WEC Energy Group, Inc. (WEC) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary and Q&A highlight strong financial guidance, significant capital investment in renewable and natural gas projects, and positive growth forecasts. The reaffirmed earnings guidance and dividend growth are positive indicators. While there are some uncertainties, such as the Point Beach capacity and Microsoft's site search, the overall sentiment is positive. The company's strategic focus on renewable energy and robust supply chain management further support a positive outlook. Thus, the stock price is likely to experience a positive movement in the next two weeks.

Key Financial Performance

Third Quarter 2025 Earnings Per Share $0.83 per share, a $0.01 increase year-over-year. The increase was driven by rate-based growth, favorable weather conditions, and timing of fuel expense, tax, and other items, partially offset by higher depreciation, amortization, and O&M expenses.

Weather-Normal Retail Electric Deliveries 1.8% increase year-over-year, led by a 2.9% growth in the large commercial and industrial segment, 1.3% growth in the residential segment, and 1.4% growth in the small commercial and industrial segment. This growth was attributed to economic development and increased demand.

American Transmission Company Earnings Contribution Incremental $0.02 increase in Q3 2025 earnings compared to 2024, driven by capital investment growth.

Energy Infrastructure Segment Earnings $0.01 increase in Q3 2025 earnings compared to 2024, attributed to higher production tax credits.

Corporate and Other Segment Earnings $0.11 increase in Q3 2025 earnings compared to 2024, largely driven by tax timing and higher interest expense.

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Operating Highlights

5-year capital plan: WEC Energy Group announced a new 5-year capital plan with an investment of $36.5 billion between 2026 and 2030, marking an $8.5 billion increase from the previous plan. This includes investments in natural gas, batteries, renewables, and transmission capabilities.

Renewable energy and battery storage: The company plans to increase investment in renewable generation and battery storage by $2.5 billion over the prior plan.

Natural gas generation: An additional $3.4 billion will be invested in modern, efficient natural gas generation, including combustion turbines and upgrades to existing facilities.

Economic growth in Wisconsin: Electric demand is expected to grow by 3.4 gigawatts between 2026 and 2030, driven by major projects like Microsoft's data center complex and Vantage Data Centers' Lighthouse campus.

Data center investments: Microsoft is investing $7.3 billion in its data center complex in Mount Pleasant, Wisconsin, while Vantage Data Centers plans to invest $15 billion in its Lighthouse campus in Port Washington.

Pipe retirement program: The company is focusing on retiring over 1,000 miles of older cast iron and ductile iron pipes in Illinois by 2035, as directed by the Illinois Commerce Commission.

Electric and natural gas distribution: An additional $2 billion will be invested in electric and natural gas distribution networks to support economic growth and reliability.

Earnings per share growth: WEC Energy Group expects long-term EPS growth of 7% to 8% annually between 2026 and 2030, with an acceleration starting in 2028.

Very Large Customer (VLC) tariff: A proposed VLC tariff in Wisconsin aims to meet the needs of large customers while protecting other customers and investors. The tariff includes a fixed return on equity and is expected to attract data center investments.

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Risk or Challenges

Regulatory Risks: The Illinois Commerce Commission has directed the company to retire all cast iron and ductile iron pipes under 36 inches by 2035, requiring significant investment and regulatory reviews. Additionally, the proposed BLC tariff in Wisconsin is still under review, with a commission order expected by May 2026, creating uncertainty for large customer agreements.

Capital Expenditure Challenges: The company plans to invest $36.5 billion between 2026 and 2030, a 30% increase from the previous plan. This requires significant funding, including $5 billion in common equity and $14 billion in incremental debt, which could strain financial resources and increase leverage.

Execution Risks: The company is in the early stages of deploying capital for large-scale projects, including data centers and renewable energy investments. Delays or inefficiencies in execution could impact projected growth rates and financial performance.

Economic Dependency: The company's growth heavily relies on economic development in Wisconsin, particularly from large customers like Microsoft and Vantage Data Centers. Any slowdown in these projects or economic conditions could adversely affect demand and financial projections.

Supply Chain and Resource Risks: The ambitious infrastructure projects, including renewable energy and natural gas investments, may face supply chain disruptions or resource constraints, potentially delaying project timelines and increasing costs.

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Guidance & Outlook

Earnings Guidance for 2025: Reaffirmed earnings guidance for 2025 at a range of $5.17 to $5.27 per share, assuming normal weather for the remainder of the year.

5-Year Capital Plan (2026-2030): Announced a $36.5 billion investment in capital projects, representing an $8.5 billion increase over the previous plan. This includes investments in regulated electric generation, transmission, distribution, and a pipe retirement program in Illinois.

