WEC Energy Group Inc (WEC) — Q3 2024 Earnings Call Transcript

Good afternoon, everyone, and thank you for joining us today as we review our results for the third quarter of 2024. Here with me are 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 third quarter 2024 adjusted earnings of $0.82 per share. This excludes a charge of $0.06 per share related to the disallowance of certain 2016 capital expenditures under the Qualifying Infrastructure Plant rider in Illinois. With this solid quarter, we remain on track for a strong 2024. Our focus on executing the fundamentals of our business is creating real value for our customers and stockholders. Today we're reaffirming our earnings guidance for the year. On an adjusted basis, the range is $4.80 to $4.90 a share. Of course, this assumes normal weather through the remainder of 2024. We continue to see a strong foundation of growth in the region. The unemployment rate in Wisconsin stands at 2.9%, continuing a long-running trend below the national average. Microsoft is making good progress on its large data center complex in Southeast Wisconsin. The company has continued to increase its landholdings as part of this development. It has been reported that Microsoft now owns more than 1,900 acres, up from 1,300 acres at the beginning of the year, and work is well underway. We're seeing development elsewhere in the state as well. Amazon, for example, opened a 1.1 million square foot warehouse in Kenosha earlier this year. The company is growing steadily with additional distribution facilities and is also starting to use electric delivery vans in its fleet. And in Green Bay, Georgia-Pacific completed a major mill expansion just last month, with an investment of $550 million. Of course, this growth is spawning small commercial and residential development throughout the region. This highlights the strength and the potential of our local economy and underscores the need for the investments in our updated capital plan. And speaking of the capital plan, we're very excited to roll out the plan for the period 2025 through 2029. As you may have seen from our announcement this morning, we expect to invest $28 billion over the next five years. This is the largest capital plan in our history, an increase of $4.3 billion above our previous five-year plan. That's more than an 18% increase. Once again, a major factor in our plan is the economic growth we're seeing in Southeastern Wisconsin, particularly in what we call the I-94 corridor between Milwaukee and the Illinois State line. This plan supports 1,800 megawatts of additional demand over the next five years. That's an incremental 400 megawatts from our previous plan. In our new five-year plan, we expect our asset-based growth to average an 8.8% a year. This supports our long-term projected earnings per share growth of 6.5% to 7% a year on a compound annual basis. As I mentioned, we increased our capital plan by $4.3 billion, driven by an increase in regulated electric generation, transmission and distribution, and partially offset by a reduction in energy infrastructure. Let me give you a few updates on the details. Over the next five years, we'll continue to transform our power generation fleet to support economic growth, reliability, and compliance with the EPA rules by investing in renewables and natural gas generation. Between 2025 and 2029, we plan to increase our investment in regulated renewables by $2.1 billion over our prior plan. In total, we plan to invest $9.1 billion in 2,900 megawatts of solar, 900 megawatts of wind, and almost 600 megawatts of battery storage. That adds up to 4,400 megawatts, more than quadrupling our carbon-free generation from where we are today. These resources save on fuel costs and provide benefits to customers through tax credits. To support economic growth and system reliability, when the wind doesn't blow and the sun doesn't shine on those extreme weather days, we need dispatchable resources. We expect to spend an incremental $900 million on modern efficient natural gas generation over the next five years versus the prior plan. This includes both combustion turbines and reciprocating internal combustion engines or RICE units. Also, we plan to invest an additional $400 million in liquefied natural gas capacity for another two Bcf facility. This will be used to meet customer demand for heating and ensure gas supply for our power generation. In addition, American Transmission Company will be adding transmission capabilities to serve the region's robust economic growth, connecting new renewables and strengthening of the system. Our plan calls for us to invest $3.2 billion in that effort between 2025 and 2029. This represents a $200 million increase from the previous plan. And to help ensure reliability and support economic growth, we're continuing to invest in our distribution networks with an additional $700 million in the plan. Given the significant investment opportunity in our regulated businesses, we have reduced our planned investments in our infrastructure segment by $800 million compared to the last plan. This leaves us approximately $400 million in the plan for next year. And today, I'm pleased to announce our plan to acquire a 90% interest in Hardin Solar III Energy Park located in Ohio. We expect to invest approximately $410 million to add 250 megawatts of renewable energy to our infrastructure portfolio when the projects come online, currently expected in the first quarter of 2025. Our future is bright, investment opportunity has never been stronger, and we're focused on execution. We look forward to providing more detail on our plan in just a few weeks at the EEI conference. Turning to the regulatory front, I have a few updates across our service areas. In Wisconsin, rate reviews are nearly complete for test years 2025 and 2026. All testimony and hearings are concluded in the case and we expect the decision by the end of the year with new rates effective January 1, 2025. As you know, in Michigan, the Public Service Commission has now approved the settlement in the 2025 rate cases for both Michigan Gas Utilities and Upper Michigan Energy Resources, each with an ROE of 9.86%. In Illinois, we're actively engaged in two dockets. One is the review of the Safety Modernization Program. The next steps are an ALJ proposed order at the end of November, final briefings to the ICC in December, and the commission's final decision expected in the first quarter of 2025. The other docket is an evaluation of the future of natural gas in Illinois, which was initially planned to conclude next year. The ICC has extended this docket into 2026. Of course, we'll keep you updated on any further developments. Now, I'll turn it to Xia to provide you with more details on our financial results and our financing plans.

