Wisconsin Electric Power Company · OTC:WELPP
Wisconsin Electric Power — Investor Presentation (November 2003)
36 slides from Wisconsin Electric Power's investor presentation, Nov 14, 2003
Slide 1: Wisconsin Energy Corporation Power the Future Plan
Wisconsin Energy Corporation Power the Future Plan
Slide 2: Disclaimer
Disclaimer All statements in this presentation other than historical facts are forward-looking statements that involve risks and uncertainties which are subject to change at any time. Such statements are based upon management's expectations at the time they are made. In addition to these assumptions
Slide 3: Power the Future Topics
Power the Future Topics m= Background on Power the Future Plan = Estimated Financial Impact = Net Income @ Financing Plan = Fundamentals of the Lease = Financial Flows for WEC and subsidiaries m Wisconsin Energy = Wisconsin Electric m We Power Va 3 Wisconsin Energy Corporation
Slide 4: New Generating Capacity: Expansion Plan
New Generating Capacity Expansion Plan ‘ak Creel tnt #2* 2azo eazy ta 518 Mv Puberbed Coa (ak Creel tnt #17 S515 Mi Pulverzed Coa? Por Westington Unt #2 155 Mv Natural Ge CC" Por Westngton Unt #t 545M Maral Gas CC 200s 200g «2007 20ne 2008 amon 4. Anpoved bythe PSCIWin Doce br 2002. Ting of Pot Wast
Slide 5: Overview of Power the Future Structure
New Generating Capacity Overview of Power the Future Structure Power the Future Legislative/ Legal Structure Key Attributes New state law passed in 2001 Utiitycan lease facility owned by anafiiliate Requires recovery of payments associated with any approved lease Sole purpose of We Power will beto c
Slide 6: Approved Terms
New Generating Capacity Approved Terms Natural Gas Coal Status Approved Approved Total MWS 4,090 Mw 4,030 MW ROE 12.7% 12.7% Equity 53% 55% Initial Term 25 Years 30 Years Other Cash camying costs covered in Cash canying costs covered in construction constmction “Fined price endit-servize date sLeace
Slide 7: Estimated Earnings Impact
Wisconsin Energy Estimated Earnings Impact Investment Estimated Earnings (First Full Year) Port Washington Unit 1 $ 327 $17 Port Washington Unit 2 $317 $17 Oak Creek Unit 1* $1,229 $ 65 Oak Creek Unit 2° $805 $35 $2,478 $134 *pprocintely £350 nln i e-pacte to be invest inte bo colons by MGREWPPIibr
Slide 8: Fundamentals of the Lease
Fundamentals of the Lease We Power and Wisconsin Electric are two wholly-owned subsidiaries of Wisconsin Energy Lease Payments will be recovered in rates by Wisconsin Electric Lease Payments will Cover = Carrying Costs - During Construction = Plant cost, plus an allowed return - During Operation Pla
Slide 9: Power the Future Dollar Flows
Power the Future Dollar Flows Construction Operation Dividends Equity Capital and Loans, and Loan Repayment Return of and Canying Costs feturn of ani on Capital ve rower Wisconsin — ve rower Electric 4 tease Lease Agreements Agreements Construction Rate Relief Permanent Rate Relief Debt Debt t Wisco
Slide 10: Fundamentals of the Lease
Fundamentals of the Lease m Wisconsin Energy (On a Consolidated Basis) = All intercompany transactions are eliminated = Plant is depreciated over the estimated useful lives m= Common equity/debt trends to 40/60 over time
Slide 11: WEC Lease Capacity Assumptions
WEC Lease Capacity Assumptions (amounts in $millions) Expected InitialLease Equity ROE Investments InService = Term Port Washington Unit1 2005 25 Years 83% = «12.7% == $ 327 PortWashington Unit2 2008 25 Years 83% «= «12.7% «= $ 317 Oak Creek Unit 1* 2009 a0 Years 86% += 12.7% $1,229 Oak Creek Unit 2
Slide 12: Lease Capacity Charge Example
Lease Capacity Charge Example Port Washington Unit 1 = Capital Costs m= Equity Ratio = Debt Ratio = Debt Rate = Equity Rate, after-tax m= Lease Term 25 years = Annual Lease Payment
Slide 13: Impact on Wisconsin Energy
Impact on Wisconsin Energy
Slide 14: WEC Cash Flow Impacts
WEC Cash Flow Impacts = Cash Inflows m Recovery of Carrying Costs during construction m Lease Payments recovered through rates = Cash Outflows m Cash Costs to build the plants m Interest Costs m Income Taxes
Slide 15: WEC Cash Inflows: Carrying Costs
WEC Cash Inflows Carrying Costs = Carrying Costs = Recovered monthly during construction = Based on construction work in progress balance times weighted average capital costs = GAAP Accounting = Deferred on Balance Sheet when received = Amortized to Revenue over the term of the lease = Tax Accountin
Slide 16: WEC Cash Inflows: Lease Payments Recovered Through Rates
WEC Cash Inflows Lease Payments Recovered Through Rates = Based on cash costs of the plant = Level Payments over life of the Lease m= Lease payments start when plants go into service Recover the plant cost, plus cost of capital Debt cost included in lease payments will be determined when plants go i
Slide 17: WEC Cash Outflows Construction Costs
