# WEC Energy Group (WEC) Financial Model Free Excel 3-statement financial model and company analysis for WEC Energy Group. - Canonical: https://finamodel.com/companies/wec-energy-group - Industry: Utilities - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/WEC.xlsx ## Model Purpose This model provides a comprehensive equity valuation and rate-base growth analysis for WEC Energy Group, enabling an equity research analyst to evaluate how the company's $37.5 billion capital investment plan and surging data centre load growth will translate into regulated earnings, dividend sustainability, and long-term shareholder value. ## Company Overview WEC Energy Group is one of the largest electric and natural gas delivery companies in the United States, serving approximately 4.7 million retail customers. The company operates primarily through its regulated utility subsidiaries, providing electricity and natural gas to residential, commercial, and industrial customers, while also investing in non-utility renewable energy infrastructure. Business segments include: * **Wisconsin Segment** (~63% of asset base): The largest segment, providing electric and natural gas service through We Energies and Wisconsin Public Service. * **Illinois Segment** (~16% of asset base): Provides natural gas distribution through Peoples Gas and North Shore Gas. * **Other States Segment** (~4% of asset base): Provides electric and natural gas service in Michigan and Minnesota. * **Electric Transmission** (~10% of asset base): Represents a 60% ownership interest in American Transmission Company (ATC), accounted for using the equity method. * **Non-Utility Energy Infrastructure (WECI)** (~7% of asset base): Owns and operates contracted renewable energy assets. The business model is highly asset-heavy and regulated, relying on capital investments into the rate base to generate a commission-approved return on equity (ROE). WEC holds a dominant competitive position as a monopoly provider in its franchised service territories. Recent major events include a massive upward revision of its 2026-2030 capital plan to $37.5 billion to support renewable transition and unprecedented data centre demand (e.g., Microsoft and Vantage Data Centers in Wisconsin), alongside regulatory friction in Illinois resulting in impairment charges related to the Qualifying Infrastructure Plant (QIP) rider. ## Revenue Deep Dive ### Wisconsin Segment (Electric and Natural Gas) * **Revenue driver formula:** (Average Rate Base x Equity Thickness x Allowed ROE) + Cost of Debt + O&M + D&A + Taxes + Fuel Costs. * **Historical growth rate:** 4-6% CAGR, accelerating recently due to large customer additions. * **Key growth levers and headwinds:** Driven by $3.4 GW of new data centre demand forecasted through 2030. Headwinds include regulatory pushback on requested 10% ROE increases and customer affordability concerns. * **Pricing dynamics:** Regulated by the Public Service Commission of Wisconsin (PSCW). Fuel costs are generally passed through to customers via recovery mechanisms. * **Revenue recognition notes:** Recognised over time as energy is delivered. Unbilled revenues are accrued at month-end. * **Seasonality:** Electric revenues peak in Q3 (summer cooling), while natural gas revenues peak in Q1 and Q4 (winter heating). ### Illinois Segment (Natural Gas) * **Revenue driver formula:** Base rates + Rider mechanisms (subject to recent regulatory pauses) + Gas cost recovery. * **Historical growth rate:** 1-3% CAGR. * **Key growth levers and headwinds:** Headwinds are severe due to the Illinois Commerce Commission (ICC) pausing the pipeline replacement programme and disallowing certain capital expenditures, leading to earnings charges in 2024 and 2025. * **Pricing dynamics:** Regulated by the ICC. * **Seasonality:** Highly concentrated in the winter heating season (Q1 and Q4). ### Electric Transmission (ATC) * **Revenue driver formula:** FERC-approved formula rates based on transmission rate base. * **Historical growth rate:** 5-7% CAGR. * **Revenue recognition notes:** Reported as "Equity in Earnings of Transmission Affiliates" below operating income, not in consolidated revenue. ### Non-Utility Energy Infrastructure (WECI) * **Revenue driver formula:** Installed Capacity x Capacity Factor x PPA Price. * **Historical growth rate:** 10-15% CAGR as the portfolio expands. * **Pricing dynamics:** Long-term power purchase agreements (PPAs) with fixed pricing, insulating the segment from spot market volatility. ## Cost Structure ### Variable Costs / COGS * **Cost of Sales:** Primarily consists of "Fuel and purchased power" and "Cost of natural gas sold". These are generally pass-through costs to customers. * **Gross margin range:** Not a traditional metric for utilities, but utility margin (Revenues less fuel/gas costs) typically runs at 45-55% of total revenues. * **Key input costs:** Natural gas prices, coal prices, and wholesale electricity prices. * **How COGS scales:** Scales directly with volume, but due to pass-through mechanisms, fluctuations in fuel costs have a minimal impact on net income. ### Operating Expenses * **Operation and Maintenance (O&M):** The largest controllable expense. Includes day-to-day maintenance, customer service, and administrative costs. WEC