Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (May 2020)
49 slides from Wec Energy's investor presentation, May 15, 2020
Slide 1: Focused on Performance: Investor Update May 2020
Focused on Performance Investor Update: May 2020 One of America’s Most Reliable Utility Outstanding Best in the U.S. in Large Most Responsible in the Midwest Midsize Utility Customer Satisfaction (Top 2 Box) Companies for 2020 We Energies Wisconsin Public Service WEC Energy Group WEC Energy Group PA
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 Statistics
Company Statistics . $28.6 billion market cap* . 1.6 million electric customers . 2.9 million natural gas customers . 60% ownership of American Transmission Company . 70,600 miles of electric distribution . 49,500 miles of gas distribution . $35.0 billion of assets . 9th largest natural gas distribu
Slide 4: Delivering reliable, affordable energy to our customers
“Delivering reliable, affordable energy to our customers. Reducing greenhouse gas emissions. Building and maintaining safe, resilient infrastructure. These imperatives continue to drive our decision-making, and the results are clear.” - Gale Klappa, WEC Energy Group Executive Chairman 2019 Best CEO
Slide 5: What's New?
What’s New? 4
Slide 6: Solidly Positioned for Unprecedented Circumstances
Solidly Positioned for Unprecedented Circumstances Strong balance sheet $2.6 billion of liquidity as of April 30, 2020 Executable capital plan with no need to issue additional equity No open rate cases Recovery mechanisms for bad debt in place Pension well-funded as of December 31, 2019
Slide 7: Wisconsin Utilities Regulatory Impacts of COVID-19
Wisconsin Utilities Regulatory Impacts of COVID-19 Ordered to defer incremental bad debt expense and new late payment charges for potential future recovery Suspended disconnections for nonpayment and deposits for new service suspended for all customers Authorized to defer recovery of increment
Slide 8: Electric Sales Volume Assumptions
Electric Sales Volume Assumptions 5.0% +4% 0.0% +0.5% -3% -5.0% -8% -7% -10.0% -15.0% -18% -20.0% Second Quarter Fourth Quarter 2020 2020 Based on the assumptions above, we are forecasting total retail electric volumes* to decrease by approximately 5% for the remaining nine months, compared to our o
Slide 9: A Decade of EPS Growth
A Decade of EPS Growth $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 GAAP Adjusted 8
Slide 10: Proven Track Record of Performance
Proven Track Record of Performance EPS Guidance 2019 Exceeded 2018 Exceeded 2017 Exceeded 2016 Exceeded The only utility to beat 2015 Exceeded guidance every year for 2014 Exceeded 16 years running 2013 Exceeded 2012 Exceeded 2011 Exceeded 2010 Exceeded 2009 Exceeded 2008 Excee
Slide 11: Solid Dividend Growth Continues
Solid Dividend Growth Continues Annualized Dividends Per Share In January, raised the $2.53** dividend by 7.2% to a $2.36 new annual rate of $2.21 $2.53 per share $2.08 $1.98 Targeting dividend $1.83* payout of 65-70% of earnings $1.56 $1.445 Projecting dividend $1.20 growth in line with $1.04 earni
Slide 12: Confident in Achieving Our EPS Growth Guidance
Confident in Achieving Our EPS Growth Guidance $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 2015 2016 2017 2018 2019 2015 Base GAAP Adjusted* *See Appendix for reconciliation of adjusted amounts to GAAP amounts (1) 7.1% annual average growth rate calculated from 2015 base of $2.72 per share (2) Based o
Slide 13: Infrastructure Portfolio Investments
Infrastructure Portfolio Investments Expected to provide returns that are higher than those in our regulated business 8%+ unlevered internal rate of return Expected to qualify for 100% bonus depreciation and production tax credits Project Investment Offtake Agreement Capacity Upstream Wind Aff
Slide 14: Met and exceeded our 2030 carbon emissions reduction goal
In 2019, met and exceeded our 2030 goal of reducing carbon emissions by 40% below 2005 levels Progress driven by generation reshaping plan Retired 40% of our coal generation since 2014 Given our progress, we are re-evaluating our longer-term carbon reduction goals 13
Slide 15: Methane Reduction Goal
Methane Reduction Goal More than halfway 0% towards Reduction Goal:* our goal -10% -20% 30% by the year 2030 -30% from a 2011 baseline -40% 2011 2019 2030 *This goal represents a decrease in the rate of methane emissions from the natural gas distribution lines in our network of 30% per mile by the y
Slide 16: Five-Year Capital Plan
Five-Year Capital Plan 15
Slide 17: 2020-2024 Capital Plan
2020-2024 Capital Plan ($ in billions) Total of $15.0 billion Gas Distribution Announced $5.7 Infrastructure 38% Projects $0.8 5% Remaining $1.0 Technology Infrastructure 7% $1.2 8% Projects Generation $2.2 Electric ATC 15% Distribution Investment* $2.8 $1.3 18% 9% * ATC is accounted for using the e
Slide 18: Greater Opportunities in Natural Gas and Energy Infrastructure
Greater Opportunities in Natural Gas and Energy Infrastructure Average Asset Base Projected Asset Base 12/31/2019 7% 12/31/2024 $21.4 billion Growth $30.2 billion Gas Distribution Gas29% Gas Distribution* Distribution* FERC 33% FERC Regulated 37% Regulated Electric We15% Power Electric 15% We Power
Slide 19: New Liquefied Natural Gas (LNG) Facilities
New Liquefied Natural Gas (LNG) Facilities Taking steps to maintain reliable and affordable service for our customers These LNG facilities provide We Energies is seeking approval for two a solution for Southeastern LNG facilities to address the need for Wisconsin to meet peak additional natural ga
Slide 20: Wisconsin Utilities Investing in Zero-Carbon Generation
Wisconsin Utilities Investing in Zero-Carbon Generation Solar generation technology has improved in efficiency, become more cost-effective and complements our summer demand curve. Wisconsin Electric, Wisconsin Public Service and Madison Gas & Electric are partnering on major solar initiatives.
