Executive Summary / Key Takeaways

• Unprecedented Capital Expansion: WEC Energy Group is embarking on its largest-ever capital plan, committing $36.5 billion from 2026 to 2030, a 30% increase over previous forecasts, to capitalize on surging electric demand, particularly from data centers in its Wisconsin service territory.
• Accelerated Earnings Growth: This robust investment is projected to drive asset-based growth exceeding 11% annually and accelerate WEC's long-term diluted EPS growth to a compound annual rate of 7% to 8% from 2026 to 2030, with an anticipated 8% annual growth in the later years (2028-2030).
• Diversified Generation Strategy: WEC employs an "all-of-the-above" approach, investing heavily in a balanced mix of 3,700 MW of utility-scale solar, 1,780 MW of battery storage, 555 MW of wind, and 3,300 MW of efficient natural gas combustion turbines and 180 MW of reciprocating internal combustion engines (RICE) to ensure reliability and meet clean energy goals.
• Strategic Customer Tariffs & Regulatory Clarity: The proposed Very Large Customer (VLC) Tariff in Wisconsin, designed in collaboration with major data center clients, aims to ensure these high-load customers pay their fair share, featuring a fixed return on equity (ROE) of 10.48% to 10.98% and a 57% equity ratio, with a PSCW decision expected by Q2 2026.
• Operational Resilience Amidst Challenges: Despite regulatory disallowances in Illinois and supply chain pressures from tariffs on solar components, WEC's disciplined execution, including proactive O&M and fuel management, has allowed it to reaffirm its 2025 EPS guidance of $5.17 to $5.27 per share.

WEC's Foundation and Strategic Imperative: Fueling a New Era of Demand

WEC Energy Group, Inc., established in 1896 in Milwaukee, Wisconsin, has a long history of adapting to the evolving energy landscape, transforming from its early roots to a diversified holding company. Today, WEC provides regulated natural gas and electricity, alongside renewable energy services, across Wisconsin, Illinois, Michigan, and Minnesota. This evolution has been marked by strategic acquisitions and a consistent drive to modernize its infrastructure and generation mix. A significant shift in its operational philosophy has been the systematic retirement of older fossil-fueled generation, a process that began in 2018 and continued with the retirement of Oak Creek Power Plant Units 5 and 6 in May 2024, aligning with broader environmental goals.

The company's overarching strategy is defined by an "all-of-the-above" approach to generation, underpinned by core tenets of environmental stewardship, reliability, operating efficiency, financial discipline, exceptional customer care, and safety. This strategy is now more critical than ever, as WEC stands at the forefront of an unprecedented surge in electric demand. The AI-driven data center boom is a primary catalyst, with electric demand projected to grow by 3.4 gigawatts (GW) between 2026 and 2030, an increase of 1.6 GW compared to the prior plan. This growth is heavily concentrated in WEC's Wisconsin service territory, notably driven by Microsoft (MSFT)'s expanding data center complex in Mount Pleasant, supporting approximately 2.1 GW of the overall demand growth, and Vantage Data Centers' Lighthouse campus in Port Washington, which has the potential to reach 3.5 GW of demand over time, with WEC focused on serving an estimated 1.3 GW in the next five years.

Within this dynamic environment, WEC operates in a highly regulated utility sector, competing with other large, publicly traded utilities like Duke Energy Corporation , Southern Company , Dominion Energy, Inc. , and NextEra Energy, Inc. . WEC's market positioning leverages its strong regional presence and operational reliability. Its competitive advantages include an extensive infrastructure network that enhances reliability and customer loyalty, potentially leading to stronger recurring revenue and efficient operations. Furthermore, WEC's regulatory expertise allows it to navigate complex approval processes effectively, fostering strategic adaptability. However, WEC's regional operational focus could limit revenue diversification compared to larger, more geographically dispersed rivals, and its historical reliance on traditional energy sources presents a vulnerability to regulatory shifts favoring renewables. Indirect competitors, such as alternative energy providers and battery storage firms, also pose a challenge by offering decentralized solutions that could reduce reliance on traditional utilities.

Technological Edge and Innovation Driving Future Capacity

WEC's strategic response to escalating demand and evolving environmental mandates is deeply rooted in its technological advancements and diversified generation portfolio. The company is making substantial investments in both zero-carbon-emitting renewables and highly efficient natural gas-fired generation, ensuring a robust and flexible energy supply.

