Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Q4 2021 Earnings Presentation
54 slides from Wec Energy's earnings presentation, Feb 3, 2022
Slide 1: Our ESG Progress Plan
Investor Update: February 2022 Our “ESG” Progress Plan Investing in Efficiency, Sustainability and Growth Best ESG Growth Finalist for Best in the We Energies Named Strategy in the U.S. the S&P Global U.S. in Large #1 Energy Company Capital Finance Energy Award in Customer in America by Internationa
Slide 2: Cautionary Statement Regarding Forward-Looking Information
Cautionary Statement Regarding Forward-Looking Information Much of the information contained in this presentation is forward-looking information based upon management’s current expectations and projections that involve risks and uncertainties. Forward-looking information includes, among other things
Slide 3: Company Profile
Company Profile $30.6 billion market cap* 4.6 million retail customers 60% ownership of American Transmission Company $39.0 billion of assets * As of Jan. 31, 2022 3
Slide 4: A History of Quality Earnings Growth
A History of Quality Earnings Growth $5.00 $4.29-$4.33 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 GAAP Adjusted** 2022 Guidance * Estimated based on 2022 guidance midpoint of $4.31 per share. ** See Appendix
Slide 5: Consistent Performance Over Time
Consistent Performance Over Time EPS Guidance 2021 Exceeded 2020 Exceeded 2019 Exceeded 2018 Exceeded The only utility to beat 2017 Exceeded guidance every year for 2016 Exceeded 18 years running. 2015 Exceeded 2014 Exceeded 2013 Exceeded 2012 Exceeded 2011 Exceeded 2010 Exceed
Slide 6: What's New?
What’s New? 6
Slide 7: Strong Dividend Growth Continues
Strong Dividend Growth Continues In January, raised the dividend by 7.4% to a new annual rate of $2.91 per share* Top decile dividend growth in industry** *Annualized based on 1st quarter 2022 dividend of 72.75 cents per share ** Reflects dividends declared in 2021 7
Slide 8: Strong Dividend Growth Continues
Strong Dividend Growth Continues Targeting dividend Annualized Dividends Per Share payout of 65%-70% $2.91 ** of earnings $2.71 $2.53 Projecting dividend $2.36 growth in line with $2.21 earnings growth $2.08 $1.98 $1.83* $1.56 $1.445 $1.20 $1.04 $0.80 2010 2011 2012 2013 2014 2015 2016 2017 2018 201
Slide 9: Exiting Coal
Exiting Coal Near-term retirements planned (2023-2024) Oak Creek - Units 5-8 1,100 MW Columbia - Units 1-2 300 MW Enhancing fuel flexibility (gas blending) at Oak Creek Power the Future units, pending environmental and regulatory approvals By the end of 2030, we expect our use of coal to b
Slide 10: Hydrogen Pilot Program
Hydrogen Pilot Program Leading a pilot program to test hydrogen as a fuel source for power generation Partnering with the Electric Power Research Institute (EPRI) Co-firing hydrogen with natural gas at one of our RICE units* One of the first hydrogen power pilot programs of its kind in the U
Slide 11: Next Steps in Succession Planning
Next Steps in Succession Planning Kevin Fletcher Scott Lauber Gale Klappa announced his plan to promoted to president will continue to serve retire in June 2022 and CEO effective as executive chairman February 1, 2022 until May 2024 11
Slide 12: ESG Progress Plan
ESG Progress Plan 12
Slide 13: ESG Progress Plan Supports 6-7% EPS Growth
ESG Progress Plan Supports 6-7% EPS Growth Increasing Five-Year Capital Plan by $1.6 Billion $17,700 $16,100 $1,900 $2,188 $1,345 $542 Energy Infrastructure $1,120 Former Plan New Plan $487 $3,053 ATC 1 MERC/MGU $3,054 Illinois $2,811 WI Gas Delivery 2,3 $3,023 WI Electric Delivery 3 3,4 $3,356 WI G
Slide 14: Robust Growth in Asset Base
Robust Growth in Expect long-term Asset Base EPS growth of 6-7% per year. 7% Growth $35 billion $25 billion 2021A 2026E* *Estimated year-end average asset base 14
Slide 15: Investing in Efficiency and Sustainability Drives Growth
2022-2026 Capital Plan ($ in billions) Investing in Efficiency and Sustainability Drives Growth Growth Sustainability Gas Distribution $1.3 Renewables $5.4 $2.8 Electric (G,T&D) $1.5 16% Grid and Fleet Reliability $6.8 $17.7 billion Planned $12.2 Investment $2.7 69% 15% Efficiency Technology $1.1 Gr
