Wisconsin Energy's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Wisconsin Energy Corporation (

WEC

)

Q4 2011 Earnings Conference Call

February 2, 2012 2:00 PM ET

Executives

Colleen Henderson – Manager of Strategic Planning and IR

Gale Klappa – Chairman, President and CEO

James Fleming – EVP and General Counsel

Frederick Kuester – EVP and CFO

Stephen Dickson – VP and Controller

Allen Leverett – EVP

Patrick Keyes – VP and Treasurer

Analysts

Greg Gordon – ISI Group

Jim Von Riesman – USB

Michael Lapides – Goldman Sachs

Paul Patterson – Glenrock Associates

Paul Ridzon – KeyBanc

Jay Dobson – Wunderlich Securities

Brian Russo – Ladenburg Thalmann

Daniel Jenkins – State of Wisconsin

Andrew Levi – Caris

Ted Hayden – Point State Capital

Presentation

Colleen Henderson

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Good afternoon, ladies and gentlemen. Thank you for waiting, and welcome to Wisconsin Energy’s Conference Call to review 2011 year-end results. This conference call is being recorded for rebroadcast, and all participants are in a listen-only mode at this time.

Before the conference call begins, I will read the forward-looking language. All statements in this presentation, other than historical facts, are forward-looking statements that involve risks and uncertainties, which are subject to change at any time. 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 the company’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 opened to analysts for questions and answers. In conjunction with this call, Wisconsin Energy has posted on its website a package of detailed financial information at www.wisconsinenergy.com. A replay of our remarks will be available approximately two hours after the conclusion of this call.

And now, it’s my pleasure to introduce Mr. Gale Klappa, Chairman of the Board, President and Chief Executive Officer of Wisconsin Energy Corporation.

Gale Klappa

Colleen, thank you. Good afternoon, everyone. Happy Groundhog Day. I can tell you that the tundra is not frozen. But we appreciate you joining us for our review today of the company’s 2011 yearend results.

Let me begin, as always, by introducing the members of the Wisconsin Energy management team, who are here with me today. We have Allen Leverett, President and CEO of We Generation; Rick Kuester, our Chief Financial Officer; Pat Keyes, is serving as our Treasurer; Steve Dickson, Controller; and of course, Jim Fleming, our General Counsel.

On a personal note, this is the last time that Jim will be officially sitting in on our conference calls. After a long and productive career, Jim has decided to retire. He’s done a truly outstanding job as our General Counsel over the past six years and we’ll miss him but we understand that his lake house and his classic Corvette are calling. Jim, our entire team wishes you and Kay in Godspeed as you open a new chapter of your life.

James Fleming

Thank you, Gale.

Gale Klappa

You’re welcome. Thank you, Jim. Now, Rick will review our financial results in detail in just a moment. But as you saw from our news released this morning, we reported earnings from continuing operations of $2.18 a share for the 2011. This compares with earnings of $1.92 a share for 2010. A number of factors contributed to our strong performance in 2011 including earnings from our Power the Future assets. As you recall, our second expansion unit at Oak Creek began commercial service in January of 2011.

We also recorded equity AFUDC related to the Air Quality Control upgrade at our older Oak Creek units and the Glacier Hills Wind Park. Overall, we’re very pleased with our financial and operational performance in 2011. We exceeded our customer satisfaction goals. We achieved the best safety record in the history of the company and we were named the most reliable utility in the Midwest for the seventh time in the past 10 years.

Turning now to the economy of Wisconsin’s area, Wisconsin’s unemployment rate at 7.1% remains well below the national average. And after nearly a double-digit rebound in 2010, electric sales to our large commercial and industrial customers rose by three-tenths of a percent in 2011. The demand destruction that we saw from five large plant closings during recession is now being largely offset by modest growth and recovery in other sectors of the region’s economy. For example, we continue to see strength in specialty steel and metal fabrication, paper and printing and industrial machine rate.

Now I’d like to update you on three of our significant construction projects, the 50-megawatt biomass plant in Northern Wisconsin, the Glacier Hills Wind project, northeast of Madison and the air quality control upgrade of the original Oak Creek units. We’re making and I’m pleased to say excellent progress on the biomass plant in Rothschild, Wisconsin. The foundations for the boiler and fuel storage buildings are now complete, and we’re well underway on steel erection for the boiler and the fuel storage facility. As I’ve noted before, the biomass plant will help us diversify our renewable energy portfolio. We’ll be able to dispatch the unit and the efficient technology that will be used to produce steam for the paper mill will clearly enhance the economics of the project.

Our investment in the biomass plan is expected to total between $245 million and $255 million, excluding AFUDC. We’re on schedule and on budget to meet the completion date by the end of 2013. I’m also pleased to report that on December 20, 2011, the Glacier Hills Wind Park was placed in the commercial service. Glacier Hills is 162-megawatt energy center located on more than 15,000 acres of rolling farm land about 45 miles Northeast of Madison. It is the largest wind farm in Wisconsin.

The completion of Glacier Hills is on time and actually better than budget. It was achieved largely through the talents of Wisconsin labor and Wisconsin companies. When all the costs are finalized, we expect the project to come in below the target of $363.7 million that was set by the Wisconsin Public Service Commission. The $363 million target does not include allowance for funds used during construction or reimbursable transmission costs. Of course, the biomass project and the Glacier Hills Wind Park are key components that will help us meet Wisconsin’s renewable portfolio standard for the year 2015.

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