WEC Energy Group (NYSE:WEC) Chairman and CEO Gale Klappa, noting that WEC is now a 60% owner of American Transmission Company (ATC), said on Feb. 4 that ATC’s capital plan calls for investment of $3.7bn to $4.5bn between now and 2024 to bolster the reliability of the grid.
“As I have said in the past, we welcome the opportunity to increase our commitment to the transmission business,” he said during WEC’s 4Q15 earnings call.
Last year, WEC invested nearly $780m in its legacy core business, with all major projects on time and on budget, he said.
Klappa also noted that the company continued to see an uptick in customer growth across its system, adding that WE Energies is serving about 6,500 more electric customers and more than 8,500 more customers on the natural gas side of its business today than it was a year ago. WEC Energy Group is now the eighth largest natural gas distribution company in the country and one of the 15 largest investor-owned utility systems in the United States, with real opportunity for growth, he said.
Klappa also discussed the impact of bonus depreciation, noting that Congress last December “passed a tax law that extends and modifies bonus depreciation for property placed in service from 2015 to 2019. At this point, we estimate that we’ll receive approximately $1bn of cash benefits from this extension of bonus depreciation, with most of the benefits coming in 2016 and in 2017.”
He said that the company does not expect bonus depreciation to have any material impact on earnings this year and over the longer term, the company has significant flexibility to bring forward reliability projects that will benefit customers.
“The additional cash benefits will allow us to fund a strong backlog of infrastructure investments that the region needs for reliability, and if the [U.S. Environmental Protection Agency’s] Clean Power Plan moves forward on the proposed time table, our incremental cash flow could well be needed to support additional investments in renewable energy or in natural gas generation for our fleet,” he said.
WEC’s current 10-year investment plan is primarily focused on modernizing its delivery efforts, he said.
“We expect that more than half of our capital investments, about $800m a year, roughly, will be dedicated to the gas delivery business, providing safer and more reliable infrastructure, and extending our gas distribution lines to customers across the Midwest,” he said. “We also plan to invest approximately $400m a year to upgrade and harden our electric delivery networks.”
The company’s focus now on renewing its distribution networks is essential to maintaining its status as one of the nation’s most reliable utilities, he said.
Klappa also said that the company expects that the remaining investment, about $300m a year, will be focused on its generating fleet and other infrastructure.
“To be clear, however, these projections do not include any capital that would be needed for compliance with the Clean Power Plan,” he said.
Also speaking on the call, J. Patrick Keyes, WEC Energy Group executive vice president and CFO, said, “[W]e expect to invest at least $1.5bn per year in capital projects, or $15bn in the next decade. Correspondingly, we plan to invest $1.5bn in 2016, primarily focused on modernizing our delivery networks. We will continue to evaluate both our short- and long-term capital investment plans in light of bonus depreciation.”
Among other things, Klappa noted that the company is “making very good progress on the major construction work at our Twin Falls hydro electric plant on the border of Wisconsin and Michigan’s Upper Peninsula. … Overall, the Twin Falls project is on time and on budget, with approximately 82% of the construction now complete.”
The company is targeting commercial operation for next summer and forecasting a total investment of $60m to $65m, excluding allowance for funds used during construction, he said.
WEC Energy Group on Feb. 4 said it recorded net income based on generally accepted accounting principles (GAAP) of $179.3m, or 57 cents a share for 4Q15. WEC Energy Group was formed last June when Wisconsin Energy completed the acquisition of Integrys.
The company added that Wisconsin Energy’s stand-alone earnings for the fourth quarter, excluding Integrys earnings and acquisition costs, rose to 63 cents a share. In the corresponding quarter a year ago, Wisconsin Energy’s stand-alone earnings, adjusted for acquisition costs, were 56 cents a share, the company said.
Consolidated revenue for 4Q15 totaled $1.85bn, the company said, adding that Wisconsin Energy’s stand-alone fourth quarter revenue, which excludes $780m of revenue from Integrys operations, was $1.07bn. That compares with Wisconsin Energy revenue of $1.23bn in 4Q14, the company said.
For the full year 2015, WEC Energy Group reported net income based on GAAP of $638.5m, or $2.34 a share.
Wisconsin Energy’s stand-alone earnings for the full year 2015, excluding Integrys earnings and acquisition costs, increased to $2.73 a share, which compares to Wisconsin Energy’s stand-alone earnings, adjusted for acquisition costs, of $2.65 a share in 2014, the company added.