UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
-------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Name of Registrant, State of Incorporation, IRS Employer
Commission Address of Principal Executive Offices Identification
File Number and Telephone Number Number
----------- ------------------------------------------ ----------------
1-9894 ALLIANT ENERGY CORPORATION 39-1380265
(a Wisconsin corporation)
222 West Washington Avenue
Madison, Wisconsin 53703
Telephone (608)252-3311
0-4117-1 IES UTILITIES INC. 42-0331370
(an Iowa corporation)
Alliant Energy Tower
Cedar Rapids, Iowa 52401
Telephone (319)398-4411
0-337 WISCONSIN POWER AND LIGHT COMPANY 39-0714890
(a Wisconsin corporation)
222 West Washington Avenue
Madison, Wisconsin 53703
Telephone (608)252-3311
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject
to such filing requirements for the past 90 days. Yes X No
----- -----
This combined Form 10-Q is separately filed by Alliant Energy Corporation,
IES Utilities Inc. and Wisconsin Power and Light Company. Information
contained in the quarterly report relating to IES Utilities Inc. and
Wisconsin Power and Light Company is filed by such registrant on its own
behalf. Each of IES Utilities Inc. and Wisconsin Power and Light Company
makes no representation as to information relating to registrants other than
itself.
Number of shares outstanding of each class of common stock as of July 31, 2000:
Alliant Energy Corporation Common stock, $.01 par value, 79,002,896
shares outstanding
IES Utilities Inc. Common stock, $2.50 par value, 13,370,788
shares outstanding (all of which are owned
beneficially and of record by Alliant Energy
Corporation)
Wisconsin Power and Common stock, $5 par value, 13,236,601 shares
Light Company outstanding (all of which are owned
beneficially and of record by Alliant Energy
Corporation)
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
--------
Page
----
<S> <C> <C>
Part I. Financial Information 4
Item 1. Consolidated Financial Statements 4
Alliant Energy Corporation:
---------------------------
Consolidated Statements of Income for the Three and Six Months Ended
June 30, 2000 and 1999 4
Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 5
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2000 and 1999 7
Notes to Consolidated Financial Statements 8
IES Utilities Inc.:
-------------------
Consolidated Statements of Income for the Three and Six Months Ended
June 30, 2000 and 1999 11
Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 12
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2000 and 1999 14
Notes to Consolidated Financial Statements 15
Wisconsin Power and Light Company:
----------------------------------
Consolidated Statements of Income for the Three and Six Months Ended
June 30, 2000 and 1999 16
Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 17
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2000 and 1999 19
Notes to Consolidated Financial Statements 20
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 36
Part II. Other Information 36
Item 4. Submission of Matters to a Vote of Security Holders 36
Item 6. Exhibits and Reports on Form 8-K 38
Signatures 39
</TABLE>
2
<PAGE>
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes of this combined
Form 10-Q are defined below:
<TABLE>
<CAPTION>
Abbreviation or Acronym Definition
----------------------- -----------
<S> <C>
Alliant Energy............................................... Alliant Energy Corporation
APB.......................................................... Accounting Principle Board Opinion
ATC.......................................................... American Transmission Company, LLC
Capstone..................................................... Capstone Turbine Corporation
CEMS......................................................... Continuous Emission Monitoring System
Corporate Services........................................... Alliant Energy Corporate Services, Inc.
DAEC......................................................... Duane Arnold Energy Center
DOJ.......................................................... United States Department of Justice
Dth.......................................................... Dekatherm
EAC.......................................................... Energy Adjustment Clause
EPA.......................................................... United States Environmental Protection Agency
FASB......................................................... Financial Accounting Standards Board
FERC......................................................... Federal Energy Regulatory Commission
IESU......................................................... IES Utilities Inc.
International................................................ Alliant Energy International, Inc.
IPC.......................................................... Interstate Power Company
ISCO......................................................... Alliant Energy Industrial Services, Inc.
ISO.......................................................... Independent System Operator
IUB.......................................................... Iowa Utilities Board
Kewaunee..................................................... Kewaunee Nuclear Power Plant
kV........................................................... Kilovolt
MAIN......................................................... Mid-America Interconnected Network, Inc.
MAPP......................................................... Mid-Continent Area Power Pool
McLeod....................................................... McLeodUSA Incorporated
MD&A......................................................... Management's Discussion and Analysis of Financial Condition
and Results of Operations
MGP.......................................................... Manufactured Gas Plants
MPUC......................................................... Minnesota Public Utilities Commission
MWH.......................................................... Megawatt-Hour
NMC.......................................................... Nuclear Management Company, LLC
NOx.......................................................... Nitrogen Oxides
NRC.......................................................... Nuclear Regulatory Commission
NSP.......................................................... Northern States Power Company
OCA.......................................................... Office of Consumer Advocate
PGA.......................................................... Purchased Gas Adjustment
PSCW......................................................... Public Service Commission of Wisconsin
PUHCA........................................................ Public Utility Holding Company Act of 1935
Resources.................................................... Alliant Energy Resources, Inc.
RTO.......................................................... Regional Transmission Organization
SEC.......................................................... Securities and Exchange Commission
SFAS......................................................... Statement of Financial Accounting Standards
Transportation............................................... Alliant Energy Transportation, Inc.
U.S.......................................................... United States
WDNR......................................................... Wisconsin Department of Natural Resources
WEPCO........................................................ Wisconsin Electric Power Company
Whiting...................................................... Whiting Petroleum Corporation
WP&L......................................................... Wisconsin Power and Light Company
WPSC......................................................... Wisconsin Public Service Corporation
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating revenues:
Electric utility $393,843 $366,152 $767,465 $717,490
Gas utility 54,653 46,200 184,787 179,885
Non-regulated and other 124,069 73,762 241,163 135,594
-------------- -------------- -------------- --------------
572,565 486,114 1,193,415 1,032,969
-------------- -------------- -------------- --------------
--------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 64,113 53,360 133,385 118,763
Purchased power 74,792 72,440 137,137 124,505
Cost of utility gas sold 31,869 22,666 113,982 104,009
Other operation and maintenance 237,042 180,225 453,508 334,403
Depreciation and amortization 77,970 70,475 153,881 144,115
Taxes other than income taxes 26,612 26,690 52,965 53,929
-------------- -------------- -------------- --------------
512,398 425,856 1,044,858 879,724
-------------- -------------- -------------- --------------
--------------------------------------------------------------------------------------------------------------------------------
Operating income 60,167 60,258 148,557 153,245
-------------- -------------- -------------- --------------
--------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 41,794 34,715 82,412 68,114
Contingent interest on indexed senior notes (39,493) - - -
Allowance for funds used during construction (2,885) (1,782) (4,639) (3,716)
Preferred dividend requirements of subsidiaries 1,678 1,677 3,356 3,353
Gains on sales of McLeodUSA Inc. stock - (33,826) (10,206) (33,826)
Miscellaneous, net (9,243) (3,239) (22,440) (10,008)
-------------- -------------- -------------- --------------
(8,149) (2,455) 48,483 23,917
-------------- -------------- -------------- --------------
--------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 68,316 62,713 100,074 129,328
-------------- -------------- -------------- --------------
--------------------------------------------------------------------------------------------------------------------------------
Income taxes 26,038 24,167 38,476 49,039
-------------- -------------- -------------- --------------
--------------------------------------------------------------------------------------------------------------------------------
Net income $42,278 $38,546 $61,598 $80,289
============== ============== ============== ==============
--------------------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding 79,002 78,214 78,999 77,997
============== ============== ============== ==============
--------------------------------------------------------------------------------------------------------------------------------
Earnings per average common share (basic and diluted) $0.54 $0.49 $0.78 $1.03
============== ============== ============== ==============
--------------------------------------------------------------------------------------------------------------------------------
Dividends declared per common share $0.50 $0.50 $1.00 $1.00
============== ============== ============== ==============
--------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30,
2000 December 31,
ASSETS (Unaudited) 1999
-------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Property, plant and equipment:
Utility -
Plant in service -
Electric $5,115,907 $5,032,675
Gas 554,600 540,874
Other 467,956 458,547
-------------------- -------------------
6,138,463 6,032,096
Less - Accumulated depreciation 3,205,528 3,077,459
-------------------- -------------------
2,932,935 2,954,637
Construction work in progress 135,567 119,276
Nuclear fuel, net of amortization 51,512 54,363
-------------------- -------------------
3,120,014 3,128,276
Other property, plant and equipment, net of accumulated
depreciation and amortization of $196,843 and $184,722, respectively 441,575 357,758
-------------------- -------------------
3,561,589 3,486,034
-------------------- -------------------
-------------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 31,869 113,669
Accounts receivable:
Customer, less allowance for doubtful accounts
of $2,759 and $2,253, respectively 62,676 67,299
Unbilled utility revenues 43,310 48,033
Other, less allowance for doubtful accounts
of $512 and $954, respectively 26,574 30,095
Income tax refunds receivable 32,076 14,611
Production fuel, at average cost 50,862 49,657
Materials and supplies, at average cost 55,454 52,440
Gas stored underground, at average cost 17,573 23,151
Regulatory assets 30,225 33,439
Prepaid gross receipts tax 21,976 20,864
Other 38,598 32,728
-------------------- -------------------
411,193 485,986
-------------------- -------------------
-------------------------------------------------------------------------------------------------------------------------------
Investments:
Investment in McLeodUSA Inc. 1,175,449 1,123,790
Investments in foreign entities 580,473 198,055
Nuclear decommissioning trust funds 280,917 271,258
Other 132,068 59,866
-------------------- -------------------
2,168,907 1,652,969
-------------------- -------------------
-------------------------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 253,189 263,610
Deferred charges and other 202,200 187,084
-------------------- -------------------
455,389 450,694
-------------------- -------------------
-------------------------------------------------------------------------------------------------------------------------------
Total assets $6,597,078 $6,075,683
==================== ===================
-------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
June 30,
2000 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 1999
--------------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
<S> <C> <C>
Capitalization:
Common stock - $.01 par value - authorized 200,000,000 shares;
outstanding 79,002,896 and 78,984,014 shares, respectively $790 $790
Additional paid-in capital 946,154 942,408
Retained earnings 560,190 577,464
Accumulated other comprehensive income 679,194 634,903
Shares in deferred compensation trust - 25,999 shares
at an average cost of $29.52 per share (767) -
------------------- -------------------
Total common equity 2,185,561 2,155,565
------------------- -------------------
Cumulative preferred stock of subsidiaries, net 113,714 113,638
Long-term debt (excluding current portion) 1,915,153 1,486,765
------------------- -------------------
4,214,428 3,755,968
------------------- -------------------
--------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 65,645 54,795
Variable rate demand bonds 55,100 55,100
Commercial paper 407,495 374,673
Notes payable 42,044 50,046
Capital lease obligations 11,481 13,321
Accounts payable 182,571 191,149
Accrued interest 29,082 24,818
Accrued taxes 76,779 78,825
Other 98,061 90,898
------------------- -------------------
968,258 933,625
------------------- -------------------
--------------------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 1,058,878 1,018,482
Accumulated deferred investment tax credits 70,292 71,857
Environmental liabilities 61,523 65,327
Pension and other benefit obligations 64,048 61,988
Other 159,651 168,436
------------------- -------------------
1,414,392 1,386,090
------------------- -------------------
--------------------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $6,597,078 $6,075,683
=================== ===================
--------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30,
2000 1999
-----------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $61,598 $80,289
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization 153,881 144,115
Amortization of nuclear fuel 8,903 9,142
Amortization of deferred energy efficiency expenditures 12,908 13,250
Deferred taxes and investment tax credits (4,818) (8,487)
Refueling outage provision 4,811 4,412
Gains on dispositions of assets, net (11,950) (37,591)
Other (13,656) 1,502
Other changes in assets and liabilities:
Accounts receivable 12,867 18,871
Notes receivable 1,320 7,813
Income tax refunds receivable (17,465) (3,572)
Production fuel (1,205) 11,817
Gas stored underground 5,578 13,495
Accounts payable (8,578) (58,409)
Adjustment clause balances 8,986 (9,240)
Benefit obligations and other (14,425) 16,367
----------------- -----------------
Net cash flows from operating activities 198,755 203,774
----------------- -----------------
-----------------------------------------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends declared (78,987) (77,892)
Proceeds from issuance of common stock 579 20,888
Net change in Resources' credit facility 49,152 15,495
Proceeds from issuance of other long-term debt 520,366 12,144
Reductions in other long-term debt (61,793) (67,016)
Net change in other short-term borrowings (24,332) 59,240
Principal payments under capital lease obligations (5,239) (6,869)
Other (15,356) 285
----------------- -----------------
Net cash flows from (used for) financing activities 384,390 (43,725)
----------------- -----------------
-----------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Utility (136,347) (105,054)
Non-regulated businesses (517,991) (78,654)
Nuclear decommissioning trust funds (17,658) (17,658)
Proceeds from disposition of assets 14,994 47,209
Shared savings program (6,676) (10,594)
Other (1,267) 2,278
----------------- -----------------
Net cash flows used for investing activities (664,945) (162,473)
----------------- -----------------
-----------------------------------------------------------------------------------------------------
Net decrease in cash and temporary cash investments (81,800) (2,424)
----------------- -----------------
-----------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 113,669 31,827
----------------- -----------------
-----------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $31,869 $29,403
================= =================
-----------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Cash paid during the period for:
Interest $76,759 $68,166
================= =================
Income taxes $60,073 $56,130
================= =================
Noncash investing and financing activities:
Capital lease obligations incurred $277 $18,252
================= =================
-----------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
7
<PAGE>
ALLIANT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The interim consolidated financial statements included herein have been
prepared by Alliant Energy, without audit, pursuant to the rules and
regulations of the SEC. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted, although management believes that the disclosures
are adequate to make the information presented not misleading. The
consolidated financial statements include Alliant Energy and its
consolidated subsidiaries (including IESU, WP&L, IPC, Resources and
Corporate Services). These financial statements should be read in
conjunction with the financial statements and the notes thereto included
in Alliant Energy's, IESU's and WP&L's latest Annual Report on Form 10-K.
