Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (June 2016)
46 slides from Wec Energy's investor presentation, June 2016
Slide 1: WEC Energy Group June 2016
WEC Vz Energy Group June 2016
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 New Look WEC
The New Look WEC Chicago, IL Same top management team New growth platform Focused on the energy and infrastructure needs of 4.4 million customers across the heartland 2
Slide 4: Transaction Overview
Strategic Rationale Transaction Overview 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 Meets or exceeds WEC’s acquisition criteria Accretive to earn
Slide 5: Electric Distribution, Natural Gas Distribution, Electric Generation, Transmission
Electric Distribution Natural Gas Distribution Electric Electric Generation Transmission 60% ownership 4
Slide 6: WEC Energy Group
WEC Energy Group Service Territory Company Statistics $19 billion market cap (1) 1.6 million electric customers 2.8 million gas customers 60% ownership of ATC 70,000 miles electric distribution 44,000 miles gas distribution $17 billion of rate base (2) We Energies Michigan Gas Utilitie
Slide 7: Well Positioned for the Future
An “Earn and Return” Company with a Low Risk Profile Well Positioned for the Future Larger transmission Diversified across four state jurisdictions and gas business and FERC No required equity Strong financial condition issuances Top-tier record of producing shareholder Attractive EPS value gr
Slide 8: WEC Energy Group: Focused on the fundamentals
Well Positioned for the Future WEC Energy Group Focused on the fundamentals: World-class reliability Operating efficiency Financial discipline Exceptional customer care 7
Slide 9: Drivers and Differentiators for Premium Growth
Well Positioned for the Future Drivers and Differentiators for Premium Growth Power the Future - $2.8 billion of total investment 12.7 percent equity return 60 percent owner of one of the largest transmission companies in America “Deliver the Future” capital spending over multiple years supp
Slide 10: Earnings Growth Drivers
Earnings Growth Drivers Year-end 2015 rate base ($ billions) Core Investment $17 billion Rate Base: $8 - $8.5 billion of projected rate base investment from 2016-2020 $1.8 $2.7 ATC – Traditional Footprint $2.8 $3.7 to $4.5 billion 10 year capital plan WEC Ownership 60% Power the Future: RO
Slide 11: A Compelling Value Proposition
Well Positioned for the Future A Compelling Value Proposition For 2016, targeting earnings per share growth of 6-8 percent Beyond 2016, earnings per share expected to grow at 5-7 percent annually More than 99 percent of earnings from regulated operations Projecting dividend growth in line wi
Slide 12: Industry Leading Total Shareholder Returns
A Track Record of Performance Industry Leading Total Shareholder Returns 300% 254.8% WEC 250% Dow Jones Utilities Average 200% S&P Utilities Index 150% Philadelphia Utility Index 100% S&P Electric Index 50% 0% One Year Three Year Five Year Ten Year -50% Annualized returns for periods ending 12/31/15
Slide 13: Industry Leading Dividend Growth
A Track Record of Performance Industry Leading Dividend Growth Annualized Dividends Per Share $1.98** $1.83* $1.56 $1.445 $1.20 $1.04 $0.80 2010 2011 2012 2013 2014 2015 2016 In two steps, raised the dividend by 17.3 percent in 2015 Continuing to target dividend payout of 65-70% of earnings Di
Slide 14: Declared a Dividend Increase of 8.2% in January 2016
A Track Record of Performance Declared a Dividend Increase of 8.2% in January 2016 49.50¢ 8.2% 45.75¢ 2015 2016 New quarterly dividend rate per share 13
Slide 15: Five Year Capital Projection 2016-2020: Line of Business View
Line of Business View Five Year Capital Projection 2016-2020 In millions $2,000 Under evaluation $1,908 $1,800 $1,549 $1,547 $1,547 $1,548 $1,600 $1,400 $1,071 $1,200 $843 $837 $858 $866 $1,000 $800 $600 $482 $402 $434 $413 $406 $400 $200 $304 $355 $277 $277 $277 $0 2016 2017 2018 2019 2020 Total
Slide 16: Five Year Capital Projection 2016-2020: State View
State View Five Year Capital Projection 2016-2020 In millions $1,908 Under evaluation $2,000 $96 $1,800 $1,549 $1,547 $1,547 $1,548 $1,600 $72 $586 $67 $67 $67 $1,400 $434 $398 $398 $398 $1,200 $1,000 $800 $871 $739 $805 $805 $806 $600 $400 $200 $304 $355 $277 $277 $277 $0 2016 2017 2018 2019 2020
Slide 17: Delivering the Future
