WEC Energy Group's Q3 2025: Contradictions Emerge on Data Center Expansion, Capital Spending, and Microsoft Commitment

Date of Call: October 30, 2025

Financials Results

• EPS: $0.83 per share, $0.01 over third quarter 2024 adjusted earnings; reaffirmed 2025 guidance $5.17–$5.27 (assumes normal weather)

Guidance:

• Reaffirmed 2025 EPS guidance of $5.17–$5.27, assuming normal weather.
• 2026–2030 capital plan increased to $36.5B (up $8.5B vs prior plan); asset base growth ~11.3% annual average.
• EPS growth guidance: 6.5%–7% CAGR through 2027, accelerating to 7%–8% CAGR for 2026–2030 (midpoint of 2025 assumed).
• Funding mix: ~50% equity content; ~$21B cash from operations, ~$14B incremental debt, ~$5B common equity; 2026 equity issuance ~$900M–$1.1B.
• VLC tariff proposed terms: ROE 10.48%–10.98% and ~57% equity ratio; commission order expected by early May next year.
• Dividend target: payout ratio 65%–70%; dividend growth targeted ~6.5%–7%; 2026 dividend plan/guidance to be provided in December.

Business Commentary:

* Earnings Growth and Economic Development: - WEC Energy Group reported third-quarter 2025 earnings of $0.83 per share, which included a $0.12 increase in earnings from utility operations and a $0.01 positive impact from weather. - The earnings growth was attributed to rate-based growth contributing $0.15, timing of fuel expenses, tax items adding $0.07, and economic development in the region driving demand growth.

• Capital Expenditure and 5-Year Plan:
• The company announced a new 5-year capital plan with an increase of $8.5 billion, raising the total investment between 2026 and 2030 to $36.5 billion.

• This increase is driven by investments in regulated electric generation, transmission, and distribution projects in Wisconsin and Illinois, particularly focusing on economic growth and reliability needs.

• Data Center and Economic Growth:

• The electric demand is expected to grow by 3.4 gigawatts between 2026 and 2030, an increase of 1.6 gigawatts from the previous plan.

• This growth is supported by significant economic developments, including Microsoft's data center complex in Mount Pleasant, Wisconsin, and Vantage Data Centers' projects in Port Washington.

• Regulatory and Financial Update:

• The company continues to work on a very large customer tariff (BLC) in Wisconsin, aiming for a fixed return on equity of 10.48% to 10.98% and an equity ratio of 57%.
• This is designed to meet the needs of large customers, protect other customers, and support Wisconsin's data center investment environment.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 'third quarter 2025 earnings of $0.83 per share' and reaffirmed full-year guidance; announced a bullish $36.5B 5-year capital plan and said they are 'excited' and 'optimistic' about the plan and regional economic growth, repeatedly emphasizing execution and opportunities from large data-center projects.

Q&A:

• Question from Shahriar Pourreza (Wells Fargo Securities, LLC): Can you walk through how the CAGR shapes in the back half of the plan and whether it can be accelerated or smoothed?
  Response: Growth is back-end loaded to align with capex ramp (~$6.5–7B in 2026 to >$7.7B in 2027); management views this pacing as executable with some upside opportunity to accelerate.

• Question from Shahriar Pourreza (Wells Fargo Securities, LLC): Is there any opportunity to smooth the back-end loaded growth or is the plan fixed?
  Response: There is opportunity to accelerate, but management prefers a prudent, executable plan and will avoid 'white space' until approvals and execution are certain.

• Question from Shahriar Pourreza (Wells Fargo Securities, LLC): Any timing on Point Beach discussions with NextEra and will that affect the plan timing?
  Response: Discussions with NextEra are ongoing and timing is uncertain; the current plan assumes neither outcome and includes no replacement capital.

• Question from Julien Dumoulin-Smith (Jefferies LLC): Is the Microsoft second-phase expansion incremental to the plan or already reflected?
  Response: The plan reflects Microsoft-related growth included in the 2.1 GW Southeastern Wisconsin projection; management is confident in the regional growth but won't disclose customer-level details.

