Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (November 2016)
44 slides from Wec Energy's investor presentation, Nov 4, 2016
Slide 1: WEC Energy Group November 2016
> WEC LSS VA Energy Group =— November 2016 ee
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: Well Positioned for the Future
2 Well Positioned for the Future WEC Energy Group Focused on the fundamentals: World-class reliability Operating efficiency Financial discipline Exceptional customer care
Slide 4: A Compelling Value Proposition
3 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 CAGR off 2015 base More than 99 percent of earnings from regulated operations Projecting dividen
Slide 5: WEC Energy Group
4 Well Positioned for the Future WEC Energy Group $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) 99+% of earnings from regulated ope
Slide 6: Earnings Growth Drivers
5 Well Positioned for the Future Earnings Growth Drivers Plus Additional Growth Opportunities Outside ATC Traditional Footprint Clean Power Plan investment $2.7 $5.7 2015 average rate base ($ billions) $12.4 $2.8 $1.8 Utilities PTF Transmission Note: Power the Future value represents investment
Slide 7: Our Portfolio of Regulated Businesses
6 Well Positioned for the Future Our Portfolio of Regulated Businesses Electric Generation and Distribution 65% Gas Distribution 26% Electric Transmission 9% Based on 2015 regulated earnings 71% 13% 12% 4% WI FERC IL MI/MN By Jurisdiction By Business
Slide 8: Balanced Regulatory Environment: Rate-Making Parameters by Company
7 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% Mi
Slide 9: Power the Future Investments
8 Well Positioned for the Future Power the Future Investments Natural Gas Coal Capacity 1,090 MW 1,030 MW 1 Investment $664 million $2 billion 1 ROE 12.7% 12.7% Equity 53% 55% In Service Dates Unit 1 – July 2005 Unit 2 – May 2008 Unit 1 – February 2010 Unit 2 – January 2011 Lease Terms 25 years 30 y
Slide 10: Rate Case Update
9 Balanced Regulatory Environment Rate Case Update Wisconsin No 2017 test year base rate cases Filed 2017 fuel cases July 1 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% and autho
Slide 11: Line of Business View Five Year Capital Projection 2016-2020
10 Line of Business View Five Year Capital Projection 2016-2020 $309 $343 $412 $317 $337 $396 $517 $502 $529 $515 $771 $1,090 $1,041 $1,052 $1,035 $- $500 $1,000 $1,500 $2,000 $2,500 2016 2017 2018 2019 2020 Gas Delivery Electric Delivery Generation In millions Total capital spend over the five-ye
Slide 12: State View Five Year Capital Projection 2016-2020
11 State View Five Year Capital Projection 2016-2020 $309 $343 $412 $317 $337 $732 $933 $914 $944 $904 $360 $575 $525 $529 $535 $75 $99 $104 $108 $111 $- $500 $1,000 $1,500 $2,000 $2,500 2016 2017 2018 2019 2020 MERC/MGU Illinois WI/MI Delivery WI/MI Generation In millions Depreciation at the util
Slide 13: American Transmission Company
12 $516 $543 $489 $399 $311 $327 $295 $241 $0 $100 $200 $300 $400 $500 $600 2016 2017 2018 2019 ATC WEC portion 60% Well Positioned for the Future American Transmission Company Key Assumptions ATC rate base at year end 2015: $3.1 billion Implies average $197 million effective annual (FERC) rate
Slide 14: American Transmission Company – Outside the Traditional Footprint
13 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 transmissi
Slide 15: Sample Merger Driven Initiatives
14 Well Positioned for the Future Sample Merger Driven Initiatives Category Activity Staffing levels Achieving reductions in staff; optimizing vendor and contractor resources Information Technology Consolidating IT infrastructure Implementing enterprise-wide application investments across majo
Slide 16: Industry-Leading Dividend Growth
15 A Track Record of Performance Industry-Leading Dividend Growth Raised the dividend by 17.3% in 2015 and 8.2% in 2016 Continuing to target dividend payout of 65-70% of earnings Dividend expected to grow in line with earnings *Annualized based on 4th quarter 2015 dividend of $0.4575 **Annuali
Slide 17: Industry Leading Total Shareholder Returns
16 A Track Record of Performance Industry Leading Total Shareholder Returns 0% 50% 100% 150% 200% 250% 300% One Year Three Year Five Year Ten Year WEC S&P Utilities Index S&P Electric Index Philadelphia Utility Index Dow Jones Utilities Average Annualized returns for periods ending 12/31/15 Source:
Slide 18: Key Takeaways for WEC Energy Group
17 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 CAGR off 2015 base Targeting dividend growth in line
Slide 19: Appendix
> WEC LSS VA Energy Group — Appendix ee
Slide 20: Electric Distribution, Transmission, Natural Gas Distribution, Generation
19 Electric Distribution Electric Transmission 60% ownership Natural Gas Distribution Electric Generation
Slide 21: Strategic Rationale: Transaction Overview
20 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 e
Slide 22: An Earn and Return Company with a Low Risk Profile
21 An “Earn and Return” Company with a Low Risk Profile Well Positioned for the Future Diversified across four state jurisdictions and FERC Strong financial condition Top-tier record of producing shareholder value Strong, experienced management Larger transmission and gas business No require
