WEC ENERGY GROUP, INC. Quarterly Report on Form 10-Q For the Quarter Ended March 31, 2025

Overview of WEC Energy Group’s Financial Performance

WEC Energy Group, a diversified energy company, has reported its financial results for the first quarter of 2025. The company’s net income attributed to common shareholders increased by $101.9 million, or 16.4%, compared to the same period in 2024. This strong performance was driven by several factors across the company’s business segments.

Wisconsin Segment Shines

The Wisconsin segment, which includes the company’s electric and natural gas utilities in the state, was the standout performer. Net income attributed to common shareholders in this segment increased by $93.5 million, or 35.1%, compared to the first quarter of 2024. This was primarily due to higher margins from the impact of new rate orders approved by the Wisconsin Public Service Commission (PSCW), as well as higher retail sales volumes driven by colder winter weather.

The Wisconsin utilities also benefited from continued investments in their electric and natural gas distribution systems to enhance reliability. However, these investments led to higher operating expenses, particularly in the areas of depreciation, amortization, and transmission costs.

Illinois Segment Faces Headwinds

In contrast, the Illinois segment, which includes Peoples Gas Light and Coke Company (PGL) and North Shore Gas Company (NSG), saw a $9.4 million, or 5.0%, decrease in net income attributed to common shareholders. This was primarily due to higher operating expenses, including the impact of a favorable legal settlement in the prior year, as well as increases in property and revenue taxes, natural gas distribution and maintenance costs, and employee benefit expenses.

The Illinois utilities continue to face regulatory challenges, including ongoing proceedings related to the recovery of costs incurred under the Qualifying Infrastructure Plant (QIP) rider and the Uncollectible Expense Adjustment (UEA) rider. Disallowances of these costs by the Illinois Commerce Commission (ICC) could have a material adverse impact on the company’s results.

Other Segments Contribute to Growth

The company’s other business segments also contributed to the overall increase in earnings. The non-utility energy infrastructure segment, which includes the company’s renewable energy investments, saw a $14.5 million, or 15.4%, increase in net income attributed to common shareholders. This was driven by higher production tax credits, insurance proceeds related to storm damage, and improved revenue from lower congestion costs.

The electric transmission segment, which includes the company’s equity investment in American Transmission Company (ATC), also reported a $6.8 million, or 22.6%, increase in net income attributed to common shareholders, primarily due to continued capital investment by ATC and a gain on the sale of an investment.

Outlook and Strategic Initiatives

Looking ahead, WEC Energy Group remains focused on its strategic initiatives to create a sustainable future, enhance reliability, and improve operational efficiency. The company’s capital plan includes significant investments in renewable energy, natural gas-fired generation, and infrastructure upgrades across its utility systems.

Specifically, the company plans to invest approximately $9.1 billion from 2025 to 2029 in regulated renewable energy projects in Wisconsin, including the construction of 2,900 MW of utility-scale solar, 900 MW of wind, and 565 MW of battery storage. Additionally, the company is investing in new natural gas-fired generation, including 1,100 MW of combustion turbines and 242 MW of natural gas-fueled RICE (Reciprocating Internal Combustion Engine) units.

These investments are part of the company’s broader efforts to reduce carbon emissions from its electric generation fleet by 60% by the end of 2025 and 80% by the end of 2030, both from a 2005 baseline. The company’s long-term target is to achieve net carbon neutrality by 2050.

Regulatory Environment and Challenges

The company’s financial performance and future plans are heavily influenced by the regulatory environment in the states it operates. In Wisconsin, the company’s utilities received new rate orders from the PSCW, effective January 1, 2025, which contributed to the strong performance in the first quarter.

However, the company’s Illinois utilities continue to face regulatory challenges. The ICC has disallowed certain capital costs related to PGL’s natural gas delivery system upgrades and has ordered the utility to pause spending on these projects until the ICC determines the optimal method and investment level for replacing aging infrastructure. The ICC has also initiated a statewide “Future of Gas” proceeding to explore the role of natural gas in Illinois’ decarbonization efforts, which could impact the company’s natural gas operations in the state.

Additionally, the company’s Illinois utilities are subject to ongoing proceedings related to the recovery of costs incurred under the QIP and UEA riders. Disallowances of these costs by the ICC could have a material adverse impact on the company’s results.

Conclusion

WEC Energy Group’s strong financial performance in the first quarter of 2025 demonstrates the company’s ability to navigate a complex regulatory environment and execute on its strategic initiatives. The Wisconsin segment’s success, coupled with contributions from the company’s other business segments, has positioned WEC Energy Group for continued growth and success.

However, the company’s Illinois utilities face ongoing regulatory challenges that could impact their financial performance. The company’s ability to effectively manage these challenges and continue investing in its infrastructure and renewable energy projects will be crucial in achieving its long-term goals and delivering value to shareholders.