WI Energy Unveils 10-Year $6 Billion Growth Plan
Banking on a growing customer base in the upper Midwest, Milwaukee-based Wisconsin Energy Corp. this week unveiled a broad 10-year, $6 billion manifesto to construct new power generation units, refurbish or replace old facilities, improve its distribution system, cut its quarterly common stock dividend by 50%, and double its share repurchase program.
Overall, the massive plan is designed to meet Wisconsin's growing electric energy supply needs, which are growing at the rate of about 3% a year. Richard A. Abdoo, WEC CEO, said he thought the plan provided a "sensible and decisive" way to meet the state's supply challenges, and "spark continued growth."
WEC, which has subsidiaries in utility and non-utility businesses, serves more than 1 million electric and 940,000 natural gas customers in Wisconsin and Michigan's Upper Peninsula through Wisconsin Electric, Wisconsin Gas and Edison Sault Electric. Its non-utility subsidiaries include energy services and development, pump manufacturing, waste-to-energy and real estate. Most of the changes announced this week affect its power generation businesses.
Electricity demand in Wisconsin is expected to outstrip its capacity by nearly 4,000 MW by 2010, and to meet that growth, WEC wants to construct at least one 500 MW combined cycle natural gas fired unit, and at least two 600 MW coal-fired units in the next decade, totaling about 17,000 MW overall. Additional units also are on the drawing boards for post-2010, which could bring another 3,000 MW to the state.
Initial construction of the new units is estimated to cost $2 billion, and WEC would invest another $1.3 billion in existing facilities. The proposed fuel mix of coal and natural gas is designed to enhance long-term fuel price stability. WEC also would expand its renewable energy sources.
"In planning for Wisconsin's energy future, we must be careful not to become too dependent on electricity generated by a single fuel," said Richard R. Grigg, COO. "A mix that uses natural gas, coal, nuclear, hydro, renewables and purchased power will help assure a more reliable and environmentally sensitive supply of electricity."
Following regulatory and environmental approvals, WEC would begin construction of a natural gas-fired combined cycle unit in 2003 with an in-service date of 2005. The first coal-fired unit would break ground in 2004, and be on line in 2007. More units would come on line between 2009 and 2013.
The 330 MW coal-fired Port Washington unit already has been identified as a candidate for conversion to a combined cycle gas unit. The Oak Creek site has tentatively been identified as the preferred location for new coal-fired units, with the Pleasant Prairie site an alternative. Other sites still are under consideration for new construction, conversion or retirement.
WEC also plans to dramatically enhance its distribution system capability and electric supply quality. Distribution spending is already on paper for18 new substations; 150,000 new electric service installations; 2,500 miles of new rural distribution lines; and 60,000 rebuilt miles of distribution line.
"Over the past decade we have moved from an analog to a digital society and we have worked to keep pace with this change," said Abdoo. "Now, we need to ensure our electric systems can handle the continually growing demands of the future."
Financing changes are in the works as well. A new WEC generation subsidiary, which would maintain a balanced capital structure and thus protect the company's utility customers during the massive rebuilding, would be set up to take care of the debt structure. WEC also plans to retain more of its earnings to make investments in its core competencies: electric generation, utility distribution and pump manufacturing.
Effective Dec. 1, 2000, WEC plans to reduce the quarterly dividend payable on shares of its common stock to $.20 per share ($.80 annualized rate) from its current $.39 per share ($1.56 annualized rate). WEC's board also has authorized the company to increase to $400 million from $200 million the previously announced share repurchase program. Shares would be repurchased on the open market over the next two years.
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