The capital plan from 2026 to 2030 includes significant commitments to renewable energy, with plans for 3,700 megawatts (MW) of utility-scale solar, 1,780 MW of battery energy storage systems (BESS), and 555 MW of wind generation. These investments are critical for meeting both demand growth and WEC's long-term goal of achieving net carbon neutral electric generation by 2050. The Paris Solar-Battery Park, which saw its 110 MW battery storage portion come online in June 2025, marks Wisconsin's first large-scale battery storage project, demonstrating WEC's commitment to cutting-edge energy solutions. This BESS capacity is vital for capturing excess power and dispatching it during peak demand or unexpected disruptions, enhancing grid stability.

Complementing its renewable build-out, WEC is also investing in reliable, efficient natural gas generation. The plan includes 3,300 MW of combustion turbines (CTs) and 180 MW of reciprocating internal combustion engines (RICE). These dispatchable resources are crucial for maintaining grid stability, especially given the intermittent nature of some renewables. To further bolster natural gas supply, WEC is developing a 2 billion cubic feet (Bcf) liquefied natural gas (LNG) storage facility at the Oak Creek Power Plant (OCPP) site, with an estimated cost of $456 million and an expected in-service date of 2027. An additional 4 Bcf of LNG supply is also proposed, with an estimated cost of $1 billion. These facilities are designed to mitigate natural gas distribution system constraints during periods of high demand.

WEC's technological differentiation extends to enhancing existing infrastructure. The company has successfully tested a 30% gas blend on its Elm Road Generating Station coal-fired units and plans to convert these units, along with Weston Unit 4, to run on 100% natural gas by 2029. This fuel flexibility ensures continued capacity while transitioning to cleaner operations. Furthermore, WEC is implementing an Advanced Metering Infrastructure (AMI) program, an integrated system of smart meters and communication networks, which reduces manual effort for meter reading and enhances outage management capabilities, leading to improved operational efficiency and customer service.

Beyond these core technologies, WEC is actively engaged in several pilot programs, including Solar Now, Dedicated Renewable Energy Resource (DRER), and the Renewable Pathway Pilot, to integrate more renewable energy and support large commercial and industrial customers. The company is also expanding its electric vehicle (EV) charging network and exploring renewable natural gas (RNG) pilots. A notable R&D initiative is the pilot program with Electric Power Research Institute and CMBlu Energy to test an organic solid flow battery at the Valley Power Plant (VAPP), aiming for long-duration energy storage capabilities. These technological advancements and strategic investments are designed to create a competitive moat, ensuring reliability, supporting clean energy goals, and enhancing cost-effectiveness, thereby strengthening WEC's market positioning and long-term growth trajectory.

Financial Performance: A Story of Growth and Discipline

WEC Energy Group's recent financial performance reflects a company effectively executing its strategy amidst a period of significant investment and economic expansion. For the third quarter of 2025, the company reported diluted earnings per share (EPS) of $0.83, contributing to a strong year-to-date performance. This solid result keeps WEC on track to meet its reaffirmed 2025 earnings guidance of $5.17 to $5.27 per share.

The Wisconsin segment, WEC's largest, was a primary driver of this growth. Net income attributed to common shareholders for this segment increased by $43.5 million, or 18.3%, in Q3 2025 compared to the prior year, and by $187.3 million, or 29.4%, for the nine months ended September 30, 2025. This robust performance was largely attributable to higher margins resulting from Wisconsin rate orders effective January 1, 2025, increased retail sales volumes, and favorable income tax benefits. Weather-normal retail electric deliveries in Wisconsin (excluding the iron ore mine) saw a 1.8% increase in Q3 2025, with strong contributions from the large commercial and industrial segment, which grew 2.9%.

The Illinois segment, while still reporting a net loss for Q3 2025, demonstrated an $18.1 million reduction in that loss compared to the previous year. This improvement was primarily due to the absence of a $25.3 million pre-tax charge recorded in Q3 2024, which was related to the Illinois Commerce Commission's (ICC) disallowance of certain capital costs. The Electric Transmission segment also contributed positively, with equity in earnings from transmission affiliates increasing by $8.1 million in Q3 2025 and $22 million year-to-date, driven by continued capital investment by American Transmission Company (ATC). The Non-Utility Energy Infrastructure segment saw its operating income rise by $1.6 million in Q3 2025, benefiting from new renewable generation facilities, and its income tax benefit increased by $39.1 million year-to-date due to higher Production Tax Credits (PTCs).

