Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (June 2017)
43 slides from Wec Energy's investor presentation, Jun 21, 2017
Slide 1: WEC Energy Group June 2017
> WEC LSS VA Energy Group — June 2017 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: Well Positioned for the Future: Focused on the Fundamentals
2 Well Positioned for the Future WEC Energy Group Focused on the fundamentals: Safety World-class reliability Operating efficiency Financial discipline Exceptional customer care
Slide 4: Consistent EPS Growth
3 Well Positioned for the Future Focused on the Fundamentals $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 Consistent EPS Growth 6 years in a row Ranked #2 in our sector GAAP Adjusted
Slide 5: A Compelling Value Proposition
4 Well Positioned for the Future A Compelling Value Proposition For 2017, targeting earnings per share growth of 5-7 percent 2017 earnings guidance is $3.06 - $3.12 per share Longer-term earnings per share growth is expected to be 5-7 percent compound annual growth rate off 2015 base of $2.72
Slide 6: WEC Energy Group Company Statistics and Service Territory
5 Well Positioned for the Future WEC Energy Group $19.1 billion market cap (1) 1.6 million electric customers 2.8 million gas customers 60% ownership of ATC 69,000 miles electric distribution 46,000 miles gas distribution $17.7 billion of rate base (2) 99+% of earnings from regulated
Slide 7: Earnings Growth Drivers
6 Well Positioned for the Future Earnings Growth Drivers $2.7 $5.7 2016 average rate base ($ billions) $12.8 $2.9 $2.0 Utilities PTF Transmission Note: Power the Future value represents investment book value Core Investment Rate Base: Projected rate base investment from 2017 – 2021: $9.5 – $10.0 b
Slide 8: Our Portfolio of Regulated Businesses
7 Well Positioned for the Future Our Portfolio of Regulated Businesses Electric Generation and Distribution 59% Gas Distribution 27% Electric Transmission 14% Based on 2016 average rate base 70% 14% 12% 4% WI FERC IL MI/MN By Jurisdiction By Business
Slide 9: Power the Future Investments
8 Well Positioned for the Future Power the Future Investments Port Washington Generating Station ranks 7th in nation for natural gas combined-cycle heat rate2 Elm Road Generating Station ranks 4th in nation for coal heat rate2 Natural Gas Coal Capacity 1,090 MW 1,030 MW 1 Investment $664 million
Slide 10: Balanced Regulatory Environment: Rate-Making Parameters
9 Balanced Regulatory Environment 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 Reso
Slide 11: Rate Case Update
10 Balanced Regulatory Environment Rate Case Update Wisconsin Proposed settlement filed with PSCW on April 4, 2017 Rate freezes for Wisconsin customers for 2018 and 2019 Expand and make permanent real-time market pricing options Extend current earnings cap and sharing mechanism through 201
Slide 12: Five Year Capital Projection 2017-2021 by Line of Business
11 Line of Business View Five Year Capital Projection 2017-2021 $343 $412 $317 $337 $250 $517 $502 $529 $515 $538 $1,320 $1,041 $1,052 $1,035 $1,016 $- $500 $1,000 $1,500 $2,000 $2,500 2017 2018 2019 2020 2021 Gas Delivery Electric Delivery Generation $1,804 In millions Total capital spend over th
Slide 13: Five Year Capital Projection 2017-2021 by State
12 State View Five Year Capital Projection 2017-2021 $343 $412 $317 $337 $250 $1,163 $914 $944 $904 $946 $575 $525 $529 $535 $496 $99 $104 $108 $111 $112 $- $500 $1,000 $1,500 $2,000 $2,500 2017 2018 2019 2020 2021 MERC/MGU Illinois WI/MI Delivery WI/MI Generation In millions Depreciation at the u
Slide 14: American Transmission Company Key Assumptions
13 $543 $489 $399 $428 $318 $327 $295 $241 $291 $191 $0 $100 $200 $300 $400 $500 $600 2017 2018 2019 2020 2021 ATC WEC portion 60% Well Positioned for the Future American Transmission Company Key Assumptions ATC average rate base at year end 2016: $3.3 billion Implies average $164 million effect
Slide 15: ATC Outside the Traditional Footprint
14 Well 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 current ownership interest is 30%, potentially growing to 34% Owns California’s Path 15 transmis
Slide 16: Sample Merger-Driven Initiatives
15 Well Positioned for the Future Sample Merger-Driven Initiatives Category Activity Supply Chain Achieving savings in consolidated vendor and supplier contracts, negotiating most favorable terms Information Technology Consolidating IT infrastructure Implementing uniform processes and consolid
Slide 17: Industry-Leading Dividend Growth
16 A Track Record of Performance Industry-Leading Dividend Growth Raised the dividend 5.1% in 2017 14.6% compound annual growth rate off 2010 base Continuing to target dividend payout of 65-70% of earnings Dividend expected to grow in line with earnings *Annualized based on 4th quarter 2015
Slide 18: Key Takeaways for WEC Energy Group
17 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 Projected long-term earnings per share growth of 5-7 percent compound annual growth rate off 2015 base Targeting d
Slide 19: Appendix
> WEC LSS VA Energy Group — Appendix ee
Slide 20: Electric and Gas Business Overview
19 Electric Distribution Electric Transmission 60% ownership Natural Gas Distribution Electric Generation
Slide 21: Strategic Rationale: Integrys Acquisition Overview
20 Strategic Rationale Acquisition 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 Met or exceeded WEC’s acquisition criteria Accretive to ea
Slide 22: Major Construction Projects: Delivering the Future
