How did earnings change in 2001?

Net income increased to $219.0 million, or $1.86 per diluted share, from $154.2 million, or $1.27 per diluted share, in 2000. Management reported adjusted earnings of $2.04 per share, up $0.53 from 2000 adjusted earnings. The filing attributes the growth mainly to higher electric utility gross margins, Wisconsin Gas seasonality and improved Wisvest earnings, partly offset by lower gas margins from warm weather.

What is the Power the Future strategy and what does it require?

Power the Future is a 10-year, $7 billion plan to improve electricity supply and reliability in Wisconsin. It includes about $3.0 billion for 2,800 MW of new natural gas and coal capacity built by W.E. Power and leased to Wisconsin Electric for 20 to 25 years, about $1.3 billion for upgrades to existing generation, and about $2.7 billion for distribution system assets. The PSCW issued a declaratory ruling on October 16, 2001 finding it prudent to proceed, but individual expenses still require PSCW approval and the plan remains subject to regulatory approvals.

What are the company's main financial commitments and liquidity position?

At December 31, 2001, the company had $945 million of unused short-term borrowing capacity and $1.7 billion of unused bank credit lines. Total contractual cash obligations were $5,634.3 million, including $3,552.6 million of long-term debt principal. The company expects to meet 2002 capital requirements mainly through internally generated funds and asset sale proceeds, and it reports that it has adequate capacity to fund operations for the foreseeable future.

What legal and regulatory risks does the filing highlight?

The PSCW ordered a five-year rate restriction period starting January 1, 2001, freezing electric and gas rates subject to limited carve-outs. The Giddings & Lewis case was returned to the trial court for a punitive damages retrial. The Department of Energy's failure to begin removing used fuel from Point Beach since January 31, 1998 is the subject of a Court of Federal Claims complaint, with damages of more than $35 million cited as of August 2000. Environmental exposure includes NOx control costs of $150 million to $200 million for 2001 through 2004 and manufactured gas plant remediation estimated at $25 million to $45 million over ten years.

WEC 10-K FY2001 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 26, 2002. Cited figures are marked; the original filing is the authoritative source.

Wisconsin Energy Corporation reported 2001 net income of $219.0 million^a, or $1.86 diluted earnings per share, compared with $154.2 million, or $1.27 per diluted share, in 2000.

Total operating revenues rose to $3,928.5 million^b from $3,362.7 million. Management reported adjusted earnings of $2.04 per share for 2001, an increase of $0.53 per share over 2000 adjusted earnings. The company operates through a utility energy segment (Wisconsin Electric, Wisconsin Gas and Edison Sault), a non-utility energy segment (Wisvest and W.E.

Power) and a manufacturing segment (WICOR Industries pump businesses). The central strategic initiative is Power the Future, a 10-year, $7 billion^c plan announced in September 2000 and enhanced in February 2001. It calls for about $3.0 billion to build 2,800 megawatts of new natural gas and coal generation through W.E.

Power, about $1.3 billion^d to upgrade existing generating assets, and about $2.7 billion for distribution system assets. Implementation is subject to state and federal regulatory approvals. The company is divesting non-core assets, including most of Wisvest's holdings and a large part of Wispark's real estate, and received total proceeds of almost $700 million from non-core divestitures in 2000 and 2001.

The quarterly dividend was cut to $0.20 per share in 2000, and a share repurchase program was active. Key risks include a five-year PSCW rate restriction period that froze electric and gas rates from January 1, 2001, a lawsuit with a $100 million punitive damage award that was overturned on appeal and remanded for retrial, environmental remediation and NOx compliance costs, and the Department of Energy's failure to begin removing used nuclear fuel from Point Beach. Total capital expenditures were $672.5 million in 2001 and are estimated at $661 million for 2002.

02—Key points

Key Highlights

Net income rose to $219.0 million ($1.86 diluted EPS) in 2001 from $154.2 million ($1.27 diluted EPS) in 2000; adjusted EPS was $2.04.
Total operating revenues were $3,928.5 million in 2001, up from $3,362.7 million in 2000; manufacturing revenues were $585.1 million.
Power the Future strategy totals about $7 billion over ten years, including approximately $3.0 billion for 2,800 MW of new generation to be built through W.E. Power.
Non-core divestitures produced almost $700 million of proceeds in 2000 and 2001, including the SkyGen sale and the sales of FieldTech and the Blythe project.
Cash flow from operations was $555.8 million in 2001; capital expenditures were $672.5 million, with $661 million estimated for 2002.
Total capitalization was $6,558.5 million at year-end 2001, with long-term debt at 56.7% and common equity at 31.4%; short-term debt fell to $550.4 million from $1,386.1 million.
The Giddings & Lewis/City of West Allis case was remanded for a new trial on punitive damages, expected in 2003, after the $100 million punitive award was overturned.

03—Questions

Frequently Asked Questions

How did earnings change in 2001?
Net income increased to $219.0 million, or $1.86 per diluted share, from $154.2 million, or $1.27 per diluted share, in 2000. Management reported adjusted earnings of $2.04 per share, up $0.53 from 2000 adjusted earnings. The filing attributes the growth mainly to higher electric utility gross margins, Wisconsin Gas seasonality and improved Wisvest earnings, partly offset by lower gas margins from warm weather.
What is the Power the Future strategy and what does it require?
Power the Future is a 10-year, $7 billion plan to improve electricity supply and reliability in Wisconsin. It includes about $3.0 billion for 2,800 MW of new natural gas and coal capacity built by W.E. Power and leased to Wisconsin Electric for 20 to 25 years, about $1.3 billion for upgrades to existing generation, and about $2.7 billion for distribution system assets. The PSCW issued a declaratory ruling on October 16, 2001 finding it prudent to proceed, but individual expenses still require PSCW approval and the plan remains subject to regulatory approvals.
What are the company's main financial commitments and liquidity position?
At December 31, 2001, the company had $945 million of unused short-term borrowing capacity and $1.7 billion of unused bank credit lines. Total contractual cash obligations were $5,634.3 million, including $3,552.6 million of long-term debt principal. The company expects to meet 2002 capital requirements mainly through internally generated funds and asset sale proceeds, and it reports that it has adequate capacity to fund operations for the foreseeable future.
What legal and regulatory risks does the filing highlight?
The PSCW ordered a five-year rate restriction period starting January 1, 2001, freezing electric and gas rates subject to limited carve-outs. The Giddings & Lewis case was returned to the trial court for a punitive damages retrial. The Department of Energy's failure to begin removing used fuel from Point Beach since January 31, 1998 is the subject of a Court of Federal Claims complaint, with damages of more than $35 million cited as of August 2000. Environmental exposure includes NOx control costs of $150 million to $200 million for 2001 through 2004 and manufactured gas plant remediation estimated at $25 million to $45 million over ten years.

04—Continue

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