Q2 2024 WEC Energy Group Inc Earnings Call
Good afternoon and welcome to the WEC Energy Group's conference call for second quarter 2024 results. This call is being recorded for rebroadcast and all participants are in a listen-only mode at this time.
Operator: Energy Group's conference call for second quarter 2024 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 and questions and answers. In conjunction with this call, a package of detailed financial information will be posted on wecenergygroup.com. A replay will be available approximately two hours after the conclusion of this call.
After the presentation, the conference will be open to analysts and questions and answers.
In conjunction with this call, a package of detailed financial information is posted on wecenergygroup.com. A replay will be available approximately two hours after the conclusion of this call.
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 each statement. Factors described in WEC Energy Group's latest Form K and subsequent reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those contested. During the discussions, referenced earnings per share will be based on diluted earnings per share, unless otherwise noted. And it's now my pleasure to introduce Scott Lauber, President and Chief Executive Officer of WEC. All right.
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.
Speaker Change: Such statements are based on management's expectations at the time they are made.
Speaker Change: in addition to the assumptions and other factors referred to in connection with the statements.
Speaker Change: Factors described in WEC Energy Group's latest form K and subsequent reports filed with 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.
Scott J. Lauber: And it's now my pleasure to introduce Scott Lauber, President and Chief Executive Officer of WEC Energy Group.
Scott J. Lauber: Good afternoon, everyone, and thank you for joining us today as we review our results for the second quarter of 2024. Here with me today is Xia Liu, our Chief Financial Officer, and Beth Strzoka, Senior Vice President of Corporate Communications and Investor Relations.
Scott J. Lauber: Good afternoon, everyone, and thank you for joining us today as we review our results for the second quarter of 2024. Here with me today is Shah Liu, our Chief Financial Officer, and Beth Straka, Senior Vice President of Corporate Communications and Investor Relations.
Scott J. Lauber: As you saw from our news release this morning, we reported second quarter 2024 earnings of $0.67 per share. We're firmly on track to meet the full year 2024 guidance of $4.80 to $4.90 a share. This, of course, assumes normal weather for the balance of the year. We continue to see strong foundational growth in our regional economy. The unemployment rate in Wisconsin stands at 2.9%, continuing a long-running trend below the national average
Speaker Change: As you saw from our news release this morning, we reported second quarter 2024 earnings of $0.67 per share. We're firmly on track to meet the full year 2024 guidance of $4.80 to $4.90 a share.
Speaker Change: This, of course, assumes normal weather for the balance of the year.
Speaker Change: We continue to see strong foundational growth in our regional economy.
Speaker Change: The unemployment rate in Wisconsin stands at 2.9%, continuing a long-running trend below the national average.
Scott J. Lauber: The pipeline of economic activity is particularly strong in what we call the I-94 corridor between Milwaukee and Chicago. For example, just last month, Westrock broke ground on a new facility at the former site of a retired power plant. Westrock is a leading company in paper and packaging solutions with 50,000 employees and 300 plants worldwide.
Speaker Change: The pipeline of economic activity is particularly strong in what we call the I-94 corridor between Milwaukee and Chicago.
Speaker Change: For example, just last month, West Rock broke ground on a new facility at the former site of our retired power plants.
Speaker Change: Westrock is a leading company in paper and packaging solutions with 50,000 employees and 300 plants worldwide. The company called the cutting-edge facility a super plant, stating it will be one of their largest and most advanced plants.
Scott J. Lauber: The company called the cutting-edge facility a super plant, stating it will be one of their largest and most advanced plants, and Microsoft is making good progress on the construction of a large data center complex in southeast Wisconsin. In May, Microsoft announced a broad investment package to strengthen our region as a hub for AI economic activity, innovation, and job creation. These investments include a planned $3.3 billion to be spent on cloud computing and AI infrastructure between now and the end of 2026. Microsoft has stated that it expects to bring 2,300 construction jobs to the area by 2025 and 2,000 permanent jobs over time.
Speaker Change: And Microsoft is making good progress on the construction of a large data center complex in southeast Wisconsin.
Microsoft: In May, Microsoft announced a broad investment package to strengthen our region as a hub for AI economic activity, innovation, and job creation.
Speaker Change: These investments include a planned $3.3 billion to be spent in cloud computing and AI infrastructure between now and the end of 2026.
Microsoft: Microsoft has stated that it expects to bring 2,300 construction jobs to the area by 2025 and 2,000 permanent jobs over time.
Scott J. Lauber: These developments highlight the strength and potential of our local economy and underscore the need for the investments in our capital plan. During the second quarter, we continued to move forward on major projects in our capital. It's the largest five-year investment plan in our history, totaling $23.7 billion for efficiency, sustainability, and growth. As we've discussed, the plan is based on projects that are low risk and highly executable. At the end of May, we closed on our second option at West Riverside Energy Center for $100 million.
Speaker Change: These developments highlight the strength and the potential of our local economy and underscores the need for the investments in our capital plan.
Speaker Change: During the second quarter, we continued to move forward on major projects in our capital plan.
Speaker Change: It's the largest five-year investment plan in our history, totaling $23.7 billion for efficiency, sustainability, and growth. As we've discussed, the plan is based on projects that are low-risk and highly executable.
Speaker Change: At the end of May, we closed on our second option at West Riverside Energy Center for $100 million.
Scott J. Lauber: This adds 100 megawatts of efficient combined cycle natural gas generation to our portfolio. You'll recall that last year, we discussed several filings, or last quarter, we discussed several filings for major projects to support economic growth and reliability in Wisconsin. This includes approximately 1,200 megawatts of efficient natural gas generation at our Paris and Oak Creek sites, as well as a 2 billion cubic foot liquefied natural gas storage facility and a 33-mile gas lateral to serve the Oak Creek site.
Speaker Change: This adds 100 megawatts of efficient combined cycle natural gas generation to our portfolio.
Speaker Change: You'll recall that last year we discussed several filings or last quarter we discussed several filings for major projects to support economic growth and reliability in Wisconsin.
Speaker Change: This includes approximately 1,200 megawatts of efficient natural gas generation at our Paris and Oak Creek sites, as well as a 2 billion cubic foot liquefied natural gas storage facility and a 33-mile gas lateral to serve the Oak Creek site.
Scott J. Lauber: In total, these projects combined represent $2.1 billion of investment. Our proposals were submitted to the Wisconsin Commission in April, and we expect a decision in approximately a year. Also under review, we filed an application in February to purchase a 90% ownership interest in High Noon Solar Energy Center in Southern Wisconsin, with an expected investment of approximately $580 million. The facility is expected to provide 300 megawatts of solar generation.
Speaker Change: In total, these projects combined represent $2.1 billion of investment.
Speaker Change: Our proposals were submitted to the Wisconsin Commission in April , and we expect a decision in approximately a year.
Speaker Change: Also under review, we filed an application in February to purchase a 90% ownership interest in High Noon Solar Energy Center in Southern Wisconsin.
Speaker Change: With an expected investment of approximately $580 million, the facility is expected to provide 300 megawatts of solar generation.
Scott J. Lauber: We have asked the Commission to make a decision before the end of the year. As a reminder, we expect these investments to earn AFUDC during the construction period after commission approval. And in our WEC infrastructure segment, the Delilah-1 solar project is now expected to go into service at the end of the year, delayed from June due to a weather event. We plan to invest approximately $460 million for a 90% ownership interest in this project in Northeast Texas, and we still expect our Maple Flag Solar Project to be in service by the end of the year. As you recall, we're investing an additional $560 million this year in our infrastructure segment. Additionally, we reallocated a total of $800 million away from our operations in Illinois.
