Q3 2025 WEC Energy Group Inc Earnings Call
Speaker #2: Good afternoon, and welcome to WEC Energy Group's conference call for third quarter 2025 results. This call is being recorded for rebroadcast, and all participants are in a listen-only mode at this time.
Speaker #2: 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 EnergyGroup.com.
Speaker #2: A replay will be available approximately two hours after the conclusion of this call . Before the conference call begins , please note that all statements in the presentation , other than historical facts , are forward looking statements that involve risks and uncertainties that are subject to change at any time .
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: Referenced earnings per share will be based on diluted earnings per share unless otherwise noted. This call will also include non-GAAP financial information.
Speaker #2: The company has provided reconciliations to the most directly comparable GAAP measures in the materials posted on its website for this conference call.
Speaker #2: And now it's my pleasure to introduce Scott Lauber, President and Chief Executive Officer of WEC Energy Group. Please go ahead.
Speaker #3: Good afternoon, everyone, and thank you for joining us today as we review our results for the third quarter of 2025.
Speaker #3: Here with me are our Chief Financial Officer and Senior Vice President of Corporate Communications and Investor Relations. As you saw from our news release this morning, we reported third quarter 2025 earnings of $0.83 per share. With this solid quarter, we remain on track for strong 2025 results.
Speaker #3: Our focus on executing the fundamentals of the business is creating real value for our customers and stockholders. Today, we are reaffirming our earnings guidance for the year at a range of $5.17 to $5.27 a share.
Speaker #3: Of course , this assumes normal weather through the remainder of 2025 . In addition , I'm excited to share our new five year capital plan .
Speaker #3: Let's start talking by talking about the economic growth that's driving the plan . We continue to see major business building a future in our region .
Speaker #3: Overall, our electric demand is expected to grow by 3.4 GW between 2026 and 2030. That's an increase of 1.6 GW compared to the prior plan.
Speaker #3: Microsoft is making good progress on its large data center complex in Mount Pleasant, Wisconsin. The company has stated that the first phase of that project is on track to go online next year.
Speaker #3: In addition, Microsoft also recently announced plans for a second phase in Mount Pleasant that would be similar in size and power. Its projected investment is an incremental $4 billion on top of the original $3.3 billion investment.
Speaker #3: The economic development south of Milwaukee is supporting approximately 2.1GW of our overall 3.4GW demand growth . And as you recall , vantage Data Centers has signed on to develop data center facilities on approximately 1900 acres north of Milwaukee in Port Washington .
Speaker #3: Just last week , Vantage announced that this campus , named lighthouse , will be part of open AI and Oracle's partnership on the Stargate expansion .
Speaker #3: Vantage has reported that the site has the potential to reach 3.5 GW of demand over time. Right now, we're focused on providing generation for an estimated 1.3 GW of demand at the site in the next five years.
Speaker #3: The city of Fort Washington approved Vantage's plans in August for the initial development on 670 acres . Vantage has stated that it expects to invest $15 billion in the project .
Speaker #3: The campus will feature four data centers, and construction is planned to start this year. Vantage has announced that the facility could go online in late 2027.
Speaker #3: With this first phase of the project scheduled for completion in 2028 . Of course , the growth from large customers is also fostering small commercial and residential development throughout our service territory and Wisconsin's unemployment rate stands at 3.1% .
Speaker #3: Continuing a long running trend below the national average . This significant economic development is driving our capital plan . As you may have seen from our announcement this morning , we expect to invest $36.5 billion in capital projects between 2026 and 2030 , an increase of $8.5 billion above our previous five year plan .
Speaker #3: That's more than a 30% increase . With this updated capital plan , we expect asset based growth at an average rate of just over 11% a year .
Speaker #3: We expect that strong asset base growth will support our updated long-term projected earnings per share growth of 7 to 8% a year on a compound annual basis between 2026 and 2030.
Speaker #3: This is based on the midpoint of our 2025 guidance for the next few years . However , we expect to maintain our existing EPs growth rate of six and a half to 7% on a compound basis , and then accelerate starting in 2028 to the upper half of the new guidance range .
Speaker #3: On a compound basis, as you are well aware, we're in the early stages of deploying the capital required to support the robust growth in our region, and it takes time to fully put the projects in service.
Speaker #3: The increase in our plan is driven by investments in regulated electric generation, transmission, and distribution in Wisconsin, and the Pipe Retirement Program in Illinois.
Speaker #3: Let me give you a few more details . Over the next five years , we'll utilize an all of the above approach for generation to support the economic growth and reliability by investing in new natural gas , batteries and renewables .
Speaker #3: The key to reliability is dispatchable resources. Between 2026 and 2030, we expect to invest an incremental $3.4 billion in modern, efficient natural gas generation compared to the prior plan.
Speaker #3: This includes combustion turbines , reciprocating internal combustion engines , or race units , and upgrades to existing facilities . We also will continue to invest in renewable generation and battery storage , increasing our projected investment by $2.5 billion over our prior plan .
