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Wisconsin Energy CEO: Moving to 60% Payout Ratio by 2014

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  • Description

    Wisconsin Energy CEO Gale Klappa on the natural gas business.

  • Duration 5:33
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So you hear this very often my next guest runs a company that has paid a dividend to -- shareholders.

Every single quarter.

Since 1942.

That's a long time -- -- paid -- dividend since Franklin Delano Roosevelt was president since a bottle of Coca-Cola cost five cents.

And the average price of a -- you -- you guys 920 bucks.

The battle of midway was happening in 1942 okay but campus dividend lasted and who is this company let's find out.

From Wisconsin Energy chairman and CEO Gail -- we just were so fascinated with your company because not only that look over the past year.

-- stock is up 23%.

So.

You've also got a great business story not just up -- we pay a dividend and that's important because lately I think people gotten a little cuckoo over dividends but.

-- talk to me first about the business and what it is about Wisconsin Energy that has seen a move to 23% to the upside this year alone.

-- was personal thanks for having us -- great to be with you.

We have invested over the last nine years of Wisconsin Energy seven point eight billion dollars in infrastructure.

The reach in the midwest are part of Wisconsin was badly in need of infrastructure upgrades we didn't have enough power plant capacity wouldn't have enough distribution capacity and transmission capacity.

And we've embarked on a massive infrastructure build but is now almost behind us.

Included -- that infrastructure builders.

Two of the most efficient natural gas fueled power plants.

In the United States and two of the most efficient coal fired power plants United States.

We're now beginning to see both customers and shareholders the benefit of that building program.

Now -- looking at a ten year chart her cat it's a beautiful chart with the one tiny dip in 09 which everybody seemed to see.

And and it gets its worth as business ever people always looking for great trade or great stock to buy.

That there is something about you guys you know you are sort of fleet of foot you figure out ways to constantly.

Move with what the it the atmosphere is -- and that's why you're you're going to convert one of your plants at at a pretty significant cost sixty to 65 million dollars.

From coal you have the -- natural gas ones already that are gonna convert one.

You'll lose fifty jobs but I would assume you did the math and figured out that it's best for business to do it this way yes exactly.

This particular power plant there were about to convert is near downtown Milwaukee which is where headquarters.

And -- headquarters building it is.

It is the only operating power plant inside the city limits of Milwaukee's sort of crucial piece of energy infrastructure to keep the lights on people -- support for the city.

But clearly we can improve environmental performance of units and it makes economic sense even -- five or six dollar -- To convert to natural gas there will be more efficient environmental performance will be up.

And I might also tell you that now with a large part of our infrastructure builders is behind us.

We have set a dividend policy speaking of dividends.

To move to a 60% payout ratio in other words -- 60% of our earnings in dividends by 2014.

That gives us I think best in class dividend growth potential for the next several years.

Listen that sounds enticing 285.

Quarters already behind you -- dividends and now you say this but.

One never knows what can happen with the economy we saw a lot of companies suspend or cut their dividends and when General Electric did that people were flipping out of their minds.

You know during the financial crisis.

Do you plan for the worst -- oh -- what would that be that would force you to either suspend or cut the dividend.

What we do plan for the worst and one of the reasons that we have a target to pay out only 60% of our earnings and dividends.

-- that we won't be faced and a very difficult economic climate would needing to cut the dividend.

So we think it's very prudent to stop and about 60% of our earnings being paid out in dividends again -- gives us a cushion for tough time.

-- environment obviously natural gas is cleaner burning it's not the panacea to all our problems but -- kind of wish with that being so cheap that we could have an opportunity.

-- to at least at some point be really very much more dependent on natural gas than some of those dirty your burning fossil fuels.

What you care one way or another is it's simply Nat gas is cheap now -- isn't so much.

No we do care but I think -- the lesson of history and if you look back over 607080.

Years.

The lesson of history is that the best service most cost competitive price to our customers as if we have a diverse fuel mix of a diverse portfolio.

With coal burning power plants nuclear natural gas Hydro wind solar biomass.

And I think that's the key to success because at one point in history and one point in time you cannot predict what's going to happen to any one of those fuel sources at some.

Such a portfolio want a little bit and stocks were little hidden box -- -- knows what as we finish up you know obviously you're heavily regulated industry.

You've -- should do pretty well.

What is the one thing you wish if you have the president's -- he would say to him about regulating your industry.

Oh goodness one thing and one thing clearly do not raise taxes on dividends.

The single biggest demographic group but benefits from dividends -- seniors.

And it just seems insane to me and will mean higher cost of capital for our industry.

If -- tax dividends.

At very high rates so that would be my single biggest message president.

Hello this from a company that has been paying -- a dividend for 280 consecutive quarters of congratulations -- record net income last year and the highest earnings per share in history.

Good to see you thank you -- come back again we'll do it.

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