CORPORATE DEVELOPMENTS

The following discussion should be read in conjunction with the accompanying financial statements and related notes and our 2019 Annual Report on Form 10-K.

Introduction

We are a diversified holding company with natural gas and electric utility operations (serving customers in Wisconsin, Illinois, Michigan, and Minnesota), an approximately 60% equity ownership interest in American Transmission Company LLC (ATC) (a for-profit electric transmission company regulated by the FERC and certain state regulatory commissions), and non-utility energy infrastructure operations through We Power (which owns generation assets in Wisconsin), Bluewater (which owns underground natural gas storage facilities in Michigan), and WEC Infrastructure LLC (WECI), which holds ownership interests in several wind generating facilities.

In August 2019, WECI signed an agreement to acquire an 80% ownership interest in Thunderhead Wind Energy LLC (Thunderhead), a 300 MW wind generating facility under construction in Antelope and Wheeler counties in Nebraska. In January 2020, WECI signed an agreement to acquire an 80% ownership interest in Blooming Grove Wind Energy Center LLC (Blooming Grove), a 250 MW wind generating facility under construction in McLean County, Illinois. In February 2020, WECI agreed to acquire an additional 10% ownership interest in both Thunderhead and Blooming Grove. See Note 2, Acquisitions, for more information.

Corporate Strategy

Our goal is to continue to build and sustain long-term value for our shareholders and customers by focusing on the fundamentals of our business: reliability; operating efficiency; financial discipline; customer care; and safety.

Reshaping Our Generation Fleet

The planned reshaping of our generation fleet balances reliability and customer cost with environmental stewardship. Taken as a whole, this plan should reduce costs to customers, preserve fuel diversity, and lower carbon emissions. Generation reshaping includes retiring older fossil fuel generation units, building state-of-the-art natural gas generation, and investing in cost-effective zero-carbon generation. In 2019, we met and exceeded our 2030 goal of reducing CO2 emissions by 40% below 2005 levels, and are re-evaluating our longer-term CO2 reduction goals. We have already retired more than 1,800 MW of coal-fired generation since the beginning of 2018, and expect to continue adding natural gas-fired generating units and renewable generation, including utility-scale solar projects. The plan included the March 2019 retirement of the Presque Isle power plant as well as the 2018 retirements of the Pleasant Prairie power plant, the Pulliam power plant, and the jointly-owned Edgewater Unit 4 generating units.

As part of our commitment to invest in zero-carbon generation, we have received approval to invest in 300 MW of utility-scale solar within our Wisconsin segment. Wisconsin Public Service Corporation (WPS) has partnered with an unaffiliated utility to construct two solar projects in Wisconsin. Badger Hollow Solar Farm I (Badger Hollow I) is located in Iowa County, Wisconsin, and the Two Creeks Solar Project (Two Creeks) is located in Manitowoc County, Wisconsin. Once constructed, WPS will own 100 MW of the output of each project for a total of 200 MW. The Public Service Commission of Wisconsin (PSCW) approved the acquisition of these two projects in April 2019. Construction began at Two Creeks and Badger Hollow I in August 2019 and October 2019, respectively. Commercial operation for Two Creeks and Badger Hollow I is targeted for December 2020 and April 2021, respectively. Wisconsin Electric Power Company (WE) has partnered with an unaffiliated utility to acquire an ownership interest in a proposed solar project, Badger Hollow Solar Farm II, that will be located in Iowa County, Wisconsin. Once constructed, WE will own 100 MW of the output of this project. The PSCW issued a written order approving the acquisition of this project in March 2020.

In December 2018, WE received approval from the PSCW for two renewable energy pilot programs. The Solar Now pilot is expected to add 35 MW of solar generation to WE's portfolio, allowing non-profit and governmental entities, as well as commercial and industrial customers to site utility owned solar arrays on their property. Under this program, in 2019, WE constructed 5 MW of solar generation and expects to construct more than that in 2020. The second program, the Dedicated Renewable Energy Resource pilot, would allow large commercial and industrial customers to access renewable resources that WE would operate, adding up to 150 MW of renewables to WE's portfolio, and allowing these larger customers to meet their sustainability and renewable energy goals.

03/31/2020 Form 10-Q 34 WEC Energy Group, Inc.

--------------------------------------------------------------------------------

Table of Contents

As the cost of renewable energy generation continues to decline, these utility-scale solar projects and the WE pilot programs have become cost effective opportunities for WEC Energy Group and our customers to participate in renewable energy.

We also have a goal to decrease the rate of methane emissions from the natural gas distribution lines in our network by 30% per mile by the year 2030 from a 2011 baseline. We were over half way toward meeting that goal at the end of 2019.

