WEC Energy Group, Inc. · NYSE:WEC
WEC Energy — Investor Presentation (December 2017)
52 slides from WEC Energy's investor presentation, December 2017
Slide 1: Poised for Growth: Investor Update December 2017
Poised for Growth Investor Update: December 2017
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 $21.9 billion market cap (1) 1.6 million electric customers 2.8 million gas customers 60% ownership of ATC 69,000 miles electric distribution 46,000 miles gas distribution $17.7 billion of rate base (2) 99+% regulated (3) (1) As of 11/30/17 (2) 2016 average rate base (3) Based on
Slide 4: Focused on the Fundamentals
Focused on the Fundamentals “Across the corporation, our employees are focused on the fundamentals – safety, efficiency, reliability, financial discipline and customer care. These fundamentals provide a strong platform for sustainable business. As we look toward the future, we commit to serving our
Slide 5: Focused on the Fundamentals
Focused on the Fundamentals $3.50 A Decade of Consistent EPS Growth $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 GAAP Adjusted Best in America - 2017 Ranked #2 in our sector Best in Midwest 7 years in a row 4
Slide 6: Proven Track Record of Performance
Proven Track Record of Performance EPS Guidance 2016 Exceeded 2015 Exceeded 2014 Exceeded The only regulated utility 2013 Exceeded to beat guidance 10 years in a row* 2012 Exceeded 2011 Exceeded 2010 Exceeded 2009 Exceeded 2008 Exceeded 2007 Exceeded 2006 Exceeded 2005 Exceeded
Slide 7: 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 $5,514 New Plan $8,000 Former Plan $5,234 $6,000 $4,000 $2,707 $2,601 $2,000 $2,691 $1,659 $- 2017-2021 2018-2022 In millions Generation Electric Delivery Gas Delivery Energy Infrastructure 6
Slide 8: 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 $2,207 $2,142 $230 $1,971 $1,190 $2,000 $318 $30 $996 $1,181 $1,500 Energy Infrastructure $1,136 $1,159 $988 Gas Delivery $556 Electric Delivery $1,000 $511 Generation $559 $498 $54
Slide 9: Robust Capital Projection 2017-2022
State View Robust Capital Projection 2017-2022 ATC Investment $2,690 $111 $15 $2,555 $2,500 $2,465 $309 $239 $2,207 $677 $100 $96 $2,142 $230 $1,971 $2,000 $318 $93 $117 $30 $526 $639 $80 $609 Energy Infrastructure $1,500 $632 $525 $958 MERC/MGU Illinois $885 WI/MI Delivery $1,000 $1,001 WI/MI Gener
Slide 10: 2018-2022 Capital Plan by Category
2018-2022 Capital Plan by Category $ In billions Energy 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 11: American Transmission Company
American Transmission Company WEC portion of investment from 2018-2022 projected at $1.6 billion Key Assumptions Projected Capital Expenditures Average rate base: $3.3 billion (Inside Traditional Footprint) (in millions) (2016) $600 Implies average $153 million $516 $492 rate base growth $500 $4
Slide 12: Confident in Achieving Our EPS Growth Guidance
Confident in Achieving Our EPS Growth Guidance $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 2015 2016 2017E 2018 2019 2020 2015 Base GAAP Adjusted* * Excludes charges related to Integrys acquisition (1) Growth rate off 2015 base of $2.72 per share, and an estimated EPS of $3.12 for 2017 (2) Guidance based on
Slide 13: Solid Dividend Growth Continues
Solid Dividend Growth Continues Annualized Dividends Per Share 5-7% $2.08** 14.6% compound $1.98 annual growth rate $1.83* 5.1% off 2010 base 8.2% Continuing to target $1.56 17.3% dividend payout of $1.445 65-70% of earnings 8.0% $1.20 20.4% Projecting dividend growth in line with $1.04 15.4%
Slide 14: Earnings Growth Drivers
Earnings Growth Drivers 2016 average rate base ($ billions) $12.8 $2.9 $2.0 $17.7 billion $2.7 Utilities PTF Transmission Utility: Power the Future: ATC – Traditional Footprint: Projected capital spend ROE of 12.7% on historical Projected capital spend Core investment from 2018–2022: and new inv
