Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (May 2018)
52 slides from Wec Energy's investor presentation, May 14, 2018
Slide 1: Poised for Growth Investor Update: May 2018
Poised for Growth Investor Update: May 2018
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 $20.3 billion market cap (1) 1.6 million electric customers 2.9 million natural gas customers 60% ownership of American Transmission Company 69,600 miles of electric distribution 48,000 miles of gas distribution $18.5 billion of rate base (2) 99+% regulated (3) (1) As of 4/30/2018
Slide 4: Focused on the Fundamentals
Focused on the Fundamentals Our strategy is to create long- term value by focusing on the fundamentals: safety, world- class reliability, operating efficiency, financial discipline and customer care. 3
Slide 5: A Decade of EPS Growth
Focused on the Fundamentals A Decade of EPS Growth $4.00 $3.00 $2.00 $1.00 $0.00 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 GAAP Adjusted nd 2 year in a row Best in America - 2017 Ranked #3 in our sector Best in Midwest 7 years in a row * 10% CAGR based off GAAP EPS that include a one-ti
Slide 6: Proven Track Record of Performance
Proven Track Record of Performance EPS Guidance 2017 Exceeded � 2016 Exceeded � 2015 Exceeded � 2014 Exceeded The only regulated utility � to beat guidance every 2013 Exceeded � year for more than a 2012 Exceeded � decade 2011 Exceeded � 2010 Exceeded � 2009 Exceeded � 2008 Exceeded � 2007 Exceeded
Slide 7: Tax Reform Summary
Tax Reform Summary • Beneficial to customers • No equity issuances required • No change to 2018 guidance, long-term growth rate or capital plan • Maintaining FFO-to-debt in the range of 16 to 18 percent • Estimated to be a partial cash taxpayer in 2018, full cash taxpayer in 2019 State Tax Treatment
Slide 8: Increasing 5-Year Capital Plan by $2.1 billion
Increasing 5-Year Capital Plan by $2.1 billion $14,000 $11,823 $12,000 $911 $9,724 $10,000 $230 $8,000 $5,514 $5,234 $6,000 $4,000 $2,707 NewPlan $2,601 $2,000 Former Plan $2,691 $1,659 $- 2017-2021 2018-2022 In millions Generation Electric Delivery Gas Delivery Energy Infrastructure 7
Slide 9: 2018-2022 Capital Plan by Category
2018-2022 Capital Plan by Category Energy $ In billions Infrastructure Gas Distribution $0.9 SMP $1.5 Generation 8% Gas Growth 0.7 New Gas $0.7 Distribution $5.0 System Renewal 1.4 New Renewables 0.9 42% Required Relocation 1.0 Maintenance Capital 0.9 Manlove Storage 0.4 Total $2.5 Generation Total
Slide 10: American Transmission Company
American Transmission Company WEC portion of investment from 2018-2022 projected at $1.6 billion Key Assumptions Projected Capital Expenditures (Inside Traditional Footprint) � ATC’s 2017 average rate base: (in millions) $3.5 billion $600 � Implies WEC’s average rate $516 base growth of $144 million
Slide 11: Confident in Achieving Our EPS Growth Guidance
Confident in Achieving Our EPS Growth Guidance $4.00 $3.50 $3.00 2018 earnings guidance of $2.50 $3.26 to $3.30 per share. Expect to reach top end of range $2.00 $1.50 $1.00 2015 2016 2017 2018 2019 2020 2015 Base GAAP Adjusted* * Adjusted earnings per share exclude acquisition costs totaling 1 cent
Slide 12: Solid Dividend Growth Continues
Solid Dividend Growth Continues 5-7% Annualized Dividends Per Share $2.21** � 13.5% compound $2.08 annual growth rate $1.98 6.25% 5.1% off 2010 base $1.83* 8.2% � Continuing to target dividend payout of $1.56 17.3% $1.445 65-70% of earnings 8.0% $1.20 20.4% � Projecting dividend growth in line with
Slide 13: Reshaping our Generation Fleet for a Clean, Reliable Future
Focus on efficiency Reshaping our Generation Fleet for a Clean, Reliable Future Balancing reliability and customer cost with environmental stewardship � Taken as a whole, changes to our generation Our goal is to work with fleet should reduce costs to customers, preserve industry partners, fuel diver
Slide 14: Retiring Coal-Fueled Generation
