Q4 2023 WEC Energy Group Inc Earnings Call

Operator: Please wait; the conference will begin shortly. Good afternoon, and welcome to WEC Energy Group's conference call for its fourth quarter and year-end 2023 results. This call is being recorded for rebroadcast, and all participants are in a listen-only mode at this time.

Please wait the conference will begin shortly.

[music].

Speaker Change: Good afternoon, and welcome to W. E C Energy group's conference call for fourth quarter and year end 2023 results. This call is being recorded for rebroadcast and all participants are in a listen only mode. At this time.

Operator: After the presentation, the conference will be open to analysts for question and answer. 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.

Speaker Change: After the presentation the conference will be open to analysts for questions and answers in conjunction with this call a package of detailed financial information is posted at W. E C Energy group Dotcom.

Speaker Change: A replay will be available approximately two hours after the conclusion of this call.

Okay.

Operator: 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 specified.

Speaker Change: 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.

Speaker Change: In addition to the assumptions and other factors referred to in connection with the statements factors described in W. E. C energy group's latest Form 10-K, and subsequent subsequent reports excuse me filed with the Securities and Exchange Commission could cause actual results to differ materially from those contemplated.

Speaker Change: During the discussions referenced earnings per share will be based on diluted earnings per share unless otherwise noted.

Operator: This call also will include non-GAAP financial information. The company has provided reconciliations to the most directly comparable GAAP measures in the materials posted on its website for this. Now, it is my pleasure to introduce Gale Klappa, Executive Chairman of WEC. Good afternoon, everyone.

Speaker Change: This call also will include non-GAAP financial information.

Speaker Change: The company has provided reconciliations to the most directly comparable GAAP measures in the materials posted on its website for this conference call.

Speaker Change: And now it is my pleasure to introduce Gale <unk> executive Chairman of WEC Energy group.

Well good afternoon, everyone and thank you for joining us today as we review our results for calendar year 2023, first I'd like to introduce the members of our management team who are here with me today, we have Scott Lauber, our president and Chief Executive <unk>, Our Chief Financial Officer, and Beth Straka, Senior Vice President of corporate Communications.

Gale E. Klappa: Thank you for joining us today as we review our results for calendar year 2023. First, I'd like to introduce the members of our management team who are here with me today. We have Scott Lauber, our President and Chief Executive Officer, Shalu, our Chief Financial Officer, and Beth Stracha, Senior Vice President of Corporate Communications and Investor Relations. Now, as you saw from our news release this morning, we reported full year 2023 adjusted earnings of $4.63 a share. This excludes a one-time non-cash charge of $0.41 per share.

Speaker Change: <unk> Investor Relations.

Speaker Change: As you saw from our news release. This morning, we reported full year 2023 adjusted earnings of $4 63, a share. This excludes a one time noncash charge of 41 cents a share you may recall that the Illinois Commerce Commission in November this allowed the construction costs for the modern service.

Gale E. Klappa: You may recall that the Illinois Commerce Commission in November disallowed the construction costs for the modern service centers and facilities that we built in Illinois to improve employee safety and productivity. We firmly believe that the investments were necessary and prudent, and at the appropriate time, we will appeal the decision in court. Despite the setback in Illinois, I'm pleased to report that we delivered another year of solid results on virtually every meaningful measure, from customer satisfaction to financial performance to steady execution of our capital plan. Sean will provide you with more detail on our financial metrics for 2023 in just a few moments. Turning to other regulatory matters, the Wisconsin Commission approved our limited reopener filings in December.

Speaker Change: Centers and facilities that we built in Illinois to improve employee safety and productivity, we firmly believe that the investments were necessary and prudent and at the appropriate time, we will appeal the decision in court.

Speaker Change: Despite the setback in Illinois, I am pleased to report that we delivered another year of solid results on virtually every meaningful measure from customer satisfaction to financial performance to steady execution of our capital plan, Sean will provide you with more detail on our financial metrics for 2023, and just a few moments.

Turning to other regulatory matters, the Wisconsin Commission approved our limited reopener filings in December new rates are now in effect for all of our Wisconsin utilities.

Gale E. Klappa: New rates are now in effect for all of our Wisconsin utilities. And in Illinois, a limited rehearing has been scheduled for a portion of our safety modernization program. As a reminder, the Illinois Commerce Commission ordered a pause in that program for at least one year.

Speaker Change: And in Illinois are limited rehearing has been scheduled for a portion of our safety modernization program. As a reminder, the Illinois Commerce Commission ordered a pause in that program for at least one year, we've been systematically replacing old leaking cast iron pipes under the streets of Chicago. This.

Gale E. Klappa: We've been systematically replacing old, leaking cast-iron pipes under the streets of Chicago. This long-running project is approximately 38 percent complete today. However, given the commission's order, we will not be carrying out the program as envisioned.

Speaker Change: A long running project is approximately 38% complete today.

Speaker Change: We had planned to invest approximately $265 million in the safety upgrades during 2024, given the Commission's order, we will not be carrying out the program as envisioned.

Gale E. Klappa: We honestly do not believe that stopping the work is in the best interest of our Chicago customers, but we will have another opportunity to make our case in the coming months through this limited rehearing. In addition, the Illinois Commission will open a new docket this month to examine the future of gas across the state of Illinois. This review is expected to take at least one year to complete. Switching gears now, let's look at the investment needs of our broader enterprise. We continue to refine our ESG progress plan, our roadmap, if you will, for the period 2024 through 2028. As you would expect, we're lowering our planned capital investment in Illinois. But the bigger picture is strong and growing.

Speaker Change: We honestly do not believe that stopping the work is in the best interest of our Chicago customers, but we will have another opportunity to make our case in the coming months through this limited rehearing. In addition, the Illinois Commission will open a new docket. This month to examine the future of gas across the state of Illinois.

This review is expected to take at least one year to complete.

Speaker Change: Switching gears now, let's look at the investment needs of our broader enterprise, we continued to refine our ESG progress plan. Our roadmap. If you will for the period 2024 through 2028.

Speaker Change: As you would expect we're lowering our planned capital investment in Illinois.

Speaker Change: But the bigger picture is strong and growing and today, we're increasing our five year plan by $300 million.

Gale E. Klappa: And today, we're increasing our five-year plan by $300 million. What was a $23.4 billion plan, the largest in our company's history, is now a five-year plan totaling $23.7 billion. The increase is focused on two categories, electric distribution to support the strong economic growth we're seeing in Wisconsin and WEC energy projects that are in our due diligence pipeline, that is, our WEC infrastructure projects. In fact, we're in the final stage now of vetting another major project for our infrastructure portfolio, a 300-megawatt solar investment for approximately $460 million. Closing and commercial operation could take place in the second quarter of this year. We'll keep you informed.

Speaker Change: What was the $23 4 billion plan the largest in our company's history is now a five year plan totaling $23 7 billion. The increase is focused on two categories electric distribution to support the strong economic growth, we're seeing in Wisconsin, and WEC Energy East project.

Speaker Change: <unk> that are in our due diligence pipeline, that's arguably we see infrastructure projects.

Speaker Change: In fact, we are in the final stage now vetting another major project for our infrastructure portfolio, a 300 megawatt solar investment for approximately $460 million closing in commercial operation could take place in the second quarter of this year, we'll keep you informed.

Gale E. Klappa: Overall, the building blocks of our updated capital plan clearly support our long-term growth rate. Growth from our five-year plan on a compound average annual basis remains in the six and a half to seven percent range. As always, we're starting with the midpoint of our 2023 guidance. However, we expect earnings for 2024 to come in at or below the current consensus estimate. The reason is simple.

Speaker Change: Overall, the building blocks of our updated capital plan clearly support our long term growth rate growth from our five year plan on a compound average annual basis remains in the six 5% to 7% range as always we're starting with the midpoint of our 2023 guidance.

Speaker Change: However, we expect earnings for 2024 to come in at or below the current consensus estimate.

Speaker Change: The reason is simple as we redeploy capital at least temporarily away from Illinois. The majority of the quality projects. We're investing in it will not be in service for the full year of 2024. So for this year for 2024, we project earnings to be in the range of $4 80 to $4 90 a share.

Gale E. Klappa: As we redeploy capital, at least temporarily, away from Illinois, the majority of the quality projects we're investing in will not be in service for the full year of 2024. So for this year, for 2024, we project earnings to be in the range of $4.80 to $4.90 a share. And Sha will provide you with more detail in just a moment or two.

Speaker Change: There shall will provide you with more detail in just a moment or two.

Gale E. Klappa: One final but important point about our capital plan. As a percentage of the total enterprise, our regulated electric business will be larger five years from now than it is today. Economic development, reliability, and decarbonization are driving that growth. We plan to continue our investment in the infrastructure segment as well, but five years from now, we expect the infrastructure segment will be only 6% of our asset base. And now, turning to the regional economy, the unemployment rate in Wisconsin stands at 3.3%.

One final, but important point about our capital plan.

Speaker Change: As a percentage of the total enterprise our regulated electric business will be larger five years from now than it is today.

Speaker Change: Economic development reliability and de carbonization are driving that growth.

Speaker Change: We plan to continue our investment in the infrastructure segment as well, but five years from now we expect the infrastructure segment will be only 6% of our asset base.

Speaker Change: And now turning to the regional economy, the unemployment rate in Wisconsin stands at three 3% that continues a long running trend below the national average and as we've discussed we're seeing some really exciting developments here on the stage.

Gale E. Klappa: That continues a long-running trend below the national average. And as we've discussed, we're seeing some really exciting developments here in the state. You've heard about Microsoft's plans for the Wisconsin Innovation Park south of Milwaukee. That investment continues to build. Microsoft has now purchased a total of 1,345 acres of property, and construction is already underway on a major data center complex. Of course, Microsoft isn't alone.

Speaker Change: Heard about Microsoft plans in the Wisconsin Innovation Park, South of Milwaukee that investment continues to build Microsoft has now purchased a total of 1345 acres of property and construction is already underway on a major data center complex of course, Microsoft didn't alone and what we call.

Gale E. Klappa: In what we call the I-94 corridor, companies like Haribo and Uline are expanding their footprints as well. For example, Uline just announced plans for a third office building in Pleasant Prairie. Uline expects to complete construction by 2025, creating additional space for more than 700 workers. Uline, in case you're not familiar with the name, is the leading distributor of shipping, industrial, and packaging materials to businesses throughout North America.

Speaker Change: The I 94 corridor companies like terrible and utilize our expanding their footprints as well for example, ULA and just announced plans for a third office building in Pleasant Prairie ULA and expects to complete construction by 2025, creating additional space for more than 700 workers you line in case you are.

Speaker Change: I'm not familiar with the name is the leading distributor of shipping industrial and packaging materials to businesses throughout North America and.

Scott J. Lauber: And just last week, Westrock, a Fortune 200 company that produces sustainable paper and packaging materials, announced plans to build a 587,000 square foot manufacturing facility on the former site of our Pleasant Prairie Power Plant. These developments highlight the strength and the potential of the Wisconsin economy and underscore the need for the investments we're outlining in our five-year ESG progress plan. And with that, I'll turn the call over to Scott for more specifics on our regulatory calendar, our capital plan, and our operational highlights. Scott, all yours.

Speaker Change: And just last week West Rock, a fortune 200 company that produces sustainable paper and packaging materials announced plans to build a 587000 square foot manufacturing facility on the former site.

