Q1 2026 Earnings Call Transcript

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Vantage has stated that it is expected to invest $15 billion to complete this phase in 2028. Construction continues and the first facility could come online late in 2027. We currently have 1.3 gigawatts of demand for this Vantage site in our forecast over the next 5 years. Looking to the future, this site has the potential to reach 3.5 gigawatts of demand over time. And there's other notable growth in the state. As a recent example, Milwaukee Tool has announced plans to further expand its campus in our territory, including a new research and development facility.

Waukesha Engine also announced plans to expand upon its local operation and employee base. In addition, we're starting to see good housing development. In fact, realtor.com recognized Racine County, Home of the Microsoft side as 1 of the nation's hottest housing markets. We're committed to meeting the growing demand across our service areas as we invest in our system for increased capacity and reliability.

Our 5-year capital plan includes $37.5 billion of projected investments -- it's based on projects that are low risk and highly executable with a good portion dedicated to the very large customers. In total, by the end of 2030, we expect approximately 15% of our asset base to be attributable to these very large customers. As you recall, we project long-term earnings per share growth of 7% to 8% a year on a compound annual basis between 2026 and 2030. This is based on the midpoint of our 2025 adjusted guidance. We expect that growth rate to accelerate to the upper half of the range starting in 2028. Now let me give you an update on our capital projects.

This March, we had a solar facility going to service with total capital of about $225 million. The Wisconsin Commission has approved the purchase of 3 additional solar projects and a battery storage project. In total, we plan to invest approximately $730 million in these newly approved projects. Construction continues on the new natural gas facilities in Paris and Old Creek, Wisconsin, -- we have our labor force and supply chain lined up to bring these projects online according to schedule.

We expect the Paris Race units in the Yield Creek combustion turbines to start coming online in late 2027. Also at our Old Creek site, we recently announced plans to extend the operating lives of units 7 and 8. We expect to have units available to meet high energy demand periods through 2027 rather than retiring them at the end of this year. The decision is based on 2 critical factors: reliability and affordability for our customers. Overall, we have a highly -- a high level of confidence in our ability to execute on our capital plan and continue our growth trajectory. Now turning to the regulatory front.

First, let's update you on Wisconsin and our VLC tariff. After completing its review, the Public Service Commission verbally approved the tariff structure on April 24. We expect the written order in the few weeks. As a reminder, this tariff provides a balanced approach, reliable electric service for our very large customers with a predictable cost profile, protection of other customers from bearing any cost to serve these very large customers, protection of the company's financial health and support for economic development and growth in the region. The commission approved the return on equity in the range of 10.48% to 10.98% and an equity ratio of 57%.

For our non-VOC customers, on April 1, we filed rate request with the Wisconsin Commission for forward-looking test years 2027 and 2028. Our proposed plans would help us continue to strengthen key infrastructure and deliver the energy our customers depend on while remaining focused on affordability for our customers. We expect final orders by the end of the year with new rates effective in January 2027 and 2028. And in Illinois, just last week, we filed a proposed settlement with the Illinois Congress Commission if approved, these agreements will resolve all open proceedings related to the customers' uncollectible and QIP riders.

As you recall, we filed a rate request for our Illinois utilities in January for test year 2027. A key driver of this request is support the pipe retirement program in Chicago. The Illinois Commerce Commission continues to review our filings, we expect the decision by the end of the year. In summary, we remain focused on executing our capital investment plan. Now I'll turn things over to Shaw.

Thank you, Scott. Our first quarter 2026 earnings of $2.45 per share reflects an $0.18 increase compared to the first quarter of 2025, our earnings package includes a comparison of first quarter results on Page 12. I'll walk through the significant drivers. Starting with our utility operations, earnings were $0.17 higher versus the first quarter of 2025. Let me highlight a couple of key drivers. Weather negatively impacted quarter-over-quarter earnings by approximately $0.02. Compared to normal conditions, we estimate that weather had a $0.01 negative impact in the first quarter of 2026 versus a $0.01 positive impact for the same period in 2025. Rate-based growth contributed $0.17 to earnings, including $0.09 of incremental AFUDC equity from projects under construction.

