Wec Energy Group, Inc. · NYSE:WEC

Wec Energy — Q4 2022 Earnings Presentation

52 slides from Wec Energy's earnings presentation, Feb 2, 2023

  1. Slide 1: Investor Update: February 2023

    Investor Update: February 2023 Our “ESG” Progress Plan Update Investing in Efficiency, Sustainability and Growth We Energies Named #1 Best in the U.S. Finalist for the S&P Global Energy Company in America in Large Customer Energy Award in Corporate by Business Customers Satisfaction Social Responsib

  2. 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

  3. Slide 3: The Premier Energy Company in America's Heartland

    The Premier Energy Company in America’s Heartland  $29.6 billion market cap*  4.6 million retail customers  60% ownership of American Transmission Company  $41.9 billion of assets * As of Jan. 31, 2023 3

  4. Slide 4: A History of Quality Earnings Growth

    A History of Quality Earnings Growth $5.00 $4.58-$4.62 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 GAAP Adjusted** 2023 Guidance * Estimated based on 2023 guidance midpoint of $4.60 per share. ** See Appe

  5. Slide 5: Consistent Performance Over Time

    Consistent Performance Over Time EPS Guidance 2022 Exceeded  2021 Exceeded  2020 Exceeded  2019 Exceeded  The only utility to beat 2018 Exceeded  guidance every year for 2017 Exceeded  19 years running. 2016 Exceeded  2015 Exceeded  2014 Exceeded  2013 Exceeded  2012 Exceeded  2011 Exceed

  6. Slide 6: Strong Dividend Growth Continues

    Strong Dividend Growth Continues In January, raised the dividend by 7.2% to a new annual rate of $3.12 per share* Top decile dividend growth in industry** *Annualized based on 1st quarter 2023 dividend of 78 cents per share ** Reflects current and expected dividends declared in 2023 6

  7. Slide 7: Strong Dividend Growth Continues

    Strong Dividend Growth Continues Targeting dividend Annualized Dividends Per Share payout of 65%-70% $3.12 ** of earnings $2.91 $2.71 $2.53 Projecting dividend $2.36 growth in line with $2.21 earnings growth $2.08 $1.98 $1.83* $1.56 $1.445 $1.20 $1.04 $0.80 2010 2011 2012 2013 2014 2015 2016 2017 20

  8. Slide 8: What's New?

    What’s New? 8

  9. Slide 9: Wisconsin Utilities - Rate Review

    December 2022 Final Order Wisconsin Utilities - Rate Review  Authorized Return on Equity - 9.80 percent  Equity component of capital structure rises to 53 percent Earnings sharing mechanism: Treatment 9.80% – 9.95% No sharing >9.95% – 10.55% 50/50 sharing >10.55% 100% customer  Scope for 2024 Lim

  10. Slide 10: Illinois Rate Reviews

    Illinois Rate Reviews  Peoples Gas will not seek an extension of the automatic bill adjustment rider QIP.  With natural gas prices expected to decline this year and next year, we project customer bills to stay largely flat as new rates take effect in 2024.  Chicago home heating bills are below ot

  11. Slide 11: Organic Flow Battery Storage

    New Clean Energy Pilot Project Organic Flow Battery Storage  Leading a pilot project to test a new form of long-duration energy storage on the U.S. electric grid.  Partnering with EPRI and CMBlu Energy  This energy storage system uses a proprietary technology that incorporates environmentally fri

  12. Slide 12: ESG Progress Plan Supports 6.5% to 7.0% EPS Growth

    ESG Progress Plan Supports 6.5% to 7.0% EPS Growth Increasing Five-Year Capital Plan by $2.4 Billion $20,100 $1,928 $17,700 $1,953 $1,900 $529 $1,345 Former Plan New Plan $542 $3,021 Energy Infrastructure $3,053 ATC* $2,673 MERC/MGU $2,811 Illinois $3,556 WI Gas Delivery** $3,356 WI Electric Deliver

  13. Slide 13: Robust Growth in Asset Base

    Robust Growth in Expect long-term Asset Base EPS growth of 6.5% to 7.0% per year. 7.7% Growth $38.4 billion $26.5 billion 2022A 2027E* *Estimated year-end average asset base 13

  14. Slide 14: Investing $5.4 billion in Regulated Renewables

    2023-2027 Capital Plan Investing $5.4 billion in Regulated Renewables Plan to build and own nearly 3,300 MW – quadrupling our carbon-free generation Solar  505 MW under construction  270 MW filed for approval  Planning for additional 1,135 MW  Qualifies for Production Tax Credits Battery  167 M