Thank you, Scott. Turning now to earnings. Our third quarter 2024 adjusted earnings were $0.82 per share. This excludes the $0.06 per share charge related to the disallowance of certain 2016 capital expenditures under the QIP rider in Illinois. While this was a decrease of $0.18 per share quarter-over-quarter, we did exceed our Q3 guidance range, driven by more favorable September weather, financing, and timing of tax items compared to the guidance. As Scott indicated, we remain on track to meet our 2024 adjusted earnings guidance. Now let's look at our quarter-over-quarter variances. Our earnings package includes a comparison of adjusted third quarter results on Page 16. I'll walk through the significant drivers. Starting with our utility operations, adjusted earnings in the third quarter of 2024 were $0.18 lower when compared to 2023. This decrease was driven by the Illinois rate design change, higher O&M, depreciation and amortization, and interest expense. These items more than offset favorable weather, timing of fuel expense, taxes, and other items. Specifically, on weather, compared to normal conditions, we estimate that weather had a $0.02 positive impact in the third quarter of 2024 compared to a $0.01 positive impact in 2023. Also, as I reminded you on the last few calls, with the rate design changes at Peoples Gas, base revenues are now more concentrated in the first and fourth quarters when natural gas usage is the highest. This shift resulted in lower third quarter earnings compared to the prior year. Before I turn to earnings at the other segments, let me briefly discuss our weather-normal electric sales for the quarter. Retail electric deliveries in Wisconsin, excluding the iron ore mine, were up four-tenths of 1% quarter-over-quarter. Sales from residential and small C&I segments both slightly increased compared to Q3 last year. Overall, year-to-date, retail electric volumes are in line with our forecast. Looking at ATC, continued capital investment contributed an incremental $0.01 to Q3 earnings compared to 2023. Remember, we have been recognizing earnings at 10.38% ROE. I'll discuss in a few minutes that we have some tailwinds in Q4 related to FERC's recent decision of 10.48% ROE. And in our Energy Infrastructure segment, earnings improved to $0.06 in the third quarter of 2024 compared to the third quarter of 2023. This was primarily driven by production tax credits resulting from higher PTC rates approved by the IRS in the third quarter as well as a quarter-over-quarter increase in production from our renewable generation facilities. Finally, you'll see that earnings at our Corporate and Other segment decreased by $0.07 as a result of the impact of tax timing and higher interest expense. As Scott noted, we are reaffirming our 2024 annual guidance on an adjusted basis. That range is $4.80 to $4.90 per share. This includes October weather and assumes normal weather for the remainder of the year. Year-to-date compared to last year, we are $0.07 behind, largely due to weather. However, looking ahead, we have some tailwinds in Q4 this year. This will help us to achieve our adjusted earnings guidance. For example, as I mentioned just now, we have been recognizing earnings at ATC assuming a 10.38% ROE. With FERC's decision on the 10.48%, we will be able to unwind a reserve at ATC in Q4 to reflect this change. This item is about $0.05 a share that we have included in our guidance. And recall, weather was $0.07 unfavorable in Q4 last year. Assuming normal weather for the remainder of this year, it should also be a tailwind. Overall, we remain on track to meet our 2024 adjusted earnings guidance. Now turning to our financing plan. For 2024, we continue to utilize dividend reinvestment and employee benefit plans to issue common equity. Also, we have now formally put in place an ATM program which we plan to tap into during this quarter. Overall, we still project that our common equity issuance will be up to $200 million for 2024. Beyond 2024, Scott has outlined our new five-year capital plan. I'll spend a few minutes discussing our anticipated financing plan. You can find this information on Page 22 of the earnings package. As you can see on the chart, over the next five years we expect cash from operations to fund $18.5 billion to $19.5 billion or about 60% of our cash needs. About $9.5 billion to $10 billion or 31% of the funding is expected to come from incremental debt. This could include some junior subordinated notes or other instruments with equity content. And the remaining 9% of cash is expected to be funded by common equity. This range is between $2.7 billion to $3.2 billion. As I said previously, the cadence of common equity is a function of capital. Given the strong capital plan in 2025, we expect common equity to be between $700 million to $800 million. All in all compared to the prior five-year plan, we expect about 50% of the $4.3 billion additional capital to be financed with increased equity content. Finally, as shown on page 21 of the earnings package, through our capital allocation, we expect the percent of asset base in our regulated electric businesses to grow faster over the next five years. This is driven by the strong economic development and demand growth in Wisconsin and our continued energy transition plans. At the same time, the percent of asset base in gas distribution and contracted renewables is expected to decline. Particularly, you can see that we expect our asset base in Illinois to decline from 16% in 2023 to 10% in 2029 with only 9% at Peoples Gas. In closing, we are excited about our company's future and investment opportunities ahead of us. With that I'll turn it back to Scott.

