WEC Energy Group, Inc. 2026 Q3 Earnings Call

Good afternoon, everyone, and thank you for joining us today as we review our results for the third quarter of 2026. Here with me are Xia Liu, our Chief Financial Officer, and Beth Straka, Senior Vice President of Corporate Communications and Investor Relations. As you saw in our news release this morning, we reported third quarter 2026 earnings of $1.18 per share, compared to $0.83 per share in the third quarter last year. These results were driven by warmer than normal weather, execution of our capital plan, and operating efficiency. With another solid quarter, we remain on track to deliver strong results for 2026. Our continued focus on the fundamentals of our business is creating value for our customers and stockholders. Today, we're raising and narrowing our earnings guidance for 2026 to a range of $5.60 to $5.64 per share, assuming normal weather for the remainder of the year.

This reflects 7.7% growth in earnings per share from our 2025 adjusted guidance midpoint. As a reminder, our previous guidance was in the range of $5.51 to $5.61 per share. I'm also pleased to share our new 5-year capital plan. Let's start by talking about the economic growth that's driving it. Overall, we expect our electric demand to grow 4.9 gigawatts between 2026 and 2031, an increase of 1 gigawatt compared to the prior plan. Microsoft continues to make good progress on its large data center complex in Mount Pleasant, Wisconsin. With the first facility operating, construction is underway on additional facilities as Microsoft expands at the site. As a reminder, Microsoft has purchased more than 2,200 acres to date in the I-94 corridor south of Milwaukee. Just last week, Microsoft announced the purchase of an additional 70 acres next to the site.

We are preparing to serve forecasted demand of 3.2 gigawatts in the I-94 region through 2031, with opportunity for further expansion. That is up 600 megawatts from the previous plan. You will notice an additional 400 megawatts in the new capital plan. We are making good progress with another customer, and you can expect more details in the future. Stay tuned. To the north of Milwaukee, you will recall that Vantage Data Centers is developing facilities for Oracle on approximately 1,900 acres. Construction continues on the initial phase of the data center project, which is being built on 670 acres. Vantage has stated that it expects to invest $15 billion to complete this phase in 2028. We currently have 1.3 gigawatts of demand for this Vantage site in our forecast through 2031. Looking to the future, it has the potential to reach 3.5 gigawatts of demand over time.

The project is well on its way, and Oracle has met its financial security obligations, which are consistent with the Wisconsin Commission's very large customer tariff requirements. To serve this project, ATC has refiled a proposal with the Public Service Commission of Wisconsin. In addition to the transmission line, this filing includes proposed investment in an eSTATCOM system to maintain grid reliability. ATC is working through the process now with the commission. As a reminder, both Microsoft and Oracle have committed to paying their full share for energy costs. We solidified this through our very large customer tariff, which protects other customers. Microsoft, Vantage, and Oracle have made significant investments to support our communities. Just recently, we worked with Oracle to save our customers an estimated $300 million in fuel costs. Oracle agreed to subscribe to a portion of the energy we purchase from Point Beach Nuclear Power Plant.

We expect the full details to be submitted to the Wisconsin Commission in the coming months. As we work with these hyperscalers, we are confident our very large customer tariff provides a strong framework for growth while maintaining affordable energy service for all our customers. We continue to see local growth in small, commercial, and large businesses as well. For example, both Generac and Modine are expanding and adding jobs. We have designed our new capital plan to reliably serve our customers while supporting the significant growth we continue to see across our service areas. As you may have seen from our announcement this morning, we expect to invest $47.5 billion in capital projects between 2027 and 2031. This is an increase of $10 billion, or more than 26% above our previous five-year plan.

The majority of this increase is being driven and therefore paid for by our very large customers. The updated plan is expected to support asset-based growth at a 13.4% compound annual growth rate. This should drive compound annual earnings per share growth of 7% to 9+% from 2027 to 2031. This is based off the midpoint of our original 2026 guidance. The increase in our plan is mostly driven by investments in regulated electric generation and transmission, largely due to very large customer demand. Let me give you a few more details. Over the next five years, we will continue to take an all-of-the-above approach for generation to support economic growth and reliability by investing in new natural gas, batteries, and renewables. Dispatchable generation is a key component of our reliability strategy.

