Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (September 2021)
53 slides from Wec Energy's investor presentation, Sep 7, 2021
Slide 1: Investor Update: September 2021
Investor Update: September 2021 Our “ESG” Progress Plan: Investing in Efficiency, Sustainability and Growth Best in the U.S. in Large Customer Satisfaction (Top 2 Box) JD Power We Energies named Most Reliable Utility in the Midwest PA Consulting Best ESG Growth Strategy in the U.S. Capital Finance I
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: Company Profile
2 Company Profile $29.8 billion market cap* 4.6 million retail customers 60% ownership of American Transmission Company $37.8 billion of assets * As of August 31, 2021
Slide 4: A History of Quality Earnings Growth
3 A History of Quality Earnings Growth $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 GAAP Adjusted** 2021 Guidance * Estimated based on 2021 guidance $4.02 - $4.05 per share. ** See Appendix for reconciliation of a
Slide 5: Consistent Performance Over Time
4 Consistent Performance Over Time EPS Guidance 2020 Exceeded 2019 Exceeded 2018 Exceeded 2017 Exceeded 2016 Exceeded 2015 Exceeded 2014 Exceeded 2013 Exceeded 2012 Exceeded 2011 Exceeded 2010 Exceeded 2009 Exceeded 2008 Exceeded 2007 Exceeded 2006 Exceeded 2005 Exceede
Slide 6: Strong Dividend Growth Continues
5 $0.80 $1.04 $1.20 $1.445 $1.56 $1.83* $1.98 $2.08 $2.21 $2.36 $2.53 $2.71 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E Strong Dividend Growth Continues In January, raised the dividend by 7.1% to a new annual rate of $2.71 per share Targeting dividend payout of 65-70% of earnings Pr
Slide 7: What's New?
6 What’s New?
Slide 8: We Energies Named #1 Energy Company in America by Business Customers
We Energies Named #1 Energy Company in America by Business Customers Escalent
Slide 9: Rate Case "Stay Out" We Energies & Wisconsin Public Service
8 Rate Case “Stay Out” We Energies & Wisconsin Public Service On August 11, the PSCW approved – as filed – a one-year (2022) stay out and our requested accounting treatments Maintains current authorized return on equity: Wisconsin Electric – 10.0% Wisconsin Gas – 10.2% Wisconsin Public Ser
Slide 10: WEC Infrastructure Investment: Sapphire Sky Wind Energy Center
9 WEC Infrastructure Investment Sapphire Sky Wind Energy Center 64 turbines with a capacity of ~250MW Expected total investment: $412 million 90% ownership interest Under development by Invenergy Located in McLean county, Illinois Expected returns are higher than those in our regulated bus
Slide 11: Our ESG Progress Plan: New Carbon Reduction Goals
10 Our ESG Progress Plan New Carbon Reduction Goals – Electric Generation Reduction goals: 60% below 2005 levels by 2025 80% below 2005 levels by the end of 2030 Net carbon neutral by 2050 Goals aligned with the Paris Climate Accord*Includes projection of potential carbon offsets by 2050 -100 -80 -6
Slide 12: Exposure to Coal - Significantly Reduced
11 Exposure to Coal - Significantly Reduced *ATC is accounted for using the equity method; this represents WEC’s portion of the asset base **Includes purchased power ***Includes electric distribution revenue and transmission expense that we are authorized to collect in rates 2020 Assets by Business
Slide 13: Electricity Supply by Fuel Type
12 Electricity Supply by Fuel Type (megawatt-hours delivered to regulated utility customers) 73% 36% 7% 36% 29% 17% 22% 24% 3% 6% 39% 2005 2020 2030 estimated 2050 estimated Coal Natural Gas Nuclear Renewables Exposure to Coal - Significantly Reduced 8% Net carbon neutral
Slide 14: Reducing Greenhouse Gas Emissions
13 Reducing Greenhouse Gas Emissions 0.78 0.42 0.33 0.17 0** 2005 2020 2025E 2030E 2050E Greenhouse gas intensity* (metric tons CO2e/MWh) *Includes owned electric generation, purchased power and WEC Infrastructure (WECI). The environmental attributes of the WECI renewable facilities are or may be th
Slide 15: New Methane Reduction Goal
14 Reduction goal: Net zero by the year 2030** Our ESG Progress Plan New Methane Reduction Goal *Represents a decrease in the rate of methane emissions, per mile, from the natural gas distribution lines in our network from a 2011 baseline. **This goal applies to emissions from WEC Energy Group natur
Slide 16: Investment in Regulated Renewables
15 Investment in Regulated Renewables Progress on plan to build 1,800MW of solar, wind and battery storage Project Utility WEC Ownership** WEC Investment ($M) WEC Capacity (MWs) In-Service or Target Two Creeks Solar Project WPS 66.7% $130 100 Nov. 2020 Badger Hollow I Solar Park 130 100 Q4 2021 Badg
Slide 17: ESG Progress Plan
16 ESG Progress Plan
Slide 18: Investing $16.1 billion: 2021-2025 Capital Plan
17 Investing $16.1 billion for: Efficiency Sustainability Growth 2021-2025 Capital Plan Our ESG Progress Plan
Slide 19: Investing in Efficiency, Sustainability and Growth
18 $2.7 17% $10.4 64% $3.0 19% Sustainability Renewables $4.1 Grid and fleet reliability $6.3 Efficiency Technology $1.0 Grid and fleet modernization $1.7 Growth Gas distribution $1.6 Electric (G,T&D) $1.4 2021-2025 Capital Plan ($ in billions) Investing in Efficiency, Sustainability and Growth $16.
