WEC Energy Group Inc (WEC) — Q3 2021 Earnings Call Transcript

From America's heartland, good afternoon, everyone. Thank you for joining us today. As we review our results for the Third Quarter of 2021. First, I'd like to introduce the members of our management team who are here with me today. We have Kevin Fletcher, our President and CEO, Scott Lauber, our Chief Operating Officer, Xia Liu our Chief Financial Officer, and Beth Straka, Senior Vice President of Corporate Communications and Investor Relations. I'm sure you saw the announcement last week that our Board of Directors has taken the next step in our long-term succession planning. Kevin has decided to devote more time to his grandchildren and water skiing barefoot on his favorite lakes. He'll be retiring in 2022. We're delighted that Scott will assume the role of President and Chief Executive on February 1. And finally, I've agreed to continue serving as Executive Chairman until our annual stockholders meeting in 2024. Kevin and Scott, of course, have been instrumental in shaping our progress over many years. We wish Kevin all the best, and I look forward to working hand-in-hand with Scott as he takes on his new role. Now, as you saw from our news release this morning, we reported third quarter 2021 earnings of $0.92 a share. Our results were significantly better than expected, driven by warmer than normal weather, continued economic recovery in our region, and our focus on operating efficiency. Our balance sheet and cash flows remain strong. And as we've discussed, this allows us to fund a highly executable capital plan without issuing equity. In just a moment, we will update you on the details of our new 5-year ESG progress plan, a plan that will cover our investments in reliability and decarbonization over the period 2022 through 2026. As we've reported to you, we're well on our way to achieving some of the most aggressive goals in our industry for reducing carbon emissions. Across our generation fleet, we're targeting a 60% reduction by 2025 and an 80% reduction by 2030, both from a 2005 baseline. Importantly, we have a roadmap to reach these goals without any major advances in technology. So today, we're announcing that our use of coal will continue to decline to a level that we expect will be immaterial by the end of 2030. By the end of 2030, we expect our use of coal will account for less than 5% of the power we supply to customers. Many of you have also been asking, when can we exit coal completely? Here's the answer. We believe we will be in a position to eliminate coal as an energy source by the year 2035. The next logical question is what does this mean for the modern coal-fired units at our Oak Creek site? As you recall, these units were part of our Power of the Future plan and were completed only about a decade ago. While our modern units at Oak Creek will remain a key part of our fleet for many years to come, these Power of the Future units rank as some of the most efficient in the country, among the top 5% of all coal-fired plants in heat rate performance over the past decade. Strategically, as we've discussed, they are located to support reliability on the Midwestern transmission grid. Fortunately, we can plan for the future of the new units at Oak Creek with fuel flexibility in mind. We've tested co-firing on natural gas at the site. So, subject to the receipt of an environmental permit, we plan to make operating refinements over the next 2 years that will allow a fuel blend of up to 30% on natural gas. And then over time, we will be able to transition completely away from coal by making incremental investments in plant equipment. This would include, for example, new burners. And of course, we will need additional pipeline capacity reaching into the site. So we see a very bright and long future for the newer units at Oak Creek. And now let's take a look at the capital plan that will continue to shape a decarbonizing economy. For the period 2022 through 2026, we expect to invest $17.7 billion. Our focus remains on efficiency, sustainability, and growth. This ESG progress plan is the largest capital plan in our history, an increase of $1.6 billion or nearly 10% above our previous 5-year plan. We expect this plan to support compound earnings growth of 6% to 7% a year over the next 5 years without any need to issue new equity. We will be increasing our investment in renewables for our regulated utilities from 1,800 megawatts of capacity in our previous plan to nearly 2,400 megawatts in this brand new plan. These carbon-free assets include solar, wind, and battery storage. We're also dedicating more capital to hardening our electric distribution networks so that we can maintain a superior level of reliability for our customers. Investments in our gas delivery systems and the development of renewable natural gas will support our goals for the gas distribution business as well. As a reminder, we are targeting net zero methane emissions by 2030. To add it all up, we have what I really believe is a premium growth plan. The projects that are driving our growth are low-risk and highly executable, and they're accelerating the transition to a clean energy future. With that, I'll turn the call over to Scott for more details on our sales results for the quarter, as well as an update on our infrastructure segment. Scott, all yours.

