Alliant Energy Corporation

Q3 2021 Earnings Conference Call

11/5/2021

spk15: Good morning and welcome to Alliant Energy's conference call for third quarter 2021 results. This call is being recorded for rebroadcast. At this time, all lines are in listen-only mode. I would now like to turn the call over to our host, Zach Fields, Lead Investor Relations Analyst at Alliant Energy.
spk20: 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. Joining me on this call are John Larson, Chair, President, and Chief Executive Officer, and Robert Durian, Executive Vice President and CFO. Following prepared remarks by John and Robert, we will have time to take questions from the investment community. We issued a news release last night announcing Alliant Energy's third quarter financial results, updated our consolidated 2021 guidance range, and announced our 2022 Earnings Guidance and Common Stock Dividend Target. This release, as well as supplemental slides that will be referenced during today's call, are available on the Investors page of our website at www.alliantenergy.com. Before we begin, I need to remind you that the remarks we make on this call and our answers to your questions include forward-looking statements. These forward-looking statements are subject to risk that could cause actual results to be materially different. Those risks include, among others, matters discussed in the Line 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 references to non-GAAP financial measures. The reconciliation between non-GAAP and GAAP measures are provided in the earnings release and our 10-Q, which will be available on our website. At this point, I'll turn the call over to John.
spk07: Thanks, Zach. Good morning, everyone, and thank you for joining us today as we highlight our solid results for the third quarter of 2021. To start us off, I'm pleased to share our narrowed and increased 2021 earnings guidance range of $2.61 to $2.67, which represents a forecasted 12th consecutive year of 5% or greater earnings growth. We are also announcing our 2022 earnings guidance range of $2.65 to $2.79 per share, marking yet another year of forecasted 5% to 7% growth. We understand the importance of delivering consistent returns for our investors and solid operations for our customers. And in keeping with our plan to grow dividends commensurate with earnings growth, I'm pleased to share that our Board of Directors has approved a 6% increase in our targeted annual common stock dividend to $1.71 per share. In a few moments, I'll turn the call over to Robert to share more details of our excellent third quarter financial results. But before I do, I'll highlight some of our many accomplishments from the quarter. Over the past several weeks, I've been pleased to meet with many investors and continue to share our ESG story. It's been a natural journey for us and a direct outcome of how we deliver on our purpose to serve customers and build stronger communities. We know that a clear vision and solid execution are very important factors when making investment decisions. We're proud that our progress and results have been recognized by several key ESG rating organizations who rate us near the top of the utility industry. Our top performing results can be seen on supplemental slide number two. Our recent corporate responsibility report highlights many of our achievements. We continue to make steady progress, such as our commitment to plant more than one million trees across our service territory over the next decade. Not only will this support our care for the environment value and our carbon reduction efforts, It is also responsive to the impact from the 2020 derecho windstorm that devastated our service territory. In Wisconsin, we celebrated our first community solar project with a public open house and tours in the town of Fond du Lac. The one megawatt solar garden will supply clean energy to up to 1,000 homes and is expected to be operational by the end of 2021. Celebrating this solar garden reflects the community's innovative spirit and passion for clean energy. In Iowa, we are excited to have received IUB approval for our first solar garden. It's expected to be constructed in 2022 at a site near Cedar Rapids. In the third quarter, we also assumed ownership of the Bear Creek, North Rock, Wood County, and Grant County solar projects in Wisconsin. Construction is either started or will be started shortly on these projects that total 450 megawatts. And here in the fourth quarter, we acquired the Crawfish River project and expect to acquire the Onion River project before the end of the year. With those acquisitions, we will have assumed ownership of all 675 megawatts of solar that was approved as part of our first CA filing in Wisconsin. Two final highlights I'll share are tied to the social side of ESG. In September, we committed $4 million to the Hometown Care Energy Fund, to help customers who need financial assistance to help pay their energy bills during the upcoming home heating season. The U.S. Energy Information Administration estimates that Midwest natural gas expenditures will rise by nearly 50% compared with last winter. And while we expect the proactive planning by our energy markets team will keep us in line or below those forecasted increases, we know customers will welcome the additional support from this donation to help them stay on track with their energy bills during this time of increased natural gas demand. And finally, I'm excited to share that with the support of our suppliers and partners, our 15th annual Drive Out Hunger event raised over $400,000, bringing our 15-year fundraising total to more than $5 million. This event has provided over 17 million meals to families in need across our service territories. Combating hunger is one of the focus areas of our charitable foundation, and we are proud to partner with our Feeding America Food Bank partners in Iowa and Wisconsin to help thousands of our customers access nutritious food to strengthen their families. With all the great results from the quarter, I would be remiss in not mentioning that our economic development and customer growth efforts have resulted in our third year in a row of being named a top utility in economic development by Site Selector Magazine. Our economic development team, in collaboration with local, regional, and state partners in Iowa and Wisconsin, created more than $900 million in new capital investments and more than 2,200 new jobs across Iowa and Wisconsin. I look forward to meeting with many of you next week at the EEI Financial Conference to share even more about our company, including our clean energy vision, flexible and well-executed capital investment plan, our long track record of consistent financial and operational results, and our focus on the well-being of our employees, customers, and communities. Thank you for your confidence in Align Energy. I'll now turn the call over to Robert.
