Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (March 2018)
51 slides from Wec Energy's investor presentation, Mar 14, 2018
Slide 1: Poised for Growth Investor Update: March 2018
Poised for Growth Investor Update: March 2018
Slide 2: Cautionary Statement Regarding Forward-Looking Information
1 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 thin
Slide 3: Company Statistics
2 Company Statistics $18.9 billion market cap (1) 1.6 million electric customers 2.9 million natural gas customers 60% ownership of American Transmission Company 69,600 miles of electric distribution 48,000 miles of gas distribution $18.5 billion of rate base (2) 99+% regulated (3) (1) As of 2/28/18
Slide 4: Focused on the Fundamentals
3 Focused on the Fundamentals Our strategy is to create long- term value by focusing on the fundamentals: safety, world- class reliability, operating efficiency, financial discipline and customer care.
Slide 5: Focused on the Fundamentals: A Decade of EPS Growth
4 Focused on the Fundamentals $0.00 $1.00 $2.00 $3.00 $4.00 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Best in Midwest 7 years in a row Ranked #2 in our sector GAAP Adjusted A Decade of EPS Growth Best in America - 2017 * 10% CAGR based off GAAP EPS that include a one-time, non-cash gain
Slide 6: Proven Track Record of Performance
5 Proven Track Record of Performance EPS Guidance 2017 Exceeded 2016 Exceeded 2015 Exceeded 2014 Exceeded 2013 Exceeded 2012 Exceeded 2011 Exceeded 2010 Exceeded 2009 Exceeded 2008 Exceeded 2007 Exceeded 2006 Exceeded 2005 Exceeded The only regulated utility to beat guidanc
Slide 7: Tax Reform Summary
6 Tax Reform Summary • Beneficial to customers • No equity issuances required • No change to 2018 guidance, long-term growth rate or capital plan • Maintaining FFO-to-debt in the range of 16 to 18 percent • Estimated to be a partial cash taxpayer in 2018, full cash taxpayer in 2019 State Tax Treatme
Slide 8: Increasing 5-Year Capital Plan by $2.1 billion
7 Increasing 5-Year Capital Plan by $2.1 billion $1,659 $2,691 $2,601 $2,707 $5,234 $5,514 $230 $911 $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 2017-2021 2018-2022 Generation Electric Delivery Gas Delivery Energy Infrastructure In millions $9,724 $11,823 Former Pla n N e w Pla n
Slide 9: 2018-2022 Capital Plan by Category
8 Generation $2.5 21% Energy Infrastructure $0.9 8% Gas Distribution $5.0 42% Technology $0.9 8% Electric Distribution $2.5 21% Gas Distribution SMP $1.5 Growth 0.7 System Renewal 1.4 Required Relocation 1.0 Manlove Storage 0.4 Total $5.0 Generation New Gas $0.7 New Renewables 0.9 Maintenance Capita
Slide 10: American Transmission Company
9 $516 $474 $387 $405 $366 $310 $284 $232 $243 $220 $0 $100 $200 $300 $400 $500 $600 2018 2019 2020 2021 2022 ATC WEC portion 60% American Transmission Company Key Assumptions ATC’s 2017 average rate base: $3.5 billion Implies WEC’s average rate base growth of $144 million ROE currently under
Slide 11: Confident in Achieving Our EPS Growth Guidance
10 Confident in Achieving Our EPS Growth Guidance $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 2015 2016 2017 2018 2019 2020 * Adjusted earnings per share exclude acquisition costs totaling 1 cent per share in 2016, and exclude a one-time, non-cash gain totaling 65 cents per share related to the new ta
Slide 12: Solid Dividend Growth Continues
11 $0.80 $1.04 $1.20 $1.445 $1.56 $1.83* $1.98 $2.08 $2.21** 2010 2011 2012 2013 2014 2015 2016 2017 2018 Solid Dividend Growth Continues 13.5% compound annual growth rate off 2010 base Continuing to target dividend payout of 65-70% of earnings Projecting dividend growth in line with earnings
Slide 13: Reshaping our Generation Fleet for a Clean, Reliable Future
12 Focus on efficiency Reshaping our Generation Fleet for a Clean, Reliable Future Our goal is to work with industry partners, environmental groups and the state of Wisconsin with a goal of reducing CO2 emissions by approximately 40 percent below 2005 levels by 2030. Balancing reliability and custom