Speaker Change: We have asked the Commission to make a decision before the end of the year.
Speaker Change: As a reminder, we expect these investments to earn AFUDC during the construction period after commission approval.
Speaker Change: And in our WEC Infrastructure segment, the Delilah-1 solar project is now expected to go into service at the end of the year, delayed from June due to a weather event.
Speaker Change: We plan to invest approximately $460 million for a 90% ownership interest in this project in Northeast Texas.
Speaker Change: And we still expect our Maple Flats Solar Project to be in service by the end of the year.
Speaker Change: As you recall, we're investing an additional $560 million this year in our infrastructure segment. We reallocated away from our operations in Illinois a total of $800 million in our five-year capital plan.
Scott J. Lauber: Overall, our plan fully supports our long-term earning growth rate, which we project to be in the 6.5% to 7% range on a compound average annual basis. We're also on schedule with the development of our next five-year plan, and as usual, we expect to share the details with you in the fall. Now I have a few updates on the regulatory front. In Wisconsin, we filed new rate reviews for test years 2025 and 2026 on April 12. Our requests focus on addressing three major areas of need. First, improving reliability and reducing outages from increased storm activity.
Speaker Change: Overall, our plan fully supports our long-term earning growth rate which we project to be in the six and a half to seven percent range on a compound average annual basis.
Speaker Change: We're also on schedule with the development of our next five-year plan, and as usual, we expect to share the details with you in the fall.
Speaker Change: Now I have a few updates on the regulatory front.
Speaker Change: In Wisconsin, we filed new rate reviews for test year 2025 and 2026 on April 12th. Our requests focused on addressing three major areas of need.
Speaker Change: First, improving reliability and reducing outages from increased storm activity.
Scott J. Lauber: Second, support Wisconsin's economic growth and job creation through investments in new generation and distribution projects. And lastly, continue the transition from coal generation to renewables and natural gas. Commission staff and intervener testimony is scheduled for August 21st.
Speaker Change: Second, supporting Wisconsin's economic growth and job creation through investments in new generation and distribution projects.
Speaker Change: And lastly, continue the transition from coal generation to renewables and natural gas.
Speaker Change: Commission staff and intervener testimony is scheduled for August 21st. We expect a decision by the end of the year with new rates effective January 1st, 2025.
Scott J. Lauber: We expect a decision by the end of the year with new rates effective January 1st, 2025. We have smaller rate reviews in progress at Michigan Gas Utilities and Upper Michigan Energy Resources. We also expect decisions on these reviews by the end of the year, and in Illinois, we've been engaged in three. The Illinois Commerce Commission issued its decision on the first of these, a limited rehearing on the Commission's rate order for people's gas, at the end of May.
Speaker Change: We have smaller rate reviews in progress at Michigan Gas Utilities and Upper Michigan Energy Resources. We also expect decisions on these reviews by the end of the year.
Speaker Change: And in Illinois, we've been engaged in three dockets.
Speaker Change: The Illinois Commerce Commission issued its decision on the first of these, a limited re-hearing on the Commission's rate order for people's gas at the end of May.
Scott J. Lauber: The commission has agreed to reconsider our request to restore $145 million for the safety modernization program in 2024, although this is mostly related to emergency work. Unfinished projects and work driven by public entities like the City of Chicago. The Commission granted $28.5 billion, concentrating on what they deemed emergency work. We have appealed this decision to the Illinois Appellate Court along with other items in the rate order, including the Commission's previous disallowance of investments in new service centers.
Speaker Change: The Commission had agreed to reconsider our request to restore $145 million for a safety modernization program in 2024. It is mostly related to emergency work.
Speaker Change: Unfinished projects and work driven by public entities like the City of Chicago.
Speaker Change: The Commission granted $28.5 billion concentrating on what they deemed emergency work. We have appealed this decision to the Illinois Appellate Court along with other items in the rate order, including the Commission's previous disallowance of investments in new service centers.
Scott J. Lauber: We are also actively involved in two remaining dockets. One is the review of the safety modernization program; staff and intervener rebuttal testimony is expected by August 21st, with a commission decision expected in the first quarter of 2025. The other docket is the evaluation of the future of natural gas in Illinois, which is expected to conclude in about a year. Of course, we'll keep you updated on any further developments. Across our business, we continue to make good progress toward our goals of reducing greenhouse gas emissions.
Speaker Change: We are also actively involved in two remaining dockets. One is the review of the safety monetization program.
Speaker Change: Staff and intervener rebuttal testimony are expected by August 21st with a commission decision expected in the first quarter of 2025.
Speaker Change: The other docket is the evaluation of the future of natural gas in Illinois, which is expected to conclude in about a year. Of course, we'll keep you updated on any further developments.
Speaker Change: Across our business, we continue to make good progress towards our goals of reducing greenhouse gas emissions.
Scott J. Lauber: In May, we retired Units 5 and 6 at our Old Creek Power Plant. Together, those made up over 500 megawatts of coal-fired generation. Including these units, since 2018, we've retired nearly 2,500 megawatts of older fossil fuel generation.
Speaker Change: In May, we retired Units 5 and 6 at our Oak Creek Power Plant, together those made up over 500 megawatts of coal-fired generation. Including these units, since 2018, we've retired nearly 2,500 megawatts of older fossil fuel generation.
Scott J. Lauber: Finally, a quick reminder about the dividends. We continue to target a payout ratio of 65 to 70% of earnings. We're tracking in that range now and expect the dividend growth will continue to be in line with the growth of our earnings per share. Now I'll turn it over to Shah to provide you with more details on our financial results and our guidance for the third quarter.
Speaker Change: Finally, a quick reminder about the dividend.
Speaker Change: We continue to target a payout ratio of 65 to 70 percent of earnings. We're tracking in that range now and expect the dividend growth will continue to be in line with the growth of our earnings per share.
Speaker Change: Now I'll turn it to Shah to provide you more details on our financial results and our guidance for the third quarter.
Shah: Thank you, Scott. We earned 67 cents a share for the second quarter. While this was a decrease of $0.25 quarter over quarter, we exceeded our Q2 guidance range of $0.60 to $0.64 a share, driven by favorable O&M and financing compared to guidance. As Scott indicated, we're on track to meet our 2024 earnings guidance. As I reminded you on the last couple of calls, with the redesigned changes at People's Gas, base revenues are now more concentrated in the first and fourth quarters when natural gas usage is the highest.
Shaw: Thank you, Scott. We earned 67 cents a share for the second quarter.
Shaw: While this was a decrease of $0.25 quarter over quarter, we exceeded our Q2 guidance range of $0.60 to $0.64 a share, driven by favorable O&M and financing, compared to guidance.
Shaw: As Scott indicated, we're on track to meet our 2024 earnings guidance.
Speaker Change: As I reminded you on the last couple of calls, with the redesigned changes at People's Gas, base revenues are now more concentrated in the first and fourth quarters when natural gas
Scott: Usage is the highest.
Shah: This earnings shift has impacted our second quarter and will impact our Q3 guidance, which I will discuss in a few minutes. Now, let's look at our quarterly variances. Our earnings packet includes a comparison of second quarter results on page 15. I'll walk you through the significant drivers. Starting with our utility operations, earnings were $0.19 lower compared to the second quarter of 2023 as a result of higher O&M, fuel, depreciation and amortization, interest, and other expenses. A couple of drivers for the day-to-day O&M variants are worth noting.