21 Major Construction Projects 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 23: Wisconsin Public Service System Modernization and Reliability Project
22 Phase 1 – convert 1,200 miles of overhead lines to underground and add distribution automation equipment on 400 miles Project $220 million investment Phase 2 – underground an additional 1,000 miles Project $210 million investment Expect both phases to be complete by 2021 Wisconsin Publi
Slide 24: Peoples Gas Natural Gas System Modernization Program
23 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 22 percent complete Investment recovery under a monthly bill rider Project $280 - $300 million av
Slide 25: Wisconsin Utilities Advanced Metering Infrastructure Program
24 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 equip
Slide 26: Acquisition of Bluewater Natural Gas Holding
25 Well Positioned for the Future Acquisition of Bluewater Natural Gas Holding Underground natural gas storage facility in Michigan that will provide one-third of the storage needs for our natural gas distribution companies in Wisconsin Bluewater will have long-term service agreements with the t
Slide 27: Upper Michigan Energy Resources Corp. Proposed New Generation
26 Major Construction Projects – Upper Michigan Energy Resources Corp. (UMERC) Proposed New Generation in the Upper Peninsula Provides a long-term generation solution for electric reliability in Upper Peninsula ~180 MW of clean, natural gas-fired Reciprocating Internal Combustion Engine (RICE) g
Slide 28: State-of-the-Art Generation Fleet
27 Well 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
Slide 29: Supporting a Clean Energy Future
28 Well Positioned for the Future Supporting a Clean Energy Future 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 Added state-of-th
Slide 30: Reducing Emissions: Environmental Performance
29 Reducing Emissions Environmental Performance 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 m a ini n g E m iss io n s 0% 20% 40% 60% 80% 100% 120% 140% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 SO2 (92% reduction) NOx (83% re
Slide 31: Decline in Carbon Intensity
30 Reducing Emissions Decline in Carbon Intensity 26% Reduction in Carbon Intensity 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2016 Fuel Sources Coal Nuclear Natural Gas Renewables Other 0% 20% 40% 60% 80% 100% 120% 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0
Slide 32: Committed to Protecting the Environment
31 Committed to Protecting the Environment Our Goal: Preserve fuel diversity, reduce costs and lower carbon emissions Implementing generation solutions to allow retirement of coal Examples – Presque Isle (365MW) and Pulliam (200MW) power plants Continuing evaluation of possible future retireme
Slide 33: Increasing Fuel Diversity
32 Increasing Fuel Diversity Sources of Electric Energy Supply by Fuel Type 49.7% 23.9% 26.4% 2016 Coal Natural Gas Carbon Free Aspirational
Slide 34: Strong Financial Condition: Credit Ratings Distribution
33 0 20 40 60 80 100 120 140 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 (January 31, 2017) Utilities Electric and Gas Utilities Credit Ratings Distribution* Utility Rating
Slide 35: Balanced Sales Mix
34 Paper 22% Mining/Minerals 14% Foundry (SIC 33) 11% Other Manufacturing 8% Food/Agriculture 8% Metal (SIC 34,35,37) 6% Medical 6% Office 4% Education 4% Chemical 3% Printing 3% Other 11% 36% Large C&I by Segment Wisconsin Retail Deliveries Balanced Sales Mix Large C&I 36% Residential plus Farm 29%
Slide 36: Composition of Rate Base
35 34.5% 16.4% 16.4% 10.7% 6.8% 1.1% 1.1% 1.7% 11.3% 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 2016 Rate Base of $17.7 billion
Slide 37: Key Rate Making Components
36 Key Rate Making Components *Wisconsin Electric Power Company and Wisconsin Gas only Area Illinois – Gas Minnesota – Gas Michigan– Electric & Gas Wisconsin – Gas Wisconsin – Electric Gas Pipeline Replacement Rider PGL Bad Debt Rider X Bad Debt Escrow Accounting WE / WG WE Decoupling X X Fuel Cost
Slide 38: Key Open Dockets
37 Key Open Dockets Michigan generation application: U-18224 Illinois System Modernization Program: 16-0376 Wisconsin rate settlement We Energies – 5-UR-108 WPS – 6690-UR-125
Slide 39: Regulatory Environment: Wisconsin and Michigan
38 Regulatory Environment Wisconsin Governor Scott Walker (R) Commission Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appointment 6-year staggered terms Michigan Governor Rick Snyder (R) Commission Gubernatorial appointment, Senate confirmation Chairman: G
Slide 40: Regulatory Environment: Illinois and Minnesota
39 Regulatory Environment Illinois Governor Bruce Rauner (R) Commission Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appointment 5-year staggered terms Minnesota Governor Mark Dayton (D) Commission Gubernatorial appointment, Senate confirmation Chairman: G
Slide 41: Regulatory Environment: FERC
40 Regulatory Environment FERC Presidential appointment, Senate confirmation 5-year term FERC Commissioners Name Party Began Serving Term Ends Cheryl LaFleur Interim Chair D 07/2014 06/2019 Colette Honorable D 01/2015 06/2017 Neil Chatterjee* R Robert Powelson* R Open * Appointed, pending sena
Slide 42: Precedent Transactions
41 Precedent Transactions Announce Date Closing Date Target Acquiror 1-Day Premium FY1 P/E FY2 P/E Transaction Value ($mm) Equity Value ($mm) Price/Book Enterprise Value/ Rate Base 01/25/2017 Pending WGL AltaGas 28%(1) 25.7x 23.8x $6,316 $4,517 3.3x n/a 07/29/2016 Pending Oncor NEE n/a 26.5x 23.8x $
Slide 43: Contact Information
42 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 414-221-2592