Speaker #3: In addition , a transmission company plans to continue to invest in our transmission capabilities to serve our region's economic growth , connect new generation and strengthen the system .
Speaker #3: Part of that new transmission is planned to serve customers and new data center needs . Our plan calls for us to invest approximately $4.1 billion in ATC projects between 2026 and 2030 .
Speaker #3: This represents a $900 million increase from the previous plan , and to help assure reliability and support economic growth , we're continuing to invest in our electric and natural gas distribution networks with an additional $2 billion in the plan .
Speaker #3: This includes significant investment in our pipe retirement program in Chicago. Recall that the Illinois Commerce Commission directed us to review, to direct us, to focus on retiring all cast iron and ductile iron pipe with a diameter under 36 in.
Speaker #3: By January 1st , 2035 . We expect that over 1000 miles of older pipe will need to be replaced . Turning to the regulatory front , I have just a few updates across our service areas in Wisconsin .
Speaker #3: Our proposed very large or VLC tariff remains with the public Service Commission for review . As we discussed earlier this year , this tariff is designed to meet the needs of our very large customers .
Speaker #3: While protecting all of our other customers and investors . As currently proposed and in our testimony filed earlier this month , the tariff would provide for a fixed return on equity .
Speaker #3: In an updated range of 10.48% to 10.98% and an equity ratio of 57%, these financial terms have been agreed upon with the customers.
Speaker #3: The proposed terms of the agreements are 20 years for wind and solar, and the depreciable lives for natural gas and battery storage assets.
Speaker #3: We worked with our very large customer in designing the tariff, including the financial parameters, and we believe the tariff is a key component to making Wisconsin a prime spot for data center investment.
Speaker #3: We have a procedural schedule and provided our direct testimony earlier this month , a commission order is expected by early May of next year for customers to take service in June .
Speaker #3: And in Illinois, we are continuing to coordinate with the City of Chicago on our pipe retirement program as we ramp up these efforts.
Speaker #3: We will continue to have regulatory reviews of the process. This includes the forecast and the general rate case proceeding, which we are planning to file in early 2026 for the test year 2027.
Speaker #3: Of course , we'll keep you updated on any further developments . Now I'll turn it to shore to provide you more details on the financial results and our financial plans .
Speaker #4: Thank you . Scott . Our third quarter 2025 earnings , or $0.83 per share , one penny over third quarter 2020 . Four .
Speaker #4: Adjusted earnings . Our earnings package includes a comparison of third quarter results on page 16 . I'll walk through the significant drivers , starting with our utility operations .
Speaker #4: Earnings were $0.12 higher when compared to the third quarter of 2024. Adjusted earnings positively impacted earnings by about a penny relative to last year compared to normal conditions.
Speaker #4: We estimate that weather had a three cent favorable impact in the third quarter of 2025 compared to a two cent favorable impact in 2024.
Speaker #4: Rate base growth contributed $0.15 more to earnings and timing of fuel expense , tax and other items , added another $0.07 . These positive drivers were partially offset by $0.06 from higher depreciation and amortization expense , and $0.05 from higher day to day O&M .
Speaker #4: In terms of our weather, normal retail electric deliveries, excluding the iron ore mine, we saw a 1.8% increase compared to the third quarter of 2024.
Speaker #4: This was led by the large commercial and industrial segment, which grew 2.9%. The residential and small commercial and industrial segments grew 1.3% and 1.4%, respectively.
Speaker #4: Overall, we're slightly ahead of our annual electric sales growth forecast. Looking ahead with the updated load growth, we now expect our annual electric sales growth to be between 6% and 7% for the period 2028 through 2030.
Speaker #4: That's up from the 4.5% to 5% we previously forecasted. Turning to the American Transmission Company, capital investment growth contributed an incremental $0.02 to Q3 earnings versus 2024. At our energy infrastructure segment, earnings increased a penny in the third quarter of 2025 from higher production tax credits.
Speaker #4: Next, you'll see that earnings from the corporate and other segment decreased by $0.11. This was largely driven by tax timing and higher interest expense.
Speaker #4: In terms of common equity, we issued about $800 million through the first nine months via our ATM program, as well as the dividend reinvestment and employee benefit plans.
Speaker #4: This largely satisfied our common equity needs for this year . As Scott noted , we're reaffirming our 2025 earnings guidance of $5.17 to $5.27 per share .
Speaker #4: This includes October weather and assumes normal weather for the remainder of the year . Going forward with the updated capital plan , we expect our EPs growth to accelerate post 2027 .
Speaker #4: Overall, based on the midpoint of the 25 guidance range, our long-term growth rate is expected to be 7% to 8% through 2030.
Speaker #4: Now, let me comment on the financing plan that supports this growth and the new capital plan. As we have consistently guided you, we expect any incremental capital will be funded with 50% equity content when compared to the prior plan.
Speaker #4: We added $8.5 billion of capital and about $4 billion of incremental equity content , equally split between incremental common equity and hybrids or lichen securities .
Speaker #4: So, here are the details of the funding sources over the next five years. We expect cash from operations to be approximately $21 billion.
