EUR 850.00 For Business Accounts Only

Morningstar | Management Meeting: Numerous Long-Term Growth Opportunities for WEC Energy Group

We are reaffirming our $64 per share fair value estimate, narrow moat, and stable moat trend for WEC Energy Group after meeting with management at the Edison Electric Institute Financial Conference in San Francisco.

Management recently announced a $14.1 billion, five-year capital expenditure plan from 2019-23, an increase of $700 million from its prior plan. Gas distribution leads with $5 billion in investment, followed by electric and generation investments. Gas distribution investments at its Integrys subsidiary in Chicago continues at roughly $250 million to $280 million annually with the project roughly 25% complete. Management has moved past prior mismanagement under prior ownership, and we see few impediments to successful completion of the program. Generation investments include natural gas and solar build out in Wisconsin.

WEC's strong balance sheet allows it to be opportunistic as some peers look to sell assets to allay equity issuances due to tax reform. WEC Energy recently paid $148 million for an 80% interest in the 132 MW Bishop Wind Hill III and $276 million for an 80% interest in the 200 MW Upstream Wind Energy Center. We like these investments, which provide utility-like returns supporting our narrow moat.

With Allan Leverett's recent resignation since being on medical leave since late 2017, Gale Klappa, Leverett's predecessor and current CEO, currently has no immediate retirement plans. Klappa, with Leverett's help, developed one of the best combinations of shareholder returns and regulatory relationships in the nation, so we welcome Klappa's permanent return. The board recently promoted the highly capable Kevin Fletcher to president of WEC Energy. Fletcher, who also came from highly respected Southern Company, represents a clear CEO succession plan upon Klappa's retirement.