Day-to-day O&M was $0.05 favorable in the first quarter. This includes a $0.02 gain from a planned asset sale in Illinois during first quarter of this year. The rest of the favorability was largely due to the timing of certain maintenance and benefit costs, which we expect to reverse throughout the rest of the year. For 2026, we continue to expect day-to-day O&M to increase 3% to 5% when compared to 2025 actuals.

Next, let me give you some color on our weather-normal retail electric deliveries, excluding the iron ore mine. Compared to Q1 last year, we saw 1.3% growth this quarter led by the large commercial and industrial costs, which grew 3%. This is in line with our forecast. For the year, we still expect electric sales to grow around 1.5%.

At American Transmission Company, earnings increased $0.01 compared to the first quarter of 2025 as a result of continued capital investment. Turning to our Energy Infrastructure segment. Earnings were $0.04 higher in the first quarter of '26 compared to the same period in 2025 driven largely by higher operating income from WEC infrastructure. WEC also benefited from a full quarter of operations from the Harden 3 solar projects acquired in February 2025. Next, you'll see that earnings from the Corporate and Other segment increased $0.03 driven by favorable tax timing.

In terms of common equity, we locked in about $455 million in Q1 this year. This includes $25 million issued under our employee benefit plan and $430 million via the ATM program under forward contracts that we will settle in the future. Remember, we expect to issue up to $1.1 billion of common equity this year. So through the first quarter, we have accounted for almost half of our expected equity needs for 2026. Going forward, as a reminder, any incremental capital beyond the current plan is expected to be funded with 50% equity content.

Now let me comment on guidance. As Scott mentioned earlier, we are reaffirming our 2026 earnings guidance of $5.51 to $5.61 per share, assuming normal weather for the rest of the year. For the second quarter, we're expecting a range of $0.76 to $0.82 per share. This accounts for April weather and assumes normal weather for the rest of the quarter.

With that, I'll turn it back to Scott.

Thank you, Shaw. Now as you may recall, our Board this January meeting increased the dividend by 6.7%. This marks the 23rd consecutive year that our shareholders will be rewarded with higher dividends. The increase is consistent with our plan to grow the dividend rate at the 6.5% to 7%.

We're optimistic about continued growth in the region and our company's future. Operator, we are now ready for the question-and-answer portion of the call.

[Operator Instructions] Your first question comes from the line of Shar Purreza with Wells Fargo.

It's actually Alex on for Shar. Janis good, Alex. So just obviously, you're seeing a lot of growth on the data center front. You have Microsoft and Vantage projects and you kind of highlighted some upsides there.

But can you maybe talk a little bit more to the extent that you can? Are you seeing additional interest from other hyperscaler customers in the state -- and just to add on, there's been obviously a lot of local opposition in some parts of the state. So can you just talk about your strategy and overall confidence level around attracting new customers despite some of the headlines we've seen.

Sure, sure. Let me kind of phrase this and look at it in total. When you think about -- we've got Microsoft and the Southeastern Wisconsin region and then North and Advantage site -- when you look at that, we have about 3.9 gigawatts in our 5-year plan. And if you just look at the acreage and do some back of the envelope math, you could see how these sites which have already been approved and have the ability to put data centers on could add another 4 to 5 gigawatts of capacity on those sites alone.

So we see tremendous growth on already the available sites that we have in the works and construction is starting on a good portion of them. And then you think of the other data centers, we are in discussions with a few others. I think very optimistic now that we have the final VLC tariff, and we'll see that final order come out in the next few weeks, a little more clarity. I expect to have more information on our third quarter call and anticipate we hopefully we'll have another announcement debate on that third quarter call.

Got it. That's very helpful. I guess just switching gears here. Just want to touch on Point Beach. You've obviously mentioned in discussions there. Just if you were to go ahead with building sort of incremental generation, can you maybe provide some sort of sensitivity around the CapEx opportunity there and just maybe any sense on possible timing.

Sure. And we're going through the planning process right now, we always go through the summer and go through our generation planning process and working with our very large customers to factor in additional growth along with what we need on the generation side to serve our native load. And as we talked about in the last call, the Point Beach PPA, the prices are pretty high. We're going to look at affordability for our customers.

