WEC Energy Group (WEC), a prominent utility company, has announced its second-quarter earnings for 2024, meeting analysts' expectations at $0.67 per share. The company has confirmed that it is on track to achieve its full-year earnings guidance of $4.80 to $4.90 per share.
This performance is buoyed by a robust regional economy featuring low unemployment and substantial investments from corporations, including WestRock (NYSE:WRK) and Microsoft (NASDAQ:MSFT). WEC Energy Group is progressing with its capital plan, which includes significant renewable energy projects and natural gas generation expansion.
Key Takeaways
- WEC Energy Group reports Q2 2024 earnings of $0.67 per share, aligned with market expectations.
- Full-year 2024 guidance is reaffirmed at $4.80 to $4.90 per share.
- The company is actively engaged in regulatory proceedings across multiple states and expects a decision on Illinois safety program spending in Q1 2025.
- WEC Energy Group plans to issue up to $200 million in common equity in 2024 and about $500 million annually post-2024.
- Collaborative efforts with Microsoft on land development are underway, with initial energy needs covered for the first 315 acres.
- The company is addressing delays in the Delilah I solar project and is confident in mitigating any negative impacts.
Company Outlook
- WEC Energy Group is working on refreshing its capital plan and anticipates a recommendation from the commission in early 2025.
- Plans to file for additional renewables are set for the coming month to satisfy generation requirements.
Bearish Highlights
- There has been a delay in the Delilah I solar project, but WEC Energy Group is optimistic about overcoming this setback.
- Regulatory challenges include the denial of AFUDC and the pending review of the safety modernization program in Illinois.
Bullish Highlights
- The regional economy shows strong growth, supporting the company's operations.
- WEC Energy Group is moving forward with significant capital projects, including 100 megawatts of natural gas generation and various renewable energy projects.
- A partnership with Microsoft presents opportunities for land acquisition and development.
Misses
- No specific misses were reported in the earnings call.
Q&A Highlights
- Scott Lauber discussed the company's ongoing projects and regulatory matters.
- The company is in talks with NextEra about the Point Beach PPA, although no new information was provided during the call.
- WEC Energy Group expects that resolving the Illinois Gas Appeal will take one to two years.
WEC Energy Group's continued investment in infrastructure and its strategic partnership with Microsoft are poised to bolster the company's growth prospects. Despite regulatory hurdles and project delays, the company's reaffirmed earnings guidance and planned equity issuance signal confidence in its financial management and long-term strategy.
The markets will be watching closely as WEC Energy Group navigates the regulatory landscape and expands its renewable energy footprint.
InvestingPro Insights
WEC Energy Group's recent earnings announcement has been a moment of validation for the company's strategic direction. The utility has not only met second-quarter expectations but has also maintained a stable outlook for the year. Let's delve into some key metrics and insights from InvestingPro that offer a deeper understanding of WEC's financial health and market position.
InvestingPro Data highlights that WEC Energy Group has a market capitalization of $27.2 billion, reflecting its significant presence in the utility sector. The company's Price to Earnings (P/E) ratio stands at 17.87 for the last twelve months as of Q2 2024, which might be considered high relative to its near-term earnings growth. WEC's dividend yield is attractive at 3.88%, especially when considering the company's history of raising dividends for 54 consecutive years.
An InvestingPro Tip worth noting is that four analysts have revised their earnings upwards for the upcoming period, indicating a positive sentiment regarding WEC's future performance. This is particularly relevant as the company embarks on substantial renewable energy projects and natural gas generation expansion. Moreover, WEC is trading near its 52-week high, with the price representing 96.22% of this peak, suggesting investor confidence in the stock.
For readers interested in a more comprehensive analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/WEC, which provide further insights into WEC Energy Group's financials and market performance.
In conclusion, WEC Energy Group's steady earnings and strategic investments in infrastructure, coupled with a strong dividend track record and the potential for upward earnings revisions, present a compelling case for investors. As the company continues to navigate regulatory challenges and expand its renewable portfolio, these metrics will be crucial in monitoring its progress and assessing its long-term potential.
