Investing.com -- S&P Global Ratings has lowered the credit ratings of Alliant Energy (NASDAQ: LNT ) Corp. (AEC) and its subsidiaries, Interstate Power & Light Co. (IPL) and Wisconsin Power & Light Co. (WPL), due to ongoing weak financial performance. The ratings downgrade was announced on March 5, 2025.

AEC’s year-end 2024 funds from operations (FFO)-to-debt ratio of 13.4% was below the 15% downgrade threshold set by S&P. This is largely due to the company’s substantial capital spending, which has resulted in higher debt leverage. In 2024, AEC announced it would increase its four-year capital spending plan by about $1.8 billion, bringing the total to $10.9 billion for the 2025-2028 period. This increase is primarily due to data center growth.

Despite the financial pressure from the company’s capital spending, S&P expects AEC’s financial measures to be supported by rate case orders and the company’s monetization of tax credits. Under S&P’s base case, it is expected that AEC’s consolidated FFO to debt will average 14% through 2027.

AEC’s business risk profile is assessed as excellent by S&P. This is based on AEC’s lower-risk regulated utility operations, minimal exposure to wildfire risks, and operations under credit-supportive and constructive regulatory jurisdiction in Wisconsin and Iowa. Both states include forward-looking test years, which minimizes the regulatory lag and authorized returns on equity that are above industry averages.

In September 2024, the Iowa Utilities Commission ordered IPL an electric rate increase of $185 million and a gas rate increase of $10 million. This order allows the company to create an individual customer rate tariff that can be used for data center growth.

S&P also downgraded IPL and WPL by one notch each. IPL’s issuer credit rating was lowered to ’BBB+’ from ’A-’, reflecting its status as a core subsidiary of AEC. WPL’s issuer credit rating was lowered to ’A-’ from ’A’. S&P expects WPL’s stand-alone FFO to debt will reflect 17%-19% through 2027 due to the company’s robust capital spending.

WPL is rated above AEC’s ’bbb+’ group credit profile, reflecting WPL’s ’a-’ stand-alone credit profile and the insulating measures in place. These measures include WPL functioning as a separate stand-alone legal entity, maintaining its own records and books, issuing its own long-term debt, and having full access to a minimum sub limit as part of a larger committed credit facility. WPL does not commingle funds, assets, or cash flows with its parent, and Wisconsin utilities are prohibited from paying out a dividend that would cause the common equity level to fall below a certain level.

Despite the downgrade, the outlook for AEC and its subsidiaries remains stable, with S&P expecting AEC to fund its increased capital spending plan in a balanced manner that maintains its consolidated FFO-to-debt above 13%.

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