In the opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of (a) the
consolidated results of operations for the three and six months ended June
30, 2000 and 1999, (b) the consolidated financial position at June 30,
2000 and December 31, 1999, and (c) the consolidated statement of cash
flows for the six months ended June 30, 2000 and 1999, have been made.
Because of the seasonal nature of IESU's, WP&L's and IPC's operations,
results for the three and six months ended June 30, 2000 are not
necessarily indicative of results that may be expected for the year ending
December 31, 2000. Certain prior period amounts have been reclassified on
a basis consistent with the 2000 presentation.
2. Alliant Energy's comprehensive income (loss), and the components of other
comprehensive income (loss), net of taxes, were as follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended June 30, For the Six Months Ended June 30,
2000 1999 2000 1999
----------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Net income $42,278 $38,546 $61,598 $80,289
Other comprehensive income (loss):
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period, net of tax (1) (215,621) 84,742 68,837 159,773
Less: reclassification adjustment for gains
included in net income, net of tax (2) -- (21,324) (6,328) (21,324)
--------------- ------------- ------------- -------------
Net unrealized gains (losses) (215,621) 63,418 62,509 138,449
--------------- ------------- ------------- -------------
Foreign currency translation adjustments (19,135) (239) (18,218) (853)
--------------- ------------- ------------- -------------
Other comprehensive income (loss) (234,756) 63,179 44,291 137,596
--------------- ------------- ------------- -------------
Comprehensive income (loss) ($192,478) $101,725 $105,889 $217,885
=============== ============= ============= =============
</TABLE>
(1) Primarily due to quarterly adjustments to the estimated fair value of
Alliant Energy's investments in McLeod and Capstone. Alliant Energy
invested $10 million in Capstone in March 2000. Capstone and Resources also
entered into a non-exclusive distribution agreement in which Resources will
act as a distributor for Capstone's MicroTurbine power generation systems
and solutions.
(2) The first quarter 2000 earnings included a pre-tax gain of $10.2 million
($0.08 per share) from the sale of 150,000 shares (450,000 shares as
adjusted for the 3-for-1 stock split effective April 24, 2000) of McLeod
stock held by Alliant Energy. The second quarter 1999 earnings included a
pre-tax gain of $33.8 million ($0.27 per share) from the sale of
approximately 640,000 shares (approximately 3,840,000 shares as adjusted
for both the 2-for-1 stock split effective July 26, 1999 and the 3-for-1
stock split effective April 24, 2000) of McLeod stock held by Alliant
Energy. Alliant Energy still held beneficial ownership in approximately 57
million shares of McLeod stock as of June 30, 2000.
IESU and WP&L had no other comprehensive income in the periods presented.
8
<PAGE>
3. Certain financial information relating to Alliant Energy's significant
business segments is presented below:
<TABLE>
<CAPTION>
------------------------------------------------------
Regulated Domestic Utilities Alliant
------------------------------------------------------ Non-regulated Energy
Electric Gas Other Total Businesses Other Consolidated
---------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended
June 30, 2000
-------------
Operating revenues $393,843 $54,653 $7,422 $455,918 $117,309 ($662) $572,565
Operating income (loss) 61,034 (4,746) 740 57,028 3,251 (112) 60,167
Net income 20,042 21,972 264 42,278
Three Months Ended
June 30, 1999
-------------
Operating revenues $366,152 $46,200 $7,820 $420,172 $66,595 ($653) $486,114
Operating income (loss) 56,155 (2,018) 1,529 55,666 4,101 491 60,258
Net income (loss) 17,138 21,560 (152) 38,546
Six Months Ended
June 30, 2000
-------------
Operating revenues $767,465 $184,787 $15,578 $967,830 $226,772 ($1,187) $1,193,415
Operating income (loss) 124,872 14,105 2,520 141,497 7,194 (134) 148,557
Net income (loss) 59,109 5,860 (3,371) 61,598
Six Months Ended
June 30, 1999
-------------
Operating revenues $717,490 $179,885 $17,024 $914,399 $119,794 ($1,224) $1,032,969
Operating income 124,770 21,921 3,883 150,574 2,265 406 153,245
Net income (loss) 61,905 19,654 (1,270) 80,289
</TABLE>
Non-regulated earnings for the three months ended June 30, 2000 included a
reversal of the $24.8 million after-tax non-cash charge to net income
recorded in the first quarter of 2000 due to a decrease in the stock price
of McLeod at June 30, 2000 (the value of the McLeod stock impacts Alliant
Energy's obligation under the 30-year exchangeable senior notes issued in
February). Refer to "Alliant Energy Results of Operations - Interest
Expense and Other" in MD&A for additional information.
Resources' (i.e., the non-regulated businesses) assets increased $552
million during the first six months of 2000, primarily due to Alliant
Energy's recent investment in various Brazilian utilities and the increase
in market value of its investments in Capstone and McLeod. On January 25,
2000, Resources acquired a stake in four Brazilian electric utilities for a
total of approximately $347 million. Intersegment revenues were not
material to Alliant Energy's operations.
4. The provisions for income taxes are based on the estimated annual
effective tax rate, which differs from the federal statutory rate of 35%
principally due to: state income taxes, tax credits, effects of utility
rate making and certain non-deductible expenses.
9
<PAGE>
5. At June 30, 2000, Alliant Energy had $580 million of investments in
foreign entities on its Consolidated Balance Sheet that primarily included
investments in various Brazilian electric utilities, investments in
various New Zealand and Australian utility entities, investments in
various generation facilities in China and an investment in secured
debentures of a development project in Mexico. The Brazil, China and a
portion of both the New Zealand and Australian investments are accounted
for under the equity method. The remainder of the New Zealand and
Australian investments are accounted for under the cost method. The
geographic concentration of Alliant Energy's investments in foreign
entities at June 30, 2000, included investments of approximately $355
million in Brazil, $137 million in New Zealand and Australia, $72 million
in China and $16 million in Mexico.
6. Summary financial information for Resources was as follows (in
thousands):
June 30, 2000
-------------
Current assets $103,938
Non-current assets 2,296,225
Current liabilities 263,397
Non-current liabilities
(excludes minority interest) 551,322
Minority interest (primarily
real estate joint ventures) 7,189
Refer to the "Non-regulated Businesses" column of Note 3 for summary
income statement data of Resources. Alliant Energy has not presented
separate financial statements for Resources because it is a wholly-owned
subsidiary of Alliant Energy and because management has determined that
such information is not material to holders of senior notes of Resources.
Alliant Energy has fully and unconditionally guaranteed the payment of
principal and interest on the senior notes.
7. On February 1, 2000, Resources completed a private placement of $402.5
million of exchangeable senior notes due 2030. The exchangeable senior
notes have a stated interest rate of 7.25% through February 15, 2003 and
2.5% thereafter and are exchangeable for cash based upon a percentage of
the value of McLeod Class A Common Stock. Refer to "Other
Matters-Accounting Pronouncements" in MD&A for a further discussion.
WP&L issued $100 million of senior unsecured debentures in March 2000 at a
fixed interest rate of 7-5/8%, due 2010. The net proceeds from the sale
of the debentures were primarily used to repay short-term debt.