Full transcript - Wisconsin Energy Group Inc (NYSE:WEC) Q2 2024:
Operator: Good afternoon and welcome to the WEC Energy Group's Conference Call for Second Quarter 2024 Results. This call is being recorded for rebroadcast and all participants are in a listen-only mode at this time. After the presentation, the conference will be opened to analysts and questions-and-answers. In conjunction with this call, a package of detailed financial information is posted on wecenergygroup.com. A replay will be available approximately two hours after the conclusion of this call. Before the conference call begins, please note 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 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 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. And it's now my pleasure to introduce Scott Lauber, President and Chief Executive Officer of WEC Energy Group.
Scott Lauber: Good afternoon, everyone, and thank you for joining us today as we review our results for the second quarter of 2024. Here with me today 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 second quarter 2024 earnings of $0.67 per share. We're firmly on track to meet the full-year 2024 guidance of $4.80 to $4.90 a share. This, of course, assumes normal weather for the balance of the year. We continue to see strong foundational growth in our regional economy. The unemployment rate in Wisconsin stands at 2.9%, continuing a long-running trend below the national average. The pipeline of economic activity is particularly strong in what we call the I-94 corridor between Milwaukee and Chicago. For example, just last month, WestRock broke ground on a new facility at the former site of our retired power plants. WestRock is a leading company in paper and packaging solutions with 50,000 employees and 300 plants worldwide. The company called the cutting-edge facility a super plant, stating it will be one of their largest and most advanced plants. And Microsoft is making good progress on the construction of a large data center complex in Southeast Wisconsin. In May, Microsoft announced a broad investment package to strengthen our region as a hub for AI economic activity, innovation and job creation. These investments include a planned $3.3 billion to be spent in cloud computing and AI infrastructure between now and the end of 2026. Microsoft has stated that it expects to bring 2,300 construction jobs to the area by 2025 and 2,000 permanent jobs over time. These developments highlights the strength and the potential of our local economy and underscores the need for the investments in our capital plan. During the second quarter, we continued to move forward on major projects in our capital plan. It's the largest five-year investment plan in our history totaling $23.7 billion for efficiency, sustainability and growth. As we've discussed, the plan is based on projects that are low-risk and highly executable. At the end of May, we closed on our second option at West Riverside Energy Center for $100 million. This adds a 100 megawatts of efficient combined-cycle natural gas generation to our portfolio. You'll recall that last year, we discussed several filings or last quarter we discussed several filings for major projects to support economic growth and reliability in Wisconsin. This includes approximately 1,200 megawatts of efficient natural gas generation at our Paris and Oak Creek sites as well as 2 billion cubic foot liquefied natural gas storage facility and a 33 mile gas lateral to serve the Oak Creek site. In total, these projects combined represent $2.1 billion of investment. Our proposals were submitted to the Wisconsin Commission in April and we expect a decision in approximately a year. Also under review, we filed an application in February to purchase a 90% ownership interest in High Noon Solar Energy Center in Southern Wisconsin. With an expected investment of approximately $580 million, the facility is expected to provide 300 megawatts of solar generation. We have asked the commission to make a decision before the end-of-the year. As a reminder, we expect these investments to earn AFUDC during the construction period after commission approval. And in our WEC Infrastructure segment, the Delilah I solar project is now expected to go into service at the end-of-the year, delayed from June due to a weather event. We plan to invest approximately $460 million for a 90% ownership interest in this project in Northeast Texas. And we still expect our Maple Flats solar project to be in service by the end-of-the year. As you recall, we're investing an additional $560 million this year in our Infrastructure segment. We reallocated away from our operations in Illinois a total of $800 million in our five-year capital plan. Overall, our plan fully supports our long-term earnings growth rate, which we project to be in the 6.5% to 7% range on a compound average annual basis. We're also on schedule with the development of our next five-year plan. And as usual, we expect to share the details with you in the fall. Now I have a few updates on the regulatory front. In Wisconsin, we filed new rate reviews for test year 2025 and 2026 on April 12th. Our request focused on addressing three major areas of need. First, improving reliability and reducing outages from increased storm activity. Second, supporting Wisconsin's economic growth and job creation through investments in new-generation and distribution projects. And lastly, continue the transition from coal generation to renewables and natural gas. Commission staff and