Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (June 2016)
46 slides from Wec Energy's investor presentation, Jun 6, 2016
Slide 1: WEC Energy Group June 2016
> WEC LSS VA Energy Group — June 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: The New Look WEC
2 The New Look WEC Same top management team New growth platform Focused on the energy and infrastructure needs of 4.4 million customers across the heartland Chicago, IL
Slide 4: Strategic Rationale Transaction Overview
3 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 ea
Slide 5: Electric and Gas Business Overview
4 Electric Distribution Electric Transmission 60% ownership Natural Gas Distribution Electric Generation
Slide 6: WEC Energy Group Company Statistics and Service Territory
5 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) We Energies Michigan Gas Utilities Corporation Minnesota Energy Reso
Slide 7: An Earn and Return Company with a Low Risk Profile
6 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 required
Slide 8: Well Positioned for the Future: Focus on Fundamentals
7 Well Positioned for the Future WEC Energy Group Focused on the fundamentals: World-class reliability Operating efficiency Financial discipline Exceptional customer care
Slide 9: Drivers and Differentiators for Premium Growth
8 Well Positioned for the Future Drivers and Differentiators for Premium Growth Power the Future - $2.8 billion of total investment 12.7 percent equity return 60 percent owner of one of the largest transmission companies in America “Deliver the Future” capital spending over multiple years su
Slide 10: Earnings Growth Drivers Plus Additional Growth Opportunities
9 Earnings Growth Drivers Plus Additional Growth Opportunities Outside ATC Traditional Footprint Clean Power Plan investment $2.7 $5.7 Year-end 2015 rate base ($ billions) $12.4 $2.8 $1.8 Utilities PTF Transmission Note: Power the Future value represents investment book value Core Investment R
Slide 11: A Compelling Value Proposition
10 Well Positioned for the Future A Compelling Value Proposition For 2016, targeting earnings per share growth of 6-8 percent Beyond 2016, earnings per share expected to grow at 5-7 percent annually More than 99 percent of earnings from regulated operations Projecting dividend growth in line
Slide 12: Industry Leading Total Shareholder Returns
11 A Track Record of Performance Industry Leading Total Shareholder Returns -50% 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 Sou
Slide 13: Industry Leading Dividend Growth
12 A Track Record of Performance Industry Leading Dividend Growth In two steps, raised the dividend by 17.3 percent in 2015 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 **Ann
Slide 14: Declared a Dividend Increase of 8.2% in January 2016
13 A Track Record of Performance Declared a Dividend Increase of 8.2% in January 2016 New quarterly dividend rate per share 45.75¢ 49.50¢ 2015 2016 8.2%
Slide 15: Line of Business View Five Year Capital Projection 2016-2020
14 Line of Business View Five Year Capital Projection 2016-2020 $304 $355 $277 $277 $277 $402 $482 $434 $413 $406 $843 $1,071 $837 $858 $866 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 2016 2017 2018 2019 2020 In millions Total capital spend over the five-year period of $8 - $
Slide 16: State View Five Year Capital Projection 2016-2020
15 State View Five Year Capital Projection 2016-2020 $304 $355 $277 $277 $277 $739 $871 $805 $805 $806 $434 $586 $398 $398 $398 $72 $96 $67 $67 $67 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 2016 2017 2018 2019 2020 In millions Depreciation at the utilities expected to averag
Slide 17: Delivering the Future
16 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 18: Wisconsin Public Service Major Construction Projects
17 Wisconsin Public Service Major Construction Projects 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 equ
Slide 19: Peoples Gas Major Construction Projects
18 Peoples Gas Major Construction Projects Accelerated Main Replacement Project Extensive effort to modernize natural gas infrastructure in City of Chicago Investment recovery under a monthly bill rider Projecting $250 – $280 million average investment annually Enabling legislation in effect
Slide 20: We Energies Major Construction Projects
19 We Energies Major Construction Projects Twin Falls: Building a modern powerhouse $60-$65 million expected investment Scheduled for completion in summer 2016