10
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Operating revenues:
Electric utility $148,327 $142,209 $294,035 $282,226
Gas utility 27,445 22,012 86,874 83,308
Steam 6,185 6,572 13,172 14,524
--------------- --------------- ----------------- ---------------
181,957 170,793 394,081 380,058
--------------- --------------- ----------------- ---------------
-------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 28,995 12,285 61,634 38,873
Purchased power 17,718 27,142 31,140 40,292
Cost of gas sold 16,964 11,623 55,038 49,535
Other operation and maintenance 56,939 57,739 110,705 115,084
Depreciation and amortization 26,849 25,481 53,699 50,963
Taxes other than income taxes 12,057 12,468 23,932 25,083
--------------- --------------- ----------------- ---------------
159,522 146,738 336,148 319,830
--------------- --------------- ----------------- ---------------
-------------------------------------------------------------------------------------------------------------------------------
Operating income 22,435 24,055 57,933 60,228
--------------- --------------- ----------------- ---------------
-------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 12,584 14,434 25,595 27,638
Allowance for funds used during construction (573) (535) (1,063) (1,384)
Miscellaneous, net (1,415) (2,499) (6,166) (3,355)
--------------- --------------- ----------------- ---------------
10,596 11,400 18,366 22,899
--------------- --------------- ----------------- ---------------
-------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 11,839 12,655 39,567 37,329
--------------- --------------- ----------------- ---------------
-------------------------------------------------------------------------------------------------------------------------------
Income taxes 5,294 5,611 16,912 15,828
--------------- --------------- ----------------- ---------------
-------------------------------------------------------------------------------------------------------------------------------
Net income 6,545 7,044 22,655 21,501
--------------- --------------- ----------------- ---------------
-------------------------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 229 229 457 457
--------------- --------------- ----------------- ---------------
-------------------------------------------------------------------------------------------------------------------------------
Earnings available for common stock $6,316 $6,815 $22,198 $21,044
=============== =============== ================= ===============
-------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED BALANCE SHEETS
June 30,
2000 December 31,
ASSETS (Unaudited) 1999
----------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Property, plant and equipment:
Utility -
Plant in service -
Electric $2,219,674 $2,196,895
Gas 211,526 207,769
Steam 59,866 59,929
Common 150,594 147,845
------------------- -----------------
2,641,660 2,612,438
Less - Accumulated depreciation 1,362,230 1,311,996
------------------- -----------------
1,279,430 1,300,442
Construction work in progress 56,077 37,572
Leased nuclear fuel, net of amortization 32,832 39,284
------------------- -----------------
1,368,339 1,377,298
Other property, plant and equipment, net of accumulated
depreciation and amortization of $2,167 and $2,094, respectively 5,408 5,481
------------------- -----------------
1,373,747 1,382,779
------------------- -----------------
----------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 4,325 5,720
Accounts receivable:
Customer, less allowance for doubtful accounts
of $321 and $824, respectively 6,761 14,130
Associated companies 1,890 5,696
Other, less allowance for doubtful accounts
of $370 and $817, respectively 11,340 12,864
Income tax refunds receivable 13,422 6,007
Production fuel, at average cost 13,721 12,312
Materials and supplies, at average cost 24,752 24,722
Gas stored underground, at average cost 8,377 11,462
Adjustment clause balances 1,618 11,099
Regulatory assets 17,212 18,569
Prepayments and other 1,973 2,921
------------------- -----------------
105,391 125,502
------------------- -----------------
----------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 109,855 105,056
Other 6,120 6,119
------------------- -----------------
115,975 111,175
------------------- -----------------
----------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 112,717 123,031
Deferred charges and other 12,623 13,321
------------------- -----------------
125,340 136,352
------------------- -----------------
----------------------------------------------------------------------------------------------------------------
Total assets $1,720,453 $1,755,808
=================== =================
----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
June 30,
2000 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 1999
--------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
<S> <C> <C>
Capitalization:
Common stock - $2.50 par value - authorized 24,000,000
shares; 13,370,788 shares outstanding $33,427 $33,427
Additional paid-in capital 279,042 279,042
Retained earnings 245,835 252,953
------------------ -----------------
Total common equity 558,304 565,422
------------------ -----------------
Cumulative preferred stock 18,320 18,320
Long-term debt (excluding current portion) 490,645 551,079
------------------ -----------------
1,067,269 1,134,821
------------------ -----------------
--------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 60,560 51,196
Capital lease obligations 11,463 13,307
Notes payable to associated companies 84,743 56,946
Accounts payable 39,437 41,273
Accounts payable to associated companies 21,001 17,438
Accrued payroll and vacations 8,589 7,816
Accrued interest 8,888 10,833
Accrued taxes 44,331 44,259
Other 18,977 15,802
------------------ -----------------
297,989 258,870
------------------ -----------------
--------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 226,891 225,961
Accumulated deferred investment tax credits 26,554 26,682
Environmental liabilities 23,243 26,292
Pension and other benefit obligations 27,278 27,734
Capital lease obligations 21,369 25,977
Other 29,860 29,471
------------------ -----------------
355,195 362,117
------------------ -----------------
--------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,720,453 $1,755,808
================== =================
--------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30,
2000 1999
--------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $22,655 $21,501
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 53,699 50,963
Amortization of leased nuclear fuel 6,730 6,092
Amortization of deferred energy efficiency expenditures 7,319 9,518
Deferred taxes and investment tax credits (616) (6,745)
Refueling outage provision 4,811 4,412
Gain on disposition of assets, net (1,415) -
Other 1,106 529
Other changes in assets and liabilities:
Accounts receivable 12,699 13,537
Income tax refunds receivable (7,415) (1,366)
Gas stored underground 3,085 8,486
Accounts payable 1,727 (22,567)
Adjustment clause balances 9,482 (8,488)
Benefit obligations and other (84) 3,596
----------------- ------------------
Net cash flows from operating activities 113,783 79,468
----------------- ------------------
--------------------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends declared (29,316) (58,633)
Dividends payable (229) (4,840)
Preferred stock dividends (457) (457)
Reductions in long-term debt (51,196) (50,140)
Net change in short-term borrowings 27,797 29,706
Principal payments under capital lease obligations (5,239) (6,869)
Other - (3)
----------------- ------------------
Net cash flows used for financing activities (58,640) (91,236)
----------------- ------------------
--------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (53,783) (41,173)
Nuclear decommissioning trust funds (3,004) (3,004)
Proceeds from disposition of assets 1,415 -
Other (1,166) 236
----------------- ------------------
Net cash flows used for investing activities (56,538) (43,941)
----------------- ------------------
--------------------------------------------------------------------------------------------------------------------
Net decrease in cash and temporary cash investments (1,395) (55,709)
----------------- ------------------
--------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 5,720 57,904
----------------- ------------------
--------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $4,325 $2,195
================= ==================
--------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Cash paid during the period for:
Interest $24,317 $24,714
================= ==================
Income taxes $24,158 $30,824
================= ==================
Noncash investing and financing activities-Capital lease obligations incurred $277 $18,252
================= ==================
--------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
14
<PAGE>
IES UTILITIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except as modified below, the Alliant Energy Notes to Consolidated
Financial Statements are incorporated by reference insofar as they relate
to IESU.
1. The interim consolidated financial statements included herein have been
prepared by IESU, without audit, pursuant to the rules and regulations of
the SEC. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted,
although management believes that the disclosures are adequate to make the
information presented not misleading. IESU is a subsidiary of Alliant
Energy. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in IESU's latest
Annual Report on Form 10-K.
In the opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of (a) the
consolidated results of operations for the three and six months ended June
30, 2000 and 1999, (b) the consolidated financial position at June 30,
2000 and December 31, 1999, and (c) the consolidated statement of cash
flows for the six months ended June 30, 2000 and 1999, have been made.
Because of the seasonal nature of IESU's operations, results for the three
and six months ended June 30, 2000 are not necessarily indicative of
results that may be expected for the year ending December 31, 2000.
Certain prior period amounts have been reclassified on a basis consistent
with the 2000 presentation.
2. Certain financial information relating to IESU's significant business
segments is presented below. Intersegment revenues were not material
to IESU's operations.
<TABLE>
<CAPTION>
Electric Gas Other Total
------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Three Months Ended June 30, 2000
--------------------------------
Operating revenues $148,327 $27,445 $6,185 $181,957
Operating income (loss) 24,092 (1,992) 335 22,435
Earnings available for common stock 6,316
Three Months Ended June 30, 1999
--------------------------------
Operating revenues $142,209 $22,012 $6,572 $170,793
Operating income (loss) 23,803 (895) 1,147 24,055
Earnings available for common stock 6,815
Six Months Ended June 30, 2000
------------------------------
Operating revenues $294,035 $86,874 $13,172 $394,081
Operating income 50,777 5,422 1,734 57,933
Earnings available for common stock 22,198
Six Months Ended June 30, 1999
------------------------------
Operating revenues $282,226 $83,308 $14,524 $380,058
Operating income 49,140 8,052 3,036 60,228
Earnings available for common stock 21,044
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Operating revenues:
Electric utility $173,111 $150,510 $335,487 $300,455
Gas utility 19,515 15,358 74,801 67,151
Water 1,239 1,248 2,409 2,500
--------------- --------------- --------------- ---------------
193,865 167,116 412,697 370,106
--------------- --------------- --------------- ---------------
------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric production fuels 26,703 26,014 50,501 53,380
Purchased power 38,063 28,425 71,820 52,424
Cost of gas sold 9,638 5,798 44,967 36,979
Other operation and maintenance 54,319 49,207 100,184 84,419
Depreciation and amortization 32,599 28,407 64,976 59,546
Taxes other than income taxes 7,417 7,355 14,628 15,057
--------------- --------------- --------------- ---------------
168,739 145,206 347,076 301,805
--------------- --------------- --------------- ---------------
------------------------------------------------------------------------------------------------------------------------------
Operating income 25,126 21,910 65,621 68,301
--------------- --------------- --------------- ---------------
------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 11,228 10,078 22,136 19,943
Allowance for funds used during construction (2,088) (1,109) (3,150) (2,032)
Miscellaneous, net (2,353) 1,996 (6,432) (2,348)
--------------- --------------- --------------- ---------------
6,787 10,965 12,554 15,563
--------------- --------------- --------------- ---------------
------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 18,339 10,945 53,067 52,738
--------------- --------------- --------------- ---------------
--------------------------------------------------------------------------------------- ----------------------------------
Income taxes 7,041 3,992 19,898 19,497
--------------- --------------- --------------- ---------------
------------------------------------------------------------------------------------------------------------------------------
Net income 11,298 6,953 33,169 33,241
--------------- --------------- --------------- ---------------
------------------------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 828 828 1,656 1,656
--------------- --------------- --------------- ---------------
------------------------------------------------------------------------------------------------------------------------------
Earnings available for common stock $10,470 $6,125 $31,513 $31,585
=============== =============== =============== ===============
------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
June 30,
2000 December 31,
ASSETS (Unaudited) 1999
---------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Property, plant and equipment:
Utility -
Plant in service -
Electric $1,968,757 $1,921,624
Gas 267,103 258,132
Water 28,396 27,770
Common 223,577 218,607
----------------- -----------------
2,487,833 2,426,133
Less - Accumulated depreciation 1,327,807 1,266,366
----------------- -----------------
1,160,026 1,159,767
Construction work in progress 58,445 66,784
Nuclear fuel, net of amortization 18,680 15,079
----------------- -----------------
1,237,151 1,241,630
Other property, plant and equipment, net of accumulated
depreciation and amortization of $215 and $169, respectively 605 608
----------------- -----------------
1,237,756 1,242,238
----------------- -----------------
---------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 8,596 3,555
Accounts receivable:
Customer 18,670 22,061
Associated companies 1,335 5,067
Other 9,456 10,984
Production fuel, at average cost 15,779 20,663
Materials and supplies, at average cost 22,274 20,439
Gas stored underground, at average cost 7,907 8,624
Prepaid gross receipts tax 21,976 20,864
Other 7,116 9,275
----------------- -----------------
113,109 121,532
----------------- -----------------
---------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 171,063 166,202
Other 15,673 15,272
----------------- -----------------
186,736 181,474
----------------- -----------------
---------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 86,431 82,161
Deferred charges and other 155,017 138,730
----------------- -----------------
241,448 220,891
----------------- -----------------
---------------------------------------------------------------------------------------------------------------
Total assets $1,779,049 $1,766,135
================= =================
---------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
June 30,
2000 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 1999
----------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
<S> <C> <C>
Capitalization:
Common stock - $5 par value - authorized 18,000,000
shares; 13,236,601 shares outstanding $66,183 $66,183
Additional paid-in capital 229,438 229,438
Retained earnings 335,103 303,476
----------------- -----------------
Total common equity 630,724 599,097
----------------- -----------------
Cumulative preferred stock 59,963 59,963
Long-term debt (excluding current portion) 514,132 414,673
----------------- -----------------
1,204,819 1,073,733
----------------- -----------------
----------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities 1,875 1,875
Variable rate demand bonds 55,100 55,100
Notes payable to associated companies 28,791 125,749
Accounts payable 76,506 88,245
Accounts payable to associated companies 27,466 25,306
Other 30,184 30,283
----------------- -----------------
219,922 326,558
----------------- -----------------
----------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 229,439 235,838
Accumulated deferred investment tax credits 30,392 31,311
Customer advances 33,877 34,643
Environmental liabilities 10,300 10,861
Other 50,300 53,191
----------------- -----------------
354,308 365,844
----------------- -----------------
----------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,779,049 $1,766,135
================= =================
----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30,
2000 1999
--------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $33,169 $33,241
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 64,976 59,546
Amortization of nuclear fuel 2,173 3,050
Deferred taxes and investment tax credits (6,721) (4,258)
Other (6,521) (620)
Other changes in assets and liabilities:
Accounts receivable 8,651 9,350
Income tax refunds receivable - (8,129)
Production fuel 4,884 4,628
Accounts payable (9,579) (20,359)
Benefit obligations and other (4,344) (4,255)
--------------------- ---------------------
Net cash flows from operating activities 86,688 72,194
--------------------- ---------------------
--------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Common stock dividends - (29,176)
Preferred stock dividends (1,656) (1,656)
Proceeds from issuance of long-term debt 100,000 -
Net change in short-term borrowings (96,958) 32,236
Other (1,319) -
--------------------- ---------------------
Net cash flows from financing activities 67 1,404
--------------------- ---------------------
--------------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (60,214) (48,600)
Nuclear decommissioning trust funds (14,654) (14,654)
Shared savings program (6,902) (7,723)
Other 56 (153)
--------------------- ---------------------
Net cash flows used for investing activities (81,714) (71,130)
--------------------- ---------------------
--------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and temporary cash investments 5,041 2,468
--------------------- ---------------------
--------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 3,555 1,811
--------------------- ---------------------
--------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $8,596 $4,279
===================== =====================
--------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Cash paid during the period for:
Interest $18,418 $21,860
===================== =====================
Income taxes $30,016 $32,885
===================== =====================
--------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
19
<PAGE>
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except as modified below, the Alliant Energy Notes to Consolidated
Financial Statements are incorporated by reference insofar as they relate
to WP&L.