Asset-Based Growth: Projected asset-based growth at an average rate of over 11% annually, supporting long-term earnings per share growth of 7% to 8% annually on a compound basis between 2026 and 2030.

Earnings Per Share Growth: Expected EPS growth of 6.5% to 7% annually for the next two years, accelerating to the upper half of the 7% to 8% range starting in 2028.

Electric Demand Growth: Forecasted electric demand growth of 3.4 gigawatts between 2026 and 2030, driven by large-scale projects such as Microsoft and Vantage Data Centers developments.

Investments in Generation and Renewables: Planned $3.4 billion investment in modern natural gas generation and $2.5 billion in renewable generation and battery storage between 2026 and 2030.

Transmission Investments: Projected $4.1 billion investment in transmission projects by American Transmission Company between 2026 and 2030, a $900 million increase from the previous plan.

Pipe Retirement Program in Illinois: Focused on retiring over 1,000 miles of older cast iron and ductile iron pipes by January 1, 2035, with significant investments included in the 5-year plan.

Dividend Growth: Targeting a dividend growth rate of 6.5% to 7%, with a payout ratio of 65% to 70% of earnings.

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Shareholder Return Plan

Dividend Plan: The company plans to provide its 2026 dividend plan and earnings guidance in December. They are targeting a payout ratio of 65% to 70% of earnings and are currently positioned well within that range. The dividend is expected to grow at a rate of 6.5% to 7%, consistent with past practices.

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Key Q&A

Q:Can you explain the compound annual growth rate (CAGR) in the back half of the plan and whether it can be accelerated?

A:Scott Lauber explained that the CAGR is shaped by the capital plan, with $6.5 billion to $7 billion in 2026, ramping up to over $7.7 billion in 2027. Year-over-year growth is expected to be 7%-8% in 2027 and closer to 8% from 2028 to 2030. He mentioned opportunities for acceleration but emphasized the need for prudence and execution.

Q:What is the timing around an announcement regarding Point Beach conversations with NextEra?

A:Scott Lauber stated that conversations are ongoing and may shift further out. The current plan does not assume any capital for replacing capacity if the agreement is not renewed. The focus is on what is best for customers, with potential capital upside if the agreement is not renewed.

Q:How should the Microsoft expansion in the second phase be interpreted in terms of the plan?

A:Scott Lauber mentioned that the growth in Southeastern Wisconsin, including Microsoft's data center, is reflected in the plan. Microsoft announced that the data center could scale up to 2 gigawatts, and there is confidence in growth over the next five years.

Q:Is the Port Washington transmission project fully reflected in the plan?

A:Scott Lauber confirmed that the project is factored into the plan, with WEC owning 60% of American Transmission Company. There may be additional upside as other data centers are included.

Q:What is driving the ramp in Illinois capital expenditures, and what is the impact of Illinois legislation?

A:Scott Lauber explained that the ramp is consistent with previous guidance, reaching $500 million annually by 2028. The Illinois legislation is being monitored but is not expected to have a significant impact.

Q:What is the delta between asset base growth and earnings growth on Slide 22?

A:Scott Lauber and Liu Xia explained that the delta is primarily due to equity dilution and financing. Approximately 3% is from equity, with the rest from holding company adjustments.

Q:What is the capacity for junior subordinated debt or hybrids in the financing plan?

A:Liu Xia stated that there is still significant capacity for junior subordinated debt or hybrids, with billions of dollars of capacity remaining.

Q:What is the appetite for recycling capital to replace common equity needs?

A:Scott Lauber mentioned that while they are not actively looking to sell smaller companies, they would consider opportunities that fit financial parameters and benefit investors.

Q:How does WEC plan to handle turbine capacity and renewable agreements for incremental deals?

A:Scott Lauber stated that WEC has a robust supply chain and works closely with large customers to ensure the ability to meet accelerated or additional load demands.

Q:What is the urgency from state stakeholders regarding Point Beach capacity?

A:Scott Lauber noted that there is time to address the capacity issue, with contracts extending to 2030 and 2033. WEC is exploring options to replace capacity if needed.

Q:What is the growth forecast for 2028-2030, and does it align with the overall 5-year period?

A:Scott Lauber and Liu Xia clarified that the growth forecast is about 8% annually for 2028-2030, aligning with a 7%-8% compound growth rate for the 5-year period.

Q:What accounts for the $400 million gap in the CapEx update?

A:Scott Lauber explained that the gap includes additional gas distribution and smaller items in generation and other areas not highlighted in the main reconciliation.

Q:What is driving the increase in demand forecast to 3.4 gigawatts by 2030?

