WEC (WEC) Q3 2025: Capex Plan Jumps $8.5B as Data Center Demand Lifts 2030 Growth Outlook
WEC Energy Group’s new $36.5 billion capital plan marks a more than 30% increase, fueled by surging data center and industrial demand across Wisconsin. The company’s outlook now embeds higher long-term asset and earnings growth, but execution risk rises as the plan depends on large customer commitments and regulatory approvals. Investors face a transformed utility growth profile—back-end loaded, data center-driven, and capital intensive.
Summary
- Data Center Pipeline Reshapes Growth Trajectory: Large-scale projects from Microsoft and Vantage drive a step-change in load and capex planning.
- Capital Plan Expansion Raises Execution Stakes: Asset base and earnings growth guidance climb, but depend on project delivery and regulatory alignment.
- Back-End Loaded Upside: Earnings acceleration is weighted toward 2028-2030, hinging on timely ramp of major customer projects.
Performance Analysis
WEC delivered a steady third quarter, with diluted EPS of $0.83, edging out last year’s comparable result. Utility operations were the primary earnings driver, benefitting from a 1.8% increase in weather-normalized retail electric deliveries, led by 2.9% growth in the large commercial and industrial segment. Rate-based growth contributed $0.15 per share, offset by higher depreciation, amortization, and operating expenses. Weather provided a modest tailwind, but the company’s results were otherwise in line with expectations.
Segment performance reveals the early impact of economic development, particularly within electric delivery and transmission. American Transmission Company, WEC’s 60% owned transmission affiliate, contributed incremental earnings via capital investment, while the energy infrastructure segment saw a small uptick from production tax credits. Corporate and other segments, however, were a drag due to higher interest expense and tax timing. Importantly, WEC is running slightly ahead of annual electric sales growth forecasts, signaling robust underlying demand even before the full effect of new data center loads.
- Commercial Demand Outpaces Residential: Large C&I electric growth outstripped residential, reflecting the region’s industrial and hyperscale momentum.
- Transmission and Infrastructure Investment Ramps: Capital deployed in transmission and renewables is already supporting earnings, with more acceleration ahead.
- Higher O&M and Depreciation Offset Gains: Rising costs and investment-related expenses temper the near-term earnings benefit from load growth.
WEC’s reaffirmed annual EPS guidance underscores management’s confidence in near-term execution, but the real story is the step-function in capital deployment and load growth embedded in the new five-year plan.
Executive Commentary
"We continue to see major business building a future in our region. Overall, our electric demand is expected to grow 3.4 gigawatts between 2026 and 2030, an increase of 1.6 gigawatts compared to the prior plan."
Scott Lauber, President and Chief Executive Officer
"With the asset base forecasted to grow at 11.3% a year on average, we expect to nearly double our asset base over the next five years. It's important to note that the bespoke assets allocated to our very large customers are projected to represent 14% of our total asset base by 2030."
Sha Lu, Chief Financial Officer
Strategic Positioning
1. Data Center and Hyperscale Load as Growth Catalyst
WEC’s growth thesis now centers on hyperscale data center development, with Microsoft and Vantage Data Centers anchoring two multi-gigawatt projects in southeast and northern Wisconsin. These projects alone account for the majority of the 3.4 GW incremental demand forecast through 2030, up from 1.8 GW in the prior plan. Vantage’s “Lighthouse” campus, part of the OpenAI and Oracle Stargate expansion, will drive 1.3 GW of load in the next five years, with further upside possible from additional land and expansion phases.
2. Capital Plan Escalation and Asset Base Growth
The new $36.5 billion capex plan represents an $8.5 billion, or 30%+ increase over the prior five-year outlook. Investment is concentrated in regulated electric generation (notably modern gas, batteries, and renewables), transmission, and distribution upgrades, as well as the Illinois pipe retirement program. The plan targets asset base growth of 11.3% annually, nearly doubling by 2030, and underpins a new 7-8% EPS CAGR guidance for 2026-2030 (up from 6.5-7%).
3. Regulatory and Tariff Structuring to Protect Returns
WEC is proactively structuring bespoke tariffs for very large customers (VLC), with fixed ROE ranges (10.48-10.98%) and equity ratios, ensuring large loads pay their share and avoid subsidization by other customers. The company expects 14% of its asset base will be tied to these premium-rate projects by 2030, with regulatory proceedings on track for approval by mid-2026. This approach balances new growth with protection for legacy customer economics and investor returns.