From a broader financial perspective, WEC's trailing twelve-month (TTM) profitability metrics underscore its operational effectiveness: a Gross Profit Margin of 49.58%, an Operating Profit Margin of 24.96%, and a Net Profit Margin of 17.76%. The EBITDA Margin stood at 43.99%. These figures are competitive within the regulated utility sector, with WEC's TTM P/E ratio of 21.32 comparing favorably to peers like Duke Energy Corporation (20.33), Southern Company (23.20), Dominion Energy, Inc. (D) (21.44), and NextEra Energy, Inc. (25.78).

Cash flow generation remains strong, with net cash provided by operating activities increasing by $324.8 million for the nine months ended September 30, 2025, driven by higher customer collections, increased natural gas costs, and greater sales volumes. While current liabilities exceeded current assets by $2.535 billion as of September 30, 2025, WEC anticipates maintaining adequate liquidity through internal cash generation, access to its revolving credit facilities, and capital markets. The company's adjusted capitalization structure, which accounts for rating agencies' treatment of its junior notes, shows a debt to total capitalization ratio of 59.4%.

Strategic Initiatives and Future Outlook

WEC Energy Group's future is defined by an ambitious capital plan and a clear vision for growth, driven by the burgeoning energy demands of its service territories. The company's updated five-year capital plan for 2026-2030 now stands at an impressive $36.5 billion, representing a substantial $8.5 billion, or over 30%, increase from its previous forecast. This significant investment is expected to fuel asset-based growth at an average rate of over 11% annually, effectively doubling the company's asset base within the next five years.

This capital deployment is directly linked to WEC's updated long-term diluted EPS growth target of 7% to 8% on a compound annual basis from 2026 to 2030, based on the midpoint of its 2025 guidance. Management anticipates that the EPS growth will accelerate in the later years of the plan, reaching approximately 8% annually from 2028 through 2030, as major projects come online and contribute to earnings. This acceleration is supported by an expected annual electric sales growth of 6% to 7% for the period 2028-2030, a notable increase from the previously forecasted 4.5% to 5%.

A cornerstone of WEC's strategy is its approach to serving very large customers (VLCs), particularly data centers. The proposed VLC Tariff in Wisconsin is designed to ensure that these customers, who require 500 MWs or more of new load, directly pay for the electricity they consume, as well as for the dedicated power plants and distribution facilities built to serve them. This tariff, which includes a fixed ROE ranging from 10.48% to 10.98% and an equity ratio of 57%, is expected to receive a decision from the Public Service Commission of Wisconsin (PSCW) by the second quarter of 2026. This initiative is crucial for attracting and integrating significant load growth without burdening existing residential or business customers.

In Illinois, WEC is addressing aging infrastructure through its Pipe Retirement Program (PRP), with a projected investment of approximately $500 million from 2025 through 2027, ramping up to a full run rate of "a little over $500 million a year" by 2028. This program, mandated by the Illinois Commerce Commission (ICC), aims to replace over 1,000 miles of cast and ductile iron pipe by January 1, 2035. A general rate case proceeding is anticipated in early 2026 to address the recovery of these costs.

WEC's financing strategy for this ambitious capital plan is robust. Approximately $21 billion is expected to be generated from cash operations, covering more than half of its funding needs. The remaining capital will be sourced through approximately $14 billion in incremental debt and $5 billion in common equity, with a commitment to funding incremental capital with 50% equity content. For 2026, common equity issuances are projected to be between $900 million and $1.1 billion. The company also maintains a consistent dividend policy, targeting a payout ratio of 65% to 70% of earnings, with dividend growth expected to align with EPS growth.

While WEC remains committed to its long-term goal of net carbon neutral electric generation by 2050, it has reconsidered its near-term CO2 emission reduction goals due to tightened energy supply requirements in the Midwest power market. The company plans to use coal only as a backup fuel by the end of 2030 and to eliminate coal as an energy source by the end of 2032. Similarly, its standalone goal for methane emissions from natural gas distribution is being reassessed due to market uncertainties. These adjustments reflect a pragmatic approach to energy transition, balancing environmental aspirations with the critical need for reliable and affordable energy supply.

