Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (December 2017)
52 slides from Wec Energy's investor presentation, Dec 12, 2017
Slide 1: Poised for Growth Investor Update: December 2017
Poised for Growth Investor Update: December 2017
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 $21.9 billion market cap (1) 1.6 million electric customers 2.8 million gas customers 60% ownership of ATC 69,000 miles electric distribution 46,000 miles gas distribution $17.7 billion of rate base (2) 99+% regulated (3) (1) As of 11/30/17 (2) 2016 average rate base (3) Based o
Slide 4: Focused on the Fundamentals
3 Focused on the Fundamentals “Across the corporation, our employees are focused on the fundamentals – safety, efficiency, reliability, financial discipline and customer care. These fundamentals provide a strong platform for sustainable business. As we look toward the future, we commit to serving ou
Slide 5: Focused on the Fundamentals: A Decade of Consistent EPS Growth
4 Focused on the Fundamentals $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Best in Midwest 7 years in a row Ranked #2 in our sector GAAP Adjusted A Decade of Consistent EPS Growth Best in America - 2017
Slide 6: Proven Track Record of Performance
5 Proven Track Record of Performance EPS Guidance 2016 Exceeded 2015 Exceeded 2014 Exceeded 2013 Exceeded 2012 Exceeded 2011 Exceeded 2010 Exceeded 2009 Exceeded 2008 Exceeded 2007 Exceeded 2006 Exceeded 2005 Exceeded * As reported by Thomson, Barclays Research The only regul
Slide 7: Increasing 5-Year Capital Plan by $2.1 billion
6 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 8: Line of Business View Capital Plan Drives 5% to 7% EPS Growth
7 Line of Business View Capital Plan Drives 5% to 7% EPS Growth $343 $486 $242 $929 $739 $295 $498 $559 $540 $556 $511 $541 $1,136 $1,181 $1,159 $1,190 $996 $988 $230 $239 $30 $15 $309 $318 $- $500 $1,000 $1,500 $2,000 $2,500 2017 2018 2019 2020 2021 2022 Energy Infrastructure Gas Delivery Electric
Slide 9: State View Robust Capital Projection 2017-2022
8 State View Robust Capital Projection 2017-2022 $343 $486 $242 $929 $739 $295 $932 $1,001 $950 $958 $885 $924 $609 $639 $632 $677 $526 $525 $93 $100 $117 $111 $96 $80 $230 $239 $30 $15 $309 $318 $- $500 $1,000 $1,500 $2,000 $2,500 2017 2018 2019 2020 2021 2022 Energy Infrastructure MERC/MGU Illinoi
Slide 10: 2018-2022 Capital Plan by Category
9 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 11: American Transmission Company
10 $492 $516 $474 $387 $405 $366 $295 $310 $284 $232 $243 $220 $0 $100 $200 $300 $400 $500 $600 2017 2018 2019 2020 2021 2022 ATC WEC portion 60% American Transmission Company Key Assumptions Average rate base: $3.3 billion (2016) Implies average $153 million rate base growth ROE currently und
Slide 12: Confident in Achieving Our EPS Growth Guidance
11 Confident in Achieving Our EPS Growth Guidance $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 2015 2016 2017E 2018 2019 2020 * Excludes charges related to Integrys acquisition 2015 Base GAAP Adjusted* (1) Growth rate off 2015 base of $2.72 per share, and an estimated EPS of $3.12 for 2017 (2) Guidance based
Slide 13: Solid Dividend Growth Continues
12 $0.80 $1.04 $1.20 $1.445 $1.56 $1.83* $1.98 $2.08** 2010 2011 2012 2013 2014 2015 2016 2017 Solid Dividend Growth Continues 14.6% compound annual growth rate off 2010 base Continuing to target dividend payout of 65-70% of earnings Projecting dividend growth in line with earnings growth *Ann
Slide 14: Earnings Growth Drivers
13 Earnings Growth Drivers $2.7 2016 average rate base ($ billions) Note: Power the Future value represents investment book value $17.7 billion $12.8 $2.9 $2.0 Utility: Projected capital spend from 2018–2022: Approximately $11.6 billion ATC – Traditional Footprint: Projected capital spend from 201
Slide 15: Reshaping our Generation Fleet for a Clean, Reliable Future
14 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 16: Retiring Coal-Fueled Generation
15 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 17: Building Natural Gas-Fueled Generation
16 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 18: Investing in Zero-Carbon Generation
17 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 19: Achieving Our Carbon Goal
18 -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 20: Sources of Electric Energy Supply by Fuel Type
19 51% 24% 25% 2016A 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 21: Increasing Natural Gas Distribution Investment
20 Increasing Natural Gas Distribution Investment Electric Generation and Distribution 59% Gas Distribution 27% Estimated Rate Base at 12/31/2022 Average Rate Base at 12/31/2016 Gas Distribution 35% Electric Transmission 14% Electric Transmission 15% Electric Generation and Distribution 50%
Slide 22: Delivering the Future
21 Delivering the Future • Converting 2,200 miles of overhead lines and adding distribution automation equipment through our System Modernization and Reliability Project at WPS • Phase 1 of project is 88% complete • Phase 2 of project is underway Infrastructure Resilience • Major investments planned
Slide 23: Wisconsin Public Service System Modernization and Reliability Project
22 Wisconsin Public Service System Modernization and Reliability Project Phase 1 – convert 1,200 miles of overhead lines to underground and add distribution automation equipment on 400 miles Project $220 million investment Phase 2 – underground an additional 1,000 miles Project $210 million inve
Slide 24: Major Construction Projects – Peoples Gas Natural Gas System Modernization Program