Speaker Change: Our pleasant Prairie power plant.

These developments highlight the strength and the potential of the Wisconsin economy and underscore the need for the investments we're outlining in our five year ESG progress plan and with that I'll turn the call over to Scott for more specifics on our regulatory calendar, our capital plan and our operational highlights and Scott all yours.

Scott J. Lauber: Thank you, Gale. I'd like to start with some more updates on the regulatory front. First, let's review where we stand after the Wisconsin Public Service Commission's written orders this past December. The re-opener filings address recovery of capital investments for certain projects going into service in 2023 and also this year. These are Renewable Facilities, Rice Generation, and L&G Reliability Investments. The return on equity and the equity layer were not up for consideration as part of this proceeding.

Scott: Thank you Gail.

Scott: I'd like to start with some more updates on the regulatory front first let's review, where we stand after the Wisconsin Public service Commission's written orders this past December.

Scott: The reopener filings address recovery of capital investments for certain projects going into service in 2023 and also this year. These are renewable facilities race generation and LNG reliability investments.

Scott: The return on equity and the equity layer, we're not up for consideration as part of this proceeding.

Scott J. Lauber: In the coming months, we plan to file new rate reviews in Wisconsin for test years 2025 and 2026. You heard from Gale on the latest developments in Illinois. The commission has granted us a limited rehearing focused on our request to restore $134 million of the safety modernization program in 2024. This mostly relates to emergency work, work that is in progress, and work driven by public entities like the City of Chicago. We expect the Commission to issue an order by June 1st.

Scott: In the coming months, we plan to file a new rate reviews in Wisconsin for test years, 2025 and 2026.

Scott: You heard from Gail on the latest developments in Illinois.

Scott: The Commission has granted US a limited rehearing focussed on our request III score of $134 million of safety modernization program in 2024.

Scott: This is mostly rates to emergency work work that is in progress and work driven by public entities like the city of Chicago, We expect the commission to issue an order by June one.

Scott J. Lauber: Now turning to our updated capital plan, we have identified $300 million of additional capital investment compared to the initial version of our five-year plan. I'll walk you through the changes, which are summarized for your reference in the slides we provided for today's call. Most notably, we have included several new investments in our energy infrastructure portfolio. We're continuing to take advantage of production tax credits under the Inflation Reduction Act while providing solid returns through long-term off-take agreements. We expect these projects to add approximately $800 million to our plan, and we're already on our way.

Scott: Now turning to our updated capital plan, we have identified $300 million of additional capital investment compared to the initial version of our five year plan I'll walk you through the changes which are summarized for your reference in the slides we provided for todays call.

Scott: Most notably we have included several new investments and our energy infrastructure portfolio, we're continuing to take advantage of production tax credits under the inflation reduction act, while providing solid returns through long term offtake agreements.

Scott: We expect these projects to add approximately $800 million to our plant.

Scott: And we're already on our way just last month, we closed on an incremental 10% ownership of the Sampson Solar farm now in operation and Northern Texas, We now own 90% of the farm for a total investment of $280 million.

Scott J. Lauber: Just last month, we closed on an incremental 10% ownership of the Sampson Solar Farm, now in operation in Northern Texas. We now own 90% of the farm for a total investment of $280 million. And as Gale mentioned, we have another major project, the solar project, in their sights. We also plan to increase investment in Wisconsin by $300 million to better support economic development and reliability in the state. Offsetting these incremental investments, you will see a $800 million decrease in our planned spending on the Illinois gas delivery system over the five-year period.

Scott: And as Gail mentioned, we have another major project solar project in their sites.

We also plan to increase investments in Wisconsin by $300 million to better support economic development and reliability in the state.

Scott: Offsetting these incremental investments you will see a $800 million decrease in our planned spending on the Illinois gas delivery system over the five year period.

Scott J. Lauber: This is driven by the regulatory order we received in November. Meanwhile, we're making good progress on a number of regulated projects in support of affordable, reliable, and clean energy. We continue to work toward our ambitious goal of reducing greenhouse gas emissions. By the end of 2023, we will have achieved a 54% reduction in carbon emissions from electric generation compared to 2005. That puts us well on our way toward an 80% reduction in carbon emissions target by the end of 2030 as we build our portfolio of low and no carbon generation. And the progress continues. The final panels of the Badger Hollow Solar Park are now in service, completing the largest solar project in Wisconsin history.

Scott: This is driven by the regulatory order we received in November.

Scott: Meanwhile, we're making good progress in a number of regulated projects in support of affordable reliable and clean energy.

Scott: We continue to work toward our ambitious goals for reducing greenhouse gas emissions at the end of 2023, we achieved a 54% reduction in carbon emissions from electric generation compared to 2005.

Scott: That puts us well on our way towards 80% reduction target by the end of 2030, as we build our portfolio of low and no carbon <unk>.

Scott: Generation.

Scott: And the progress continues the final panels of the Badger Hollow Solar Park are now in service completing the largest solar project in Wisconsin history, as Youll recall, our Wisconsin utilities on a total of 200 megawatts of solar capacity at Badger Hollow. The facility's first phase went online in December 'twenty one 'twenty.

Scott J. Lauber: As you'll recall, our Wisconsin utilities own a total of 200 megawatts of solar capacity at Badger Hollow. The facility's first phase went online in December 2021, and the second phase wrapped up at the end of 2023. In addition, our Bluff Creek LNG storage facility is now in service. Liquefied natural gas provides a solution to meet peak customer demand for heating, as well as gas supply needed for power generation.

Scott: One in the second phase wrapped up at the end of 2023.

Scott: In addition, our Bluff Creek LNG storage facility is now in service liquefied natural gas provides a solution to meet peak customer demand for heating as well as gasify needed for power generation.

Scott J. Lauber: This storage will be necessary during extreme weather events like we experienced in mid-January. I'm also pleased to announce that we have been using renewable natural gas in our distribution system. This replaces a portion of the traditional natural gas we deliver to customers while contributing to our methane reduction goals. Our latest pilot project with EPRI and CM Blue Energy is also underway, and as you recall, this is testing a long-duration battery made with environmentally friendly materials.

Scott: This storage will be necessary during extreme weather events like we experienced in mid January.

Scott: I'm also pleased to announce that we have been using renewable natural gas in our distribution system.

This replaces a portion of the traditional natural gas, we deliver to customers while.

Scott: Contributing to our methane reduction goal.

Scott: Our latest pilot project with FRE and see them Blue Energy is also underway and as Youll recall. This is testing a long duration battery made with environmentally friendly materials, we look forward to sharing the results across the industry later this year it's.

Scott J. Lauber: We look forward to sharing the results across the industry later this year. It's a strong start to the year. Our capital plan is robust and highly executable, and we continue to focus on the fundamentals of the business. With that, I'll turn things back to Gale.

It is a strong start to the year, our capital plan as we both robust and highly executable and we continue to focus on the fundamentals of the business with that I'll turn things back to Gail Scott. Thank you very much now as you may have seen our board of its January meeting raised the quarterly dividend to <unk> 83, and a half cents a share that's an increase of <unk>.

Gale E. Klappa: Scott, thank you very much. Now, as you may have seen, our board at this January meeting raised the quarterly dividend to 83.5 cents a share. That's an increase of 5.5 cents a share, or 7%. This will mark the 21st consecutive year that our shareholders will be rewarded with higher dividends. The increase is consistent with our policy of paying out 65-70% of our earnings in dividends and underscores our confidence in delivering a bright, sustainable future. One other quick note on our track record of dividend growth. We learned last week that WEC Energy is being added to S&P's High Dividend Aristocrat Index. This index is made up exclusively of companies that have raised their dividends for at least 20 consecutive years.

Five and a half cents a share or 7%. This will mark the 20 <unk> consecutive year that our shareholders will be rewarded with higher dividends. The increase is consistent with our policy of paying out 65% to 70% of our earnings in dividends and underscores our confidence in delivering our bright sustainable future.

Scott: One other quick note on our track record of dividend growth. We learned last week. The WEC energy is being added to S&P as high dividend aristocrat Index. This index was made up exclusively of companies that have raised their dividends for at least 20 consecutive years next John will provide you with more detail on our.

Sha: Next up, Sha will provide you with more detail on our financial results, our financing plan, and our 2024 guidance. Sha? Thanks, Gale. Turning now to earnings, excluding the $0.41 per share non-cash impairment charge in Illinois, our 2023 adjusted earnings per share were $4.63. Our earnings packet includes a year-over-year comparison of results on page 16. I'll walk you through the significant drivers. Starting with our utility operations, weather had an estimated 24-cent negative impact year-over-year.

Scott: Financial results, our financing plan and our 2024 guidance Shaw.

John: Thanks, Dale turning now to earnings excluding the 41 per share non cash impairment charge in Illinois, Our 2023 adjusted earnings per share were $4 63.

John: Our earnings packet includes a year over year comparison.

On page 16, I will walk through the significant drivers.

Shaw: Starting with our utility operations weather had an estimated 24 negative impact year over year.

Shaw: That January February in December of 2023 white, the warmest on record over the past 133 years.

Sha: In fact, January, February, and December of 2023 were the warmest on record over the past 133 years. Higher depreciation and amortization expense and interest expense added another $0.33 of negative variance. These unfavorable variances were more than offset during the year, as rate-based growth contributed 75 cents of positive variance year over year. This includes the base rate increase for our Wisconsin and Minnesota utilities, as well as the rate increase for people's gas that was effective December 1, 2023. Additionally, fuel expense improved our earnings by 14 cents. Lower day-to-day O&M resulted in a $0.10 improvement, and taxes and other items benefited earnings by $0.04.

Shaw: Higher depreciation and amortization expense and interest expense added another 33 cents of negative variance.

Shaw: These unfavorable variances were more than offset during the year.

Shaw: This growth contributed 75 of par.

Shaw: Positive earnings year over year.

Shaw: This includes the base rate increases for our Wisconsin, and Minnesota utilities as well as the rate increase for peoples gas that was effective December one 2023.

Shaw: Additionally, he will expand improve our earnings I 14 funds.

Shaw: Lower day to day O&M resulted in a 10% improvement and taxes and other items benefited earnings by <unk> 14.

Shaw: Yes.

Shaw: Remember, we originally guided our 2023 total company day to day O&M to be 3% to 5% higher in 2022.

Sha: Remember, we originally guided our 2023 total company day-to-day O&M to be three to five percent higher than 2022. However, throughout the year, we were able to manage to a much tighter range. Our actual 2023 total company day-to-day O&M was only six-tenths of one percent higher than 2022. Turning now to sales, you'll see the details on page 12 of the earnings package. On a weather-normal basis, retail electric deliveries in Wisconsin, excluding the iron ore mine, were down 1% in 2023. The decrease was driven by our large commercial and industrial sales, which were down 3.3%.

Shaw: Throughout the year, we were able to manage to a much tighter range.

Shaw: Our actual 2023 total company day to day, O&M with only 610th of 1% higher and 2022.

Shaw: Turning now to sales you'll see the detailed on page 12 of the earnings packet.

Shaw: On a weather normal basis retail electric delivery and with anthem, excluding the iron ore mine were down 1% in 2023.

Shaw: The decrease was driven by our large commercial.

<unk> sales, which were down three 3%.

Shaw: Meanwhile, residential and small commercial and industrial sales increased two tenths of 1%, which were ahead of our forecast.

