LNT Q1 2025: Reaffirms 5–7% EPS CAGR, Eyes Top‐End on 11% CapEx Boost
- Strong EPS growth prospects: Management reaffirmed a long-term EPS CAGR target of 5% to 7%, noting that with strong load growth and elevated capital expenditure, earnings are expected to accelerate particularly starting in 2027.
- Stable regulatory framework: The company’s ICR structure and regulatory strategy in both Iowa and Wisconsin help maintain predictable rate adjustments and flat base rates over the coming years, supporting reliable revenue outcomes.
- Operational and financial flexibility: The firm is well-positioned with a flexible financing plan—including an upcoming ATM program and potential junior subordinated debt—and is effectively managing tariff exposure on Chinese batteries, which sustains lower costs relative to domestic alternatives.
- Margin Pressure Due to Weather Impacts: Warmer temperatures in Q1 2025 led to lower electric and gas margins, which if persistent or worsening could negatively impact earnings.
- Increased Capital Investment Costs: The company's higher revenue requirements from capital investments have resulted in increased depreciation and financing expenses, potentially pressuring future profitability.
- Tariff Exposure Risk: The estimated tariff exposure of 1% to 2% on the $11.5 billion updated capital expenditure plan represents a potential risk to margins if mitigation efforts do not fully materialize.
| Metric | YoY Change | Reason |
|---|---|---|
Total Assets | Remained stable at $22,851 million | The asset base is consistent with previous periods, indicating a balanced mix of liabilities and equity, and reflecting stable financial management over time. |
Property, Plant and Equipment net | Reported at $19,022 million | The large proportion of PP&E relative to total assets continues the company’s focus on capital-intensive investments, mirroring historical investment patterns in long‐lived assets. |
Debt Profile | Current maturities at $1,371 million; long-term debt at $8,580 million; common equity at $7,093 million | A relatively high leverage remains evident compared to common equity. This structure likely reflects both scheduled maturities and previous capital expenditure financing strategies that have been maintained or increased from earlier periods. |
Cash and Cash Equivalents | Extremely low at $25 million | Persistently limited liquidity indicates that management has historically prioritized funding long-term investments and servicing debt over holding cash, a trend that continues into the current period. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
2025 Earnings Guidance | FY 2025 | $3.15 to $3.25 per share | no guidance provided | no current guidance |
Long-Term Earnings Growth | FY 2025 | 5% to 7% (based on 2024 earnings of $3.04) | no guidance provided | no current guidance |
Capital Expenditure Update | FY 2025 | Plans to update 2025–2028 financing plans | no guidance provided | no current guidance |
Regulatory Filings | FY 2025 | Filing for a WI rate review for 2026–2027 | no guidance provided | no current guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Data Center Load Growth | Q4 2024 described secured agreements for up to 1.9 GW at Big Cedar ; Q3 2024 mentioned cautious expectations of ramp‐up starting in 2027 with confidential agreements noted in Q2 2024. | Q1 2025 detailed three fully executed ESAs totaling 2.1 GW, including phased expansion and accelerated load utilization. | Recurring with increased execution and clarity – a more aggressive, bullish growth narrative. |
Capital Expenditure Financing | Q4 2024 referenced incremental capital additions financed 45–50% by equity ; Q3 2024 outlined an $11 billion plan with planned equity issuances and tax credit monetization ; Q2 2024 indicated only minimal equity needs via a shareowner direct plan. | Q1 2025 presented an expanded $11.5 billion capital plan for 2025–2028 with a balanced mix (≈50% cash/tax credits, ≈40% debt, ≈12% equity) and detailed tax credit strategies. | Recurring with evolved detail and broader capital scope – providing a more balanced and confident financing strategy. |
Weather-Related Earnings Impact | Q4 2024 reported significant negative weather impacts (up to a $0.15 EPS decline) ; Q3 2024 noted a $0.10 per share decrease that was largely offset through cost measures ; Q2 2024 indicated a $0.10 reduction in earnings. | Q1 2025 noted that milder, warmer-than-normal conditions led to a lesser impact (a $0.03 EPS reduction) and higher retail margins compared to Q1 2024. | Recurring with improved sentiment – weather challenges remain but are less severe and better offset in Q1 2025. |
Regulatory Environment & Rate Reviews | Q4 2024 highlighted active legislative measures and multiple filings in Iowa and Wisconsin ; Q3 2024 emphasized a collaborative regulatory environment and stability via the ICR construct ; Q2 2024 focused on success with the Iowa rate review settlement and evolving energy filings. | Q1 2025 discussed ongoing regulatory initiatives including ICR filings for data centers and planned additional filings in Iowa and Wisconsin to support growth. | A consistently proactive topic – showing continued regulatory engagement with increased filings and strategic focus. |
