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Edited Transcript of WEC earnings conference call or presentation 25-Apr-19 6:00pm GMT

Q1 2019 WEC Energy Group Inc Earnings Call

MILWAUKEE Apr 29, 2019 (Thomson StreetEvents) -- Edited Transcript of WEC Energy Group Inc earnings conference call or presentation Thursday, April 25, 2019 at 6:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Gale E. Klappa

WEC Energy Group, Inc. - Executive Chairman

* Joseph Kevin Fletcher

WEC Energy Group, Inc. - President, CEO & Director

* Scott J. Lauber

WEC Energy Group, Inc. - Senior EVP, CFO & Treasurer

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Conference Call Participants

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* Gregory Harmon Gordon

Evercore ISI Institutional Equities, Research Division - Senior MD and Head of Power & Utilities Research

* Julien Patrick Dumoulin-Smith

BofA Merrill Lynch, Research Division - Director and Head of the US Power, Utilities & Alternative Energy Equity Research

* Michael Jay Lapides

Goldman Sachs Group Inc., Research Division - VP

* Michael Weinstein

Crédit Suisse AG, Research Division - United States Utilities Analyst

* Paul Patterson

Glenrock Associates LLC - Analyst

* Praful Mehta

Citigroup Inc, Research Division - Director

* Shahriar Pourreza

Guggenheim Securities, LLC, Research Division - MD and Head of North American Power

* Vedula Murti

Millennium Management LLC - Senior Analyst & Assistant Portfolio Manager

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Presentation

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Operator [1]

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Good afternoon, and welcome to WEC Energy Group's conference call for first quarter 2019 results. This call is being recorded for rebroadcast. (Operator Instructions)

Before the conference call begins, I remind you that all statements in the presentation, other than historical facts, are forward-looking statements that involve risks and uncertainties that are subject to change at any time. Such statements are based on management's expectations at the time they are made. In addition to the assumptions and other factors referred to in connection with the statements, factors described in WEC Energy Group's latest Form 10-K and subsequent reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those contemplated.

During the discussions, referenced earnings per share will be based on diluted earnings per share, unless otherwise noted.

After the presentation, the conference will be open to analysts for questions and answers. In conjunction with this call, a package of detailed financial information is posted at wecenergygroup.com. A replay will be available approximately 2 hours after the conclusion of this call.

And now, it's my pleasure to introduce Gale Klappa, Executive Chairman of WEC Energy Group.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [2]

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Good afternoon, everyone. Thank you for joining us today as we review our results for the opening quarter of 2019. First, as always, I'd like to introduce the members of our management team who are here with me today. We have Kevin Fletcher, President and CEO of WEC Energy Group; Scott Lauber, our Chief Financial Officer; Bill Guc, our Controller; Peggy Kelsey, Executive Vice President and General Counsel; and Beth Straka, Senior Vice President, Corporate Communications and Investor Relations.

With that, we'll discuss our financial results in detail a bit later in the call. And as you saw from our news release this morning, we reported first quarter 2019 earnings of $1.33 a share. That performance was driven by colder-than-normal weather, a strong economy and a continuing focus on operating efficiency across our system of companies. I might add that our people and our technology performed exceptionally well during the polar vortex cold snap that gripped the region during January. As wind chills in late January dropped to near 50 degrees below 0, customer demand for natural gas hit new all-time records across our service areas in Wisconsin, Michigan and Minnesota. Our gas distribution networks were truly put to the test, and when it counted most, we delivered.

We also made real progress on a number of other important initiatives during the quarter. We completed our new natural gas-fired power plants in Michigan's Upper Peninsula on time and on budget. With the new units online, we were able to retire our older, less-efficient coal-fired plant at Presque Isle. And here in Wisconsin, we received approval from the Wisconsin Public Service Commission for 2 major solar farms. These facilities will be among the largest solar installations in the Midwest and will support our effort to reduce greenhouse gas emissions while maintaining reliable and cost-effective infrastructure. You can learn more about our generation-reshaping plan in the climate report that we just published just this last week.

In addition, our regulatory calendar is on track with rate filings in Wisconsin during the quarter. Kevin will provide you with an update on that front in just a moment.

And as I mentioned earlier, we're benefiting from a thriving economy here in Wisconsin. The state's unemployment rate came in at 3% or less during each month of this year's first quarter, and new proposed investments are promising additional development and jobs.

For example, global health care firm, Fresenius Kabi recently announced that it will build a flagship facility for its U.S. distribution operations in the southeastern corner of our state. Closer to Milwaukee, Foxconn plans to restart construction as planned after the winter break on phase 1 of its high-tech manufacturing and research campus in Racine County. Foxconn announced during the quarter that a centerpiece of phase 1 will be a gen 6 fabrication plant. That gen 6 plant will produce liquid crystal display panels in various sizes up to perhaps 90 inches. Production is expected to begin by the end of 2020.

And in a matter of weeks, the company plans to issue initial bid packages for that gen 6 facility and for construction of a new data center as well as research and development labs. We're already seeing the positive ripple effects of Foxconn's commitment to Wisconsin. More than 30 additional investment projects have been announced in the vicinity of the Foxconn campus including hotels, medical centers and more than 2,700 housing units. These 30-plus projects should result in more than $900 million of new private capital investment. And now, I'll turn the call over to Kevin for details on our operations and our regulatory calendar for 2019. Kevin, all yours.

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Joseph Kevin Fletcher, WEC Energy Group, Inc. - President, CEO & Director [3]

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Thank you, Gale. I'd like to start by highlighting the work our employees are doing to provide excellent customer care and reliable service. Just last month, our WEC Energy Group company has placed in the top quartile in the American Customer Satisfaction Index for Energy Utilities. And as Gale mentioned, we're making progress across our companies on key initiatives. I'll review where we stand in our 4 state jurisdictions. Here in Wisconsin, we're now on track to add utility scale solar generation to our portfolio of regulated assets. You'll recall that on May 31 of last year, our Wisconsin Public Service subsidiary, along with Madison Gas and Electric filed a joint application with the Wisconsin Commission to purchase 300 megawatts of solar generation at 2 locations. Earlier this month, the commission approved our proposal and we received a written order on April 18. The Badger Hollow Solar Farm will be located in the southwestern part of the state in Iowa County and will be developed and constructed by Invenergy. The Two Creeks Solar Project is being developed and constructed by NextEra in northeastern Wisconsin.

