We Energies Plans Biomass Plant - Analyst Blog

We Energies plans to build a 50 megawatts (MW) biomass-fueled power plant at Rothschild, Wisconsin paper mill site of Domtar Corp. (UFS). Early next year, the utility will apply to the Public Service Commission of Wisconsin for necessary permits. The project will cost around $250 million and is expected to be completed by first half of 2013.

The proposed power plant to be fueled by wood, waste wood and sawdust will expand the renewable energy portfolio of We Energies. Presently, the utility has two other projects in the pipeline – a 145 MW Blue Sky Green Field Wind Energy Center in Fond du Lac County and a 162 MW Glacier Hills Wind Park in Columbia County. Collectively, these projects will generate around 360 MW of clean energy, which is sufficient to power nearly 120 thousand households.

The biomass plant will provide support to Domtar’s papermaking operations. Moreover, it will help We Energies to comply with Wisconsin state regulations, which require state utilities to meet 10% of retail electricity needs from renewable sources by 2015.

We Energies is the trade name of Wisconsin Electric Power Co. and Wisconsin Gas LLC, which are principal utility subsidiaries of Wisconsin Energy (WEC). We Energies supply electricity to over 1.1 million consumers in Wisconsin and Upper Peninsula and natural gas to over 1 million consumers in Wisconsin.

Shares of Wisconsin Energy closed at $45.10 on Tuesday, trading at 14.3X trailing 12-month EPS versus 11.8X of the peer group. We maintain our Neutral recommendation for the company.