay a special
- ----
assessment into a "Uranium Enrichment Decontamination and Decommissioning
Fund." The assessment is based upon prior nuclear fuel purchases. IESU is recoveringIP&L and
WP&L recover the costs associated with this assessment through its electricEACs and fuel
adjustment clausescosts, respectively, over the period the costs are assessed. Alliant Energy
continues to pursue relief from this assessment through litigation.
Oil and Gas Properties Dismantlement and Abandonment Costs - Whiting is
- ----------------------------------------------------------
responsible for certain dismantlement and abandonment costs related to various
82
off-shore oil and gas platforms (and related on-shore plants and equipment),
the most significant of which is located off the coast of California. Whiting
estimates the total costs for these properties to be approximately $13 million
and the most significant expenditures are not expected to be incurred until
2004. In accordance with applicable accounting requirements, Whiting has
accrued these costs.
(g) Spent Nuclear Fuel - Nuclear Waste Policy Act of 1982 assigned
responsibility to the DOE to establish a facility for the ultimate disposition
of high level waste and spent nuclear fuel and authorized the DOE to enter
into contracts with parties for the disposal of such material beginning in
January 1998. IESU and WP&L entered into such contracts and have made the
agreed payments to the Nuclear Waste Fund held by the U.S. Treasury. The
companies were subsequently notified by the DOE that it was not able to begin
acceptance of spent nuclear fuel by the January 31, 1998 deadline.
Furthermore, the DOE has experienced significant delays in its efforts and
material acceptance is now expected to occur no earlier than 2010 with the
possibility of further delay being likely. Alliant Energy has participated in
several litigation proceedings against the DOE on this issue and the
respective courts have affirmed the DOE's responsibility for spent nuclear
fuel acceptance. Alliant Energy is evaluating its options for recovery of
damages due to the DOE's delay in accepting spent nuclear fuel.
The Nuclear Waste Policy Act of 1982 assigns responsibility for interim
storage of spent nuclear fuel to generators of such spent nuclear fuel, such
as IESU and WP&L. In accordance with this responsibility, IESU and WP&L have
been storing spent nuclear fuel on site at DAEC and Kewaunee, respectively,
since plant operations began. IESU will have to increase its spent fuel
storage capacity at DAEC to store all of the spent fuel that will be produced
before the current license expires in 2014. To provide assurance that both
the operating and post-shutdown storage needs are satisfied, construction of a
dry cask storage facility is being planned. With minor modifications planned
for 2001, Kewaunee would have sufficient fuel storage capacity to store all of
the fuel it will generate through the end of the NRC license life in 2013. No
decisions have been made concerning post-shutdown storage needs. Legislation
is being considered on the federal level that would, among other provisions,
expand the DOE's permanent spent nuclear fuel storage to include interim
storage for spent nuclear fuel as early as 2003. This legislation has been
passed in the U.S. Senate and submitted in the U.S. House. The prospects for
the legislation being approved by the U.S. Senate and the President, and
subsequent successful implementation by the DOE, are uncertain at this time.
(h)(f) Decommissioning of DAEC and Kewaunee - Pursuant to the most recentThe IUB, in its interim electric
rate case order the IUB and PSCW allow IESU and WPeffective July 2002, allows IP&L to recover $6
million and $16$11 million annually
for theirits share of the cost to decommission DAEC andDAEC. FERC, in its most recent
interim wholesale rate order effective April 2002, allows WP&L to recover $3
million annually for its share of the cost to decommission Kewaunee. Both
interim orders are subject to refund, pending determination of final rates.
The PSCW, in an order effective Jan. 1, 2002, eliminated WP&L's recovery from
retail customers for the cost to decommission Kewaunee, respectively.due to the trust fund
being adequately funded. Decommissioning expense is included in
"Depreciation and amortization" in the Consolidated Statements of Income and
the cumulative amount is included in "Accumulated depreciation" on the
Consolidated Balance Sheets to the extent recovered through rates.
Additional information relating to the decommissioning of DAEC and Kewaunee
included in the most recent electric rate orderswas as follows (dollars in millions):
DAEC Kewaunee
------------------------- ----------------------
Assumptions relating to current rate recovery figures:
amounts:
Alliant Energy's share of estimated decommissioning cost $252.8 $200.8$374.3 $263.2
Year dollars in 1993 19992002 2002
Method to develop estimate NRC minimum formulaSite-specific study Site-specific study
Annual inflation rate 4.91% 5.83%4.20% 6.50%
Decommissioning method Prompt dismantling Prompt dismantling
and removal and removal
Year decommissioning to commence 2014 2013
After-tax return on external investments:
Qualified 7.34% 5.62%7.10% 6.12%
Non-qualified 5.98% 6.97%4.70% 5.14%
External trust fund balance at DecemberDec. 31, 1999 $105.1 $166.22002 $121.2 $223.7
Internal reserve at DecemberDec. 31, 19992002 $21.7 --$--
After-tax earnings (losses) on external trust funds in 1999 $4.8 ($4.3)2002 $3.8 $19.7
83
The interim rate recovery figuresamounts for DAEC only includedinclude an inflation estimate
through 1997.2005. Both IESUIP&L and WP&L are funding all rate recoveries for
decommissioning into external trust funds and funding on a tax-qualified
basis to the extent possible. All of the rate recovery assumptions are subject to change in
future regulatory proceedings. In accordance with their respective regulatory
requirements, IESUIP&L and WP&L record the earnings on the external trust funds
as interest income with a corresponding entry to interest expense at IESUIP&L and
to depreciation expense at WP&L. The earnings accumulate in the external
trust fund balances and in accumulated depreciation on utility plant.
IESU's 70% shareSFAS 143, which provides accounting and disclosure requirements for
retirement obligations associated with long-lived assets, was adopted by
Alliant Energy on Jan. 1, 2003. SFAS 143 requires that the present value of
retirement costs for which Alliant Energy has a legal obligation be recorded
as liabilities with an equivalent amount added to the asset cost. The
liability is accreted to its present value each period and the capitalized
cost is depreciated over the useful life of the estimated costrelated asset. Upon
settlement of the liability, an entity settles the obligation for its
recorded amount or incurs a gain or loss. The adoption of SFAS 143 will have
no impact on IP&L's and WP&L's earnings, as the effects will be offset by the
establishment of regulatory assets or liabilities pursuant to decommissionSFAS 71.
Alliant Energy has completed a detailed assessment of the specific
applicability and implications of SFAS 143. The scope of SFAS 143 as it
relates to Alliant Energy primarily includes decommissioning costs for DAEC
based on the most
recent site-specific study completed in 1998 is $334.2 million, in 1998
dollars. This study includes the costs to terminate DAEC's NRC license and to
return the siteKewaunee. It also applies to a greenfield condition. IESU's 70% sharesmaller extent to several other regulated
and non-regulated assets including, but not limited to, active ash landfills,
water intake facilities, underground storage tanks, groundwater wells,
transmission and distribution equipment, easements, leases and the
dismantlement of the estimated
cost to decommissioncertain hydro facilities. Other than DAEC based on the most recent NRC minimum formula, using
the direct disposal method, is $351.2 million in 1998 dollars. The NRC
minimum formula is intended to apply only to the costand Kewaunee,
Alliant Energy's asset retirement obligations as of terminating DAEC's
NRC license. The additional decommissioning expense funding requirements
which should result from these updated studiesJan. 1, 2003 are not
reflectedsignificant.
83
Prior to January 2003, IP&L and WP&L recorded nuclear decommissioning charges
in IESU's
rates.
(i) Legal Proceedings - Alliant Energyaccumulated depreciation on their Consolidated Balance Sheets. Upon
adoption of SFAS 143, IP&L and WP&L will reverse approximately $125 million
and $175 million, respectively, previously recorded in accumulated
depreciation and will record liabilities of approximately $250 million and
$175 million, respectively. The difference between amounts previously
recorded and the net SFAS 143 liability will be deferred as a regulatory
asset and is involvedexpected to approximate $125 million and $0 for IP&L and WP&L,
respectively.
IP&L and WP&L have previously recognized removal costs as a component of
depreciation expense and accumulated depreciation for other non-nuclear
assets in legalaccordance with regulatory rate recovery. As of Dec. 31, 2002,
IP&L and administrative proceedings before various courtsWP&L estimate that they have approximately $250 million and agencies with respect to
matters arising$150
million, respectively, of such regulatory liabilities recorded in
the ordinary course of business. Although unable to
predict the outcome of these matters, Alliant Energy believes that appropriate
reserves have been established and final disposition of these actions will not
have a material adverse effect"Accumulated depreciation" on its financial condition or results of
operations.
(13)their Consolidated Balance Sheets.
(12) JOINTLY-OWNED ELECTRIC UTILITY PLANT
Under joint ownership agreements with other Iowa and Wisconsin utilities, IESU, WP&L and IPCthe
utility subsidiaries have undivided ownership interests in jointly-owned
electric generating stations andstations. IP&L also has joint ownership agreements
related to transmission facilities. Each of the respective owners is
responsible for the financing of its portion of the construction costs. Kilowatt-hourKWh
generation and operating expenses are divided on the same basis as ownership
with each owner reflecting its respective costs in its Consolidated
Statements of Income. Information relative to IESU's, WP&L's and IPC'sthe utility subsidiaries'
ownership interest in these facilities at DecemberDec. 31, 1999 is2002 was as follows
(dollars in millions):
1999 1998
-------------------------------- -----------------------------
Plant Accumulated Accumulated
Name-plate Provision Plant ProvisionConstruction
Fuel Ownership In-service MW Plant in Provision for in forWork-In-
Type Interest % Date Capacity Service Depreciation CWIP Service Depreciation CWIP
- ------------------- ----------- -------- ----------- -- --------- ------------- -------- -------- ------------- -------
IESU
Coal:Progress
---------- ----------------- --------------- --------------- ----------------
IP&L
- ----
DAEC Nuclear 70.0 $543.3 $318.5 $25.2
Ottumwa Coal 48.0 190.9 118.2 0.7
Neal Unit 1 48.0 1981 716 $195.3 $107.8 $0.5 $193.1 $102.7 $0.84 Coal 21.5 85.3 59.4 0.2
Neal Unit 3 Coal 28.0 1975 515 59.2 32.1 -- 59.0 32.459.9 36.9 1.9
Louisa Unit 1 Coal 4.0 25.0 14.9 0.1
Nuclear:
DAEC 70.0 1974 520 515.8 264.4 8.6 507.1 247.2 1.4
--------- ------------- -------- -------- ------------- -------
Total IESU $770.3 $404.3 $9.1 $759.2 $382.3 $2.3
--------- ------------- -------- -------- ------------- ---------------------- --------------- ----------------
904.4 547.9 28.1
--------------- --------------- ----------------
WP&L
Coal:- ----
Edgewater Unit 5 Coal 75.0 234.8 112.9 0.4
Columbia Energy 1975 &
Center Coal 46.2 1978 1,023 $163.2 $97.8 $2.6 $161.5 $93.8 $1.4187.5 110.3 1.6
Kewaunee Nuclear 41.0 172.6 120.9 6.8
Edgewater Unit 4 Coal 68.2 1969 330 52.7 32.0 0.7 52.4 30.8 0.4
Edgewater Unit 5 75.0 1985 380 229.3 92.2 0.6 229.0 85.9 0.2
Nuclear:
Kewaunee 41.0 1974 535 135.0 100.7 13.6 132.2 93.7 6.4
--------- ------------- ------- --------- ------------ -------
Total WP&L $580.2 $322.7 $17.5 $575.1 $304.2 $8.4
--------- ------------- ------- --------- ------------ -------
IPC
Coal:
Neal Unit 4 21.5 1979 640 $83.5 $51.1 $-- $82.1 $48.4 $1.5
Louisa Unit 1 4.0 1983 738 24.7 12.5 -- 24.7 11.7 --
--------- ------------- ------- --------- ------------ -------
Total IPC $108.2 $63.6 $-- $106.8 $60.1 $1.5
--------- ------------- ------- --------- ------------ -------
Total Alliant Energy $1,458.7 $790.6 $26.6 $1,441.1 $746.6 $12.2
========= ============= ======= ========= ============ =======60.0 36.1 1.6
--------------- --------------- ----------------
654.9 380.2 10.4
--------------- --------------- ----------------
$1,559.3 $928.1 $38.5
=============== =============== ================
84
(14)(13) SEGMENTS OF BUSINESS
Alliant Energy's principal business segments are:
o Regulated domestic utilities - consists of Alliant Energy's three
regulated utility operating companies (IESU, WPIP&L and IPC)WP&L, serving
customers in Iowa, Wisconsin, Minnesota and Illinois. The regulated
domestic utility business is broken down intoIllinois, and includes three
segments which are:segments: a) electric operations; b) gas operations; and c) other, which
includes the watersteam and steamwater businesses and the unallocated portions of the
utility business. Various line items in the following tables are not
allocated to the electric and gas segments for management reporting
purposes and therefore are included in "Total Regulated Domestic Utilities."
o Non-regulated businesses - represents the operations of Resources, its
subsidiaries and its subsidiaries. This includes domesticAlliant Energy's investment in Cargill-Alliant (sold in
2002), and international energy productsis broken down into two segments: a) International (Int'l) and
services businesses; industrial services,b) other, which includes environmental,
engineeringthe operations of the Integrated Services,
Investments, Non-regulated Generation, Energy Technologies and transportation services; investmentsMass
Marketing business units described in affordable housing
initiatives;Note 1(a); the operations of
Resources (the non-regulated holding company); and investments in various other strategic initiatives.any non-regulated
reconciling/eliminating entries.
o Other - includes the operations of Alliant Energy'sEnergy (the parent companycompany)
and Corporate Services, as well as any Alliant Energy parent company
reconciling/eliminating entries.
84
Intersegment revenues were not material to Alliant Energy's operations and
there was no single customer whose revenues exceededwere 10% or more of Alliant
Energy's consolidated revenues. Refer to Note 109 for a breakdown of Alliant
Energy's international investments by country. Certain financial information
relating to Alliant Energy's significant business segments and products and
services is presented below:was as follows (in millions):
Regulated Domestic Utilities Non-regulated Businesses
-------------------------------------- ------------------------------- Alliant Energy
----------------------------------------------
Electric Gas Other Total BusinessesInt'l Other Total Other Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
(in millions)
1999------------------------------------------------------------------------------------------------------------------------------------
2002
- ----
Operating revenue $1,548.9 $ 314.3 $32.1 $1,895.3 $305.0revenues $1,752.5 $394.0 $37.2 $2,183.7 $103.2 $328.6 $431.8 ($2.3) $2,198.06.7) $2,608.8
Depreciation and amortization expense 219.3 25.2 2.9 247.4 31.7250.6 27.9 3.9 282.4 11.2 17.0 28.2 -- 279.1310.6
Operating income (loss) 345.1 27.4 5.3 377.8 (1.3) -- 376.5299.2 26.2 8.2 333.6 9.7 (21.1) (11.4) (0.5) 321.7
Interest expense, net of AFUDC 100.7 100.7 24.8 3.4 128.9
Preferred and preference
dividends 6.7 6.7100.0 44.9 31.6 76.5 2.3 178.8
Interest income from loans to
discontinued operations, net -- (6.0) (10.0) (16.0) -- 6.7
Net(16.0)
Equity (income) loss from
equity
method subsidiaries (0.3) (0.3) (2.9) 0.2 (3.0)
Gains on sales of McLeod stockunconsolidated investments (17.6) 17.1 13.3 30.4 -- 12.8
Preferred dividends 6.2 -- -- (40.3) -- (40.3)-- 6.2
Impairment of available-for-sale
securities of McLeodUSA Inc. -- -- 27.2 27.2 -- 27.2
Miscellaneous, net (other than
equity income/loss) (5.4) (5.4) (27.6) 0.1 (32.9)(27.9) 3.4 25.4 28.8 (0.6) 0.3
Income tax expense (benefit) 115.0 115.0 6.9 (1.4) 120.5107.1 (12.1) (54.6) (66.7) (4.3) 36.1
Income from continuing operations 165.8 (37.6) (54.0) (91.6) 2.1 76.3
Income from discontinued
operations, net of tax -- 10.5 20.1 30.6 -- 30.6
Net income (loss) 161.1 161.1 37.8 (2.3) 196.6165.8 (27.1) (33.9) (61.0) 2.1 106.9
Total assets 3,321.8 477.6 385.2 4,184.6 1,848.6 42.5 6,075.73,676.5 574.9 474.8 4,726.2 1,009.6 1,250.8 2,260.4 14.8 7,001.4
Investments in equity method
subsidiaries 5.7 5.7 74.0125.1 -- 79.7-- 125.1 297.1 29.1 326.2 0.3 451.6
Construction and acquisition
expenditures 246.9 35.5 3.3 285.7 192.1 0.8 478.6371.3 28.6 4.8 404.7 65.5 152.8 218.3 33.8 656.8
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Regulated Domestic Utilities Non-regulated Businesses
--------------------------------------- ------------------------------ Alliant Energy
Electric Gas Other Total Int'l Other Total Other Consolidated
- -----------------------------------------------------------------------------------------------------------------------------------
2001
- ----
Operating revenues $1,756.6 $487.9 $37.1 $2,281.6 $85.4 $263.3 $348.7 ($5.6) $2,624.7
Depreciation and amortization 245.6 28.8 3.2 277.6 8.3 16.7 25.0 -- 302.6
Operating income (loss) 306.1 11.2 7.5 324.8 7.4 (13.3) (5.9) (1.9) 317.0
Interest expense, net of AFUDC 100.5 54.6 9.6 64.2 9.8 174.5
Interest income from loans to
discontinued operations, net -- (0.1) (9.8) (9.9) -- (9.9)
Equity (income) loss from
unconsolidated investments (15.6) 4.1 (7.2) (3.1) (0.1) (18.8)
Preferred dividends 6.7 -- -- -- -- 6.7
Miscellaneous, net (25.9) (2.8) 20.7 17.9 (4.6) (12.6)
Income tax expense (benefit) 94.2 (22.7) (12.3) (35.0) (8.4) 50.8
Income from continuing operations 164.9 (25.7) (14.3) (40.0) 1.4 126.3
Income from discontinued
operations, net of tax -- 11.3 47.7 59.0 -- 59.0
Cumulative effect of a change in
accounting principle, net of tax -- (12.9) -- (12.9) -- (12.9)
Net income (loss) 164.9 (27.3) 33.4 6.1 1.4 172.4
Total assets 3,336.6 506.4 465.0 4,308.0 858.6 995.9 1,854.5 75.4 6,237.9
Investments in equity method
subsidiaries 119.2 -- -- 119.2 448.3 32.6 480.9 -- 600.1
Construction and acquisition
expenditures 298.7 36.9 5.2 340.8 173.0 159.3 332.3 40.0 713.1
- -----------------------------------------------------------------------------------------------------------------------------------
85
Regulated Domestic Utilities Non-regulated Businesses
---------------------------------------- ------------------------------- Alliant Energy
------------------------------------------------
Electric Gas Other Total BusinessesInt'l Other Total Other Consolidated
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2000
- ----
Operating revenues $1,648.0 $415.0 $33.4 $2,096.4 $ -- $186.0 $186.0 ($2.7) $2,279.7
Depreciation and amortization 252.6 27.7 3.1 283.4 3.7 9.6 13.3 -- 296.7
Operating income (loss) 330.6 26.6 4.5 361.7 (7.8) (18.1) (25.9) 0.2 336.0
Interest expense, net of AFUDC 103.1 38.8 9.0 47.8 8.5 159.4
Interest income from loans to
discontinued operations, net -- -- (7.2) (7.2) -- (7.2)
Equity income from
unconsolidated investments (0.5) (5.8) (13.2) (19.0) -- (19.5)
Preferred dividends 6.7 -- -- -- -- 6.7
Gain on reclassification of
investments -- -- (321.3) (321.3) -- (321.3)
Miscellaneous, net (23.3) (8.9) (4.3) (13.2) (2.7) (39.2)
Income tax expense 107.9 (14.2) 132.2 118.0 0.3 226.2
Income from continuing operations 167.8 (17.7) 186.7 169.0 (5.9) 330.9
Income from discontinued
operations, net of tax -- (0.5) 51.6 51.1 -- 51.1
Cumulative effect of a change in
accounting principle, net of tax -- -- 16.7 16.7 -- 16.7
Net income (loss) 167.8 (18.2) 255.0 236.8 (5.9) 398.7
Total assets 3,402.2 554.4 427.2 4,383.8 631.0 1,702.3 2,333.3 16.7 6,733.8
Investments in equity method
subsidiaries 6.5 -- -- 6.5 389.0 29.5 418.5 -- 425.0
Construction and acquisition
expenditures 265.9 35.8 3.0 304.7 395.6 134.1 529.7 11.1 845.5
- ------------------------------------------------------------------------------------------------------------------------------------
Products and Services
- ---------------------
Non-regulated and Other Revenues
- -----------------------------------------------------------------------------------------------------------
Integrated
Year Services International Mass Marketing Investments Other Total
- -----------------------------------------------------------------------------------------------------------
(in millions)
1998
2002 $258.8 $103.2 $46.9 $26.1 $27.3 $462.3
2001 241.9 85.4 6.8 26.6 19.5 380.2
2000 172.3 -- 0.7 28.5 15.2 216.7
(14) GOODWILL AND OTHER INTANGIBLE ASSETS
Alliant Energy adopted SFAS 142 on Jan. 1, 2002, which resulted
in goodwill no longer being subject to amortization. Had
SFAS 142 been adopted Jan. 1, 2000, net income for 2001
and 2000 would have increased $4 million and $1 million, respectively, and
basic and diluted EPS would have increased $0.05 and $0.02 per share,
respectively. Certain information regarding net goodwill and other
intangible assets included on Alliant Energy's Consolidated Balance Sheets at
Dec. 31 was as follows (in millions):
2002 2001
----------- -----------
Net goodwill
Deferred charges and other (consolidated investments) $66 $66
Investments in unconsolidated foreign entities (equity method investments) 9 7
Net other intangible assets
Deferred charges and other (consolidated investments) 19 20
Investments in unconsolidated foreign entities (equity method investments) 22 35
Investment in ATC and other (equity method investments) 25 --
In January 2003, Alliant Energy committed to a plan to sell its interest in
SmartEnergy by year-end. In the fourth quarter of 2002, Alliant Energy
recorded a SFAS 142 after-tax non-cash goodwill impairment charge related to
SmartEnergy of $4.5 million primarily due to less favorable market
conditions. The fair value of SmartEnergy's goodwill was estimated using a
combination of the expected discounted future cash flows and market value
86
indicators. The impairment charge was recorded in continuing operations,
"Miscellaneous, net," in Alliant Energy's Consolidated Statement of Income for
2002.
(15) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
All "per share" references refer to earnings per diluted share. Summation of
the individual quarters may not equal annual totals due to rounding.
2002 2001
---------------------------------------- ---------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
---------- --------- --------- --------- ---------- --------- -------- --------
(in millions, except per share data)
Operating revenues $1,567.5 $295.6 $31.2 $1,894.3 $238.7 ($2.1) $2,130.9
Depreciation and
amortization expense 219.4 23.7 2.6 245.7 33.8 -- 279.5$608.6 $570.9 $709.4 $719.9 $805.6 $571.0 $631.1 $617.0
Operating income 63.1 58.7 128.3 71.6 69.4 54.3 125.2 68.1
Income (loss) 271.5 16.0 5.6 293.1 (8.6) (1.2) 283.3
Interest expense,from continuing operations (8.4) (6.7) 43.9 47.5 18.6 8.6 53.2 45.8
Income (loss) from discontinued
operations, net of AFUDC 97.0 97.0 23.3 2.3 122.6
Preferred and preference
dividends 6.7 6.7tax 18.1 13.1 0.8 (1.4) 3.5 29.1 16.1 10.3
Cumulative effect of a change in
accounting principle, net of tax -- -- 6.7
Net (income) loss from equity
method subsidiaries (0.9) (0.9) 2.2 -- 1.3
Miscellaneous, net (other than
equity income/loss) 3.5 3.5 (8.0) 2.4 (2.1)
Income tax expense (benefit) 77.2 77.2 (17.2) (1.9) 58.1-- (12.9) -- -- --
Net income 9.7 6.3 44.7 46.1 9.2 37.7 69.3 56.1
EPS:
Income (loss) 109.6 109.6 (8.9) (4.0) 96.7
Total assets 3,268.5 477.0 386.0 4,131.5 869.2 (41.4) 4,959.3
Investmentsfrom continuing operations (0.09) (0.07) 0.48 0.52 0.23 0.11 0.67 0.54
Income (loss) from discontinued
operations 0.20 0.14 0.01 (0.01) 0.05 0.37 0.20 0.12
Cumulative effect of a change in
equity method
subsidiaries 5.2 5.2 49.4accounting principle -- 54.6
Construction and acquisition
expenditures 233.7 33.2 2.3 269.2 102.9 -- 372.1
- ------------------------------------------------------------------------------------------------------------------------------ -- (0.16) -- -- --
Net income 0.11 0.07 0.49 0.51 0.12 0.48 0.87 0.66
(16) DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
Alliant Energy announced in November 2002 its commitment to pursue the sale
of, or other exit strategies for, certain non-regulated businesses in 2003.
In the fourth quarter of 2002, Alliant Energy applied the provisions of SFAS
144, "Accounting for the Impairment or Disposal of Long-Lived Assets," to
certain of its assets which were held for sale. SFAS 144 requires that a
long-lived asset classified as held for sale be measured at the lower of its
carrying amount or fair value, less costs to sell, and to cease depreciation,
depletion and amortization. At Dec. 31, 2002, Alliant Energy's oil and gas
(Whiting), Australian (including Southern Hydro) and affordable housing
businesses have been classified as held for sale. Alliant Energy currently
plans to complete the sales by year-end. The operating results for these
businesses have been separately classified and reported as discontinued
operations in Alliant Energy's Consolidated Financial Statements. A summary
of the components of discontinued operations in Alliant Energy's Consolidated
Statements of Income was as follows (in thousands):
Regulated Domestic Utilities Non-regulated Alliant Energy
------------------------------------------------
Electric Gas Other Total Businesses Other Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
(in millions)
1997
- ----2002 2001 2000
-------------- ------------ -------------
Operating revenues $1,515.7 $393.9 $30.9 $1,940.5 $362.0 ($1.9) $2,300.6
Depreciation and
amortization expense 201.7 21.6 2.4 225.7 34.0 -- 259.7$185,576 $152,664 $125,310
Operating income (loss) 316.9 29.3 2.2 348.4 (6.8) (5.2) 336.4expenses 140,037 99,598 80,224
Interest expense net of AFUDC 95.7 95.7 23.2 (1.6) 117.3
Preferred and preference
dividends 6.7 6.7 -- -- 6.7
Net (income) loss from equity
method subsidiaries -- -- 0.8 -- 0.8
Miscellaneous, net (other than
equity income/loss) (8.2) (8.2) (8.3) 1.8 (14.7)other 15,466 (14,992) (18,589)
-------------- ------------ -------------
Income before income taxes 30,073 68,058 63,675
Income tax expense (benefit) 101.7 101.7 (18.6) (1.4) 81.7
Net income (loss) 152.5 152.5 (4.0) (3.9) 144.6(539) 9,073 12,636
-------------- ------------ -------------
Income from discontinued operations, net of tax $30,612 $58,985 $51,039
============== ============ =============
Alliant Energy's Australian business enters into electricity derivative
contracts that have not been designated as hedges (as defined by SFAS 133) to
manage the electricity commodity price risk associated with anticipated sales
into the spot market. Approximately $16 million of income is included in
"Interest expense and other" for both 2002 and 2001 in the previous table
related to the change in the fair value of these electricity derivative
contracts during these respective periods. In 2000, Alliant Energy's
affordable housing business sold a portion of its investment in McLeod,
resulting in a pre-tax gain of approximately $24 million included in
"Interest expense and other" in the previous table. At Dec. 31, 2002, Alliant
Energy's affordable housing business owned approximately 0.1 million shares
of McLeod. "Income tax expense (benefit)" in the previous table includes
approximately $10 million, $10 million and $7 million of affordable housing
87
tax credits earned by Alliant Energy's affordable housing business during
2002, 2001 and 2000, respectively. These tax credits had a significant
impact on the effective tax rate of Alliant Energy's discontinued
operations.
A summary of the components of assets and liabilities of discontinued operations
on Alliant Energy's Consolidated Balance Sheets at Dec. 31 was as
follows (in thousands):
2002 2001
------------- ------------
Assets of discontinued operations:
Property, plant and equipment, net $644,137 $420,619
Current assets 99,044 45,217
Investments 6,824 60,442
Deferred charges and other 194,323 13,909
------------- ------------
Total assets 3,262.3 471.5 343.2 4,077.0 838.5 8.1 4,923.6
Investments in equity method
subsidiaries 5.7 5.7 39.2 -- 44.9
Constructionof discontinued operations $944,328 $540,187
============= ============
Liabilities of discontinued operations:
Current liabilities 65,885 28,521
Other long-term liabilities and acquisition
expenditures 217.0 34.0 5.7 256.7 71.3 -- 328.0
- ----------------------------------------------------------------------------------------------------------------------------deferred credits 68,990 32,125
Minority interest 124 267
------------- ------------
Total liabilities of discontinued operations 134,999 60,913
------------- ------------
Net assets of discontinued operations $809,329 $479,274
============= ============
86
In March 2002, Alliant Energy acquired a controlling interest in Southern
Hydro and therefore changed from the equity method of accounting to the
consolidation method at such time.
A summary of the components of cash flows for discontinued operations for the
years ended Dec. 31 was as follows (in thousands):
Products and Services
Revenues
-----------------------------------------------------------------------------------------------------------------
Regulated Domestic Utilities Non-regulated Businesses
------------------------------------ ---------------------------------------------------------------------------
Total
Industrial Oil and Gas Non-regulated
Year Electric Gas Other Services Production Transportation Other Businesses
- -------------------------------------------- ---------------------------------------------------------------------------
(in millions)2002 2001 2000
------------- ------------ ------------
1999 $1,548.9 $314.3 $32.1 $196.0 $62.6 $21.6 $24.8 $305.0
1998 1,567.5 295.6 31.2 127.2 64.6 22.0 24.9 238.7
1997 1,515.7 393.9 30.9 245.4 68.9 21.3 26.4 362.0Net cash flows from operating activities $84,118 $51,562 $44,844
Net cash flows from financing activities 141,234 32,079 99,338
Net cash flows used for investing activities (215,583) (87,051) (145,573)
------------- ------------ ------------
Net increase (decrease) in cash and temporary cash investments 9,769 (3,410) (1,391)
Cash and temporary cash investments at beginning of period 5,261 8,671 10,062
------------- ------------ ------------
Cash and temporary cash investments at end of period $15,030 $5,261 $8,671
============= ============ ============
Supplemental cash flows information:
Cash paid during the period for:
Interest $14,693 $6,350 $4,878
============= ============ ============
Income taxes, net of refunds ($7,712) ($3,331) ($331)
============= ============ ============
(15) SELECTED CONSOLIDATED QUARTERLY(17) CONDENSED CONSOLIDATING FINANCIAL DATA
Quarter Ended
------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- ---------------- ------------------ -----------------
(in millions, except per share data)
1999
Operating revenues $546.9 $486.1 $598.3 $566.7
Operating income 93.0 60.2 130.8 92.5
Net income * 41.7 38.6 71.5 44.8
Earnings per average common
share (basic and diluted) * 0.54 0.49 0.91 0.57
1998
Operating revenues $556.3 $491.0 $555.3 $528.3
Operating income 73.9 32.6 122.2 54.6
Net income (loss) ** 28.9 (9.1) 51.7 25.2
Earnings per average common
share (basic and diluted) ** 0.38 (0.12) 0.67 0.33
* In the second and fourth quarters of 1999, Alliant Energy realized pre-tax
gains on the sales of McLeod stock of approximately $34 million and $6 million,
respectively.
** Net income for 1998 was impacted by the recording of approximately $10
million, $35 million, $6 million and $3 million of pre-tax merger-related
expenses in the first, second, third and fourth quarters, respectively.
(16) SUBSEQUENT EVENTS
In January 2000, Resources acquired a non-controlling interest in four
Brazilian electric utilities serving more than 820,000 customers for a total
investment of approximately $347 million.
On January 25, 2000, Resources committed to a private placement of
exchangeable senior notes in the original aggregate principal amount of $402.5
million, due in 2030, with a closing date of February 1, 2000. The
exchangeable senior notes have an interest rate of 7.25% through February 15,
2003 and 2.5% thereafter. The exchangeable senior notes are exchangeable for
cash based upon the higher of the amount borrowed or the value of McLeod Class
A Common Stock.STATEMENTS
Alliant Energy has agreed to fully and unconditionally guaranteeguaranteed the payment of
principal and interest on the exchangeable senior
notes.
Refervarious debt securities issued by Resources and, as
a result, is required to the "Liquidity and Capital Resources - Future Considerations" sectionpresent condensed consolidating financial
statements. No other Alliant Energy subsidiaries are guarantors of
MD&A for additional details.
