Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (September 2015)
39 slides from Wec Energy's investor presentation, Sep 8, 2015
Slide 1: WEC Energy Group September 2015
Exhibit 99.1 = WEC LSS VA Energy Group =— September 2015
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: A Transformational Step
2 A Transformational Step On June 29, Wisconsin Energy acquired Integrys in a transaction valued at $9 billion
Slide 4: Key Transaction Metrics
3 Key Transaction Metrics One-Day Premium 17% Price to Book 1.7x Enterprise Value to Rate Base 1.55x Price/Earnings FY One 20.0x* * Based on 2014 , the year in which the merger was announced
Slide 5: Strategic Rationale Transaction Overview
4 Strategic Rationale Transaction Overview Acquisition creates the leading electric and natural gas utility in the Midwest Meets or exceeds WEC’s acquisition criteria Accretive to earnings per share starting in first full calendar year of combined operations Largely credit neutral Long-term g
Slide 6: The New Look WEC
5 The New Look WEC Same top management team New growth platform Focused on the energy and infrastructure needs of 4.4 million customers across the heartland Chicago, IL
Slide 7: WEC Energy Group
6 WEC Energy Group $15.2 billion market cap (1) 1.6 million electric customers 2.8 million gas customers 60% ownership of ATC 70,000 miles electric distribution 44,000 miles gas distribution $16.4 billion of rate base (2) We Energies Michigan Gas Utilities Corporation Minnesota Energy
Slide 8: Well Positioned for the Future: Portfolio of Regulated Businesses
7 Well Positioned for the Future Our Portfolio of Regulated Businesses Electric Generation and Distribution 66% Gas Distribution 23% Electric Transmission 11% Based on 2014 regulated earnings
Slide 9: Well Positioned for the Future: Rate Base Investment by Jurisdiction
8 Well Positioned for the Future Rate Base Investment by Jurisdiction* 70% 14% 13% 4% WI FERC IL MI/MN *Actual 2014 Rate Base
Slide 10: WEC Energy Group: Focused on the fundamentals
9 WEC Energy Group Focused on the fundamentals: World-class reliability Operating efficiency Financial discipline Exceptional customer care
Slide 11: A Compelling Value Proposition
10 A Compelling Value Proposition For 2016, targeting earnings per share growth of 6-8 percent Beyond 2016, earnings per share expected to grow at 5-7 percent annually More than 99 percent of earnings from regulated operations 60 percent ownership of American Transmission Company Dividend
Slide 12: A Track Record of Performance: Consistent Earnings and Dividend Growth
11 A Track Record of Performance Consistent Earnings and Dividend Growth WEC is the only company in the S&P Electric Index S&P Utilities Index Philadelphia Utility Index Dow Jones Utilities Average that has grown earnings per share and dividends per share every year for the past 12 years
Slide 13: Industry Leading Total Shareholder Returns
12 A Track Record of Performance Industry Leading Total Shareholder Returns 0% 50% 100% 150% 200% 250% 300% 350% One Year Three Year Five Year Ten Year WEC S&P Utilities Index S&P Electric Index Philadelphia Utility Index Dow Jones Utilities Average Annualized returns for periods ending 12/31/2014 S
Slide 14: Industry Leading Dividend Growth
13 Industry Leading Dividend Growth In two steps, raised the dividend by 17.3 percent in 2015 *Annualized based on new quarterly dividend of $0.4575 2010 2011 2012 2013 2014 2015 $0.80 $1.04 $1.20 $1.445 $1.56 $1.83* Annualized Dividends Per Share
Slide 15: Leading Reliability and Customer Satisfaction
14 A Track Record of Performance Leading Reliability and Customer Satisfaction We Energies Most reliable utility in Midwest for 4th consecutive year Top quartile in the Midwest for customer service and power quality(1) Top quartile nationally for customer service(2) Wisconsin Public Service
Slide 16: Delivering the Future