Thank you, Gale. We continue to see customer growth across our system. At the end of September, our utilities were serving approximately 8,000 more electric customers and 15,000 more natural gas customers compared to a year ago. Retail electric and natural gas sales volumes are shown on a comparative basis, beginning on Page 13 of the earnings packet. Overall, retail deliveries of electricity excluding the iron ore mine were up 2.4% from the third quarter of 2020 and on a weather-normal basis were up 2.5%. We continue to see economic rebound in our service territory. For example, small commercial and industrial electric sales were up 3.5% from last year's third quarter, and on a weather-normal basis, they were up 4.2%. Meanwhile, large commercial and industrial sales, excluding the iron ore mine, were up 3.8% from the third quarter of 2020, and on a weather-normal basis, were up 3.5%. Natural gas delivery in Wisconsin was up 1%. This excludes gas used for power generation, and on a weather-normal basis, natural gas deliveries in Wisconsin grew by 2.5%. Overall, our growth continues to track ahead of our forecast as the economy continues to open up. Turning now to our infrastructure segment, our new capital plan calls for an investment of $1.9 billion between 2022 and 2026. Considering the 3 projects that are currently under development, we expect to invest an additional $1.1 billion in that timeframe. As a quick reminder, we have 8 wind projects, all with long-term off-takers. Announced or in operation the infrastructure segment represents approximately $2.3 billion of investments. As previously discussed, our Jayhawk Wind Farm is projected to go into service by early next year, and our Thunderhead Wind investment is projected to go into service in the first half of 2022. These timelines have been factored into our updated capital plan. With that, I will turn it over to Kevin for an update on our Utility Operations.

Thank you, Scott. First I'll cover some developments here in Wisconsin. I'm pleased to report that our Badger Hollow 1 Solar project is just weeks away from completion. You'll recall that we own 100 megawatts of this project in Southwest Wisconsin. For the next phase of the project, Badger Hollow 2, we are now performing civil work and grading. Our target for completing that project is the end of 2022. That date will depend on module supply, which is uncertain as we await clarity on matters before the Department of Commerce. Now, for a few regulatory updates, we expect a decision from the Wisconsin Commission shortly on our plans to build two liquefied natural gas storage facilities in the southeastern part of the state. This proposed investment would greatly enhance customer savings and reliability during Wisconsin's cold winters. Pending approval, we expect the facilities to enter service in late 2023. They are projected to save our WEC Energy's customers approximately $200 million over time. We also have updates on the rate reviews at two of our smaller utilities. The Illinois Commerce Commission unanimously approved the final order for our rate case at North Shore Gas. The order authorizes a rate increase of 4.5%, including an ROE of 9.67% and an equity ratio of 51.58%. New rates went into effect on September 15. The Michigan Public Service Commission unanimously approved a settlement in our rate case for Michigan Gas Utilities. The settlement authorizes a rate increase of 6.35%, including an ROE of 9.85% and an equity ratio of 51.5%. New rates will be effective January 1. We have no other rate cases pending at this time. As we look forward to the winter heating season ahead, I am pleased to report that we are ready. We have our gas contracts in place, and our gas inventories are at our targeted levels. And with that, I'll turn it over to Xia.