87Resources' debt securities. Alliant Energy's condensed consolidating
financial statements are as follows:
88
REPORT OF
Alliant Energy Corporation Condensed Consolidating Statements of Income for the Years Ended December 31, 2002 and 2001
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
--------------------------------------------------------------------
Year Ended December 31, 2002 (in thousands)
- ----------------------------
Operating revenues:
Electric utility $- $- $1,752,534 $- $1,752,534
Gas utility - - 393,986 - 393,986
Non-regulated and other - 431,819 356,286 (325,813) 462,292
--------------------------------------------------------------------
- 431,819 2,502,806 (325,813) 2,608,812
--------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 303,570 55 303,625
Purchased power - - 362,501 - 362,501
Cost of utility gas sold - - 248,994 - 248,994
Other operation and maintenance 2,116 408,419 846,988 (300,379) 957,144
Depreciation and amortization 7 28,242 288,577 (6,209) 310,617
Taxes other than income taxes - 6,517 99,031 (1,312) 104,236
--------------------------------------------------------------------
2,123 443,178 2,149,661 (307,845) 2,287,117
--------------------------------------------------------------------
Operating income (loss) (2,123) (11,359) 353,145 (17,968) 321,695
--------------------------------------------------------------------
Interest expense and other:
Interest expense 5,640 76,486 116,344 (11,932) 186,538
Interest income from loans to discontinued operations, net - (15,959) - - (15,959)
Equity (income) loss from unconsolidated investments (941) 31,337 (17,571) - 12,825
Allowance for funds used during construction - - (8,480) 784 (7,696)
Preferred dividend requirements of subsidiaries - - 6,172 - 6,172
Impairment of available-for-sale securities of McLeodUSA Inc. - 27,218 - - 27,218
Miscellaneous, net (109,236) 27,218 (17,167) 99,405 220
--------------------------------------------------------------------
(104,537) 146,300 79,298 88,257 209,318
--------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 102,414 (157,659) 273,847 (106,225) 112,377
--------------------------------------------------------------------
Income tax expense (benefit) (4,467) (66,442) 107,959 (942) 36,108
--------------------------------------------------------------------
Income (loss) from continuing operations 106,881 (91,217) 165,888 (105,283) 76,269
--------------------------------------------------------------------
Income from discontinued operations, net of tax - 30,612 - - 30,612
--------------------------------------------------------------------
Net income (loss) $106,881 ($60,605) $165,888 ($105,283) $106,881
====================================================================
Year Ended December 31, 2001
- ----------------------------
Operating revenues:
Electric utility $- $- $1,756,556 $- $1,756,556
Gas utility - - 487,877 - 487,877
Non-regulated and other - 348,611 310,520 (278,888) 380,243
--------------------------------------------------------------------
- 348,611 2,554,953 (278,888) 2,624,676
--------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 310,689 - 310,689
Purchased power - - 403,166 - 403,166
Cost of utility gas sold - - 360,911 - 360,911
Other operation and maintenance 3,609 322,599 772,246 (270,329) 828,125
Depreciation and amortization - 25,052 277,591 - 302,643
Taxes other than income taxes - 6,897 103,408 (8,121) 102,184
--------------------------------------------------------------------
3,609 354,548 2,228,011 (278,450) 2,307,718
--------------------------------------------------------------------
Operating income (loss) (3,609) (5,937) 326,942 (438) 316,958
--------------------------------------------------------------------
Interest expense and other:
Interest expense 14,281 64,096 117,707 (10,480) 185,604
Interest income from loans to discontinued operations, net - (9,938) - - (9,938)
Equity (income) loss from unconsolidated investments (7,237) 4,138 (15,700) - (18,799)
Allowance for funds used during construction - - (11,144) - (11,144)
Preferred dividend requirements of subsidiaries - - 6,720 - 6,720
Miscellaneous, net (177,151) 18,026 (30,285) 176,913 (12,497)
--------------------------------------------------------------------
(170,107) 76,322 67,298 166,433 139,946
--------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 166,498 (82,259) 259,644 (166,871) 177,012
--------------------------------------------------------------------
Income tax expense (benefit) (5,864) (37,573) 94,642 (438) 50,767
--------------------------------------------------------------------
Income (loss) from continuing operations 172,362 (44,686) 165,002 (166,433) 126,245
--------------------------------------------------------------------
Income from discontinued operations, net of tax - 58,985 - - 58,985
--------------------------------------------------------------------
Income before cumulative effect of a change in
accounting principle, net of tax 172,362 14,299 165,002 (166,433) 185,230
--------------------------------------------------------------------
Cumulative effect of a change in accounting principle, net of tax - (12,868) - - (12,868)
--------------------------------------------------------------------
Net income $172,362 $1,431 $165,002 ($166,433) $172,362
====================================================================
89
Alliant Energy Corporation Condensed Consolidating Statement of Income for the Year Ended December 31, 2000
Alliant Energy Other Consolidated
Parent Alliant Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
----------------------------------------------------------------------
Operating revenues: (in thousands)
Electric utility $- $- $1,648,036 $- $1,648,036
Gas utility - - 414,948 - 414,948
Non-regulated and other - 185,952 294,507 (263,769) 216,690
----------------------------------------------------------------------
- 185,952 2,357,491 (263,769) 2,279,674
----------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 288,621 - 288,621
Purchased power - - 294,818 - 294,818
Cost of utility gas sold - - 278,734 - 278,734
Other operation and maintenance 703 192,472 751,888 (258,087) 686,976
Depreciation and amortization - 13,350 283,382 - 296,732
Taxes other than income taxes - 6,069 98,379 (6,625) 97,823
----------------------------------------------------------------------
703 211,891 1,995,822 (264,712) 1,943,704
----------------------------------------------------------------------
Operating income (loss) (703) (25,939) 361,669 943 335,970
----------------------------------------------------------------------
Interest expense and other:
Interest expense 17,350 47,832 121,250 (18,283) 168,149
Interest income from loans to discontinued operations, net - (7,195) - - (7,195)
Equity income from unconsolidated investments (14,653) (4,311) (504) - (19,468)
Allowance for funds used during construction - - (8,761) - (8,761)
Preferred dividend requirements of subsidiaries - - 6,713 - 6,713
Gain on reclassification of investment - (321,349) - - (321,349)
Miscellaneous, net (407,484) (13,234) (31,790) 413,294 (39,214)
----------------------------------------------------------------------
(404,787) (298,257) 86,908 395,011 (221,125)
----------------------------------------------------------------------
Income from continuing operations before income taxes 404,084 272,318 274,761 (394,068) 557,095
----------------------------------------------------------------------
Income taxes 5,422 112,820 106,996 942 226,180
----------------------------------------------------------------------
Income from continuing operations 398,662 159,498 167,765 (395,010) 330,915
----------------------------------------------------------------------
Income from discontinued operations, net of tax - 51,039 - - 51,039
----------------------------------------------------------------------
Income before cumulative effect of a change in
accounting principle, net of tax 398,662 210,537 167,765 (395,010) 381,954
----------------------------------------------------------------------
Cumulative effect of a change in accounting principle, net of tax - 16,673 35 - 16,708
----------------------------------------------------------------------
Net income $398,662 $227,210 $167,800 ($395,010) $398,662
======================================================================
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2002
Alliant Energy Other Consolidated
Parent Alliant Energy Consolidating Alliant
ASSETS Company Resources Subsidiaries Adjustments Energy
Property, plant and equipment: ----------------------------------------------------------------------
Utility: (in thousands)
Electric plant in service $- $- $5,295,381 $- $5,295,381
Gas plant in service - - 613,122 - 613,122
Other plant in service - - 530,456 - 530,456
Accumulated depreciation - - (3,573,407) - (3,573,407)
Construction work in progress - - 263,096 - 263,096
Other, net - - 68,340 - 68,340
----------------------------------------------------------------------
Total utility - - 3,196,988 - 3,196,988
----------------------------------------------------------------------
Non-regulated and other, net:
Non-regulated generation - 156,699 - - 156,699
Other - 300,128 75,503 (111) 375,520
----------------------------------------------------------------------
Total non-regulated and other - 456,827 75,503 (111) 532,219
----------------------------------------------------------------------
- 456,827 3,272,491 (111) 3,729,207
----------------------------------------------------------------------
Current assets:
Income tax refunds receivable 18,175 72,882 6,412 - 97,469
Regulatory assets - - 46,076 - 46,076
Assets of discontinued operations - 944,328 - - 944,328
Other 254,461 219,028 489,181 (436,395) 526,275
----------------------------------------------------------------------
272,636 1,236,238 541,669 (436,395) 1,614,148
----------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,817,341 - 10 (1,817,351) -
Investments in unconsolidated foreign entities - 373,816 - - 373,816
Other 11,660 56,357 494,867 - 562,884
----------------------------------------------------------------------
1,829,001 430,173 494,877 (1,817,351) 936,700
----------------------------------------------------------------------
Deferred charges and other - 137,202 611,721 (27,583) 721,340
----------------------------------------------------------------------
Total assets $2,101,637 $2,260,440 $4,920,758 ($2,281,440) $7,001,395
======================================================================
90
Alliant Energy Corporation Condensed Consolidating Balance Sheet (Continued) as of December 31, 2002
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES (in thousands)
Capitalization:
Common stock and additional paid-in capital $1,294,842 $232,743 $906,261 ($1,139,004) $1,294,842
Retained earnings 758,187 114,838 773,556 (888,394) 758,187
Accumulated other comprehensive loss (209,943) (166,947) (42,996) 209,943 (209,943)
Shares in deferred compensation trust (6,896) - - - (6,896)
------------------------------------------------------------------------------
Total common equity 1,836,190 180,634 1,636,821 (1,817,455) 1,836,190
------------------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net - - 205,063 - 205,063
Long-term debt (excluding current portion) 24,000 1,290,205 1,323,598 - 2,637,803
------------------------------------------------------------------------------
1,860,190 1,470,839 3,165,482 (1,817,455) 4,679,056
------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds - 41,511 5,080 - 46,591
Commercial paper 135,500 - 60,000 - 195,500
Other short-term borrowings 85,000 194,482 79,003 (244,764) 113,721
Accounts payable 1,534 61,503 223,653 - 286,690
Accrued taxes 9,743 14,149 82,123 - 106,015
Liabilities of discontinued operations - 134,999 - - 134,999
Other 6,419 122,395 305,819 (191,631) 243,002
------------------------------------------------------------------------------
238,196 569,039 755,678 (436,395) 1,126,518
------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income tax expense (benefit) (3,198) 137,263 492,352 - 626,417
Pension and other benefit obligations 6,328 4,348 170,334 - 181,010
Other 121 35,526 336,912 (27,590) 344,969
------------------------------------------------------------------------------
3,251 177,137 999,598 (27,590) 1,152,396
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Minority interest - 43,425 - - 43,425
------------------------------------------------------------------------------
Total capitalization and liabilities $2,101,637 $2,260,440 $4,920,758 ($2,281,440) $7,001,395
==============================================================================
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2001
ASSETS
Property, plant and equipment:
Utility:
Electric plant in service $- $- $5,123,781 $- $5,123,781
Gas plant in service - - 597,494 - 597,494
Other plant in service - - 517,938 - 517,938
Accumulated depreciation - - (3,374,867) - (3,374,867)
Construction work in progress - - 111,069 - 111,069
Other, net - - 62,194 - 62,194
------------------------------------------------------------------------------
Total utility - - 3,037,609 - 3,037,609
------------------------------------------------------------------------------
Non-regulated and other, net:
Non-regulated generation - 60,411 - - 60,411
Other - 295,255 49,014 (111) 344,158
------------------------------------------------------------------------------
Total non-regulated and other - 355,666 49,014 (111) 404,569
------------------------------------------------------------------------------
- 355,666 3,086,623 (111) 3,442,178
------------------------------------------------------------------------------
Current assets:
Income tax refunds receivable 7,552 11,438 6,411 - 25,401
Regulatory assets - - 19,632 - 19,632
Assets of discontinued operations - 540,187 - - 540,187
Other 180,962 231,008 337,582 (225,916) 523,636
------------------------------------------------------------------------------
188,514 782,633 363,625 (225,916) 1,108,856
------------------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,793,737 - - (1,793,737) -
Investments in unconsolidated foreign entities - 508,145 - - 508,145
Other 32,814 66,028 477,929 (14) 576,757
------------------------------------------------------------------------------
1,826,551 574,173 477,929 (1,793,751) 1,084,902
------------------------------------------------------------------------------
Deferred charges and other 3,661 120,005 511,537 (33,214) 601,989
------------------------------------------------------------------------------
Total assets $2,018,726 $1,832,477 $4,439,714 ($2,052,992) $6,237,925
==============================================================================
91
Alliant Energy Corporation Condensed Consolidating Balance Sheet (Continued) as of December 31, 2001
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES (in thousands)
Capitalization:
Common stock and additional paid-in capital $1,240,690 $232,743 $789,002 ($1,021,745) $1,240,690
Retained earnings 832,293 175,443 749,102 (924,545) 832,293
Accumulated other comprehensive loss (152,434) (140,137) (12,297) 152,434 (152,434)
Shares in deferred compensation trust (2,208) - - - (2,208)
------------------------------------------------------------------
Total common equity 1,918,341 268,049 1,525,807 (1,793,856) 1,918,341
------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net - - 113,953 - 113,953
Long-term debt (excluding current portion) 24,000 1,105,792 1,328,149 - 2,457,941
------------------------------------------------------------------
1,942,341 1,373,841 2,967,909 (1,793,856) 4,490,235
------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds - 9,946 560 - 10,506
Commercial paper 68,389 - - - 68,389
Other short-term borrowings - 84,318 - - 84,318
Accounts payable - 35,969 185,949 (95) 221,823
Accrued taxes - 9,712 77,387 - 87,099
Liabilities of discontinued operations - 60,913 - - 60,913
Other 4,341 46,670 404,134 (225,821) 229,324
------------------------------------------------------------------
72,730 247,528 668,030 (225,916) 762,372
------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income tax expense (benefit) (4,033) 152,196 459,389 - 607,552
Pension and other benefit obligations 7,555 3,539 85,402 - 96,496
Other 133 12,262 258,984 (33,220) 238,159
------------------------------------------------------------------
3,655 167,997 803,775 (33,220) 942,207
------------------------------------------------------------------
------------------------------------------------------------------
Minority interest - 43,111 - - 43,111
------------------------------------------------------------------
Total capitalization and liabilities $2,018,726 $1,832,477 $4,439,714 ($2,052,992) $6,237,925
==================================================================
Alliant Energy Corporation Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2002
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
------------------------------------------------------------------
(in thousands)
Net cash flows from operating activities $107,594 $89,116 $458,785 ($111,455) $544,040
------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (180,987) - (141,435) 141,435 (180,987)
Proceeds from issuance of common stock 56,066 - - - 56,066
Proceeds from issuance of preferred stock of subsidiary - - 144,602 - 144,602
Redemption of preferred stock of subsidiary - - (56,389) - (56,389)
Net change in Resources' credit facility - (383,610) - - (383,610)
Proceeds from issuance of other long-term debt - 300,023 - - 300,023
Reductions in other long-term debt - (20,258) (560) - (20,818)
Net change in commercial paper and other short-term borrowings 76,106 153,795 (31,695) 1,939 200,145
Net change in loans to discontinued operations - 49,320 - - 49,320
Other 1,417 (15,760) 105,431 (115,350) (24,262)
------------------------------------------------------------------
Net cash flows from (used for) financing activities (47,398) 83,510 19,954 28,024 84,090
------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities - - (404,736) - (404,736)
Non-regulated businesses - (218,282) - - (218,282)
Corporate Services and other (50) - (33,724) - (33,774)
Proceeds from dispositions of assets 19,349 8,295 - - 27,644
Other (85,872) 24,859 (27,867) 85,370 (3,510)
------------------------------------------------------------------
Net cash flows used for investing activities (66,573) (185,128) (466,327) 85,370 (632,658)
------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (6,377) (12,502) 12,412 1,939 (4,528)
------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 6,381 60,751 3,207 (1,939) 68,400
------------------------------------------------------------------
Cash and temporary cash investments at end of period $4 $48,249 $15,619 $- $63,872
==================================================================
Supplemental cash flows information:
Cash paid (refunded) during the period for:
Interest $5,244 $74,933 $103,969 $- $184,146
==================================================================
Income taxes, net of refunds ($2,183) ($46,033) $77,575 $- $29,359
==================================================================
Noncash investing and financing activities:
Capital lease obligations incurred $- $- $19,101 $- $19,101
==================================================================
92
Alliant Energy Corporation Condensed Consolidating Statements of Cash Flows for the Years Ended December 31, 2001 and 2000
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
-----------------------------------------------------------------
Year Ended December 31, 2001 (in thousands)
- ----------------------------
Net cash flows from (used for) operating activities $155,559 ($10,090) $453,795 ($173,153) $426,111
-----------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (158,231) - (140,789) 140,789 (158,231)
Proceeds from issuance of common stock 288,553 - - - 288,553
Net change in Resources' credit facility - 63,110 - - 63,110
Proceeds from issuance of other long-term debt - 313,530 200,000 - 513,530
Reductions in other long-term debt - (9,249) (136,110) - (145,359)
Net change in commercial paper and other short-term borrowings (265,496) (54,953) - - (320,449)
Net change in loans to discontinued operations - (39,556) - - (39,556)
Other 46,777 (30,112) (16,850) (30,888) (31,073)
-----------------------------------------------------------------
Net cash flows from (used for) financing activities (88,397) 242,770 (93,749) 109,901 170,525
-----------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities - - (340,789) - (340,789)
Non-regulated businesses - (332,253) - - (332,253)
Corporate Services - - (40,019) - (40,019)
Proceeds from formation of ATC and other asset dispositions - 32,117 75,817 - 107,934
Other (61,355) 2,922 (54,015) 61,313 (51,135)
-----------------------------------------------------------------
Net cash flows used for investing activities (61,355) (297,214) (359,006) 61,313 (656,262)
-----------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 5,807 (64,534) 1,040 (1,939) (59,626)
-----------------------------------------------------------------
Cash and temporary cash investments at beginning of period 574 125,285 2,167 - 128,026
-----------------------------------------------------------------
Cash and temporary cash investments at end of period $6,381 $60,751 $3,207 ($1,939) $68,400
=================================================================
Supplemental cash flows information:
Cash paid (refunded) during the period for:
Interest $12,461 $60,772 $107,123 $- $180,356
=================================================================
Income taxes, net of refunds ($10,258) ($32,015) $113,168 $- $70,895
=================================================================
Noncash investing and financing activities:
Capital lease obligations incurred and other $- $- $19,967 $- $19,967
=================================================================
Year Ended December 31, 2000
- ----------------------------
Net cash flows from (used for) operating activities $391,284 ($23,712) $427,241 ($401,723) $393,090
-----------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (157,964) - (80,340) 80,340 (157,964)
Proceeds from issuance of common stock 1,069 - - - 1,069
Net change in Resources' credit facility - 181,652 - - 181,652
Proceeds from issuance of exchangeable senior notes - 402,500 - - 402,500
Proceeds from issuance of other long-term debt - 7,747 100,000 - 107,747
Reductions in other long-term debt - (501) (53,071) - (53,572)
Net change in commercial paper and other short-term borrowings 48,060 99,217 - - 147,277
Net change in loans to discontinued operations - (87,112) - - (87,112)
Other 3,385 (13,962) (23,212) 5,255 (28,534)
-----------------------------------------------------------------
Net cash flows from (used for) financing activities (105,450) 589,541 (56,623) 85,595 513,063
-----------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Regulated domestic utilities - - (304,656) - (304,656)
Non-regulated businesses - (529,675) - - (529,675)
Corporate Services and other - - (11,123) - (11,123)
Proceeds from dispositions of assets 2,281 25,273 3,336 - 30,890
Other (316,188) 8,834 (63,463) 316,128 (54,689)
-----------------------------------------------------------------
Net cash flows used for investing activities (313,907) (495,568) (375,906) 316,128 (869,253)
-----------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (28,073) 70,261 (5,288) - 36,900
-----------------------------------------------------------------
Cash and temporary cash investments at beginning of period 28,647 55,024 7,455 - 91,126
-----------------------------------------------------------------
Cash and temporary cash investments at end of period $574 $125,285 $2,167 $- $128,026
=================================================================
Supplemental cash flows information:
Cash paid (refunded) during the period for:
Interest $17,220 $44,135 $97,495 $- $158,850
=================================================================
Income taxes, net of refunds ($2,350) ($20,560) $140,136 $- $117,226
=================================================================
Noncash investing and financing activities:
Capital lease obligations incurred and other $- $- $20,419 $- $20,419
=================================================================
93
INDEPENDENT PUBLIC ACCOUNTANTSAUDITORS' REPORT
To the Board of Directors and Shareowners of IES Utilities Inc.:Interstate Power and Light Company:
We have audited the accompanying consolidated balance sheets and statements
of capitalization of IES Utilities Inc. (an Iowa
corporation)Interstate Power and Light Company and subsidiaries (the
"Company") as of December 31, 19992002 and 1998,2001, and
the related consolidated
statements of income, retained earningscash flows and cash flowschanges in common equity for each of the
three years in the period ended December 31, 1999.2002. Our audit also included
the supplemental schedule listed in Item 15(a)(2). These financial
statements and the supplemental schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the supplemental schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted auditing standards.in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, thesuch consolidated financial statements referred to above present fairly, in all
material respects, the financial position of IES
Utilities Inc. and subsidiariesthe Company as of December 31,
19992002 and 1998,2001, and the results of theirits operations and theirits cash flows for each
of the three years in the period ended December 31, 1999,2002 in conformity with
accounting principles generally accepted accounting principles.
Our audit was made forin the purposeUnited States of forming anAmerica.
Also, in our opinion, onsuch supplemental schedule, when considered in relation
to the basic consolidated financial statements taken as a whole. The schedule listed in Item
14(a)(2) is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our
opinion,whole, presents
fairly states in all material respects the financial data
required to beinformation set forth therein in relation to the basic financial
statements taken as a whole.therein.
/s/ ARTHUR ANDERSENDELOITTE & TOUCHE LLP
ARTHUR ANDERSEN LLP- -------------------------
Milwaukee, Wisconsin
January 28, 2000
88March 18, 2003
94
IES UTILITIES INC.INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1999 1998 19972002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Electric utility $627,950 $639,423 $604,270$964,854 $1,003,106 $955,845
Gas utility 145,825 141,279 183,517214,895 281,014 249,796
Steam and other 26,921 26,228 26,191
---------------- ---------------- ----------------
800,696 806,930 813,978
---------------- ---------------- ----------------31,859 32,130 28,366
----------------- ----------------- -----------------
1,211,608 1,316,250 1,234,007
----------------- ----------------- -----------------
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 95,247 113,181 108,344171,133 189,967 175,413
Purchased power 82,402 71,637 74,098145,292 185,860 147,879
Cost of gas sold 88,308 84,642 126,631138,875 207,088 171,603
Other operation 174,417 187,932 161,418
Maintenance 48,504 52,040 53,833and maintenance 339,214 322,644 308,434
Depreciation and amortization 101,053 93,965 89,754146,137 148,494 143,471
Taxes other than income taxes 49,266 48,537 46,130
---------------- ---------------- ----------------
639,197 651,934 660,208
---------------- ---------------- ----------------64,846 62,783 62,592
----------------- ----------------- -----------------
1,005,497 1,116,836 1,009,392
----------------- ----------------- -----------------
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating income 161,499 154,996 153,770
---------------- ---------------- ----------------206,111 199,414 224,615
----------------- ----------------- -----------------
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 51,852 52,354 52,79167,458 68,149 67,234
Allowance for funds used during construction (2,366) (3,351) (2,309)(5,057) (6,391) (3,396)
Miscellaneous, net (3,818) 2,589 2,279
---------------- ---------------- ----------------
45,668 51,592 52,761
---------------- ---------------- ----------------(9,461) (13,377) (7,370)
----------------- ----------------- -----------------
52,940 48,381 56,468
----------------- ----------------- -----------------
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 115,831 103,404 101,009
---------------- ---------------- ----------------153,171 151,033 168,147
----------------- ----------------- -----------------
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income taxes 49,385 41,494 42,216
---------------- ---------------- ----------------62,294 52,967 65,020
----------------- ----------------- -----------------
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net income 66,446 61,910 58,793
---------------- ---------------- ----------------90,877 98,066 103,127
----------------- ----------------- -----------------
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 914 914 914
---------------- ---------------- ----------------2,862 3,410 3,403
----------------- ----------------- -----------------
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Earnings available for common stock $65,532 $60,996 $57,879
================ ================ ================$88,015 $94,656 $99,724
================= ================= =================
- --------------------------------------------------------------------------------------------------------
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Year Ended December 31,
1999 1998 1997
- --------------------------------------------------------------------------------------------------------
(in thousands)
Balance at beginning of year $275,372 $233,216 $231,337
Net income 66,446 61,910 58,793
Cash dividends declared on common stock (87,951) (18,840) (56,000)
Cash dividends declared on preferred stock (914) (914) (914)
---------------- ---------------- ----------------
Balance at end of year $252,953 $275,372 $233,216
================ ================ ================
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
8995
IES UTILITIES INC.INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 1999 19982002 2001
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Utility -
PlantElectric plant in service -
Electric $2,196,895 $2,140,322$3,451,547 $3,344,188
Gas 207,769 198,488plant in service 326,470 316,613
Steam 59,929 55,797
Common 147,845 106,940plant in service 59,737 59,452
Other plant in service 195,328 182,868
Accumulated depreciation (2,163,371) (2,046,756)
----------------- -----------------
2,612,438 2,501,547
Less - Accumulated depreciation 1,311,996 1,209,204
----------------- -----------------
1,300,442 1,292,343Net plant 1,869,711 1,856,365
Construction work in progress 37,572 48,991
Leased nuclear fuel,166,350 73,241
Other, net of amortization 39,284 25,64450,529 44,110
----------------- -----------------
1,377,298 1,366,978
Other property, plant and equipment, net of accumulated
depreciation and amortization of $2,094 and $1,948, respectively 5,481 5,623
----------------- -----------------
1,382,779 1,372,6012,086,590 1,973,716
----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 5,720 4,175
Temporary cash investments with associated companies - 53,7296,076 87
Accounts receivable:
Customer, less allowance for doubtful accounts of $824$894 and $1,058, respectively 14,130 16,703$1,564 42,647 19,950
Associated companies 5,696 2,66279,105 4,718
Other, less allowance for doubtful accounts of $817$388 and $357, respectively 12,864 10,346
Income tax refunds receivable 6,007 1,754$319 27,898 25,497
Production fuel, at average cost 12,312 11,86336,852 32,083
Materials and supplies, at average cost 24,722 25,59128,821 29,121
Gas stored underground, at average cost 11,462 12,284
Adjustment clause balances 11,099 -19,450 18,447
Regulatory assets 18,569 23,48718,077 14,469
Prepayments and other 2,921 2,43113,941 9,498
----------------- -----------------
125,502 165,025272,867 153,870
----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 105,056 91,691121,158 117,159
Other 6,119 6,01913,492 15,157
----------------- -----------------
111,175 97,710134,650 132,316
----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 123,031 137,908199,691 132,109
Deferred charges and other 13,321 15,73444,608 34,303
----------------- -----------------
136,352 153,642244,299 166,412
----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total assets $1,755,808 $1,788,978$2,738,406 $2,426,314
================= =================
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
9096
IES UTILITIES INC.INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)(Continued)
December 31,
CAPITALIZATION AND LIABILITIES 1999 19982002 2001
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See Consolidated Statements of Capitalization):
Common stock - $2.50 par value - authorized 24,000,000 shares;
13,370,788 shares outstanding $33,427 $33,427
Additional paid-in capital 279,042 279,042477,701 422,461
Retained earnings 252,953 275,372374,428 368,203
Accumulated other comprehensive loss (18,887) (2,131)
------------------ -----------------
Total common equity 565,422 587,841866,669 821,960
------------------ -----------------
Cumulative preferred stock, not mandatorily redeemable 18,320 18,320145,100 29,139
Cumulative preferred stock, mandatorily redeemable - 24,850
Long-term debt (excluding current portion) 551,079 602,020855,389 860,068
------------------ -----------------
1,134,821 1,208,1811,867,158 1,736,017
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 51,196 50,140
Capital lease obligations 13,307 11,9655,080 560
Notes payable to associated companies 56,946 - 38,047
Accounts payable 41,273 43,95383,126 49,574
Accounts payable to associated companies 17,438 22,487
Accrued payroll and vacations 7,816 6,36541,537 21,194
Accrued interest 10,833 12,04514,628 14,715
Accrued taxes 44,259 55,29562,135 70,747
Accumulated refueling outage provision 1,455 6,605
Environmental liabilities 5,530 5,66013,845 5,614
Other 8,817 17,61740,946 46,102
------------------ -----------------
258,870 232,132261,297 246,553
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 225,961 224,510313,308 268,010
Accumulated deferred investment tax credits 26,682 29,243
Environmental liabilities 26,292 29,19531,135 34,491
Pension and other benefit obligations 27,734 25,655
Capital lease obligations 25,977 13,67988,449 40,573
Regulatory liabilities 78,995 8,520
Environmental liabilities 39,849 38,206
Other 29,471 26,38358,215 53,944
------------------ -----------------
362,117 348,665609,951 443,744
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 12)11)
- --------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,755,808 $1,788,978$2,738,406 $2,426,314
================== =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
9197
IES UTILITIES INC.INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1999 1998 19972002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $66,446 $61,910 $58,793$90,877 $98,066 $103,127
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 101,053 93,965 89,754146,137 148,494 143,471
Amortization of leased nuclear fuel 11,400 12,513 14,77414,781 12,702 13,867
Amortization of deferred energy efficiency expenditures 16,000 18,707 10,9873,956 17,032 25,610
Deferred taxestax benefits and investment tax credits (6,399) (17,921) (16,059)18,735 (15,155) (14,486)
Refueling outage provision (5,150) (4,001) 9,290
Impairment of regulatory assets - 8,969 -8,232 (3,628) 7,787
Other 1,355 (346) 3,952641 93 1,468
Other changes in assets and liabilities:
Accounts receivable (2,979) 9,690 (5,670)
Gas stored underground 822 4,908 (3,740)(99,485) 78,640 (57,532)
Accounts payable (7,729) 3,158 (11,198)30,510 (36,958) 49,111
Accrued taxes (11,036) (3,701) 18,043(8,612) 8,744 3,096
Adjustment clause balances (14,530) 8,829 5,354
Benefit obligations and other 12,450 9,433 16,020(7,881) 25,962 (10,252)
Manufactured gas plants insurance refunds - (21,541) -
Other 52,539 (6,503) 2,297
--------------- --------------- ---------------
Net cash flows from operating activities 161,703 206,113 190,300250,430 305,948 267,564
--------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows used forfrom (used for) financing activities:
Common stock dividends declared (87,951) (18,840) (56,000)
Dividends payable (4,840) 4,840 -(81,790) (80,340) (80,339)
Preferred stock dividends (914) (914) (914)(2,862) (3,410) (3,403)
Capital contribution from parent 60,000 - -
Redemption of preferred stock (56,389) - -
Proceeds from issuance of preferred stock 144,602 - -
Proceeds from issuance of long-term debt - 10,000 190,000200,000 -
Reductions in long-term debt (50,140) (10,140) (63,140)(560) (89,110) (51,196)
Net change in short-term borrowings 56,946 - (135,000)(38,047) (131,266) 73,169
Principal payments under capital lease obligations (12,887) (13,250) (12,964)(14,328) (9,122) (15,813)
Other (20) (137) (871)(4,340) 11,162 (134)
--------------- --------------- ---------------
Net cash flows used forfrom (used for) financing activities (99,806) (28,441) (78,889)6,286 (102,086) (77,716)
--------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (107,342) (115,371) (108,966)
Deferred energy efficiency expenditures - - (8,450)(247,815) (193,757) (171,753)
Nuclear decommissioning trust funds (6,008)(6,831) (6,008) (6,008)
Other (731) 1,381 6353,919 (4,073) (12,101)
--------------- --------------- ---------------
Net cash flows used for investing activities (114,081) (119,998) (122,789)(250,727) (203,838) (189,862)
--------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (52,184) 57,674 (11,378)5,989 24 (14)
--------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 57,904 230 11,60887 63 77
--------------- --------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $5,720 $57,904 $230$6,076 $87 $63
=============== =============== ===============
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flowflows information:
Cash paid during the period for:
Interest $47,307 $50,177 $46,377$64,430 $63,886 $57,040
=============== =============== ===============
Income taxes, $70,779 $64,738 $41,422net of refunds $39,024 $61,134 $82,254
=============== =============== ===============
Noncash investing and financing activities-activities:
Capital lease obligations incurred $25,040 $1,426 $16,781and other $19,101 $19,967 $20,419
=============== =============== ===============
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
9298
IES UTILITIES INC.INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
1999 19982002 2001
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Common equity:
Common stockequity $866,669 $821,960
------------------- --------------------
- $2.50 par value - authorized 24,000,000 shares;
13,370,788 shares outstanding $33,427 $33,427
Additional paid-in capital 279,042 279,042
Retained earnings 252,953 275,372
------------------ ------------------
565,422 587,841
------------------ ------------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock:
Cumulative, par valuePar/Stated Authorized Shares Mandatory
Value Shares Outstanding Series Redemption
----- ------ ----------- ------ ----------
$25 16,000,000 6,000,000 8.375% No 150,000 -
$50 per* 100,000 6.10% No - 5,000
$50 * 146,406 4.80% No - 7,320
$50 * 120,000 4.30% No - 6,000
$50 ** 216,381 4.36% - 7.76% No - 10,819
$50 ** 545,000 6.40% $50 / share not mandatorily redeemable
- 27,250
------------------- --------------------
150,000 56,389
Less: Unamortized expenses (4,900) (2,400)
------------------- --------------------
145,100 53,989
------------------- --------------------
* 466,406 authorized 466,406 shares; 366,406 shares outstanding:
6.10% series, 100,000in total, fully retired in 2002. ** 2,000,000 authorized shares outstanding 5,000 5,000
4.80% series, 146,406 shares outstanding 7,320 7,320
4.30% series, 120,000 shares outstanding 6,000 6,000
------------------ ------------------
18,320 18,320
------------------ ------------------in total, fully retired in 2002.
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Long-term debt:
Collateral Trust Bonds:
7.65% series, due 2000 50,000 50,000
7.25% series, due 2006 60,000 60,000
6-7/8% series, due 2007 55,000 55,000
6% series, due 2008 50,000 50,000
7% series, due 2023 50,000 50,000
5.5% series, due 2023 19,400 19,400
------------------ ------------------
284,400 284,400------------------- --------------------
234,400 234,400
First Mortgage Bonds:
Series Y, 8-5/8%, due 2001 60,000 60,000
Series Z, 7.6%, retired in 1999 - 50,000
9-1/8% series, due 2001 21,000 21,000
7-1/4% series, due 2007 30,000 30,000
------------------ ------------------
111,000 161,00027,450 27,450
8% series, due 2007 25,000 25,000
8-5/8% series, due 2021 20,000 20,000
7-5/8% series, due 2023 94,000 94,000
------------------- --------------------
166,450 166,450
Pollution control obligations:Control Revenue Bonds:
5.75%, due serially 2000 to 2003, 2,996 3,136partially retired in 2002 2,680 3,240
6.25%, due 2009 1,000 1,000
6.30%, due 2010 5,600 5,600
6.35%, due 2012 5,650 5,650
Variable rate (5.45%(2.8% at December 31, 1999)2002), due 20002003 to 2010 11,100 11,10010,100 10,100
Variable/fixed rate series 1998 (4.25% to 4.30% through 2003), due 2005 to 2023 10,000 10,000
------------------ ------------------
24,096 24,23614,950 14,950
Variable/fixed rate series 1999 (4.05% to 4.20% through 2004), due 2010 to 2013 10,950 10,950
------------------- --------------------
50,930 51,490
Senior debentures, 6-5/8% to 6-3/4%, due 2009 to 2011 335,000 335,000
Subordinated Deferrable Interest Debentures,deferrable interest debentures, 7-7/8%, due 2025 50,000 50,000
Senior Debentures, 6-5/8%,Other, 5.34% at December 31, 2002, due 2009 135,000 135,000
------------------ ------------------
604,496 654,636
------------------ ------------------2006 28,000 28,000
------------------- --------------------
864,780 865,340
------------------- --------------------
Less:
Current maturities (51,196) (50,140)(5,080) (560)
Unamortized debt premium and (discount),discount, net (2,221) (2,476)
------------------ ------------------
551,079 602,020
------------------ ------------------(4,311) (4,712)
------------------- --------------------
855,389 860,068
------------------- --------------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total capitalization $1,134,821 $1,208,181
================== ==================$1,867,158 $1,736,017
=================== ====================
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
9399
IES UTILITIES INC.
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Common
Stock Capital Earnings Loss Equity
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
2000:
Beginning balance $33,427 $422,011 $334,502 $- $789,940
Earnings available for common stock 99,724 99,724
Unrealized holding gains on derivatives due to
cumulative effect of a change in accounting
principle, net of tax of $38 54 54
Other unrealized holding gains on derivatives,
net of tax of $151 212 212
Less: reclassification adjustment for gains
included in earnings available for common
stock, net of tax of $201 284 284
------------ -------------
Net unrealized losses on qualifying derivatives (18) (18)
------------ -------------
Total comprehensive income 99,706
Common stock dividends (80,339) (80,339)
Amortization of preferred stock issuance costs and other (58) (58)
------------ ------------ ------------- ------------ -------------
Ending balance 33,427 421,953 353,887 (18) 809,249
2001:
Earnings available for common stock 94,656 94,656
Reclassification adjustment for losses included
in earnings available for common stock
related to derivatives qualified as hedges,
net of tax of ($12) 18 18
Minimum pension liability adjustment, net of
tax of ($1,469) (2,131) (2,131)
-------------
Total comprehensive income 92,543
Common stock dividends (80,340) (80,340)
Amortization of preferred stock issuance costs and other 508 508
------------ ------------ ------------- ------------ -------------
Ending balance 33,427 422,461 368,203 (2,131) 821,960
2002:
Earnings available for common stock 88,015 88,015
Minimum pension liability adjustment, net of
tax of ($11,844) (16,756) (16,756)
-------------
Total comprehensive income 71,259
Common stock dividends (81,790) (81,790)
Amortization of preferred stock issuance costs and other (548) (548)
Capital contribution from parent 60,000 60,000
Redemption of preferred stock (4,212) (4,212)
------------ ------------ ------------- ------------ -------------
Ending balance $33,427 $477,701 $374,428 ($18,887) $866,669
============ ============ ============= ============ =============
- -----------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
100
INTERSTATE POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Except as modified below, the Alliant Energy Notes"Notes to Consolidated Financial
StatementsStatements" are incorporated by reference insofar as they relate to IESU.IP&L and
incorporate the disclosures relating to IP&L contained in the following notes
of the Alliant Energy "Notes to Consolidated Financial Statements":
Summary of Significant Accounting Policies Note 1(a) 3rd and 4th paragraphs, 1(b), 1(c), 1(d), 1(f) to 1(l),
1(n), 1(p), 1(q)
Utility Rate Matters Note 2
Leases Note 3
Utility Accounts Receivable Note 4
Common and Preferred Stock Note 7
Debt Note 8(a) 1st paragraph, 8(b) 1st and 2nd paragraphs
Investments Note 9 1st paragraph
Derivative Financial Instruments Note 10(a) 1st paragraph, "Cash Flow Hedging Instruments" 1st
paragraph, "Other Derivatives Not Designated in Hedge
Relationships" 4th paragraph; 10(b)
Commitments and Contingencies Note 11(b) 1st paragraph, 11(c), 11(e) "MGP Sites" and "NEPA," 11(f)
Jointly-Owned Electric Utility Plant Note 12
The notes that follow herein set forth additional specific information for
IP&L and are numbered to be consistent with the Alliant Energy "Notes to
Consolidated Financial Statements."
