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. After the presentation, the conference will be opened 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. Before the conference call begins, please note that all statements in the presentation, other than historical facts are forward-looking statements that involve risks and uncertainties that are subject to change at any time. Such statements are based on management's expectations at the time they are made. In addition to the assumptions and other factors referred to in connection with the statements, factors described in WEC Energy Group's latest Form 10-K and subsequent reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those contemplated. During the discussions, referenced earnings per share will be based on diluted earnings per share unless otherwise noted. And it's now my pleasure to introduce Scott Lauber, President and Chief Executive Officer of WEC Energy Group.

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 are Xia Liu, our Chief Financial Officer; and Beth Straka, Senior Vice President of Corporate Communications and Investor Relations. 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. 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 our retired power plants. 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. 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 in 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. 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 plan. 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. This adds a 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. 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. 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 I 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 Flats 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. We reallocated away from our operations in Illinois a total of $800 million in our five-year capital plan. Overall, our plan fully supports our long-term earnings 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 year 2025 and 2026 on April 12th. Our request focused on addressing three major areas of need. First, improving reliability and reducing outages from increased storm activity. Second, supporting 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 intervenor testimony is scheduled for August 21st, and we expect a decision by the end of the year with new rates effective January 1st, 2025. We have smaller rate reviews and 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 dockets. The Illinois Commerce Commission issued its decision on the first of these, a limited rehearing on the commission's rate order for Peoples Gas at the end of May. The commission had agreed to reconsider our request to restore $145 million for safety modernization program in 2024. This mostly related to emergency work, unfinished projects and work driven by public entities like the City of Chicago. The commission granted $28.5 million 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. We are also actively involved in two remaining dockets. One is the review of the safety modernization program. Staff and intervenor rebuttal testimony are 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 towards our goals of reducing greenhouse gas emissions. In May, we retired units five and six 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. Finally, a quick reminder about the dividend. 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 to Xia to provide you more details on our financial results and our guidance for the third quarter.

Thank you, Scott. We earned $0.67 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 per 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 redesign changes at Peoples Gas, base revenues are now more concentrated in the first and fourth quarters when natural gas usage is the highest. 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 quarter-over-quarter variances. Our earnings package includes a comparison of second quarter results on Page 15. I'll walk 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 variance are worth noting. 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% to 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. Compared to normal conditions, we estimate that weather had a $0.02 negative impact for the second quarter in both 2023 and 2024. 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 $0.02 in the second quarter of '24 compared to the second quarter of '23, driven partially by higher production tax credits at WEC Infrastructure. Finally, you'll see that earnings at our Corporate and Other segment 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 are expecting a range of $0.68 to $0.70 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 pattern. Our third quarter 2023 earnings were $1 a share. Once again, we are 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 for 2024. Post 2024, our equity issuances will be tied to our capital spending ratably 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 plans. With that, I'll turn it back to Scott.

Thank you, Xia. 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.

Our first question comes from Shar Pourreza with Guggenheim Partners. Your line is open.

Hi guys, good afternoon.

Hi, good afternoon, Shar.

Hi, Scott. To start, I want to touch on the ongoing Microsoft opportunity that frequently comes up. This is becoming increasingly relevant now. Can you remind us what portion of Microsoft's land acquisition and development is included in your current plan? I'm asking because it's now public that they've acquired more land. When do you anticipate this will impact your plan more significantly? Thanks.

Thank you, Shar. To update everyone, they announced plans to spend $3.3 billion from 2024 through 2026, which covers the initial 315 acres they purchased. Last fall, they also acquired an additional 1,030 acres. Our capital plans were formulated before acquiring that additional land. This morning, there were reports about another purchase of 173 acres in Southeastern Wisconsin. We are currently collaborating with Microsoft to develop our next five-year plan, which will be rolled out this fall. At this time, our energy and capacity needs are focused on the initial 315 acres.

Got it. Okay, that's perfect. So more to come there. And then just lastly on the Delilah I solar project delay, it's roughly six months. I guess, can you just maybe a question for Xia is how to think about the offsets around the potential headwind there versus your kind of prior assumption? Thanks.

Yes. We took that into consideration as we reaffirmed the annual guidance of $4.80 to $4.90. 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 downside from the delay.

Okay. That's perfect. Thanks, guys. Appreciate it. And hopefully Gale is somewhere tropical listening to this earnings call. Thanks. Appreciate it.

He probably is.

Our next question comes from the line of Julien Dumoulin-Smith with Jefferies. Your line is open.

Hi, good afternoon, team. Can you guys hear me okay?

Yes, we can hear you fine. Welcome back, Julien.

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 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 focused 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 first.