intervenor testimony is scheduled for August 21st, we expect a decision by the end-of-the year with new rates effective January 1st, 2025. We have smaller rate reviews and progress at Michigan Gas Utilities and Upper Michigan Energy Resources. We also expect decisions on these reviews by the end of the year. And in Illinois, we've been engaged in three dockets. The Illinois Commerce Commission issued its decision on the first of these, a limited rehearing on the commission's rate order for Peoples Gas at the end of May. The commission had agreed to reconsider our request to restore $145 million for safety modernization program in 2024. This mostly related to emergency work, unfinished projects and work driven by public entities like the City of Chicago. The commission granted $28.5 billion concentrating on what they deemed emergency work. We have appealed this decision to the Illinois Appellate Court along with other items in the rate order, including the commission's previous disallowance of investments in new service centers. We are also actively involved in two remaining dockets. One is the review of the safety monetization program. Staff and intervener rebuttal testimony are expected by August 21st with a commission decision expected in the first quarter of 2025. The other docket is the evaluation of the future of natural gas in Illinois, which is expected to conclude in about a year. Of course, we'll keep you updated on any further developments. Across our business, we continue to make good progress towards our goals of reducing greenhouse gas emissions. In May, we retired units five and six at our Oak Creek power plant. Together, those made up over 500 megawatts of coal-fired generation. Including these units since 2018, we've retired nearly 2,500 megawatts of older fossil fuel generation. Finally, a quick reminder about the dividend. We continue to target a payout ratio of 65% to 70% of earnings. We're tracking in that range now and expect the dividend growth will continue to be in line with the growth of our earnings per share. Now, I'll turn it to Xia to provide you more details on our financial results and our guidance for the third quarter.
Xia Liu: Thank you, Scott. We earned $0.67 a share for the second quarter. While this was a decrease of $0.25 quarter-over-quarter, we exceeded our Q4 guidance -- Q2 guidance range of $0.60 to $0.64 per share, driven by favorable O&M and financing compared to guidance. As Scott indicated, we're on-track to meet our 2024 earnings guidance. As I reminded you on the last couple of calls, with the redesign changes at Peoples Gas, base revenues are now more concentrated in the first and fourth quarters when natural gas usage is the highest. This earnings shift has impacted our second quarter and will impact our Q3 guidance, which I will discuss in a few minutes. Now, let's look at our quarter-over-quarter variances. Our earnings package includes a comparison of second quarter results on Page 15. I'll walk through the significant drivers. Starting with our utility operations, earnings were $0.19 lower compared to the second quarter of 2023 as a result of higher O&M, fuel, depreciation and amortization, interest and other expenses. A couple of drivers for the day-to-day O&M variance are worth noting. One, we experienced higher storm costs in the current quarter compared to Q2 last year. And two, we benefited in Q2 last year from a land sale at a retired plant site in Wisconsin. Looking ahead, I now expect overall day-to-day O&M in 2024 to be 2% to 3% higher compared to 2023. This is a 4% improvement compared to our initial expectation due to our continued O&M savings initiatives that we expect to realize late this year. The impact of weather was flat for the quarter. Compared to normal conditions, we estimate that weather had a $0.02 negative impact for the second quarter in both 2023 and 2024. Our weather normal electric sales in Wisconsin are relatively flat quarter-over-quarter and are overall in line with our forecast. Looking at ATC, continued capital investment contributed an incremental penny to Q2 earnings compared to 2023. And in our Energy Infrastructure segment, earnings improved $0.02 in the second quarter of '24 compared to the second quarter of '23, driven partially by higher production tax credit at WEC Infrastructure. Finally, you'll see that earnings at our Corporate and Other segment decreased $0.09 as a result of the impact of tax timing and higher interest expense. Now turning to guidance, for the third quarter, we are expecting a range of $0.68 to $0.70 per share. This accounts for July weather and assumes normal weather for the rest of the quarter. As I mentioned earlier, it also accounts for the shift in Illinois revenue recognition pattern. Our third quarter 2023 earnings were $1 a share. Once again, we are reaffirming our 2024 earnings guidance of $4.80 to $4.90 per share, assuming normal weather for the rest of the year. Before I turn back to Scott, let me quickly remind you that we continue to utilize dividend reinvestment and employee benefit plans to issue common equity. Also, as we said before, we plan to set up an ATM program. Overall, we still project that our common equity issuance will be up to $200 million for 2024. Post (NYSE:POST) 2024, our equity issuances will be tied to our capital spending ratably with approximately $500 million expected per year in the current plan. We look forward to updating you in the fall as we refresh our capital and financing plans. With that, I'll turn it back to Scott.
