Wisconsin Energy’s down earnings described as ‘return to normal’

Wisconsin Energy (NYSE:WEC) continues to monitor transmission activities and plans at American Transmission Company (ATC) which, through its joint venture (JV) with Duke Energy (NYSE:DUK), has proposed approximately $4bn of new transmission in the Midwest and western portions of the country, Wisconsin Energy officials said on Oct. 30.

Because Wisconsin Energy has a 26.2% ownership stake in ATC, any of those projects would, if approved, provide additional investment upside for Wisconsin Energy via ATC’s 50% share in the JV.

Wisconsin Energy officials made the comments during the company’s Oct. 30 3Q12 earnings call, during which it reported net income of $137.5m on net income of $1.05bn for 3Q13, a decline from net income of $156.1m on revenue of $1.04bn reported for the 3Q12. However, company officials described 3Q13 as more reflective of normal conditions.

“Our latest results reflect a return to normal summer weather compared to the record heat that we experienced last summer,” Gale Klappa, Wisconsin Energy chairman and CEO said, noting that the return to more typical summer temperatures resulted in a significant drop in customer demand for air conditioning.

Accordingly, residential use of electricity in the July through September period was down 8.9% while electricity consumption by small commercial and industrial customers declined 3% and electricity use by large commercial and industrial customers, excluding the iron ore mines in Michigan’s Upper Peninsula, was down 3.5%.

On the positive side of the ledger, the company’s earnings were boosted by a slight uptick in net income at We Power, the company subsidiary that designs, builds and owns electric generating plants; and by the company’s share repurchase program. Non-utility energy operating income was $93.2m in 3Q13 compared to $91.5m in 3Q12. Operating income from utility energy attributable to We Energies, the company’s principle utility, was $166.6m during the quarter compared to $191m during the same quarter a year earlier.

Klappa said he expects generation assets that the company is building and modifying to result in lower costs and higher profits.

The company is nearing completion of its new biomass-fueled generation facility in Rothschild, Wis. Construction is now 97% finished and the plant is on schedule for completion before the end of year. When on line, the facility is expected to be responsible for adding 9 cents per share to company earnings during 4Q13.

“The biomass plant will help us diversify our portfolio of renewable energy,” Klappa said, noting that the new unit will produce electricity for the grid and steam for the on-site paper mill. In addition, the unit will be dispatchable on demand, a benefit that is simply not available with solar or wind generation, he added.

Overall, the company’s investment in the Rothschild plant is expected to total approximately $269m, excluding allowance for funds used during construction.

The company is also adding to its portfolio of generation assets by building a new powerhouse at its Twin Falls hydroelectric site on the border of Wisconsin and Michigan’s Upper Peninsula, and by converting its Valley power plant located along the Menomonee River near downtown Milwaukee, Wis., from coal to natural gas.

On an earnings-per-share (EPS) basis, 3Q13 net income was 60 cents per share compared to 67 cents per share in 3Q12. However, the realized EPS exceeded the company’s earnings guidance of 52 cents to 56 cents per share, issued Aug. 1, as well as Wall Street’s EPS estimate for the quarter of 56 cents per share, as reported Oct. 28.