Speaker Change: This earnings shift has impacted our second quarter and will impact our Q3 guidance which I will discuss in a few minutes.
Speaker Change: Now let's look at our quarter-over-quarter variances.
Speaker Change: Our earnings packet includes a comparison of second quarter results on page 15. I'll walk through the significant drivers.
Shah: One, we experienced higher storm costs in the current quarter compared to Q2 last year. And two, we benefited in Q2 last year from a land sale at a retired plant site in Wisconsin. Looking ahead, I now expect overall day-to-day O&M in 2024 to be 2-3% higher compared to 2023. This is a 4% improvement compared to our initial expectation due to our continued O&M savings initiatives that we expect to realize late this year. The impact of weather was flat for the quarter.
Speaker Change: Starting with our utility operations, earnings were $0.19 lower compared to the second quarter of 2023 as a result of higher O&M, fuel, depreciation and amortization, interest, and other expenses.
Speaker Change: A couple of drivers for the day-to-day O&M variants are worth noting.
Speaker Change: One, we experienced higher storm costs in the current quarter compared to Q2 last year.
Speaker Change: And two, we benefited in Q2 last year from a land sale at a retired plant site in Wisconsin.
Speaker Change: Looking ahead, I now expect overall day-to-day O&M in 2024 to be 2-3% higher compared to 2023.
Speaker Change: This is a 4% improvement compared to our initial expectation due to our continued O&M savings initiatives that we expect to realize late this year.
Speaker Change: The impact of weather was flat for the quarter.
Shah: Compared to normal conditions, we estimate that weather had a 2 cent negative impact on the second quarter in both 2023 and 2024. However, our weather-normal electric sales in Wisconsin are relatively flat quarter over quarter and are overall in line with our forecast. Looking at ATC, continued capital investment contributed an incremental penny to Q2 earnings compared to 2023. And in our energy infrastructure segment, earnings improved two cents in the second quarter of 2024 compared to the second quarter of 2023, driven partially by higher production tax credits at WEC infrastructure.
Speaker Change: Compared to normal conditions, we estimate that weather had a two-cent negative impact for the second quarter in both 2023 and 2024.
Speaker Change: Our weather normal electric sales in Wisconsin are relatively flat quarter over quarter and are overall in line with our forecast.
Speaker Change: Looking at ATC, continued capital investment contributed an incremental penny to Q2 earnings compared to 2023.
Speaker Change: And in our energy infrastructure segment, earnings improved 2 cents in the second quarter of 24 compared to the second quarter of 23, driven partially by higher production tax credit at WEC infrastructure.
Shah: Finally, you'll see that earnings at our corporate and other segments decreased $0.09 as a result of the impact of tax timing and higher interest expense. Now, turning to guidance, for the third quarter, we're expecting a range of 68 to 70 cents per share. This accounts for July weather and assumes normal weather for the rest of the quarter. As I mentioned earlier, it also accounts for the shift in Illinois revenue recognition patterns.
Speaker Change: Finally, you'll see that earnings at our corporate and other segments decreased $0.09 as a result of the impact of tax timing and higher interest expense.
Speaker Change: Now, turning to guidance, for the third quarter, we're expecting a range of $0.68 to $0.70 per share.
Speaker Change: This accounts for July weather and assumes normal weather for the rest of the quarter.
Speaker Change: As I mentioned earlier, it also accounts for the shift in Illinois revenue recognition pattern.
Shah: Our third-quarter 2023 earnings were $1 a share. Once again, we're reaffirming our 2024 earnings guidance of $4.80 to $4.90 per share, assuming normal weather for the rest of the year. Before I turn back to Scott, let me quickly remind you that we continue to utilize dividend reinvestment and employee benefit plans to issue common equity. Also, as we said before, we plan to set up an ATM program. Overall, we still project that our common equity issuance will be up to $200 million in 2024.
Speaker Change: Our third quarter 2023 earnings were $1 a share.
Speaker Change: Once again, we're reaffirming our 2024 earnings guidance of $4.80 to $4.90 per share, assuming normal weather for the rest of the year.
Speaker Change: Before I turn back to Scott, let me quickly remind you that we continue to utilize dividend reinvestment and employee benefit plans to issue common equity.
Speaker Change: Also, as we said before, we plan to set up an ATM program.
Speaker Change: Overall, we still project that our common equity issuance will be up to $200 million for 2024.
Shah: Post-2024, our equity issuances will be tied to our capital spending, relatively with approximately $500 million expected per year in the current plan. We look forward to updating you in the fall as we refresh our capital and financing plan. With that, I'll turn it back to Scott.
Speaker Change: Post-2024, our equity issuances will be tied to our capital spending, relatively with approximately $500 million expected per year in the current plan.
Speaker Change: We look forward to updating you in the fall as we refresh our capital and financing plan.
Speaker Change: With that, I'll turn it back to Scott.
Scott J. Lauber: Thank you, Shah. Overall, we're on track and focused on providing value for our customers and our stockholders. Operator, we're ready now for the question and answer portion of the call.
Scott: Thank you, Shah. Overall we're on track and focused on providing value for our customers and our stockholders. Operator, we're ready now for the question and answer portion of the call.
Operator: Thank you. 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 digital 1 on your phone. If you are using a speakerphone, turn off your mute function to allow your signal to reach our equipment. We will take as many questions as time permits. Once again, please press star and then 1 on your phone to ask a question. Our first question comes from Shahriar Pourreza of Guggenheim Partners. Your line is open.
Speaker Change: Thank you. 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 digital 1 on your phone.
Speaker Change: If you are using a speakerphone, turn off your mute function to allow your signal to reach our equipment. We will take as many questions as time permits.
Speaker Change: Once again, please press star and then 1 on your phone to ask a question.
Speaker Change: Our first question comes from Shahriar Pourreza with Guggenheim Partners. Your line is open.
Operator: Go ahead. Good afternoon, Shahriar.
Shahriar Pourreza: Hey guys, good afternoon.
Shahriar Pourreza: Hey Scott, just starting off, just on the sort of perennial Microsoft opportunity that always seems to be asked. It's obviously becoming even more kind of topical now. Just remind us what portion of Microsoft's land acquisition and build is kind of layered in your current plan. And the reason why I ask is that it's obviously now kind of public that they bought a bit more land. And I guess when do you see this hit your plans more materially? Thanks.
Scott: Good afternoon, Shahriar. Hey, Scott. Just starting off, just on the sort of the perennial Microsoft opportunity that always seems to be asked. It's obviously becoming even more kind of topical now. Just remind us on what portion...
Shahriar Pourreza: Microsoft's land acquisition and build is kind of layered in your current plan and the reason why I ask is that it's obviously now kind of public that they bought a bit more land and I guess when do you see this hit your plan more materially? Thanks.
Scott J. Lauber: Sure, sure. So just as everyone, you know, update everyone, you know, they announced spending $3.3 billion through 2024 through 2026, which is on that first 315 acres that they purchased. And then last fall, they purchased another 1,030 acres. And, you know, of course, we pulled our capital plans together before that 1,000 acres were purchased. And just this morning, there were a couple announcements in the paper where they purchased another 173 acres in southeastern Wisconsin.
Speaker Change: Sure, sure. So just as everyone, you know, update everyone, you know, they announced spending $3.3 billion through 2024 through 2026.