  15. Slide 15: WEC Infrastructure Portfolio – Green and Growing

    Plan to invest $1.9 Billion (2023-2027) WEC Infrastructure Portfolio – Green and Growing Total Project Investment Capacity (MW) (in millions) Wind ● Upstream 200 $307 SD ● Bishop Hill III 132 166 ● Coyote Ridge 97 145 ● Blooming Grove 250 389 NE ● Tatanka Ridge 155 240 IL ● Jayhawk 190 282 KS ● Thun

  16. Slide 16: Modernizing Our Gas-Fueled Generation Fleet

    Modernizing Our Gas-Fueled Generation Fleet Retiring Investing  200 MW of older, less-efficient West Riverside Energy Center combined-cycle gas generation expected First Option: 100 MW*  Target: 2023 and 2024  Expected investment: $91 million  Target: 2023 Additional 100 MW option** Building  E

  17. Slide 17: Exiting Coal

    Exiting Coal  Near-term retirements planned:  Oak Creek Units 5-6: 528 MW (May 2024)  Oak Creek Units 7-8: 611 MW (late in 2025)  Columbia Units 1-2: 300 MW (by June 1, 2026)  Enhancing fuel flexibility (gas blending) at Oak Creek Power the Future units  By the end of 2030, we expect to use co

  18. Slide 18: American Transmission Company

    American Transmission Company WEC portion of investment from 2023-2027: $2.0 billion 5-year (2023-2027) WEC Projected Capital Expenditures (millions) projected capital investment: $707 $712  Ongoing ATC: $1.7 billion $661 $643 $532  Tranche 1 (2025-2027): $0.3 billion $424 $427 $397 $386 $319 Futu

  19. Slide 19: Carbon Reduction Goals – Electric Generation

    Carbon Reduction Goals – Electric Generation Reduction goals: Achieved and anticipated CO2 reductions (net mass)* 0 60% below 2005 -20 levels by the end of 2025 80% -40 -60 -49% below 2005 levels by the end of 2030 -80 Net carbon -100 neutral 2005 2022 2025 2030 2050 by 2050 We have established aggr

  20. Slide 20: Methane Reduction

    Our ESG Progress Plan Methane Reduction Achieved* and anticipated methane emission reduction from natural gas distribution. Aligns with the effort to limit warming to 1.5°C. 0% Goal: -16% -20% Net zero -40% by the end of 2030** -60% -80% Use of Renewable Natural Gas (RNG) will contribute significant

  21. Slide 21: Regional Economy

    Regional Economy 21

  22. Slide 22: Powering Industry Leaders in our Region

    Powering Industry Leaders in our Region 22

  23. Slide 23: Longer-Term Sales Forecast

    Wisconsin Segment Longer-Term Sales Forecast Year-Over-Year 2025-2027 Sales Growth Forecast Electric 0.7%-1.0% (weather-normalized) Gas 0.7%-1.0% 23

  24. Slide 24: Key Takeaways for WEC Energy Group

    Key Takeaways for WEC Energy Group  Track record of top decile performance among regulated utilities  Industry leading earnings quality  ESG Progress Plan drives premium EPS growth of 6.5% to 7.0%  No need to issue equity through forecast period  100% of capital allocated to regulated businesse

  25. Slide 25: Appendix

    Appendix Wa WeEC WA Energy Group

  26. Slide 26: Electric Generation, Distribution and Energy Infrastructure

    Electric Generation Electric Distribution Natural Gas Distribution Energy Infrastructure Electric Transmission 60% ownership 26

  27. Slide 27: Inflation Reduction Act

    Inflation Reduction Act Customer Benefit and Investment Opportunity  Extension of Production Tax Credits (PTC) and Investment Tax Credits (ITC)  PTC option for solar projects  Potential opportunities at WEC infrastructure segment  ITC for stand-alone electric storage projects  Tax Credit “trans

  28. Slide 28: Commitment to ESG

    Commitment to ESG Reduce carbon dioxide emissions from electric generation 60% by the end of 2025 and 80% by the end of 2030 – both from a 2005 baseline. Carbon Goals Long-term goal of net-zero carbon emissions from our generating fleet by 2050 Exit from Coal Planned exit from coal by the end of 203

  29. Slide 29: Exiting Coal

    Exiting Coal Electricity Supply by Fuel Type (megawatt-hours delivered to regulated utility customers) 73% 39% 32% 37% 32% Planned exit Net carbon 22% 24% from coal neutral goal 17% <5% 7% 8% 3% 2005 2022 2030E 2035 2050 Coal Natural Gas Nuclear Renewables 29

  30. Slide 30: Reducing Greenhouse Gas Emissions

    Reducing Greenhouse Gas Emissions Greenhouse gas intensity* (metric tons CO2/MWh) 0.78 0.41 0.33 0.16 0** 2005 2022 2025E 2030E 2050E *Includes owned electric generation, purchased power and WEC Infrastructure (WECI). The environmental attributes of the WECI renewable facilities are or may be the pr