• Question from Julien Dumoulin-Smith (Jefferies LLC): Is the Port Washington transmission work (ATC) fully reflected in the plan?
  Response: ATC projects (WEC is a ~60% owner) are factored into the plan; base needs are included with modest upside possible.

• Question from Julien Dumoulin-Smith (Jefferies LLC): Can you explain the ramp in Illinois capex and any impact from pending legislation?
  Response: Illinois capex ramps to about $1.5B over the plan consistent with prior guidance; pending legislation is being monitored but not expected to have a significant effect.

• Question from Michael Sullivan (Wolfe Research, LLC): Why does ~11% rate base growth translate to only ~7%–8% EPS growth; what about bespoke/VLC exposure?
  Response: The gap is largely due to equity dilution (~3%) and holding-company impacts; bespoke/VLC assets are projected to be ~14% of rate base by 2030.

• Question from Michael Sullivan (Wolfe Research, LLC): Capacity for issuing junior subordinated and hybrid securities—any constraints?
  Response: Plenty of runway; rating agencies use different metrics but management expects 'billions' of capacity remaining for juniors/subs.

• Question from Nicholas Campanella (Barclays Bank PLC): Would you consider recycling WEC Infrastructure assets to meet equity needs?
  Response: Management would consider accretive opportunities but currently has no intent to sell performing subsidiaries.

• Question from Nicholas Campanella (Barclays Bank PLC): Do you have the turbine/supply-chain access to serve further commitments from hyperscalers?
  Response: Yes—management says they have a robust supply chain and developer relationships to serve increased load; plan includes only firm commitments.

• Question from Nicholas Campanella (Barclays Bank PLC): Given the recent Point Beach license extension, is there urgency to lock capacity and could we see an outcome by year-end?
  Response: License extensions run to 2030/2033 giving time; negotiations with NextEra continue but there's no immediate year-end urgency.

• Question from Andrew Weisel (Scotiabank Global Banking and Markets): For 2028–2030 do you mean ~8% annual growth and does that hit the 5-year midpoint CAGR?
  Response: Yes—management clarified ~8% annual in later years compounds to the 7%–8% CAGR target versus the 2025 midpoint.

• Question from Andrew Weisel (Scotiabank Global Banking and Markets): Bridge the $8.5B capex uplift vs the $8.1B sum on Page 18—where's the $400M?
  Response: Difference is rounding and additional smaller categories (e.g., gas distribution, generation and other 'cats and dogs') beyond the highlighted items.

• Question from Andrew Weisel (Scotiabank Global Banking and Markets): Is the 3.4 GW demand increase largely data centers or other industrial/residential growth?
  Response: Mostly data centers—1.3 GW from Vantage Port Washington plus significant SE WI data-center growth (Microsoft) alongside manufacturing and residential growth.

• Question from Sophie Karp (KeyBanc Capital Markets Inc.): Which recent gigawatt announcements are in the plan versus not?
  Response: In-plan: 2.1 GW in Southeastern WI (includes Microsoft) and 1.3 GW for Vantage/Oracle in Port Washington; additional acreage (Port ~1,200 acres and SE WI ~700+ acres) could support further GWs but are not included.

• Question from Sophie Karp (KeyBanc Capital Markets Inc.): Is the current plan conservative?
  Response: Yes—management only includes customer-announced and firm commitments in the plan.

• Question from Sophie Karp (KeyBanc Capital Markets Inc.): Will VLC premium economics affect the rest of the rate base?
  Response: No—the plan assumes the rest of rate base earns current authorized returns per jurisdiction and VLC customers pay separate terms to avoid cross-subsidization.

• Question from Ryan Levine (Citigroup Inc.): Status/timeline for Vantage expansion beyond the initial 1.3 GW?
  Response: Vantage is focused on delivering the first 1.3 GW; further expansion discussions are ongoing into next year after the initial phase.

