Wisconsin Energy Corporation Earnings Call Nuggets: Share Repurchases, Weather Normalization

On Tuesday, Wisconsin Energy Corporation (NYSE:WEC) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Share Repurchases

Unidentified Analyst: So, I think, Rick, you mentioned no issuance of shares. Can we extrapolate from the first quarter that there’s no share repurchases likely at the current stock price?

Frederick D. Kuester – EVP and CFO: Well, Kip, I wouldn’t start extrapolating. I guess I would back up and just say because of the free cash flow that we have, we’ve identified a number of uses for that cash. First and foremost is to reinvest in our business. Second is to increase our dividend and as you’re aware we accelerated our target to get to 60% by year. So, we’ll be there in 2014. Then we’re looking opportunistically at basically buying shares or reducing debt at the holding company. And we want to make good economic choices. We don’t want to sit on a bunch of cash. We got a program that basically is authorized out through 2013 to buy back shares, and we will continue to look at that every quarter and just see what makes the most sense for shareholders.

Unidentified Analyst: Let me ask one more on sales, can you give us any further color, you guys able to see whether it’s commercial versus residential that’s the kind of relative weaknesses in offset to the somewhat improving industrial sales.

Gale E. Klappa – Chairman, President and CEO: Actually Kip because of the unusual weather in Q1, way more than two standard deviations off norm. We all are a little bit skeptical of how effective the weather normalization techniques, the fee industry uses really are when you get that far off norm. So I would put a lot of stock in the precision of the weather normalized first quarter numbers, but directionally they are correct and everyone of the categories is up on a weather normalized basis. The one that seems to be at least the first quarter lagging a little bit would be small commercial, but that was not the case last year. So, my sense is when you look at the pickup in industrial demand and when you look at the pickup in the customer connections that I mentioned. We are seeing a, we are seeing some stronger economic activity Rick anything to add.

Frederick D. Kuester – EVP and CFO: I think you hit Gale. there again in.

Weather Normalization

Paul Patterson – Glenrock Associates: Just to sort of follow-up on that I realized it’s more of an art than a science here, but just to make sure I understood that 0.3% was what the weather normalized sales growth was is that correct.

Gale E. Klappa – Chairman, President and CEO: Yeah, that’s excluding the mines.

Paul Patterson – Glenrock Associates: Excluding the mines and with the mines it’s about 0.6%.

Gale E. Klappa – Chairman, President and CEO: I believe that’s correct.

Paul Patterson – Glenrock Associates: Okay and does that include leap year.

Gale E. Klappa – Chairman, President and CEO: Yes it does include leap year.

Paul Patterson – Glenrock Associates: So it would actually be negative if we were to take out the effects of leap year, right.

Gale E. Klappa – Chairman, President and CEO: You could probably come to that conclusion I wouldn’t necessarily think that’s a firm conclusion again thinking about the deficiency of the technique the weather normalization technique when you have this kind of disparity in the weather. My own sense is we’re seeing a little bit stronger pickup particularly on the industrial side and my guess is we are going to see a bit of a rebound if weather ever comes back to normal here on the commercial side, because we did last year, commercial was stronger than we expected last year.

Paul Patterson – Glenrock Associates: Then the Prairieville, I think it is – I’m probably messing this, up to the Zion line that got approved.

Gale E. Klappa – Chairman, President and CEO: Yeah, Pleasant Prairie to Zion.

Paul Patterson – Glenrock Associates: Could you guys give us any flavor as to what you think that might do with respect to congestion and with respect to imports or exports into Illinois?

Gale E. Klappa – Chairman, President and CEO: Sure. I will ask Allen Leverett to give you his views, since he represents us on the Board of American Transmission Company, but let me just for everybody’s sake kind of clarify what Paul is talking about. The Pleasant Prairie to Zion line is an important link to strengthen the transmission network and relieve some congestion between the very far southern chunk of the State of Wisconsin and the Illinois. It’s only about a five mile line but an important additional interconnect, Allen?

Allen L. Leverett – EVP: Yeah, and Paul, it’s a 345 KV segment if you will. I would expect at this point that they would bring it in service in 2014, and effectively, what it will allow us to do, often we get in a situation right now where we have generation that sort of think of it’s been shut in, where you can’t – if you had no transmission constraint, you’d to be able export much more to the south. So it’ll open that up a bit and should result in some savings for our customers. It’s hard to say, Paul, because you don’t know precisely what the situation will be on the transmission system, but I could easily see savings for our customers in say $15 million to $20 million a year range from a fuel standpoint. So, no earnings, certainly no earnings impact for us, but some nice savings we hope for our customers.

Gale E. Klappa – Chairman, President and CEO: They would expect to complete both the Illinois and Wisconsin commissions and approve the construction of the line and they would expect to complete it, before the end of 2013.

Paul Patterson – Glenrock Associates: So good for customers and perhaps a little bit depressing to the power markets in Illinois all things being equal?

Gale E. Klappa – Chairman, President and CEO: They are depressed already.