Retiring Coal-Fueled Generation � Our plan includes retiring more than 1,800 Achieving targeted CO2 megawatts (MW) of coal generation by 2020 reductions by 2022 � Pulliam Power Plant � 200 MW � Expected by the end of 2018 � Edgewater 4 � WPS share – 100 MW � Expected end of third quarter 2018 � Pres
Slide 15: Building Natural Gas-Fueled Generation
Building Natural Gas-Fueled Generation 400+ MW of natural gas-fueled generation � U.P. of Michigan (UMERC) Reciprocating Internal � RICE generation Combustion Engines � 180 MW (RICE) are modular, run � Expected in-service – by mid-2019 on natural gas and allow for reliable and � West Marinette (WPS)
Slide 16: Investing in Zero-Carbon Generation
Investing in Zero-Carbon Generation 350+ MW of zero-carbon generation in Wisconsin by 2020 � Solar Solar generation technology � WPS – purchase 200 MW from developer has greatly improved, become more cost-effective and � We Energies – purchase150 MW from developer complements our summer demand curve
Slide 17: Achieving Our Carbon Goal
Achieving Our Carbon Goal Anticipated CO2 Reductions 0% -10% -20% Reduction Goal -30% 40% below 2005 % Reduction from 2005 -40% -50% -60% 2005 2016 2022 2030 Mass Rate 16
Slide 18: Sources of Electric Energy Supply by Fuel Type
Sources of Electric Energy Supply by Fuel Type 2005A 2017A 2022 Estimated 2030 Aspirational 20% 26% 26% 40% 7% 53% 73% 21% 34% Coal Natural Gas Carbon Free 17
Slide 19: Delivering the Future
Delivering the Future Infrastructure Resilience Infrastructure Redesign Technology Enhancements • Installing 2,200 miles of • Major investments planned • Advanced metering underground circuits to replace to address aging program that uses troublesome overhead lines, infrastructure integrated system
Slide 20: Wisconsin Public Service System Modernization and Reliability Project
Wisconsin Public Service System Modernization and Reliability Project Phase 1 – install 1,200 miles of underground circuits and add distribution automation equipment Minocqua Eagle River Rhinelander on 400 miles Tomahawk Wausaukee Wabeno � Project $220 million investment Merrill Antigo Menominee Wau
Slide 21: Major Construction Projects – Peoples Gas
Major Construction Projects – Peoples Gas Natural Gas System Modernization Program Extensive effort to modernize natural gas infrastructure in city of Chicago � Ultimately replace 2,000 miles of piping � Approximately 25% complete* Investment recovery under a monthly rider � Project $280-$300 millio
Slide 22: Advanced Metering Infrastructure (AMI) Program
Advanced Metering Infrastructure (AMI) Program � Real-time data for faster identification of meter condition, theft of electric service and outage management � Reduce manual work and deliver timely and accurate bills for customers � Benefits from implementation of remote disconnection and reconnecti
Slide 23: Acquisition of Bluewater Natural Gas Holding
Well Positioned for the Future Acquisition of Bluewater Natural Gas Holding � Bluewater entered into long-term service Underground natural agreements with the three Wisconsin gas gas storage facilities in utilities Michigan that will � Total acquisition price: $230 million provide one-third of the s
Slide 24: Acquisition of Upstream Wind Energy Center
Well-Positioned for the Future Acquisition of Upstream Wind Energy Center � Currently being built by Invenergy in 81 GE wind turbines with Antelope County, Nebraska a capacity of ~200 MW � Total acquisition price: $276 million for an 80% ownership interest � Expected to provide returns that are high
Slide 25: New Generation in Upper Peninsula
Major Construction Projects New Generation in Upper Peninsula � Provides a long-term generation solution for electric ~180 MW of clean, natural reliability in Upper Peninsula gas-fired generation from Reciprocating Internal � Estimated $266 million ($277 million including Combustion Engines (RICE) A
Slide 26: Foxconn in Wisconsin
Foxconn in Wisconsin � Capital investment by Foxconn of $10 billion Foxconn announced dollars July 26, 2017, Wisconsin’s largest � Goal of creating 13,000 jobs, with an average economic development salary of $53,875, plus benefits project and largest corporate attraction � Estimated 22,000 indirect
