WEC Energy Group, Inc.

Good afternoon and welcome to WEC Energy Group's conference call for second quarter 2020 results. This call is being recorded for rebroadcast and all participants are in a listen-only mode at this time. Before the conference call begins, I remind you that all statements in the presentation, other than historical facts, are forward-looking statements that involve risks and uncertainties that are subject to change at any time. Such statements are based on management's expectations at the time they are made. In addition to the assumptions and other factors referred to in connection with the statements, factors described in WEC Energy Group's latest Form 10-K and subsequent reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those contemplated. During the discussions, referenced earnings per share will be based on diluted earnings per share, unless otherwise noted. After the presentation, the conference will be open to analysts for questions and answers. In conjunction with this call, a package of detailed financial information is posted at wecenergygroup.com. A replay will be available approximately two hours after the conclusion of this call. And now it's my pleasure to introduce Gail Klapa, Executive Chairman of WEC Energy Group.

Hot town, summer in the city. Good afternoon, everyone. Thank you for joining us today as we review our results for the second quarter of 2020. First, I'd like to introduce the members of our management team who are on the call with me today. We have Kevin Fletcher, our President and Chief Executive, Scott Lauber, our new Chief Operating Officer, Beth Straka, Senior Vice President of Corporate Communications and Investor Relations, and please join me in welcoming Sha Liu, our new Executive Vice President and Chief Financial Officer. Sha will discuss our metrics in more detail a little bit later in the call. As you saw from our news release this morning, we reported second quarter, sense of share. We remain optimistic and confident in our ability to create value despite the challenges presented by the pandemic. As always, our focus on operating efficiency was a major factor in our second quarter performance. In addition, warmer than normal weather drove residential energy use significantly higher during the quarter. We also continue to make excellent progress on our $15 billion capital investment plans. You recall that plan covers the period 2020 through 2024. As a reminder, we have ample liquidity and no need to issue new equity. Now, you may have seen our latest project announcement just last week. We agreed to acquire an 85% ownership interest in the Tatanka Ridge Wind Farm. Tatanka Ridge is under construction in South Dakota, and we expect the project to be in service in early 2021. When complete, the site will consist of 56 wind turbines with a combined capacity of 155 megawatts. Our investment is expected to total approximately $235 million for the 85% ownership interest and substantially all of the tax benefits. This project, ladies and gentlemen, fits our investment criteria to a T. It has long-term offtake agreements for all of the energy produced with Google Energy LLC and with Dairyland Power Cooperative, a well-established electric co-op based in Wisconsin that serves utilities in multiple states. We also expect the project to be eligible for 100% bonus depreciation. This will be our sixth wind project in the infrastructure segment of our business. As you may recall, we've allocated $1.8 billion of our current five-year plan to grow our infrastructure segment. With the Tatanka Ridge project, we've already committed over a billion dollars of that amount, and we're only seven months into the five-year plan. We have one other quick update for you on our infrastructure segment. You may recall that we will be the 90% owner of the Thunderhead Wind Farm being built by Invenergy in Antelope County, Nebraska. This 300 megawatt project was expected to begin service by the end of this year. However, we now project a several-month delay because the local utility has paused construction of a substation that's needed to connect the Thunderhead project to the transmission network. We continue to work with all the relevant parties to minimize the delay. I would point out, however, that we have a number of positive offsets in our plan, so this delay should not change the trajectory of our earnings growth for 2021. Switching gears now, I'd like to touch on our commitment to environmental stewardship and the tremendous progress we're making. In 2019, we exceeded by a decade the goal we had set for the year 2030 to reduce carbon dioxide emissions by 40%. The major solar investments we're building for our Wisconsin retail customers, more carbon-free energy is on the way. In light of our progress, we recently announced two new aggressive goals. to reduce carbon dioxide emissions by 70% below 2005 levels by the year 2030, and for our generation fleet to be net carbon neutral by the year 2050. We look forward to working with all of our stakeholders to develop policies that will help us achieve these appropriate goals. We're also committed to reducing methane emissions. At the end of 2019, we were halfway toward our 2030 goal of lowering methane emissions from our natural gas distribution lines by 30% per mile, and that's from a 2011 baseline. And now for a moment, I'd like to take a step back and look at the economic conditions in Wisconsin. As you would expect, unemployment spiked during the first few months of the pandemic. The data for June were really encouraging. The labor market improved with the addition of more than 100,000 jobs. and unemployment in Wisconsin fell to 8.5%, well below the national average. We're also encouraged that the major economic development projects announced over the past few years are moving forward. For example, Amazon continues to expand here in Wisconsin with new local distribution centers. And Haribo, the German candy manufacturer, received local approval of its final site and operational plans in May. Groundbreaking is now projected to take place in September. As you may recall, this will be one of North America's largest confectionery plants. Haribo expects to invest between $320 and $350 million and hire 400 employees in the first phase of the project. Meanwhile, just a few miles south of Milwaukee and Racine County, Foxconn continues to develop its high-tech manufacturing and research campus. Recent published reports indicate that Foxconn could begin production at its new LCD fabrication plant as early as this fall. Construction is progressing well on Foxconn's smart manufacturing facility and its new network operations center. It's also important to note that we're seeing a strong ripple effect from Foxconn's commitment to Wisconsin. More than 70 additional investment projects have been announced within a 20 mile radius of the Foxconn campus. 70 plus projects range the gamut from healthcare to housing to industrial buildings to retail. We expect these developments will result in more than $1.2 billion of new private capital investment and more than 2,500 jobs. Long story short, our long-term growth projections remain fully intact. And now I'll turn the call over to Scott for more detail on our sales results for the quarter. Scott, all yours.