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General - The Consolidated Financial Statementsconsolidated financial statements include the accounts of
IESUIP&L and its consolidated subsidiaries. In the fourth quarter of 1999,
IESU's subsidiaries were merged into IESU. IESUIP&L is a direct subsidiary of
Alliant Energy and is engaged principally in the generation, transmission,
distribution and sale of electric energy; the purchase, distribution,
transportation and sale of natural gas; and the provision of steam services. Allservices
in Iowa, Minnesota and Illinois.
The merger of IESU's
retail customers are locatedIPC with and into IESU was approved by their respective
shareowners in Iowa.
(i) Operating Revenues -April 2001 and by the SEC in October 2001. The merger was
effective Jan. 1, 2002 and IESU accrues revenueschanged its name to IP&L. Each share of IPC
common stock outstanding was cancelled without payment and each share of IPC
preferred stock outstanding was cancelled and converted into the right to
receive one share of a new class of IESU Class A preferred stock with
substantially identical designations, rights and preferences as the
previously outstanding IPC preferred stock. IPC and IESU were both
wholly-owned operating subsidiaries of Alliant Energy. As such, the
transaction was accounted for services rendered but
unbilled at month-end in orderas a common control merger. The consolidated
financial statements and notes to more properly match revenues with
expenses. Inconsolidated financial statements
illustrate the third quarter of 1999, IESU recorded a $5 million increase
in the estimate of utility services rendered but unbilled at month-end. This
change was a resultimpact of the implementationmerger as if it had occurred as of Jan. 1, 2000.
(c) Regulatory Assets and Liabilities - At Dec. 31, 2002 and 2001,
regulatory assets and liabilities were comprised of the following items (in
millions):
Regulatory Assets Regulatory Liabilities
----------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ---------- -----------
Tax-related $152.6 $86.3 $69.2 $--
Environmental-related 45.9 44.4 4.5 4.7
Energy efficiency program costs 8.1 6.0 -- --
Other 11.2 9.9 5.3 3.8
---------- ---------- ---------- -----------
$217.8 $146.6 $79.0 $8.5
========== ========== ========== ===========
(d) Income Taxes - Alliant Energy files a refined estimation process
compared withconsolidated federal income tax
return. Under the unbilled revenues recorded at June 30, 1999 usingterms of an agreement between Alliant Energy and its
subsidiaries, the estimation process in effect at that time.subsidiaries calculate their respective federal income tax
provisions and make payments to or receive payments from Alliant Energy as if
they were separate taxable entities.
101
(3) LEASES
IESU'sIP&L's operating lease rental expenses for 1999, 19982002, 2001 and 19972000 were $8.9$12.4
million, $9.0$11.7 million and $8.3$11.6 million, respectively. IESU'sThe synthetic leases
relate to the financing of the utility railcars that were not included on
IP&L's Consolidated Balance Sheets. IP&L has guaranteed the residual value of
its synthetic leases totaling $6.8 million in the aggregate. The guarantees
extend through the maturity of each respective underlying lease with
remaining terms up to seven years. Residual value guarantees have been
included in the future minimum lease payments by year are as followsnoted in the table below (in
millions):
Capital Operating
Year Leases Leases
- ----------------------------------------- --------------- ------------------Present
Less: value of
amount net minimum
representing capital lease
2003 2004 2005 2006 2007 Thereafter Total interest payments
------- -------- ------- -------- -------- ----------- --------- -------------- -------------
2000 $15.6 $8.8
2001 10.5 7.1
2002 8.7 5.7
2003 4.3 5.2
2004 3.9 4.7
Thereafter 1.3 10.2
--------------- ------------------
44.3 $41.7
==================
Less: Amount representing interest 5.0
---------------
Present value of net minimum
capital lease payments $39.3
===============
Operating leases $8.9 $6.5 $4.5 $3.0 $2.4 $30.1 $55.4 n/a n/a
Synthetic leases 0.4 0.5 5.1 0.3 0.3 2.7 9.3 n/a n/a
Capital leases 15.1 15.8 9.8 35.5 1.7 1.2 79.1 $9.3 $69.8
(6)(4) UTILITY ACCOUNTS RECEIVABLE
At Dec. 31, 2002 and 2001, IP&L had sold $86 million and $90 million of
receivables, respectively. In 2002, 2001 and 2000, IP&L received $1.1
billion, $1.1 billion and $0.7 billion, respectively, in aggregate proceeds
from the sale of accounts receivable. IP&L paid fees associated with these
sales of $2.0 million, $3.9 million and $4.0 million in 2002, 2001 and 2000,
respectively.
(5) INCOME TAXES
The components of federal and state income taxes for IESU for the years ended
December 31IP&L were as follows (in millions):
1999 1998 1997
----------------2002 2001 2000
-------------- ---------------------------- --------------
Current tax expense $55.8 $59.4 $58.3expense:
Federal $28.2 $57.3 $63.3
State 17.8 11.0 16.4
Deferred tax expense (3.8) (15.3) (13.5)(benefit):
Federal 22.8 (9.7) (9.0)
State (0.7) (2.1) (2.9)
Research and development tax credits (2.2) -- --
Amortization of investment tax credits (2.6) (2.6) (2.6)
----------------and other (3.6) (3.5) (2.8)
-------------- ---------------
$49.4 $41.5 $42.2
================------------- --------------
$62.3 $53.0 $65.0
============== ============================ ==============
The overall effective income tax rates shown below forin the years ended December
31following table were
computed by dividing total income tax expense by income before income taxes.
1999 1998 19972002 2001 2000
------------- ------------- --------------------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefits 7.0 6.6 7.04.5 5.4
Effect of rate making on property related differences 5.1 1.5 3.51.3 3.9 3.8
Adjustment of prior period taxes 0.8 (5.5) (2.8)
Amortization of investment tax credits (2.2) (2.5) (2.6)
Adjustment of prior period taxes (2.7) (1.4) (1.4)(2.3)
Other items, net 0.4 0.9 0.3(1.2) (0.3) (0.4)
------------- ------------- --------------------------
Overall effective income tax rate 42.6% 40.1% 41.8%40.7% 35.1% 38.7%
============= ============= ==========================
94102
The accumulated deferred income taxestax (assets) and liabilities as set forth
belowincluded on the
Consolidated Balance Sheets at DecemberDec. 31 arise from the following temporary
differences (in millions):
1999 1998
----------- -----------2002 2001
------------- -------------
Property related $276.2 $275.7
Investment tax credit related (18.9) (20.8)$418.9 $327.8
Other (31.3) (30.4)
----------- -----------
$226.0 $224.5
=========== ===========
(7)(105.6) (59.8)
------------- -------------
$313.3 $268.0
============= =============
(6) BENEFIT PLANS
(a) Pension Plans and Other Postretirement Benefits - IESU has aSubstantially all of
IP&L's employees are covered by three non-contributory defined benefit
pension plan that covers substantially all
of its employees who are subject to a collective bargaining agreement. Plan
benefits are generally based on years of service and compensation duringplans. For the
employees' latter years of employment. Effective in 1998, eligible employees
of IESU that are not subject to a collective bargaining agreement are covered
by the Alliant Energy Cash Balance Pension Plan, a non-contributory defined benefit pension plan. The projected unit credit actuarial cost method was
usedplan sponsored by Corporate
Services, Alliant Energy allocates pension costs and contributions to computeIP&L
based on labor costs of plan participants and any additional minimum pension
cost and the accumulated and projected benefit
obligations. IESU's policy is to fund the pension plan at an amount that is
at least equal to the minimum funding requirements mandated by ERISA and that
does not exceed the maximum tax deductible amount for the year.
IESU also provides certain other postretirement benefits to retirees,
including medical benefits for retirees and their spouses and, in some cases,
retiree life insurance. IESU's funding policy for other postretirement
benefits is generally to fund an amount up to the cost calculated using SFAS
106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions."liability based on each group's funded status. The weighted-average
assumptions as ofat the measurement date of SeptemberSept. 30 arewere as follows:
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------ ---------------------------------------
1999 1998 1997 1999 1998 19972002 2001 2000 2002 2001 2000
----------- ---------- ---------------------------------- ----------- ----------- ---------------
Discount rate 7.75% 6.75% 7.25% 7.75%8.00% 6.75% 7.25% 8.00%
Expected return on plan assets 9% 9% 9% 9% 9% 9%
Rate of compensation increase 3.5% 3.5% 4.75%3.5% N/A N/A N/A
Medical cost trend on covered charges:
Initial trend rangerate N/A N/A N/A 7% 8% 8%10.8% 12.0% 9.0%
Ultimate trend rangerate N/A N/A N/A 5% 6% 6.5%5% 5%
95
The components of IESU'sIP&L's qualified pension benefits and other postretirement
benefits costs arewere as follows (in millions):
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------- ----------------------------------
1999 1998 1997 1999 1998 19972002 2001 2000 2002 2001 2000
--------- ----------- --------- -------- --------- ---------
Service cost $2.6 $2.9 $5.4$4.2 $3.4 $3.5 $1.8 $1.5 $1.5 $1.5$1.6
Interest cost 7.6 8.0 14.1 4.4 4.2 3.511.3 10.6 10.1 7.7 6.7 6.3
Expected return on plan assets (10.3) (11.3) (15.1) (2.0) (1.1) (0.7)(12.8) (14.4) (13.7) (4.0) (4.5) (3.8)
Amortization of:
Transition obligation (asset) (0.1) -- -- 2.6 2.6 2.8
Prior service cost 1.3 1.3 1.2 (0.2) (0.2) (0.3)
1.8 1.9 1.9
Prior service cost 0.9 0.9 1.8 -- -- --
Actuarial gain -- (0.4) -- -- -- --loss (gain) 0.3 (1.2) (1.0) 0.3 (0.9) (1.1)
--------- ----------- --------- -------- --------- ---------
Total $0.6$4.2 ($0.1) $5.9 $5.7 $6.5 $6.20.3) $0.1 $8.2 $5.2 $5.5
========= =========== ========= ======== ========= =========
During 1997, IESU recognized an additional $3.8 million of costs in
accordance with SFAS 88 for severance and early retirement programs. In
addition, during 1998, IESU recognized $1.2 million of curtailment charges
relating to IESU's other postretirement benefits.
The pension benefit cost shown above (and in the following tables) for 1999
and 1998 represents
only the pension benefit cost for bargaining unit employees of IESUIP&L covered
under the bargaining unit pension planplans that isare sponsored by IESU.IP&L. The
benefit obligations and assets associated with IP&L's non-bargaining
employees who are participants in other Alliant Energy plans are reported in
Alliant Energy's consolidated financial statements and are not reported
above. The pension benefit cost for IESU'sIP&L's non-bargaining employees who are
now participants in other Alliant Energy plans was $0.9$2.7 million, $1.2 million
and $2.7$1.9 million for 19992002, 2001 and 1998, respectively, including a special
charge of $1.9 million in 1998 for severance and early retirement window
programs.2000, respectively. In addition,
Corporate Services provides services to IESU.IP&L. The allocated pension benefit
costs associated with these services was $1.2$2.7 million, $2.1 million and $0.5$1.9
million for 19992002, 2001 and 1998,2000, respectively. The other postretirement
benefit cost shown above for each period (and in the following tables)
represents the other postretirement benefit cost for all IESUIP&L employees. The
allocated other postretirement benefit cost associated with Corporate
Services for IESUIP&L was $0.9 million, $0.5 million and $0.4 million for 2002,
2001 and $0.2 million for 1999 and
1998,2000, respectively.
103
The assumed medical trend rates are critical assumptions in determining the
service and interest cost and accumulated postretirement benefit obligation
related to postretirement benefit costs. A one percent1% change in the medical trend
rates for 1999,2002, holding all other assumptions constant, would have the
following effects (in millions):
1 Percent 1 Percent
Increase Decrease
---------- ----------
Effect on total of service and interest cost components $1.3 ($1.0)
Effect on postretirement benefit obligation $8.4 ($6.8)
96
1% Increase 1% Decrease
---------------- ----------------
Effect on total of service and interest cost components $1.1 ($0.9)
Effect on postretirement benefit obligation $13.1 ($11.5)
A reconciliation of the funded status of IESU'sIP&L's plans to the amounts
recognized on IESU'sIP&L's Consolidated Balance Sheets at DecemberDec. 31 is presented
belowwas as follows
(in millions):
Qualified Pension Benefits Other Postretirement Benefits
----------------------------- -------------------------------
1999 1998 1999 19982002 2001 2002 2001
------------ ------------ ------------- -------------
Change in benefit obligation:
Change in benefit obligation:
Net benefit obligation at beginning of year $113.1 $206.1 $65.2 $50.8
Transfer of obligation (to)/from other
Alliant Energy plans -- (99.1) -- 2.3$154.9 $132.8 $107.6 $85.2
Service cost 2.6 2.9 1.54.2 3.4 1.8 1.5
Interest cost 7.6 8.0 4.4 4.211.3 10.6 7.7 6.7
Plan participants' contributions -- -- 0.4 0.40.3 0.3
Plan amendments 1.1 -- -- (1.0) --
Actuarial loss (gain) (14.3) 2.2 (20.1) 8.2
Curtailments -- -- -- 0.416.3 15.2 17.6 22.0
Gross benefits paid (6.7) (7.0) (3.6) (2.6)(7.1) (7.1) (6.8) (8.1)
------------ ------------ ------------- -------------
Net benefit obligation at end of year 102.3 113.1 46.8 65.2180.7 154.9 128.2 107.6
------------ ------------ ------------- -------------
Change in plan assets:
Fair value of plan assets at beginning of year 118.7 225.7 21.7 19.9
Transfer of assets to other Alliant Energy plans -- (97.5) -- --145.3 163.1 56.0 63.7
Actual return on plan assets 14.1 (2.5) 5.6 0.1(6.5) (10.7) (5.7) (6.5)
Employer contributions -- -- 6.2 2.76.8 6.6
Plan participants' contributions -- -- 0.4 0.4
401(h) assets recognized -- -- -- 1.20.3 0.3
Gross benefits paid (6.7) (7.0) (3.6) (2.6)(7.1) (7.1) (6.8) (8.1)
------------ ------------ ------------- -------------
Fair value of plan assets at end of year 126.1 118.7 30.3 21.7131.7 145.3 50.6 56.0
------------ ------------ ------------- -------------
Funded status at end of year 23.8 5.6 (16.5) (43.5)(49.0) (9.6) (77.6) (51.6)
Unrecognized net actuarial loss (gain) (25.4) (7.3) (18.6) 5.743.8 8.5 38.3 11.5
Unrecognized prior service cost 8.9 9.8 (0.3) (0.3)11.0 11.2 (0.4) (0.7)
Unrecognized net transition obligation (asset) (1.4) (1.6) 23.6 25.9(0.7) (0.8) 26.0 28.5
------------ ------------ ------------- -------------
Net amount recognized at end of year $5.9 $6.5$5.1 $9.3 ($11.8)13.7) ($12.2)12.3)
============ ============ ============= =============
Amounts recognized on the Consolidated
Balance Sheets consist of:
Prepaid benefit cost $5.9 $6.5 $-- $--$9.3 $0.8 $0.8
Accrued benefit cost (0.8) -- (14.5) (13.1)
Additional minimum liability (24.1) (2.6) -- --
(11.8) (12.2)Intangible asset 11.0 2.3 -- --
Accumulated other comprehensive loss 13.1 0.3 -- --
------------ ------------ ------------- -------------
Net amount recognized at measurement date 5.9 6.5 (11.8) (12.2)5.1 9.3 (13.7) (12.3)
------------ ------------ ------------- -------------
Contributions paid after 9/30 and prior to 12/31 -- -- 3.4 3.62.9 1.5
------------ ------------ ------------- -------------
Net amount recognized at 12/31 $5.9 $6.5$5.1 $9.3 ($8.4)10.8) ($8.6)10.8)
============ ============ ============= =============
The projected benefit obligation, accumulated benefit obligation, and fair
value of assets for pension plans with the accumulated benefit obligation in
excess of plan assets are $180.7 million, $150.7 million and $131.7 million,
respectively, as of Sept. 30, 2002 and $37.3 million, $30.4 million and $29.1
million, respectively, as of Sept. 30, 2001. In addition to the additional
minimum liability in the table above, Corporate Services allocated an
additional minimum liability at Dec. 31, 2002 and 2001 of $24.0 million and
$0, respectively.
104
Alliant Energy sponsors several non-qualified pension plans whichthat cover
certain current and former officers.key employees. The pension expense allocated to
IESUIP&L for these plans was $0.8$2.7 million, $1.4$2.1 million and $2.3 million in 1999, 19982002,
2001 and 1997,2000, respectively. IESUIP&L has various life insurance policies that
cover certain key employees and directors. At both Dec. 31, 2002 and 2001,
the cash surrender value of these investments was $9 million. A significant
number of IP&L employees also participate in defined contribution pension
plans (401(k) and Employee Stock Ownership plans) covering substantially all employees. IESU's. IP&L's contributions to
the plans, which are based on the participants' level of contribution, were
$2.0 million, $2.8$2.3 million and $1.2$2.5 million in 1999, 19982002, 2001 and 1997,2000,
respectively.
97
(8)(7) COMMON PREFERRED AND PREFERENCEPREFERRED STOCK
(b) Preferred and Preference Stock - The carrying value of IESU'sIP&L's cumulative preferred
stock at DecemberDec. 31, 19992002 and 19982001 was $18 million.
The fair market value, based upon the market yield of similar securities and
quoted market prices, at December 31, 1999 and 1998 was $12$145 million and $15
million, respectively.
(9) DEBT
(a) Short-Term Debt - IESU participates in a utility money pool with WP&L
and IPC that is funded, as needed, through the issuance of commercial paper
by Alliant Energy. Interest expense and other fees are allocated based on
borrowing amounts. Information regarding short-term debt is as follows
(dollars in millions):
1999 1998 1997
--------------- --------------- ---------------
As of year end:
Money pool borrowings $56.9 $-- $--
Interest rate on money pool borrowings 5.84% N/A N/A
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $24.6 $-- $88.4
Average interest rate on short-term debt 5.24% N/A 5.58%
(b) Long-Term Debt - Debt maturities (excluding periodic sinking fund
requirements, which will not require additional cash expenditures) for 2000
to 2004 are $51.2 million, $81.5 million, $0.6 million, $4.1 million and $0,
respectively. Depending upon market conditions, it is currently anticipated
that a majority of the maturing debt will be refinanced with the issuance of
long-term securities.
The carrying value of IESU's long-term debt at December 31, 1999 and 1998 was
$602 million and $652$54 million,
respectively. The fair market value, based upon the market yield of similar
securities and quoted market prices, at DecemberDec. 31, 19992002 and 19982001 was $573$150
million and $687$50 million, respectively.
(10)(8) DEBT
(a) Short-Term Debt - Information regarding IP&L's short-term debt was as
follows (dollars in millions):
2002 2001
------------- --------------
At Dec. 31:
Money pool borrowings $-- $38.0
Interest rates on money pool borrowings N/A 2.4%
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $35.2 $31.2
Average interest rates on short-term debt 2.6% 5.9%
(b) Long-Term Debt - IP&L's debt maturities for 2003 to 2007 are $5.1
million, $0, $2.7 million, $60.0 million and $107.5 million, respectively.
The carrying value of IP&L's long-term debt (including current maturities) at
Dec. 31, 2002 and 2001 was $860 million and $861 million, respectively. The
fair market value, based upon the market yield of similar securities and
quoted market prices, at Dec. 31, 2002 and 2001 was $920 million and $872
million, respectively.
(9) INVESTMENTS AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Information relating to other financial instrumentsvarious investments held by IESU isIP&L at Dec. 31 that are
marked-to-market as a result of SFAS 115 was as follows (in
millions):
December 31, 1999 December 31, 1998
------------------------------------- --------------------------------
Gross Gross
Carrying2002 2001
--------------------------- --------------------------
Carrying/ Unrealized Carrying/ Unrealized
Fair Unrealized CarryingGains, Fair UnrealizedGains,
Value Net of Tax Value Gains/(Losses) Value Value Gains
----------- -------- ---------------- ---------- --------Net of Tax
------------ Nuclear decommissioning trust funds:-------------- ------------ -------------
Available-for-sale securities:
Nuclear decommissioning trust funds:
Debt securities $75 $4 $69 $1
Equity securities $47 $47 $35 $45 $45 $29
Debt securities 58 58 (1) 47 47 2
----------- -------- ---------------- ---------- --------46 8 48 19
------------ -------------- ------------ -------------
Total $105 $105 $34 $92 $92 $31
=========== ======== ================ ========== ========$121 $12 $117 $20
============ ============== ============ =============
The carrying amount of IESU's current assetsNuclear Decommissioning Trust Funds - At Dec. 31, 2002, $39 million, $19
million and current liabilities
approximates fair value because$17 million of the short maturity of such financial
instruments.debt securities mature in 2003-2010, 2011-2020
and 2021-2035, respectively. The nuclear decommissioning trust funds realized gainsgains/(losses) from the
sales of securities of $2.5$0.1 million, $0.4($0.1) million and $0.1($0.2) million in
1999,
19982002, 2001 and 1997,2000, respectively (cost of the investments based on specific
identification were $25.5was $18.9 million, $14.3$22.4 million and $14.6$11.3 million and
proceeds from the sales were $19.0 million, $22.3 million and $11.1 million,
respectively).
Since IESU is subject to regulation, any gains or losses
related to the difference between the carrying amount and the fair value of
its financial instruments may not be realized by IESU's parent.
98105
(12)(11) COMMITMENTS AND CONTINGENCIES
(a) Construction and Acquisition Expenditures - Certain commitments have been
made in connection with 2003 capital expenditures. During 2003, total
construction and acquisition expenditures are estimated to be approximately
$450 million.
(b) Purchased-Power, Coal and Natural Gas Contracts - Corporate Services has
entered into purchased-power capacity contracts as agent for IESU, WP&L and
IPC. Based on the System
Coordination and Operating Agreement, Alliant Energy annually allocates
purchased-power contracts to the individual
utilities.IP&L and WP&L. Such process considers factors
such as resource mix, load growth and resource availability and as a result of that process, IESU was not
allocated any of theavailability. However, for
2003, system-wide purchased-power contracts for 2000of $45.1 million (1.6 million
MWh) have not yet been directly assigned to 2004. IESU has
entered into a contract forIP&L and WP&L since the purchasespecific
needs of $9.3 million of capacity in 2000
from IPC. Seeeach utility is not yet known. Refer to Note 1718 for additional
information. In addition, Corporate
Services has entered into various coal contracts as agent for IESU, WP&L and
IPC. ContractCoal contract quantities are allocateddirectly assigned to specific
plants at the individual
utilitiesIP&L and WP&L based on various factors including projected heat
input requirements, combustion compatibility and efficiency. However, in 2000 and
2001,for
2003-2006, system-wide coal contracts of $24.6$56.1 million (6.5(7.8 million tons),
$37.5 million (7.6 million tons), $28.0 million (4.7 million tons) and $12.5$8.2
million (3.6(0.9 million tons), respectively, have not yet been allocated to the
individual utilities due to the need for additional analysis of combustion
compatibility and efficiency. The minimum commitments directly assigned
to IESU areIP&L and WP&L since the specific needs of each utility is not yet known.
At Dec. 31, 2002, IP&L's minimum commitments were as follows (dollars and
Dths in millions,millions; MWhs and tons in thousands):
Coal
(including
transportation)
-----------------------
Dollars Tons
---------- -----------
2000 $12.8 2,300
2001 10.4 1,556
2002 3.7 619
2003 3.3 520
2004 3.2 475
Corporate Services is in
Purchased-power Coal Natural gas
---------------------- ------------------------ -------------------------
Dollars MWhs Dollars Tons Dollars Dths
--------- --------- ---------- ---------- ----------- ----------
2003 $38.1 937 $18.0 2,078 $42.5 4
2004 7.5 142 13.1 1,714 4.2 --
2005 2.0 -- 10.9 1,386 1.0 --
2006 2.0 -- 3.2 -- 0.9 --
2007 0.1 -- 2.3 -- 1.4 --
Thereafter 0.4 -- -- -- -- --
(e) Environmental Liabilities - IP&L had recorded the processfollowing
environmental liabilities, and regulatory assets associated with certain of
negotiating several new coal
contracts. In addition, it expectsthese liabilities, at Dec. 31 (in millions):
Environmental Liabilities Regulatory Assets
------------------------------- -----------------------------
2002 2001 2002 2001
------------- ------------- ------------ ------------
MGP sites $42.4 $39.5 $41.1 $38.5
NEPA 4.1 5.1 4.8 5.7
Other 0.1 0.3 -- 0.2
------------- ------------- ------------ ------------
$46.6 $44.9 $45.9 $44.4
============= ============= ============ ============
MGP Sites - Management currently estimates the range of remaining costs to supplement its coal contracts with
spot market purchasesbe
- ---------
incurred for the investigation, remediation and monitoring of all IP&L's
sites to fulfill its future fossil fuel needs. IESU also has
various natural gas supply, transportation and storage contracts
outstanding. The minimum dekatherm commitments, in millions, for 2000-2004
are 93.8, 79.3, 72.1, 60.8 and 2.4, respectively. The minimum dollar
commitments for 2000-2004, in millions, are $51.4, $39.0, $27.4, $23.5 and
$1.3, respectively. The gas supply commitments are all index-based. IESU
expectsbe approximately $31 million to supplement its natural gas supply with spot market purchases as
needed.
(c) Information Technology Services - Alliant Energy has an agreement,
expiring in 2004, with EDS for information technology services. IESU's
anticipated operating and capital expenditures under the agreement for 2000
are estimated to total approximately $13$57 million.
Future costs under the
agreement are variable and are dependent upon IESU's level of usage of
technological services from EDS.
(d) Financial Guarantees and Commitments - IESU has financial guarantees,
which were generally issued to support third-party borrowing arrangements and
similar transactions, amounting to $17 million and $18 million outstanding at
December 31, 1999 and 1998, respectively. Such guarantees are not reflected
in the consolidated financial statements. Management believes that the
likelihood of IESU having to make any material cash payments under these
agreements is remote.
(14)106
(13) SEGMENTS OF BUSINESS
IESUIP&L is a regulated domestic utility, serving customers in Iowa, withMinnesota
and Illinois, and includes three
principal business segments: a) electric operations; b) gas
operations; and c) other, which includes the steam operationsbusiness and the
unallocated portions of the utility business. Various line items in the
following tables are not allocated to the electric and gas segments for
management reporting purposes and therefore are included in "Total."
Intersegment revenues were not material to IESU'sIP&L's operations and there was no
single customer whose revenues exceededwere 10% or more of IESU'sIP&L's consolidated
revenues.
99
Certain financial information relating to IESU'sIP&L's significant
business segments is presented below:was as follows (in millions):
Electric Gas Other Total
- ------------------------------------------------------------------------------------------------------------
(in millions)
1999------------------------------------------------------------------------------------------------------------------------------
2002
- ----
Operating revenue $628.0 $145.8 $26.9 $800.7revenues $964.9 $214.9 $31.8 $1,211.6
Depreciation and amortization expense 91.0 8.2 1.9 101.1133.3 10.2 2.6 146.1
Operating income 149.6 8.4 3.5 161.5185.1 14.1 6.9 206.1
Interest expense, net of AFUDC 49.5 49.5
Net income from equity method subsidiaries -- --62.4
Miscellaneous, net (other than equity income/loss) (3.8) (3.8)(9.5)
Income tax expense 49.4 49.462.3
Net income 66.4 66.490.9
Preferred and preference dividends 0.9 0.92.9
Earnings available for common stock 65.5 65.588.0
Total assets 1,449.2 201.1 105.5 1,755.8
Investments in equity method subsidiaries -- --2,186.6 315.4 236.4 2,738.4
Construction and acquisition expenditures 92.7 13.8 0.8 107.3226.8 17.9 3.1 247.8
- ------------------------------------------------------------------------------------------------------------
1998------------------------------------------------------------------------------------------------------------------------------
2001
- ----
Operating revenue $639.4 $141.3 $26.2 $806.9revenues $1,003.1 $281.0 $32.2 $1,316.3
Depreciation and amortization expense 84.7 7.6 1.7 94.0134.1 12.4 2.0 148.5
Operating income 143.4 7.6 4.0 155.0184.5 8.7 6.2 199.4
Interest expense, net of AFUDC 49.0 49.0
Net income from equity method subsidiaries -- --61.7
Miscellaneous, net (other than equity income/loss) 2.6 2.6(13.4)
Income tax expense 41.5 41.553.0
Net income 61.9 61.998.1
Preferred and preference dividends 0.9 0.93.4
Earnings available for common stock 61.0 61.094.7
Total assets 1,440.8 201.2 147.0 1,789.0
Investments in equity method subsidiaries -- --2,010.1 280.7 135.5 2,426.3
Construction and acquisition expenditures 100.5 14.1 0.8 115.4170.8 20.1 2.9 193.8
- ------------------------------------------------------------------------------------------------------------
1997------------------------------------------------------------------------------------------------------------------------------
2000
- ----
Operating revenue $604.3 $183.5 $26.2 $814.0revenues $955.8 $249.8 $28.4 $1,234.0
Depreciation and amortization expense 81.2 7.0 1.6 89.8129.7 11.8 2.0 143.5
Operating income 138.1 13.0 2.7 153.8207.4 14.4 2.8 224.6
Interest expense, net of AFUDC 50.5 50.5
Net loss from equity method subsidiaries 0.4 0.463.8
Miscellaneous, net (other than equity income/loss) 1.9 1.9(7.3)
Income tax expense 42.2 42.265.0
Net income 58.8 58.8103.1
Preferred and preference dividends 0.9 0.93.4
Earnings available for common stock 57.9 57.999.7
Total assets 1,441.9 211.7 115.3 1,768.9
Investments in equity method subsidiaries -- --2,055.6 328.3 140.9 2,524.8
Construction and acquisition expenditures 89.4 15.3 4.3 109.0
- ------------------------------------------------------------------------------------------------------------150.4 20.6 0.8 171.8
100107
(15) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summation of the individual quarters may not equal annual totals due to
rounding.
Quarter Ended
------------------------------------------------------------------------2002 2001
---------------------------------------- ---------------------------------------
March 31 June 30 SeptemberSept. 30 DecemberDec. 31 ----------------- --------------- ----------------- ------------------March 31 June 30 Sept. 30 Dec. 31
---------- --------- --------- --------- ---------- --------- -------- ---------
(in millions)
1999
Operating revenues $209.3 $170.8 $228.3 $192.3$278.8 $269.3 $351.5 $312.0 $395.4 $303.4 $343.5 $274.0
Operating income 36.2 24.1 72.1 29.138.2 34.2 96.6 37.2 40.0 32.8 92.9 33.7
Net income 14.4 7.0 35.5 9.512.9 15.8 45.0 17.2 15.7 12.2 51.3 18.9
Earnings available for common stock 14.2 6.8 35.3 9.2
1998 *
Operating revenues $208.3 $174.7 $222.2 $201.7
Operating income 34.3 21.8 69.9 29.0
Net income 11.7 3.0 30.6 16.6
Earnings available for common stock 11.4 2.8 30.4 16.412.0 14.9 44.3 16.8 14.8 11.3 50.5 18.1
* Earnings in 1998 were impacted by the recording of approximately $2
million, $10 million, $3 million and $2 million of pre-tax merger-related
expenses in the first, second, third and fourth quarters, respectively.
(17)(18) RELATED PARTY ISSUES
In association with the merger, IESU, WPPARTIES
IP&L and IPCWP&L have entered into a System Coordination and Operating
Agreement which became effective with the merger.Agreement. The agreement, which has been approved by FERC, provides a
contractual basis for coordinated planning, construction, operation and
maintenance of the interconnected electric generation and transmission
systems of the three
utility companies.IP&L and WP&L. In addition, the agreement allows the
interconnected system to be operated as a single entity with off-system
capacity sales and purchases made to market excess system capability or to
meet system capability deficiencies. Such sales and purchases are allocated
among the
three utility companiesIP&L and WP&L based on procedures included in the agreement. The sales
amounts allocated to IESUIP&L were $18.1$27.3 million, $40.6 million and $18.0$41.7 million
for 19992002, 2001 and 1998,2000, respectively. The purchases allocated to IESUIP&L were
$71.3$138.8 million, $183.1 million and $56.0$134.7 million for 19992002, 2001 and 1998,2000,
respectively. The procedures were approved by both FERC and all state
regulatory bodies having jurisdiction over these sales. Under the agreement,
IESU, WPIP&L and IPCWP&L are fully reimbursed for any generation expense incurred to
support the sale to an affiliate or to a non-affiliate. Any margins on sales
to non-affiliates are distributed to the three utilitiesIP&L and WP&L in proportion to each
utility's share of electric production at the time of the sale.
Pursuant to a service agreement approved by the SEC under PUHCA, IESUIP&L
receives various administrative and general services from an affiliate,
Corporate Services. These services are billed to IESUIP&L at cost based on
payroll and other expenses incurred by Corporate Services for the benefit of
IESU.IP&L. These costs totaled $93.9$182.1 million, $149.5 million and $59.3$146.8 million
for 19992002, 2001 and 1998,2000, respectively, and consisted primarily of employee
compensation, benefits and fees associated with various professional
services. Corporate Services began
operations in May 1998 upon the consummation of the merger.
At DecemberDec. 31, 19992002 and 1998, IESU2001, IP&L had ana net intercompany payable to
Corporate Services of $16.4$39.1 million and $20.9$33.6 million, respectively.
101108
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTSAUDITORS' REPORT
To the Board of Directors and Shareowners of Wisconsin Power and Light Company:
We have audited the accompanying consolidated balance sheets and statements
of capitalization of Wisconsin Power and Light Company (a Wisconsin corporation) and subsidiaries (the
"Company") as of December 31, 19992002 and 1998,2001, and the related consolidated
statements of income, retained earningscash flows and cash flowschanges in common equity for each of the
three years in the period ended December 31, 1999.2002. Our audit also included
the supplemental schedule listed in Item 15(a)(2). These financial
statements and the supplemental schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the supplemental schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted auditing standards.in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, thesuch consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Wisconsin Power and Lightthe Company and subsidiaries as of December 31,
19992002 and 1998,2001, and the results of theirits operations and theirits cash flows for each
of the three years in the period ended December 31, 1999,2002 in conformity with
accounting principles generally accepted accounting
principles.
