Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Q2 2021 Earnings Presentation
53 slides from Wec Energy's earnings presentation, Aug 3, 2021
Slide 1: Our ESG Progress Plan: Investing in Efficiency, Sustainability and Growth
Investor Update: August 2021 Our “ESG” Progress Plan: Investing in Efficiency, Sustainability and Growth Best ESG Growth Finalist for Best in the We Energies Strategy in the U.S. the S&P Global U.S. in Large named Most Capital Finance Energy Award in Customer Reliable Utility International Corporate
Slide 2: Cautionary Statement Regarding Forward-Looking Information
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 things
Slide 3: Company Profile
Company Profile $29.7 billion market cap* 4.6 million retail customers 60% ownership of American Transmission Company $37.8 billion of assets 10th largest publicly traded utility in U.S. measured by market value* * As of July 31, 2021 2
Slide 4: A History of Quality Earnings Growth
A History of Quality Earnings Growth Guidance of $4.02 - $4.05 Expect to reach $4.50 top end of range $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 '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 -
Slide 5: Consistent Performance Over Time
Consistent Performance Over Time EPS Guidance 2020 Exceeded 2019 Exceeded 2018 Exceeded 2017 Exceeded The only utility to beat 2016 Exceeded guidance every year for 2015 Exceeded 17 years running 2014 Exceeded 2013 Exceeded 2012 Exceeded 2011 Exceeded 2010 Exceeded 2009 Exceede
Slide 6: Strong Dividend Growth Continues
Strong Dividend Growth Continues Annualized Dividends Per Share $2.71** In January, raised the $2.53 dividend by 7.1% to a $2.36 new annual rate of $2.21 $2.71 per share $2.08 $1.98 $1.83* Targeting dividend payout of 65-70% of $1.56 earnings $1.445 $1.20 Projecting dividend $1.04 growth in line wit
Slide 7: What’s New?
What’s New? 6
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: Sapphire Sky Wind Energy Center
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 busin
Slide 10: New Carbon Reduction Goals – Electric Generation
Our ESG Progress Plan New Carbon Reduction Goals – Electric Generation Achieved and anticipated CO2 reductions (net mass)* Reduction goals: 0 60% below 2005 -20 levels by 2025 -40 80% below 2005 -60 levels by the end of 2030 -80 Net carbon -100 neutral 2005 2020 2025 2030 2050 by 2050 *Includes proj
Slide 11: Exposure to Coal - Significantly Reduced
Exposure to Coal - Significantly Reduced We expect the percentage of our revenue and asset base that is tied to coal will be less than 10% at the end of 2025. Renewables 6% Natural gas 7% Carbon-free Electric Electric 11% generation** generation Natural Natural gas Natural gas gas distribution distr
Slide 12: Exposure to Coal - Significantly Reduced
Exposure to Coal - Significantly Reduced Electricity Supply by Fuel Type (megawatt-hours delivered to regulated utility customers) 73% 36% 36% 39% Net carbon 29% neutral 22% 24% 17% 8% 7% 6% 3% 2005 2020 2030 estimated 2050 estimated Coal Natural Gas Nuclear Renewables 11
Slide 13: Reducing Greenhouse Gas Emissions
Reducing Greenhouse Gas Emissions Greenhouse gas intensity* (metric tons CO2e/MWh) 0.78 0.42 0.33 0.17 0** 2005 2020 2025E 2030E 2050E *Includes owned electric generation, purchased power and WEC Infrastructure (WECI). The environmental attributes of the WECI renewable facilities are or may be the p
Slide 14: New Methane Reduction Goal
Our ESG Progress Plan New Methane Reduction Goal Achieved* and anticipated methane emissions reduction from distribution 0% Reduction goal: -20% -40% Net zero by the year 2030** -60% -80% -100% 2011 2020 2030 *Represents a decrease in the rate of methane emissions, per mile, from the natural gas dis
Slide 15: Investment in Regulated Renewables
Investment in Regulated Renewables Progress on plan to build 1,800MW of solar, wind and battery storage WEC WEC WEC Capacity In-Service Project Utility Ownership** Investment ($M) (MWs) or Target Two Creeks Solar Project $130 100 Nov. 2020 WPS Badger Hollow I Solar Park 66.7% 130 100 Q4 2021 Badger
Slide 16: Electric and Gas Rate Case “Stay-Out”
Electric and Gas Rate Case “Stay-Out” We Energies & Wisconsin Public Service Filed with the Public Service Commission of Wisconsin on March 30 One year “stay-out” Maintain current authorized return on equity: Wisconsin Electric – 10.0% Wisconsin Gas – 10.2% Wisconsin Public Service – 10.