Sha: Meanwhile, residential and small commercial and industrial sales increased by two-tenths of one percent, which was ahead of our forecast. Our sales projections for 2024 can be found on pages 12 and 13 of the earnings package. Overall, we're projecting relatively flat electric sales year-over-year and eight-tenths of one percent growth in gas sales year-over-year. Regarding our investment in American Transmission Company, earnings decreased $0.03 compared to 2022. Recall that last year we recorded a $0.05 pickup from a resolution of the MISO ROE appeal. This was partially offset by a $0.02 improvement in earnings related to additional capital investment.

Shaw: Our sales projections for 2024 can be found on pages 12, and 13 of the earnings packet.

Shaw: Overall, we are projecting relatively flat electric sales year over year, and eight tenths of 1% growth in gas sales year over year.

Shaw: Okay.

Shaw: Regarding our investment in American transmission company earnings decrease compared.

Shaw: Compared to 2022.

Shaw: Call that last year, we recorded a five gen pickup from the resolution of MISO <unk> PL.

Shaw: This was partially offset by a <unk> <unk> improvement in earnings related to additional capital investments.

Shaw: Earnings at our energy infrastructure segment improved <unk> 23 compared to 2022.

Sha: Earnings at our energy infrastructure segment improved by $0.04 in 2023 compared to 2022. This was mainly driven by an increase in production tax credit. Finally, you'll see that earnings at our corporate and other segments decreased by 29 cents, primarily driven by an increase in interest expense.

Shaw: This was mainly driven by an increase in production tax credits.

Shaw: Finally, you'll see that earnings at our corporate and other segment decreased 29%.

Shaw: Primarily driven by an increase in interest expense.

Shaw: Overall, we improved outperforming by <unk> 18 per share on an adjusted basis in 2023.

Shaw: Now go and Scott have laid out our refreshed five year capital plan.

Speaker Change: In light of the $309 increase to our capital plan, we have revised our funding plan accordingly.

Sha: Overall, we improved our performance by $0.18 per share on an adjusted basis in 2023. Now, Gale and Scott have laid out our refreshed five-year capital plan. In light of the $300 million increase to our capital plan, we have revised our funding plan accordingly.

Speaker Change: Consistent with our previous message we're funding this increase with an even split between debt and equity.

Speaker Change: As you can see on page 21 of the earnings packet. We now expect issue between $1 95, and 2.35 billion of common equity over the next five years.

Sha: Consistent with our previous message, we're funding this increase with an even split between debt and equity. As you can see on page 21 of the earnings package, we now expect to issue between $1.95 and $2.35 billion of common equity over the next five years. As you can see on the chart, over the next five years, we expect cash from operations to fund about 64% of our cash needs. About 28% of the funding is expected to come from debt, and the remaining 8% from the issuance of common equity.

Speaker Change: As you can see on the chart over the next five years.

Speaker Change: Cash from operations to fund about 64% of our cash needs.

Speaker Change: About 28% of the funding is expected to come from debt and the remaining 8% from issuance of common equity.

Speaker Change: We have turned on our new equity to satisfy the dividend reinvestment and employee benefit plans and we also expect to use at the market programs.

Speaker Change: Our common equity issuance is still projected to be in the range of 100 to $209 by 2024.

Speaker Change: <unk> 2024, our equity issuances will be tied to our capital plan Ratably at approximately $509 a year.

Sha: We have turned on new equity to satisfy the Dividend Reinvestment and Employee Benefit Plan, and we also expect to use at-the-market programs. Our common equity issuance is still projected to be in the range of $100 to $200 million for 2024. Post-2024, our equity issuances will be tied to our capital plan relatively at approximately $500 million a year. Finally, let's look at our earnings guidance. As Gale stated, for the full year 2024, we're providing guidance of $4.80 to $4.90 per share. In developing this guidance range, we took into consideration the expected loss of earnings from the lower rate base in Illinois and the timing of several projects under development. Now, let me briefly discuss our day-to-day non-fuel O&M expenses.

Speaker Change: Hi.

Speaker Change: Let's look at our earnings guidance as Gil stated for the full year 2024, we are providing guidance of $4 80 to $4 90 per share.

Speaker Change: In developing this guidance range, we took into consideration the expected loss of earnings from lower rebates on Illinois and timing of several projects under development.

Speaker Change: Now, let me briefly discuss our day to day non fuel O&M expenses.

That patient.

Speaker Change: We expect our 2020 for O&M to be 6% to 7% higher.

Speaker Change: <unk>, 5% of the increase is driven by assets that were included in our recent rate case it projects in the infrastructure segment.

Speaker Change: Jordan or a storm cost in January.

Speaker Change: The remaining O&M increase of 1% to 2% is largely driven by inflation offset by operating efficiencies.

Sha: We expect our 2024 O&M to be 6 to 7% higher. Approximately 5% of the increase is driven by assets that were included in recent rate cases, projects in the infrastructure segment, and extraordinary storm costs in January. The remaining O&M increase of 1-2% is largely driven by inflation offset by operating efficiencies.

Speaker Change: Looking at the bigger picture, our O&M projections for 2024 is well below our actual O&M O&M expenditures eight years ago in 2016.

Speaker Change: In terms of first quarter 2024 earnings guidance, we project to earn in the range of one dollar and at 96 cents per share to $2 per share.

Speaker Change: This forecast takes into accounts January weather and assumes normal weather for the rest of the quarter.

Sha: Looking at the bigger picture, our O&M projection for 2024 is well below our actual O&M expenditures eight years ago in 2016. In terms of first quarter 2024 earnings guidance, we project to earn in the range of $1.96 per share to $2 per share. This forecast takes into account January weather and assumes normal weather for the rest of the quarter. Recall that we earned $1.61 per share in the first quarter last year. There are a couple of main drivers for the quarter. One, weather was unfavorable by 10 cents in Q1 last year. Of course, we're assuming normal weather for the remainder of the quarter this year. However, with the rate design changes at People's Gas under the latest commission order, we now expect base revenues will be concentrated in the first and fourth quarter heating months when natural gas usage is the highest.

Speaker Change: Recall that we earned $1 61 per share in the first quarter last year.

Speaker Change: There are a couple of main drivers for the quarter.

Speaker Change: One whether it was unfavorable by 10% in Q1 last year of course, we are assuming normal weather for the remainder of the quarter. This year.

Speaker Change: Two with the rate design changes at peoples gas under the latest Commission order. We now expect base revenue will it be concentrated in the first and fourth quarter heating months when natural gas usage is the highest.

Speaker Change: <unk>, we expect lower contribution from peoples gas in Q2, and Q3 will.

We will provide you with more details as the year progresses.

Speaker Change: As a reminder, however in Illinois, we have a decoupling mechanism in place that mitigates that weather impact.

Speaker Change: With that I'll turn it back to Gale.

Gale: Sure. Thank you very much operator, we're ready now for the question and answer portion of the call.

Gale: Thanks Gail.

Gale: And now we will take your questions. The question and answer session will be conducted electronically to ask a question. Please press the star key followed by the digit one on your phone.

Sha: Correspondingly, we expect lower contributions from People's Gas in Q2 and Q3. We'll provide you with more details as the year progresses. As a reminder, however, in Illinois, we have a decoupling mechanism in place that mitigates that weather impact. With that, I'll turn it back to Gale.

Gale: If you are using a speaker phone turn off your mute function to allow your signal to reach our equipment and we will take as many questions as time permits once again press Star and then one on your phone to ask a question.

Sharp: And it looks like your first question comes from the line of sharp <unk> with Guggenheim Partners Sharpe. Please go ahead.

Gale E. Klappa: Joe, thank you very much. Operator, we're ready now for the question and answer portion of the call. Thanks, Gale. And now we will take your questions. The question and answer session will be conducted electronically. To ask a question, please press the star key, followed by the digit one on your phone.

Sharp: Morning, guys Rock'n'roll Shar.

Sharp: How are you doing it are not too bad not too bad.

Sharp: Just a quick one on so the 40 to $4 90 guidance for 'twenty four I mean, that's obviously about five 4% growth year over year and you obviously have a very tight EPS growth range and the debate. This year is clearly from the Capex timing as we kind of bridge into 25 lets just say can you kind of grow.

Operator: If you are using a speakerphone, turn off your mute function to allow your signal to reach us, and we will take as many questions as time permits. Once again, press star and then one on your phone to ask a question. And it looks like your first question comes from the line of Shar Pourreza with Guggenheim Partners. Shar, please go ahead. Morning, guys. Rock and roll, Shar.

Sharp: With that top end or above the EPS growth range to keep you within the six 5% to 7% target or should we assume kind of bottom end in the near term and a step up in the back half given the pace of which you may not be able to deploy capital.

Speaker Change: Well great.

Speaker Change: <unk> Charlotte, let me say this we have a lot of levers and a lot of great opportunities and so it's probably too early to say.

Shar Pourreza: How are you doing, Char? Not too bad. Not too bad. Gale, just a quick one on, so the 480 to 490 guidance for 24, I mean, that's obviously about 5.4% growth year over year, and you obviously have a very tight EPS growth range, and the divot this year is clearly from the CapEx timing. As we kind of bridge into 25, let's just say, can you kind of grow at that top end or above?

Speaker Change: Exactly where in the 2025 range, we might land, but were pretty optimistic about the levers and the opportunities that we have.

Speaker Change: In 2024 of course, as we redeploy as I mentioned in the script as we redeploy in away from Illinois and into quality projects timing is really the driver here, but let me just say this.

Speaker Change: We were able to make the top end of our 2024 guidance for 90, we would've we would've recovered virtually the entire hit from the Illinois rate order. So that might help put things in perspective for 2024, and then we will work on 25 and beyond.

Gale E. Klappa: Well, great question, Charlotte. Let me say this: we have a lot of levers and a lot of great opportunities. And so it's probably too early to say exactly where in the 2025 range we might land, but we're pretty optimistic about the levers and the opportunities that we have. In 2024, of course, as we redeploy, as I mentioned in the script, as we redeploy away from Illinois and into quality projects, timing is really the driver here. But let me just say this: if we were able to make the top end of our 2024 guidance, 490, we would have recovered virtually the entire hit from the Illinois rate order. So that might help put things in perspective for 2024. And then we will work on 25 and beyond. But again, we mean, just with what we're seeing here on the ground, we have a tremendous opportunity for appropriate investments that will drive growth. Okay.

Speaker Change: But again we.

Speaker Change: Just with what we're seeing here on the ground, we have tremendous opportunity for appropriate investments that will drive growth.

Speaker Change: Okay got it perfect and then just given the $800 million reduction in Illinois was that all related to S&P or what was the amount that was above that and then just that concurrent shift into sort of the infrastructure segment. I guess can you just talk about the profile of that spend and whether theres any earnings accretive.

Speaker Change: <unk> from this shuffle, especially since you do target returns on an adjusted basis any way for the infrastructure segment that is higher than the regulated side.

Speaker Change: Yes, we do we target returns on the infrastructure segment slightly higher than the regulated piece of the business.

Speaker Change: But to answer your first question.

Speaker Change: Virtually all of the $800 million reduction that youre seeing as we allocate capital in our various business segments virtually all of that $800 million reduction, Illinois as an assumption because we just don't know what SMP spending is going to look like going forward. So that's virtually all related to the cessation of work.

