WEC ENERGY GROUP, INC.(WEC)Q2 2026 法說會逐字稿

Good afternoon, and welcome to WEC Energy Group's Conference Call for Second Quarter 2026 results. This call is being recorded for rebroadcast. 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. 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 second quarter of 2026. 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 second quarter 2026 earnings of $0.91 a share. Our results reflect our continued focus on execution, financial discipline and operating efficiency. We're on track to deliver results in line with our 2026 earnings guidance of $5.51 to $5.61 a share. This, of course, assumes normal weather for the remainder of the year. In a few minutes, Xia will walk through our financial results and outlook in more detail. But first, let me highlight the strong economic growth in our region that serves as a foundation of our robust capital plan. Construction continues at the Microsoft site in Pleasant Prairie. And the first data center facility is fully operational. As a reminder, Microsoft has purchased more than 2,200 acres to date in that I-94 corridor south of Milwaukee. We are preparing to serve a forecasted demand increase of 2.6 gigawatts in this region through 2030 and an opportunity for further expansion. And to the north of Milwaukee, you'll recall that Vantage Data Centers is developing facilities for Oracle on approximately 1,900 acres. Construction continues on the initial phase of its data center project which is being built on 670 acres. Vantage has stated that it expects to invest $15 billion to complete this phase in 2028. Significant construction progress has been made with structural framework complete on multiple buildings. The first facility could come online as soon as late 2027. We currently have 1.3 gigawatts of demand for this Vantage site in our forecast over the next five years. Looking to the future, this site has the potential to reach 3.5 gigawatts of demand over time. And there's other notable growth in our state. As a recent example, Rehlko, formerly known as Kohler Energy, has announced plans to expand its production operations in Kenosha. The new facility is expected to complete in 2027 to produce backup generators for data centers. In addition, Waukegan Steel, a steel fabricating company, is looking to move its headquarters from Illinois to Pleasant Prairie. Harley-Davidson has also announced plans to bring some motorcycle production operations back from overseas to Wisconsin facilities. Wisconsin continues to be an attractive location for a variety of businesses. We are committed to meeting the growing demand across our service area as we invest in our systems for increased reliability and capacity. Our five-year capital plan includes $37.5 billion of projected investments. It's based on projects that are low risk and highly executable with a good portion serving our very large customers. In total, by the end of 2030, we expect approximately 15% of our asset base to be dedicated to these very large customers. As you recall, we project long-term earnings per share growth of 7% to 8% a year on a compound annual basis between 2026 and 2030. This is based on the midpoint of our 2025 adjusted guidance. We expect that growth rate to accelerate to the upper half of the range starting in 2028. And as a reminder, on our major capital projects, construction continues on the new natural gas generation facilities in Paris and Old Creek, Wisconsin. We expect these facilities to start coming online in late 2027. Overall, we have a high level of confidence in our ability to execute on our capital plan and continue our growth trajectory. We are in the process of updating our next capital plan, and we look forward to sharing the details with you on our third quarter call. Now turning to the regulatory front. In May, the Public Service Commission provided the written order for our very large customer tariff, or VLC. Under the tariff, the VLCs paid their full share of the cost. This is important to us, to the commission and to our customers, including the data center companies we are working with. I'm sure many of you are aware of the credit support required for Oracle for the Port Washington project. Oracle has stated it remains committed to the project, paying its full share of energy and providing the financial support needed, so there's no risk to other Wisconsin customers. We are actively working with Oracle to update the financial security in line with the PSCW requirements. We believe our VLC tariff provides a strong framework for data center growth in the region. For our non-VLC customers, progress continues on the rate request we filed in April for forward-looking test years 2027 and 2028. Our proposed plan would help us continue to strengthen key infrastructure and deliver the energy our customers depend on while remaining focused on affordability. Staff and intervener testimony is due in mid-August. We expect final orders from the commission by the end of the year with new rates effective in January 2027 and 2028. Turning to Illinois. In May, the Illinois Commerce Commission unanimously approved the Rider QIP and bad debt write-off settlements. The settlements resolve all issues relating to 12 open dockets. We also continue to make progress on the rate request for our Illinois utilities. A key driver for Peoples Gas is to support the pipe retirement program in Chicago. We expect the decision by the end of the year for test year 2027. In summary, we're excited about the strong economic development in our region. We're focused on execution of our capital plan, designed to support thousands of jobs and strengthen our local economy. Next, I'll turn it over to Xia.