spk13: Thanks, John. Good morning, everyone. Yesterday, we announced third quarter 2021 gap earnings of $1.02 per share compared to $0.98 per share in the third quarter last year. Our higher earnings year over year were driven by higher revenue requirements due to increasing rate base, as well as higher temperature normalized sales compared to the third quarter of 2020. These higher earnings were partially offset by higher depreciation expense and timing of income tax expense. Additionally, in the third quarter of 2020, we recorded a non-gap adjustment of $0.04 per share related to a legacy guarantee in our non-utility operations. Through the first nine months of this year, temperatures in our service territory have increased retail electric and gas margins by approximately $0.08 per share. By comparison, in 2020, the year-to-date temperature impacts through the first three quarters increased retail electric and gas margins by approximately $0.01 per share. Turning to temperature normalized sales, our retail electric sales in the third quarter of 2021 were up 4.1% versus last year. The two key drivers for this increase are continued pandemic recovery in year-over-year sales, particularly in the commercial and industrial classes, and minimal storm activity this year compared to the third quarter of 2020 when our Iowa territory experienced a derecho windstorm. Through the first nine months of 2021, temperature-normalized electric sales have been better than forecasted, largely due to higher-than-expected demand from residential and industrial customer classes. As John mentioned, last night we issued our consolidated 2022 earnings guidance range of $2.65 to $2.79 per share. The key driver of the 6% growth in temperature normalized EPS is higher earnings on increasing capital investments, primarily driven by our solar program. The details of our refreshed capital expenditure plans are shown on slides five and six. Our capital expenditures net of expected tax equity contributions over the five-year period from 2021 through 2025 will total approximately $7 billion, or an average of $1.4 billion per year. Our capital expenditure plans continue to be focused on the transition to cleaner energy and strengthening the reliability and resiliency of our electric grid. We continue to make progress on our plans to add 1,500 megawatts of solar energy for both our Wisconsin and Iowa customers and have adjusted our flexible capital expenditure plans to address the current market conditions for solar panels and related project materials. Our plan includes expectations for increasing costs for these solar projects as supply constraints and commodity inflation continue to be prevalent in the solar market. Despite increasing costs, these solar projects remain key elements of our clean energy blueprints and will bring long-term environmental and cost benefits to our customers. In addition to the 1.1 gigawatts of solar previously announced for our Wisconsin customers, our plan includes additional renewables and energy storage in Wisconsin, in part to replace the capacity from a portion of the West Riverside Energy Center that we anticipate will be purchased by our neighboring utilities over the next few years. In Iowa, we recently completed an advanced rate-making filing for our announced 400 megawatts of solar and 75 megawatts of battery storage. We plan for 200 megawatts of that solar plus the battery storage to be located at the site of the recently retired Duane Arnold Energy Center, leveraging the existing transmission interconnection from the former nuclear plant. This will be our first utility scale battery storage installation and will be an important complement to our solar generation. Finally, We've also included capital expenditures in the latter part of our five-year plan for additional energy storage and renewables, including wind-repowering opportunities, to increase our portfolio of cost-effective clean energy sources for our utility customers. Slide 9 has been provided to assist you in modeling the effective tax rates for our two utilities and our consolidated group. We estimate a consolidated effective tax rate of negative 13% for 2021 and positive 6% for 2022. At our Wisconsin utility, we will have returned essentially all of the available excess deferred income tax benefits to our customers by the end of 2021, leading to a higher effective tax rate going forward. At our Iowa utility, our large wind portfolio and the resulting production tax credits will maintain our lower effective tax rate for several more years. The production tax credits and excess deferred tax benefits pull back to customers resulting in lower electric margins. Thus, the changes in the effective tax rate related to the PTCs and excess deferred tax benefits are largely earnings neutral. Next, I'd highlight our continued focus on controlling costs for our customers. We have met virtually with many of you throughout this year and shared our strategy to reduce O&M over the next few years. This strategy is important as we head into the upcoming winter heating season with much higher anticipated fuel prices. reminding us that our customers need our continued focus on controlling costs to keep rates affordable. Additionally, while we are not immune to rising commodity prices, we are able to leverage our risk management programs to mitigate the impact of rising natural gas and coal costs on customer bills. Let's move next to our financing plans. In September, we issued a $300 million green bond at WPL to finance renewal projects in Wisconsin. The coupon rate of 1.95% represents the lowest