1. The interim consolidated financial statements included herein have been
prepared by WP&L, without audit, pursuant to the rules and regulations of
the SEC. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted,
although management believes that the disclosures are adequate to make the
information presented not misleading. The consolidated financial
statements include WP&L and its consolidated subsidiary. WP&L is a
subsidiary of Alliant Energy. These financial statements should be read
in conjunction with the financial statements and the notes thereto
included in WP&L's latest Annual Report on Form 10-K.
In the opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of (a) the
consolidated results of operations for the three and six months ended June
30, 2000 and 1999, (b) the consolidated financial position at June 30,
2000 and December 31, 1999, and (c) the consolidated statement of cash
flows for the six months ended June 30, 2000 and 1999, have been made.
Because of the seasonal nature of WP&L's operations, results for the three
and six months ended June 30, 2000 are not necessarily indicative of
results that may be expected for the year ending December 31, 2000.
Certain prior period amounts have been reclassified on a basis consistent
with the 2000 presentation.
2. Certain financial information relating to WP&L's significant business
segments is presented below. Intersegment revenues were not material to
WP&L's operations.
<TABLE>
<CAPTION>
Electric Gas Other Total
------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Three Months Ended June 30, 2000
Operating revenues $173,111 $19,515 $1,239 $193,865
Operating income (loss) 25,737 (1,017) 406 25,126
Earnings available for common stock 10,470
Three Months Ended June 30, 1999
Operating revenues $150,510 $15,358 $1,248 $167,116
Operating income (loss) 22,540 (1,012) 382 21,910
Earnings available for common stock 6,125
Six Months Ended June 30, 2000
Operating revenues $335,487 $74,801 $2,409 $412,697
Operating income 56,796 8,039 786 65,621
Earnings available for common stock 31,513
Six Months Ended June 30, 1999
Operating revenues $300,455 $67,151 $2,500 $370,106
Operating income 57,889 9,565 847 68,301
Earnings available for common stock 31,585
</TABLE>
20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The primary first tier subsidiaries of Alliant Energy include: WP&L, IESU,
IPC, Resources and Corporate Services. Among various other regulatory
constraints, Alliant Energy is operating as a registered public utility
holding company subject to the limitations imposed by PUHCA. This MD&A
includes information relating to Alliant Energy, IESU and WP&L (as well as
IPC, Resources and Corporate Services). Where appropriate, information
relating to a specific entity has been segregated and labeled as such. The
following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial
Statements included in this report as well as the financial statements, notes
and MD&A included in Alliant Energy's, IESU's and WP&L's latest Annual Report
on Form 10-K.
FORWARD-LOOKING STATEMENTS
Statements contained in this report (including MD&A) that are not of
historical fact are forward-looking statements intended to qualify for the
safe harbors from liability established by the Private Securities Litigation
Reform Act of 1995. From time to time, Alliant Energy, IESU or WP&L may make
other forward-looking statements within the meaning of the federal securities
laws that involve judgments, assumptions and other uncertainties beyond the
control of such companies. These forward-looking statements may include,
among others, statements concerning revenue and cost trends, cost recovery,
cost reduction strategies and anticipated outcomes, pricing strategies,
changes in the utility industry, planned capital expenditures, financing
needs and availability, statements of expectations, beliefs, future plans and
strategies, anticipated events or trends and similar comments concerning
matters that are not historical facts. Investors and other users of the
forward-looking statements are cautioned that such statements are not a
guarantee of future performance and that such forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those expressed in, or implied by, such statements. Some,
but not all, of the risks and uncertainties include weather effects on sales
and revenues, competitive factors, general economic conditions in the
relevant service territory, federal and state regulatory or government
actions, including issues associated with the deregulation of the utility
industry, unanticipated construction and acquisition expenditures, issues
related to stranded costs and the recovery thereof, the operations of Alliant
Energy's nuclear facilities, unanticipated costs associated with certain
environmental remediation efforts being undertaken by Alliant Energy, Alliant
Energy's ability to successfully implement its growth strategy, including the
acquisition and operation of foreign companies, unanticipated issues relating
to establishing a transmission company, material changes in the value of
Alliant Energy's investment in McLeod, technological developments, employee
workforce factors, including changes in key executives, collective bargaining
agreements or work stoppages, political, legal and economic conditions in
foreign countries Alliant Energy has investments in and changes in the rate
of inflation.
UTILITY INDUSTRY OUTLOOK
A summary of the current regulatory environment is included in the Form 10-K
filed by Alliant Energy, IESU and WP&L for the year ended December 31, 1999.
Set forth below are several developments relating to such regulatory
environment.
Across the nation, approximately half of the states (including Illinois) have
passed legislation or issued regulatory rulings granting customers the right
to choose their electric energy supplier. Legislation that would allow
customers to choose their electric energy supplier was introduced in Iowa in
2000 but was never voted upon. At the federal level, a number of proposals
to restructure the electric industry are currently under consideration.
However, there continues to be a lack of consensus over how restructuring
should be implemented and how much control the federal government should have
over this process. Until one of the proposals gains significant bipartisan
support, Alliant Energy believes there is unlikely to be final federal action
to either facilitate or force states to open electricity markets to
competition.
21
<PAGE>
"Reliability 2000" legislation was enacted in Wisconsin in 1999. This
legislation included, among other items, the formation of a Wisconsin
transmission company for those Wisconsin utility holding companies who elect to
take advantage of the asset cap law. WP&L currently expects to transfer its
transmission assets to the transmission company (American Transmission Company,
or ATC)at the end of 2000 and it is expected that the net book value of such
assets (approximately $170 million) will become the new carrying value of its
investment in ATC, resulting in no gain or loss for WP&L. In July 2000, the PSCW
issued a ruling indicating that facilities with voltages of 50 kV and above are
considered transmission facilities for purposes of transferring assets to ATC.
At this time, Alliant Energy has decided not to contribute IESU's and IPC's
transmission assets to ATC.
WP&L does not expect this transfer to result in a significant impact on its
financial condition or results of operations because it believes the FERC
will allow WP&L to earn a return on the contributed assets comparable to the
return currently allowed by the PSCW and FERC. WP&L will not be able to
determine its exact ownership percentage in ATC until it is known which
entities will participate in ATC, and the valuation of the assets each
participant contributes is completed. However, WP&L expects its ownership
interest to exceed 20%, but be less than 50%. As a result, WP&L expects to
account for its investment in ATC under the equity method. Although no
assurance can be given, it is currently anticipated that ATC's dividend
policy will support a return of a significant portion of these earnings to
the participants. ATC will realize its revenues from the provision of
transmission services to both participants in ATC as well as
nonparticipants. ATC is currently expected to begin operations on January 1,
2001.
In December 1999, FERC issued Order 2000 which outlines requirements for
utilities to voluntarily turn over operational control of their transmission
system to a regional entity. FERC's timeline is to have the RTOs in
operation by the end of 2001. Alliant Energy's current plans to contribute
its Wisconsin transmission assets to ATC, in exchange for an equity interest,
and to participate in the Midwest ISO are expected to comply with the
provisions of Order 2000. In March 2000, FERC approved Alliant Energy's
membership in the Midwest ISO as well as WP&L's transfer of its transmission
assets.
Each of the utilities complies with the provisions of SFAS 71, "Accounting
for the Effects of Certain Types of Regulation." SFAS 71 provides that
rate-regulated public utilities record certain costs and credits allowed in
the rate making process in different periods than for non-regulated
entities. These are deferred as regulatory assets or regulatory liabilities
and are recognized in the consolidated statements of income at the time they
are reflected in rates. If a portion of the utility subsidiaries' operations
becomes no longer subject to the provisions of SFAS 71 as a result of
competitive restructurings or otherwise, a write-down of related regulatory
assets and possibly other charges would be required, unless some form of
transition cost recovery is established by the appropriate regulatory body
that would meet the requirements under generally accepted accounting
principles for continued accounting as regulatory assets during such recovery
period. In addition, each utility subsidiary would be required to determine
any impairment of other assets and write-down any impaired assets to their
fair value. The utility subsidiaries believe they currently meet the
requirements of SFAS 71 and will continue to monitor and assess this as the
various utility industry restructuring initiatives progress.
ALLIANT ENERGY RESULTS OF OPERATIONS
Overview - Second Quarter Results - Alliant Energy reported net income of
---------------------------------
$42.3 million, or $0.54 per share (basic and diluted), for the second quarter
of 2000 compared to $38.5 million, or $0.49 per share (basic and diluted),
for the second quarter of 1999. The second quarter 2000 earnings included
$24.8 million of non-cash income, or $0.31 per share, to reverse the non-cash
charge recorded in the first quarter of 2000 for an increase in Alliant
Energy's obligation under certain 30-year exchangeable senior notes issued in
February. The second quarter 1999 earnings included $0.27 per share realized
from the sale of certain shares of Alliant Energy's investment in McLeod last
year. Excluding the 2000 non-cash income adjustment and the 1999 McLeod
gain, earnings per share were $0.22 in both 2000 and 1999.
22
<PAGE>
Earnings in the second quarter of 2000 benefited from higher electric utility
margins primarily due to the favorable impact of approximately $10 million
due to a change in estimate of WP&L's utility services rendered but unbilled
at month-end and increased earnings from Alliant Energy's oil and gas and
electricity trading businesses. Earnings in 2000 were also impacted by
higher utility operating expenses, largely due to a planned refueling outage
at Kewaunee, increased interest expense to fund Alliant Energy's strategic
growth initiatives and the expected earnings dilution from Alliant Energy's
recent investment in Brazil.
Second quarter 2000 utility earnings were $20.0 million ($0.25 per share)
compared to $17.1 million ($0.22 per share) for the same period in 1999. The
increase resulted primarily from an increase in electric margin partially
offset by higher other operation and maintenance expenses.
Resources reported net income of $22.0 million ($0.28 per share) in the
second quarter of 2000, including the $24.8 million non-cash income related
to the exchangeable senior notes issued in February 2000. Net income for the
second quarter of 1999 was $21.6 million ($0.27 per share), which included
the McLeod gain. Excluding the 2000 non-cash income adjustment and the 1999
McLeod gain, second quarter earnings per share were ($0.04) in 2000 and $0.01
in 1999.
Higher interest expense ($0.05 per share) to fund Resources' strategic growth
initiatives and the expected dilutive effect of Resources' recent investment
in Brazil ($0.04 per share for earnings before interest and taxes)
contributed to the lower earnings in 2000. Resources expects the impact of
the Brazilian investment will be dilutive to earnings in 2000 with positive
contributions in subsequent years. These items were partially offset by the
increased earnings from Resources' oil and gas ($0.03 per share) and
electricity trading ($0.03 per share) businesses.
The non-cash income of $24.8 million realized in the second quarter was a
reversal of the $24.8 million non-cash charge recorded in the first quarter.
The increase at March 31, 2000, in Alliant Energy's obligation relating to
the exchangeable senior notes, reversed in the second quarter due to a
decrease in the stock price of McLeod at June 30, 2000 (the value of the
McLeod stock impacts Alliant Energy's obligation under the exchangeable
senior notes). The adoption of SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," is expected to mitigate these
fluctuations in earnings. Refer to "Other Matters - Accounting
Pronouncements" for additional information.
