EUR 850.00 For Business Accounts Only

Morningstar | WEC Updated Forecasts and Estimates from 01 Nov 2018

WEC Energy Group is the largest Midwest utility, with nearly $20 billion in rate base and nearly all earnings derived from regulated operations. Roughly 85% of earnings will come from constructive Wisconsin and Federal Energy Regulatory Commission regulation. Illinois has proved challenging in the past, but favorable regulatory treatment for its current Chicago gas infrastructure investment should improve returns.Infrastructure investment in Integrys' Chicago service territory could hit $280 million to $300 million annually with a 20-year runway of investment opportunities as part of the Natural Gas System Modernization Program. The company will recognize immediate earnings on infrastructure investments under the qualified infrastructure plan rider. New management at Peoples Gas has turned the project around and regained key stakeholder support, as evidenced by a recent regulatory decision supporting the modernization program. WEC Energy Group is working to reduce its carbon footprint, resulting in new natural gas investments and up to 350 MW of solar in Wisconsin by 2020. The company's $14.1 billion of planned capital spending, which includes its American Transmission Company, or ATC, spend, supports management's projected 5%-7% earnings growth, with higher dividend growth to achieve a 65%-70% dividend payout. Other growth opportunities include system modernization across its Wisconsin Public Service territory, advanced metering infrastructure across its Wisconsin footprint, natural gas storage, renewable generation, proposed new generation in the Upper Peninsula in Michigan. The company has also allocated $900 million for infrastructure investments such as natural gas storage and wind generation, which will have regulated-like returns. Management has made two wind generation purchases thus far, and we expect there will be more.WEC Energy Group holds a 60% majority stake in ATC, through which it earns an enviable 12.2% on its equity investment, although those rates might tick downward given the current FERC review. Year-end rate base was $3.4 billion, with ATC forecasting an additional $2.7 billion in transmission investments through 2022.