Thanks, Gail. We continue to see customer growth across our system. At the end of the quarter, our utilities were serving approximately 11,000 more electric and 27,000 more natural gas customers compared to a year ago. Retail electric and natural gas sales volumes are shown on a comparative basis on page 17 and 18 of the earnings package. We saw an impact from the stay-at-home orders that were in place during much of the reporting period, but usage was better than we projected on the first quarter call. For example, residential sales of electricity were up 17.1% from the second quarter of 2019, and on a weather-normal basis, were up 7.3%, 3.4% better than our adjusted forecast. All commercial and industrial electric sales were down 8.6% from last year's second quarter, and on a weather-normal basis were down 11.3%, falling 2.7% below our adjusted forecast. Meanwhile, large commercial and industrial sales, excluding the iron ore mine, were down 12.9% from the second quarter of 2019, and on a weather-normal basis were down 14.1%, 5.4% better than our adjusted forecast. Overall, retail deliveries of electricity, excluding the iron ore mine, were down 2.7% from the second quarter of 2019. On the weather normal basis, sales were down 6.9%, tracking 1.7% ahead of our forecast. To summarize our experience during the quarter, we encouraged THAT THE MONTHLY TREND IN SALES IMPROVES SEQUENTIALLY EACH MONTH. FOR MORE DETAIL, SEE PAGE 17 OF THE EARNINGS PACKET. AT THIS TIME, I'D LIKE TO ADDRESS OUR SALES OUTLOOK FOR THE BALANCE OF 2020. OUR THIRD QUARTER FORECAST HAS RETAIL SALES, EXCLUDING THE IRON-ORE MINE, DOWN 3.6% COMPARED TO 2019. KEEP IN MIND, THIS IS ON A WEATHER NORMAL BASIS. IN LOOKING AT THE DATA FOR JULY, excluding the impact of weather, we tracked slightly better than our forecast. Looking now at the projections for the fourth quarter, our adjusted forecast reflects continued economic recovery. We are looking at sensitivities to this forecast and watching economic indicators. We are prepared if the level of recovery would drop back to what we saw in the second quarter. We estimate that the additional impact to the pre-tax margin would be approximately $10 to $15 million. We believe we could absorb this margin compression through efficiency measures already in place. And now I'll turn it to Kevin for an update on utility operations.