We've been collaborating with Microsoft to address the needs in the area, and Wisconsin presents numerous development opportunities. We want to ensure that we meet the capacity requirements necessary to support not just Microsoft's growth, but also the overall development in the region. Therefore, we will be submitting more proposals for renewable projects in the coming month to assist in fulfilling the capacity and energy needs in the area. We believe there are significant opportunities in generating renewables, as well as addressing some capacity and distribution needs. Additionally, we are taking into account the role of the American Transmission Company and the necessary investments in regional transmission as we formulate our five-year plan.

And Julien, all those filings will be in the regulated area, as you know, in Wisconsin.

Yes, absolutely. I know you're working on this from various angles. Regarding the regulatory aspect, I have a couple of questions. What are your thoughts on the PSC's denial concerning the AFUDC? Should we infer anything from that about the pre-construction costs? I know this might seem a bit detailed, but I'm curious if there's anything we can learn from it in terms of strategic or financial direction.

No, I don't think there's anything to read into that. We, of course, thought if we 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-savings 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 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 would continue to go up as everyone across the country is looking at adding generation.

Yes, that seems pretty transparent as you say. 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 looking for it all along.

Congratulations. Excellent to hear.

Thank you. Absolutely. All right, guys. I'll see you soon, alright? Appreciate it.

It sounds good.

Our next question comes from the line of Michael Sullivan with Wolfe Research. Your line is open.

Hi, good afternoon.

Good afternoon, Michael.

Hi, 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 incremental equity needs associated with that? Should it just be any incremental CapEx is financed consistent with your utility capital structures or any different way to think about it?

No, 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 Xia 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 on the capital and the insights we have looking-forward on additional capital.

Okay, that makes sense. Now moving on to Illinois, could you outline the possible outcomes for the pending docket, specifically regarding the pipe program review? What range of outcomes should we expect? Additionally, are there any unresolved issues related to the QIP Rider reconciliations from previous years that could affect the numbers?

Sure. So let's look at both of them. So the QIP Rider is from other years. Right now, 2016 Rider 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 Rider, so it's been a while. And then, of course, we have those other years under the QIP still to look at. So remember the requirements there is prudency and we think we've been very prudent specifically after the Integrys 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 those are still more to come on there. 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 is 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 and emergency work. There, the City of Chicago, I think he said he 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, they all said they should lift the pause and get some work done specifically related to the emergency work and working with the City of Chicago as they do their capital work.

Okay. Yes, just on that, I mean, I think 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 just think about that risk in these dockets that you could get more of the same when it actually comes down to the final order?

Yes. And we're going to have to wait-and-see 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 there on the rehearing talked about the emergency work. So on that low end, you're talking between $60 million and $100 million a year. So I don't think anyone is disputing that. And 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 rehearing we asked for, 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 why we're going to the case.

Okay. No, that is super helpful context. Thank you.

Thank you.

Our next question comes from the line of Durgesh Chopra with Evercore ISI. Your line is open.

Hi, good afternoon.

Hi, Durgesh.

Hi, good afternoon, Scott and Xia. Thanks for your time. Regarding the safety modernization program review in Illinois, you made a decision on the $145 million and received $28 million. Can you remind us what is included in the plan for 2025 and beyond concerning the safety program?

Sure, and I'll let Xia go through the details. But in general, we took about $800 million out. And as we look at our plan, we'll reevaluate it based on the testimony we're seeing here as we look at the next five-year plan. But Xia, can you tell us what's in the current?

Yes, 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 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.

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 the spending relative to what you have in the plan, right? I'm assuming you've asked for anywhere between $100 million to $120 million and then the commission is going to come back with a recommendation. Is that fair?

Yes. We expect to hear a recommendation in the first quarter of 2025 from the commission.

Thank you. Can I quickly follow up on Delilah I? Can you share any details? I know you mentioned a weather event. I'm wondering if it could extend beyond six months. What caused it? Was it just equipment or something else? Any details you can provide would be appreciated. Thank you.

Yes, of course. We haven't purchased it yet, although we have a commitment to do so. There was a hail event during construction, which caused some hail damage. We want to collaborate with the developer as they make repairs to ensure the fields are in proper condition before we complete the purchase. Based on recent discussions, we expect to be in by the end of the year. We receive weekly updates on the progress, and as it stands, we still plan to be in by the end of the year, provided no other events occur.

Thank you. I appreciate it. Thanks, Scott. Thanks, Xia.

Thank you.

Our next question comes from the line of Carly Davenport with Goldman Sachs. Your line is open.

Hi, good afternoon. Thanks for taking the questions.

Hi, Carly. Absolutely.

