Good afternoon and welcome to the WEC Energy Group's Conference Call for Third Quarter 2024 Results. This call is being recorded for rebroadcast and all participants are in a listen-only mode at this time. After the presentation, the conference will be opened 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 two hours after the conclusion of this call. Before the conference call begins, please note 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. This call also will include non-GAAP financial information. The company has provided reconciliations to the most directly comparable GAAP measures in the materials posted on its website for this conference call. And now, it's my pleasure to introduce Scott Lauber, President and Chief Executive Officer of WEC Energy Group.

Good afternoon, everyone, and thank you for joining us today as we review our results for the third quarter of 2024. Here with me are Xia Liu, our Chief Financial Officer; and Beth Straka, Senior Vice President of Corporate Communications and Investor Relations. As you saw from our news release this morning, we reported third quarter 2024 adjusted earnings of $0.82 per share. This excludes a charge of $0.06 per share related to the disallowance of certain 2016 capital expenditures under the Qualifying Infrastructure Plant rider in Illinois. With this solid quarter, we remain on track for a strong 2024. Our focus on executing the fundamentals of our business is creating real value for our customers and stockholders. Today we're reaffirming our earnings guidance for the year. On an adjusted basis the range is $4.80 to $4.90 a share. Of course, this assumes normal weather through the remainder of 2024. We continue to see strong foundation of growth in the region. The unemployment rate in Wisconsin stands at 2.9%, continuing a long-running trend below the national average. Microsoft is making good progress on its large data center complex in Southeast Wisconsin. The company has continued to increase its landholdings as part of this development. It has been reported that Microsoft now owns more than 1,900 acres, up from 1,300 acres at the beginning of the year and work is well underway. We're seeing development elsewhere in the state as well. Amazon for example, opened a 1.1 million square foot warehouse in Kenosha earlier this year. The company is growing steadily with additional distribution facilities and is also starting to use electric delivery vans in its fleet. And in Green Bay, Georgia-Pacific completed a major mill expansion just last month, with an investment of $550 million. Of course, this growth is…

Thank you, Scott. Turning now to earnings. Our third quarter 2024 adjusted earnings were $0.82 per share. This excludes the $0.06 per share charge related to the disallowance of certain 2016 capital expenditures under the QIP rider in Illinois. While this was a decrease of $0.18 per share quarter-over-quarter, we did exceed our Q3 guidance range, driven by more favorable September weather, financing and timing of tax items compared to the guidance. As Scott indicated, we remain on track to meet our 2024 adjusted earnings guidance. Now let's look at our quarter-over-quarter variances. Our earnings package includes a comparison of adjusted third quarter results on Page 16. I'll walk through the significant drivers. Starting with our utility operations, adjusted earnings in the third quarter of 2024 were $0.18 lower when compared to 2023. This decrease was driven by the Illinois rate design change, higher O&M, depreciation and amortization and interest expense. These items more than offset favorable weather, timing of fuel expense, taxes and other items. Specifically on weather, compared to normal conditions, we estimate that weather had a $0.02 positive impact in the third quarter of 2024 compared to a $0.01 positive impact in 2023. Also, as I reminded you on the last few calls, with the rate design changes at Peoples Gas, base revenues are now more concentrated in the first and fourth quarters when natural gas usage is the highest. This shift resulted in lower third quarter earnings when compared to the prior year. Before I turn to earnings at the other segments, let me briefly discuss our weather-normal electric sales for the quarter. Retail electric deliveries in Wisconsin, excluding the iron ore mine, were up four-tenth of 1% quarter-over-quarter. Sales from residential and small C&I segments, both slightly increased compared to Q3 last year. Overall, year-to-date,…

Thank you, Xia. Finally, a quick reminder about the dividend. I expect we'll provide our 2025 dividend plan and earnings guidance in December. We continue to target a payout ratio of 65% to 70% of earnings. We're positioned well within the range so I expect our dividend growth will continue to be in line with the growth of the earnings per share. Overall, we're on track and focused on providing value for our customers and our stockholders. Operator, we're now ready for the question-and-answer portion of the call.