Wisconsin Public Service will own a total of 200 megawatts, 100 megawatts at each site with an expected investment of approximately $260 million. We expect these projects to enter commercial service by the end of 2020.

Now I'll touch on our rate filings. On March 28, we filed a proposal with the Wisconsin Public Service Commission to set customer rates for our Wisconsin utilities. The request comes after a 4-year base rate freeze, a freeze that has resulted in lower customer bills while maintaining world-class reliability and shaping a cleaner energy future.

First, I'll discuss the request we're making to set We Energies customers rates for electricity for 2020 and 2021. You can refer to the last 2 pages of the earnings packet for details on our natural gas and steam filings. Using savings from tax reform, we are targeting an increase in a typical monthly electric bill of approximately 2.9% in 2020, and an additional 2.9% in 2021. There are 3 primary cost drivers for our proposed We Energies electric increases. Number one, higher transmission charges. Remember, the amounts collected in rates have been capped since 2010. Number two, revenue to commission assumed We Energies would receive from MISO starting in 2015 that was not received. And number three, increased costs associated with the agreement to purchase energy from the Point Beach Nuclear Plant. This agreement was approved by the commission in 2007 when we sold Point Beach and credited customers a total of $670 million over a 3-year period.

Now onto Wisconsin Public Service. The rate proposal includes our acquisition of approximately 60 megawatts of the Forward Wind Energy Center in 2018 as well as our investment in the 2 solar facilities. It also includes ongoing modernization of the electric system by upgrading and moving underground 2,000 miles of electric distribution lines. We've already seen higher reliability in Northern Wisconsin as a result of these upgrades. With the tax savings and other credits applied, the typical electric bill would increase by approximately 4.9% in 2020 and an additional 4.9% in 2021. Even with the increases, Wisconsin Public Service average deals would remain well below the current state and national averages. To support our strong balance sheet, we are seeking a slightly higher equity component in these rate reviews consistent with Wisconsin Commission's prior decisions. We expect final orders by the end of the year with new rates effective in January 2020.

Turning to Michigan. Upper Michigan Energy Resources has begun commercial operations of its new gas-powered generation stations on March 31. We've invested approximately $255 million in these new facilities. After the investment, we'll be covered by a 20-year agreement with Cliffs Natural Resources and the other half will be covered in retail rates. This generation solution is expected to save customers nearly $600 million over the next 30 years.

Looking to Illinois, the Peoples Gas System Modernization Program is roughly 1/4 complete. As we improve safety and reliability, we continue to focus on efficiency and excellent customer care. Earlier this month, a national customer study found Peoples Gas to be one of the energy companies that's easiest to do business with in America. In filing, an update on Minnesota Energy Resources. As you may remember from our last call, the Minnesota Attorney General requested a review of the return on equity that the Public Utilities Commission had approved in December. The commission has chosen not to take up this request so our Minnesota ROE stands at 9.7%.

And with that, I'll turn it back to Gale.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [4]

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Kevin, thank you very much. The company continues to perform at a high level. And as we look through the remainder of the year, we're on track to meet the upper end of our 2019 guidance. As a reminder, our guidance range is $3.48 a share to $3.52 a share. And again, we're guiding to the upper end. This translates to a growth rate between 6.1% and 7.3% off the midpoint of our original 2018 guidance. And finally, a reminder about our dividend. This January meeting, our Board of Directors raised the quarterly cash dividend to $0.59 a share, that's an increase of 6.8% over the previous rate. Folks, this marks the 16th consecutive year that our shareholders will enjoy higher dividends. We continue to target a payout ratio of 65% to 70% of earnings. We're in the middle of that range right now so I expect our dividend growth will continue to be in line with the growth in our earnings per share.

And now with details on our first quarter results and our outlook for the remainder of the year, here's our trusty CFO, Scott Lauber. Scott?

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Scott J. Lauber, WEC Energy Group, Inc. - Senior EVP, CFO & Treasurer [5]

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Thank you, Gale. Our 2019 first quarter earnings of $1.33 per share increased $0.10 per share compared to the first quarter of 2018. Higher earnings were largely driven by the colder-than-normal winter weather. Additional capital investment and our continued emphasis on cost control also had favorable impact on earnings. The earnings packet placed on our website this morning includes a comparison of first quarter 2019 and 2018 results. I'll first focus on operating income by segment, and then other income, interest expense and income taxes.

Referring to Page 8 of the earnings packet, our consolidated operating income for the first quarter of 2019 was $542.8 million compared to operating income of $545.1 million in the first quarter of 2018, a decrease of $2.3 million. Adjusting for the impact of tax repairs and our adoption of the new lease accounting rules, operating income actually increased by $2.4 million. We have a breakout of these items for your reference on Page 8 of the earnings packet. Neither of these items impacted our net income.

Recall that as part of our Wisconsin settlement, we agreed to apply the benefits of tax repairs to offset the growth of certain regulatory asset balances. Plan continues and our expectations remains that the transmission escrow balance of Wisconsin Electric will be reduced to 0 by the end of this year.

In January, we adopted the new lease accounting standard. While it had no impact on our net income, it does affect our segment reporting. Two separate items affect year-over-year comparability. First, the presentation of our intercompany lease related to the Power the Future assets were impacted. The leases are fully eliminated in consolidation. However, the contracts are treated differently in 2019 across our business segments. The second item is a smaller purchase power agreement which had an impact of approximately $1 million reclassified between operating income and interest. We have adjustment of these items in a separate column on Page 8 of the earnings packet.

My segment update will focus on the remaining $2.4 million increase in operating income which excludes the impact of tax repairs in the new lease accounting rules.

Starting with the Wisconsin settlement, the increase in operating income net of these adjustments was $5.6 million. Higher sales volumes drove a $20.7 million increase in margins. This was partially offset by $11.6 million negative fuel impact and a $7.7 million increase in depreciation expense.