interest rate for a 10-year debenture issued by WPL, helping to support our customer affordability objectives. Our financing plan over the next 14 months includes issuing up to $1.4 billion of long-term debt at our utilities and Align Energy Finance. The proceeds from the new debt issuances will be used to refinance existing debt and the redemption of preferred stock, and to finance the utilities capital expenditure plans. Our 2022 financing plans also include $25 million of new common equity through our DRIP plan. Lastly, we have included our regulatory initiatives of note on slide 7. As mentioned earlier, this week we filed the advanced rate-making principles for 400 megawatts of solar and 75 megawatts of storage for our Iowa utility. The key details of this filing are outlined on slide 8. We plan to receive a decision on this filing in the second half of 2022. Looking ahead, this quarter we expect to receive the written decision regarding our WPL rate review, including the decision on the innovative cost recovery mechanism for the Edgewater Unit 5 coal plant, expected to retire by the end of 2022. And in the first half of next year, we plan to receive a decision on our second solar CA filing in Wisconsin. We very much appreciate your continued support of our company and look forward to meeting with many of you during the EEI Finance Conference next week. Later today, we expect to post on our website the EEI Investor Presentation and the November 2021 Factbook, which details the separate IPL and WPL updated capital expenditures, rate base, and construction work-in-progress forecast through 2025. At this time, I'll turn the call back over to the operator to facilitate the question-and-answer session.
spk15: Thank you, Mr. Durian. At this time, the company will open the call to questions from members of the investment community. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star 1 if you would like to ask a question. And we'll take our first question from Julianne DeMullion-Smith with Bank of America.
spk00: Hey, good morning, team. Thanks for the time and the opportunity.
spk05: Look forward to seeing many of you. Perhaps just, hey, good morning. So perhaps just to kick things off, can we go back to the solar capex and some of the shifts here? Obviously, you kind of alluded to it, but I want to make this a little bit more explicit. The shift in capex here to 24, is that just about, you know, inflation and supply chain uncertainties here in the near term? Or are there other factors, especially in the later years, whether that's, you know, 22 or 23 years that are driving it out?
spk07: Yeah, hey, good morning, Julie and John here. I think you have that just a little bit of an adjustment for inflation. And then, of course, this time of year, we bring in our new refreshed CapEx. And as Robert noted, you know, we've added a bit there with some repower and some additional resources. But I think you've got the headline on that one.
spk05: Yeah, you're not alone is what I'll say. But if I can actually ask that a little bit in reverse here, how are you thinking about financing it today? I mean, certainly the conversation around direct pay from several of your peers has taken note. How are you thinking about this impacting your financing structure and, or more importantly, your cash flow outlook?
spk13: Robert, you want to?
spk05: Yeah, sure, Julian.
spk13: So you'll see in the information that we shared in the earnings release with the CapEx table, we continue to model out a tax equity structure in that we'll finance roughly 25 to 45 percent of these solar projects with a tax equity financing partner. But to your point, we are watching the new legislation that's being proposed in the budget reconciliation bill and If we do see some type of direct pay plus production tax credits for solar, we'll reevaluate that financing mechanism. Right now, we've got about a billion dollars of financing planned over the next five years with the tax equity structures. So that could be an opportunity for us for future rate-based growth if those provisions come to fruition through the new legislation.
spk05: Got it. But you're not ready to talk about what the... shall we say, nearer-term benefit to your cash flow metrics looks like thus far?
spk07: I think there's still some moving targets on that, Julie and John here, but I think the net result from what we're seeing, it's very much in line with where we're going with our plan. And as Robert noted, if anything, it appears to have some favorability for both customers and investors. So I think as we see that play out, we'll certainly talk more about any impacts to our plan.
spk05: Got it. And the last quick one there, just on the shift in distribution capex, obviously stepping up in the later years, is there any undergrounding in there? I know we've talked about that at various points with respect to RACCHO follow-up.
spk07: Yeah, continue to have a lot of focus on advancing underground what we're working on is making sure we continue to get more and more efficient. So we look at not only advancing the underground, but getting efficient with each unit of capital, if you will, Julian. So that's very much in there.
spk05: Got it. Okay, so the undergrounding is in there. All right, excellent. I will leave it there. Thank you, guys.
spk08: Very good. Thanks, Julian.
spk15: And once again, that is star one. If you would like to ask a question. And we'll pause for just a moment. And again, that is star one, if you would like to ask a question. And we'll now take a follow-up from Julian D'Amelio Smith with Bank of America.
