Tag Archives: weather

South Jersey Industries’ (SJI) CEO Mike Renna on Q4 2015 Results – Earnings Call Transcript

Operator Good day, ladies and gentlemen and welcome to the Fourth Quarter 2015 South Jersey Industries Earning Conference Call. My name is Lauren and I’ll be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Ann Anthony, Treasurer. Please proceed. Ann Anthony Thank you. Good morning and thank you for joining us as we present SJI’s fourth quarter and full year fiscal 2015 results, as well as an update on our business. Joining me on the call today are Mike Renna, President and CEO of SJI; along with Steve Clark, our CFO; and Jeff DuBois, President of South Jersey Gas; as well as Marissa Travaline, our Director of Investor Relations. We also have several additional members of our senior management team available to help address questions following our prepared comments. Our earnings release was issued to the media this morning and is also available on our Web site at www.sjindustries.com. This release and the associated 10-K provide an in-depth review of earnings on both the GAAP and to non-GAAP basis, using our non-GAAP measure of Economic Earnings. Reconciliations of Economic Earnings to the comparable GAAP measures appear in both documents. Let me note that throughout today’s call, we will be making references to future expectations, plans and opportunities for South Jersey Industries. Actual results may differ materially from those indicated by these statements, as a result of various important factors, including those discussed in the Company’s Form 10-K on file with the SEC. Please be reminded that our 2014 per share numbers have been adjusted to reflect the impact of the stock split that occurred in May of 2015. With that said, I will now turn the call over to our CFO, Steve Clark to present SJI’s fourth quarter and full year 2015 results. Steve Clark Thanks, Ann and good morning everyone. To begin, our full year 2015 Economic Earnings results totalled $99 million as compared with $104 million in 2014. Economic Earnings per share for 2015 were $1.44 as compared with the $1.57 for the prior year. For the fourth quarter of 2015, Economic Earnings totalled $43.2 million as compared with $31.2 million in the prior year period. Economic EPS for the fourth quarter of 2015 was $0.62 compared with $0.47 for the same period in 2014. Major driver of the year-over-year decline is the write-down of our investment in the energy facility of the former Revel Casino property in 2015 and related cost we incurred. This non-recurring event reduced Economic Earnings on a compared basis year-over-year by $15.7 million. OpEx totalled $11.1 million which is attributable to the write-off of our equity investment in the project and a reduction in operating income compared to the prior year period. In the fourth quarter of 2015, we also took an additional charge after-tax of $4.6 million resulting from a payment to the formal bondholders to settle all claims associated with the project. We are currently pursuing recovery of that payment from our financial and legal advisors, as well as our insurance carriers. We’ll recognize that recovery in the future period in which it occurs. We also restructured our Energy Project business at the end of 2015, distributing the assets held within Energenic, our energy project development joint venture among the partners. Later in the call we’ll provide more detail around this transaction which resulted in a onetime after-tax charge of $1.7 million. The charge was entirely due to recapture of investment tax credits associated with several of the projects we divested. Excluding these non-recurring items SJI’s Economic Earnings and Economic Earnings per share for 2015 would have improved by $17.4 million and $0.25 per share respectively. With that said, we did see some very strong operating performance within our business lines that reinforces our potential for significant earnings growth over the next five years. I’ll detail that information now as we review the performance of each for our business lines. Looking at the utility, South Jersey Gases’ earnings for the year remained stable at $66.6 million as compared with $66.5 million in 2014. Fourth quarter utility net income was $22.2 million as compared to $24 million for the same period of 2014. Earnings was attributable to significant infrastructure investment and strong customer growth, was offset by higher charges related to uncollectible accounts and post-retirement benefits, as well as investments made to improve customer service. As we discussed in the last call, extreme cold experienced in the past few winters produced significantly higher customer bills. Also during 2015, we revised upwards our reserve percentages for age receivables based upon a recent experience. These events resulted in increased aging of those receivables and ultimately increased reserves and write-offs for those receivables. The after-tax charges for our uncollectable receivables totalled $8.8 million for the full year of 2015 and $3.8 million for the fourth quarter. This compares to after-tax charges of $5.6 million and $3.4 million for the same periods in 2014. We continue to educate customers of ways to reduced usage, excess programs for assistance and take advantage of the various bill repayment options we offer. As I mentioned earlier, customer growth and infrastructure investments remain key drivers of current performance and will continue to benefit utility earnings in the future. During 2015, we added more than 6,200 customers, brining our current customer count to 373,100. During the same time period, customer growth added 2.2 million in incremental net margin as compared with the prior year period. High for our industry, this 1.7% customer growth rate is supported by low natural gas prices from abundant local supplies, aggressive efforts targeting conversions and a noteworthy increase in new construction, which accounted for 2,900 customers in 2015 that was up a little over 19% from 2014 results. Regarding investments in our gas system, we closed out 2015 with accelerated infrastructure investments totalling $70 million. AIRP, which replaces aging bare steel and cast iron gas mains throughout our system and the SHARP, which replaces low pressure gas mains along the barrier islands with high pressure mains helped to reinforce and better protect our system. These investments added an incremental $2.3 million of net income for the full year. Another major infrastructure initiative underway is the proposed pipeline to provide natural gas to the former BL England Electric generating station. We received final approval from the New Jersey Board of Public Utilities in December, allowing the project to proceed. While several outside parties have filed appeals to the decision, we remain optimistic that construction will begin on this project later this year. Now we’ll move to the non-utility side of our business, which is comprised of two segments, South Jersey Energy Services and South Jersey Energy Group. For the full year these segments added combined Economic Earnings of $31.5 million as compared to $37.6 million in 2014. For the fourth quarter, the non-utility businesses generated $20 million compared with $7.2 million for the fourth quarter of 2014. South Jersey Energy Services added Economic Earnings of $14.7 million in 2015 as compared to $24.6 million in 2014. For the fourth quarter South Jersey Energy Services contributed $9.3 million as compared with $3 million for the same period of 2014. Plus this area of the business houses our entire energy production portfolio, $17.4 million of one-time charges I noted in my opening comments flowed entirely through our Energy Services business, while the conversation concerning Revel is a familiar one, it is worth noting that we believe the settlement reached in December puts the negative impacts of that issue fully behind us. Further, we’re in discussions to recover the $4.6 million charge incurred in the fourth quarter. The remaining $1.7 million charge relates to December transaction whereby substantially all of the assets held in our joint venture Energenic LLC were distributed between SJI subsidiary, Marina Energy and its partnered DCO Energy. SJI retained all the assets associated with the provision of energy to the well-established Borgata hotel and casino property and two solar facilities. Other landfill and CHP assets were distributed to the partner firm. I’ll let Mike expand on the strategic rationale behind that transaction a little bit later. Turning to our individual project businesses, our Solar business contributed $33.9 million for the full year 2015 as compared with $25.5 million in 2014. For the fourth quarter, this business line contributed $17.3 million in 2015 as compared with $4.1 million for the same period in 2014. Investment tax credits throughout that performance contributing $38.3 million in 2015 as compared with $30.3 million in 2014. Operating performance continues to improve within our Solar fleet, and 2015 production generated approximately 136,000 Solar renewable energy credits as compared with 111,000 in 2014. As has been the case in prior quarters’ results, total production is not yet fully recognized in net income due to the three to six month lag in the certification of certain renewable energy certificates. Performance also reflects the fact that we have hedged a considerable amount of our SRECs when SREC prices were much lower than they are today. Looking ahead, we expect operating performance of our Solar business to continue improving as SREC prices have strengthened significantly during the last year. We’ll benefit from this as we hedge future production from our new and existing Solar facilities, at the much higher SREC prices available in the market today. Looking at CHP, for the full year our portfolio reflected a loss of $13.7 million as compared with Economic Earnings of $1.8 million in 2014. For the quarter, contributions from CHP reflected a loss of $5.1 million in 2015 as