Now we will take your questions. [Operator Instructions] Your first question comes from the line of Shar Pourreza from Guggenheim Partners. Your line is open.

Hey, Scott. Hey, Xia.

How are you doing?

All right. Not too bad. Let me just -- 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?

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.

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?

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.

Okay. That is perfect. We'll see you in a week in Florida and congrats on getting warmer. Appreciate It.

Absolutely, thank you.

Your next question comes from the line of Julien Dumoulin-Smith from Jefferies. Your line is open.

Hey, good afternoon. How you guys doing?

Good. How you doing, Julien.

Just talking about Illinois a little bit more here. I mean on PGL here a few different options that have been put on the table here and there's a staff rack out there how do you think about that Option 3? I suppose about $7 billion-ish through 2040. How does that compare with what you guys are updating here today? And is there any upside vis-a-vis what you guys are embedding against that proposed outcome here? I'll let you guys comment.

Sure. That's a good question. And Option 3 just to get everyone on the same page Option three has the spending and it's the option -- it's the lowest spending option. It's the preferred option by PGL. And then staff also came out ICC staff came out and recommended Option three also that has about $7.2 billion of spending over the period. When you look at what we put together in the five-year plan and Xia and I don't like to have much any white space if any in our 5-year plan; so we took the capital down just to the emergency work and the work needed for facility relocates. So that's about $90 million a year in our plan for the next five years. So if this plan would get picked up I think that could be an upside of maybe $100 million to $150 million maybe $200 million a year. But remember if they would pick that we ramp down those projects very quickly of what we are doing. So it takes a while to ramp back up. But we took basically just the bare minimum and put it in our current 5-year plan. So there would be upside if one of these options is selected.

Your next question.

Go ahead.

Your next question comes from the line of Michael Sullivan from Wolfe Research. Your line is open.

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?

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?

Yes, it does. Yes, very helpful, Scott. And then I just had two questions just on the earnings side. On this ATC ROE that you're going to book in Q4, I guess how should we think about why you are not raising guidance for that? Or what would have happened if you weren't able to book that?

No, that's a good question. And things move around in our forecast. And it came through there. We just got a little bit of timing of some other expenses that we were anticipating maybe would come through a little bit better. But timing, we got to make sure we execute on it. So factoring it all in, and we went through and factored everything through here and comfortable with keeping the guidance where it's at.

Okay. And then the last one

Michael, this is Xia. Just remember, we had a really mild first quarter. Year-to-date, we're $0.06 behind on weather. So like Scott said, there are lots of things that have kind of developed throughout the year, and this $0.05 will help us offset some of the weather deficit.

Okay. Appreciate that color. And then the last one for me, just to level set ahead of December here. So can you just remind what the base is for your long-term EPS CAGR? And will that shift with the December update? And how do we think about the potential to get back in that 6.5% to 7% range after kind of being short of that this year based on your guide?

Sure. And our 6.5% to 7%, and we are still using the 2023 base. I think it was $4.60 as our starting point for our guidance because last year, because of the Illinois decision and some adjustments we had to do there and timing of when we could do our capital investments. So we're keeping that 2023 base this year as we look at our long-term guidance. We will -- we've got to get through the rate case here, and we'll come out with our plan next -- in December after we get through that.

Okay. Thank you very much.

Thank you.

Your next question comes from the line of Neil Kalton from Wells Fargo Securities. Your line is open.

Hi. Guys. How are you doing?

Good. Hi, Neil.

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?

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

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?

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.

Okay. Okay. Got it. And then I mean so just and maybe it's only limited as to what you can say. But like if Microsoft were to formally announce a Phase 2 would that be something that would necessitate more capacity?

That -- we'd have to see what they're -- I mean Microsoft is -- we will let Microsoft make their announcements. Working with them on the demand, I'm not sure if that actually includes some other phases or not. They just -- we work with them on kind of the demand over the period and kind of keep it inside baseball here unfortunately. But that's the way they want to do it which is fine.

Okay. Thank you very much.

Thanks Neil.

Your next question comes from the line of Andrew Weisel from Scotiabank. Your line is open.

Hey everybody. Good afternoon.

Hey Andrew.

