Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (November 2021)
53 slides from Wec Energy's investor presentation, Nov 5, 2021
Slide 1: Investor Update: November 2021
Investor Update: November 2021 Our “ESG” Progress Plan Investing in Efficiency, Sustainability and Growth Best in the U.S. in Large Customer Satisfaction ESource We Energies Named #1 Energy Company in America by Business Customers Escalent Best ESG Growth Strategy in the U.S. Capital Finance Interna
Slide 2: Cautionary Statement Regarding Forward-Looking Information
2 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
3 Company Profile $28.4 billion market cap* 4.6 million retail customers 60% ownership of American Transmission Company $37.8 billion of assets * As of Oct. 31, 2021
Slide 4: A History of Quality Earnings Growth
4 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 $4.05-$4.07 per share. ** See Appendix for reconciliation of adj
Slide 5: Consistent Performance Over Time
5 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
6 $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?
7 What’s New?
Slide 8: Next Steps in Succession Planning
8 Kevin Fletcher announced his plan to retire in June 2022 Scott Lauber promoted to president and CEO effective February 1, 2022 Next Steps in Succession Planning Gale Klappa will continue to serve as executive chairman until May 2024
Slide 9: Exiting Coal by 2035
9 Near-term retirements (2023-2024) Oak Creek - Units 5-8 1,100MW Columbia - Units 1-2 300MW Enhance fuel flexibility at Oak Creek Power the Future units, pending environmental permit By the end of 2030, we expect coal to provide less than 5% of our power supply We plan to eliminate coal
Slide 10: ESG Progress Plan Supports 6-7% EPS Growth
10 $3,078 $4,693 $3,150 $3,356 $3,023 $2,811 $3,054 $3,053 $487 $542 $1,120 $1,345 $2,188 $1,900 $16,100 $17,700 2021-2025 2022-2026 Energy Infrastructure ATC MERC/MGU Illinois WI Gas Delivery WI Electric Delivery WI Generation N e w P la n 1 F o rm e r P la n ESG Progress Plan Supports 6-7% EPS Gro
Slide 11: Robust Growth in Asset Base
11 $25 billion $35 billion 2021E* 2026E* Robust Growth in Asset Base *Estimated year-end average asset base Expect long-term EPS growth of 6-7% per year. 7% Growth
Slide 12: Investing in Efficiency and Sustainability Drives Growth
12 $2.7 15% $12.2 69% $2.8 16% Sustainability Renewables $5.4 Grid and Fleet Reliability $6.8 Efficiency Technology $1.1 Grid and Fleet Modernization $1.6 Growth Gas Distribution $1.3 Electric (G,T&D) $1.5 2022-2026 Capital Plan ($ in billions) Investing in Efficiency and Sustainability Drives Growt
Slide 13: Our ESG Progress Plan: Carbon Reduction Goals
13 Our ESG Progress Plan 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 -60 -4
Slide 14: Increasing Renewable Generation
14 Increasing Renewable Generation 0 1,000 2,000 3,000 4,000 5,000 2020A 2026E Electricity Supply by Renewable Source Hydro Biomass Battery Solar Wind Wind - WECI (n a m e p la te c a p a c it y ( M W s )) Includes owned electric generation and announced WEC Infrastructure (WECI) projects
Slide 15: Investing in Carbon-Free Generation
15 Solar We Energies – 100 MW currently under construction Filed for approval 675 MW Additional 700 MW Qualifies for Investment Tax Credit (ITC) Wind Filed for approval 82 MW Qualifies for Production Tax Credit (PTC) Battery storage Filed for approval 316 MW (qualifies for ITC) Addit
Slide 16: WEC Infrastructure Portfolio – Green and Growing
16 SD IL NE Plan to invest $1.9 Billion (2022-2026) WEC Infrastructure Portfolio – Green and Growing In-service Under development Total Project 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 Jayhawk 19
Slide 17: Modernizing Our Gas-Fueled Generation Fleet
17 Modernizing Our Gas-Fueled Generation Fleet Retiring 200 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 Energy Center combined cycle
Slide 18: Our ESG Progress Plan: Methane Reduction Goal
18 Reduction goal: Net zero by the year 2030** Our ESG Progress Plan 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 natural g
Slide 19: Regional Economy
19 Regional Economy
Slide 20: Powering Industry Leaders in our Region
20 Powering Industry Leaders in our Region
Slide 21: Wisconsin Segment Sales Forecast
21 Wisconsin Segment Broad Ranging Growth Driving Longer-Term Sales Forecast 2024-2026 Electric 0.7%-1.0% Gas 0.7%-1.0% Sales Growth Forecast (weather-normalized) Year-Over-Year
Slide 22: Key Takeaways for WEC Energy Group
22 Track record of top decile performance among regulated utilities Industry leading earnings quality ESG Progress Plan drives premium EPS growth of 6-7% No need to issue equity through forecast period 100% of capital allocated to regulated businesses or contracted renewables Dividend gr
Slide 23: Appendix
Appendix | VA V/A Energy Group
Slide 24: Business Lines
24 Electric Distribution Electric Transmission 60% ownership Electric Generation Energy Infrastructure Natural Gas Distribution
Slide 25: Environmental, Social & Governance Focus
25 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 Planned exit from coal by 2035 Targeting net-zero methane emissions by the end of 2030 Planned
Slide 26: Electricity Supply by Fuel Type
26 Electricity Supply by Fuel Type (megawatt-hours delivered to regulated utility customers) 73% 36% 7% 36% 32% 17% 22% 24% 3% 6% 39% 2005 2020 2030E 2035 2050 Coal Natural Gas Nuclear Renewables Exiting Coal <5% Net carbon neutral goal Planned exit from coal