spk05: Sorry, guys. If no one's going to ask this question, I might as well jump in to confirm it. Just on Dwayne Arnold, is that in the solar facility? Is that in the updated CapEx plan? Sorry, I'm not sure if I heard that right in the commentary. And then on the reconciliation bill, just clarifying this, you're not really concerned about minimum cash tax considerations here either, right?
spk07: Yeah, affirmative on both, Julian. The Solar in Iowa, we recently announced, is in our capex, and we don't see the minimum tax as impacting the line energy.
spk13: Yeah, I might add, Julian, so right now what we're seeing is the minimum threshold for the book income to qualify for the 15% minimum tax would be $1 billion, and right now we're probably in that sixth, growing to $700 million. over the next few years, so we think we'll be exempt from that, assuming that the provision comes out with the same minimum threshold of a billion.
spk04: Got it. All right. Thanks, guys. I'll get back to you. You bet.
spk15: And as a final reminder, that is star one. If you would like to ask a question, we'll now take a question from Andrew Levy with PipeHedge.
spk03: How fast are you guys? Everybody wants to ask a question. How are you guys doing?
spk19: Doing well, Andrew.
spk03: Yeah. Okay. That's good. Um, hold on. Just move in a little bit. I think it's probably a little noisy right now. Um, so, okay. So I'd like the answers to Julian's questions, especially on the financing and tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, tech, looking forward, you know, because you always kind of, you know, your CapEx plans are somewhat front-end loaded and then you kind of fill in. As you look at the second part of the decade, you know, you get out to 25 and beyond, what's kind of not included yet that you envision to, whether it's in 24, 25, and more importantly, 26, 27, to be kind of added or, you know, CapEx plans?
spk13: Yeah, Andrew, this is Robert. I guess when we look beyond 2025, which we've announced to date, we have provided some guidance through some of our materials that show we're thinking about roughly $7 billion to $9 billion of CapEx over the following five-year plan. And as you think about that, I think it's going to be a continuation of what we're focused on now. A lot of it's going to be focused on cleaner energy sources. Something of that is more solar, more wind, including repowering opportunities, more storage. So all of those line up well with what our intention is to translate or transfer our generation fleet to cleaner sources. And we think this new legislation that's being proposed under the budget reconciliation bill would be very supportive of that and help be able to provide some good cost benefits for our customers through that program. And also on a continuation of our electric grid spend. So we've obviously talked a lot to you guys about the fact that we feel it's very important to focus on reliability and resiliency of that system. And so we'll see a continuation of undergrounding spend on 25 kV standardization. So that's going to drive a lot of that capex in the latter half. So those are the two primary categories. We'll have other things that we'll obviously watch. And as John indicated before, we let our capital compete. We're always looking for the best opportunities for our customers, but those seem to be bubbling up to the top right now as far as cleaner sources of energy and the grid.
spk03: Okay, that's great. And then just on the transmission side, you know, again, you know, I think a smaller opportunity for you, but then also if you kind of look at your customers and all the other money that you're spending and at the same time saving, by which you feel so, you know, kind of give and take. But, you know, one area that's kind of I think always been something that you guys are focused on is like lowering the cost of transmission for your customers. I think ITC is a big part of that cost. So could you kind of maybe talk about what efforts, if any, you're trying to do as far as to reduce your transmission costs as far as returns and what you may be hearing from the FERC and what direction they're going as far as adders and also potential reduction of the base ROE and whether you're in support of that or you're just kind of an onlooker.
spk08: Yeah, maybe I'll just start out.
spk07: It's certainly important, Andrew, from overall cost, and we know it's important for transmission that's needed to connect renewables. So we certainly have a forecast for that and certainly would like to see transmission commensurate with the renewable adds We do continue to focus on making sure those investments remain affordable for our customers. So you'll see us weighing in on occasion on those, you know, to handicap what's going to come out with the FERC. I guess I'd say it's going to be just going to assume that it's going to be reasonable. It's going to continue to be helpful for transmission to get built. And, you know, other than trying to predict numbers, you know, I think we've got a lot of that baked into our forecast and we'll continue to monitor it.
spk02: Thank you, guys. We'll see you in a couple days.
spk16: Yeah, you bet, Andrew. Thank you.
spk20: This concludes Alliant Energy's third quarter earnings call. A replay will be available through November 12, 2021 at 888-203-1112. for U.S. and Canada, or 719-457-0820 for international. Callers should reference Conference ID 417-5543 and PIN 9578. In addition, an archive of the conference call and a script of the prepared remarks made on the call will be available on the Investors section of the company's website later today. Thank you for your continued support of Alliant Energy, and feel free to contact me with any follow-up questions.
spk15: And once again, that does conclude today's conference, and we thank you all for your participation. You may now disconnect.