Delivering the Future Committed to infrastructure investment that will: Renew and modernize our delivery networks Meet new environmental standards Reduce operating costs for customers 16
Slide 18: Wisconsin Public Service Major Construction Projects
Wisconsin Public Service Major Construction Projects System Modernization and Reliability Project $220 million of projected investment from 2014-2018 Converting more than 1,000 miles of overhead distribution power lines to underground in northern Wisconsin Adding distribution automation equipm
Slide 19: Peoples Gas Major Construction Projects
Peoples Gas Major Construction Projects Accelerated Main Replacement Project Extensive effort to modernize natural gas infrastructure in City of Chicago Investment recovery under a monthly bill rider Projecting $250 – $280 million average investment annually Enabling legislation in effect fr
Slide 20: We Energies Major Construction Projects
We Energies Major Construction Projects Twin Falls: Building a modern powerhouse $60-$65 million expected investment Scheduled for completion in summer 2016 19
Slide 21: We Power Major Construction Projects
We Power Major Construction Projects Fuel flexibility initiative at our new Oak Creek units $21 million projected investment for plant modifications $58 million projected investment for storage, fuel handling Significant reduction in fuel costs for our customers 20
Slide 22: EPA's Clean Power Plan
EPA’s Clean Power Plan Plan calls for Wisconsin to reduce CO2 emissions by 41% Approximately two-thirds of the reductions must be achieved by 2022 Stay by U.S. Supreme Court introduces delay and additional uncertainty 21
Slide 23: Ten Year Capital Projection 2016-2025
Line of Business View Ten Year Capital Projection 2016-2025 In millions $2,000 Under evaluation Clean Power Plan Compliance? $1,800 $1,600 $1,400 $1,071 $1,200 $843 $837 $858 $866 $861 $861 $839 $839 $839 $1,000 $800 $600 $482 $402 $434 $413 $406 $406 $406 $396 $396 $396 $400 $200 $304 $355 $277 $27
Slide 24: Key Takeaways for WEC Energy Group
Poised for Growth Key Takeaways for WEC Energy Group Leading electric and natural gas utility in the Midwest The eighth largest natural gas distribution company in the nation Long-term earnings per share growth of 5-7% projected annually – driven by multi-year infrastructure projects Targeti
Slide 25: Appendix
Wa WEC Vz Energy Group Appendix
Slide 26: Strong Financial Condition
A Track Record of Performance Strong Financial Condition Electric and Gas Utilities Credit Ratings Distribution* Utilities Utility Rating Number of Issuers 120 Wisconsin Electric A- 100 Wisconsin Gas A 80 60 Wisconsin Public Service A- 40 20 Peoples Gas A- 0 AA - A A- BBB+ BBB BBB- Below North Shore
Slide 27: Our Portfolio of Regulated Businesses
Well Positioned for the Future Our Portfolio of Regulated Businesses Gas Electric Distribution Transmission 26% 9% Electric Generation and Distribution 65% Based on 2015 regulated earnings 26
Slide 28: Balanced Sales Mix
Wisconsin Retail Deliveries Balanced Sales Mix 2015 Retail Mwh Deliveries Mix* 37% Large C&I by Segment Paper 21% Mining/Minerals 13% Foundry (SIC 33) 11% Other Manufacturing 9% Small C&I Food/Agriculture 8% 35% Large C&I 37% Metal (SIC 34,35,37) 7% Medical 5% Office 5% Residential Education 4% and
Slide 29: Rate Base Investment by Jurisdiction
Well Positioned for the Future Rate Base Investment by Jurisdiction* 4% 12% WI FERC 13% IL MI/MN 71% *Actual 2015 Rate Base 28
Slide 30: Composition of Rate Base
Composition of Rate Base Total 2015 Rate Base of $17.0 billion 1.2% Wisconsin Electric 1.2% 10.8% 1.4% Power the Future Wisconsin Public Service Corporation 6.6% 35.5% Peoples Gas Wisconsin Gas 10.6% Minnesota Energy Resources North Shore Gas 16.2% Michigan Gas Utilities 16.5% ATC 29
Slide 31: American Transmission Company
Positioned for the Future American Transmission Company $3.7 – $4.5 billion projected investment from 2015 – 2024 Projected Capital Expenditures Key Assumptions (Millions of Dollars) ATC rate base at year end 2015: $700 $3.1 billion $612 $600 $565 $500 Implies average $171 million $400 $372 $367
Slide 32: American Transmission Company – Outside the Traditional Footprint
Positioned for the Future American Transmission Company – Outside the Traditional Footprint Joint venture between Duke Energy and ATC (DATC) Ownership split 50/50 between Duke and ATC WEC interest: 30% Investment opportunities: Potential expansion of California’s Path 15 transmission line
