Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (June 2021)
50 slides from Wec Energy's investor presentation, Jun 21, 2021
Slide 1: Investor Update: June 2021
Investor Update: June 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 Finalist for the S&P Global Energy Award in Corporate Socia
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 $29.6 billion market cap* 4.6 million retail customers 60% ownership of American Transmission Company $37.6 billion of assets 10th largest publicly traded utility in U.S. measured by market value* * As of May 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 midpoint of $4.01 per share. ** See Appendix for reconciliation
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 $2.71 per share Targeting dividend payout of 65-70% of earnings Pr
Slide 7: What's New?
6 What’s New?
Slide 8: Our ESG Progress Plan: New Carbon Reduction Goals
7 Our ESG Progress Plan New Carbon Reduction Goals – Electric Generation Reduction goals: 60% below 2005 levels by 2025 80% below 2005 levels by the end of 2030 Net carbon neutral by 2050 Goals aligned with the Paris Climate Accord*Includes projection of potential carbon offsets by 2050 -100 -80 -60
Slide 9: Exposure to Coal - Significantly Reduced
8 Exposure to Coal - Significantly Reduced *ATC is accounted for using the equity method; this represents WEC’s portion of the asset base **Includes purchased power ***Includes electric distribution revenue and transmission expense that we are authorized to collect in rates 2020 Assets by Business T
Slide 10: Reducing Greenhouse Gas Emissions
9 Reducing Greenhouse Gas Emissions 0.78 0.42 0.33 0.17 0** 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 2005 2020 2025E 2030E 2050E Greenhouse gas intensity* (metric tons CO2e/MWh) *Includes owned electric generation, purchased power and WEC Infrastructure (WECI). The environmental attributes of the WECI
Slide 11: New Methane Reduction Goal
10 Reduction goal: Net zero by the year 2030** Our ESG Progress Plan New Methane Reduction Goal *Represents a decrease in the rate of methane emissions, per mile, from the natural gas distribution lines in our network from a 2011 baseline. **This goal applies to emissions from WEC Energy Group natur
Slide 12: Investment in Regulated Renewables
11 Investment in Regulated Renewables Progress on plan to build 1,800MW of solar, wind and battery storage Project Utility WEC Ownership** WEC Investment ($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 Summer, 2021
Slide 13: Electric and Gas Rate Case "Stay-Out"
12 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 –
Slide 14: ESG Progress Plan
13 ESG Progress Plan
Slide 15: 2021-2025 Capital Plan: Investing $16.1 Billion
14 Investing $16.1 billion for: Efficiency Sustainability Growth 2021-2025 Capital Plan Our ESG Progress Plan
Slide 16: Investing in Efficiency, Sustainability and Growth
15 $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 17: Robust Growth in Asset Base
16 $22.8 billion $32.2 billion 2020A 2025E* Robust Growth in Asset Base 7% Growth *Estimated year-end average asset base
Slide 18: Modernizing Our Gas-Fueled Generation Fleet
17 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 19: Aggressively Reducing Coal-Fueled Generation
18 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 20: WEC Infrastructure Portfolio – Green and Growing
19 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 21: Regional Economy
20 Regional Economy
Slide 22: Powering Industry Leaders in our Region
21 Powering Industry Leaders in our Region
Slide 23: Wisconsin Segment Sales Forecast 2022-2025
22 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 24: Key Takeaways for WEC Energy Group
23 ESG Progress Plan supports 5-7% EPS growth with minimal impact on customer rates 100% of capital allocated to regulated businesses or contracted renewables Dividend growth projected to be in line with earnings growth No need to issue additional equity through forecast period Strong and
Slide 25: Appendix
Appendix | VA Ee VA Energy Group
Slide 26: Business Lines Overview
25 Electric Distribution Electric Transmission 60% ownership Electric Generation Energy Infrastructure Natural Gas Distribution
Slide 27: Office of the Chair
26 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 28: Environmental, Social & Governance Focus
27 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 29: Why Our Natural Gas Distribution Networks Matter
28 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 30: New Liquefied Natural Gas (LNG) Storage Facilities
29 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 31: Efficiency, Growth and Sustainability Progress
30 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 32: WEC Infrastructure Projects and Offtake Agreements
31 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 33: Low-Risk Capital Plan Drives 5% to 7% EPS Growth
32 $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 $688 $375 $375 $375 $375 $3,451 $3,312 $3,489 $3,037 $2,811 $- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 2021 2022 2023 2024 2025 Energy Infrastru
Slide 34: Capital Plan Projections by Company
33 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 35: Composition of Asset Base
34 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 36: Power the Future Investments
35 Power the Future Investments 1 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 Capaci
Slide 37: One of the Top Performers in Operating Efficiency
36 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 38: Focused on Efficiency
37 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 39: Industry Leading Earnings Quality
38 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 40: Balance Sheet Remains Strong
39 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 41: Balanced Sales Mix
40 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 42: Diverse Portfolio of Businesses
41 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 us
Slide 43: Estimated Key Dates
42 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 3/
Slide 44: Regulatory Environment
43 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 45: Rate-Making Parameters by Company
44 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 46: Key Rate Making Components
45 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 47: Industry Leading Total Shareholder Returns
46 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 48: 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 49: Reconciliation of Reported EPS (GAAP) to Adjusted EPS (Non-GAAP)
48 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 50: Ratio of FFO to Debt
49 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