Speaker #4: Funding more than half of our cash needs, approximately $14 billion of the funding is expected to come from incremental debt, and the remaining cash is expected to be funded by approximately $5 billion of common equity.
Speaker #4: As a reminder , the cadence of common equity is a function of capital expenditures for 2026 . We expect common equity issuances to be between 900 million to $1.1 billion .
Speaker #4: In closing , as Scott discussed previously , the strong economic development and low growth in Wisconsin is the foundation of our new five year plan with the asset based forecasted to grow at 11.3% a year on average .
Speaker #4: We expect to nearly double our asset base over the next five years. It's important to note that the bespoke assets allocated to our very large customers are projected to represent 14% of our total asset base by 2030.
Speaker #4: As a reminder, the tariff is designed so these customers pay their fair share and are not being subsidized by other customers. We're very excited about our company's future and the investment opportunities ahead of us.
Speaker #4: With that, I'll turn it back to Scott.
Speaker #3: Thank you . Shar . Finally , a quick reminder about the dividend . As usual , I expect we'll provide our 2026 dividend plan and earnings guidance in December .
Speaker #3: We continue to target a payout ratio of 65 to 70% of earnings , and we're currently positioned well within that range . We expect to grow the dividend at a rate of six and a half to 7% , consistent with our past practice .
Speaker #3: Overall , we're optimistic about our five year plan and the longer term outlook . I think we're in the early stages of the growth cycle as we continue to see opportunities and economic development in our region , including data centers , we look forward to providing additional detail details on our plan in just over a week at the EEI conference .
Speaker #3: Operator, we are now ready for the questions and answers portion of the call.
Speaker #2: Thank you . We will now begin the question and answer session . If you have dialed in and would like to ask a question , please press star one on your telephone keypad .
Speaker #2: To raise your hand and join the queue, if you would like to withdraw your question, simply press star one again. We'll take our first question from Shar Pourreza at Wells Fargo.
Speaker #5: Hey guys .
Speaker #3: Hey , welcome back sir .
Speaker #5: Oh , thanks God , appreciate it . Appreciate it . Just got on the obviously just on the updated growth outlook . I mean , there is that inflection post 27 I guess some would be surprised .
Speaker #5: It's more back end loaded . Can you maybe just walk us through the how the kager shapes kind of in that back half of the plan .
Speaker #5: Can it be accelerated? Are there incremental opportunities to smooth this out a little bit? Thanks.
Speaker #3: Sure , sure . Great question . And and remember , as we as we historically have done , we've always taken the midpoint of the current year's guidance , the 2025 guidance , and looked at a compound annual growth rate .
Speaker #3: I think it'll help if I give you a little color on what we're seeing year by year. And think about it as you look at our capital plan.
Speaker #3: So in the first year , in 26 , we're seeing , you know , six and a half to seven , I think as you start looking in 27 , then you can see our capital plans ramping up to a little , almost seven and a little over $7.7 billion .
Speaker #3: When you have that , you're going to see part of those earnings coming in . So , you know , 2027 , we're seeing 7 to 8% probably on that annual basis year over year growth versus looking at a compound basis .
Speaker #3: And then when you look at those outer years, 2028 through 2030, you know, I'm seeing closer to $8. That's kind of where we're seeing it. It just takes a while to ramp up and really lines up well with what our capital plan is.
Speaker #3: And that's how you get that compound growth rate , that 7 to 8% at the upper end of our plan here . Does that does that add a little color ?
Speaker #5: No it does . And is there is there any opportunity , Scott , to smooth it out a little bit . Or is this the plan .
Speaker #5: Is the plan .
Speaker #3: Well I think I think there's some opportunities that we could see as things potentially accelerate . There's a lot of stuff that we're asking for approvals for in the commission is doing a great job getting us approvals .
Speaker #3: There's just a lot of activity and we want to be very prudent on what it takes to get approvals , what it takes to actually get everything , to start building those plans .
Speaker #3: So I think there's opportunity there . We're just , you know , we don't like to have any white space . We want to make sure we can execute , and we want to make sure we can deliver .
Speaker #3: And we feel this is very, very executable.
Speaker #5: Perfect . I appreciate that . And then just my my perennial question for you is just around the point beach conversations . Just with NextEra .
Speaker #5: I guess any sort of sense of timing around an announcement. Are you still having an Analyst Day coming up in early December?
Speaker #5: Are you still thinking by year-end, or are the conversations kind of shifting a little bit further out?
Speaker #3: Yeah , that's a great question . And , you know , the conversations are still going on . There may be shifting a little bit farther out .
Speaker #3: I just want you to know , in this plan , we have it assumed one way or the other . So we have no capital in here .
Speaker #3: If we had to replace that capacity , in the end , we're really looking at what's the best for our end use customers and what value we have for the customers .
Speaker #3: We just got to be very prudent . We have a lot of opportunities . We think , in fact , if we don't renew something , I think there's potentially capital upside .
Speaker #3: We're just going to really look at it from the perspective of the customer and what makes sense overall . .
