WEC Energy Group, Inc. · NYSE:WEC
WEC Energy — Wisconsin Energy — Investor Presentation (January 2014)
34 slides from WEC Energy's investor presentation, January 2014
Slide 1: Wisconsin Energy Corporation January 2014
Wisconsin Energy Corporation V- January 2014
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: Overview: Retail Electric and Gas Utilities
Overview Retail Electric and Gas Utilities Largest electric and gas company in Wisconsin 1.1 million electric customers 1.1 million natural gas customers 3
Slide 4: Investment Thesis
Investment Thesis An “Earn and Return” Company with a Low Risk Profile Positive free cash flow Targeted EPS growth of 4%-6% Best in class dividend growth - targeting a dividend payout ratio of 65%-70% of earnings in 2017 Implies 7%-8% dividend growth annually 2015-2017 In January, the boar
Slide 5: Consistent Earnings and Dividend Growth
A Track Record of Performance Consistent Earnings and Dividend Growth Wisconsin Energy is the only company in the S&P Electric Index S&P Utilities Index Philadelphia Utility Index Dow Jones Utilities Average that has grown earnings per share and dividends per share every year since 2003 5
Slide 6: Industry Leading Total Shareholder Returns
A Track Record of Performance Industry Leading Total Shareholder Returns One Three Five Ten Year Year Year Year Wisconsin Energy 16.1% 55.5% 131.8% 227.1% S&P Utilities Index 13.2% 37.5% 62.3% 141.8% S&P Electric Index 7.8% 29.7% 38.7% 132.4% Philadelphia Utility Index 11.0% 31.6% 53.0% 137.1% Dow J
Slide 7: Industry Leading Dividend Growth
A Track Record of Performance Industry Leading Dividend Growth $1.56 $1.45 $1.20 $1.04 $0.80 $0.68 $0.50 $0.54 $0.44 $0.46 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E Targeting dividend payout ratio of 65 - 70 percent of earnings in 2017 7
Slide 8: Leading Reliability and Customer Satisfaction
A Track Record of Performance Leading Reliability and Customer Satisfaction Named the most reliable utility … In the U.S. in 2013 In the Midwest nine of the past 12 years During 2012, achieved highest customer satisfaction ratings in past decade … likely best ever 8
Slide 9: Power the Future Investments – Natural Gas
A Track Record of Performance Power the Future Investments – Natural Gas Meeting the Region’s Energy Needs Capacity 1,090 MW Investment $664 million ROE 12.7% Equity 53% In Service Dates Unit 1 – July 2005 Unit 2 – May 2008 Cost Per Unit of Capacity $609/kW 9
Slide 10: Power the Future Investments – Coal
A Track Record of Performance Power the Future Investments – Coal Meeting the Region’s Energy Needs Capacity 1,030 MW1 Investment $2 billion1 ROE 12.7% Equity 55% In Service Dates Unit 1 – February 2010, Unit 2 – January 2011 Cost Per Unit Approximately of Capacity $1,950/kW 1 All capacity and inves
Slide 11: Dramatic Change in Environmental Performance
A Track Record of Performance Dramatic Change in Environmental Performance From 2000 to 2013... Power plant capacity up 50% Emissions of nitrogen oxide sulfur dioxide down 80% mercury particulate matter 11
Slide 12: Strong Financial Foundation
A Track Record of Performance Strong Financial Foundation Positive Cash Flow … Project $500 million of free cash flow from 2014-2018 Expect to generate free cash flow each year after reaching target dividend payout ratio in 2017 Solid credit ratings … Well Funded Pension … Moody’s S&P Fitch Mo
Slide 13: Pension Funding Status
A Track Record of Performance Pension Funding Status Percentage Funded through 2012 100% Average 90% 80% 70% 60% 50% 40% Major US Utilities *Company 1 is more than 100% funded Source: Wolfe Research and company filings 13
Slide 14: Summary of our Core Business
A Track Record of Performance Summary of our Core Business Rate Base and Power the Future Investment at 12/31/12 Retail Electric and Gas Utilities $9.8 Billion Wisconsin, Michigan, and FERC jurisdictions $2.7 48.5% to 53.5% equity for Wisconsin Electric 10.4% allowed ROE 45% to 50% equity
Slide 15: Major Segment Earnings for 2011 – 2013
Where We Go From Here Major Segment Earnings for 2011 – 2013 Projecting earnings per share growth of 4-6% annually from the 2011 base 2011A 2012A 2013 Electric and Gas Utilities $1.44 $1.55 To be Power the Future (1) $0.66 $0.69 released February Wholesale Electric $0.16 $0.17 6th, 2014 Transmission
Slide 16: Delivering the Future
Where We Go From Here Delivering the Future From 2014 through 2018, our plan is to invest $3.2 to $3.5 billion in needed infrastructure projects that will: Renew and modernize our grid Meet new environmental standards Reduce our operating costs for customers 16
Slide 17: Solid Capital Investment in our Core Business
Where We Go From Here Solid Capital Investment in our Core Business (In millions) $800 $723 $700 $668 $668 $617 $607 83 $588 $600 188 330 194 200 $500 189 188 $400 224 220 $300 211 208 214 227 409 426 $200 388 173 342 359 329 108 84 102 125 137 $100 83 82 96 97 48 61 $0 2013 2014 2015 2016 2017 2018
Slide 18: Western Wisconsin Gas Expansion
Where We Go From Here Western Wisconsin Gas Expansion Additional natural gas distribution Sand Plants – Wisconsin capacity needed to address reliability and to meet growth in customer demand Propane conversion - eight municipalities have passed franchise resolutions to receive natural gas servic