Slide 33: State-of-the-Art Generation Fleet
Positioned for the Future State-of-the-Art Generation Fleet Natural gas – 3,753 megawatts Port Washington Generating Station among the lowest cost combined-cycle plants in country Coal – 5,044 megawatts Oak Creek heat rate is top 5% in country Renewables – 483 megawatts Wisconsin’s two largest
Slide 34: Supporting a Clean Energy Future
Positioned for the Future Supporting a Clean Energy Future Over the past decade, WEC Energy Group has implemented a multi-emission strategy to achieve greater environmental benefit for lower cost Retired older, less-efficient coal-fired generation Added two combined cycle natural gas units Add
Slide 35: Reducing Emissions: Environmental Performance
Reducing Emissions Environmental Performance 140% SO2 (88% reduction) NOx (81% reduction) 120% Mercury (84% reduction) Emissions Remaining Emissions 100% of Remaining 80% 60% Percentage of Percentage 40% 20% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 34
Slide 36: Reducing Emissions: Carbon Intensity
Reducing Emissions Environmental Performance 23% Reduction in Carbon Intensity 120% Percentage Compared to 2000 Levels CO2 rate - lbs/mwh 100% 80% 60% 40% 20% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 35
Slide 37: Rate Case Update
Balanced Regulatory Environment Rate Case Update Wisconsin Subject to PSCW action, which is not expected, we will not file 2017 test year base rate cases in 2016 for our Wisconsin utilities Michigan Michigan Gas Utilities settlement approved by commission on Dec. 11, 2015 for rates effective
Slide 38: Rate-Making Parameters By Company
Rate-Making Parameters By Company Utility Equity Layer(1) Allowed ROE Wisconsin Electric 48.5% - 53.5% 10.2% WPS 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 50.31% 9.35% Michigan Gas Utilities 52% 9.9% 1. Repr
Slide 39: Key Rate Making Components
Key Rate Making Components Wisconsin – Wisconsin – Area PGL NSG MERC MGU Electric Gas Michigan Gas Pipeline Replacement Rider X Bad Debt Rider X X Bad Debt Escrow Accounting WE WG Decoupling X X X 1 for 1 recovery of prudent fuel Fuel Cost Recovery 1 for 1 recovery of prudent fuel costs +/- 2% band
Slide 40: Regulatory Environment
Regulatory Environment Wisconsin Michigan Governor Scott Walker (R) Governor Rick Snyder (R) Commission Commission Gubernatorial appointment, Gubernatorial appointment, Senate confirmation Senate confirmation Chairman: Gubernatorial appointment Chairman: Gubernatorial appointment 6
Slide 41: Regulatory Environment
Regulatory Environment Illinois Minnesota Governor Bruce Rauner (R) Governor Mark Dayton (D) Commission Commission Gubernatorial appointment, Senate Gubernatorial appointment, Senate confirmation confirmation Chairman: Gubernatorial appointment Chairman: Gubernatorial appointment 5
Slide 42: Regulatory Environment
Regulatory Environment FERC Presidential appointment, Senate confirmation 5-year term FERC Commissioners Began Term Name Party Serving Ends Norman Bay Chair D 08/2014 06/2018 Cheryl LaFleur D 07/2014 06/2019 Tony Clark R 06/2012 06/2016 Colette Honorable D 01/2015 06/2017 Open 41
Slide 43: Key Provisions in Merger Approval
Balanced Regulatory Environment Key Provisions in Merger Approval • Earnings cap at Wisconsin Electric and Wisconsin Gas Wisconsin • Joint Resource Plan for capacity needs of Wisconsin Electric and Wisconsin Public Service • 2-year requirement for minimum level of jobs • 2-year base rate freeze Illi
Slide 44: Sample Merger Driven Initiatives
Sample Merger Driven Initiatives Category Activity Staffing levels Achieving reductions in staff, vendors and contractors (e.g. functionalization of Wisconsin utilities) Information Technology Consolidating IT infrastructure Implementing enterprise-wide application investments across major fun
Slide 45: Precedent Transactions
Precedent Transactions Announce Closing Target Acquiror 1-Day FY1 FY2 Transaction Equity Price/Book Enterprise Date Date Premium P/E P/E Value ($mm) Value Value/ ($mm) Rate Base 2/9/16 Pending EDE AQN.CN 50%(1) 22.4x 21.1x $2,366 $1,489 1.9x 1.49x 2/9/16 Pending ITC FTS.CN 33%(1) 21.6x 20.0x $11,269
Slide 46: Contact Information
Contact Information M. Beth Straka Senior Vice President – Investor Relations and Corporate Communications Beth.Straka@wecenergygroup.com 414-221-4639 Colleen Henderson Manager – Investor Relations Colleen.Henderson@wecenergygroup.com 414-221-2592 45