Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Q3 2022 Earnings Presentation
48 slides from Wec Energy's earnings presentation, Nov 1, 2022
Slide 1: Investor Update: November 2022 - Our ESG Progress Plan Update
Investor Update: November 2022 Our “ESG” Progress Plan Update 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 Inter
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: The Premier Energy Company in America's Heartland
The Premier Energy Company in America’s Heartland $28.8 billion market cap* 4.6 million retail customers 60% ownership of American Transmission Company $40.8 billion of assets * As of Oct. 31, 2022 3
Slide 4: A History of Quality Earnings Growth
A History of Quality Earnings Growth Guidance of $4.38 - $4.40 $5.00 Expected to reach top end of range $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 guid
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: 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 first quarter 2022 dividend of 72.75 cents per share ** Reflects current and expected dividends declared in 2022 6
Slide 7: What's New?
What’s New? 7
Slide 8: ESG Progress Plan Supports 6.5% to 7.0% EPS Growth
ESG Progress Plan Supports 6.5% to 7.0% EPS Growth Increasing Five-Year Capital Plan by $2.4 Billion $20,100 $1,928 $17,700 $1,953 $1,900 $529 $1,345 Former Plan New Plan $542 $3,021 Energy Infrastructure $3,053 ATC* $2,673 MERC/MGU $2,811 Illinois $3,556 WI Gas Delivery** $3,356 WI Electric Deliver
Slide 9: Robust Growth in Asset Base
Robust Growth in Expect long-term Asset Base EPS growth of 6.5% to 7.0% per year. 7.4% Growth $38.4 billion $25.0 billion 2021A 2027E* *Estimated year-end average asset base 9
Slide 10: Investing in Efficiency and Sustainability Drives Growth
2023-2027 Capital Plan Investing in Efficiency and Sustainability Drives Growth Growth Sustainability Gas Distribution $1.1 Renewables $7.3 $2.8 Electric (G,T&D) $1.7 Grid and Fleet Reliability $7.3 14% $20.1 Billion Planned $2.7 $14.6 Investment 13% 73% Efficiency Technology $1.2 Grid and Fleet Mod
Slide 11: Investing $5.4 billion in Regulated Renewables
2023-2027 Capital Plan Investing $5.4 billion in Regulated Renewables Plan to build and own nearly 3,300 MW – quadrupling our carbon-free generation Solar 280 MW under construction Badger Hollow II Solar Park and Paris Solar-Battery Park Filed for approval 495 MW Planning for additional 1,13
Slide 12: WEC Infrastructure Portfolio – Green and Growing
Plan to invest $1.9 Billion (2023-2027) WEC Infrastructure Portfolio – Green and Growing Total Project Investment Capacity (in millions) (MW) Wind Upstream 200 $307 Bishop Hill III 132 166 SD Coyote Ridge 97 145 Blooming Grove 250 389 NE Tatanka Ridge 155 240 Jayhawk 190 282 IL Thunderhead 300 381E
Slide 13: 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 Additional 100 MW option** Building Expected i
Slide 14: Exiting Coal
Exiting Coal Near-term retirements planned: Oak Creek Units 5-6: 528 MW (May 2024) Oak Creek Units 7-8: 611 MW (late in 2025) Columbia Units 1-2: 300 MW (by June 1, 2026) Enhancing fuel flexibility (gas blending) at Oak Creek Power the Future units By the end of 2030, we expect to use co
Slide 15: American Transmission Company
American Transmission Company WEC portion of investment from 2023-2027: $2.0 billion 5-year (2023-2027) WEC Projected Capital Expenditures (millions) projected capital investment: $707 $712 Ongoing ATC: $1.7 billion $661 $643 $552 $532 Tranche 1 (2025-2027): $0.3 billion $424 $427 $397 $386 $331
Slide 16: Rate Case Settlements for our Wisconsin Utilities
Rate Case Settlements for our Wisconsin Utilities Base revenue increases totaling $507 million Equity component of capital structure rises to 53 percent Earnings sharing mechanism unchanged from 2022 Wisconsin Electric to seek approval to securitize $100 million of the remaining book balance
Slide 17: Hydrogen Pilot Program
Hydrogen Pilot Program Led a pilot program – first of its kind in the world - to test hydrogen as a fuel source for power generation Partnered with the Electric Power Research Institute (EPRI) Blended hydrogen with natural gas at one of our RICE units Initial findings indicate that all proje
Slide 18: Carbon Reduction Goals – Electric Generation
Carbon Reduction Goals – Electric Generation Achieved and anticipated CO2 reductions (net mass)* Reduction goals: 60% 0 below 2005 -20 levels by 2025 -45% -40 80% below 2005 -60 levels by the end of 2030 -80 Net carbon -100 neutral 2005 2021 2025 2030 2050 by 2050 We have established ambitious green
Slide 19: Methane Reduction
Our ESG Progress Plan Methane Reduction Achieved* and anticipated methane emission reduction from natural gas distribution. Aligns with the effort to limit warming to 1.5°C. 0% Goal: -16% -20% Net zero -40% by the year 2030** -60% -80% Use of Renewable Natural Gas (RNG) will contribute significantly
Slide 20: Regional Economy
Regional Economy 20
