WEC Energy Group Q2 2023 Earnings Call Transcript

Presentation

[Operator]

Good afternoon and welcome to WEC Energy Group's Conference Call for Second Quarter 2023 Results. [Operator Instructions] Before the conference call begins, I remind you that all statements in the presentation, other than historical facts are forward-looking statements that involve risks and uncertainties that are subject to change at anytime. Such statements are based on management's expectations at the time they are made. In addition to the assumptions and other factors referred to in connection with the statements, factors described in WEC Energy Group's latest Form 10-K and subsequent reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those contemplated.

During the discussions, referenced earnings per share will be based on diluted earnings per share unless otherwise noted. After the presentation, the conference will be open to analysts for questions and answers. In conjunction with this call, a package of detailed financial information is posted at wecenergygroup.com. A replay will be available approximately two hours after the conclusion of this call.

And now it's my pleasure to introduce Gale Klappa, Executive Chairman of WEC Energy Group.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Well, good afternoon, everyone. Thank you for joining us today, as we review our results for the second quarter of 2023. First, I'd like to introduce the members of our management team who are here with me today. We have Scott Lauber, our President and Chief Executive; Xia Liu, our Chief Financial Officer and Beth Straka, Senior Vice-President of Corporate Communications and Investor Relations.

As you saw from our news release this morning, we reported second quarter 2023 earnings of $0.92 a share, after a down first quarter marked by one of the warmest winters on record, we delivered solid results in the second quarter and we're firmly on-track for a strong 2023. Today, we are reaffirming our guidance for the year. The range is $4.58 to $4.62 a share. This of course assumes normal weather going forward. As always, we're focused on the fundamentals of our business, financial discipline, operating efficiency and customer satisfaction.

During the second quarter, we also continued to move forward on our major initiatives, including the investments outlined in our $20.1 billion ESG progress plan. As we've discussed, the plan is based on projects that are low-risk and highly executable. We expect to quadruple the amount of renewable generation for our regulated customers and highly efficient gas fueled capacity to ensure reliability and continue to harden our delivery networks. Scott will provide you with more detail on several specific projects in just a moment.

As a reminder, we project that our ESG progress plan will drive growth in earnings per share of 6.5% to 7% a year and as we've discussed, there is no need to issue equity for this $20.1 billion Five-Year plan. Now, over the past few months, many of you have asked about the trajectory of our next Five-Year plan. Our updated plan will cover the period 2024 through 2028. Of course, the growth in-demand for capacity and energy drives our next capital plan significantly higher, then we'll evaluate all our financing options.

In addition to incremental debt and refinancing opportunities, our options could include accessing the equity market through our dividend reinvestment plans, employee benefit plans and at-the-market programs. I would stress that at this point, we do not see the need for any block equity offering. Again as a reminder, any equity need would be driven by growth and would support our long-term growth projections. As you would expect, we're on schedule with the development of our next Five-Year plan and as usual we'll share the details with you in the fall.

Now let's take a brief look, we'll switch gears and take a brief look at our regional economy. We're still seeing a very strong labor market in Wisconsin. In June, the State added 7,000 private sector jobs, the unemployment rate came in at 2.5% well below the national average and the labor force participation rate rose for the fourth straight month in Wisconsin to 65.3%, very solid numbers.

We're also encouraged by the pipeline of economic activity in our region. Last quarter, you heard that Microsoft plans to make an initial investment of $1 billion to create a new datacenter campus. This new complex will be built south of Milwaukee in the Wisconsin Innovation Park, where Foxconn is located. Microsoft has purchased 315 acres in area, three of the park and is moving full-speed ahead. In fact, earth work at the site began just a few days ago. So along with American Transmission Company, we're working closely in fact on a weekly basis with Microsoft to determine the full extent of the energy infrastructure that will be needed to serve this development.

We're excited about supporting Microsoft as the company moves forward with a major technology investment and we'll update you as the planning proceeds.

With that, I'll turn the call over to Scott for more information on our regulatory developments and on our operations. Scott, all yours.