Slide 21: Regional Economy
Regional Economy 20
Slide 22: Powering Industry Leaders in our Region
Powering Industry Leaders in our Region 21
Slide 23: Wisconsin Segment Longer-Term Sales Forecast
Wisconsin Segment Longer-Term Sales Forecast Benefits from Regional Economic Growth Year-over-Year 2022 - 2024 Sales Growth Forecast Electric 1.2% - 1.5% (weather-normalized) Gas 1.2% - 1.5% 22
Slide 24: Key Takeaways for WEC Energy Group
Key Takeaways for WEC Energy Group Track record of exceptional performance Portfolio of premium businesses Investment opportunities support 5-7% EPS growth with minimal impact on base rates 100% of capital allocated to regulated businesses or contracted renewables/gas storage Dividend grow
Slide 25: Appendix
Appendix Y WEC Energy Group
Slide 26: 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 - Gale Klappa, Executive Chairman WEC Energy Group Rick Kuester Kevin Fle
Slide 27: Business Structure
Electric Generation Electric Distribution Natural Gas Distribution Energy Infrastructure Electric Transmission 60% ownership 26
Slide 28: Infrastructure Investment: Blooming Grove Wind Farm
Infrastructure Investment Blooming Grove Wind Farm 94 GE wind turbines with a capacity of ~250MW Under development by Invenergy and located in McLean County, Illinois Expected total investment: $389 million for a 90% ownership interest Expected returns are higher than those in our regulated bu
Slide 29: Infrastructure Investment: Thunderhead Wind Energy Center
Infrastructure Investment Thunderhead Wind Energy Center 108 GE wind turbines with a capacity of ~300MW Under development by Invenergy and located in Antelope and Wheeler Counties, Nebraska Expected total investment: $381 million for a 90% ownership interest Expected returns are higher than th
Slide 30: Infrastructure Investment: Coyote Ridge Wind Farm
Infrastructure Investment Coyote Ridge Wind Farm Built by Avangrid Renewables in Brookings County, 39 GE wind turbines with South Dakota, within MISO footprint a capacity of ~97 MW Total investment: $145 million for an 80% ownership interest and substantially all of the tax benefits Expected r
Slide 31: Infrastructure Investment: Upstream Wind Energy Center
Infrastructure Investment Upstream Wind Energy Center Built by Invenergy and located in Antelope County, Nebraska 81 GE wind turbines with Total Investment: $307 million for a 90% a capacity of ~200 MW ownership interest Expected to provide returns that are higher than those in our regulated b
Slide 32: Infrastructure Investment: Bishop Hill III Wind Energy Center
Infrastructure Investment Bishop Hill III Wind Energy Center Developed by Invenergy and placed into service in May 2018 Located in Henry County, Illinois 53 GE wind turbines with a capacity of ~132 MW Total investment: $166 million for a 90% ownership interest Expected to provide returns tha
Slide 33: "Delivering" the Future Project Highlights
“Delivering” the Future Project Highlights Electric Redesign/ Resilience Natural Gas System Technology Modernization Enhancements • Major investments planned to address aging infrastructure Illinois • Advanced metering • Expect to spend $2.8 billion over • Modernizing Chicago’s natural program uses
Slide 34: Power the Future Investments
Power the Future Investments Natural Gas Coal Capacity 1,090 MW 1,030 MW1 Investment $664 million $2 billion1 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 $609
Slide 35: Capital Plan Drives 5% to 7% EPS Growth
$15.0 billion projected capital spend from 2020-2024 Capital Plan Drives 5% to 7% EPS Growth $3,468 $3,500 $212 $3,080 $3,005 $3,000 $286 $800 $305 $2,790 $100 $2,658 $113 $255 $2,500 $315 $199 $118 $87 $315 ATC Investment $625 $308 $81 $81 Energy Infrastructure $2,000 $785 $587 $580 MERC/MGU $621 I
