Wisconsin seems caught right in the middle of current economic woes — not as well off as some Upper Midwest states, but decidedly better off than Michigan, its neighbor across the Great Lakes — and Wisconsin Energy Corp. (WEC) sees continuing signs of slow recovery of the industrial sector, according to CEO Gale Klappa.

Milwaukee-based WEC reported 3Q2011 profits of $129.8 million (55 cents/share) compared with $112.3 million (47 cents/share) in 3Q2010.

Klappa characterized the growth in Wisconsin as slow but steady, and indicated that the combination natural gas/electric utility holding company is not a target for the merger/acquisition (M&A) push that is regaining momentum in the energy sector.

“Obviously we are open to, and continue to look a,t what might make sense in terms of mergers, acquisitions and consolidations, and we have very specific criteria that would have to be applied to any potential situation,” Klappa said during a conference call with analysts. “Those include having any deal be accretive to earnings immediately and contributing to WEC’s long-term growth rate to the same degree that company now concludes is realistic for it.

“Frankly, I think the criteria are very important because if you don’t apply those criteria, you are not creating shareholder value. Beyond that, there has to be a willing seller and buyer.”

Klappa said WEC is “not counting on” any potential M&A or consolidation activity.

On the industrial growth front, Klappa said he does not put much importance on the fact that third quarter industrial sector growth (0.3%) dropped substantially from what was experienced in the second quarter (1.8%). Some larger customers, such as mining operations, will have planned outages in certain quarters that will greatly reduce output for a given quarter, but not be indicative of future trends.

“When you look at longer periods of time, industrial sales aren’t showing any substantial weakening,” Klappa said. “In mining, specialty steel and fabrication, industrial machinery and paper/printing all are continuing to show some growth, and I have been very encouraged by the number of expansion and relocation announcements we have had in the last few weeks, and I know from personal involvement there are more to come.

“We see some traction in terms of the industrial part of the economy here — nothing robust, but steady and, I think, cautiously optimistic for continued modest growth.”

Earlier this year Klappa said WEC planned to invest $3.4 billion by 2015 to modernize its electric and natural gas infrastructure, meet changing environmental standards and add renewable energy to its generation fleet (see Daily GPI, May 10).

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