Thanks, Kevin. We continue to deliver quality and consistent earnings. Our 2021 third quarter earnings of $0.92 per share increased $0.08 per share compared to the third quarter of 2020. Our favorable results were largely driven by higher earnings from our utility operations. Our regulated utilities benefited from the strong economic recovery in our region, continued execution of our capital plan, and our focus on operating efficiency. The earnings packet placed on our website this morning includes a comparison of third quarter results on Page 17. I'll walk through the significant drivers. Starting with our utility operations, we grew our earnings by $0.05 compared to the third quarter of 2020. First, continued economic recovery from the pandemic and stronger weather-normalized sales drove a $0.03 increase in earnings. Also, rate relief and additional capital investment added $0.04 compared to the third quarter of 2020 and lower day-to-day O&M contributed $0.04. These favorable factors were partially offset by $0.04 of higher depreciation and amortization expense and $0.02 of increased fuel costs related to higher natural gas prices. It's worth noting that we estimate weather was $0.05 favorable compared to normal in the third quarters of both 2021 and 2020. Overall, we added $0.05 quarter-over-quarter from utility operations. Moving on to our investment in the American Transmission Company, earnings increased $0.01 compared to the third quarter of 2020, driven by continued capital investment. Earnings at our energy infrastructure segment improved $0.01 in the third quarter of 2021 compared to the third quarter of 2020. This was driven by production tax credit related to wind farm acquisitions. Finally, we saw a $0.01 improvement in the corporate and other segment. This increase was primarily driven by lower interest expense. In summary, we improved on our third quarter of 2020 performance by $0.08 a share. Now, I'd like to update you on some other financial items. For the full year, we expect our effective income tax rate to be between 13% and 14%. Excluding the benefit of unprotected taxes flowing to customers, we project our 2021 effective tax rate will be between 19% and 20%. As in past years, we expect to be a modest taxpayer in 2021. Our projections show that we will be able to efficiently utilize our tax position with our current capital plan. Looking now at the cash flow statement on Page 6 of the earnings package, net cash provided by operating activities increased $57 million. Our increase in cash earnings in the first 9 months of 2021 more than offset the higher working capital requirements. As expected, with normal collection practices underway in all of our service territories, we made great strides in improving our working capital position in the third quarter. Total capital expenditures and asset acquisitions were $1.7 billion for the first 9 months of 2021, a $129 million increase as compared with the first 9 months of 2020. This reflects our investment focus in our regulated utilities and energy infrastructure business. Looking forward, as Gale outlined earlier, we're excited about our plans to invest $17.7 billion over the next 5 years in key infrastructure. This ESG progress plan supports 7% annual growth in our asset base. Pages 18 and 19 of the earnings package provide more details of the breakdown of the plan, which I will highlight here. As we continue to make our energy transition, nearly 70% of our capital plan is dedicated to sustainability, including $5.4 billion in renewable investments and $6.8 billion in grid and fleet reliability. Additionally, we dedicated $2.8 billion to support our strong customer growth. We also plan to invest $2.7 billion in technology and modernization of our infrastructure to further generate long-term operating efficiency. With our strong economic development background and our continued focus on efficiency, sustainability, and growth, we see a long runway of investment ahead, even beyond the next 5 years. In closing, before I turn it back to Gale, I'd like to provide our guidance. We're raising our earnings guidance again for 2021 to a range of $4.05 to $4.07 per share with an expectation of reaching the top end of the range. This assumes normal weather for the remainder of the year. This is the second time we're raising our guidance. If you recall, our original guidance was $3.99 to $4.03 per share. With that, I will turn it back to Gale.

Xia, thank you very much. We're on track for a solid year; again, in light of our strong performance, our guidance range now stands at $4.05 to $4.07 per share. We're also tightening our projection of long-term earnings growth to a range of 6% to 7% per year. And finally, a quick reminder about our dividend. As usual, I expect our board will assess our dividend plans for next year at our scheduled meeting in early December. We continue to target 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. Overall, we're on track, focusing on delivering and providing value for our customers and our stockholders. And Operator, we're now ready to open it up for the Q&A portion of the call.

Hey guys.

Rock and roll, Shar. How are you doing?

Not too bad. Not too bad, Gale. Appreciate it. So just a couple of questions and Gale, when I unpacked your comments around the Oak Creek Power of The Future units because I think that's somewhat pretty material. Any estimate around capital cost to fully convert from coal to gas and what the heat rate of those units would be. I know the contracts are obviously tech-agnostic, but would shifting also base load units to essentially higher heat rate speakers have any kind of ramifications under the terms of the contracts with the unit service capacity or do you expect to run them all the time? Thanks.

Great question, Shar. And I'm going to ask Scott to give you some details as well. Let me say one thing though. I would not expect as we move through the transition at the new Oak Creek units between now and 2035. I would not expect them to run simply as speakers. They're probably going to run much more like our Port Washington units, which are highly efficient combined cycle units. So I wouldn't make the conclusion that they will run as speakers; they're very much going to be needed for reliability. No question about that. In terms of capital, I mentioned that the incremental capital investments in the plant, and I'm going to have Scott give you the details. I can tell you, though that after a lot of work and a lot of analysis, we still have more to do for the long run. But after a lot of work and a lot of analysis, we are convinced that this is an economic thing to do for customers. Scott.

Sure, Gale. Looking back at the initial steps to reach that 30% target, we are considering a modest investment of around $30 million to enable co-blending with some gas and a bit of coal. As we project towards 2030 and 2035, the total cost for a complete conversion would be about $150 million, but this analysis is still in the early stages, and we will provide more information as we continue to develop it.