Slide 15: 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 Our goal is to work with Taken as a whole, changes to our generation industry partners, fleet should reduce costs to customers, preserve environmen
Slide 16: 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 fall 2018 or later Edgewater 4 WPS share – 100 MW Expected end of third quarter 2018 Pres
Slide 17: 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 18: 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 Qualifies
Slide 19: Achieving Our Carbon Goal
Achieving Our Carbon Goal Anticipated CO2 Reductions 0% -10% % Reduction from 2005 -20% Reduction Goal -30% 40% below 2005 -40% -50% -60% 2005 2016 2022 2030 Mass Rate 18
Slide 20: Sources of Electric Energy Supply by Fuel Type
Sources of Electric Energy Supply by Fuel Type 2005A 2016A 2022 Estimated 2030 Aspirational 20% 25% 26% 40% 7% 51% 73% 24% 34% Coal Natural Gas Carbon Free 19
Slide 21: Increasing Natural Gas Distribution Investment
Increasing Natural Gas Distribution Investment Average Rate Base Estimated Rate Base at 12/31/2016 at 12/31/2022 Gas Gas Distribution Distribution Electric Transmission 27% 35% 14% Electric Transmission Electric 15% Electric Generation Generation and Distribution and Distribution 59% 50% 20
Slide 22: Delivering the Future
Delivering the Future Infrastructure Resilience Infrastructure Redesign Technology Enhancements • Converting 2,200 miles of • Major investments planned • Advanced metering overhead lines and adding to address aging program that uses distribution automation infrastructure integrated system of smart e
Slide 23: System Modernization and Reliability Project
Wisconsin Public Service System Modernization and Reliability Project Phase 1 – convert 1,200 miles of overhead lines to underground and add distribution automation Minocqua Eagle River equipment on 400 miles Tomahawk Rhinelander Wausaukee Wabeno Project $220 million investment Merrill Antigo Meno
Slide 24: Natural Gas System Modernization Program
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 23% complete* Investment recovery under a monthly rider Project $280-$300 million average annual investm
Slide 25: Advanced Metering Infrastructure (AMI) Program
Major Construction Projects – Wisconsin Utilities Advanced Metering Infrastructure (AMI) Program AMI is an integrated system of smart meters, communication networks and data management systems that enable two-way communication between utilities and customers Replaces aging meter-reading equipmen
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 s
Slide 27: 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, reliability in Upper Peninsula natural gas-fired Estimated $266 million ($277 million including Reciprocating Internal Combustion Engine AFUDC) investment to be m
Slide 28: Foxconn in Wisconsin
Foxconn in Wisconsin Capital investment by Foxconn of $10 billion dollars Foxconn announced Goal of creating 13,000 jobs, with an average salary July 26, 2017, of $53,875, plus benefits Wisconsin’s largest Estimated 22,000 indirect jobs created throughout economic development Wisconsin project
Slide 29: Key Takeaways for WEC Energy Group
Key Takeaways for WEC Energy Group Track record of exceptional performance Portfolio of premium businesses with investment opportunities that can support 5-7 percent EPS growth with minimal rate impact Dividend growth projected to be in line with earnings growth Poised to deliver among the b
Slide 30: Appendix
Appendix Wa WEC Va Energy Group
Slide 31: Electric Distribution, Natural Gas Distribution, Electric Generation, Non-Utility Energy
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 WEC Energy Group’s subsidiaries combined are the eighth-larg
Slide 33: Sample Acquisition-Driven Initiatives
Sample Acquisition-Driven Initiatives Category Activity Supply Chain Achieving savings in consolidated vendor and supplier contracts, negotiating most favorable terms Information Technology Consolidating IT infrastructure Implementing uniform processes and consolidating to a single Enterprise