compared to a loss of $0.5 million in the fourth quarter of 2014. As I previously indicated, these results directly reflect the charge associated with our energy facility at the former Revel property. Excluding the charge, CHP was a positive contributor to Economic Earnings for the year. Our landfill projects produced a loss of $4.5 million in 2015 as compared with a loss of $3.3 million in 2014. For the quarter landfills posted a loss of $1.3 million versus a $700,000 loss in the fourth quarter of 2014, due in large part to the inability of the landfill operator at our largest facility to provide gas in November and December. Performance of the landfills has been an issue for a while and that was one of the drivers behind the restructuring of our Energy production business. As we move forward, SJI’s portfolio now includes just four active landfill projects, which all support a single power purchase agreement for renewable energy at the Borgata property. Within the Wholesale Commodity and Fuel Management segment of our business, 2015 was a very profitable year. South Jersey Energy Group contributed $16.8 million in 2015 compared with $13 million in the previous year, an increase of nearly 30%. For the quarter, South Jersey Energy Group added $10.7 million as compared with $4.2 million in the fourth quarter of 2014. I want to emphasize that this performance was particularly impressive because it was achieved without the benefit of the polar vortex that boosted 2014 results. Rather, these results were attributable to the contributions from our three active field management contracts and our ability to optimize storage and transportation assets within our portfolio. We see this performance as being repeatable in 2016. Finally, our year-end equity to cap ratio was 42% as compared to 43% in 2014. This ratio reflects the significant investments we made in our Utility and in our Solar Project Development business over the last year. To support our balance sheet, we’ve used our dividend reinvestment plan to issue equity totalling $63.2 million in 2015. Further, we currently maintain a cumulative deferred tax benefits totalling nearly $400 million related to bonus depreciation and investment tax credits that we expect to realize over the next 10 years, as we work towards strengthening our balance sheet. At this time, I’ll turn the call over to Mike. Mike Renna Thanks, Steve. Good morning, everyone. It goes without saying that 2015 was a particularly challenging one for SJI. But it is our performance in light of those challenges, strengthened by a new vision that has put us on a path for long-term sustainable growth. Repositioning executed in 2015, will serve as the bridge to our 2020 plan, defined by four clear and achievable goals. The first is to grow earnings to at least $150 million, it’s important to emphasize that 150 million represents earnings from our core operations. In other words, earnings without the benefit of investment tax credits. Effectively, we are doubling SJI’s earnings from operations in five years. Next, is to improve the quality of our earnings. As we move through the second half of the decade toward 2020, we expect nearly 80% of earnings to be coming from regulated businesses. The third tenant of our plan is to strengthen our balance sheet. As our investment profile changes and aligns with increased opportunity in our regulated businesses, we will realize a marked and considerable de-levering of our balance sheet. Finally, we will accomplish all of this with a continued focus on reducing risk across our portfolio to ensure that we provide not only high-quality, but also consistent and reliable earnings. As I mentioned earlier, the challenges face in 2015 were certainly difficult and unfortunate, provided a platform for change and growth. Specifically, the bondholders’ settlement and eventual write-off of our energy assets associated with the former Revel property allowed us to relief SJI of a significant and costly financial and resource drain. Last six months have brought forth a renewed organizational focus on those businesses that are the foundation of our plan. The Energenic transaction completed in December has real and tangible strategic benefits. Our assets are now concentrated on high-performing proven CHP assets and a smaller landfill fleet, a fleet, where the majority of the output is protected by a long-term power purchase agreement with Borgata. Over the long-term this transaction will afford a stronger and more stabled income stream and considerable cost savings. The impacts in our region from higher gas cost during extreme weather in 2014 and to a lesser extent 2015 have only deepened our commitment to critical pipeline projects like BL England and PennEast, both provide much needed gas and electric reliability and cost savings to constrained areas of New Jersey. 2015 bolstered my confidence in our ability to deliver at least 150 million in Economic Earnings by 2020. The foundation is there, customer growth combined with ongoing investment in our utility infrastructure, supported by strong performance from our Commodity Marketing and Fuel Management business lines will drive meaningful and near-term improvements in performance. While broader initiatives like an enhanced commitment to leadership and talent development and new midstream investments like PennEast will allow for exceptional long-term growth. Looking to 2016, due to the many advantages of natural gas, we expect significant customer growth to continue. Additionally, investments through programs like our AIRP and SHARP will provide benefits to both customers and shareholders alike. These impacts combined with investment in new projects like the BL England pipeline and our natural gas liquifier will position the utility to contribute more than 70% of earnings in 2016. On the non-utility side of the business, our retail and wholesale commodity lines at South Jersey Energy Group are solidly positioned for the future. On the retail side, a number of diverse multiyear customer contracts support growth from this business line year-over-year. In 2016, two additional fuel management contracts will begin contributing when the Panda Liberty and Panda Patriot facilities come online. With a total of eight contracts already executed, we remain well-positioned to serve at least 10 gas fired generators by 2020. These initiatives support our expectation that this business segment will contribute roughly 20% to 25% to earnings in 2016. Looking at South Jersey Energy Services, and in particular our Energy Production business, we expect to see Solar development continue to be a technology that demonstrates improved performance and remains highly valued within the market. With that said though, due in large part to the impact of bonus depreciation on the timing of when we can realize the cash benefit of renewable ITCs, we anticipate a sharp decline in Solar investment in 2016. As a result for this year and beyond, we expect services to contribute between 5% and 10% to Economic Earnings. As we look ahead, our future will benefit from the roll in 2015 played as a critical positioning year, because of the versatility and agility of our business, we’ve been able to overcome several short-term challenges without compromising our potential for significant long-term growth. This time, I’ll turn the call back over to the operator for the Q&A portion. Question-and-Answer Session Operator [Operator Instructions] Your first question comes from the line of Chris Ellinghaus. Please proceed. Chris Ellinghaus I just want to ask you a couple of things. Can you give us any color, I gather from your comments on solar ITCs that despite the ITC extension, you are sort of sticking to your plan to wind down solar ITCs as an earnings driver. Can you give us any color over what ’16 looks like and how many years do you see that taking? Mike Renna Sure, I think again 2016 you’ll see a considerable reduction in the level of renewable investment, and then consequently with the ITC number would be significantly less than it is or it has been in recent years. I don’t want to pre-empt our guidance by giving you a finite number, but I think considerable and significant are the two words that come to mind. And I would expect that in 2017 and beyond, you’ll see very limited investment on our part in renewable projects. Look I think the project is still – they produced very attractive returns when you look at them on a discrete basis, but the issue becomes when you can recognize the cash benefits of them. So, when you cut the NPV of these projects in half and start to get the de minimis returns on investment because of the nature of when you can realize the cash flows, it becomes pretty difficult to support meaningful investment. Chris Ellinghaus Okay. Steve Clark At the same time Chris, we have a lot of investment coming in front of us in the regulated businesses, so I think our focus is to have that be the area that we look to deploy our capital. Chris Ellinghaus Right, I don’t disagree with the strategy. I’m just trying to figure out the timing. Bad debt expense in 2015, I get the polar vortex and how that would impact customers. How do you see that sort of going forward, do you see that as something that is going to decline with the more mild weather? What do you think is going to happen? Mike Renna I’ll let Jeff DuBois answer that question. Jeff DuBois Chris yes I mean we definitely see it stabilize, we saw a big uptick because of the polar vortex two winters ago and even last winter, but with the combination of commodity prices dropping so drastically, as well as the weather being down we see our receivables coming down. Chris Ellinghaus Also, Steve, can you give us any color on outside of the charges for 2015, any kind of indication of how much you spent in terms of legal, O&M costs for all of the commotion? Steve Clark No Chris I don’t have a good breakdown on that, I can provide that at another time, I think it’s relatively straight forward. The difference we were talking about there that was