The views expressed below are those of Anchor Capital Advisors, LLC (“Anchor”) as of the date written and are subject to change at any time. They are based on our proprietary research of the stated company and the following is a summary of the primary factors that support our beliefs and rationale for investing in the company. Please see additional disclosures at the end of this publication.
Alliant Energy is an electric and gas utility holding company headquartered in Madison, Wisconsin. Through its utility subsidiaries Interstate Power and Light Company (IPL) and Wisconsin Power and Light Company (WPL), LNT provides rate regulated electric and natural gas service to approximately 970,000 electric and approximately 420,000 natural gas customers.
In our opinion, LNT has room for strong EPS and dividend growth over the next few years. We believe the company is shifting its power away from fossil fuel generation and toward a cleaner energy alternative like solar. We believe the utility has a good regulatory environment, and thus should have years of growth, in addition to having a strong credit rating, which is a positive for a utility company.
Confirmation through Research
We believe the company can hit its target of 5% to 7% EPS growth and dividend growth per year through 2024. Over the last 15 years LNT has shifted its energy away from coal by 20%, by the end of 2020 only 20% of the supply was coal. By 2030 LNT has a goal to reduce carbon dioxide emissions by 50% from 2005 levels. By 2040, they expect to eliminate all coal generation, and by 2050 be net zero carbon dioxide emissions. The company continues move toward renewable energy and we expect that by 2030 it will be 52% of power generation. Going forward, the company’s renewables will be focused on solar and solar storage. We believe that utilities with more renewable exposure will get higher valuations as they will benefit from better ESG performance metrics. Alliant has also had a strong history of constructive regulatory outcomes in both Iowa and Wisconsin. Both jurisdictions have allowed return on equity of more than 10%. Lastly, the company has strong credit and investment grade ratings, at both Moody’s and S&P.
In our opinion, the market is not assigning fair value to the business considering the EPS/dividend growth, the company’s move toward renewable energy, the favorable regulatory environment, and the strong credit rating.