In Illinois, operating income decreased $9.7 million, driven by a $16 million increase in operations and maintenance expense. This is due to higher weather-related work repair, benefit costs and timing between quarters. Margins increased $11 million as a result of our continued investment in the Peoples Gas System Modernization Program.

Operating income in our Other States segments increased $5.3 million, driven by an increase in margin due to colder weather. Turning now to our energy infrastructure segment. Operating income in this segment was down $300,000. As expected, Bishop Hill and Upstream Wind Farms did not have a material impact on operating income. However, a significant portion of the earnings for these facilities come in the form of production tax credits, and are recognized as an offset to income tax exemptions. These production tax credits add approximately $0.02 per share.

The operating loss at our Corporate and Other segment improved by $1.5 million. In line with these changes and excluding the impact of tax repairs and the new lease rules, operating income increased $2.4 million.

Turning to our investment in American Transmission Company totaled $36.1 million, an increase of $3.3 million as compared to the first quarter of 2018. Higher earnings were driven by continued capital investments.

Other income net increased by $23.4 million, driven by higher AFUDC related to the new rate generation in Michigan's Upper Peninsula and an increase in investment gains associated with our benefit plans. Note that these investment gains partially offset the benefit expense including in our operating segments.

Excluding the impact of the new lease accounting, our net interest expense increased $16.8 million, primarily driven by our continued capital investment and slightly higher interest rates. Our consolidated income tax expense net of tax repairs decreased $17.7 million. This was driven by wind production tax credits related to our recent acquisitions of the Bishop Hill and Upstream Wind Generation facilities in addition to various smaller tax items. We expect our effective income tax rate to be between 10.5% and 11.5% this year. Excluding the benefits of tax repairs, we expect our 2019 effective tax rate to be between 20% and 21%. At this time, we expect to be a partial taxpayer in 2020.

Looking now at the cash flow statement on Page 6 of the earnings packet. Net cash provided by operating activities decreased $158 million. The decrease was driven by higher working capital levels due to colder weather and tax reform refunds to customers. In the first quarter of 2018, we had not yet begun refunding them out to customers related to tax reform.

Owned capital expenditures and asset acquisitions were $627 million for the first quarter of 2019, a $187 million increase from 2018. This reflects our investment focus in our regulated utility and energy infrastructure business. Our adjusted debt-to-capital ratio was 53% at the end of the first quarter, a decrease from the 53.4% at the end of 2018. Our calculations continue to treat half the WEC Energy Group's 2007 subordinate notes as common equity. We're using cash to satisfy any shares required for our 401(k) plans, options and other programs. Going forward, we do not expect to issue any additional shares.

We made $186.2 million in common dividends during the first quarter of 2019, an increase of $12 million over the same period in 2018 which reflects the increase in the annualized dividend level that was effective in the first quarter.

Turning now to sales. We continue to see customer growth across our system. At the end of the first quarter of 2019, our utilities were serving approximately 11,000 more electric and 22,000 more natural gas customers compared to a year ago. Retail electric and natural gas sales volume are shown on a comparative basis on Page 10 of the earnings packet.

Natural gas deliveries in Wisconsin increased 7% versus the first quarter of 2018. This excludes gas used for power generation. Net gas deliveries in Wisconsin grew by 2.6% on a weather-normal basis. Overall, our retail deliveries of electricity, excluding the iron ore mine, were up 0.5% from the first quarter of 2018. And on a weather-normal basis, retail deliveries were down 0.4%.

Finally, a quick reminder on the earnings guidance. We are reaffirming our earnings guidance of $3.48 to $3.52 per share with an expectation of reaching the top end of the range. This assumes normal weather for the remainder of the year.

Now looking at the guidance for the second quarter. In the second quarter last year, we earned $0.73 per share, which included approximately $0.04 from weather. Taking the weather into account, we expect our second quarter 2019 earnings to be in the range of $0.70 to $0.72 per share, as it takes into account April weather and assumes normal weather for the rest of the quarter.

With that, I'll turn things back to Gale.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [6]

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Scott, thank you very much. Overall, we're on track and focused on delivering value for our customers and our stockholders. And just a brief sidenote for those of you listening in from Boston, I just want to let you know the Milwaukee Bucks are ready to rumble.

So fear the deer, folks. And operator, we're ready to open it up now for the question-and-answer portion of the call.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question comes from Greg Gordon with Evercore ISI.

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Gregory Harmon Gordon, Evercore ISI Institutional Equities, Research Division - Senior MD and Head of Power & Utilities Research [2]

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Just a few questions and I can take this off-line if Scott doesn't have this handy, but when you look at the investment gains and other income net of the increased expense, overall, do you know what the net contribution was off hand? And if not, I'll take it off-line.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [3]

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Scott?

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Scott J. Lauber, WEC Energy Group, Inc. - Senior EVP, CFO & Treasurer [4]

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Yes, I think the investment gain was probably -- it's a ballpark of about $15 million to $16 million. But remember, those investment gains, they really offset expenses that are up at the operating segment. So they're kind of a -- it's just really how we're reporting the information that we're required to report it like segments down there, but it's really offset to the operating up above.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [5]

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Yes, Greg, and to Scott's point, you really have to look at the 2 different pieces together to really get a good picture because, one...

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Gregory Harmon Gordon, Evercore ISI Institutional Equities, Research Division - Senior MD and Head of Power & Utilities Research [6]

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I agree completely, that's why I asked, yes.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [7]

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Terrific. Thank you, Greg. What else was on your mind today?

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Gregory Harmon Gordon, Evercore ISI Institutional Equities, Research Division - Senior MD and Head of Power & Utilities Research [8]

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I guess the second thing on my mind was taking into account the tax repairs agreement and the way you're flowing that through. How much have you reduced the regulatory asset balance that that's impacting? And how -- and what's that trajectory expected to look like?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [9]

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Well, considerably, on the -- and Scott can fill this in as well, but on the big one, the transmission escrow balance, which was over $200 million, we've more than cut that in half and we're expecting it to be 0 in terms of the remaining escrow balance by the end of 2019. It's a great story.