Gale E. Klappa: Perfect. And then just on the $800 million reduction in Illinois, was that all related to S&P? Or what was the amount that was above that?

Gale E. Klappa: And then just that concurrent shift into sort of the infrastructure segment. Can you just talk about the profile of that spend and whether there's any earnings accretive opportunities from this shuffle, especially since you do target returns on an adjusted basis anyway for the infrastructure segment that is higher than the regulated side? Yeah, we do.

Okay got it okay perfect and then just lastly for me is just and obviously the S&P program.

Speaker Change: Obviously, there is a new dock it out there and there is an investigation, but there was sort of this independent engineering study that was recently conducted by the commission.

Gale E. Klappa: We target returns on the infrastructure segment slightly higher than the regulated piece of the business. But to answer your first question, virtually all of the $800 million reduction that you're seeing as we allocate capital in our various business segments, virtually all of that $800 million reduction in Illinois is an assumption because we just don't know what S&P spending is going to look like going forward. So that's virtually all related to the cessation of work. Okay, I got it. Okay, perfect. And then, just lastly, you know, for me, it's just, I know, obviously, the SMP program, you know, we're, you know, obviously, there's a new docket out there. Investigation.

Speaker Change: That already sort of proved out that the S&P needed to be carried out how does that kind of play into this new docket. Thanks guys.

Speaker Change: Yes, sure great memory.

Speaker Change: Shire is exactly correct.

Speaker Change: A number of years ago, 2017, 2018 timeframe, the Illinois Commission ordered us to bring in a highly recognized outside engineering firm, an independent engineering firm to assess the condition of particularly the cast iron and ductile iron pipes under.

Speaker Change: So remember we started out on this program there were 2000 miles of iron pipes that we believed needed to be replaced.

Gale E. Klappa: There was sort of this independent engineering study that was recently conducted by the commission that already sort of proved that the S&P needed to be carried out. How does that kind of play into this new docket? Thanks.

Speaker Change: It's called the <unk> study K E F N E. R. It's on file with the commission itself, a fundamental and wants to take a look at it but long story short that Keith <unk> study, which was delivered to the commission in January of 2020.

Speaker Change: Concluded something pretty stark the conclusion was that more than 80%.

Gale E. Klappa: Char is exactly correct. A number of years ago, in the 2017-2018 timeframe, the Illinois Commission ordered us to bring in a highly recognized outside engineering firm, an independent engineering firm, to assess the condition of, particularly, the cast iron and ductile iron pipes under Chicago. Remember, when we started out on this program, there were 2,000 miles of iron pipes that we believed needed to be replaced. It's called the Kiefner Study, K-I-

Speaker Change: The remaining iron pipes under Chicago have a remaining useful life of less than 15 years.

Speaker Change: That material was reintroduced in our rate case of this past this past fall it was dismissed by the intervenors as old data.

Speaker Change: And I guess my only comment on that as the pipes aren't getting any younger and the corrosion keeps on coming.

Speaker Change: So we think there's really a solid basis from the standpoint of safety and from the continuing call from the federal pipeline safety administration to accelerate the replacement of these pipes, but you've got a great memory that studies on record and very supportive of the need to continue for safety reasons. The work we've had underway.

Gale E. Klappa: It's on file with the commission itself, if anyone wants to take a look at it. But long story short, that Kiefner Study, which was delivered to the commission in January of 2020, concluded something pretty stark. The conclusion was that more than 80% of the remaining iron pipes under Chicago have a remaining useful life of less than 15 years. That material was reintroduced in our rate case this past fall. It was dismissed by the interveners as old data.

Speaker Change: Got it perfect. Thank you guys see in a couple of weeks ago.

Speaker Change: Sounds good look forward to it sure. Thank you.

Speaker Change: Thanks sure.

Speaker Change: And our next question comes from the line of Neil <unk> with Wells Fargo Security Neil. Please go ahead.

Gale E. Klappa: And I guess my only comment on that is the pipes aren't getting any younger, and the corrosion keeps on coming. So we think there's really a solid basis from the standpoint of safety and from the continuing call from the Federal Pipeline Safety Administration to accelerate the replacement of these pipes. But you've got a great memory.

Speaker Change: Yes, hi, Neil Thanks for taking my question.

Neil: So quick question on the sort of following up on the initial question is on the SMP program, if that were to come back into play that $800 million.

Neil: How should we think about the capital allocation at that point when we reverse some of what we're seeing today or not necessarily would it be additive at that point.

Gale E. Klappa: That study's on record and very supportive of the need to continue, for safety reasons, the work we've had underway. Got it. Perfect. Thank you guys. I'll see you in a couple weeks, Gale. Bye.

Speaker Change: That's a great question Neal.

Neal: And I'm going to ask Scott to give you his view on this as well I would say first of all.

Scott: It wouldn't be surprising at least to me if some of the capital.

Scott: That is currently on pause in Illinois would come back simply because of the need to continue safety.

Gale E. Klappa: I look forward to it, Shar. Thank you. Thank you, Sheriff.

Operator: And our next question comes from the line of Neil Kelton with Wells Fargo Security. Neil, please go ahead. Thanks for taking my question. Yeah, so quick question on the sort of following up on the initial questions on the S&P program: if that were to come back into play, that 800 million, how should we think about the capital allocation at that point? Would we reverse some of what we're seeing today? Or not necessarily?

Scott: So.

Scott: Looking at it a little more broadly our view is the sweet spot of growth is still six 5% to 7% a year.

Scott: We have to see Scott, where we stand in terms of additional infrastructure investments that we have in the pipeline, but as Scott said, we have we have several hundred million dollars of those projects now that are in final due diligence stages, Scott absolutely and then when you think about the S&P program. Unfortunately about 1000.

Neil Kelton: Would it be added if at that point? That's a great question, Neil. I'm going to ask Scott to give you his view on this as well. But I would say, first of all, it wouldn't be surprising, at least to me, if some of the capital that is currently on pause in Illinois would come back simply because of the need to continue safety. So, looking at it a little more broadly, Neil, our view is that the sweet spot of growth is still 6.5 to 7 percent a year. So, I think we have to see, Scott, where we stand in terms of additional infrastructure investments that we have in the pipeline. But as Scott said, we have several hundred million dollars of those projects now that are in the final due diligence stages.

Scott: Workers stopped doing work at the end of the year here, so depending on how long. It takes it may take a while to ramp it up efficiently too. So you would we'd reevaluate that as we get through the hearings are rehearings.

Speaker Change: Yes, actually Scott is making a great point I mean, you can't just turn it on on a dime.

Speaker Change: So if indeed, just thinking out loud with you Neil if indeed, the commission investigation of the program or their review of the need for the program last year.

Speaker Change: Which the order yesterday suggested a year, but its also said if it could be expedited with.

Speaker Change: With all the proper information they would welcome that.

Speaker Change: But I wouldn't think.

Gale E. Klappa: Absolutely. And then, when you think about the S&P program, unfortunately, about a thousand workers stopped doing work at the end of the year here. So, depending on how long it takes, it may take a while to ramp it up efficiently, too. So, we would really evaluate that as we get through these hearings or re-hearings. Yeah, actually, Scott's making a great point. I mean, you can't just turn it on on a dime.

Speaker Change: It can be turned on to back to its full level, even if authorized to do so this year.

Speaker Change: Okay.

Speaker Change: Got it makes sense and one quick follow up Couldnt.

Speaker Change: Couldn't help but notice I guess.

Speaker Change: I thought the capex coming up to $800 million would be replaced one for one instead as I think you've added $300 million through the program and just curious as to what drove that obviously didn't tail a little more equity to do that.

Speaker Change: Yes Neil.

Gale E. Klappa: So if indeed, just thinking out loud with you, Neil, if indeed the Commission's investigation of the program or their review of the need for the program lasts a year, which the order yesterday suggested a year, but also said if it could be expedited with all the proper information, they would welcome that. But I wouldn't think that it could be turned on back to its full level, even if it were authorized to do so this year. Yeah, I got it. It makes sense. And one quick follow-up. I couldn't help but notice. I guess we had thought the CapEx coming out, $800 million, would be replaced one for one. And instead, I think you should add $300 million to the program. And I was just curious as to what drove that.

Speaker Change: As we continue to get more detailed and granular information about the need to support the economic growth in particular in the I 94 corridor that we talked about.

Speaker Change: Clearly, there's going to need to be some additional distribution investment no question about that.

Speaker Change: And then there is also some additional renewable need so those were the two things all regulated all Wisconsin, but really driven really driven by the continued expansion and location and I just mentioned in the script as you may recall.

Speaker Change: Another major investment by the company based in Atlanta called West Rock with a 587000 corrugated box production plant so the.

Speaker Change: Economic growth is just amazing I would encourage anybody in fact going to invite all of you to come see what we're seeing on the ground here in the not too distant future. The economic growth expansions that we're seeing in that I 94 corridor are just literally amazing.

Neil Kelton: Obviously, it entailed a little more equity to do this. Yeah, Neil, as we continue to get more detailed and granular information about the need to support the economic growth, in particular in the I-94 corridor that we talked about, clearly, there's going to need to be some additional distribution investment. No question about that. And then there's also some additional renewable energy need. So those were the two things, all regulated, all Wisconsin, but really driven by the continued expansion and location. And I just mentioned in the script, as you may recall, another major investment by a company based in Atlanta called Westrock with a 587,000 corrugated box production plant. So the economic growth is just amazing. I would encourage anybody, in fact, we're going to invite all of you to come see what we're seeing on the ground here in the not too distant future.

Speaker Change: Perfect. Thank you.

Speaker Change: I appreciate it and they will take care.

Speaker Change: Thanks, Neal and our next question comes from the line of Jeremy Tonet with Jpmorgan Jeremy. Please go ahead.

Jeremy Bryan Tonet: Rock'n'roll Jeremy.

Jeremy Tonet: Hi.

Jeremy Tonet: Sure.

Jeremy Bryan Tonet: Just wanted to kind of come back to Illinois, overall here and given the lower than expected rate case outcomes from the ICC.

You expected.

Jeremy Bryan Tonet: What's your current view I guess on the Illinois of regulatory jurisdiction here, how have conversations with.

Jeremy Bryan Tonet: Stakeholders been trending regarding the longer term outlook for for Illinois gas, Illinois.

Jeremy Bryan Tonet: Well I think clearly we're going to see a lot more evidence as we move through 2024, because there are really two dockets now of <unk>.

Jeremy Bryan Tonet: Very significant importance that are in their absolute beginning stage, but first occurred yesterday when the when the Illinois Commission authorized at the start of.

Gale E. Klappa: The economic growth, and the expansions that we're seeing in that I-94 corridor are just literally amazing. Perfect, thank you. I appreciate it, Neal. Take care, Neil.

Jeremy Bryan Tonet: Their review of our safety modernization program and then they're also they're also beginning this this look at which will take we think at least a year, let's look at the future of gas in the state of Illinois.

Operator: And our next question comes from the line of Jeremy Tonet with JPMorgan. Jeremy, please go ahead. Rock and roll, Jeremy.

Jeremy Bryan Tonet: Just wanted to kind of come back to Illinois overall here, and you know, given the lower-than-expected rate case outcomes from the ICC than you expected. What's the current view, I guess, of Illinois as a regulatory jurisdiction here, and how have conversations with stakeholders been trending regarding the longer-term outlook for Illinois and gas? Well, I think clearly we're going to see a lot more evidence as we move through 2024 because there are really two dockets now of very significant importance that are in their absolute beginning stage. The first occurred yesterday when the Illinois Commission authorized the start of their review of our safety modernization program.