4. Financing and Capital Allocation Discipline
Management outlined a clear funding plan for the expanded capex, targeting 50% equity content for incremental capital. Over five years, $21 billion of cash from operations, $14 billion of debt, and $5 billion of common equity are expected to fund the plan, with hybrid securities providing additional flexibility. The cadence of equity issuance will be tied to capex deployment, and management emphasized ample capacity for junior subordinated debt and hybrids.
5. Execution Focus and Conservative Planning
The plan is intentionally conservative, embedding only firm customer commitments and not yet reflecting potential upside from additional data center land or further customer wins. Management stressed the importance of execution, regulatory approvals, and prudent pacing of project delivery, with upside possible if customer projects accelerate or expand.
Key Considerations
WEC’s strategic pivot toward data center-driven growth introduces both substantial opportunity and new operational complexities. The company is navigating a transition from traditional utility growth to a model where hyperscale and industrial demand drive capital allocation, regulatory negotiations, and risk management.
Key Considerations:
- Load Growth is Highly Concentrated: A few large customers will account for a disproportionate share of incremental demand and asset base growth, increasing exposure to project timing and customer-specific risks.
- Capital Deployment and Execution Risk Rises: The back-end loaded nature of the plan means earnings acceleration is contingent on timely delivery of major projects and regulatory approvals.
- Tariff Structure Shields Legacy Customers: The VLC tariff is designed to ensure large loads do not subsidize or distort rates for other customers, but its ultimate effectiveness will depend on ongoing regulatory support.
- Financing Plan Relies on Market Access: The $5 billion equity issuance and hybrid debt strategy assumes stable capital markets and continued investor appetite for utility securities.
- Conservative Planning Leaves Upside Potential: Only announced and contracted projects are in the plan, with further growth possible if additional data center or industrial projects materialize.
Risks
WEC’s growth plan is exposed to execution and regulatory risk, as the timing and scale of data center projects, capex deployment, and tariff approvals will determine whether the company achieves its ambitious asset and earnings growth targets. Customer concentration risk increases, as a handful of hyperscale clients drive a large portion of future earnings. Rising interest rates, inflation, and supply chain constraints could also pressure project costs and financing assumptions.
Forward Outlook
For Q4 2025, WEC reaffirmed:
- Full-year EPS guidance of $5.17 to $5.27, assuming normal weather.
- 2026 dividend plan and earnings guidance to be provided in December, with payout ratio targeted at 65-70% of earnings.
For full-year 2026-2030, management raised guidance:
- EPS CAGR of 7-8% (compound annual growth rate), with acceleration to the upper half of the range post-2027.
Management emphasized:
- Capital plan execution and regulatory approvals as key determinants of growth pacing.
- Conservative planning, with upside if additional customer commitments are secured.
Takeaways
WEC is at an inflection point, pivoting from stable utility growth to a higher-risk, higher-reward model driven by the data center boom. Investors should focus on the timing and execution of large customer projects, regulatory outcomes, and the company’s ability to balance capital needs with shareholder returns.
- Data Center Expansion is the Engine: Microsoft, Vantage, and other hyperscale projects are now the primary drivers of WEC’s growth, with 14% of the asset base tied to bespoke tariffs by 2030.
- Execution and Regulatory Approvals are Pivotal: The back-end loaded earnings ramp will only materialize if projects are delivered on time and regulatory terms remain favorable.
- Watch for Upside from Unmodeled Growth: WEC’s plan is conservative, with additional land and customer prospects providing potential for further growth beyond current guidance.
Conclusion
WEC’s Q3 call marks a structural shift, with the company staking its future on hyperscale load growth and a major capital plan expansion. Success now depends on disciplined execution, regulatory alignment, and the realization of large customer commitments, all against a backdrop of rising capital intensity and industry transformation.
Industry Read-Through
WEC’s results and outlook highlight a new era for regulated utilities, where data center and industrial electrification are fundamentally reshaping load profiles and capital needs. The company’s approach to bespoke tariffs and customer segmentation could serve as a model for other utilities facing similar demand surges. Investor focus is shifting toward execution risk and customer concentration, with the potential for higher returns but also greater volatility as utilities transition to data center-centric growth models. Peers in regions with similar economic development may see rising capex, regulatory engagement, and capital market demands, requiring a careful balance of growth and risk management.