Release Date: May 01, 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 strong first quarter 2024 earnings of $1.97 per share, demonstrating financial discipline and operational efficiency.
- The company is advancing its ESG progress plan with a historic 5-year investment totaling $23.7 billion aimed at enhancing efficiency, sustainability, and growth.
- WEC Energy Group Inc (WEC) has strategically increased investments in renewable energy projects, including a significant stake in the Delilah 1 solar project and additional interests in the Samson Solar project and Maple Flats Solar Energy Center.
- The regional economy in Wisconsin is robust, with a low unemployment rate of 3% and record employment levels, indicating strong economic growth and potential for further expansion.
- WEC Energy Group Inc (WEC) continues to focus on transitioning from coal generation to renewables and natural gas, aligning with new EPA emission rules and enhancing environmental sustainability.
Negative Points
- The warmest winter in Wisconsin's history negatively impacted the company's earnings, with weather having an estimated $0.07 negative impact per share in the first quarter.
- Higher depreciation, amortization, and interest expenses have offset some of the positive financial variances, presenting ongoing financial challenges.
- Regulatory challenges and uncertainties in Illinois could affect future operations and financial stability, particularly concerning the safety modernization program and the future of gas in the state.
- The need for rapid approval and construction of new generation facilities to meet customer demand poses a risk if regulatory or logistical delays occur.
- While WEC Energy Group Inc (WEC) is reallocating resources towards renewable projects, the transition involves significant capital expenditure and operational shifts that could impact short-term performance.
Q & A Highlights
Q: It's actually James on for Shar. So the first -- the $400 million of the equity in your current 5-year plan was put there to true-up utility equity layers? In your current Wisconsin rate cases, you're asking for 53.5% equity or 50 basis points above where you indicate current levels to be. Could we see incremental equity being added to the current plan to true those utilities up that 50 basis points?
A: Gale E. Klappa - WEC Energy Group, Inc. - Executive Chairman of the Board: I think the short answer is no, Shar. I'm thinking of Shar in a closet somewhere. Xia, go ahead.
Q: Gale, well, finally, the day came. Well, I appreciate all 87 of those calls, which I probably either listen to or read the transcript of all of them. So -- but wish you the best. But I'm not going to let you get away without answering some questions. So just -- you brought up the Microsoft announcement potentially coming soon and I guess there's already kind of been announcements, but just could you give a little more color kind of what else they might be talking about? Is it -- is there kind of an expansion of maybe the build-out that they're looking at. And just how do we think about just -- are you -- from a supply standpoint, are you basically the supplier for all their electricity? And are you kind of -- how are you making sure that you're kind of doing at the right margins and just how we should think about both the tariff margin and CapEx potential?
A: Gale E. Klappa - WEC Energy Group, Inc. - Executive Chairman of the Board: Yes. Terrific. Great question, Steve. I mean, first of all, to answer your second question, yes, we will be the supplier for all of the energy that Microsoft will need at their site inside the Wisconsin Technology Park, which, as you know, is about 20 miles south of our headquarter city.
: So listen, so Gale, do you -- I guess, just from your perspective and the team's perspective, do you worry about the pace at which the data center deployment is projected to kind of occur? I'm thinking about how fast they're building, you just alluded to your active conversations versus sort of your construction cycle, getting approvals and all the sort of the road blocks or the milestones that you need to kind of check to get the generation there. Is that something that concerns you?
A: Gale E. Klappa - WEC Energy Group, Inc. - Executive Chairman of the Board: Just in terms of the amount of time it takes to get approvals. Is that what you're referring to, Durgesh?
Q: Maybe just to start, I wanted to just ask on the electric sales this quarter, you walked through some of the weather impacts, but anything else that you flag driving some of the C&I load for the quarter, particularly for the larger customers there? And then as you just think about some of these economic development opportunities, how you think about really that timing for an inflection in load growth?
A: Gale E. Klappa - WEC Energy Group, Inc. - Executive Chairman of the Board: Well, we've already -- and we will ask Xia to give you, she's got a couple of very good important details, particularly about the large industrial activity that we saw in Q1 here. Let me just say 2 quick things.
Q: Congratulations and best of luck and best of luck to Shar in the closet also. So great news all around. I guess also Neil and Steve's question, I apologize if you answered it, just I guess you talked about you have an adequate reserve margin in the service territory and if a large data center hyperscale that comes in, and they eat up that entire reserve margin and now the generations need to get back. Just on the allocation of cost for the data center moving in there and maybe eating up that reserve margin, does the rest of this jurisdiction bear the cost of now building back up the reserve margin?
A: Gale E. Klappa - WEC Energy Group, Inc. - Executive Chairman of the Board: No. And I'm glad you asked the question actually because we should be very, very clear about that. First of all, Microsoft has said time and time and again that they want to and will pay their fair share. And we're working on a specific rate for them that will have several components. It will have essentially a component for generation capacity basically, they'll have to pay for their fair share of the generation that's needed. They will have to pay a small amount. There will be a little bit of distribution, but they will pay for the distribution investment that serves them.
Q: Congratulations. So I guess my question is the future of gas. You brought it up. And I know it's kind of early procedurally, but any sense as to when that might be wrapped up in Illinois?
A: Gale E. Klappa - WEC Energy Group, Inc. - Executive Chairman of the Board: A long time. What is going on right now and started a couple of months ago is really what they would call a scoping phase. So they're having almost weekly meetings to identify and get broad input on all the different sub subjects or sub subject matters that should have broad discussion from all the stakeholders going forward. So the scoping itself, I think, is going to take until mid-summer. Our guess is probably when do you think Scott, at least a year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
