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Wec Energy Group Annual Report, Year Ended Dec 31, 2005

Filing Date
Filed March 2, 2006
Period End
December 31, 2005
Security
WEC
In the record · 2016–202610-K1110-Q338-K260

WEC filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 260 current reports (8-K) between 2016 and 2026.

  1. FY2018 annual report10-K · Feb ’19Feb ’19
  2. Leadership change8-K · Jan ’22Jan ’22
  3. Leadership change8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed March 2, 2006. Cited figures are marked; the original filing is the authoritative source.

Wisconsin Energy Corporation, a diversified holding company with a utility energy segment and a non-utility energy segment, reported 2005 total operating revenues of $3,815.5 milliona and net income of $308.7 million, compared with $306.4 million in 2004.

Income from continuing operations rose to $303.6 millionb from $219.6 million, and diluted earnings per share from continuing operations were $2.56 versus $1.84. The utility segment contributed $542.4 million of operating income, while the non-utility segment's operating income rose to $19.5 million, largely due to Port Washington Generating Station Unit 1 entering service in July 2005. Management highlighted higher fuel and purchased power costs, a coal delivery shortfall, and MISO Midwest Market charges as pressures during 2005, and the company has deferred and sought recovery of part of these costs.

The company's central strategy is Power the Future, a plan to add 2,320 megawatts of gas- and coal-fired capacity by 2010, with the Oak Creek coal units (about $2.191 billionc target cost) and the second Port Washington unit still under construction. The filing states that management expects to finance the majority of this program with internally generated cash and debt, with no new equity planned, and that the debt-to-total-capital ratio was 59.5% at December 31, 2005.

Rate increases approved by the PSCW in January 2006, including $222.0 milliond for retail electric service, are expected to support recovery of these costs. Key risks include construction cost and schedule overruns, regulatory approvals, the pending FERC authorization required under the Energy Policy Act of 2005, the pending review of Point Beach nuclear plant ownership and operation, and the Department of Energy's breach of its used fuel removal obligation.

02—Key points

Key Highlights

  1. Total operating revenues of $3,815.5 million in 2005, up from $3,406.1 million in 2004.
  2. Net income of $308.7 million in 2005 versus $306.4 million in 2004; diluted EPS from continuing operations of $2.56 versus $1.84.
  3. Utility energy segment operating income of $542.4 million in 2005, up from $528.6 million; non-utility energy operating income rose to $19.5 million from $4.6 million.
  4. Port Washington Generating Station Unit 1 (545 MW) entered service in July 2005; the Oak Creek coal expansion (two 615 MW units) is under construction, with first unit expected in 2009.
  5. Debt-to-total-capital ratio of 59.5% at December 31, 2005, compared with 59.3% at year-end 2004; no new equity is planned for Power the Future.
  6. Cash from operating activities was $576.9 million in 2005 versus $599.0 million in 2004, reflecting higher working capital needs and deferred costs.
  7. January 2006 PSCW rate orders approved an electric increase of $222.0 million and a gas increase of $21.4 million, effective January 26, 2006.

03—Questions

Frequently Asked Questions

  1. What drove the increase in 2005 earnings?

    Continuing operations income rose to $303.6 million from $219.6 million. The filing attributes the utility segment's higher operating income to favorable summer weather and pricing increases, and the non-utility segment's improvement mainly to Port Washington Unit 1 operating from July 2005, which contributed $18.9 million of operating income in its six months of service. Income taxes also fell to a 33.0% effective rate, helped by a $16.3 million reversal of state valuation allowances.

  2. What are the main cost pressures the company reported?

    Fuel and purchased power expense rose 32.1% to a net $188.0 million after deferrals, driven by higher natural gas prices, nuclear refueling outages, MISO Midwest Market charges of about $28 million, and coal delivery shortfalls estimated at about $52 million. The company deferred $72.8 million of these costs for future recovery, subject to PSCW approval.

  3. How will the Power the Future program be financed and what are its risks?

    The company expects to fund most of the program with internally generated cash and debt financings and does not plan to issue new equity. Key risks include construction cost and schedule overruns, legal challenges and permit issues, and the need for FERC authorization under the Energy Policy Act of 2005 to lease the units to Wisconsin Electric. The filing states that Oak Creek costs above a 5% overrun cap would not be recovered from customers absent extraordinary circumstances.

  4. What regulatory developments affect future revenue?

    The PSCW approved a January 2006 electric rate increase of $222.0 million (10.6%) and a gas increase of $21.4 million (2.9%) for Wisconsin Electric, plus a steam increase of $7.8 million, effective January 26, 2006. The approved return on equity for Wisconsin Electric fell to 11.2% from 12.2% in 2005, and Wisconsin Gas' approved return fell to 11.2% from 11.8%.

04—Continue

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