Electric Utility Operations - Electric margins and MWH sales for Alliant
---------------------------
Energy for the three months ended June 30 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) (in thousands)
---------------------------------- --------------------------------
2000 1999 Change 2000 1999 Change
----------------- --------------- ----------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $127,945 $123,379 4% 1,535 1,575 (3%)
Commercial 83,674 77,534 8% 1,260 1,251 1%
Industrial 127,209 116,780 9% 3,367 3,239 4%
----------------- --------------- --------------- ---------------
Total from ultimate customers 338,828 317,693 7% 6,162 6,065 2%
Sales for resale 43,717 37,364 17% 1,160 1,339 (13%)
Other 11,298 11,095 2% 41 39 5%
----------------- --------------- --------------- ---------------
Total revenues/sales 393,843 366,152 8% 7,363 7,443 (1%)
=============== ===============
Electric production fuels expense 60,167 49,827 21%
Purchased power expense 74,792 72,440 3%
----------------- ---------------
Margin $258,884 $243,885 6%
================= ===============
</TABLE>
23
<PAGE>
Electric margins and MWH sales for Alliant Energy for the six months ended
June 30 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) (in thousands)
---------------------------------- --------------------------------
2000 1999 Change 2000 1999 Change
----------------- --------------- ----------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $262,940 $253,659 4% 3,357 3,385 (1%)
Commercial 161,524 149,557 8% 2,537 2,495 2%
Industrial 238,753 219,381 9% 6,488 6,314 3%
----------------- --------------- --------------- ---------------
Total from ultimate customers 663,217 622,597 7% 12,382 12,194 2%
Sales for resale 77,611 73,578 5% 2,365 2,684 (12%)
Other 26,637 21,315 25% 88 81 9%
----------------- --------------- --------------- ---------------
Total revenues/sales 767,465 717,490 7% 14,835 14,959 (1%)
=============== ===============
Electric production fuels expense 125,713 111,136 13%
Purchased power expense 137,137 124,505 10%
----------------- ---------------
Margin $504,615 $481,849 5%
================= ===============
</TABLE>
Electric margin increased $15.0 million, or 6%, and $22.8 million, or 5%, for
the three and six months ended June 30, 2000, respectively, compared with the
same periods in 1999, primarily due to the favorable impact of approximately
$10 million due to a change in estimate of WP&L's utility services rendered
but unbilled at month-end, increases of 2% in sales to retail customers
resulting from economic growth in Alliant Energy's service territory and a
WP&L rate recovery adjustment implemented in early May 2000 to recover higher
purchased-power and transmission costs. Also contributing to the increase in
electric margin for the six months ended June 30 was a $15 million annual
rate recovery adjustment implemented in March 1999 at WP&L to recover higher
purchased-power and transmission costs. Other revenues increased for the six
months ended June 30 primarily due to WP&L conservation programs for which
WP&L receives a return on invested capital. Higher purchased-power costs
resulting from the planned Kewaunee outage and the impact of milder weather
conditions partially offset these items for both periods.
IESU's and IPC's electric tariffs include EAC's that are designed to
currently recover the costs of fuel and the energy portion of purchased-power
billings.
Gas Utility Operations - Gas margins and Dth sales for Alliant Energy for the
----------------------
three months ended June 30 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs Dekatherms Sold
(in thousands) (in thousands)
---------------------------------- -------------------------------
2000 1999 Change 2000 1999 Change
----------------- --------------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $32,597 $26,602 23% 4,354 3,969 10%
Commercial 15,466 12,495 24% 2,657 2,532 5%
Industrial 3,716 3,649 2% 898 1,038 (13%)
Transportation/other 2,874 3,454 (17%) 9,604 10,834 (11%)
----------------- --------------- -------------- ---------------
Total revenues/sales 54,653 46,200 18% 17,513 18,373 (5%)
============== ===============
Cost of gas sold 31,869 22,666 41%
----------------- ---------------
Margin $22,784 $23,534 (3%)
================= ===============
</TABLE>
24
<PAGE>
Gas margins and Dth sales for Alliant Energy for the six months ended June 30
were as follows:
<TABLE>
<CAPTION>
Revenues and Costs Dekatherms Sold
(in thousands) (in thousands)
---------------------------------- -------------------------------
2000 1999 Change 2000 1999 Change
----------------- --------------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $112,208 $109,041 3% 17,428 18,805 (7%)
Commercial 55,036 51,654 7% 10,433 11,091 (6%)
Industrial 10,550 10,416 1% 2,586 2,957 (13%)
Transportation/other 6,993 8,774 (20%) 22,001 25,443 (14%)
----------------- --------------- -------------- ---------------
Total revenues/sales 184,787 179,885 3% 52,448 58,296 (10%)
============== ===============
Cost of gas sold 113,982 104,009 10%
----------------- ---------------
Margin $70,805 $75,876 (7%)
================= ===============
</TABLE>
Gas margin decreased $0.8 million, or 3%, and $5.1 million, or 7%, for the
three and six months ended June 30, 2000, respectively, compared with the
same periods in 1999. The decrease for both periods is primarily due to the
decline in sales resulting from milder weather.
IESU's and IPC's gas tariffs include PGA clauses that are designed to
currently recover the cost of utility gas sold.
Non-regulated and Other Revenues - Non-regulated and other revenues for the
--------------------------------
three and six months ended June 30 were as follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
--------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
ISCO $79,629 $37,493 $159,851 $66,899
Oil and gas (Whiting) 26,605 16,608 45,799 29,442
Steam 6,536 6,894 13,876 15,155
Transportation 5,217 5,218 10,006 10,442
Other 6,082 7,549 11,631 13,656
--------------- ---------------- ---------------- ---------------
$124,069 $73,762 $241,163 $135,594
=============== ================ ================ ===============
</TABLE>
ISCO revenues increased $42.1 million and $93.0 million for the three and six
months ended June 30, 2000, respectively, compared with the same periods in
1999, primarily due to the second quarter 1999 acquisition of an oil
gathering and transportation business in Texas. Oil and gas revenues
increased for both periods due to higher oil and gas prices, partially offset
by reduced gas volumes.
Other Operating Expenses - Other operation and maintenance expenses for the
------------------------
three and six months ended June 30 were as follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
--------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Utility - IESU / WP&L / IPC $136,445 $129,246 $259,206 $239,839
ISCO 80,681 34,019 156,984 60,657
Oil and gas (Whiting) 9,384 7,124 16,733 14,658
Transportation 2,660 2,312 5,557 4,841
Other 7,872 7,524 15,028 14,408
--------------- ---------------- ---------------- ---------------
$237,042 $180,225 $453,508 $334,403
=============== ================ ================ ===============
</TABLE>
25
<PAGE>
Other operation and maintenance expenses at the utility subsidiaries
increased $7.2 million and $19.4 million for the three and six months ended
June 30, 2000, respectively, compared with the same periods in 1999,
primarily due to a planned second quarter 2000 refueling outage at Kewaunee,
$3 million of one-time fees related to the transfer of the Iowa utility
businesses from the MAPP reliability region to the MAIN region and higher
transmission and distribution expenses at WP&L. Refer to "Power Supply" for
additional information related to MAPP and MAIN. Also contributing to the
increase were higher nuclear operations expense, the timing of MGP
expenditures, and increased energy conservation expense at WP&L. Such
increases were partially offset by lower employee benefit costs and the
nonrecurrence of expenses in 1999 relating to Alliant Energy's Year
2000 readiness program.
Other operation and maintenance expenses at ISCO increased $46.7 million and
$96.3 million for the three and six months ended June 30, 2000, respectively,
compared with the same periods in 1999, primarily due to expenses associated
with the acquisition of the oil gathering and transportation business.
Depreciation and amortization expense increased $7.5 million and $9.8 million
for the three and six months ended June 30, 2000, respectively, compared with
the same periods in 1999, primarily due to increased earnings in the WP&L
nuclear decommissioning trust fund (offset entirely in "Miscellaneous, net"),
increased amortization expenses and property additions.
Interest Expense and Other - Interest expense increased $7.1 million and
--------------------------
$14.3 million for the three and six months ended June 30, 2000, respectively,
compared with the same periods in 1999, primarily due to higher non-regulated
and utility borrowings to fund Alliant Energy's strategic growth initiatives,
including Resources' $347 million investment in several Brazilian electric
utilities in January 2000.
The non-cash income of $24.8 million realized in the second quarter was a
reversal of the $24.8 million non-cash charge recorded in the first quarter. The
increase at March 31, 2000, in Alliant Energy's obligation relating to the
exchangeable senior notes, reversed in the second quarter due to a decrease in
the stock price of McLeod at June 30, 2000 (the value of the McLeod stock
impacts Alliant Energy's obligation under the exchangeable senior notes). The
adoption of SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," is expected to mitigate these fluctuations in earnings. Refer to
"Other Matters - Accounting Pronouncements" for additional information.
Alliant Energy sold 150,000 shares (450,000 shares as adjusted for the
3-for-1 stock split effective April 24, 2000) of its investment in McLeod in
the first quarter of 2000, resulting in a pre-tax gain of $10.2 million.
Miscellaneous, net income increased $6.0 million and $12.4 million for the three
and six months ended June 30, 2000, respectively, compared with the same periods
in 1999, primarily due to increased earnings in the WP&L nuclear decommissioning
trust fund and an increase in equity income from Alliant Energy's electricity
trading business. In addition, Alliant Energy realized $4.1 million from a tax
settlement at IESU in the first quarter of 2000. Such increases were partially
offset by the dilutive effect of Alliant Energy's recent investment in Brazil
and a decrease in the IESU nuclear decommissioning trust fund earnings.
Income Taxes - Income tax expense increased $1.9 million and decreased $10.6
------------
million for the three and six months ended June 30, 2000, respectively,
compared with the same periods in 1999, primarily due to changes in taxable
income. The effective income tax rates were 37.2% for both the three- and
six-month periods ended June 30, 2000, compared with 37.5% and 37.0%,
respectively, for the same periods last year.
IESU RESULTS OF OPERATIONS
Overview - Second Quarter Results - IESU's earnings available for common
--------
stock decreased $0.5 million for the three months ended June 30, 2000,
compared with the same period in 1999, primarily due to higher depreciation
and amortization expense and a lower electric margin, partially offset by
reduced other operation and maintenance expenses.
26
<PAGE>
Electric Utility Operations - Electric margins and MWH sales for IESU for the
---------------------------
three months ended June 30 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) (in thousands)
---------------------------------- -------------------------------
2000 1999 Change 2000 1999 Change
----------------- --------------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $50,192 $51,226 (2%) 582 595 (2%)
Commercial 41,783 38,884 7% 643 618 4%
Industrial 46,021 43,211 7% 1,302 1,292 1%
----------------- --------------- -------------- ---------------
Total from ultimate customers 137,996 133,321 4% 2,527 2,505 1%
Sales for resale 7,294 6,382 14% 254 341 (26%)
Other 3,037 2,506 21% 10 11 9%
----------------- --------------- -------------- ---------------
Total revenues/sales 148,327 142,209 4% 2,791 2,857 (2%)
============== ===============
Electric production fuels expense 25,049 8,752 186%
Purchased power expense 17,718 27,142 (35%)
----------------- ---------------
Margin $105,560 $106,315 (1%)
================= ===============
</TABLE>
Electric margins and MWH sales for IESU for the six months ended June 30 were
as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) (in thousands)
---------------------------------- -------------------------------
2000 1999 Change 2000 1999 Change
----------------- --------------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $105,134 $105,579 -- 1,266 1,288 (2%)
Commercial 82,009 77,432 6% 1,276 1,246 2%
Industrial 88,226 81,093 9% 2,515 2,474 2%
----------------- --------------- -------------- ---------------
Total from ultimate customers 275,369 264,104 4% 5,057 5,008 1%
Sales for resale 12,497 12,735 (2%) 501 682 (27%)
Other 6,169 5,387 15% 21 21 --
----------------- --------------- -------------- ---------------
Total revenues/sales 294,035 282,226 4% 5,579 5,711 (2%)
============== ===============
Electric production fuels expense 53,961 31,247 73%
Purchased power expense 31,140 40,292 (23%)
----------------- ---------------
Margin $208,934 $210,687 (1%)
================= ===============
</TABLE>
Electric margin decreased $0.8 million, or 1%, and $1.8 million, or 1%, for
the three and six months ended June 30, 2000, respectively, compared with the
same periods in 1999, primarily due to reduced recoveries of approximately
$1.8 million and $4.3 million, respectively, in concurrent and previously
deferred expenditures for Iowa-mandated energy efficiency programs and the
impact of milder weather conditions. Increased retail sales from economic
growth in the service territory partially offset these items. The recovery
for energy efficiency programs in Iowa is in accordance with IUB orders (a
portion of these recoveries is offset as they are also amortized to expense
in other operation and maintenance expense).