Scott Lauber: Thank you, Xia. Overall, we're on track and focused on providing value for our customers and our stockholders. Operator, we're ready now for the question-and-answer portion of the call.
Operator: [Operator Instructions] Our first question comes from Shar Pourreza with Guggenheim Partners. Your line is open.
Shar Pourreza: Hi guys, good afternoon.
Scott Lauber: Hi, good afternoon, Shar.
Shar Pourreza: Hi, Scott. Just -- starting off just on sort of the perennial Microsoft opportunity that always seems to be asked. It's obviously becoming even more kind of topical now. Just remind us on what portion of Microsoft's land acquisition and build is kind of layered in your current plan? And the reason why I ask is that it's obviously now kind of public that they bought a bit more land. And I guess, when do you see this hit your plan more materially? Thanks.
Scott Lauber: Thank you, Shar. So just as everyone -- update everyone, they announced spending $3.3 billion through 2024 through 2026, which is on that first about 315 acres that they purchased. And then last fall, they purchased another 1,030 acres. And, of course, we pulled our capital plans together before that 1,000 acres were purchased. And then just this morning, there's been a couple announcements in the paper where they purchased another 173 acres in Southeastern Wisconsin. So we are currently in the process of working with Microsoft and developing our plans for our next five-year plan that we'll roll out this fall in the development. But currently, we really only have the energy and the capacity needs for that first 315 acres.
Shar Pourreza: Got it. Okay, that's perfect. So more to come there. And then just lastly on the Delilah I solar project delay, it's roughly six months. I guess, can you just -- maybe a question for Xia is how to think about the offsets around the potential headwind there versus your kind of prior assumption? Thanks.
Xia Liu: Yes. We took that into consideration as we reaffirmed the annual guidance of $4.80 to $4.90. So as I mentioned, we continue to focus on O&M management and financing costs and tax and others. So we're confident that we can offset the downside from the delay.
Shar Pourreza: Okay. That's perfect. Thanks, guys. Appreciate it. And hopefully Gale is somewhere tropical listening to this earnings call. Thanks. Appreciate it.
Scott Lauber: He probably is.
Operator: Our next question comes from the line of Julien Dumoulin-Smith with Jefferies. Your line is open.
Julien Dumoulin-Smith: Hi, good afternoon, team. Can you guys hear me okay?
Scott Lauber: Yes, we can hear you fine. Welcome back, Julien.
Julien Dumoulin-Smith: Awesome. Thank you. I appreciate the time, guys. It's a pleasure to chat here. So perhaps just to kick things off here, look, nicely done all-around. In fact, I wanted to just focus on the infrastructure segment. Obviously, you guys are planning well against those targets. I'm curious as you think about the totality of the data center opportunities, what does that mean as you think about the opportunities that you're seeing on that side of the business? And how do you think about the scope of that business in turn? You guys are obviously focused on contracted opportunities. By contrast, a lot of these potential customers would be in a similar manner focused on these kinds of counterparties. Curious as you think about that opportunity set on that front first.