really designed to pick up kind of the variance between how it impacted us in ’14 and how it impacted us in ’15. There were obviously several million dollars there and the settlement done there was probably the biggest, so that was a pre-tax settlement of about $7.5 million, so getting that out of the way for us is a big deal. Probably more important than any of that Chris, is that it was the amount of management time and focus that was spent on it. Chris Ellinghaus Right. Steve Clark That will be kind of dedicated that to profitable portions of our business as opposed to dealing with an issue of settlement. Operator Your next question comes from the line of Dan Fidell. Please proceed. Dan Fidell I think that’s me, good morning guys it is Dan Fidell. Mike Renna We thought it was your brother Dan. Dan Fidell Yes my brother is Sam, right. So thanks for the call and just a couple of follow-up questions from me. First, can you just from a timing standpoint give us how you see the BL England process from here on playing out? Where do we stand in terms of the appeals process and maybe a little bit more specifically when do you think you might be able to start construction? Jeff DuBois Hi Dan this is Jeff. We’ve gotten all of the approvals that we need from both the Board of Public Utilities and the Pinelands Commission. There have been a couple of challenges by some environmental groups. We see those challenges probably taking anywhere as in the range of nine to 12 months in total. So we believe that there is still an opportunity to start construction this year at the very least we’ll probably start ordering supplies and equipment for that project hopefully by the fourth quarter. Dan Fidell Okay, great. Thank you, very helpful there in terms of the timing. I guess maybe just switching topics quickly to Energenic. Just kind of interested in sort of a two part question here in terms of how you guys kind of decided on the division of assets? And then I guess secondarily now that we are past kind of that restructuring process, what it means for your partnership in terms of future growth opportunities going forward? Mike Renna Sure, Dan. It is Mike. Dan Fidell Hi Mike. Mike Renna Let me — and I’ll start with this, this was a — we like to actually we kind of joke about it a little bit. This was a very amicable divorce if you will. The partnership was strong throughout. I think that we expected and hoped to be able to evaluate future development opportunities together with DCO. I think that right now, the market is pretty dry as it relates to opportunities for CHP which is where our interest would lie in terms of development opportunities. So, if things change, and the market picks back up and there are opportunities with credit worthy strong off takers and attractive returns on investment then we would certainly jump at the opportunity to do something with DCO again, so I think everything here is fine and solid. As far as the allocation of assets, it really came down to — for us to kind of as part of this repositioning was getting back to our core and our core are the CHP assets that serve Borgata. They are proven, profitable, they’re reliable and they’re complimentary. So when we acquired the cogeneration facility that serves Borgata, it was complimentary to that Marina thermal facility. The four landfills as well are all backed by PPA contract where their output is delivered to Borgata. So, we really focused on those assets that were related to our relationship with the Borgata. Dan Fidell Got it. That certainly makes sense there. I guess that kind of leads into my last question which is basically on the landfill side with kind of — it seems like the separation of a number of the landfill assets and you mentioned the four that you kept. Is it, I guess should we basically imply from this that the losses you have on the landfill side in the past that should narrow or get back to breakeven just on the landfill assets that you have retained? Mike Renna That is a core assumption that drove this decision for us and the selection of the assets that we were interested in acquiring, so, yes. Again, we are — I’m not going to certainly run from the fact that we’ve had some operational challenges whether it be gas availability or equipment issues at multiple landfill sites, but we believe these to be the four that offer the most potential going forward and again are also benefiting from the fact that there is a PPA above market actually that backs these contracts. Operator [Operator Instructions] I would now like to turn the call back over to Mike Renna. Please proceed. Mike Renna Thanks. Before we wrap-up, as always, please feel free to contact Marissa Travaline, our Director of Investor Relations or Ann Anthony, our Treasurer if any follow-up questions arise. Marissa can be reached at 609-561-9000 extension 227 or by email at mtravaline@sjindustries.com. Ann can be reached at extension 4143 or by email at aanthony@sjindustries.com. Again, thank you for joining us today and for your continued interest and investment in SJI. Operator Ladies and gentlemen, that concludes today’s conference. Thank you for your participation. You may now disconnect and have a great day. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com . Thank you!

Northwest Natural Gas’ (NWN) CEO Gregg Kantor on Q4 2015 Results – Earnings Call Transcript

Operator Good morning and welcome to the Northwest Natural Gas Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Nikki Sparley, Investor Relations Manager. Please go ahead. Nikki Sparley Thank you, Andrew. Good morning, everyone and welcome to our fourth quarter 2015 earnings call. As a reminder some of the things that will be said this morning contains forward-looking statements. They are based on management’s assumptions, which may or may not come true. You should refer to the language at the end of our press release for the appropriate cautionary statements and also our SEC filings for additional information. We expect to file our 10-K later today. As mentioned, this teleconference is being recorded and will be available on our website following the call. Please note these conference calls are designed for the financial community. If you are an investor and have questions, please contact me directly at (503) 721-2530. Media may contact, Melissa Moore, at (503) 220-2436. Speaking this morning are Gregg Kantor, Chief Executive Officer and Greg Hazelton, Senior Vice President, Chief Financial Officer, and Treasurer. Mr. Kantor and Mr. Hazelton have some opening remarks and then will be available to answer your questions. Also joining us today are other members of our executive team, who are available to help answer any questions you may have. With that, I will turn it over to Mr. Kantor for his opening remarks. Gregg S. Kantor Thanks Nikki, good morning everyone and welcome to our fourth quarter and year-end earnings call. I will start today with highlights from the year and then I will turn it over to Greg Hazelton to cover our 2015 financial performance. Finally I will wrap up the call with a look forward. In 2015 Northwest Natural successfully navigated a number of challenges while still achieving our key financial and operational goals. Our financial challenges came early in the year with Oregon experiencing the warmest winter on record. The impact was substantially mitigated by our weather normalization mechanism which has been place since 2003. However, we experienced lower volumes and revenues as about 20% of our customer base is not covered by the mechanism. In addition in February 2015, the Oregon Commission approved a mechanism that allows us to recover, prudently incurred environmental clean-up cost allocated to Oregon associated with our historic manufactured gas operations. We began collection of our environmental expenditures through this mechanism known as the SRM in November of last year. However, as part of the February 2015 order, the OPUC disallowed environmental expenses totaling $15 million based on the application of an earnings test for past years when the company earned above its allowed rate of return. As a result, we took an after tax charge of $9.1 million in the first quarter of 2015. In response to the warm winter and the disallowance, management instituted a number of temporary cost saving measures. Through these targeted efforts we reduced budgeted O&M levels by approximately $5 million or about $0.11 per share. And I am proud of our employees whose hard work and commitment allowed us to accomplish this while still remaining dedicated to exceptional service and safety. Despite the financial headwinds our core utility performance remained solid with higher margin and continued customer growth. Part of this performance stems from the strength of our region’s economy and you can see that strength in a number of trends including in migration and housing growth. Oregon is experiencing strong population gains particularly attracting college educated workers between the age of 25 and 34. In fact Oregon ranks sixth in the nation for in migration of degree holders who are beginning or mid career. These young working age households are considered vital for both regional economic development and longer term growth. In the last year average monthly employment in the Portland Vancouver metro area increased by about 35000 new jobs equating to an annual employment growth rate of 3.2% which exceeded the average national rate by more than 1%. Over the last 12 months the unemployment rate in the Portland and surrounding metro areas sell 100 basis points to 5.3%. We’re also seeing strong housing growth in the Portland Vancouver area with a 25% increase in single family building permits in the last 12 months. And in the last year, home sales were up about 20% in Portland and average home prices increased by 6.5%. In Park County [ph] Washington where about 11% of our customers are located, home sales were up 19% for the year and average home prices were up 8.6%. All of these factors contributed to a fast growing Oregon