Thank you, Xia. Finally, a quick reminder about the dividend. I expect we'll provide our 2025 dividend plan and earnings guidance in December. We continue to target a payout ratio of 65% to 70% of earnings. We're positioned well within the range so I expect our dividend growth will continue to be in line with the growth of the earnings per share. Overall, we're on track and focused on providing value for our customers and our stockholders. Operator, we're now ready for the question-and-answer portion of the call.

Hey, Scott. Hey, Xia.

How are you doing?

All right. Not too bad. Let me just ask a question I've asked before, but given your resource mix, I want to touch on Point Beach briefly. Many of the infrastructure segment PPAs are expiring around the same time as the Point Beach PPA. Are there viable alternatives? If you can’t reach an agreement with NextEra, would you consider backstopping them with dispatchable capacity, resulting in some additional spending? How is that negotiation progressing?

Sure. And as just a reminder for everyone, our PPA with Point Beach, I think the one contract ends at December of 2030 the other is March of 2033. And like we talked about we have been in very constructive discussions on the Point Beach with NextEra. We're making good progress on both sides. We've been really busy up here with the Wisconsin rate case. I think they've been busy down there with some hurricane activity. So we're making good progress; more to come. I expect you'll see more in the next six months. But lining up really well we think for everybody.

Okay. That's helpful. Regarding the CapEx update, I'm curious about the reduction in infrastructure spending. It seems like there has been a decreased focus on that segment for some time. I would like to understand what is causing this change. Is it related to capital allocation returns or is there a slowdown in demand for contracted renewables? What exactly is happening in that area? Should we adjust our expectations accordingly?

No. Last year, when we reviewed the plan, we actually reduced that segment due to the level of economic development. Following events in Illinois, we adjusted our capital plan and stated we would increase spending by about $800 million. The last contract we announced aligns with our investment objectives and meets the $800 million target we outlined. We have significant capital within the regulated utility sector, especially with the ongoing economic development in Wisconsin, and we are focusing our efforts there. The economic conditions in the infrastructure segment have been favorable, but we have a lot to invest in Wisconsin, so our concentration will be on that area.

Okay. That is perfect. We'll see you in a week in Florida and congrats on getting warmer. Appreciate it.

