Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (July 2015)
32 slides from Wec Energy's investor presentation, Jul 30, 2015
Slide 1: WEC Energy Group July/August 2015
WEC V/A Energy Group July/August 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: An "Earn and Return" Company with a Low Risk Profile
2 An “Earn and Return” Company with a Low Risk Profile A Unique Value Proposition Targeted earnings per share growth of 6-8% for 2016 Beyond 2016, earnings per share expected to grow at 5-7% annually with more than 99% from regulated operations Enhanced total return outlook Raised dividend o
Slide 4: A Transformational Step: Wisconsin Energy has acquired Integrys
3 A Transformational Step Wisconsin Energy has acquired Integrys in a transaction valued at $9 billion
Slide 5: Strategic Rationale for Transaction
4 An “Earn and Return” Company with a Low Risk Profile Strategic Rationale for Transaction Acquisition creates the leading electric and natural gas utility in the Midwest Meets or exceeds WEC’s acquisition criteria Earnings per share projected to be accretive from first full calendar year of c
Slide 6: WEC Energy Group
5 An “Earn and Return” Company with a Low Risk Profile WEC Energy Group $14.9 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
Slide 7: Building An Enduring Enterprise
6 An “Earn and Return” Company with a Low Risk Profile Building An Enduring Enterprise Chicago, IL Milwaukee, WI Green Bay, WI Focused on the fundamentals World-class reliability Operating efficiency Financial discipline Exceptional customer care Green Bay photo courtesy of Greater Green Bay
Slide 8: Well Positioned for the Future
7 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 $14.9 billion market cap enhances liquidity Top-tier record of producing shareholder value Positive free cash flow
Slide 9: Leading Reliability and Customer Satisfaction
8 A Track Record of Performance Leading Reliability and Customer Satisfaction We Energies Most reliable utility in Midwest for 4th consecutive year and 7 of past 10 years Top quartile in the Midwest for customer service, power quality and reliability(1) and top quartile nationally for customer s
Slide 10: Industry Leading Total Shareholder Returns
9 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 So
Slide 11: Industry Leading Dividend Growth
10 A Track Record of Performance Industry Leading Dividend Growth Dividend raised over 8% in June Dividend growth of 52.5% since 2012, including a 17.3% increase in 2015 Future dividend growth in line with earnings growth Targeting dividend payout of 65-70% of earnings *Annualized based on d
Slide 12: Strong Financial Condition
11 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 13: A Diversified Regulated Portfolio
12 Positioned for the Future A Diversified Regulated Portfolio Wisconsin Energy(1) WEC Energy Group(1) Electric Utility 77% Gas Utility 17% ATC 6% Electric Utility 66% Gas Utility 23% ATC 11% Regulated Business Mix (1) Based on 2014 regulated earnings
Slide 14: Delivering the Future
13 Positioned for the Future Delivering the Future Anticipated annual capital investment of $1.3 – $1.4 billion Committed to investing in infrastructure that will: Renew and modernize our delivery networks Meet new environmental standards Reduce operating costs for customers
Slide 15: State-of-the-Art Generation Fleet
14 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 16: Supporting a Clean Energy Future
15 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 17: We Energies Major Construction Projects
16 Positioned for the Future We Energies Major Construction Projects Western Wisconsin gas distribution expansion Less than projected $175 million Projected in-service date: fourth quarter 2015 Projects at our new Oak Creek units $21 million expected investment for plant modifications $58 mi
Slide 18: WPS Major Construction Projects
17 Positioned for the Future WPS Major Construction Projects Weston 3 plant environmental upgrade (ReACT™) $345 million expected investment Projected completion: early 2016 System Modernization and Reliability Project (SMRP) $220 million of total investment expected from 2014-2018 Converting
Slide 19: Peoples Gas Major Construction Projects
18 Positioned for the Future Peoples Gas Major Construction Projects Accelerated Main Replacement Project (AMRP) 20-year program to modernize natural gas infrastructure in City of Chicago Investment recovery under Qualified Infrastructure Plant Rider (QIP) ~ projected $250 million average annual
Slide 20: Rate Base Investment
19 $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 21: American Transmission Company – Traditional Footprint
20 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 22: American Transmission Company – Outside the Traditional Footprint
21 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 23: Key Merger Provisions
22 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 24: Rate Case Update
23 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 25: Key Takeaways of WEC Energy Group
24 Poised for Growth Key Takeaways of WEC Energy Group Leading electric and natural gas utility in the Midwest and a top ten natural gas distribution company Long-term earnings per share growth of 5-7% and enhanced shareholder returns Majority ownership in ATC brings opportunity for additional
Slide 26: Appendix
WA WEC V/A Energy Group Appendix EO SSS ee
Slide 27: Regulatory Environment: Wisconsin and Michigan Commissions
26 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 28: Regulatory Environment: Illinois and Minnesota Commissions
27 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 29: Key Rate Making Components
28 Key Rate Making Components Area PGL NSG MERC MGU Wisconsin – Electric Wisconsin – Gas Michigan Gas Pipeline Replacement Rider 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 o
Slide 30: Composition of Rate Base
29 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 $16.4 Billion
Slide 31: Rate-Making Parameters By Company
30 Rate-Making Parameters By Company Utility Equity Layer Allowed ROE Wisconsin Electric 51%* 10.2% WPS 51%* 10.2% Wisconsin Gas 49.5%* 10.3% Peoples Gas 50.33% 9.05% North Shore Gas 50.48% 9.05% Minnesota Energy Resources 50.31% 9.35% Michigan Gas Utilities 48.62% 10.25% *Represents mid-point
Slide 32: Precedent Transactions
31 Precedent Transactions Announce Date Closing Date Target Acquiror 1-Day Premium FY1 P/E FY2 P/E Transaction Value ($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