Morningstar | Busy Wisconsin Regulatory Calendar for WEC Energy Group; Reports 1Q Earnings Growth
We are reaffirming our $66 fair value estimate and narrow economic moat rating after WEC Energy Group reported first-quarter operating earnings per share of $1.33 compared with $1.23 per share in the same year-ago period.Management reaffirmed its 2019 earnings guidance of $3.48 to $3.52 per share, in line with our $3.50 per share estimate. The board recently approved a 6.8% dividend increase, and we expect future dividend increases in line with earnings growth.
WEC Energy Group has a busy 2019 regulatory calendar, filing for rate increases at Wisconsin Electric and Wisconsin Public Services. The proposals seek a 10.35% return on equity, up from the current allowed 10.2%, and a slightly higher equity component in its capital structure. Rate increases at Wisconsin Electric aim to recover higher transmission costs and cost escalations at the Point Beach PPA.
At Wisconsin Public Services, rate increases seek recovery for the acquisition of the Forward Energy Wind Center, distribution system upgrades, and environmental costs. Given Wisconsin's long history of constructive regulation, we continue to expect positive rate outcomes.
Major investment initiatives are also progressing well. In Wisconsin, WEC Energy Group received regulatory approval for 300 megawatts of new generation at two separate locations. WEC Energy Group will own 200 MW for a total $260 million investment. In Michigan, the company's 180 MW, $266 million natural gas plant went on line at the end of March. Half of the investment will be recovered through customer rates, with the remaining recovered through a long-term PPA with a large industrial customer.
For the quarter, earnings were aided by particularly cold January weather, which drove natural gas deliveries up 7%. Weather-normalized natural gas deliveries still grew a healthy 2.6%, and weather-normalized retail electric deliveries declined 0.5%.
WEC Energy Group is a holding company. Through its subsidiaries, the company provides regulated natural gas and electricity, and nonregulated renewable energy. The company's segments include: Wisconsin, which generates and distributes electric energy and provides retail natural gas distribution service; Illinois, which includes the natural gas utility operations; Electric Transmission, which owns, maintains, monitors, and operates electric transmission systems in Wisconsin, Michigan, Illinois, and Minnesota; and Non-Utility Energy Infrastructure, which owns and leases generating facilities to its Wisconsin Electric Power Company subsidiary and owns underground natural gas storage facilities in Michigan.
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