WEC Cash Outflows Construction Costs Amounts in $ Millions = Total Estimated Cash Costs by Plant* = Port Washington Unit1 $ 327 = Port Washington Unit2 $ 317 = Oak Creek Unit 1* $1,229 = Oak Creek Unit 2* $ 605 = GAAP Accounting = Depreciate over Useful Life of the Plant = Capitalize interest during
Slide 18: WEC Cash Outflows Debt Service
WEC Cash Outflows Debt Service = Interest at WE Power m Expect 45% to 47% permanent debt level = Debt costs to be included in the lease payments all fixed at time of construction = Interest at WEC m= Some debt to fund equity contribution to We Power m= Common equity debt at the WEC level trends to 4
Slide 19: WEC Income Statement Impact
WEC Income Statement Impact m Revenues = Amortization of Carrying Costs m Lease Payments = Depreciation Costs m Depreciation of Cash Costs = Amortization of Capitalized Interest = Interest Expense m Interest at We Power m Interest at WEC Wisconsin Energy * VB Corporation
Slide 20: WEC Balance Sheet Impact
WEC Balance Sheet Impact = Assets = Plant in Service Cash Costs of Plant Capitalized Interest = Accumulated Depreciation = Deferred Tax Asset - Cash taxes paid on carrying costs payments during construction = Liabilities and Equity = Debt Non-recourse debt at the We Power level Some recourse debt at
Slide 21: Impact on Wisconsin Electric
Impact on Wisconsin Electric
Slide 22: Wisconsin Electric Lease
Wisconsin Electric Lease Regulatory Accounting = The Lease is treated as an Operating Lease for Regulatory Accounting m Revenues are based on annual Lease Payments
Slide 23: Wisconsin Electric Cash Flow Impacts
Wisconsin Electric Cash Flow Impacts = Cash Inflows m Recovery of Carrying Costs m Recovery of Lease Payments = Cash Outflows = Carrying Costs to We Power m Lease payments to We Power
Slide 24: Wisconsin Electric Carrying Costs
Wisconsin Electric Carrying Costs = Carrying Costs m Paid to We Power Monthly During Construction = Based on construction work in progress balance times weighted average capital costs m GAAP Accounting = Deferred on Balance Sheet when Paid m= Amortized to expense when collected from customers Wiscon
Slide 25: Lease Payments to We Power
Wisconsin Electric Lease Payments to We Power = Begin when plant begins operation m Fixed payments over the term of the lease = Treated as a capital lease for GAAP m At the inception of the lease, Wisconsin Electric will set up an asset (Asset under Capital Lease) anda liability (Obligation under Ca
Slide 26: Wisconsin Electric Balance Sheet
Wisconsin Electric Balance Sheet = Assets = Asset under Capital Lease = Accumulated Amortization of Capital Lease m Prepaid Asset = Liabilities and Equity m Obligation under Capital Lease
Slide 27: Wisconsin Electric Balance Sheet
Wisconsin Electric Balance Sheet m= Asset Under Capital Lease m Represents the Asset Cost at the Lease Inception m= Amortized to expense over the life of the lease on a straight line basis
Slide 28: Obligation Under Capital Lease
Wisconsin Electric Obligation Under Capital Lease m At Lease Inception m Lease Obligation = Lease Asset m Lease payments are split between g Interest (at implied financing cost set by PSC) = Principal
Slide 29: Wisconsin Electric Income Statement
| Wisconsin Electric Income Statement m Revenues from Customers m Recovery of Carrying Costs m Recovery of Lease Payments = Depreciation Costs m Lease Amortization = Interest g Interest on Capital Lease
Slide 30: Impact on We Power
Impact on We Power VPA weconan Every
Slide 31: We Power
We Power = Constructs, Finances, and Owns the Generating plants m Lease Payments from Wisconsin Electric Create a Long-Term Asset m Financing Lease Receivable
Slide 32: We Power Cash Flow Impacts
We Power Cash Flow Impacts = Cash Inflows m Recovery of Carrying Costs from Wisconsin Electric m Lease payments from Wisconsin Electric = Equity from Parent = Debt from third parties = Cash Outflows m Cash costs of plants m Debt service payments = Dividend to Parent
Slide 33: We Power Carrying Costs
We Power Carrying Costs = Carrying Costs = Billed to Wisconsin Electric Monthly During Construction m Based on construction work in progress balance times weighted average capital costs m GAAP Accounting = Deferred on Balance Sheet when Billed m Amortized to Revenue over the Term of the Lease Wiscon
Slide 34: We Power Lease Payments
We Power Lease Payments = Begin when plant begins operation m Fixed payments over the term of the lease = Treated as a financing lease receivable for GAAP m At the inception of the lease, We Power will set up an asset (Financing Lease Receivable). This asset will represent the construction costs of
Slide 35: We Power Balance Sheet
| We Power Balance Sheet = Assets m Financing Lease Receivable = Liabilities and Equity = Equity from Parent = Outside Debt m Deferred Revenue
Slide 36: We Power Income Statement
We Power Income Statement m Revenues @ Income from Financing Lease = Amortization of Deferred Revenue = Interest Expense m Interest on outside debt
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