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Gregory Harmon Gordon, Evercore ISI Institutional Equities, Research Division - Senior MD and Head of Power & Utilities Research [10]

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And then once that's at 0, does the agreement sort of complete or what happens then?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [11]

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Well, it'll be if -- all that will be decided in the rate case with new rates effective January 1, 2020.

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Gregory Harmon Gordon, Evercore ISI Institutional Equities, Research Division - Senior MD and Head of Power & Utilities Research [12]

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Great, that's a great answer. And then forgive me if I don't know the answer to this because I haven't read it thoroughly. But looking in the rate case, what are some of the other key second-level things that you're looking to try to achieve? Are there any significant incremental changes in your generation portfolio that you're asking for in terms of deployment of new capital or retirement of incremental existing coal plants? And what are some of the big drivers there underneath the surface?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [13]

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Greg, I think Kevin covered the 3 big drivers in the Wisconsin Electric rate case in his prepared remarks. A couple of things that might be responsive to your question. First of all, in the Wisconsin Public Service rate case, part of the driver for that rate case is really 2 renewable projects. One is the acquisition of a portion of the Forward Wind Energy Center that Kevin mentioned, and then the other would be included in our rate case, would be the investment in the 2 new solar projects that we covered during the prepared remarks, the Two Creeks and the Badger Hollow Solar projects. That's a pretty sizable investment, Kevin, and that would be a part of our rate ask at Wisconsin Public Service.

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Joseph Kevin Fletcher, WEC Energy Group, Inc. - President, CEO & Director [14]

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And the other one that I would add, Gale, which I mentioned is our SMRP project, the renewal project where we're undergrounding a couple of thousand miles of overhead distribution to underground. We'll be looking to put that into our rate base as well.

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Scott J. Lauber, WEC Energy Group, Inc. - Senior EVP, CFO & Treasurer [15]

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In addition, the little higher equity layer that we highlighted in there, but that's about 1% and we have done this for other cases and now it's part of the balance sheet, even better.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [16]

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Right. So we're asking for an increase in the upper end. We have a range now, as you know, for the equity layer that the commission has approved. We're looking for a bit of an increase in the equity layer itself. And again, as Scott said, this has been approved in prior cases here in the state. I hope that helps, Greg.

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Operator [17]

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Your next question comes from Shar Pourreza with Guggenheim Partners.

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Shahriar Pourreza, Guggenheim Securities, LLC, Research Division - MD and Head of North American Power [18]

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Gale, thanks for the sort of the update around Foxconn, but maybe we could just touch a little bit about some sort of the noise we're seeing in the headlines around the governor and potentially looking to revise terms at the state contracts. I think it sort of highlights changes with the business plan hiring and this is obviously, Gale, this is your baby, this is -- you're very close to this situation. How difficult would it be for the governor to reopen the contract legislatively, especially that you've got a Republican-controlled legislator? Is this just noise? How should we think about this?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [19]

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A great question, Shar, I appreciate it. Three observations to directly answer your question. First of all, we have now, for the first time in almost a decade in Wisconsin, a divided government. So one can expect, I think, a fair amount of rhetoric, newspaper headlines, political discussions that we haven't been overly used to over the course of the last decade. I would characterize much of that as just the normal back and forth in a divided government -- in a political climate of a divided government. And my suggestion to all of you would be kind of ignore the rhetoric and look precisely at what's happening on the ground. Interestingly enough, as I mentioned during our prepared remarks, Foxconn is moving forward and has now clearly defined what they want to accomplish over the next 18 months in phase 1 of the project. It's significant, including the addition of a major data center. And as you recall, they're still standing by their longer-term projection of creating 13,000 jobs. But to put a finer point on it, we have been, as you know, very conservative in our projections. In fact, I don't think Scott had any significant ramp-up in demand from the Foxconn campus until the last year of our 5-year plan. And we only had a very small amount of ripple effect, if you will, of additional economic development and additional jobs and additional demand. What we're seeing so far already as far surpassed in terms of the ripple effect, what we have planned in our projections for the fifth year. So my view is kind of steady as she goes. A lot of political talk, let's focus on really what's happening on the ground. I hope that helps, Shar.

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Shahriar Pourreza, Guggenheim Securities, LLC, Research Division - MD and Head of North American Power [20]

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No, it does. And then I appreciate you addressing that because I know it's been a topic a little bit with investors, so I appreciate that. And then just I know, Gale, you've highlighted shifting to infrastructure, you've highlighted more than a dozen sort of wind opportunities that are under valuation, very similar to the South Dakota deal with Google. If you've hit 40% of your spending, would you bucket it for about $1 billion? Are you seeing sort of enough opportunities that could be incremental to plan? Or as we're modeling this, should we just think about this as being more front-end loaded growth? And then just secondary to that question, as trusty Scott said, you guys are going to be in a tax position by 2020. But if some of these projects sort of hit fruition, how should we think about your current cash tax position post these projects?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [21]

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Shar, we still have -- a great question, we still have a robust pipeline of projects that we're doing a fair amount, as you can imagine, of due diligence on right now. It wouldn't surprise me in the least if you saw over the next 4 to 6 months, another major announcement. So we still have plenty of opportunity here. And as Scott mentioned in his prepared remarks, right now, if we did nothing else, we would be a partial cash taxpayer in 2020. Another announcement would push us out into 2021, so we're continuing to work on basically filling the bucket in that segment, that infrastructure segment that you see in our 5-year plan, and I'm very optimistic about it.

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Operator [22]

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Your next question comes from Michael Weinstein with Crédit Suisse.

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Michael Weinstein, Crédit Suisse AG, Research Division - United States Utilities Analyst [23]

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On the wind tax credits, you noted that the operating income from the infrastructure business is kind of flat for the year-over-year. And understood the new projects aren't going to contribute that much, that's understood, but with the new projects in service over the next year, how will that affect future quarters' net operating income line? And just want to confirm that the tax credit line will -- that the $17 million increase should be persistent throughout the year, right?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [24]

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We'll ask Scott to give you more detail. My view would be, you pretty much got to ignore -- in this instance, you pretty much got to ignore the operating income line and look at where the earnings are flowing from and it's largely the production tax credits.