Thank you, Scott. Our second quarter 2026 earnings of $0.91 per share reflect a $0.15 increase compared to the second quarter of 2025. Our earnings package includes a comparison of second quarter results on Page 15. I'll walk through the significant drivers. Starting with our utility operations, earnings were $0.06 higher versus the second quarter of 2025. Weather negatively impacted quarter-over-quarter earnings by approximately $0.05. Compared to normal conditions, we estimate that weather had a $0.03 negative impact in the second quarter of 2026 compared to a $0.02 positive impact in the second quarter of 2025. Grid-based growth contributed $0.13 to earnings. This includes $0.09 of incremental AFUDC equity and $0.02 of incremental cash returns associated with projects under construction, mostly from projects supporting the VLC customers. In addition, sales growth, tax and other items contributed a total of $0.06 to earnings. These positive drivers were partially offset by $0.05 from higher depreciation and amortization expense and $0.03 from higher day-to-day O&M. Next, let me provide some additional color on our weather-normal retail electric deliveries. Compared to Q2 last year, total weather-normal retail electric sales grew 4.2% this quarter, driven by growth from the VLCs. Excluding the iron ore mine and the VLC customers, we saw sales grow 1.2% driven by higher volumes across all customer classes. Although results came in slightly ahead of our forecast, we expect full year 2026 weather-normalized electric sales, excluding the iron ore mine and VLC customers, to be relatively even with 2025. At American Transmission Company, significant capital investment growth contributed an incremental $0.03 to Q2 earnings compared to 2025. Turning to our Energy Infrastructure segment. Earnings were $0.11 higher in the second quarter of '26 compared to the same period in 2025. Remember, in Q2 last year, we recognized a loss related to an asset impairment due to storm damages. This Q2 we received an insurance payment from some storm damages that occurred before. These two items account for a net $0.04 in total. The rest of the positive variance was largely driven by O&M timing, PTCs and other items. Next, you'll see that earnings from the Corporate and Other segment decreased $0.03, driven by tax timing and higher interest expense. In terms of common equity, we locked in about $760 million in the first half of this year. This includes about $40 million issued under our employee benefit plan and $720 million via the ATM program under forward contracts that we will settle in the future. In total, we expect to issue about $1.1 billion of common equity this year. Going forward, as a reminder, any incremental capital beyond the current plan is expected to be funded with 50% equity content. Finally, let me comment on guidance. As Scott mentioned earlier, we are reaffirming our 2026 earnings guidance of $5.51 to $5.61 per share, assuming normal weather for the rest of the year. For the third quarter, we are expecting a range of $0.92 to $0.98 per share. This accounts for July weather and assumes normal weather for the rest of the quarter. We look forward to updating you in the fall as we refresh our capital and financing plans. With that, I'll turn it back to Scott.

Thank you, Xia. Now as you may recall, our Board at its January meeting increased the dividend by 6.7%. This marks the 23rd consecutive year that our shareholders will be rewarded with higher dividends. The increase is consistent with our plan to grow the dividend at a rate of 6.5% to 7%. We're optimistic about continued growth in our region and our company's future. Operator, we are now ready with the question-and-answer portion of the call.

Your first question comes from the line of Shar Pourreza with Wells Fargo.

Scott, let me just — it's on everyone's mind, just on the Port Washington project. Obviously, there's a lawsuit out there, and you guys seem like you're assisting them with sort of the collateral payment issue. But I guess any risk to the current site timeline and even potential expansion opportunities? And couldn't the site just be redeployed to another hyperscaler if the current customer is not able to fulfill its obligation, maybe with stronger credit?

Sure. A little color on that. We are working with the customer Oracle. And as we said in our prepared remarks, they're working to provide the credit support that we have in the new tariff — in the updated tariffs. So they're working to get that, and I have confidence in that. Site construction is continuing. They are moving along. It's on time, it's on budget. They're moving forward and talking about continuing on their timeline. So no questions on that in my mind. You are correct that if you go to a worst-case scenario where, for some reason, they decided not to expand, there are a lot of opportunities for that site for anyone else. But at this point, I have no indication that's the case. And as long as they have the credit support with us and provide all those financial requirements, I feel good about the continued expansion.

Okay. I appreciate that. And then just lastly, Scott, we're obviously approaching Q3. Maybe this will be the final time we're going to be asking on Point Beach. Is it fair to assume you're going to be filing a generation plan in lieu of the PPAs later this year?

Shar, we are finalizing everything for our third quarter call. Just to remind everyone, the first 500 megawatts comes due in that PPA in December of 2030; the next 500 megawatts is in March 2033. And as a rule of thumb, about a gigawatt is about $2 billion to $2.5 billion, so half of that for the 500 megawatts. As we said in the prior call, never say never. Things could always change. Capital is an option for this as we get to the fall, but we'll finalize on our third quarter call because we have to get orders out, et cetera.