Our audit was made forin the purposeUnited States of forming anAmerica.
Also, in our opinion, onsuch supplemental schedule, when considered in relation
to the basic consolidated financial statements taken as a whole. The schedule listed in Item
14(a)(2) is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our
opinion,whole, presents
fairly states in all material respects the financial data
required to beinformation set forth therein in relation to the basic financial
statements taken as a whole.therein.
/s/ ARTHUR ANDERSENDELOITTE & TOUCHE LLP
ARTHUR ANDERSEN LLP- -------------------------
Milwaukee, Wisconsin
January 28, 2000
102March 18, 2003
109
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1999 1998 19972002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Operating revenues:
Electric utility $626,607 $614,704 $634,143$787,680 $753,450 $692,191
Gas utility 120,770 111,737 155,883179,091 206,863 165,152
Water 5,128 5,007 4,691
---------------- ---------------- ----------------
752,505 731,448 794,717
---------------- ---------------- ----------------5,307 5,040 5,038
----------------- ----------------- -----------------
972,078 965,353 862,381
----------------- ----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric production fuels 110,521 120,485 116,812132,492 120,722 113,208
Purchased power 107,598 113,936 125,438217,209 217,306 146,939
Cost of gas sold 64,073 61,409 99,267110,119 153,823 107,131
Other operation 126,479 143,666 131,398
Maintenance 45,652 49,912 48,058and maintenance 215,689 186,477 188,967
Depreciation and amortization 113,037 119,221 104,297136,232 129,098 139,911
Taxes other than income taxes 30,240 30,169 30,338
---------------- ---------------- ----------------
597,600 638,798 655,608
---------------- ---------------- ----------------32,874 32,504 29,163
----------------- ----------------- -----------------
844,615 839,930 725,319
----------------- ----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating income 154,905 92,650 139,109
---------------- ---------------- ----------------127,463 125,423 137,062
----------------- ----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 40,992 36,584 32,60740,202 43,483 44,644
Interest income (21,590) (8,109) (13,143)
Equity income from unconsolidated investments (17,022) (15,535) (552)
Allowance for funds used during construction (4,511) (3,049) (2,775)(2,639) (4,753) (5,365)
Miscellaneous, net 1,836 (1,129) (3,796)
---------------- ---------------- ----------------
38,317 32,406 26,036
---------------- ---------------- ---------------2,864 (4,391) (2,841)
----------------- ----------------- -----------------
1,815 10,695 22,743
----------------- ----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 116,588 60,244 113,073
---------------- ---------------- ----------------125,648 114,728 114,319
----------------- ----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income taxes 45,758 24,670 41,839
---------------- ---------------- ----------------44,724 41,238 42,918
----------------- ----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of a change
in accounting principle, net of tax 80,924 73,490 71,401
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Cumulative effect of a change in accounting
principle, net of tax - - 35
----------------- ----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Net income 70,830 35,574 71,234
---------------- ---------------- ----------------80,924 73,490 71,436
----------------- ----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 3,310 3,310 3,310
---------------- ---------------- --------------------------------- ----------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Earnings available for common stock $67,520 $32,264 $67,924
================ ================ ================$77,614 $70,180 $68,126
================= ================= =================
- ---------------------------------------------------------------------------------------------------------
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Year Ended December 31,
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
(in thousands)
Balance at beginning of year $294,309 $320,386 $310,805
Net income 70,830 35,574 71,234
Cash dividends declared on common stock (58,353) (58,341) (58,343)
Cash dividends declared on preferred stock (3,310) (3,310) (3,310)
---------------- ---------------- ----------------
Balance at end of year $303,476 $294,309 $320,386
================ ================ ================
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
103110
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 1999 19982002 2001
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Utility -
PlantElectric plant in service -
Electric $1,921,624 $1,839,545$1,843,834 $1,779,593
Gas 258,132 244,518plant in service 286,652 280,881
Water 27,770 26,567
Common 218,607 219,268
----------------- ------------------
2,426,133 2,329,898
Less -plant in service 33,062 32,497
Other plant in service 242,329 243,121
Accumulated depreciation 1,266,366 1,168,830(1,410,036) (1,328,111)
----------------- ------------------
1,159,767 1,161,068-----------------
Net plant 995,841 1,007,981
Construction work in progress 66,784 56,994
Nuclear fuel,96,746 37,828
Other, net of amortization 15,079 18,67117,811 18,085
----------------- ------------------
1,241,630 1,236,733
Other property, plant and equipment, net of accumulated
depreciation and amortization of $169 and $44, respectively 608 630
-----------------
------------------
1,242,238 1,237,3631,110,398 1,063,894
----------------- -----------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 3,555 1,8118,577 307
Accounts receivable:
Customer, 22,061 13,372less allowance for doubtful accounts of $1,770 and $1,543 7,977 33,190
Associated companies 5,067 3,01921,484 3,676
Other, 10,984 8,298less allowance for doubtful accounts of $458 and $- 18,191 16,571
Production fuel, at average cost 20,663 20,10518,980 17,314
Materials and supplies, at average cost 20,439 20,02522,133 20,669
Gas stored underground, at average cost 8,624 10,73816,679 22,187
Regulatory assets 3,707 3,70727,999 5,163
Prepaid gross receipts tax 20,864 22,22227,388 25,673
Other 5,568 6,9878,599 7,855
----------------- ------------------
121,532 110,284
-----------------
------------------178,007 152,605
----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 166,202 134,112
Other 15,272 15,960223,734 215,794
Investment in ATC and other 133,043 127,941
----------------- ------------------
181,474 150,072
-----------------
------------------356,777 343,735
----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 82,161 76,284102,674 109,864
Deferred charges and other 138,730 111,147236,741 205,702
----------------- ------------------
220,891 187,431
-----------------
------------------339,415 315,566
----------------- -----------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total assets $1,766,135 $1,685,150$1,984,597 $1,875,800
================= ===================================
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
104111
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)(Continued)
December 31,
CAPITALIZATION AND LIABILITIES 1999 19982002 2001
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See Consolidated Statements of Capitalization):
Common stock - $5 par value - authorized 18,000,000 shares;
13,236,601 shares outstanding $66,183 $66,183
Additional paid-in capital 229,438 199,438325,603 264,603
Retained earnings 303,476 294,309399,302 381,333
Accumulated other comprehensive loss (24,108) (10,167)
------------------ -----------------
Total common equity 599,097 559,930766,980 701,952
------------------ -----------------
Cumulative preferred stock not mandatorily redeemable 59,963 59,963
Long-term debt (excluding current portion) 414,673 414,579468,208 468,083
------------------ -----------------
1,073,733 1,034,4721,295,151 1,229,998
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities 1,875 -
Variable rate demand bonds 55,100 56,975
Notes payable55,100
Commercial paper 60,000 - 50,000
Notes payable to associated companies 125,749 26,799- 90,816
Accounts payable 88,245 84,75490,869 94,091
Accounts payable to associated companies 25,306 20,31543,276 25,231
Accrued payroll and vacations 7,499 5,276
Accrued interest 6,903 6,863taxes 19,353 2,057
Regulatory liabilities 16,938 7,619
Other 15,881 14,60029,064 25,543
------------------ -----------------
326,558 265,582314,600 300,457
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 235,838 245,489191,894 206,245
Accumulated deferred investment tax credits 31,311 33,17023,241 24,907
Pension and other benefit obligations 58,921 18,175
Customer advances 34,643 34,367
Environmental liabilities 10,861 11,68336,555 34,178
Other 53,191 60,38764,235 61,840
------------------ -----------------
365,844 385,096374,846 345,345
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 12)11)
- --------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,766,135 $1,685,150$1,984,597 $1,875,800
================== =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
105112
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1999 1998 19972002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $70,830 $35,574 $71,234$80,924 $73,490 $71,436
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 113,037 119,221 104,297136,232 129,098 139,911
Amortization of nuclear fuel 6,094 5,356 3,5346,486 4,554 5,066
Amortization of deferred energy efficiency expenditures 21,179 14,361 14,361
Deferred taxestax benefits and investment tax credits (12,618) (7,529) 3,065(5,562) (6,791) (12,077)
Equity income from unconsolidated investments, net (17,022) (15,535) (552)
Distributions from equity method investments 13,199 8,450 992
Other 2,432 (2,089) (1,323)(22,160) (10,539) (15,451)
Other changes in assets and liabilities:
Accounts receivable (13,423) 12,845 (3,314)5,785 14,408 (29,733)
Accounts payable 8,482 19,452 (7,102)
Benefit obligations and other (11,854) (5,509) (20,460)(11,676) (20,549) 36,265
Accrued taxes 17,296 (1,225) (3,257)
Other (931) (53,836) (32,901)
---------------- --------------- -------------------------------
Net cash flows from operating activities 162,980 177,321 149,931223,750 135,886 174,060
---------------- --------------- -------------------------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows from (used for)used for financing activities:
Common stock dividends (58,353) (58,341) (58,343)(59,645) (60,449) -
Preferred stock dividends (3,310) (3,310) (3,310)
Capital contribution from parent 61,000 35,000 -
Proceeds from issuance of long-term debt - 60,000 105,000- 100,000
Reductions in long-term debt - (8,899) (55,000)(47,000) (1,875)
Net change in short-term borrowings 48,950 (4,201) 11,500
Capital contribution from parent 30,000 - -(30,816) 61,572 (96,505)
Other - (1,966) (2,601)5,086 (4,989) 2,677
---------------- --------------- -------------------------------
Net cash flows from (used for)used for financing activities 17,287 (16,717) (2,754)(27,685) (19,176) 987
---------------- --------------- -------------------------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (131,915) (117,143) (119,232)(156,921) (147,032) (131,640)
Nuclear decommissioning trust funds (16,092) (14,297) (11,427)
Shared savings program (31,085) (24,355) (17,610)(16,092) (16,092)
Proceeds from formation of ATC and other asset dispositions - 75,600 961
Other 569 (5,490) (583)(14,782) (29,308) (28,109)
---------------- --------------- -------------------------------
Net cash flows used for investing activities (178,523) (161,285) (148,852)(187,795) (116,832) (174,880)
---------------- --------------- -------------------------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 1,744 (681) (1,675)8,270 (122) 167
---------------- --------------- -------------------------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 1,811 2,492 4,167307 429 262
---------------- --------------- -------------------------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $3,555 $1,811 $2,492$8,577 $307 $429
================ =============== ===============================
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flowflows information:
Cash paid during the period for:
Interest $38,330 $33,368 $32,955$39,540 $43,237 $40,455
================ =============== ===============================
Income taxes, $47,164 $31,951 $37,407net of refunds $35,875 $54,161 $54,676
================ =============== ===============================
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
106113
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
1999 19982002 2001
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Common equity:
Common stock - $5.00 par value - authorized 18,000,000 shares;
13,236,601 shares outstanding $66,183 $66,183
Additional paid-in capital 229,438 199,438
Retained earnings 303,476 294,309
------------------ ------------------
599,097 559,930equity $766,980 $701,952
------------------ ------------------
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock:
Cumulative, without par value, not mandatorily redeemable - authorized
3,750,000 shares, maximum aggregate stated value $150,000,000:
$100 stated value - 4.50% series, 99,970 shares outstanding 9,997 9,997
$100 stated value - 4.80% series, 74,912 shares outstanding 7,491 7,491
$100 stated value - 4.96% series, 64,979 shares outstanding 6,498 6,498
$100 stated value - 4.40% series, 29,957 shares outstanding 2,996 2,996
$100 stated value - 4.76% series, 29,947 shares outstanding 2,995 2,995
$100 stated value - 6.20% series, 150,000 shares outstanding 15,000 15,000
$25 stated value - 6.50% series, 599,460 shares outstanding 14,986 14,986
------------------ ------------------
59,963 59,963
------------------ ------------------
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Long-term debt:
First Mortgage Bonds:
1984 Series A, variable rate (5.00%(1.6% at December 31, 1999)2002), due 2014 8,500 8,500
1988 Series A, variable rate (5.60%(2.1% at December 31, 1999)2002), due 2015 14,600 14,600
1990 Series V, 9.3%, due 2025 27,000 27,000
1991 Series A, variable rate (4.75%(1.85% at December 31, 1999)2002), due 2015 16,000 16,000
1991 Series B, variable rate (4.75%(1.85% at December 31, 1999)2002), due 2005 16,000 16,000
1991 Series C, variable rate (4.75% at December 31, 1999), due 2000 1,000 1,000
1991 Series D, variable rate (4.75% at December 31, 1999), due 2000 875 875
1992 Series W, 8.6%, due 2027 90,000 90,00070,000 70,000
1992 Series X, 7.75%, due 2004 62,000 62,000
1992 Series Y, 7.6%, due 2005 72,000 72,000
------------------ ------------------
307,975 307,975259,100 259,100
Debentures, 7%, due 2007 105,000 105,000
Debentures, 5.7%, due 2008 60,000 60,000
Debentures, 7-5/8%, due 2010 100,000 100,000
------------------ ------------------
472,975 472,975524,100 524,100
------------------ ------------------
Less:
Current maturities (1,875) -
Variable rate demand bonds (55,100) (56,975)(55,100)
Unamortized debt premium and (discount),discount, net (1,327) (1,421)(792) (917)
------------------ ------------------
414,673 414,579468,208 468,083
------------------ ------------------
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total capitalization $1,073,733 $1,034,472$1,295,151 $1,229,998
================== ==================
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
107114
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Common
Stock Capital Earnings Loss Equity
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
2000:
Beginning balance $66,183 $229,438 $303,476 $-- $599,097
Earnings available for common stock 68,126 68,126
Unrealized holding losses on derivatives due to cumulative
effect of a change in accounting principle,
net of tax of ($430) (642) (642)
Other unrealized holding losses on derivatives,
net of tax of ($3,634) (5,151) (5,151)
Less: reclassification adjustment for losses
included in earnings available for common
stock, net of tax of ($769) (1,085) (1,085)
-------------- -----------
Net unrealized losses on qualifying derivatives (4,708) (4,708)
-------------- -----------
Total comprehensive income 63,418
Stock options exercised 78 78
----------- ----------- ------------ -------------- -----------
Ending balance 66,183 229,516 371,602 (4,708) 662,593
2001:
Earnings available for common stock 70,180 70,180
Minimum pension liability adjustment, net of tax of ($9,552) (14,248) (14,248)
Unrealized holding gains on derivatives,
net of tax of $3,932 5,952 5,952
Less: reclassification adjustment for losses
included in earnings available for common
stock, net of tax of ($1,676) (2,837) (2,837)
-------------- -----------
Net unrealized gains on qualifying derivatives 8,789 8,789
-------------- -----------
Total comprehensive income 64,721
Common stock dividends (60,449) (60,449)
Stock options exercised 87 87
Capital contribution from parent 35,000 35,000
----------- ----------- ------------ -------------- -----------
Ending balance 66,183 264,603 381,333 (10,167) 701,952
2002:
Earnings available for common stock 77,614 77,614
Minimum pension liability adjustment, net of tax of ($6,823) (10,177) (10,177)
Unrealized holding losses on derivatives,
net of tax of ($92) (137) (137)
Less: reclassification adjustment for gains
included in earnings available for common
stock, net of tax of $2,432 3,627 3,627
-------------- -----------
Net unrealized losses on qualifying derivatives (3,764) (3,764)
-------------- -----------
Total comprehensive income 63,673
Common stock dividends (59,645) (59,645)
Capital contribution from parent 61,000 61,000
----------- ----------- ------------ -------------- -----------
Ending balance $66,183 $325,603 $399,302 ($24,108) $766,980
=========== =========== ============ ============== ===========
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
115
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Except as modified below, the Alliant Energy Notes"Notes to Consolidated Financial
StatementsStatements" are incorporated by reference insofar as they relate to WP&L.&L and
incorporate the disclosures relating to WP&L contained in the following notes
of the Alliant Energy "Notes to Consolidated Financial Statements":
Summary of Significant Accounting Policies Note 1(a) 3rd and 4th paragraphs, 1(b), 1(c), 1(d), 1(f) to 1(l),
1(n), 1(p), 1(q)
Utility Rate Matters Note 2
Leases Note 3
Utility Accounts Receivable Note 4
Common and Preferred Stock Note 7
Debt Note 8(a) 1st paragraph, 8(b) 1st paragraph
Investments Note 9 1st paragraph, "Investment in ATC"
Derivative Financial Instruments Note 10(a) 1st paragraph, "Cash Flow Hedging Instruments" 1st
paragraph, "Other Derivatives Not Designated in Hedge Relationships"
4th paragraph; 10(b); 10(c)
Commitments and Contingencies Note 11(b) 1st paragraph, 11(c), 11(e) "MGP Sites" and "NEPA," 11(f)
Jointly-Owned Electric Utility Plant Note 12
The notes that follow herein set forth additional specific information for
WP&L and are numbered to be consistent with the Alliant Energy "Notes to
Consolidated Financial Statements."
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General - The Consolidated Financial Statementsconsolidated financial statements include the accounts of
WP&L and its principal consolidated subsidiaries.subsidiaries WPL Transco LLC and South
Beloit. WP&L is a direct subsidiary of Alliant Energy and is engaged
principally in the generation, transmission, distribution and sale of electric energy; the
purchase, distribution, transportation and sale of natural gas; and the
provision of water services. Nearly all of WP&L's retail customers are
located in south and central Wisconsin.
WP&L's
principal(c) Regulatory Assets and Liabilities - At Dec. 31, 2002 and 2001,
regulatory assets and liabilities were comprised of the following items (in
millions):
Regulatory Assets Regulatory Liabilities
---------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ----------- ----------
Energy efficiency program costs $38.6 $33.9 $-- $--
Tax-related 25.0 29.0 14.6 15.1
Environmental-related 19.0 18.7 0.6 0.5
Other 48.1 33.4 17.0 7.6
---------- ---------- ----------- ----------
$130.7 $115.0 $32.2 $23.2
========== ========== =========== ==========
(d) Income Taxes - Alliant Energy files a consolidated subsidiary is South Beloit.federal income tax
return. Under the terms of an agreement between Alliant Energy and its
subsidiaries, the subsidiaries calculate their respective federal income tax
provisions and make payments to or receive payments from Alliant Energy as if
they were separate taxable entities.
(3) LEASES
WP&L's operating lease rental expenses, which include certain purchased-power
agreements, for 1999, 19982002, 2001 and 19972000 were $7.7$24.5 million, $6.4$23.4 million and
$5.5$7.9 million, respectively. The purchased-power agreements below include
$463 million and $78 million, respectively, related to a new plant
(Riverside) currently under development and the RockGen plant, both in
Wisconsin. The Riverside plant is expected to be placed in-service in 2004.
The synthetic leases relate to the financing of the utility railcars and a
utility radio dispatch system that were not included on WP&L's Consolidated
Balance Sheets. WP&L has guaranteed the residual value of its synthetic
leases totaling $14.3 million in the aggregate. The guarantees extend
through the maturity of each respective underlying lease with remaining terms
116
up to 13 years. Residual value guarantees have been included in the future
minimum lease payments by year are as followsnoted in the table below (in millions):
Operating
Year Leases
- ---------------- -------------
2003 2004 2005 2006 2007 Thereafter Total
-------- -------- -------- -------- -------- ----------- ---------
Certain purchased-power agreements $18.7 $51.8 $66.3 $67.6 $69.0 $308.6 $582.0
Synthetic leases 6.4 7.6 7.5 7.4 5.5 25.5 59.9
Other 2.0 1.1 1.2 1.0 1.0 2.2 8.5
-------- -------- -------- -------- -------- ----------- ---------
$27.1 $60.5 $75.0 $76.0 $75.5 $336.3 $650.4
======== ======== ======== ======== ======== =========== =========
(4) UTILITY ACCOUNTS RECEIVABLE
At Dec. 31, 2002 and 2001, WP&L had sold $116 million and $88 million of
receivables, respectively. In 2002, 2001 and 2000, $8.0WP&L received $1.2
billion, $1.1 billion and $0.9 billion, respectively, in aggregate proceeds
from the sale of accounts receivable. WP&L paid fees associated with these
sales of $2.2 million, $4.0 million and $5.0 million in 2002, 2001 7.6
2002 6.2
2003 4.9
2004 4.5
Thereafter 25.3
-------------
$56.5
=============
(6)and 2000,
respectively.
(5) INCOME TAXES
The components of federal and state income taxes for WP&L for the years ended
December 31 were as follows (in millions):
1999 1998 1997
------------ ---------- ----------2002 2001 2000
------------- ------------- -------------
Current tax expense $58.4 $32.2 $38.8expense:
Federal $42.8 $36.8 $44.5
State 9.7 11.2 10.5
Deferred tax expense (10.7) (5.6) 4.9(benefit):
Federal (5.0) (4.6) (9.9)
State 1.2 (0.4) (0.3)
Amortization of investment tax credits (1.8) (1.8) (1.9)
(1.9) (1.9)
------------ ---------- ----------
$45.8 $24.7 $41.8
============ ========== ==========Research and development tax credits (2.2) -- --
------------- ------------- -------------
$44.7 $41.2 $42.9
============= ============= =============
The overall effective income tax rates shown below forin the years ended
December 31following table were
computed by dividing total income tax expense by income before income taxes.
1999 1998 19972002 2001 2000
------------- -------------- -------------- -------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefits 6.3 7.8 5.76.1 6.4 6.0
Adjustment of prior period taxes (1.1) (2.8) (0.8)
Amortization of investment tax credits (1.4) (1.6) (3.1) (1.7)
Adjustment of prior period taxes (0.3) -- (2.1)
Merger expenses -- 2.5 0.3(1.6)
Amortization of excess deferred taxes (1.4) (1.5) (1.3)
(2.5) (1.3)Research and development tax credits (1.8) -- --
Other items, net 1.1 1.3 1.10.2 0.4 0.2
------------- -------------- -------------- -------------
Overall effective income tax rate 39.2% 41.0% 37.0%
==============35.6% 35.9% 37.5%
============= ============== ===========================
108
The accumulated deferred income taxestax (assets) and liabilities as set forth
belowincluded on the
Consolidated Balance Sheets at DecemberDec. 31 arise from the following temporary
differences (in millions):
1999 1998
----------- -----------2002 2001
--------------- ---------------
Property related $271.9 $282.7
Investment tax credit related (21.0) (22.2)$201.2 $200.8
Minimum pension liability (16.4) (9.6)
Decommissioning (25.2) (20.8)
Other (15.1) (15.0)
----------- -----------
$235.8 $245.5
=========== ===========
(7)32.3 35.8
--------------- ---------------
$191.9 $206.2
=============== ===============
117
(6) BENEFIT PLANS
(a) Pension Plans and Other Postretirement Benefits - Substantially all of
WP&L has a&L's employees are covered by two non-contributory defined benefit pension
plan that covers substantially all
of its employees who are subject to a collective bargaining agreement. Plan
benefits are generally based on years of service and levels of compensation.
Effective in 1998, eligible employees of WP&L that are not subject to a
collective bargaining agreement are covered byplans. For the Alliant Energy Cash
Balance Pension Plan, a non-contributory defined benefit pension plan. The
projected unit credit actuarial cost method was usedplan sponsored by Corporate Services,
Alliant Energy allocates pension costs and contributions to computeWP&L based on
labor costs of plan participants and any additional minimum pension cost
and the accumulated and projected benefit obligations. WP&L's policy is to
fund the pension plan at an amount that is at least equal to the minimum
funding requirements mandated by ERISA, and that does not exceed the maximum
tax deductible amount for the year.
WP&L also provides certain other postretirement benefits to retirees,
including medical benefits for retirees and their spouses and, in some cases,
retiree life insurance. WP&L's funding policy is generally to fund tax
deductible amounts up to the incurred but unclaimed paid medical claim
reserve and tax deductible amounts (if any) to the retiree medical account
within the Cash Balance Pension Plan.liability
based on each group's funded status. The weighted-average assumptions as ofat the
measurement date of SeptemberSept. 30 arewere as follows:
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 19972002 2001 2000 2002 2001 2000
------------ ----------- ------------ ---------- ----------------------- ------------- ---------------
Discount rate 7.75% 6.75% 7.25% 7.75%8.00% 6.75% 7.25% 8.00%
Expected return on plan assets 9% 9% 9% 9% 9% 9%
Rate of compensation increase 3.5% 3.5% 3.5-4.5%3.5% 3.5% 3.5% 3.5%
Medical cost trend on covered charges:
Initial trend rangerate N/A N/A N/A 7% 8% 8%10.8% 12.0% 9.0%
Ultimate trend rangerate N/A N/A N/A 5% 5% 5%
109
The components of WP&L's qualified pension benefits and other postretirement
benefits costs arewere as follows (in millions):
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997-------------------------------------- ---------------------------------
2002 2001 2000 2002 2001 2000
---------- ----------- ------------------- -------- -------- ---------
Service cost $3.8 $3.2 $4.8$3.6 $2.8 $3.0 $2.4 $1.6 $1.7 $1.8$1.4
Interest cost 10.1 9.2 8.9 8.5 13.9 2.7 2.64.4 3.6 3.3
Expected return on plan assets (12.2) (13.7) (12.9) (12.8) (19.2) (1.5) (1.5) (1.1)(1.6) (1.7) (1.6)
Amortization of:
Transition obligation (asset) (1.7) (2.1) (2.1) (2.4)1.1 1.2 1.3 1.51.2
Prior service cost 0.4 0.5 0.4 -- -- --
Actuarial loss (gain) 0.21.5 -- -- (0.9) (1.1) (0.3)0.1 (0.6) (0.8)
---------- ----------- ------------------- -------- -------- ---------
Total$1.7 ($1.7)3.3) ($2.7) ($2.5) $3.1 $3.0 $5.2$6.4 $4.1 $3.5
========== =========== =================== ======== ======== =========
During 1998 and 1997, WP&L recognized an additional $0.6 million and $1.3
million, respectively, of costs in accordance with SFAS 88. The charges were
for severance and early retirement programs in the respective years. In
addition, during 1998 and 1997, WP&L recognized $3.6 million and $1.7
million, respectively, of curtailment charges relating to WP&L's other
postretirement benefits.
The pension benefit cost shown above (and in the following tables) for 1999
and 1998 represents
only the pension benefit cost for bargaining unit employees of WP&L covered
under the bargaining unit pension plan that is sponsored by WP&L. The
benefit obligations and assets associated with WP&L's non-bargaining
employees who are participants in other Alliant Energy plans are reported in
Alliant Energy's consolidated financial statements and are not reported
above. The pension benefit (income) cost for WP&L's non-bargaining employees
who are now participants in other Alliant Energy plans was $0.3 million,
($1.8)1.5) million and $3.0($1.3) million for 19992002, 2001 and 1998, respectively, including a special
charge of $3.6 million in 1998 for severance and early retirement window
programs.2000, respectively. In
addition, Corporate Services provides services to WP&L. The allocated
pension benefit costs associated with these services was $1.2$1.7 million, $1.3
million and $0.6$1.3 million for 19992002, 2001 and 1998,2000, respectively. The other
postretirement benefit cost shown above for each period (and in the following
tables) represents the other postretirement benefit cost for all WP&L
employees. The allocated other postretirement benefit cost associated with
Corporate Services for WP&L was $0.4$0.5 million, $0.3 million and $0.2$0.3 million
for 19992002, 2001 and 1998,2000, respectively.
The assumed medical trend rates are critical assumptions in determining the
service and interest cost and accumulated postretirement benefit obligation
related to postretirement benefit costs. A one percent change in the medical
trend rates for 1999,2002, holding all other assumptions constant, would have the
following effects (in millions):
1 Percent 1 Percent1% Increase 1% Decrease
-------------- ---------------------------------- ----------------------
Effect on total of service and interest cost components $0.3$0.6 ($0.3)0.6)
Effect on postretirement benefit obligation $1.5$5.6 ($1.5)5.1)
110118
A reconciliation of the funded status of WP&L's plans to the amounts
recognized on WP&L's Consolidated Balance Sheets at DecemberDec. 31 is presented
belowwas as follows
(in millions):
Qualified Pension Benefits Other Postretirement Benefits
---------------------------- ------------------------------
1999 1998 1999 1998----------------------------- -------------------------------
2002 2001 2002 2001
------------ ------------ ------------- -----------
Change in benefit obligation:-------------- ------------
Change in benefit obligation:
Net benefit obligation at beginning of year $132.3 $205.1 $40.3 $47.1
Transfer of obligations to other Alliant Energy
plans -- (91.9) -- --$139.2 $115.9 $60.5 $42.3
Service cost 3.8 3.23.6 2.8 2.4 1.6 1.7
Interest cost 8.9 8.5 2.7 2.610.1 9.2 4.4 3.6
Plan participants' contributions -- -- 1.2 0.81.5 1.6
Actuarial loss (gain) (20.8) 12.2 0.8 (9.7)
Curtailments -- -- -- 0.7
Special termination benefits -- 0.6 -- --10.3 18.3 13.2 16.6
Gross benefits paid (7.2) (7.0) (5.4) (4.2) (2.9)(5.2)
------------ ------------ ------------- ------------------------- ------------
Net benefit obligation at end of year 117.2 132.3 42.4 40.3156.0 139.2 76.6 60.5
------------ ------------ ------------- ------------------------- ------------
Change in plan assets:
Fair value of plan assets at beginning of year 137.5 244.4 15.1 16.1
Transfer of assets to other Alliant Energy plans -- (100.2) -- --138.8 156.3 17.8 19.4
Actual return on plan assets 17.1 (1.3) 1.8 1.1(8.1) (10.5) (1.4) (0.5)
Employer contributions 30.0 -- -- 4.0 --4.2 2.5
Plan participants' contributions -- -- 1.2 0.81.5 1.6
Gross benefits paid (7.2) (7.0) (5.4) (4.2) (2.9)(5.2)
------------ ------------ ------------- ------------------------- ------------
Fair value of plan assets at end of year 147.6 137.5 17.9 15.1153.5 138.8 16.7 17.8
------------ ------------ ------------- ------------------------- ------------
Funded status at end of year 30.4 5.2 (24.5) (25.2)(2.5) (0.4) (59.9) (42.7)
Unrecognized net actuarial loss (gain) 0.8 26.0 (14.5) (17.0)63.5 34.3 20.4 4.4
Unrecognized prior service cost 4.7 5.1 (0.2)3.4 3.9 (0.1) (0.2)
Unrecognized net transition obligation (asset) (5.8) (7.9) 14.9 17.2-- (1.7) 11.5 12.6
------------ ------------ ------------- ------------------------- ------------
Net amount recognized at end of year $30.1 $28.4$64.4 $36.1 ($24.3)28.1) ($25.2)25.9)
============ ============ ============= ========================= ============
Amounts recognized on the Consolidated
Balance Sheets consist of:
Prepaid benefit cost $30.1 $28.4 $0.6 $0.4$64.4 $36.1 $1.5 $1.3
Accrued benefit cost -- -- (24.9) (25.6)(29.6) (27.2)
------------ ------------ ------------- ------------------------- ------------
Net amount recognized at measurement date 30.1 28.4 (24.3) (25.2)64.4 36.1 (28.1) (25.9)
------------ ------------ ------------- ------------------------- ------------
Contributions paid after 9/30 and prior to 12/31 -- -- 1.0 2.11.1
------------ ------------ ------------- ------------------------- ------------
Net amount recognized at 12/31 $30.1 $28.4$64.4 $36.1 ($23.3)27.1) ($23.1)24.8)
============ ============ ============= ========================= ============
Alliant Energy sponsors several non-qualified pension plans which cover
certain current and former officers. The pension expense allocated to WP&L
for these plans was $0.8 million, $0.8 million and $0.5 million in 1999, 1998
and 1997, respectively.
WP&L employees also participate in defined contribution pension plans (401(k)
plans) covering substantially all employees. WP&L's contributions to the
plans, which are based on the participants' level of contribution, were $2.0
million, $2.4 million and $2.8 million in 1999, 1998 and 1997, respectively.
111
The benefit obligation and fair value of plan assets for the postretirement
welfare plans with benefit obligations in excess of plan assets were $36.5$74.7
million and $8.4 million as of September 30, 1999 and $33.4 million and $6.2$13.7 million, respectively, as of SeptemberSept. 30, 1998.
(8)2002 and $53.8
million and $8.5 million, respectively, as of Sept. 30, 2001. At Dec. 31,
2002 and 2001, Corporate Services allocated an additional minimum liability
of $41.3 million and $0 million, respectively.
Alliant Energy sponsors several non-qualified pension plans that cover
certain current and former key employees. The pension expense allocated to
WP&L for these plans was $1.5 million, $1.0 million and $1.2 million in 2002,
2001 and 2000, respectively. WP&L has various life insurance policies that
cover certain key employees and directors. At Dec. 31, 2002 and 2001, the
cash surrender value of these investments was $10 million and $9 million,
respectively. A significant number of WP&L employees also participate in
defined contribution pension plans (401(k) plans). WP&L's contributions to
the plans, which are based on the participants' level of contribution, were
$2.2 million, $2.1 million and $2.1 million in 2002, 2001 and 2000,
respectively.
(7) COMMON PREFERRED AND PREFERENCEPREFERRED STOCK
(b) Preferred and Preference Stock - The carrying value of WP&L's cumulative preferred
stock at Decemberboth Dec. 31, 19992002 and 19982001 was $60 million. The fair market value,
based upon the market yield of similar securities and quoted market prices,
at DecemberDec. 31, 19992002 and 19982001 was $48 million and $49 million, and $55
million, respectively.
(9)119
(8) DEBT
(a) Short-Term Debt - WP&L participates in a utility money pool with IESU
and IPC that is funded, as needed, through the issuance of commercial paper
by Alliant Energy. Interest expense and other fees are allocated based on
borrowing amounts. The PSCW has restricted WP&L from lending money to
non-utility affiliates and non-Wisconsin utilities. As a result, WP&L is
prohibited from lending money to the utility money pool but is able to borrow
money from the utility money pool. Information regarding WP&L's short-term debt iswas as
follows (dollars in millions):
1999 1998 19972002 2001
-------------- -------------- --------------
As of year end:
At Dec. 31:
Commercial paper outstanding $-- $-- $81.0
Notes payable outstanding $-- $50.0 $--
Money pool borrowings $125.7 $26.8$60.0 $--
Discount rates on commercial paper 1.6% N/A
N/A 5.82-5.90%Money pool borrowings $-- $90.8
Interest rate on notes payable N/A 5.44% N/A
Interest raterates on money pool borrowings 5.84% 5.17% N/A 2.4%
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $77.1 $48.4 $49.2$57.4 $23.8
Average interest raterates on short-term debt 5.22% 5.55% 5.64%1.8% 3.7%
(b) Long-Term Debt - DebtWP&L's debt maturities (excluding periodic sinking fund
requirements, which will not require additional cash expenditures) for 20002003 to 20042007 are $1.9$0, $62.0
million, $88.0 million, $0, $0, $0 and $62.0$105.0 million, respectively. The carrying
value of WP&L's long-term debt (including variable rate demand bonds) at Decemberboth
Dec. 31, 19992002 and 19982001 was $472$523 million. The fair market value, based upon
the market yield of similar securities and quoted market prices, at DecemberDec. 31,
19992002 and 19982001 was $469$574 million and $513$548 million, respectively.