Reliability

We have made significant reliability-related investments in recent years, and plan to continue strengthening and modernizing our generation fleet and distribution networks to further improve reliability. Our investments, coupled with our commitment to operating efficiency and customer care, resulted in We Energies and WPS being recognized in 2019 by PA Consulting Group, an independent consulting firm, for superior reliability of their electric delivery networks. This was the ninth consecutive year that We Energies has been named the most reliable utility in the Midwest and the first time WPS has been recognized.

Below are a few examples of reliability projects that are proposed or currently underway.

• Subject to PSCW approval, WE plans to install approximately 46 miles of


   natural gas transmission main in southeastern Wisconsin. This project has been
   designated as the "Lakeshore Lateral Project." The primary purpose of this
   project is to increase the quantity and reliability of natural gas service,
   both on a peak day and annually, in southeastern Wisconsin. Construction for
   the project is tentatively scheduled to begin during the fourth quarter of
   2020, and the project is expected to be completed by the end of 2021.

• WE and Wisconsin Gas LLC (WG) each plan to construct their own LNG facility.


   Subject to PSCW approval, each facility would provide approximately one
   billion cubic feet of natural gas supply to meet anticipated peak demand
   without requiring the construction of additional interstate pipeline capacity.
   These facilities are expected to reduce the likelihood of constraints on WE's
   and WG's natural gas systems during the highest demand days of winter.
   Commercial operation of the LNG facilities is targeted for the end of 2023.

• The Peoples Gas Light and Coke Company continues to work on its Natural Gas


   System Modernization Program, which primarily involves replacing old cast and
   ductile iron pipes and facilities in Chicago's natural gas delivery system
   with modern polyethylene pipes to reinforce the long-term safety and
   reliability of the system.

• WPS continues work on its System Modernization and Reliability Project, which


   involves modernizing parts of its electric distribution system, including
   burying or upgrading lines. The project focuses on constructing facilities to
   improve the reliability of electric service WPS provides to its customers. WE,
   WPS, and WG also continue to upgrade their electric and natural gas
   distribution systems to enhance reliability.

Operating Efficiency

We continually look for ways to optimize the operating efficiency of our company. For example, we are making progress on our Advanced Metering Infrastructure program, replacing aging meter-reading equipment on both our network and customer property. An integrated system of smart meters, communication networks, and data management programs enables two-way communication between our utilities and our customers. This program reduces the manual effort for disconnects and reconnects and enhances outage management capabilities.

We continue to focus on integrating the resources of all our businesses and finding the best and most efficient processes while meeting all applicable legal and regulatory requirements. We also strive to provide the best value to our customers and shareholders by embracing constructive change, leveraging capabilities and expertise, and using creative solutions to meet or exceed our customers' expectations.

Financial Discipline

A strong adherence to financial discipline is essential to meeting our earnings projections and maintaining a strong balance sheet, stable cash flows, a growing dividend, and quality credit ratings.

03/31/2020 Form 10-Q 35 WEC Energy Group, Inc.

--------------------------------------------------------------------------------

Table of Contents

We follow an asset management strategy that focuses on investing in and acquiring assets consistent with our strategic plans, as well as disposing of assets, including property, plants, equipment, and entire business units, that are no longer strategic to operations, are not performing as intended, or have an unacceptable risk profile. See Note 2, Acquisitions, for information about our acquisitions or planned acquisitions of portions of wind energy generation facilities in Illinois and Nebraska.

Our investment focus remains in our regulated utility and non-utility energy infrastructure businesses, as well as our investment in ATC. We expect total capital expenditures for our regulated utility and non-utility energy infrastructure businesses to be approximately $13.7 billion from 2020 to 2024. Specific projects are discussed in more detail below under Liquidity and Capital Resources.

From 2020 to 2024, we expect capital contributions to ATC to be approximately $150 million. Capital investments at ATC will be funded utilizing these capital contributions, in addition to cash generated by ATC from operations and debt. We currently forecast that our share of ATC's projected capital expenditures over the next five years will be $1.3 billion.

Exceptional Customer Care

Our approach is driven by an intense focus on delivering exceptional customer care every day. We strive to provide the best value for our customers by demonstrating personal responsibility for results, leveraging our capabilities and expertise, and using creative solutions to meet or exceed our customers' expectations.

Safety

We have a long-standing commitment to both workplace and public safety, and under our "Target Zero" mission, we have an ultimate goal of zero incidents, accidents, and injuries. We also set goals around injury-prevention activities that raise awareness and facilitate conversations about employee safety. Our corporate safety program provides a forum for addressing employee concerns, training employees and contractors on current safety standards, and recognizing those who demonstrate a safety focus.

03/31/2020 Form 10-Q 36 WEC Energy Group, Inc.

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses