HPI and Alliant Energy Resources featured in the Cedar Rapids Gazette on December 3, 2000

 
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Note: this article appeared in the December 3, 2000 Cedar Rapids Gazette, article by George C. Ford; Gazette Financial Editor.
With an eye to the future, Alliant Energy Corp. has been building an impressive portfolio of diversified business investments.
The Madison, Wis.-based company's Alliant Energy Resources subsidiary has holdings in energy management, environmental and engineering consulting, overseas utilities, barge and railroad operations, natural gas and oil production, real estate development and telecommunications.
It also is part of Cargill-Alliant LLC, an electricity trading joint venture with Cargill Inc. that enables commercial and industrial customers to reduce electricity costs and energy risks.
Financial results have already begun to impact Alliant Energy's bottom line.
Alliant Energy Resources, based in Cedar Rapids, accounted for 14 percent of Alliant Energy's $2.2 billion of revenue in 1999. The remaining 86 percent came from the company's utility operations, including IES Utilities, Interstate Power and Wisconsin Power & Light.
Alliant Energy Resources also contributed $37.8 million in net income last year, compared with a net loss of $8.9 million in 1998.
Jim Hoffman, president of Alliant Energy Resources, expects his subsidiary to steadily increase its contribution to corporate revenues and earnings in the years to come.
"We want the unregulated business to be about 25 percent of our net earnings by 2003," said Hoffman. "Much of our growth strategy right now is really pushing investment in areas where we have an opportunity for higher earnings."
Alliant Energy Resources has invested in electric utility ventures in Australia, Brazil, China, Mexico and New Zealand. Hoffman said each country is going from a particular regulated structure to a different regulated structure.
"New Zealand did it on a federal level, making the transition from a vertically integrated small, local utility structure to a wires (distribution) business and a generation/customer business," he said. "The government ordered all that to take place within a year."
"We were already there through our investment in two vertically integrated utilities. We had to decide whether to be on the wires side or the generation/customer side."
"We made a decision to be on the generation/customer side. We sold off a significant portion of our interest in the wires side and made a very handsome profit."
Hoffman said Alliant Energy Resources seeks to balance growth opportunities with potential risks when it makes international investments. One of the ways it reduces risks is the selection of a strong local partner.
In January, the company invested $347 million in Latin America in partnership with one of Brazil's most respected energy holding companies - Companhia Forca E Luz Cataguazes-Leopoldina. 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.
Alliant Energy Resources financed the Brazilian investment with the proceeds of a $250 million long-term debenture sale, a large short-term credit line and cash from the profits of existing non-utility businesses.
"This initial investment established Alliant Energy as a major investor in Brazil and created a platform for Energisa's further expansion," said Hoffman. "With the expected reinvestment of earnings from the Brazil holdings over the next several years, we anticipate that the value of our holdings could exceed $400 million."
The Brazilian investment represented the company's largest international investment to date. The total value of Alliant Energy Resources' investments in Australia, China, Mexico and New Zealand is about $200 million.
Along with its international investments, Alliant Energy Resources is active in the increasingly deregulated U.S. energy market.
The company's Denver, Colo.-based Whiting Petroleum Corp. unit is involved with oil and natural gas exploration and production. Whiting Petroleum contributed $11 million in net income last year, which included ongoing gains from the sale of properties.
"Whiting Petroleum has about 6,000 operating leases in 22 states," said Tom Aller, president of Alliant Energy Investments. "We buy proven reserves, pump them or sell them, and then buy some more. It's a very big oil and natural gas company."
Alliant Energy Investments also is involved in the development of affordable housing within its utility service territories. The company has made more than 100 investments in affordable housing through Heartland Properties Inc. and a sister company, Capital Square Financial Corp., which provides mortgage banking services.
While communities gain affordable housing stock, including some award-winning historic preservation projects, Alliant Energy receives a steady stream of tax credits worth an estimated $6 million annually.
Aller also supervises Alliant Energy Transportation, corporate parent of the Cedar Rapids and Iowa City Railroad Co. and IEI Barge Services in East Dubuque. Aller said the 95-year-old CRANDIC continues to generate revenues and profits and IEI Barge Services handles coal, fertilizer and grain for customers using the Mississippi River.
"We have a couple of newer companies in the transportation area," said Aller. "Transfer Services provides transfer and storage services for paper or any other product that is shipped by rail. Williams Transfer, located north of Ames, handles and stores coal for a variety of customers."
Aller said Alliant Transportation is studying a number of options for the CRANDIC, including becoming part of a larger regional or national railroad.
"We're analyzing all of our options to determine the best value for the Alliant shareholders," said Aller. He added that no decision has been made and no time line for a decision has been established.
While the CRANDIC is nearing a century, Alliant Energy Industrial Services (ISCO) is a relatively new enterprise. Chuck Castine, president of Industrial Services, said his company plans to harness Alliant Energy's energy and environmental expertise and apply it to new competitive markets.
"It's going to be a whole new ballgame out there," said Castine. "The pace at which we recognize and meet those opportunities and challenges will define our company's survival in the new energy marketplace.
"Our goal is to have the processes, people and infrastructure assets in place so that we can move swiftly when the time comes."
Alliant Energy Industrial Services has five business divisions focusing on four centers of expertise: energy planning, energy management and delivery services, energy infrastructure services and environmental services. The company aggressively launched its activities in Illinois, one of the first Midwestern states to participate in customer choice of electricity providers.
"What we are seeing in Illinois is a marketplace that strongly favors Commonwealth Edison and the other incumbent electricity suppliers," said Castine. "That puts us at a disadvantage, but it also forces us to think smarter and work harder."
"Illinois is a good testing ground for competition because the state's rules make it almost impossible for newcomers to compete and make a profit. We have to create a combination of services that represents economic value to customers and causes them to change from their current utility."
Castine said the company has 128 retail natural gas customers in Wisconsin. It owns two natural gas gathering pipelines in Texas and an oil gathering system that moves oil to the Houston shipping channel.
"Our RMT Inc. engineering and environmental company has 18 locations around the country," said Castine. "We basically perform remediation work."
"Two years ago, we lost money. Last year, we broke even, and this year we we are probably going to add 2 cents to 3 cents a share to the bottom line."
"Our goal is to add 6 cents a share in 2001 and 8 cents a share in 2002."

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