Slide 23: Major Construction Projects: Delivering the Future
22 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
Slide 24: Wisconsin Public Service System Modernization and Reliability Project
23 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 e
Slide 25: Upper Michigan Energy Resources Corp. (UMERC)
24 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) g
Slide 26: Peoples Gas Natural Gas System Modernization Program
25 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 Plan to replace 250 miles over next three years Investment recovery under a monthly bill rider Pr
Slide 27: We Power Fuel Flexibility Initiative
26 Major Construction Projects – We Power Fuel flexibility initiative at our 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
Slide 28: State-of-the-Art Generation Fleet
27 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
Slide 29: Supporting a Clean Energy Future
28 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-th
Slide 30: Reducing Emissions
29 Reducing Emissions Environmental Performance 0% 20% 40% 60% 80% 100% 120% 140% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 SO2 (88% reduction) NOx (81% reduction) Mercury (84% reduction) P e rce n ta g e o f Re m a ini n g E m iss io n s P e rce n ta g e o f Re
Slide 31: Planning for Carbon Regulations
30 Planning for Carbon Regulations 0% 20% 40% 60% 80% 100% 120% 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 P erce n ta g e C omp a red t o 2 0 0 0 L e v el s CO2 rate - lbs/mwh 23% Reduction in Carbon Intensity 0% 1
Slide 32: EPA's Clean Power Plan
31 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
Slide 33: Committed to Protecting the Environment
32 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 r
Slide 34: Line of Business View Ten Year Capital Projection 2016-2025
33 Line of Business View Ten Year Capital Projection 2016-2025 $309 $343 $412 $317 $337 $250 $350 $250 $250 $250 $396 $517 $502 $529 $515 $538 $476 $476 $476 $476 $771 $1,090 $1,041 $1,052 $1,035 $1,016 $956 $951 $951 $951 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 2016 2017 20
Slide 35: Strong Financial Condition: Credit Ratings
34 0 20 40 60 80 100 120 AA - A A- BBB+ BBB BBB- Below Investment Grade A Track Record of Performance Strong Financial Condition Number of Issuers *Source: Standard & Poor’s Financial Services LLC (April 2016) Utilities Electric and Gas Utilities Credit Ratings Distribution* Utility Rating Wisconsin
Slide 36: Balanced Sales Mix
35 Paper 21% Mining/Minerals 13% Foundry (SIC 33) 11% Other Manufacturing 9% Food/Agriculture 8% Metal (SIC 34,35,37) 7% Medical 5% Office 5% Education 4% Chemical 4% Printing 3% Other 10% 37% Large C&I by Segment Wisconsin Retail Deliveries Balanced Sales Mix Large C&I 37% Residential and Farm 28%
Slide 37: Composition of Rate Base
36 35.5% 16.5% 16.2% 10.6% 6.6% 1.4% 1.2% 1.2% 10.8% Wisconsin Electric Power the Future Wisconsin Public Service Corporation Peoples Gas Wisconsin Gas Minnesota Energy Resources North Shore Gas Michigan Gas Utilities ATC Composition of Rate Base Total 2015 Rate Base of $17.0 billion
Slide 38: Key Rate Making Components
37 Key Rate Making Components Area PGL NSG MERC MGU Wisconsin – Electric Wisconsin – Gas Michigan Gas Pipeline Replacement Rider X Bad Debt Rider X X Bad Debt Escrow Accounting WE WG Decoupling X X X Fuel Cost Recovery 1 for 1 recovery of prudent fuel costs +/- 2% band 1 for 1 recovery of prudent fu
Slide 39: Regulatory Environment: Wisconsin and Michigan
38 Regulatory Environment Wisconsin Governor Scott Walker (R) Commission Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appointment 6-year staggered terms Michigan Governor Rick Snyder (R) Commission Gubernatorial appointment, Senate confirmation Chairman: G
Slide 40: Regulatory Environment: Illinois and Minnesota
39 Regulatory Environment Illinois Governor Bruce Rauner (R) Commission Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appointment 5-year staggered terms Minnesota Governor Mark Dayton (D) Commission Gubernatorial appointment, Senate confirmation Chairman: G
Slide 41: Regulatory Environment: FERC
40 Regulatory Environment FERC Presidential appointment, Senate confirmation 5-year term FERC Commissioners Name Party Began Serving Term Ends Norman Bay Chair D 08/2014 06/2018 Cheryl LaFleur D 07/2014 06/2019 Colette Honorable D 01/2015 06/2017 Open Open
Slide 42: Key Provisions in Merger Approval
41 Key Provisions in Merger Approval • Earnings cap at Wisconsin Electric and Wisconsin Gas • Joint Resource Plan for capacity needs of Wisconsin Electric and Wisconsin Public Service Wisconsin • 2-year requirement for minimum level of jobs • 2-year base rate freeze • 3-year capital commitment • Fol
Slide 43: Precedent Transactions
42 Precedent Transactions Announce Date Closing Date Target Acquiror 1-Day Premium FY1 P/E FY2 P/E Transaction Value ($mm) Equity Value ($mm) Price/Book Enterprise Value/ 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 $1
Slide 44: Contact Information
43 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
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