01—Abstract
Summary
Summary of the 10-K filed February 26, 2019. Cited figures are marked; the original filing is the authoritative source.
WEC Energy Group, Inc. reported 2018 operating revenues of $7,679.5 milliona and net income attributed to common shareholders of $1,059.3 million, compared with $1,203.7 million in 2017.
Diluted EPS was $3.34b versus $3.79 in 2017. The earnings decline was driven largely by the Tax Cuts and Jobs Act: 2017 included a $206.7 million one-time net reduction in income tax expense from revaluing deferred taxes, and the 2018 flow-through of tax repairs and Tax Legislation impacts reduced earnings. Absent the Tax Legislation effect, the company states earnings increased $78.8 million, driven by higher Wisconsin margins from favorable weather and growth, and higher other states and transmission earnings.
The company is executing a generation reshaping plan targeting retirement of approximately 1,800 MW of coal-fired generation by 2020, with 1,500 MW retired in 2018, and reducing CO2 emissions by approximately 40% below 2005 levels by 2030 and 80% by 2050. It projects regulated utility and non-utility energy infrastructure capital expenditures of almost $12.7 billionc from 2019 to 2023. Operating cash flow rose to $2,445.5 million in 2018 from $2,078.6 million, while total debt reached $11,799.1 million, a debt-to-total-capitalization ratio of 54.6%.
The company also acquired several wind and storage assets, including Bishop Hill III, Forward Wind Energy Center, Coyote Ridge, and Upstream (acquired January 2019 for $276.0 milliond). The company declared a quarterly dividend of $0.59 per share in January 2019, equal to $2.36 annually, and affirmed a dividend payout target of 65-70% of earnings. Moody's downgraded several WEC senior unsecured ratings to Baa1 in July 2018, citing reduced cash flow from the Tax Legislation.
02—Key points
Key Highlights
- Net income attributed to common shareholders was $1,059.3 million in 2018, down from $1,203.7 million in 2017, which included a $206.7 million one-time tax benefit.
- Operating revenues were $7,679.5 million in 2018 versus $7,648.5 million in 2017.
- Operating cash flow increased to $2,445.5 million in 2018 from $2,078.6 million in 2017.
- Planned capital expenditures for regulated utility and non-utility energy infrastructure are almost $12.7 billion from 2019 to 2023.
- The company plans to retire approximately 1,800 MW of coal-fired generation by 2020, with about 1,500 MW retired in 2018.
- The quarterly dividend was raised to $0.59 per share ($2.36 annually) effective with the first quarter 2019 payment, with a 65-70% payout ratio target.
- Moody's downgraded WEC Energy Group senior unsecured ratings to Baa1 from A3 in July 2018, citing Tax Legislation cash flow effects.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Wec Energy Group kept $0.14.
- Revenue$7.68B100.0%
- Cost of revenue−$2.90B37.7%
- Gross profit$4.78B62.3%
- Operating costs−$3.31B43.1%
- Operating income$1.47B19.1%
- Interest, other & tax−$409.1M5.3%
- Net income$1.06B13.8%
Where FY2018 revenue went
$7.68B- Operating costs: $3.31B, 43% of revenue
- Cost of revenue: $2.90B, 38% of revenue
- Net income: $1.06B, 14% of revenue
- Interest, other & tax: $409.1M, 5.3% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 26, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $7.68B$7.65B | +0.4% |
| Cost of Revenue | $2.90B$2.82B | +2.7% |
| Gross Profit | $4.78B$4.83B | −0.9% |
| Operating Expenses | $6.21B$5.87B | +5.8% |
| Operating Income | $1.47B$1.78B | −17.3% |
| Interest Expense | $445.10M$415.70M | +7.1% |
| Net Income | $1.06B$1.20B | −12.0% |
| EPS (Basic) | $3.36$3.81 | −11.8% |
| EPS (Diluted) | $3.34$3.79 | −11.9% |
| Shares Outstanding (Basic) | 315.50M315.60M | 0.0% |
| Shares Outstanding (Diluted) | 316.90M317.20M | −0.1% |
05—Questions
Frequently Asked Questions
Why did net income decline in 2018?
Net income attributed to common shareholders fell to $1,059.3 million from $1,203.7 million. The 2017 results included a $206.7 million one-time net reduction in income tax expense from revaluing deferred taxes under the Tax Legislation. The company states that, absent the Tax Legislation effect, earnings increased $78.8 million, driven by higher Wisconsin margins, other states margins, and transmission earnings.
What is the company's plan for its coal-fired generation?
The generation reshaping plan calls for retiring approximately 1,800 MW of coal-fired generation by 2020. In 2018, about 1,500 MW was retired, including the Pleasant Prairie power plant, Pulliam power plant, and jointly owned Edgewater Unit 4. The Presque Isle Power Plant must be retired by May 31, 2019.
How much does the company plan to invest?
The company expects total capital expenditures for its regulated utility and non-utility energy infrastructure businesses to be almost $12.7 billion from 2019 to 2023. Estimated capital expenditures are $2,705.4 million for 2019, $2,927.1 million for 2020, and $2,510.9 million for 2021.
How leveraged is the company?
Total debt was $11,799.1 million at December 31, 2018, and the ratio of debt to total capitalization was 54.6%, compared with 53.8% at year-end 2017. Long-term debt was $9,994.0 million excluding the current portion.
What is the dividend outlook?
In January 2019, the Board increased the quarterly dividend to $0.59 per share, equal to $2.36 annually, effective with the first quarter 2019 payment. The Board affirmed a dividend policy targeting a payout ratio of 65-70% of earnings.
06—Continue