economy. In fact Oregon’s economic health index rose the most in the nation through the first three quarters of 2015 according to the latest Bloomberg economic evaluation of states report. These were all good signs our economy continues to move in the right direction. On the operations front we had an excellent year with a continued focus on safety and reliability. We hit a milestone in the fourth quarter when we removed the final known bare steel pipe from our distribution system making our system one of the most modern in the nation. This achievement was supported by trackers established with the help of the commission more than three decades ago. In 2015 we once again reached our emergency response goals of answering 90% of emergency calls within 10 seconds and responding to damage and protocols onsite within 30 minutes on average. During the year we also began several multiyear infrastructure projects to ensure the continued reliability of our system and support customer growth. These ongoing investments include improvements totaling $25 million at our Newport LNG facility to modernize that plant and $25 million of upgrades are being made to our system in Vancouver, Washington also over the next several years to increase pressure levels to support our service territories fastest growing community. Safety and reliability coupled with affordability make natural gas a very competitive fuel source. In 2015 we were able to strengthen that position by reducing residential customer rates in Oregon by 7%, by 14% in Washington. This rate reduction was a reflection of the lowest natural gas commodity prices we’ve seen in 15 years. And finally for the sixth time in nine years we posted the highest score among large gas utilities in West in the 2015 JD Power Residential Customer Satisfaction study. This also marked the eighth time in nine years of ranking among the top two highest satisfaction scores in the nation. These results reflect our continued commitment to operate reliably, safely, and with high quality customer service in the communities we serve. With that let me turn it over to Gregg to cover our financial results and provide the 2016 guidance. Gregory C. Hazelton Thank you, Gregg and good morning everyone. Today I’ll start with a review of the fourth quarter results, followed by a discussion of our annual performance, and close with 2016 earnings guidance including key assumptions for the year. For the fourth quarter we reported improved consolidated results with net earnings of $1.08 per share or $29.7 million compared to $1.04 per share or $28.5 million for the same period last year. Consolidated results were driven by higher utility margin and other income, partially offset by increased O&M expense. Looking at our segment results, for the quarter our utility segment net income increased $1.1 million based on a $2.6 million increase in utility margin and then $1.8 million increase in other income, offset by a $2.4 million increase in O&M expense. The utility margin -– the increase in utility margin was predominantly driven by customer growth with over 3,300 new meter sets installed in the fourth quarter, which is nearly 1% higher than the prior year. In addition, utility margin benefited from the gas cost sharing gains as a result of lower actual gas prices than rates in Oregon -– in the Oregon purchase gas adjustment mechanism. Utility O&M for the quarter increased primarily reflecting higher incentive compensation, retirement, and healthcare costs. During the quarter, our gas storage segment earnings improved slightly reflecting some positive trends. Our Mist gas storage facility continues to perform well and operating results remained strong and comparable to the prior year. Gill Ranch realized an uptick in revenues reflecting higher contract prices for both firm and optimization contracts. Additionally, operating expenses decreased as we managed the business to a lower cost structure which we expect to benefit from in 2016. Also in December we redeemed the remaining Gill Ranch note, prior to its November 2016 scheduled maturity. Turning to our annual consolidated results, net income was $1.96 per share or $53.7 million compared to $2.16 per share or $58.7 million in 2014. As previously discussed, the company recognized a non-cash, after-tax $9.1 million environmental disallowance related to the February 2015 SRRM order. This charge was reported as O&M expenses in the first quarter of 2015. Excluding this charge consolidated earnings were $2.29 per share or $62.8 million, an increase of $0.13 over 2014. Annual results were largely driven by higher utility margin and other income, offset by increased O&M expenses. For the year utility net income increased $3.9 million, excluding the impact of the $9.1 million charge. Higher net income was largely driven by a $5.3 million increase in utility margin, a $6.6 million increase in other income, and a $2.4 million decrease in interest expense, offset by $7.2 million increase in O&M expense, and a $1.8 million increase in depreciation expense. In November we began collecting revenues from customers through the environmental mechanism or SRRM. For the -– for 2015, these collections totaled $3.5 million and are included in operating revenues with a corresponding offset for the amortization of environmental regulatory asset. For the year, utility margin increased primarily driven by strong customer growth with the addition of more than 9,700 customers and gains from our gas cost incentive sharing mechanism. These increases were offset by lower margin from customers not covered by weather normalization as the region experienced exceptionally warm weather. The $6.6 million increase in utility, other income was primarily due to the recognition of equity earnings on deferred environmental expenditures as a result of the February 2015 order. Excluding the regulatory disallowance, utility O&M expense increased over last year, primarily due to an increase in compensation and benefit expense, which included higher employee incentive compensation, retirement and healthcare costs, as well a new union labor contract that was effective June 2014. In addition, non-payroll expense increased from higher professional service and insurance cost. In the second half of 2015, management implemented a number of temporary cost saving initiatives to mitigate the unplanned effects of warm weather and the disallowance. These targeted initiatives resulted in approximately $5 million or $0.11 per share of O&M savings. While these measures help the company meet its 2015 financial targets, they are unsustainable and we do not plan to continue them in 2016. Utility interest expense decreased $2.4 million over the last 12 months with the redemption of $40 million of debentures without reissuance. For the year net income for gas storage improved mainly due to a reduction in operating expenses reflecting lower repair and power cost at our Gill Ranch facility. As well as permanent expense savings I previously mentioned. Despite improvement in the fourth quarter, gas storage annual operating revenues declined as a result of higher contracted storage prices in the first quarter of 2014. In addition interest expense increased reflecting the early redemption of the Gill Ranch note. Cash flow from operating activities declined $31 million compared to last year due to over $100 million of environmental insurance recoveries in 2014 offset in part by the decrease in cash flows from changes in deferred gas cost balance. Now I’d like to briefly mention two regulatory updates. In January 2016 we received an order from the OPUC resulting all open matters in our SRRM docket. The order confirmed the recovery of environmental cost eligible to Oregon rate payers under the SRRM and disallowed interest earned on the original $15 million charge from the February 2015 order. As a result we recognized a non-cash $3.3 million pretax charge in January 2016. Also we continually assess our business and economic environment to determine the need for future rate cases. Based on rate based growth since our last Oregon rate case in November 2012 and increases in operating expenses, we are evaluating the need to file in Oregon general rate case within the next 12 to 24 months. And a potential Washington rate case sometime thereafter. Moving to 2016 guidance, capital expenditures are expected to range from a $155 million to $175 million including approximately $15 million of capital expenditures associated with our North Mist expansion. For the five year period ending 2020, we estimate utility capital expenditures to range from $850 million to $950 million excluding any potential future gas reserve investments. This range also includes a $125 million of CAPEX for our North Mist expansion. At this time we expect cash savings from the extension of bonus depreciation to total approximately $90 million through 2019. We are evaluating the impact of this extension on the mix and profile of our investments. Our CAPEX range does not include any potential additional capital investment that may result from this evaluation. We currently do not anticipate the need to issue equity until 2018 with the completion of our North Mist expansion. In addition we are utilizing open market purchases for a dividend reinvestment program as well as certain share based compensation programs. The company initiated 2016 earnings guidance today in the range of $1.98 to $2.18 per share which includes the $3.3 million pretax or $0.07 after tax charge from the January 2016 order. Our adjusted guidance range excluding the charge is $2.05 to $2.25 per share. With that I’ll turn it back over to Gregg for his concluding remarks. Gregg S. Kantor Thanks Gregg, as we turned to 2016 we continued to focus on our regulatory agenda and on growing our company. On the regulatory front we were pleased to reach conclusion on the implementation of our environmental mechanism with the commission’s order this January. Although the additional charge in 2016 is disappointing, this was a complex docket