Absolutely, thank you.

Hey, good afternoon. How you guys doing?

Good. How you doing, Julien.

Just talking about Illinois a little bit more here. I mean on PGL here a few different options that have been put on the table here, and there's a staff rack out there how do you think about that Option 3? I suppose about $7 billion-ish through 2040. How does that compare with what you guys are updating here today? And is there any upside vis-a-vis what you guys are embedding against that proposed outcome here? I'll let you guys comment.

Sure. That's a good question. Option three is the lowest spending choice and is preferred by PGL. Additionally, the ICC staff recommended Option three, which involves approximately $7.2 billion in spending over the period. In our five-year plan, Xia and I aim to minimize any gaps, so we focused the capital on emergency work and facility relocations, budgeting about $90 million annually for the next five years. If this plan is approved, it could potentially generate an extra $100 million to $150 million, possibly even $200 million a year. However, if they choose this option, the ramp-down of current projects would happen quickly, and it would take time to ramp back up. Essentially, we've included only the bare minimum in our current five-year plan, so there would be potential benefits if one of these options is selected.

Go ahead.

Yeah. Hey, good afternoon. Maybe just wanted to ask for a little more color on the Wisconsin case that you have pending and maybe why you weren't able to settle there. What some of the sticking points might be? And how you're feeling about the final order coming up?

We are making significant progress in the Wisconsin case. We've completed all the hearings, and the final decision matrix was released recently. We are currently as advanced in the Wisconsin case as we have ever been at this time of year. The next step is for the commission to make a decision, which they typically do in the first or second week of December. They are well-prepared for this decision. Regarding a settlement, we are pleased with the staff's position. However, I believe everyone involved still wants to see the commission go through the case instead of settling. I have confidence in the commission's ability to make a decision based on the matrix. Although we weren't able to reach a settlement, I am not worried about it. Overall, our commission consists of balanced individuals who understand the importance of reliability and economic development in the region. We are ready for a decision, even if it doesn't come through a settlement, which isn't necessarily a negative. I think everyone is eager to see the outcome. Does that address your question?

Yes, it does. Yes, very helpful, Scott. And then I just had two questions just on the earnings side. On this ATC ROE that you're going to book in Q4, I guess how should we think about why you are not raising guidance for that? Or what would have happened if you weren't able to book that?

No, that's a good question. And things move around in our forecast. And it came through there. We just got a little bit of timing of some other expenses that we were anticipating maybe would come through a little bit better. But timing, we got to make sure we execute on it. So factoring it all in, and we went through and factored everything through here and are comfortable with keeping the guidance where it's at.

Okay. And then the last one.

Michael, this is Xia. Just remember, we had a really mild first quarter. Year-to-date, we're $0.06 behind on weather. So like Scott said, there are lots of things that have kind of developed throughout the year, and this $0.05 will help us offset some of the weather deficit.

Okay. Appreciate that color. And then the last one for me, just to level set ahead of December here. So can you just remind what the base is for your long-term EPS CAGR? And will that shift with the December update? And how do we think about the potential to get back in that 6.5% to 7% range after kind of being short of that this year based on your guide?

Sure. We are still considering the 2023 base, which we believe was $4.60, as our starting point for our guidance. This is influenced by last year's Illinois decision and necessary adjustments, as well as the timing of our capital investments. We plan to maintain this 2023 base while we evaluate our long-term guidance. We need to complete the rate case first, and we will share our plan in December after that process is finalized.

Okay. Thank you very much.

Thank you.

Hi. Guys. How are you doing?

Good. Hi, Neil.

So a quick question, Scott. You opened up talking about the Microsoft that they acquired more land. I think you said 1,900 acres. Is that correct in total?

Correct. Correct. So at the beginning of the year, they started about 1,300, and now they're up to 1,900 acres.

Okay. Perfect. And then in terms of the CapEx refresh, I know you're kind of waiting on Microsoft to lay out additional plants, what they intend to do. Was there anything in this CapEx revision that sort of incorporated potential spend for what they might do to some extent? Or is that still all to be determined?