Speaker Change: which is on that first about 315 acres that they purchased, and then last fall they purchased another thousand thirty acres.
Speaker Change: And, you know, of course, we pulled our capital plans together before that 1,000 acres were purchased.
Speaker Change: And then just this morning, there's been a couple of announcements in the paper where they purchased another 173 acres.
Scott J. Lauber: So we are currently in the process of working with Microsoft and developing our plans for our next five-year plan that we'll roll out this fall in the development. But currently, we really only have the energy and the capacity needs for that first 315 acres.
Speaker Change: in southeastern Wisconsin. So we are currently in the process of working with Microsoft and developing our plans for our next five-year plan that we'll roll out this fall in the development.
Shahriar Pourreza: Got it. Okay, that's perfect.
Speaker Change: Currently, we really only have the energy and the capacity needs for that first 315 acres.
Shah: So more to come there. And then, just lastly, on the Delilah-1 solar project delay, it's roughly six months. I guess, can you maybe question Shah about the offsets around the potential headwind there versus your kind of prior assumption? Thanks.
Speaker Change: Got it. Okay, that's perfect. So more to come there. And then just lastly, on the Delilah-1 solar project delay, it's roughly six months. I guess, can you just maybe question for Shah is how to think about the offsets around the potential headwind there versus your kind of prior assumption? Thanks.
Shah: Yeah, we took that into consideration as we reaffirmed the annual guidance of 480 to 490. As I mentioned, we continue to focus on O&M management, financing costs, tax, and others. So, we're confident that we can offset the downside from the delay. Okay.
Speaker Change: Yeah, we took that into consideration as we reaffirmed the annual guidance of 480 to 490. So, as I mentioned, we continue to focus on O&M management and financing costs and tax and others, so we're confident that we can offset the
Speaker Change: the downside from the delay.
Shahriar Pourreza: Okay, that's perfect. Thanks, guys. Appreciate it. And hopefully, Gale is somewhere tropical listening to this earnings call. Thanks.
Speaker Change: Okay, that's perfect. Thanks, guys. Appreciate it. And hopefully, Gale is somewhere tropical listening to this earnings call. Thanks. Appreciate it.
Speaker Change: He probably is.
Operator: Our next question comes from the line of Julien Dumoulin-Smith with Jeffries. Your line is open.
Speaker Change: Our next question comes from the line of Julien Dumoulin-Smith with Jeffries. Your line is opened.
Julien Patrick Dumoulin: Thank you.
Julien Patrick Dumoulin: Thank you.
Julien Patrick Dumoulin: Hey, good afternoon, team. Can you guys hear me okay?
Speaker Change: Hey, good afternoon team. Can you guys hear me okay? Yeah, we can hear you fine. Welcome back, Julien.
Scott J. Lauber: Yeah, we can hear you fine. Welcome back, Julien.
Julien Patrick Dumoulin: Awesome. Thank you. I appreciate the time, guys. It's a pleasure to chat here.
Julien Patrick Dumoulin: Awesome. Thank you. I appreciate the time, guys. It's a pleasure to chat here. So perhaps just to kick things off here, look, nicely done all around. In fact, I wanted to just focus on the infrastructure segment. Obviously, you guys are –
Scott J. Lauber: So perhaps just to kick things off here, look, it's nicely done all around. In fact, I wanted to just focus on the infrastructure segment. Obviously, you guys are planning well against those targets. I'm curious, as you think about the totality of the data center opportunities, what does that mean as you think about the opportunities that you're seeing on that side of the business, and how do you think about the scope of that business, in turn?
Speaker Change: planning well against those targets. I'm curious as you think about the totality of the data center opportunities, what does that mean as you think about the opportunities that you're seeing on that side of the business? And how do you think about the scope of that business in turn? You guys are obviously focusing on contracted opportunities. By contrast, a lot of these potential customers would be in a similar manner focused on these kinds of counterparties.
Scott J. Lauber: You guys are obviously focusing on contracted opportunities. By contrast, a lot of these potential customers would be, in a similar manner, focused on these kinds of counterparties. Curious as you think about that opportunity set on that front for us.
Speaker Change: Curious as you think about that opportunity set on that front for us.
Scott J. Lauber: Sure, and we've been working with Microsoft on the needs of the area, and Wisconsin has a lot of development opportunities, and we want to make sure we hit the capacity requirements we need for the area to support the growth, not just of Microsoft but all the other growth that we're seeing in the region. So that's why we've added the, you know, and you'll see more filings shortly on renewable projects in the next month or so that we're proposing to help meet the capacity and the energy needs in the region.
Speaker Change: Sure, and we've been working with Microsoft.
Speaker Change: on the needs for the area. And Wisconsin's got a lot of development opportunities, and we want to make sure we hit the capacity requirements we need for the area to support the growth, not just Microsoft, but all the other growth that we're seeing in the region.
Speaker Change: So that's why we've added the, you know, and you'll see more filings shortly on renewable projects.
Speaker Change: in the next month or so that we're proposing to help meet the capacity and the energy needs in the region. So, we think there's a lot of opportunity, not only from generation of renewables, some capacity needs.
Scott J. Lauber: So we think there's a lot of opportunity not only from the generation of renewables, some capacity needs, some distribution needs also, but also American Transmission Company and investment in transmission in the region. So we're factoring all that in as we pull together our five-year plan here.
Speaker Change: some distribution needs also, but also American Transmission Company and investment in the transmission in the region. So, we're factoring all that in as we pull together our five-year plan here.
Scott J. Lauber: And Julien, all those filings will be in the regulated area, as you know, in Wisconsin.
Speaker Change: And Julien, all those filings will be in the regulated area, as you know, in Wisconsin.
Julien Patrick Dumoulin: Yep, absolutely. Indeed, I know you're pursuing this on multiple fronts. Absolutely. And then, team, just maybe we need to tackle on the regulatory front a couple questions here. How do you think about this, the PSC's denial in the AFEDC? Is there anything to read into that here on the pre-construction costs? I'm just, I know it's a little bit nitpicky, but I'm just curious if there's anything to tease out of that in terms of direction.
Julien: Yep, absolutely. Indeed. I know you're pursuing this on multiple fronts. Absolutely.
Julien: And then, team, just maybe to tackle on the regulatory front a couple questions here. How do you think about the PSC's denial on the AFEDC? Is there anything to read into that here on the pre-construction costs?
Speaker Change: I know it's a little bit nitpicky, but I'm just curious if there's anything to tease out of that in terms of direction, strategically or financial.
Scott J. Lauber: Now, I don't think there's anything to read into that. We, of course, thought we'd get approval on that. We'll wait and see what the final written order is, but when you look at the value we're providing our customers by getting these orders in early, both from a cost-saving standpoint and a time of delivery standpoint, there's really a lot of value for our customers. So we're going to most likely ask for reconsideration and refile that information with the additional information they're looking for.
Speaker Change: Now, I don't think there's anything...
Speaker Change: You know, to read into that, you know, we, of course, thought we'd get approval on that. We'll wait and see what the final written order is. But when you look at the value we're providing our customers getting these orders in early, both from a cost-saving standpoint and a time of delivery standpoint, there's really a lot of value for our customers. So we're going to most likely ask for reconsideration and refile that information with the additional information they're looking for. So...
Scott J. Lauber: So, you know, stay tuned on that. But we think there's a lot of value. And I know the cost of the projects, the longer you wait, will continue to go up as everyone across the country is looking at, you know, adding generation.