A:Scott Lauber attributed the increase to data center growth, including Vantage and Microsoft, as well as other manufacturing and residential developments in Southeastern Wisconsin.

Q:What is included in the plan for recent data center announcements, and what is not?

A:Scott Lauber clarified that the plan includes 2.1 gigawatts for Southeastern Wisconsin and 1.3 gigawatts for Vantage/Oracle in Port Washington. Additional potential capacity is not included.

Q:What are the expected economics for the rest of the rate base with the large load customer tariff?

A:Scott Lauber stated that the rest of the rate base is expected to earn the current authorized return, with no subsidies or cross-subsidies between large and other customers.

Q:What is the state of conversations for Vantage expansion beyond 1.3 gigawatts?

A:Scott Lauber mentioned that discussions are ongoing, but the focus is currently on the first 1.3 gigawatts. Further discussions are expected next year.

Q:What is the engagement level with potential new customers beyond Microsoft and Oracle?

A:Scott Lauber stated that WEC is in discussions with other potential customers but focuses on announced and committed projects.

Q:Does the plan assume the higher very large load tariff ROE?

A:Scott Lauber confirmed that the plan assumes the very large load tariff is implemented, with a range of ROEs from 10.48% to 10.98%.

Q:What is the status of Microsoft's search for an alternative site in Southeastern Wisconsin?

A:Scott Lauber noted that Microsoft is early in its search for a new site, which could take about a year. WEC does not have significant land available for this purpose.

Q:What type of generation would WEC build if an agreement with NextEra is not reached?

A:Scott Lauber stated that WEC would consider dispatchable options like gas or combined cycle generation, potentially supplemented by renewables.

Q:Is junior subordinated debt included in the $4.8 billion to $5.2 billion common equity plan?

A:Liu Xia clarified that the common equity plan does not include junior subordinated debt, which is considered incremental.

Q:Is forecasting easier or harder with the recent load growth?

A:Scott Lauber stated that while load growth is a positive tailwind, it requires significant effort to manage timing, in-service dates, and execution.

Q:Does the very large customer tariff help attract more customers?

A:Scott Lauber believes the tariff, along with Wisconsin's advantages, will help attract more customers. The tariff ensures no rate impact on other customers.

Q:What is the affordability impact of the plan on residential customers?

A:Scott Lauber mentioned that rate increases are expected to align with inflation, with no costs from hyperscalers affecting other customers.

Q:Is there incremental capacity for more load in the current plan?

A:Scott Lauber stated that additional growth could occur at the end of the current 5-year plan, depending on customer development.

Q:Review of Unclear Management Responses

A:Management appeared to avoid giving a direct answer to the timing of an announcement regarding Point Beach conversations with NextEra, stating only that discussions are ongoing and may shift further out. Additionally, they did not provide specific details on the urgency from state stakeholders regarding Point Beach capacity or the exact timing for Microsoft's search for an alternative site in Southeastern Wisconsin.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

WEC Transcript

WEC Energy Group, Inc. (WEC) Q3 2025 Earnings Call Transcript

Positive10-30

WEC Energy Group, Inc. (WEC) Q2 2025 Earnings Call Transcript

Unknown7-30

The earnings call highlights strong future potential with significant capital plans and demand growth, but current results show a decrease in segment earnings due to higher interest expenses. The Q&A reveals uncertainties in meeting future demand and supply chain constraints, with management providing vague responses on critical issues. The reaffirmed earnings guidance and long-term growth expectations are positive, but the lack of clarity and immediate financial challenges balance the sentiment to neutral.

Earnings call transcript: WEC Energy Q1 2025 beats expectations, stock rises

Positive5-6

The earnings call summary and Q&A reveal a positive outlook. Strong financial performance is evident with increased EPS, utility operations earnings, and a significant capital investment plan. The dividend increase and long-term growth projections further bolster confidence. While there are some concerns about the MISO auction and pipeline spending, the company's strategic partnerships and renewable energy investments mitigate these risks. Overall, the sentiment leans positive with a focus on growth and shareholder returns, suggesting a likely stock price increase.

WEC Energy Group, Inc. (WEC) Q1 2025 Earnings Conference Call Transcript

Positive5-6

The earnings call summary shows strong financial performance with increased utility operations and retail electric deliveries. The dividend increase and positive guidance for renewable energy investments and capital expenditures are favorable. The Q&A section reveals confidence in handling market uncertainties and future growth opportunities with Microsoft. However, concerns about O&M expense growth and unclear responses on certain projects slightly temper enthusiasm. Overall, the positive aspects, including dividend increases and growth prospects, outweigh the negatives, suggesting a likely positive stock price movement in the short term.

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