So what this has in and what we talked about is 1,800 megawatts of capacity for the region over this 5-year period, which includes Microsoft, which includes getting some demand from some electric vehicles and all the other economic development in the region. So that's 1,800 megawatts. Just to put that in perspective, our system is about 7,500 megawatts. So it's a little over 20% growth in capacity or demand needs in the region. So all of that is factored into our five-year plan. But just like many other companies, we are getting inquiries from a variety of other data centers. We just don't come out with a number until we really feel comfortable that it's actually going to happen. But if there would be any upside from any future stuff, that would probably be in those outer half of the plan. But based on the conversations, there's just a lot of good discussion on continued economic development in the region.

Okay. Okay. Got it. And then I mean so just and maybe it's only limited as to what you can say. But like if Microsoft were to formally announce a Phase 2 would that be something that would necessitate more capacity?

We will wait for Microsoft to make their announcements. I'm uncertain if the demand we are working on with them includes other phases. We collaborate with them on the demand over time, but unfortunately, we have to keep some details confidential. However, we respect their approach.

Okay. Thank you very much.

Thanks Neil.

Hey everybody. Good afternoon.

Hey Andrew.

Just want to clarify a little on the CapEx update. Obviously, some very big numbers here, and I appreciate the granular detail on the moving pieces. One I wanted to clarify was electric generation. You showed that the total on Page 18 went up by $3.7 billion, but the commentary on Page 17 really only calls out $3 billion. You showed regulated renewables and the natural gas generation. We're missing about $700 million. So, what else is in that bucket? Then it looks like similar there's about a $100 million increase for natural gas distribution. Would I be correct? Is that just higher day-to-day spending and cost inflation? Or have you made some assumptions around regulation and policy changes in Illinois compared to the assumptions you made when you gave the last update in February?

Yes. Good questions, really quick analysis of the numbers. So, when you look at the gas distribution and you go behind the numbers, it's actually a decrease in Illinois and an increase in the other parts of the service territory Wisconsin, Michigan, and Minnesota; as it relates to adding capital for good customer growth and just other area expansion. I think as you look at the PHMSA rules, there could be some requirements that more capital is needed. Until we see the final PHMSA rules, it's hard to really handicap the final number. So, that's really a plus in the other areas a little decline in Illinois. And in the generation, you're exactly right, there's probably about another $700 million. That's in a variety of projects across the enterprise from looking at upgrading a wind farm to get some additional production tax credits, to adding some more resilience and a few of our generating plants, to looking at other different types of backup storage just to make sure we have that additional resilience. So, it's a variety of items, all in that generation area just so we can make sure we continue to hit that demand.

Okay, great. That's very helpful. Then on the transmission side you increased it by $200 million, is that all related to near-term economic development? Would I be correct in assuming that the MISO Tranche 2 stuff is more outside of this forecast period?

Yes, you're exactly right. More of the MISO Tranche 2 is going to be after this, most likely after this five-year plan, maybe a little bit at the very end, but most of it is going to be after the five-year plan. But we'll know more of that and the final numbers come December.

Very good. And one last one here on the load growth. I think you said you're now expecting 1,800 megawatts of incremental load, that's up from 1,400 megawatts. I don't think you commented on what that means in terms of percentage load growth forecast. Is that something that you can share now? Or is that something you plan to share at EEI?

Sure, we can discuss that now. When looking at electric sales growth on a megawatt-hour basis, we've extended our forecast to 4.5% to 5% through 2029, which I believe is conservative. We're observing volumes increasing on a megawatt-hour basis. Currently, we are seeing an increase of 1,800 megawatts on a base of about 7,500, translating to a little over 20% increase in demand for our sales, indicating a very significant rise in demand. I view demand as a crucial factor because it's essential that we develop the dispatchable resources necessary to meet the demand and capacity requirements on those peak days. Does that make sense?

Yes, thank you so much.

Hi. Good afternoon. Thank you for taking my question.

Absolutely, Sophie.

So, it's a great update all around, right? Your load growth is going higher. Very, very healthy capital update as well. Wisconsin rate case is, in its going to last innings already. Is there any reason why I guess you wouldn't raise the EPS growth rate when you do refresh your guidance in December? Are there any like offsetting factors we are missing here that would prevent that from happening?