• Question from Ryan Levine (Citigroup Inc.): Is engagement with potential large customers broad or concentrated on Microsoft/Oracle?
  Response: Management continues to engage others but Microsoft and Oracle/Vantage are the primary public drivers today.

• Question from Ryan Levine (Citigroup Inc.): Does the plan assume VLC implementation and would a higher VLC ROE add upside?
  Response: The plan assumes VLC implementation (ROE range 10.48%–10.98%); a higher ROE within that range would be accretive.

• Question from Paul Fremont (Ladenburg Thalmann & Co. Inc.): With Microsoft canceling Caledonia, do you have alternative land to offer?
  Response: WEC has limited large parcels; Microsoft is exploring alternatives in SE WI—management sees potential upside if they pick new sites.

• Question from Paul Fremont (Ladenburg Thalmann & Co. Inc.): How long might it take Microsoft to find a replacement site?
  Response: Management estimates ~12 months could be reasonable but timing is uncertain and driven by Microsoft.

• Question from Paul Fremont (Ladenburg Thalmann & Co. Inc.): If Point Beach not renewed, what generation would you build and when?
  Response: Replacement would require dispatchable resources (likely gas, e.g., combined-cycle) potentially paired with renewables; timelines align with contract expiries (2030/2033), so planning time exists.

• Question from Paul Fremont (Ladenburg Thalmann & Co. Inc.): Is the $4.8B–$5.2B figure all common equity or includes juniors?
  Response: That $4.8B–$5.2B is common equity only.

• Question from Paul Fremont (Ladenburg Thalmann & Co. Inc.): Will junior subordinated debt be issued as part of incremental financing?
  Response: Yes—of the added ~$4B of equity content, roughly half is expected as common equity and the other half via junior subordinated or like-kind securities.

• Question from Anthony Crowdell (Mizuho Securities USA LLC): Does the influx of large loads make forecasting easier or harder?
  Response: Large loads are a clear tailwind but add complexity around timing and execution; company has dedicated teams to manage supply chain and project delivery.

• Question from Stephen D’Ambrisi (RBC Capital Markets): Will the VLC tariff broaden the customer funnel?
  Response: Yes—management believes the VLC tariff makes Wisconsin more attractive, is viewed as fair by customers, and should help attract additional large customers once approved.

• Question from William Appicelli (UBS Investment Bank): Any offsets in the asset base step-up or other changes to explain growth math?
  Response: No material offsets aside from removing certain WECE investments; the growth shift is largely back-end loaded in timing.

• Question from William Appicelli (UBS Investment Bank): What average annual residential rate increases are embedded in the plan?
  Response: Rate case filings are being prepared (likely filed late Q1/early Q2); management expects inflation-like increases but it's early and hyperscaler costs are not subsidized.

• Question from Carly Davenport (Goldman Sachs Group, Inc.): Is there incremental capacity available within the current 5-year plan or mainly beyond 2030?
  Response: Potential additional capacity could come both within the current 5-year plan and beyond 2030 depending on customer development timing; more growth is possible.

Contradiction Point 1

Microsoft's Data Center Expansion and Timing

It involves differences in the details and timing of Microsoft's data center expansion, which could impact infrastructure development and regional economic investments.

Is Microsoft's second-phase expansion incremental? - Julien Dumoulin-Smith(Jefferies)

2025Q3: We're confident in the growth in Southeastern Wisconsin with approximately 2.1 gigawatts. Microsoft's first phase in Mount Pleasant is on track to go online next year, expected to scale up to 2 gigawatts alone. - Scott Lauber(CEO)

Can you update on recent discussions with Microsoft and any concerns about potential pauses or global slowdowns in their data center projects? - Andrew Weisel(Scotiabank)

2025Q1: Microsoft reiterated their confidence in the 1.8 gigawatt demand forecast in Southeastern Wisconsin. They are progressing with substation work, and Scott mentioned learning about their build cycles from their conference call. - Scott Lauber(CEO)

Contradiction Point 2

Capacity Auction Results and Strategic Investments

It pertains to the interpretation and strategic implications of MISO capacity auction results, which could affect power asset investments and long-term strategy.