Slide 19: Renewable Energy Investments
Where We Go From Here Renewable Energy Investments Biomass Plant 50MW Investment of approximately $269 million Commercial operation began in November of 2013 Montfort Wind Energy Center 30MW Purchased from a subsidiary of NextEra Energy, Inc. Purchase price of $27 million Approved
Slide 20: Valley Power Plant
Where We Go From Here Valley Power Plant In 2012 announced plans to convert Valley from coal to natural gas Targeting completion of the conversion for late 2015 or early 2016 Follows completion of a $26 million gas pipeline upgrade with expected completion in 2014 Currently seeking regulator
Slide 21: Twin Falls Hydroelectric Powerhouse
Where We Go From Here Twin Falls Hydroelectric Powerhouse In 2012 announced plans to build a new powerhouse at Twin Falls Existing powerhouse is in need of repair All major permits have been obtained Construction began in the fall of 2013 with scheduled completion in 2016 Expected cost: $6
Slide 22: Michigan Retail Choice
Where We Go From Here Michigan Retail Choice Two iron ore mines in Michigan’s Upper Peninsula switched to an alternate energy supplier effective September 1, 2013 In response, the company: Dissolved the joint venture agreement with Wolverine Power Cooperative for environmental upgrades and par
Slide 23: Growth at American Transmission Company
Where We Go From Here Growth at American Transmission Company ATC projects a need for $3.0-$3.6 billion of transmission investments in its footprint from 2013-2022 ATC’s prior plan called for $3.9-$4.8 billion of in- footprint investments from 2012-2021 Excludes potential transmission projects
Slide 24: Multiple Opportunities Being Evaluated
Where We Go From Here Multiple Opportunities Being Evaluated Additional capital for fuel blending at the Oak Creek Expansion units Divestiture of energy assets by the State of Wisconsin New transmission projects outside of Wisconsin and Michigan through our 26.2 percent ownership of American T
Slide 25: Industry Leading Dividend Growth
Where We Go From Here Industry Leading Dividend Growth The board of directors raised the quarterly dividend in January to 39 cents a share – equivalent to an annual rate of $1.56 a share Represents a 30% increase over the rate in effect during 2012 The board of directors also affirmed a target
Slide 26: Financial Flexibility for Share Repurchases
Where We Go From Here Financial Flexibility for Share Repurchases The board of directors has authorized management to purchase up to $300 million of Wisconsin Energy common stock from 2014 – 2017 Original share buyback program authorized management to purchase up to $300 million of Wisconsin Ene
Slide 27: Holding Company Debt Retirement
Where we go from here Holding Company Debt Retirement Our free cash position enables us to consider the early retirement of holding company obligations Two major debt instruments at the holding company $200 million bond with a 6.2% coupon expiring in 2033 $500 million hybrid security with a
Slide 28: Key Takeaways on Wisconsin Energy
Key Takeaways on Wisconsin Energy An “Earn and Return” Company with a Low Risk Profile Power the Future program now complete Highly visible earnings and strong cash flow Final regulatory approvals in place Well managed utility franchises with rate base growth Investment in American Transmi
Slide 29: Appendix
Appendix
Slide 30: Wisconsin Jurisdiction Rate Case Summary
Where We Go From Here Wisconsin Jurisdiction Rate Case Summary Public Service Commission of Wisconsin (PSCW) authorized 2.6% increase in net customer bills in 2013 and 2014 (after applying expected proceeds from a renewable energy tax grant) Non-fuel rate increase prior to credits: 4.8% or $13
Slide 31: Projected Rate Base
Where We Go From Here Projected Rate Base Average Total Utility Rate Base $7.1 $8 $6.8 $6.6 $0.1 $0.3 $7 $6.4 $0.3 $0.6 $6 Billions of Dollars $5 $4 $7.5 $7.3 $6.7 $3 $6.0 $2 $1 ($0.2) ($0.4) $0 ($0.6) ($0.7) -$1 -$2 2012A 2013E 2014E 2015E PPE CWIP All Other* *All other is comprised of customer adv
Slide 32: DATC
Where We Go From Here DATC Non-exclusive joint venture between Duke Energy and ATC (DATC) announced in April 2011 Adds potential investment opportunities outside ATC’s current footprint Ownership is split 50/50 between Duke and ATC DATC has proposed transmission projects for MISO’s Midwest T
Slide 33: Forecast of Electric Sales
Where We Go From Here Forecast of Electric Sales 2013 Forecast vs. 2013 Forecast vs. 2012 Actual 2012 Normalized Residential -2.3% 0.1% Small C&I 0.2% 0.3% Large C&I (ex. Mines) -0.9% 0.2% Total Large C&I -3.2% -2.4% Total Retail -1.8% -0.7% Based on our customer demand for distribution services 33
Slide 34: Regulatory Environment
Regulatory Environment Wisconsin Commission Michigan Commission 3 Commissioners 3 Commissioners Gubernatorial appointment, Gubernatorial appointment, Senate confirmation Senate confirmation Chairman: Gubernatorial Chairman: Gubernatorial appointment appointment Terms Terms 6 ye
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