That's a good question. We added capital in Wisconsin and also reduced it in the WEC infrastructure while considering reductions in Illinois. As we assess the equity and debt needs, we feel very comfortable with the range of 6.5 to 7. We need to get through the Wisconsin rate case and understand how our Safety Modernization Program in Illinois progresses, which we will learn about in the first quarter of next year. It's important to be realistic about the financing plans related to our capital spending while reducing capital in some other areas.

Got it. Okay. Thank you. We’ll see you at the AI. Sounds good. Thank you.

Hey team. Good afternoon. I got some Haribo gummy bears sitting outside my front door. That's my trick-or-treat.

Excellent. Excellent. Thank you for supporting the community.

Bingo. They are from Milwaukee. Okay. So, a couple of questions, Xia. I know you mentioned that 50% of the capital is funded through equity. However, when I compare the prior plan to the current plan, the CapEx has increased by $4.3 billion, but the equity has only risen by about $1 billion. It has gone up from approximately $2 billion to $3 billion at the midpoint of the current guidance range. Can you help clarify why the equity isn't higher? It would be helpful to understand the difference between the two planned equity issuances in the two plans.

Yes, I'd be happy to. So the last plan, remember the range was $1.95 billion to $2.35 billion. This plan the range is $2.7 billion to $3.2 billion. So to your point, it's roughly about $800 million increase in common equity. We also are adding some holding company debt, particularly using maybe some hybrid that would give us 50% of the equity content. So if you include that, plus the $800 million of common equity, that's around $2 billion increase in equity content. So our capital has gone up $4.3 billion. We're adding a little over $2 billion of equity content including the $800 million of common equity.

Got it. That is very clear. Thank you, Xia. I also wanted to quickly follow up on Delilah solar. Is the plan still for it to complete construction and go into service by the end of the year? Is that still on track?

Yes. That is correct. Delilah and Maple Flats are both on track by the end of the year.

All right. Thank you so much. Appreciate the time.

Thank you.

Hi. Good afternoon.

Good afternoon.

Happy Halloween, everyone. Just wanted to go into the addition of gas generation, and how that contributes to LNG operations overall? Do you have any thoughts you could share there?

We are increasing our gas generation capacity. It's important for us to have our own dispatchable gas in Wisconsin to ensure we can generate electricity and provide heating during the cold months. We have included an additional 2 Bcf in our plan, which is located where a coal pile used to be. Having this stored energy close to our power plants in Wisconsin is crucial for maintaining energy supply during the coldest days. A couple of years back, one of our suppliers experienced a compressor issue, which significantly impacted natural gas availability in Wisconsin. Therefore, these LNG tanks will be essential for maintaining reliability.

Got it. Very helpful there. And then going a bit further here with this big call on generation broadly in the country, I'm just wondering if you could provide us thoughts on reserve margins, how it stands now, where it could be going? And as it relates to gas generation, coal generation in particular does it affect retirement timelines given this greater need? And at the same time could CCS be part of the answer here? Just wondering if you have thoughts on these topics?

Gas generation is crucial for us as we aim to have reliable resources. While conditions like wind can be favorable some days, there are times when it’s not windy or sunny. Therefore, we are focused on developing a generation mix that includes both renewables and gas generation to ensure we meet the necessary reserve margins for MISO. They have been updating their rules to accommodate the increasing presence of renewables, which is essential for addressing seasonal demand and load-following requirements. This is a significant aspect as we expand our capacity plans. What was your second part?

Carbon capture with regards to gas generation and just coal plant retirements in general generation…

In the carbon capture, for us we don't have any natural place to store the carbon here in Wisconsin. And if we had to do carbon capture, we think it would cost our customers $1 billion to $2 billion more in order to do carbon capture and haul it someplace that you look at where you're going to store it and then you have the transmission of it. So we, of course, looked at it, is it possible? It's just did not seem viable and cost-effective for our customers versus the plan that we're developing here and we laid out in front of you. And when you think about the coal retirements we already retired Oak Creek 5 and 6. The other units 7 and 8, we plan to retire at the end of 2025. And we're doing that because we're putting in some of the more efficient gas generation. And to be quite honest, if we weren't going to retire 7 and 8, we'd have to add additional capital to those plants to have them to extend longer and add the carbon capture. So those are still planning to be in retirements. Some of the plants like Weston 3, we plan on retiring by 2031. We continue to look does it make sense to use natural gas there or some other fuel? I don't know if it'd be economical or not. But it really hasn't adjusted much of our coal adjustments either, our coal plant retirements.