IESU's electric tariffs include EAC's that are designed to currently recover
the costs of fuel and the energy portion of purchased-power billings.
27
<PAGE>
Gas Utility Operations - Gas margins and Dth sales for IESU for the three
----------------------
months ended June 30 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs Dekatherms Sold
(in thousands) (in thousands)
---------------------------------- -------------------------------
2000 1999 Change 2000 1999 Change
----------------- --------------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $16,642 $13,034 28% 2,048 1,783 15%
Commercial 7,617 5,968 28% 1,217 1,146 6%
Industrial 2,187 2,033 8% 571 605 (6%)
Transportation/other 999 977 2% 2,184 2,267 (4%)
----------------- --------------- -------------- ---------------
Total revenues/sales 27,445 22,012 25% 6,020 5,801 4%
============== ===============
Cost of gas sold 16,964 11,623 46%
----------------- ---------------
Margin $10,481 $10,389 1%
================= ===============
</TABLE>
Gas margins and Dth sales for IESU for the six months ended June 30 were as
follows:
<TABLE>
<CAPTION>
Revenues and Costs Dekatherms Sold
(in thousands) (in thousands)
---------------------------------- -------------------------------
2000 1999 Change 2000 1999 Change
----------------- --------------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $53,856 $52,195 3% 8,104 8,638 (6%)
Commercial 25,319 23,938 6% 4,689 5,035 (7%)
Industrial 5,288 4,836 9% 1,382 1,478 (6%)
Transportation/other 2,411 2,339 3% 5,102 5,462 (7%)
----------------- --------------- -------------- ---------------
Total revenues/sales 86,874 83,308 4% 19,277 20,613 (6%)
============== ===============
Cost of gas sold 55,038 49,535 11%
----------------- ---------------
Margin $31,836 $33,773 (6%)
================= ===============
</TABLE>
Gas margin increased $0.1 million, or 1%, and decreased $1.9 million, or 6%,
for the three and six months ended June 30, 2000, respectively, compared with
the same periods in 1999. The decrease for the six months ended June 30 was
primarily due to reduced natural gas sales due to milder weather.
IESU's gas tariffs include PGA clauses that are designed to currently recover
the cost of gas sold.
Other Operating Expenses - IESU's other operation and maintenance expenses
------------------------
decreased $0.8 million and $4.4 million for the three and six months ended
June 30, 2000, respectively, compared with the same periods in 1999 largely
due to decreases of $1.5 million and $4.1 million, respectively, in energy
efficiency expenses, lower employee benefits costs and the nonrecurrence of
expenses in 1999 on Year 2000 readiness efforts. Such decreases
were partially offset by the timing of MGP expenditures and one-time fees
related to the transfer from the MAPP reliability region to the MAIN region.
Also offsetting the six-month decrease were higher nuclear operating
expenses.
IESU's depreciation and amortization expense increased $1.4 million and $2.7
million for the three and six months ended June 30, 2000, respectively,
compared with the same periods in 1999, primarily due to property additions.
Interest Expense and Other - Interest expense decreased $1.9 million and $2.0
--------------------------
million for the three and six months ended June 30, 2000, respectively,
compared with the same periods in 1999, primarily due to lower nuclear
decommissioning trust fund earnings, which were offset entirely in
"Miscellaneous, net."
The accounting for earnings on the nuclear decommissioning trust funds
results in no net income impact. Miscellaneous, net income increases for
earnings on the trust fund and the corresponding offset is recorded as
interest expense.
28
<PAGE>
Miscellaneous, net income decreased $1.1 million and increased $2.8 million
for the three and six months ended June 30, 2000, respectively, compared with
the same periods in 1999. For both periods a decrease in the nuclear
decommissioning trust fund earnings previously described was partially offset
by a gain on the sale of property in the second quarter of 2000. Also
contributing to the increase for the six months ended June 30, 2000, was $4.1
million of interest income realized from a tax settlement in the first
quarter of 2000.
Income Taxes - IESU's income tax expense decreased $0.3 million and increased
------------
$1.1 million for the three and six months ended June 30, 2000, respectively,
compared with the same periods last year, primarily due to changes in taxable
income. The effective income tax rates were 44.7% and 42.7% for the three
and six months ended June 30, 2000, respectively, compared with 44.3% and
42.4%, respectively, for the same periods last year.
WP&L RESULTS OF OPERATIONS
Overview - Second Quarter Results - WP&L's earnings available for common
---------------------------------
stock increased $4.3 million for the three months ended June 30, 2000,
compared with the same period in 1999. The increased earnings were primarily
due to a change in estimate of WP&L's utility services rendered but unbilled
at month-end, which was partially offset by a planned refueling outage at
Kewaunee, which resulted in higher maintenance and purchased-power capacity
costs, and increased interest expense.
Electric Utility Operations - Electric margins and MWH sales for WP&L for the
------------------------------
three months ended June 30 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) (in thousands)
---------------------------------- -------------------------------
2000 1999 Change 2000 1999 Change
----------------- --------------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $54,563 $49,660 10% 669 717 (7%)
Commercial 32,240 29,445 9% 463 494 (6%)
Industrial 52,063 41,880 24% 1,205 1,115 8%
----------------- --------------- -------------- ---------------
Total from ultimate customers 138,866 120,985 15% 2,337 2,326 --
Sales for resale 29,061 23,937 21% 773 762 1%
Other 5,184 5,588 (7%) 13 14 (7%)
----------------- --------------- -------------- ---------------
Total revenues/sales 173,111 150,510 15% 3,123 3,102 1%
============== ===============
Electric production fuels expense 26,703 26,014 3%
Purchased power expense 38,063 28,425 34%
----------------- ---------------
Margin $108,345 $96,071 13%
================= ===============
</TABLE>
29
<PAGE>
Electric margins and MWH sales for WP&L for the six months ended June 30 were
as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) (in thousands)
---------------------------------- -------------------------------
2000 1999 Change 2000 1999 Change
----------------- --------------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $112,109 $103,549 8% 1,507 1,518 (1%)
Commercial 61,935 56,461 10% 966 959 1%
Industrial 93,333 81,479 15% 2,332 2,201 6%
----------------- --------------- -------------- ---------------
Total from ultimate customers 267,377 241,489 11% 4,805 4,678 3%
Sales for resale 54,018 48,866 11% 1,562 1,575 (1%)
Other 14,092 10,100 40% 35 29 21%
----------------- --------------- -------------- ---------------
Total revenues/sales 335,487 300,455 12% 6,402 6,282 2%
============== ===============
Electric production fuels expense 50,501 53,380 (5%)
Purchased power expense 71,820 52,424 37%
----------------- ---------------
Margin $213,166 $194,651 10%
================= ===============
</TABLE>
Electric margin increased $12.3 million, or 13%, and $18.5 million, or 10%,
for the three and six months ended June 30, 2000, respectively, compared with
the same periods in 1999, primarily due to the favorable impact of
approximately $10 million due to a change in estimate of WP&L's utility
services rendered but unbilled at month-end and a rate recovery adjustment
implemented in early May 2000 to recover higher purchased-power and
transmission costs. Also contributing to the six-month increase was a $15
million rate recovery adjustment implemented in March 1999 to recover higher
purchased-power and transmission costs and a 3% increase in sales to retail
customers due to economic growth in the service territory. Other revenues
increased for the six months ended June 30, 2000 primarily due to
conservation programs for which WP&L receives a return on its invested
capital.
Higher purchased-power costs resulting from the planned Kewaunee outage and
the impact of milder weather conditions partially offset these items for both
periods.
Gas Utility Operations - Gas margins and Dth sales for WP&L for the three
----------------------
months ended June 30 were as follows:
<TABLE>
<CAPTION>
Revenues and Costs Dekatherms Sold
(in thousands) (in thousands)
---------------------------------- -------------------------------
2000 1999 Change 2000 1999 Change
----------------- --------------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $11,470 $8,670 32% 1,694 1,470 15%
Commercial 5,920 4,290 38% 1,117 991 13%
Industrial 906 662 37% 192 178 8%
Transportation/other 1,219 1,736 (30%) 2,772 2,695 3%
----------------- --------------- -------------- ---------------
Total revenues/sales 19,515 15,358 27% 5,775 5,334 8%
============== ===============
Cost of gas sold 9,638 5,798 66%
----------------- ---------------
Margin $9,877 $9,560 3%
================= ===============
</TABLE>
30
<PAGE>
Gas margins and Dth sales for WP&L for the six months ended June 30 were as
follows:
<TABLE>
<CAPTION>
Revenues and Costs Dekatherms Sold
(in thousands) (in thousands)
---------------------------------- -------------------------------
2000 1999 Change 2000 1999 Change
----------------- --------------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $44,483 $39,930 11% 6,987 7,327 (5%)
Commercial 23,226 19,390 20% 4,467 4,484 --
Industrial 3,638 3,166 15% 779 837 (7%)
Transportation/other 3,454 4,665 (26%) 6,841 6,738 2%
----------------- --------------- -------------- ---------------
Total revenues/sales 74,801 67,151 11% 19,074 19,386 (2%)
============== ===============
Cost of gas sold 44,967 36,979 22%
----------------- ---------------
Margin $29,834 $30,172 (1%)
================= ===============
</TABLE>
Gas margin increased $0.3 million, or 3%, and decreased $0.3 million, or 1%,
for the three and six months ended June 30, 2000, respectively, compared with
the same periods in 1999.
Other Operating Expenses - Other operation and maintenance expenses increased
------------------------
$5.1 million and $15.8 million for the three and six months ended June 30,
2000, respectively, compared to the same periods in 1999, primarily due to a
planned second quarter 2000 refueling outage at Kewaunee and increased
transmission and distribution expenses. Also contributing to the increase
for the six months ended June 30 were increased energy conservation expense
and higher nuclear operations expense. Partially offsetting such increases
for both periods were reduced employee benefits costs.
Depreciation and amortization expense increased $4.2 million and $5.4 million
for the three and six months ended June 30, 2000, respectively, compared with
the same periods in 1999, primarily due to increased earnings on the nuclear
decommissioning trust fund (offset entirely in "Miscellaneous, net") and
increased amortization expense.
The accounting for earnings on the nuclear decommissioning trust funds
results in no net income impact. Miscellaneous, net income increases for
earnings on the trust fund and the corresponding offset is recorded as
depreciation expense.
Interest Expense and Other - Interest expense increased $1.2 million and $2.2
---------------------------
million for the three and six months ended June 30, 2000, respectively,
compared with the same periods in 1999, primarily due to higher borrowings
outstanding in 2000.
Miscellaneous, net income increased $4.3 million and $4.1 million for the
three and six months ended June 30, 2000, respectively, compared with the
same periods in 1999, due to increased earnings on the nuclear
decommissioning trust fund.