Slide 34: 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 Deployed* capital investment 600 opportunities, with no 500 expected impact to 400 customer rates 300 200 100 0 0 25 50 75 100 In million
Slide 35: Power the Future Investments
Power the Future Investments Natural Gas Coal 1 Capacity 1,090 MW 1,030 MW 1 Investment $664 million $2 billion 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 $6
Slide 36: 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 30%, potentially growing to 34% Owns California’s Path 15 transmission line Zephyr Power Transmiss
Slide 37: Balanced Sales Mix
Balanced Sales Mix 2016 Retail MWh Deliveries Mix* 36% Large C&I by Segment Paper 22% Mining/Minerals 14% Foundry (SIC 33) 11% Small C&I Large C&I Other Manufacturing 8% 35% Food/Agriculture 8% 36% Metal (SIC 34,35,37) 6% Medical 6% Residential Office 4% plus Farm Education 4% 29% Chemical 3% Printi
Slide 38: Diverse Portfolio of Regulated Businesses
Diverse Portfolio of Regulated Businesses By Business By Jurisdiction MI/MN 4% Gas Distribution IL Electric 27% 12% Transmission 14% FERC 14% WI Electric Generation 70% and Distribution 59% Based on 2016 average rate base Note: Wisconsin jurisdiction includes UMERC 37
Slide 39: Composition of Rate Base
Composition of Rate Base Total 2016 Rate Base of $17.7 billion 1.7% 1.1% 11.3% Wisconsin Electric 1.1% Power the Future Wisconsin Public Service Corporation 6.8% 34.5% Peoples Gas Wisconsin Gas 10.7% Minnesota Energy Resources North Shore Gas Michigan Gas Utilities 16.4% 16.4% ATC 38
Slide 40: Strong Financial Condition
Strong Financial Condition Electric and Gas Utilities Credit Ratings Distribution* Utilities Utility Rating Number of 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 North Shore Gas A- Investment Grade *
Slide 41: 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 40
Slide 42: Balance Sheet Remains Strong
Balance Sheet Remains Strong No Equity Issuances Anticipated Funds from Operations/Debt Holding Company Debt 22% to Total Debt 30% 21% 20% 30% 25% 18% 16-19% 20% 16% 15% Goal of 30% or Less 14% 10% 12% 5% 10% 0% 2016 2017-2019E 2016 2017-2019E 41
Slide 43: Electric Residential Bills below National Average
Electric Residential Bills below National Average 2016 Average Electric Residential Annual Bill $1,350 $1,300 $1,250 $1,200 $1,150 $1,100 $1,050 $1,000 $950 $900 National Avg Wisconsin Electric Wisconsin Public Service Source: S&P Global Financial Focus Topical Special Report Issued May 31, 2017 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) Receive approval on acquisition of Bluewater Natural Gas Holding Co. Illinois
Slide 47: Regulatory Environment
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
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
Regulatory Environment FERC Presidential appointment, Senate confirmation 5-year term FERC Commissioners Name Party Began Serving Term Ends Neil Chatterjee R 08/2017 06/2021 Chairman Cheryl LaFleur D 07/2014 06/2019 Robert R 08/2017 06/2020 Powelson Richard Glick D 11/2017 06/2022 Kevin McInty
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 250% 200% WEC Energy Group 150% Dow Jones Utilities S&P Utilities Philadelphia Utility Index 100% S&P 500 Index 50% 0% One-Year Three-Year Five-Y
Slide 51: Meeting and Exceeding Commitments
Meeting and Exceeding Commitments Commitments Results Deliver among the best risk- adjusted returns in the industry 8% EPS 10-Year CAGR and 14.6% dividend growth off the 2010 base Reduce 2017 O&M by 3% off 2016 base O&M reduction of more than 7% as of September 30, 2017 Maintain strong financial
Slide 52: Contact Information
Contact Information M. Beth Straka Senior Vice President – Investor Relations and Corporate Communications [email protected] 414-221-4639 Ashley Knutson Investor Relations Analyst [email protected] 414-221-3339
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