spk18: Thank you. Thank you. music you you
spk15: Good morning and welcome to Alliant Energy's conference call for third quarter 2021 results. This call is being recorded for rebroadcast. At this time, all lines are in listen-only mode. I would now like to turn the call over to our host, Zach Fields, Lead Investor Relations Analyst at Alliant Energy.
spk20: 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. Joining me on this call are John Larson, Chair, President, and Chief Executive Officer, and Robert Durian, Executive Vice President and CFO. Following prepared remarks by John and Robert, we will have time to take questions from the investment community. We issued a news release last night announcing Alliant Energy's third quarter financial results, updated our consolidated 2021 guidance range, and announced our 2022 Earnings Guidance and Common Stock Dividend Target. This release, as well as supplemental slides that will be referenced during today's call, are available on the Investors page of our website at www.alliantenergy.com. Before we begin, I need to remind you that the remarks we make on this call and our answers to your questions include forward-looking statements. These forward-looking statements are subject to risk that could cause actual results to be materially different. Those risks include, among others, matters discussed in the Line 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 references to non-GAAP financial measures. The reconciliation between non-GAAP and GAAP measures are provided in the earnings release and our 10-Q, which will be available on our website. At this point, I'll turn the call over to John.
spk07: Thanks, Zach. Good morning, everyone, and thank you for joining us today as we highlight our solid results for the third quarter of 2021. To start us off, I'm pleased to share our narrowed and increased 2021 earnings guidance range of $2.61 to $2.67, which represents a forecasted 12th consecutive year of 5% or greater earnings growth. We are also announcing our 2022 earnings guidance range of $2.65 to $2.79 per share, marking yet another year of forecasted 5% to 7% growth. We understand the importance of delivering consistent returns for our investors and solid operations for our customers. and in keeping with our plan to grow dividends commensurate with earnings growth, I'm pleased to share that our Board of Directors has approved a 6% increase in our targeted annual common stock dividend to $1.71 per share. In a few moments, I'll turn the call over to Robert to share more details of our excellent third quarter financial results. But before I do, I'll highlight some of our many accomplishments from the quarter. Over the past several weeks, I've been pleased to meet with many investors and continue to share our ESG story. It's been a natural journey for us and a direct outcome of how we deliver on our purpose to serve customers and build stronger communities. We know that a clear vision and solid execution are very important factors when making investment decisions. We're proud that our progress and results have been recognized by several key ESG rating organizations who rate us near the top of the utility industry. Our top performing results can be seen on supplemental slide number two. Our recent corporate responsibility report highlights many of our achievements. We continue to make steady progress, such as our commitment to plant more than one million trees across our service territory over the next decade. Not only will this support our care for the environment value and our carbon reduction efforts, It is also responsive to the impact from the 2020 derecho windstorm that devastated our service territory. In Wisconsin, we celebrated our first community solar project with a public open house and tours in the town of Fond du Lac. The one megawatt solar garden will supply clean energy to up to 1,000 homes and is expected to be operational by the end of 2021. Celebrating this solar garden reflects the community's innovative spirit and passion for clean energy. In Iowa, we are excited to have received IUB approval for our first solar garden. It's expected to be constructed in 2022 at a site near Cedar Rapids. In the third quarter, we also assumed ownership of the Bear Creek, North Rock, Wood County, and Grant County solar projects in Wisconsin. Construction is either started or will be started shortly on these projects that total 450 megawatts. And here in the fourth quarter, we acquired the Crawfish River project and expect to acquire the Onion River project before the end of the year. With those acquisitions, we will have assumed ownership of all 675 megawatts of solar that was approved as part of our first CA filing in Wisconsin. Two final highlights I'll share are tied to the social side of ESG. In September, we committed $4 million to the Hometown Care Energy Fund, to help customers who need financial assistance to help pay their energy bills during the upcoming home heating season. The U.S. Energy Information Administration estimates that Midwest natural gas expenditures will rise by nearly 50% compared with last winter. And while we expect the proactive planning by our energy markets team will keep us in line or below those forecasted increases, we know customers will welcome the additional support from this donation to help them stay on track with their energy bills during this time of increased natural gas demand. And finally, I'm excited to share that with the support of our suppliers and partners, our 15th annual Drive Out Hunger event raised over $400,000, bringing our 15-year fundraising total to more than $5 million. This event has provided over 17 million meals to families in need across our service territory. Combating hunger is one of the focus areas of our charitable foundation, and we are proud to partner with our Feeding America Food Bank partners in Iowa and Wisconsin to help thousands of our customers access nutritious food to strengthen their families. With all the great results from the quarter, I would be remiss in not mentioning that our economic development and customer growth efforts have resulted in our third year in a row of being named a top utility in economic development by Site Selector Magazine. Our economic development team, in collaboration with local, regional, and state partners in Iowa and Wisconsin, created more than $900 million in new capital investments and more than 2,200 new jobs across Iowa and Wisconsin. I look forward to meeting with many of you next week at the EEI Financial Conference to share even more about our company, including our clean energy vision, flexible and well-executed capital investment plan, our long track record of consistent financial and operational results, and our focus on the well-being of our employees, customers, and communities. Thank you for your confidence in Align Energy. I'll now turn the call over to Robert.