Jeremy Bryan Tonet: Actually we're looking forward to both of these both of these dockets because there will be broad based.

Jeremy Bryan Tonet: Broad based evidence from all kinds of parties intervenors across the board.

Jeremy Bryan Tonet: Who all have an opinion on this.

Jeremy Bryan Tonet: I would just simply say that but we're encouraged by the fact that theres going to be open productive discussion and both of these dockets.

And when you step back and think about it, particularly with the fact that we talked about earlier where.

Jeremy Bryan Tonet: From a safety standpoint, these cast iron pipes, 80% of them ever remaining life of less than 15 years.

Jeremy Bryan Tonet: I think at the end of the day, Illinois.

Jeremy Bryan Tonet: Illinois is a pretty practical and at the end of the day I think we're going to get to that we're going to get to a very reasonable point.

Gale E. Klappa: And then they're also beginning this look at, which will take, we think, at least a year, this look at the future of gas in the state of Illinois. Actually, we're looking forward to both of these dockets because there will be broad-based evidence from all kinds of parties, interveners across the board, who all have an opinion on this. I would simply say that we're encouraged by the fact that there will be open, productive discussion on both of these dockets. And when you step back and think about it, particularly with the fact that we talked about earlier, where from a safety standpoint, these cast iron pipes, 80% of them have a remaining life of less than 15 years.

Jeremy Bryan Tonet: This policy is just too important to the future not only from an energy supply standpoint, but from an economic standpoint for the state of Illinois, Scott you want to add anything to that no I agree. It's just it'll be good to get the facts on the table and everyone be able to talk about the issues in <unk>.

Speaker Change: And work through it so.

Speaker Change: We have a lot of good information and willing to provide it.

Got it that's helpful. There and then just wanted to pivot towards Wisconsin here with the PSC, we've seen kind of some some rapid turnover. If you will and just wondering I guess updated thoughts on it.

Speaker Change: Commission outlook in relationships going forward, given given changes we've seen.

Well I think probably the most significant change obviously as chairman volte deciding that she that she would like to retire from the position.

Gale E. Klappa: I think at the end of the day, Illinoisans are pretty practical, and at the end of the day, I think we're going to get to a very reasonable point. This policy is just too important to the future, not only from an energy supply standpoint but from an economic standpoint for the state of Illinois. Scott, do you want to add anything to that? No, I agree.

Speaker Change: And summer strand.

Who was appointed last year by the Governor, becoming the new chair and I would just simply repeat what we've said before about the qualifications that summer strand has in her background in energy policy her background in construction and engineering.

Speaker Change: Very very well suited to a position like this so we're looking forward to working.

Scott J. Lauber: It'll be good to get the facts on the table and everyone be able to talk about the issues and work through them. So, you know, we have a lot of good information and are willing to provide it. Got it, that's helpful there. And then just wanted to pivot toward.

Speaker Change: Even more closely with summer.

Speaker Change: And then the other most recent appointment.

Speaker Change: As a person who has been at the commission and has headed up.

Speaker Change: Divisions and stabs at the commission for I believe more than a decade. So a good bit of experience to join summer strand and Scott I think we feel like we are.

Jeremy Bryan Tonet: This is Chris Carson here with the PST. We've seen kind of a lot of changes. We're going to start off with some rapid turnover, if you will, and just wondering, I guess, updated thoughts on the commission, outlook, and relationships going forward. Well, I think probably the most significant change, obviously, is Chairman Volk deciding that she would like to retire from the position, and Summer Strand, who was appointed last year by the governor, becoming I would just simply repeat what we've said before about the qualifications that Summer Strand has, her background in energy policy, her background in construction and engineering, very, very well suited to a position like this.

Speaker Change: Both of these appointments are very balanced very balanced and having that experience in the commission and be able to fill one of the spots very quickly is good to see.

Speaker Change: Got it thank you for that and maybe just a last one if I could just.

Speaker Change: Thoughts about the energy infrastructure segment in general versus the regulated utilities, there was a pivot kind of a way before and then back towards it and so just wondering how you think about I guess investments in the two different sides.

Speaker Change: Targeting <unk>.

Speaker Change: Higher returns on the infrastructure business in excess of your authorized ROE or just wondering kind of how you see that gives it takes there given the shifts in capex in recent years.

Gale E. Klappa: So we're looking forward to working even more closely with Summer. And then the other recent appointment is a person who's been at the commission and has headed up divisions and staff at the commission for, I believe, more than a decade. So a good bit of experience to join Summer Strand.

Speaker Change: Well, let me start and then let Scott give you his view on this as well.

Speaker Change: Let me start by saying that when we originally laid out our new five year capital plan, which would have been.

Scott J. Lauber: And Scott, I think we feel like both of these appointments are very balanced. And having that experience on the commission and being able to fill one of the spots very quickly is good to see. Got it. Thank you for that. And maybe just the last one, if I could.

Speaker Change: In early November it was before obviously the rate order decision in Illinois.

Scott: Essentially that.

Scott: That plan to achieve a six 5% to 7% EPS growth that plan crowded out if you will a number of infrastructure projects that we had in the due diligence pipeline.

Scott: So.

Scott: Really it was not all that difficult to begin to look at what alternatives do we have here for high quality projects I would say, they're kind of two things related to your question. The first is.

Jeremy Bryan Tonet: Thoughts about the energy infrastructure segment in general versus the regulated utilities. There was a kind of pivot before and then back towards it. And so just wondering how you think about, I guess, investments on the two different sides and are you targeting higher returns on the infrastructure business in excess of the authorized ROEs? I was just wondering, you know, kind of how you see the gives and takes there given the shifts in capital. Well, let me start, and we'll let Scott give you his view on this as well, let me start by saying that when we originally laid out our new five-year capital plan, which would have been in early November, it was before, obviously, the rate order decision in Illinois. Essentially, that plan, to achieve a 6.5 to 7% EPS growth, that plan crowded out, if you will, a number of infrastructure projects that we had So, really, it was not all that difficult to begin to look at what alternatives we have here for high quality projects.

Scott: The first is that we are still seeing a significant number of high quality projects that we're looking at number one number two.

Scott: We target in the neighborhood of an 8% Unlevered IRR.

Basically the way we look at this that should result in a return slightly higher than the regulated business, but I would just add and Scott can add on to this for a number of the projects.

Scott: We probably don't talk enough about this we're building flexibility for our regulated business, particularly Scott for the projects that are in the MISO footprint.

Scott: That's exactly right Gale so when these ppas.

Scott: Wind down at the end.

Scott: <unk>.

Scott: 10 to 15 years will have the ability then perhaps either repower repower of them find another off taker or.

Scott: Especially in the MISO footprint move them into the.

The regulated utility here as we continue to Decarbonize. So I think there's a lot of opportunities here and when we look at these projects. We also look at getting all the cash back within 10 years and for sure at the time of the PPA. So we're really looking at it as good cash flow, but also opportunities here in the regulated long term.

Gale E. Klappa: I would say there are kind of two things related to your question. The first is that we are still seeing a significant number of high-quality projects that we're looking at. Number two, we target in the neighborhood of an 8 percent unlevered IRR. That's kind of basically the way we look at this. That should result in a return slightly higher than the regulated business.

Speaker Change: Does that respond to your question.

Speaker Change: Yes, that's helpful. I'll leave it there thank you very much.

Speaker Change: Great. Thank you.

Speaker Change: Thanks, Jeremy.

Speaker Change: And our next question comes from the line of <unk> Chopra with Evercore ISI. Please go ahead.

Chopra: Hey, guys How're you doing today, Hey, good afternoon, Gale I'll take you up on that and why I'm ready to come and bring a bunch of guys and gals with me. So let me know and excellent excellent.

Scott J. Lauber: But I would just add, and Scott can add on to this, for a number of the projects, and we probably don't talk enough about this, we're building flexibility for our regulated business, particularly, Scott, for the projects that are in the MISO footprint. Oh, that's exactly right, Gale. So, when these PPAs wind down at the end, you know, in 10, 15 years, we'll have the ability then, perhaps, to either repower them, find another off-taker, or, especially in the MISO footprint, move them into the regulated utility here as we continue to decarbonize. So, I think there are a lot of opportunities here. And when we look at these projects, we also look at getting all the cash back within, you know, 10 years, and for sure in the time of the PPA. So, we're really looking at it as good cash flow, but also opportunities here in the regulated long term. Does that respond to your question? Yeah, that's helpful. I'll leave it there. Thank you very much.

Chopra: Very good.

Deepak Chopra: Just a clarification on 2024.

Deepak Chopra: Our EPS.

Deepak Chopra: EPS guidance.

Deepak Chopra: Does that.

Deepak Chopra: Include the 300 megawatt project that you might be executing on a rather.

Deepak Chopra: Buying in the I think you.

Deepak Chopra: And the first half the solar project.

Speaker Change: Yes, yes, it does yes.

And what are the final do deal we're in final due diligence right now on that project.

However, the project itself is not yet commercial it's close but it's not yet commercial.

Speaker Change: Got it so in that 480 to $4 90 range, we should be modeling like.

Speaker Change: Halfway year plus contribution from that project.

Speaker Change: No that's fair absolutely that's fair, Okay, and then maybe just a shot just can you update us on the timing of equity.

Speaker Change: I think you were targeting a small amount this year and then sort of pro rata going forward setting that numbers of 100, and 200 million. This year, and then $415 million a year starting in 2025, how should we think about that with a slightly higher equity number now.

Jeremy Bryan Tonet: Thank you. Thanks, Jeremy. And our next question comes from the line of Durgesh Chopra with Evercore ISI. Durgesh, please go ahead. Hey Dragesh, how are you doing today? Hey, good afternoon, Gale. I'll take you up on that invite. I'm ready to come and bring a bunch of guys and gals with me, so let me know when.

Speaker Change: Nothing is new cash and 100 to 200.

Speaker Change: The way getting their return on the dividend reinvestment plan the employee benefit plans as of January one this year.

We have seen shares coming in so far and additionally, those programs gave us between $100 million to $200 million, if not turn on the ATM program later in the year.

Durgesh Chopra: Excellent. Very good. So just a clarification on 2024 EPS guidance. Does that include the 300 megawatt project that you might be executing on, or rather buying in, I think you said in the first half, the solar project? Yes, it does.

And then going forward it would be it will be a combination of benefit programs and the ATM program.

Speaker Change: So just to be clear, though the total equity issuance amount doesn't it should still be in that $100 million to $100 million I guess, what I was really asking is the incremental equity I know, it's small that's going to be just kind of 2025 and beyond.

Gale E. Klappa: Yep. And we're in final due diligence right now on that project. However, the project itself is not yet commercial. It's closed, but it's not yet commercial. Got it.

Speaker Change: Correct Yep.

Speaker Change: Exactly.

Speaker Change: So much I appreciate the time.

Speaker Change: Look forward to seeing it there guys.

Gil: Likewise Gil thank you.

Gil: Thanks, Rakesh and our next question comes from the line of Michael Sullivan with Wolfe Research Michael. Please go ahead.

