WEC Energy Group, Inc. · NYSE:WEC
WEC Energy — Investor Presentation (December 2015)
48 slides from WEC Energy's investor presentation, December 2015
Slide 1: WEC Energy Group December 2015
WEC Vz Energy Group December 2015
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: A Transformational Step
A Transformational Step On June 29, Wisconsin Energy acquired Integrys in a transaction valued at $9 billion 2
Slide 4: Key Transaction Metrics
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 3
Slide 5: Transaction Overview
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
Slide 6: The New Look WEC
The New Look WEC Chicago, IL Same top management team New growth platform Focused on the energy and infrastructure needs of 4.4 million customers across the heartland 5
Slide 7: Customer-Facing Brands
Customer-Facing Brands Electric Generation and Electric Natural Gas Distribution Distribution Transmission 60% ownership 6
Slide 8: WEC Energy Group
WEC Energy Group Service Territory Company Statistics $16.4 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 $17 billion of rate base (2) We Energies Michigan Gas Utilit
Slide 9: Our Portfolio of Regulated Businesses
Well Positioned for the Future Our Portfolio of Regulated Businesses Gas Electric Transmission Distribution 11% 23% Electric Generation and Distribution 66% Based on 2014 regulated earnings 8
Slide 10: Rate Base Investment by Jurisdiction
Well Positioned for the Future Rate Base Investment by Jurisdiction* 4% 13% WI FERC 14% IL 70% MI/MN *Actual 2014 Rate Base 9
Slide 11: Drivers and Differentiators for Premium Growth
Well Positioned for the Future Drivers and Differentiators for Premium Growth Power the Future - $2.8 billion of total investment 12.7 percent equity return 60 percent owner of one of the largest transmission companies in America “Deliver the Future” capital spending over multiple years supp
Slide 12: WEC Energy Group
Well Positioned for the Future WEC Energy Group Focused on the fundamentals: World-class reliability Operating efficiency Financial discipline Exceptional customer care 11
Slide 13: A Compelling Value Proposition
Well Positioned for the Future 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 Projecting dividend growth in line wi
Slide 14: Consistent Earnings and Dividend Growth
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 13
Slide 15: Industry Leading Total Shareholder Returns
A Track Record of Performance Industry Leading Total Shareholder Returns 350% 317.9% WEC 300% Dow Jones Utilities Average 250% S&P Utilities Index 200% Philadelphia Utility Index 150% S&P Electric Index 100% 50% 0% One Year Three Year Five Year Ten Year Annualized returns for periods ending 12/31/20
Slide 16: Industry Leading Dividend Growth
A Track Record of Performance Industry Leading Dividend Growth Annualized Dividends Per Share $1.83* $1.56 $1.445 $1.20 $1.04 $0.80 2010 2011 2012 2013 2014 2015 In two steps, raised the dividend by 17.3 percent in 2015 Targeting dividend payout of 65-70% of earnings Dividend expected to grow
Slide 17: Plan to Increase Dividend 8.2%
A Track Record of Performance Plan to Increase Dividend 8.2% 49.50¢ 8.2% 45.75¢ 2015 2016 Projected quarterly dividend per share 16
Slide 18: Leading Reliability and Customer Satisfaction
