Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (March 2018)
51 slides from Wec Energy's investor presentation, March 2018
Slide 1: Poised for Growth
Poised for Growth Investor Update: March 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 $18.9 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) 99+% regulated (3) (1) As of 2/28/18 (
Slide 4: Focused on the Fundamentals
Focused on the Fundamentals Our strategy is to create long- term value by focusing on the fundamentals: safety, world- class reliability, operating efficiency, financial discipline and customer care. 3
Slide 5: Focused on the Fundamentals: A Decade of EPS Growth
Focused on the Fundamentals A Decade of EPS Growth $4.00 $3.00 $2.00 $1.00 $0.00 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 GAAP Adjusted Best in America - 2017 Ranked #2 in our sector Best in Midwest 7 years in a row * 10% CAGR based off GAAP EPS that include a one-time, non-cash gain r
Slide 6: Proven Track Record of Performance
Proven Track Record of Performance EPS Guidance 2017 Exceeded 2016 Exceeded 2015 Exceeded The only regulated utility 2014 Exceeded to beat guidance every year for more than a 2013 Exceeded decade 2012 Exceeded 2011 Exceeded 2010 Exceeded 2009 Exceeded 2008 Exceeded 2007 Exceeded
Slide 7: Tax Reform Summary
Tax Reform Summary • Beneficial to customers • No equity issuances required • No change to 2018 guidance, long-term growth rate or capital plan • Maintaining FFO-to-debt in the range of 16 to 18 percent • Estimated to be a partial cash taxpayer in 2018, full cash taxpayer in 2019 State Tax Treatment
Slide 8: Increasing 5-Year Capital Plan by $2.1 billion
Increasing 5-Year Capital Plan by $2.1 billion $14,000 $11,823 $12,000 $911 $9,724 $10,000 $230 $5,514 New Plan $8,000 Former Plan $5,234 $6,000 $4,000 $2,707 $2,601 $2,000 $2,691 $1,659 $- 2017-2021 2018-2022 In millions Generation Electric Delivery Gas Delivery Energy Infrastructure 7
Slide 9: 2018-2022 Capital Plan by Category
2018-2022 Capital Plan by Category $ In billions Energy Infrastructure Gas Distribution $0.9 SMP $1.5 Generation 8% Gas Growth 0.7 New Gas $0.7 Distribution $5.0 System Renewal 1.4 New Renewables 0.9 42% Required Relocation 1.0 Maintenance Capital 0.9 Manlove Storage 0.4 Total $2.5 Generation Total
Slide 10: American Transmission Company
American Transmission Company WEC portion of investment from 2018-2022 projected at $1.6 billion Key Assumptions Projected Capital Expenditures ATC’s 2017 average rate base: (Inside Traditional Footprint) (in millions) $3.5 billion $600 Implies WEC’s average rate $516 base growth of $144 million
Slide 11: 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 2018 2019 2020 2015 Base GAAP Adjusted* * Adjusted earnings per share exclude acquisition costs totaling 1 cent per share in 2016, and exclude a one-time, non-cash gain totaling 65 cents per share
Slide 12: Solid Dividend Growth Continues
Solid Dividend Growth Continues 5-7% Annualized Dividends Per Share $2.21** 13.5% compound $2.08 annual growth rate $1.98 6.25% off 2010 base 5.1% $1.83* 8.2% Continuing to target $1.56 17.3% dividend payout of $1.445 65-70% of earnings 8.0% Projecting dividend $1.20 20.4% growth in line with
Slide 13: Reshaping our Generation Fleet for a Clean, Reliable Future
Focus on efficiency Reshaping our Generation Fleet for a Clean, Reliable Future Balancing reliability and customer cost with environmental stewardship Our goal is to work with Taken as a whole, changes to our generation industry partners, fleet should reduce costs to customers, preserve environmen
Slide 14: Retiring Coal-Fueled Generation
Retiring Coal-Fueled Generation Our plan includes retiring more than 1,800 Achieving targeted CO2 megawatts (MW) of coal generation by 2020 reductions by 2022 Pulliam Power Plant 200 MW Expected fall 2018 or later Edgewater 4 WPS share – 100 MW Expected end of third quarter 2018 Pres
Slide 15: Building Natural Gas-Fueled Generation