Slide 36: Capital Plan Projections By Company
By Company Capital Plan Projections ($ in millions) 2020 2021 2022 Wisconsin Electric $701.9 $1,189.5 $926.7 Wisconsin Gas 184.8 267.7 268.2 Wisconsin Public Service 579.3 405.1 409.1 Upper Michigan Energy Corp 16.0 18.8 26.5 Wisconsin Segment 1,482.0 1,881.1 1,630.5 Peoples Gas 721.0 563.4 523.4 No
Slide 37: Diverse Portfolio of Regulated Businesses
Diverse Portfolio of Regulated Businesses By Business By Jurisdiction MI/MN 5% Gas Distribution 33% IL 16% FERC Regulated 14% FERC WI 14% 65% Electric Generation and Distribution 53% Based on 2019 average asset base. Excludes wind investments in our Energy Infrastructure segment 36
Slide 38: Composition of Asset Base
Composition of Asset Base Total 2019 Average Asset Base of $21.4 billion Company Asset Base - $B % of Total Wisconsin Electric $6.3 29.4% Wisconsin Gas 1.5 7.0 Wisconsin Public Service 3.4 15.9 Upper Michigan Energy Resources 0.4 1.9 Peoples Gas 3.0 14.0 North Shore Gas 0.3 1.4 Minnesota Energy Reso
Slide 39: Balanced Sales Mix
Balanced Sales Mix 2019 Retail MWh Deliveries Mix* 35% Large C&I by Segment Paper 23% Foundry (SIC 33) 11% Mining/Minerals 11% Small C&I Large C&I Food/Agriculture 9% 35% 35% Other Manufacturing 8% Metal (SIC 34,35,37) 7% Medical 5% Residential Education 4% plus Farm Chemical 4% 30% Printing 3% Offi
Slide 40: Balance Sheet Remains Strong
Balance Sheet Remains Strong Funds from Operations/Debt Holding Company Debt to Total Debt 19.0% 30% 18.0% 18.5% 28% 17.0% 16-18% 25% 16.0% Goal of 15.0% 30% or 20% 14.0% Less 13.0% 12.0% 15% 11.0% 10.0% 10% 2019 2020-2024E 2019 2020-2024E Electric and Gas Utilities Credit Ratings Distribution* Util
Slide 41: 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 5
Slide 42: Foxconn in Wisconsin
Foxconn in Wisconsin Expected capital investment by Foxconn of Foxconn announced $10 billion dollars July 26, 2017, Wisconsin’s largest Goal of creating 13,000 jobs, and an estimated economic development 22,000 indirect jobs created throughout Wisconsin project and largest corporate attraction
Slide 43: Focused on Efficiency
Focused on Efficiency Reducing Day to Day O&M $1,342 • Competitive excellence $1,281 $1,234 • Productivity through technology 4.5% $1,143 • Generation reshaping 3.7% 7.4% • Delivering the future 2016 2017 2018 2019 Electric Residential Bills below National Average $1,353 $1,264 National Average $1,2
Slide 44: Electric and Gas Rate Case Settlements
Electric and Gas Rate Case Settlements We Energies & Wisconsin Public Service PSCW approved the rate settlements in a final written order on December 19 Authorized return on equity: Wisconsin Electric – 10.0% Wisconsin Gas – 10.2% Wisconsin Public Service – 10.0% Capital structure equity
Slide 45: 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 WE / WG WE Decoupling ✓ ✓ Fuel Cost Recovery 1 for 1 recovery of prudent fuel costs +/- 2% band
Slide 46: Regulatory Environment
Regulatory Environment Wisconsin Illinois Governor Tony Evers (D) Governor J.B. Pritzker (D) Commission Commission Gubernatorial appointment, Gubernatorial appointment, Senate Senate confirmation confirmation Chairman: Gubernatorial appointment Chairman: Gubernatorial appointment 6
Slide 47: 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 400% 350% 300% WEC Energy Group 250% Dow Jones Utilities S&P Utilities 200% Philadelphia Utility S&P Electric 150% 100% 50% 0% One-Year Three-Yea
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)
Reconciliation of Reported EPS (GAAP) to Adjusted EPS (Non-GAAP) 2017 2016 Reported EPS – GAAP basis $ 3.79 $ 2.96 Tax benefit related to Tax Cuts and Jobs Act of 2017 $ (0.65) – Acquisition Costs – $ 0.01 Adjusted EPS – Non-GAAP basis* $ 3.14 $ 2.97 * WEC Energy Group has provided adjusted earnings