At this time, we're planning that we're going to have to replace that, and we'll put that in our 5-year plan this fall, most likely replace it with some gas, perhaps a combined cycle. -- remember that PPA ends -- the first unit end in like 2030 and the second unit ends in 2033. So we have some time, but it'll start working into our planning cycle. As just a lot it's about $2 billion to $2.5 billion, and this is over those 2 units, it's about 500 for each. So that's about a gigawatt. But when we look at our planning assumptions, it's about $2 million to $2.5 million.

Picking up some of the commentary on the VLC tariffs. I think the revisions from the commission saw the threshold move down to a lower level, maybe 100 megawatts if I'm recalling correctly. Curious if that captures more load than you were expecting to run through the VLC tariff and any ramifications on your plan as a result of that? And then it sounds like sort of customer interest overall, now that you've gotten to the other side of a VLC outcome, is sort of firming up.

But again, just curious more broadly in the context of that load side revision, how you're thinking about the tariff impacting economic development going forward?

Sure. And great question. And when you think about it, we proposed 500 megawatts, which is smaller than the 2 data centers that we have going right now. the load going down to the 100 megawatts, we don't have any current customers that fall into that range. So it doesn't affect any of our current customers.

And we'll see as we talk to a future load -- is there something in that 200 megawatt? How does that deal? And how does it look at the economics with our tariff and we'll address that if we see something at the time. But right now, moving to 100 does not affect our economic development in either direction, maybe a little positive that it actually opened up the door for some smaller data centers and we can show that they're paying their full share.

So not concerned at all about going to 100 megawatt.

Perfect. And then turning to Illinois, it sounds like, again, more progress that you've been able to put up in the state, although still more to come on the rate case as well. Could you speak a little bit more to the data points that are sort of emerging along the way here? How you see conversations trending overall in the state and kind of what you have an eye to over the balance of the year to get those rate orders?

Sure. So a couple of things. We just filed the settlement, which I think has taken off 12 cases related to uncollectibles in the previous QIP rider. So an extremely long period.

We filed that just the other day that had the support of the AG the ICC staff and the Citizens Utility Board was involved in that signing. So it's great to see that sign and that in front of the commission now. We have our rate case in front of the commission. Of course, 1 of the key elements there is going to be the pipe retirement plan and as we're ramping that up.

That we expect to see the first testimony from our the ICC staff and other interveners I think by the end of the day to day, we'll see where that comes out. And then we're just executing on our plan, starting to ramp up the pipe replacement program that we've talked about. We're ramping it up this year. It will get about 200 -- I think we're about $200 million this year, and it will ramp up in 2027 and 2028. And we're just going to execute on the program.

We're following along all the direction that we received in the order from the pipe retirement program on having workshops in working through those workshops and really have a lot of transparency on our program. So we're hitting the ground running feel really good about the progress we're having in our communication with our customers and keeping the ICC informed along with the safety monitor. So those are kind of the 3 key elements, and that will evolve during the summer here as we start seeing the testimony and more results of the settlement with Illinois.

Your next question comes from the line of Nick Campanella with Barclays.

Hey, good afternoon, and hope everyone is doing well. Can you hear me? Nick. Great.

So I just wanted to ask on the -- you talked about the acreage that you have that is kind of fully permitted and ready to go. And I think you said like up to 4 gigawatt potential number. And maybe just acknowledging the fact that the hyperscaler CapEx is continuing to kind of increase here -- and if customers want to kind of maximize that, can you just kind of talk about your ability to execute on that from a supply chain and equipment standpoint? And then just how do we kind of think about how much could actually fall into the plan in the third quarter just based on the conversations you're having?

And now that the DLC is finalized and it seems that everyone is happy with that. Maybe you could just expand on that a little bit more.

Sure, sure. So as we kind of peel back that question, and we've been working with these very large customers, as you know, behind the scenes for years and working with our developer and our generation and planning team, and we feel very confident we can deliver all that needed to supply the load growth as we ramp this up. It's a little early before I talk about what gave you on that third quarter call, but feel for sure, there'll be increment add it in our third quarter. It's just -- we're still working with them on this individual amounts and a little more to come on third quarter, but feel good about the update we'll have there.

