Wisconsin Energy Earnings Call Nuggets: Sales Growth Correction and State Power Funds

Wisconsin Energy Corporation (NYSE:WEC) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Sales Growth Correction

Greg Gordon – ISI Group: Quick and simple question. You’ve obviously tightened your earnings guidance range; you’ve raised the lower end of the range. That’s good. But it seems to me, if my memory is correct that your sales growth is trailing behind what your beginning of year budgeted expectation was. So, can you tell us what you’ve done in terms of a mid-course correction to stay on track to have such a good year?

Gale E. Klappa – Chairman, President and CEO: I appreciate it, Greg. If you look at our natural gas sales projections, remember, our natural gas distribution business is about 20% of our total business, and then you look at our electric sales projections; you put it all in one pot and we’re about on target where we thought we would be overall for energy consumption. So, there’s not been a big deviation up to this point through the first six months of this year against our sales growth forecast when you put the whole group of companies together.

Greg Gordon – ISI Group: So I was focused on the electric numbers but the gas numbers are ahead of plan?

Gale E. Klappa – Chairman, President and CEO: Exactly.

State Power Funds

Jonathan Arnold – Deutsche Bank: On the State power funds, the timeframe I think you laid out was probably a little longer than we might have thought. Maybe we were too optimistic, or is this some extra steps that have to go through here and just could you update on how you see that process playing out?

Gale E. Klappa – Chairman, President and CEO: Happy to, Jonathan. The truth of the matter is the State has not announced or the Department of Administration on behalf of the state has not announced a formal timetable. We know that this is something that they are planning, that they are putting together a process to move forward with, but they’ve not announced a formal timetable. So the information we gave you in the prepared remarks, or (with) the sale, it would be perhaps a 2014 or early 2015 event. That’s our best guess at this stage of the game, because they have not announced a timetable. But I don’t sense any slippage in their desire to try to put a process together and move forward. It’s just we don’t have a very good handle because no one has talked about a specific timetable at this stage of the game. On the other hand, the Governor has said publicly how he would like to use the proceeds from sale if a sale takes place. So, there is no lack of attention at the state in terms of trying to put it together a process. I hope that helps Jonathan?

Jonathan Arnold – Deutsche Bank: That’s very helpful. Thank you, Gale. And the other thing on timing, it seemed like kind of you’re now expecting not to start the Twin Falls construction till next year rather than later this year, or is that just, but you’re still on track for 2016. What’s going on there?

Gale E. Klappa – Chairman, President and CEO: You’re correct. We were planning to start next year. Allen?

Allen L. Leverett – EVP and President and CEO, We Generation: Right, that’s right; in the spring of 2014. So we need one last permit from the Wisconsin Department of natural resources and then the final approval from FERC. So we expect to get those well before year end which will allow us to – when the construction season starts in Michigan to do the construction starting in the spring of ’14.

Jonathan Arnold – Deutsche Bank: So, you were saying fall of ’13 the last quarter, I’m just wondering what’s taken longer.

Allen L. Leverett – EVP and President and CEO, We Generation: Well, that DNR permit that we need – we have to have that Wisconsin DNR permit before the FERC will act. So it’s taken us a bit longer to get that Wisconsin DNR permit than we had hoped. Because part of what’s happening with this project Jonathan and this might be too much detail but we’re literally moving the powerhouse from the Michigan side of the river to the Wisconsin side of the river. And because of that, even though it’s the same river, the Wisconsin regulators have to weigh in. So that’s taking a little longer than we expected.

Jonathan Arnold – Deutsche Bank: Thank you very much.

Gale E. Klappa – Chairman, President and CEO: You’re welcome, Jonathan. Thank you for the question. We don’t, by the way, think anything is off track here. It’s just a matter of working through the permitting process and that’s taking just a hair longer.

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