Slide 17: ESG Progress Plan
ESG Progress Plan 16
Slide 18: Investing $16.1 billion for Efficiency, Sustainability and Growth
2021-2025 Capital Plan Our ESG Progress Plan Investing $16.1 billion for: Efficiency Sustainability Growth 17
Slide 19: Investing in Efficiency, Sustainability and Growth
2021-2025 Capital Plan ($ in billions) Investing in Efficiency, Sustainability and Growth Growth Sustainability Gas distribution $1.6 $3.0 Renewables $4.1 19% Electric (G,T&D) $1.4 Grid and fleet reliability $6.3 $16.1 billion Planned $10.4 Investment $2.7 64% 17% Efficiency Technology $1.0 Grid and
Slide 20: Robust Growth in Asset Base
Robust Growth in Expect long-term EPS growth of 5-7% per year, Asset Base with a strong bias toward the top half of the range 7% Growth $32.2 billion $22.8 billion 2020A 2025E* *Estimated year-end average asset base 19
Slide 21: Modernizing Our Gas-Fueled Generation Fleet
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 Reciprocating Interna
Slide 22: Aggressively Reducing Coal-Fueled Generation
Aggressively Reducing Coal-Fueled Generation Plant retirements have lowered fuel and operating costs while reducing CO2 emissions Retirements Pleasant Prairie 1,190 MW Expected Future 4,935 Edgewater Retirements MW 100 MW Oak Creek Pulliam 3,095 Units 5-8* – 200 MW MW 1,100MW Columbia 1,700 Presque
Slide 23: WEC Infrastructure Portfolio – Green and Growing
$2.2 Billion 2021-2025 WEC Infrastructure Portfolio – Green and Growing In-Service Capacity Investment (MW) (in millions) Upstream 200 $307 SD Bishop Hill III 132 $166 Coyote Ridge 97 $145 Blooming Grove 250 $389 NE Tatanka Ridge 155 $240 IL Total 834 $1,247 KS Under Development Capacity Investment
Slide 24: Regional Economy
Regional Economy 23
Slide 25: Powering Industry Leaders in our Region
Powering Industry Leaders in our Region 24
Slide 26: Broad Ranging Growth Driving Longer-Term Sales Forecast
Wisconsin Segment Broad Ranging Growth Driving Longer-Term Sales Forecast Year-over-Year 2022 - 2025 Sales Growth Forecast Electric 1.0% - 1.3% (weather-normalized) Gas 1.0% - 1.3% 25
Slide 27: Key Takeaways for WEC Energy Group
Key Takeaways for WEC Energy Group ESG Progress Plan supports 5-7% EPS growth with minimal impact on customer rates Strong bias toward the top half of the 5-7% range No need to issue additional equity through forecast period 100% of capital allocated to regulated businesses or contracted ren
Slide 28: Appendix
Appendix VAG Vz Energy Group
Slide 29: Electric Generation, Distribution and Energy Infrastructure
Electric Generation Electric Distribution Natural Gas Distribution Energy Infrastructure Electric Transmission 60% ownership 28
Slide 30: Office of the Chair
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 customers.” - Gale Klappa, Executive Chairman Scott Lauber Kevin Fletcher Xia Liu Senior Executive Vice President an
Slide 31: Environmental, Social & Governance Focus
Environmental, Social & Governance Focus Reduce carbon dioxide emissions from electric generation 60% by 2025 Carbon Goals 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 Methane Reduction Goal Targeting net-zero m
Slide 32: Why Our Natural Gas Distribution Networks Matter
Today and Tomorrow Why Our Natural Gas Distribution Networks Matter -46° Our Service Area -26° 65-78% of homes use natural gas for heating -26° Growth continues as customers convert to natural gas Hydrogen opportunities post 2030+ -23° Potential to blend Investment potential to convert exist
Slide 33: New Liquefied Natural Gas (LNG) Storage Facilities
New Liquefied Natural Gas (LNG) Storage Facilities Taking steps to maintain reliable and affordable service for our customers LNG provides a solution We Energies is seeking approval for two for Southeastern LNG facilities to address the need for Wisconsin to meet peak additional natural gas supply
Slide 34: Efficiency, Growth and Sustainability Progress
Project Highlights Efficiency, Growth and Sustainability Progress Electric Delivery Natural Gas System Technology Redesign / Resilience Modernization Enhancements • Addressing aging Illinois • Implementing advanced infrastructure • Expected replacement of 2,000 metering miles of piping for safety an
Slide 35: Wind Infrastructure Investment Summary
Projected Returns Higher than Regulated Business Wind Infrastructure Investment Summary WEC Commercial Project Developer Location Investment Offtake Agreement Operations Capacity 80% on 8/31/18 Bishop Hill III Wind Henry $166M for WPPI Energy Invenergy Incremental 10% 132MW Energy Center County, IL
Slide 36: Low-Risk Capital Plan Drives 5% to 7% EPS Growth