Slide 20: Robust Growth in Asset Base
19 $22.8 billion $32.2 billion 2020A 2025E* Robust Growth in Asset Base *Estimated year-end average asset base Expect long-term EPS growth of 5-7% per year, with a strong bias toward the top half of the range 7% Growth
Slide 21: Modernizing Our Gas-Fueled Generation Fleet
20 Reducing 100MW of Capacity Modernizing Our Gas-Fueled Generation Fleet Retiring 400 MW of older, less-efficient gas generation expected Building Weston RICE units 128 MW Expected investment: $170 million Targeted in-service: 2023, pending regulatory approval Investing West Riverside E
Slide 22: Aggressively Reducing Coal-Fueled Generation
21 4,935 MW 3,095 MW 1,700 MW 2017 2020 2025E Aggressively Reducing Coal-Fueled Generation Plant retirements have lowered fuel and operating costs while reducing CO2 emissions Retirements Pleasant Prairie 1,190 MW Edgewater 100 MW Pulliam 200 MW Presque Isle 350 MW Expected Future Retirements Oak Cr
Slide 23: WEC Infrastructure Portfolio – Green and Growing
22 SD IL NE $2.2 Billion 2021-2025 WEC Infrastructure Portfolio – Green and Growing In-service Under development In-Service Capacity (MW) Investment (in millions) Upstream 200 $307 Bishop Hill III 132 $166 Coyote Ridge 97 $145 Blooming Grove 250 $389 Tatanka Ridge 155 $240 Total 834 $1,247 Under Dev
Slide 24: Regional Economy
23 Regional Economy
Slide 25: Powering Industry Leaders in our Region
24 Powering Industry Leaders in our Region
Slide 26: Wisconsin Segment Sales Forecast 2022-2025
25 Wisconsin Segment Broad Ranging Growth Driving Longer-Term Sales Forecast 2022 - 2025 Electric 1.0% - 1.3% Gas 1.0% - 1.3% Sales Growth Forecast (weather-normalized) Year-over-Year
Slide 27: Key Takeaways for WEC Energy Group
26 Track record of top decile performance among regulated utilities Industry leading earnings quality ESG Progress Plan drives premium EPS growth Strong bias toward the top half of the 5-7% range No need to issue equity through forecast period 100% of capital allocated to regulated busin
Slide 28: Appendix
Appendix | VA Ee V/A Energy Group
Slide 29: Business Lines Overview
28 Electric Distribution Electric Transmission 60% ownership Electric Generation Energy Infrastructure Natural Gas Distribution
Slide 30: Management Team
29 Kevin Fletcher President and CEO Scott Lauber Senior Executive Vice President and Chief Operating Officer Office of the Chair “Working together as a team, we will leverage the strengths of each individual as we write the next chapter of the company’s growth, development and service to our custome
Slide 31: Environmental, Social & Governance Focus
30 Reduce carbon dioxide emissions from electric generation 60% by 2025 and 80% by the end of 2030 – both from a 2005 baseline. Long-term goal of net-zero carbon emissions from our generating fleet by 2050 Targeting net-zero methane emissions by the end of 2030 Amount of combustion products for bene
Slide 32: Why Our Natural Gas Distribution Networks Matter
31 Today and Tomorrow Why Our Natural Gas Distribution Networks Matter Our Service Area 65-78% of homes use natural gas for heating Growth continues as customers convert to natural gas Hydrogen opportunities post 2030+ Potential to blend Investment potential to convert existing distribution
Slide 33: New Liquefied Natural Gas (LNG) Storage Facilities