15 Delivering the Future Projected capital investment of $1.3 – $1.4 billion annually Committed to infrastructure investment that will: Renew and modernize our delivery networks Meet new environmental standards Reduce operating costs for customers
Slide 17: We Energies Major Construction Projects: West Central Gas Expansion
16 We Energies Major Construction Projects West Central Gas Expansion Project Largest expansion of gas distribution network in our history On time and better than budget at approximately $135 million Projected in-service date: fourth quarter 2015
Slide 18: We Energies Major Construction Projects: Valley Power Plant Conversion
17 We Energies Major Construction Projects Converting the Valley Power Plant from coal to natural gas Approximately: $65 million investment Projected completion in late 2015 On time and on budget
Slide 19: We Power Major Construction Projects
18 We Power Major Construction Projects Fuel flexibility initiative at our new Oak Creek units $21 million investment for plant modifications $58 million investment for storage, fuel handling Significant reduction in fuel costs for our customers
Slide 20: Wisconsin Public Service Major Construction Projects
19 Wisconsin Public Service Major Construction Projects System Modernization and Reliability Project $220 million of projected investment from 2014-2018 Converting more than 1,000 miles of overhead distribution power lines to underground in northern Wisconsin Adding distribution automation equ
Slide 21: Peoples Gas Major Construction Projects
20 Peoples Gas Major Construction Projects Accelerated Main Replacement Project Extensive effort to modernize natural gas infrastructure in City of Chicago Investment recovery under a monthly bill rider Projecting $250 million average investment annually Enabling legislation in effect from 2
Slide 22: Poised for Growth: Key Takeaways for WEC Energy Group
21 Poised for Growth Key Takeaways for WEC Energy Group Leading electric and natural gas utility in the Midwest One of the top ten natural gas distribution companies in the nation Long-term earnings per share growth of 5-7% annually – driven by multi-year infrastructure projects Dividend gro
Slide 23: Appendix
> WEC LSS VA Energy Group — Appendix ee
Slide 24: An "Earn and Return" Company with a Low Risk Profile
23 An “Earn and Return” Company with a Low Risk Profile Well Positioned for the Future Diversified across 5 (including FERC) regulatory jurisdictions Strong financial condition $15.2 billion market cap enhances liquidity* Top-tier record of producing shareholder value Positive free cash fl
Slide 25: Strong Financial Condition
24 A Track Record of Performance Strong Financial Condition 0 20 40 60 80 100 120 AA - A A- BBB+ BBB BBB- Below Investment Grade Number of Issuers *Source: 2015 Standard & Poor’s Financial Services LLC. Utilities Electric and Gas Utilities Credit Ratings Distribution* Utility Rating Wisconsin Electr
Slide 26: State-of-the-Art Generation Fleet
25 Positioned for the Future State-of-the-Art Generation Fleet Natural gas – 3,753 megawatts Port Washington Generating Station among the lowest cost combined-cycle plants in country Coal – 5,044 megawatts Oak Creek heat rate is top 5% in country 80% of generation equipped with latest emission
Slide 27: Supporting a Clean Energy Future
26 Positioned for the Future Supporting a Clean Energy Future Over the past decade, WEC Energy Group has implemented a multi-emission strategy to achieve greater environmental benefit for lower cost Retired older, less-efficient coal-fired generation Added two combined cycle natural gas units
Slide 28: Positioned for the Future: Rate Base Investment
27 $11.9 $2.7 $1.7 By Business - $16.4 billion* Utilities PTF Transmission 70% 14% 13% 4% By State / Federal Jurisdiction* WI FERC IL MI/MN Positioned for the Future Rate Base Investment Note: Power the Future value is book value of investment Electric transmission represents 60% of ATC’s rate base
