Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (February 2016)
41 slides from Wec Energy's investor presentation, Feb 16, 2016
Slide 1: WEC Energy Group – February 2016
> WEC LSS VA Energy Group — February 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: Customer-Facing Brands
4 Customer-Facing Brands Electric Generation and Distribution Electric Transmission 60% ownership Natural Gas Distribution
Slide 6: WEC Energy Group
5 WEC Energy Group $18.2 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 $17 billion of rate base (2) We Energies Michigan Gas Utilities Corporation Minnesota Energy Re
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
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 1/15/16 Sour
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 Targeting 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 *Annualized base
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 $297 $288 $277 $277 $277 $398 $415 $434 $413 $406 $804 $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 Total capital spend over the five-year period of $7.5 - $8 billi
Slide 16: State View Five Year Capital Projection 2016-2020
15 State View Five Year Capital Projection 2016-2020 $297 $288 $277 $277 $277 $729 $795 $805 $805 $806 $407 $402 $398 $398 $398 $66 $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 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 $297 $288 $277 $277 $277 $277 $277 $277 $277 $277 $398 $415 $434 $413 $406 $406 $406 $396 $396 $396 $804 $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 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
25 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 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: Rate Base Investment by Jurisdiction
27 Well Positioned for the Future Rate Base Investment by Jurisdiction* 71% 13% 12% 4% WI FERC IL MI/MN *Actual 2015 Rate Base
Slide 29: Composition of Rate Base
28 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 30: American Transmission Company Key Assumptions
29 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 31: American Transmission Company – Outside the Traditional Footprint
30 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 32: State-of-the-Art Generation Fleet
31 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 33: Supporting a Clean Energy Future
32 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 34: Rate Case Update
33 Balanced Regulatory Environment Rate Case Update Wisconsin In the process of evaluating data for potential 2016 filing Michigan Michigan Gas Utilities settlement approved by commission on Dec. 11, 2015, for rates effective January 1, 2016 Minnesota Interim rates effective January 2016
Slide 35: Rate-Making Parameters By Company
34 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 36: Key Rate Making Components
35 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 37: Regulatory Environment
36 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 38: Regulatory Environment
37 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 39: Key Provisions in Merger Approval
38 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 40: Sample Merger Driven Initiatives
39 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 41: Precedent Transactions
40 Precedent Transactions Announce Date Closing Date Targ et 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
WEC Energy Group — Investor Presentation (February 2016) on 6ix