spk13: Thanks, John. Good morning, everyone. Yesterday, we announced third quarter 2021 gap earnings of $1.02 per share compared to $0.98 per share in the third quarter last year. Our higher earnings year over year were driven by higher revenue requirements due to increasing rate base, as well as higher temperature normalized sales compared to the third quarter of 2020. These higher earnings were partially offset by higher depreciation expense and timing of income tax expense. Additionally, in the third quarter of 2020, we recorded a non-gap adjustment of $0.04 per share related to a legacy guarantee in our non-utility operations. Through the first nine months of this year, temperatures in our service territory have increased retail electric and gas margins by approximately $0.08 per share. By comparison, in 2020, the year-to-date temperature impacts through the first three quarters increased retail electric and gas margins by approximately $0.01 per share. Turning to temperature normalized sales, our retail electric sales in the third quarter of 2021 were up 4.1% versus last year. The two key drivers for this increase are continued pandemic recovery in year-over-year sales, particularly in the commercial and industrial classes, and minimal storm activity this year compared to the third quarter of 2020 when our Iowa territory experienced a derecho windstorm. Through the first nine months of 2021, temperature-normalized electric sales have been better than forecasted, largely due to higher-than-expected demand from residential and industrial customer classes. As John mentioned, last night we issued our consolidated 2022 earnings guidance range of $2.65 to $2.79 per share. The key driver of the 6% growth in temperature normalized EPS is higher earnings on increasing capital investments, primarily driven by our solar program. The details of our refreshed capital expenditure plans are shown on slides five and six. Our capital expenditures, net of expected tax equity contributions over the five-year period from 2021 through 2025, will total approximately $7 billion, or an average of $1.4 billion per year. Our capital expenditure plans continue to be focused on the transition to cleaner energy and strengthening the reliability and resiliency of our electric grid. We continue to make progress on our plans to add 1,500 megawatts of solar energy for both our Wisconsin and Iowa customers and have adjusted our flexible capital expenditure plans to address the current market conditions for solar panels and related project materials. Our plan includes expectations for increasing costs for these solar projects as supply constraints and commodity inflation continue to be prevalent in the solar market. Despite increasing costs, these solar projects remain key elements of our clean energy blueprints and will bring long-term environmental and cost benefits to our customers. In addition to the 1.1 gigawatts of solar previously announced for our Wisconsin customers, our plan includes additional renewables and energy storage in Wisconsin, in part to replace the capacity from a portion of the West Riverside Energy Center that we anticipate will be purchased by our neighboring utilities over the next few years. In Iowa, we recently completed an advanced rate-making filing for our announced 400 megawatts of solar and 75 megawatts of battery storage. We plan for 200 megawatts of that solar plus the battery storage to be located at the site of the recently retired Duane Arnold Energy Center, leveraging the existing transmission interconnection from the former nuclear plant. This will be our first utility scale battery storage installation and will be an important complement to our solar generation. Finally, We've also included capital expenditures in the latter part of our five-year plan for additional energy storage and renewables, including wind-repowering opportunities to increase our portfolio of cost-effective clean energy sources for our utility customers. Slide 9 has been provided to assist you in modeling the effective tax rates for our two utilities and our consolidated group. We estimate a consolidated effective tax rate of negative 13% for 2021 and positive 6% for 2022. At our Wisconsin utility, we will have returned essentially all of the available excess deferred income tax benefits to our customers by the end of 2021, leading to a higher effective tax rate going forward. At our Iowa utility, our large wind portfolio and the resulting production tax credits will maintain our lower effective tax rate for several more years. The production tax credits and excess deferred tax benefits pull back to customers resulting in lower electric margins. Thus, the changes in the effective tax rate related to the PTCs and excess deferred tax benefits are largely earnings neutral. Next, I'd highlight our continued focus on controlling costs for our customers. We have met virtually with many of you throughout this year and shared our strategy to reduce O&M over the next few years. This strategy is important as we head into the upcoming winter heating season with much higher anticipated fuel prices. reminding us that our customers need our continued focus on controlling costs to keep rates affordable. Additionally, while we are not immune to rising commodity prices, we are able to leverage our risk management programs to mitigate the impact of rising natural gas and coal costs on customer bills. Let's move next to our financing plans. In September, we issued a $300 million green bond at WPL to finance renewal projects in Wisconsin. The coupon rate of 1.95% represents