Speaker Change: You know, stay tuned on that, but we think there's a lot of value, and I know the cost of the projects, as the longer you wait, will continue to go up, as everyone across the country is looking at, you know, adding generation.
Julien Patrick Dumoulin: Yeah, that seems pretty transparent as well. And lastly, I'll just offer this. I traded in the dog, the Equity, traded him in, and I have a little boy now. So I appreciate you guys for it all along.
Speaker Change: Yeah, that seems pretty transparent, as you say.
Speaker Change: And lastly, I'll just offer this. I traded in the dog, the Equity, traded him in, and I got a little boy now, so I appreciate you guys for it all along. Congratulations. Congratulations. Excellent to hear.
Julien Patrick Dumoulin: Congratulations! Thank you. Congratulations. Congratulations!
Scott J. Lauber: Thank you. Absolutely. All right, guys.
Julien Patrick Dumoulin: All right, guys, I'll see you soon, all right? Appreciate it. That sounds good.
Speaker Change: Absolutely. All right, guys. I'll see you soon, all right? Appreciate it. Sounds good.
Operator: Our next question comes from the line of Michael Sullivan with Wolf Research. Your line is open.
Speaker Change: Our next question comes from the line of Michael Sullivan with Wolf Research. Your line is opened.
Michael P. Sullivan: Hey, good afternoon.
Scott J. Lauber: Good afternoon, Michael.
Michael P. Sullivan: Hey, good afternoon.
Michael P. Sullivan: Hey Scott, just as we look forward to your kind of usual plan refresh with Q3 and, you know, CapEx has usually been biased higher, how should we think about incremental equity needs associated with that? Should it just be any incremental capex excess finance, you know, consistent with your utility capital structures or any different way to think about it?
Michael P. Sullivan: Good afternoon, Michael. Hey, Scott. Just as we look forward to your kind of usual plan refresh with Q3, and CapEx has usually been biased higher, how should we think about...
Speaker Change: incremental equity needs associated with that should it just be any incremental cap excess finance you know consistent with your utility capital structures or any different way to think about it
Scott J. Lauber: Now I think you got it right in line. I mean, of course, we'll put everything together and look at it, refresh it again, but similar to what Shah has been talking about, we'll just look at the equity needs in line with the capital spend and be very excited about the long-term growth that we have available in the capital and the insights we have looking forward to additional capital.
Speaker Change: Now I think you got it right in line. I mean, of course, we'll put everything together and look at it, refresh it again, but similar to what Shah has been talking about, we'll just look at the equity needs in line with the capital spend and be very excited about the
Speaker Change: The long-term growth that we have available in the capital and the insights we have looking forward on additional capital.
Michael P. Sullivan: Okay, that makes sense. And then, um...
Speaker Change: Okay, that makes sense.
Scott J. Lauber: Shifting over to Illinois, I was just maybe hoping you could..., you know, frame some bookends for potential outcomes of the still pending docket, namely the PIPE program review. What's the range of outcomes there? And then also, is there anything, any loose ends still tied to, like the QIP rider reconciliations from prior years that could, you know, move numbers around at all?
Speaker Change: Shifting over to Illinois, I was just maybe hoping you could...
Speaker Change: frame some bookends for potential outcomes of the still pending docket, namely the
Speaker Change: and the Pipe Program.
Speaker Change: review. What's the range of outcomes there and then also really is there anything, any loose ends still tied to like the QIP rider reconciliations from from prior years that could you know move numbers around at all?
Scott J. Lauber: Sure, so let's look at both of them. So the QIP riders from other years, right now, the 2016 rider has been queued up I think for a decision, hopefully I would expect by the end of the year. As you know, it's 2016 now, so it's been a while. And then, of course, we have those other years under the QIP still to look at. So you know, remember the requirement there is prudence, and we think we've been very prudent specifically after Integra's acquisition where we really took a look at the program and factored in a lot of information that we received from the audits of the Liberty Audit and staff recommendations from that audit. So there is still more to come on that.
Speaker Change: Sure, so let's look at both of them. So the QIP riders from other years...
Speaker Change: Right now, 2016 Ryder has been queued up, I think, for a decision, hopefully, I would expect by the end of the year, a decision will be made in that. As you know, it's 2016 Ryder, so it's been a while. And then, of course, we have those other years under the QIP still to look at. So, you know, remember the...
Speaker Change: The requirements there is prudency and, you know, we think we've been very prudent specifically after the Integra's acquisition where we really took a look at the program and factored in a lot of information that we received from the audits.
Speaker Change: of the Liberty Audit and staff recommendations from that audit. So those are still more to come on there.
Scott J. Lauber: And then under the current S&P, remember, the S&P in our last rate case, no one requested a pause in the program at all during the rate case. And now, in looking at the testimony for the first set of testimony that came through, there's no one also recommending a pause in the case. The range that our people are talking about that was in the testimony is from including emergency work to working with the City of Chicago on emergency work.
Speaker Change: And then under the current S&P, remember, the S&P in our last rate case...
Speaker Change: No one requested a pause in the program at all during the rate case, and now in looking at the testimony for the first set of testimony that came through, there's no one also recommending a pause.
Speaker Change: in the case. The range that our people are talking about that was in the testimony is from including emergency work to working with the City of Chicago in emergency work.
Scott J. Lauber: There, the City of Chicago, I think, said you should lift the pause for at least two years with a cap of about $245 million, all the way to the other extreme, where I think staff is recommending that you accelerate the program and actually get it done faster by 2030. So, there's quite a range in the middle there, but once again, none of the interveners in the initial testimony all said they should lift the pause and get some work done specifically related to emergency work and work with the City of Chicago as they do their capital work.
Speaker Change: There, the city of Chicago, I think, said he should lift the pause for at least two years.
Speaker Change: with a cap of about $245 million.
Speaker Change: All the way to the other extreme where I think staff recommending that you accelerate the program and actually get it done faster by 2030. So, there's quite a range in the middle there, but once again, none of the interveners in the initial testimony
Speaker Change: They all said they should lift the pause and get some work done specifically related to emergency work and working with the city of Chicago as they do their capital work.
Michael P. Sullivan: Okay, yeah, just on that. I mean, as we've seen with some of the recent orders there, the ICC has come out worse than every single other intervener, so how do we think about that risk in these dockets that, you know, you could get more of the same when it actually comes down to the final order?
Speaker Change: Okay, yeah, just on that, I mean, I think as we've seen with some of the recent orders there, the
Speaker Change: ICC has come out worse than every single other intervener, so how do we just think about that risk in these dockets that, you know, you could get more of the same when it actually comes down to the final order?
Scott J. Lauber: Yeah, and we're going to have to wait and see what they say. I think when you look at it from every intervener group, though, they are saying we need to work with the City of Chicago, including the City of Chicago, to help them with their capital programs, and everyone, even on the re-hearing, talked about emergency work. So on the low end, you're talking between $60 and $100 million a year.
Speaker Change: Yeah, and we're going to have to wait and see and see what they say. I think when you look at it...
Speaker Change: From every intervener group, though, they are saying we need to work with the city of Chicago, including the city of Chicago, to help them with their capital programs, and everyone, even on the re-hearing, talked about the emergency work.
Speaker Change: So on that low end, you're talking between $60 and $100 million a year.
