WEC ENERGY GROUP, INC. Q3 FY2024 earnings call

Economic Development

• Microsoft is making progress on its large data center complex in Southeast Wisconsin, now owning over 1,900 acres. Amazon opened a 1.1 million square foot warehouse in Kenosha and is growing with additional distribution facilities and electric delivery vans. Georgia-Pacific completed a major mill expansion in Green Bay with a $550 million investment.

Capital Plan

• Announced a $28 billion capital plan for 2025-2029, the largest in history, a $4.3 billion increase from previous plan. Focus on Southeastern Wisconsin's I-94 corridor, supporting 1,800 megawatts of additional demand. Plan to invest $9.1 billion in 2,900 MW solar, 900 MW wind, and almost 600 MW battery storage, quadrupling carbon-free generation. Incremental $900 million on modern efficient natural gas generation and $400 million in LNG capacity. American Transmission Company to invest $3.2 billion in transmission. Reduced infrastructure segment investment by $800 million to focus on regulated utility due to economic development in Wisconsin.

Regulatory Progress

• Wisconsin rate reviews nearly complete for test years 2025 and 2026, expected decision by end of 2024 with new rates effective Jan 1, 2025. Michigan Public Service Commission approved settlement in 2025 rate cases for Michigan Gas Utilities and Upper Michigan Energy Resources. Illinois actively engaged in Safety Modernization Program and evaluation of natural gas future, with ICC extending docket into 2026.

Financing Plan

• 2024 common equity issuance projected up to $200 million, using dividend reinvestment, employee benefit plans, and ATM program. Over 2025-2029, cash from operations to fund 60% of cash needs, incremental debt 31%, and common equity 9% (range $2.7 billion to $3.2 billion). Percent of asset base in regulated electric businesses to grow faster due to economic development and energy transition plans, while gas distribution and contracted renewables' asset base percent to decline.

In the third quarter of 2024, WEC Energy Group reported adjusted earnings of $0.82 per share, excluding a $0.06 per share charge related to the disallowance of certain 2016 capital expenditures in Illinois. Utility operations saw adjusted earnings $0.18 lower compared to 2023, driven by Illinois rate design change, higher O&M, depreciation, amortization, and interest expense, offsetting some favorable factors like weather. ATC's continued capital investment contributed an incremental $0.01 to Q3 earnings compared to 2023. The Energy Infrastructure segment's earnings improved to $0.06 in Q3 2024 compared to Q3 2023, mainly due to production tax credits and increased production from renewable generation facilities. The Corporate and Other segment's earnings decreased $0.07 due to tax timing impact and higher interest expense. Retail electric deliveries in Wisconsin (excluding iron ore mine) were up 0.4% quarter-over-quarter, with residential and small C&I segments slightly increasing year-over-year. Year-to-date retail electric volumes are in line with forecast.

2024 Earnings Guidance

• Reaffirmed 2024 adjusted earnings guidance range of $4.80 to $4.90 per share, assuming normal weather through remainder of 2024.

2025-2029 Capital Plan Guidance

• Expect to invest $28 billion over next five years, with asset-based growth at an average rate of 8.8% per year, supporting long-term projected earnings per share growth of 6.5% to 7% compound annual basis.

Risks

• Actual results may differ materially from forward-looking statements due to factors described in WEC Energy Group's latest Form 10-K and subsequent SEC filings. Uncertain weather conditions can impact earnings. Regulatory changes, such as in Illinois' natural gas future evaluation, can affect operations and capital plans.

Q: Hey, Scott. Hey, Xia. I know this is kind of a repeated question from me but I have to ask just given the size in your kind of resource mix want to just touch on Point Beach for a sec. I mean obviously many of the infrastructure segment PPAs roll off around the time of the Point Beach PPA. Are those kind of viable alternatives? If you can't get there with NextEra, would you look to backstop them with dispatchable capacity so some incremental spend there? Just directionally how is that bid-ask progressing?

