Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (November 2015)
47 slides from Wec Energy's investor presentation, Nov 6, 2015
Slide 1: WEC Energy Group November 2015
Exhibit 99.1 = WEC LSS VA Energy Group =— November 2015 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: A Transformational Step
2 A Transformational Step On June 29, Wisconsin Energy acquired Integrys in a transaction valued at $9 billion
Slide 4: Key Transaction Metrics
3 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
Slide 5: Strategic Rationale Transaction Overview
4 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 g
Slide 6: The New Look WEC
5 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 7: WEC Energy Group
6 WEC Energy Group $16.4 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 Re
Slide 8: Our Portfolio of Regulated Businesses
7 Well Positioned for the Future Our Portfolio of Regulated Businesses Electric Generation and Distribution 66% Gas Distribution 23% Electric Transmission 11% Based on 2014 regulated earnings
Slide 9: Rate Base Investment by Jurisdiction
8 Well Positioned for the Future Rate Base Investment by Jurisdiction* 70% 14% 13% 4% WI FERC IL MI/MN *Actual 2014 Rate Base
Slide 10: Drivers and Differentiators for Premium Growth
9 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 11: Focused on the fundamentals
10 Well Positioned for the Future WEC Energy Group Focused on the fundamentals: World-class reliability Operating efficiency Financial discipline Exceptional customer care
Slide 12: A Compelling Value Proposition
11 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 13: Consistent Earnings and Dividend Growth
12 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
Slide 14: Industry Leading Total Shareholder Returns
13 A Track Record of Performance Industry Leading Total Shareholder Returns 0% 50% 100% 150% 200% 250% 300% 350% 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 12/31/2014 S
Slide 15: Industry Leading Dividend Growth
14 A Track Record of Performance Industry Leading Dividend Growth In two steps, raised the dividend by 17.3 percent in 2015 *Annualized based on new quarterly dividend of $0.4575 2010 2011 2012 2013 2014 2015 $0.80 $1.04 $1.20 $1.445 $1.56 $1.83* Annualized Dividends Per Share
Slide 16: Leading Reliability and Customer Satisfaction
15 A Track Record of Performance Leading Reliability and Customer Satisfaction We Energies Most reliable utility in Midwest for 5th consecutive year Top quartile in the Midwest for customer service and power quality(1) Top quartile nationally for customer service(2) Wisconsin Public Service
Slide 17: Delivering the Future
16 Delivering the Future Projected capital investment of $1.4 – $1.55 billion annually Committed to infrastructure investment that will: Renew and modernize our delivery networks Meet new environmental standards Reduce operating costs for customers
Slide 18: We Energies Major Construction Projects: West Central Gas Expansion
17 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 $130 million In-service November 2015
Slide 19: We Energies Major Construction Projects: Valley Power Plant Conversion
18 We Energies Major Construction Projects Converting the Valley Power Plant from coal to natural gas $60 to $62 million of investment Projected completion: November 2015 On time and on budget
Slide 20: We Power Major Construction Projects: Oak Creek Fuel Flexibility
19 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 21: Wisconsin Public Service Major Construction Projects
20 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 22: Peoples Gas Major Construction Projects
21 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 2
Slide 23: 2016 Guidance
22 2016 Guidance 2015 projected legacy WEC earnings of $2.72* per share Targeting 2016 earnings per share growth of 6-8 percent Guidance for 2016: $2.88 to $2.94 per share** *Please reference last slide for explanation of what is excluded from legacy WEC ** 2016 earnings per share exclude any
Slide 24: Line of Business View Five Year Capital Projection 2016-2020
23 Line of Business View Five Year Capital Projection 2016-2020 $288 $288 $277 $277 $277 $356 $415 $434 $413 $406 $755 $850 $837 $858 $866 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2016 2017 2018 2019 2020 In millions Annual capital expenditure of $1.4 - $1.55 billion Total capit
Slide 25: State View Five Year Capital Projection 2016-2020
24 State View Five Year Capital Projection 2016-2020 $288 $288 $277 $277 $277 $650 $795 $805 $805 $806 $402 $402 $398 $398 $398 $59 $68 $67 $67 $67 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 2016 2017 2018 2019 2020 In millions Depreciation at the utilities expected to average $770 million
Slide 26: Capital Plan Summary