Just want to clarify a little on the CapEx update. Obviously some very big numbers here and I appreciate the granular detail on the moving pieces. One I wanted to clarify was electric generation. You showed that the total on Page 18 went up by $3.7 billion, but the commentary on Page 17 really only calls out $3 billion. You showed regulated renewables and the natural gas generation. We're missing about $700 million. So, what else is in that bucket? Then it looks like similar there's about a $100 million increase for natural gas distribution. Would I be correct? Is that just higher day-to-day spending and cost inflation? Or have you made some assumptions around regulation and policy changes in Illinois compared to the assumptions you made when you gave the last update in February?

Yes. Good questions, really quick analysis of the numbers. So, when you look at the gas distribution and you go behind the numbers it's actually a decrease in Illinois and an increase in the other parts of the service territory Wisconsin, Michigan, and Minnesota; as it relates to adding capital for good customer growth and just other area expansion. I think as you look at the PHMSA rules, there could be some requirements that more capital is needed. Until we see the final PHMSA rules, it's hard to really handicap the final number. So, that's really a plus in the other areas a little decline in Illinois. And in the generation, you're exactly right, there's probably about another $700 million. That's in a variety of projects across the enterprise from looking at upgrading a wind farm to get some additional production tax credits, to adding some more resilience and a few of our generating plants, to looking at other different types of backup storage just to make sure we have that additional resilience. So, it's a variety of items, all in that generation area just so we can make sure we continue to hit that demand.

Okay, great. That's very helpful. Then on the transmission side you increased it by $200 million, is that all related to near-term economic development? Would I be correct in assuming that the MISO Tranche 2 stuff is more outside of this forecast period?

Yes, you're exactly right. More of the MISO Tranche 2 is going to be after this most likely after this five-year plan, maybe a little bit at the very end, but most of it is going to be after the five-year plan. But we'll know more of that and the final numbers come December.

Very good. And one last one here on the load growth. I think you said you're now expecting 1,800 megawatts of incremental load, that's up from 1,400 megawatts. I don't think you commented on what that means in terms of percentage load growth forecast. Is that something that you can share now? Or is that something you plan to share at EEI?

Sure. Sure, we can talk about them now. So, what -- when it looks at a megawatt hour basis and I think these are probably on the low side, but we extended that 4.5% to 5% electric sales growth through 2029. So, we continue to see the volumes on a megawatt-hour basis. And on a megawatt basis, we are at -- up 1,800 on a base of about 7,500. So, that's a little over a 20% increase in the demand on our sales, so very significant demand increase. And I really look at the demand as being a key component because that's really where we have to build the dispatchable resources too to make sure we have enough demand and capacity hit on those peak days. Make sense?

Yes, thank you so much.

Our next question comes from the line of Sophie Karp from KeyBanc Capital Markets. Your line is open.

Hi. Good afternoon. Thank you for taking my question.

Absolutely, Sophie.

So, it's a great update all around, right? Your load growth is going higher. Very, very healthy capital update as well. Wisconsin rate case is, in it's going to last innings already. Is there any reason why I guess you wouldn't raise the EPS growth rate when you do refresh your guidance in December? Are there any like offsetting factors we are missing here that would prevent that from happening?

That's a good question. And when we looked at it, we did -- we added capital in Wisconsin. We also reduced it in the WEC infrastructure but also looked at Illinois and reducing it. So as we look at it and add in the equity needs and the debt needs, we're very comfortable with that 6.5 to 7. We do have to get through the Wisconsin rate case and really hear what goes on in our Safety Modernization Program in Illinois, which we'll hear in the first quarter of next year. But it's really just being realistic on the financing plans, associated with our capital spending and taking down capital in some of the other areas.

Got it. Okay. Thank you. Go for me [ph] we’ll see you at the AI.

Sounds good. Thank you.

Your next question comes from the line of Durgesh Chopra from Evercore ISI. Your line is open.

Hey team. Good afternoon. I got some Haribo gummy bears sitting outside my front door. That's my trick-or-treat.

Excellent. Excellent. Thank you for supporting the community.