$16.1 billion projected capital spend from 2021-2025 Low-Risk Capital Plan Drives 5% to 7% EPS Growth $3,730 $3,477 $3,500 $793 $363 $3,070 $3,025 $3,000 $253 $307 $93 $363 $2,798 $289 $258 $107 $176 $362 $2,500 $99 Energy Infrastructure $662 $96 $144 1 $584 $92 ATC Investment $578 $614 $2,000 MERC/
Slide 37: Capital Plan Projections ($ in millions)
By Company Capital Plan Projections ($ in millions) 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
Slide 38: Composition of Asset Base
Composition of Asset Base Total 2020 Average Asset Base of $22.8 billion 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 Gas 3.4 14.9 North Shore Gas 0.3 1.3 Minnesota Energy Reso
Slide 39: Power the Future Investments
1 Power the Future Investments Natural Gas Coal 2 Capacity 1,090 MW 1,030 MW 2 Investment $664 million $2 billion ROE 12.7% 12.7% Equity 53% 55% In Service Dates Unit 1 – July 2005 Unit 1 – February 2010 Unit 2 – May 2008 Unit 2 – January 2011 Lease Terms 25 years 30 years Cost Per Unit of Capacity
Slide 40: One of the Top Performers in Operating Efficiency
One of the Top Performers in Operating Efficiency $35 2019 Non-Fuel O&M per MWh* $31.20 $30 $29.30 $25 $23.30 $21.30 $21.50 $21.51 $20.80 $20.10 $20 $18.30 AVERAGE $15.30 $15 $14.00 WEC $10 The top 10 vertically integrated electric utilities by market cap Source: FERC Form 1 Reports *For all compani
Slide 41: Focused on Efficiency
Focused on Efficiency Reducing Day-to-Day O&M Expense* $1,342 $1,281 $1,234 4.5% 3.7% $1,143 $1,107 7.4% 3.2% 2-3% $ In millions 2016 2017 2018 2019 2020 2021E *Excludes costs that have a revenue offset such as operation and maintenance costs associated with the We Power generation units, transmissi
Slide 42: Industry Leading Earnings Quality
847.3% Industry Leading Earnings Quality Annual EPS Adjustments as a percentage of GAAP Earnings The 10 largest vertically integrated electric utilities* 250% 223.2% 200% 150% 117.9% 107.6% 108.3% 100% 82.3% No EPS adjustments 50% 20.5% 10.3% 0% 0% WEC 2018 2019 2020 Note: Percent changes are in abs
Slide 43: Balance Sheet Remains Strong
Balance Sheet Remains Strong Funds from Operations/Debt 18.0% 17.0% 16.0% 16.9% Target 15.0% WEC Energy Group 2020-2025 15.4% 14.0% S&P >15% 13.0% FFO to Debt 12.0% Moody’s >16% 11.0% CFO Pre-WC/Debt 10.0% 2020 Actual* 2020 Adjusted** Issuer Credit Ratings Holding Company Debt to Total Debt S&P Mood
Slide 44: Balanced Sales Mix
Balanced Sales Mix 2020 Retail MWh Deliveries Mix* 33% Large C&I by Segment Paper/Packaging 27% Foundry (SIC 33) 10% Mining/Minerals 9% Small C&I Large C&I Food/Agriculture 9% 35% 33% Other Manufacturing 8% Metal (SIC 34,35,37) 7% Medical 6% Residential Education 3% plus Farm Chemical 4% 32% Printin
Slide 45: Diverse Portfolio of Businesses
Diverse Portfolio of Businesses By Business By Jurisdiction Renewables WECI 6% Natural gas 2% 7% MI/MN 5% ATC 11% Electric Natural gas generation distribution Coal 34% IL 17% 16% WI Electric 66% Electric transmission distribution 11%* 25% Based on 2020 average asset base. *ATC is accounted for using
Slide 46: Open Regulatory Matters
Open Regulatory Matters Estimated Key Dates Wisconsin (apps.psc.wi.gov) Decision on 2022 Rate Case “Stay Out” Q3 2021 Decision on Koshkonong Solar and Battery Storage (Docket 5-BS-258 filed 4/30/2021) 2022 Decision on Weston RICE units (Docket 5-CE-153 filed 4/16/2021) 2021 Decision on Red B
Slide 47: Regulatory Environment
Regulatory Environment Wisconsin Illinois Governor Tony Evers (D) Governor J.B. Pritzker (D) Commission Commission Gubernatorial appointment, Gubernatorial appointment, Senate confirmation Senate confirmation Chairman: Gubernatorial appointment Chairman: Gubernatorial appointment 6
Slide 48: Rate-Making Parameters by Company
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 52
Slide 49: Key Rate Making Components
Key Rate Making Components Michigan– Illinois– Minnesota– Electric & Wisconsin– Wisconsin– Area Gas Gas Gas Gas Electric Gas Pipeline Replacement PGL Rider 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
Industry Leading Total Shareholder Returns* Over the past decade, WEC Energy Group has consistently delivered among the best total returns in the industry 350% 300% 250% WEC Energy Group 200% Dow Jones Utilities S&P Utilities 150% Philadelphia Utility S&P Electric 100% 50% 0% One-Year Three-Year Fiv
Slide 51: Contact Information
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 414-221-3339
Slide 52: Reconciliation of Reported EPS (GAAP) to Adjusted EPS (Non-GAAP)
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 – – – $ (0.65) Act of 2
Slide 53: Ratio of FFO to Debt
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 quali