Slide 14: Retiring Coal-Fueled Generation
13 Retiring Coal-Fueled Generation Our plan includes retiring more than 1,800 megawatts (MW) of coal generation by 2020 Pulliam Power Plant 200 MW Expected fall 2018 or later Edgewater 4 WPS share – 100 MW Expected end of third quarter 2018 Presque Isle Power Plant 350 MW Expecte
Slide 15: Building Natural Gas-Fueled Generation
14 Building Natural Gas-Fueled Generation U.P. of Michigan (UMERC) RICE generation 180 MW Expected in-service – by mid-2019 West Marinette (WPS) RICE generation 50 MW Anticipated need – 2021 Option to invest in West Riverside Energy Center Combined cycle 200 MW 2020-2022 Ad
Slide 16: Investing in Zero-Carbon Generation
15 Investing in Zero-Carbon Generation Solar WPS – purchase 200 MW from developer We Energies – purchase150 MW from developer Qualifies for Investment Tax Credit (ITC) Battery storage Option to add as part of solar developments, if cost effective Qualifies for Investment Tax Credit (IT
Slide 17: Achieving Our Carbon Goal
16 -60% -50% -40% -30% -20% -10% 0% 2005 2016 2022 2030 % Red u cti o n f ro m 20 0 5 Anticipated CO2 Reductions Mass Rate Achieving Our Carbon Goal Reduction Goal 40% below 2005
Slide 18: Sources of Electric Energy Supply by Fuel Type
17 53% 21% 26% 2017A Coal Natural Gas Carbon Free 73% 7% 20% 2005A Sources of Electric Energy Supply by Fuel Type 40% 34% 26% 2022 Estimated 2030 Aspirational
Slide 19: Delivering the Future
18 Delivering the Future • Installing 2,200 miles of underground circuits to replace troublesome overhead lines, and adding distribution automation equipment through our System Modernization and Reliability Project at WPS • Phase 1 of project is approximately 90% complete • Phase 2 of project is und
Slide 20: Wisconsin Public Service System Modernization and Reliability Project
19 Wisconsin Public Service System Modernization and Reliability Project Phase 1 – install 1,200 miles of underground circuits and add distribution automation equipment on 400 miles Project $220 million investment Phase 2 – underground an additional 1,000 miles Project $210 million investment Ex
Slide 21: Major Construction Projects – Peoples Gas Natural Gas System Modernization Program
20 Investment recovery under a monthly rider Major Construction Projects – Peoples Gas Natural Gas System Modernization Program Project $280-$300 million average annual investment Illinois law authorizes rider through 2023 Extensive effort to modernize natural gas infrastructure in city of Chica
Slide 22: Major Construction Projects – Wisconsin Utilities AMI Program
21 Major Construction Projects – Wisconsin Utilities Advanced Metering Infrastructure (AMI) Program AMI is an integrated system of smart meters, communication networks and data management systems that enable two-way communication between utilities and customers Replaces aging meter-reading equip
Slide 23: Acquisition of Bluewater Natural Gas Holding
22 Acquisition of Bluewater Natural Gas Holding Bluewater entered into long-term service agreements with the three Wisconsin gas utilities Total acquisition price: $230 million Working gas capacity of 23.2 Bcf Expected to provide a utility return on capital Public Service Commission of Wis
Slide 24: Major Construction Projects New Generation in Upper Peninsula
23 Major Construction Projects New Generation in Upper Peninsula Provides a long-term generation solution for electric reliability in Upper Peninsula Estimated $266 million ($277 million including AFUDC) investment to be made by Michigan utility – UMERC Half of investment recovered in retail r
Slide 25: Foxconn in Wisconsin
24 Foxconn in Wisconsin Foxconn announced July 26, 2017, Wisconsin’s largest economic development project and largest corporate attraction project in U.S. history, as measured by jobs. Capital investment by Foxconn of $10 billion dollars Goal of creating 13,000 jobs, with an average salary of $5
Slide 26: Key Takeaways for WEC Energy Group