32 New Liquefied Natural Gas (LNG) Storage Facilities LNG provides a solution for Southeastern Wisconsin to meet peak customer demand on the coldest days of the year Taking steps to maintain reliable and affordable service for our customers We Energies is seeking approval for two LNG facilities to
Slide 34: Efficiency, Growth and Sustainability Progress
33 Efficiency, Growth and Sustainability Progress Electric Delivery Redesign / Resilience • Addressing aging infrastructure • Enhancing efficiencies and reducing operating costs • Expect to spend $2.9 billion (2021-2025) Natural Gas System Modernization Illinois • Expected replacement of 2,000 miles
Slide 35: WEC Infrastructure Projects and Offtake Agreements
34 Project Developer Location Investment Offtake Agreement WEC Commercial Operations Capacity Bishop Hill III Wind Energy Center Invenergy Henry County, IL $166M for 90% ownership WPPI Energy 22 years 80% on 8/31/18 Incremental 10% on 12/5/18 132MW Upstream Wind Energy Center Invenergy Antelope Coun
Slide 36: Low-Risk Capital Plan Drives 5% to 7% EPS Growth
35 $555 $767 $900 $506 $350 $578 $571 $664 $685 $652 $695 $619 $542 $585 $582 $578 $584 $662 $614 $616 $99 $107 $93 $96 $92 $258 $289 $253 $176 $144 $307 $793 $363 $363 $362 $3,070 $3,730 $3,477 $3,025 $2,798 $- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 2021 2022 2023 2024 2025 Energy Infrastru
Slide 37: Capital Plan Projections by Company
36 2021 2022 2023 Wisconsin Electric $933.5 $1,032.0 $1,375.3 Wisconsin Gas $234.4 $256.2 $234.4 Wisconsin Public Service $578.8 $537.6 $443.8 Upper Michigan Energy Corp $16.7 $18.8 $16.7 Wisconsin Segment $1,763.4 $1,844.6 $2,070.2 Peoples Gas $509.5 $517.2 $598.6 North Shore Gas $64.4 $64.6 $62.3
Slide 38: Composition of Asset Base
37 Composition of Asset Base Total 2020 Average Asset Base of $22.8 billion Note: We Power value represents investment book value Company Asset Base - $B % of Total Wisconsin Electric $6.5 28.5% Wisconsin Gas 1.6 7.0 Wisconsin Public Service 3.7 16.2 Upper Michigan Energy Resources 0.4 1.8 Peoples G
Slide 39: Power the Future Investments
38 Power the Future Investments1 Natural Gas Coal Capacity 1,090 MW 1,030 MW 2 Investment $664 million $2 billion 2 ROE 12.7% 12.7% Equity 53% 55% In Service Dates Unit 1 – July 2005 Unit 2 – May 2008 Unit 1 – February 2010 Unit 2 – January 2011 Lease Terms 25 years 30 years Cost Per Unit of Capacit
Slide 40: One of the Top Performers in Operating Efficiency
39 One of the Top Performers in Operating Efficiency $14.00 $15.30 $18.30 $20.10 $20.80 $21.30 $21.50 $21.51 $23.30 $29.30 $31.20 $10 $15 $20 $25 $30 $35 2019 Non-Fuel O&M per MWh* Source: FERC Form 1 Reports *For all companies, excluded 1) pensions and other employee benefits, 2) costs reported as
Slide 41: Focused on Efficiency
40 Focused on Efficiency $1,342 $1,281 $1,234 $1,143 $1,107 2016 2017 2018 2019 2020 2021E 4.5% $ In millions *Excludes costs that have a revenue offset such as operation and maintenance costs associated with the We Power generation units, transmission expenses that are collected in rates, regulator
Slide 42: Industry Leading Earnings Quality
41 Annual EPS Adjustments as a percentage of GAAP Earnings Note: Percent changes are in absolute values 847.3%Industry Leading Earnings Quality The 10 largest vertically integrated electric utilities* 10.3% 20.5% 82.3% 107.6% 108.3% 117.9% 223.2% 0% 50% 100% 150% 200% 250% WEC 2018 2019 2020 No EPS
Slide 43: Balance Sheet Remains Strong