Income Taxes - Income taxes increased $3.0 million and $0.4 million for the
-------------
three and six months ended June 30, 2000, respectively, compared with the
same periods in 1999, primarily due to changes in pre-tax income. The
effective income tax rates were 38.4% and 37.5% for the three and six months
ended June 30, 2000, respectively, compared with 36.5% and 37.0%,
respectively, for the same periods last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities at Alliant Energy decreased $5 million
for the six months ended June 30, 2000, compared with the same period in
1999, primarily due to changes in working capital. Cash flows from financing
activities increased $428 million for the six months ended June 30, 2000,
compared with the same period in 1999, primarily as a result of changes in
the amount of debt outstanding. Cash flows used for investing activities
31
<PAGE>
increased $502 million for the six months ended June 30, 2000, compared with
the same period in 1999, due to increased levels of construction and
acquisition expenditures primarily in the non-regulated businesses including
the $347 million invested in Brazil in January 2000.
Cash flows from operating activities at IESU increased $34 million for the
six months ended June 30, 2000, compared with the same period in 1999,
primarily due to changes in working capital. Cash flows used for financing
activities decreased $33 million for the six months ended June 30, 2000,
compared with the same period in 1999, due to decreased common stock
dividends in 2000. The dividend payment in the first quarter of 1999 was
larger than IESU's historical quarterly payment as no dividend payments were
made in the last three quarters of 1998 due to merger-related tax
considerations. Cash flows used for investing activities increased $13
million for the six months ended June 30, 2000, compared with the same period
in 1999, due to increased levels of construction expenditures.
Cash flows from operating activities at WP&L increased $14 million for the
six months ended June 30, 2000, compared with the same period in 1999,
primarily due to changes in working capital. Cash flows used for financing
activities decreased $1 million for the six months ended June 30, 2000,
compared with the same period in 1999, as WP&L did not declare a common stock
dividend during the first six months of 2000 due to management of its
capital structure. This was offset by changes in the amount of debt
outstanding. Cash flows used for investing activities increased $11 million
for the six months ended June 30, 2000, compared with the same period in
1999, primarily due to increased levels of construction expenditures.
Future Considerations
On January 25, 2000, Resources acquired a stake in four Brazilian electric
utilities serving more than 820,000 customers for a total investment of
approximately $347 million. As part of this investment, Resources acquired a
49.1% ownership interest in Companhia Forca e Luz Cataguazes-Leopoldina
(Cataguazes), an electric utility. Cataguazes owns a majority stake in CENF,
another electric utility company, as well as a majority interest in Energisa
S.A., an energy development company. As part of the same investment,
Resources directly acquired a 45.6% interest in Energisa S.A. itself, which
holds majority stakes in two regulated utilities (Energipe and Celb). As
part owner of Cataguazes, Resources will hold both indirect and direct
interests in Energisa S.A. The investment is anticipated to dilute Alliant
Energy's earnings per share by approximately 3% in 2000, with positive
32
<PAGE>
contributions to earnings expected in subsequent years. Resources, through its
wholly owned subsidiary, International, initially financed the Brazil investment
with cash made available through the internal transfer of existing non-regulated
corporate assets. Resources has entered into a shareholders agreement with the
Brazilian companies, which would allow it to name two directors to the boards of
each company and its subsidiaries. The agreement will also provide Resources
with a role in selecting each company's management team, along with voting
rights relating to critical issues at the Brazilian companies and their
subsidiaries. The investment is accounted for under the equity method.
As a result of a sale by Whiting of its interest in an offshore oil and gas
production property in the fourth quarter of 1999, Whiting has a potential
gain contingency of $500,000 relating to the sale that will be resolved in
the fourth quarter of 2000. Such gain contingency has not yet been
recognized in income.
Refer to "Other Matters - Accounting Pronouncements" for a discussion of $402.5
million of exchangeable senior notes issued by Resources in February 2000.
Financing and Capital Structure
WP&L issued $100 million of senior unsecured debentures in March 2000 at a
fixed interest rate of 7-5/8%, due 2010. The net proceeds from the sale of
the debentures were primarily used to repay short-term debt.
Refer to "Other Matters - Accounting Pronouncements" for a discussion of $402.5
million of exchangeable senior notes issued by Resources in February 2000.
Capital Requirements
Refer to "Other Matters - Environmental" for a discussion of various issues
impacting Alliant Energy's future capital requirements.
Nuclear Facilities - In February 1999, Alliant Energy, NSP, WPSC and WEPCO
------------------
announced the formation of the NMC to sustain long-term safety, optimize
reliability and improve the operational performance of their nuclear
generating plants. Combined, the NMC members operate seven nuclear
generating units at five plants. In October 1999, Alliant Energy received
approval from the SEC, under PUHCA, to form Alliant Energy Nuclear LLC, whose
purpose is solely to invest in the NMC. Such investment has been made and
Alliant Energy Nuclear LLC now has a 25% ownership interest in the NMC. In
November 1999, the NMC members applied to the NRC to allow the NMC to operate
the plants owned or co-owned by the four utilities. Applications to the
PSCW, MPUC and the SEC to allow the purchase of operating services were also
made at that time. In May 2000, the NRC approved the transfer of operating
authority to the NMC for DAEC and Kewaunee which was completed for both
plants in August 2000. The utilities will continue to own their respective
plants, be entitled to energy generated at the plants, and retain the
financial obligations for their safe operation, maintenance and
decommissioning.
Rates and Regulatory Matters
In February and April of 2000, the OCA requested certain financial
information related to the electric utility operations within the state of
Iowa from IESU and IPC, respectively. IESU and IPC have responded to its
data requests including follow-up requests in May and June of 2000. While
IESU and IPC cannot predict the outcome of this process, such data requests
could lead to an effort by the OCA to seek an electric rate reduction for
IESU and/or IPC in Iowa.
WP&L's retail electric rates are based in part on forecasted fuel and
purchased-power costs. Under PSCW rules, WP&L can seek emergency rate
increases if the annual costs are more than 3% higher than the estimated
costs used to establish rates. If WP&L's earnings exceed its authorized
return on equity, the incremental revenues collected causing the excessive
return are subject to refund. WP&L does not believe any revenues collected
to-date are subject to refund. In December 1999, WP&L requested a $26
million retail electric rate increase to reflect higher purchased-power and
transmission costs. Effective May 5, 2000, the PSCW granted WP&L a $16.5
million annual retail electric rate increase.
In April 2000, the intervenors who had appealed the PSCW's order to grant
WP&L rate recovery of $6.3 million of its Year 2000 program expenditures
withdrew their appeal. WP&L began recovering such costs in May 2000.
33
<PAGE>
OTHER MATTERS
Labor Issues
The collective bargaining agreements at Alliant Energy cover approximately
50% of all Alliant Energy employees. All agreements that had expired in 1999
and 2000 have been ratified and renewed. There are no other agreements
expiring in 2000.
Market Risk Sensitive Instruments and Positions
Alliant Energy's primary market risk exposures are associated with interest
rates, commodity prices, equity prices and currency exchange rates. Alliant
Energy has risk management policies to monitor and assist in controlling
these market risks and uses derivative instruments to manage some of the
exposures. Alliant Energy's market risks have not changed materially from
the market risks reported in the 1999 Form 10-K, except as noted below.
Equity Price Risk - At June 30, 2000 and December 31, 1999, Alliant Energy
-----------------
had an investment in the stock of McLeod, a publicly traded telecommunications
company, valued at $1,175 million and $1,124 million, respectively. In addition
to the equity risk associated with the investment in McLeod, Alliant Energy also
has equity risk related to the option liability within Resources' exchangeable
senior notes. Refer to "Accounting Pronouncements" for additional information. A
10% increase (decrease) in the quoted market price of McLeod at June 30, 2000
would not have a significant impact on net income as any resulting increase
(decrease) in the value of the option would be substantially offset by a
corresponding increase (decrease) in the value of the McLeod shares classified
as trading. At June 30, 2000, the McLeod available for sale securities were
valued at $852 million. A 10% increase (decrease) in the quoted market prices
would have increased (decreased) the value of the investment by approximately
$85 million. At December 31, 1999, Alliant Energy also had various investments
accounted for under the cost method, in publicly traded utility companies in New
Zealand and Australia which were valued at $97 million. A 10% increase
(decrease) in the quoted market prices at December 31 would have increased
(decreased) the value of the investment at December 31, 1999 by approximately
$9.7 million. In the second quarter of 2000, Capstone completed its initial
public offering and Alliant Energy's $10 million investment in Capstone was
valued at $68 million at June 30, 2000. A 10% increase (decrease) in the quoted
market price at June 30, 2000 would have increased (decreased) the value of the
investment by approximately $6.8 million.
Currency Risk - Alliant Energy has investments in various countries where the
-------------
net investments are not hedged, including Australia, Brazil, China and New
Zealand. As a result, these investments are subject to currency exchange
risk with fluctuations in currency exchange rates. At June 30, 2000 and
December 31, 1999, Alliant Energy had a cumulative foreign currency
translation loss of $27.8 million and $9.6 million, respectively, recorded in
"Accumulated other comprehensive income" on its Consolidated Balance Sheets.
The increase in the cumulative foreign currency translation loss is due to
declines in both the New Zealand and Brazil exchange rates. Based on Alliant
Energy's investments at June 30, 2000 and December 31, 1999, a 10% sustained
increase (decrease) over the next twelve months in the foreign exchange rates
of Australia, Brazil, China and New Zealand would increase (decrease) the
cumulative foreign currency translation loss by $49.0 million and $17.2
million, respectively. The significant increase in the cumulative
translation adjustment account at June 30 is primarily due to the increase in
the amount of Resources' investment in Brazil at June 30, 2000 compared with
December 31, 1999.
Accounting Pronouncements
In June 1998, the FASB issued SFAS 133, which has been amended by SFAS 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS 133, an amendment of SFAS 133" and SFAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities,
an amendment of SFAS 133." SFAS 133 requires that every derivative
instrument be recorded on the balance sheet as an asset or liability measured
at its fair value and that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met.
SFAS 133 is effective for fiscal years beginning after June 15, 2000 and must
be applied to: (a) derivative instruments; and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired or
substantively modified after December 31, 1998. Alliant Energy, through the
use of a cross-functional project team involving both Alliant Energy
34
<PAGE>
employees and a consultant, has completed the process of identifying all
derivative instruments, determining fair market values of derivatives,
designating and documenting hedge relationships, and evaluating the
effectiveness of those hedge relationships. As a result of the successful
completion of this process, Alliant Energy adopted SFAS 133 as of July 1,
2000.
SFAS 133 requires that as of the date of initial adoption, the difference
between the fair market value of derivative instruments recorded on the
balance sheet and the previous carrying amount of those derivatives be
reported in net income or other comprehensive income, as appropriate, as the
cumulative effect of a change in accounting principle in accordance with APB
20, "Accounting Changes."
A limited number of Alliant Energy's fixed price commodity contracts are
defined as derivatives under SFAS 133. Alliant Energy uses these contracts
and other financial derivative instruments to mitigate commodity price risk
related to the purchase or sale of natural gas, coal and oil in both its
utility and non-regulated businesses. Alliant Energy has designated many of
these instruments as hedges of the anticipated purchases or sales of the
commodity. The fair market values of these derivative instruments have been
recorded as assets and liabilities on the balance sheet and in the transition
adjustment in accordance with the transition provisions of SFAS 133. Future
changes in the fair market values of these instruments, to the extent that
the hedges are effective at mitigating the underlying commodity risk, will be
recorded in other comprehensive income. At the date the underlying
transaction occurs, the amounts accumulated in other comprehensive income
will be reported in the Consolidated Statements of Income. To the extent
that the hedges are not effective, the ineffective portion of the changes in
fair market value will be recorded directly in earnings.
At maturity, the holders of Resources' exchangeable senior notes are paid the
higher of the principal amount of the notes or an amount based on the value
of McLeod common stock. SFAS 133 requires that Alliant Energy split the
value of the notes into a debt component and a derivative component. The
payment feature tied to McLeod stock is considered an embedded derivative
under SFAS 133 that must be accounted for as a separate derivative
instrument. Subsequent changes in the fair market value of the option will be
reflected as an increase or decrease in Alliant Energy's reported net
income. The carrying amount of the host debt security will be adjusted for
amortization of the debt discount in accordance with the interest method as
prescribed by APB 21, "Interest on Receivables and Payables."