Building Natural Gas-Fueled Generation 400+ MW of natural gas-fueled generation U.P. of Michigan (UMERC) Reciprocating Internal RICE generation Combustion Engines 180 MW (RICE) are modular, run Expected in-service – by mid-2019 on natural gas and allow for reliable and West Marinette (WPS)
Slide 16: Investing in Zero-Carbon Generation
Investing in Zero-Carbon Generation 350+ MW of zero-carbon generation in Wisconsin by 2020 Solar Solar generation technology WPS – purchase 200 MW from developer has greatly improved, become more cost-effective and We Energies – purchase150 MW from developer complements our summer Qualifies
Slide 17: Achieving Our Carbon Goal
Achieving Our Carbon Goal Anticipated CO2 Reductions 0% -10% % Reduction from 2005 -20% Reduction Goal -30% 40% below 2005 -40% -50% -60% 2005 2016 2022 2030 Mass Rate 16
Slide 18: Sources of Electric Energy Supply by Fuel Type
Sources of Electric Energy Supply by Fuel Type 2005A 2017A 2022 Estimated 2030 Aspirational 20% 26% 26% 40% 7% 53% 73% 21% 34% Coal Natural Gas Carbon Free 17
Slide 19: Delivering the Future
Delivering the Future Infrastructure Resilience Infrastructure Redesign Technology Enhancements • Installing 2,200 miles of • Major investments planned • Advanced metering underground circuits to replace to address aging program that uses troublesome overhead lines, infrastructure integrated system
Slide 20: System Modernization and Reliability Project
Wisconsin Public Service System Modernization and Reliability Project Phase 1 – install 1,200 miles of underground circuits and add distribution automation equipment Minocqua Eagle River on 400 miles Tomahawk Rhinelander Wausaukee Wabeno Project $220 million investment Merrill Antigo Menominee Wau
Slide 21: 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 of piping 24% complete* Investment recovery under a monthly rider Project $280-$300 million average annu
Slide 22: Advanced Metering Infrastructure (AMI) Program
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 equipmen
Slide 23: Acquisition of Bluewater Natural Gas Holding
Well Positioned for the Future Acquisition of Bluewater Natural Gas Holding Bluewater entered into long-term service Underground natural agreements with the three Wisconsin gas gas storage facilities in utilities Michigan that will Total acquisition price: $230 million provide one-third of the s
Slide 24: New Generation in Upper Peninsula
Major Construction Projects 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 Reciprocating Internal Estimated $266 million ($277 million including Combustion Engines (RICE) A
Slide 25: Foxconn in Wisconsin
Foxconn in Wisconsin Capital investment by Foxconn of $10 billion Foxconn announced dollars July 26, 2017, Wisconsin’s largest Goal of creating 13,000 jobs, with an average economic development salary of $53,875, plus benefits project and largest corporate attraction Estimated 22,000 indirect
Slide 26: 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 rate impact Dividend growth projected to be in line with earnings growth No need to issue additional equity throug
Slide 27: Appendix
Appendix Wa WEC Va Energy Group
Slide 28: Electric Distribution, Natural Gas Distribution, Non-Utility Energy
Electric Distribution Natural Gas Distribution Electric Generation Non-Utility Energy Infrastructure Electric Transmission 60% ownership 27
Slide 29: Still Recognizing Benefits from Acquisition
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 Based on the number of customers, WEC Energy Group is the se
Slide 30: Saving for Growth
Saving for Growth Reduced O&M leads to incremental capital investment opportunities 900 Every dollar in O&M 800 savings results in 700 approximately $8 of Capital Deployed* capital investment 600 opportunities, with no 500 expected impact to 400 customer rates 300 200 100 0 0 25 50 75 100 In million
Slide 31: Earnings Growth Drivers
Earnings Growth Drivers 2017 average rate base ($ billions) $13.4 $3.0 $2.1 $18.5 billion $2.7 Utilities Energy Transmission Infrastructure Utility: Energy Infrastructure: ATC: Projected capital spend Projected capital spend Projected capital spend from 2018–2022: ~ $10.7B from 2018-2022: ~ $1.1B fr