A: Sure. And as just a reminder for everyone our PPA with Point Beach and I think the one contract ends at December of 2030 the other is March of 2033. And like we talked about we have been in very constructive discussions on the Point Beach with NextEra. We're making good progress on both sides. We've been really busy up here with Wisconsin rate case. I think they've been busy down there with some hurricane activity. So we're making good progress more to come. I expect you'll see more in the next six months. But lining up really well we think for everybody.

Q: Shahriar Pourreza: Okay. That's helpful. And then obviously Scott very healthy CapEx update. I just -- I'm not getting a strong sense on why we saw sort of that CapEx reduction on the infrastructure side. I think it's been some time there's been some sort of a deemphasis of that segment. I just want to get a better sense on what's driving it. Is it sort of a capital allocation return issue? Is the kind of the demand for contracted renewable slowed? I guess what exactly is going on in that segment? Should we kind of start tempering our expectations there?

A: No. I mean what we looked at it last year when we went through the plan we had actually reduced that segment also just because of the amount of economic development. And then as what happened in Illinois and we reduced our capital plan there we said we're going to spend about $800 million incremental. And the last contract we announced here hits our investment profiles and it fills that amount of the $800 million we said we're going to do. We just have a lot of capital within the regulated utility with the economic development going on in Wisconsin and we just want to concentrate on that. The economics have been good on the other -- in the infrastructure segment it's just we've got a lot to deploy here in Wisconsin so we're going to concentrate on that.

Q: Michael Sullivan: Yeah. Hey, good afternoon. Maybe just wanted to ask for a little more color on the Wisconsin case that you have pending and maybe why you weren't able to settle there. What some of the sticking points might be? And how you're feeling about the final order coming up?

A: Sure, sure. So we are extremely far in the Wisconsin case. When you think about the Wisconsin case we've gone through all the hearings. In fact the final decision matrix just came out the other day. So we're about as far along in the Wisconsin case that we've ever been this time of the year. So right now the next step is the commission making a decision which they usually do. Historically, it's been the first week in December -- the first or second week in December but they're far along and they've got everything ready for a decision. Now the idea of a settlement -- and we've talked a little bit about settlement. We're very happy where the staff position came out. I think everyone still related to 2 years ago on the settlement that we had in Wisconsin, I think everyone wants to just see the commission go through a case. I'm very comfortable with the commission going through a case and deciding going through the decision matrix. So we just weren't able to come up to a settlement, but I'm not concerned about that. I think overall, our commission is filled with really balanced individuals that understand the importance of reliability and the economic development in the region. So we're ready for a decision. We just don't get there in the settlement, but that's not all bad either. I think everyone wants to see what's going on here. Okay. Does that answer your question?

Q: Neil Kalton: Hi. Guys. How are you doing? So a quick question, Scott. You opened up talking about the Microsoft that they acquired more land. I think you said 1,900 acres. Is that correct in total?

A: Correct. Correct. So at the beginning of the year, they started about 1,300, and now they're up to 1,900 acres.

Q: Neil Kalton: Okay. Perfect. And then in terms of the CapEx refresh, I know you're kind of waiting on Microsoft to lay out additional plants, what they intend to do. Was there anything in this CapEx revision that sort of incorporated potential spend for what they might do to some extent? Or is that still all to be determined all on the come?

A: So what this has in and what we talked about is 1,800 megawatts of capacity for the region over this 5-year period, which includes Microsoft, which includes getting some demand in from some electric vehicles and all the other economic development in the region. So that's 1,800 megawatts. Just to put that in perspective, our system is about 7,500 megawatts. So it's a little over 20% growth in capacity or demand needs in the region. So all of that is factored into our five-year plan. But just like many other companies, we are getting inquiries from a variety of other data centers. We just don't come out with a number until we really feel comfortable that it's actually going to happen. But if there would be any upside from any future stuff, that would probably be in those outer half of the plan. But based on the conversations, there's just a lot of good discussion on continued economic development in the region.