the lowest interest rate for a 10-year debenture issued by WPL, helping to support our customer affordability objectives. Our financing plan over the next 14 months includes issuing up to $1.4 billion of long-term debt at our utilities and Align Energy Finance. The proceeds from the new debt issuances will be used to refinance existing debt and the redemption of preferred stock, and to finance the utilities capital expenditure plans. Our 2022 financing plans also include $25 million of new common equity through our DRIP plan. Lastly, we have included our regulatory initiatives of note on slide 7. As mentioned earlier, this week we filed the advanced rate-making principles for 400 megawatts of solar and 75 megawatts of storage for our Iowa utility. The key details of this filing are outlined on slide 8. We plan to receive a decision on this filing in the second half of 2022. Looking ahead, this quarter we expect to receive the written decision regarding our WPL rate review, including the decision on the innovative cost recovery mechanism for the Edgewater Unit 5 coal plant, expected to retire by the end of 2022. And in the first half of next year, we plan to receive a decision on our second solar CA filing in Wisconsin. We very much appreciate your continued support of our company and look forward to meeting with many of you during the EEI Finance Conference next week. Later today, we expect to post on our website the EEI Investor Presentation and the November 2021 Factbook, which details the separate IPL and WPL updated capital expenditures, rate base, and construction work-in-progress forecast through 2025. At this time, I'll turn the call back over to the operator to facilitate the question-and-answer session.
spk15: Thank you, Mr. Durian. At this time, the company will open the call to questions from members of the investment community. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star 1 if you would like to ask a question. And we'll take our first question from Julianne DeMullion-Smith with Bank of America.
spk00: Hey, good morning, team. Thanks for the time and the opportunity.
spk05: Look forward to seeing many of you. Perhaps just, hey, good morning. So perhaps just to kick things off, can we go back to the solar capex and some of the shifts here? Obviously, you kind of alluded to it, but I want to make this a little bit more explicit. The shift in capex here to 24, is that just about, you know, inflation and supply chain uncertainties here in the near term? Or are there other factors, especially in the later years, whether that's, you know, 22 or 23 that are driving it out?
spk07: Yeah. Hey, good morning, Julie and John here. I think you have that just a little bit of an adjustment for inflation. And then, of course, this time of year, we bring in our new refreshed CapEx. And as Robert noted, you know, we've added a bit there with some repower and some additional resources. But I think you've got the headline on that one.
spk05: Yeah, you're not alone is what I'll say. But if I can actually ask that a little bit in reverse here, how are you thinking about financing it today? I mean, certainly the conversation around direct pay from several of your peers has taken note. How are you thinking about this impacting your financing structure and, or more importantly, your cash flow outlook?
spk13: Robert, you want to? Yeah, sure, Julian. So you'll see in the information that we shared in the earnings release with the CapEx table, we continue to model out a tax equity structure in that we'll finance roughly 25 to 45 percent of these solar projects with a tax equity financing partner. But to your point, we are watching the new legislation that's being proposed in the budget reconciliation bill and If we do see some type of direct pay plus production tax credits for solar, we'll reevaluate that financing mechanism. Right now we've got about a billion dollars of financing planned over the next five years with the tax equity structures, so that could be an opportunity for us for future rate-based growth if those provisions come to fruition through the new legislation.
spk05: But you're not ready to talk about what the... shall we say, nearer-term benefit to your cash flow metrics looks like thus far?
spk07: I think there's still some moving targets on that, Julie and John here, but I think the net result from what we're seeing, it's very much in line with where we're going with our plan. And as Robert noted, if anything, it appears to have some favorability for both customers and investors. So I think as we see that play out, we'll certainly talk more about any impacts to our plan.
spk05: Got it. And the last quick one there, just on the shift in distribution capex, obviously stepping up in the later years, is there any undergrounding in there? I know we've talked about that at various points with respect to the ratio follow-up.
spk07: Yeah, continue to have a lot of focus on advancing underground what we're working on is making sure we continue to get more and more efficient. So we look at not only advancing the underground, but getting efficient with each unit of capital, if you will, Julian. So that's very much in there.
spk05: Got it. Okay, so the undergrounding is in there. All right, excellent. I will leave it there. Thank you, guys.
spk08: Very good. Thanks, Julian.
spk15: And once again, that is star one. If you would like to ask a question... And we'll pause for just a moment. And again, that is star 1 if you would like to ask a question. And we'll now take a follow-up from Julianne Dumoulin-Smith with Bank of America.