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Scott J. Lauber, WEC Energy Group, Inc. - Senior EVP, CFO & Treasurer [25]

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Yes, that's exactly right. So the production tax credits, like I said, it added about $0.02 to the wind when you looked at it. Now there's a few other items in that tax line, so the settlement of the previous items and just quarterly spreading that's required by the GAAP accounting that we planned in our forecast. But I think the key here is that $0.02 that we got that relates to production tax credits, that's about what we're going to expect assuming normal wind.

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Michael Weinstein, Crédit Suisse AG, Research Division - United States Utilities Analyst [26]

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Right. And also, I mean, we're hearing a lot about how it's been a pretty bad year for wind in general. Does that affect the projects at all or affected the output, affected any of this at all or just tax credit-driven?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [27]

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Well, it would have -- I mean, because these are production tax credits, the level of wind obviously is going to affect your income from the tax credits themselves. I will say though, when we looked at and we looked in pretty great detail like Kevin, Scott and Rick Kuester and I, when we looked at the results of the first quarter and remember, the Upstream Wind Farm was not in service during all of the first quarter. I think it came in second week of January, Scott, or third week of January? So we have Bishop Hill in service for the whole quarter and we had Upstream in service for a portion of the quarter and we were very pleased. Overall, it was very close to budget.

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Michael Weinstein, Crédit Suisse AG, Research Division - United States Utilities Analyst [28]

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And one last question for me. As the weather versus normal, can you guys provide -- can you provide any kind of impact versus normal instead of just year-over-year?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [29]

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Oh, Mike, yes. You probably heard me say this a million times. The weather normalization techniques in our industry are just not very good. I mean, it's the best we've got but they're just not very good. And looking at 1 quarter is really -- can really be misleading. So I'm not sure, frankly, as good as work as our folks do, I just don't believe the weather normalization numbers. I don't think our retail was down, but just think about one -- in fact, Kevin and I were talking about this just a few minutes ago. Think about one side impact of the polar vortex a couple of days that we had. Well, most schools, many commercial businesses actually closed. So weather normalization can't possibly factor in that kind of extreme closure. I'm not overly worried, in fact, I mean, we did see the huge spike in gas obviously, and one would expect that. We're up in residential usage of electricity whether normal, well, everybody stayed home. So I wouldn't be overly concerned about 1 quarter and I still have -- I think you have to look at a very long period of time to get any kind of normal results from our weather normalization effort. I don't know, Kevin, if you've got anything to add to that.

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Joseph Kevin Fletcher, WEC Energy Group, Inc. - President, CEO & Director [30]

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No, I agree with you. Exactly what you said. I don't have anything to add, so...

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Scott J. Lauber, WEC Energy Group, Inc. - Senior EVP, CFO & Treasurer [31]

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So I think, in general, weather was probably $0.04 to $0.05 just a pure weather effect that helped us in the quarter. When you look at it by really Wisconsin had that weather because there's that decoupling Illinois had, decoupling between Wisconsin, Michigan and Minnesota, it's probably about $0.04 or $0.05.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [32]

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And Mike, the thing I'm most happy about is our system delivered. I mean, when you look at some of the shortages and some of the pleas for conservation, when it was 50 degrees below 0 with the wind chill and we really held up, some other states did not, and I'm very pleased with how our company performed.

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Joseph Kevin Fletcher, WEC Energy Group, Inc. - President, CEO & Director [33]

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Yes. I was going to say the same thing, too. If you look at just our neighboring states, there was a request for conservation in that standpoint. We did extremely well, not only our system but our employees as well who weathered through the polar vortex very effectively, very proud of that.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [34]

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Amen.

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Operator [35]

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Your next question comes from Julien Dumoulin with Bank of America Merrill Lynch.

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Julien Patrick Dumoulin-Smith, BofA Merrill Lynch, Research Division - Director and Head of the US Power, Utilities & Alternative Energy Equity Research [36]

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So perhaps to pick up on a slightly different thread, a little bit tricky but curious, how do you think about settlement prospects here at this point? Clearly, your peers in the state were pretty prompt to get something together. What are some of the important nuances to consider in a given case? You've already kind of talked about the key capital items. What are the other variables when you think about it? And obviously, given this would be the inaugural effort to use a new legislation, any other considerations that we should just be aware of as we move though this for the first time?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [37]

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Well, good question, Julien. Let me just say this, we are very early in the process right now. I can't imagine there would be any meaningful settlement discussions until after the staff completes its normal audit of our data. And we're going through the garden variety, normal data responses right now in terms of just verifying our numbers, clarifying their questions on our numbers, et cetera. So when you say others did something in terms of settlement fairly early in the process, maybe they were 3, 4, 5 months into the process. But it's simply, Julian, too early to tell. Obviously, we will have what we hope would be productive discussions with the other parties in the case, with the staff itself. But at this stage of the game, it's just way too early to tell. And again, I wouldn't -- I just wouldn't imagine any productive or meaningful discussions on settlement until after the normal audit is complete and we're still going through the data requests as per our normal schedule right now.

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Julien Patrick Dumoulin-Smith, BofA Merrill Lynch, Research Division - Director and Head of the US Power, Utilities & Alternative Energy Equity Research [38]

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Got it. All right, understood. And then moving back to state politics here a little bit. Can you explain a little bit of the back and forth and sort of your expectations for what is to come around Ellen Nowak and sort of the intriguing back and forth between the courts and the legislation that's going on as best you understand it?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [39]

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Sure. I would just say this, obviously, we all would like the issues surrounding the governor's appointments to be resolved as soon as possible. I think the encouraging thing here is the Wisconsin Supreme Court has now taken up the case, not just from the standpoint of whether or not a stay is appropriate, but they are picking up the case on its merits. And the Wisconsin Supreme Court has already established a briefing and hearing schedule, and my best guesstimate is that the Wisconsin Supreme Court will resolve this in a relatively near future. I'm guessing end of second quarter, early third quarter. So I think that's good news. The Wisconsin Supreme Court now has this in its jurisdiction and they're taking it seriously and they've set a schedule to move forward pretty expeditiously, Julian.