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

Looking forward to that third quarter update. Let me ask you this: how are the discussions going vis-à-vis potentially other counterparties here? Obviously, we've seen success build upon success, especially geographically in regions like your own. How are you thinking about potentially a third or other hyperscalers or other data center parties following the lead here and advancing negotiations with you? Can you give us any latest flavor as to where things stand?

Sure. We continue to have really good discussions with potential new very large customers. I would have to say these customers are probably not as large as what we're seeing in our first two, more in that 400 to 500-megawatt size, but we're having really good discussions, and there is more to come on that. As you said, they tend to grow in the region. I think our very large customer tariff has that transparency and openness that we're charging them their fair share. So I think it is a really good step forward to have that approved by the commission now.

Yes, absolutely. And then what is the status of the VLC tariff? What do the PCA contracts cover? Can you talk a little bit about the nuance of this vis-à-vis Oracle and Vantage? Also, following the PSC decision not to rehear the IG collateral requirements under the VLC, are there any other next steps there? Or is that basically put to bed and final?

Sure. If you look at the Vantage Oracle site, currently they are under the payment calculation agreements. That kicks in, so we have the credit support very similar to the tariffs and in line with the tariffs. The credit support means we don't spend without that credit support in place. Then it falls into the service agreements under the very large customer tariff. In Oracle's case, that site is being built by Vantage. We have the payment cancellation agreements with Oracle and are obtaining that credit support. Then, as of June 1 of next year, they'll enter into those service agreements for the site. It's a matter of timing because the site doesn't really come online until the end of 2027. Construction is going on right now. Regarding the rehearing, we asked for a reconsideration or rehearing, and it didn't get picked up, so our tariffs stand today with the credit requirement of an A-. There is a case in court that Oracle brought. I think they're trying to determine their long-term credit needs; we'll see where that case goes. Regardless, a BBB- in what we filed in the rehearing request — the original filing required credit support — so they're essentially in the same position with the current rating of BBB-. I don't think they were taken by surprise because we already had that provision in our filing. This is more about their longer-term thinking on credit as they work through their plans.

Your next question comes from the line of Nick Campanella with Barclays.

Thanks for all the updates. My understanding is the ATC line to serve the Vantage opportunity is going through the discovery phase at the commission. Can you provide an update on where that's trending? Is that in the formal capital plan today? Or as we look toward the third quarter refresh, how can we think about ATC's capital opportunity changing?

This current line is in our forecast in the current ATC plan. That is proceeding at the commission. You've seen some back and forth — as you can imagine, the site is on a very accelerated basis. Construction is progressing. There've been updates to the filing to ensure the commission has the latest information. That line, per our last schedule, looks like it should be decided by the end of the year to get approval to move forward with construction. Staff provided some testimony recently and additional filings are due by August 7. So that's proceeding. When you think about transmission generally, this line is largely in the forecast, but there could be more growth in the transmission area as we look at the third quarter.

Great. And then with all the focus on Vantage and Oracle and potential expansion down the road, can you provide an update on how you're thinking about Microsoft? Anything you can share there?

Microsoft has continued to proceed. Their first units are online; the first data center is online. Things are moving ahead at the site. Every year we've had an updated plan and there's progression on the megawatts. We'll add another year to the plan, and I anticipate something a bit more as we get to the third quarter. We are working with them on what that number will be. Continued progression: the site is developing well, data centers are up and running, electricity is flowing, and several substations are moving ahead of schedule. Everything has been progressing in a positive direction.

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

You've talked in the past about maybe three or four potential additional data center customers. Obviously, nothing to announce today. Can you speak to whether those customers would qualify for the VLC or how your conversations are going around collateral obligations? Are these issues with Oracle causing any slowdown or concerns among these customers?

We're talking with a variety of customers, but I want to temper expectations — it's not that three or four will come in immediately. We're working through them one at a time. I don't think collateral will be an issue long term. What we had in our very large customer filing was well received; all three rating agencies said it was good. The key is transparency so customers know what collateral is needed. As they review our tariffs and the sites, they understand the requirements. I don't think it will hurt our ability to attract new customers.

Okay. Then as you think about serving these data centers, how should we think about future generation capacity additions? You have a lot of new build in the plan, nearly all related to various technologies around gas. To whatever degree you get incremental data center contracts, would it be mostly or entirely gas? How do you think about that?

