WEC Energy Group Financial Model

• Total assets: Approximately $51.5 billion, projected to grow to $58.5 billion by 2030.
• Key asset categories: Property, Plant, and Equipment (PP&E) is the vast majority. Regulatory assets are also material, representing deferred costs approved for future recovery.
• Goodwill & intangibles: Approximately $3.0 to $3.5 billion, stemming from historical acquisitions (e.g., Integrys in 2015).
• Working capital profile:
• DSO: 35-45 days.
• DIO: Gas in storage peaks in autumn and depletes through winter.
• DPO: 30-40 days.
• Net working capital: Typically negative, which is standard for utilities as they use short-term debt and operating cash flow to fund massive capital programmes.
• PP&E: Consists of generation plants, distribution grids, and gas pipelines. Useful lives range from 10 to 60 years.
• Right-of-use assets: Immaterial relative to the massive owned PP&E base.

• Capex as % of revenue: Extremely high, often 70-90% of revenue, as growth is driven by rate base investment rather than sales volume.
• Maintenance vs. growth capex: The majority is growth and transition capex.
• Major capex programmes: The 2026-2030 capital plan totals $37.5 billion. This includes $12.6 billion for regulated renewables (solar, wind, battery) and $7.4 billion for thermal generation and LNG capacity.
• M&A pattern: Historically a transformational acquirer (Integrys), but currently focused entirely on organic rate base growth.

• Total debt: Approximately $16 to $18 billion.
• Debt/EBITDA ratio: Typically 4.5x to 5.0x.
• Credit rating: Strong investment grade (A- at S&P, Baa1 at Moody's).
• Key debt instruments: Long-term utility mortgage bonds, holding company senior notes, and commercial paper for working capital.
• Interest rate profile: Mostly fixed-rate long-term debt, but commercial paper exposes the company to short-term rate fluctuations.
• Covenants: Standard debt-to-capitalisation limits (usually maximum 65% debt). Target FFO/Debt metrics of >=15% (S&P) and >=16% (Moody's).
• Share repurchase programme: Inactive. Utilities issue equity to fund capex; they rarely buy back shares.
• Dividend policy: Highly predictable. Targets a payout ratio of 65-70% of earnings. The 2026 annualised dividend is $3.81 per share, representing a ~6.7% CAGR.

• Operating cash flow conversion: Strong, typically 1.5x to 2.0x Net Income due to massive non-cash D&A charges.
• Free cash flow margin: Consistently negative. OCF is entirely consumed by the $7+ billion annual capex programme.
• Working capital cash flow impact: Seasonal swings based on gas storage injections and winter heating billings.
• Capex intensity: The defining characteristic of the business. The funding gap (Capex + Dividends - OCF) is bridged via debt and periodic equity issuances.
• Cash tax rate: Often lower than the statutory rate due to accelerated depreciation and production tax credits (PTCs) from renewable investments.

1. Assumptions: Hardcoded drivers for rate base growth, allowed ROEs, equity thickness, debt costs, and capex schedules.
2. Summary: Dashboard showing EPS, Dividend per Share, FFO/Debt, Rate Base CAGR, and valuation outputs.
3. Rate Base & Capex: Roll-forward of PP&E and regulatory rate base by segment (Wisconsin, Illinois, Other).
4. Revenue & Fuel: Calculation of segment revenues based on rate base returns, plus pass-through fuel calculations.
5. O&M & D&A: Detailed build of operating expenses, with D&A driven by the PP&E schedules.
6. Income Statement: Consolidated GAAP view, including the equity earnings line for ATC.
7. Balance Sheet: Assets, liabilities, and equity, highlighting the massive PP&E and debt balances.
8. Cash Flow: Operating, investing, and financing cash flows. Must clearly show the funding gap and required debt/equity issuance.
9. Debt & Interest: Tranches of debt, commercial paper balances, and interest expense calculations.
10. Valuation: Dividend Discount Model (DDM) and Sum-of-the-Parts (SOTP) P/E valuation (standard for utilities).

1. Wisconsin Segment Revenue = (Wisconsin Average Rate Base x Wisconsin Equity Ratio x Wisconsin Allowed ROE) + Wisconsin Interest Expense + Wisconsin O&M + Wisconsin D&A + Wisconsin Taxes + Wisconsin Fuel Costs.
2. Illinois Segment Revenue = (Illinois Average Rate Base x Illinois Equity Ratio x Illinois Allowed ROE) + Illinois Interest Expense + Illinois O&M + Illinois D&A + Illinois Taxes + Illinois Gas Costs.
3. ATC Equity Earnings = ATC Net Income x 60% Ownership Stake.
4. WECI Revenue = WECI Operating Capacity (MW) x Average Capacity Factor x Average PPA Price ($/MWh).
5. Consolidated D&A = Prior Year PP&E x Composite Depreciation Rate (historically ~3.0-3.5%).
6. Total Capex = Wisconsin Capex + Illinois Capex + Other Capex + WECI Capex (must tie to the $37.5B 5-year plan).
7. Funding Gap = Operating Cash Flow - Total Capex - Dividends Paid.
8. New Debt Issued = Funding Gap x Target Debt Funding Percentage (typically 50-60%).
9. New Equity Issued = Funding Gap x Target Equity Funding Percentage (typically 40-50%).
10. Dividend per Share = Prior Year Dividend per Share x Target Dividend Growth Rate (6.5-7.0%).
11. Target Payout Ratio Check = Dividend per Share / Adjusted EPS (must flag if outside 65-70% range).
12. FFO / Debt = (Operating Cash Flow - Working Capital Changes) / Total Debt.