Thank you for that. Gale, the $1.6 billion increase in the Capital plan is clearly significant. As you pointed out, it is largely driven by electric investments, potentially at the cost of energy infrastructure and gas spending. So, as you look ahead, electric spending has increased by about $2 billion, while infrastructure and gas expenditures have decreased by around $450 million. Is this indicative of a broader and more sustainable strategic shift in growth focus going forward, or is it merely a timing issue, especially considering your plans beyond 2025?

Thank you for the question, Shar. We always begin by identifying needs, and we prefer to invest in regulated assets that provide clear benefits to customers. Looking at our capital plan, while the increase is significant, it's important to note that this is the largest 5-year capital plan we've ever had at $17.7 billion. You mentioned two key points, which are accurate. Firstly, we will be adding a considerable amount of renewable energy to ensure reliability as we retire older, less efficient coal-fired plants during this period. This means that we need to replace part of that capacity with carbon-free energy, leading to increased investment in regulated renewables compared to the previous 5-year plan. Secondly, we have aging distribution infrastructure that we need to address. Although we have invested in it before, we are now at a stage where it is imperative to replace this infrastructure. These are the two main factors driving the changes in this 5-year capital plan compared to the last one. Does that answer your question?

It does, and that's super helpful, Gale. And then just lastly is just on the infrastructure segment. On that roll-forward, does the contracting spending profile indicate anything about project returns you're seeing or pressure from input costs, or is it just really a function of limited capital flowing to newer regulated opportunities instead? So are you seeing any of these pressures in the business that others are seeing?

No, we have addressed this question previously. The last project we announced a few months ago, Sapphire Sky, is projected to have the best returns among the eight projects. We are not experiencing any decline in potential returns or the strength of our pipeline. Additionally, we have two announced projects that are not yet in service, Jayhawk and Thunderhead, my James Bond Project. Furthermore, there is still more than $1 billion planned for investment in this five-year capital plan. We remain very active and are seeing the positive returns we anticipated.

Fantastic. Thank you for that and congrats Scott and Kevin on phase two, and Gale, don't go anywhere. It's appreciated.

Thank you very much.

Greetings, Gale, how are you doing?

Hey, Gale, good afternoon. Hi, everyone.

First of all, just on the new growth rate, the 6% to 7%, should we assume that that is based off of the initial 2021 guidance?

Yes. Yes.

Okay. I just wanted to know.

I'm glad you asked. The short answer is yes. And then just to kind of put some numbers around it. Historically, what we've done is looked at the midpoint of our original guidance and then give you guidance, in this case, the 6% to 7% off of that. So the midpoint of our original guidance for 2021 is like $4.01 a share.

Okay. Great. Regarding the spending to convert the newer Oak Creek units, I understand it's relatively modest, but will that spending be recoverable under the lease structure of that law or will it be handled through the normal rate base? How will that work?

Now, the short answer, Steve, is that we obviously have to get commission approval for any investment of that kind, but it would be under the way the lease works, it would be under the Power the Future terms.

Okay. Is there any possibility that the end dates could be extended if you take steps to prolong the period, or are those dates fixed by law?

There is currently a 30-year end date for the lease of the new Oak Creek units, starting from their operational date. The Commission originally established this 30-year lease, but the agreement allows for the possibility of extending it. This matter will likely be addressed around 2040, and I know you will still be working on it.

You're not going to be the Chairman then. And you'll still be Chairman. Last question, and this is a broad one. I'd be curious your take on the, I guess it's the Build Back Better Infrastructure Bill and potential implications and opportunities for WEC from that and chances you think it will pass.

It's such a sausage-making machine in Washington as you know, but if I were a betting man, I think something will pass. And it appears, as you've seen, Steve, that there is strong support for the renewable tax credit portion of that Build Back Better plan. That seems to have stuck in every single version or iteration of the plan. So again, if I were a betting man, I would say that extensions of renewable tax credits will happen. And it looks like there's a strong possibility that what they call Direct Pay will occur. Now, if Direct Pay is a part of the renewable package, if you will, in that plan, then that clearly enhances our opportunities. It's good for customers, it's good for cash flows. It's good for the growth of our regulated business. It's good for the growth of our infrastructure segment. So I think a key to watch is not only the 10-year extension that they're talking about of production tax credits but also the flexibility on tax credits for solar, and a big key would be the direct pay. That would be a strong positive and would also have a step back and look again at what is doable and what's needed here.

Great. Thanks so much.

You're welcome, Steve. Thank you.

