Alliant Energy posts loss tied to buyback of debt

Oct 30, 2009 (The Wisconsin State Journal - McClatchy-Tribune Information Services via COMTEX) -- LNT | Quote | Chart | News | PowerRating -- Cool summer weather, the stunted economy and replacing old debt with new all worked together to push Alliant Energy Corp. to a loss for the third quarter.

The Madison utility holding company reported a $44.3 million net loss, or 40 cents a share, on $885.7 million in revenue for the three months that ended Sept. 30, a sharp drop from profits of $108.5 million, or 98 cents a share, on $980.3 million in revenue for the 2008 third quarter.

Earnings for local utility subsidiary Wisconsin Power & Light were $20.2 million, less than half of the $41.8 million in earnings for the 2008 third quarter. Customers didn't run their air conditioners as much as usual because of the mild summer weather. Meanwhile, the struggling economy reduced sales to businesses and is expected to continue to do so next year, said Alliant chairman, president and chief executive Bill Harvey.

"We estimate WPL has permanently lost approximately 7 percent of its industrial ... sales due to plant closures. Although the industrial sales decline is slowing, there is little evidence that any sales recovery from industrial is forthcoming over the near term," Harvey told a conference call with analysts.

Analyst David Parker, of Robert W. Baird & Co., in Tampa, Fla., said he was surprised at how much industrial demand declined. "From Alliant's perspective, it probably couldn't come at a worse time, when they're ramping up construction activity," Parker said in an interview. "Rate relief is needed really badly so they can invest in wind (power)."

The Wisconsin Public Service Commission is expected to act in December on WPL's proposal to raise rates. Harvey said Alliant plans to file another request for higher rates in early 2010, to take effect the following January.

Non-utility subsidiary RMT saw a drop in earnings of 7 cents a share in the third quarter because of sluggish activity in the wind energy business. RMT's revenues fell 38 percent, to $90 million from $144 million for the 2008 third quarter. Alliant is lowering its forecast for the year for RMT to a 1 cent per share loss from a 3 cents per share gain, partly due to restructuring charges.

The biggest factor in the quarterly decline, though, was a $1.16 per share charge related to the company's buyback of $402 million of debt, at 2.5 percent interest, in September, replacing it with $250 million of debt at 4 percent interest. The move averted a trial scheduled in U.S. District Court in February alleging Alliant had violated terms of the financing obtained nearly 10 years ago.

Parker said the move also was "a way to clean up the balance sheet, replacing a derivative security with more traditional debt, which rating agencies and investors view as lower risk." A derivative is a hybrid security, made up partly of debt and partly of equity. Parker said other utility companies around the U.S. also have taken steps to eliminate non-traditional debt.

Alliant now projects profits of $1.75 to $1.90 a share for 2009, down slightly from earlier estimates of $1.80 to $2 a share.

Alliant stock closed Friday at $26.56 a share, down 25 cents.

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