and we believe the mechanism provides a good path forward for all stakeholders. This year we will continue working with the commission and other gas utilities in Oregon on the policy docket exploring commodity hedging. This includes what role gas reserves could play in a balanced natural gas supply portfolio. We’ve also been working with the Oregon Commission and stakeholders on a carbon solutions program under Oregon’s Greenhouse Gas Reduction Legislation. As we’ve discussed before, Senate Bill 844 allows the OPUC to incent natural gas utilities to undertake projects that will reduce emissions. Our first proposal was submitted in June and is designed to further the use of combined heat and power in Oregon. We filed our last briefs a few weeks ago and expect a decision from the commission in the next few months. On the customer growth side, we are working hard on expanding our multi -– our market share in the multi-family housing sector. As I mentioned, the Portland area housing market has seen an upturn, particularly in multi-family apartments. To further our efforts, we have created a cross-functional team to evaluate every aspect of the apartment rental market, a market that is typically underserved with natural gas. Results of a recent market study show that 80% of renters in Portland prefer natural gas entities. This shows a clear gap between what renters want and what’s available and we’ve begun developing a comprehensive marketing program targeting apartment developers. We view rental apartments as an untapped growth opportunity and a priority segment for us moving forward. Now let me give you a quick update on the potential expansion project at our underground storage facility in Mist, Oregon. As you know in 2014 we received approval from Portland General Electric to move forward with the committee and land acquisition work required for the expansion project. The project would provide no notice storage services to PGE’s natural gas power generating plants at Port Westward. It would include a new reservoir providing up to 2.5 billion cubic feet of available storage, an additional compressor station, and a new pipeline. Last April, we submitted an application to the Oregon Energy Facility Siting Council for an amendment to our existing Mist site certificate, a step required to support the expansion. In early October, we held an open-house with the local community near the expansion site and received positive feedback from attendees. And then on March 5th, just a few weeks ago, the Department of Energy published a proposed order. Public comment processed on that order will end on March 7, just a few weeks from now. If there are no challenges to proposed order through the comment process, we could receive the EFSC permit approval later this spring. And currently, we’re in the process of rebidding the EPC portion of the project. Following the approval of the permit and the rebidding process we expect to receive a notice to proceed from Portland General later this year. We continue targeting an in-service date during the 2018, 2019 winter season, a target that depends of course on the permitting process and construction schedule. And the current estimated cost of the project is approximately $125 million. Over many years Northwest Natural has demonstrated the careful planning essential to finding and retaining the talent necessary to drive success. Detailed succession plans are an integral part of the company’s business activities and this past year the benefits of that work were clearly visible. I would like to mention two key changes; first, in June of last year Greg Hazelton joined the management team as CFO and was also recently named Treasurer. And second, this past December, I announced my retirement at the end of 2016 and that David Anderson would be promoted to Chief Executive Officer effective to August 1. I will be working with the Board in Advisory role until the end of December. A smooth transition at the top is critical, but as important is developing the talent for succession in key positions across the organization, and that has been a long held commitment at Northwest Natural, one, that in my opinion, is the true mark of a Board and the management team with foresight. David is an excellent example of this talent. He is a strong leader and he brings great experience and a diverse skill set to the CEO position. I’m confident our company will be in good hands going forward. With that, thanks for joining us this morning and now I’ll open it up for questions. Question-and-Answer Session Operator We will now begin the question-and-answer session. [Operator Instructions]. Gregg S. Kantor Looks like people are ready for the weekend I guess. Operator Okay, well this concludes our question-and-answer session, I would like to turn the conference back over to Gregg Kantor, Chief Executive Officer for any closing remarks. Gregg S. Kantor Well thank you everyone. Thank you again for your interest in our company and for taking the time out this morning to listen in and have a great weekend. Operator The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com . Thank you!

Alliant Energy’s (LNT) CEO Pat Kampling on Q4 2015 Results – Earnings Call Transcript

Operator Thank you for holding, ladies and gentlemen, and welcome to Alliant Energy’s Yearend and Fourth Quarter 2015 Earnings Conference Call. AT this time, all lines are in a listen-only mode and today’s conference is being recorded. I would now like to turn the call over to your host, Susan Gille, Manager of Investor Relations at Alliant Energy. Susan Gille Good morning. I would like to thank all of you on the call and on the webcast for joining us today. We appreciate your participation. With me here today are Pat Kampling, Chairman, President and Chief Executive Officer; Tom Hanson, Senior Vice President and CFO; and Robert Durian, Vice President, Chief Accounting Officer and Controller; as well as other members of the Senior Management Team. Following prepared remarks by Pat and Tom, we will have time to take questions from the investment community. We issued a news release last night announcing Alliant Energy’s yearend and fourth quarter 2015 earnings, affirmed 2015 earnings guidance and provided updated 2016 through 2019 capital expenditure guidance. This release, as well as supplemental slides that will be referenced during today’s call, are available on the investor page of our website at alliantenergy.com. Before we begin, I need to remind you the remarks we make on this call and our answers to your questions include forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters discussed in Alliant Energy’s press release issued last night and in our filings with the Securities and Exchange Commission. We disclaim any obligation to update these forward-looking statements. In addition, this presentation contains non-GAAP financial measures. The reconciliation between non-GAAP and GAAP measures are provided in the earnings release, which are available on our website at alliantenergy.com. At this point I’ll turn the call over to Pat. Pat Kampling Thank you, Sue. Good morning and thank you for joining us for our yearend earnings call. I’ll begin with an overview of 2015 performance and then provide an update on our forecasted capital expenditures and rate base. I’ll also share the progress made in transforming our generation fleet, modernizing our electric system and expanding our natural gas system. I’ll then turn the call over to Tom to provide details on our 2015 results and 2016 guidance as well as review our regulatory calendar. I am pleased to report we’ve had another solid year achieving a $3.57 midpoint of our November 2015 guidance range when adding back to negative temperature impact of $0.08 per share to the non-GAAP earnings of $3.49 per share. Our 2015 non-GAAP temperature normalized earnings reflect an increase of over 5% from comparable 2014 earnings as shown on Slide 2. The temperatures of late 2015 did impact our actual yearend results. For the first 10 months of 2015, our financial results were basically temperature neutral, but the one winter we experienced, especially in December resulted in a negative $0.08 per share variance in 2015 earnings. This was quite the opposite for 2014 where we experienced a $0.09 per share positive variance to earnings. Therefore, temperature swings did lead to a significant year-over-year variance of $0.17 per share. We also issued an updated capital expenditure plan for 2016 through 2019, totaling $5 billion as shown on Slide 3. In addition, we have provided a walk from the previous 2016 to 2019 capital expenditure plan to our current plan on Slide 4. As you can see, the $260 million increase in our forecasted 2016 through 2019 capital expenditure plan is driven primarily from accelerated investments from our electric and gas distribution systems. The December 2015 extension of bonus depreciation for certain investments through 2019 has given us the opportunity to bring forward some infrastructure projects that will benefit our customers for years to come. I do want to point out that with this revised capital plan, we expect no material change to the rate base forecast that we provided last November for IPL and WPL through 2018. We anticipate the increase in forecasted capital expenditures will offset the impact resulting from the extension of bonus depreciation. During the past few years, we’ve been executing on a plan for the orderly transition of our generation fleet in an economical manner to serve our customers. We made significant progress in building a generation portfolio that have lower emissions, greater fuel diversity and is more cost efficient. The transition included installing emission controls and performance upgrades at our largest coal-fired facilities retiring all the less efficient coal units and increasing levels of natural gas fired and renewable energy generation. Since 2010, Alliant Energy has retired or repowered over 1,150 megawatts of coal-fired generation for about one third of our 2009 coal linked plate capacity. These retirements have been replaced with highly efficient gas-fired generation, which produces approximately half of the carbon emissions when compared to coal-fired generation. Though natural gas prices in 2015 resulted in significant changes to the capacity factors of our gas units. Riverside had an approximately 50% capacity factor last year, more than doubled its prior five-year average. Our Emery combined cycle facility also experienced significant increase in operating hours during 2015. With lower gas prices, the additional gas generation in our portfolio resulted in savings for our customers in 2015. Now let me brief you on our construction activities. 