Hey, good afternoon team. Thanks for the time. Congratulations.

You're on the road again, Julien?

Trying to stay out of that, call it what it is. I appreciate it. And congratulations again to Kevin and Scott here. If I can pick it up where perhaps left off on the coal side. What about Weston here? You made the broader comment, not just about Oak Creek, but about the wider nature of coal within your portfolio. Can you comment on that asset? And I have a follow-up.

Sure. I will give you an answer and then I'm going to let Shar and Scott give you a little bit more detail. But the Western units, which for those of you who may not be familiar, the Western units are relatively new coal-fired units that are an integral part of the Wisconsin Public Service Generation Fleet, the Company that we acquired based in Green Bay. Western is a real workhorse. Again, we may have some flexibility there that we're looking at now in terms of optionality for the Western units. Scott?

Yes, Gale. At the Western and particularly the newer units, less than 4, we actually have done some coal firing on that with some natural gas also. So we'll be evaluating that as an option as we go through the next several years here. But we do realize that it's a very critical part of the state, and we want to make sure we have the reliability at that location. We're going to continue to evaluate it.

And Julien, to your question, which is a good one, and everyone should know, we have a path here to have a really significant change in our portfolio to support decarbonization and to get to aggressive environmental goals. We can do that without sacrificing reliability. We don't have to do that as we work through our plan.

Excellent. Thank you for clarifying that. If I can ask just on the infrastructure side, just elaborate on this. You said a moment ago your Sapphire project, for instance, is amongst the best returns you had thus far in your efforts. And obviously, you're relatively scaling this down. Is this more about keeping the infrastructure segment within a 10% bucket of total earnings, and having effectively achieved that with this 5-year outlook, and that's what's driving a little bit of scaling back? Or conversely, is this just about being conservative and arguably whether it's Direct Pay or simply finding opportunities that exceed that allocation that you could actually be exceeding these budgets?

Let me just say this. We're usually conservative, and that won't surprise you. I would look at what we've just laid out here for that segment of our capital spending over the next 5 years as a really strong placeholder, which we will then once we see what's in that Build Back Better plan. We'll step back and see what opportunities it might give us. So I think the short answer to your question, and Xia is smiling and nodding her head. We're being appropriately conservative today.

Excellent. Sorry. Just clarifying the earlier comment on what's the FFO-to-debt improvements, if you can quantify that at all?

I'm sorry, you broke up, Julien. Can you ask that one more time?

Sorry, regarding the Balance Sheet, how much improvement do you expect in your credit metrics under the current plan? Do you have any insight on that?

Julien, we're looking at the details as you know that the language just came out, so we wanted to study the specific implications, but I think in general we could look at between 50 to 100 basis points improvement just looking at the first glance of the language.

Excellent. Thank you, guys. Wow, impressive. Cheers.

Hello, Durgesh, how are you doing today?

Hey, Gale, good afternoon, and congratulations to Kevin and Scott as well. I have two questions. First, am I correct to think that there will be no equity in the plan through 2026?

Yes. Yes, and yes.

Okay. Just wanted to clarify that. That's great. And then maybe just really quickly, some of your peers have talked about, given us some sensitivity on natural gas price increases and customer will impact to the extent that you can help us with that, that would be greatly appreciated.

Sure. Let me provide you with a dollar figure, and Scott can share some additional details. We serve a natural gas market that includes most of Wisconsin, Chicago, the northern suburbs of Chicago, parts of Western Michigan, and various locations across Minnesota. Depending on the location within our service area, the average monthly bill increase for our residential customers, taking into account our efforts to mitigate higher gas prices through hedging and storage, is expected to be between $25 and $40 during each month of the heating season based on current conditions and what we have secured. I can share that we have consistently pursued aggressive hedging strategies, along with gas storage and option contracts, and we are satisfied with our ability to lessen the significant increase in natural gas prices. Scott?

Now, that's exactly correct, Gale. So we've got about 1/3 of our gas in storage that we fill throughout the year, and as Kevin mentioned, those storage levels are where we wanted to be at this time. We also have a lot of 1/3 of the hedging programs so that $25 to $40 looking at the current prices, and we don't expect that to move too much with our hedging program or storage inventory.

And is there a percentage of total bill? What's that like 25% to 30%? Am I thinking that the right way?

Yes, it's about 30% to 40% depending upon the area.

Thank you, Durgesh.

Good afternoon, Jeremy.

Hi, good afternoon. And thanks for having me here.

