Wec Energy Group, Inc. · NYSE:WEC
Wec Energy — Investor Presentation (June 2018)
55 slides from Wec Energy's investor presentation, Jun 19, 2018
Slide 1: Poised for Growth Investor Update: June 2018
Poised for Growth Investor Update: June 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 $19.9 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 5/31/2018
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 Best in Midwest 7 years in a row * 10% CAGR based off GAAP EPS that include a one-time, non-cash gain relate
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 2013 Exceeded to beat guidance every year for more than a 2012 Exceeded decade 2011 Exceeded 2010 Exceeded 2009 Exceeded 2008 Exceeded 2007 Exceeded
Slide 7: What's New?
What’s New?
Slide 8: 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 9: Investment in Upstream Wind Energy Center
Well-Positioned for the Future Investment in Upstream Wind Energy Center Currently being built by Invenergy in Antelope County, Nebraska 81 GE wind turbines with a capacity of ~200 MW Total investment: $276 million for an 80% ownership interest Expected to provide returns that are higher than
Slide 10: Wisconsin Public Service Proposed Solar Generation
Wisconsin Public Service Proposed Solar Generation Wisconsin Public Service and Madison Gas & ~200 MW of combined Electric have partnered on two major solar projects output for WPS at two Badger Hollow Solar Farm locations Located in Iowa County, Wisconsin WPS would own 100 MW (MGE 50 MW) ~$
Slide 11: 5-Year Capital Plan
5-Year Capital Plan
Slide 12: 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 13: American Transmission Company
American Transmission Company WEC portion of investment from 2018-2022 projected at $1.6 billion Key Assumptions Projected Capital Expenditures ATC’s 2017 average rate base: (Inside Traditional Footprint) (in millions) $3.5 billion $600 Implies WEC’s average rate $516 base growth of $144 million
Slide 14: 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 15: 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% Projecting dividend $1.20 20.4% growth in line with
Slide 16: 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 17: 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 18: 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 19: Investing in Zero-Carbon Generation
Investing in Zero-Carbon Generation Solar WPS – asset purchase – 200 MW from developers (Certificates of Authority filed for approval 5/31) Solar generation technology We Energies – plan to purchase150 MW has greatly improved, become from developer more cost-effective and complements our summe
Slide 20: Achieving Our Carbon Goal
Achieving Our Carbon Goal Anticipated CO2 Reductions 0% -10% -20% Reduction Goal -30% 40% below 2005 % % Reduction from2005 -40% -50% -60% 2005 2016 2022 2030 Mass Rate 19
Slide 21: Sources of Electric Energy Supply by Fuel Type
Sources of Electric Energy Supply by Fuel Type 2005A 2017A 2022 Estimated 20% 26% 26% 40% 7% 53% 73% 21% 34% Coal Natural Gas Carbon Free 20
Slide 22: 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 23: 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 24: 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 25: 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 26: 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
Slide 27: New Generation in Upper Peninsula
Major Construction Projects New Generation in Upper Peninsula Provides a long-term generation solution for electric reliability in Upper Peninsula ~180 MW of clean, natural Estimated $266 million ($277 million including AFUDC) gas-fired generation from investment to be made by Michigan utility –
Slide 28: 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 29: 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 30: Appendix
Appendix fa WEC (ag, Energy Group
Slide 31: Business Lines Overview
Electric Distribution Natural Gas Distribution Electric Generation Non-Utility Energy Infrastructure Electric Transmission 60% ownership 30
Slide 32: 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 33: 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 $8 of capital investment 600 opportunities, with no 500 expected impact to customer rates 400 Capital Deployed* Capital 300 200 100 0 0 25 50 75 100 In
Slide 34: Earnings Growth Drivers
Earnings Growth Drivers 2017 average rate base ($ 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 35: Line of Business View Capital Plan
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 36: State View Robust Capital Projection
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 37: 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% 36
Slide 38: 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 39: 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 40: 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 41: Natural Gas Sales – Wisconsin Segment
Natural Gas Sales – Wisconsin Segment Year over Year Change Actual Sales Weather Normalized Sales 20161 2017 2018Q1 20161,2 20172 2018Q1 Residential -0.6% 2.4% 12.1% 2.6% 1.6% 3.5% Total Commercial & -2.0% 5.4% 12.8% 1.1% 3.4% 6.1% Industrial3 Total Retail Sales -1.1% 3.5% 12.4% 2.0% 2.3% 4.5% Volum
Slide 42: 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 41
Slide 43: 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 44: 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 45: 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 44
Slide 46: 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 2018-2022E 2017 2018-2022E 45
Slide 47: 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 48: 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 49: 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. . Rec
Slide 50: 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 51: 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 52: 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 53: 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 54: 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 55: 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