2015 was again a very active construction year with over $1 billion deployed. Our investments included approximately $360 million for electric and gas distribution systems. This was one of the largest annual investments in those systems and will be an area of growing investment. These projects are driven by customer expectations to make our electric system more reliable and resilient and to expand natural gas services, especially to communities that did not have access before. In Iowa, the Marshalltown natural gas-fired generating facility is progressing well and is now approximately 75% complete. Forecasted capital expenditure for this project is approximately $700 million excluding AFUDC and transmission. Marshalltown is on time and on budget and is expected to go in service in the spring of 2017. In Wisconsin, progress continues on the installation of a scrubber and baghouse at Edgewater Unified. This project is approximately 90% complete and is on time and below budget. Capital expenditure forecast for this project are approximately $270 million and it is expected to be in service later this year. Driven upgrades and pulverizing replacement work continues at Columbia and these performance improvements projects are expected to be complete next year. This spring construction of a Columbia unit to SCR will begin. WPLs capital expenditure for this project is approximately $50 million and it is expected to go in service in 2018. In 2013, WPL announced that it will retire several older coal facilities and natural gas peaking units and therefore more than 50 years of dependable operation Nelson Dewey and Edgewater Unit 3 were retied in December. The retirement of these units puts several other retirements through 2019 but will result in a reduction of WPL capacities for approximately 700 megawatts. As a result, WPL proposed to construct the 700 megawatt highly efficient natural gas generating facility referred to as a Riverside Energy Center expansion. We anticipate the Public Service Commission will issue its decision on the Riverside expansion in the second quarter. Earlier this month, we announced that we have negotiated options with neighboring utilities and electric cooperatives for partial Riverside ownership of up to 55 megawatts during the construction facility and up to an additional 250 megawatts during the first five years of the facility is operating. With this agreement, the cooperatives have extended their wholesale electric contracts at WP&L by four years through 2026. We’re pleased that our neighbor utilities realize the benefits of our proposed facility and want to be involved in this exciting and innovative project. While we now expect the other from the Riverside units to be close to 700 megawatts, the capital expenditure for Riverside remains at approximately $700 million excluding AFUDC and transmission. The targeted and service days has changed from early 2019 to early 2020. Therefore the timing of the capital expenditure have been updated and are reflected on Slide 3 based on input from the EPC bidders. The expenditures presented for Riverside do not reflect the possible capital reduction if the cooperatives exercise their 55 megawatt purchase option during construction. In addition to the Riverside joint ownership option, hub service and MG&E will have the option to limit their capital expenditures at Columbia to paying for only the SCR during the time that Riverside is being constructed. Our capital expenditure plan does not reflect this option being executed. However, we expect that any increase in our capital expenditures at Columbia would be largely offset if the electric co-ops exercise their purchase option 55 megawatts of Riverside. Earlier this month the United States Supreme Court effectively delayed implementation of the clean power plant until legal challenges to the EPAs rules are resolved. This stay will not change our current resource or capital expenditure plan as they were not based on compliance with the clean power plant. As we planned for our future generation needs, we aim to minimize emissions while providing safe, reliable and affordable energy to our customers. We believe that with the transition of our generation fleet and the availability of lower natural gas prices, our carbon emissions will continue to decrease. We’re very fortunate to operating states that have a long history of support for renewable energy and a strong commitment to environmental storage ship. We have and will continue to invest in purchase renewable energy. The currently owned 568 megawatts of wind generation and our 10-year capital plan includes additional wind investments to the customer energy needs. In addition, we currently purchase approximately 470 megawatts of energy from renewable sources. Wind energy provided approximately 8% of our customer’s energy needs in 2015. Also your several solar projects under development from which we anticipate gathering valuable experience on how best to integrate solar in a cost effective manner into our electric system. At our Madison headquarters with 1300 solar panels have been installed and they’re now generating power for the building. Construction has also started on Wisconsin’s largest solar farm on our Rock River landfill, which is adjacent to Riverside. In an Iowa we’ll be owning and operating the solar panels at the Indian Creek Nature Center in Cedar Rapids and are reviewing responses to the RFP we issued for additional solar in our portfolio. There is a sense of excitement as you work to transform the company to meet our customer’s evolving expectations. A major improvement to our customer experience just happened as we went live with our new customer care and billing system. The $110 million investment we placed the interim systems from the 1980s. Our new billing system will make communication with our customers more convenient and timely and will allow for us provide innovative service options. This project was another well executed major initiative. I do want to thank everyone that worked so hard for years to transform our customer experience. At Alliant Energy we’ve already made great progress transitioning our utilities to a cleaner more modern energy system. This would not have been possible without the hard work and commitment of our employees who keep the customer at the center of everything we do. Let me summarize the key messages for today. We had a solid 2015 and we work hard to also deliver 2016’s financial and operating objectives. We anticipate no material change for the rate base growth through 2018 as the updated capital expenditure plan while offset any impact from the extension of bonus depreciation. Our plan continues to provide for 5% to 7% earnings growth and a 60% to 70% common dividend payout target. Our targeted 2016 dividend increased by 7% over the 2015 dividend target. The central execution on our major construction projects include completing projects on time and at or below budget in a very safe manner. Working with our regulators, consumer advocates; environmental groups, neighboring utilities and customers in a collaborative manner. Reshaping our organization to be leaner and faster while keeping the focus on serving our customers and being good partners in our communities and we will continue to manage the company to strike a balance between capital investment, operational and financial discipline and cost effective customers. Thank you for your interest in Alliant Energy and I will now turn the call over to Tom. Tom Hanson Good morning, everyone. We released 2015 earnings last evening with our non-GAAP earnings from continuing operations of $3.49 per share and our GAAP earnings from continuing operations of $3.38 per share. The non-GAAP to GAAP differences are due to a $0.07 per share charge resulting from the sale of IPOs Minnesota electric and gas distribution assets and a $0.04 per share charge resulting from the approximately 2% of employees accepting voluntary separation packages as we continue focusing on managing cost for our customers. Comparisons between 2015 and 2014 earnings per share are detailed on Slide 5, 6 and 7. Retail, electric, temperature normalized sales increased approximately 1% or $0.04 per share at IPO and WP&L between 2015 and 2014. This excludes the impacts of the Minnesota sale. The industrial segment continues to be the largest sales growth driver year-over-year. The 2015 results include an adjustment to our ATC earnings to reflect an anticipated decision from FERC expected to lower ATCs current authorized ROE of 12.2%. We reserve $0.06 per share for 2015 reflecting an anticipated all in ROE of 10.82%. This is a result of the FERC Administrative Law Judge’s initial decision issued in December 2015. Now let’s review our 2016 guidance. In November, we issued our consolidated 2016 earnings guidance range of $3.60 to $3.90. The key drivers for the 5% growth in earnings relate to infrastructure investment such as the Edgewater 5 and Lansing emission control equipment and higher AFUDC related to the construction of the Marshalltown generating station. The 2016 guidance range assumes normal weather and modest retail electric sales increases of approximately 1% for IPO and WP&L excluding the impacts of the Minnesota sale. Also the earnings guidance is based upon the impacts of IPOs and WP&Ls previously announced retail electric base