23 Investment recovery under a monthly rider Major Construction Projects – Peoples Gas Natural Gas System Modernization Program Project $280-$300 million average annual investment Enabling legislation in effect from 2014-2023 Extensive effort to modernize natural gas infrastructure in city of Ch
Slide 25: Major Construction Projects – Wisconsin Utilities AMI Program
24 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 26: Acquisition of Bluewater Natural Gas Holding
25 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 27: Major Construction Projects: New Generation in Upper Peninsula
26 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 new Michigan utility – UMERC Half of investment recovered in reta
Slide 28: Foxconn in Wisconsin
27 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 29: Key Takeaways for WEC Energy Group
28 Key Takeaways for WEC Energy Group Track record of exceptional performance Portfolio of premium businesses with investment opportunities that can support 5-7 percent EPS growth with minimal rate impact Dividend growth projected to be in line with earnings growth Poised to deliver among th
Slide 30: Appendix
Appendix WEC Energy Group
Slide 31: WEC Energy Group Businesses
30 Electric Distribution Electric Transmission 60% ownership Electric Generation Non-Utility Energy Infrastructure Natural Gas Distribution
Slide 32: Still Recognizing Benefits from Acquisition
31 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 WEC Energy Group’s subsidiaries combined are the eighth-l
Slide 33: Sample Acquisition-Driven Initiatives
32 Sample Acquisition-Driven Initiatives Category Activity Supply Chain Achieving savings in consolidated vendor and supplier contracts, negotiating most favorable terms Information Technology Consolidating IT infrastructure Implementing uniform processes and consolidating to a single Enterpri
Slide 34: Saving for Growth
33 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 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 30%, potentially growing to 34% Owns California’s Path 15 transmission line Zephyr Power Transm
Slide 37: Balanced Sales Mix
36 36% Large C&I by Segment Paper 22% Mining/Minerals 14% Foundry (SIC 33) 11% Other Manufacturing 8% Food/Agriculture 8% Metal (SIC 34,35,37) 6% Medical 6% Office 4% Education 4% Chemical 3% Printing 3% Other 11% Balanced Sales Mix Large C&I 36% Residential plus Farm 29% Small C&I 35% 2016 Retail M
Slide 38: Diverse Portfolio of Regulated Businesses
37 Diverse Portfolio of Regulated Businesses Electric Generation and Distribution 59% Gas Distribution 27% Electric Transmission 14% Based on 2016 average rate base WI 70% FERC 14% IL 12% MI/MN 4% By Jurisdiction By Business Note: Wisconsin jurisdiction includes UMERC
Slide 39: Composition of Rate Base
38 Composition of Rate Base 34.5% 16.4% 16.4% 10.7% 6.8% 1.1% 1.1% 1.7% 11.3% Wisconsin Electric Power the Future Wisconsin Public Service Corporation Peoples Gas Wisconsin Gas Minnesota Energy Resources North Shore Gas Michigan Gas Utilities ATC Total 2016 Rate Base of $17.7 billion
Slide 40: Strong Financial Condition: Credit Ratings
39 0 20 40 60 80 100 120 140 AA - A A- BBB+ BBB BBB- Below Investment Grade Strong Financial Condition Number of Issuers *Source: Standard & Poor’s Financial Services LLC (January 31, 2017) Utilities Electric and Gas Utilities Credit Ratings Distribution* Utility Rating Wisconsin Electric A- Wiscons
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 30% 2016 2017-2019E 0% 5% 10% 15% 20% 25% 30% 21% 16-19% 10% 12% 14% 16% 18% 20% 22% 2016 2017-2019E Goal of 30% or Less No Equity Issuances Anticipated
Slide 43: Electric Residential Bills below National Average
42 Electric Residential Bills below National Average $900 $950 $1,000 $1,050 $1,100 $1,150 $1,200 $1,250 $1,300 $1,350 National Avg Wisconsin Electric Wisconsin Public Service 2016 Average Electric Residential Annual Bill Source: S&P Global Financial Focus Topical Special Report Issued May 31, 2017
Slide 44: Rate-Making Parameters by Company
43 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 45: Constructive Rate Making Components
44 Constructive Rate Making Components *Wisconsin Electric and Wisconsin Gas earnings cap applies 2016-2019, Wisconsin Public Service cap applies 2018-2019 Area Illinois – Gas Minnesota – Gas Michigan– Electric & Gas Wisconsin – Gas Wisconsin – Electric Gas Pipeline Replacement Rider PGL Bad Debt Ri
Slide 46: Regulatory and Open Docket Update: Estimated Key Dates
45 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) Receive approval on acquisition of Bluewater Natural Gas Holding Co. Illinois (icc.illinois.gov) Final wri
Slide 47: Regulatory Environment – Wisconsin and Michigan
46 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 48: Regulatory Environment – Illinois and Minnesota
47 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 49: Regulatory Environment – FERC
48 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 50: Industry Leading Total Shareholder Returns
49 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, 2016 0% 50% 100% 150% 200% 250% One-Year Three-Year Five-Yea
Slide 51: Meeting and Exceeding Commitments
50 Meeting and Exceeding Commitments Commitments Results Deliver among the best risk- adjusted returns in the industry 8% EPS 10-Year CAGR and 14.6% dividend growth off the 2010 base Reduce 2017 O&M by 3% off 2016 base O&M reduction of more than 7% as of September 30, 2017 Maintain strong financ
Slide 52: 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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