While reporting improved quarter-over-quarter earnings and a growing rate base in its utilities, Wisconsin Energy CEO Gale Klappa noted the anticipated start-up date for a second coal-fired generation plant at its Oak Creek facility won't be commercial until near the end of this year.

The disclosure was part of Klappa's prepared statement on a conference call with financial analysts Thursday in which the company reported second quarter profits of $87.5 million, or 74 cents/share, compared with $63 million, or 53 cents/share, for the same period in 2009.

For the first half of this year Wisconsin Energy reported net income of $216.5 million, or $1.83/share, compared to $204.4 million, or $1.73/share, for the first six months last year. Klappa attributed part of the profit improvement to a return to more normal weather after an unusually cool summer last year.

After Oak Creek's 615 MW coal-fired Unit 1 began commercial operation about four months behind schedule in February, contractor Bechtel Power Corp. has been focused on getting the second 615 MW unit completed. "The Unit 2 effort is proceeding well," said Klappa, although noting the timetable slipped from where it was originally.

"The first fire on coal was achieved on July 8, and the generator was synchronized to the grid on July 16, and since then the unit has operated at up to 30% of its rated capacity," Klappa said. "Over the coming weeks, Bechtel will gradually increase the output while conducting a range of tests along the way."

He said that after the unit reaches its maximum capacity, it will be shut down for a two-week outage to further work commissioning bugs out of it. "The unit is then returned to service for more fine tuning and rigorous performance tests," Klappa said. The new start-up target date, guaranteed by the utility holding company settlement late last year with Bechtel is Nov. 28.

The original "turnover" dates for the coal units were Sept. 29, 2009 for Unit 1 and September 29 this year for Unit 2. Klappa said Wisconsin Energy is planning on the start of Unit 2 being a "fourth quarter event."

In the question-and-answer portion of the earnings conference call, Klappa and CFO Allen Leverett outlined the overall utility activities concentrated in We Energies' two units, Wisconsin Electric Power Co., which includes some natural gas operations, and Wisconsin Gas LLC. They said the rate base collectively is expected to total about $7 billion next year.

"If you look at it in three categories -- fixed asset rate base, quarterly income preferred securities [QUIPS], and all other capital -- it is about $5.7 billion for fixed assets, about $400 million of QUIPS, and the balance is all the other capital we have invested [about $900 million]," Leverett said.

At the start of next year, he and Klappa said it is "highly likely" the parent company will be merging the two We Energies units into one legal entity.

"We haven't talked a lot about it because we try to manage our gas operations as one unit, but we have separate gas operations in the Wisconsin Electric unit, and we also have a large separate gas operation under Wisconsin Gas," Klappa said. "We're in the process of getting [Wisconsin Public Service] Commission approval to put Wisconsin Gas's operational rate base into Wisconsin Electric's total rate base."

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