Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (November 2018)
51 slides from Wec Energy's investor presentation, Nov 9, 2018
Slide 1: Focused on Performance: Investor Update November 2018
Focused on Performance Investor Update: November 2018
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 Statistics
Company Statistics $21.6 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) (1) As of 10/31/2018 (2) 2017 average
Slide 4: Strategy focused on fundamentals and recognition
Our strategy is to create long-term value by focusing on the fundamentals: safety, world-class reliability, operating efficiency, financial discipline and customer care. One of the 100 Best One of America’s 2018 CEO of the Year Corporate Citizens Best Employers Most Outstanding Energy Corporate Resp
Slide 5: A Decade of EPS Growth
A Decade of EPS Growth $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 GAAP Adjusted 2018 Guidance 4
Slide 6: Proven Track Record of Performance
Proven Track Record of Performance EPS Guidance 2017 Exceeded 2016 Exceeded 2015 Exceeded 2014 Exceeded The only regulated utility 2013 Exceeded to beat guidance every year for more than a 2012 Exceeded decade 2011 Exceeded 2010 Exceeded 2009 Exceeded 2008 Exceeded 2007 Exceeded
Slide 7: 5-Year Capital Plan
5-Year Capital Plan 6
Slide 8: Increasing 5-Year Capital Plan by $700 million
By Line of Business Increasing 5-Year Capital Plan by $700 million Continues to Support 5-7% EPS Growth $16,000 $14,114 $14,000 $13,412 $1,427 $1,589 $12,000 $1,487 $911 $10,000 $8,000 $5,514 $5,869 $6,000 $4,000 $2,707 Plan New $2,780 $2,000 Plan Former $2,691 $2,551 $- In millions 2018-2022 2019-2
Slide 9: 2019-2023 Capital Plan
2019-2023 Capital Plan ($ in billions) Total of $14.1 billion New Energy Infrastructure $1.2 8% Gas Distribution $5.1 36% Technology Upstream $1.1 Wind Farm - 8% Infrastructure Generation ATC $0.3 $2.5 Investment* 2% 18% Electric $1.4 Distribution 10% $2.5 18% * ATC is accounted for using the equity
Slide 10: 2019-2023 Capital Plan Breakdown of Major Segments
2019–2023 Capital Plan Breakdown of Major Segments ($ in billions) Total Capital Plan of $14.1 billion Generation Gas Distribution New Renewables $1.0 SMP $1.5 New Gas 0.5 Growth 1.0 Maintenance Capital 1.0 System Renewal 1.6 Total $2.5 Required Relocation 0.6 Manlove Storage 0.4 Electric Distributi
Slide 11: Increasing Natural Gas Distribution Investment
Increasing Natural Gas Distribution Investment Average Asset Base Estimated Asset Base 12/31/2017 7% 12/31/2023 $18.5 billion Growth $27.8 billion Bluewater Gas Gas Gas Storage Distribution Bluewater Distribution 1% Gas Gas Storage 35%Gas 29% Distribution Distribution 1% FERC FERC 35% Regulated Regu
Slide 12: Our Capital Plan in Context
Our Capital Plan in Context Capital plan extends the runway for 5 to 7 percent growth from our core business well into the future Electric sales growth expected to accelerate in later part of 5-year plan Electric distribution capital expected to grow in next iteration of 5-year capital plan Be
Slide 13: Confident in Achieving Our EPS Growth Guidance
Confident in Achieving Our EPS Growth Guidance $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 2015 2016 2017 2018E 2019 2020 2015 Base GAAP Adjusted* *See Appendix 2 for reconciliation of adjusted amounts to GAAP amounts (1) 6.9% growth rate calculated from 2015 base of $2.72 per share and increased 2018
Slide 14: Solid Dividend Growth Continues
Solid Dividend Growth Continues 5-7% 13.5% compound Annualized Dividends Per Share annual growth rate $2.21** off 2010 base $2.08 $1.98 $1.83* Targeting dividend payout of 65-70% of $1.56 earnings $1.445 Projecting dividend $1.20 growth in line with $1.04 earnings growth $0.80 2010 2011 2012 2013 20
Slide 15: Generation Reshaping
Generation Reshaping 14
Slide 16: Reshaping our Generation Fleet for a Clean, Reliable Future
Reshaping our Generation Fleet for a Clean, Reliable Future Balancing reliability and customer cost with environmental stewardship We have set aggressive Taken as a whole, changes to our generation goals to reduce carbon fleet should reduce costs to customers, preserve dioxide emissions by fuel dive
Slide 17: Achieving Our Carbon Goal
Achieving Our Carbon Goal Reduction Goals: Achieved and anticipated CO2 reductions (mass) 0% 40 % -10% below 2005 levels by 2030 -20% -30% 8 0% -40% below 2005 levels by 2050 -50% -60% -70% -80% 2005 2017 2030 2050 Milestone years 16
Slide 18: Coal-Fueled Generation Reducing Greenhouse Gas Emissions
Coal-Fueled Generation Reducing Greenhouse Gas Emissions 4,935 Apr. Pleasant Prairie 1,190 MW MW Sept. Edgewater 100 MW Oct. Pulliam 200 MW 3,095 Presque Isle 350 MW MW 2017 2018 2019 2020 17
Slide 19: Building Natural Gas-Fueled Generation
Building Natural Gas-Fueled Generation 400+ MW of natural gas-fueled generation U.P. of Michigan (UMERC) Reciprocating Internal Combustion Engines RICE generation (RICE) are modular, run 180 MW on natural gas and Estimated investment of $266 million* allow for reliable and Expected in-servic
Slide 20: Investing in Zero-Carbon Generation