Speaker #5: Fantastic . Thank you guys . I'll see you in a few days . Thanks .
Speaker #3: Yep. Sounds good. See ya. Thank you.
Speaker #2: We'll take our next question from Julien Dumoulin-Smith at Jefferies.
Speaker #6: Hey , good afternoon team . Thank you guys very much . Nicely done . I'm wearing the rally cap for you guys here today on this one .
Speaker #6: Look , I . Of course , with that said , I , there's a lot , a lot to pick on here . Let me come back to the question on this Microsoft expansion in the second phase .
Speaker #6: Obviously they made some headlines recently . How should we interpret that as being incremental or not to the plan ? If if eventually there's something falls in there ?
Speaker #6: I mean, to what extent is it or isn't it fully reflected here?
Speaker #3: So, we work with Microsoft along with all the other customers in southeastern Wisconsin, and we came up to that 2.1 GW for southeastern Wisconsin.
Speaker #3: And I can't really divulge individual customer information, but let's just say I'm very confident in the growth we have in southeastern Wisconsin.
Speaker #3: And I think there's more growth in the remaining five years . When you think about the next five years of our plan , and I don't know if you had a chance to listen to the Microsoft conference call , they actually called out the growth in southeastern Wisconsin .
Speaker #3: They called the data center Fairwater. It's the world you expect to go online next quarter or this quarter. They announce it.
Speaker #3: It's best to go online next year . And you know , they say it could scale up to two gigawatts alone . So I think and I can't speak for them .
Speaker #3: But when you look at the overall picture I think there's a lot of opportunities as you think about the next five years . Also .
Speaker #6: Got it . Excellent . If I can , Neil , you on a couple details here . One thing that stood out here , you raised the transmission CapEx by slightly less than $1 billion , but I think the Port Washington transmission project itself , with ATC was 1.3 .
Speaker #6: Is that fully in there ? Again , I know it's a partial ownership for you guys , etc. , but just wanted to clarify that here .
Speaker #3: Sure . And we're a we're a 60% owner of American Transmission Company . So it's it's all kind of factored in here . I think there's maybe a little bit more upside as we see other data centers in there .
Speaker #3: I think it's probably the basics factored into our plan. So, there's probably a little more upside at that $1.4 billion. I think that even came out after the original ATC forecast was pulled together.
Speaker #3: So, I think there's a little bit more runway there. Remember, there's only so much transmission you can do on the system at a time.
Speaker #3: So, it's maybe limited a little bit by that.
Speaker #6: Got it. And sorry, one more here. The ramp in Illinois seems a little bit more than perhaps somewhat expected again.
Speaker #6: It's a pretty healthy number here . You know , with the 1.5 billion . Can you speak a little bit to what what's taking place there ?
Speaker #6: And also, if you have any latest thoughts about what could happen with this Illinois legislation, if it has any meaningful impact for you guys?
Speaker #3: Sure , sure . You know , it's very consistent with what we've been laying out that it's going to ramp up a little , you know , some in 2026 .
Speaker #3: Then in 27 . And we expect we'll be up to about that 500,000,000 in 2028 . And going forward . Remember we had about 90 million a year in the plan .
Speaker #3: So, it falls in line between $1.4 billion and $1.6 billion. We have $1.5 billion in here, so that's all kind of consistent with what we've been saying.
Speaker #3: You know , the Illinois legislation , we'll see where that goes . There's a little bit on on efficiencies in there . I don't think you'll have a significant effect on us , but we of course are watching it .
Speaker #6: Yeah . All right guys . Well , I'll let others ask . Thank you so much again . Nicely done .
Speaker #3: Thank you .
Speaker #2: We'll move next to Michael Sullivan at Wolfe Research.
Speaker #7: Hey, good afternoon. Thanks.
Speaker #3: Thanks .
Speaker #7: Michael . Hey , Scott . Wanted to start with slide 22 . If if you could just help on the just bridging the asset base growth to earnings growth is the delta there from 11% to seven eight is it's all just equity dilution .
Speaker #7: Or is there anything else we should be thinking about it . And then on that same slide , the 14% of asset base with the bespoke customer is that like a proxy for for like earnings attached to those projects as well .
Speaker #3: So, a couple of items, and we'll let Shaw address it at a high level. The bespoke portion there, that's the identify.
Speaker #3: People would ask how much of the potential rate base in those out of years will be tied to that very large customer tariff.
Speaker #3: And that's the current projection that it's about 14% of our asset base up in 2030, dealing with that. The renewables and other stuff that the VLC careful will cover.
Speaker #3: And then that 11.3% to our growth rate. A large part of it is just dealing with Shaw's. I think it looks like what we do with the financing and the dilution from the equity issuance.
Speaker #4: Yeah, I think roughly 3% is from the equity, and the rest is a little bit of holding company. Kerry Michael.
Speaker #7: Okay . That's very helpful . And then sticking with the financing plan , any sense of where you are in terms of capacity for junior subs and hybrids , like are there any thresholds that eventually you run into at some point or still a lot a lot of runway .