Between 2027 and 2031, we expect to invest an incremental $6.8 billion in modern, efficient natural gas generation versus the prior plan. This includes a combined cycle turbine project that we expect to come online by the end of the five-year forecast period, as well as combustion turbines and upgrade to our existing facilities. We are increasing planned investment in renewable generation and battery storage by $1.1 billion, with the total planned battery storage increased by $3 billion, while planned solar and wind investment decreased by $1.9 billion. Some of this decrease relates to the work already completed in 2026. Continuing our all-of-the-above approach, we also reached an agreement with NextEra that pending regulatory approval, we will support long-term electric reliability and customer savings. We plan to extend our purchase power agreement for approximately 1,000 megawatts of carbon-free base load capacity from the Point Beach nuclear plant.

The new PPA would extend the existing agreement by 20 years. Outside of generation, American Transmission Company plans to continue investing in transmission capabilities to serve our region's economic growth, connecting new facilities and strengthening the system. Our plan calls for us to invest approximately $5.3 billion in ATC projects between 2027 and 2031. This represents a $1.2 billion increase from the previous plan. Adding to strength and reliability and support economic growth, we continue to invest in our electric and natural gas distribution networks. Our plan includes an additional $1 billion to improve distribution infrastructure. This supports the continuing investment in our pipe retirement program in Chicago. Recall, the Illinois Commerce Commission directed us to focus on retiring more than 1,000 miles of older pipe by January 1, 2035. Turning to the regulatory front, I have a couple of updates across our service area.

In Wisconsin, progress continues on the rate request we filed in April for forward-looking test years 2027 and 2028. The procedural calendar has now been completed. We expect final orders from the commission by the end of the year, with new rates effective in January 2027 and 2028. We also have rate filings under review in Illinois for test years 2027 at Peoples Gas and North Shore Gas. Recently, the administrative law judge issued a proposed order that is largely consistent with the staff's recommendation. The order recommends a 9.48% ROE and a 50% equity ratio at both utilities. We expect a final decision in December. Of course, we will keep you updated on future developments. In summary, we are excited about the strong economic development in our region, and we believe our capital plan, along with our very large customer tariff, positions us well to support that growth.

I will turn it over to Xia for more details.

Thank you, Scott. Our third quarter 2026 earnings of $1.18 per share reflects a $0.35 increase compared to the third quarter of 2025. Our earnings packet includes a comparison of third quarter results on page 15. I will walk through the significant drivers. Starting with our utility operations, earnings were $0.28 higher versus the third quarter of 2025. Let me highlight a couple of factors. Weather favorably impacted quarter-over-quarter earnings by approximately $0.05. Compared to normal conditions, we estimate that weather had an $0.08 positive impact in the third quarter of 2026, compared to a $0.03 positive impact in the third quarter of 2025. Rate-based growth contributed $0.19 to earnings. This includes $0.15 of growth from incremental AFUDC equity and cash returns associated with projects under construction. I will note that $0.12, or 80% of these incremental returns, are from projects for and supported by the VLCs.

In addition, VLCs added $0.02 of margin quarter over quarter. Favorable day-to-day O&M drove an $0.08 variance. This was primarily driven by our stock-based plan, which could be timing. These positive drivers were partially offset by higher depreciation and amortization expense, higher interest expense, and tax and other items. Next, let me provide some additional color on our weather normal retail electric deliveries. Compared to Q3 last year, total weather normal retail electric sales grew 4.1%, driven by growth from the VLCs. Excluding the iron ore mine and VLC customers, we saw sales grow 0.4% during the quarter. For the year, we continue to expect weather normalized electric sales to be relatively flat with 2025. At American Transmission Company, capital investment growth contributed an incremental $0.03 to Q3 earnings compared to 2025.