Alliant Energy Corporation (LNT) finally entered into an agreement to hive off its renewable energy services subsidiary RMT, Inc. (“RMT”) to Infrastructure and Energy Alternatives, LLC (“IEA”). Alliant had expressed its intention to sell this subsidiary in February and appointed a leading investment bank for the purpose.
RMT Inc. did not feature in the long-term growth plans of the company. We expect the company to utilize the proceeds for further growth initiatives. The company expects to close the transaction by January 2013.
The company was determined to shed this business within this year, which was evident from the guidance provided during the third quarter earnings release. The guidance for 2012 included a charge of 14 cents per share associated with state tax apportionment changes at the utilities resulting from the planned sale of RMT. The company expects its 2012 earnings to range from $2.75 to $3.05 per share.
Alliant’s 2013 earnings are expected to be between $2.95 and $3.25 per share. Rate increase and benefits from utility investment will boost earnings in 2013 surpassing 2012 levels. The Zacks Consensus Estimates for 2012 and 2013 are $2.98 and $3.13 per share, respectively.
The company will refocus on its existing assets once it divests its renewable business. It is also looking to expand its operations in focus areas. Alliant Energy will spend $395 million for the Riverside Energy Center acquisition, which we feel is an excellent move.
The acquisition of the 600-megawatt Riverside Energy Center will definitely boost the prospects of Alliant’s utility company Wisconsin Power and Light Company (“WPL”). The capital expenditure plans from 2012 through 2016 suggests that Alliant will systematically increase its natural gas supply and utility service providing capacity.
The present valuation of the company looks reasonable. The forward price-earnings (P/E) multiple of the company is 14.9%, in line with its industry peers, while its ROE is 11.1%, higher than the peer group average of 9.8%. We expect the planned capital expenditure of the company will enable it to reach new highs in the forthcoming years.
Another utility operating in the same region Wisconsin Energy Corporation (WEC) presently has a short-term Zacks # 2 Rank ( Buy rating).
Based in Madison, Wisconsin, Alliant Energy Corporation is an electric and natural gas service provider. The company provides services to one million electric and 412,000 natural gas consumers located in Iowa, Wisconsin and Minnesota. The company retains a short-term Zacks #2 Rank (Buy rating).
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