Scott Lauber: Sure. And we've been working with Microsoft on the needs for the area and Wisconsin has got a lot of development opportunities and we want to make sure we hit the capacity requirements we need for the area to support the growth, not just Microsoft, but all the other growth that we're seeing in the region. So that's why we've added the -- and you'll see more filings shortly on renewable projects in the next month or so that we're proposing to help beat the capacity and the energy needs in the region. So we think there's a lot of opportunity not only from generation of renewables, some capacity needs, some distribution needs also, but also American Transmission Company and investment in the transmission in the region. So we're factoring all that in as we pull together our five-year plan here.
Xia Liu: And Julien, all those filings will be in the regulated area, as you know, in Wisconsin.
Julien Dumoulin-Smith: Yes, absolutely. Indeed. I know you're pursuing this on multiple fronts. Absolutely. And then team, just maybe to tackle on the regulatory front, a couple of questions here. How do you think about this -- the PSC's denial in the AFUDC? Is there anything to read into that here on the pre-construction costs? And just -- I know it's a little bit nit-picky, but I'm just curious if there's anything to tease out of that in terms of direction, strategically or financial?
Scott Lauber: No, I don't think there's anything to read into that. We, of course, thought if we get approval on that, we'll wait and see what the final written order is. But when you look at the value we're providing our customers getting these orders in early, both from a cost-savings standpoint and a time of delivery standpoint, there's really a lot of value for our customers. So we're going to most likely ask for reconsideration and refile that information with the additional information they're looking for. So stay tuned on that, but we think there's a lot of value. And I know the cost of the projects as the longer you wait would continue to go up as everyone across the country is looking at adding generation.
Julien Dumoulin-Smith: Yes, that seems pretty transparent as you say. And lastly, I'll just offer this. I traded in the dog, the equity, traded him in and I got a little boy now. So I appreciate you guys looking for it all along.
Scott Lauber: Congratulations. Excellent to hear.
Julien Dumoulin-Smith: Thank you. Absolutely. All right, guys. I'll see you soon, alright? Appreciate it.
Scott Lauber: It sounds good.
Operator: Our next question comes from the line of Michael Sullivan with Wolfe Research. Your line is open.
Michael Sullivan: Hi, good afternoon.
Scott Lauber: Good afternoon, Michael.
Michael Sullivan: Hi, Scott. Just as we look forward to your kind of usual plan refresh with Q3 and CapEx has usually been biased higher, how should we think about incremental equity needs associated with that? Should it just be any incremental CapEx is financed consistent with your utility capital structures or any different way to think about it?
Scott Lauber: No, I think you got it right in line. I mean, of course, we'll put everything together and look at it, refresh it again, but similar to what Xia has been talking about, we'll just look at the equity needs in-line with the capital spend and be very excited about the long-term growth that we have available on the capital and the insights we have looking-forward on additional capital.
Michael Sullivan: Okay. That makes sense. And then shifting over to Illinois, I was just maybe hoping you could frame some bookends for potential outcomes of the still pending docket, namely the pipe program review. What's the range of outcomes there? And then also really, is there anything -- any loose end still tied to like the QIP Rider reconciliations from prior years that could move numbers around at all?
Scott Lauber: Sure. So let's look at both of them. So the QIP Rider is from other years. Right now, 2016 Rider has been queued up I think for a decision hopefully I would expect by the end-of-the year. Decision will be made in that. As you know, it's 2016 Rider, so it's been a while. And then, of course, we have those other years under the QIP still to look at. So remember the requirements there is prudency and we think we've been very prudent specifically after the Integrys acquisition where we really took a look at the program and factored in a lot of information that we received from the audits of the Liberty Audit and staff recommendations from that audit. So those are still more to come on there. And then under the current S&P, remember, the S&P in our last rate case, no one requested a pause in the program at all during the rate case. And now in looking at the testimony for the first set of testimony that came through, there is no one also recommending a pause in the case. The range that our people are talking about that was in the testimony is from including emergency work to working with the City of Chicago and emergency work. There, the City of Chicago, I think he said he should lift the pause for at least two years with a cap of about $245 million all the way to the other extreme where I think staff recommending that you accelerate the program and actually get it done faster by 2030. So there's quite a range in the middle there. But once again, none of the interveners in the initial testimony, they all said they should lift the pause and get some work done specifically related to the emergency work and working with the City of Chicago as they do their capital work.