focuses heavily on keeping O&M flat to offset capital-driven rate increases. * **Depreciation and Amortisation (D&A):** A massive and growing expense (averaging $1.6 billion annually expected through 2030) driven by the $37.5 billion capital plan. * **Property Taxes:** Significant fixed cost based on the assessed value of utility infrastructure. * **Restructuring / one-time charges:** Frequent recently in the Illinois segment due to ICC disallowances and legal settlements (e.g., a $0.46 per share charge in 2025). ### Margin Profile * **EBITDA margin:** Typically 35-40% (2025 TTM EBITDA was approximately $3.8 billion on $9.8 billion revenue). * **Operating margin:** 18-22%. * **Margin trend:** Stable underlying utility margins, though consolidated GAAP margins fluctuate based on fuel cost pass-throughs (higher fuel costs inflate revenue but not profit, compressing percentage margins). ## Balance Sheet Structure * **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. ## Capital Expenditure & Investment * **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. ## Debt & Capital Structure * **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. ## Cash Flow Characteristics * **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. ## Sheet Structure 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). ## Key Financial Relationships 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. ## Cross-Sheet Dependencies 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. ## Sign Convention * 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. ## Things Most Likely to Go Wrong * **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. ## Validation Checks * "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." ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Wisconsin Allowed ROE | 9.80 | % | Current PSCW allowed return on equity. | | Wisconsin Equity Thickness | 52.0 | % | Standard regulatory capital structure for the segment. | | Illinois Allowed ROE | 9.38 | % | Recent ICC order reducing allowed returns. | | 2026-2030 Total Capex | 37.5 | $ Billions | Management's updated 5-year capital plan. | | Annual Dividend Growth Rate | 6.7 | % | Matches historical CAGR and management guidance. | | Target Payout Ratio | 68.0 | % | Midpoint of management's 65-70% target range. | | Long-Term EPS CAGR Target | 7.5 | % | Midpoint of management's 7.0-8.0% guidance. | | Base Year (2025) Adjusted EPS | 5.27 | $ | Actual reported 2025 adjusted EPS. | | Base Year (2026) Dividend | 3.81 | $ | Declared annualised dividend for 2026. | | Effective Tax Rate | 12.0 | % | Reflects benefits of renewable production tax credits. | | Average Cost of Debt | 4.5 | % | Blended rate of historical utility mortgage bonds and new issuances. | | ATC Ownership Stake | 60.0 | % | WEC's equity interest in American Transmission Company. | | WECI Capacity Factor (Wind/Solar) | 35.0 | % | Blended average for midwestern renewable assets. | | Discount Rate (Cost of Equity) | 8.5 | % | Standard utility cost of equity for DDM valuation. | ## Data Sources & Benchmarks * **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. ## Sources * 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. --- ## Frequently asked questions ### What does WEC Energy Group do? WEC Energy Group is one of the largest electric and natural gas delivery companies in the United States, serving approximately 4.7 million retail customers. The company operates primarily through regulated utility subsidiaries, providing electricity and natural gas, and also invests in non-utility renewable energy infrastructure. ### How does WEC Energy Group generate revenue? WEC Energy Group primarily generates revenue through its regulated utility operations, providing electric and natural gas services to residential, commercial, and industrial customers. Its business model relies heavily on capital investment in its rate base, which drives regulated earnings and growth. ### What are WEC Energy Group's key capital expenditure plans? WEC Energy Group has a significant capital investment plan totaling $37.5 billion for the 2026-2030 forecast horizon. This includes substantial investments of $12.6 billion for regulated renewables and $7.4 billion for thermal generation and LNG capacity. ### What is WEC Energy Group's typical net working capital profile? WEC Energy Group typically exhibits a negative net working capital profile, which is standard for utility companies. This is because utilities often use short-term debt and operating cash flow to fund their massive capital programs. ### What are the main assumptions used in the WEC Energy Group financial model? Key assumptions in the WEC Energy Group financial model include a revenue growth rate of approximately 4.27% and COGS as 37.75% of revenue. Other significant assumptions are SGA at 15% of revenue, a tax rate of about 14.24%, and Capex as 15.77% of revenue. ### Can I download an Excel financial model for WEC Energy Group? Yes, an Excel financial model for WEC Energy Group is available for download. This model provides a comprehensive equity valuation and rate-base growth analysis, with a forecast horizon extending from FY2026 to FY2030. [Interactive forecast calculator](https://finamodel.com/companies/wec-energy-group/forecast)