Speaker #4: Still, there are still a lot of runways. And as you know, the agencies have a slightly different definition for the capacity. SMP uses a percentage of the total capitalization, while Moody's uses a percentage of the total debt capacity.
Speaker #4: The five-year plan, with the planned junior sub, shows we still have billions of dollars of capacity left. So we're good.
Speaker #7: Okay. That's great. Thank you very much.
Speaker #3: Thanks, Mike. Michael.
Speaker #2: We'll take our next question from Nicholas Campanella at Barclays.
Speaker #8: Hey . Good afternoon . Thanks for taking my questions . Hey , I wanted to ask just , you know , very large increase in the capital plan and the rate base growth following that .
Speaker #8: That's obviously coming with a financing need . And you are in a lot of different states in jurisdictions . I noticed that you also , as part of this plan , took some capital out of WEC infrastructure .
Speaker #8: Just wondering what the appetite is to recycle capital to replace common equity needs or other financing needs in the plan.
Speaker #3: Sure , that's a great question . And you know , if there was an opportunity that came along , we of course , would look at it .
Speaker #3: We just want to make sure that it hits our financial parameters and would be good for investors. But we really like the performance of some of our smaller companies.
Speaker #3: They perform very well. They don't take a lot of work, and we continue to execute on them. We got a great team there.
Speaker #3: So it's not like we're looking to sell them at all. But if an opportunity were to exist, we would always look at that opportunity.
Speaker #3: We just want to make sure it's good for our investors.
Speaker #8: Okay , great . And then I guess just , you know , as we think about the ability for current customers to gross up commitments in your territory or a potential new customers , I guess one thing we've heard through this earnings season from some other companies is they talked about just available turbine capacity , what their advantage in the supply chain would be to kind of deliver on those incremental deals .
Speaker #8: How do you kind of think about that from the WEC side? If Vantage was to come and do an increased commitment, or Microsoft was to come, or other large customers, do you have the turbines or maybe the renewable agreements to kind of execute on that?
Speaker #8: Thanks .
Speaker #3: Sure . Great question . And we have a team that that works with our very large customers and potential additional customers on how we could supply either an accelerated load on their basis or additional load or new growth .
Speaker #3: So, you know, we are working with them every day. We have a robust supply chain and are working with developers to have a path to be able to serve that.
Speaker #3: So very feel very confident . If a load would increase and we could work with them . So we have been working with them behind the scenes for several years on this to stay ahead of it .
Speaker #3: But what you're seeing in the plan, though, is what they have firm commitments to.
Speaker #8: Maybe if I could just sneak one more in quickly, just on point Beach, you know, just recognizing the license extension there that recently happened in the last few months.
Speaker #8: What's just the state of urgency from state stakeholders to kind of further lock up this capacity through the end of the decade or the end of 2030 now?
Speaker #8: And is that something that you think we could see by year-end?
Speaker #3: So , I mean , we've got the capacity . I think it's through 2030 and 2033 . So we have a lot of time , you know , we've been working with next year .
Speaker #3: We just got to make sure that we have the right , the right agreement for our customers . But as I said , we do have access to other abilities if we need to replace that capacity .
Speaker #3: So we're working with them . We just got to get to a right position . And if we get there , great . If we don't get there , you know , there's a lot of opportunities for us to .
Speaker #8: Thanks a lot .
Speaker #3: All right. Thank you.
Speaker #2: Next, we'll move to Andrew Weisel at Scotiabank.
Speaker #9: Hey everybody. Good afternoon.
Speaker #3: Hey Andrew .
Speaker #9: First question . Sorry if I'm getting too cute here , but for 28 to to 30 . Are you implying 8% or like seven and a half to eight .
Speaker #9: And if it is the latter, doesn't the math suggest that the overall five-year period would be below the midpoint?
Speaker #3: Well , you know , we you know , I , I don't think it'll be below the midpoint . I think we're going to look at , you know , probably in that eight area that'll get us to the midpoint on the compound basis .
Speaker #4: I think the there's a little confusion . Andrew , in terms of the upper half on the slide , I think that's a compound number of the midpoint of 2025 .
Speaker #4: What Scott is talking about is on an annual basis , if you look at from 27 to 28 , 28 to 29 , we're seeing that 8% range .
Speaker #4: And if you compound it back, that's the 7% to 8% of the midpoint of 2025.
Speaker #9: Okay , great . Just wanted to clarify . So it's about 8% for the later years right . .
Speaker #4: On an annual basis .
Speaker #9: Okay . Great . Just wanted to clarify that . Thank you . Next question on the CapEx update . First of all , very impressive numbers .
Speaker #9: A huge increase . What I want to understand though , is it's an $8.5 billion increase . But when I add up the pieces on page 18 , I'm calculating a total of 8.1 billion .
Speaker #9: So I don't know if it's rounding or if there are some pieces missing, but can you help me bridge that gap? Where's the extra $400 million coming from?
Speaker #3: Yeah , that's I mean , we just kind of picked out a couple of the highlights there . I guess if you do the the specific reconciliation with the bar chart , you have a little bit more gas distribution of a couple hundred million .
Speaker #3: And then I think it's kind of cats and dogs and generation and everything else . We just called out the significant ones .
Speaker #9: Okay , that's what I thought . Just wanted to be sure . Then lastly , in terms of demand , again , a big increase , your forecasting 3.4GW by 2030 , up from 1.8GW in 29 previously .
Speaker #9: Is that increase related to data center projects? You've been talking about ramping up, or is it some of the other manufacturing activity you've discussed in the past?
Speaker #9: I know there's a lot going on , going on along the I-95 corridor . How much of that is like existing projects ramping versus new incremental projects coming online ?
Speaker #3: So yeah , great question . So when you look at it , it's about 1.6GW growth . 1.3 is the Vantage data center in port Washington .
Speaker #3: And then in southeastern Wisconsin , you know , as you can imagine , a significant part is from the the data center in southeastern Wisconsin .
Speaker #3: But it really is all the customers in that area . We have Eli Lilly expanding . We've got Amazon , we've got other companies coming to the region .
Speaker #3: And then that's not even counting all the residential load. We're starting to see it in new construction, starting in the area.
Speaker #3: I think it's all of the above, but it's definitely significantly related to database or data center growth.
Speaker #9: That's great. Thank you so much.
Speaker #3: Thank you .
Speaker #2: We'll take our next question from Sophie Karp, KeyBanc.
Speaker #10: Hi . Good afternoon . Thank you for taking my question . Thank you . Comprehensive update today . So if I may just dig in a little bit on this data center announcements .
Speaker #10: Right . There's been a slew of announcements lately . Some assets traded hands . So I think there is a some confusion . What's incremental .
Speaker #10: What's in the plan? So could you make it very clear to us what's actually in the plan of the recent gigawatts of announcements and what's yet not in the plan?
Speaker #10: Yes .
Speaker #3: Sure , sure . So what's in the plan ? And we have southeastern Wisconsin . So there's 2.1GW down there . That includes the Microsoft .
Speaker #3: What they have up told us to factor into this five year plan . And then in northern in that port Washington site , it's really I would look at it as being vantage and vantage has has worked with Oracle .
Speaker #3: So those are the same megawatts at 1.3GW . Okay . So vantage slash Oracle is 1.3 . That's what's in the plan . What's not in the plan is there's additional land of about 1200 acres in Port Washington that potentially could house another oh what , two , two gigawatts plus of additional capacity .
Speaker #3: And then in southeastern Wisconsin, when you think about the Microsoft site, there are an additional 700-plus acres that they have there that I think could be for future development. That also could add into the overall megawatt usage.
Speaker #3: So, I think there's a lot of opportunity for future growth here. I hope that helps clarify it.
Speaker #10: Yeah. So it sounds like the plan as it stands right now is just like super conservative. Is it fair to say?
Speaker #3: Yeah , we we only put what the other what the customers are announcing and provide us the information on .
Speaker #10: Got it . Okay . And my other question was this when you you you it's very helpful color when you talk about 14% of your , you know , rate base being under the large load customer tariff by the end of 2030 or by 2030 , what do you expect in the economics on that part ?
Speaker #10: Pretty clear, right? These are premium economics on that chunk of rate base. What do you expect the economics to be for the rest of the rate base?
Speaker #10: When you when you formulate your plan , do you expect that ? I guess they will . The overall average will be similar to what you have today in the trajectory .
Speaker #10: What you have today, or for the lack of a better word, is some deterioration in the economics of the rest of the rate base.
Speaker #10: Or do you expect the rest to be unaffected by the presence of this new premium part of the rate base?
Speaker #3: Right. So we assume the rest of the rate base earns the current authorized return that we currently have on all the, you know, on each of the jurisdictions.
Speaker #3: When you look at them separately , and then when you look at Wisconsin , the Wisconsin , right now , we're at that .
Speaker #3: You know, 9.8% ROE, depending upon the utility, like a 57.5% or 58% regulated ratio on Wisconsin Electric, that each of those earn their separate return.
Speaker #3: Remember, the foundation of our tariffs is that, you know, the large customers don't get subsidized or are subsidized at a different rate than the other customers.
Speaker #3: They each pay their fair share, so we keep them as separate.
Speaker #10: Got it. Very clear. Thank you so much.
Speaker #3: Thank you .
Speaker #2: We'll take our next question from Ryan Levine at Citigroup.
Speaker #11: Good afternoon . I two quick questions , just in terms of the execution or state of conversations for some of the managed expansion beyond the 1.3 , any color you could share around , maybe the engagement level or or the timeline that that conversations are progressing through .
Speaker #3: Sure . So we're you know , we're always in our discussions with vantage , Microsoft and potential others . But right now , vantage , as we said in the prepared remarks , are really concentrating on that first 1.3GW .
Speaker #3: I think they had a press release out there. They're to have construction of about 4,000 construction workers out there when they're able to start construction.