(10)(9) INVESTMENTS AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Information relating to other financial instrumentsvarious investments held by WP&L isat Dec. 31 that are
marked-to-market as a result of SFAS 115 was as follows (in
millions):
December 31, 1999 December 31, 1998
------------------------------------- --------------------------------
Gross Gross
Carrying2002 2001
--------------------------- --------------------------
Carrying/ Unrealized Carrying/ Unrealized
Fair Unrealized CarryingGains, Fair UnrealizedGains,
Value Net of Tax Value Gains/(Losses) Value Value Gains
----------- -------- ---------------- ---------- --------Net of Tax
------------ Nuclear decommissioning trust funds:-------------- ------------ -------------
Available-for-sale securities:
Nuclear decommissioning trust funds:
Debt securities $131 $5 $122 $2
Equity securities $65 $65 $45 $53 $53 $27
Debt securities 101 101 (3) 81 81 1
----------- -------- ---------------- ---------- --------93 5 94 23
------------ -------------- ------------ -------------
Total $166 $166 $42 $134 $134 $28
=========== ======== ================ ========== ========$224 $10 $216 $25
============ ============== ============ =============
The carrying amount of WP&L's current assetsNuclear Decommissioning Trust Funds - At Dec. 31, 2002, $75 million, $24
million and current liabilities
approximates fair value because$32 million of the short maturity of such financial
instruments.debt securities mature in 2003-2010, 2011-2020
and 2021-2049, respectively. The nuclear decommissioning trust funds realized gains from the sales of
securities of $4.1$10.3 million, $0.8$2.1 million and $0.1$5.2 million in 1999,
19982002, 2001 and
1997,2000, respectively (cost of the investments based on specific identification
were $86.2was $92.2 million, $57.6$147.4 million and $54.0$202.1 million 112and proceeds from the
sales were $102.5 million, $149.5 million and $207.3 million, respectively).
Unconsolidated Equity Investments - Summary financial information from WP&L's
unconsolidated equity investments' financial statements is as follows (in
millions):
2002 2001 2000
---------- ----------- ----------
Operating revenues $211.7 $180.3 $5.3
Operating income 75.7 65.8 1.3
Net income 59.5 55.9 1.6
As of Dec. 31:
Current assets 44.7 59.5
Non-current assets 774.4 681.4
Current liabilities 50.8 39.3
Non-current liabilities 7.5 4.4
120
respectively). Since WP&L is subject to regulation, any gains or losses
related to the difference between the carrying amount and the fair value of
its financial instruments may not be realized by WP&L's parent.
(12)(11) COMMITMENTS AND CONTINGENCIES
(a) Construction and Acquisition Expenditures - Certain commitments have been
made in connection with 2003 capital expenditures. During 2003, total
construction and acquisition expenditures are estimated to be approximately
$160 million.
(b) Purchased-Power, Coal and Natural Gas Contracts - Corporate Services has
entered into purchased-power capacity contracts as agent for WP&L, IESU and
IPC. Based on the System
Coordination and Operating Agreement, Alliant Energy annually allocates
purchased-power contracts to the individual
utilities.IP&L and WP&L. Such process considers factors
such as resource mix, load growth and resource availability. SeeHowever, for
2003, system-wide purchased-power contracts of $45.1 million (1.6 million
MWh) have not yet been directly assigned to IP&L and WP&L since the specific
needs of each utility is not yet known. Refer to Note 1718 for additional
information. In
addition, Corporate Services has entered into various coal contracts as agent
for WP&L, IESU and IPC. ContractCoal contract quantities are allocateddirectly assigned to specific
plants at the individual utilitiesIP&L and WP&L based on various factors including projected heat
input requirements, combustion compatibility and efficiency. However, in
2000 and 2001,for
2003-2006, system-wide coal contracts of $24.6$56.1 million (6.5(7.8 million tons),
$37.5 million (7.6 million tons), $28.0 million (4.7 million tons) and $12.5$8.2
million (3.6(0.9 million tons), respectively, have not yet been allocated
to the individual utilities due to the need for additional analysis of
combustion compatibility and efficiency. The minimum commitments directly assigned
to IP&L and WP&L aresince the specific needs of each utility is not yet known.
At Dec. 31, 2002, WP&L's minimum commitments were as follows (dollars and
Dths in millions,millions; MWhs and tons in thousands):
Coal
Purchased-Power (including
transportation)
------------------- ----------------------
Dollars MWHs
Purchased-power Coal Natural gas
----------------------- ----------------------- -------------------------
Dollars MWhs Dollars Tons Dollars Dths
--------- ---------- --------- ---------- ----------- ----------
2003 $31.3 219 $6.9 -- $48.1 2
2004 8.0 219 6.9 -- 32.3 --
2005 -- -- 1.3 -- 25.0 --
2006 -- -- 1.3 -- 14.1 --
2007 -- -- 1.3 -- 13.3 --
Thereafter -- -- -- -- 26.4 --
(e) Environmental Liabilities - WP&L had recorded the following
environmental liabilities, and regulatory assets associated with certain of
these liabilities, at Dec. 31 (in millions):
Environmental Liabilities Regulatory Assets
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------- ------------ ------------
MGP sites $6.9 $4.4 $13.0 $11.7
NEPA 2.5 3.1 3.1 4.0
Other -- -- 2.9 3.0
------------ ------------- ------------ ------------
$9.4 $7.5 $19.0 $18.7
============ ============= ============ ============
MGP Sites - Management currently estimates the range of remaining costs to be
- ---------
-------- ---------- ----------
2000 $79.8 1,509 $16.8 5,269
2001 59.2 864 14.0 4,557
2002 43.9 219 9.8 3,707
2003 33.4 219 5.4 2,957
2004 25.2 219 5.4 2,957
Corporate Services is inincurred for the processinvestigation, remediation and monitoring of negotiating several new coal
contracts. In addition, it expectsall WP&L's
sites to supplement its coal contracts with
spot market purchasesbe approximately $6 million to fulfill its future fossil fuel needs. WP&L also has
various natural gas supply, transportation and storage contracts
outstanding. The minimum dekatherm commitments, in millions, for 2000-2004
are 60.0, 44.9, 42.6, 34.6 and 7.4, respectively. The minimum dollar
commitments for 2000-2004, in millions, are $27.9, $18.5, $14.6, $12.0 and
$1.9, respectively. The gas supply commitments are all index-based. WP&L
expects to supplement its natural gas supply with spot market purchases as
needed.
(c) Information Technology Services - Alliant Energy has an agreement,
expiring in 2004, with EDS for information technology services. WP&L's
anticipated operating and capital expenditures under the agreement for 2000
are estimated to total approximately $2$7 million.
Future costs under the
agreement are variable and are dependent upon WP&L's level of usage of
technological services from EDS.
(14)(13) SEGMENTS OF BUSINESS
WP&L is a regulated domestic utility, serving customers in Wisconsin and
Illinois, withand includes three principal business segments: a) electric operations; b) gas
operations; and c) other, which includes the water operationsbusiness and the
unallocated portions of the utility business. IntersegmentVarious line items in the
following tables are not allocated to the electric and gas segments for
management reporting purposes and therefore are included in "Total." In 2002
and 2001, gas revenues included $22 million and $21 million, respectively,
for sales to the electric segment. All other intersegment revenues were not
material to WP&L's operations and there was no single customer whose revenues
exceededwere 10% or more of WP&L's consolidated revenues.
113
Certain financial
information relating to WP&L's significant business segments is presented below:was as follows
(in millions):
121
Electric Gas Other Total
- ------------------------------------------------------------------------------------------------------------
(in millions)
1999------------------------------------------------------------------------------------------------------------------------------
2002
- ----
Operating revenue $626.6 $120.8 $5.1 $752.5revenues $787.7 $179.1 $5.3 $972.1
Depreciation and amortization expense 97.5 14.5 1.0 113.0117.3 17.7 1.2 136.2
Operating income 139.3 13.8 1.8 154.9114.1 12.0 1.4 127.5
Interest expense, net of AFUDC 36.5 36.5
Net37.6
Interest income (21.6)
Equity income from equity method subsidiaries (0.7) (0.7)unconsolidated investments (17.0)
Miscellaneous, net (other than equity income/loss) 2.5 2.52.9
Income tax expense 45.8 45.844.7
Net income 70.8 70.880.9
Preferred and preference dividends 3.3 3.3
Earnings available for common stock 67.5 67.577.6
Total assets 1,310.5 200.3 255.3 1,766.11,426.7 259.5 298.4 1,984.6
Investments in equity method subsidiaries 5.2 5.2121.7 121.7
Construction and acquisition expenditures 111.2 18.2 2.5 131.9144.6 10.6 1.7 156.9
- ------------------------------------------------------------------------------------------------------------
1998------------------------------------------------------------------------------------------------------------------------------
2001
- ----
Operating revenue $614.7 $111.7revenues $753.5 $206.9 $5.0 $731.4$965.4
Depreciation and amortization expense 104.7 13.6 0.9 119.2111.5 16.4 1.2 129.1
Operating income 87.4 3.6 1.7 92.7121.6 2.5 1.3 125.4
Interest expense, net of AFUDC 33.5 33.5
Net38.7
Interest income (8.1)
Equity income from equity method subsidiaries (0.8) (0.8)unconsolidated investments (15.5)
Miscellaneous, net (other than equity income/loss) (0.3) (0.3)(4.4)
Income tax expense 24.7 24.741.2
Net income 35.6 35.673.5
Preferred and preference dividends 3.3 3.3
Earnings available for common stock 32.3 32.370.2
Total assets 1,276.4 195.9 212.9 1,685.21,323.9 224.5 327.4 1,875.8
Investments in equity method subsidiaries 5.2 5.2117.3 117.3
Construction and acquisition expenditures 99.6 16.0 1.5 117.1127.9 16.8 2.3 147.0
- ------------------------------------------------------------------------------------------------------------
1997------------------------------------------------------------------------------------------------------------------------------
2000
- ----
Operating revenue $634.1 $155.9 $4.7 $794.7revenues $692.2 $165.2 $5.0 $862.4
Depreciation and amortization expense 91.2 12.3 0.8 104.3122.9 15.9 1.1 139.9
Operating income (loss) 125.9 13.7 (0.5) 139.1123.2 12.2 1.7 137.1
Interest expense, net of AFUDC 29.8 29.8
Net39.3
Interest income (13.1)
Equity income from equity method subsidiaries (0.4) (0.4)unconsolidated investments (0.5)
Miscellaneous, net (other than equity income/loss) (3.3) (3.3)(2.9)
Income tax expense 41.8 41.842.9
Net income 71.2 71.271.4
Preferred and preference dividends 3.3 3.3
Earnings available for common stock 67.9 67.968.1
Total assets 1,270.9 193.6 200.1 1,664.61,344.9 226.1 286.0 1,857.0
Investments in equity method subsidiaries 5.7 5.74.8 4.8
Construction and acquisition expenditures 101.3 16.1 1.8 119.2
- ------------------------------------------------------------------------------------------------------------114.2 15.1 2.3 131.6
114122
(15) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summation of the individual quarters may not equal annual totals due to
rounding.
Quarter Ended
------------------------------------------------------------------------2002 2001
---------------------------------------- ---------------------------------------
March 31 June 30 SeptemberSept. 30 DecemberDec. 31 ----------------- --------------- ----------------- ------------------March 31 June 30 Sept. 30 Dec. 31
---------- --------- --------- --------- ---------- --------- -------- ---------
(in millions)
1999
Operating revenues $203.0 $167.1 $186.8 $195.6$229.5 $217.5 $249.0 $276.1 $317.2 $204.1 $228.3 $215.8
Operating income 46.4 21.9 32.5 54.124.1 28.6 35.4 39.3 37.0 23.4 36.2 28.8
Net income 26.3 6.9 14.2 23.415.7 12.8 19.2 33.2 19.3 11.6 19.9 22.8
Earnings available for common stock 25.4 6.1 13.4 22.6
1998 *
Operating revenues $202.8 $172.5 $176.1 $180.0
Operating income 33.7 10.8 29.7 18.5
Net income (loss) 17.6 (1.2) 12.7 6.5
Earnings available for common stock 16.8 (2.1) 11.9 5.714.9 12.0 18.3 32.4 18.4 10.7 19.0 22.0
*Earnings for 1998 were impacted by the recording of approximately $3
million, $11 million, $2 million and $1 million of pre-tax merger-related
expenses in the first, second, third and fourth quarters, respectively.
(17)(18) RELATED PARTY ISSUES
In association with the merger, IESU, WPPARTIES
IP&L and IPCWP&L have entered into a System Coordination and Operating
Agreement which became effective with the merger.Agreement. The agreement, which has been approved by FERC, provides a
contractual basis for coordinated planning, construction, operation and
maintenance of the interconnected electric generation and transmission
systems of the three
utility companies.IP&L and WP&L. In addition, the agreement allows the
interconnected system to be operated as a single entity with off-system
capacity sales and purchases made to market excess system capability or to
meet system capability deficiencies. Such sales and purchases are allocated
among the
three utility companiesIP&L and WP&L based on procedures included in the agreement. The sales
amounts allocated to WP&L were $23.8$26.9 million, $32.1 million and $23.6$28.6 million
for 19992002, 2001 and 1998,2000, respectively. The purchases allocated to WP&L were
$101.0$205.8 million, $209.2 million and $70.0$130.7 million for 19992002, 2001 and 1998,2000,
respectively. The procedures were approved by both the FERC and all state
regulatory bodies having jurisdiction over these sales. Under the agreement,
IESU, WPIP&L and IPCWP&L are fully reimbursed for any generation expense incurred to
support athe sale to an affiliate or to a non-affiliate. Any margins on sales
to non-affiliates are distributed to the three utilitiesIP&L and WP&L in proportion to each
utility's share of electric production at the time of the sale.
Pursuant to a service agreement approved by the SEC under PUHCA, WP&L
receivedreceives various administrative and general services from an affiliate,
Corporate Services. These services are billed to WP&L at cost based on
payroll and other expenses incurred by Corporate Services for the benefit of
WP&L. These costs totaled $96.5$117.7 million, $107.0 million and $53.9$103.4 million
for 19992002, 2001 and 1998,2000, respectively, and consisted primarily of employee
compensation, benefits and fees associated with various professional
services. Corporate Services began
operations in May 1998 upon the consummation of the merger.
At DecemberDec. 31, 19992002 and 1998,2001, WP&L had ana net intercompany payable to
Corporate Services of $24.7$31.1 million and $20.0$32.2 million, respectively.
115123
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
ALLIANT ENERGY
The information required by Item 10 relating to directors and nominees for
election of directors at the 20002003 Annual Meeting of Shareowners is
incorporated herein by reference to the relevant information under the
caption "Election of Directors" in Alliant Energy's Proxy Statement for the
20002003 Annual Meeting of Shareowners (the 20002003 Alliant Energy Proxy Statement),
which has beenwill be filed with the SEC within 120 days after the end of Alliant
Energy's fiscal year. The information required by Item 10 relating to the
timely filing of reports under Section 16 of the Securities Exchange Act of
1934 is incorporated herein by reference to the relevant information under
the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the
2003 Alliant Energy Proxy Statement. Information regarding executive
officers of Alliant Energy asmay be found in Part I of this report under the
caption "Executive Officers of the date of this filing are as follows (figures following
the names represent the officer's age as of December 31, 1999):
Executive Officers of Alliant Energy
Erroll B. Davis, Jr., 55, has served as President and Chief Executive
- ---------------------
Officer (CEO) since 1990 and has been a board member since 1988.
William D. Harvey, 50, was elected Executive Vice President-Generation
- -----------------
effective April 1998. Prior thereto, he served as Senior Vice President
since 1993 at WP&L.
James E. Hoffman, 46, was elected Executive Vice President-Business
- -----------------
Development effective April 1998. Prior thereto, he served as Executive
Vice President since 1996 at IES and Executive Vice President-Customer
Service & Energy Delivery from 1995 to 1997 at IESU.
Eliot G. Protsch, 46, was elected Executive Vice President-Energy
- -----------------
Delivery effective April 1998. Prior thereto, he served as Senior Vice
President since 1993 at WP&L.
Barbara J. Swan, 48, was elected Executive Vice President and General
- ---------------
Counsel effective October 1998. She previously served as Vice
President-General Counsel from 1994 to 1998 at WP&L.
Thomas M. Walker, 52, was elected Executive Vice President and Chief
- -----------------
Financial Officer (CFO) effective April 1998. Prior thereto, he served
as Executive Vice President and CFO since 1996 at IES and IESU. Prior to
joining Alliant Energy, he was Executive Vice President-Chief Financial
and Administrative Officer and member of the Board of Directors from 1990
to 1995 at Information Resources, Inc.
Pamela J. Wegner, 52, was elected Executive Vice President-Corporate
- ----------------
Services effective October 1998. She previously served as Vice
President-Information Services and Administration from 1994 to 1998 at
WP&L.
Daniel A. Doyle, 41, was elected Vice President-Chief Accounting and
- ---------------
Financial Planning Officer effective January 2000. He previously served
as Vice President-Manufacturing and Energy Portfolio Services since
October 1998 at WPRegistrants."
IP&L
and IESU and Vice President-Fossil Plants since
April 1998 at WP&L. He has also served as Vice President-Power
Production from 1996 to 1998 and Vice President-Finance, Controller and
Treasurer from 1994 to 1996 at WP&L.
John E. Ebright, 56, was elected Vice President-Special Projects
- ---------------
effective January 2000. He previously served as Vice
President-Controller since April 1998 at Alliant Energy, IESU and WP&L
and as Controller and Chief Accounting Officer from 1996 to 1998 at IES
and IESU. Prior to joining Alliant Energy, he was Vice President and
Controller from 1987 to 1996 at MidCon Corp., a subsidiary of Occidental
Petroleum Corporation.
116
Edward M. Gleason, 59, has served as Vice President-Treasurer and
- -----------------
Corporate Secretary since 1993.
Susan J. Kosmo, 53, was elected Assistant Controller effective April
- --------------
1998. She previously served as Assistant Controller since 1995 at WP&L.
John E. Kratchmer, 37, was elected Assistant Controller effective April
- -----------------
1998. He previously served as Manager of Financial Reporting and
Property since 1996 and Manager of Financial Reporting from 1994 to 1996
at IES.
Linda J. Wentzel, 51, was elected Assistant Corporate Secretary effective
- -----------------
May 1998. She previously served as Executive Administrative Assistant
since 1995 at Alliant Energy.
Enrique Bacalao, 50, was elected Assistant Treasurer effective November
- ---------------
1998. Prior to joining Alliant Energy, he was Vice President, Corporate
Banking from 1995 to 1998 at the Chicago Branch of The Industrial Bank of
Japan, Limited.
NOTE: None of the executive officers listed above is related to any
member of the Board of Directors or nominee for director or any other
executive officer.
Mr. Davis has an employment agreement with Alliant Energy pursuant to
which his term of office is established. All other executive officers
have no definite terms of office and serve at the pleasure of the Board
of Directors.
IESU
IESU'sIP&L's directors are identical to those of Alliant Energy, but are elected by
consent action.Energy. The information
required by Item 10 relating to directors and nominees for election of
directors at the 20002003 Annual Meeting of Shareowners is incorporated herein by
reference to the relevant information included under the caption "Election of
Directors" in the 20002003 Alliant Energy Proxy Statement, which has beenwill be filed
with the SEC within 120 days after the end of IESU'sIP&L's fiscal year. The
information required by Item 10 relating to the timely filing of reports
under Section 16 of the Securities Exchange Act of 1934 is incorporated
herein by reference to the relevant information under the caption "Section
16(a) Beneficial Ownership Reporting Compliance" in the 2003 Alliant Energy
Proxy Statement. Information regarding executive officers of IESU asIP&L may be
found in Part I of this report under the caption "Executive Officers of the
date of this filing are as follows (figures
following the names represent the officer's age as of December 31,
1999):
Executive Officers of IESU
Erroll B. Davis, Jr., 55, was elected CEO effective April 1998. Mr.
- --------------------
Davis is also an officer of Alliant Energy and WP&L.
Eliot G. Protsch, 46, was elected President effective April 1998. Mr.
- ----------------
Protsch is also an officer of Alliant Energy and WP&L.
William D. Harvey, 50, was elected Executive Vice President-Generation
- -----------------
effective October 1998. Mr. Harvey is also an officer of Alliant Energy
and WP&L.
Barbara J. Swan, 48, was elected Executive Vice President and General
- ---------------
Counsel effective October 1998. Ms. Swan is also an officer of Alliant
Energy and WP&L.
Thomas M. Walker, 52, was elected Executive Vice President and CFO in
- -----------------
1996. Mr. Walker is also an officer of Alliant Energy and WP&L.
Pamela J. Wegner, 52, was elected Executive Vice President-Corporate
- -----------------
Services effective October 1998. Ms. Wegner is also an officer of
Alliant Energy and WP&L.
Dale R. Sharp, 59, was elected Senior Vice President-Transmission
- ------------------
effective September 1999. He previously served as Senior Vice
President-Engineering and Standards since October 1998 at IESU and WP&L.
He has also served as Vice President-Engineering from 1996 to 1998 and
Vice President-Power Production from 1995 to 1996 at IPC. Mr. Sharp is
also an officer of WP&L.
Daniel A. Doyle, 41, was elected Vice President-Chief Accounting and
- -------------------
Financial Planning Officer effective January 2000. He previously served
as Vice President-Manufacturing and Energy Portfolio Services since
October 1998. Mr. Doyle is also an officer of Alliant Energy and WP&L.
117
Edward M. Gleason, 59, was elected Vice President-Treasurer and Corporate
- -----------------
Secretary effective April 1998. Mr. Gleason is also an officer of
Alliant Energy and WP&L.
Dundeana K. Langer, 41, was elected Vice President-Customer Services and
- ------------------
Operations effective September 1999. She previously served as Vice
President-Customer Operations since April 1998 at IESU and Vice
President-Customer Services since October 1998 at WP&L. She has also
served as Assistant Vice President-Field Operations from 1997 to 1998,
General Manager-Operations & Director Process Redesign Implementation
from 1996 to 1997 and Team Leader-Energy Delivery Process Redesign Team
from 1995 to 1996 at IESU. Ms. Langer is also an officer of WP&L.
Daniel L. Mineck, 51, was elected Vice President-Performance Engineering
- ----------------
and Environmental effective October 1998. He previously served as
Assistant Vice President-Corporate Engineering since 1996 and Assistant
Vice President-Nuclear from 1995 to 1996. Mr. Mineck is also an officer
of WP&L.
David L. Wilson, 53, was elected Vice President-Nuclear effective
- ---------------
September 1999. He previously served as Assistant Vice President-Nuclear
since 1997, Facility Leader from 1996 to 1997 and Plant Manager from 1995
to 1996. Mr. Wilson is also an officer of WP&L.
Kim K. Zuhlke, 46, was elected Vice President-Engineering, Sales and
- --------------
Marketing effective September 1999. He previously served as Vice
President-Customer Operations since October 1998. Mr. Zuhlke is also an
officer of WP&L.
Daniel L. Siegfried, 40, was elected Assistant Corporate Secretary
- -------------------
effective April 1998. He also serves as Senior Attorney for Alliant
Energy. Previously he served as Senior Environmental Counsel from 1992
to 1998 at IES.
Linda J. Wentzel, 51, was elected Assistant Corporate Secretary effective
- -----------------
May 1998. Ms. Wentzel is also an officer of Alliant Energy and WP&L.
Enrique Bacalao, 50, was elected Assistant Treasurer effective November
- ---------------
1998. Prior to joining IESU, he was Vice President, Corporate Banking
from 1995 to 1998 at the Chicago Branch of The Industrial Bank of Japan,
Limited. Mr. Bacalao is also an officer of Alliant Energy and WP&L.
Steven F. Price, 47, was elected Assistant Treasurer effective April
- ----------------
1998. Mr. Price is also an officer of WP&L.
Robert A. Rusch, 37, was elected Assistant Treasurer effective April
- ---------------
1998. Mr. Rusch is also an officer of WP&L.
NOTE: None of the executive officers listed above is related to any
member of the Board of Directors or nominee for director or any other
executive officer.
Mr. Davis has an employment agreement with Alliant Energy pursuant to
which his term of office is established. All other executive officers
have no definite terms of office and serve at the pleasure of the Board
of Directors.Registrants."
WP&L
The information required by Item 10 relating to directors and nominees for
election of directors at the 20002003 Annual Meeting of Shareowners is
incorporated herein by reference to the relevant information under the
caption "Election of Directors" in WP&L's Proxy Statement for the 20002003 Annual
Meeting of Shareowners (the 20002003 WP&L Proxy Statement), which will be filed
with the SEC within 120 days after the end of WP&L's fiscal year. The
information required by Item 10 relating to the timely filing of reports
under Section 16 of the Securities Exchange Act of 1934 is incorporated
herein by reference to the relevant information under the caption "Section
16(a) Beneficial Ownership Reporting Compliance" in the 2003 WP&L Proxy
Statement. Information regarding executive officers of WP&L asmay be found in
Part I of this report under the caption "Executive Officers of the
date of this filing are
as follows (figures following the names represent the officer's age as of
December 31, 1999):
118
Executive Officers of WP&L
Erroll B. Davis, Jr., 55, was elected CEO effective April 1998. He
- --------------------
previously served as President and CEO of WP&L since 1988 and has been a
board member of WP&L since 1984. Mr. Davis is also an officer of Alliant
Energy and IESU.
William D. Harvey, 50, was elected President effective April 1998. He
- ------------------
previously served as Senior Vice President since 1993 at WP&L. Mr.
Harvey is also an officer of Alliant Energy and IESU.
Eliot G. Protsch, 46, was elected Executive Vice President-Energy
- ----------------
Delivery effective October 1998. He previously served as Senior Vice
President from 1993 to 1998 at WP&L. Mr. Protsch is also an officer of
Alliant Energy and IESU.
Barbara J. Swan, 48, was elected Executive Vice President and General
- ----------------
Counsel effective October 1998. She previously served as Vice
President-General Counsel from 1994 to 1998 at WP&L. Ms. Swan is also an
officer of Alliant Energy and IESU.
Thomas M. Walker, 52, was elected Executive Vice President and CFO
- ----------------
effective October 1998. Mr. Walker is also an officer of Alliant Energy
and IESU.
Pamela J. Wegner, 52, was elected Executive Vice President-Corporate
- ----------------
Services effective October 1998. She previously served as Vice
President-Information Services and Administration from 1994 to 1998 at
WP&L. Ms. Wegner is also an officer of Alliant Energy and IESU.
Dale R. Sharp, 59, was elected Senior Vice President-Transmission
- --------------
effective September 1999. He previously served as Senior Vice
President-Engineering and Standards since October 1998 at WP&L and IESU.
He has also served as Vice President-Engineering from 1996 to 1998 and
Vice President-Power Production from 1995 to 1996 at IPC. Mr. Sharp is
also an officer of IESU.
Daniel A. Doyle, 41, was elected Vice President-Chief Accounting and
- ---------------
Financial Planning Officer effective January 2000. He previously served
as Vice President-Manufacturing and Energy Portfolio Services since
October 1998 at WP&L and IESU and Vice President-Fossil Plants since
April 1998 at WP&L. He has also served as Vice President-Power
Production from 1996 to 1998 and Vice President-Finance, Controller and
Treasurer from 1994 to 1996 at WP&L. Mr. Doyle is also an officer of
Alliant Energy and IESU.
Edward M. Gleason, 59, was elected Vice President-Treasurer and Corporate
- -----------------
Secretary effective April 1998. He previously served as Controller,
Treasurer, and Corporate Secretary of WP&L since 1996 and Corporate
Secretary of WP&L from 1993 to 1996. Mr. Gleason is also an officer of
Alliant Energy and IESU.
Dundeana K. Langer, 41, was elected Vice President-Customer Services and
- ------------------
Operations effective September 1999. She previously served as Vice
President-Customer Services since October 1998. Ms. Langer is also an
officer of IESU.
Daniel L. Mineck, 51, was elected Vice President-Performance Engineering
- ----------------
and Environmental effective April 1998. Mr. Mineck is also an officer of
IESU.
David L. Wilson, 53, was elected Vice President-Nuclear effective
- ----------------
September 1999. He previously served as Assistant Vice President-Nuclear
since April 1998. Mr. Wilson is also an officer of IESU.
Kim K. Zuhlke, 46, was elected Vice President-Engineering, Sales &
- -------------
Marketing effective September 1999. He previously served as Vice
President-Customer Operations since April 1998 at WP&L and since October
1998 at IESU and as Vice President-Customer Services and Sales from 1993
to 1998 at WP&L. Mr. Zuhlke is also an officer of IESU.
119
Linda J. Wentzel, 51, was elected Assistant Corporate Secretary effective
- -----------------
May 1998. She previously served as Executive Administrative Assistant
since 1995 at Alliant Energy. Ms. Wentzel is also an officer of Alliant
Energy and IESU.
Enrique Bacalao, 50, was elected Assistant Treasurer effective November
- ----------------
1998. Prior to joining WP&L, he was Vice President, Corporate Banking
from 1995 to 1998 at the Chicago Branch of The Industrial Bank of Japan,
Limited. Mr. Bacalao is also an officer of Alliant Energy and IESU.
Steven F. Price, 47, was elected Assistant Treasurer effective April
- ---------------
1998. He previously served as Assistant Corporate Secretary since 1992
at Alliant Energy and WP&L and as Assistant Treasurer since 1992 at
Alliant Energy. Mr. Price is also an officer of IESU.
Robert A. Rusch, 37, was elected Assistant Treasurer effective April
- ---------------
1998. He previously served as Assistant Treasurer since 1995 at WP&L.
Mr. Rusch is also an officer of IESU.
NOTE: None of the executive officers listed above is related to any
member of the Board of Directors or nominee for director or any other
executive officer.
Mr. Davis has an employment agreement with Alliant Energy pursuant to
which his term of office is established. All other executive officers
have no definite terms of office and serve at the pleasure of the Board
of Directors.Registrants."
ITEM 11. EXECUTIVE COMPENSATION
ALLIANT ENERGY
The information required by Item 11 is incorporated herein by reference to
the relevant information under the captions "Compensation of Directors,"
"Compensation of Executive Officers," "Stock Options," "Long-Term Incentive
Awards," "Certain Agreements" and "Retirement and Employee Benefit Plans" in
the 20002003 Alliant Energy Proxy Statement, which has beenwill be filed with the SEC
within 120 days after the end of Alliant Energy's fiscal year.
IESUIP&L
The directors as well as the CEO and the four other most highly compensated
executive officers for IESUIP&L are the same as for WP&L. Therefore, the
information required by Item 11 is incorporated herein by reference to the
relevant information under the captions "Compensation of Directors,"
"Compensation of Executive Officers," "Stock Options," "Long-Term Incentive
Awards," "Certain Agreements" and "Retirement and Employee Benefit Plans" in
the 20002003 WP&L Proxy Statement, which will be filed with the SEC within 120
days after the end of IESU'sIP&L's fiscal year.
124
WP&L
The information required by Item 11 is incorporated herein by reference to
the relevant information under the captions "Compensation of Directors,"
"Compensation of Executive Officers," "Stock Options," "Long-Term Incentive
Awards," "Certain Agreements" and "Retirement and Employee Benefit Plans" in
the 20002003 WP&L Proxy Statement, which will be filed with the SEC within 120
days after the end of WP&L's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ALLIANT ENERGY
Information regarding Alliant Energy's equity compensation plans as of Dec.
31, 2002 was as follows:
(c)
(a) (b) Number of securities
Number of securities Weighted-average remaining available for
to be issued upon exercise price of future issuance under
exercise of outstanding equity compensation plans
outstanding options, options, warrants (excluding securities
Plan Category warrants and rights and rights reflected in column (a))
- ----------------------------------- ---------------------- -------------------- -----------------------------
Equity compensation plans
approved by shareowners 4,325,172 (1) $29.44 3,226,517 (2)
Equity compensation plans not
approved by shareowners N/A (3) N/A N/A (4)
---------------------- -------------------- -----------------------------
Total 4,325,172 $29.44 3,226,517
====================== ==================== =============================
(1) Represents performance shares and options to purchase shares of Alliant
Energy common stock granted under the Alliant Energy LTEIP and EIP. The
performance shares are paid out in shares of Alliant Energy common
stock or a combination of cash and stock and are modified by a performance
multiplier, which ranges from zero to two, based on the performance
criteria. The performance shares included in column (a) of the table
reflect an assumed payout at a performance multiplier of two.
(2) All of the available shares under the LTEIP and EIP may be issued upon
the exercise of stock options or may be issued as awards in the form of
stock appreciation rights, restricted stock, restricted stock units,
performance shares or performance units. Excludes 1,745 shares of
restricted common stock previously issued and outstanding for which the
restrictions have not lapsed.
(3) As of Dec. 31, 2002, there have been 239,467 shares of Alliant Energy
common stock issued under the Alliant Energy Key Employee Deferred
Compensation Plan (KEDCP) and the Alliant Energy Deferred Compensation Plan
for Directors (DDCP) described below.
(4) There is no limit on the number of shares of Alliant Energy common stock
that may be issued under the KEDCP and the DDCP.
Deferred Compensation Plans - Alliant Energy maintains an unfunded KEDCP
under which participants may defer up to 100% of base salary, incentive
compensation and eligible supplemental executive retirement plan payments.
Participants who have made the maximum allowed contribution to the Alliant
Energy 401(k) Savings Plan may receive an additional credit to the deferred
compensation plan. Alliant Energy also maintains an unfunded DDCP under
which directors may elect to defer all or part of their retainer fee. Key
employees and directors may elect to have their deferrals credited to an
interest account or a company stock account, which are held in grantor
trusts. Payments from the company stock account will be made in shares of
Alliant Energy common stock.
The remainder of the information required by Item 12 is incorporated herein
by reference to the relevant information under the caption "Ownership of
Voting Securities" in the 20002003 Alliant Energy Proxy Statement, which has beenwill be
filed with the SEC within 120 days after the end of Alliant Energy's fiscal
year.
IESUIP&L
To IESU'sIP&L's knowledge, no shareowner beneficially owned five percent5% or more of IESU's 4.80%IP&L's
8.375% Cumulative Preferred Stock as of DecemberDec. 31, 1999.2002. None of the directors
or executive officers of IESUIP&L own any shares of IESU's 4.80%IP&L's 8.375% Cumulative
Preferred Stock.
125
WP&L
The information required by Item 12 is incorporated herein by reference to
the relevant information under the caption "Ownership of Voting Securities"
in the 20002003 WP&L Proxy Statement, which will be filed with the SEC within 120
days after the end of WP&L's fiscal year.
120
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ALLIANT ENERGY
The information required by Item 13 is incorporated herein by referenceNone.
ITEM 14. CONTROLS AND PROCEDURES
Within 90 days prior to the relevant informationdate of filing this Annual Report on Form 10-K,
Alliant Energy, IP&L and WP&L carried out evaluations, under the caption "Certain Agreementssupervision
and Transactions" in
the 2000 Alliant Energy Proxy Statement, which has been filed with the SEC
within 120 days afterparticipation of their management, including their CEO, CFO and
Disclosure Committee, of the endeffectiveness of the design and operation of
Alliant Energy's, fiscal year.
IESU
The information required by Item 13 is incorporated herein by referenceIP&L's and WP&L's disclosure controls and procedures
pursuant to the relevant information underrequirements of the caption "Certain AgreementsSecurities Exchange Act of 1934, as
amended. Based on those evaluations, the CEO and Transactions"the CFO concluded that
Alliant Energy's, IP&L's and WP&L's disclosure controls and procedures were
effective as of the date of such evaluation.
There have been no significant changes in the 2000 Alliant Energy Proxy Statement, which has been filed with the SEC
within 120 days after the end of IESU's fiscal year.Energy's, IP&L's and WP&L
The information required by Item 13 is incorporated herein by reference&L's
internal controls, or in other factors that could significantly affect
internal controls, subsequent to the relevant information under the caption "Certain Agreementsdate of their evaluation, including any
corrective actions with regard to significant deficiencies and Transactions" in
the 2000 WP&L Proxy Statement, which will be filed with the SEC within 120 days
after the end of WP&L's fiscal year.material
weaknesses.