Michael Sullivan: Okay. Yes, just on that, I mean, I think as we've seen with some of the recent orders there, the ICC has come out worse than every single other intervener. So how do we just think about that risk in these dockets that you could get more of the same when it actually comes down to the final order?
Scott Lauber: Yes. And we're going to have to wait-and-see and see what they say. I think when you look at it from every intervener group though, they are saying we need to work with the City of Chicago, including the City of Chicago to help them with their capital programs and everyone even there on the rehearing talked about the emergency work. So on that low end, you're talking between $60 million and $100 million a year. So I don't think anyone is disputing that. And I understand what the commission is, but they're taking some time. And I think when you look at that last S&P case or the rehearing we asked for, they are concentrating on purely emergency and wanted to wait for this order to look at the entire program. So I wish I knew the answer, but that's why we're going to the case.
Michael Sullivan: Okay. No, that is super helpful context. Thank you.
Scott Lauber: Thank you.
Operator: Our next question comes from the line of Durgesh Chopra with Evercore ISI. Your line is open.
Durgesh Chopra: Hi, good afternoon.
Scott Lauber: Hi, Durgesh.
Durgesh Chopra: Hi, good afternoon, Scott and Xia. Thanks for giving me time. Hi, just on the safety modernization program review in Illinois. So obviously, you had a decision on the $145 million, you got $28 million. Can you just remind us what is baked into the plan '25 and forward on that -- on the safety program?
Scott Lauber: Sure, and I'll let Xia go through the details. But in general, we took about $800 million out. And as we look at our plan, we'll reevaluate it based on the testimony we're seeing here as we look at the next five-year plan. But Xia, can you tell us what's in the current?
Xia Liu: Yes, it's between $100 million to $120 million a year, Durgesh. And as Scott mentioned, we are in the process of refreshing the capital plan. So we're working with the team in Illinois to reflect the latest development from the commission's decision on the approval of the $28.5 million. So likely that number could potentially come down over the next five years, but we're still working through the details right now.
Durgesh Chopra: Got it. Thank you. That's very helpful. And just to be clear, first quarter of next year, we're going to get a decision on the spending relative to what you have in the plan, right? I'm assuming you've asked for anywhere between $100 million to $120 million and then the commission is going to come back with a recommendation. Is that fair?
Scott Lauber: Yes. We expect to hear a recommendation in the first quarter of 2025 from the commission.
Durgesh Chopra: Yes. Okay. Thank you. And then just can I quickly follow up on Delilah I? Any color you can share? I know you mentioned weather event. I'm just wondering if it's -- it could be more than six months? Just what caused it? Was it just equipment or something else? Any color you can share there? Thank you.
Scott Lauber: Yes, sure. There was -- and remember, we haven't purchased it yet. We have a commitment to, but it was during construction and there was a hail event there. So there was some hail damage. We want to work with the developer as they are repairing it to make sure the fields in full shape before we purchase it. We anticipate based on all the latest discussions that it will be in by the end-of-the year. And we get weekly updates on the progress going there. And right now that is still the plan to be in by the end-of-the year assuming no other events happen.
Durgesh Chopra: Thank you. I appreciate it. Thanks, Scott. Thanks, Xia.
Scott Lauber: Thank you.
Operator: Our next question comes from the line of Carly Davenport with Goldman Sachs (NYSE:GS). Your line is open.
Carly Davenport: Hi, good afternoon. Thanks for taking the questions.
Scott Lauber: Hi, Carly. Absolutely.
Carly Davenport: Just wanted to ask a quick one on transmission and ATC. We've obviously seen the sizing of MISO Tranche 2 moving higher here. So just curious how you're thinking about the opportunities around transmission there both from a size and a timing perspective.