[Scott Lauber, President and Chief Executive Officer at WEC Energy Group]

Thank you, Gale. I'd like to start with a few updates on the regulatory front. In May, we filed a limited reopener to set 2024 rates for our Wisconsin utilities. The filings address the recovery of capital investments for certain projects going into service this year and in 2024. These are renewable facilities, rate generation and LNG reliability investments. The projects have already been approved by the Wisconsin Commission. The return-on-equity and the equity layer are all said and are not up for consideration as part of this proceeding. We expect a decision from the Commission by the end of this year.

And as you recall, we have rate filings under review in Illinois for Peoples Gas and North Shore Gas. After nine years without a base rate case at Peoples Gas, we're making these request for 2024 to support our investments in critical infrastructure. In mid July, the staff filed its rebuttal testimony recommending a 9.83% return-on-equity and an equity layer of 50.83% for Peoples Gas. This was consistent with the initial recommendations from the staff. We expect a final decision by the end-of-the year.

And moving to the other states, we are very pleased that we have reached a settlement agreement at our rate reviews at both Minnesota Energy Resources and Michigan Gas Utilities. The Minnesota Commission is considering a settlement that would provide a 7.1% increase in base rates. As a quick reminder, that's based on a 9.65% return-on-equity with an equity layer of 53% and we're pleased to update you that in Michigan, we have reached a unanimous settlement and the details will be made public later this week.

We expect final Commission approval by the end-of-theyear. Meanwhile, we're continuing progress on a number of regulatory regulated capital projects. At the beginning of June, we closed on our first option of West Riverside Energy Center for $95 million. This has 100 MW of efficient and combined-cycle natural gas generation to our portfolio. As you recall, this plant is in operation and the purchase price was based on-book value. And in the next few weeks, we plan to file our request to purchase another 100 MW of Riverside capacity under our remaining option. We also put 128 MW of new natural gas generation online last month. As you recall, we invested $170 million to build this generation at our existing Western Power plant site in Northern Wisconsin. The facility uses seven reciprocating internal combustion engines or as we call them race units.

Elsewhere in the state, work continues on the Badger Hollow II Solar facility and the Paris and Darien Solar Battery Parks. The Badger Hollow II site has begun receiving panels using non-Chinese polysilicon. Also, we continue to work on securing custom release of panels from a bonded warehouse in Chicago. And we're still expecting Badger Hollow II to go into service late this year or early next year with Paris Solar Park to follow. In addition, work has been begun on the Darien solar facility, which is planned to go into service in 2024. We'll keep you posted and updated on future developments.

With that, I'll turn you back to Gale.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Scott, thanks very much. As you may recall, our Board of Directors at its January meeting raised our quarterly cash dividend by 7.2%. We believe this continues to rack our dividend growth in the top-decile of our industry. We're targeting a payout ratio of 65% to 70% of earnings, we're right in the middle of that range now, so I expect our dividend growth will continue to be in-line with the growth in our earnings per share.

Next up, Xia will provide you with more detail on our financial results and unveil our third quarter guidance. Xia, all yours.

[Xia Liu, Chief Financial Officer at WEC Energy Group]

Thanks, Gale. Our 2023 second quarter earnings of $0.92 per share increased one penny per share compared to the second quarter of 2022. Our earnings package includes a comparison of second quarter results on page 15, I'll walk through the significant drivers. Our earnings from utility operations were $0.04 above the second quarter of 2022. First, weather had an estimated $0.05 negative impact quarter-over-quarter. Higher depreciation and amortization expense and interest expense added another $0.09 of negative variance. These negative variances were more than offset in the quarter. Rate base growth contributed $0.11 to earnings. This includes the base rate increase for our Wisconsin utilities, as well as the interim rate increase for Minnesota Energy Resources, both of which were effective January 1, 2023.

Additionally, timing of fuel expense improved our earnings by a nickel and lower day-to-day O&M taxes and other items resulted in a $0.02 improvement. Before I turn to earnings at the other segment, let me briefly discuss our weather-normalized sales for the quarter. You can find this sales information on Page 11 of the earnings package.