PART IV
ITEM 14.15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Consolidated Financial Statements ---------------------------------- Refer to Index"Index to Financial
Statements at---------------------------------
Statements" in Item 8. "Financial8 Financial Statements and Supplementary Data."
(a) (2) Financial Statement Schedules ------------------------------
Report of Independent Public Accountants on Schedules- Schedule II. Valuation and Qualifying
-----------------------------
Accounts and Reserves
NOTE: All other schedules are omitted because they are not applicable or
not required, or because that required information is shown either in the
consolidated financial statements or in the notes thereto.
(a) (3) Exhibits Required by Securities and Exchange Commission
-------------------------------------------------------
Regulation S-K ----------------------------------------------------------------------- The following Exhibits are filed herewith or incorporated
- --------------
herein by reference.
Documents indicated by an asterisk (*) are incorporated
herein by reference.
2.1*2.1 Agreement and Plan of Merger, dated as of November 10, 1995, byMarch 15, 2000, as
amended on Nov. 29, 2000, between IP&L (formerly IESU) and
among WPLH, IES, IPC and AMW Acquisition, Inc. (incorporated by reference to Exhibit 2.1Appendix A to Alliant Energy's
Current Report on Form 8-K,the joint
proxy statement/prospectus of IP&L, dated November 10, 1995)
2.2* AmendmentFeb. 13, 2001
(Registration No. 1 to Agreement and Plan of Merger and Stock
Option Agreements, dated May 22, 1996, by and among WPLH, IES,
IPC, a Delaware corporation, AMW Acquisition, Inc., WPLH
Acquisition Co. and IPC, a Wisconsin corporation (incorporated
by reference to Exhibit 2.1 to Alliant Energy's Current Report
on Form 8-K, dated May 22, 1996)
2.3* Amendment No. 2 to Agreement and Plan of Merger, dated August
16, 1996, by and among WPLH, IES, IPC, a Delaware corporation,
WPLH Acquisition Co. and IPC, a Wisconsin corporation
(incorporated by reference to Exhibit 2.1 to Alliant Energy's
Current Report on Form 8-K, dated August 15, 1996)
3.1*333-53846))
3.1 Restated Articles of Incorporation of Alliant Energy, as
amended (incorporated by reference to Exhibit 3.2 to Alliant
Energy's Form 10-Q for the quarter ended June 30, 1999)
3.2 Bylaws of Alliant Energy, as amended, effective as of March
15,2000
3.3*Jan.
30, 2001 (incorporated by reference to Exhibit 3.2 to
Alliant Energy's Form 10-K for the year 2000)
3.3 Restated Articles of Incorporation of WP&L, as amended
(incorporated by reference to Exhibit 3.1 to WP&L's Form
10-Q for the quarter ended June 30, 1994)
121
3.4 Bylaws of WP&L, as amended, effective as of March 15, 2000
3.5* Amended andJan. 30, 2001
(incorporated by reference to Exhibit 3.4 to WP&L's Form
10-K for the year 2000)
3.5 Restated Articles of Incorporation of IESUIP&L (incorporated by
reference to Exhibit 3.53.1 to IESU'sIP&L's Form 10-Q for the quarter
ended JuneSept. 30, 1998)2002)
3.5a Articles of Amendment to IP&L's Restated Articles of
Incorporation
126
3.6 Bylaws of IESU,IP&L, as amended, effective as of March 15, 2000
4.1*Jan. 30, 2001
(incorporated by reference to Exhibit 3.6 to IP&L's Form
10-K for the year 2000)
4.1 Rights Agreement, dated Jan. 20, 1999, between Alliant
Energy and Wells Fargo Bank Minnesota, N.A., successor
(incorporated by reference to Exhibit
4.1 to Alliant Energy's Registration Statement on Form 8-A,
dated Jan. 20, 1999)
4.2 Indenture of Mortgage or Deed of Trust dated AugustAug. 1, 1941,
between WP&L and First Wisconsin Trust Company (n/k/a FirstarU.S. Bank N.A.)National Association (U.S. Bank)
and George B. Luhman,Robert T. Jones, successor, as Trustees, filed as
Exhibit 7(a) in File No. 2-6409, and the indentures
supplemental thereto dated, respectively, JanuaryJan. 1, 1948,
SeptemberSept. 1, 1948, June 1, 1950, April 1, 1951, April 1, 1952,
SeptemberSept. 1, 1953, OctoberOct. 1, 1954, March 1, 1959, May 1, 1962,
AugustAug. 1, 1968, June 1, 1969, OctoberOct. 1, 1970, July 1, 1971,
April 1, 1974, DecemberDec. 1, 1975, May 1, 1976, May 15, 1978,
AugustAug. 1, 1980, JanuaryJan. 15, 1981, AugustAug. 1, 1984, JanuaryJan. 15, 1986,
June 1, 1986, AugustAug. 1, 1988, DecemberDec. 1, 1990, SeptemberSept. 1, 1991,
OctoberOct. 1, 1991, March 1, 1992, May 1, 1992, June 1, 1992 and
July 1, 1992 (Second Amended Exhibit 7(b) in File
No. 2-7361; Amended Exhibit 7(c) in File No. 2-7628; Amended
Exhibit 7.02 in File No. 2-8462; Amended Exhibit 7.02 in
File No. 2-8882; Second Amendment Exhibit 4.03 in File
No. 2-9526; Amended Exhibit 4.03 in File No. 2-10406;
Amended Exhibit 2.02 in File No. 2-11130; Amended
Exhibit 2.02 in File No. 2-14816; Amended Exhibit 2.02 in
File No. 2-20372; Amended Exhibit 2.02 in File No. 2-29738;
Amended Exhibit 2.02 in File No. 2-32947; Amended
Exhibit 2.02 in File No. 2-38304; Amended Exhibit 2.02 in
File No. 2-40802; Amended Exhibit 2.02 in File No. 2-50308;
Exhibit 2.01(a) in File No. 2-57775; Amended Exhibit 2.02 in
File No. 2-56036; Amended Exhibit 2.02 in File No. 2-61439;
Exhibit 4.02 in File No. 2-70534; Amended Exhibit 4.03 in
File No. 2-70534; Exhibit 4.02 in File No. 33-2579; Amended
Exhibit 4.03 in File No. 33-2579; Amended Exhibit 4.02 in
File No. 33-4961; Exhibit 4.24 in File No. 33-45726, Exhibit
4.25 in File No. 33-45726, Exhibit 4.26 in File
No. 33-45726, Exhibit 4.27 in File No.33-45726,No. 33-45726, Exhibit 4.1
to WP&L's Form 8-K dated March 9, 1992, Exhibit 4.1 to
WP&L's Form 8-K dated May 12, 1992, Exhibit 4.1 to WP&L's
Form 8-K dated June 29, 1992 and Exhibit 4.1 to WP&L's
Form 8-K dated July 20, 1992)
4.2* Rights Agreement, dated January 20, 1999, between Alliant
Energy and Firstar Bank Milwaukee, N.A. (incorporated by
reference to Exhibit 4.1 to Alliant Energy's Registration
Statement on Form 8-A, dated January 20, 1999)
4.3*4.3 Indenture, dated as of June 20, 1997, between WP&L and Firstar
Trust Company (n/k/a FirstarU.S.
Bank, N.A.), as Trustee, relating to debt securities (incorporated
by reference to Exhibit 4.33 to Amendment No. 2 to WP&L's
Registration Statement on Form S-3 (Registration No.
33-60917))
4.4*4.4 Officers' Certificate, dated as of June 25, 1997, creating
WP&L's 7% debentures due June 15, 2007 (incorporated by
reference to Exhibit 4 to WP&L's Current Report on Form 8-K, dated June 25,
1997)
4.5*4.5 Officers' Certificate, dated as of OctoberOct. 27, 1998, creating
WP&L's 5.70%5.7% debentures due OctoberOct. 15, 2008 (incorporated by
reference to Exhibit 4 to WP&L's Current Report on Form 8-K, dated OctoberOct. 27,
1998)
4.6*4.6 Officers' Certificate, dated as of March 1, 2000, creating
WP&L's 7-5/8% debentures due March 1, 2010 (incorporated by
reference to Exhibit 4 to WP&L's Current Report on Form 8-K, dated March 1,
2000)
122
4.7*4.7 Indenture of Mortgage and Deed of Trust, dated as of
SeptemberSept. 1, 1993, between IESU (formerly Iowa Electric LightIP&L and PowerBank One Trust Company,
(IE)) and The First National Bank of Chicago,Association (Bank One Trust), successor, as Trustee (Mortgage)
(incorporated by reference to Exhibit 4(c) to
IESU'sIP&L's Form 10-Q for the quarter ended SeptemberSept. 30, 1993), and
the indentures supplemental thereto dated, respectively,
OctoberOct. 1, 1993, NovemberNov. 1, 1993, March 1, 1995, SeptemberSept. 1, 1996 and
April 1, 1997 (Exhibit 4(d) in IESU'sIP&L's Form 10-Q dated NovemberNov.
12, 1993, Exhibit 4(e) in IESU'sIP&L's Form 10-Q dated NovemberNov. 12,
1993, Exhibit 4(b) in IESU'sIP&L's Form 10-Q dated May 12, 1995,
Exhibit 4(c)(i) in IESU'sIP&L's Form 8-K dated SeptemberSept. 19, 1996 and
Exhibit 4(a) in IESU'sIP&L's Form 10-Q dated May 14, 1997)
4.8* Indenture of Mortgage and Deed of Trust, dated as of August 1,
1940, between IESU (formerly IE) and The First National Bank of
Chicago, Trustee (1940 Indenture) (incorporated by reference to
Exhibit 2(a) to IESU's Registration Statement, File No.
2-25347), and the indentures supplemental thereto dated,
respectively, March 1, 1941, July 15, 1942, August 2, 1943,
August 10, 1944, November 10, 1944, August 8, 1945, July 1,
1946, July 1, 1947, December 15, 1948, November 1, 1949,
November 10, 1950, October 1, 1951, March 1, 1952, November 5,
1952, February 1, 1953, May 1, 1953, November 3, 1953, November
8, 1954, January 1, 1955, November 1, 1955, November 9, 1956,
November 6, 1957, November 4, 1958, November 3, 1959, November
1, 1960, January 1, 1961, November 7, 1961, November 6, 1962,
November 5, 1963, November 4, 1964, November 2, 1965, September
1, 1966, November 30, 1966, November 7, 1967, November 5, 1968,
November 1, 1969, December 1, 1970, November 2, 1971, May 1,
1972, November 7, 1972, November 7, 1973, September 10, 1974,
November 5, 1975, July 1, 1976, November 1, 1976, December 1,
1977, November 1, 1978, December 1, 1979, November 1, 1981,
December 1, 1980, December 1, 1982, December 1, 1983, December
1, 1984, March 1, 1985, March 1, 1988, October 1, 1988, May 1,
1991, March 1, 1992, October 1, 1993, November 1, 1993, March
1, 1995, September 1, 1996 and April 1, 1997 (Exhibit 2(a) in
File No. 2-25347, Exhibit 2(a) in File No. 2-25347, Exhibit
2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No.
2-25347, Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File
No. 2-25347, Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in
File No. 2-25347, Exhibit 2(a) in File No. 2-25347, Exhibit
2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No.
2-25347, Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File
No. 2-25347, Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in
File No. 2-25347, Exhibit 2(a) in File No. 2-25347, Exhibit
2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File No.
2-25347, Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in File
No. 2-25347, Exhibit 2(a) in File No. 2-25347, Exhibit 2(a) in
File No. 2-25347, Exhibit 2(a) in File No. 2-25347, Exhibit
2(a) in File No. 2-25347, Exhibit 2(a) in File No. 2-25347,
Exhibit 4.10 in IESU's Form 10-K for the year 1966, Exhibit
4.10 in IESU's Form 10-K for the year 1966, Exhibit 4.10 in
IESU's Form 10-K for the year 1967, Exhibit 4.10 in IESU's Form
10-K for the year 1968, Exhibit 4.10 in IESU's Form 10-K for
the year 1969, Exhibit 1 in IESU's Form 8-K dated December
1970, Exhibit 2(g) in File No. 2-43131, Exhibit 1 in IESU's
Form 8-K dated May 1972, Exhibit 2(i) in File No. 2-56078,
Exhibit 2(j) in File No. 2-56078, Exhibit 2(k) in File No.
2-56078, Exhibit 2(l) in File No. 2-56078, Exhibit 1 in IESU's
Form 8-K dated July 1976, Exhibit 1 in IESU's Form 8-K dated
December 1976, Exhibit 2(o) in File No. 2-60040, Exhibit 1 in
IESU's Form 10-Q dated June 30, 1979, Exhibit 2(q) in Form S-16
in File No. 2-65996, Exhibit 2 in IESU's Form 10-Q dated March
31, 1982, Exhibit 4(s) in IESU's Form 10-K for the year 1981,
Exhibit 4(t) in IESU's Form 10-K for the year 1982, Exhibit
4(u) in IESU's Form 10-K for the year 1983, Exhibit 4(v) in
IESU's Form 10-K for the year 1984, Exhibit 4(w) in IESU's Form
10-K for the year 1984, Exhibit 4(b) in IESU's Form 10-Q dated
May 12, 1988, Exhibit 4(c) in IESU's Form 10-Q dated November
10, 1988, Exhibit 4(d) in IESU's Form 10-Q dated August 13,
1991, Exhibit 4(c) in IESU's Form 10-K for the year 1991,
Exhibit 4(a) in IESU's Form 10-Q dated November 12, 1993,
Exhibit 4(b) in IESU's Form 10-Q dated November 12, 1993,
Exhibit 4(a) in IESU's Form 10-Q dated May 12, 1995, Exhibit
4(f) in IESU's Form 8-K dated September 19, 1996 and Exhibit
4(b) in IESU's Form 10-Q dated May 14, 1997)
4.9*4.8 Indenture or Deed of Trust dated as of FebruaryFeb. 1, 1923, between
IESU (successor to Iowa Southern Utilities Company (IS)IP&L and Bank One Trust, successor and Lawrence Dillard,
successor, as result of merger of IS and IE) and The Northern Trust
Company (The First National Bank of Chicago, successor) and
Harold H. Rockwell (Richard D. Manella, successor), as Trustees
123
(1923 Indenture) (incorporated by
reference to Exhibit B-1 to File No. 2-1719), and the
indentures supplemental thereto dated, respectively, May 1,
1940, May 2, 1940, OctoberOct. 1, 1945, OctoberOct. 2, 1945, JanuaryJan. 1, 1948,
SeptemberSept. 1, 1950, FebruaryFeb. 1, 1953, OctoberOct. 2, 1953, AugustAug. 1, 1957,
SeptemberSept. 1, 1962, June 1, 1967, FebruaryFeb. 1, 1973, FebruaryFeb. 1, 1975,
July 1, 1975, SeptemberSept. 2, 1975, March 10, 1976, FebruaryFeb. 1, 1977,
JanuaryJan. 1, 1978, March 1, 1979, March 1, 1980, May 31, 1986,
July 1, 1991, SeptemberSept. 1, 1992 and DecemberDec. 1, 1994 (Exhibit B-1-k
in File No. 2-4921, Exhibit B-1-l in File No. 2-4921,
Exhibit 7(m) in File No. 2-8053, Exhibit 7(n) in File No.
2-8053, Exhibit 7(o) in File No. 2-8053, Exhibit 4(e) in
127
File No. 33-3995, Exhibit 4(b) in File No. 2-10543, Exhibit
4(q) in File No. 2-10543, Exhibit 2(b) in File No. 2-13496,
Exhibit 2(b) in File No. 2-20667, Exhibit 2(b) in File No.
2-26478, Exhibit 2(b) in File No. 2-46530, Exhibit 2(aa) in
File No. 2-53860, Exhibit 2(bb) in File No. 2-54285, Exhibit
2(bb) in File No. 2-57510, Exhibit 2(cc) in File No.
2-57510, Exhibit 2(ee) in File No. 2-60276, Exhibit 2 in
File No. 0-849, Exhibit 2 in File No. 0-849, Exhibit 2 in
File No. 0-849, Exhibit 4(g) in File No. 33-3995, Exhibit
4(h) in File No. 0-849, Exhibit 4(m) in File No. 0-849 and
Exhibit 4(f) in File No. 0-4117-1)
4.10*4.9 Indenture (For Unsecured Subordinated Debt Securities),
dated as of DecemberDec. 1, 1995, between IESUIP&L and The First National
Bank of Chicago,One Trust,
successor, as Trustee (Subordinated Indenture) (incorporated
by reference to Exhibit 4(i) to IESU'sIP&L's Amendment No. 1 to
Registration Statement, File No. 33-62259)
4.11*4.10 Indenture (For Senior Unsecured Debt Securities), dated as
of AugustAug. 1, 1997, between IESUIP&L and The First National Bank of
Chicago,One Trust, successor,
as Trustee (incorporated by reference to Exhibit 4(j) to
IESU'sIP&L's Registration Statement, File No. 333-32097)
4.12*4.11 Officer's Certificate, dated as of Aug. 4, 1997, creating
IP&L's 6-5/8% Senior Debentures, Series A, due 2009
(incorporated by reference to Exhibit 4.12 to IP&L's Form
10-K for the year 2000)
4.12 Officers' Certificate, dated as of March 6, 2001, creating
IP&L's 6-3/4% Series B Senior Debentures due 2011
(incorporated by reference to Exhibit 4 to IP&L's Form 8-K,
dated March 6, 2001)
4.13 The Original through the Nineteenth Supplemental Indentures
of IPCIP&L, successor, to TheJPMorgan Chase Manhattan Bank and Carl E. Buckley and C.
J. Heinzelmann,James P. Freeman,
successor, as Trustees,Trustee, dated JanuaryJan. 1, 1948 securing First
Mortgage Bonds (incorporated by reference to Exhibits 4(b)
through 4(t) to IPC's Registration Statement No. 33-59352
dated March 11, 1993)
4.13*4.14 Twentieth Supplemental Indenture of IPCIP&L, successor, to TheJPMorgan Chase
Manhattan
Bank and C. J. Heinzelmann,James P. Freeman, successor, as Trustees, dated May
15, 1993 (incorporated by reference to Exhibit 4(u) to IPC's
Registration Statement No. 33-59352 dated March 11, 1993)
4.14*4.15 Twenty-First Supplemental Indenture relatingof IP&L, successor, to Resources' debt securities,JPMorgan
Chase Bank and James P. Freeman, as Trustees, dated Dec. 31,
2001 (incorporated by reference to Exhibit 4.3 to IP&L's
Form 8-K, dated Jan. 1, 2002)
4.16 Indenture, dated as of NovemberNov. 4, 1999, among Resources, Alliant Energy,
as Guarantor, and FirstarU.S. Bank, N.A., as Trustee (incorporated by
reference to Exhibit 4.1 to Resources' and Alliant Energy's
Registration Statement on Form S-4 (Registration No.
333-92859)), and the indentures supplemental thereto dated,
respectively, NovemberNov. 4, 1999, and FebruaryFeb. 1, 2000 and Nov. 15, 2001
(Exhibit 4.2 in FileRegistration No. 33-92859 and333-92859, Exhibit 99.4 in
Alliant Energy's Form 8-K dated FebruaryFeb. 1, 2000)
4.15* Registration Rights Agreement, related to Resources' 7-3/8%
senior notes due 2009, dated as of November 9, 1999, among
Resources, Alliant Energy, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Morgan Stanley & Co. Incorporated, Salomon
Smith Barney Inc., ABN AMRO Incorporated2000 and Barclays Capital
Inc. (incorporated by reference to Exhibit 4.5 to4.4
in Resources' and Alliant Energy's Registration Statement on
Form S-4 (Registration No. 333-92859)333-75020))
4.16* Registration Rights Agreement, related to Resources'
exchangeable senior notes due 2030,4.16a Fourth Supplemental Indenture, dated as of February 1,
2000,Dec. 26, 2002,
among Resources, Alliant Energy, as Guarantor, and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (incorporated by reference
to Exhibit 99.5 to Alliant Energy's Current Report on Form 8-K
dated February 1, 2000)
4.17* PurchaseU.S.
Bank, as Trustee
4.17 Registration Rights Agreement, relating to Resources' 7-3/8% senior
notes due 2009, dated as of November 4, 1999,Dec. 26, 2002,
among Resources, Alliant Energy, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Morgan StanleyInc., Utehdahl Capital Partners, L.P. and The
Williams Capital Group, L.P.
4.18 Registration Rights Agreement, dated as of Dec. 20, 2002,
between IP&L and Robert W. Baird & Co. Incorporated, Salomon Smith
Barney Inc., ABN AMRO Incorporated
10.1 364-Day Credit Agreement, dated as of Oct. 11, 2002, among
Alliant Energy, the Banks named therein and Barclays Capital Inc.Bank One, NA, as
administrative agent and issuer of Letters of Credit
(incorporated by reference to Exhibit 4.410.1 to Resources' and Alliant
Energy's Registration Statement on Form S-4
(Registration No. 333-92859))
4.18* Purchase10-Q for the quarter ended Sept. 30, 2002)
10.2 Credit Agreement, relating to Resources' exchangeable
senior notes due 2030, dated as of January 26, 1999,Oct. 11, 2002, among Resources, Alliant EnergyIP&L, the
Banks named therein and Merrill Lynch, Pierce, Fenner &
Smith IncorporatedCitibank, N.A., as administrative
agent (incorporated by reference to Exhibit 99.210.2 to IP&L's
10-Q for the quarter ended Sept. 30, 2002)
10.3 Credit Agreement, dated as of Oct. 11, 2002, among WP&L, the
Banks named therein and Citibank, N.A., as administrative
agent (incorporated by reference to Exhibit 10.3 to WP&L's
10-Q for the quarter ended Sept. 30, 2002)
128
10.4 364-Day Credit Agreement, dated as of Dec. 27, 2002, among
Resources, as Borrower, and Alliant Energy's Current ReportEnergy, Heartland
Properties, Inc. and International, as Guarantors and the
Lenders Named therein and Merrill Lynch Capital Corporation, as
Administrative Agent
10.5 Credit Agreement, dated as of Dec. 20, 2002, among Whiting,
as Borrower, the Financial Institutions Listed on Form 8-KSchedule
1.1 thereto, as Banks, Bank One, NA, as Administrative
Agent, and Wachovia Bank, National Association, as
Syndication Agent
10.5a First Amendment to Credit Agreement, dated February
1, 2000)
124
10.1*as of Jan. 7,
2003, by and among Whiting, Bank One, NA, as Administrative
Agent and each of the Financial Institutions a Party thereto
10.6 Service Agreement by and among WP&L, South Beloit, IESU, IPC,IP&L and
Corporate Services (incorporated by reference to Exhibit
10.1 to Alliant Energy's Form 10-Q for the quarter ended
June 30, 1998)
10.2*10.7 Service Agreement by and among Resources, IPC Development
Company, Inc. and Corporate Services (incorporated by
reference to Exhibit 10.2 to Alliant Energy's Form 10-Q for
the quarter ended June 30, 1998)
10.3*10.8 System Coordination and Operating Agreement dated April 11,
1997, among IESU, IPC,IP&L, WP&L and Corporate Services (incorporated
by reference to Exhibit 10.3 to Alliant Energy's Form 10-Q
for the quarter ended June 30, 1998)
10.4*10.9 Joint Power Supply Agreement among WPSC, WP&L, and MG&E,
dated FebruaryFeb. 2, 1967 (incorporated by reference to Exhibit
4.09 of WPSC in File No. 2-27308)
10.5*10.9a Amendment No. 1 to Joint Power Supply Agreement dated Feb.
2, 1967 among WPSC, WP&L, and MG&E (incorporated by
reference to Exhibit 10.1 to WP&L's Form 10-Q for the
quarter ended Sept. 30, 2001)
10.10 Joint Power Supply Agreement among WPSC, WP&L, and MG&E,
dated July 26, 1973 (incorporated by reference to Exhibit
5.04A of WPSC in File No. 2-48781)
10.6*10.11 Basic Generating Agreement, Unit 4, Edgewater Generating
Station, dated June 5, 1967, between WP&L and WPSC
(incorporated by reference to Exhibit 4.10 of WPSC in File
No. 2-27308)
10.7*10.12 Agreement for Construction and Operation of Edgewater 5
Generating Unit, dated FebruaryFeb. 24, 1983, between WP&L, WEPCO
and WPSC (incorporated by reference to Exhibit 10C-1 to
WPSC's Form 10-K for the year 1983 (File No. 1-3016))
10.7a*10.12a Amendment No. 1 to Agreement for Construction and Operation
of Edgewater 5 Generating Unit, dated DecemberDec. 1, 1988
(incorporated by reference to Exhibit 10C-2 to WPSC's Form
10-K for the year 1988 (File No. 1-3016))
10.8*10.13 Revised Agreement for Construction and Operation of Columbia
Generating Plant among WPSC, WP&L, and MG&E, dated July 26,
1973 (incorporated by reference to Exhibit 5.07 of WPSC in
File No. 2-48781)
10.9*10.14 Operating and Transmission Agreement between CIPCO and IESUIP&L
(incorporated by reference to Exhibit 10(q) to IESU'sIP&L's Form
10-K for the year 1990)
10.10*10.15 DAEC Ownership Participation Agreement dated June 1, 1970
between CIPCO, Corn Belt Power Cooperative and IESUIP&L
(incorporated by reference to Exhibit 5(kk) to IESU'sIP&L's
Registration Statement, File No. 2-38674)
10.11*10.16 DAEC Operating Agreement dated June 1, 1970 between CIPCO,
Corn Belt Power Cooperative and IESUIP&L (incorporated by
reference to Exhibit 5(ll) to IESU'sIP&L's Registration Statement,
File No. 2-38674)
10.12*10.17 DAEC Agreement for Transmission, Transformation, Switching,
and Related Facilities dated June 1, 1970 between CIPCO,
Corn Belt Power Cooperative and IESUIP&L (incorporated by
reference to Exhibit 5(mm) to IESU'sIP&L's Registration Statement,
File No. 2-38674)
10.13*129
10.18 Basic Generating Agreement dated April 16, 1975 between Iowa
Public Service Company, Iowa Power and Light Company,
Iowa-Illinois Gas and Electric Company and IESUIP&L for the
joint ownership of Ottumwa Generating Station-Unit 1 (OGS-1)
(incorporated by reference to Exhibit 1 to IESU'sIP&L's Form 10-K
for the year 1977)
10.13a*10.18a Addendum Agreement to the Basic Generating Agreement for
OGS-1 dated DecemberDec. 7, 1977 between Iowa Public Service
Company, Iowa-Illinois Gas and Electric Company, Iowa Power
and Light Company and IESUIP&L for the purchase of 15% ownership
in OGS-1 (incorporated by reference to Exhibit 3 to IESU'sIP&L's
Form 10-K for the year 1977)
125
10.14*10.19 Second Amended and Restated Credit Agreement dated as of
SeptemberSept. 17, 1987 between Arnold Fuel, Inc. and the First
National Bank of ChicagoOne Trust,
successor, and the Amended and Restated Consent and
Agreement dated as of SeptemberSept. 17, 1987 by IESUIP&L (incorporated
by reference to Exhibit 10(j) to IESU'sIP&L's Form 10-K for the
year 1987)
10.15 Second Amended10.20 Asset Contribution Agreement between ATC and Restated November 1998 Stockholders'
Agreement entered intoWEPCO, WP&L,
WPSC, MG&E, Edison Sault Electric Company and South Beloit,
dated as of December 17, 1999,Dec. 15, 2000 (incorporated by reference to
Exhibit 10.15 to Alliant Energy's Form 10-K for the year
2000)
10.20a Addenda to the Asset Contribution Agreement between ATC and
among
McLeod, Alliant Energy, InvestmentsWEPCO, WP&L, WPSC, MG&E, Edison Sault Electric Company and
certain other principal
stockholders of McLeod
10.16 Second Amended and Restated January 1999 Stockholders'
Agreement entered intoSouth Beloit, dated as of December 17, 1999,Dec. 15, 2000 (incorporated by
and among
McLeod,reference to Exhibit 10.15a to Alliant Energy, Investments and certain other principal
stockholdersEnergy's Form 10-K
for the year 2000)
10.21 Operating Agreement of McLeod
10.17#*ATC, dated as of Jan. 1, 2001
(incorporated by reference to Exhibit 10.16 to Alliant
Energy's Form 10-K for the year 2000)
10.22# Alliant Energy LTEIP, as amended (incorporated by reference
to Exhibit 10.1 to Alliant Energy's Form 10-Q for the
quarter ended June 30, 1999)
10.18#*10.23# Alliant Energy EIP (incorporated by reference to Exhibit 4.2
to Alliant Energy's Registration Statement on Form S-8
(Registration No. 333-88304))
10.24# Alliant Energy 1998 Officer Incentive Compensation Plan
(incorporated by reference to Exhibit 10.16 to Alliant
Energy's Form 10-Q for the quarter ended June 30, 1998)
10.19#*Restricted Stock Agreement pursuant to the10.25# Alliant Energy LTEIPKEDCP (incorporated by reference to Exhibit
10.14.2 to Alliant Energy's Registration Statement on Form 10-Q for the quarter ended March 31, 1999)
10.20#*Corporate Services Key Employee Deferred Compensation Plan
(incorporated by reference to Exhibit 10.18 to Alliant Energy's
Form 10-Q for the quarter ended June 30, 1998)
10.21#*Key Employee Deferred Compensation PlanS-8
dated Dec. 1, 2000)
10.26# KEDCP (incorporated by reference to Exhibit 10(n) to IES's
Form 10-K for the year 1987)
10.21a#*10.26a# Amendments to Key Employee Deferred Compensation Agreement
for Key Employees (incorporated by reference to Exhibit
10(v) to IES's Form 10-Q for the quarter ended March 31,
1990)
10.22#*Alliant Energy Deferred Compensation Plan for Directors10.27# DDCP, as amended and restated effective Jan. 1, 2000,
amended Nov. 14, 2001 (incorporated by reference to Exhibit
I-610.22 to Alliant Energy's Post-Effective Amendment No. 1 to Form U-1, File No. 70-8891)
10.23#*IES Grantor Trust for Director Retirement Plan (incorporated
by reference to Exhibit 10(c) to IES's Form 10-Q10-K for the quarter ended September 30, 1997)
10.24#* IES Grantor Trust for Deferred Compensation Agreements
(incorporated by reference to Exhibit 10(d) to IES's Form 10-Q
for the quarter ended September 30, 1997)
10.25#* IES Grantor Trust for Supplemental Retirement Agreements
(incorporated by reference to Exhibit 10(e) to IES's Form 10-Q
for the quarter ended September 30, 1997)
10.26#* IESU Grantor Trust for Deferred Compensation Agreements
(incorporated by reference to Exhibit 10(f) to IES's Form 10-Q
for the quarter ended September 30, 1997)
10.27#* IESU Grantor Trust for Supplemental Retirement Agreements
(incorporated by reference to Exhibit 10(g) to IES's Form 10-Q
for the quarter ended September 30, 1997)
126
10.28#* IPCyear 2001)
10.28# IP&L Irrevocable Trust Agreement dated April 30, 1990
(incorporated by reference to Exhibit 99.f to IPC's Form
10-K for the year 1993)
10.29#* IPC10.29# IP&L Irrevocable Trust Agreement dated December 1997
(incorporated by reference to Exhibit 99.7 to IPC's Form
10-K for the year 1997)
10.30#*10.30# Alliant Energy Grantor Trust for Deferred Compensation
Agreements (Key Employees) (incorporated by reference to
Exhibit 4.4 to Alliant Energy's Registration Statement on
Form S-8 (Registration No. 33-51126))
10.31# Alliant Energy Grantor Trust for Deferred Compensation
Agreements (Directors) (incorporated by reference to Exhibit
4.3 to Alliant Energy's Registration Statement on Form S-8
(Registration No. 33-51126))
10.32# Form of Supplemental Retirement Agreement (SRA)
(incorporated by reference to Exhibit 10.15 to Alliant
Energy's Form 10-Q for the quarter ended June 30, 1998)
10.31#*130
10.33# Form of SRA (incorporated by reference to Exhibit 10.1 to
Alliant Energy's Form 10-Q for the quarter ended June 30,
2002)
10.34# Supplemental Retirement Plan (incorporated by reference to
Exhibit 10(l) to IES's Form 10-K for the year 1987)
10.32#* Executive Change of Control Severance Agreement - Vice
Presidents10.35# Alliant Energy Excess Plan (incorporated by reference to
Exhibit 10(b)10.33 to IES'sAlliant Energy's Form 10-K for the year
2000)
10.36# SRA by and between Alliant Energy and E.B. Davis, Jr., W.D.
Harvey, J.E. Hoffman, E.G. Protsch, B.J. Swan, P.J. Wegner
and T.M. Walker (incorporated by reference to Exhibit 10.1
to Alliant Energy's Form 10-Q for the quarter ended September 30, 1996)
10.33#*March
31, 2000)
10.37# Key Executive Employment and Severance Agreement (KEESA),
dated March 29, 1999, by and between Alliant Energy and
Erroll B. Davis, Jr. (incorporated by reference to Exhibit
10.2 to Alliant Energy's Form 10-Q for the quarter ended
March 31, 1999)
10.34#*Key Executive Employment and Severance Agreement,10.38# KEESA, dated March 29, 1999, by and between Alliant Energy
and each of J.E. Hoffman, W.D. Harvey, E.G. Protsch, P.J.
Wegner, T.M. Walker and B.J. Swan (incorporated by reference
to Exhibit 10.3 to Alliant Energy's Form 10-Q for the
quarter ended March 31, 1999)
10.35#*Key Executive Employment and Severance Agreement,10.39# KEESA, dated March 29, 1999, by and between Alliant Energy
and each of T.L. Aller, D.A.D.K. Doyle, E.M. Gleason, D.K. Langer, D.L. Mineck, D.R. Sharp
and K.K.
ZuhlkeZuhlke; dated April 23, 2002, by and between Alliant Energy
and V.A. Gebhart; dated May 22, 2002, by and between Alliant
Energy and T.L. Hanson (incorporated by reference to Exhibit
10.4 to Alliant Energy's Form 10-Q for the quarter ended
March 31, 1999)
10.36*10.40# Employment Agreement by and between Alliant Energy and
Erroll B. Davis, Jr., amended and restated as of March 29,
1999 (incorporated by reference to Exhibit 10.5 to Alliant
Energy's Form 10-Q for the quarter ended March 31, 1999)
10.37#* Employment Agreement, dated as of April 21, 1998, by and
between Alliant Energy and Lee Liu (incorporated by reference
to Exhibit 10.2 to Alliant Energy's Form 8-K dated April 21,
1998)
10.38#* Severance Agreement by and between Alliant Energy and Anthony
J. Amato (incorporated by reference to Exhibit 10.28 to Alliant
Energy's Form 10-Q for the quarter ended June 30, 1998)
10.39#* Executive Guaranty Plan (incorporated by reference to Exhibit
10(p) to IES's Form 10-K for the year 1987)
10.40#* Early Retirement Agreement, dated as of October 7, 1998, by
and between Alliant Energy et al. and Michael R. Chase
(incorporated by reference to Exhibit 10.1 to Alliant Energy's
Form 10-Q for the quarter ended September 30, 1998)
10.41#* Early Retirement Agreement, dated as of December 4, 1998, by
and between Alliant Energy et al. and Richard R. Ewers
(incorporated by reference to Exhibit 10.46 to Alliant Energy's
Form 10-K for the year 1998)
10.42#* Consulting Agreement by and between Alliant Energy and Wayne
H. Stoppelmoor (incorporated by reference to Exhibit 10.2 to
Alliant Energy's Form 10-Q for the quarter ended June 30, 1999)
10.43#*10.41# Executive Tenure Compensation Plan as revised November 1992
(incorporated by reference to Exhibit 10A to Alliant
Energy's Form 10-K for the year 1992)
127
10.43a#*10.41a# Amendment to Executive Tenure Compensation Plan adopted FebruaryFeb.