Slide 27: 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 percent EPS growth with minimal rate impact � Dividend growth projected to be in line with earnings growth � No need to issue additional equity throug
Slide 28: Appendix
Appendix WEC Energy Group
Slide 29: WEC Energy Group business lines
Electric Distribution Natural Gas Distribution Electric Generation Non-Utility Energy Infrastructure Electric Transmission 60% ownership 28
Slide 30: Still Recognizing Benefits from Acquisition
Still Recognizing Benefits from Acquisition � WEC Energy Group formed in 2015 when Wisconsin Energy acquired Integrys in a transaction valued at $9 billion � Acquisition created the leading electric and natural gas utility in the Midwest � Based on the number of customers, WEC Energy Group is the ei
Slide 31: Saving for Growth
Saving for Growth Reduced O&M leads to incremental capital investment opportunities 900 Every dollar in O&M 800 savings results in 700 approximately $8 of capital investment 600 opportunities, with no 500 expected impact to customer rates 400 CapitalDeployed* 300 200 100 0 0 25 50 75 100 In millions
Slide 32: Earnings Growth Drivers
Earnings Growth Drivers 2017 average rate base ($ billions) $13.4 $3.0 $2.1 $18.5 billion $2.7 Utilities Energy Transmission Infrastructure Utility: Energy Infrastructure: ATC: Projected capital spend Projected capital spend Projected capital spend from 2018–2022: ~ $10.7B from 2018-2022: ~ $1.1B fr
Slide 33: Line of Business View Capital Plan Drives 5% to 7% EPS Growth
Line of Business View Capital Plan Drives 5% to 7% EPS Growth ATC Investment $2,690 $15 $2,555 $2,500 $2,465 $309 $239 $2,142 $1,971 $1,190 $2,000 $318 $30 $996 $1,181 $1,500 Energy Infrastructure $1,159 $988 Gas Delivery $556 Electric Delivery $1,000 $511 Generation* $559 $541 $500 $540 $929 $739 $
Slide 34: State View Robust Capital Projection 2018-2022
State View Robust Capital Projection 2018-2022 ATC Investment $2,690 $111 $15 $2,555 $2,500 $2,465 $309 $239 $100 $677 $96 $2,142 $1,971 $2,000 $318 $117 $30 $526 $639 $80 Energy Infrastructure $1,500 $632 $525 $958 MERC/MGU Illinois $885 WI/MI Delivery $1,000 $1,001 WI/MI Generation* $950 $924 $500
Slide 35: Increasing Natural Gas Distribution Investment
Increasing Natural Gas Distribution Investment Average Rate Base Estimated Rate Base at 12/31/2017 at 12/31/2022 Gas Gas Distribution Distribution FERC 29% 35% Regulated FERC 15% Regulated Electric Electric 15% Generation Generation and Distribution and Distribution 56% 50% 34
Slide 36: 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 37: American Transmission Company – Outside the Traditional Footprint
American Transmission Company – Outside the Traditional Footprint � Joint venture between Duke Energy and ATC (DATC) � Ownership split 50/50 between Duke and ATC � WEC current ownership interest is 37% � Owns transmission rights to California’s Path 15 � Zephyr Power Transmission project � Proposed
Slide 38: Balanced Sales Mix
Balanced Sales Mix 2017 Retail MWh Deliveries Mix* 35% Large C&I by Segment Paper 24% Foundry (SIC 33) 11% Mining/Minerals 10% Small C&I Large C&I Food/Agriculture 9% 36% 35% Other Manufacturing 8% Metal (SIC 34,35,37) 7% Medical 5% Residential Office 4% plus Farm Education 4% 29% Printing 3% Chemic
Slide 39: Diverse Portfolio of Regulated Businesses
Diverse Portfolio of Regulated Businesses By Business By Jurisdiction MI/MN 3% Gas Distribution IL 29% 13% FERC Regulated 15% FERC 15% WI 69% Electric Generation and Distribution 56% Based on 2017 average rate base 38
Slide 40: Composition of Rate Base
Composition of Rate Base Total 2017 Rate Base of $18.5 billion Wisconsin Electric Power the Future Wisconsin Public Service Corporation UMERC Wisconsin Gas North Shore Gas 33.5% 15.7% Peoples Gas Minnesota Energy Resources 15.7% Michigan Gas Utilities ATC 0.5% 11.4% Bluewater 7.0% 0.5% 11.9% 1.1% 1.