Retail electric deliveries in Wisconsin, excluding the iron-ore mine were down 0.6% on a weather normal basis. This was driven by lower sales volume to large commercial and industrial customers. Residential usage again on a weather normal basis was flat quarter-over-quarter which is in-line with our forecast. Also, sales to our small commercial and industrial customers were up 1.4%, which is ahead of forecast.

Earnings at our Energy Infrastructure segment improved $0.02 in the second quarter of 2023 compared to the second quarter of 2022. This was largely driven by higher production tax credit as a result of the acquisition of renewable project. Finally, you'll see that earnings at our Corporate and Other segment decreased $0.05, primarily driven by an increase in interest expense. This was partially offset by favorable rabbi trust performance and some tax and other items.

Remember rabbi trust performance is largely offset in O&M. Overall, we improved on our second quarter performance by one penny per share compared to last year and by $0.08 per share compared to the midpoint of our Q2 guidance. Looking now at the cash-flow statement on page six of the earnings package. Net cash provided by operating activities was relatively flat compared to the prior year and total capital expenditures and asset acquisitions were $2.1 billion during the first half of 2023, an increase of more than $1 billion from the first-half of 2022. This was primarily driven by acquisition of generation projects in our regulated and infrastructure segment.

Now let me give you the guidance for the third quarter, we're expecting a range of $0.88 to $0.90 per share. This accounts for July weather and assumes normal weather for the rest of the quarter. As a reminder, we earned $0.96 per share in the third quarter last year, which included a positive $0.02 from weather and a $0.05 pickup related to the resolution of the MISO ROE complaint. As Gale mentioned earlier, we are reaffirming our 2023 earnings guidance of $4.58 to $4.62 per share assuming normal weather for the rest of the year.

As a reminder, largely due to timing of O&M and fuel expense, we expect earnings in Q4 to be materially better than Q4 of 2022.

With that, I will turn it back to Gale.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Great, Xia. Thank you. Overall, we're on-track and focused on providing value for our customers and our stockholders and operator, we're ready now for the question-and-answer portion of the call.

Questions and Answers

[Operator]

[Operator Instructions] Our first question will come from the line of Julien Dumoulin-Smith with Bank of America. Please go ahead.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Hey, Julien. Julien, before we start I know -- before we start, I know a great puppy trainer. So just let me know. Julien, are you still with us?

[Operator]

Julien, your line is open.

[Julien Dumoulin-Smith, Analyst at Bank of America]

Can you hear me now, Darius go for it?

[Gale Klappa, Executive Chairman at WEC Energy Group]

We can.

[Operator]

We can.

[Gale Klappa, Executive Chairman at WEC Energy Group]

What I thought -- I thought I heard a dog barking in the back there, Julien.

[Julien Dumoulin-Smith, Analyst at Bank of America]

[Speech Overlap] Sorry about that, I don't know what happened. I thought I was on-mute, half mute there, but I go figure.

[Gale Klappa, Executive Chairman at WEC Energy Group]

I was just saying, Julien, Julien, I was just saying that I know a great puppy trainer, so let me know.

[Julien Dumoulin-Smith, Analyst at Bank of America]

All right. I'm going to put it -- duly noted, sir, duly noted. I appreciate it and by the way congrats guys on all the updates there, really nicely done. I mean, to that effect, when you think about the settlement here in Michigan, how do you think about Illinois here and the ability to settle that out at least in part here as you get through the bulk of the hearings here in the near-term. Any opportunities and also any thoughts here on the legislative side going into 2024 for gas in Illinois as well?

[Gale Klappa, Executive Chairman at WEC Energy Group]

Okay, appreciate the question, Julien, very much, tackle the first one first and that's any potential or possibility for a rate settlement in our Peoples Gas and North Shore Gas cases in Illinois. So as many of you know, the way the process really unfolds during normal rate reviews in Illinois, historically settlement windows really don't occur, really don't open until the administrative law judge has prepared a draft order. And if I remember correctly, the schedule for that administrative law judge draft order, probably looks like late October, early November, Scott is agreeing that that's the case.

So if there is a settlement opportunity, I think those discussions would take place, probably in the November timeframe. So we'll see, again, as Scott mentioned in his prepared remarks, the staff has reiterated its position with the 9A3 return-on-equity recommendation and an equity layer higher than what we have at Peoples Gas today. So I hope that responds to your question?

And then as far as legislation related to gas in Illinois, we'll just have to see what takes place. And but first things first, we continue to work on a positive resolution of the cases currently pending before the Illinois Commerce Commission. Hope that helps, Julien?

[Julien Dumoulin-Smith, Analyst at Bank of America]

Certainly does. And then just quickly, if I can. Any thoughts about convertium [Phonetic] and I heard your opening comments, Gale and just curious if open to following the trend across the space?

[Gale Klappa, Executive Chairman at WEC Energy Group]

Yeah, as we look at our financing package that will be needed to support our new Five-Year capital plan, I mean, we'll look at it, it could be part of the mix, but again I think it really depends upon the circumstances at the time, we haven't ruled it out. We follow the -- we follow the companies that have used this particular financing and I think you saw one announced today as a matter of fact. So we haven't ruled it out. We haven't ruled it in, but it certainly will be part of what we look at going forward.

[Julien Dumoulin-Smith, Analyst at Bank of America]

Awesome. Leave it there, I'll follow-up with you, Gale, all right. Take care.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Sounds -- sounds good. Thanks, Julien.

[Operator]

Your next question will come from the line of Shar Pourreza with Guggenheim Partners. Please go ahead.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Shar, you didn't do any permanent damage to those portions, did you?

[Shar Pourreza, Analyst at Guggenheim Partners]

Yeah, that Southern Company that makes.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Well, I noticed, I noticed that you've taken a charge this quarter, so I was worried about what you did now there.

[Shar Pourreza, Analyst at Guggenheim Partners]

We'll have to wait for that one, but thanks for that, yeah. I know you mentioned the Microsoft facility could be in-service by late 2024, early 2025, which obviously that overlaps with your existing Five-Year plan through 2027. Should we be thinking about Microsoft related investment as something that's separate and incremental to the current Five-Year plan or is the focus on really maintaining that 7.7% asset-base growth as you manage customer affordability. So in other words, so could other base spending be pushed out to make room for Microsoft related spending? Thanks.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Well, great question, Shar and first-off, I don't think really just given the magnitude of the construction that Microsoft seems to be planning. My own belief is, we won't see the Microsoft campus in operation in 2024, I think that's just too much of a stretch. My guess although the company is still very much in its refining its plans, my guess is fourth quarter 2025, early 2026 would be my guess for the first element of the plan that Microsoft is putting together to be operational.

And then secondly to your question about would the Microsoft investment that we need to make to support their energy needs and reliability, would that investment be incremental to the plan? Absolutely, incremental to the plan. No, there is any question about that, because it was not in our current Five-Year plan. Although, there are many moving pieces at this stage of the game, but I would just say, this is a really positive exciting opportunity for a major new high-tech investment in our state.

[Shar Pourreza, Analyst at Guggenheim Partners]

Okay, perfect. So we shouldn't look into this crowding out other base related spending as you're managing rate in the vehicle?

[Gale Klappa, Executive Chairman at WEC Energy Group]

No, absolutely. I mean think about -- it's a great question, Shar, but I would think about it this way. I mean clearly with the way our customer rates are set, demand from Microsoft I mean, essentially, I mean given the rate charges that Microsoft would receive, they will pay their fair share of whatever additional capacity and energy is needed. So it wouldn't be a crowd out type of a -- type of a factor at all-in my opinion.

[Shar Pourreza, Analyst at Guggenheim Partners]

Okay, perfect. And then just on the equity comments, Gale, I just want to get a little bit of a better sense on timing and then trigger, is it like -- would it be Microsoft related spending, because I have to imagine if the facilities whatever 25, 26 facility the generation needs would be before that transmission and distribution needs would be before that. So what's the trigger for incremental equity, is it Microsoft or is there other things we should be thinking about?