Investing in Zero-Carbon Generation Wisconsin Public Service and Madison Gas & Electric Solar generation have partnered on two major solar projects* technology has improved in efficiency, become Badger Hollow Solar Farm more cost-effective and Located in Iowa County, Wisconsin complements our
Slide 21: Regional Economy
Regional Economy 20
Slide 22: Foxconn in Wisconsin
Foxconn in Wisconsin Expected capital investment by Foxconn of Foxconn announced $10 billion dollars July 26, 2017, Wisconsin’s largest Goal of creating 13,000 jobs, and an estimated economic development 22,000 indirect jobs created throughout Wisconsin project and largest Largest greenfield i
Slide 23: Wisconsin Segment Sales Forecast Benefits from Regional Economic Growth
Wisconsin Segment Sales Forecast Benefits from Regional Economic Growth Year-over-Year 2019 – 2021 2022 - 2023 Annual Sales Electric Flat – 0.5% 1.2% - 1.5% Growth Forecast (weather-normalized) Gas 0.5% – 1% 1.2% - 1.5% 22
Slide 24: Powering Industry Leaders in our Region
Powering Industry Leaders in our Region 23
Slide 25: Key Takeaways for WEC Energy Group
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 impact on base rates 100 percent of capital allocated to regulated businesses or contracted renewables/gas storage
Slide 26: Appendix #1
Appendix #1 Wa WEC (ag, Energy Group
Slide 27: Business lines: distribution, generation, infrastructure, transmission
Electric Distribution Natural Gas Distribution Electric Generation Non-Utility Energy Infrastructure Electric Transmission 60% ownership 26
Slide 28: "Delivering" the Future Project Highlights
“Delivering” the Future Project Highlights Electric Resilience Electric Redesign Technology Enhancements • Installing 2,200 miles of • Major investments planned to • Advanced metering program underground circuits to address aging infrastructure that uses integrated system of replace troublesome smar
Slide 29: Peoples Gas Natural Gas System Modernization Program
Peoples Gas Natural Gas System Modernization Program Extensive effort to modernize natural gas infrastructure in city of Chicago Ultimately replace 2,000 miles of piping Approximately 26% complete* Investment recovery under a monthly rider Project $280-$300 million average annual investment
Slide 30: New Generation in Upper Peninsula
New Generation in Upper Peninsula Provides a long-term generation solution for electric ~180 MW of clean, natural reliability in Upper Peninsula gas-fired generation from Estimated $266 million ($277 million including AFUDC) Reciprocating Internal investment to be made by Michigan utility – UMER
Slide 31: Infrastructure Investment: Bishop Hill III Wind Energy Center
Infrastructure Investment Bishop Hill III Wind Energy Center Developed by Invenergy and placed into service in May 2018 53 GE wind turbines with Located in Henry County, Illinois a capacity of ~132 MW Total investment: $148 million for an 80% ownership interest Expected to provide returns th
Slide 32: Infrastructure Investment: Upstream Wind Energy Center
Infrastructure Investment Upstream Wind Energy Center Currently being built by Invenergy in Antelope County, Nebraska 81 GE wind turbines with Total investment: $276 million a capacity of ~200 MW for an 80% ownership interest Expected to provide returns that are higher than those in our regula
Slide 33: Power the Future Investments
Power the Future Investments Natural Gas Coal Capacity 1,090 MW 1,030 MW1 Investment $664 million $2 billion1 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 Lease Terms 25 years 30 years Cost Per Unit of Capacity $609
Slide 34: Capital Plan by Line of Business Drives 5% to 7% EPS Growth
By Line of Business Capital Plan Drives 5% to 7% EPS Growth $3,500 $3,277 $265 $3,000 $2,902 $2,882 $2,605 $282 $481 $2,578 $371 $2,476 $2,500 $291 $297 $205 $330 $180 $171 $102 $402 $2,000 ATC Investment $1,375 $1,146 Energy Infrastructure $1,082 $1,388 $997 $1,500 Gas Delivery $963 Electric Delive
Slide 35: Robust Capital Projection by State 2018-2023
By State Robust Capital Projection 2018-2023 $3,500 $3,277 $2,902 $265 $2,882 $3,000 $2,605 $282 $481 $2,577 $371 $2,476 $2,500 $291 $297 $136 $205 $329 $180 $106 $249 $157 $102 $93 $402 ATC Investment $2,000 $97 $687 Energy Infrastructure $603 $90 $769 $525 $574 MERC/MGU $1,500 $504 Illinois WI/MI
Slide 36: American Transmission Company
American Transmission Company WEC portion of investment from 2019-2023: $1.4 billion Key Assumptions Projected Capital Expenditures (millions) ATC’s 2017 average rate base: (Inside Traditional Footprint) $3.5 billion Implies WEC’s average rate $485 base growth of $128 million $470 $441 ROE cur
Slide 37: Diverse Portfolio of Regulated Businesses
Diverse Portfolio of Regulated Businesses By Business By Jurisdiction MI/MN 3% Gas Distribution IL 29% 13% FERC Regulated 15% FERC 15% WI 69% Electric Generation and Distribution 56% Based on 2017 average rate base 36
Slide 38: Composition of Rate Base
Composition of Rate Base Total 2017 Rate Base of $18.5 billion Wisconsin Electric Power the Future Wisconsin Public Service Corporation UMERC Wisconsin Gas North Shore Gas 33.5% 15.7% Peoples Gas Minnesota Energy Resources 15.7% Michigan Gas Utilities ATC 0.5% 11.4% Bluewater 7.0% 0.5% 11.9% 1.1% 1.