Great. And then just maybe just 1 more thing, just keeping with the megawatts here on Point Beach. Is it the base idea that you're going to bring in the full replacement? Or could you just be kind of targeting half of that to start? And then on the next plan, look at the next part of the PPA that rolls off, I think, in the mid-2030 time frame?

Yes, that's a great question. And when you think about that first 1 is -- so for sure, that first 1 will be in this plan and then probably some dollars as it relates to long lead time equipment for that 2033. So you may start to see a little bit tweak in on that last 500 in this plan.

Great. Great. And then maybe if I could just 1 more. The GRC just given all that's kind of in front of you and you had a successful VLC with this commission, we're still very early innings of this case, but is this something that you expect to go fully litigated? Or do you think there could be an opportunity to settle depending on where the starting points of testimony are?

Sure. As you look at it, and remember, we filed the case at the beginning of April. I think we have a real -- a modest increase out there on our base rates in the electric side of 4.7% and 4.5% in each of the -- in '27 and '28. -- we'll we don't even have a procedural schedule out, but I think we'll get through the staff audit sometime this summer. And when we see that audit and probably the first run to testimony, that will be an opportunity for us to take a step and see if there's an opportunity to settle you noticed last year, this commission did sell cases with a couple other utilities in the state.

So optimistic that we're going to have a reasonable audit and then we can make progress later in the year, but a little early before we can make any decisions on that.

Your next question comes from the line of Julian Damon Smith with Jefferies.

Julien Dumoulin-Smith: Appreciate the time. Nicely done. Again, I got to hand it to you on the ICC backdrop here with the QIP resolution.

Excellent. Thanks, Julien.

Julien Dumoulin-Smith: Absolutely. Just a couple of things if I can come back to the VLC tariff with that approved here, at least verbally, -- are you having other discussions with other days developers? I know this was asked a little bit earlier in a different permutation, but -- how is this enabling or catalyzing developments? And can you speak to the expansion opportunity a little bit more specifically again, just if I can link this to another subject, how do you think about Point Beach enabling data centers as well. I just want to ask that explicitly here, if I can.

Sure, sure. Well, the VLC and when we see the final order, I think that's just going to be a lot more transparency for everyone. And we wanted to make sure we filed as a tariff to make sure it's transparent not only for other VLC customers, but also for the public and the community to see that they're paying their full share. So very happy about that.

It's good. I think all the people we've been talking to are well aware of what the VLC filing was and what the tariff and the discussion from the commission. So a lot of people are watching that decision to see what was going on in that. As you think about Point Beach, there's -- that's in 2030, 2033, we'll see what opportunities are there.

But potentially, right now, we're looking at it, how do we serve our native load and actually provide a capital investment and probably some bill headroom as you think about affordability in that 2030 and '33 time frame.

Julien Dumoulin-Smith: Yes. Yes, absolutely. I hear you here. And then just to ask it explicitly, I know it's brought up a little bit earlier. But given this rate case, I mean, it seems fairly benign in many respects, my words. How do you think about settlement and any specific items that might stand out here in the filing, right? I mean mid-single-digit increase, it seems fairly down the fairway.

It's too early. We want to see what the final audit is. But when you think about our rate case filing, it's really balanced. There are some a little bit of new generation.

There's a little bit of transmission. There's a little bit of reliability that we put in on the distribution system, some general inflation, some truing up for sales. So it's sprinkled throughout -- so it's not like we are having any 1 big initiative here. And remember, when we filed our case now, we laid out that those very large customers are paying a significant amount of our capital additions that we're putting into our plan.

So you're not seeing it come through to these individual non-VOC customers. It's all being paid for by the large customers. But too early to talk about.

Your next question comes from the line of Andrew Weisel with Scotiabank. Your next question comes from the line of Sophie Karp with KeyBanc.

I wanted to ask you guys, yes, not a bit this horse to that, but I wanted to ask about Point Beach, and it sounds like since you're thinking about replacing that power that you're contemplate a scenario where it won't be available to serve our retail customers. And I just kind of -- can you give us some reminder what other options the owners of this asset would even have on the Wisconsin or which, and I don't think they're able to serve retail directly themselves. So what kind of an outcome is actually contemplated here with respect to point Beach?

I can't speak with -- for NextEra. So you'd have to ask them that question. They could always enter into a financial transaction or something like that. But you'll have to run that by NextEra on to what their thoughts are.