[Gale Klappa, Executive Chairman at WEC Energy Group]

I think it's both, I mean certainly if we need to add significant capacity to support Microsoft's operation here, but there are other things going on. The other economic developments that have occurred for example, I mean, we talk a lot about HARIBO, but they are now up and running and they've told us they will produce GBP132 million of gummy bears in the next 12 month period. So there's a good bit of economic activity going on. So if you think about -- if you think about transmission and we're going to start to see in the next Five-Year plan, the impact of Tranche one from the MISO planning process, so I think we're going to see an uptick in transmission investments. I think we're going to see clearly some additional capacity need, we need to continue to harden our distribution networks. There are lot of moving pieces and all of them moving in a direction of a stronger capital budget.

And as Scott and I've talked about a stronger for longer in terms of our -- of our continuing growth projections.

[Shar Pourreza, Analyst at Guggenheim Partners]

Okay, perfect. I guess that will wait for [Indecipherable] should be an interesting update and for the record, Gale, I did not crash proportions. Thanks, guys.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Rock and roll, Shar.

[Operator]

Your next question will come from the line of Durgesh Chopra with Evercore ISI. Please go ahead.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Hi, Durgesh. How you're doing?

[Durgesh Chopra, Analyst at Evercore ISI]

Hey, good afternoon, Gale. I'm doing just fine. Thanks for asking. Hey, just, sorry if I missed it, but what drove the $0.08 variance versus guidance like what are the kind of the tailwinds you had which -- which then drove the beat versus your guidance in the quarter?

[Gale Klappa, Executive Chairman at WEC Energy Group]

Shar told me was superior management, but she probably had some more granular answer.

[Xia Liu, Chief Financial Officer at WEC Energy Group]

It was a -- its a little better fuel and quite a bit better O&M and weather was actually slightly negative compared to normal, but better fuel, better O&M and a couple of other items.

[Durgesh Chopra, Analyst at Evercore ISI]

Got it, so I mean, I guess in terms of the guidance for back-half of the year, I'm just thinking about like how are you positioned versus your guidance there. I mean is better O&M versus your plan correct?

[Xia Liu, Chief Financial Officer at WEC Energy Group]

Yeah, we see quite a bit of O&M tailwind coming in the fourth quarter, so we'll expect to see O&M to be much better than Q4 last year. We expect fuel to be better and additional PTCs and other items, but quite a bit of O&M and fuel tailwind in the fourth quarter.

[Gale Klappa, Executive Chairman at WEC Energy Group]

And Durgesh just to add-on to what Xia is saying, if you recall, there were a number of very significant items in Q4 last year, that will not repeat in Q4 this year. So there is a -- there is a very major difference as we compare the comps for Q4 of 2022 and what we expect to happen in Q4 of this year.

[Xia Liu, Chief Financial Officer at WEC Energy Group]

And remember, we guided 2% to 3% higher on day-to-day O&M this year compared to last year. So you see some quarter-to-quarter variances, but for the year, we still expect that to be 2% to 3% higher than last year.

[Durgesh Chopra, Analyst at Evercore ISI]

Understood. Thanks for all that additional color. Maybe just, Xia, just I know we recently talked about transferability and the implications to FFO and there was a lot of discussion amongst your peers on how that needs to be -- how that should be treated. Maybe just any additional color or thoughts there, progress you're making with other stakeholders on how are you going to treat the transferability as cash-flow?

[Gale Klappa, Executive Chairman at WEC Energy Group]

We'll ask Xia to give you the detail on this, but I would say, one very important point to kind of kick-off the answer, is that our entire industry is really aligned around what we believe is the proper treatment of these ongoing transfers that will happen across the industry, the ongoing sale of production tax credits. And that alignment across the industry has really resulted in I think Xia a very thorough and very solid white paper.

[Xia Liu, Chief Financial Officer at WEC Energy Group]

Yeah, EI, developed a very comprehensive white paper, really outlined the views from FASB from the big four accounting firms from the over like Gale said, the industry. So they shared the white paper with the rating agencies and all that is to say, I think everybody is aligned in terms of we plan to follow GAAP and the transferability will go through income tax provision on income statement therefore would be picked up as FFO. So we are looking-forward to continuing to work with the rating agencies on this issue. I will say though is we would not issue equity, just to address that transferability item, but that's something we'll continue to work with rating agencies on.