Slide 16: Carbon Reduction Goals – Electric Generation
Our ESG Progress Plan Carbon Reduction Goals – Electric Generation Achieved and anticipated CO2 reductions (net mass)* Reduction goals: 0 60% below 2005 -20 levels by the end of 2025 -40 -60 80% below 2005 levels by the -80 end of 2030 Net carbon -100 2005 2021 2025 2030 2050 neutral by 2050 *Includ
Slide 17: More than Doubling Renewable Generation
More than Doubling Renewable Generation Electricity Supply by Renewable Source 5,000 Hydro Biomass Battery Solar Wind Wind - WECI 4,000 Nameplate capacity (MW) 3,000 2,000 1,000 0 2021A 2026E Includes owned electric generation and announced WEC Infrastructure (WECI) projects 17
Slide 18: Investing in Carbon-Free Generation
Plan to invest $3.5 billion in regulated renewables (2022-2026) Investing in Carbon-Free Generation Plan to build and own nearly 2,400 MW of solar, wind, and battery storage Solar We Energies – 100 MW currently under construction (Badger Hollow II) Filed for approval 675 MW Planning for additi
Slide 19: WEC Infrastructure Portfolio – Green and Growing
Plan to invest $1.9 Billion (2022-2026) WEC Infrastructure Portfolio – Green and Growing Total Project Investment Capacity (in millions) (MW) SD Upstream 200 $307 Bishop Hill III 132 166 Coyote Ridge 97 145 NE Blooming Grove 250 389 IL Tatanka Ridge 155 240 Jayhawk 190 302E KS Thunderhead* 300 381E
Slide 20: Modernizing Our Gas-Fueled Generation Fleet
Modernizing Our Gas-Fueled Generation Fleet Retiring Investing 200 MW of older, less-efficient West Riverside Energy Center combined cycle gas generation expected First Option: 100 MW* Target: 2024 Expected Investment: $91 million Target: 2023 Building Additional 100 MW Option** Weston RICE
Slide 21: Methane Reduction Goal
Our ESG Progress Plan Methane Reduction Goal Achieved* and anticipated methane emissions reduction from distribution 0% Reduction goal: -20% Net zero -40% by the year 2030** -60% -80% -100% 2011 2020 2030 *Represents a decrease in the rate of methane emissions, per mile, from the natural gas distrib
Slide 22: Regional Economy
Regional Economy 22
Slide 23: Powering Industry Leaders in our Region
Powering Industry Leaders in our Region 23
Slide 24: Broad Ranging Growth Driving Longer-Term Sales Forecast
Wisconsin Segment Broad Ranging Growth Driving Longer-Term Sales Forecast Year-Over-Year 2024-2026 Sales Growth Forecast Electric 0.7%-1.0% (weather-normalized) Gas 0.7%-1.0% 24
Slide 25: Key Takeaways for WEC Energy Group
Key Takeaways for WEC Energy Group Track record of top decile performance among regulated utilities Industry leading earnings quality ESG Progress Plan drives premium EPS growth of 6-7% No need to issue equity through forecast period 100% of capital allocated to regulated businesses or con
Slide 26: Appendix
Appendix | VAise Va Energy Group
Slide 27: Business Segments Overview
Electric Generation Electric Distribution Natural Gas Distribution Energy Infrastructure Electric Transmission 60% ownership 27
Slide 28: Commitment to ESG
Commitment to ESG Reduce carbon dioxide emissions from electric generation 60% by the end of 2025 and 80% by the end of 2030 – both from a 2005 baseline. Carbon Goals Long-term goal of net-zero carbon emissions from our generating fleet by 2050 Exit from Coal Planned exit from coal by 2035 Methane T
Slide 29: Exiting Coal
Exiting Coal Electricity Supply by Fuel Type (megawatt-hours delivered to regulated utility customers) 73% 39% 39% Planned exit Net carbon 33% 32% from coal neutral goal 24% 21% 17% <5% 7% 7% 3% 2005 2021 2030E 2035 2050 Coal Natural Gas Nuclear Renewables 29
Slide 30: Reducing Greenhouse Gas Emissions
Reducing Greenhouse Gas Emissions Greenhouse gas intensity* (metric tons CO2/MWh) 0.78 0.45 0.33 0.16 0** 2005 2021 2025E 2030E 2050E *Includes owned electric generation, purchased power and WEC Infrastructure (WECI). The environmental attributes of the WECI renewable facilities are or may be the pr
