Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- WEC Energy Group Inc (WEC, Financial) reported second-quarter 2024 earnings of $0.67 per share, exceeding their guidance range of $0.60 to $0.64 per share.
- The company is on track to meet its full-year 2024 earnings guidance of $4.80 to $4.90 per share.
- Significant economic development in the I-94 corridor between Milwaukee and Chicago, including major investments from companies like WestRock and Microsoft.
- WEC Energy Group Inc (WEC) is progressing on its largest five-year investment plan, totaling $23.7 billion for efficiency, sustainability, and growth.
- The company continues to make strides in reducing greenhouse gas emissions, having retired nearly 2,500 megawatts of older fossil fuel generation since 2018.
Negative Points
- Second-quarter earnings were $0.25 lower compared to the same period in 2023, primarily due to higher O&M, fuel, depreciation, and interest expenses.
- Higher storm costs and the absence of a land sale benefit that was present in Q2 2023 negatively impacted O&M expenses.
- The Delilah I solar project has been delayed to the end of the year due to a weather event, impacting the company's infrastructure segment.
- Regulatory uncertainties in Illinois, including appeals and ongoing dockets, could impact future capital allocation and project approvals.
- The company has experienced a shift in revenue recognition patterns at Peoples Gas, concentrating base revenues more in the first and fourth quarters, which affects quarterly earnings distribution.
Q & A Highlights
Q: What portion of Microsoft's land acquisition and build is layered in your current plan, and when do you see this hit your plan more materially?
A: Currently, we only have the energy and capacity needs for the first 315 acres Microsoft purchased. They announced spending $3.3 billion through 2024-2026. We are working with Microsoft to develop our next five-year plan, which will include the additional 1,030 acres they purchased last fall and the 173 acres announced recently.
Q: How will the delay of the Delilah I solar project impact your financials?
A: We have taken the delay into consideration and reaffirmed our annual guidance of $4.80 to $4.90 per share. We are confident that we can offset the downside from the delay through O&M management, financing costs, and tax strategies.
Q: What are the opportunities around transmission with the sizing of MISO Tranche 2 moving higher?
A: Tranche 2 is expected to be larger than Tranche 1, and it will likely be proportionately larger for ATC. The spending will probably occur around 2030 plus. The biggest drivers for ATC will be economic development and the integration of renewables in Wisconsin.
Q: How should we think about incremental equity needs associated with your usual plan refresh with Q3?
A: Any incremental CapEx will be financed consistent with our utility capital structures. We will look at the equity needs in line with the capital spend and are excited about the long-term growth opportunities.
Q: Can you frame some bookends for potential outcomes of the still pending docket in Illinois, namely the pipe program review?
A: The range of outcomes includes emergency work to working with the City of Chicago, with a cap of about $245 million, to staff recommending accelerating the program to be completed by 2030. No interveners have recommended pausing the program.
Q: What is baked into the plan for the safety modernization program in Illinois for 2025 and forward?
A: We have between $100 million to $120 million a year in the plan. We are refreshing the capital plan and working with the team in Illinois to reflect the latest developments from the commission's decision.
Q: How do you view the recent commission vote in Wisconsin and its implications?
A: We believe the commission was looking for additional information on the economics and benefits. We will review the order, pull together the necessary information, and ask for reconsideration. We appreciate the commission's thorough evaluation of each case.
Q: What is the timing for the Illinois Gas Appeal at the Appellate Court?
A: We anticipate that it will take a year or two for a decision.
Q: How are conversations with NextEra regarding the Point Beach PPA progressing?
A: We have had productive conversations with NextEra, but there is nothing to report at this time. We are still in discussions.
Q: What are the details behind the improved O&M outlook?
A: The improvement is due to lower benefits, using contractors versus internal labor, and other efficiency initiatives. It is a combination of one-time initiatives and sustainable efficiency improvements.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