Nice being ahead, Jeremy.

Just the last one on Oak Creek. Care if I could. Just wanted to see with regard to the timeline of 2035, how that date was established at the right timeline as opposed to something earlier or later.

It's a great question. It all comes back, as we've talked this through with our operating people, with our technicians, with our outside experts. It all comes back to the proper transition to continue aggressive CO2 reduction while maintaining reliability. We're quite confident that by 2035 at the latest, we can adjust our fuel source at Oak Creek such that coal will be a backup source. I mentioned to you that our view is that our use of coal for power supply for our customers will be almost immaterial in our planning by 2030, less than 5% of our total power supply. So we're going to continue to increase the fuel blending at Oak Creek and making sure that we maintain that high standard of reliability, which we've got to have. But it really is a thought about how quickly can we go and maintain reliability in step increments. That's our current view. We'll see how it goes, but we're very confident about the trajectory between now and 2030. If the trajectory is even better, then we'll see where we go. But it's really our best estimate of how to make continued progress on aggressive environmental goals while maintaining reliability.

Got it. That's very helpful, thanks. And just one last one from me on the new 6% to 7% growth target, what's different now versus prior to the change? Just give me your directional guidance and since growth has already generally trended at the high end of the range, just wondering what prompted today's change in message?

We have refreshed our 5-year capital plan, which has increased from $16.1 billion to $17.7 billion, representing a 10% increase. This adjustment gives us confidence in achieving a growth rate of 6% to 7%.

Got it, makes sense. I suppose WEC operational execution might feed into it a little bit as well, but appreciate the CapEx uplift there.

Let me just say this, the operational execution had heard.

Afternoon, Andrew.

Hi, everybody. First question on O&M. I see the income statement is flattish on a year-to-date basis. Can you give us a figure on what you call the manageable or day-to-day O&Ms? And I know you've been targeting at 2% to 3% year-over-year reduction on that metric. Is that still a good number, or should we expect some spending to be pulled from 2022 given the strong year-to-date earnings results?

Xia has the answer for you.

So we're looking at the projection for the year taking into consideration what has happened over the past three quarters and what we expect to see. The 3% range is still a very good number with the day-to-day reduction compared to the annual 2020.

Okay. Great. And the next question is on rate cases. Congrats on having such a clear near-term outlook. Can you talk about expectations for the next filings? I think you previously talked about May 2022 for Wisconsin. Is that still a good placeholder, or does it seem that smaller subs might see activity over the coming months?

Well, yes, for our Wisconsin utilities late spring 2022 or certainly by no later than May 1 of 2022, that's the plan for filing our next rate reviews for the Wisconsin Utilities. Recall that we are, I believe, the only state in the U.S. that has a 2-year forward-looking test period for those rate reviews. So we're looking forward to having the rate reviews done next year in Wisconsin. Kevin and Scott, I don't know of any other plan. I mean, we just, as Kevin described, we just finished rate reviews for North Shore Gas in Illinois, for Michigan Gas Utilities, and nothing else seems to be on the docket.

Gale, just as I said in my remarks, we have no other plans at this particular time. Thanks for the question.

It's a great position to be in, thank you team.

Thank you.

Rock and Roll, Michael.

Hey guys, thank you for taking my question. Just curious, in the 5-year plan, can you walk us through a little bit of the cadence of the change? Meaning is the change mostly in '22 and 2023, or is it more in kind of the back-end of the plan?

Sure, Gale. When we look at the plan, it's actually throughout the plan. In fact, when you look at it compared to this year's plan, the prior capital plan in years 4 and 5, it kind of tapered off. In this particular year, especially as we laid out more and more as our energy transition and these projects stay in over time, it's actually a flatter outlook as you look through it. So it really blended in well and when you think about us putting in the generation and agreeing very measured, you've got to make sure you get the generation in and go to the next projects. So it's very deliberate on how we laid it out.

Xia, anything you'd like to add.

I agree. I think the 2 areas would be the renewable investment and the grid and fleet reliability investments. We are adding investment in all 5 years in both categories.

As we look beyond the new 5-year plan we introduced this morning, one thing that Xia mentioned is very clear to us. The investments in grid modernization and reliability will continue to grow well beyond this 5-year period because the need will persist.

Right. Oh, no, you've got a massive opportunity in Wisconsin and elsewhere on the system. Just curious though, I want to make sure I follow-up, can you give any cadence for like what years within just the Wisconsin regulated business, what amount of potential new megawatts of renewable is in this plan that hasn't already been announced?