Got it. That's very helpful. Thank you for that. And just one last quick one if I could: as far as 2025 funding needs are concerned for equity content, just wondering, does it make sense for the ATM? Could we see a block? How much transferability I guess is in the mix here?

Sure. I'll let Xia take that one.

We still have the employee benefit plans in place, which will be included in the equity raise for next year. The ATM should easily accommodate the remaining portion. We do not plan to execute a block sale at this time. The tax credits have already been factored into the FFO. So far, we have been selling between $100 million to $200 million, and as we continue to expand our renewable projects, that figure could increase slightly, but those assumptions are already included in the FFO.

Got it. Thank you. Very helpful. I’ll leave it there.

Thank you.

Hey, good morning or good afternoon rather. Long day. Thank you for taking my question. So just one for me. A lot of things have been answered. I guess just kind of decomposing that 8.8% asset-based growth figure, it does seem like a lot of the growth is coming from Wisconsin. So just what's rate base growth outlook in Wisconsin, as you see it today versus kind of what you've been trending at or executing at the past few years? And that's it for me. Thanks.

So when you look at the rate base growth in Wisconsin, it's going to be – oh, I don't know, I imagine between 14% and 15%, pretty significant rate base growth. But remember, that's where all the economic growth is. And when you look at the economic growth and we usually look at the growth and try to break it into different components being – whether it's growth from sales, growth from resiliency. And a lot of our growth I would say, I don't know, $8 billion to $9 billion that is related to economic development and growth of the support of the economy. So it's really driven that sales are going to help grow into that. So that's significant. And then ATC has good growth. So we're also growing a lot in the American Transmission Company, which is Wisconsin based also but FERC regulated. So a lot of growth in Wisconsin largely driven by economic development.

Yes. Nick 40% of our – this is Xia. 40% of our total capital is we call the growth capital. So that comes with the large customers paying for their required demand and related cost. So we feel good about the growth in Wisconsin and also the driver for it.

All right. Thanks a lot. See you soon. Thank you.

Hey, good afternoon.

Good afternoon.

Just to follow things up. Is there any change – well, first of all, could you just sort of remind me what your rate increase outlook is given the new CapEx program, if it's changed at all and just what it is again?

Sure. And we're right now going through the rate case in Wisconsin. So if you go out and you start to look at 2027 through 2030, you got to kind of break it into this capital. As Xia said, a lot of it's being supported by economic development. So I think rate increases will be in line with inflation. We do have some reliability projects that we're putting in place that we're doing some overhead underground to add more stability as we continue to see some stronger weather patterns and wind patterns across the state. So that may take it maybe 1% above inflation. But for the most part, a lot of this capital is being driven by economic development which will come with megawatt hours and megawatt sales. So it's not like it's all on the back of our retail customers at any means. And Microsoft has said and they put in their testimony, they understand and they need to pay their fair share. They don't plan on subsidizing anyone else, but they also realize that they're not supposed to get subsidized either. So they have been perfect. And as we look at potentially other data centers coming in that's kind of – that's the playbook to make sure everyone pays their fair share appropriate amount.

Okay. And then on the – I apologize if I missed this, but it looked like there was a big increase in gas normalized sales in commercial or something for Q3, when I looked at your...

And we can – when you look at Q3, commercial industrial yes, it was up a little bit. Q3 is such a small volume quarter that any little change can affect it. So I would not read much into it. I would look more at the year-to-date where we are. Q3 that could have been just an anomaly with the meter issue or something – I mean there's so smaller volumes in that quarter you got to really look at the year-to-date.

Makes sense. Thanks so much. Have a great one.

You too. All right. Thanks, everyone. That concludes our conference call for today. Thank you for participating. If you have any more questions, please feel free to contact Beth Straka at 414-221-4639.