Earnings Growth Strategy & EPS Guidance | Q4 2024 reaffirmed 5–7% EPS growth with strong dividend and renewable investment narratives ; Q3 2024 reiterated similar long‐term growth targets with refined quarterly guidance ; Q2 2024 maintained guidance through strong cost control and stabilized forecasts. | Q1 2025 reaffirmed the long-term 5–7% EPS growth target along with a 2025 EPS guidance of $3.15–$3.25 and reported a robust quarterly EPS improvement (0.83 vs. 0.62), driven by strategic investments and customer growth. | Recurring with sustained bullish sentiment – continued confidence and consistent upward EPS guidance. |
Tariff Exposure Risk | – | Q1 2025 introduced discussion of a 20% tariff on Chinese batteries, noting that costs remain favorable despite the tariff and that exposure is well-managed. | Emerging topic – a new risk factor highlighted in Q1 2025 that was not previously mentioned. |
Natural Gas Projects & Sustainability/ESG Concerns | Q4 2024 mentioned including natural gas projects alongside other generation for diversification and ESG ; Q3 2024 had no specific details; Q2 2024 discussed the sale of a 125 MW natural gas facility and expanded advanced ratemaking incorporating ESG elements. | Q1 2025 provided extensive details on integrating natural gas projects into the capital plan to meet peak demand, positioning them as a complement to renewables while balancing sustainable initiatives. | Recurring with evolving emphasis – focus shifts to leveraging natural gas as part of a balanced approach to sustainability and growth. |
Economic Development & Customer Acquisition | Q4 2024 emphasized economic development via legislative support, data center agreements, and flexible customer rate constructs ; Q3 2024 highlighted proactive data center load acquisition with approved ICRs and Big Cedar commitments ; Q2 2024 focused on settlements and data center initiatives. | Q1 2025 underscored strong economic development through fully executed data center ESAs, regulatory approvals for ICRs, and expanded capital investments aimed at customer acquisition and long‑term load growth. | Recurring with amplified focus – increasing momentum in leveraging customer acquisition strategies and regulatory leverage for growth. |
Recession Risk & Earnings Instability | Q4, Q3, and Q2 2024 did not mention recession risk or earnings instability. | Q1 2025 did not discuss recession risk or earnings instability either. | Absent – this topic remains unaddressed across all periods. |
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EPS Outlook
Q: EPS CAGR 5–7%?
A: Management expects robust growth, aiming for the top-end of a 5–7% long-term EPS CAGR by leveraging an updated capital plan with an 11% investment CAGR boost starting in 2027. -
Equity Financing
Q: How will new equity be raised?
A: They plan to raise about $1.4 billion through 2028 via an ATM program and possible forward transactions, with any additional equity needs likely representing 40–50% of new financing if required. -
CapEx Increase
Q: What was added to CapEx?
A: The company increased its plan by $600 million, primarily to fund new natural gas generation capacity, which supports growing data center load and new customer demand. -
Data Centers
Q: How is data center growth converting?
A: Management is differentiating between fully signed ESAs and high-confidence opportunities, utilizing existing resources and short-term PPAs to accelerate load growth effectively. -
Tax Safe Harbor
Q: Are safe harbor benefits maintained?
A: They confirmed that 100% of renewable and storage CapEx through 2028 is safe harbored, helping to mitigate legislative risks associated with tax credit modifications. -
Regulatory Rates
Q: Can ICR structure keep rates flat?
A: Their regulatory construct, particularly for WPL, allows for biennial rate filings designed to minimize customer cost impacts, echoing the stable rate achievements in Iowa. -
Additional MW
Q: How many extra megawatts are planned?
A: Management alluded to supplemental slides that detail significant planned volumes in natural gas, batteries, and wind, with specific megawatt targets to be filed in upcoming regulatory actions. -
MISO Auction
Q: Impact on consumer bills from auction?
A: Proceeds from the capacity auction are being used to offset customer bills, helping counterbalance higher summer capacity prices and maintain overall bill stability. -
Battery Tariffs
Q: Impact of 20% tariffs on batteries?
A: Despite the 20% tariff on Chinese batteries, these remain cost competitive versus domestic options and are secured in their supply chain, ensuring minimal impact on near-term plans. -
ROFR Impact
Q: How would ROFR affect CapEx?
A: While ROFR legislation in Wisconsin could bolster transmission investment strength, its impact isn’t reflected in the current CapEx plan and is viewed as upside potential for later years.