Slide 39: Balanced Sales Mix
Balanced Sales Mix 2017 Retail MWh Deliveries Mix* 35% Large C&I by Segment Paper 24% Foundry (SIC 33) 11% Mining/Minerals 10% Small C&I Large C&I Food/Agriculture 9% 36% 35% Other Manufacturing 8% Metal (SIC 34,35,37) 7% Medical 5% Residential Office 4% plus Farm Education 4% 29% Printing 3% Chemic
Slide 40: Strong Financial Condition
Strong Financial Condition Electric and Gas Utilities Credit Ratings Distribution* Utilities Number of Utility Rating Issuers 140 Wisconsin Electric A- 120 100 Wisconsin Gas A 80 60 Wisconsin Public Service A- 40 20 Peoples Gas A- 0 AA - A A- BBB+ BBB BBB- Below Investment Grade *Source: Standard &
Slide 41: Manageable Levels of Refinancing
Manageable Levels of Refinancing $1,000 Long-Term Debt Maturities $900 $800 $700 $600 $500 $400 $300 No debt maturities in $200 2022 or 2023 $100 $- In millions 2018 2019 2020 2021 2022 2023 Hold Co WEPCO WPS PGL 40
Slide 42: No Equity Issuances Anticipated
No Equity Issuances Anticipated Balance Sheet Remains Strong Funds from Operations/Debt Holding Company Debt 20% to Total Debt 19% 30% 19% 18% 29% 25% 17% 16-18% 16% 20% 15% Goal of 30% 15% 14% or Less 13% 10% 12% 5% 11% 10% 0% 2017 2018-2023E 2017 2018-2023E 41
Slide 43: Rate-Making Parameters by Company
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 Utiliti
Slide 44: Electric Residential Bills below National Average
Electric Residential Bills below National Average National Average Wisconsin Electric Wisconsin Public Service $1,299 $1,300 $1,304 $1,281 $1,264 $1,226 $1,200 $1,187 $1,190 $1,172 $955 $949 $959 $952 $930 2013 2014 2015 2016 2017 Source: SNL data for average annual residential bills 43
Slide 45: Key Rate Making Components
Key Rate Making Components Michigan– Illinois – Minnesota – Electric & Wisconsin – Wisconsin – Area Gas Gas Gas Gas Electric Gas Pipeline Replacement PGL Rider Bad Debt Rider ✓ Bad Debt Escrow Accounting WE / WG WE Decoupling ✓ ✓ Fuel Cost Recovery 1 for 1 recovery of prudent fuel costs +/- 2% band
Slide 46: Regulatory and Open Docket Update
Regulatory and Open Docket Update Estimated Key Dates Wisconsin (apps.psc.wi.gov) . Received approval on Forward Wind Center . Decision on new solar generation projects (Docket: 5-BS-228) Q4 2018 . Decision on renewable energy pilot programs (Docket: 6630-TE-102) Q1 2019 Illinois (icc.illinois.gov
Slide 47: Regulatory Environment
Regulatory Environment Wisconsin Illinois Governor Scott Walker (R) Governor Bruce Rauner (R) Commission Commission Gubernatorial appointment, Gubernatorial appointment, Senate Senate confirmation confirmation Chairman: Gubernatorial appointment Chairman: Gubernatorial appointment
Slide 48: 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 49: Management and investor relations contacts
Gale Klappa Kevin Fletcher Scott Lauber Beth Straka CEO and Chairman President EVP, CFO and SVP Communications Treasurer and Investor Relations 48
Slide 50: Appendix #2
Appendix #2 Wa WEC (ag, Energy Group
Slide 51: Reconciliation of Reported EPS (GAAP) to Adjusted EPS (Non-GAAP)
Reconciliation of Reported EPS (GAAP) to Adjusted EPS (Non-GAAP) 2017 2016 Reported EPS – GAAP basis $ 3.79 $ 2.96 Tax benefit related to Tax Cuts and Jobs Act of 2017 $ (0.65) – Acquisition Costs – $ 0.01 Adjusted EPS – Non-GAAP basis* $ 3.14 $ 2.97 * WEC Energy Group has provided adjusted earnings
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