The data centers have signed up, both Oracle and Microsoft, for an 'all of the above' approach with renewables, batteries, and natural gas for backup. As we develop the next five-year plan, you may see combined cycle units rather than simple cycle because we may need more energy in addition to capacity. Our engineering and planning teams are analyzing to ensure we have the right reliability and cost for all customers.

Very helpful. One more on the regulatory side: you have two rate cases in Wisconsin and Illinois, both expected to be resolved around year end if fully litigated. How are you thinking about the potential for settlements? Wisconsin has a good history of deal making; it's less common in Illinois. How are you thinking about opportunities for settlements, especially given the timing coinciding with election season?

When you think about settlement, in Wisconsin there's been a history of settlement, and specifically with the individuals on this commission there has been settlement activity, including last year. I think there is an opportunity, but it really doesn't materialize until staff and intervenor direct testimony appear in mid-August. We always have discussions and hope there's an opportunity. In Illinois, the settlement on the 12 cases was positive. Historically, Illinois hasn't had many settlements, so I'd assign a lower probability to settlement there, though we won't rule it out.

Your next question comes from the line of Sophie Karp with KeyBanc.

I was curious if you could discuss the political environment in Wisconsin given the elections. How would you characterize the overall atmosphere in the state? Have you engaged with any of the candidates or prospective candidates yet before the primary? Any color on that would be helpful.

Wisconsin is a pretty purple state. The Republican primary has Tom Tiffany as the likely candidate; the Democratic primary currently has about five candidates. The primary is August 11. We've historically worked with both sides of the aisle and have been successful over many years promoting a strong economy with reliable electric and gas distribution systems. We continue to work with the governor and the legislature. In debates, issues like inflation, the economy, public safety, education and infrastructure come up. It's important for officials to understand data centers and how they impact the economy. Our tariff transparency will be helpful; customers are committed to paying their fair share. We have had some discussions with candidates and will likely have more as the races progress. The key is we work with both sides to make Wisconsin successful economically for all residents.

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

Following up on the political front: could you give perspective on the potential for data center pushback, whether it be moratoriums at the state level or local site issues? You have two well-established sites with existing customers, but as you think of future new opportunities, are you seeing potential pushback?

One candidate has proposed a potential moratorium on data centers. Right now, candidates are on the campaign trail and need facts. Several communities have considered moratoria, but they are conducting fact-finding. We need to ensure policymakers have the facts about economic benefits: jobs, property taxes, and how data centers affect cost allocations. For example, in our rate filing, we identified about $100 million of savings for our customers over the next two years from the value of data centers, and there are additional state tax benefits. There's also a narrative about water usage; many data centers use closed-loop systems. On generation, from 2015 through our projections to 2030, our generation-related water consumption is projected to be down about 25% to 30%. So water is not a significant issue on the generation side. We need to make sure candidates and communities have the facts and understand the economic benefits.

Very helpful. Then on funding and financing: I appreciate the guidance of 50% equity for incremental capital. As the capital plan continues to grow, does it still make sense to primarily rely on the ATM? And would you consider strategic options like monetizing nonutility renewables to recycle capital to help fund higher CapEx?

I'll let Xia address the financing specifics, but over the next couple of months before the third quarter we'll be evaluating all options.

We are very comfortable relying on the ATM program; it's efficient. Last year we raised $800 million, and this year we're on track to accomplish $1.1 billion. Having said that, we are also looking at a variety of options to accelerate cash accumulation. You saw in my prepared remarks I called out some current returns on projects. Under our tariffs, customers can choose to pay AFUDC or current cash returns. If customers switch more to cash returns, that would give us more cash to manage funding needs. We're thinking through all angles to be efficient; nothing is off the table right now.

Your next question comes from the line of Richard Sunderland with Truist Securities.

Turning back to Illinois: how is work trending on the pipe program as you've been ramping it? Any recent learnings or takeaways and anything informing the rate proceedings?

We updated our filings slightly, reducing spending in 2026. Things are going well overall, but the hardest part has been ramping the labor force. It's been more challenging to secure the workforce we need amid strong economic activity. We're working on training and other methods to bring in talent and expect to ramp up more in 2027. Execution is fine, but resource constraints slowed us a bit in 2026.

Appreciate the color. Zooming out on the future of gas topic: how do you see that conversation currently standing amid national and state affordability discussions?

The future of gas discussions continue. What we're learning is that gas remains valuable given electricity demand and the economics of electrification. There are ongoing sessions and discussions; something substantive is expected by year end.

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

Just want to come back to what would be upside to the capital plan. When you talk about Point Beach replacement capital or another data center or a third customer there, are these all upside to the capital budget? If these come in, would you think of this as upside to the EPS CAGR or presenting upside to the current five-year range?