A Track Record of Performance Leading Reliability and Customer Satisfaction We Energies Most reliable utility in Midwest for 5th consecutive year Top quartile in the Midwest for customer service and power quality(1) Top quartile nationally for customer service (2) Wisconsin Public Service #2
Slide 19: Delivering the Future
Delivering the Future Projected capital investment of $1.4 – $1.55 billion annually Committed to infrastructure investment that will: Renew and modernize our delivery networks Meet new environmental standards Reduce operating costs for customers 18
Slide 20: We Energies Major Construction Projects
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 $130 million In-service November 2015 19
Slide 21: We Energies Major Construction Projects
We Energies Major Construction Projects Converting the Valley Power Plant from coal to natural gas $60 to $62 million of investment On time and on budget In-service November 2015 20
Slide 22: We Power Major Construction Projects
We Power Major Construction Projects Fuel flexibility initiative at our new Oak Creek units $21 million projected investment for plant modifications $58 million projected investment for storage, fuel handling Significant reduction in fuel costs for our customers 21
Slide 23: Wisconsin Public Service Major Construction Projects
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 equipm
Slide 24: Peoples Gas Major Construction Projects
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 2014
Slide 25: 2016 Guidance
2016 Guidance 2015 projected legacy WEC earnings of $2.72* per share Targeting 2016 earnings per share growth of 6-8 percent Guidance for 2016: $2.88 to $2.94 per share** *Please reference last slide for explanation of what is excluded from legacy WEC ** 2016 earnings per share exclude any pot
Slide 26: Five Year Capital Projection 2016-2020
Line of Business View Five Year Capital Projection 2016-2020 In millions $1,800 $1,553 $1,547 $1,547 $1,548 $1,600 $1,399 $1,400 $1,200 $850 $837 $858 $866 $1,000 $755 $800 $600 $356 $415 $434 $413 $406 $400 $200 $288 $288 $277 $277 $277 $0 2016 2017 2018 2019 2020 Annual capital expenditure of $1
Slide 27: Five Year Capital Projection 2016-2020
State View Five Year Capital Projection 2016-2020 Clean Power Plan Compliance In millions $1,600 $1,553 $1,547 $1,547 $1,548 $1,399 $68 $67 $67 $67 $1,400 $59 $402 $398 $398 $398 $1,200 $402 $1,000 $800 $795 $805 $805 $806 $600 $650 $400 $200 $288 $288 $277 $277 $277 $0 2016 2017 2018 2019 2020 De
Slide 28: Capital Plan Summary
Capital Plan Summary Capex more than double stand-alone plan Continues to be driven primarily by investments in our delivery infrastructure ... no “big bets” Multiple customer-benefitting projects to choose from 27
Slide 29: Earnings Growth Drivers
Earnings Growth Drivers Projected year-end 2015 rate base ($ billions) Core Investment Rate Base: $7 - $8 billion of projected $1.8 rate base investment from 2016-2020 $2.8 $2.7 ATC – Traditional Footprint $3.7 to $4.5 billion 10 year capital plan WEC Ownership 60% Power the Future: ROE of
Slide 30: EPA's Clean Power Plan
Preliminary assessment EPA’s Clean Power Plan Plan calls for Wisconsin to reduce CO2 emissions by 41% First compliance deadline is 2022 Approximately two-thirds of the reductions must be achieved by 2022 EPA rule envisions natural gas combined cycle plants operating at a 75% capacity factor.