The critical chain begins on the Rate Base & Capex sheet. Capex additions drive the PP&E balance on the Balance Sheet, which dictates D&A on the O&M & D&A sheet. The average rate base from the balance sheet feeds the Revenue & Fuel sheet to calculate allowed returns. Revenue and expenses flow to the Income Statement to generate Net Income. Net Income flows to the Cash Flow sheet, where the deduction of Capex and Dividends creates a funding gap. This gap feeds the Debt & Interest sheet to calculate new debt required, which generates Interest Expense, creating a circularity back to the Income Statement and Revenue requirement.

• Revenues, asset balances, and equity balances are positive.
• Expenses (O&M, D&A, Interest, Taxes) are negative in the Income Statement build.
• Capital expenditures are negative in the Cash Flow statement.
• Debt issuances are positive in the Cash Flow statement; debt retirements are negative.
• Dividends paid are negative in the Cash Flow statement.

• Ignoring the ATC Equity Method: ATC is not consolidated. Its revenue and capex should not appear in WEC's consolidated revenue or capex lines. It only appears as a single line item "Equity in Earnings of Transmission Affiliates" on the income statement.
• Misunderstanding Utility Revenue: Utility revenue is not driven by "Volume x Price" in the long run; it is driven by the allowed return on the rate base. If capex goes up, revenue goes up to recover it.
• Fuel Cost Pass-Throughs: Spikes in natural gas prices will inflate consolidated revenue and COGS equally, compressing the gross margin percentage but leaving gross margin dollars unchanged.
• Illinois Regulatory Disallowances: The model must allow for manual overrides or adjustments in the Illinois segment, as the ICC has recently disallowed QIP rider investments, breaking the standard rate-base return formula.
• Circularity in Debt Funding: Because utilities fund capex with debt, and debt interest is recovered in revenue, there is a tight circularity. Use a toggle to break the circularity during model calculation.
• Data Centre Load Tariffs: The new Very Large Customer (VLC) tariffs for Microsoft and Vantage have fixed ROE terms that may differ from the standard Wisconsin residential rate base.
• Weather Normalisation: Historical revenues fluctuate based on heating degree days (HDD) and cooling degree days (CDD). The model should project based on "weather-normal" baselines.
• Tax Credits: WECI generates significant Production Tax Credits (PTCs) which lower the effective tax rate. Failing to forecast these will understate net income.

• "Dividend payout ratio should remain within the 65-70% range based on stated policy; flag if breached."
• "FFO/Debt must remain >= 15% to maintain the current S&P credit rating."
• "Consolidated Capex for 2026-2030 must sum to exactly $37.5 billion."
• "Wisconsin Segment ROE implied by the model should not exceed 9.8% without a flagged assumption change."
• "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period."
• "EPS CAGR for 2026-2030 should fall within management's target range of 7.0-8.0%."
• "Effective tax rate should remain low (typically 10-15%) due to renewable tax credits."
• "Operating Cash Flow must be positive and significantly higher than Net Income due to heavy D&A add-backs."

• Filings: WEC Energy Group SEC EDGAR page (10-K, 10-Q, 8-K).
• Presentations: WEC Investor Relations page (specifically the February 2026 Q4 Earnings Presentation and the 2025-2029/2026-2030 Capital Plan updates).
• Key Peers: Xcel Energy (XEL), CMS Energy (CMS), Alliant Energy (LNT), DTE Energy (DTE).
• Industry Data: S&P Global Market Intelligence (for rate case decisions and allowed ROE tracking), Edison Electric Institute (EEI) for industry capex trends.
• Regulatory Dockets: Public Service Commission of Wisconsin (PSCW) and Illinois Commerce Commission (ICC) electronic docket systems for real-time rate case filings.

• WEC Energy Group Q4 2025 Earnings Release and Presentation (February 2026).
• WEC Energy Group 2025 Form 10-K.
• Quartr API Transcripts: WEC Energy Group Investor Presentation Summary (February 2026).
• Morningstar: WEC Energy Group posts 2025 results.
• Energy and Policy Institute: Wisconsin utilities file for rate, profit hikes (June 2024).
• Gabelli Funds: Utilities - U.S. Sector Update (January 2026).
• Macrotrends: WEC Energy EBITDA History.