25 Capital Plan Summary Capex more than double stand-alone plan Continues to be driven primarily by investments in our delivery infrastructure ... no “big bets” Multiple customer-benefitting projects to choose from
Slide 27: Earnings Growth Drivers Plus Additional Growth Opportunities
26 Earnings Growth Drivers Plus Additional Growth Opportunities Outside ATC Traditional Footprint Clean Power Plan investment $2.7 $5.7 Projected year-end 2015 rate base ($ billions) $12.4 $2.8 $1.8 Utilities TF Transmission Note: Power the Future value is book value of investment. Core Investme
Slide 28: Concluding Remarks
ee Concluding Remarks Wa, WVEC Energy Group
Slide 29: Preliminary assessment EPA's Clean Power Plan
28 Preliminary assessment EPA’s Clean Power Plan Plan calls for Wisconsin to reduce CO2 emissions by 41% First compliance deadline is 2022 Approximately two-thirds of the reductions must be achieved by 2022 EPA rule envisions natural gas combined cycle plants operating at a 75% capacity fact
Slide 30: Line of Business View Ten Year Capital Projection 2016-2025
29 Line of Business View Ten Year Capital Projection 2016-2025 $288 $288 $277 $277 $277 $277 $277 $277 $277 $277 $356 $415 $434 $413 $406 $406 $406 $396 $396 $396 $755 $850 $837 $858 $866 $861 $861 $839 $839 $839 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2016 2017 2018 2019 2020 2021
Slide 31: Poised for Growth: Key Takeaways for WEC Energy Group
30 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% projected annually – driven by multi-year infrastructure projects Ta
Slide 32: Appendix
> WEC LSS VA Energy Group — Appendix ee
Slide 33: An Earn and Return Company with a Low Risk Profile
32 An “Earn and Return” Company with a Low Risk Profile Well Positioned for the Future Diversified across 5 (including FERC) regulatory jurisdictions Strong financial condition $16.4 billion market cap enhances liquidity* Top-tier record of producing shareholder value Strong, experienced m
Slide 34: Strong Financial Condition
33 A Track Record of Performance Strong Financial Condition 0 20 40 60 80 100 120 AA - A A- BBB+ BBB BBB- Below Investment Grade Number of Issuers *Source: 2015 Standard & Poor’s Financial Services LLC. Utilities Electric and Gas Utilities Credit Ratings Distribution* Utility Rating Wisconsin Electr
Slide 35: Composition of Rate Base
34 35.5% 16.4% 16.2% 10.7% 6.6% 1.4% 1.2% 1.2% 10.8% Wisconsin Electric We Power Wisconsin Public Service Corporation Peoples Gas Wisconsin Gas Minnesota Energy Resources North Shore Gas Michigan Gas Utilities ATC Composition of Rate Base Total Projected 2015 Rate Base of $17.0 billion
Slide 36: American Transmission Company Key Assumptions
35 Positioned for the Future American Transmission Company Key Assumptions ATC rate base at year end 2015: $3.1 billion ATC projected capital program 2015 – 2024: $3.7-$4.5 billion Implies average $171 million effective annual (FERC) rate base growth for WEC from 2015 to 2017 12.2% ROE* (wit
Slide 37: American Transmission Company - Outside the Traditional Footprint
36 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 38: State-of-the-Art Generation Fleet
37 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
Slide 39: Supporting a Clean Energy Future
38 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 40: Rate Case Update
39 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 Filed a Minnesota Energy Resources case i
Slide 41: Rate-Making Parameters By Company
40 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 equity layer in r
Slide 42: Key Rate Making Components
41 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 Partial Fuel Cost Recovery 1 for 1 PGA recovery of prudent fuel costs +/- 2% band 1 for 1 recovery o
Slide 43: Regulatory Environment: Wisconsin and Michigan
42 Regulatory Environment Wisconsin Commission 3 Commissioners Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appointment 6-year staggered terms Michigan Commission 3 Commissioners Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appoin
Slide 44: Regulatory Environment: Illinois and Minnesota
43 Regulatory Environment Illinois Commission 5 Commissioners Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appointment 5-year staggered terms Minnesota Commission 5 Commissioners Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appoin
Slide 45: Key Merger Provisions
44 Balanced Regulatory Environment Key Merger Provisions • 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 • 3-year capi
Slide 46: Precedent Transactions
45 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 10/26/15 Pending PNY DUK 42% 29.8x 28.0x $6,700 $4,916 3.5x n/a 9/4/15 Pending TE EMA.CN 48%(1) 23.3x 21.5x $10,361 $6,
Slide 47: Reconciliation of 2015 EPS to Wisconsin Energy Stand Alone
46 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
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