That hasn't been announced.

Yes. So there are approximately under solar side that hasn't been announced, approximately 700 megawatts on the solar and then another about 500 in the batteries.

Got it.

As you know, we have several of the largest wind farms already and nothing additional just that one that we've already filed for in the wind.

And much of the batteries really can be deployed at existing sites.

Got it. And so when you think about this, that 700 megawatts of solar, 500 megawatts of battery, that's spread throughout the 5 years of the plan.

Correct. Yes. Correct.

It's going to see a consistent growth that we look at our renewables over the next 5 years.

Got it. And then the one thing and it's smaller, but I noticed that there is an uptake in expected CapEx at ATC. And we haven't really seen an uptake in expected CapEx in ATC for a while. Can you talk a little bit about what's driving that and whether this is a beginning of a cycle of continual increase in spend at ATC or is it just a little bit more of a loss?

And Kevin, of course, is the Chairman at ATC. I want to ask him to comment on this, but one of the things that is notable here that I think Kevin will continue is that ATC has a lot of maintenance capital that is just really going to be required to maintain the reliability of the existing transmission network. I think that uptake in maintenance capital, Kevin, is a significant driver here.

It is just like it is on our retail side that's exactly right. Also, as you know, there's a lot of renewable projects that are planned on board. So that will help drive some of that CapEx investment over the next 5 years and even into the future from that perspective. So, maintenance as well as new needs from renewables as the drivers.

Got it. Thank you, guys. Much appreciated.

You're welcome, Michael. Hang in there.

Greetings, Vedula?

Hello, Gale. How are you?

We're good. How are you doing?

I'm okay.

How's your friend Matt Doug doing?

Matt Doug?

Never mind. Your friend at

I'm slow today.

Is it WFAN in New York?

Oh, yes, my twin brother works there. You're doing very well. Thank you.

Very good.

Yes. A topic I'm going to ask about is electric vehicles and associated infrastructure. I mean, we saw the other day large announcements by Hertz in terms of wanting to convert over their fleet in choosing Tesla itself as their preferred provider, etc. Can you give us a sense as to right now what how large your fleet that you have that's addressable to be converted to electric? And kind of how you're thinking about that over a period of time? And kind of based on how the fleet runs, CapEx characteristics in features, etc., that you'll be looking for as you do the transition?

Vedula, are you thinking about our own fleet that you're asking about?

Yes.

All right. We've made a commitment. I'm actually going to ask Kevin to give you the details. We've made a commitment to be part of a national plan to, in a very reasonable time frame, to continue to add materially to our operating fleet on the ground, to our bucket trucks, to our other vehicles to continue to transition them to EVs. I'll ask Kevin to give you the details on that and then I'll come back and I want to talk very briefly about a pilot program that is beyond our own fleet, but a pilot program for our customers that we just got approved a couple of months ago. Kevin?

Gale, for our cars and SUVs specifically for our fleet as you're asking about, we have a goal of 35% to be purchased of EVs between now and 2025, and then for the larger trucks, or our Class 3 trucks, our goal is that 25% of those would be EVs by that point in time. We're also looking at some of the fleets instore, looking at our forklifts and the equipment that we use for moving our products around. Looking at those have targets for those as well.

And Kevin wanted to buy some new electric motorcycles from Harley, but we'll talk about that later. We just got approved a pilot program from the Wisconsin Commission. We're in the very early stages. We'll talk more about it as we roll out some of these options for our customers, but essentially the pilot program is to help with the affordability for particularly large commercial customers, hotels, etc. the affordability of installing charging stations. That program is again, just now in the earliest stages, we'll talk more about that as we get some customers to sign up. But early on as our key account folks talk to our large customers, there is significant interest in moving forward with putting EV charging stations in offices, hotels, parking lots, etc.

I hope that responds to your question Vedula. Our fleet is one, but we're also working on large customers and the biggest opportunity as our large customers are looking at their fleets, not just our internal fleet, but that goes hand-in-hand with what Gale shared with the pilot that we're working on. Thank you for your question.

Thank you very much.

Terrific. Thank you, Vedula. Ladies and gentlemen, that concludes our conference call for today. Thanks so much for participating and for all your good questions. If you have any other questions, feel free to contact Beth Straka. She can be reached at 4142214639. Thanks, everybody. So long.