Slide 41: Strong Financial Condition
Strong Financial Condition Electric and Gas Utilities Credit Ratings Distribution* Utilities Number of Utility Rating Issuers 140 Wisconsin Electric A- 120 100 Wisconsin Gas A 80 60 Wisconsin Public Service A- 40 20 Peoples Gas A- 0 AA - A A- BBB+ BBB BBB- Below Investment Grade *Source: Standard &
Slide 42: Manageable Levels of Refinancing
Manageable Levels of Refinancing $900 Upcoming Debt Maturities $800 $700 $600 $500 $400 $300 $200 No debt maturities $100 in 2022 $- In millions 2018 2019 2020 2021 2022 Hold Co WEPCO WPS PGL 41
Slide 43: Balance Sheet Remains Strong
Balance Sheet Remains Strong No Equity Issuances Anticipated Funds from Operations/Debt Holding Company Debt 20% to Total Debt 19% 30% 19% 18% 29% 25% 17% 16-18% 16% 20% 15% Goal of 30% 15% 14% or Less 13% 10% 12% 5% 11% 10% 0% 2017 2018-2020E 2017 2018-2020E 42
Slide 44: Rate-Making Parameters by Company
Rate-Making Parameters by Company Utility Equity Layer (1) Authorized ROE Wisconsin Electric 48.5%-53.5% 10.2% Wisconsin Public Service 49.0%-54.0% 10.0% Wisconsin Gas 47.0%-52.0% 10.3% Peoples Gas 50.33% 9.05% North Shore Gas 50.48% 9.05% Minnesota Energy Resources 50.32% 9.11% Michigan Gas Utiliti
Slide 45: Constructive Rate Making Components
Constructive Rate Making Components Michigan – Illinois – Minnesota Electric & Wisconsin – Wisconsin – Area Gas – Gas Gas Gas Electric Gas Pipeline Replacement Rider PGL Bad Debt Rider X Bad Debt Escrow Accounting WE / WG WE Decoupling X X Fuel Cost Recovery 1 for 1 recovery of prudent fuel costs +/
Slide 46: Regulatory and Open Docket Update
Regulatory and Open Docket Update Estimated Key Dates Wisconsin (apps.psc.wi.gov) � Decision regarding proposed rate case settlement for all Wisconsin utilities (Dockets: We Energies – 5-UR-108 and WPS – 6690-UR-125) � � Received approval on acquisition of Bluewater Natural Gas Holding Co. � � Recei
Slide 47: Regulatory Environment Wisconsin Michigan
Regulatory Environment Wisconsin Michigan � Governor Scott Walker (R) � Governor Rick Snyder (R) � Commission � Commission � Gubernatorial appointment, � Gubernatorial appointment, Senate confirmation Senate confirmation � Chairman: Gubernatorial appointment � Chairman: Gubernatorial appointment � 6
Slide 48: Regulatory Environment Illinois Minnesota
Regulatory Environment Illinois Minnesota � Governor Bruce Rauner (R) � Governor Mark Dayton (D) � Commission � Commission � Gubernatorial appointment, Senate � Gubernatorial appointment, Senate confirmation confirmation � Chairman: Gubernatorial appointment � Chairman: Gubernatorial appointment � 5
Slide 49: Regulatory Environment FERC
Regulatory Environment � FERC � Presidential appointment, Senate confirmation � 5-year term FERC Commissioners Name Party Began Serving Term Ends Kevin McIntyre R 11/2017 06/2023 Chairman Cheryl LaFleur D 07/2014 06/2019 Robert R 08/2017 06/2020 Powelson Richard Glick D 11/2017 06/2022 Neil Chatterj
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 300% 250% 200% WEC Energy Group Dow Jones Utilities 150% S&P Utilities Philadelphia Utility S&P Electric 100% 50% 0% One-Year Three-Year Five-Yea
Slide 51: Meeting and Exceeding Commitments
Meeting and Exceeding Commitments Commitments Results Deliver among the best risk- • Adjusted EPS 10-year CAGR of 8% (2007-2017) adjusted returns in the industry � • Dividend CAGR of 13.5% (2010-2018) Reduce 2017 O&M by 3% off O&M reduction of more than 6% year over year 2016 base � Maintain strong
Slide 52: 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