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Julien Patrick Dumoulin-Smith, BofA Merrill Lynch, Research Division - Director and Head of the US Power, Utilities & Alternative Energy Equity Research [40]

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Got it. And to be extra clear about this, that would, in theory, depending on the outcome, there could be an outcome that actually puts her back in the role effective immediately?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [41]

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There certainly could be, yes.

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Operator [42]

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Your next question comes from Michael Lapides with Goldman Sachs.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [43]

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Michael, for Kevin's benefit, could you explain the difference between miss and beat?

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Michael Jay Lapides, Goldman Sachs Group Inc., Research Division - VP [44]

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Miss is for all the Auburn fans on the line, what they're going to do when we think about the SEC title gain. Beat is what all of us Alabama fans are going to do when we think about what happens in the third or fourth weekend of November every year. Does that work?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [45]

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I'm with Georgia Tech, but I got that analogy.

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Michael Jay Lapides, Goldman Sachs Group Inc., Research Division - VP [46]

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I figured you would. I have an easy question for you guys. Real quickly, is there -- when you're looking at your coal generation fleet, not only in the Power the Future units but the rest of the fleet, is there, given what's happened in both renewable costs and with natural gas and gas generation, is there an opportunity in the next 3 to 5 years-or-so for you to retire incremental coal units and potentially save customers' money as well as having an environmental impact? And if so, which potential units would you see as where the biggest opportunity for that could emerge?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [47]

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Even the Georgia Tech grad probably wouldn't answer that entire question, Michael. But certainly, I mean, we look at -- we review our fleet on an ongoing basis. We look at our costs, we looked at the additional capital that might have to be put into these units to keep them running. And I think the short answer, Kevin, that is there potential opportunity over the next 5 years to retire additional coal units, I think the potential answer is yes. We've done a lot already, Kevin.

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Joseph Kevin Fletcher, WEC Energy Group, Inc. - President, CEO & Director [48]

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Well, I was going to say the same, Gale. If you look at what we've done since 2017, we've retired 840 megawatts and we've done it based on evaluating the criteria that you just mentioned. And as technology continues to change, we'll continue that evaluation. And assuming that the things work out and the decisions that was made evident by our analysis, we would continue to look at it. But certainly, we do not have any specific ones that we're looking at right now that I want to talk about.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [49]

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And I will say, Michael, to your question, we're already -- remember, we set a goal of reducing carbon emissions by 40% by the year 2030. We're now thinking based on what we've accomplished and what we're seeing, that we may hit that goal by as early as the end of 2023. And seeing that progress, we then set a longer-term goal of an 80% reduction by the year 2050. And if you have the time, I think just perusing our climate report that we just published might be helpful to you to kind of show you the various pathways that we think might work to get us to that 80% reduction, Michael.

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Scott J. Lauber, WEC Energy Group, Inc. - Senior EVP, CFO & Treasurer [50]

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Our report shows different options and technologies that are needed to help us to advance the -- to reach that 80% goal.

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Michael Jay Lapides, Goldman Sachs Group Inc., Research Division - VP [51]

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No, and that was honestly one of the better versions of a report like that I've seen because unlike some of the others, it was easy to understand and easy to make through. I just keep thinking to myself, if you keep adding renewables and if the gas output in the state continues to rise, utilization rates or capacity factors, it will weigh on coal capacity factors and at some point, you hit a tipping point where because it's a heavy fixed cost business, meaning running a coal plant, that just the economics don't work like they used to. And that's kind of what -- I was actually thinking about that report and going through it when I asked that question a little bit of, this is still a state that uses a lot of coal generation and just trying to think about how that will significantly change. And one of the ways it does is clearly through the retirements and the other way it does is through asset additions of different fuel types, but those tend to be a little bit of a circular reference.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [52]

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Right. And Michael, one other thought along those lines that might be useful, you are correct, the economics are very different than they were even 5 years ago. But you still have to have -- and what we experienced in late January in the polar vortex is a great example of this. You still have to have a backbone system that you can dispatch to keep the lights on. And one of the things that was amazing to us is on the morning of the coldest day in January, remember, I mentioned wind chills near minus 50, in the Midwest, based on MISO's data, 6,000 megawatts of wind did not operate. It wasn't because there wasn't wind, it was because in some cases, at minus 20, the designs of the steel towers are such that they units have to shut down, the wind turbines have to shut down, so -- and this is a complicated, complex subject and the lessons that Kevin and Scott and others and I have learned from it is the idea of having a balanced portfolio while continuing to improve your environmental performance is just, Kevin, just essential.

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Joseph Kevin Fletcher, WEC Energy Group, Inc. - President, CEO & Director [53]

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Just for me, Gale, and I'd like to correct the number I spoke to a minute ago. I believe I said 800 megawatts of coal units have been retired. It's actually 1,840, so a little misspoke there. But you're exactly right, Gale, in your summary, that we have to have a balanced approach for the first conditions because we have to have the consistent and reliable energy at all times for our customers.

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Operator [54]

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Your next question comes from Praful Mehta with Citigroup.

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Praful Mehta, Citigroup Inc, Research Division - Director [55]

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Thank you for all the Q&A, we really appreciate all the color and input so far. So I guess I was -- So I wanted to touch on the ripple effects point that you brought up. Clearly, you're seeing a lot going on and maybe even more than what you originally kind of thought about. How would that fit in with the growth profile that you've kind of laid out longer term? You're clearly hitting the upper end this year but as you think about the 5% to 7%, and I guess some of these, you kind of addressed in previous questions as well. But wanted to get at how we should think about that range going forward, and what are the pushes and pulls that could help us kind of triangulate to what you'll kind of hit in the outyears.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [56]

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Well, good question. And I think, Scott and Kevin, please feel free to add your thoughts as well. I think the first 2 things that come to mind are we have obviously, a very modest rate ask in front of the Wisconsin Commission for our 2 largest companies. So the outcome of that rate case obviously, will have an impact going forward. We're very optimistic about it. And then secondly, remember that we have in place, and I suspect it will stay in place an earnings sharing mechanism, such that customers get benefit if we earn above our allowed rate of return. So for now, Scott, I think probably our best advice might be think about our continuing a 5% to 7% growth range.