You nailed the drivers: growth in current data centers, potential additional customers in the I-94 corridor, transmission growth, and potential generation for Point Beach are all upside. Much of that is in the 2030-2031 timeframe because supply chain and development timing mean it takes time. We'll evaluate everything on the third quarter call. We're at the high end of our range around 2028, so we'll see how the numbers evolve as we pull the plan together.

Got it. And on new nuclear: WEC has been considering shareholder protections and there are federal loan programs for long-lead items. Is there a scenario where you'd participate in new nuclear? Any thoughts?

We have been actively working with DOE regarding potential loans for fossil projects and some of our gas generation, so our name has been associated with those efforts. Longer term, we have a site called Kewaunee that we retained through the Integrys acquisition; nuclear may be a potential option in the longer term. In the short term, our focus is elsewhere, but nuclear is a possibility over a longer horizon.

Your next question comes from the line of Paul Fremont with Ladenburg.

I have a question about the collateral with respect to the Oracle contract. Does the collateral essentially track which phase they're moving forward with? Does it track to your construction? How should we think about the initial collateral requirement?

The collateral, whether through the payment cancellation agreements or the VLC tariff, is based on the assets and expenditures we're putting in and it ramps up over time as more construction occurs. That ensures we don't have stranded assets or issues for other customers or shareholders. When the VLC tariff goes into service, the collateral aligns with the depreciable value they must support. We view this as very protective. We have a stringent approach: customers must sign up for 20 years for wind and solar, and the depreciable life for batteries and gas assets requires them to post collateral equal to the net book value to ensure protection. The rating agencies recognized it as protective.

So to clarify, if they move forward into a Phase 2, that would require a step-up in the level of collateral?

Correct, so long as their credit rating remains where it is.

If they're downgraded further by Moody's or S&P, how much additional collateral would that involve since they're on the border between investment grade and sub-investment grade?

We already have the collateral we need at the current level. If it goes down further, we have protection in place for the full amount.

In the original filing and under the PCA, if the customer's rating is BBB- or worse, they would need to post collateral. So we've already built that protection in. From that protection perspective, we are actually one layer better protected; all the rating agencies recognized this. We're not requiring them to post collateral only when they become junk-rated; the requirements kick in earlier.

Where does their legal challenge currently stand? They've just filed it. Should we assume this will take years to play out in the courts? What's a normal expectation?

It could take some time — months or longer. However, what we refiled in our reconsideration had the requirement that they need to post at a BBB-, so short-term timing likely doesn't change the practical effect. They may seek reconsideration, but at this moment it doesn't change our protections and approach.

On the first quarter call you mentioned potentially having another announcement by the end of the year. Are you still comfortable with that?

Yes, we're still having good discussions with potential large customers that would fall under the tariff. They're probably not as big as the current two customers, more in the 400 to 500-megawatt size. We're having discussions and I feel good about it; more to come.

One final question: several Democrats are in the primary. Who are the main candidates besides Hong and who might be competitive?

There are five candidates currently: Mandela Barnes, a former lieutenant governor; Tony Evers is not in the primary, but the names you should be aware of include Hong, Mandela Barnes, David Crowley, Joe Biden Brennan — sorry, Joe — Joe Biden is not part of this; let me be precise: the candidates include Mandela Barnes, David Crowley who is Milwaukee County Executive, Kelda Roys, and another individual who was a former state official. The field is active and they recently debated. The primary is August 11, so activity has picked up in the last few weeks.

Your next question comes from the line of Paul Patterson with Glenrock Associates. This is our final question.

Following up on the Oracle matter: if I understand correctly, you don't expect this lawsuit and its outcome, assuming Oracle loses, to have a significant impact on the project going forward. Is that correct?

You nailed it. Construction on the project is moving extremely well. Things are getting done. I don't think anything in this particular project is tied to the lawsuit in a way that would stop progress.

Helpful. On the waterfall chart on Slide 15 for WECI, could you give more color on the moving parts? I understand the absence of the 2025 impairments, but can you explain the insurance recovery in 2026 and the O&M timing and how that might work out going forward?

Happy to. As I called out, the lack of impairment this quarter along with the insurance payment received this year accounts for a net $0.04 of the $0.11 increase. We have $0.01 from additional PTCs. The remainder is a combination of O&M timing and a little bit of capacity payment from the market; generation was a little better for some assets. That combination accounts for the remaining $0.06. We hope some of the favorability will persist, but we expect some of it to revert in the fourth quarter.

The insurance recovery component of the $0.04: how much of that was this quarter's insurance recovery?

$0.02 of that was insurance payments received this quarter.

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

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.