rate settlements. The IPO settlement reflected rate-based growth primarily from placing the Lansing scrubber in service in 2015. In 2016, IPO expects to credit customer builds by approximately $10 million. By comparison the billing credits in 2015 were $24 million. During 2016 IPO also expects to provide tax benefit rider billing credits to electric and gas customers of approximately $62 million compared to $72 million in 2015. As in prior years the tax benefit riders may have a quarterly timing impact but are not anticipated to impact full year results. The WPL settlement reflected electric rate base growth for the Edgewater 5 scrubber in baghouse projected to be placed in service in 2016. The increase in revenue requirements in 2016 for this and other rate base additions was completely offset by lower energy efficiency, cost recovery amortizations. Also included in WP&Ls rate settlement was an increase in transmission cost, primarily related to the anticipated allocation of SSR cost. As a result of a third quarter issued after the settlement, the amount of the transmission cost build to WP&L in 2016 will be lower than what was reflected in the settlement. Since the PSCW approved escrow accounting treatment for transmission costs, the difference between the actual transmission costs billed to WP&L and those reflected in the settlement has been accumulated in a regulatory liability. We estimate that this regulatory liability will have a balance of approximately $35 million by the end of 2016. This regulatory liability is another mechanism we can use to minimize future rate increases for our Wisconsin retail electric customers. Slide 8 has been provided to assist you in modeling the effective tax rates for IPO, WP&L and AEC for 2016 and provides you the actual effective tax rates for 2015. Turning to our financing plans, our current financing forecast incorporates the extension bonus depreciation deductions for certain capital expenditures for property through 2019. As a result of the five year extension to bonus depreciation, Alliant Energy currently does not expect to make any significant federal income tax payments through 2021. This forecast is based upon the current federal net operating losses and the credit carry-forward positions as well as future amounts of bonus depreciation expected to be taken under federal income tax returns over the next five years. Cash flows from operations are expected to be strong given the earnings generated by the business. We believe that with our strong cash flows and financing plan, we will maintain our targeted liquidity and capitalization ratios as well as high quality credit ratings. Our 2016 financing plan assumes we’ll be issuing approximately $25 million of new common equity through our share owner direct plan. The 2016 financing plan also anticipates issuing long-term debt up to $300 million at IPO and approximately $400 million at the parent and Alliant Energy resources. $310 million of the proceeds at apparent and Alliant Energy resources are expected to be used to refinance maturity of term loans. We may adjust our financing plans as deemed prudent if market conditions warrant and as our debt and equity needs continue to reassessed. As we look beyond 2016, our equity needs will be driven by the proposed riverside expansion project. Our forecast assumes that capital expenditures for 2017 and 2018 would be financed primarily by a combination of debt and new common equity. Before the five-year extension bonus depreciation, we were not expected to make any material federal income tax payments through 2017. Thus, the extension of bonus depreciation is not expected to change our financing needs for the next two years. We have several current and planned regulatory dockets of note for 2016 and 2017, which we have summarized on Slide 9 during the second quarter of 2016 we anticipate a decision from the PSCW on the riverside expansion proposal and we anticipate filing a WP&L retail electric and gas rate case for 2017 and 2018 rates. For IPL, we’ll be filing our five-year emission plan and budget in the first quarter and expect a decision regarding the permanent application for the approximately $60 million Clinton Natural Gas pipeline in the second quarter. The next Iowa retail electric and gas based rate cases are expected to be filed in the first quarter of 2017. We very much appreciate your continued support of our company and look forward to meeting with you throughout the coming year. At this time I’ll turn the call back over the operator to facilitate the question-and-answer session. Question-and-Answer Session Operator Thank you, sir. [Operator Instructions] Alliant Energy’s Management will take as many questions as they can within the one hour timeframe for this morning’s call. [Operator Instructions] We will take our first question from Brian Russo with Ladenburg Thalmann. Brian Russo Hi. Good morning. Pat Kampling Good morning, Brian. Brian Russo Would you be able to possibly quantify the amount of equity you might need to help finance the riverside expansion? Tom Hanson Brian, as we said, our objective is to continue to maintain the targeted equity levels at both IPL and WP&L. So you can assume that with largest project here at WP&L that we will have incremental equity needs. We’ll be sharing specifics as we issue guidance in later years, but what’s important are targeted incremental equity is included in our forward-looking guidance. So the delusion is reflected in our 5% to7% targeted growth rate. Brian Russo Okay. Great and it looks like ’15 over ’14 and ’16 over ’15 you got to kind of gravitating towards the lower end of the 5% to 7% EPS CAGR. Is there something structural there that as rate base grows its harder to get in the middle or the higher end or is it just a function of lumpiness of the CapEx? Pat Kampling Yes, what really is Brian is that our sales forecast has come down a little bit. Originally we were about 2% at Wisconsin 1% in Iowa. Now we see it as overall 1% and that’s what’s really brought us down to more to the midpoint of the range, not to the higher end of the range. Brian Russo Okay. And just to clarify, fourth quarter weather versus normal is negative $0.08? Pat Kampling That’s correct. Brian Russo Okay. And what quarters did those two charges occur? Were they in the fourth quarter or earlier? Tom Hanson The third quarter we recorded the Minnesota charge and I believe second quarter was Minnesota’s charge and then the third quarter was the charge associated with voluntary separation package. So second third quarter. Sorry Brian. Brian Russo Okay. Great. Thank you. Operator We’ll take our next question from Andrew Weisel with Macquarie Capital. Andrew Weisel Thanks. Good morning, everyone. Pat Kampling Good morning, Andrew. Andrew Weisel First question on the CapEx update. Help me understand is the $260 million net increase over the years, is that pulling forward from the existing 10-year CapEx plan or would that be incremental to the $10.6 billion that you’ve forecast through 2020 for? Pat Kampling Yes so this is — it’s incremental to what we had shown you in the 10-year plan. Andrew Weisel Okay great. Next question I have is on a lot of the announcements you made on Riverside, I believe if I heard you correct, you said that the cash associated with incremental Columbia CapEx would be roughly offset by Muniz exercising the option for 55 megawatts, is that right and is there a scenario where you have one but not the other? Pat Kampling Andrew that is correct that they should offset each other as they both have been. We’re not revising the CapEx until we know exactly what’s going to happen with the gracious options at this point, but the additional capital for Columbia would be offset by the co-ops purchasing Riverside. But it is possible that one of the options could occur without the other. They’re very independent of each other. Andrew Weisel Okay. Could that be big enough to move the needle on equity needs? Pat Kampling I don’t think so. We’re talking capital of under $100 million here. Andrew Weisel Okay. Great. Then lastly I might be reading the subtleties of the wording a little too closely, but in the press release, you added — you have the expression striving to achieve the projected earnings growth rate. And the last question you just talked about the lower sales growth. Any reason to think that the next years might be toward the low end of that range or do you still feel comfortable with the midpoint through the construction and maybe just commentary on how that — how the outlook looks over the next several years. Pat Kampling Yeah, no, we’re very confident and in keep in mind the reason we’re gravitating towards the lower end right now is that when rate freezes and the sales forecast change from the timing you agree to rate freezes, but we’re still very confident with our plan going forward especially as we enter rate cases about jurisdictions. Andrew Weisel Great, thank you very much. I appreciate the detail. Pat Kampling Sure. Operator We’ll take our next question from Steve Fleishman with Wolfe Research. Steve Fleishman Hi, good morning. Pat Kampling Good morning. Steve Fleishman Couple questions just to follow up on the one with you mentioned on Riverside and Columbia and the co-ops how about also with Wisconsin energy and MGE just how do we think about both the impact of what they decide and when they likely decide on whether they’re going to take more Riverside and share some of Colombia. Pat Kampling Yeah. So the Colombia is — that change is happening during the Riverside construction that’s between now and 2019. The purchase option is 2020 and beyond and that’s really not in our CapEx plans. That’s something we’re going to need to monitor. We’ll be working with the other utilities as they develop their resource plans as well. But that’s not something that we can actually estimate the probability of right now. Steve Fleishman So that would be after the plant fully done and operating basically. Pat Kampling Except for the 55 megawatts for