Durgesh Chopra: So in that 480 to 490 range, we should be modeling like, you know, half a year plus contribution from that project. That's fair, absolutely fair. Okay. And then maybe, Shah, could you just update us on the timing of equity? I think you were targeting a small amount this year and then sort of pro rata going forward, setting the numbers at 100, 200 million this year and then 450 million a year, starting in 2025. How should we think about that with a slightly higher equity number now? Nothing is new. The 100 to 200; we're on the way to getting there. We turned down the dividend reinvestment plan, the employee benefit plan, as of January 1 this year.

Michael P. Sullivan: Greetings Michael.

Michael P. Sullivan: Hey, Gil.

Michael P. Sullivan: I wanted to just parse out the 24 guidance a little bit more.

Michael P. Sullivan: How much year over year uplift are you getting from the energy infrastructure segment and can you just confirm.

Michael P. Sullivan: This solar project is going to be taking PTC or ITC.

Speaker Change: The well will let Sean give you the breakdown, but the solar project that we are in final due diligence on would be PTC is not itc's ptc's.

Speaker Change: So we're not we're not to your point, we're not planning accounting games, we're not try to take some giant onetime leap forward here. They would it would be the standard approach that we've used on all of our other infrastructure projects, Sean Yeah, I would look at it.

Sha: And we have seen shares coming in so far. Traditionally, those programs give us between 100 and 200 million. If not, we'll turn down the ATM program later in the year. And then, going forward, it will be a combination of the benefit programs and the ATM program. So just to be clear, though, the total equity issuance amount doesn't, it should still be in that 100 or 200 million. I guess what I was really asking is the incremental equity, I know it's small, that's going to be just kind of 2025 out. Correct. Yep, exactly. Thank you so much.

Holistically, so 'twenty to.

Speaker Change: 24, we talked about the reduction from Illinois.

Sean: 10 to 12, and we have some interest headwind in the year and a little bit of O&M and offsetting that you would see Wisconsin.

Sean: And that the EC to offset those headwinds. So overall, that's the increase from the 463 to <unk>.

Adi: For Adi.

Adi: Okay and then just.

Sticking with 24.

O&M increase.

Durgesh Chopra: I appreciate the time. I look forward to seeing you there, guys. Likewise, Gale, thank you. Thanks, Dragesh. And our next question comes from the line of Michael Sullivan with Wolf. Michael, please go ahead. Greetings, Michael.

Adi: How much of that was kind of.

Adi: None I guess through most of last year and how much of it popped up more recently.

Adi: If you could.

Adi: This January storm, and then and then the.

Adi: These projects it sounds like Theres, a little bit of Reg lag on.

Michael P. Sullivan: Hey Gale, yeah, I wanted to just separate out the 24 guides a little bit more. How much year-over-year uplift are you getting from the energy infrastructure segment? And can you just confirm this solar project? Is it going to be using PTC or IT? We'll let Sha give you the breakdown, but the solar project that we're in final due diligence on would be PTCs, not ITCs, PTCs. So, to your point, we're not playing accounting games.

Adi: Yes, what was kind of like known versus more recent development of the <unk>.

Adi: On an uptick.

Speaker Change: Well I'll, let Chuck give you the more detailed answer but long story short.

Speaker Change: The lion's share of the O&M increase is already recovered in rates I mean, there were driven by asset additions driven by mostly by asset additions that have come into service and were recovered in the last rate cases sure. Yeah. That's it so about 1% I called out five <unk>.

Gale E. Klappa: We're not trying to take some giant one-time leap forward here. It would be the standard approach that we've used on all of our other infrastructure projects. Sian?

Speaker Change: One of those we already knew.

Speaker Change: 1% of that was related to storm arrest would be the O&M ing.

Speaker Change: Related to asset can do rate cases, as well as additional lap WEC interest after projects.

Sha: Yeah, I would look at it holistically. So, 23 to 24, we talked about the reduction from Illinois. That's 10 to 12 cents.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Oh, sorry go ahead.

Speaker Change: No I was just going to say if you just think about it broadly as we add assets you add O&M to basically operate those assets and we added a considerable I mean, we added a considerable number of renewable assets infrastructure projects etcetera, but if you look at core O&M I mean core O&M is very.

Michael P. Sullivan: And we have some interest headwinds during the year and a little bit of O&M. And offsetting that, you would see Wisconsin, ATC, and WEC to offset those headwinds. So, overall, that's the increase from 463 to midpoint 485. Okay, and then just stick with 24, the O&M increase. How much of that was kind of... known, I guess, through most of last year and how much of it popped up more recently? Like, I don't know if you could Peace out this January storm and then and then the these projects that sound like there's a little bit of lag on. Yeah, what was kind of like known versus more recent development of the O&M uptick?

Speaker Change: Very very under control.

Speaker Change: Okay.

Speaker Change: Can you put the storm.

Speaker Change: One time and like an earnings per share basis.

Speaker Change: Scott I think we're talking the January storm 8 million of share it's about it's about <unk>.

Speaker Change: Okay.

Speaker Change: Okay and then thanks for all that and then kind of just shifting to this upcoming Wisconsin rate case, any any like high level sense of the size of the rate increase we should be anticipating there.

Speaker Change: Yes.

Michael P. Sullivan: Well, we'll let Sha give you the more detailed answer, but long story short, the lion's share of the O&M increase is already recovered in rates. I mean, they were driven by asset additions. I mean, driven mostly by asset additions that have come into service and were recovered in the last rate cases. Sha?

Scott: Scott go ahead.

So we're currently pulling all those numbers together as you can tell we've been working on filling in the hole from the Illinois capital, but we're currently working on those numbers. We got these asset additions that were putting in this year.

Sha: Yeah, and that's it. So about 1%, I called out 5% of those we already knew. 1% of that was related to the storm. The rest would be the O&M related to assets in the rate cases, as well as additional WEC infrastructure projects. Okay, do you have that on fire?

Scott: Of course, there'll be some inflation as we look at the O&M. So we don't have a final number yet.

Scott: But we should know by the end of the first quarter here, we file something but everything seems reasonable as you're pulling stuff together.

Scott: Okay.

Scott: Within the range of where the last case was in terms of like opening as well.

Michael P. Sullivan: I'm sorry, guys. No, I was just going to say, if you just think about it broadly, as we add assets, you add O&M to basically operate those assets. And we added a considerable number of renewable assets, infrastructure projects, etc. But if you look at core O&M, I mean, core O&M is very, very under control.

Scott: Ballpark is that fair.

Yes, yes, I doubt it would be higher than that it'll be in that ballpark or a little less I would think we're still pulling those together, though and we got a factor a lot of stuff in and look at like the production tax credits were getting under solar that just went into service in fact, our net all of that.

Speaker Change: Okay, and then Youll see Youll see youll see the filing in the second quarter.

Speaker Change: Alright, Thanks, Michael.

Speaker Change: And our next question comes from the line of Andrew Weisel with Scotiabank Andrew. Please go ahead.

Scott J. Lauber: Okay. Just, can you put the storm... one time and on an earnings per share basis. Scott, I think we're talking about the January storm, 8 million ish. Yeah, it's about two cents.

Andrew Weisel: Hello, Andrew.

Andrew Weisel: Hey, good afternoon everybody.

Speaker Change: Excuse me.

Andrew Weisel: Two quick follow ups on the commissioners in Wisconsin. So obviously, some new faces. There first question just to confirm that turnover won't have any impact on the timing or outcome of the rate case rate, Washington to outcome it won't impact the timing right.

Michael P. Sullivan: Okay. Okay, and then thanks for all that. And then kind of just shifting to this upcoming Wisconsin rate case, any kind of high-level sense of the size of the rate increase we should be anticipating there? Scott, go ahead.

Andrew Weisel: No. The timing has been set by commission policy I would expect no change.

Speaker Change: Okay, great. The other question I had relates to former Commissioner counter Huebner. He was ousted if you will by the Republican Senate Republican led Senate and a lot of the media reports make it sound like a lot of the pushback from that said it was around his support for renewables and solar in particular so.

Scott J. Lauber: So we're currently pulling all those numbers together. As you can tell, we've been working on filling in the hole from the Illinois capital. But we're currently working on those numbers. You know, we've got these asset additions that we're putting in this year.

Scott J. Lauber: And of course, there'll be some inflation as we look at the O&M. So we don't have a final number yet. But we should know by the end of the first quarter here when we file something. But it's, you know, everything seems reasonable as we're pulling stuff together. Okay, like within within the range of where the last one, Ballpark. Is that fair?

Speaker Change: My question is do you worry that the state's commitment to renewables might potentially be changing politically and if so would that impact your spending strategy at all.

Scott J. Lauber: Yeah, yeah, I doubt it'd be higher than that. It'll be in that ballpark or a little less, I would think. We're still pulling those together, though. We have to factor a lot of stuff in and look at things like the production tax credits we're getting on the solar that just went in the service, factor that all in. And you'll see the filing in the second quarter. All right. And our next question comes from the line of Andrew Wiesel with Scotiabank. Andrew, please go ahead. Hello, Andrew. Hey, good afternoon, everybody.

Speaker Change: Short answer is no.

Speaker Change: And in fact, I don't know what you are reading, but I really don't think his support for renewables, our solar was really a.

Speaker Change: It was really a deciding factor in the Senate vote at all I would just add.

Speaker Change: Ask you to go back and perhaps read some of the other.

Speaker Change: Actually there are very specific comments that were made by members of the Senate Energy Committee news releases that were put out after the fact, explaining the action, but it wasn't at least in our view it was not at all related to the fact that he felt a certain amount of renewables where needed not at all.

Andrew Wiesel: Two quick follow-ups on the commissioners in Wisconsin, so obviously, some new faces there. First question, just to confirm that turnover won't have any impact on the timing or outcome of the rate case, right? Well, I shouldn't say outcome. It won't impact the timing.

Speaker Change: Okay, Great that's reassuring.

Speaker Change: And then just a very quick follow up on equity I understand the slightly higher equity related to the higher capex what about the write down following the Illinois rate case, and disallowances or you're not expecting that to lead to additional equity or are you awaiting results of rehearings or potential court cases before you decide.

Gale E. Klappa: No, the timing has been set by commission policy. I would expect no change. Okay, great. The other question I had relates to former Commissioner Tyler Huebner. He was ousted, if you will, by the Republican Senate, the Republican-led Senate.

Speaker Change: That write down the additional equity will send down to Illinois, that's already in the in the five year plan.

Speaker Change: Alluded into the new equity numbers I gave you.

Andrew Wiesel: And a lot of the media reports make it sound like a lot of the pushback from the Senate was around his support for renewables and solar in particular. So my question is, do you worry that the state's commitment to renewables might potentially be changing politically, and if so, would that impact your spending strategy? The short answer is no, and in fact, I don't know what you were reading, but I really don't think his support for renewables or solar was really a deciding factor in the Senate vote at all.

So we've already baked into the five year plan.

Speaker Change: Very good thank you.

Speaker Change: Thank you.

Speaker Change: Alright, our next.

Speaker Change: Question comes from the line of Paul Fremont with Lautenberg, Paul. Please go ahead.

Paul Patterson: Hi, Paul how are you doing today.

Paul Patterson: Doing great. Thank you. Thank you for asking.

Paul Patterson: I guess my first question is.

Paul Patterson: Okay.

Paul Patterson: It does.

Paul Patterson: When you look at sort of the 28 outlook for the company the 5% decrease in the National natural gas distribution segment.