Slide 21: We Power Major Construction Projects
20 We Power Major Construction Projects Fuel flexibility initiative at our new 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 22: EPA's Clean Power Plan
21 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 23: Line of Business View Ten Year Capital Projection 2016-2025
22 Line of Business View Ten Year Capital Projection 2016-2025 $304 $355 $277 $277 $277 $277 $277 $277 $277 $277 $402 $482 $434 $413 $406 $406 $406 $396 $396 $396 $843 $1,071 $837 $858 $866 $861 $861 $839 $839 $839 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 2016 2017 2018 2019
Slide 24: Poised for Growth: Key Takeaways for WEC Energy Group
23 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 Long-term earnings per share growth of 5-7% projected annually – driven by multi-year infrastructure projects Targ
Slide 25: Appendix
> WEC LSS VA Energy Group — Appendix ee
Slide 26: Strong Financial Condition: Utility Credit Ratings
25 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 27: Our Portfolio of Regulated Businesses
26 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
Slide 28: Balanced Sales Mix
27 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 29: Rate Base Investment by Jurisdiction
28 Well Positioned for the Future Rate Base Investment by Jurisdiction* 71% 13% 12% 4% WI FERC IL MI/MN *Actual 2015 Rate Base
Slide 30: Composition of Rate Base
29 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 31: American Transmission Company Key Assumptions
30 Positioned for the Future American Transmission Company Key Assumptions ATC rate base at year end 2015: $3.1 billion Implies average $171 million effective annual (FERC) rate base growth for WEC from 2015 to 2017 12.2% ROE* (with true-ups); 50% equity Projected Capital Expenditures (Million
Slide 32: American Transmission Company – Outside the Traditional Footprint
31 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 li
Slide 33: State-of-the-Art Generation Fleet
32 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 larg
Slide 34: Supporting a Clean Energy Future
33 Positioned for the Future Supporting a Clean Energy Future Over the past decade, 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
Slide 35: Reducing Emissions: Environmental Performance
34 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 36: Reducing Emissions: Carbon Intensity
35 Reducing Emissions Environmental Performance 0% 20% 40% 60% 80% 100% 120% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 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
Slide 37: Balanced Regulatory Environment Rate Case Update
36 Balanced Regulatory Environment Rate Case Update Wisconsin Subject to PSCW action, which is not expected, we will not file 2017 test year base rate cases in 2016 for our Wisconsin utilities Michigan Michigan Gas Utilities settlement approved by commission on Dec. 11, 2015 for rates effect
Slide 38: Rate-Making Parameters By Company
37 Rate-Making Parameters By Company Utility Equity Layer(1) Allowed 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 50.31% 9.35% Michigan Gas Utilities 52% 9.9% 1. R
Slide 39: Key Rate Making Components
38 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 40: Regulatory Environment Wisconsin and Michigan
39 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 41: Regulatory Environment Illinois and Minnesota
40 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 42: Regulatory Environment FERC
41 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 Tony Clark R 06/2012 06/2016 Colette Honorable D 01/2015 06/2017 Open
Slide 43: Key Provisions in Merger Approval
42 Balanced Regulatory Environment 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 •
Slide 44: Sample Merger Driven Initiatives
43 Sample Merger Driven Initiatives Category Activity Staffing levels Achieving reductions in staff, vendors and contractors (e.g. functionalization of Wisconsin utilities) Information Technology Consolidating IT infrastructure Implementing enterprise-wide application investments across major
Slide 45: Precedent Transactions
44 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 2/9/16 Pending EDE AQN.CN 50%(1) 22.4x 21.1x $2,366 $1,489 1.9x 1.49x 2/9/16 Pending ITC FTS.CN 33%(1) 21.6x 20.0x $11,
Slide 46: Contact Information
45 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