[Durgesh Chopra, Analyst at Evercore ISI]

Got it, thanks. So sounds like discussion is underway there. Appreciate that color as well. Thank you, guys.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Take care, Durgesh.

[Operator]

[Operator Instructions] Our next question will come from the line of Anthony Crowdell with Mizuho. Please go ahead.

[Anthony Crowdell, Analyst at Mizuho]

Hey, good afternoon Gale, Xia, Scott.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Hello.

[Anthony Crowdell, Analyst at Mizuho]

No dogs, no Porsche's but plenty of gummy bears here. Just just maybe two housekeeping keeping items I had on the PDF Page 12 of your release. Just curious if you could give us some more color, the decline in large commercial industrial sales and maybe I have the wrong view, I typically view them as maybe like weather agnostic, but yet they've come in 3%, just thoughts on that?

[Gale Klappa, Executive Chairman at WEC Energy Group]

Yeah, couple of thoughts and will ask Xia to give you some chapter and verse on some specifics, but two things that -- but as we've looked at the data and again we have a very granular breakdown of the major industrial sectors that we serve. So let me first say, most people just as you mentioned, Anthony, look at large commercial and industrial and it's fairly weather insensitive, fairly as you said, fairly weather agnostic.

I will say though and you've heard me say this a gazillion times, the weather normalization is more, it's more precise than accurate. And as we look at kind of the backdrop of the economy in Wisconsin, as we look to -- look at the jobs that have been added and as we kind of look at the industrial sectors, I would describe the industrial economy in Wisconsin for the first-half of 2023 is really fairly flat. There were a couple of major customers who had outages, planned outages, etc that affected the numbers, but the 3% seems on a weather normal basis, seems a little draconian to me. I think Scott and I have -- Xia really worked through this and we kind of look at it as kind of first-half flat.

But having said that, the most recent data is pretty encouraging, Xia?

[Xia Liu, Chief Financial Officer at WEC Energy Group]

Yeah, just to put it in perspective, in Q1 we saw a minus 3.9% quarter-over-quarter, Q2 that number became better to minus 3.1% like you pointed out, Anthony. I think if you look at Q2 by month, June was fairly close to the forecast. If you look at the last four weeks compared to the last 13 weeks or even the prior four weeks, we're seeing lots of green, actually everything was picking-up. So we are very cautiously optimistic that the large C&I will come back in the second-half of the year. So nothing to worry too much about.

And I would just say that, on residential, it's pretty flat year-over-year and but it's thoroughly better than prior to COVID and that's the key point on the residential usage, small C&I actually year-to-date is on par with with last year. So, those are higher-margin segments.

[Anthony Crowdell, Analyst at Mizuho]

Great. And then just lastly, you've been very clear on what would cause you to issue more equity, Xia, you had said it's -- it's not so much to -- if it was too -- I don't want to say put the words in your mouth, but like but the credit agency, it's more of a growth. Is it fair to say that if you got to the point where there was more growth have to be financed that you would finance that a cap structure that's probably equal to what you have at the regulated utilities or is there an opportunity that you would look to over equitize I guess the term somebody using if you had the additional to get some growth going on?

[Xia Liu, Chief Financial Officer at WEC Energy Group]

I think first and foremost is, we're still developing the capital plan. So the numbers are -- we're still developing it. But like Gale said in his prepared remarks, if growth -- capital growth is significantly higher, we wouldn't mind turning on the employee benefit plans, dribble plans and rely on maybe ATM, but we don't see any block sales at this point, number one.

Number two, we are very confident in our long-term EPS growth forecast, we don't expect any equity sale to dilute the long-term EPS growth. And I'll also say that we're very mindful about the rating agencies and we want to work with them, but the equity would be to support growth.

[Gale Klappa, Executive Chairman at WEC Energy Group]

And a very good description that Xia just made, I will say, she also mentioned and then I would just reiterate, for the one-item on FFO-to-debt that might affect a rating at one particular agency, we wouldn't issue equity simply to chase that particular item...

[Xia Liu, Chief Financial Officer at WEC Energy Group]

As to transferability -- transferability, yeah.

[Anthony Crowdell, Analyst at Mizuho]

Great, thanks for the clarity. And again, congrats on a great quarter.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Great, thank you. Good to see you.