Gale E. Klappa: I would just ask you to go back and perhaps read some of the other—actually, there are very specific comments that were made by members of the Senate Energy Committee, news releases that were put out after the fact explaining the action, but it wasn't, at least in our view, it was not at all related to the fact that he felt a certain amount of renewables were needed, not at all. Okay, great, that's reassuring. Then just a very quick follow-up on equity. I understand the slightly higher equity related to the higher CapEx.

Paul Patterson: What does that assume.

Paul Patterson: In terms of outcomes in Illinois.

It assumes the status quo.

Paul Patterson: Because we just don't know exact.

Paul Patterson: Exactly the outcome of the of the safety modernization review Scott right. So it assumes that we will still be doing emergency work and work for the city and some of those real reliability needs, but we're assuming the status.

Paul Patterson: Till they get through the system. The safety modernization program, we review that neighborhood program.

Andrew Wiesel: What about the write-down following the Illinois rate case and disallowances? Are you not expecting that to lead to additional equity, or are you awaiting the results of rehearings or potential court cases before you decide? That write-down, the additional equity will be sent down to Illinois. That's already in the five-year plan. It's included in the new equity numbers I gave you. So we've already baked it into the five-year plan. Very good. Thank you. Thank you. All right, our next question comes from the line of Paul Fremont with Lautenberg. Hi Paul, how are you doing today?

Paul Patterson: We don't have any of that in there. So scott's right. It assumes some spending because we have to do emergency work related to I mean, if you can't fix a pipe and you have to replace it we have to do that emergency work.

Paul Patterson: And we really do need to cooperate with the city of Chicago when they are replacing their water mains for example, so but beyond that it does not assume any return to the to the full roughly $280 million a year. It does not assume that.

Paul Patterson: And presumably I mean, if the outcome were favorable in Illinois.

Paul Patterson: I'm doing great. Thank you. Thank you for asking. I guess my first question is... does it. When you look at sort of the 28-year outlook for the company, the 5% decrease in the national natural gas distribution segment.

Paul Patterson: Would that potentially change upward.

Speaker Change: It certainly could and we'll just have to see the outcome.

Probably won't know more on that though until what do you think Scott.

Scott: At the end of next year at the same time this year, it's going to take awhile to get through which is they want to be thorough so that's good.

Gale E. Klappa: What does that assume in terms of outcomes in Illinois? It assumes the status quo, isn't we just don't know exactly the outcome of the safety modernization review, Scott? Right. So it assumes that we will still be doing emergency work and work for the city and some of those real reliability needs, but we're assuming the status until they get through the system, you know, the safety modernization program and review that neighborhood program. We don't have any of that in there. So Scott's right.

Scott: And because it's a not only specific look at the safety modernization program, but with a separate docket on the future of gas there will be broad policy decisions within a year we believe.

Scott: Great.

Scott: And then.

Speaker Change: Can you discuss.

What comprises the added infrastructure investment is that all essentially renewable investment.

Oh, yes, yes, largely solar but yes, all renewable.

Speaker Change: Right.

Speaker Change: And any update on the tender or.

Scott J. Lauber: It assumes some spending because we have to do emergency work related to, I mean, if you can't fix a pipe and you have to replace it, we have to do that emergency work. And we really do need to cooperate with the city of Chicago when they're replacing their water mains, for example. So, but beyond that, it does not assume any return to the full roughly 280 million a year. It does not assume that, and presumably, I mean, if the outcome were favorable in Illinois. Would that potentially change? It certainly could; we'll just have to see the outcome.

Speaker Change: And where are you in the tender because the early the early period I think expired.

Speaker Change: Then when does the.

Speaker Change: When does the tender expire.

Speaker Change: Joe has all the details for you on yes. The early tender has run its course, yes. The early tender has expired.

Speaker Change: We expect to tender a little over $120 million out of the $500 million.

Speaker Change: All of that is coming together.

Speaker Change: And Youre still waiting for the regular tender to expire right.

Speaker Change: Correct, but.

Speaker Change: Given the expiration of the early tender we don't expect much pickup after the Ernie early expiration date.

Gale E. Klappa: And we probably won't know more on that, though, until, what do you think, Scott? Late at the end of next year, the same time this year. It's going to take a while to get through, which is, you know, they want to be thorough. So that's good. And because it's not only a specific look at the safety modernization program but with a separate docket on the future of gas, there will be broad policy decisions within a year, we believe. And then, can you discuss... What comprises the added infrastructure investment? Is that all essentially renewable investment? Oh yes, yeah, largely solar, but yes, all renewable, and any update on the tender or anything? And where are you in the tender? Because the early period has, I think, expired.

Speaker Change: Okay.

Speaker Change: And then I guess last question when.

Speaker Change: Would we see sort of the annual breakouts of the change in your Spendings in other words.

The.

Speaker Change: Five year numbers.

Speaker Change: We have that in the 10-K that we will issue the 10-K.

Speaker Change: In February and then we have our February investor deck, which well give you the details for the next few years.

Speaker Change: Right.

Hi.

Speaker Change: That's it for me and thank you so much.

Speaker Change: Hello, I'm surprised you'll have more questions.

Speaker Change: Thank you for your time.

Speaker Change: Yes.

Speaker Change: Thanks, Paul and our next question comes from the line of Julien Dumoulin Smith with Bank of America, Julian the floor is yours.

Paul Patterson: When does the tender expire? Shaw has all the details for you. And yes, the early tender has run its course. Yep. The early tender has expired. We expect to get a little over $120 million out of the $500 million.

Speaker Change: Yeah, good afternoon Gale.

Speaker Change: Equity and I will Miss you here eventually.

Speaker Change: Pleasure.

Speaker Change: [laughter].

Sha: All that is coming together. And you're still waiting for the regular tender to expire, right? Correct, but given the expiration of the early tender, we don't expect much pickup after the early expiration date. I'm, And then, I guess, last question: when... Would we see sort of the annual breakdowns of the change in your spending? In other words, the five-year numbers.

Rock'n'roll hanging it and are you still hanging or you're still hanging in Houston right now.

Speaker Change: You bet you bet to having a good old time, Thank you bill.

Speaker Change: Hey, look, let's let's let's bring it back to your neck of the Woods Super quick you know.

Speaker Change: There's been a lot of conversation on all sides on legislation in Illinois, and a lot of different parties coming to the table. Obviously it doesn't seem entirely riper obvious where that's going but how do you see that kind of matching up against these various dockets, whether the future gas or frankly youre on rehearing, we just kind of getting a cohesive set of policies may be aligning with the governor around or what have you.

Paul Patterson: We have that in the 10-K. So we'll issue the 10-K in February. And then we have a February investor deck, which will give you the details for the next three years. That's it for me, and thank you so much. Oh, I'm surprised you don't have more questions. Thank you for your time, www.wec.gov.au. Thanks, Paul. And our next question comes from the line of Julian Dumoulin-Smith with Bank of America. Julian, the floor is yours.

Speaker Change: I mean, how do you see that possibly coming together like what venue, even if you will.

Speaker Change: Well I think.

Speaker Change: I'm not sure there's a clear answer to that but I can give you my opinion and let you know my opinion on this because it's not a clear answer could be wrong, but my sense is that.

Julien Dumoulin: Hey, excellent. Good afternoon, Gale. Equity and I will miss you here, eventually here. Pleasure. Indeed. Rock and roll.

Speaker Change: Every every major step that we're going to see going forward is going to be under the umbrella of implementing what we call CJ the clean energy jobs Act.

Gale E. Klappa: Indeed. Are you still hanging around Houston right now? You betcha. You betcha. Having a good old time. Thank you, though. Hey, look. Let's bring this back to your neck of the woods, super quick.

Speaker Change: And I think that you see that path very clearly discussed with by chairman Scott as he talks about his decisions on the commission's decisions.

Julien Dumoulin: You know, there's been a lot of conversation on all sides about legislation in Illinois and a lot of different parties coming to the table. Obviously, it doesn't seem entirely ripe or obvious where that's going, but, you know, how do you see that kind of meshing up against these various dockets, whether it's the future of gas or, frankly, your own rehearing? I mean, just kind of getting a cohesive set of policies, maybe aligning with the governor around or what have you. I mean, how do you see that possibly coming together? Like, you know, what venue, even if you will?

Speaker Change: Being tied to implementation of the clean energy jobs Act.

Speaker Change: No.

Speaker Change: I think the framework or the umbrella under which a lot of all of these dockets are going to proceed if you will.

Speaker Change: I think the chairman sees his job as his mandate from the governor of basically putting into action that piece of legislation.

And one of the most important steps now is going to be at the commission and with that docket that they've now just authorized.

Gale E. Klappa: Well, I'm not sure if there's a clear answer to that, but I can give you my opinion and let you know my opinion on this because there's not a clear answer. It could be wrong.

Speaker Change: Looking at the future of gas in the state of Illinois.

Speaker Change: And again, that's going to be that's going to be very open very productive I think.

Gale E. Klappa: But my sense is that every major step that we're going to see going forward is going to be under the umbrella of implementing what we call CEJA, the Clean Energy Jobs Act. And I think that you see that path very clearly discussed by Chairman Scott as he talks about his decisions and the Commission's decisions being tied to the implementation of that act. So that's, I think, the framework or the umbrella under which a lot of these dockets are going to proceed, if you will. And I think the chairman sees his job as his mandate from the governor of basically putting into action that piece of legislation.

Speaker Change: All of the stakeholders are going to have their say.

Speaker Change: And I would just say to you at the end of the day Midwesterners, Illinois ends are pretty practical people. So I think we're going to end up with a practical result that would be my that would be my projection.

Speaker Change: At the end of all of those discussions it's got anything to add.

Speaker Change: No nothing additional I agree with you, we'll probably go through that process.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Oh, absolutely I know I know, it's a little opaque at the time for the time being but I. Appreciate it look actually related if we can just talk about Q IP I mean, obviously there is an element of trying to get recovery here.

Gale E. Klappa: And one of the most important steps now is going to be at the commission and with that docket that they've now just authorized, looking at the future of gas in the state of Illinois. And again, that's going to be very open, very productive, I think. All the stakeholders are going to have their say, and I would just say to you, at the end of the day, Midwesterners, Illinoisans are pretty practical people.

Speaker Change: Spending is there any portion of spending that can be funneled through.

Speaker Change: That are related riders here I mean, how do you think about.

Speaker Change: In the context of spending in Illinois, I mean, obviously youre pulling back on spending here, but I just want to try to make sure we kind of calibrate accordingly to how to think about.

Gale E. Klappa: So I think we're going to end up with a practical result. That would be my, that would be my projection at the end of all of those discussions. Scott, anything to add? No, nothing additional, Gale.

Speaker Change: The business and the ability to earn.

Speaker Change: At or near your authorized if you will.

Scott J. Lauber: I agree with you. We'll probably go through that process. I hope that responds to your question. Oh, absolutely. I know it's a little opaque for the time being, but I appreciate it.

Speaker Change: Well I think it's a good.

Speaker Change: Question I think the short answer is really to be found in the docket that now is being authorized.

Speaker Change: We will come to a conclusion by June 1st are we expect early June at the latest.