co-ops, that’s during construction. Steve Fleishman Okay. And just the growth rate the 5 to 7 is that through 2018 or 2019 to follow the CapEx period? Pat Kampling Yes, it does. Yes, the CapEx period Steve, that’s right. Steve Fleishman So it’s 2019? Pat Kampling Yes. Steve Fleishman Okay. And then a question on the — as I’m sure you’re aware, we had a recent acquisition announcement of ITC and you have the transmission involvement there I’m just curious if you’re likely to get involved and have any issues with that transaction or any intervention? Pat Kampling Steve, we wish we’re analyzing the transaction as you can imagine. We’re very large customer of ITC. So this is of quite interest to us as you can imagine. So we’ve had open dialogue with the folks at ITC and we just plan on having the open dialogue and we’ll figure out exactly what our position is in their dockets, they have several dockets over the next several months. Steve Fleishman Is you intention just to file at FERC or do you think Iowa has a role at all? Pat Kampling We’re still looking at what the different options are at this point Steve. Steve Fleishman Okay. Thank you. Operator Our next question comes from [Raza with L&T Capital]. Unidentified Analyst Thank you. Just a quick question, on the rate base that you commented on earlier, is the deferred tax portion of rate base going up while the entire rate base total phase constant versus your prior guidance. Is that the best way to think about it? Tom Hanson I would characterize it that the NOLs along with the additional CapEx are offsetting the effect of the bonus depreciation. Unidentified Analyst The earnings base stays constant? Tom Hanson Yes. Pat Kampling Yeah, I would say the net rate base remains constant. Unidentified Analyst Net rate base, okay and then I think you commented on it a little bit earlier, but this incremental CapEx that you added, how does that affect financing plans over this period? Does it potentially lead to little more equity or not or how should we think about that? Tom Hanson The modest amounts that we’re adding will not significantly change our equity needs. As Pat made reference, some of this is due to the timing of Riverside. Some of that cost is being pushed out and then we do have the opportunity to backfill as Pat mentioned with some of the electric gas distribution. So it’s not going to be materially changing any of our financing needs. Unidentified Analyst And then the load growth you talked about, I’m sorry if I missed this earlier, but what is the forecasted load growth for your planning period? Pat Kampling Sure. We’re using 1% now to book utilities. But I would say the growth is out of the 1%. It’s higher in the industrial sector and lower in the residential sector. Unidentified Analyst Okay. Thank you very much. Pat Kampling Sure. You’re welcome. Operator We’ll take our next question from Jay Dobson with Wunderlich Jay Dobson Hey good morning, Pat and good morning, Tom. Question just to follow-up on Raza’s question. So the rate base with the change in bonus depreciation and CapEx is the expectation are flat. So the earnings growth will be flat. But it doesn’t really change your tax position. So cash flow we would anticipate would in fact be negatively impacted by the rise in CapEx, which facilitates the increase modest as you just said Tom, increase in financing needs. Do I have it right? Tom Hanson In the near term, yeah because when we had our previous forecast assuming no depreciation or potential bonus depreciation we were looking at making modest tax payments beginning in ’17 and ’18 and now with the extension, we won’t have that, but that delta in terms of cash is not that significant certainly in the ’17 and ’18 timeframe. Jay Dobson Right. Okay, great. And then earned ROEs at the utilities subs what were those in ’15 on sort of a non-weather adjusted basis understanding that weather is going to. Pat Kampling Yes we definitely earned our authorized return with [them] which was about 10.4 and then in Iowa is around the around 10% again excluding the Minnesota sale though. Jay Dobson Got it. And those are weather adjusted or — so that would reflect that $0.08 adjustment or maybe more like a $3.57 number. I know it’s not fair to say that on a jurisdictional basis but… Pat Kampling Right I would say it’s all in including the weather. Jay Dobson Got you. Okay fine. And then last one on trended, the transportation segment just what you see going forward there obviously a tough year in 2015 for that segment though it developed throughout the year. So not a great surprise but you look forward through ’16 and beyond just volume trends you’re seeing. Pat Kampling Trend it’s actually going through our strategic planning process. Right now looking at other opportunities and where they can expand their current footprint. So I’m very optimistic about some possibilities that they’re looking at right now, but they’ve been very proactive knowing the reduction in their business these are really basically cold transportation. They’re looking forward at some other opportunities for them right now, some more to come on that. Jay Dobson Got it. But if we’re thinking about ’16 and it’s probably within a broad range of guidance would you — we certainly couldn’t get back to the 2014 level of earnings from [Krandex but] probably do see some improvement with some of the strategic initiatives there we’re reviewing currently, is that fair. Pat Kampling I would say it might be beyond ’16. It would be hard to execute on projects for ’16, but definitely going into ’17. Jay Dobson Got it, no that’s fair. Thanks so much Tom thank you. Pat Kampling Sure. Operator We’ll take our next question from Paul Patterson with Glenrock Associates. Paul Patterson Good morning, guys. Pat Kampling Good morning, Paul. Paul Patterson Just what was the 2015 weather adjusted sales year-over-year? What was the growth rate? Tom Hanson It was 1% in both of our two utilities. Again that’s adjusting for the Minnesota sale. Paul Patterson Okay. And then the sales forecast is now 1% what was it previously I apologize. Pat Kampling Sure previously and this goes back to year ago, it was 2% Wisconsin and 1% in Iowa and now it’s 1% in both jurisdictions. Paul Patterson Okay. And then the incremental CapEx, I’m not exactly — this is incremental above, this isn’t bringing it forward from what I understand. This is new stuff. What is that and what’s driving that? Tom Hanson We have provided a slide in our supplemental slides that kind of highlight that but I would put it basically in two big buckets. The first is dealing with our electric area in terms of certainly continuing to replace existing distribution lines. So it’s really trying to upgrade the distribution system and we also have then some modest gas expansion as well. Paul Patterson Okay. And I guess so I’m wondering though is that if this is incremental over a 10-year forecast that would indicate that something is driving those. I saw the slide, I guess what I’m wondering is what’s kind of driving this. Is it something forward that would indicate that you guys see some new need and I am just wondering what that is or if there is one, what I am missing? Pat Kampling Yeah, I would just say that we’re actually just taking the opportunity to expand some of these projects. We’ve had a replacement program for our overhead and underground system for years and we’re just really increasing that taking the opportunity now to increase that and where we evaluate after this five-year program because actually for the next five years and if we want to accelerate even more in the second five-year time frame and again our customer’s expectations are in liability and resilience you just keep increasing. Paul Patterson Okay. Pat Kampling This is our first stage of looking at that and putting good dollars to work for our customers. Paul Patterson And then just the Kewaunee power plant, I believe that the Wisconsin has halted implementation of that. Is there any impact that you guys see of that or how are you guys dealing with that served just on a high level. Any thoughts we should have on that? Pat Kampling Yes, at a high level, yes the safest [comment] is that they’re not going to put any resources to work on any clean power plant implementation. However, the utilities are still working together to try to understand their own circumstances into the plan. So we’re working very proactively with the other utilities and we’ll just have to see how this plays out in the State. Paul Patterson Okay. My other questions have been answered. Thanks so much. Pat Kampling Sure. You’re welcome. Operator And there are no further questions. I would like to turn the call — we actually have a follow-up question from Brian Russo with Ladenburg Thalmann. Brian Russo Yes, hi. Thanks for the follow-up. Just can you remind us what the base year and adjusted EPS is to formulate the 5% to 7% CAGR? Tom Hanson Brian, we update that every single year. You would want it, our non-GAAP temperature adjusted so similar to what we did in ’14. So you would want to rebase that now that we reported our actuals for 2015. So the base for purposes that calculation would be $3.57. Brian Russo Okay. Thanks a lot. Operator And there are no further questions at this time. I would like to turn the conference back over presenters for any additional or closing remarks. Susan Gille With no more questions, this concludes our call. A replay will be available through March 01, 2016, at 888-203-1112 for U.S. and Canada, or 719-457-0820 for international. Callers should reference conference ID 8244179. In addition, an archive of the conference call and a script of the prepared remarks we made on the call will be available on the Investor section of the company’s website later today. We thank you for your continued support of Alliant Energy and feel free to contact me with any follow up questions. Operator And that concludes today’s presentation. Thank you for your participation. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com . Thank you!