Slide 31: Investment in Regulated Renewables
Plan to invest $3.5 Billion (2022-2026) Investment in Regulated Renewables Expected WEC WEC Target Project Utility WEC Investment Capacity Ownership** ($M) (MWs) In Service Two Creeks Solar Project WPS $130 100 In Service Badger Hollow I Solar Park WPS 66.7% 130 100 Q1 2023 Badger Hollow II Solar Pa
Slide 32: Wind Infrastructure Investment Summary
Projected Returns Higher than Regulated Business Wind Infrastructure Investment Summary WEC Total Commercial Project Project Developer Location Investment Offtake Agreement Operations Capacity 80% on 8/31/18 Bishop Hill III Wind Henry $166M for WPPI Energy Invenergy Incremental 10% 132MW Energy Cent
Slide 33: Oak Creek PTF Units Critical to Wisconsin and Region
Oak Creek PTF Units Critical to Wisconsin and Region Among newest, most efficient units; in a critical location Top 5% in the country on coal plant efficiency* One of only two 1,000 MW sites in the top decile heat rate in MISO Plant equipment capable of co-firing natural gas and coal *Based
Slide 34: Why Our Natural Gas Distribution Networks Matter
Today and Tomorrow Why Our Natural Gas Distribution Networks Matter -46° Our Service Area -26° 65-78% of homes use natural gas for heating -26° Growth continues as customers convert to natural gas Hydrogen and RNG Opportunities Post 2030 -23° Potential to blend Investment potential to conver
Slide 35: New Liquefied Natural Gas (LNG) Storage Facilities
New Liquefied Natural Gas (LNG) Storage Facilities Taking Steps to Maintain Reliable and Affordable Service for Our Customers LNG will provide a solution We Energies received approval for two for Southeastern LNG facilities to address the need for Wisconsin to meet peak customer demand on the addi
Slide 36: Efficiency, Growth and Sustainability Progress
Project Highlights Efficiency, Growth and Sustainability Progress Taking Steps to Maintain Reliable and Affordable Service for Our Customers Electric delivery redesign / resilience Addressing aging infrastructure and system hardening Enhancing efficiencies and reducing operating costs Expect t
Slide 37: Efficiency, Growth and Sustainability Progress
Project Highlights Efficiency, Growth and Sustainability Progress Taking Steps to Maintain Reliable and Affordable Service for Our Customers Natural Gas Safety Modernization Increasing capacity and reliability of natural gas service in our territories Illinois Expected replacement of 2,000 miles
Slide 38: Robust Growth in Asset Base
Robust Growth in Expect long-term Asset Base $35B EPS growth of 7% 6-7% per year. 7% 12% Growth $25B 9% 5% 12% WECI 12% 35% Transmission 36% We Power Gas Distribution 37% 35% Electric Generation and Distribution 2021A 2026E* *Estimated year-end average asset base 38
Slide 39: Utility Capital Plan Drives EPS Growth
Utility Capital Plan Drives EPS Growth 4,000 3,500 $3,257 $3,249 $3,160 $3,079 333 343 $3,055 3,000 278 208 183 120 104 107 107 104 ATC Investment 1 2,500 578 591 636 603 645 MERC/MGU 2,000 Illinois 649 559 513 596 494 WI Gas Delivery 2,3 1,500 WI Electric Delivery 3 579 665 711 716 685 WI Generatio
Slide 40: Capital Plan Projections by Company
By Company Capital Plan Projections ($ in millions) 2022 2023 2024 Wisconsin Electric $1,204.2 $1,360.2 $1,173.9 Wisconsin Gas $280.5 $233.6 $263.4 Wisconsin Public Service $627.2 $537.3 $621.6 Upper Michigan Energy $19.8 $16.9 $55.2 Wisconsin Segment $2,131.7 $2,148.0 $2,114.1 Peoples Gas $521.1 $5
Slide 41: Composition of Asset Base
Composition of Asset Base Total 2021 Average Asset Base of $25.0 Billion Company Asset Base - $B % of Total Wisconsin Electric $6.8 27.2% Wisconsin Gas 1.7 6.8 Wisconsin Public Service 4.0 16.0 Upper Michigan Energy Resources 0.4 1.6 Peoples Gas 4.0 16.0 North Shore Gas 0.4 1.6 Minnesota Energy Reso
Slide 42: Power the Future Investments
Power the Future Investments 1 Port Washington Oak Creek Expansion (Natural Gas) (Coal/Co-Fire Gas3) Capacity 1,090 MW 1,030 MW 2 Investment $664 million $2 billion 2 ROE 12.7% 12.7% Equity 53% 55% In Service Dates Unit 1 – July 2005 Unit 1 – February 2010 Unit 2 – May 2008 Unit 2 – January 2011 Lea