Bingo. And they are from source from Milwaukee. Okay. So, a couple of questions, Xia. Just -- I know you talked about 50% the capital funded through equity. But when I compare plan -- the prior plan over the current plan, the CapEx has gone up $4.3 billion, but the equity has only gone up roughly $1 billion. It's gone up from like $2 billion and change to $3 billion at the midpoint of the current guidance range. So maybe just why is it -- I would have thought that the equity is a lot higher. Maybe just help us bridge the two planned equity issuance -- equity issuances between the two plans please?

Yes, I'd be happy to. So the last plan, remember the range was $1.95 billion to $2.35 billion. This plan the range is $2.7 billion to $3.2 billion. So to your point, it's roughly about $800 million increase in common equity. We also are adding some holding company debt, particularly using maybe some hybrid that would give us 50% of the equity content. So if you include that, plus the $800 million of common equity, that's around $2 billion increase in equity content. So our capital has gone up $4.3 billion. We're adding a little over $2 billion of equity content including the $800 million of common equity.

Got it. As always, that is crystal clear. Thank you, Xia. And then maybe just quickly I wanted to follow-up on Delilah solar. Is the plan that's still -- that it completes construction goes into service by the end of the year. Is that still on track?

Yes. That is correct. Delilah and Maple Flats are both on track by the end of the year.

All right. Thank you so much. Appreciate the time.

Thank you.

Your next question comes from the line of Jeremy Tonet from JPMorgan. Your line is open.

Hi. Good afternoon.

Good afternoon.

Happy Halloween, everyone. Just wanted to go into the addition of gas generation, and how that contributes to LNG operations overall? Do you have any thoughts you could share there?

Sure, sure. We're adding more gas generation. And as you can imagine, we want to make sure that we have that dispatchable gas -- our own gas within the state of Wisconsin to make sure we can run the generation and keep the houses warm on the gas side. So we added another 2 Bcf in our plan. Literally the one that we're looking at and we filed at the commission is sitting where a coal pile used to sit. So having that stored energy or stored fuel in the state of Wisconsin near the power plants are very helpful to make sure on those coldest days of the year that we have enough energy in the state to be able to run those plants. Couple of years ago we had one of our pipelines not our pipeline but one of our vendors suppliers pipeline had a compressor issue that really made the state of Wisconsin really thin on natural gas. So having those LNG tanks are going to be very critical to keep that reliability.

Got it. Very helpful there. And then going a bit further here with this big call on generation broadly in the country, I'm just wondering if you could provide us thoughts on reserve margins how it stands now where it could be going? And as it relates to gas generation, coal generation in particular does it affect retirement timelines given this greater need? And at the same time could CCS be part of the answer here? Just wondering if you have thoughts on these topics?

Sure. And gas generation is critical for us as we look at having something dispatchable. I mean today is -- the wind's blowing. But some days the wind doesn't blow or the sun isn't shining. So we are looking at building our generation the mix renewables and gas generation and just to make sure we're staying ahead of the reserve margin that's needed for MISO and they've continued to evolve their rules as more renewables, appropriately as more renewables get on the system to make sure they have seasonal demand and the load following type of needs here and the capacity. So that is very important for us as we continue to grow out our capacity plans. What was your second part?

Carbon capture with regards to gas generation and just coal plant retirements in general generation…

In the carbon capture, for us we don't have any natural place to store the carbon here in Wisconsin. And if we had to do carbon capture, we think it would cost our customers $1 billion to $2 billion more in order to do carbon capture and haul it someplace that you look at where you're going to store it and then you have the transmission of it. So we, of course, looked at it, is it possible? It's just did not seem viable and cost-effective for our customers versus the plan that we're developing here and we laid out in front of you. And when you think about the coal retirements we already retired Oak Creek 5 and 6. The other units 7 and 8, we plan to retire at the end of 2025. And we're doing that because we're putting in some of the more efficient gas generation. And to be quite honest, if we weren't going to retire 7 and 8, we'd have to add additional capital to those plants to have them to extend longer and add the carbon capture. So those are still planning to be in retirements. Some of the plants like Weston 3, we plan on retiring by 2031. We continue to look does it make sense to use natural gas there or some other fuel? I don't know if it'd be economical or not. But it really hasn't adjusted much of our coal adjustments either, our coal plant retirements.

