Banking on a growing customer base in the upper Midwest,Milwaukee-based Wisconsin Energy Corp. this week unveiled a broad10-year, $6 billion manifesto to construct new power generationunits, refurbish or replace old facilities, improve itsdistribution system, cut its quarterly common stock dividend by50%, and double its share repurchase program.

Overall, the massive plan is designed to meet Wisconsin’sgrowing electric energy supply needs, which are growing at the rateof about 3% a year. Richard A. Abdoo, WEC CEO, said he thought theplan provided a “sensible and decisive” way to meet the state’ssupply challenges, and “spark continued growth.”

WEC, which has subsidiaries in utility and non-utilitybusinesses, serves more than 1 million electric and 940,000 naturalgas customers in Wisconsin and Michigan’s Upper Peninsula throughWisconsin Electric, Wisconsin Gas and Edison Sault Electric. Itsnon-utility subsidiaries include energy services and development,pump manufacturing, waste-to-energy and real estate. Most of thechanges announced this week affect its power generation businesses.

Electricity demand in Wisconsin is expected to outstrip itscapacity by nearly 4,000 MW by 2010, and to meet that growth, WECwants to construct at least one 500 MW combined cycle natural gasfired unit, and at least two 600 MW coal-fired units in the nextdecade, totaling about 17,000 MW overall. Additional units also areon the drawing boards for post-2010, which could bring another3,000 MW to the state.

Initial construction of the new units is estimated to cost $2billion, and WEC would invest another $1.3 billion in existingfacilities. The proposed fuel mix of coal and natural gas isdesigned to enhance long-term fuel price stability. WEC also wouldexpand its renewable energy sources.

“In planning for Wisconsin’s energy future, we must be carefulnot to become too dependent on electricity generated by a singlefuel,” said Richard R. Grigg, COO. “A mix that uses natural gas,coal, nuclear, hydro, renewables and purchased power will helpassure a more reliable and environmentally sensitive supply ofelectricity.”

Following regulatory and environmental approvals, WEC wouldbegin construction of a natural gas-fired combined cycle unit in2003 with an in-service date of 2005. The first coal-fired unitwould break ground in 2004, and be on line in 2007. More unitswould come on line between 2009 and 2013.

The 330 MW coal-fired Port Washington unit already has beenidentified as a candidate for conversion to a combined cycle gasunit. The Oak Creek site has tentatively been identified as thepreferred location for new coal-fired units, with the PleasantPrairie site an alternative. Other sites still are underconsideration for new construction, conversion or retirement.

WEC also plans to dramatically enhance its distribution systemcapability and electric supply quality. Distribution spending isalready on paper for18 new substations; 150,000 new electricservice 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 digitalsociety and we have worked to keep pace with this change,” saidAbdoo. “Now, we need to ensure our electric systems can handle thecontinually growing demands of the future.”

Financing changes are in the works as well. A new WEC generationsubsidiary, which would maintain a balanced capital structure andthus protect the company’s utility customers during the massiverebuilding, would be set up to take care of the debt structure. WECalso plans to retain more of its earnings to make investments inits core competencies: electric generation, utility distributionand pump manufacturing.

Effective Dec. 1, 2000, WEC plans to reduce the quarterlydividend payable on shares of its common stock to $.20 per share($.80 annualized rate) from its current $.39 per share ($1.56annualized rate). WEC’s board also has authorized the company toincrease to $400 million from $200 million the previously announcedshare repurchase program. Shares would be repurchased on the openmarket over the next two years.

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