01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
Wisconsin Energy Corporation, a diversified holding company headquartered in Milwaukee, reported 2009 net income of $382.4 milliona, or $3.24 diluted earnings per share, on operating revenues of $4.13 billion, compared with $359.1 million net income on $4.43 billion of revenues in 2008.
Its utility energy segment, anchored by Wisconsin Electric and Wisconsin Gas (operating as We Energies), contributed $554.3 millionb of operating income in 2009, while the non-utility segment, centered on We Power, contributed $120.1 million. Results were weighed down by a recession that cut electric sales volumes, with total electric sales falling to 29.2 million MWh from 31.9 million MWh, and by milder weather. Net income was supported by lower fuel and purchased power costs and by rate adjustments.
The central strategic story is the Power the Future (PTF) program. Oak Creek Unit 1 entered service on February 2, 2010, and Unit 2 is targeted for commercial operation by the end of August 2010, with a settlement with contractor Bechtel that adds $72 millionc in costs, of which the company is responsible for about 85%. Capital expenditures were $817.7 million in 2009 and are estimated at $950.5 million for 2010.
Working capital was negative by approximately $420.2 milliond at year-end because of short-term debt used to finance the construction, which the company expects to refinance with long-term debt, including $530 million issued in February 2010. The filing also notes the planned sale of Edison Sault Electric for approximately $61.5 million and a January 2010 PSCW rate order, which raised Wisconsin electric rates by approximately $85.8 million (3.35%). The board increased the quarterly dividend to $0.40 per share.
Key risks include environmental compliance costs of about $300 million expected in 2010, possible regulation of greenhouse gases and coal ash, rising natural gas and coal costs, and the dependence on regulatory approval for cost recovery. The ratio of debt to total capitalization was 58.1% at December 31, 2009.
02—Key points
Key Highlights
- Net income of $382.4 million, or $3.24 diluted EPS, in 2009, compared with $359.1 million in 2008.
- Utility energy segment operating income of $554.3 million, down from $580.5 million, and non-utility energy segment operating income of $120.1 million, up from $89.3 million.
- Oak Creek Unit 1 (OC 1) placed in service on February 2, 2010; Unit 2 targeted for commercial operation by the end of August 2010.
- Total capital expenditures were $817.7 million in 2009, with $950.5 million estimated for 2010.
- Working capital was negative by approximately $420.2 million at December 31, 2009, which the company expects to improve after long-term debt issuance.
- Agreement to sell Edison Sault Electric to Cloverland Electric Cooperative for approximately $61.5 million, subject to regulatory approval and expected to close in 2010.
- Quarterly dividend increased to $0.40 per share in January 2010, which would result in annual dividends of $1.60 per share.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Operating Income | $660.30M$655.20M | +0.8% |
| Interest Expense | $156.70M$153.70M | +2.0% |
| Net Income | $382.40M$359.10M | +6.5% |
| EPS (Basic) | $1.64$3.07 | −46.6% |
| EPS (Diluted) | $1.62$3.04 | −46.7% |
| Shares Outstanding (Basic) | 233.80M116.90M | +100.0% |
| Shares Outstanding (Diluted) | 235.90M118.20M | +99.6% |
05—Questions
Frequently Asked Questions
How did earnings and revenues change in 2009?
Net income rose to $382.4 million from $359.1 million, and diluted EPS was $3.24, up from $3.04. Operating revenues fell to $4,127.9 million from $4,427.8 million, mainly because lower electric sales volumes and lower natural gas costs passed through to customers reduced revenue.
What is the status of the Oak Creek expansion and its cost?
OC 1 was placed in service on February 2, 2010. Bechtel targets commercial operation of OC 2 by the end of August 2010, and the guaranteed in-service date is November 28, 2010. Under a December 2009 settlement, ERS will pay Bechtel $72 million, and the company is responsible for approximately 85% of that amount. The PSCW approved a target construction cost of $2.191 billion, with recovery of cost overruns up to 5% subject to PSCW approval.
How is the company financing its capital program?
The company financed construction largely with short-term borrowings, and commercial paper outstanding was $820.9 million at year-end 2009. It issued $530 million of long-term senior notes in February 2010 to repay short-term debt used to build OC 1. The company said it currently does not plan to issue new common equity for its PTF strategy.
What regulatory decisions affect future rates?
In December 2009, the PSCW approved a $85.8 million (3.35%) increase in Wisconsin Electric retail electric rates, effective January 1, 2010, and lowered the return on equity for Wisconsin Electric to 10.4%. Michigan rates were self-implemented at about $12 million (9.5%), subject to refund pending a final MPSC decision expected in July 2010. A separate $60.5 million fuel recovery request was filed in February 2010.
What are the main environmental and regulatory risks?
The company expects environmental capital expenditures of approximately $300 million in 2010, and it estimates the Consent Decree with the EPA will cost about $1.2 billion through 2013. The filing notes possible regulation of greenhouse gas emissions, the EPA's consideration of classifying coal ash as hazardous waste, and an EPA Notice of Violation concerning Edgewater Generating Unit 5, in which Wisconsin Electric holds a 25% interest.
06—Continue