Wisconsin Energy Corporation (WEC)

Q2 2010 Earnings Call Transcript

July 29, 2010 2:00 pm ET


Colleen Henderson – Manager of Strategic Planning & IR

Gale Klappa – Chairman, President & CEO

Allen Leverett – EVP & CFO

Rick Kuester – EVP


Reza Hatefi – Decade Capital

Michael Lapides – Goldman Sachs

Jay Dobson – Wunderlich Securities

Paul Ridzon – KeyBanc

Steven Fleishman – Banc of America/Merrill Lynch

Bill Appicelli – Morgan Stanley


Colleen Henderson

Good afternoon, ladies and gentlemen. Thank you for waiting and welcome to Wisconsin Energy’s quarterly conference call. This conference 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 open 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.

Now, I would like to introduce Mr. Gale Klappa, Chairman of the Board, President and Chief Executive Officer of Wisconsin Energy Corporation.

Gale Klappa

Colleen, thank you very much. Good afternoon, everyone. We appreciate you joining us as we review the company’s 2010 second quarter results. Let me begin as always by introducing the members of the Wisconsin Energy management team who are here with me today.

We have Rick Kuester, President and CEO of We Generation; Allen Leverett, our Chief Financial Officer; Jim Fleming, our General Counsel; Jeff West, Treasurer and Steve Dickson, Controller. Allen, of course, will review our financial results in detail in just a moment.

But as you saw from our news release this morning, we reported earnings from continuing operations of $0.74 a share for the second quarter of 2010. This compares with $0.53 a share for the comparable period last year.

Our second quarter 2010 results were helped by a return to more normal weather, continuing cost controls and earnings from our $1.2 billion investment in the first expansion unit at Oak Creek. Overall, we’re quite pleased with our second quarter and year-to-date performance.

Now I’d like to spend just a moment on our continuing effort to upgrade the energy infrastructure in Wisconsin. Our Power the Future plan is fundamental to the principle of energy self sufficiency.

Key components of our focus on self sufficiency include, investing in two combined cycle gas-fired units at Port Washington, which is North of Milwaukee; the construction of two supercritical pulverized coal units at Oak Creek, which is south of the city, and building a significant amount of renewable generation.

As we’ve discussed on previous calls, both units at Port Washington are in service. Construction was completed on time and on budget. The units are among the most efficient in the Midwest market. They are operating well and our customers are now benefiting from the low price of natural gas that fuels these units.

Turning now to the status of the coal-fired units at Oak Creek. As you’ll recall, Unit 1 passed all of its performance tests, and was placed into commercial service on February 2 of this year. Our general contractor at Oak Creek, Bechtel Power Corporation is now focusing its efforts on completing the commissioning and testing of Unit 2 and I’m pleased to report the effort is proceeding well.

First fire on coal in the Unit 2 boiler was achieved on July 8. The generator has been synchronized to the grid for the first time on July 16 and since July 16 the unit has operated up to 30% of its rated capacity.

Over the coming weeks, Bechtel will gradually increase the output of the unit while conducting a range of tests along the way. After it reaches its full rated capacity, the unit will be shut down for a scheduled two-week outage. Bechtel will use this time to address punch list items and remove startup equipment. And then the unit will be returned to service for a further tuning and a series of rigorous performance tests.

Now, as with any two-unit plant, the second unit should benefit from the lessons learned on the first, thus shortening the startup and commissioning schedule. As a reminder, the guaranteed turnover date for Unit 2 at Oak Creek, a date that was set as a part of our settlement agreement with Bechtel is now November 28. We expect Bechtel to meet or beat this completion date. However, our current view is that commercial operation of Unit 2 is indeed likely to be a fourth quarter event.

Turning now to other important developments, on May 18, Wisconsin Act 403 was signed into law by Governor Doyle. This action directs the Wisconsin Public Service Commission to develop a new set of rules that will govern how electric utilities in the state recover their fuel and purchase power costs.

Read the rest of this transcript for free on seekingalpha.com

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