25 Key Takeaways for WEC Energy Group Track record of exceptional performance Portfolio of premium businesses Investment opportunities support 5-7 percent EPS growth with minimal rate impact Dividend growth projected to be in line with earnings growth No need to issue additional equity thr
Slide 27: Appendix
Appendix WEC Energy Group
Slide 28: Business Segments Overview
27 Electric Distribution Electric Transmission 60% ownership Electric Generation Non-Utility Energy Infrastructure Natural Gas Distribution
Slide 29: Still Recognizing Benefits from Acquisition
28 Still Recognizing Benefits from Acquisition WEC Energy Group formed in 2015 when Wisconsin Energy acquired Integrys in a transaction valued at $9 billion Acquisition created the leading electric and natural gas utility in the Midwest Based on the number of customers, WEC Energy Group is the
Slide 30: Saving for Growth
29 Saving for Growth Every dollar in O&M savings results in approximately $8 of capital investment opportunities, with no expected impact to customer rates 0 100 200 300 400 500 600 700 800 900 0 25 50 75 100 C a p ita l D e p lo y e d * O&M Reduction* In millions * Based on a 30-year utility projec
Slide 31: Earnings Growth Drivers
30 Earnings Growth Drivers $2.7 2017 average rate base ($ billions) $18.5 billion $13.4 $3.0 $2.1 Utility: Projected capital spend from 2018–2022: ~ $10.7B ATC: Projected capital spend from 2018-2022: ~ $1.6B Energy Infrastructure: Projected capital spend from 2018-2022: ~ $1.1B • Includes ~ $200M o
Slide 32: Line of Business View Capital Plan Drives 5% to 7% EPS Growth
31 Line of Business View Capital Plan Drives 5% to 7% EPS Growth $486 $242 $929 $739 $295 $559 $540 $556 $511 $541 $1,181 $1,159 $1,190 $996 $988 $239 $30 $15 $309 $318 $- $500 $1,000 $1,500 $2,000 $2,500 2018 2019 2020 2021 2022 Energy Infrastructure Gas Delivery Electric Delivery Generation In mil
Slide 33: State View Robust Capital Projection 2018-2022
32 State View Robust Capital Projection 2018-2022 $486 $242 $929 $739 $295 $1,001 $950 $958 $885 $924 $639 $632 $677 $526 $525 $100 $117 $111 $96 $80 $239 $30 $15 $309 $318 $- $500 $1,000 $1,500 $2,000 $2,500 2018 2019 2020 2021 2022 Energy Infrastructure MERC/MGU Illinois WI/MI Delivery WI/MI Gener
Slide 34: Increasing Natural Gas Distribution Investment
33 Increasing Natural Gas Distribution Investment Electric Generation and Distribution 56% Gas Distribution 29% Estimated Rate Base at 12/31/2022 Average Rate Base at 12/31/2017 Gas Distribution 35% Electric Transmission 15% Electric Transmission 15% Electric Generation and Distribution 50%
Slide 35: Power the Future Investments
34 Power the Future Investments Port Washington Generating Station ranks seventh in nation for natural gas combined-cycle heat rate 2 Elm Road Generating Station ranks fourth in nation for coal heat rate 2 Natural Gas Coal Capacity 1,090 MW 1,030 MW 1 Investment $664 million $2 billion 1 ROE 12.
Slide 36: American Transmission Company – Outside the Traditional Footprint
35 American Transmission Company – Outside the Traditional Footprint Joint venture between Duke Energy and ATC (DATC) Ownership split 50/50 between Duke and ATC WEC current ownership interest is 37% Owns transmission rights to California’s Path 15 Zephyr Power Transmission project Propos
Slide 37: Balanced Sales Mix
36 35% Large C&I by Segment Paper 24% Foundry (SIC 33) 11% Mining/Minerals 10% Food/Agriculture 9% Other Manufacturing 8% Metal (SIC 34,35,37) 7% Medical 5% Office 4% Education 4% Printing 3% Chemical 3% Other 12% Balanced Sales Mix Large C&I 35% Residential plus Farm 29% Small C&I 36% 2017 Retail M
Slide 38: Diverse Portfolio of Regulated Businesses
37 Diverse Portfolio of Regulated Businesses Electric Generation and Distribution 56% Gas Distribution 29% Electric Transmission 15% Based on 2017 average rate base WI 69% FERC 15% IL 13% MI/MN 3% By Jurisdiction By Business
Slide 39: Composition of Rate Base
38 Composition of Rate Base 33.5% 15.7% 15.7% 0.5% 7.0% 1.1% 11.9% 1.6% 1.1% 11.4% 0.5% Wisconsin Electric Power the Future Wisconsin Public Service Corporation UMERC Wisconsin Gas North Shore Gas Peoples Gas Minnesota Energy Resources Michigan Gas Utilities ATC Bluewater Total 2017 Rate Base of $18