23, 1998 (incorporated by reference to Exhibit 10.19a to
Alliant Energy's Form 10-Q for the quarter ended June 30,
1998)
21 Subsidiaries of Alliant Energy and WP&L
23 Consent of Independent Public AccountantsAuditors' Consent for Alliant Energy
27.1 Financial Data Schedule99.1 Written Statement of the Chairman, President and CEO
Pursuant to 18 U.S.C. Section 1350 for Alliant Energy
at99.2 Written Statement of the EVP and CFO Pursuant to 18
U.S.C. Section 1350 for Alliant Energy
99.3 Written Statement of the period ended December 31, 1999
27.2 Financial Data ScheduleChairman and CEO Pursuant to 18
U.S.C. Section 1350 for IESU atIP&L
99.4 Written Statement of the EVP and CFO Pursuant to 18
U.S.C. Section 1350 for IP&L
99.5 Written Statement of the period ended
December 31, 1999
27.3 Financial Data ScheduleChairman and CEO Pursuant to 18
U.S.C. Section 1350 for WP&L
at99.6 Written Statement of the EVP and CFO Pursuant to 18
U.S.C. Section 1350 for the period ended
December 31, 1999WP&L
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the registrants agree to
furnish to the SEC, upon request, any instrument defining the rights of
holders of unregistered long-term debt not filed as an exhibit to this
Form 10-K. No such instrument authorizes securities in excess of 10% of the
total assets of Alliant Energy, WP&L or IESU,IP&L, as the case may be.
Documents incorporated by reference to filings made by Alliant Energy under
the Securities Exchange Act of 1934, as amended, are under File No. 1-9894.
Documents incorporated by reference to filings made by WP&L under the
Securities Exchange Act of 1934, as amended, are under File No. 0-337.
Documents incorporated by reference to filings made by IES under the
Securities Exchange Act of 1934, as amended, are under File No. 1-9187.
Documents incorporated by reference to filings made by IESUIP&L under the
131
Securities Exchange Act of 1934, as amended, are under File No. 0-4117-1.
Documents incorporated by reference to filings made by IPC under the
Securities Exchange Act of 1934, as amended, are under File No. 1-3632.
# - A management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
---------------------------------------
Alliant Energy
- None.
IESU - None.Alliant Energy filed a Current Report on Form 8-K, dated Dec. 26, 2002,
reporting (under Items 5 and 7) that it issued a press release announcing
that Resources completed a private placement of $300 million in senior notes
in accordance with Rule 144A under the Securities Act of 1933.
Alliant Energy filed a Current Report on Form 8-K, dated Dec. 20, 2002,
reporting (under Items 5 and 7) that it issued two press releases announcing
that: 1) IP&L completed a private placement of $150 million of preferred
stock in accordance with Rule 144A under the Securities Act of 1933; and 2)
Whiting closed a revolving credit facility with a current maximum borrowing
availability of $200 million which matures on Dec. 20, 2005.
Alliant Energy filed a Current Report on Form 8-K, dated Dec. 16, 2002,
reporting (under Item 5) that, among other things, it: 1) will, as early as
the fourth quarter of 2002, be required under SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," to classify the assets of
Whiting, its investments in Australia and its affordable housing business as
held for sale and their operations as discontinued operations; 2) may also be
required to record accounting adjustments, other charges and/or income in the
fourth quarter of 2002 and/or in 2003 related to these proposed divestitures;
3) had engaged its current independent auditors, Deloitte & Touche LLP, to
reaudit its financial statements for the years ended Dec. 31, 2001 and 2000
as a result of the aforementioned reclassifications; and 4) continues to
pursue various financing transactions, the proceeds of which will be used to
repay short-term debt and for other general corporate purposes, to enhance
its liquidity position.
Alliant Energy filed a Current Report on Form 8-K, dated Nov. 22, 2002,
reporting (under Items 5 and 7) that it issued a press release announcing
that its Board of Directors approved five strategic actions designed to
maintain strong credit ratings, strengthen its balance sheet and position it
for improved long-term financial performance and providing updated 2003
earnings guidance based on these actions.
IP&L
IP&L filed a Current Report on Form 8-K, dated Dec. 20, 2002, reporting
(under Items 5 and 7) that Alliant Energy issued a press release announcing
that IP&L completed a private placement of $150 million of preferred stock in
accordance with Rule 144A under the Securities Act of 1933.
WP&L - None.
128132
ALLIANT ENERGY, IESU AND WP&L
SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Additions
------------------------------------
Balance, Charged to Charged to Other Balance,
Description JanuaryJan. 1 Expense Accounts (1) Deductions (1) December(2) Dec. 31
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Valuation and Qualifying Accounts Which are Deducted in the Balance Sheet From the Assets to Which They Apply:
Accumulated Provision for Uncollectible Accounts:
Alliant Energy-------------------------------------------------
Alliant Energy
--------------
Year ended DecemberDec. 31, 1999 $3,128 $2,909 $2,677 $3,3602002 $9,045 $15,659 $1,244 $12,072 $13,876
Year ended DecemberDec. 31, 1998 2,636 3,740 3,248 3,1282001 4,341 9,613 2,368 7,277 9,045
Year ended DecemberDec. 31, 1997 3,319 3,315 3,998 2,636
IESU2000 3,048 3,644 1,616 3,967 4,341
IP&L
----
Year ended DecemberDec. 31, 1999 $1,415 $2,268 $2,042 $1,6412002 $1,883 $3,115 $-- $3,716 $1,282
Year ended DecemberDec. 31, 1998 854 2,840 2,279 1,4152001 1,316 7,206 -- 6,639 1,883
Year ended DecemberDec. 31, 1997 757 2,439 2,342 8542000 1,841 3,273 -- 3,798 1,316
WP&L
----
Year ended DecemberDec. 31, 1999 $8 $-- $2 $62002 $1,543 $4,067 $1,244 $4,626 $2,228
Year ended DecemberDec. 31, 1998 122001 8 37 1,498 -- 4 81,543
Year ended DecemberDec. 31, 1997 452000 6 2 -- 33 12-- 8
Note: The above provisions relate to various customer, notes and other receivable balances included in various
line items on the respective Consolidated Balance Sheets.
Other Reserves:
Accumulated Provision for Injuries & Damages, Workers' Compensation, Litigation and Other Miscellaneous Reserves:
-----------------------------------------------------------------------------------------------------------------
Alliant Energy
--------------
Year ended DecemberDec. 31, 1999 $7,458 $5,479 $4,942 $7,9952002 $7,596 $10,221 $-- $4,079 $13,738
Year ended DecemberDec. 31, 1998 6,400 7,738 6,680 7,4582001 12,489 3,047 -- 7,940 7,596
Year ended DecemberDec. 31, 1997 4,616 3,728 1,944 6,400
IESU2000 8,963 8,505 -- 4,979 12,489
IP&L
----
Year ended DecemberDec. 31, 1999 $3,129 $2,036 $2,547 $2,6182002 $4,618 $4,551 $-- $1,994 $7,175
Year ended DecemberDec. 31, 1998 5,033 215 2,119 3,1292001 4,825 1,712 -- 1,919 4,618
Year ended DecemberDec. 31, 1997 3,219 3,384 1,570 5,0332000 5,123 2,766 -- 3,064 4,825
WP&L
----
Year ended DecemberDec. 31, 1999 $2,799 $1,937 $1,742 $2,9942002 $2,574 $4,011 $-- $1,732 $4,853
Year ended DecemberDec. 31, 1998 1 2,7982001 2,689 1,266 -- 2,7991,381 2,574
Year ended DecemberDec. 31, 19972000 2,994 1,282 -- 1 -- 1
Reserve for Merger-Related Employee Separation Charges:
Alliant Energy
Year ended December 31, 1999 $5,712 $-- $4,744 $968
Year ended December 31, 1998 -- 9,950 4,238 5,712
Year ended December 31, 1997 -- -- -- --
IESU
Year ended December 31, 1999 $1,893 $-- $1,215 $678
Year ended December 31, 1998 -- 3,551 1,658 1,893
Year ended December 31, 1997 -- -- -- --
WP&L
Year ended December 31, 1999 $766 $-- $766 $--
Year ended December 31, 1998 -- 867 101 766
Year ended December 31, 1997 -- -- -- --1,587 2,689
(1) Accumulated provision for uncollectible accounts: In 2001, Resources
acquired SmartEnergy and assumed a provision of $0.9 million. In 2000,
Alliant Energy acquired EUA Cogenex Corporation and assumed a provision of
$1.6 million. In accordance with its regulatory treatment, certain amounts
provided by WP&L are recorded in regulatory assets.
(2) Deductions are of the nature for which the reserves were created. In
the case of the accumulated provision for uncollectible accounts,
deductions from this reserve are reduced by recoveries of amounts
previously written off.
129133
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 29th25th day
of March 2000.
2003.
ALLIANT ENERGY CORPORATION
By: /s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 25th day of March 2003.
/s/ Erroll B. Davis, Jr. Erroll B. Davis, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 29th day of March 2000.
/s/ Erroll B. Davis, Jr.Chairman, President, Chief Executive Officer and Director (Principal Executive Officer)
- ---------------------------------------------------
Erroll B. Davis, Jr.
/s/ Thomas M. Walker Executive Vice President and Chief Financial Officer (Principal Financial Officer)
- --------------------------------------------------
Thomas M. Walker
/s/ Daniel A. DoyleJohn E. Kratchmer Vice President -President-Controller and Chief Accounting and Financial Planning Officer
- --------------------
Daniel A. Doyle (Principal Accounting Officer)
- -----------------------------
John E. Kratchmer
/s/ Alan B. Arends Director /s/ Milton E. NeshekDavid A. Perdue Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Alan B. Arends Milton E. NeshekDavid A. Perdue
/s/ Jack B. Evans Director /s/ Judith D.PyleD. Pyle Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Jack B. Evans Judith D. Pyle
/s/ Rockne G. Flowers Director /s/ Robert D. Ray Director
- ----------------------------------------- -------------------------------------------
Rockne G. Flowers Robert D. Ray
/s/ Joyce L. Hanes Director /s/ Robert W. Schlutz Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Joyce L. Hanes Robert W. Schlutz
/s/ Lee Liu Director /s/ Wayne H. Stoppelmoor Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Lee Liu Wayne H. Stoppelmoor
/s/ Katharine C. Lyall Director /s/ Anthony R. Weiler Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Katharine C. Lyall Anthony R. Weiler
/s/ Arnold M. NemirowSingleton B. McAllister Director
- -----------------------------------------
Arnold M. Nemirow-----------------------------
Singleton B. McAllister
130134
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 29h25th day
of March 2000.2003.
INTERSTATE POWER AND LIGHT COMPANY
By: /s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 25th day of March 2003.
IES UTILITIES INC.
By:
/s/ Erroll B. Davis, Jr. Erroll B. Davis, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 29th day of
March 2000.
/s/ Erroll B. Davis, Jr.Chairman, Chief Executive Officer and Director (Principal Executive Officer)
- ---------------------------------------------------
Erroll B. Davis, Jr.
/s/ Thomas M. Walker Executive Vice President and Chief Financial Officer (Principal Financial Officer)
- --------------------------------------------------
Thomas M. Walker
/s/ Daniel A. DoyleJohn E. Kratchmer Vice President -President-Controller and Chief Accounting and Financial Planning Officer
- --------------------
Daniel A. Doyle (Principal Accounting Officer)
- -----------------------------
John E. Kratchmer
/s/ Alan B. Arends Director /s/ Milton E. NeshekDavid A. Perdue Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Alan B. Arends Milton E. NeshekDavid A. Perdue
/s/ Jack B. Evans Director /s/ Judith D.PyleD. Pyle Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Jack B. Evans Judith D. Pyle
/s/ Rockne G. Flowers Director /s/ Robert D. Ray Director
- ----------------------------------------- -------------------------------------------
Rockne G. Flowers Robert D. Ray
/s/ Joyce L. Hanes Director /s/ Robert W. Schlutz Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Joyce L. Hanes Robert W. Schlutz
/s/ Lee Liu Director /s/ Wayne H. Stoppelmoor Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Lee Liu Wayne H. Stoppelmoor
/s/ Katharine C. Lyall Director /s/ Anthony R. Weiler Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Katharine C. Lyall Anthony R. Weiler
/s/ Arnold M. NemirowSingleton B. McAllister Director
- -----------------------------------------
Arnold M. Nemirow-----------------------------
Singleton B. McAllister
131135
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 29th25th day
of March 2000.
2003.
WISCONSIN POWER AND LIGHT COMPANY
By: /s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 25th day of March 2003.
/s/ Erroll B. Davis, Jr. Erroll B. Davis, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 29th day of March 2000.
/s/ Erroll B. Davis, Jr.Chairman, Chief Executive Officer and Director (Principal Executive Officer)
- ---------------------------------------------------
Erroll B. Davis, Jr.
/s/ Thomas M. Walker Executive Vice President and Chief Financial Officer (Principal Financial Officer)
- --------------------------------------------------
Thomas M. Walker
/s/ Daniel A. DoyleJohn E. Kratchmer Vice President -President-Controller and Chief Accounting and Financial Planning Officer
- --------------------
Daniel A. Doyle (Principal Accounting Officer)
- -----------------------------
John E. Kratchmer
/s/ Alan B. Arends Director /s/ Milton E. NeshekDavid A. Perdue Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Alan B. Arends Milton E. NeshekDavid A. Perdue
/s/ Jack B. Evans Director /s/ Judith D.PyleD. Pyle Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Jack B. Evans Judith D. Pyle
/s/ Rockne G. Flowers Director /s/ Robert D. Ray Director
- ----------------------------------------- -------------------------------------------
Rockne G. Flowers Robert D. Ray
/s/ Joyce L. Hanes Director /s/ Robert W. Schlutz Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Joyce L. Hanes Robert W. Schlutz
/s/ Lee Liu Director /s/ Wayne H. Stoppelmoor Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Lee Liu Wayne H. Stoppelmoor
/s/ Katharine C. Lyall Director /s/ Anthony R. Weiler Director
- ----------------------------------------- ------------------------------------------------------------------------ --------------------------------
Katharine C. Lyall Anthony R. Weiler
/s/ Arnold M. NemirowSingleton B. McAllister Director
- -----------------------------------------
Arnold M. Nemirow-----------------------------
Singleton B. McAllister
132136
EXHIBIT INDEXCERTIFICATIONS
I, Erroll B. Davis, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Alliant Energy
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 25, 2003
/s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman, President and
Chief Executive Officer
137
I, Thomas M. Walker, certify that:
1. I have reviewed this annual report on Form 10-K of Alliant Energy
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 25, 2003
/s/ Thomas M. Walker
--------------------
Thomas M. Walker
Executive Vice President and
Chief Financial Officer
138
I, Erroll B. Davis, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Interstate Power and
Light Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 25, 2003
/s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman and Chief Executive Officer
139
I, Thomas M. Walker, certify that:
1. I have reviewed this annual report on Form 10-K of Interstate Power and
Light Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 25, 2003
/s/ Thomas M. Walker
--------------------
Thomas M. Walker
Executive Vice President and
Chief Financial Officer
140
I, Erroll B. Davis, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Wisconsin Power and
Light Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 25, 2003
/s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman and Chief Executive Officer
141
I, Thomas M. Walker, certify that:
1. I have reviewed this annual report on Form 10-K of Wisconsin Power and
Light Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 25, 2003
/s/ Thomas M. Walker
--------------------
Thomas M. Walker
Executive Vice President and
Chief Financial Officer
142
ALLIANT ENERGY CORPORATION
INTERSTATE POWER AND LIGHT COMPANY
WISCONSIN POWER AND LIGHT COMPANY
Exhibit Index to Annual Report on Form 10-K
For the fiscal year ended Dec. 31, 2002
Exhibit
Number Description
------ -----------
3.2 Bylaws3.5a Articles of Amendment to IP&L's Restated Articles of Incorporation
4.16a Fourth Supplemental Indenture, dated as of Dec. 26, 2002, among Resources, Alliant Energy, as
amended, effectiveGuarantor, and U.S. Bank, as Trustee
4.17 Registration Rights Agreement, dated as of March 15, 2000
3.4 Bylaws of WP&L, as amended, effectiveDec. 26, 2002, among Resources, Alliant Energy,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Utehdahl Capital Partners, L.P. and The
Williams Capital Group, L.P.
4.18 Registration Rights Agreement, dated as of March 15, 2000
3.6 Bylaws of IESU, as amended, effectiveDec. 20, 2002, between IP&L and Robert W. Baird & Co.
Incorporated
10.4 364-Day Credit Agreement, dated as of March 15, 2000
10.15 Second AmendedDec. 27, 2002, among Resources, as Borrower, and Restated November 1998 Stockholders'Alliant
Energy, Heartland Properties, Inc. and International, as Guarantors and the Lenders Named
therein and Merrill Lynch Capital Corporation, as Administrative Agent
10.5 Credit Agreement, entered intodated as of December
17, 1999,Dec. 20, 2002, among Whiting, as Borrower, the Financial
Institutions Listed on Schedule 1.1 thereto, as Banks, Bank One, NA, as Administrative Agent,
and Wachovia Bank, National Association, as Syndication Agent
10.5a First Amendment to Credit Agreement, dated as of Jan. 7, 2003, by and among McLeod, Alliant Energy, InvestmentsWhiting, Bank One,
NA, as Administrative Agent and certain other principal
stockholderseach of McLeod
10.16 Second Amended and Restated January 1999 Stockholders' Agreement entered into as of December 17,
1999, by and among McLeod, Alliant Energy, Investments and certain other principal stockholders
of McLeodthe Financial Institutions a Party thereto
21 Subsidiaries of Alliant Energy and WP&L
23 Consent of Independent Public AccountantsAuditors' Consent for Alliant Energy
27.1 Financial Data Schedule99.1 Written Statement of the Chairman, President and CEO Pursuant to 18 U.S.C. Section 1350 for Alliant
Energy
at99.2 Written Statement of the EVP and CFO Pursuant to 18 U.S.C. Section 1350 for Alliant Energy
99.3 Written Statement of the period ended December 31, 1999
27.2 Financial Data ScheduleChairman and CEO Pursuant to 18 U.S.C. Section 1350 for IESU atIP&L
99.4 Written Statement of the EVP and CFO Pursuant to 18 U.S.C. Section 1350 for IP&L
99.5 Written Statement of the period ended December 31, 1999
27.3 Financial Data ScheduleChairman and CEO Pursuant to 18 U.S.C. Section 1350 for WP&L
at99.6 Written Statement of the EVP and CFO Pursuant to 18 U.S.C. Section 1350 for the period ended December 31, 1999WP&L
EX-3.2
2
BYLAWS OF ALLIANT ENERGY CORPORATION
EXHIBIT 3.2
BYLAWS
OF
ALLIANT ENERGY CORPORATION
Effective as of March 15, 2000
ARTICLE I
OFFICES
Section 1.1 PRINCIPAL AND BUSINESS OFFICES. - The Corporation may have such
principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
Corporation may require from time to time.
Section 1.2 REGISTERED OFFICE. - The registered office of the Corporation
required by the Wisconsin Business Corporation Law to be maintained in the
State of Wisconsin may be, but need not be, identical with the principal
office in the State of Wisconsin, and the address of the registered office
may be changed from time to time by the Board of Directors or by the
registered agent. The business office of the registered agent of the
Corporation shall be identical to such registered office.
ARTICLE II
SEAL
Section 2.1 CORPORATE SEAL. - The corporate seal shall have inscribed thereon
the name of the Corporation and the words "CORPORATE SEAL, WISCONSIN." Said
seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced.
ARTICLE III
SHAREOWNERS
Section 3.1 ANNUAL MEETING. - The annual meeting of the shareowners (the
"Annual Meeting") shall be held at such date and time as the Board of
Directors may determine. In fixing a meeting date for any Annual Meeting,
the Board of Directors may consider such factors as it deems relevant within
the good faith exercise of its business judgment. At each Annual Meeting,
the shareowners shall elect that number of directors equal to the number of
directors in the class whose term expires at the time of such meeting. At
any such Annual Meeting, only other business properly brought before the
meeting in accordance with Section 3.14 of these Bylaws may be transacted.
If the election of directors shall not be held on the date fixed as herein
provided, for any Annual Meeting, or any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of
shareowners (a "Special Meeting") as soon thereafter as is practicable.
Section 3.2 SPECIAL MEETINGS. - A Special Meeting may be called only by (i)
the Board of Directors or (ii) the Chief Executive Officer and shall be
called by the Chief Executive Officer upon the demand, in accordance with
this Section 3.2, of the holders of record of shares representing at least
10% of all the votes entitled to be cast on any issue proposed to be
considered at the Special Meeting.
(a) In order that the Corporation may determine the shareowners entitled to
demand a Special Meeting, the Board of Directors may fix a record date to
determine the shareowners entitled to make such a demand (the "Demand Record
Date"). The Demand Record Date shall not precede the date upon which the
resolution fixing the Demand Record Date is adopted by the Board of Directors
and shall not be more than ten days after the date upon which the resolution
fixing the Demand Record Date is adopted by the Board of Directors. Any
shareowner of record seeking to have shareowners demand a Special Meeting
shall, by sending written notice to the Secretary of the Corporation by hand
or by certified or registered mail, return receipt requested, request the
Board of Directors to fix a Demand Record Date. The Board of Directors shall
promptly, but in all events within ten days after the date on which a valid
request to fix a Demand Record Date is received, adopt a resolution fixing
the Demand Record Date and shall make a public announcement of such Demand
Record Date. If no Demand Record Date has been fixed by the Board of
Directors within ten days after the date on which such request is received by
the Secretary, the Demand Record Date shall be the 10th day after the first
date on which a valid written request to set a Demand Record Date is received
by the Secretary. To be valid, such written request shall set forth the
purpose or purposes for which the Special Meeting is to be held, shall be
signed by one or more shareowners of record (or their duly authorized proxies
or other representatives), shall bear the date of signature of each such
shareowner (or proxy or other representative) and shall set forth all
information about each such shareowner and about the beneficial owner or
owners, if any, on whose behalf the request is made that would be required to
be set forth in a shareowner's notice described in paragraph (a) (ii) of
Section 3.14 of these Bylaws.
(b) In order for a shareowner or shareowners to demand a Special Meeting, a
written demand or demands for a Special Meeting by the holders of record as
of the Demand Record Date of shares representing at least 10% of all the
votes entitled to be cast on any issue proposed to be considered at the
Special Meeting must be delivered to the Corporation. To be valid, each
written demand by a shareowner for a Special Meeting shall set forth the
specific purpose or purposes for which the Special Meeting is to be held
(which purpose or purposes shall be limited to the purpose or purposes set
forth in the written request to set a Demand Record Date received by the
Corporation pursuant to paragraph (b) of this Section 3.2), shall be signed
by one or more persons who as of the Demand Record Date are shareowners of
record (or their duly authorized proxies or other representatives), shall
bear the date of signature of each such shareowner (or proxy or other
representative), and shall set forth the name and address, as they appear in
the Corporation's books, of each shareowner signing such demand and the class
and number of shares of the Corporation which are owned of record and
beneficially by each such shareowner, shall be sent to the Secretary by hand
or by certified or registered mail, return receipt requested, and shall be
received by the Secretary within seventy days after the Demand Record Date.
(c) The Corporation shall not be required to call a Special Meeting upon
shareowner demand unless, in addition to the documents required by paragraph
(c) of this Section 3.2, the Secretary receives a written agreement signed by
each Soliciting Shareowner (as defined below), pursuant to which each
Soliciting Shareowner, jointly and severally, agrees to pay the Corporation's
costs of holding the Special Meeting, including the costs of preparing and
mailing proxy materials for the Corporation's own solicitation, provided that
if each of the resolutions introduced by any Soliciting Shareowner at such
meeting is adopted, and each of the individuals nominated by or on behalf of
any Soliciting Shareowner for election as a director at such meeting is
elected, then the Soliciting Shareowners shall not be required to pay such
costs. For purposes of this paragraph (d), the following terms shall have
the meanings set forth below:
(i) "Affiliate" of any Person (as defined herein) shall mean any Person
controlling, controlled by or under common control with such
first Person.
(ii) "Participant" shall have the meaning assigned to such term in Rule
14a-11 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(iii) "Person" shall mean any individual, firm, corporation, partnership,
joint venture, association, trust, unincorporated organization or
other entity.
(iv) "Proxy" shall have the meaning assigned to such term in Rule 14a-1
promulgated under the Exchange Act.
(v) "Solicitation" shall have the meaning assigned to such term in Rule
14a-11 promulgated under the Exchange Act.
(vi) "Soliciting Shareowner" shall mean, with respect to any Special Meeting
demanded by a shareowner or shareowners, any of the following
Persons:
(A) if the number of shareowners signing the demand or demands of meeting
delivered to the Corporation pursuant to paragraph
(c) of this Section 3.2 is ten or fewer, each
shareowner signing any such demand;
(B) if the number of shareowners signing the demand or demands of meeting
delivered to the Corporation pursuant to paragraph
(c) of this Section 3.2 is more than ten, each Person
who either (I) was a Participant in any Solicitation
of such demand or demands or (II) at the time of the
delivery to the Corporation of the documents
described in paragraph (c) of this Section 3.2 had
engaged or intends to engage in any Solicitation of
Proxies for use at such Special Meeting (other than a
Solicitation of Proxies on behalf of the
Corporation); or
(C) any Affiliate of a Soliciting Shareowner, if a majority of the
directors then in office determine, reasonably and in
good faith, that such Affiliate should be required to
sign the written notice described in paragraph (c) of
this Section 3.2 and/or the written agreement
described in this paragraph (d) in order to prevent
the purposes of this Section 3.2 from being evaded.
(d) Except as provided in the following sentence, any Special Meeting shall
be held at such hour and day as may be designated by whichever of the Board
of Directors or the Chief Executive Officer shall have called such meeting.
In the case of any Special Meeting called by the Chief Executive Officer upon
the demand of shareowners (a "Demand Special Meeting"), such meeting shall be
held at such hour and day as may be designated by the Board of Directors;
provided, however, that the date of any Demand Special Meeting shall be not
more than seventy days after the Meeting Record Date (as defined in Section
3.6 hereof); and provided further that in the event that the directors then
in office fail to designate an hour and date for a Demand Special Meeting
within ten days after the date that valid written demands for such meeting by
the holders of record as of the Demand Record Date of shares representing at
least 10% of all the votes entitled to be cast on each issue proposed to be
considered at the Special Meeting are delivered to the Corporation (the
"Delivery Date"), then such meeting shall be held at 2:00 P.M. local time on
the 100th day after the Delivery Date or, if such 100th day is not a Business
Day (as defined below), on the first preceding Business Day. In fixing a
meeting date for any Special Meeting, the Board of Directors or the Chief
Executive Officer may consider such factors as it or he deems relevant within
the good faith exercise of its or his business judgment, including, without
limitation, the nature of the action proposed to be taken, the facts and
circumstances surrounding any demand for such meeting, and any plan of the
Board of Directors to call an Annual Meeting or a Special Meeting for the
conduct of related business.
(e) The Corporation may engage regionally or nationally recognized
independent inspectors of elections to act as an agent of the Corporation for
the purpose of promptly performing a ministerial review of the validity of
any purported written demand or demands for a Special Meeting received by the
Secretary. For the purpose of permitting the inspectors to perform such
review, no purported demand shall be deemed to have been delivered to the
Corporation until the earlier of (i) five Business Days following receipt by
the Secretary of such purported demand and (ii) such date as the independent
inspectors certify to the Corporation that the valid demands received by the
Secretary represent at least 10% of all the votes entitled to be cast on each
issue proposed to be considered at the Special Meeting. Nothing contained in
this paragraph (f) shall in any way be construed to suggest or imply that the
Board of Directors or any shareowner shall not be entitled to contest the
validity of any demand, whether during or after such five Business Day
period, or to take any other action (including, without limitation, the
commencement, prosecution or defense of any litigation with respect thereto).
(f) For purposes of these Bylaws, "Business Day" shall mean any day other
than a Saturday, a Sunday or a day on which banking institutions in the State
of Wisconsin are authorized or obligated by law or executive order to close.
Section 3.3 PLACE OF MEETING. - The Board of Directors or the Chief Executive
Officer may designate any place, either within or without the State of
Wisconsin, as the place for any Annual Meeting or any Special Meeting, or for
any postponement thereof. If no designation is made, the place of meeting
shall be the principal office of the Corporation. Any meeting may be
adjourned to reconvene at any place designated by vote of the Board of
Directors or determined by the Chief Executive Officer.
Section 3.4 NOTICE OF MEETINGS - Written notice stating the date, time and
place of any meeting of shareowners shall be delivered not less than ten days
nor more than seventy days before the date of the meeting (unless a different
time period is provided by the Wisconsin Business Corporation Law or the
Articles of Incorporation), either personally or by mail, by or at the
direction of the Chief Executive Officer or the Secretary, to each shareowner
of record entitled to vote at such meeting and to such other persons as
required by the Wisconsin Business Corporation Law. In the event of any
Demand Special Meeting, such notice of meeting shall be sent not more than
thirty days after the Delivery Date. For purposes of this Section 3.4,
notice by "electronic transmission" (as such term is defined in Section
180.0103(7m) of the Wisconsin Business Corporation Law") shall be deemed to
constitute written notice. Written notice pursuant to this Section 3.4 shall
be deemed to be effective (a) when mailed, if mailed postpaid and addressed
to the shareowner's address shown in the Corporation's current record of
shareowners or (b) when electronically transmitted to the shareowner in a
manner authorized by the shareowner. Unless otherwise required by the
Wisconsin Business Corporation Law or the Articles of Incorporation, a notice
of an Annual Meeting need not include a description of the purpose for which
the meeting is called. In the case of any Special Meeting, (i) the notice of
meeting shall describe any business that the Board of Directors shall have
theretofore determined to bring before the meeting and (ii) in the case of a
Demand Special Meeting, the notice of meeting (A) shall describe any business
set forth in the statement of purpose of the demands received by the
Corporation in accordance with Section 3.2 of these Bylaws and (B) shall
contain all of the information required in the notice received by the
Corporation in accordance with Section 3.14(b) of these Bylaws. If an Annual
Meeting or Special Meeting is adjourned to a different date, time or place,
the Corporation shall not be required to give notice of the new date, time or
place if the new date, time or place is announced at the meeting before
adjournment; provided, however, that if a new Meeting Record Date for an
adjourned meeting is or must be fixed, the Corporation shall give notice of
the adjourned meeting to persons who are shareowners as of the new Meeting
Record Date.
Section 3.5 WAIVER OF NOTICE - A shareowner may waive any notice required by
the Wisconsin Business Corporation Law, the Articles of Incorporation or
these Bylaws before or after the date and time stated in the notice. The
waiver shall be in writing and signed by the shareowner entitled to the
notice, contain the same information that would have been required in the
notice under applicable provisions of the Wisconsin Business Corporation Law
(except that the time and place of meeting need not be stated) and be
delivered to the Corporation for inclusion in the corporate records. A
shareowner's attendance at any Annual Meeting or Special Meeting, in person
or by proxy, waives objection to all of the following: (a) lack of notice or
defective notice of the meeting, unless the shareowner at the beginning of
the meeting or promptly upon arrival objects to holding the meeting or
transacting business at the meeting; and (b) consideration of a particular
matter at the meeting that is not within the purpose described in the meeting
notice, unless the shareowner objects to considering the matter when it is
presented.
Section 3.6 FIXING OF RECORD DATE. - The Board of Directors may fix in
advance a date not less than ten days and not more than seventy days prior to
the date of an Annual Meeting or Special Meeting as the record date for the
determination of shareowners entitled to notice of, or to vote at, such
meeting (the "Meeting Record Date"). In the case of any Demand Special
Meeting, (i) the Meeting Record Date shall be not later than the 30th day
after the Delivery Date and (ii) if the Board of Directors fails to fix the
Meeting Record Date within thirty days after the Delivery Date, then the
close of business on such 30th day shall be the Meeting Record Date. The
shareowners of record on the Meeting Record Date shall be the shareowners
entitled to notice of and to vote at the meeting. Except as provided by the
Wisconsin Business Corporation Law for a court-ordered adjournment, a
determination of shareowners entitled to notice of and to vote at an Annual
Meeting or Special Meeting is effective for any adjournment of such meeting
unless the Board of Directors fixes a new Meeting Record Date, which it shall
do if the meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting. The Board of Directors may also fix in
advance a date as the record date for the purpose of determining shareowners
entitled to take any other action or determining shareowners for any other
purpose. Such record date shall be not more than seventy days prior to the
date on which the particular action, requiring such determination of
shareowners, is to be taken. The record date for determining shareowners
entitled to a distribution (other than a distribution involving a purchase,
redemption or other acquisition of the Corporation's shares) or a share
dividend is the date on which the Board of Directors authorizes the
distribution or share dividend, as the case may be, unless the Board of
Directors fixes a different record date.
Section 3.7 SHAREOWNER LIST. - The Corporation shall have available,
beginning two (2) days after the notice of the meeting is given for which the
list was prepared and continuing to the date of the meeting, a complete
record of each shareowner entitled to vote at such meeting, or any
adjournment thereof, showing the address of and number of shares held by each
shareowner. The shareowner list shall be available for inspection by any
shareowner during normal business hours at the Corporation's principal office
or at a place identified in the meeting notice in the city where the meeting
will be held. The Corporation shall make the shareowners' list available at
the meeting and any shareowner or his agent or attorney may inspect the list
at any time the meeting or any adjournment thereof.
Section 3.8 QUORUM AND VOTING REQUIREMENTS.
(a) Shares entitled to vote as a separate voting group may take action on a
matter at any Annual Meeting or Special Meeting only if a quorum of those
shares exists with respect to that matter. If the Corporation has only one
class of stock outstanding, such class shall constitute a separate voting
group for purposes of this Section 3.8. Except as otherwise provided in the
Articles of Incorporation or the Wisconsin Business Corporation Law, a
majority of the votes entitled to be cast on the matter shall constitute a
quorum of the voting group for action on that matter. Once a share is
represented for any purpose at any Annual Meeting or Special Meeting, other
than for the purpose of objecting to holding the meeting or transacting
business at the meeting, it is considered present for purposes of determining
whether a quorum exists for the remainder of the meeting and for any
adjournment of that meeting unless a new Meeting Record Date is or must be
set for the adjourned meeting. If a quorum exists, except in the case of the
election of directors, action on a matter shall be approved if the votes cast
within the voting group favoring the action exceed the votes cast opposing
the action, unless the Articles of Incorporation or the Wisconsin Business
Corporation Law requires a greater number of affirmative votes. Unless
otherwise provided in the Articles of Incorporation, each director to be
elected shall be elected by a plurality of the votes cast by the shares
entitled to vote in the election of directors at an Annual Meeting or Special
Meeting at which a quorum is present.
(b) The Board of Directors acting by resolution may postpone and reschedule
any previously scheduled Annual Meeting or Special Meeting; provided,
however, that a Demand Special Meeting shall not be postponed beyond the
100th day following the Delivery Date. Any Annual Meeting or Special Meeting
may be adjourned from time to time, whether or not there is a quorum, (i) at
any time, upon a resolution by shareowners if the votes cast in favor of such
resolution by the holders of shares of each voting group entitled to vote on
any matter theretofore properly brought before the meeting exceed the number
of votes cast against such resolution by the holders of shares of each such
voting group or (ii) at any time prior to the transaction of any business at
such meeting, by the Chairperson of the Board or pursuant to a resolution of
the Board of Directors. No notice of the time and place of adjourned
meetings need be given except as required by the Wisconsin Business
Corporation Law. At any adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 3.9 CONDUCT OF MEETING. - The Chairperson of the Board shall preside
at each meeting of shareowners. In the absence of the Chairperson of the
Board, such persons, in the following order, shall act as chair of the
meeting; the Vice Chairperson of the Board, the Chief Executive Officer, the
President, any Vice President, and the Director in attendance with the
longest tenure in that office. The Secretary, or if absent, an Assistant
Secretary, of the Company shall act as Secretary of each shareowner meeting.