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Scott J. Lauber, WEC Energy Group, Inc. - Senior EVP, CFO & Treasurer [57]

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Yes, absolutely. And the other item what we're watching closely is where the ROEs end up for our transmission assets, transmission investments.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [58]

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Very good point. If you remember, Praful, the Federal Energy Regulatory Commission has had a number of cases in front of it and is still deciding the ROE question, what the appropriate band of ROE should be for transmission investments. Really, many of them in the past, these cases have been around for almost 5 years and going forward as well. There, I think we have been, I hope, conservative in our future projections, but time will tell.

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Praful Mehta, Citigroup Inc, Research Division - Director [59]

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Got you, that's very helpful. And then just in terms of the ask itself around the higher equity and the ROE, is the base case 5% to 7% based on the ask or is it based on somewhere in between? How should we think about depending on what the outcome is, how that kind of fit into the 5% to 7%?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [60]

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Well, I think the honest answer to that is we just have to see the outcome. We have to see what type of additional investments the commission is comfortable with us making. I think our plan's very solid but a number of -- a significant amount of the rate ask is tied to the capital investments that we're planning to make like the solar farms, for example. It's like Ragu, it's all in there. But I continue to believe with any kind of a reasonable outcome in the rate case, that we will continue to be able to deliver the kind of returns that you're accustomed to us delivering and that consumers will continue to see the kind of reliability we've been delivering.

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Joseph Kevin Fletcher, WEC Energy Group, Inc. - President, CEO & Director [61]

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Yes, and I will just add from my prepared remarks too that the request for both Wisconsin Public Service and We Energies are very straightforward from that perspective so from that -- then we should be okay if we move forward.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [62]

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I think so too, Kevin. Thank you. I hope that answers your question, Praful.

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Praful Mehta, Citigroup Inc, Research Division - Director [63]

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It does. And just one final thing, more broadly and this is more industry, just on the M&A side, there has been quite a quieting down at the corporate M&A level or kind of M&A in general around the conversations. Has that something with -- is that something that you've seen as well in terms of just more focus on the organic growth? Clearly, the stories are quite strong for a lot of companies like yourselves. Is there a reduced conversation around the M&A theme or do you just think that it's just we don't care about it?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [64]

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Well, I can only give you my perspective. I would say, to be candid with you, you haven't seen a lot of movement in M&A in the last 12 or 18 months, I think, in part because many of the companies have had to issue equity and don't have the balance sheets to make significant acquisitions. On the other hand, we have a strong balance sheet but we would continue to apply the 3 criteria that you probably are very familiar with that we've applied to any kind of review of any potential acquisition. And that's very simply threefold: number one, we would have to believe after a lot of due diligence that we could make the acquisition accretive to earnings per share in the first full calendar year after closing; number two, that we would want it to be largely credit-neutral and by that, we mean we're not going to trash our balance sheet simply to get bigger because acquisitions in our industry, in my mind, are all about getting bigger as well as bigger. So we wouldn't trash the balance sheet. Would we take a small 1 notch downgrade for the right deal? Maybe. Would we take a full category downgrade? No. And then thirdly, we would want the organic growth rate of anything that we would acquire to be at least as strong as our own organic growth rate. I think if you apply those 3 criteria, first of all, not much meets those 3 criteria, but if you do apply those criteria and we will and do rigorously, then I think if there was something that met those criteria, you'd actually be doing something both for your customers and your shareholders.

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Operator [65]

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Your next question comes from Paul Patterson with Glenrock Associates.

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Paul Patterson, Glenrock Associates LLC - Analyst [66]

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So just a quick follow-up on Julien's questions on the Supreme Court proceeding. When do you guys expect the Supreme Court to act on the PAC issue? And if you are willing to, do you guys have any sense as to how they might -- as if you guys handicapped, how they might actually rule?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [67]

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Well, they have -- as I said, right now, the Supreme Court just recently picked just up the case. They have set a briefing and hearing schedule. They have not sent a timeframe for a final decision. But the speed with which they took up the case would indicate to us that -- and I'm guessing here, but end of second quarter, early third quarter is when we might get a decision. My sense is they will act as quickly as the Supreme Court would normally act, with a sense of urgency in this particular case. And no, we don't have any particular insight into how they will make a final decision. But again, I think it's encouraging that the Supreme Court stepped in without being asked to say this is important enough to make a decision in a timely manner.

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Paul Patterson, Glenrock Associates LLC - Analyst [68]

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Okay. And then what happens to Nowak in the meantime? Is she still -- is she allowed to enter the building or what...

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [69]

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To my knowledge, she has been asked not to return to her office until all of this is resolved.

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Paul Patterson, Glenrock Associates LLC - Analyst [70]

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Okay. And then just with respect to Illinois, I guess this week, I think, the Chicago City Council surpassed resolution, I guess, voicing some concern about the infrastructure plan. Obviously, they don't have any direct authority over people but just in general, I mean, any thoughts about that? I mean, clearly it's pretty much the service territory of Peoples. How should we think about that or the -- what would you say about that?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [71]

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Sure. A couple of things. First of all, the city council did not pass the resolution, it was a committee of the city council. And it was simply a -- I mean, the hearing which took place, Kevin, I think yesterday, okay, we had an opportunity to present the compelling facts behind this program. There were a significant number of labor and other groups that testified during open mic. Testimony may be a wrong word but appeared and talked in the open mic period about the importance of this program. So I mean, we're not overly concerned. There have been, as you know, a number of articles in Crane. And I hate to use the fake news but that's about what it is with Crane, but I think we've responded to those very well. And the compelling piece here is just how important from a safety and efficiency standpoint this program is. And I think that message is beginning to carry today. So we're not overly concerned. It's business as usual and we're doing this as quickly and as effectively as we possibly can.

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Operator [72]

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And your last question comes from Vedula Murti with Avon Capital.