42 Balance Sheet Remains Strong Entity S&P Rating Moody’s Rating WEC Energy Group A- Baa1 Wisconsin Electric A- A2 Wisconsin Gas A A3 Wisconsin Public Service A- A2 Peoples Gas A- A2 Issuer Credit Ratings 15.4% 16.9% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% 17.0% 18.0% 2020 Actual* 2020 Adjusted**
Slide 44: Balanced Sales Mix
43 33% Large C&I by Segment Paper/Packaging 27% Foundry (SIC 33) 10% Mining/Minerals 9% Food/Agriculture 9% Other Manufacturing 8% Metal (SIC 34,35,37) 7% Medical 6% Education 3% Chemical 4% Printing 3% Office 2% Other 12% Balanced Sales Mix Large C&I 33% Residential plus Farm 32% Small C&I 35% 2020
Slide 45: Diverse Portfolio of Businesses
44 Diverse Portfolio of Businesses Based on 2020 average asset base. WI 66% ATC 11% IL 16% MI/MN 5% WECI 2% By Jurisdiction By Business Renewables 6% Natural gas 7% Coal 17% Electric transmission 11%*Electric distribution 25% Natural gas distribution 34% Electric generation *ATC is accounted for usi
Slide 46: Estimated Key Dates
45 Estimated Key Dates Wisconsin (apps.psc.wi.gov) Decision on 2022 Rate Case “Stay Out” Decision on Koshkonong Solar and Battery Storage (Docket: 5-BS-258 filed 4/30/2021) Decision on Weston RICE units (Docket: 5-CE-153 filed 4/16/2021) Decision on Red Barn Wind Park (Docket: 5-BS-256 filed
Slide 47: Regulatory Environment
46 Regulatory Environment Wisconsin Governor Tony Evers (D) Commission Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appointment 6-year staggered terms Illinois Governor J.B. Pritzker (D) Commission Gubernatorial appointment, Senate confirmation Chairman: G
Slide 48: Rate-Making Parameters by Company
47 Rate-Making Parameters by Company Utility Equity Layer* Authorized ROE Wisconsin Electric 50.0%-55.0% 10.0% Wisconsin Public Service 50.0%-55.0% 10.0% Wisconsin Gas 50.0%-55.0% 10.2% Peoples Gas 50.33% 9.05% North Shore Gas 50.48% 9.05% Minnesota Energy Resources 50.9% 9.7% Michigan Gas Utilities
Slide 49: Key Rate Making Components
48 Key Rate Making Components Area Illinois– Gas Minnesota– Gas Michigan– Electric & Gas Wisconsin– Gas Wisconsin– Electric Gas Pipeline Replacement Rider PGL Bad Debt Rider ✓ Bad Debt Escrow Accounting Residential Residential Decoupling ✓ ✓ Fuel Cost Recovery 1 for 1 recovery of prudent fuel costs
Slide 50: Industry Leading Total Shareholder Returns
49 Industry Leading Total Shareholder Returns* Over the past decade, WEC Energy Group has consistently delivered among the best total returns in the industry * Total return including reinvested dividends for the periods ended December 31, 2020 0% 50% 100% 150% 200% 250% 300% 350% One-Year Three-Year
Slide 51: Contact Information
Contact Information M. Beth Straka Senior Vice President – Investor Relations and Corporate Communications Beth.Straka@wecenergygroup.com 414-221-4639
Slide 52: Reconciliation of Reported EPS (GAAP) to Adjusted EPS (Non-GAAP)
51 Reconciliation of Reported EPS (GAAP) to Adjusted EPS (Non-GAAP) 2014 2015 2016 2017 Reported EPS – GAAP basis $2.34 $2.59 $ 2.96 $ 3.79 Acquisition Costs $0.39 $0.06 $ 0.01 – Integrys Earnings $(0.47) Impact of Additional Shares $0.47 Tax benefit related to Tax Cuts and Jobs Act of 2017 – – – $
Slide 53: Ratio of FFO to Debt
52 Ratio of FFO to Debt (in millions, except percent) Ratio of FFO to Debt 2020 Net cash provided by operating activities $2,196.0 Total Debt $14,290.8 Ratio of FFO to Debt 15.4% Ratio of FFO to Debt - Adjusted 2020 Net cash provided by operating activities $2,196.0 Add: Employer contributions to qu
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