Slide 27: Reducing Greenhouse Gas Emissions
27 Reducing Greenhouse Gas Emissions 0.78 0.42 0.33 0.16 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 28: Investment in Regulated Renewables
28 Plan to invest $3.5 Billion (2022-2026) Investment in Regulated Renewables Target Project Utility WEC Ownership** Expected WEC Investment ($M) WEC Capacity (MWs) In Service Two Creeks Solar Project WPS 66.7% $130 100 Q4 2021 Badger Hollow I Solar Park 130 100 Q4 2022 Badger Hollow II Solar Park W
Slide 29: WEC Infrastructure Projects
29 Project Developer Location Investment Offtake Agreement WEC Commercial Operations Total Project 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
Slide 30: Oak Creek PTF Units Critical to Wisconsin and Region
30 Oak Creek PTF Units Critical to Wisconsin and Region Among newest, most efficient units in a critical location Top 5% in the country on coal plant efficiency* Only one of two 1,000 MW sites in the top decile heat rate in MISO Plant equipment capable of co-firing natural gas and coal *Base
Slide 31: 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 32: New Liquefied Natural Gas Storage Facilities
32 New Liquefied Natural Gas (LNG) Storage Facilities LNG will provide 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 received approval for two LNG facilities
Slide 33: Electric Delivery Redesign / Resilience
33 Electric Delivery Redesign / Resilience Addressing aging infrastructure and system hardening Enhancing efficiencies and reducing operating costs Expect to spend $3.4 billion (2022-2026) with continued investment over next decade Project Highlights Efficiency, Growth and Sustainability Progr
Slide 34: Natural Gas System Modernization
34 Natural Gas System Modernization Increasing capacity and reliability of natural gas service in our territories Illinois Expected replacement of 2,000 miles of piping for safety and reliability in Chicago Project $280 million-$300 million annual average investment Illinois law authorizes r
Slide 35: Robust Growth in Asset Base
35 Expect long-term EPS growth of 6-7% per year. 35% 37% 35% 35%12% 9% 13% 12% 5% 7% $25B $35B 2021E* 2026E* WECI Transmission We Power Gas Distribution Electric Generation and Distribution Robust Growth in Asset Base *Estimated year-end average asset base 7% Growth
Slide 36: Utility Capital Plan Drives EPS Growth
36 342 998 987 858 890 960 571 579 665 685 711 716 589 649 559 596 494 513 536 578 591 636 645 603 105 120 104 107 107 104 262 333 343 278 208 183 $2,405 $3,257 $3,249 $3,160 $3,055 $3,079 - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2021 2022 2023 2024 2025 2026 ATC Investment MERC/MGU Illinois
Slide 37: Capital Plan Projections by Company
37 2021 2022 2023 Wisconsin Electric $841.9 $1,204.2 $1,360.2 Wisconsin Gas $182.5 $280.5 $233.6 Wisconsin Public Service $396.1 $627.2 $537.3 Upper Michigan Energy Corp $16.0 $19.8 $16.9 Wisconsin Segment $1,436.5 $2,131.7 $2,148.0 Peoples Gas $492.8 $521.1 $538.0 North Shore Gas $38.6 $52.0 $48.8
Slide 38: Composition of Asset Base
38 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
Slide 39: Power the Future Investments
39 Power the Future Investments 1 Port Washington (Natural Gas) Oak Creek Expansion (Coal/Co-Fire Gas3) 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
Slide 40: One of the Top Performers in Operating Efficiency
40 One of the Top Performers in Operating Efficiency $13.20 $16.20 $18.50 $18.80 $20.80 $21.10 $21.90 $22.00 $23.00 $23.20 $33.40 $10 $15 $20 $25 $30 $35 2020 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
41 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
42 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
43 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
44 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 and Farm 32% Small C&I 35% 2020
Slide 45: Diverse Portfolio of Businesses
45 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 Electric generation and distribution 51% Natural gas distribution 34% FERC Regulated 13% WECI 2% *ATC is accounted for using the equity method; this represents WEC’
Slide 46: Open Regulatory Matters: Estimated Key Dates
46 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
47 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
48 Rate-Making Parameters by Company Utility Equity Layer1 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 Gas2 51.58% 9.67% Minnesota Energy Resources 50.9% 9.7% Michigan Gas Utilitie
Slide 49: Key Rate Making Components
49 Key Rate Making Components Area Illinois– Gas Minnesota– Gas Michigan– Electric & Gas Wisconsin– Gas Wisconsin– Electric Gas Pipeline Replacement Rider PGL MGU Bad Debt Rider ✓ Bad Debt Escrow Accounting Residential Residential Decoupling ✓ ✓ Fuel Cost Recovery 1 for 1 recovery of prudent fuel co
Slide 50: Industry Leading Total Shareholder Returns
50 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: 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 52: 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
Slide 53: Contact Information
Contact Information M. Beth Straka Senior Vice President – Investor Relations and Corporate Communications Beth.Straka@wecenergygroup.com 414-221-4639
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