spk05: Sorry, guys. If no one's going to ask this question, I might as well jump in to confirm it. Just on Dwayne Arnold, is that in the solar facility? Is that in the updated CapEx plan? Sorry, I'm not sure if I heard that right in the commentary. And then on the reconciliation bill, just clarifying this, you're not really concerned about minimum cash tax considerations here either, right?
spk07: Yeah, affirmative on both, Julian. The Solar in Iowa, we recently announced, is in our capex, and we don't see the minimum tax as impacting the line energy.
spk13: Yeah, I might add, Julian, so right now what we're seeing is the minimum threshold for the book income to qualify for the 15% minimum tax would be $1 billion, and right now we're probably in that sixth, growing to $700 million. over the next few years, so we think we'll be exempt from that, assuming that the provision comes out with the same minimum threshold of a billion.
spk04: Got it. All right. Thanks, guys. I'll get back to you. You bet.
spk15: And as a final reminder, that is star one. If you would like to ask a question, we'll now take a question from Andrew Levy with PipeHedge.
spk03: Not bad for you guys. Everybody wants to ask a question. How are you guys doing?
spk19: Doing well, Andrew.
spk03: Yeah. Okay. That's good. Um, hold on. Just move in a little bit. I think it's my little noisy right now. Um, so, okay. So I'd like the answers to Julian's questions, especially on the financing and tech, tech, tech, tech. You guys obviously are taking a look at that. I don't know what's going on. Um, as far as, uh, looking forward, you know, because you always kind of, you know, your CapEx plans are somewhat front-end loaded and then you kind of fill in. As you look at the second part of the decade, you know, you get out to 25 and beyond, what's kind of not included yet that you envision to, whether it's in 24, 25, and more importantly, 26, 27, to be kind of added or, you know, CapEx plans
spk13: Yeah, Andrew, this is Robert. I guess when we look beyond 2025, which we've announced to date, we have provided some guidance through some of our materials that show we're thinking about roughly $7 billion to $9 billion of CapEx over the following five-year plan. And as you think about that, I think it's going to be a continuation of what we're focused on now. A lot of it's going to be focused on cleaner energy sources. Something of that is more solar, more wind, including repowering opportunities, more storage. So all of those line up well with what our intention is to translate or transfer our generation fleet to cleaner sources. And we think this new legislation that's being proposed under the budget reconciliation bill would be very supportive of that and help be able to provide some good cost benefits for our customers through that program. And also on a continuation of our electric grid spend. So we've obviously talked a lot to you guys about the fact that we feel it's very important to focus on reliability and resiliency of that system. And so we'll see a continuation of undergrounding spend on 25 kV standardization. So that's going to drive a lot of that CapEx in the latter half. So those are the two primary categories. We'll have other things that we'll obviously watch. And as John indicated before, we let our capital compete. We're always looking for the best opportunities for our customers, but those seem to be bubbling up to the top right now as far as cleaner sources of energy and the grid.
spk03: Okay, that's great. And then just on the transmission side, you know, again, you know, I think a smaller opportunity for you, but then also if you kind of look at your customers and all the other money that you're spending and at the same time saving, which you feel is kind of give and take. But, you know, one area that's kind of I think always been that you guys have focused on is like lowering the cost of transmission for your customers since I think ITC is a big part of that cost. So could you kind of maybe talk about what efforts, if any, you're trying to do as far as to reduce your transmission costs as far as returns and what you may be hearing from the FERC and what direction they're going as far as adders and also potential reduction of the base ROE and whether you're in support of that or you're just kind of an onlooker.
spk07: Yeah, maybe I'll just start out. It's certainly important, Andrew, from overall cost, and we know it's important for transmission that's needed to connect renewables. So we certainly have a forecast for that and certainly would like to see transmission commensurate with the renewable adds We do continue to focus on making sure those investments remain affordable for our customers. So you'll see us weighing in on occasion on those, you know, to handicap what's going to come out with the FERC. I guess I'd say it's going to be just going to assume that it's going to be reasonable. It's going to continue to be helpful for transmission to get built. And, you know, other than trying to predict numbers, you know, I think we've got a lot of that baked into our forecast and we'll continue to monitor it.
spk02: Thank you, guys. We'll see you in a couple days.
spk16: Yeah, you bet, Andrew. Thank you.
spk20: This concludes Alliant Energy's third quarter earnings call. A replay will be available through November 12, 2021 at 888-203-1112. for US and Canada or 719-457-0820 for international. Callers should reference conference ID 417-5543 and PIN 9578. In addition, an archive of the conference call and a script of the prepared remarks made on the call will be available on the investor section of the company's website later today. Thank you for your continued support of Alliant Energy, and feel free to contact me with any follow-up questions.
spk15: And once again, that does conclude today's conference, and we thank you all for your participation. You may now disconnect.
Disclaimer

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