Executive Summary / Key Takeaways

• WEC Energy Group is strategically positioned to capitalize on unprecedented economic development in its Midwest service territory, particularly the I-94 corridor, driven by significant data center and industrial load growth.
• The company's robust $28 billion capital plan (2025-2029) is designed to meet this surging demand through a balanced "all-of-the-above" energy strategy, investing heavily in both regulated renewables and reliable natural gas generation.
• Recent financial performance demonstrates solid execution, with Q2 2025 earnings growth driven by favorable rate orders and increased sales, reinforcing confidence in the reaffirmed 6.5%-7% long-term EPS CAGR.
• WEC's competitive advantages stem from its regulatory stability, extensive infrastructure, and a strategic mix of core and emerging technologies that enhance reliability and efficiency.
• Key risks include ongoing regulatory uncertainties in Illinois and potential impacts from evolving federal energy policies and tariffs, though management is actively pursuing mitigation strategies.

A Century of Powering Progress: WEC's Strategic Foundation

WEC Energy Group, Inc., founded in 1896 and headquartered in Milwaukee, Wisconsin, stands as a diversified holding company with deep roots in regulated natural gas and electric utility operations across Wisconsin, Illinois, Michigan, and Minnesota. A pivotal moment in its modern history was the 2015 rebranding from Wisconsin Energy Corporation to WEC Energy Group, signaling a broader strategic vision that included the acquisition of Integrys and the formation of ATC Holdco in 2016 to pursue transmission projects. This evolution has culminated in a strategic focus on reliability, financial discipline, customer satisfaction, and environmental stewardship, positioning WEC as a cornerstone of the Midwest's energy landscape.

The company operates within a competitive utility sector characterized by high barriers to entry, primarily due to stringent regulatory approvals and the immense scale of required infrastructure. WEC leverages its extensive infrastructure networks and regulatory licenses as core competitive advantages, fostering strong customer loyalty and predictable revenue streams from its regulated services. This foundational stability allows WEC to pursue capital-intensive growth initiatives while maintaining robust financial health.

WEC's strategic approach to energy generation and delivery is underpinned by a commitment to technological advancement and operational efficiency. The company's Advanced Metering Infrastructure (AMI) program, an integrated system of smart meters and communication networks, significantly reduces manual effort for tasks like disconnects and reconnects while enhancing outage management capabilities. This technological integration improves customer service and operational responsiveness. Furthermore, WEC is actively exploring cutting-edge energy storage solutions, exemplified by its pilot program with Electric Power Research Institute and CMBlu Energy to test organic solid flow batteries at its Valley Power Plant. This initiative aims to validate long-duration energy storage capabilities, potentially storing and discharging energy for up to twice as long as typical lithium-ion batteries, offering a tangible benefit for grid stability.

In its pursuit of decarbonization and resource diversification, WEC has embraced Renewable Natural Gas (RNG) pilots, successfully transporting RNG from local dairy farms onto its natural gas distribution systems in Wisconsin. With contracts for 2.1 Bcf of RNG, this initiative directly replaces higher-emission methane, contributing to environmental goals and offering a cleaner fuel source. These technological and operational differentiators enhance WEC's competitive standing by improving service reliability, optimizing costs, and advancing its environmental objectives, thereby strengthening its market position against peers like NextEra Energy , Duke Energy (DUK), Southern Company (SO), and Edison International (EIX). While NextEra (NEE) may lead in the sheer scale and speed of renewable innovation, WEC's balanced approach, regulatory stability, and focus on integrated grid solutions provide a distinct value proposition.

Unprecedented Demand Fuels Capital Ambition

WEC Energy Group is at the epicenter of a profound economic transformation in its service territory, particularly along the I-94 corridor between Milwaukee and Chicago. This region is experiencing robust economic development, evidenced by a consistently low Wisconsin unemployment rate of 3.2%. The surge in demand is largely driven by the burgeoning data center industry and significant industrial expansions. Microsoft , for instance, continues to make substantial progress on its large data center complex in Southeast Wisconsin, with a five-year demand forecast of 1.8 gigawatts and plans to invest $3.3 billion by the end of 2026. Microsoft (MSFT) has further expanded its commitment by acquiring over 1,900 acres for additional development.