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Vedula Murti, Millennium Management LLC - Senior Analyst & Assistant Portfolio Manager [73]

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A few things. When we're taking a look at the quarter-over-quarter changes and you've mentioned particularly on the income tax expense line, the wind credits that were favorable by $17.7 million on your -- on Page 8 of the earnings packet. I guess I'm wondering if we were to think about this within your annual guidance of $3.48 to $3.52, the $17.7 million variance in 1Q, what would that end up being annualized at the end of the year? I just don't know. I doubt you can just take 17.7 times 4 or something like that.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [74]

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If we could, you wouldn't be asking the question, Vedula.

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Vedula Murti, Millennium Management LLC - Senior Analyst & Assistant Portfolio Manager [75]

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Yes. Exactly.

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Scott J. Lauber, WEC Energy Group, Inc. - Senior EVP, CFO & Treasurer [76]

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Yes, the tax line is pretty unique this quarter and a lot of it, we have factored already into our guidance and all of it have been basically factored into our guidance. The true wind piece as it relates to actual production was that $0.02, a little over $6.5 million. There's other items that relate to some accounting rules plus some certification of miscellaneous, various other items that flow through that line which I thought a little unique in its first quarter. So you can't take that and multiple it by that. The true production tax credits that we anticipate is about $6 million to $7 million a quarter going forward.

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Vedula Murti, Millennium Management LLC - Senior Analyst & Assistant Portfolio Manager [77]

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I missed that very last part. $6 million to $7 million a quarter, is it per quarter?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [78]

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For the production tax credits for our infrastructure wind.

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Vedula Murti, Millennium Management LLC - Senior Analyst & Assistant Portfolio Manager [79]

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I want to make sure, thinking about this properly such that if I look at the same table, in the same line item in 2Q, 3Q, and 4Q in terms of the benefits, what is the run rate that buttresses $3.48 to $3.52? Generally speaking, is there some type of range for that line item?

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Scott J. Lauber, WEC Energy Group, Inc. - Senior EVP, CFO & Treasurer [80]

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Well, and we're still comfortable -- I guess the way to look at it, we're still comfortable with our overall effective tax rate at that 7.5% to 11.5%. I think that would be the best ROE to put in your model. And if you exclude the tax repairs, in my prepared remarks, it's 20% to 21%. I think that's probably the best way to look at it because those are still good as our forecast.

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [81]

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There's a lot of ins and outs to Scott's point in that line, so I think Scott's right. If I were in your shoes, I would model what we say we expect our effective tax rate to be for the year.

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Vedula Murti, Millennium Management LLC - Senior Analyst & Assistant Portfolio Manager [82]

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But is it fair to say that this quarter is particularly somewhat elevated and concentrated as opposed to normal?

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Scott J. Lauber, WEC Energy Group, Inc. - Senior EVP, CFO & Treasurer [83]

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Yes, I think it was somewhat elevated. I don't have the tax rates right in front of me, I think it's in there. So our -- yes, the tax rate, well, it came in about 20.1%. So you got to just factor it all in. And it's going to be a little higher, but it's maybe a little higher than this quarter. So this is unique accounting. I think the key is to look at the overall tax rate.

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Vedula Murti, Millennium Management LLC - Senior Analyst & Assistant Portfolio Manager [84]

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Okay. In terms of the 5-year capital plan, the energy infrastructure pile, that's always been like maybe 9% or as I recall, or something like that...

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [85]

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I think it's 11% in our 5-year plan.

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Vedula Murti, Millennium Management LLC - Senior Analyst & Assistant Portfolio Manager [86]

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Okay. Clearly, you're running way ahead on a pro rata run rate. You alluded to the menu of prospects that you're looking at. Why is it not reasonable for us to expect that, that number that's currently within the 5-year plan will end up having to be elevated at some point in time either next year when you update CapEx or some other time in between now and then?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [87]

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Well, a couple of things. First of all, we have, as I mentioned, a pretty robust pipeline of opportunity but we also need to look at a number of other factors including our tax appetite. So we're being very particular in cherry-picking only the very best projects that we think have really solid business cases behind them, really solid offtakers for all the wind. So there are a number of factors here that we take a look at. The best projects, the tax appetite, essentially what other investment opportunities we might have. I wouldn't -- yes, we're way ahead of schedule, we're pleased about that, the projects, I think, are first-rate but I wouldn't necessarily assume that we're going to blow the doors off just because we've had some early success here. At the same time, I'm optimistic that we can fill up that portion of our capital plan with very high quality projects.

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Vedula Murti, Millennium Management LLC - Senior Analyst & Assistant Portfolio Manager [88]

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Okay. I and guess maybe one last thing regarding Peoples Gas. Obviously, Paul asked about some of the current Preston Isle activity. Can you update us on the audit that is going on with regards to I think, the period where I think it was partially pre your ownership and partially your ownership for the first year and where the status is of that? And then when that's concluded then, remind me how the next audit gets initiated in terms of review?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [89]

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Sure. Well, what you're referring to in terms of the current audit in the year in which we were partial owner for the second half of the year. That's the 2015 reconciliation audit that -- and I would just point out that under the way this program works, there is basically a reconciliation, an audit review after the fact every year. So we can expect every year that the commission will exercise its proper oversight over how the program was managed in the prior year. It just so happens that 2015 is still outstanding. There is now a proposed from the administrative law judge, a proposed resolution, very modest amount of change that the administrative law judge is recommending and again we weren't in that company for the first half of the year. So we didn't have an opportunity when we didn't own the company to make some of the improvements we've already made. But you can expect an annual audit as normal, that's just how the program works and I think it's certainly appropriate for there to be an annual audit.

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Vedula Murti, Millennium Management LLC - Senior Analyst & Assistant Portfolio Manager [90]

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So the '16 audits for full year where -- first full year where you owned it, that will commence upon the completion of the current audit, correct?

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Gale E. Klappa, WEC Energy Group, Inc. - Executive Chairman [91]

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I suspect that's right. No schedule has yet been set but I suspect that's right.

All right, folks. That concludes our conference call for today. Thank you so much for participating. It's always a blast. If you have any more information -- or I'm sorry, if you have more information or questions, please feel free to contact Beth Straka. Her direct line. 414 221 4639.