01—Abstract
Summary
Summary of the 10-K filed February 28, 2017. Cited figures are marked; the original filing is the authoritative source.
WEC Energy Group, Inc. reported 2016 operating revenues of $7,472.3 milliona and net income attributed to common shareholders of $939.0 million, up from $638.5 million in 2015.
Diluted EPS was $2.96b versus $2.34 in 2015. The company attributed the earnings increase primarily to a full year of Integrys results (versus six months in 2015), which contributed $201.7 million of the increase, and to a $104.1 million pre-tax decrease in acquisition costs. Integrys was acquired on June 29, 2015, and the company operates six reportable segments spanning Wisconsin, Illinois, other states natural gas utilities, electric transmission (an approximately 60% interest in ATC), We Power, and corporate and other.
Capital spending remains heavy: total capital expenditures were $1,423.7 millionc in 2016, and the company expects $2,182.2 million in 2017 and $1,956.8 million in 2018. Long-term debt was $9,158.2 million at year-end, and the ratio of debt to total capitalization was 53.2%. Operating cash flow rose to $2,103.5 million from $1,293.6 million.
On January 19, 2017, the board raised the quarterly dividend to $0.52d per share, an annual rate of $2.08, and affirmed a payout target of 65-70% of earnings. Key risks flagged in the filing include uncertainty around federal climate rules such as the Clean Power Plan, potential federal tax reform that could eliminate the interest expense deduction, a pending FERC ROE complaint process that will reduce ATC's allowed return going forward, and continued regulatory and competitive pressures in its service territories. The company also disclosed a $225 million agreement, signed in January 2017, to acquire a Michigan natural gas storage facility, and the formation of UMERC, a new stand-alone Upper Peninsula utility effective January 1, 2017.
02—Key points
Key Highlights
- Net income attributed to common shareholders rose to $939.0 million in 2016 from $638.5 million in 2015; diluted EPS was $2.96 versus $2.34.
- Operating revenues were $7,472.3 million in 2016 versus $5,926.1 million in 2015, reflecting a full year of Integrys results.
- Operating cash flow increased to $2,103.5 million from $1,293.6 million in 2015.
- Capital expenditures totaled $1,423.7 million in 2016, with estimated spending of $2,182.2 million in 2017 and $1,956.8 million in 2018.
- The quarterly dividend was increased to $0.52 per share (annual $2.08) on January 19, 2017, with a target payout ratio of 65-70% of earnings.
- Total debt was $10,175.6 million, a debt-to-total-capitalization ratio of 53.2%, down from 54.4% in 2015.
- Regulatory assets were $3,138.3 million and regulatory liabilities were $1,597.2 million at year-end 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Wec Energy Group kept $0.13.
- Revenue$7.47B100.0%
- Cost of revenue−$2.65B35.4%
- Gross profit$4.82B64.6%
- Operating costs−$3.13B41.9%
- Operating income$1.70B22.7%
- Interest, other & tax−$757.3M10.1%
- Net income$939.0M12.6%
Where FY2016 revenue went
$7.47B- Operating costs: $3.13B, 42% of revenue
- Cost of revenue: $2.65B, 35% of revenue
- Net income: $939.0M, 13% of revenue
- Interest, other & tax: $757.3M, 10% of revenue
Kept 13% as net incomeNet income $939.0M · 13%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 28, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $7.47B$5.93B | +26.1% |
| Cost of Revenue | $2.65B$2.24B | +18.2% |
| Gross Profit | $4.82B$3.69B | +30.9% |
| Operating Expenses | $5.78B$4.68B | +23.5% |
| Operating Income | $1.70B$1.25B | +35.6% |
| Interest Expense | $402.70M$331.40M | +21.5% |
| Net Income | $939.00M$638.50M | +47.1% |
| EPS (Basic) | $2.98$2.36 | +26.3% |
| EPS (Diluted) | $2.96$2.34 | +26.5% |
| Shares Outstanding (Basic) | 315.60M271.10M | +16.4% |
| Shares Outstanding (Diluted) | 316.90M272.70M | +16.2% |
05—Questions
Frequently Asked Questions
What drove the increase in earnings in 2016?
Earnings increased $300.5 million, driven by a $201.7 million increase from including a full year of Integrys results versus six months in 2015, and by a $104.1 million pre-tax decrease in acquisition costs. The remaining increase was $98.8 million.
How much is WEC planning to invest in capital projects?
The filing estimates capital expenditures of $2,182.2 million in 2017, $1,956.8 million in 2018, and $1,899.3 million in 2019. Excluding ATC, total expected capital expenditures for retail utilities are about $9.7 billion over the next five years.
What are the main risks to the company's outlook?
Key risks include uncertainty around federal GHG rules including the Clean Power Plan, possible federal tax reform that could eliminate the interest expense deduction, a reduction in ATC's allowed ROE following the FERC's final order, rate case outcomes, and retail competition. Pulliam and other coal units may be retired early.
Is the dividend expected to grow?
The board increased the quarterly dividend to $0.52 per share from $0.495 effective with the first quarter 2017 payment, and affirmed a dividend policy targeting a payout ratio of 65-70% of earnings. Dividends per share were $1.98 in 2016.
What major transactions did WEC announce or complete?
WEC completed the Integrys acquisition on June 29, 2015, sold ITF in the first quarter of 2016, and sold MCPP and certain Wisvest chilled water assets in April 2016. In January 2017 it agreed to buy a Michigan natural gas storage facility for $225 million and launched UMERC as a stand-alone utility effective January 1, 2017.
06—Continue