Adding to this unprecedented demand, Vantage Data Centers (formerly Cloverleaf) is developing approximately 1,900 acres north of Milwaukee, with a potential to reach 3.5 gigawatts of demand over time, targeting 1.3 gigawatts by the end of 2027. This significant load is incremental to WEC's current demand forecast, signaling substantial future growth opportunities. Beyond data centers, the region is attracting major industrial players, including Yaskawa's $180 million investment for its U.S. headquarters, Eli Lilly's (LLY) $3 billion manufacturing facility expansion, and Uline's 1.2 million square foot warehouse expansion. This broad-based economic activity underscores the critical need for WEC's aggressive capital investment strategy.

To meet this surging demand, ensure reliability, and comply with evolving environmental regulations, WEC has unveiled its largest-ever capital plan, projecting $28 billion in investments from 2025 to 2029. This represents an 18% increase over the previous five-year plan and is expected to drive an average asset-based growth rate of 8.8% annually. The plan is designed to support an incremental 1,800 megawatts of demand over the next five years, reflecting a strategic response to the region's growth.

The capital allocation reflects an "all-of-the-above" energy strategy. WEC plans to invest $9.1 billion in regulated renewables, including 2,900 megawatts of solar, 900 megawatts of wind, and approximately 600 megawatts of battery storage. Complementing this, an incremental $900 million is earmarked for modern, efficient natural gas generation, comprising combustion turbines and reciprocating internal combustion engines (RICE) units. To bolster gas supply for both heating and power generation, an additional $400 million is allocated for liquefied natural gas (LNG) capacity, including a 2 Bcf facility at the Oak Creek Power Plant (OCPP) site, expected to be completed by the end of 2027. Furthermore, WEC plans to invest $3.2 billion in American Transmission Company (ATC) to enhance transmission capabilities and strengthen the system, alongside an additional $700 million for distribution network upgrades. This strategic focus on regulated utility growth has led to a reduction in planned investments in the non-utility energy infrastructure segment, with approximately $400 million remaining for 2025.

A key strategic initiative to manage the financial implications of these large new loads is the proposed Very Large Customer (VLC) Tariff. Filed with the Public Service Commission of Wisconsin (PSCW) in March 2025, this tariff is designed for new customers consuming 500 megawatts or more, ensuring they directly pay for the electricity, power plants, and distribution facilities built to serve them. This mechanism prevents cost shifting to other customer classes and aims to make Wisconsin a prime location for data center investments. The tariff proposes a fixed return on equity (ROE) of 10.48% and an equity ratio of 57% for dedicated generation resources, with terms ranging from 20 years for wind/solar to the depreciable lives for gas/battery assets. A decision from the PSCW is anticipated by Q2 2026.

Financial Performance: A Foundation of Stability and Growth

WEC Energy Group's financial performance in the first half of 2025 underscores its ability to execute its strategic plan and deliver consistent results. For the second quarter of 2025, the company reported net income of $245.4 million, or $0.76 per share, representing a $34.1 million increase in net income attributed to common shareholders compared to Q2 2024. This growth was primarily driven by a $50.3 million increase in net income from the Wisconsin segment, benefiting from new rate orders effective January 1, 2025, and higher retail sales volumes influenced by colder spring weather. Over the first six months of 2025, net income attributed to common shareholders reached $969.6 million, or $3.02 per share, a $136 million increase from the same period in 2024.

The Wisconsin segment's utility margin (non-GAAP) increased by $112.8 million in Q2 2025 and $276.1 million for the first six months of 2025, reflecting the positive impact of rate adjustments and robust sales. Capital expenditures for the Wisconsin segment totaled $1,316.4 million in the first half of 2025, a significant increase of $429.6 million from the prior year, demonstrating the accelerated pace of infrastructure development. The Electric Transmission segment also contributed positively, with net income increasing by $4.2 million in Q2 2025, driven by continued capital investment by ATC and a favorable FERC order setting ATC's ROE at 10.48%.

Despite these strengths, certain segments faced headwinds. The non-utility energy infrastructure segment saw an $11.0 million decrease in net income in Q2 2025, primarily due to lower operating income at WECI. This was impacted by an $11.6 million impairment loss from storm damage at the Samson I and Delilah I solar facilities, although partially offset by increased Production Tax Credits (PTCs). The Corporate and Other segment's net loss increased by $9.2 million in Q2 2025, largely due to higher interest expense from recent long-term debt issuances. The Illinois segment's net income decreased by $3.1 million in Q2 2025, affected by higher operating expenses, including maintenance costs at the Manlove Gas Storage Field.