Slide 32: Capital Plan Drives 5% to 7% EPS Growth
Line of Business View Capital Plan Drives 5% to 7% EPS Growth ATC Investment $2,690 $15 $2,555 $2,500 $2,465 $309 $239 $2,142 $1,971 $1,190 $2,000 $318 $30 $996 $1,181 $1,500 Energy Infrastructure $1,159 $988 Gas Delivery $556 Electric Delivery $1,000 $511 Generation $559 $541 $500 $540 $929 $739 $4
Slide 33: Robust Capital Projection 2018-2022
State View Robust Capital Projection 2018-2022 ATC Investment $2,690 $111 $15 $2,555 $2,500 $2,465 $309 $239 $100 $677 $96 $2,142 $1,971 $2,000 $318 $117 $30 $526 $639 $80 Energy Infrastructure $1,500 $632 $525 $958 MERC/MGU Illinois $885 WI/MI Delivery $1,000 $1,001 WI/MI Generation $950 $924 $500
Slide 34: Increasing Natural Gas Distribution Investment
Increasing Natural Gas Distribution Investment Average Rate Base Estimated Rate Base at 12/31/2017 at 12/31/2022 Gas Gas Distribution Distribution Electric 29% 35% Transmission Electric 15% Transmission Electric 15% Electric Generation Generation and Distribution and Distribution 56% 50% 33
Slide 35: Power the Future Investments
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 years Cost Per Unit of Capacity $6
Slide 36: American Transmission Company – Outside the Traditional Footprint
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 37% Owns transmission rights to California’s Path 15 Zephyr Power Transmission project Proposed
Slide 37: 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 38: Diverse Portfolio of Regulated Businesses
Diverse Portfolio of Regulated Businesses By Business By Jurisdiction MI/MN 3% Gas Distribution IL 29% 13% Electric Transmission 15% FERC 15% WI 69% Electric Generation and Distribution 56% Based on 2017 average rate base 37
Slide 39: 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 15.7% North Shore Gas 33.5% 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 40: Strong Financial Condition
Strong Financial Condition Electric and Gas Utilities Credit Ratings Distribution* Number of Utilities 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 $900 Upcoming Debt Maturities $800 $700 $600 $500 $400 $300 $200 No debt maturities $100 in 2022 $- In millions 2018 2019 2020 2021 2022 Hold Co WEPCO WPS PGL 40
Slide 42: Balance Sheet Remains Strong
Balance Sheet Remains Strong No Equity Issuances Anticipated Funds from Operations/Debt Holding Company Debt 20% to Total Debt 19% 30% 19% 18% 29% 25% 17% 16-18% 16% 20% 15% 15% Goal of 30% 14% or Less 13% 10% 12% 5% 11% 10% 0% 2017 2018-2020E 2017 2018-2020E 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: Constructive Rate Making Components
Constructive Rate Making Components Michigan– Illinois – Minnesota – Electric & Wisconsin – Wisconsin – Area Gas Gas Gas Gas Electric Gas Pipeline Replacement Rider PGL Bad Debt Rider X Bad Debt Escrow Accounting WE / WG WE Decoupling X X Fuel Cost Recovery 1 for 1 recovery of prudent fuel costs +/-
Slide 45: Regulatory and Open Docket Update
Regulatory and Open Docket Update 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) Received approval on acquisition of Bluewater Natural Gas Holding Co. Illinoi
Slide 46: 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 47: 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 48: Regulatory Environment
Regulatory Environment FERC Presidential appointment, Senate confirmation 5-year term FERC Commissioners Name Party Began Serving Term Ends Neil Chatterjee R 08/2017 06/2021 Chairman Cheryl LaFleur D 07/2014 06/2019 Robert R 08/2017 06/2020 Powelson Richard Glick D 11/2017 06/2022 Kevin McInty
Slide 49: 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 50: Meeting and Exceeding Commitments
Meeting and Exceeding Commitments Commitments Results Deliver among the best risk- adjusted returns in the industry •• Adjusted EPS 10-year CAGR of 8% (2007-2017) Dividend CAGR of 13.5% (2010-2018) Reduce 2017 O&M by 3% off 2016 base O&M reduction of more than 6% year over year Maintain strong f
Slide 51: 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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