Speaker #3: So I think everyone's concentrating on that . We'll have more discussions over the next , you know , probably next year . But I think everyone's just concentrating on the first part of the load , which is what we want to make sure we can achieve to .
Speaker #3: And there's opportunity throughout the term.
Speaker #11: Okay. And then there was a lot of mention about Microsoft and Oracle. But beyond those two customers, the engagement level is fairly broad.
Speaker #11: Or is it really focused on a more narrow group of potential customers for expansion?
Speaker #3: You know , we have other customers that we're talking to , but those are the the two main ones that are already , you know , in the area and made it public announcements .
Speaker #3: We're talking to others . You know , I don't want to jump that like , you know , I try to play it pretty close to let them make the announcement or them signing , purchase cancellation agreements before we get ahead of our skis and potential .
Speaker #3: But we are talking to others, okay.
Speaker #11: And then, unrelated just to clarify, around your plan, is the assumption embedded in the plan conservative? And does it not assume an outcome for, or doesn't it assume the higher, very large load tariff ROE?
Speaker #11: And to the extent that you were to be successful in that application, that that would be additive to the plan or help provide additional buffer.
Speaker #3: No , I mean , we're assuming the very large care is implemented . What , you know , we talked about on the call .
Speaker #3: There's a range of ROE from 1048 to 1098, which we really stayed with. The fundamentals of making sure we don't have a secondary effect that hurts our other customers.
Speaker #3: And those are more on a we're . Working individually and we can't give more details . But on a higher return on some of it to that ten , nine , ten , nine , eight but more to come on that as we continue to work with our customers on it .
Speaker #11: Thank you for taking my questions.
Speaker #3: Thank you .
Speaker #2: We'll move next to Paul Fremont at Ladenburg.
Speaker #12: Hot . Thank you very . Thank you very much . First question has to do with the Microsoft announcement where they canceled the Caledonia site .
Speaker #12: But what they said , I think , was that they would continue to look for alternative sites in southeastern Wisconsin . And your service territory , what other locations do they have , land ?
Speaker #12: Or do you potentially have land that you would be able to sell to them?
Speaker #3: Yeah . Good . Good question . So you are correct . They're looking for a different site than what was their original plan .
Speaker #3: You know , we really don't have that significant type of land available elsewhere . But I don't know their specific plans . So I know they said they're looking at other places in southeastern Wisconsin , probably more to come in that area .
Speaker #3: It's just good that they're , you know , this is really great for the area . When you think about property taxes and and good paying jobs .
Speaker #3: So I know they're early in their look . So we'll we'll see where that goes . But once again that's a potential for more upside on our on our load .
Speaker #12: Great. And the timing of how long it would take for them to find sort of a replacement type scenario. Would it be like 12 months, or what would you say would be sort of a reasonable assumption?
Speaker #3: Yeah . And I can't talk for Microsoft , but they they move pretty fast . I think a year is maybe reasonable , but we'll see where it goes .
Speaker #12: Okay . My next question on Point Beach would be if you're unable to reach an accommodation with NextEra , what type of generation would you build and when would you have to start to start building it ?
Speaker #3: Yeah , that's a good question . And you know , we will we'll look at it . But it'd have to be something that would be dispatchable that we could , you know , cover the dispatch on , you know , would have to be some type of gas .
Speaker #3: We'll see where the EPA rules do we eventually look at a combined cycle ? Maybe . And maybe some renewables in there . So we'd like the all of the above approach .
Speaker #3: And I know some people don't like renewables, but when you think of gas prices, at times when they're high, renewables are very popular.
Speaker #3: When gas prices are high and also , you know , we look at all of the above mix . So if you think about it , the contracts are 2030 and 2033 .
Speaker #3: So there's still plenty of time. And like we said, we work with all our large customers, and our planning team is looking at how to replace this.
Speaker #3: And I'm sure we have several options available.
Speaker #12: And then, last question for me: when we look at the $4.8 to $5.2 billion of common equity, would some of that be junior subordinated debt, or would any junior subordinated debt issuances be incremental?
Speaker #4: It's the latter. The 4.8 to 5.2 would be common equity.
Speaker #12: And then, is there junior subordinated debt contemplated as part of your incremental debt?
Speaker #4: Correct. As I said in the prepared remarks, we added $4 billion of equity content. So two more would come from common, and the other two would come from the junior subordinated debt.
Speaker #4: Or like kind securities .
Speaker #12: Great. Thank you very much.
Speaker #3: Thank you .
Speaker #2: We'll take our next question from Anthony Crowdell at Mizuho.
Speaker #13: Hey , good afternoon team . Thanks for squeezing me in . Just one quick one . I'm curious with all the load and , you growth that we've haven't seen for years in this sector , I'm curious if this is making forecast earnings forecasting and rate base growth forecasting easier or harder , like is it chunkier with these large loads coming in .
Speaker #13: And it's becoming more of a challenge of forecasting out ? Or is this all this load , just such a tailwind . And it's making life a lot easier on the forecasting .