Slide 43: One of the Top Performers in Operating Efficiency
One of the Top Performers in Operating Efficiency $35 2020 Non-Fuel O&M per MWh* $33.40 $30 $25 $23.00 $23.20 $21.90 $22.00 $20.80 $21.10 $20 $18.50 $18.80 AVERAGE $16.20 $15 $13.20 WEC $10 The top 10 vertically integrated electric utilities by market cap Source: FERC Form 1 Reports *For all compani
Slide 44: Focused on Efficiency
Focused on Efficiency Reducing Day-to-Day O&M Expense* $1,342 $1,281 $1,234 4.5% 3.7% $ In millions $1,143 $1,107 7.4% $1,088 3.2% 1.6% 0-1% 2016 2017 2018 2019 2020 2021 2022E *Excludes costs that have a revenue offset such as operation and maintenance costs associated with the We Power generation
Slide 45: Balance Sheet Remains Strong
Balance Sheet Remains Strong WEC Energy Group Target S&P FFO to Debt >15% Moody’s CFO Pre-WC/Debt >16% Holding Company Debt to Total Debt <30% Issuer Credit Ratings Entity S&P Rating Moody’s Rating WEC Energy Group A- Baa1 Wisconsin Electric A- A2 Wisconsin Gas A A3 Wisconsin Public Service A- A2 Pe
Slide 46: Balanced Sales Mix
Balanced Sales Mix 2021 Retail MWh Deliveries Mix* 34% Large C&I by Segment Paper/Packaging 26% Mining/Minerals 11% Foundry (SIC 33) 9% Small C&I Large C&I Metal (SIC 34,35,37) 8% 35% 34% Other Manufacturing 8% Food/Agriculture 7% Medical 7% Residential Education 4% and Farm Printing 3% 31% Chemical
Slide 47: Diverse Portfolio of Businesses
Diverse Portfolio of Businesses By Business By Jurisdiction Electric transmission 10% WECI WECI 5% 5% ATC MI/MN 10% 5% Electric generation and IL distribution 17% WI Natural gas 49% 63% distribution 36% Based on 2021 average asset base. *ATC is accounted for using the equity method; this represents
Slide 48: Open Regulatory Matters
Open Regulatory Matters Wisconsin (apps.psc.wi.gov) Estimated Key Dates Decision on Koshkonong Solar and Battery Storage 2022 (Docket: 5-BS-258 filed 4/30/2021) Decision on Weston RICE units (Docket: 5-CE-153 filed 4/16/2021) 2022 Decision on Red Barn Wind Park (Docket: 5-BS-256 filed 3/29/202
Slide 49: Regulatory Environment
Regulatory Environment Wisconsin Illinois Governor Tony Evers (D) Governor J.B. Pritzker (D) Commission Commission Gubernatorial appointment, Gubernatorial appointment, Senate confirmation Senate confirmation Chairman: Gubernatorial appointment Chairman: Gubernatorial appointment 6
Slide 50: Rate-Making Parameters by Company
Rate-Making Parameters by Company Utility Equity Layer1 Authorized ROE Wisconsin Electric 50.0%-55.0% 10.0% Wisconsin Public Service 50.0%-55.0% 10.0% Wisconsin Gas 50.0%-55.0% 10.2% Peoples Gas 50.33% 9.05% North Shore Gas 51.58% 9.67% Minnesota Energy Resources 50.9% 9.7% Michigan Gas Utilities 51
Slide 51: Key Rate Making Components
Key Rate Making Components Michigan– Illinois– Minnesota– Electric & Wisconsin– Wisconsin– Area Gas Gas Gas Gas Electric Gas Pipeline Replacement Rider PGL MGU Bad Debt Rider ✓ Bad Debt Escrow Accounting Residential Residential Decoupling ✓ ✓ Fuel Cost Recovery 1 for 1 recovery of prudent fuel costs
Slide 52: Industry Leading Total Shareholder Returns
Industry Leading Total Shareholder Returns* Over the past decade, WEC Energy Group has consistently delivered among the best total returns in the industry 300% 250% 200% WEC Energy Group Dow Jones Utilities 150% S&P Utilities Philadelphia Utility S&P Electric 100% 50% 0% One-Year Three-Year Five-Yea
Slide 53: Reconciliation of Reported EPS (GAAP) to Adjusted EPS (Non-GAAP)
Reconciliation of Reported EPS (GAAP) to Adjusted EPS (Non-GAAP) 2014 2015 2016 2017 Reported EPS – GAAP basis $2.59 $2.34 $ 2.96 $ 3.79 Acquisition Costs $0.06 $0.39 $ 0.01 – Integrys Earnings $(0.47) Impact of Additional Shares $0.47 Tax Benefit Related to Tax Cuts and Jobs Act of 2017 – – – $ (0.
Slide 54: Contact Information
Contact Information M. Beth Straka Senior Vice President – Investor Relations and Corporate Communications Beth.Straka@wecenergygroup.com 414-221-4639