Prior to the adoption of SFAS 133, changes in fair value of all of Alliant
Energy's McLeod stock had been recorded in the accumulated other comprehensive
income component of shareowners' equity on Alliant Energy's Consolidated Balance
Sheets, as these securities had been classified as available for sale. With the
adoption of SFAS 133, Alliant Energy classified 15.6 million of its 57 million
shares (adjusted for the 3-for-1 stock split effective April 24, 2000) of McLeod
stock as trading securities. Subsequent changes in the fair value of the shares
classified as trading will be reflected as increases or decreases in Alliant
Energy's net income. These trading gains or losses are expected to correspond
with and substantially offset changes in the intrinsic value of the derivative
component of Resources' exchangeable senior notes. Changes in the time value
portion of the derivative component will result in non-cash increases or
decreases to Alliant Energy's net income.
35
<PAGE>
The financial statement impact of recording the various SFAS 133 transactions
at July 1, 2000 was as follows (in millions):
<TABLE>
<CAPTION>
Amount
Financial Statement Account Financial Statement Increase (Decrease)
------------------------------------------------------------ -------------------------- -------------------------
<S> <C> <C>
Other assets Balance sheet $2.0
Other liabilities (a) Balance sheet 302.2
Cumulative effect of a change in accounting principle
(other comprehensive income) (b) Balance sheet (6.6)
Other comprehensive income (c) Balance sheet (187.3)
Long-term debt (d) Balance sheet (310.3)
Cumulative effect of a change in accounting principle (e) Income statement 16.7
Pre-tax gain on transfer to trading account (f) Income statement 321.4
Deferred tax expense (f) Income statement 134.1
</TABLE>
(a) Includes the embedded derivative component of Resources' exchangeable
senior notes of $283.7 million
(b) Result of the difference between the new and previous carrying values of
certain derivatives in accordance with the transition provisions of SFAS
133
(c) Represents the net of tax reduction to other comprehensive income resulting
from the classification of approximately 15.6 million shares of McLeod as
trading securities (equal to the amount of two line items in (f))
(d) Adjustment to the debt component of Resources' exchangeable senior notes
(e) Primarily the result of establishing the required carrying values of both
the derivative and the debt components associated with Resources'
exchangeable senior notes as compared to the previous carrying values
(f) Gain and tax expenses associated with the transfer of approximately 15.6
million shares of McLeod from available for sale securities to trading
securities
Environmental
A summary of Alliant Energy's environmental issues is included in the Form
10-K, filed by Alliant Energy, IESU and WP&L for the year ended December 31,
1999. Set forth below are several developments relating to Alliant Energy's
environmental issues.
Pursuant to an internal review of operations in 1998, IPC discovered that
Unit No. 6 at its generating facility in Dubuque, Iowa required a Clean Air
Act Acid Rain permit and CEMS. IPC has informed its environmental regulators
and has installed the CEMS and obtained the permit. Pursuant to its internal
review, IPC also identified and disclosed to regulators a potentially similar
situation at its Lansing, Iowa generating facility. In the second quarter of
1999, the EPA determined that Lansing units 1 and 2 are affected units.
Therefore, in the third quarter of 1999, IPC installed the CEMS at both of
these facilities and in December 1999, IPC submitted its certification to the
EPA for the Lansing facility. IPC received a settlement offer from the EPA,
dated December 3, 1999, to settle the matter for $550,000. IPC has since
responded with a counteroffer, and the parties have reached an agreement in
principle which contemplates a civil penalty payment and the performance of a
supplemental environmental project with a combined value of approximately
$400,000. In July 2000, a consent order was signed by the EPA and the DOJ
approving this agreement. The amount becomes payable after a 30-day comment
period. IPC had established the necessary liability for the expected
settlement obligation relating to this issue.
In October 1998, the EPA issued a final rule requiring 22 states, including
Wisconsin, to modify their state implementation plans to address the NOx
issue. On May 25, 1999, a federal appeals court delayed indefinitely the
implementation of the rule. On March 3, 2000, the court affirmed EPA's NOx
rule for the affected states. However, the court found that the EPA had
failed to explain how Wisconsin contributes significantly to non-attainment
in any other state and therefore vacated the rule for Wisconsin. This
decision had been appealed by some of the affected states. On June 22, 2000,
the ruling was upheld by the U.S. Court of Appeals and Wisconsin is still
excluded.
36
<PAGE>
Although Wisconsin is not included in the Federal rule, Wisconsin is still
subject to the Clean Air Act due to its non-attainment status with respect to
the one-hour ozone standard in the Lake Michigan region. WDNR has developed
a draft rule that contains a plan for the state to meet the one-hour ozone
attainment standard. The plan focuses on Rate of Progress requirements that
are specified by the Clean Air Act for the years 2002, 2005 and 2007. The
draft rule requires NOx reductions in a Primary Ozone Control Region
consisting of counties that are currently in non-attainment of the one-hour
ozone standard which includes WP&L's Edgewater power plant. The remaining
Alliant Energy Wisconsin power plants will be included in a Secondary Ozone
Control Region. The plan also includes performance standards and averaging
within each Region. Alliant Energy is currently evaluating various
alternatives to achieve the proposed reductions and continues to evaluate
various options to reduce the emission levels. Based on existing technology,
the preliminary estimates are that capital investments in the range of $50
million to $100 million could be required.
Power Supply
Alliant Energy transferred its IESU and IPC regional reliability membership
from the MAPP reliability region to the MAIN region effective in May 2000.
Given WP&L is already a member of MAIN, this will give Alliant Energy
additional operating flexibility and will eliminate duplicate reporting
requirements. Alliant Energy will continue to participate in the MAPP
Regional Transmission Committee and the MAPP Power and Energy Market
Committee.
On April 25, 2000, Alliant Energy issued a request for proposal for a
contract to construct a 500-600 megawatt power plant in Wisconsin. The
construction of the facility will assist Alliant Energy in meeting its
growing demands for electricity, will enable Alliant Energy to place a
greater reliance on internal generation versus purchased-power and will also
help Alliant Energy maintain the required 18% reserve margin in Wisconsin.
Proposals were received in June 2000 and are currently being evaluated.
Construction is anticipated to begin in the second quarter of 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Quantitative and Qualitative Disclosures About Market Risk are reported under
Item 2. MD&A "Other Matters - Market Risk Sensitive Instruments and
Positions."
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ALLIANT ENERGY
At Alliant Energy's annual meeting of shareowners held on May 17, 2000,
Erroll B. Davis, Jr., Lee Liu, Milton E. Neshek, Robert W. Schlutz and Wayne
H. Stoppelmoor were elected as directors of Alliant Energy for terms expiring
in 2003. The following sets forth certain information with respect to the
election of these directors at the annual meeting.
Name of Nominee Votes For Votes Withheld
-------------------- ---------- --------------
Erroll B. Davis, Jr. 64,035,461 1,423,810
Lee Liu 64,067,501 1,391,770
Milton E. Neshek 64,166,051 1,293,220
Robert W. Schlutz 64,251,281 1,207,990
Wayne H. Stoppelmoor 64,182,379 1,276,892
37
<PAGE>
The following table sets forth the other directors of Alliant Energy
whose terms of office continued after the 2000 annual meeting.
Name of Director Year in Which Term Expires
---------------- ---------------------------
Jack B. Evans 2001
Joyce L. Hanes 2001
Arnold M. Nemirow 2001
Judith D. Pyle 2001
Alan B. Arends 2002
Rockne G. Flowers 2002
Katharine C. Lyall 2002
Anthony R. Weiler 2002
WP&L
At WP&L's annual meeting of shareowners held on May 24, 2000, Erroll B.
Davis, Jr., Lee Liu, Milton E. Neshek, Robert W. Schlutz and Wayne H.
Stoppelmoor were elected as directors of WP&L for terms expiring in 2003.
The following sets forth certain information with respect to the election of
these directors at the annual meeting.
Name of Nominee Votes For Votes Withheld
------------------- ---------- ---------------
Erroll B. Davis, Jr. 13,624,902 2,835
Lee Liu 13,624,967 2,770
Milton E. Neshek 13,624,932 2,805
Robert W. Schlutz 13,625,353 2,384
Wayne H. Stoppelmoor 13,625,175 2,562
The following table sets forth the other directors of WP&L whose terms of
office continued after the 2000 annual meeting.
Name of Director Year in Which Term Expires
---------------- --------------------------
Jack B. Evans 2001
Joyce L. Hanes 2001
Arnold M. Nemirow 2001
Judith D. Pyle 2001
Alan B. Arends 2002
Rockne G. Flowers 2002
Katharine C. Lyall 2002
Anthony R. Weiler 2002
IESU
At IESU's annual meeting of shareowners held on May 15, 2000, Erroll B.
Davis, Jr., Lee Liu, Milton E. Neshek, Robert W. Schlutz and Wayne H.
Stoppelmoor were elected as directors of IESU for terms expiring in 2003.
Alliant Energy voted all of the outstanding shares of common stock of IESU
(consisting of 13,370,788 shares) in favor of the election of the
aforementioned individuals.
38
<PAGE>
The following table sets forth the other directors of IESU whose terms of
office continued.
Name of Director Year in Which Term Expires
---------------- --------------------------
Jack B. Evans 2001
Joyce L. Hanes 2001
Arnold M. Nemirow 2001
Judith D. Pyle 2001
Alan B. Arends 2002
Rockne G. Flowers 2002
Katharine C. Lyall 2002
Anthony R. Weiler 2002
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following Exhibits are filed herewith.
---------
10.1 Corporate Services Key Employee Deferred Compensation Plan, as
amended and restated
10.2 Alliant Energy Deferred Compensation Plan for Directors, as
amended and restated
10.3 Corporate Services Grantor Trust for Deferred Compensation Agreements
10.4 Alliant Energy Grantor Trust for Deferred Compensation Agreements
27.1 Financial Data Schedule for Alliant Energy Corporation at and
for the period ended June 30, 2000
27.2 Financial Data Schedule for IES Utilities Inc. at and for the period
ended June 30, 2000
27.3 Financial Data Schedule for Wisconsin Power and Light Company at
and for the period ended June 30, 2000
(b) Reports on Form 8-K:
------------------------
Alliant Energy
Alliant Energy filed a Current Report on Form 8-K, dated April 7, 2000,
reporting (under Item 5) that it will incur a non-cash charge to income of
$25 million, or 31 cents per share, in the first quarter of 2000 to recognize
an increase in Alliant Energy's obligation relating to certain 30-year
exchangeable senior notes issued in February 2000.
Alliant Energy filed a Current Report on Form 8-K, dated April 21, 2000,
reporting (under Item 5) its earnings for the quarter ended March 31, 2000.
WP&L - None.
IESU - None.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Alliant
Energy Corporation, IES Utilities Inc. and Wisconsin Power and Light Company
have each duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the 10th day of August 2000.
<TABLE>
<CAPTION>
ALLIANT ENERGY CORPORATION
--------------------------
Registrant
<S> <C>
By: /s/ Daniel A. Doyle Vice President-Chief Accounting and Financial Planning Officer
-----------------------
Daniel A. Doyle (Principal Accounting Officer and Authorized Signatory)
IES UTILITIES INC.
------------------
Registrant
By: /s/ Daniel A. Doyle Vice President-Chief Accounting and Financial Planning Officer
-------------------------
Daniel A. Doyle (Principal Accounting Officer and Authorized Signatory)
WISCONSIN POWER AND LIGHT COMPANY
---------------------------------
Registrant
By: /s/ Daniel A. Doyle Vice President-Chief Accounting and Financial Planning Officer
-----------------------
Daniel A. Doyle (Principal Accounting Officer and Authorized Signatory)
</TABLE>
40