[Operator]

Your next question will come from the line of Michael Sullivan with Wolfe Research. Please go ahead.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Rock and roll, Michael, how are you doing?

[Michael Sullivan, Analyst at Wolfe Research]

Hey, Gale, I'm doing great, thanks. Wanted to just circle back to the Microsoft and just what you're seeing in terms of long-term sales growth potential there? And then maybe if you could just compare and contrast, what this looks like relative to -- there was a lot of excitement around the Foxconn build-out a couple of years ago, I know different companies, different situations, but just in terms of how you think about that from a planning standpoint with another big-name company coming to your service territory?

[Gale Klappa, Executive Chairman at WEC Energy Group]

Yeah, great question, Michael, let me just phrase it this way. I think we will certainly know by the fall and certainly in time for our new Five-Year capital plan what the next, what the time period between now and say 2030 will look like in terms of Microsoft's capacity and energy needs. I mean they are, I mentioned in my prepared remarks, they are full-speed ahead. I mean they purchased 315 acres in a very short period of time in that technology Park. Earth work has already begun. They are still refining their plans. But everything we're hearing from Microsoft would indicate that -- that they are planning a very major investment here and they need to do it in a relatively short timeframe.

So there's really no question in our minds about how strongly intention and how strong the momentum is from the Microsoft development. As it relates to Foxconn, well, back-in 2017, they announced a long-term very, very significant plan they were talking about 10,000 jobs over 10 to 12 years or 10 to 13 years, they were talking about $10 billion of investment.

At this stage of the game, Foxconn, which is working in area one of that park. Foxconn has invested over $1 billion and has over 1,000 employees. So while they have been slower to ramp-up and their business plan has changed almost completely from the original thinking, they are still growing in that area. But Microsoft's I think, they're really not talking at the moment about a long-term 10 to 15-year plan like Foxconn was, they're talking about at least at the beginning here, they've called it an initial investment that they really want to get moving on and that would affect our next Five-Year capital plan. Does that respond to your question, Michael?

[Michael Sullivan, Analyst at Wolfe Research]

Yes, super helpful. And just as a follow-on, I think someone asked earlier, there is been a couple of questions around new capacity needs and new-generation that you might have to build and given the quick turnaround time is further delaying any -- any currently planned retirements contemplated at all things we're looking kind of tied from a timeframe perspective?

[Gale Klappa, Executive Chairman at WEC Energy Group]

Well, that's a great question and we're looking at all of that. We'll let Scott give you his view on that.

[Scott Lauber, President and Chief Executive Officer at WEC Energy Group]

So we're going -- it's a great question. We're going through the planning process right now. We are evaluating what our capacity needs are and you know MISO has changed its capacity needs over the seasonal approach too which will also affect our capital plans as we look at it this fall. So right now, nothing to announce. We're just going through the analysis.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Scott has made a really good point that we shouldn't gloss over though and that is as MISO has looked at it's responsibility to ensure reliability, they really are changing their capacity rules that all of us need to abide by and it will have, but we believe it will have a particular effect on our winter capacity reserves and that's all being factored into our new Five-Year capital plan.

[Michael Sullivan, Analyst at Wolfe Research]

Got it, okay, very helpful. Thanks -- thanks a lot.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Take care, Michael.

[Operator]

With that, I will turn the call back over to Gale Klappa for any closing remarks.

[Gale Klappa, Executive Chairman at WEC Energy Group]

Terrific, well that concludes our conference call for today. Thanks so much for being with us. If you have any additional questions, feel free to call Beth Straka, she can be reached most days, no, everyday at 414-221-4639. Thanks, everybody. Take care.

[Operator]

[Operator Closing Remarks]

Participants

Corporate Executives

• Gale Klappa, Executive Chairman
• Scott Lauber, President and Chief Executive Officer
• Xia Liu, Chief Financial Officer

Analysts

• Julien Dumoulin-Smith, Bank of America Co.
• Shar Pourreza, Guggenheim Partners
• Durgesh Chopra, Evercore ISI
• Anthony Crowdell, Mizuho
• Michael Sullivan, Wolfe Research