Speaker #3: Well , it's sure nice to have load to drive the capital plan , which makes it a lot nicer . But there's a lot of stuff that we have to keep into account , including the timing of in service , the timing of the load .
Speaker #3: And we have a whole team working at staying ahead to make sure we have the turbines and the renewable sites located. So we always like growth.
Speaker #3: We'll take on that challenge . It just takes a lot of a lot of people , a lot of bodies monitoring and keeping on top of everything .
Speaker #3: And the key is execution . So we have a whole group executing on the capital projects as we're as we got commission approval this summer , we're working on those projects right now .
Speaker #3: So, you know, it’s just different. Let’s put it that way.
Speaker #13: That's all I had. Thanks so much.
Speaker #3: Thank .
Speaker #14: You .
Speaker #2: And next, we'll go to Steve Ambriz at RBC Capital Markets.
Speaker #15: Hi, Scott. Thanks very much for taking my question.
Speaker #3: Hey , Steve .
Speaker #15: I just had a quick one . Just about , you know , a lot of the questions today have been about two existing hyperscale sites expanding and when , but I think what's interesting to me is realistically , you guys are relatively unique in the fact that you don't really talk about a sales funnel of other customers .
Speaker #15: And so, I guess what I would most be interested in is: do you think that getting the VLC tariff through the Public Service Commission will help potentially broaden the customer base?
Speaker #15: Clearly, you've had success citing some of the biggest data centers in your service territory that we've seen across the country. I'm just interested to hear about potential other people.
Speaker #3: Yeah , no , that's a good question . I think , you know , the very large customer tariff in fact , we attract some of our several .
Speaker #3: The first customer before we even had a tariff . So I think you think about location , the ability for WSC and American Transmission Company to be able to deliver and provide the generation and renewables and transmission to help energize their sites and move fastly in a in the Wisconsin environment and in the micelle footprint .
Speaker #3: I think that is a great advantage. I think also being in Wisconsin, you have a cooler environment for our air storage cooling.
Speaker #3: So, I think that's an advantage. And we don't have the natural disasters that other parts of the country have. So, I think all of those are positive.
Speaker #3: Our customers are very large customers. You know, we worked with them as we filed the very large customer tariffs. So I think they consider it fair. I've heard several times how it's fair.
Speaker #3: I think that's that's also a plus . Once it gets approved . I think that that's definitely be helpful . I think the key is and all our large customers make sure that we do not affect any other customers rates .
Speaker #3: So that was good . As a foundation for for it . So having it approved , I think can only help . But we're really excited about the pipeline .
Speaker #3: We are talking to you now about the potential growth of the significant sites that we already have going in Wisconsin.
Speaker #15: Okay , great . That's all I had . Thanks very much . I appreciate it .
Speaker #14: Thank you .
Speaker #2: We'll go next to Bill Apicella at UBS.
Speaker #9: Hey , good afternoon .
Speaker #16: Most of the questions have been asked . I just one question in clarifying just on the the step up in the asset base growth , was there any any additional offsets there or anything that came out just thinking , because the back of the envelope math maybe would have supported , given the 8.5 billion of CapEx , something maybe a little bit closer to 12% .
Speaker #16: So I'm just curious if there was anything else different in the bridge there?
Speaker #3: No, I think the only thing we took out is we don't have any investments in Weki for the most part. But overall, I don't think there are many other changes there.
Speaker #3: It's just more back end loaded , right ? Or starting more in 27 , I guess .
Speaker #16: Okay . And then just from an affordability perspective , what's embedded in this plan in terms of the electric side , in terms of average annual , you know , rate increases for residential customers .
Speaker #3: So , you know , we will be filing a rate case in Wisconsin for our biannual process . So we're pulling those numbers together now that we'll file sometime in the the end of the first quarter .
Speaker #3: Most likely beginning of the second quarter . You know , we're looking at , you know , inflation type increases , but it's early in the process .
Speaker #3: Now, the key is none of it's going to be costs that are coming in from any of the hyperscalers. They're paying their fair share.
Speaker #16: Okay. Great. All right. Thank you.
Speaker #14: Thank you .
Speaker #2: And our final question today comes from Carly Davenport with Goldman Sachs.
Speaker #17: Hey . Good afternoon . Thanks so much for taking my question . I just had one clarification just on some of the other growth opportunities , as you think about the next five years , do you see incremental capacity and potential on the system for more load to be added in the course of the current plan , or would that be largely beyond the 2030 timeframe ?
Speaker #17: As you think about those opportunities?
Speaker #3: So I , I think as we work with these very large customers , I think in the end of our current five year plan , we potentially could see additional growth coming in , depending upon how they look at their their individual development .
Speaker #3: So I think there's potential for both. And the current plan. Plus, in the next five years.
Speaker #17: Great. Thank you so much. I'll leave it there.
Speaker #3: Sounds good .
Speaker #14: Thank you .
Speaker #3: All right . That concludes our conference call for today . Thank you for participating . If you have more questions , feel free to contact Bistrica at (414) 221-4639 .
Speaker #2: And this concludes today's conference call. Thank you for your participation. You may now disconnect.