Julien Dumoulin: Look, actually, related, if we can, just talking about QIP, I mean, obviously, there's an element of, you know, trying to get recovery here of, you know, spending. Is there any portion of spending that can be funneled through, you know, that or related riders here? I mean, how do you think about, you know, lag in the context of spending in Illinois? I mean, obviously, you're pulling back on spending here, but I just want to try to make sure we kind of calibrate accordingly to how we think about, you know, the business and the ability to earn, you know, at or near your ability, if you will. Well, I think that it's a great question. I think the short answer is really to be found in the docket that is now being authorized and will come to a conclusion by June 1st, or we expect early June at the latest.

Speaker Change: So under that safety modernization program you call. It Q IP, which was a piece of legislation that authorized a rider to recover these investments so bill rider.

Speaker Change: There were several buckets of activity that were included in that legislation and recovered through that rider.

Speaker Change: One of the buckets.

Speaker Change: We feel just has to continue.

Speaker Change: Got mentioned earlier, it's the emergency work and it's it's it's the work that for example, we do in conjunction with the city of Chicago. They are actively replacing aging water mains and it doesn't make a lot of sense to rip up the streets twice. So we work together.

Speaker Change: And we worked together very well to accomplish what we need to accomplish as there were doing their work.

Speaker Change: Bucket also got paused.

Speaker Change: In the Commission's order as well as the big piece of the plan, which is the neighborhood work going neighborhood by neighborhood based on risks to upgrade the safety the safety and put in new modern state of the art piping.

Gale E. Klappa: So under that safety modernization program, you call it QIP, which was the piece of legislation that authorized a rider to recover these investments, a bill rider. There were several buckets of activity that were included in that legislation and recovered through that ride. One of the buckets we feel just has to continue, as Scott mentioned earlier, is the emergency work, and it's the work that, for example, we do in conjunction with the City of Chicago. They are actively replacing aging water mains, and it doesn't make a lot of sense to rip up the streets twice.

Speaker Change: So the piece that we're seeing to them that look we really need to continue and get appropriate recovery for its $134 million. It's that it's that bucket of work relating to emergency things that we have to do and to work with for example, like with the city of Chicago, So that piece is.

Speaker Change: What we're asking for recovery on and we should get an answer Scott I believe by early June and we expect that in June.

Gale E. Klappa: So we work together, and we work together very well to accomplish what we need to accomplish as they're doing their work. That bucket also got paused, by the commission's order, as well as the big piece of the plan, which is the neighborhood work, going neighborhood by neighborhood based on risk to upgrade the safety and put in new, modern, state-of-the-art piping. So the piece that we're saying to them that, look, we really need to continue and get appropriate recovery for is $134 million. It's that bucket of work relating to emergency things that we have to do and to working, for example, like with the city of Chicago.

And then the remaining as you look at the neighborhood programs and we think it will take about a year to go through the docket.

Speaker Change: That then would have to be looked at in a forward looking test year I'd imagine as we've put rates together.

Speaker Change: So it would be really two steps here.

Speaker Change: Indeed, so that's the story.

Speaker Change: So I was just going to say watch this space there'll be a lot of activity over the course of the next 12 months.

Absolutely excellent alright, well look I'll leave it there. Thank you guys very much for the details and best of luck and I'm sure I'll see you guys soon alright take care.

Speaker Change: Thanks Julien.

Speaker Change: Yes.

Speaker Change: Thanks, Julian and our final question today comes from the line of Paul Patterson with <unk> Associates. Please go ahead.

Gale E. Klappa: So that piece is what we're asking for recovery on, and we should get an answer, Scott, I believe by early June. Yeah, we expect that in June. And then the remaining, as you look at the neighborhood programs, and we think it'll take about a year to go through the docket. That then would have to be looked at in a forward-looking test yard, I imagine, as we put rates together. So it would really be two steps.

Paul Patterson: Hello, Paul afternoon, guys How're you doing.

Speaker Change: So we're good.

Paul Patterson: Following up on Julians.

Paul Patterson: Question on rate lag.

Paul Patterson: I'm sure aware that you were one of a number of decisions that happened late in 2023.

Paul Patterson: We're not what the utilities kind of expected.

Paul Patterson: And.

Paul Patterson: As you know Gail you've been doing this a long time.

Paul Patterson: We may be entering into environment, where they're just as less appetite.

Paul Patterson: For the Capex spending and more of a.

Paul Patterson: Desire for Bang for the Buck kind of approach or.

Gale E. Klappa: So that's the story. I'm just going to say watch this space, there will be a lot of activity over the course of the next 12 months. Absolutely, excellent. All right, well, look, I'll leave it there.

Paul Patterson: Regulatory lag as Julian was bringing up I guess, what I'm sort of a bigger picture question.

I mean at least when I'm looking at that Thats, what I see.

Julien Dumoulin: Thank you guys very much for the details, and best of luck, and I'm sure I'll see you guys soon, all right? Take care, Gale, Scott. I look forward to it.

Paul Patterson: Yes.

Speaker Change: Let me know and then secondly.

Speaker Change: How do you think because you've been doing this a long time and you've seen this kind of environment in the past I'm sure.

Gale E. Klappa: Thanks, Julian. And our final question today comes from the line of Paul Patterson with Glen Rockison. Paul, please go ahead. Hello, Paul.

Speaker Change: What.

Speaker Change: How you might approach the situation in which.

Speaker Change: There is.

Speaker Change: Yes.

Speaker Change: Hey, hesitancy to to continue.

Paul Patterson: Good afternoon. So we're going to be following up on Julian's question on rate lag. As you're, I'm sure, aware that you were one of a number of decisions that happened late in 2023 that were not what the utilities kind of expected. As you know, Gale, you've been doing this a long time. You know, we may be entering into an environment where there just is less appetite for CapEx spending and more of a desire for a bang for the buck kind of approach, or regulatory lag, as Self was bringing up. I guess a bigger picture question, you know, A, at least where I'm looking at it. If you don't disagree, let me know. And then secondly, how do you think, because you've been doing this for a long time, and you've seen this kind of environment in the past? I'm sure.

Speaker Change: With with mechanisms like the S&P or at least augmenting them or changing them in such a way that.

Speaker Change: It might be a bit more of a challenge.

Speaker Change: I just wanted to just wondering big picture, if you could sort of address that.

Speaker Change: Yes, I'd be happy to.

Speaker Change: And as you asked the question there are two specific things that really come to my mind. The first is that.

Speaker Change: I mean, we're obviously only going to make investments that follow public policy.

Speaker Change: And public policy.

Speaker Change: Safety modernization program on the future of gas in Illinois are going to be decided in the next 12 months.

Speaker Change: Having said that.

Speaker Change: There is I believe there is a certain amount of investment that's simply going to have to take place for the safety of chicagoans what amount that is I don't know in terms of what decision might be made but I can't imagine the safety modernization program, maybe it's changed maybe it's not but I can't imagine that investment going.

Paul Patterson: What, um, how you might approach a situation in which there's just a hesitancy to continue with mechanisms like the SMP or at least augment them or change them in such a way that it might be a bit more of a challenge? I just wanted to, this is sort of the big picture, if you could sort of address it. Yeah, I'd be happy to. And as you asked the question, there are two specific things that really come to my mind. The first is that, I mean, we're obviously only going to make investments that follow public policy, and public policy on the safety modernization program and the future of gas in Illinois are going to be decided in the next 12 months.

Speaker Change: Zero.

Speaker Change: Just from a pure practical standpoint.

Speaker Change: Don't think that's feasible in terms of protecting the city of Chicago or preparing the city of Chicago for an energy future that could include renewable natural gas hydrogen or any other type of fuel.

So that's kind of piece one piece to just remember that under normal circumstances, Illinois has a future test period. There are rate cases have a one year future test period, which does help to mitigate any kind of issue related to regulatory lag on a normal ongoing basis.

Paul Patterson: Having said that, I believe there's a certain amount of investment that's simply going to have to take place for the safety of Chicagoans. What amount that is, I don't know, in terms of what decision might be made. But I can't imagine the safety modernization program, maybe it's changed, maybe it's not, but I can't imagine that investment going to zero. Just from a pure practical standpoint, I don't think that's feasible in terms of protecting the city of Chicago or preparing the city of Chicago for an energy future that could include renewable natural gas, hydrogen, or any other type of fuel.

Speaker Change: And then I guess the other thing that I would add is look at just the adjustments we've made since November 16th at our capital plan.

Speaker Change: I mentioned earlier three <unk>.

Speaker Change: Mega trends are driving the kind of investment opportunity that we have in front of us which is robust.

Speaker Change: And those three mega trends are basically.

Speaker Change: Reliability, the incredible economic growth that we're seeing in terms of expansion and attraction here of businesses.

Gale E. Klappa: So that's kind of piece one. Piece two, just remember that under normal circumstances, Illinois has a future test period. Their rate cases have a one-year future test period, which does help to mitigate any kind of issue related to regulatory lag on a normal ongoing basis.

Speaker Change: And industrial customers and in the third and these are all important de carbonization, So I don't see regardless of the outcome in Illinois.

Speaker Change: Any type of of really diminished opportunity Scott in terms of the broad broad avenues that we have for productive investments that support those trends.

Gale E. Klappa: And then I guess the other thing that I would add is, you know, look at just the adjustments we've made since November 16th in our capital plan. I mean, as I mentioned earlier, three megatrends are driving the kind of investment opportunity that we have in front of us, which is robust. And those three megatrends are basically reliability, the incredible economic growth that we're seeing in terms of the expansion and attraction here of businesses and industrial customers, and then the third, and these are all important, decarbonization. So I don't see, regardless of the outcome in Illinois, any type of really diminished opportunity, Scott, in terms of the broad avenues that we have for productive investment that support those trends. No, and when you're looking at it, when you think about decarbonization, it's more than that because a lot of these power plants that are retiring, they either invest hundreds of millions of dollars there or in a carbon-free resource that doesn't cost anything for the fuel, so there's also cost savings there in the long term with the production tax credit.

Speaker Change: And when you're looking at it when you think about the decarbonization, it's more than that because a lot of these power plants that were retiring its either invest hundreds of millions of dollars there.

Speaker Change: Or in a <unk>.

Speaker Change: Carbon free resource.

Speaker Change: <unk>.

Speaker Change: It doesn't cost anything for the fuel so theres also cost savings there in the long term with the production tax credit so.

Speaker Change: We do have a lot of opportunities here.

Speaker Change: Okay, Paul is that responds.

I appreciate it.

Paul: You're more than welcome.

Speaker Change: Alright, well I think we were you guys out today. So that concludes our conference call for this afternoon. Thank you so much for your questions and for participating as always and if you have any additional thoughts or questions. Best struck is happy to pick up the phone. She can be reached at 4142 to 14639, thanks, everybody. So long.

Speaker Change: Thanks, Gail ladies and gentlemen that concludes today's call. Thank you all for joining and you may now disconnect.

Speaker Change: Please wait the conference will begin shortly.

Speaker Change: [music].

Scott J. Lauber: So, you know, we do have a lot of opportunities here. Okay. Paul, does that respond?

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Gale E. Klappa: Thank you all. You're more than welcome. All right, well, I think we wore you guys out today, so that concludes our conference call for this afternoon. Thank you so much for your questions and for participating, as always, and if you have any additional thoughts or questions, Beth Strach is happy to pick up the phone. She can be reached at 414-221-4639.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Operator: Thanks, everybody. So long. Thanks, Gale. Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now, Please wait. The conference will begin shortly. Thank you for attending. Thank you. Thank you.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].