Scott Lauber: Sure. I think Tranche 2 from everything I've seen and heard is going to be larger than Tranche 1 and you've talked about that. I think it will be probably about proportionately larger for ATC. So a lot of good opportunities there, but that spending probably won't actually occur to like 2030 plus, right, because they're still working through Tranche 1. I think the other big driver for American transmission company is going to be the economic development in the region and putting in renewables in the system. So last year, Tranche 1 had an effect on our capital plan, but the biggest drivers were economic development and continuing renewables in Wisconsin. So I consider both of those to be additional drivers. And remember that Tranche 1 was in 2020. So as they go through and reprice all of that, when you think about inflation in the last several years, it's going to be -- it's going to most likely be bigger than the original amount.
Carly Davenport: Great. I appreciate that color. I'll leave it there. Thank you.
Scott Lauber: Thank you.
Operator: Our next caller comes from the line of Andrew Weisel with Scotiabank (TSX:BNS). Your line is open.
Scott Lauber: Hi, Andrew.
Andrew Weisel: Hi, everybody. Hi. First question on Illinois. Just a question of timing. So you mentioned the uncertainty will last for about a year. At what point might you start to consider reallocating capital into this state? Could we see some CapEx go back into Illinois with the update in three months or would it be unlikely to show up until the fee update in the fall of 2025 when all of those dockets are wrapped up?
Scott Lauber: Well -- and we'll look at it. When you think about Illinois, we'll know more on the S&P program in the first quarter of next year. There's also a -- there's the future of natural gas that's being looked at and there's also an IRP process where we get stakeholders involved and our first filing will be in 2025. So, as you know, as we pull our capital plans together in the fall of this year, we're going to be pretty conservative as we look at that until we have a little more clarity. And when we think about it, there's just a lot of opportunities outside of Illinois for the additional capital and growth.
Andrew Weisel: That makes sense. Next question for Xia. If I heard you right on the O&M, you're now projecting it to be up 2% to 3%. Last quarter, you said up 3% to 5%, originally it was up 6% to 7%. So this is really good progress. Can you just give us a little bit of detail on those moving parts? How is it that the outlook is getting better and better? What are some examples?
Xia Liu: Oh, there -- every manager in the business unit understands that we had a very mild first quarter. So we made it very clear that we need to be highly focused on O&M to offset the weather headwind in the first quarter. Benefits are lower, expected to be lower. We're also looking at all the angles about using contractors versus internal labor and we -- it's across-the-board, I would say, so...
Andrew Weisel: Okay. Relative to the original budgets, would you call most of these savings one time then or is some of it going to be sustainable?
Xia Liu: I think it's a combination of one-time initiatives, but also continued focus on driving efficiency across-the-board which is also sustainable. It's a combination of both.
Scott Lauber: And also when you think about it, having a warm first quarter, you don't have like the number of leaks as you would in the gas system. So some things are naturally less now. So we've got a little bit less O&M in the gas system and we had some significant storms. So between the storms and the warmer weather, we've asked everyone across the business unit to really control cost and really kind of do some one-time things here. On the other hand, we are making sure we are actively responding to storms because the storms have had bigger and actually continuing to work on our forestry program because of some of the damage some of the storms have had to the system. So we want to really balance customer reliability along with our savings?
Andrew Weisel: Got it. That's very helpful. Then just one very nit-picky one. Corporate and other minus $0.06 for taxes this quarter, I think it was plus $0.09 in the first quarter. Will you just remind us what's the expectation for the full-year? Should that net up to zero or something else?
Xia Liu: It would be slightly positive. If you think about the reason why we had a large timing -- tax timing in the first quarter and the opposite in the second quarter. Part of that is driven by the earnings pattern shift in Illinois, so tax dollars follow the earnings pattern. And two, we had a deferral -- I'm sorry, the delay of the Delilah. So part of that is reflected in the second quarter. But as we put Delilah online end-of-the year, we expect the tax dollars to follow.
Andrew Weisel: Okay, very helpful. Thank you so much.
Operator: Our next question comes from the line of Neil Kalton with Wells Fargo (NYSE:WFC) Securities. Your line is open.