WEC maintains competitive profitability margins, with a TTM Gross Profit Margin of 43.12%, Operating Profit Margin of 24.90%, Net Profit Margin of 17.87%, and EBITDA Margin of 44.13%.

While the company's current liabilities exceeded current assets by $2,098.50 million at June 30, 2025, management expresses confidence in its liquidity, supported by internal cash generation, available credit facilities, and access to capital markets. The company's financing plan for 2025-2029 anticipates funding 60% of its cash needs from operations, 31% from incremental debt, and 9% from common equity, totaling $2.7 billion to $3.2 billion in common equity issuances through 2029. This includes $700 million to $800 million in 2025, demonstrating a commitment to a balanced capital structure with 50% equity content for incremental capital.

Outlook and Risks: Navigating the Path Ahead

WEC Energy Group has reaffirmed its 2025 earnings guidance in the range of $5.17 to $5.27 per share, assuming normal weather for the remainder of the year. For the third quarter of 2025, the company expects earnings between $0.74 and $0.80 per share. The long-term compound annual earnings growth rate is reaffirmed at 6.5% to 7%, starting from a 2023 base. This ambitious outlook is underpinned by the robust capital plan and the accelerating economic growth in the service territory.

Retail electric sales in Wisconsin are projected to grow 0.7% in 2025 on a weather-normal basis, with a significant acceleration to 4.5% to 5% annual growth expected from 2027 through 2029, driven by the large data center and industrial loads. Retail natural gas sales in Wisconsin are also forecast to grow 1.9% from 2024 levels. Day-to-day O&M expenses are anticipated to increase by 8% to 10% in 2025, reflecting investments in vegetation management, new asset integration, and restoring operational levels after prior cost-saving measures. The company's annualized dividend stands at $3.57 per share, with a target payout ratio of 65% to 70% of earnings, aligning dividend growth with EPS expansion.

Despite this positive outlook, WEC faces several pertinent risks. In Illinois, regulatory uncertainties persist, including potential disallowances related to the Uncollectible Expense Adjustment (UEA) rider and Qualifying Infrastructure Plant (QIP) rider reconciliations, with aggregate QIP capital costs and returns totaling approximately $2.90 billion as of June 30, 2025, still pending ICC review. The statewide "Future of Gas" proceeding, extended into 2026, could materially impact future natural gas operations and investment opportunities. Additionally, the proposed Clean and Affordable Buildings Ordinance (CABO) in Chicago, if passed, could effectively prohibit natural gas use in new buildings, posing a long-term threat to PGL's business.

Supply chain disruptions and evolving trade policies also present challenges. The Uyghur Forced Labor Prevention Act (UFLPA) and Department of Commerce (DOC) duties on solar panels have impacted the cost and availability of materials, with WEC estimating a 2% to 3% tariff exposure on its capital plan. While mitigation efforts are underway, these factors could lead to project delays or increased costs. Furthermore, changes to clean-energy tax credits under the One Big Beautiful Bill Act (OBBBA) and related executive orders introduce uncertainty, though WEC is actively working on safe harboring projects to secure benefits. Environmental regulations from the EPA, including the Good Neighbor Rule and GHG Power Plant Rule, are subject to ongoing legal challenges and potential deregulatory actions, creating a dynamic compliance landscape.

Conclusion

WEC Energy Group stands at a pivotal juncture, poised to leverage its robust regulated utility model and strategic capital investments to meet the burgeoning energy demands of a rapidly growing Midwest economy. The company's "all-of-the-above" energy strategy, combining significant renewable build-out with reliable natural gas generation and critical LNG storage, positions it as a resilient and forward-thinking energy provider. This approach, coupled with technological differentiators like AMI and advanced battery pilots, enhances operational efficiency and grid reliability, reinforcing its competitive moat.

While the path ahead involves navigating complex regulatory environments in Illinois and adapting to evolving federal energy policies and supply chain dynamics, WEC's management has demonstrated a proactive approach to mitigating these risks. The proposed VLC tariff in Wisconsin exemplifies a pragmatic solution to integrate large new loads like data centers, ensuring equitable cost allocation and fostering continued economic development. With a reaffirmed long-term EPS growth target and a commitment to consistent dividend increases, WEC Energy Group presents a compelling investment thesis for those seeking stable, regulated earnings coupled with substantial growth potential driven by essential infrastructure development.