Slide 21: Powering Industry Leaders in our Region
Powering Industry Leaders in our Region 21
Slide 22: Economic Growth Driving Longer-Term Sales Forecast
Wisconsin Segment Economic Growth Driving Longer-Term Sales Forecast Year-Over-Year 2025-2027 Sales Growth Forecast Electric 0.7%-1.0% (weather-normalized) Gas 0.7%-1.0% 22
Slide 23: 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 6.5% to 7.0% No need to issue equity through forecast period 100% of capital allocated to regulated businesse
Slide 24: Appendix
Appendix Wa WeEC WA Energy Group
Slide 25: Business Segments Overview
Electric Generation Electric Distribution Natural Gas Distribution Energy Infrastructure Electric Transmission 60% ownership 25
Slide 26: 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 the end of 203
Slide 27: Exiting Coal
Exiting Coal Electricity Supply by Fuel Type (megawatt-hours delivered to regulated utility customers) 73% 39% 39% 33% 32% Planned exit Net carbon 24% from coal neutral goal 21% 17% <5% 7% 7% 3% 2005 2021 2030E 2035 2050 Coal Natural Gas Nuclear Renewables 27
Slide 28: Reducing Greenhouse Gas Emissions
Reducing Greenhouse Gas Emissions Greenhouse gas intensity* (metric tons CO2/MWh) 0.78 0.48 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 29: Investment in Regulated Renewables
Plan to invest $5.4 Billion (2023-2027) Investment in Regulated Renewables Expected WEC WEC Target Project Utility WEC Investment Capacity Ownership1 ($M) (MWs) Two Creeks Solar Project $130 100 In-Service WPS Badger Hollow I Solar Park 66.7% 130 100 1st Half 2023 Badger Hollow II Solar Park WEPCO 1
Slide 30: Infrastructure Investment Summary
Infrastructure Investment Summary WEC Total Commercial Project Project Developer Investment Offtake Agreement Operations Capacity Bishop Hill III Wind $166M for WPPI Energy Invenergy 8/31/18 132 MW Energy Center 90% ownership 22 years Upstream Wind $307M for Affiliate of Allianz Invenergy 1/10/19 20
Slide 31: 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 -23° Potential to blend Investment potential to convert existing
Slide 32: 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 We Energies received approval for two LNG facilities to address the need for additional natural gas supply in Wisconsin Total expected investment: $370 million Construc
Slide 33: 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 to
Slide 34: 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 35: Utility Capital Plan Drives EPS Growth
$18.2 billion projected capital spend from 2023-2027 Utility Capital Plan Drives EPS Growth 4,500 4,000 $3,758 $3,595 $3,689 $3,615 $3,515 3,500 397 319 424 427 101 386 $2,976 113 116 105 94 3,000 590 331 563 663 ATC Investment 614 591 102 MERC/MGU 2,500 525 518 605 Illinois 563 506 474 2,000 WI/MI
Slide 36: Capital Plan Projections ($ in millions)
By Company Capital Plan Projections ($ in millions) 2022 2023 2024 Wisconsin Electric $1,108.5 $1,504.1 $1,478.2 Wisconsin Gas $262.2 $251.4 $246.0 Wisconsin Public Service $517.3 $754.8 $679.9 Upper Michigan Energy $22.3 $20.4 $28.7 Wisconsin Segment $1,910.3 $2,530.7 $2,432.8 Peoples Gas $474.0 $5
Slide 37: 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 38: National Leader in Operating Efficiency and Financial Discipline
National Leader in Operating Efficiency and Financial Discipline $80 2021 Non-Fuel O&M per MWh* $79.30 $70 $60 $50 $39.20 $40 $30 $27.60 $23.00 $24.80 $21.00 $21.60 $21.80 AVERAGE $20 $15.60 $16.80 $12.60 WEC $10 $0 The top 10 vertically integrated electric utilities by 12/31/2021 market cap Source:
Slide 39: 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 40: 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 41: 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 42: 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 43: Regulatory Matters
Regulatory Matters Wisconsin (apps.psc.wi.gov) Estimated Decision Date Commission decision on general rate review for new base rates effective Q4 2022 Jan. 1, 2023 (Dockets: WE and WG: 5-UR-110 and WPS 6690-UR-127) Decision on Whitewater Acquisition (Docket: 5-BS-264 filed 12/21/2021) Q4 2022
Slide 44: 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 45: Rate-Making Parameters by Company
Rate-Making Parameters by Company Utility Equity Layer1 Authorized ROE Wisconsin Electric 50.00%-55.00% 10.00% Wisconsin Public Service 50.00%-55.00% 10.00% Wisconsin Gas 50.00%-55.00% 10.20% Peoples Gas 50.33% 9.05% North Shore Gas 51.58% 9.67% Minnesota Energy Resources 50.90% 9.70% Michigan Gas U
Slide 46: Key Rate Making Components
Key Rate Making Components Illinois– Minnesota– Michigan– Wisconsin– Wisconsin– Area Gas Gas Electric and 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 cos
Slide 47: 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 48: Contact Information
Contact Information M. Beth Straka Senior Vice President – Investor Relations and Corporate Communications Beth.Straka@wecenergygroup.com 414-221-4639