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Wec Energy Group Annual Report, Year Ended Dec 31, 2019

Filing Date
Filed February 27, 2020
Period End
December 31, 2019
Security
WEC
One revenue dollarkept$0.15
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. Leadership change8-K · Jan ’19Jan ’19
  2. Leadership change8-K · Oct ’22Oct ’22
  3. Material agreement8-K · Aug ’26Aug ’26

01—Abstract

Summary

Summary of the 10-K filed February 27, 2020. Cited figures are marked; the original filing is the authoritative source.

WEC Energy Group, Inc. reported operating revenues of $7,523.1 milliona and net income attributed to common shareholders of $1,134.0 million for 2019, compared with $7,679.5 million and $1,059.3 million in 2018.

Diluted earnings per share rose to $3.58b from $3.34. The increase in earnings was driven primarily by a $389.4 million rise in Wisconsin segment operating income, which benefited from lower operation and maintenance expense tied to power plant retirements and the adoption of new lease guidance, along with a $36.1 million increase in Illinois segment operating income and a $31.9 million increase in other income, net. These gains were partly offset by a $56.4 million increase in interest expense, driven mainly by higher long-term debt balances used to fund capital investments.

The company's capital program remains large. Total capital expenditures were $2,260.8 millionc in 2019, and management expects regulated utility and non-utility energy infrastructure capital expenditures of approximately $13.7 billion from 2020 to 2024. Long-term debt, including the current portion, rose to $11,904.2 million at year-end 2019 from $10,359.0 million, and total debt to total capitalization was 55.7%.

Operating cash flow declined slightly to $2,345.5 milliond from $2,445.5 million, while investing outflows increased to $2,494.9 million, including the acquisition of an 80% interest in Upstream for $268.2 million. The filing also highlights ongoing generation reshaping, with more than 1,800 MW of coal-fired generation retired since the beginning of 2018, and continued expansion of wind and solar investments. Management reports that the company met its 2030 CO2 reduction goal of 40% below 2005 levels and is re-evaluating longer-term goals.

The Tax Cuts and Jobs Act continues to affect rates, with Wisconsin rate orders issued in December 2019 for 2020 and 2021. The quarterly dividend was raised to $0.6325 per share in January 2020, an annualized $2.53, and the dividend policy targets a 65-70% payout ratio.

02—Key points

Key Highlights

  1. Net income attributed to common shareholders rose to $1,134.0 million in 2019 from $1,059.3 million in 2018; diluted EPS was $3.58 versus $3.34.
  2. Wisconsin segment operating income increased $389.4 million to $1,189.6 million, driven by lower other operation and maintenance expense and the Topic 842 lease reclassification.
  3. Long-term debt including current portion increased to $11,904.2 million from $10,359.0 million; debt to total capitalization was 55.7% at year-end 2019.
  4. Expected regulated utility and non-utility energy infrastructure capital expenditures of approximately $13.7 billion from 2020 to 2024.
  5. The quarterly dividend was increased to $0.6325 per share in January 2020, an annual rate of $2.53, with a targeted payout ratio of 65-70% of earnings.
  6. More than 1,800 MW of coal-fired generation has been retired since the beginning of 2018, and the company met its 2030 goal of a 40% reduction in CO2 emissions below 2005 levels.
  7. Acquisitions of wind interests included Upstream (80% for $268.2 million in January 2019), with agreements for Thunderhead and Blooming Grove in early 2020 pending FERC approval.

03—One dollar

Follow one dollar

Of each $1.00 of revenue in FY2019, Wec Energy Group kept $0.15.

  1. Revenue$7.52B100.0%
  2. Cost of revenue−$2.68B35.6%
  3. Gross profit$4.84B64.4%
  4. Operating costs−$3.31B44.0%
  5. Operating income$1.53B20.4%
  6. Interest, other & tax−$397.4M5.3%
  7. Net income$1.13B15.1%
Computed from 10-KFY2019filed February 27, 2020Computed from this filing’s revenue, gross profit, operating income and net income · right columngrey figure: share of revenue

Where FY2019 revenue went

$7.52B
  • Operating costs: $3.31B, 44% of revenue
  • Cost of revenue: $2.68B, 36% of revenue
  • Net income: $1.13B, 15% of revenue
  • Interest, other & tax: $397.4M, 5.3% of revenue

Kept 15% as net income

Full revenue history →

04—Financials

Financial Highlights

Figures from 10-KFY2019filed February 27, 2020
Revenue$7.52B64.4% Gross MarginNet Income$1.13B15.1% Net MarginEPS (Diluted)$3.58Total Assets$34.95BCash & Equivalents$37.50MFree Cash Flow-$183.50M

Financial Statements

FY2019 against FY2018

Line itemFY2019FY2018Change
Revenue$7.52B$7.68B−2.0%
Cost of Revenue$2.68B$2.90B−7.6%
Gross Profit$4.84B$4.78B+1.3%
Operating Expenses$5.99B$6.21B−3.5%
Operating Income$1.53B$1.47B+4.3%
Interest Expense$501.50M$445.10M+12.7%
Net Income$1.13B$1.06B+7.1%
EPS (Basic)$3.60$3.36+7.1%
EPS (Diluted)$3.58$3.34+7.2%
Shares Outstanding (Basic)315.40M315.50M0.0%
Shares Outstanding (Diluted)316.70M316.90M−0.1%

05—Questions

Frequently Asked Questions

  1. What drove the increase in WEC Energy Group's 2019 earnings?

    Net income attributed to common shareholders rose $74.7 million, mainly from a $389.4 million increase in Wisconsin segment operating income, which reflected lower other operation and maintenance expense and a $36.1 million increase in Illinois operating income from higher PGL natural gas margins. Other income, net also rose $31.9 million, while the increase was partly offset by higher interest expense of $56.4 million.

  2. How much is WEC planning to invest in capital projects?

    The company expects total capital expenditures for its regulated utility and non-utility energy infrastructure businesses of approximately $13.7 billion from 2020 to 2024. Estimated capital expenditures for 2020 alone total $3,255.5 million.

  3. How has WEC's debt position changed?

    Long-term debt including the current portion increased to $11,904.2 million at December 31, 2019, from $10,359.0 million a year earlier, while short-term debt fell to $830.8 million from $1,440.1 million. Debt to total capitalization was 55.7%, compared with 54.6% at year-end 2018.

  4. What is the outlook for WEC's dividend?

    In January 2020, the Board increased the quarterly dividend to $0.6325 per share, an increase of 7.2%, equating to an annual dividend of $2.53 per share. The Board affirmed a dividend policy targeting a payout ratio of 65-70% of earnings.

  5. What are the main regulatory and environmental risks disclosed?

    Key risks include the ACE rule, which is being litigated by multiple states, and the potential for further greenhouse gas regulation. The filing also cites the ongoing effects of the Tax Cuts and Jobs Act on rates and credit ratings, the FERC's November 2019 order reducing ATC's base ROE to 9.88%, and possible future ELG and ozone standard changes that could raise compliance costs.

06—Continue

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