WEC Energy Group, Inc. · NYSE:WEC
WEC Energy — Investor Presentation (September 2015)
39 slides from WEC Energy's investor presentation, September 2015
Slide 1: WEC Energy Group September 2015
WEC Vz Energy Group September 2015
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: A Transformational Step
A Transformational Step On June 29, Wisconsin Energy acquired Integrys in a transaction valued at $9 billion 2
Slide 4: Key Transaction Metrics
Key Transaction Metrics One-Day Premium 17% Price to Book 1.7x Enterprise Value to Rate Base 1.55x Price/Earnings FY One 20.0x* * Based on 2014, the year in which the merger was announced 3
Slide 5: Transaction Overview
Strategic Rationale Transaction Overview Acquisition creates the leading electric and natural gas utility in the Midwest Meets or exceeds WEC’s acquisition criteria Accretive to earnings per share starting in first full calendar year of combined operations Largely credit neutral Long-term
Slide 6: The New Look WEC
The New Look WEC Chicago, IL Same top management team New growth platform Focused on the energy and infrastructure needs of 4.4 million customers across the heartland 5
Slide 7: WEC Energy Group
WEC Energy Group Service Territory Company Statistics $15.2 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 $16.4 billion of rate base (2) We Energies Michigan Gas Util
Slide 8: Our Portfolio of Regulated Businesses
Well Positioned for the Future Our Portfolio of Regulated Businesses Gas Electric Transmission Distribution 11% 23% Electric Generation and Distribution 66% Based on 2014 regulated earnings 7
Slide 9: Rate Base Investment by Jurisdiction
Well Positioned for the Future Rate Base Investment by Jurisdiction* 4% 13% WI FERC 14% IL 70% MI/MN *Actual 2014 Rate Base 8
Slide 10: Focused on the fundamentals
WEC Energy Group Focused on the fundamentals: World-class reliability Operating efficiency Financial discipline Exceptional customer care 9
Slide 11: A Compelling Value Proposition
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 60 percent ownership of American Transmission Company Dividend gro
Slide 12: Consistent Earnings and Dividend Growth
A Track Record of Performance Consistent Earnings and Dividend Growth WEC 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 for the past 12 years 11
Slide 13: Industry Leading Total Shareholder Returns
A Track Record of Performance Industry Leading Total Shareholder Returns 350% WEC 300% Dow Jones Utilities Average 250% S&P Utilities Index 200% Philadelphia Utility Index 150% S&P Electric Index 100% 50% 0% One Year Three Year Five Year Ten Year Annualized returns for periods ending 12/31/2014 Sour
Slide 14: Industry Leading Dividend Growth
Industry Leading Dividend Growth Annualized Dividends Per Share $1.83* $1.56 $1.445 $1.20 $1.04 $0.80 2010 2011 2012 2013 2014 2015 In two steps, raised the dividend by 17.3 percent in 2015 *Annualized based on new quarterly dividend of $0.4575 13
Slide 15: Leading Reliability and Customer Satisfaction
A Track Record of Performance Leading Reliability and Customer Satisfaction We Energies Most reliable utility in Midwest for 4th consecutive year Top quartile in the Midwest for customer service and power quality(1) Top quartile nationally for customer service (2) Wisconsin Public Service #2
Slide 16: Delivering the Future
Delivering the Future Projected capital investment of $1.3 – $1.4 billion annually Committed to infrastructure investment that will: Renew and modernize our delivery networks Meet new environmental standards Reduce operating costs for customers 15
Slide 17: We Energies Major Construction Projects
We Energies Major Construction Projects West Central Gas Expansion Project Largest expansion of gas distribution network in our history On time and better than budget at approximately $135 million Projected in-service date: fourth quarter 2015 16
Slide 18: We Energies Major Construction Projects
We Energies Major Construction Projects Converting the Valley Power Plant from coal to natural gas Approximately: $65 million investment Projected completion in late 2015 On time and on budget 17
Slide 19: We Power Major Construction Projects
We Power Major Construction Projects Fuel flexibility initiative at our new Oak Creek units $21 million investment for plant modifications $58 million investment for storage, fuel handling Significant reduction in fuel costs for our customers 18
Slide 20: Wisconsin Public Service Major Construction Projects
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 equipm
Slide 21: Peoples Gas Major Construction Projects
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 million average investment annually Enabling legislation in effect from 2014
Slide 22: Key Takeaways for WEC Energy Group
Poised for Growth Key Takeaways for WEC Energy Group Leading electric and natural gas utility in the Midwest One of the top ten natural gas distribution companies in the nation Long-term earnings per share growth of 5-7% annually – driven by multi-year infrastructure projects Dividend growth