Section 3.10 PROXIES. - At any Annual Meeting or Special Meeting, a
shareowner entitled to vote may vote his or her shares in person or by
proxy. A shareowner entitled to vote at an Annual Meeting or Special Meeting
may authorize another person to act for the shareowner by appointing the
person as proxy. Without limiting the manner in which a shareowner may
appoint a proxy, a shareowner or the shareowner's authorized officer,
director, employee, agent or attorney-in-fact may use any of the following as
a valid means to make such an appointment:
(a) Appointment of a proxy in writing by signing or causing the
shareowner's signature to be affixed to an appointment form by any reasonable
means, including, but not limited to, by facsimile signature.
(b) Appointment of a proxy by transmitting or authorizing the
transmission of an electronic transmission of the appointment to the person
who will be appointed as proxy or to a proxy solicitation firm, proxy support
service organization or like agent authorized to receive the transmission by
the person who will be appointed as proxy. Every electronic transmission
shall contain, or be accompanied by, information that can be used to
reasonably determine that the shareowner transmitted or authorized the
transmission of the electronic transmission. Any person charged with
determining whether a shareholder transmitted or authorized the transmission
of the electronic transmission shall specify the information upon which the
determination is made.
An appointment of a proxy is effective when a signed appointment form or an
electronic transmission of the appointment is received by the inspector of
election or the officer or agent of the Corporation authorized to tabulate
votes. An appointment is valid for eleven months unless a different period
is expressly provided in the appointment. Unless otherwise provided, a proxy
may be revoked any time before it is voted, either by appointing a new proxy
in accordance with the Wisconsin Business Corporation Law or by oral notice
given by the shareowner to the presiding officer during the meeting. The
presence of a shareowner who has made an effective proxy appointment shall
not itself constitute a revocation. The Board of Directors shall have the
power and authority to make rules establishing presumptions as to the
validity and sufficiency of proxies.
Section 3.11 VOTING OF SHARES. - Except as provided in the Articles of
Incorporation or statute, each outstanding share entitled to vote shall be
entitled to one (1) vote upon each matter submitted to a vote at a meeting of
shareowners.
Section 3.12 VOTING OF SHARES BY CERTAIN HOLDERS. - Shares standing in
the name of another corporation may be voted by such officer, agent or proxy
as the Bylaws of such corporation may prescribe, or, in the absence of such
provision, as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or
conservator may be voted by such person, either in person or by proxy,
without a transfer of such shares into that person's name. Shares standing
in the name of a trustee may be voted by such trustee, either in person or by
proxy, without a transfer of such shares into the trustee's name. The
Corporation may request evidence of such fiduciary status with respect to the
vote, consent, waiver, or proxy appointment.
Shares standing in the name of a receiver or trustee in
bankruptcy may be voted by such receiver or trustee, and shares held by or
under the control of a receiver may be voted by such receiver without the
transfer of the shares into such person's name if authority so to do is
contained in an appropriate order of the court by which such receiver was
appointed.
A pledgee, beneficial owner, or attorney-in-fact of the shares
held in the name of a shareholder shall be entitled to vote such shares. The
Corporation may request evidence of such signatory's authority to sign for
the shareholder with respect to the vote, consent, waiver, or proxy
appointment.
Neither treasury shares nor shares held by another corporation,
if a majority of the shares entitled to vote for the election of Directors of
such other corporation is held by the Corporation, shall be voted at any
meeting or counted in determining the total number of outstanding shares at
any given time.
Section 3.13 Action without Meeting. - Any action required or permitted
by the Articles of Incorporation or these Bylaws or any provision of the
Wisconsin Business Corporation Law to be taken at an Annual Meeting or
Special Meeting may be taken without a meeting if a written consent or
consents, describing the action so taken, is signed by all of the shareowners
entitled to vote with respect to the subject matter thereof and delivered to
the Corporation for inclusion in the corporate records.
Section 3.14 Notice of Shareowner Business and Nomination of Directors.
(a) Annual Meetings.
(i) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the
shareowners may be made at an Annual Meeting (A) pursuant to the
Corporation's notice of meeting, (B) by or at the direction of
the Board of Directors or (C) by any shareowner of the
Corporation who is a shareowner of record at the time of giving
of notice provided for in this Bylaw and who is entitled to vote
at the meeting and complies with the notice procedures set forth
in this Section 3.14.
(ii) For nominations or other business to be properly brought before an
Annual Meeting by a shareowner pursuant to clause (C) of
paragraph (a)(i) of this Section 3.14, the shareowner must have
given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a shareowner's notice shall be
received by the Secretary of the Corporation at the principal
offices of the Corporation not later than the earlier of (A) 45
days in advance of the first annual anniversary (the "Anniversary
Date") of the date set forth in the Corporation's proxy statement
for the prior year's Annual Meeting as the date on which the
Corporation first mailed definitive proxy materials for the prior
year's Annual Meeting and (B) the later of (x) the 70th day prior
to such Annual Meeting and (y) the 10th day following the day on
which public announcement of the date of such meeting is first
made. Such shareowner's notice shall be signed by the shareowner
of record who intends to make the nomination or introduce the
other business (or his duly authorized proxy or other
representative), shall bear the date of signature of such
shareowner (or proxy or other representative) and shall set
forth: (A) the name and address, as they appear on this
Corporation's books, of such shareowner and the beneficial owner
or owners, if any, on whose behalf the nomination or proposal is
made; (B) the class and number of shares of the Corporation which
are beneficially owned by such shareowner or beneficial owner or
owners; (C) a representation that such shareowner is a holder of
record of shares of the Corporation entitled to vote at such
meeting and intends to appear in person or by proxy at the
meeting to make the nomination or introduce the other business
specified in the notice; (D) in the case of any proposed
nomination for election or re-election as a director, (I) the
name and residence address of the person or persons to be
nominated, (II) a description of all arrangements or
understandings between such shareowner or beneficial owner or
owners and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination is to be
made by such shareowner, (III) such other information regarding
each nominee proposed by such shareowner as would be required to
be disclosed in solicitations of proxies for elections of
directors, or would be otherwise required to be disclosed, in
each case pursuant to Regulation 14A under the Exchange Act,
including any information that would be required to be included
in a proxy statement filed pursuant to Regulation 14A had the
nominee been nominated by the Board of Directors and (IV) the
written consent of each nominee to be named in a proxy statement
and to serve as a director of the Corporation if so elected; and
(E) in the case of any other business that such shareowner
proposes to bring before the meeting, (I) a brief description of
the business desired to be brought before the meeting and, if
such business includes a proposal to amend these Bylaws, the
language of the proposed amendment, (II) such shareowner's and
beneficial owner's or owners' reasons for conducting such
business at the meeting and (III) any material interest in such
business of such shareowner and beneficial owner or owners.
(iii) Notwithstanding anything in the second sentence of paragraph (a)(ii) of
this Section 3.14 to the contrary, in the event that the number
of directors to be elected to the Board of Directors of the
Corporation is increased and there is no public announcement
naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Corporation at least
45 days prior to the Anniversary Date, a shareowner's notice
required by this Section 3.14 shall also be considered timely,
but only with respect to nominees for any new positions created
by such increase, if it shall be received by the Secretary at the
principal offices of the Corporation not later than the close of
business on the 10th day following the day on which such public
announcement is first made by the Corporation.
(b) Special Meetings. Only such business shall be conducted at a Special
Meeting as shall have been described in the notice of meeting sent to
shareowners pursuant to Section 3.4 of these Bylaws. Nominations of persons
for election to the Board of Directors may be made at a Special Meeting at
which directors are to be elected pursuant to such notice of meeting (i) by
or at the direction of the Board of Directors or (ii) by any shareowner of
the Corporation who (A) is a shareowner of record at the time of giving of
such notice of meeting, (B) is entitled to vote at the meeting and (C)
complies with the notice procedures set forth in this Section 3.14. Any
shareowner desiring to nominate persons for election to the Board of
Directors at such a Special Meeting shall cause a written notice to be
received by the Secretary of the Corporation at the principal offices of the
Corporation not earlier than ninety days prior to such Special Meeting and
not later than the close of business on the later of (x) the 60th day prior
to such Special Meeting and (y) the 10th day following the day on which
public announcement is first made of the date of such Special Meeting and of
the nominees proposed by the Board of Directors to be elected at such
meeting. Such written notice shall be signed by the shareowner of record who
intends to make the nomination (or his duly authorized proxy or other
representative), shall bear the date of signature of such shareowner (or
proxy or other representative) and shall set forth: (A) the name and address,
as they appear on the Corporation's books, of such shareowner and the
beneficial owner or owners, if any, on whose behalf the nomination is made;
(B) the class and number of shares of the Corporation which are beneficially
owned by such shareowner or beneficial owner or owners; (C) a representation
that such shareowner is a holder of record of shares of the Corporation
entitled to vote at such meeting and intends to appear in person or by proxy
at the meeting to make the nomination specified in the notice; (D) the name
and residence address of the person or persons to be nominated; (E) a
description of all arrangements or understandings between such shareowner or
beneficial owner or owners and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination is to be
made by such shareowner; (F) such other information regarding each nominee
proposed by such shareowner as would be required to be disclosed in
solicitations of proxies for elections of directors, or would be otherwise
required to be disclosed, in each case pursuant to Regulation 14A under the
Exchange Act, including any information that would be required to be included
in a proxy statement filed pursuant to Regulation 14A had the nominee been
nominated by the Board of Directors; and (G) the written consent of each
nominee to be named in a proxy statement and to serve as a director of the
Corporation if so elected.
(c) General.
(i) Only persons who are nominated in accordance with the procedures set
forth in this Section 3.14 shall be eligible to serve as
directors. Only such business shall be conducted at an Annual
Meeting or Special Meeting as shall have been brought before such
meeting in accordance with the procedures set forth in this
Section 3.14. The chairman of the meeting shall have the power
and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance
with the procedures set forth in this Section 3.14 and, if any
proposed nomination or business is not in compliance with this
Section 3.14, to declare that such defective proposal shall be
disregarded.
(ii) For purposes of this Section 3.14, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or
15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section 3.14, a
shareowner shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 3.14. Nothing
in this Section 3.14 shall be deemed to limit the Corporation's
obligation to include shareowner proposals in its proxy statement
if such inclusion is required by Rule 14a-8 under the Exchange
Act.
ARTICLE IV
BOARD OF DIRECTORS
Section 4.1 GENERAL POWER. - The business and affairs of the Corporation
shall be managed by its Board of Directors.
Section 4.2 NUMBER. CLASSES & TERM. - The number of Directors of the
Corporation shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by the affirmative vote of a
majority of the total number of Directors that the Corporation would have if
there were no vacancies, but shall not be less than nine (9) nor more than
thirteen (13). The Directors of the Corporation shall be divided, with
respect to the time for which they severally hold office, into three classes,
as nearly equal in number as possible. At each Annual Meeting, the
successors to the class of Directors whose terms shall expire at the time of
such Annual Meeting shall be elected to hold office until the third
succeeding Annual Meeting, and until their successors are duly elected and
qualified.
Section 4.3 CHAIRPERSON OF THE BOARD. - The Chairperson of the Board if not
designated as the Chief Executive Officer of the Company shall assist the
Board in the formulation of policies and may make recommendations therefore.
Information as to the affairs of the Company in addition to that contained in
the regular reports shall be furnished to him or her on request. He or she
may make suggestions and recommendations to the Chief Executive Officer
regarding any matters relating to the affairs of the Company and shall be
available for consultation and advice.
Section 4.4 VICE CHAIRPERSON OF THE BOARD. - The Vice Chairperson of the
Board shall assist the Board in the formulation of policies and make
recommendations therefore. The Vice Chairperson shall have such other powers
and duties as may be prescribed for him or her by the Chairperson of the
Board or the Board of Directors. In the absence of or the inability of the
Chairperson of the Board to act as Chairperson of the Board, the Vice
Chairperson of the Board shall assume the powers and duties of the
Chairperson of the Board.
Section 4.5 QUALIFICATIONS AND REMOVAL. - No person who has attained 70 years
of age shall be eligible for election or re-election to the Board of
Directors. Any Director who has attained seventy (70) years of age shall
resign from the Board of Directors effective as of the next Annual Meeting.
For a period of five (5) years following April 21, 1998, no person, except
any of the initial Directors serving as such on April 21, 1998, who is an
executive officer or employee of the Corporation or any of its subsidiaries
shall be eligible to serve as a Director of the Corporation; provided,
however, that any individual serving as Chief Executive Officer of the
Corporation shall be eligible to serve as a Director of the Corporation. In
the event the Chief Executive Officer resigns or retires from his or her
office or employment with the Corporation, he or she shall simultaneously
submit his or her resignation from the Board of Directors. In the event that
the Chief Executive Officer is removed from his or her office by the Board of
Directors, or is involuntarily terminated from employment with the
Corporation, he or she shall simultaneously submit his or her resignation
from the Board of Directors. In the event that a Director experiences a
change in their principal occupation or primary business affiliation, the
Director must submit their resignation from the Board to the Nominating and
Governance Committee. The Nominating and Governance Committee shall
recommend to the Board of Directors whether the Board should accept such
resignation. If the Nominating and Governance Committee recommends
acceptance of the resignation, an affirmative vote of two-thirds of the
remaining Directors holding office is required to affirm the Nominating and
Governance Committee's recommendation. A resignation may be tendered by any
Director at any meeting of the shareholders or of the Board of Directors, who
shall at such meeting accept the same.
Section 4.6 REGULAR MEETINGS. - Regular meetings of the Board of Directors
shall be held at such time and place as may be determined by the Board of
Directors, but in no event shall the Board meet less than once a year.
Section 4.7 SPECIAL MEETINGS. - Special meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board, the Vice
Chairman of the Board, the Chief Executive Officer or any two (2) Directors.
The Chief Executive Officer or Secretary may fix any place, either within or
without the State of Wisconsin, whether in person or by telecommunications,
as the place for holding any special meeting.
Section 4.8 NOTICE; WAIVER. - Notice of any meeting of the Board of
Directors, unless otherwise provided pursuant to Section 4.6, shall be given
at least forty-eight (48) hours prior to the meeting by written notice
delivered personally or mailed to each Director at such address designed by
each Director, by telegram or other form of wire or wireless communication.
The notice need not describe the purpose of the meeting of the Board of
Directors or the business to be transacted at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States
mail, so addressed, with postage prepared. Any Director may waive notice of
any meeting. The attendance of a Director at a meeting shall constitute a
waiver of notice of such meeting, except where a Director attends a meeting
for the express purpose of objecting to the transaction of business because
the meeting is not lawfully called or convened.
Section 4.9 QUORUM. - A majority of the Board of Directors shall constitute a
quorum for the transaction of business at any meeting of the Board of
Directors, but if less than such majority is present at a meeting, a majority
of the Directors present may adjourn the meeting to some other day without
further notice.
Section 4.10 MEETING PARTICIPATION.
(a) Any or all members of the Board of Directors, or any committee thereof,
may participate in a regular or special meeting by, or to conduct the meeting
through, the use of any means of communication by which any of the following
occurs:
(i) All participating directors may simultaneously hear each other during
the meeting.
(ii) All communication during the meeting is immediately transmitted to each
participating director, and each participating director is able
to immediately send messages to all other participating directors.
(b) If a meeting is conducted by the means of communication described
herein, all participating directors shall be informed that a meeting is
taking place at which official business may be transacted.
(c) A director participating in a meeting by means of such communication is
deemed to be present in person at the meeting.
Section 4.11 ACTION WITHOUT MEETING. - Any action required or permitted
to be taken at any meeting of the Directors of the Corporation or of any
committee of the Board may be taken without a meeting if a consent in writing
setting forth the action so taken shall be signed by all of the Directors or
all of the members of the Committee of Directors, as the case may be. Such
consent shall have the same force and effect as a unanimous vote at a meeting
and shall be filed with the Secretary of the Corporation to be included in
the official records of the Corporation. The action taken is effective when
the last Director signs the consent unless the consent specifies a different
effective date.
Section 4.12 PRESUMPTION OF ASSENT. - A Director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless (a) the Director objects at the beginning of the meeting or
promptly upon arrival to the holding of or transacting business at the
meeting, (b) the Director's dissent or abstention shall be entered in the
minutes of the meeting, (c) the Director shall file a written dissent or
abstention to such action with the presiding officer of the meeting before
the adjournment thereof or shall forward such dissent or abstention by
registered or certified mail to the Secretary of the Corporation immediately
after the adjournment of the meeting, or (d) the Director shall file a
written notice to the Secretary of the Corporation promptly after receiving
the minutes of the meeting that the minutes failed to show the Director's
dissention or abstention from the action taken. Such right to dissent or
abstain shall not apply to a Director who voted in favor of such action.
Section 4.13 VACANCIES. - Except as provided below, any vacancy
occurring in the Board of Directors or on any Committee of the Board of
Directors and any directorship to be filled by reason of an increase in the
number of Directors may be filled by the affirmative vote of a majority of
the Directors then in office, even if less than a quorum of the Board of
Directors. For a period of time commencing on formation of Interstate Energy
Corporation and expiring on the date of the third annual meeting of
shareowners of the Corporation, the initially appointed IES, IPC and WPLH
directors, each as a separate group, shall be entitled to nominate those
persons who will be eligible to be appointed, elected or re-elected as IES,
IPC and WPLH Directors. The Director or Directors so chosen shall hold
office until the next election of the Class for which such Director or
Directors shall have been chosen and until their successors shall have been
duly elected and qualified.
Section 4.14 COMPENSATION. - Compensation and expenses for attendance at
a regular or special meeting of the Board of Directors, or at any committee
meeting, shall be payable in such amounts as determined from time to time by
the Board of Directors. No such payment shall preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefor. Directors who are full time employees or officers of the
Corporation shall not receive any compensation.
ARTICLE V
COMMITTEES
Section 5.1 COMMITTEES. - The Board of Directors may, by resolution passed by
a majority of the whole Board, designate from their number various Committees
from time to time as corporate needs may dictate. The Committees may make
their own rules of procedure and shall meet where and as provided by such
rules, or by resolution of the Board of Directors. A majority of the members
of the Committee shall constitute a quorum for the transaction of business.
Each Committee shall keep regular minutes of its meetings and report the same
to the Board of Directors when required. The Committee may be authorized by
the Board of Directors to perform specified functions, except that a
committee may not do any of the following: (a) authorize distributions; (b)
approve or propose to shareowners action that the Wisconsin Business
Corporation Law requires to be approved by shareowners; (c) fill vacancies on
the Board of Directors, or, unless the Board of Directors provides by
resolution that vacancies on a committee shall be filled by the affirmative
vote of the remaining committee members, on any Board committee; (d) amend
the Corporation's Articles of Incorporation; (e) adopt, amend or repeal
bylaws; (f) approve a plan of merger not requiring shareowner approval; (g)
authorize or approve reacquisition of shares, except according to a formula
or method prescribed by the Board of Directors; and (h) authorize or approve
the issuance or sale or contract for sale of shares or determine the
designation and relative rights, preferences and limitations of a class or
series of shares, except that the Board of Directors may authorize a
committee to do so within limits prescribed by the Board of Directors.
Section 5.2 EXECUTIVE COMMITTEE. - An Executive Committee is hereby
established and shall consist of at least three (3) members, including the
Chairman of the Board. The Executive Committee shall possess all the powers
and authority of the Board of Directors when said Board of Directors is not
in session, except for the powers and authorities set forth in Section 5.1.
Section 5.3 AUDIT COMMITTEE. - An Audit Committee is hereby established and
shall consist of at least three (3) Directors, all of whom shall be outside
members of the Board of Directors. The members of the Committee shall be
elected annually by a majority vote of the members of the Board of
Directors. Said Committee shall meet at the call of any one of its members,
but in no event shall it meet less than once a year. Subsequent to each such
Committee meeting, a report of the actions taken by such Committee shall be
made to the Board of Directors.
Section 5.4 COMPENSATION AND PERSONNEL COMMITTEE. - A Compensation and
Personnel Committee is hereby established and shall consist of at least three
(3) Directors who are not and never have been officers, employees or legal
counsel of the Company. The Chairperson and the members of the Compensation
and Personnel Committee shall be elected annually by a majority vote of the
members of the Board of Directors. Said Committee shall meet at such times
as it determines, but at least twice each year, and shall meet at the request
of the Chairman of the Board, the Chief Executive Officer, or any Committee
member. Subsequent to each such Committee meeting, a report of the actions
taken by such Committee shall be made to the Board of Directors.
Section 5.5 NOMINATING AND GOVERNANCE COMMITTEE. - A Nominating and
Governance Committee shall be established and shall consist of at least three
(3) Directors, all of whom shall be outside members of the Board of
Directors. The Chairperson and the members of the Nominating and Governance
Committee shall be elected annually by a majority vote of the members of the
Board of Directors. Said Committee shall meet at the call of any one of its
members, but in no event shall it meet less than once a year. Subsequent to
each such Committee meeting, a report of the actions taken by such Committee
shall be made to the Board of Directors.
ARTICLE VI
OFFICERS
Section 6.1 OFFICERS. - The Board of Directors shall elect a Chief Executive
Officer, a President, such number of Vice Presidents with such designations
as the Board of Directors at the time may decide upon, a Secretary, a
Treasurer and a Controller. The Chief Executive Officer may appoint such
other officers and assistant officers as may be deemed necessary. The same
person may simultaneously hold more than one such office.
Section 6.2 TERM OF OFFICERS. - All Officers, unless sooner removed, shall
hold their respective offices until their successors, willing to serve, shall
have been elected but any Officer may be removed from Office at any time by
the Board of Directors.
Section 6.3 REMOVAL OF OFFICERS. - Any officer may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment
of an officer shall not of itself create contract rights.
Section 6.4 CHIEF EXECUTIVE OFFICER. - Subject to the control of the Board of
Directors the Chief Executive Officer designated by the Board of Directors
shall have and be responsible for the general management and direction of the
business of the Corporation, shall establish the lines of authority and
supervision of the Officers and employees of the Corporation, shall have the
power to appoint and remove and discharge any and all agents and employees of
the Corporation not elected or appointed directly by the Board of Directors.
and shall assist the Board in the formulation of policies of the
Corporation. The Chairperson of the Board, if Chief Executive Officer, may
delegate any part of his or her duties to the President, or to one or more of
the Vice Presidents of the Corporation.
Section 6.5 PRESIDENT. - The President, when he or she is not designated as
and does not have the powers of the Chief Executive Officer, shall have such
other powers and duties as may from time to time be prescribed by the Board
of Directors or be delegated to him or her by the Chairperson of the Board or
the Chief Executive Officer.
Section 6.6 VICE PRESIDENTS. - The Vice Presidents shall have such powers and
duties as may be prescribed for him or her by the Board of Directors and the
Chief Executive Officer. In the absence of or in the event of the death of
the Chief Executive Officer and the President, the inability or refusal to
act, or in the event for any reason it shall be impracticable for Chief
Executive Officer and the President to act personally, the Vice President (or
in the event there be more than one Vice President, the Vice Presidents in
the order designated by the Board of Directors, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the Chief Executive Officer and the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the Chief
Executive Officer and the President. The execution of any instrument of the
Corporation by any Vice President shall be conclusive evidence, as to third
parties, of his or her authority to act in the stead of the Chief Executive
Officer and the President.
Section 6.7 SECRETARY. - The Secretary shall attend all meetings of the Board
of Directors, shall keep a true and faithful record thereof in proper books
to be provided for that purpose, and shall be responsible for the custody and
care of the corporate seal, corporate records and minute books of the
Corporation, and of all other books, documents and papers as in the practical
business operation of the Corporation shall naturally belong in the office or
custody of the Secretary, or shall be placed in his or her custody by the
Chief Executive Officer or by the Board of Directors. He or she shall also
act as Secretary of all shareowners' meetings, and keep a record thereof. He
or she shall, except as may be otherwise required by statute or by these
bylaws, sign, issue and publish all notices required for meetings of
shareowners and of the Board of Directors. He or she shall be responsible
for the custody of the stock books of the Corporation and shall keep a
suitable record of the addresses of shareowners. He or she shall also be
responsible for the collection, custody and disbursement of the funds
received for dividend reinvestment. He or she shall sign stock certificates,
bonds and mortgages, and all other documents and papers to which his or her
signature may be necessary or appropriate, shall affix the seal of the
Corporation to all instruments requiring the seal, and shall have such other
powers and duties as are commonly incidental to the office of Secretary, or
as may be prescribed for him or her by the President or by the Board of
Directors.
Section 6.8 TREASURER. - The Treasurer shall have charge of, and be
responsible for, the collection, receipt, custody and disbursement of the
funds of the Corporation, and shall deposit its funds in the name of the
Corporation in such banks or trust companies as he or she shall designate and
shall keep a proper record of cash receipts and disbursements. He or she
shall be responsible for the custody of such books, receipted vouchers and
other books and papers as in the practical business operation of the
Corporation shall naturally belong in the office or custody of the Treasurer,
or shall be placed in his or her custody by the President, or by the Board of
Directors. He or she shall sign checks, drafts, and other paper providing
for the payment of money by the Corporation for operating purposes in the
usual course or business. He or she may, in the absence of the Secretary and
Assistant Secretaries sign stock certificates. The Treasurer shall have such
other powers and duties as are commonly incidental to the office of
Treasurer, or as may be prescribed for him or her by the President or by the
Board of Directors.
Section 6.9 CONTROLLER. - The Controller shall be the principal accounting
Officer of the Corporation. He or she shall have general supervision over
the books of accounts of the Corporation. He or she shall examine the
accounts of all Officers and employees from time to time and as often as
practicable, and shall see that proper returns are made of all receipts from
all sources. All bills, properly made in detail and certified, shall be
submitted to him or her, and he or she shall audit and approve the same if
found satisfactory and correct, but he or she shall not approve any voucher
unless charges covered by the voucher have been previously approved through
work orders, requisition or otherwise by the head of the department in which
it originated, or unless he or she shall be otherwise satisfied of its
propriety and correctness. He or she shall have full access to all minutes,
contracts, correspondence and other papers and records of the Corporation
relating to its business matters, and shall be responsible for the custody of
such books and documents as shall naturally belong in the custody of the
Controller and as shall be placed in his or her custody by the President or
by the Board of Directors. The Controller shall have such other powers and
duties as are commonly incidental to the office of Controller, or as may be
prescribed for him or her by the President or by the Board of Directors.
Section 6.10 ASSISTANT OFFICERS. - The Assistant Secretaries, Assistant
Treasurers, Assistant Controllers, and other Assistant Officers shall
respectively assist the Secretary, Treasurer, Controller, and other Officers
of the Corporation in the performance of the respective duties assigned to
such principal Officer, and in assisting his or her principal Officer each
assistant Officer shall to that extent and for such purpose have the same
powers as his or her principal Officer. The powers and duties of any such
principal Officer shall temporarily devolve upon an assistant Officer in case
of the absence, disability, death, resignation or removal from office of such
principal Officer.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 7.1 CERTIFICATES FOR SHARES. - Each certificate representing shares
of the Corporation shall state upon the fact (a) that the Corporation is
organized under the laws of the State of Wisconsin, (b) the name of the
person to whom issued, (c) the number and class of shares, and the
designation of the series, if any, which such certificate represents, and (d)
the par value of each share, if any, and each such certificate shall
otherwise be in such form as shall be determined by the Board of Directors.
Such certificates shall be signed by the Chairman of the Board, or the Chief
Executive Officer or the President and by the Secretary or an Assistant
Secretary and shall be sealed with the corporate seal or a facsimile
thereof. The signatures of such officers upon a certificate may be
facsimiles if the certificate is manually signed on behalf of a transfer
agent and registrar. In case any officer or other authorized person who has
signed or whose facsimile signature has been placed upon such certificate for
the Corporation shall have ceased to be such officer or employee or agent
before such certificate is issued, it may be issued by the Corporation with
the same effect as if such person where an officer or employee or agent at
the date of its issue. Each certificate for shares shall be consecutively
numbered or otherwise identified.
All certificates surrendered to the Corporation for transfer
shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the
Corporation as the Board of Directors may prescribe.
Section 7.2 TRANSFER OF SHARES. - Transfer of shares of the Corporation shall
be made only on the stock transfer books of the Corporation by the holder of
record thereof or by such person's legal representative, who shall furnish
proper evidence of authority to transfer, or authorized attorney, by power of
attorney duly executed and filed with the Secretary of the Corporation, and
on surrender for cancellation of the certificate for such shares.
Subject to the provisions of Section 3.12 of Article III of these
Bylaws, the person in whose name shares stand on the books of the Corporation
shall be treated by the Corporation as the owner thereof for all purposes,
including all rights deriving from such shares, and the Corporation shall not
be bound to recognize any equitable or other claim to, or interest in, such
shares or rights deriving from such shares, on the part of any other person,
including (without limitation) a purchaser, assignee or transferee of such
shares, or rights deriving from such shares, unless and until such purchaser,
assignee, transferee or other person becomes the record holder of such
shares, whether or not the Corporation shall have either actual or
constructive notice of the interest of such purchaser, assignee, transferee
or other person. Except as provided in said Section 3.12 hereof, no such
purchaser, assignee, transferee or other person shall be entitled to receive
notice of the meetings of shareholders, to vote at such meetings, to examine
the complete record of the shareholders entitled to vote at meetings, or to
own, enjoy or exercise any other property or rights deriving from such shares
against the Corporation, until such purchaser, assignee, transferee or other
person has become the record holder of such shares.
Section 7.3 LOST, DESTROYED OR STOLEN CERTIFICATES. - When the owner claims
that certificates for shares have been lost, destroyed or wrongfully taken, a
new certificate shall be issued in place thereof if the owner (a) so requests
before the Corporation has notice that such shares have been acquired by a
bona fide purchaser, (b) files with the Corporation a sufficient indemnity
bond if required by the Corporation and (c) satisfies such other reasonable
requirements as may be provided by the Corporation.
Section 7.4 STOCK REGULATIONS. - The Board of Directors shall have the power
and authority to make all such further rules and regulations not inconsistent
with law as it may deem expedient concerning the issue, transfer and
registration of shares of the Corporation.
ARTICLE VIII
INDEMNIFICATION AND LIABILITY OF DIRECTOR AND OFFICERS
Section 8.1 INDEMNIFICATION. - The Corporation shall, to the fullest extent
permitted or required by Sections 180.0850 to 180.0859, inclusive, of the
Wisconsin Business Corporation Law, including any amendments thereto (but in
the case of any such amendment, only to the extent such amendment permits or
requires the corporation to provide broader indemnification rights than prior
to such amendment), indemnify its Directors, Officers, employees and agents
against any and all Liabilities, and advance any and all reasonable Expenses,
incurred thereby in any Proceeding to which any such Director, Officer,
employee or agent is a Party because he or she is or was a Director, Officer,
employee or agent of the Corporation. The rights to indemnification granted
hereunder shall not be deemed exclusive of any other rights to
indemnification against Liabilities or the advancement of Expenses which a
Director, Officer, employee or agent may be entitled under any written
agreement, Board resolution, vote of shareowners, the Wisconsin Business
Corporation Law or otherwise. The Corporation may, but shall not be required
to, supplement the foregoing rights to indemnification against Liabilities
and advancement of Expenses under this Section 8.1 by the purchase of
insurance on behalf of any one or more of such Directors, Officers, employees
or agents, whether or not the Corporation would be obligated to indemnify or
advance Expenses to such Director, Officer, employee or agent under this
Section 8.1. All capitalized terms used in this Article VIII and not
otherwise defined herein shall have the meaning set forth in Section 180.0850
of the Wisconsin Business Corporation Law.
ARTICLE IX
MISCELLANEOUS
Section 9.1 FISCAL YEAR. - The fiscal year of the Corporation shall be the
calendar year.
Section 9.2 DIVIDENDS. - Subject to the provisions of law or the Articles of
Incorporation, the Board of Directors may, at any regular or special meeting,
declare dividends upon the capital stock of the Corporation payable out of
surplus (whether earned or paid-in) or profits as and when they deem
expedient. Before declaring any dividend there may be set apart out of
surplus or profits such sum or sums as the directors from time to time in
their discretion deem proper for working capital or as a reserve fund to meet
contingencies or for such other purposes as the directors shall deem
conducive to the interests of the Corporation.
Section 9.3 CONTRACTS, CHECKS, DRAFTS, DEEDS, LEASES AND OTHER INSTRUMENTS. -
All contracts, checks, drafts or other orders for the payment of money, notes
or other evidences of indebtedness issued in the name of the Corporation,
shall be signed by such officer or officers, agent or agents of the
Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors. The Board may authorize by resolution
any officer or officers to enter into and execute any contract or instrument
of indebtedness in the name of the Corporation, and such authority may be
general or confined to specific instances. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the credit of the
Corporation in such banks or other depositories as the Treasurer may
authorize.
All contracts, deeds, mortgages, leases or instruments that
require the corporate seal of the Corporation to be affixed thereto shall be
signed by the President or a Vice President, and by the Secretary, or an
Assistant Secretary, or by such other officer or officers, or person or
persons, as the Board of Directors may be resolution prescribe.
Section 9.4 VOTING OF SHARES OWNED BY THE CORPORATION. - Subject always to
the specific directions of the Board of Directors, any share or shares of
stock issued by any other corporation and owned or controlled by the
Corporation may be voted at any shareholders' meeting of such other
corporation by the Chief Executive Officer of the Corporation, if present, or
if absent by any other officer of the Corporation who may be present.
Whenever, in the judgment of the Chief Executive Officer, or if absent, of
any officer, it is desirable for the Corporation to execute a proxy or give a
shareholders' consent in respect to any share or shares of stock issued by
any other corporation and owned by the Corporation, such proxy or consent
shall be executed in the name of the Corporation by the Chief Executive
Officer or one of the officers of the Corporation and shall be attested by
the Secretary or an Assistant Secretary of the Corporation without necessity
of any authorization by the Board of Directors. Any person or persons
designated in the manner above stated as the proxy or proxies of the
Corporation shall have full right, power and authority to vote the share or
shares of stock issued by such other corporation and owned by the Corporation
in the same manner as such share or shares might be voted by the Corporation.
ARTICLE X
AMENDMENT OR REPEAL OF BYLAWS
Section 10.1 AMENDMENTS BY BOARD OF DIRECTORS. - Except as otherwise
provided by the Wisconsin Business Corporation Law or the Articles of
Incorporation, these Bylaws may be amended or repealed and new Bylaws may be
adopted by the Board of Directors by the affirmative vote of a majority of
the number of directors present at any meeting at which a quorum is in
attendance; provided, however, that the shareowners in adopting, amending or
repealing a particular bylaw may provide therein that the Board of Directors
may not amend, repeal or readopt that bylaw.
Section 10.2 IMPLIED AMENDMENT. - Any action taken or authorized by the
shareowners or by the Board of Directors which would be inconsistent with the
Bylaws then in effect but which is taken or authorized by affirmative vote of
not less than the number of shares or the number of directors required to
amend the Bylaws so that the Bylaws would be consistent with such action
shall be given the same effect as though the Bylaws had been temporarily
amended or suspended so far, but only so far, as is necessary to permit the
specific action so taken or authorized.
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I,_______________________, do hereby certify that I am the duly elected and
acting _______________ Corporate Secretary of Alliant Energy Corporation, a
Wisconsin corporation, organized under the laws of the State, and that I have
access to the corporate records of said Company, and as such officer, I do
further certify that the foregoing Bylaws were adopted as of March 15, 2000.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal of said Company this ____________ day of ___________________,
_______.
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