Slide 31: Ten Year Capital Projection 2016-2025
Line of Business View Ten Year Capital Projection 2016-2025 In millions $1,800 Clean Power Plan Potential - $2.2 billion?? Clean Power Plan $1,600 $1,400 $1,200 $850 $837 $858 $866 $861 $861 $839 $839 $839 $1,000 $755 $800 $600 $356 $415 $434 $413 $406 $406 $406 $396 $396 $396 $400 $200 $288 $288 $2
Slide 32: Key Takeaways for WEC Energy Group
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% projected annually – driven by multi-year infrastructure projects Targe
Slide 33: Appendix
Wa WEC Vz Energy Group Appendix
Slide 34: An Earn and Return Company with a Low Risk Profile
An “Earn and Return” Company with a Low Risk Profile Well Positioned for the Future Broadened Diversified across 5 (including FERC) transmission and gas business regulatory jurisdictions Low near-term Strong financial condition rate case risk $16.4 billion market cap enhances liquidity* No req
Slide 35: Strong Financial Condition
A Track Record of Performance Strong Financial Condition Electric and Gas Utilities Credit Ratings Distribution* Number of Utilities Issuers Utility Rating 120 Wisconsin Electric A- 100 Wisconsin Gas A 80 60 Wisconsin Public Service A- 40 Peoples Gas A- 20 North Shore Gas A- 0 AA - A A- BBB+ BBB BBB
Slide 36: Composition of Rate Base
Composition of Rate Base Total Projected 2015 Rate Base of $17.0 billion 1.2% Wisconsin Electric 1.2% 10.8% 1.4% We Power Wisconsin Public Service Corporation 6.6% 35.5% Peoples Gas Wisconsin Gas 10.7% Minnesota Energy Resources North Shore Gas 16.2% Michigan Gas Utilities 16.4% ATC 35
Slide 37: American Transmission Company
Positioned for the Future American Transmission Company Projected Capital Expenditures Key Assumptions (Millions of Dollars) ATC rate base at year end 2015: $700 $612 $3.1 billion $600 $565 ATC projected capital program $500 $372 $367 $402 2015 – 2024: $3.7-$4.5 billion $400 $339 $300 $223 $241
Slide 38: American Transmission Company - Outside the Traditional Footprint
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 line
Slide 39: State-of-the-Art Generation Fleet
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 co
Slide 40: Supporting a Clean Energy Future
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 Add
Slide 41: Rate Case Update
Balanced Regulatory Environment Rate Case Update Wisconsin Filed a Wisconsin Public Service case in April for rates effective January 2016 Oral order received in November. Expect written decision by the end of the year Michigan Filed a Michigan Gas Utilities case in June for rates effectiv
Slide 42: Rate-Making Parameters By Company
Rate-Making Parameters By Company Utility Equity Layer(1) Allowed ROE Wisconsin Electric 51% 10.2% WPS 51% 10.0%(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 52%(3) 9.9%(3) 1. Represents equity layer
Slide 43: Key Rate Making Components
Key Rate Making Components Wisconsin – Wisconsin – Area PGL NSG MERC MGU Electric Gas Michigan Gas Pipeline Replacement Rider X Bad Debt Rider X X Bad Debt Escrow Accounting WE WG Decoupling X X X Partial 1 for 1 recovery of prudent fuel Fuel Cost Recovery 1 for 1 PGA recovery of prudent fuel costs
Slide 44: Regulatory Environment
Regulatory Environment Wisconsin Commission Michigan Commission 3 Commissioners 3 Commissioners Gubernatorial appointment, Senate Gubernatorial appointment, Senate confirmation confirmation Chairman: Gubernatorial appointment Chairman: Gubernatorial appointment 6-year staggered ter
Slide 45: Regulatory Environment
Regulatory Environment Illinois Commission Minnesota Commission 5 Commissioners 5 Commissioners Gubernatorial appointment, Senate Gubernatorial appointment, Senate confirmation confirmation Chairman: Gubernatorial appointment Chairman: Gubernatorial appointment 5-year staggered ter
Slide 46: Key Merger Provisions
Balanced Regulatory Environment Key Merger Provisions • Earnings cap at Wisconsin Electric and Wisconsin Gas Wisconsin • Joint Resource Plan for capacity needs of Wisconsin Electric and Wisconsin Public Service • 2-year requirement for minimum level of jobs • 2-year base rate freeze Illinois • 3-yea
Slide 47: Precedent Transactions
Precedent Transactions Announce Closing Target Acquiror 1-Day FY1 FY2 Transaction Equity Price/Book Enterprise Date Date Premium P/E P/E Value ($mm) Value Value/ ($mm) Rate Base 10/26/15 Pending PNY DUK 42% 29.8x 28.0x $6,700 $4,916 3.5x n/a 9/4/15 Pending TE EMA.CN 48%(1) 23.3x 21.5x $10,361 $6,480
Slide 48: Reconciliation of 2015 EPS from WEC Energy Group (GAAP) to Wisconsin Energy Stand Alone
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 3.
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