All right. And then I guess, on the VLC, what kind of feedback, if any, have you heard so far from the existing hyperscale customers and the potential others, just given the modifications that were made at the commission.

Yes. And we've been talking -- and you could kind of see it through the testing only where those potential adjustments will be made. So the initial indication is -- there's nothing major right now. But of course, we all want to see the written order to see what's really in that final written order, but nothing surprising at this time.

Your next question comes from the line of Andrew Weisel with Scotiabank.

Okay, terrific. I don't know what happened there, but thanks for giving it a second track. Okay. So I first want to ask another -- the Port Washington situation.

My question is, to what degree do you see the referendum on data centers? Is there either challenging the current 1.3 gigawatt build-out? Do you see that at all being at risk? Or do you think it might make it harder for the customers to expand to the full 3.5 gigawatts or could this potentially defer other customers from looking into opportunities in or around that area or across Wisconsin more broadly?

Well, I think you're referring to the referendum related to the TIF district. And when you look at that, it should not affect any of our any of that site up to the 3.5 gigawatts based on all of our understanding, it potentially could affect not just data centers, but any other just economic development in an area that would need a TIF district for that particular county. So more of a challenge just in general for economic development, but it should not affect any of the data center growth we had outlined in our script.

Okay. So not only the $1.3 billion, but the full $3.5 million you think would be safe. Okay, great. And then do you think it's isolated to that specific area? Do you think other -- from your conversation with customers, -- do you think it's isolated? Or do you think it's more of a broad issue in your conversations?

We haven't seen any other issues out there as it relates to like a referendum. We have seen a couple of areas across the state, just put like a 1-year moratorium on reviewing data centers just because I think everyone wants to understand a little bit more of the facts in the data centers to get the facts out, but we have -- I have not seen any other type of referendum like that.

Great. Very helpful. And just a final 1 maybe for Shaw. The weather-adjusted natural gas deliveries were down over 2 point--or down 2.1% year-on-year.

I know the weather was extremely mild that always messes with the normalization models. But volumes were also down 0.5% for the full year in -- what are you seeing in terms of trends or patterns? Is there anything worth calling out? Or was the 1Q maybe just a blip with the models?

Yes, Andrew, we looked at that. I think we expected some usage of decline in the forecast. So what played out was a little worse than what we expected by not much. But we filed in the test year '27, '28, the expected decline in the filing.

So hopefully, we catch it up for the future. And there's some details about in which metropolitan area, you see a little more decline. So as people continue to come back to the office or reduce their residential usage, so you may see that naturally happen in the metropolitan area. So nothing surprising in the first quarter.

Your next question comes from the line of Michael Sullivan with Wolfe Research.

Good afternoon. Scott, maybe I'll just try in Illinois, and this might be unfair because we're about to get the testimony, but is there any scenario where you think you can settle in that jurisdiction? And maybe just longer term, like how you think about the future of rate case cadence in that state?

Sure. And you're right, we haven't even seen the testimony yet. So pretty hard to handicap anything there. Historically, Illinois has been a hard place to actually settle when you look across other jurisdictions.

So I don't know all the opportunities there, but we got to see the testimony, but very happy as you could see, we actually got a settlement on those old historical riders. So that's a step in the right direction. And your second question was...

Just like the future rate case like is this going to be like every year, every other year? How do you think about that?

Yes. I anticipate, especially as we ramp up this rider, and we start getting increases in 27, 28 and then an ongoing. I expect that it'll be more of an annual rate case kind of cadence as you think of Illinois specifically as it relates to putting in this pipe retirement program.

Okay. Very helpful. And then we saw -- I think you mentioned pushing out the retirement dates on some of your coal units. Just as you think about your remaining coal fleet holistically. What are kind of some of the options like in terms of conversions, further push outs? How you're thinking about some of those many units holistically?

Sure, sure. And we're going to look at conversion of those to natural gas. For the most part, as you think about the EPA rules, we need to be in compliance with the current EPA rules. We'll see will those EPA rules go -- at this time, the reason we pushed out 7 and 8, we just wanted to make sure we get other dispatch a generation online and those parasites and the new CTs will start to come online at the end of '27. So we wanted to make sure we had -- as we retire old dispatches capacity, we had new capacity online.