Michael P. Sullivan: I don't think anyone's disputing that. And, you know, I understand what the commission is doing, but they're taking some time. And I think when you look at that last S&P case or the rehearing we asked for, they were concentrating on purely emergency cases and wanted to wait for this order to look at the entire program. So I wish I knew the answer, but that's why we're going to the hearing. Okay, yeah, no, that is super helpful.
Speaker Change: I don't think anyone's disputing that and you know I understand what the Commission is but they're taking some time and I think when you look at that last S&P case or the re-hearing we asked for
Speaker Change: They are concentrating on purely emergency and wanted to wait for this order to look at the entire program So I wish I knew the answer, but that's where we're going to the case
Michael P. Sullivan: Okay, yeah, no, that's super helpful context. Thank you.
Speaker Change: Okay, yeah, no, that's super helpful context. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Durgesh Chopra with Evercore ISI. Your line is opened.
Scott J. Lauber: Hey, see you guys soon.
Speaker Change: [inaudible]
Durgesh Chopra: Hey, good afternoon, Scott and Shahriar. Thanks for giving me time.
Durgesh Chopra: Hey, just on the safety modernization program review in Illinois, so obviously you got a decision on the $145 million, you got $28 million. Can you just remind us what is baked into the plan?
Speaker Change: 25 and forward on that on the safety program.
Shah: Sure, and I'll let Shah go through the details, but in general, we took about $800 million out, and as we look at our plan, we'll re-evaluate it based on the testimony we're seeing here as we look at the next five-year plan. But Shah, can you tell us what's in the current plan?
Speaker Change: Sure, and I'll let Shah go through the details, but...
Shah: In general, we took about $800 million out, and as we look at our plan, we'll re-evaluate it based on the testimony we're seeing here as we look at the next five-year plan. But Shah, can you tell us what's in the current?
Shah: Yeah, it's between $100 million to $120 million a year, Durgesh, and as Scott mentioned, we are in the process of refreshing the capital plan, so we're working with the team in Illinois to reflect the latest developments from the commission's decision on the approval of the $28.5 million. So, likely, that number could potentially come down over the next five years, but we're still working through the details right now.
Shah: Yeah, it's between $100 to $120 million a year, Durgesh.
Speaker Change: We are in the process of refreshing the capital plan, so we're working with the team in Illinois.
Sha: to reflect the latest development from the Commission's decision on the approval of the $28.5 million. So likely that number could potentially come down over the next five years, but we're still working through the details right now.
Michael P. Sullivan: Thank you. That's very helpful. And just to be clear, in the first quarter of next year, we're going to get a decision on the spending relative to what you have in the plan, right? And I'm assuming you asked for anywhere between $100 to $120, and then the commission is going to come back with... a recommendation. Is that fair?
Speaker Change: Got it. Thank you. That's very helpful. And just to be clear, first quarter of next year, we're going to get a decision on, you know, the spending relative to what you have in the plan, right? And I'm assuming you've asked for anywhere between 100 to 120. And then the commission is going to come back with...
Speaker Change: We expect to hear a recommendation in the first quarter of 2025 from the Commission.
Scott J. Lauber: Yes, we expect to hear a recommendation in the first quarter of 2025 from the Commission.
Michael P. Sullivan: Okay, thank you. And then, can I quickly follow up on Delilah 1?
Speaker Change: Okay, thank you. And then just can I quickly follow up on Delilah 1, you know, any color you can share? I know you mentioned weather event. I'm just wondering if it could be more than six months.
Scott J. Lauber: You know, any color you can share? I know you mentioned a weather event. I'm just wondering if it's, if it could be more than six months, just what caused it? Was it just equipment or something else? Any color you can share there? Thank you.
Speaker Change: What caused it? Was it just equipment or something else? Any color you can share there. Thank you.
Scott J. Lauber: Sure, there was, and remember we haven't purchased it yet; we have a commitment to do so, but it was during construction, and there was a hail event there. So there was some hail damage.
Speaker Change: Sure, there was, and remember, we haven't purchased it yet. We have a commitment to, but it was during construction and there was a hail event there. So there was some hail damage. We wanna work with the developer as they are repairing it to make sure the fields.
Scott J. Lauber: We want to work with the developer as they are repairing it to make sure the field's in full shape before we purchase it. We anticipate, based on all the latest discussions, that it'll be in by the end of the year. And we get, you know, weekly updates on the progress going there, and right now, that is still the plan to be there by the end of the year, assuming no other events happen.
Speaker Change: In full shape before we purchase it. We anticipate based on all the latest discussions that it will be in by the end of the year. And we get weekly updates on the progress going there.
Speaker Change: Right now that is still the plan to be in by the end of the year, assuming no other events happen.
Michael P. Sullivan: Thank you. I appreciate it. Thanks, Scott. Thanks, Shah.
Speaker Change: Thank you. I appreciate it. Thanks, Scott. Thanks, Shah.
Speaker Change: Thank you.
Operator: Our next question comes from the line of Carly Davenport with Goldman Sachs. Your line is open. Hey, good afternoon. Thanks for taking the question. Absolutely.
Speaker Change: Our next question comes from the line of Carly Davenport with Goldman Sachs. Your line is opened.
Carly S. Davenport: Hey, good afternoon. Thanks for taking the questions.
Carly S. Davenport: Hey, Carly, absolutely. Just wanted to ask a quick question on transmission and ATC.
Carly S. Davenport: Hey Carly, absolutely. Just wanted to ask a quick one on transmission and APC. We've obviously seen the sizing of MISO-TRANCH2 moving higher here, so just curious how you're thinking about the opportunities around transmission there, both from a size and a timing perspective.
Carly S. Davenport: We've obviously
Scott J. Lauber: Sure. I think Tronch 2, from everything I've seen and heard, is going to be larger than Tronch 1, and you've talked about that, and I think it'll probably be about proportionally larger for ATC. So a lot of good opportunities there, but that spending probably won't actually occur until like 2030 plus, right? Because they're still working through Tronch 1.
Carly S. Davenport: Sure, I think Tranche 2, from everything I've seen and heard, is going to be larger than Tranche 1, and you've talked about that, and I think it'll be...
Speaker Change: probably about proportionally larger for ATC, so a lot of good opportunities there, but that spending probably won't actually occur to like 2030 plus, right, because they're still working through tranche one. I think the other big driver for American Transmission Company is going to be the economic development in the region.
Scott J. Lauber: I think the other big driver for American Transmission Company is going to be economic development in the region and putting in renewables in the system. So last year, Tronch One had an effect on our capital plan, but the biggest drivers were economic development and continuing renewables in Wisconsin. So I consider both of those to be additional drivers. And remember, that tranche one was in 2022 dollars. So as they go through and reprice all of that, when you think about inflation in the last several years, it's going to be, most likely, be bigger than the original amount.
Speaker Change: and putting in renewables in the system. So last year, TRANCH1 had an effect.
Speaker Change: on our capital plan, but the biggest drivers were economic development and continuing renewables in Wisconsin. So I consider both of those to be additional drivers. And remember that tranche one.
Speaker Change: was in 2022 dollars. So as they go through and reprice all of that, when you think about inflation in the last several years, it's going to be, it's going to most likely be bigger than the original amount.
Speaker Change: Great, I appreciate that caller. I'll leave it there. Thank you.
Speaker Change: Thank you.
Operator: Our next caller comes from the line of Andrew Weisel with Scotiabank. Your line is open.
Speaker Change: Our next caller comes from the line of Andrew Weisel with Scotiabank. Your line is open.
Andrew Marc Weisel: Hey, Andrew. Hey, everybody. Hi.