How does the CAGR evolve in the back half of the plan? Can it be accelerated? Are there other incremental factors? Is there potential to smooth out the growth? - Shahriar Pourreza(Wells Fargo)

2025Q3: In the first year in '26, we're seeing $6.5 billion to $7 billion. Starting in '27, capital plans are ramping up. We're seeing almost $7 billion in '27 and over $7.7 billion in '28, which shows part of the earnings will come from these investments. - Scott Lauber(CEO)

How do recent MISO capacity auction results affect base generation and data center CapEx? How do these results connect to long-term power asset strategy and nuclear PPA negotiations? - Brian Russo(Jefferies)

2025Q1: The MISO auction was tight overall, with long and short positions balanced. WEC is engaged in building capacity to meet large customer load and economic development needs. - Scott Lauber(CEO)

Contradiction Point 3

Capital Expenditure (CapEx) Plan and Growth Expectations

It involves the company's capital expenditure plan and growth expectations, which are vital for investors and shareholders to understand the company's future financial performance.

How does the CAGR evolve in the latter half of the plan? Can it be accelerated or smoothed out? Are there other incremental opportunities? - Shahriar Pourreza (Wells Fargo Securities, LLC, Research Division)

2025Q3: In the first year in '26, we're seeing $6.5 billion to $7 billion. Starting in '27, capital plans are ramping up. We're seeing almost $7 billion in '27 and over $7.7 billion in '28, which shows part of the earnings will come from these investments. We expect 7% to 8% annual growth by 2027 and closer to 8% in later years. The compound growth rate is 7% to 8%. - Scott Lauber(CEO)

When will updates on long-term spending plans for projects such as Cloverleaf and MISO be provided? - Andrew Weisel (Scotiabank)

2024Q4: We're still working on some of the longer-term spending plans for some of the more significant infrastructure-type projects, understandably, given that we're going to need to go through a lengthy permitting process. But I would agree with you that there will be some differences. - Scott Lauber(CEO)

Contradiction Point 4

Involvement and Commitment of Microsoft

It directly impacts the company's ability to attract and manage large customers, which can influence revenue and customer satisfaction.

Is the Microsoft expansion in the second phase incremental? - Julien Dumoulin-Smith (Jefferies LLC, Research Division)

2025Q3: We're confident in the growth in Southeastern Wisconsin with approximately 2.1 gigawatts. Microsoft's first phase in Mount Pleasant is on track to go online next year, expected to scale up to 2 gigawatts alone. - Scott Lauber(CEO)

What's the update on Microsoft's data center expansion and new opportunities? - Carly S. Davenport (Goldman Sachs)

2025Q2: Microsoft is actively developing the site, with dirt moving on over 1,300 acres. They own additional land for future growth. WEC is confident in their commitment and plans to update capital plans accordingly. - Scott Lauber(CEO)

Contradiction Point 5

Large Load Tariff Docket Process

It involves the regulatory process for large load tariffs, which can impact long-term financial planning and customer relations.

When will you file for the large load tariff docket and what are the chances of a contested or litigated outcome at the commission? - Paul Fremont (Ladenburg Thalmann & Co. Inc., Research Division)

2025Q3: We recently filed our large load cost recovery application, which includes an interim large load tariff or LRT for both We Energies and Wisconsin Public Service. - Scott Lauber(CEO)

Can you clarify the large load tariff docket and whether you expect a contested or litigated outcome at the commission? - Nicholas Joseph Campanella (Barclays)

2025Q2: We have settled the tariff with large customers, and the commission is expected to review the process. The company believes it's reasonable and fair, and there are no major concerns about an extended process. - Scott Lauber(CEO)