We also reviewed this to make sure there was no significant capital investments we had to make to keep these units running another year. And basically, they're only running on days that we really need it. So we're really running on a limited basis but we just want to make sure we have that capacity around to make sure we had that reliability. But as you look at the other units, we're still looking at converting to natural gas, and we'll follow the EPA rules as they evolve.

Our next question comes from the line of Carly Davenport with Goldman Sachs.

Just 1 for me. Just wanted to check in kind of on -- I know you've talked about the construction activity at the Vantage site. -- has sort of started. Just any color you could provide on how execution is kind of tracking there relative to the time line, I think that the company has laid out? And perhaps just if you do see any slippage there, maybe can you refresh us kind of on the protections in place on if timing slips there related to the investments that WEC is making?

And we don't see any slippage in we're in contact with the site. We have like a beating every other week with them on the site. We don't see any slippage there. And the other significant item is approval of a transmission line to serve that site, which there is data request and information going around with the commission right now.

We expect to get approval for that in the fall of this year. So we don't think there's any issues in the slippage of that in service at this time. So things are going well there. If you think about in service, some of the fixes and fine-tuning that happened in the VLC tariff as it relates to transmission, will be more on a nominated basis, which will make sure that everyone pays their fair share and full cost as we build this cost and put that in.

So it's not getting subsidized by anyone else. And it should not be a slippage also for any of our generation plan. So we feel good about the tariff and the protection plus but more importantly, we feel really good about the execution of that site and getting it online.

Your final question comes from the line of Paul Fremont with Ladenburg.

When I look at the $2 billion to $2.5 billion for 1 gigawatt in terms of replacement capacity, should I assume that what you're looking at is a combination of renewables and gas Point Beach.

Yes. I think you got to kind of think about all of the above as we think -- and we'll look at our entire generation plan, it may be a combination of renewables and TT, but we also may be looking at a combined cycle as we look at our plan to continue to get more energy since it also provides a lot of energy. So we're going through that process. We look at it every year, not just as it relates to like the Point Beach, but also adding additional load on for our very large customers and the other economic development in the region.

So we're going through that process right now and what makes sense and cost-effective value for our customers.

Great. And then in terms of the nonregulated renewables, I imagine you're getting to a point where you're reaching sort of the end of the on some of the units. For those units, what type of uplift, if any, are you seeing in recontracting those assets? And does that sort of -- should we assume that, that offsets the BTC? Or how should we think about that?

Great question. So 2 things. One is we're going through the process right now. And in fact, last year, we had safe harbored a lot of the materials to make sure those early PTCs that fall off.

We have safe harbor materials so we could actually repower them to get to another 10 years of -- so we're evaluating that right now, and we'll talk about that on our third quarter conference call, but an opportunity to get another 10 years of PTCs. And then as those contracts come up, the value of renewable resources today and capacity across the country, it's more valuable than when we initially contracted those. So you also see some upside as those contracts come due. Now they just remind you, they don't all come due at the same time as the PTC.

So there's a different timing there. But I think there's value on both sides of it.

Great. And then I guess, last question that I have is, is it was the Microsoft Council plant, was that to be located near where the Oak Creek plant is located? Or was that in a different vicinity?

Well, there was a potential option to purchase some land by the Oak Creek plant for a potential Microsoft expansion that is no longer moving forward but I mean, in total, they still have about 2,200 acres and that was by the Oak Creek site.

So I guess my question, has there been any reconsideration by that community of potential benefits for having a data center located in their community?

I haven't talked specifically with them, but I think every community is looking at potential for data centers or the discussion of data centers because there's a lot of discussion in the region. And I think a lot of these communities are looking at like Port Washington and Mt Pleasant look at the value of property taxes and the other value these hyperscalers bring to the community, especially when you talk about affordability and people talking about property taxes. So I think there's opportunities there. We haven't had direct discussions with them, but there's potential there.

I think it's a great site. It requires very little transmission and is right by our power plant. So it's a great power supply with very little transmission, an ideal spot for something like that. All right.

That concludes our conference call for today. Thank you for participating. If you have any more questions, please feel free to contact Beth Straka at (414) 221-4639. Thanks, everyone.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.