WEC Energy Group, Inc. · NYSE:WEC
WEC Energy — Investor Presentation (January 2017)
42 slides from WEC Energy's investor presentation, January 2017
Slide 1: WEC Energy Group January 2017
WEC Vz Energy Group January 2017
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: Well Positioned for the Future
Well Positioned for the Future WEC Energy Group Focused on the fundamentals: World-class reliability Operating efficiency Financial discipline Exceptional customer care 2
Slide 4: A Compelling Value Proposition
Well Positioned for the Future A Compelling Value Proposition For 2016, targeting earnings per share growth of 6-8 percent Longer term, earnings per share growth is expected to be a 5-7 percent compound annual growth rate off 2015 base Earnings in 2017 are expected to be in a range of $3.06 to
Slide 5: WEC Energy Group
Well Positioned for the Future WEC Energy Group Service Territory Company Statistics $18.5 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 We Energies $17 billion of ra
Slide 6: Earnings Growth Drivers
Well Positioned for the Future Earnings Growth Drivers 2015 average rate base ($ billions) Core Investment $17 billion Rate Base: Projected rate base investment from 2016 – 2020 is $1.8 $2.7 $9 – $9.5 billion $2.8 ATC – Traditional Footprint $3.6 – $4.4 billion 10 year capital plan WEC Owner
Slide 7: Our Portfolio of Regulated Businesses
Well Positioned for the Future Our Portfolio of Regulated Businesses By Business By Jurisdiction Electric 4% Transmission Gas 9% Distribution 12% 26% 13% 71% Electric Generation and Distribution 65% WI FERC IL MI/MN Based on 2015 regulated earnings 6
Slide 8: Rate-Making Parameters by Company
Balanced Regulatory Environment Rate-Making Parameters by Company Utility Equity Layer(1) Authorized 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 50.32% 9.11% Mich
Slide 9: Power the Future Investments
Well Positioned for the Future Power the Future Investments Natural Gas Coal 1 Capacity 1,090 MW 1,030 MW 1 Investment $664 million $2 billion 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 yea
Slide 10: Rate Case Update
Balanced Regulatory Environment Rate Case Update Wisconsin Rate case plans under evaluation Illinois No rate case filing in 2017 Michigan MGU settlement approved by commission on Dec. 11, 2015, for rates effective January 1, 2016 Minnesota Order issued Oct. 31 setting ROE at 9.11% an
Slide 11: Five Year Capital Projection 2016-2020
Line of Business View Five Year Capital Projection 2016-2020 In millions $2,500 $1,950 $1,955 $1,898 $1,887 $2,000 $1,476 $1,500 $1,041 $1,090 $1,052 $1,035 Gas Delivery $771 Electric Delivery $1,000 Generation $517 $502 $529 $515 $500 $396 $309 $343 $412 $317 $337 $- 2016 2017 2018 2019 2020 Tota
Slide 12: Five Year Capital Projection 2016-2020
State View Five Year Capital Projection 2016-2020 In millions $2,500 $1,950 $1,955 $1,898 $1,887 $2,000 $99 $104 $108 $111 $1,476 $575 $525 $1,500 $75 $529 $535 MERC/MGU $360 Illinois $1,000 WI/MI Delivery $914 $933 $944 $904 WI/MI Generation $732 $500 $309 $343 $412 $317 $337 $- 2016 2017 2018 2019
Slide 13: American Transmission Company
Well Positioned for the Future American Transmission Company $3.6 – $4.4 billion projected investment from 2016 – 2025 Projected Capital Expenditures Key Assumptions (Millions of Dollars) ATC 2015 average rate base: $600 $543 $3.1 billion $516 $489 $500 $399 Implies average $197 million $400 eff
Slide 14: American Transmission Company – Outside the Traditional Footprint
Well 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
Slide 15: Sample Merger Driven Initiatives
Well Positioned for the Future Sample Merger 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 consolidati
Slide 16: 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 Raised the dividend by 17.3% in 2015 and 8.2% in 2016 Continuing to target dividend payout of 65-70% of earnings Dividend
Slide 17: 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 Projected long-term earnings per share growth of 5-7 percent compound annual growth rate off 2015 base Targeting divi
Slide 18: Appendix
Wa WEC Vz Energy Group Appendix
Slide 19: Electric and Natural Gas Distribution, Generation, Transmission
Electric Distribution Natural Gas Distribution Electric Electric Generation Transmission 60% ownership 18
Slide 20: 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 21: An Earn and Return Company with a Low Risk Profile
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 22: Delivering the Future
Major Construction Projects Delivering the Future Committed to infrastructure investment that will: Renew and modernize our delivery networks Meet new environmental standards Reduce operating costs for customers 21
Slide 23: System Modernization and Reliability Project
Major Construction Projects - Wisconsin Public Service 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 equi
Slide 24: Proposed New Generation in the Upper Peninsula
Major Construction Projects – Upper Michigan Energy Resources Corp. (UMERC) Proposed New Generation in the Upper Peninsula Provides a long-term generation solution for electric reliability in Upper Peninsula ~170 MW of clean, natural gas-fired Reciprocating Internal Combustion Engine (RICE) gene
Slide 25: Natural Gas System Modernization Program
Major Construction Projects – Peoples Gas Natural Gas System Modernization Program Extensive effort to modernize natural gas infrastructure in City of Chicago Ultimately replace 2,000 miles 21 percent complete Investment recovery under a monthly bill rider Project $250 – $280 million avera
Slide 26: State-of-the-Art Generation Fleet
Well 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 la
Slide 27: Supporting a Clean Energy Future
Well Positioned for the Future Supporting a Clean Energy Future 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 Added state-of-the-a
Slide 28: Reducing Emissions
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 27
Slide 29: Planning for Carbon Regulations
Planning for Carbon Regulations 23% Reduction in Carbon Intensity 100% Other 120% Renewables Percentage Compared to 2000 Levels 90% CO2 rate - lbs/mwh Natural 100% 80% Gas 70% 80% Nuclear 60% 60% 50% 40% 40% 30% 20% 20% Coal 10% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201
Slide 30: 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 29
Slide 31: Committed to Protecting the Environment
Committed to Protecting the Environment Balancing the delivery of safe, reliable and affordable energy Working to develop alternative generation solutions so we can retire coal-fueled units over time Examples – Presque Isle and Pulliam Power Plants Continuing evaluation of possible future reti
Slide 32: Ten Year Capital Projection 2016-2025
Line of Business View Ten Year Capital Projection 2016-2025 In millions $2,000 $1,800 $1,600 $1,400 $1,090 $1,041 $1,052 $1,035 $1,016 $956 $1,200 $951 $951 $951 $771 $1,000 $800 $502 $600 $517 $529 $515 $476 $396 $538 $476 $476 $476 $400 $200 $309 $343 $412 $317 $337 $350 $250 $250 $250 $250 $0 201
Slide 33: 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 34: 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 35: 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 34
Slide 36: 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 37: 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 38: 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 39: 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 Colette Honorable D 01/2015 06/2017 Open Open 38
Slide 40: Key Provisions in Merger Approval
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 Illinois • 3-year capital commitment
Slide 41: 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 07/29/2016 Pending Oncor NEE n/a 26.5x 23.8x $18,400 $11,898 1.6x 1.77x 05/31/2016 Pending WR GXP 36%(1) 24.6x 23.7x $12,2
Slide 42: Contact Information
Contact Information M. Beth Straka Senior Vice President – Investor Relations and Corporate Communications Beth.Straka@wecenergygroup.com 414-221-4639 41
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