Got it. That's very helpful. Thank you for that. And just one last quick one if I could as far as 2025 funding needs are concerned for equity content, just wondering is it makes sense for the ATM? Could we see a block? How much transferability I guess is in the mix here?

Sure. I'll let Xia take that one.

Yeah. So we have -- remember we still have the employee benefit plans on. So that will be part of the equity raise for next year. So the ATM should handle the remaining piece fairly easily. So we don't plan to have a block sale right now. The tax credits are already included in the FFO. So on average, we've been selling $100 million to $200 million so far. And as we continue to add renewable projects that number could grow a little bit, but those are already assumed in the FFO.

Got it. Thank you. Very helpful. I’ll leave it there.

Thank you.

Your next question comes from the line of Nicholas Campanella from Barclays. Your line is open.

Hey, good morning or good afternoon rather. Long day. Thank you for taking my question. So just one for me. A lot of things have been answered. I guess just kind of decomposing that 8.8% asset-based growth figure, it does seem like a lot of the growth is coming from Wisconsin. So just what's rate base growth outlook in Wisconsin, as you see it today versus kind of what you've been kind of trending at or executing at the past few years? And that's it for me. Thanks.

So when you look at the rate base growth in Wisconsin, it's going to be – oh, I don't know I imagine between 14% and 15%, pretty significant rate base growth. But remember, that's where all the economic growth is. And when you look at the economic growth and we usually look at the growth and try to break it into different components being – whether it's growth from sales, growth from resiliency. And a lot of our growth I would say, I don't know $8 billion to $9 billion that is related to economic development and growth of the support of the economy. So it's really driven that sales are going to help grow into that. So that's significant. And then ATC has good growth. So we're also growing a lot in the American Transmission Company, which is Wisconsin based also but FERC regulated. So a lot of growth in Wisconsin largely driven by economic development.

Yes. Nick 40% of our – this is Xia. 40% of our total capital is we call the growth capital. So that comes with the large customers paying for their required demand and related cost. So we feel good about the growth in Wisconsin and also the driver for it.

All right. Thanks a lot. See you soon. Thank you.

And your final question comes from the line of Paul Patterson from Glenrock Associates. Your line is open.

Hey, good afternoon.

Good afternoon.

Just to follow things up. Is there any change – well, first of all, could you just sort of remind me what your what the rate increase outlook is given the new CapEx program, if it's changed at all and just what it is again?

Sure. And we're right now going through the rate case in Wisconsin. So if you go out and you start to look at 2027 through 2030, you got to kind of break it into this capital. As Xia said a lot of it's being supported by economic development. So I think rate increases will be in line with inflation. We do have some reliability projects that we're putting in place that we're doing some overhead underground to add more stability as we continue to see some stronger weather patterns and wind patterns across the state. So that may take it maybe 1% above inflation. But for the most part, a lot of this capital is being driven by economic development which will come with megawatt hours and megawatt sales. So it's not like it's all on the back of our retail customers at any means. And Microsoft has said and they put in their testimony, they understand and they need to pay their fair share. They don't plan on subsidizing anyone else but they also realize that they're not supposed to get subsidized either. So they have been perfect. And as we look at potentially other data centers coming in that's kind of – that's the playbook to make sure everyone pays their fair share appropriate amount.

Okay. And then on the – I apologize if I missed this, but it looked like there was a big increase in gas normalized sales in commercial or something for Q3, when I looked at your...

And we can – when you look at Q3, commercial industrial yes, it was up a little bit. Q3 is such a small volume quarter that any little change can affect it. So I would not read much into it. I would look more at the year-to-date where we are. Q3 that could have been just an anomaly with the meter issue or something – I mean there's so smaller volumes in that quarter you got to really look at the year-to-date.

Makes sense. Thanks so much. Have a great one.

You too.

All right. Thanks, everyone. That concludes our conference call for today. Thank you for participating. If you have any more questions, please feel free to contact Beth Straka at 414-221-4639.

Call has now ended. You may now disconnect.