Slide 29: American Transmission Company – Traditional Footprint
28 Positioned for the Future American Transmission Company – Traditional Footprint $386 $491 $486 $231 $295 $292 2015 2016 2017 ATC WEC portion (60%) Key Assumptions ATC rate base at year end 2015: $3.1 billion ATC projected capital program 2014 – 2023: $3.3-$3.9 billion Implies average $166 m
Slide 30: American Transmission Company – Outside the Traditional Footprint
29 Positioned for the Future American Transmission Company – Outside the Traditional Footprint Joint venture between Duke Energy and ATC (DATC) Ownership split 50/50 between Duke and ATC WEC interest - 30% Investment opportunities: Potential expansion of California’s Path 15 transmission l
Slide 31: Balanced Regulatory Environment: Key Merger Provisions
30 Balanced Regulatory Environment Key Merger Provisions • Earnings cap at Wisconsin Electric and Wisconsin Gas • Joint Resource Plan for capacity needs of Wisconsin Electric and Wisconsin Public Service Wisconsin • 2-year requirement for minimum level of jobs • 2-year base rate freeze • 3-year capi
Slide 32: Balanced Regulatory Environment: Rate Case Update
31 Balanced Regulatory Environment Rate Case Update Wisconsin Filed a Wisconsin Public Service case in April for rates effective January 2016 Michigan Filed a Michigan Gas Utilities case in June for interim rates effective January 2016* Minnesota Plan to file a Minnesota Energy Resources
Slide 33: Reconciliation of 2015 EPS from WEC Energy Group to Wisconsin Energy Stand Alone
32 Reconciliation of 2015 EPS from WEC Energy Group (GAAP) to Wisconsin Energy Stand Alone Adjustments: 1. Remove Integrys earnings for the last six months of 2015 2. Remove acquisition debt interest expense $1.5 billion of funding: $1.2 billion in long-term debt, $300 million of commercial paper
Slide 34: Regulatory Environment: Wisconsin and Michigan Commissions
33 Regulatory Environment Wisconsin Commission 3 Commissioners Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appointment 6-year staggered terms Michigan Commission 3 Commissioners Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appoin
Slide 35: Regulatory Environment: Illinois and Minnesota Commissions
34 Regulatory Environment Illinois Commission 5 Commissioners Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appointment 5-year staggered terms Minnesota Commission 5 Commissioners Gubernatorial appointment, Senate confirmation Chairman: Gubernatorial appoin
Slide 36: Key Rate Making Components
35 Key Rate Making Components Area PGL NSG MERC MGU Wisconsin – Electric Wisconsin – Gas Michigan Gas Pipeline Replacement Rider X X Bad Debt Rider X X Bad Debt Escrow Accounting WE WG Decoupling X X X Partial Fuel Cost Recovery 1 for 1 PGA recovery of prudent fuel costs +/- 2% band 1 for 1 recovery
Slide 37: Composition of Rate Base
36 Composition of Rate Base 35.1% 6.2% 17.0% 16.5% 11.1% 1.3% 1.3% 1.0% 10.6% Wisconsin Electric Wisconsin Gas We Power WPS Peoples Gas North Shore Gas Minnesota Energy Resources Michigan Gas Utilities ATC Actual 2014 Rate Base Total Rate Base of $16.4 Billion
Slide 38: Rate-Making Parameters By Company
37 Rate-Making Parameters By Company Utility Equity Layer Allowed ROE Wisconsin Electric 51%* 10.2% WPS 51%* 10.2% Wisconsin Gas 49.5%* 10.3% Peoples Gas 50.33% 9.05% North Shore Gas 50.48% 9.05% Minnesota Energy Resources 50.31% 9.35% Michigan Gas Utilities 48.62% 10.25% *Represents mid-point
Slide 39: Precedent Transactions
38 Precedent Transactions Announce Date Closing Date Target Acquiror 1-Day Premium FY1 P/E FY2 P/E Transaction Value ($mm) Equity Value ($mm) Price/Book Enterprise Value/ Rate Base 02/25/2015 Pending UIL Iberdrola 25%(1) 21.7x 20.4x $4,674 $2,983 2.2x 1.95x 12/03/2014 Pending HE NEE 19% 21.3x 18.1x
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