Andrew Marc Weisel: Hey, Andrew. Hey, everybody.
Andrew Marc Weisel: First question on Illinois. Just a question of timing. So you mentioned the uncertainty will last for about a year. At what point might you start to consider reallocating capital into the state? Could we see some CapEx go back into Illinois with the update in three months? Or would it be unlikely to show up until the update in the fall of 2025 when all of those dockets are wrapped up?
Andrew Marc Weisel: Hi, first question on Illinois.
Andrew Marc Weisel: Just a question of timing. So you mentioned the uncertainty will last for about a year. At what point might you start to consider reallocating capital into the state? Could we see some CapEx go back into Illinois with the update in three months?
Speaker Change: or would it be unlikely to show up until the update in the fall of 2025 when all of those dockets are wrapped up?
Scott J. Lauber: Well, and we'll look at it, when you think about Illinois, we'll know more about the S&P program in the first quarter of next year. There's also, you know, the future of natural gas that's being looked at. And there's also an IRP process where we get stakeholders involved, and our first filing will be in 2025. So, as you know, as we pull our capital plans together in the fall of this year, we're going to be pretty conservative as we look at that until we have a little more clarity. And when we think about it, there are just a lot of opportunities outside of Illinois for additional capital and growth.
Speaker Change: Well, and we'll look at it, when you think about Illinois, we'll know more on the S&P program in the first quarter of next year. There's also a future of natural gas that's being looked at, and there's also an IRP process where we get stakeholders involved, and our first filing will be in 2025.
Speaker Change: So, as you know, as we pull our capital plans together in the fall of this year, we're going to be pretty conservative as we look at that until we have a little more clarity. And when we think about it, there's just a lot of opportunities outside of Illinois for the additional capital and growth.
Shah: Next question for Shah. If I understand you right on the O&M, you're now projecting it to be up 2 to 3 percent. Last quarter, you said it was up 3 to 5 percent. Originally, it was up 6 to 7 percent. So this is really good progress. Can you just give us a little bit of detail on those moving parts? How is it that the outlook is getting better and better? What are some examples?
Speaker Change: Does that make sense?
Shaw: Next question for Shah. If I heard you right on the O&M, you're now projecting it to be up two to three percent. Last quarter you said up three to five percent. Originally it was up six to seven percent, so this is really good progress.
Speaker Change: Can you just give us a little bit of detail on those moving parts? How is it that the outlook is getting better and better? What are some examples?
Shah: Every manager in the business unit understands that we had a very mild first quarter, so we made it very clear that we need to be highly focused on O&M to offset the weather headwind in the first quarter. Benefits are lower, and expected to be lower. We're also looking at all the angles about using contractors versus internal labor, and it's across the board.
Speaker Change: Every manager in the business unit understands that we had a very mild first quarter. So we made it very clear that we need to be highly focused on O&M to offset the weather headwind in the first quarter.
Speaker Change: Benefits are lower, expected to be lower. We're also looking at all the angles about using contractors versus internal labor and you know we it's across the board I would say so.
Shah: Okay, relative to the original budgets, would you call most of these savings one time, then, or is some of it going to be...
Speaker Change: Okay, relative to the original budgets, would you call most of these savings one time then, or is some of it going to be sustainable?
Shah: I think it's a combination of one-time initiatives, but we also continue to focus on driving efficiency across the board, which is also sustainable.
Speaker Change: I think it's a combination of, you know, one-time initiatives, but also continue to focus on driving efficiency across...
Speaker Change: across the board, which is also sustainable. It's a combination of both. And also, when you think about it, having a warm first quarter, you don't have like the number of leaks as you would in the gas system. So some things are naturally less.
Scott J. Lauber: And also, when you think about it, having a warm first quarter, you don't have the number of leaks as you would in the gas system. So some things are naturally less.
Scott J. Lauber: So we've got a little bit less O&M in the gas system, and we had some significant storms. So between the storms and the warmer weather, we've asked everyone across the business unit to really control costs and really kind of do some one-time things here. On the other hand, we are making sure, you know, we are actively responding to storms because the storms have had bigger impact and actually continuing to work on our forestry program because of some of the damage some of the storms have had on the system. So we want to really balance customer reliability along with our savings.
Speaker Change: No, so we've got a little bit less O&M on the gas system, and, you know, we had some significant storms. So, between the storms and the warmer weather, we've asked everyone across the business unit to really control costs.
Speaker Change: and really you know kind of do some one-time things here. On the other hand we are making sure you know we are actively responding to storms because the storms have had bigger and actually continuing to work on our forestry program because of some of the damage some of the storms have had to the system. So we want to really balance
Speaker Change: Customer Reliability, along with our savings.
Andrew Marc Weisel: Got it. That's very helpful. Then just one very, um... nitpicky number 1.
Speaker Change: got it that's very helpful and just one very
Andrew Marc Weisel: Corporate and other, minus six cents for taxes this quarter. I think it was plus nine cents in the first quarter. Will you just remind us what the expectation is for the full year? Should that net out to zero, or something else?
Speaker Change: corporate and other minus six cents for taxes this quarter I think it was plus nine cents in the first quarter will you just remind us what's the expectation for the full year should that net out to zero or something else
Shah: It would be slightly positive. If you think about the reason why we had a large tax timing difference in the first quarter and the opposite in the second quarter, part of that is driven by the earnings pattern shift in Illinois. So tax dollars follow the earnings pattern. And two, we had a deferral, I'm sorry about the delay of the Delilah. So part of that is reflected in the second quarter. But as we put Delilah online at the end of the year, we expect the tax dollars to follow.
Speaker Change: It would be slightly positive. If you think about the reason why we had a large tax timing the first quarter and the opposite in the second quarter.
Speaker Change: Part of that is driven by the earnings pattern shift in Illinois.
Speaker Change: So tax dollars follow the earnings.
Speaker Change: And two, we had a deferral, I'm sorry, the delay of the Delilah, so part of that is reflected in the second quarter. But as we put Delilah online end of the year, we expect the tax dollars to follow.
Andrew Marc Weisel: Okay, very helpful. Thank you so much.
Speaker Change: Okay, very helpful. Thank you so much.
Operator: Our next question comes from the line of Neil Kalton with Wells Fargo Securities. Your line is open.
Speaker Change: Our next question comes from the line of Neil Kalton with Wells Fargo Securities. Your line is open.
Neil Andrew Kalton: Yeah, hi guys. Thanks for taking my call.
Neil Andrew Kalton: Yeah, hi guys. Thanks for taking my call. Good question.
Neil Andrew Kalton: Good question. Just on the Microsoft opportunity, a lot of acreage here. As we think about the CapEx refreshes going forward, at what point in time do you think you'll have clarity to start flowing some of that potential spend related to incremental opportunities into the plan? Is that potentially 24 we could see some, or is this more like 25 or 26?
Neil Andrew Kalton: Just on the Microsoft opportunity, a lot of acreage here. As we think about the CapEx refreshes going forward, at what point in time do you think you'll have clarity?
Speaker Change: to start flowing some of that potential spend related to incremental opportunities into the plan. Is that like potentially 24 we could see some, or is this more like 25 or 26?
Scott J. Lauber: Sure. And actually, thanks, Neil. Thanks for the question.
Speaker Change: Sure, and actually, thanks Neil, thanks for the question.