Slide 23: Appendix
Wa WEC Vz Energy Group Appendix
Slide 24: Well Positioned for the Future
An “Earn and Return” Company with a Low Risk Profile Well Positioned for the Future Broadened Diversified across 5 (including FERC) transmission and gas regulatory jurisdictions business Strong financial condition Low near-term rate case risk $15.2 billion market cap enhances liquidity* No req
Slide 25: Strong Financial Condition
A Track Record of Performance Strong Financial Condition Electric and Gas Utilities Credit Ratings Distribution* Number of Utilities Issuers Utility Rating 120 Wisconsin Electric A- 100 Wisconsin Gas A 80 60 Wisconsin Public Service A- 40 Peoples Gas A- 20 North Shore Gas A- 0 AA - A A- BBB+ BBB BBB
Slide 26: State-of-the-Art Generation Fleet
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 80% of generation equipped with latest emission co
Slide 27: Supporting a Clean Energy Future
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 Add
Slide 28: Rate Base Investment
Positioned for the Future Rate Base Investment By Business - $16.4 billion* Retail Electric and Gas Utilities $1.7 Wisconsin, Illinois, Michigan, Minnesota, and Utilities FERC jurisdictions $2.7 PTF $11.9 Transmission Power the Future 12.7% ROE fixed through 25/30 year lease agreements By St
Slide 29: American Transmission Company – Traditional Footprint
Positioned for the Future American Transmission Company – Traditional Footprint Projected Capital Expenditures Key Assumptions (Millions of Dollars) ATC rate base at year end 2015: $491 $486 $3.1 billion $386 ATC projected capital program 2014 $295 $292 – 2023: $3.3-$3.9 billion $231 Implies a
Slide 30: American Transmission Company – Outside the Traditional Footprint
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 line
Slide 31: Key Merger Provisions
Balanced Regulatory Environment Key Merger Provisions • Earnings cap at Wisconsin Electric and Wisconsin Gas Wisconsin • Joint Resource Plan for capacity needs of Wisconsin Electric and Wisconsin Public Service • 2-year requirement for minimum level of jobs • 2-year base rate freeze Illinois • 3-yea
Slide 32: Rate Case Update
Balanced Regulatory Environment Rate Case Update Wisconsin Filed a Wisconsin Public Service case in April for rates effective January 2016 Michigan Filed a Michigan Gas Utilities case in June for interim rates effective January 2016* Minnesota Plan to file a Minnesota Energy Resources ca
Slide 33: Reconciliation of 2015 EPS from WEC Energy Group to Wisconsin Energy Stand Alone
Reconciliation of 2015 EPS from WEC Energy Group (GAAP) to Wisconsin Energy Stand Alone Adjustments: 1. Remove Integrys earnings for the last six months of 2015 2. Remove acquisition debt interest expense $1.5 billion of funding: $1.2 billion in long-term debt, $300 million of commercial paper 3.
Slide 34: Regulatory Environment
Regulatory Environment Wisconsin Commission Michigan Commission 3 Commissioners 3 Commissioners Gubernatorial appointment, Senate Gubernatorial appointment, Senate confirmation confirmation Chairman: Gubernatorial appointment Chairman: Gubernatorial appointment 6-year staggered ter
Slide 35: Regulatory Environment
Regulatory Environment Illinois Commission Minnesota Commission 5 Commissioners 5 Commissioners Gubernatorial appointment, Senate Gubernatorial appointment, Senate confirmation confirmation Chairman: Gubernatorial appointment Chairman: Gubernatorial appointment 5-year staggered ter
Slide 36: Key Rate Making Components
Key Rate Making Components Wisconsin – Wisconsin – Area PGL NSG MERC MGU Electric Gas Michigan Gas Pipeline Replacement Rider X X Bad Debt Rider X X Bad Debt Escrow Accounting WE WG Decoupling X X X Partial 1 for 1 recovery of prudent fuel Fuel Cost Recovery 1 for 1 PGA recovery of prudent fuel cost
Slide 37: Composition of Rate Base
Composition of Rate Base Total Rate Base of $16.4 Billion 1.0% Wisconsin Electric 1.3% Wisconsin Gas 1.3% 10.6% We Power WPS 11.1% 35.1% Peoples Gas North Shore Gas 16.5% Minnesota Energy Resources 6.2% 17.0% Michigan Gas Utilities ATC Actual 2014 Rate Base 36
Slide 38: Rate-Making Parameters By Company
Rate-Making Parameters By Company Utility Equity Layer Allowed ROE Wisconsin Electric 51%* 10.2% WPS 51%* 10.2% Wisconsin Gas 49.5%* 10.3% Peoples Gas 50.33% 9.05% North Shore Gas 50.48% 9.05% Minnesota Energy Resources 50.31% 9.35% Michigan Gas Utilities 48.62% 10.25% *Represents mid-point 37
Slide 39: Precedent Transactions
Precedent Transactions Announce Closing Target Acquiror 1-Day FY1 FY2 Transaction Equity Price/Book Enterprise Date Date Premium P/E P/E Value ($mm) Value Value/ ($mm) Rate Base 02/25/2015 Pending UIL Iberdrola 25%(1) 21.7x 20.4x $4,674 $2,983 2.2x 1.95x 12/03/2014 Pending HE NEE 19% 21.3x 18.1x $4,
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