Slide 40: Strong Financial Condition
39 0 20 40 60 80 100 120 140 AA - A A- BBB+ BBB BBB- Below Investment Grade Number of Issuers *Source: Standard & Poor’s Financial Services LLC (January 31, 2018) Utilities Electric and Gas Utilities Credit Ratings Distribution* Utility Rating Wisconsin Electric A- Wisconsin Gas A Wisconsin Public S
Slide 41: Manageable Levels of Refinancing
40 Manageable Levels of Refinancing $- $100 $200 $300 $400 $500 $600 $700 $800 $900 2018 2019 2020 2021 2022 Upcoming Debt Maturities Hold Co WEPCO WPS PGL No debt maturities in 2022 In millions
Slide 42: Balance Sheet Remains Strong
41 Balance Sheet Remains Strong Holding Company Debt to Total Debt Funds from Operations/Debt 29% 2017 2018-2020E 0% 5% 10% 15% 20% 25% 30% 19% 16-18% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 2017 2018-2020E Goal of 30% or Less No Equity Issuances Anticipated
Slide 43: Rate-Making Parameters by Company
42 Rate-Making Parameters by Company Utility Equity Layer (1) Authorized ROE Wisconsin Electric 48.5%-53.5% 10.2% Wisconsin Public Service 49.0%-54.0% 10.0% Wisconsin Gas 47.0%-52.0% 10.3% Peoples Gas 50.33% 9.05% North Shore Gas 50.48% 9.05% Minnesota Energy Resources 50.32% 9.11% Michigan Gas Util
Slide 44: Constructive Rate Making Components
43 Constructive Rate Making Components *Applied through 2019 Area Illinois – Gas Minnesota – Gas Michigan– Electric & Gas Wisconsin – Gas Wisconsin – Electric Gas Pipeline Replacement Rider PGL Bad Debt Rider X Bad Debt Escrow Accounting WE / WG WE Decoupling X X Fuel Cost Recovery 1 for 1 recovery
Slide 45: Estimated Key Dates
44 Estimated Key Dates Wisconsin (apps.psc.wi.gov) Decision regarding proposed rate case settlement for all Wisconsin utilities (Dockets: We Energies – 5-UR-108 and WPS – 6690-UR-125) Received approval on acquisition of Bluewater Natural Gas Holding Co. Illinois (icc.illinois.gov) Final Co
Slide 46: Regulatory Environment – Wisconsin and Michigan
45 Regulatory Environment Wisconsin Governor Scott Walker (R) Commission Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appointment 6-year staggered terms Michigan Governor Rick Snyder (R) Commission Gubernatorial appointment, Senate confirmation Chairman: G
Slide 47: Regulatory Environment – Illinois and Minnesota
46 Regulatory Environment Illinois Governor Bruce Rauner (R) Commission Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appointment 5-year staggered terms Minnesota Governor Mark Dayton (D) Commission Gubernatorial appointment, Senate confirmation Chairman: G
Slide 48: Regulatory Environment – FERC
47 Regulatory Environment FERC Presidential appointment, Senate confirmation 5-year term FERC Commissioners Name Party Began Serving Term Ends Neil Chatterjee Chairman R 08/2017 06/2021 Cheryl LaFleur D 07/2014 06/2019 Robert Powelson R 08/2017 06/2020 Richard Glick D 11/2017 06/2022 Kevin McI
Slide 49: Industry Leading Total Shareholder Returns
48 Industry Leading Total Shareholder Returns* Over the past decade, WEC Energy Group has consistently delivered among the best total returns in the industry * Total return including reinvested dividends for the 10 years ended December 31, 2017 0% 50% 100% 150% 200% 250% 300% One-Year Three-Year Fiv
Slide 50: Meeting and Exceeding Commitments
49 Meeting and Exceeding Commitments Commitments Results Deliver among the best risk- adjusted returns in the industry • Adjusted EPS 10-year CAGR of 8% (2007-2017) • Dividend CAGR of 13.5% (2010-2018) Reduce 2017 O&M by 3% off 2016 base O&M reduction of more than 6% year over year Maintain stro
Slide 51: Contact Information
Contact Information M. Beth Straka Senior Vice President – Investor Relations and Corporate Communications Beth.Straka@wecenergygroup.com 414-221-4639 Ashley Knutson Investor Relations Analyst Ashley.Knutson@wecenergygroup.com 414-221-3339
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