Scott J. Lauber: So we're actually, between us and American Transmission Company, we're actually spending some money now on some of the substations, and we have those orders in for some of the generation, and it's to support economic development across the board. So it's going to be 24, 25, and then even more in 26 as we get those orders released at the commission and approval for that generation. We're also, in the next month or so, you'll see some filing on additional renewables to support the generation needs as we continue to add renewables to our portfolio. So that's spending, you know, probably in that 26, 27 timeframe.
Speaker Change: So, we're actually, between us and American Transmission Company, we're actually spending some money now on some of the substations.
Speaker Change: And we have those orders in for some of the generation. And it's to support the economic development across the board. So it's going to be...
Speaker Change: 24, 25, and then even more in 26 as we get those orders released at the Commission and approval for that generation. We're also, in the next month or so, you'll see some filing on addition renewables that support the generation needs.
Speaker Change: as we continue to add renewables to our portfolio. So that spending, you know, will be probably in that 26, 27 timeframe.
Neil Andrew Kalton: Okay, so it's kind of like broadly overall, it's not just tied to the Microsoft thing. It's sort of overall you have this need and kind of anticipate things happening, so we start to kind of flow it in over time, and as we get more clarity, more comes in, is that right?
Speaker Change: Okay so it's kind of like broadly overall it's not just tied to the Microsoft thing it's sort of overall you have this need and kind of anticipate things happening so we start to kind of flow it in over time and as we get more clarity more comes in is that right?
Scott J. Lauber: Exactly. And remember, the growth that they provided us is really only through their capital plans through 2026. I imagine once they get it in, they'll continue to ramp up, but we'll continue to work through it. And I think our plan is extremely long, as we start adding 2029 to our five-year plan.
Speaker Change: Exactly, exactly. And remember...
Speaker Change: The growth that they provided us is really only through their capital plans through 26. I imagine once they get it in, they'll continue to ramp up.
Speaker Change: We'll continue to work through it, and I think our plan is...
Speaker Change: extremely long as we start adding 2029 to our five-year plan.
Neil Andrew Kalton: Okay, perfect. Thank you. Thank you. Our next question comes from the line of Jeremy Tonet with JP Morgan. Your line is open.
Speaker Change: Okay, perfect. Thank you.
Speaker Change: Thank you.
Operator: Our next question comes from the line of Jeremy Tonet with J.P. Morgan. Your line is open. Hi, good afternoon.
Speaker Change #100: Our next question comes from the line of Jeremy Tonet with J.P. Morgan. Your line is opened.
Jeremy Bryan Tonet: Hi, good afternoon.
Jeremy Bryan Tonet: Hey, Jeremy.
Jeremy Bryan Tonet: I just want to come back up to Wisconsin, if I could, with the recent commission vote here. Just wondering, with the split vote, what you take from that, I guess, and any thoughts on the direction of the commission at this point?
Jeremy Bryan Tonet: Now I think it's, I think it's kind of early to tell. I think they were just looking for some additional information, and I don't think they had the full information on, as they mentioned, the economics and the benefits of this. So, you know, this is, you know, maybe a communication between our staff and their staff, and we just got to understand it. So we'll get the order, we'll review it, we'll pull the information together, and ask for a reconsideration.
Speaker Change #102: Now I think it's I think it's kind of early to tell. I think they were just looking for some additional information and I don't think they had the full information on any mention on the economics and the benefits of this.
Speaker Change #102: So...
Speaker Change #103: You know, this is, you know, maybe a communication between our staff and their staff, and we just got to understand it, so we'll get the order, we'll review it, we'll pull the information together and ask for a reconsideration. I'm not overly concerned on this.
Jeremy Bryan Tonet: I'm not overly concerned about this. And in the end, when you listen to their comments, if they didn't have all the information, you know, they have to make the right decision for what they think is right, too. So I appreciate them, you know, really evaluating each case. So I wouldn't overread into this too much.
Speaker Change #103: And in the end, when you listen to their comments, if they didn't have all the information, you know, they have to make the right decision for what they think is right too. So I appreciate them, you know, really evaluating each case. So I wouldn't read into this over too much.
Speaker Change #104: Got it. That's helpful. I'll leave it there. Thanks.
Operator: As a reminder, if you'd like to ask a question, please press star, followed by number one on your telephone keypad. Our next question comes from the line of Shahriar Pourreza with Guggenheim Partners. Your line is open.
Speaker Change #104: As a reminder, if you'd like to ask a question, please press star, follow the number one on your telephone keypad. Our next question comes from the line of Shahriar Pourreza with Guggenheim Partners. Your line is open.
Shahriar Pourreza: Hey guys, thanks for taking my follow-up. Scott, I know we're getting closer to the back half of the year. Just on Point Beach, PPA, I know you've talked about sort of this coming potentially too ahead as we're getting to the year end. I guess, how are the conversations going with NextEra and a new PPA or sort of another path forward there? Any updates?
Shahriar Pourreza: Hey guys, thanks for taking my follow-up. Scott, I know we're getting closer to the back half of the year. Just on Point Beach, PPA, I know you've talked about sort of this coming potentially too ahead as we're getting to the year end. I guess, how are sort of conversations going with NextEra?
Speaker Change #105: and a new PPA or sort of another path forward there. Any updates?
Scott J. Lauber: You know, we've had really good, productive conversations with Nexera, but really nothing to report at this time. So, still in discussions, but stay tuned to this. You know, and we're working on it. Okay.
Speaker Change #106: You know, it's really, we've had really good, productive conversations with Nexera, but really nothing to report at this time. So still in discussions, but stay tuned to this, you know, and we'll, we're working on it. Okay. Appreciate it. Thanks so much, guys, for taking my follow-up.
Shahriar Pourreza: Okay. Appreciate it. Thanks so much, guys, for taking my follow-up. Absolutely.
Speaker Change #107: Absolutely.
Operator: Our last question comes from the line of Paul Patterson with Glenrock Associates.
Speaker Change #107: Our last question comes from the line of Paul Patterson with Glenrock Associates. Your line is open.
Paul Patterson: Hey, Paul. How are you doing? So just one question at this point, and that is the... The Illinois Gas Appeal at the appellate court in Illinois. Just any frame of timing when you think you might get a resolution to that?
Speaker Change #107: Hey. Hey, Paul. How you doing? So just one question at this point, and that is the
Speaker Change #108: The Illinois Gas Appeal at the appellate court in Illinois.
Paul Patterson: Just any frame of timing when you think you might get a resolution to that?
Paul Patterson: I apologize; it didn't come through clear on...
Speaker Change #110: I apologize, it didn't come through clear on...
Paul Patterson: No, no, so you guys appealed the, um, the, uh, the orders, yeah, Illinois Steel Corp. And I was just wondering when you think a decision on that might, might be happening.
Speaker Change #111: The future of gas?
Speaker Change #112: No, no, so you guys appealed the orders to the Illinois Steel Court, and I was just wondering when you think a decision from that might be happening.
Scott J. Lauber: I anticipate it's going to take a year or two.
Speaker Change #113: I anticipate it's going to take a year or two.
Paul Patterson: Okay. Long time. Okay, thank you. Yeah, that's it for me.
Speaker Change #113: Okay, okay, thank you. Yeah, that's it for me. All right.
Operator: Thank you. Well, that concludes our conference call for today. Thank you for participating. If you have any questions, feel free, as always, to call Bestraka at 414-221-4639. Thank you.
Best Rock: Thank you. Well, that concludes our conference call for today. Thank you for participating. If you have any questions, feel free, as always, to call Best Rock at 414-221-4639. Thank you.