Risks and Competitive Challenges

WEC Energy Group's ambitious growth trajectory is not without its inherent risks and competitive challenges. Regulatory uncertainty remains a significant factor, particularly concerning evolving environmental regulations from the EPA, such as the Good Neighbor Rule, Mercury and Air Toxics Standards (MATS), PM2.5 standards, and the Greenhouse Gas (GHG) Power Plant Rule. Any changes in these rules, or the outcomes of ongoing legal challenges, could lead to additional compliance costs or necessitate further investments in emission control technologies. The reclassification of ozone nonattainment areas to "serious" in Wisconsin, for instance, could result in more stringent emission control requirements or the need to purchase additional emission reduction credits.

Supply chain disruptions and tariffs also pose a tangible threat. Duties imposed on solar panels imported from Southeast Asian countries have already "impacted the cost and availability of solar panels in the U.S. and the U.S. solar industry overall has experienced higher costs of materials as well as delays". Further investigations into anti-dumping and countervailing duties (ADCVD) could exacerbate these pressures. Additionally, compliance with the Uyghur Forced Labor Prevention Act (UFLPA) introduces uncertainty regarding the long-term supply of solar panels and potential impacts on project timing and costs. Changes in federal energy policy, such as the executive order pausing disbursements under the Infrastructure Investment and Jobs Act and Inflation Reduction Act, could disrupt funding for infrastructure projects, leading to delays or cancellations.

The company's increasing concentration of business with large-scale customers, particularly in emerging technologies like AI and machine learning, introduces specific risks. Project termination, delays in regulatory approvals, challenges in cost recovery, or a lower-than-anticipated need for electricity by these customers could materially affect WEC's financial results. While WEC requires payment and cancellation agreements to mitigate these risks, "significant losses or delayed recovery of these costs" remain a possibility. Furthermore, advances in AI technology could potentially reduce the demand for electricity to power data centers, impacting future load growth.

In Illinois, WEC faces ongoing regulatory challenges with the ICC. There is no assurance that all costs incurred under the Uncollectible Expense Adjustment (UEA) rider (2019-2024) and Qualifying Infrastructure Plant (QIP) rider (2017-2023) will be deemed recoverable, and "Disallowances by the ICC, if any, could be material and have a material adverse impact on our results of operations". The statewide "Future of Gas" proceeding, expected to conclude in 2026, could also negatively impact future natural gas investment opportunities in Illinois.

From a competitive standpoint, while WEC boasts advantages in its extensive infrastructure, regulatory expertise, and diversified energy portfolio, its regional focus could limit revenue diversification compared to larger, more geographically expansive competitors like Duke Energy Corporation (DUK) and Southern Company (SO). NextEra Energy, Inc. (NEE), with its aggressive renewable strategy and leadership in clean energy innovation, presents a formidable challenge in terms of innovation speed and capturing new market opportunities. WEC's dependence on traditional energy sources, despite its transition efforts, also exposes it to regulatory shifts favoring renewables, which could increase costs or erode market share. However, high barriers to entry in the utility sector, such as substantial capital requirements and complex regulatory approvals, continue to protect WEC's market position.

Conclusion

WEC Energy Group stands at a pivotal juncture, poised for substantial growth driven by an unprecedented surge in electric demand, particularly from the burgeoning data center industry in its Midwest service territories. The company's strategic commitment to a $36.5 billion capital plan through 2030, focused on an "all-of-the-above" generation approach, underscores its proactive stance in meeting this demand while advancing its clean energy transition. This disciplined investment, coupled with innovative technological deployments in renewables, battery storage, and efficient natural gas, is expected to translate into accelerated EPS growth of 7% to 8% annually, reinforcing its value proposition for investors.

While WEC faces inherent challenges from regulatory uncertainties, supply chain pressures, and the specific risks associated with large-scale customer engagements, its collaborative approach to tariff design and robust financial management demonstrate a strong capacity for resilience. The company's established infrastructure, deep regulatory expertise, and regional stability provide a solid competitive foundation. As WEC continues to execute its ambitious capital plan and navigate the evolving energy landscape, its ability to balance reliability, affordability, and sustainability will be key to realizing its long-term growth potential and maintaining its position as a leading utility in the region.