Neil Kalton: Yes, hi, guys. Thanks for taking my call. Two questions. Just on the Microsoft opportunity, a lot of acreage here. As we think about the CapEx refreshes going-forward, at what point in time do you think you'll have clarity to start flowing some of that potential spend related to incremental opportunities into the plan? Is that like potentially '24 we could see some or is this more like '25 or '26?
Scott Lauber: Sure. And actually, thanks, Neil and thanks for the question. So we're actually -- between us and American transmission company, we're actually spending some money now on some of the substations and we have those orders in for some of the generation and it's to support the economic development across-the-board. So it's going to be '24, '25 and then even more in '26 as we get those orders released at the commission and approval for that generation. We're also -- in the next month or so, you'll see some filing on additional renewables that support the generation needs as we continue to add renewables to our portfolio. So that spending, it will be probably in that '26, '27 timeframe.
Neil Kalton: Okay. So it's kind of like broadly overall, it's not just tied to the Microsoft thing, sort of overall you have this need and kind of anticipate things happening that we start to kind of flow it in over time. And as we get more clarity, more comes in, is that right?
Scott Lauber: Exactly, exactly. And remember, the growth that they provided us is really only through their capital plans through '26. I imagine once they get it in, they'll continue to ramp up. But we'll continue to work through it. And I think our plan is extremely long as we start adding 2029 to our five-year plan.
Neil Kalton: Okay, perfect. Thank you.
Scott Lauber: Thank you.
Operator: Our next question comes from the line of Jeremy Tonet with JPMorgan (NYSE:JPM). Your line is open.
Jeremy Tonet: Hi, good afternoon.
Scott Lauber: Hi, Jeremy.
Jeremy Tonet: I just wanted to come back up to Wisconsin if I could with the recent commission vote here. Just wondering with the split vote, what you take from that, I guess, any thoughts on the direction of the commission at this point?
Scott Lauber: No, I think it's kind of early to tell. I think they were just looking for some additional information and I don't think they had the full information on and they mentioned on the economics and the benefits of this. So this is maybe a communication between our staff and their staff and we just got to understand it. So we'll get the order, we'll review it. We'll pull the information together and ask for a reconsideration. I'm not overly concerned on this. And in the end, when you listen to their comments, if they didn't have all the information, you know they have to make the right decision for what they think is right too. So I appreciate them really evaluating each case. So I won't over -- read into this over too much.
Jeremy Tonet: Got it. That's helpful. I'll leave it there. Thanks.
Operator: [Operator Instructions] Our next question comes from the line of Shar Pourreza with Guggenheim Partners. Your line is open.
Shar Pourreza: Hi, guys. Thanks for taking my follow up. Scott, I know we're getting closer to the back-half of the year. Just on Point Beach PPA, I know you've talked about sort of this coming potentially too ahead as we're getting to the year-end. I guess how are sort of conversations going with NextEra and a new PPA or sort of another path forward there? Any updates?
Scott Lauber: Yes, it's really -- we've had really good productive conversations with NextEra, but really nothing to report at this time. So still in discussions, but stay-tuned to this. And we'll -- we're working on it.
Shar Pourreza: Okay. I appreciate it. Thanks so much guys for taking my follow up. Appreciate it.
Scott Lauber: Absolutely.
Operator: Our last question comes from the line of Paul Patterson with Glenrock Associates. Your line is open.
Paul Patterson: Hi.
Scott Lauber: Hi, Paul.
Paul Patterson: Good afternoon. How are you doing? So just one question at this point and that is the Illinois Gas Appeal at the Appellate Court in Illinois, just any frame of timing when you think you might get a resolution to that?
Scott Lauber: I apologize. It didn't come too clear on -- the future of gas?
Paul Patterson: No, no. So you guys appealed the order to the Illinois field court. And I was just wondering when you think a decision from that might be happening?
Scott Lauber: I anticipate it's going to take a year or two.
Paul Patterson: Okay. A long-time. Okay. Thank you. That's it from me.
Scott Lauber: All right. Thank you. Well, that concludes our conference call for today. Thank you for participating. If you have any questions, feel free as always to call Beth Straka at 414-221-4639. Thank you.
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