Just wanted to ask a quick one on transmission and ATC. We've obviously seen the sizing of MISO Tranche 2 moving higher here. So just curious how you're thinking about the opportunities around transmission there both from a size and a timing perspective.

Sure. From everything I've seen and heard, Tranche 2 is expected to be larger than Tranche 1, and it's likely to be proportionately larger for the American Transmission Company. There are many good opportunities there, but the actual spending probably won't take place until around 2030 or later, since they are still working through Tranche 1. Another significant factor for the American Transmission Company will be regional economic development and the integration of renewables into the system. Last year, Tranche 1 impacted our capital plan, but the main influences were economic development and ongoing renewable initiatives in Wisconsin. I view both of these as additional contributors. Also, keep in mind that Tranche 1 was in 2020, and as they review and adjust everything considering inflation over the past few years, it is likely to be greater than the original amount.

Great. I appreciate that color. I'll leave it there. Thank you.

Thank you.

Our next caller comes from the line of Andrew Weisel with Scotiabank. Your line is open.

Hi, everybody. Hi. 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 this 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 fee update in the fall of 2025 when all of those dockets are wrapped up?

When considering Illinois, we will have more information on the S&P program in the first quarter of next year. There is also an evaluation of the future of natural gas and an IRP process that involves stakeholder participation, with our first filing expected in 2025. As we consolidate our capital plans this fall, we will take a cautious approach until we gain more clarity. Additionally, there are numerous opportunities for additional capital and growth outside of Illinois.

That makes sense. Next question for Xia. If I heard you right on the O&M, you're now projecting it to be up 2% to 3%. Last quarter, you said up 3% to 5%, originally it was up 6% to 7%. 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?

Every manager in the business unit understands that we had a very mild first quarter. So we made it clear that we need to focus on operations and maintenance to counter the weather challenges we faced in the first quarter. Benefits are expected to be lower. We are also evaluating all options regarding the use of contractors compared to internal labor, and this applies across the board.

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?

I think it's a combination of one-time initiatives, but also continued focus on driving efficiency 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 now. 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 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 customer reliability along with our savings?

Got it. That's very helpful. Then just one very nit-picky one. Corporate and other minus $0.06 for taxes this quarter, I think it was plus $0.09 in the first quarter. Will you just remind us what's the expectation for the full-year? Should that net up to zero or something else?

It would be slightly positive. The large timing differences in tax between the first and second quarters are due to the earnings pattern shift in Illinois, as tax revenues are aligned with earnings. Additionally, there was a delay in the Delilah project, which is also reflected in the second quarter. However, once Delilah is operational by the end of the year, we anticipate tax revenues to align accordingly.

Okay, very helpful. Thank you so much.

Our next question comes from the line of Neil Kalton with Wells Fargo Securities. Your line is open.

Yes, hi, guys. Thanks for taking my call. Two questions. 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 like potentially '24 we could see some or is this more like '25 or '26?

Thank you, Neil, for your question. We are currently investing in some substations in collaboration with the American Transmission Company and have placed orders for generation equipment to support economic development. This investment will extend into 2024, 2025, and likely even more into 2026 as we receive approval for those generation orders. In the coming month, we expect to file for additional renewable projects that will help meet generation needs as we expand our renewable portfolio. This spending is anticipated to occur around 2026 and 2027.

Okay. So it's kind of like broadly overall, it's not just tied to the Microsoft thing, sort of overall you have this need and kind of anticipate things happening that we start to kind of flow it in over time. And as we get more clarity, more comes in, is that right?

Exactly, exactly. And remember, 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. 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.

Our next question comes from the line of Jeremy Tonet with JPMorgan. Your line is open.

Hi, good afternoon.

Hi, Jeremy.

I just wanted 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, any thoughts on the direction of the commission at this point?

No, 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 and they mentioned on the economics and the benefits of this. So this is 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. 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 really evaluating each case. So I won't over-read into this too much.

Got it. That's helpful. I'll leave it there. Thanks.

Our next question comes from Shar Pourreza with Guggenheim Partners. Your line is open.

Hi, 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 and a new PPA or sort of another path forward there? Any updates?

Yes, we've had productive conversations with NextEra, but there is nothing to report at this time. We are still in discussions, so stay tuned. We are working on it.

Okay. I appreciate it. Thanks so much guys for taking my follow up. Appreciate it.

Absolutely.

Our last question comes from the line of Paul Patterson with Glenrock Associates. Your line is open.

Hi.

Hi, Paul.

Good afternoon. How are you doing? So just one question at this point and that is 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?

I anticipate it's going to take a year or two.

Okay. A long-time. Okay. Thank you. That's it from me.

All right. 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 Beth Straka at 414-221-4639. Thank you.