  31. Slide 31: Investment in Regulated Renewables

    Plan to invest $5.4 Billion (2023-2027) Investment in Regulated Renewables Expected WEC WEC Target Project Utility WEC Investment Capacity Ownership1 ($M) (MWs) Two Creeks Solar Project $130 100 In-Service WPS Badger Hollow I Solar Park 66.7% 130 100 2023 Badger Hollow II Solar Park WEPCO 151 100 1s

  32. Slide 32: Infrastructure Investment Summary

    Infrastructure Investment Summary WEC Total Commercial Project Project Developer Investment Offtake Agreement Operations Capacity Bishop Hill III Wind $166M for WPPI Energy Invenergy 8/31/18 132 MW Energy Center 90% ownership 22 years Upstream Wind $307M for Affiliate of Allianz Invenergy 1/10/19 20

  33. Slide 33: Hydrogen Pilot Program

    Hydrogen Pilot Program  Led a pilot program – first of its kind in the world - to test hydrogen as a fuel source for power generation  Partnered with the Electric Power Research Institute (EPRI)  Blended hydrogen with natural gas at one of our RICE units  Initial findings indicate that all proje

  34. Slide 34: Why Our Natural Gas Distribution Networks Matter

    Today and Tomorrow Why Our Natural Gas Distribution Networks Matter -46° Our Service Area -26°  65-78% of homes use natural gas for heating -26°  Growth continues as customers convert to natural gas Hydrogen and RNG Opportunities -23°  Potential to blend  Investment potential to convert existing

  35. Slide 35: New Liquefied Natural Gas (LNG) Storage Facilities

    New Liquefied Natural Gas (LNG) Storage Facilities Taking Steps to Maintain Reliable and Affordable Service for Our Customers  We Energies received approval for two LNG facilities to address the need for additional natural gas supply in Wisconsin  Total expected investment: $370 million  Construc

  36. Slide 36: Efficiency, Growth and Sustainability Progress

    Project Highlights Efficiency, Growth and Sustainability Progress Taking Steps to Maintain Reliable and Affordable Service for Our Customers Electric delivery redesign/resilience  Addressing aging infrastructure and system hardening  Enhancing efficiencies and reducing operating costs  Expect to

  37. Slide 37: Efficiency, Growth and Sustainability Progress

    Project Highlights Efficiency, Growth and Sustainability Progress Taking Steps to Maintain Reliable and Affordable Service for Our Customers Natural Gas Safety Modernization  Increasing capacity and reliability of natural gas service in our territories Illinois  Expected replacement of 2,000 miles

  38. Slide 38: Utility Capital Plan Drives EPS Growth

    $18.2 billion projected capital spend from 2023-2027 Utility Capital Plan Drives EPS Growth 4,500 4,000 $3,758 $3,595 $3,689 $3,615 $3,515 3,500 397 319 424 427 101 386 113 116 105 94 3,000 590 563 663 ATC Investment 614 591 MERC/MGU 2,500 525 605 Illinois 563 506 474 2,000 WI/MI Gas Delivery** 727

  39. Slide 39: Capital Plan Projections ($ in millions)

    By Company Capital Plan Projections ($ in millions) 2023 2024 2025 Wisconsin Electric $1,504.1 $1,478.2 $1,274.6 Wisconsin Gas $251.4 $246.0 $230.9 Wisconsin Public Service $754.8 $679.9 $858.7 Upper Michigan Energy $20.4 $28.7 $81.3 Wisconsin Segment $2,530.7 $2,432.8 $2,445.5 Peoples Gas $506.3 $5

  40. Slide 40: Composition of Asset Base

    Composition of Asset Base Total 2022 Average Asset Base of $26.5 Billion Company Asset Base - $B % of Total Wisconsin Electric $7.3 27.5% Wisconsin Gas 1.9 7.2 Wisconsin Public Service 4.2 15.9 Upper Michigan Energy Resources 0.4 1.5 Peoples Gas 4.1 15.5 North Shore Gas 0.4 1.5 Minnesota Energy Reso

  41. Slide 41: National Leader in Operating Efficiency and Financial Discipline

    National Leader in Operating Efficiency and Financial Discipline $80 2021 Non-Fuel O&M per MWh* $79.30 $70 $60 $50 $39.20 $40 $30 $27.60 $23.00 $24.80 $21.00 $21.60 $21.80 AVERAGE $20 $15.60 $16.80 $12.60 WEC $10 $0 The top 10 vertically integrated electric utilities by 12/31/2021 market cap Source:

  42. Slide 42: Focused on Efficiency

    Focused on Efficiency Day-to-Day O&M Expense* $1,342 $1,281 $1,234 $ In millions $1,143 $1,107 $1,088 $1,082 3-5% 2016 2017 2018 2019 2020 2021 2022 2023E *Excludes costs that have a revenue offset such as operation and maintenance costs associated with the We Power generation units, transmission ex

  43. Slide 43: Credit Metrics – Healthy Balance Sheet

    Credit Metrics – Healthy Balance Sheet Funds from Operations/Debt Target WEC Energy Group 2023-2027 14.2% GAAP 15-16% FFO to Debt S&P >15% 11.9% FFO to Debt Moody’s >16% CFO Pre-WC/Debt 2022 Actual* 2022 Adjusted** Issuer Credit Ratings Holding Company Debt to Total Debt S&P Moody’s Entity 30.0% Rat

  44. Slide 44: Balanced Sales Mix

    Balanced Sales Mix 2022 Retail MWh Deliveries Mix* 34% Large C&I by Segment Paper/Packaging 26% Foundry (SIC 33) 11% Mining/Minerals 10% Small C&I Large C&I Metal (SIC 34,35,37) 8% 35% 34% Other Manufacturing 8% Food/Agriculture 7% Medical 6% Residential Education 4% and Farm Printing 3% 31% Chemica

  45. Slide 45: Diverse Portfolio of Businesses

    Diverse Portfolio of Businesses By Business By Jurisdiction Electric transmission 10% WECI WECI 5% 5% ATC MI/MN 10% 5% Electric generation and IL distribution 17% WI Natural gas 49% 63% distribution 36% Based on 2022 average asset base. *ATC is accounted for using the equity method; this represents

  46. Slide 46: Regulatory Matters

    Regulatory Matters Estimated Decision Date Wisconsin (apps.psc.wi.gov)  Commission decision on general rate review for new base rates effective 1/1/2023  (Dockets: WE and WG: 5-UR-110 and WPS 6690-UR-127)  Decision on Whitewater Acquisition (Docket: 5-BS-264 filed 12/21/2021)   Decision on Dari

  47. Slide 47: Regulatory Environment

    Regulatory Environment Wisconsin Illinois  Governor Tony Evers (D)  Governor J.B. Pritzker (D)  Commission  Commission  Gubernatorial appointment,  Gubernatorial appointment, Senate confirmation Senate confirmation  Chairman: Gubernatorial appointment  Chairman: Gubernatorial appointment  6

  48. Slide 48: Rate-Making Parameters by Company

    Rate-Making Parameters by Company Utility Equity Layer1 Authorized ROE Wisconsin Electric 50.50%-55.50% 9.80% Wisconsin Public Service 50.50%-55.50% 9.80% Wisconsin Gas 50.50%-55.50% 9.80% Peoples Gas 50.33% 9.05% North Shore Gas 51.58% 9.67% Minnesota Energy Resources 50.90% 9.70% Michigan Gas Util

  49. Slide 49: Key Rate Making Components

    Key Rate Making Components Illinois– Minnesota– Michigan– Wisconsin– Wisconsin– Area Gas Gas Electric and Gas Gas Electric Gas Pipeline Replacement Rider PGL MGU Bad Debt Rider ✓ Bad Debt Escrow Accounting Residential Residential Decoupling ✓ ✓ Fuel Cost Recovery 1 for 1 recovery of prudent fuel cos

  50. Slide 50: Reconciliation of Reported EPS (GAAP) to Adjusted EPS (Non-GAAP)

    Reconciliation of Reported EPS (GAAP) to Adjusted EPS (Non-GAAP) 2014 2015 2016 2017 Reported EPS – GAAP basis $2.59 $2.34 $ 2.96 $ 3.79 Acquisition Costs $0.06 $0.39 $ 0.01 – Integrys Earnings $(0.47) Impact of Additional Shares $0.47 Tax Benefit Related to Tax Cuts and Jobs Act of 2017 – – – $ (0.

  51. Slide 51: Ratio of FFO to Debt

    Ratio of FFO to Debt (in millions, except percent) Ratio of FFO to Debt 2022 Net cash provided by operating activities $2,060.7 Total debt $17,294.5 Ratio of FFO to debt 11.9% Ratio of FFO to Debt – Adjusted* 2022 Net cash provided by operating activities $2,060.7 Add: Working Capital 340.8 Net cash

  52. Slide 52: Contact Information

    Contact Information M. Beth Straka Senior Vice President – Investor Relations and Corporate Communications Beth.Straka@wecenergygroup.com 414-221-4639

WEC Energy Group — Q4 2022 Earnings Presentation on 6ix