First Quarter 2014

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# May 2, 2014 

# First Quarter 2014 Earnings Conference CallFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 2 

# Index

3. Condensed Commentary on Forward

- Looking Statements 4. Non
- GAAP Financial Information 5. First Quarter 2014 Financial Results; 2014 Guidance; Long

- Term Growth Expectations 6. Operational Update 7. Operational Update (continued) 8. Operational Update (continued) 9. Operational Update (continued) 10. Diluted EPS
– Adjusted and Weather Impacts 11. Guidance
– 2014 Diluted EPS
– Adjusted 12. Key Investment Highlights 13. APPENDIX 14. Estimated Capital Expenditures 15. Estimated Utility Depreciation 16. Projected Average Rate Base 2013
– 2016 17. Supporting Data for Projected Average Rate Base 2013
– 2016 18. Financing Summary 19. Integrys Long
- Term Debt Maturities 20. Integrys Credit Ratings 21. Economic Drivers in Regulated Utility Service Territories 22. Regulated Utilities
– Regulatory Rate Base and Return on Equity 23. Regulated Utilities
– Statistics 24. Rider QIP Background Information 25. Costs Recovered Through Rider QIP 26. Rider QIP Recovery Mechanism 27. Minnesota Energy Resources – 2013 General Rate Case
– As Filed 28. Minnesota Energy Resources Rate Case – Positions of Department of Commerce (DOC) and Office of Attorney General (OAG ) 29. Wisconsin Public Service
– 2014 General Rate Case
– As Filed 30. Wisconsin Public Service
– Residential Electric
– 2009 – 2014 Average Annual Customer Bill Change 31. Peoples Gas and North Shore Gas
– 2014 General Rate Cases
– As Filed 32. State Regulatory Commissions in Jurisdictions Served by Integrys Energy Group 33. Nonregulated Operational Update 34. Integrys Energy Services – Delivered and Estimated Contracted Volumes 35. Integrys Energy Services – Margins 36. Integrys Energy Services – Volumes, Unit Margins, and Definitions Related to Margins Slide 37. Nonregulated Estimated Contracted Retail Volumes at March 31, 2014 by Region 38. Nonregulated Retail Services Offered 39. Special Items by Segment
– Adjusted Earnings (Loss)
– First Quarters 2014 and 2013 40. Special Items by Segment
– Diluted EPS
– Adjusted
– First Quarters 2014 and 2013 41. Adjusted Earnings Drivers
– Regulated Natural Gas Utility Segment
– First Quarter 2014 vs. 2013 42. Adjusted Earnings Drivers
– Regulated Electric Utility Segment
– First Quarter 2014 vs. 2013 43. Adjusted Earnings Drivers
– Electric Transmission Investment Segment
– First Quarter 2014 vs. 2013 44. Adjusted Earnings Drivers
– Nonregulated Integrys Energy Services Segment – First Quarter 2014 vs. 2013 45. Adjusted Earnings Drivers
– Holding Company and Other Segment
– First Quarter 2014 vs. 2013 46. Disclosure of Full Forward

- Looking StatementsFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 3 

## In this presentation, we make statements concerning our expectations, beliefs, plans,

objectives, goals, strategies, and future events or performance. These statements are “forward

- looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward

- looking statements are not guarantees of future results and conditions. Although we believe that these forward

- looking statements and the underlying assumptions are reasonable, we cannot provide assurance that such statements will prove correct. Forward

- looking statements involve a number of risks and uncertainties. Some risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward

- looking statements include those described in Item 1A of our Annual Report on Form 10
- K for the year ended December 31, 2013, as may be amended or 

## supplemented in Part II, Item 1A of our subsequently filed Quarterly Reports on Form 10

- Q. Other risks and uncertainties are set forth in greater detail in the aforementioned filing with the United States Securities and Exchange Commission and in Slide 46 in the Appendix. You are encouraged to read and understand the disclaimers set forth in these filings. All forward - looking statements included in this presentation are based upon information 

## presently available, and we, except to the extent required by the federal securities laws, undertake no obligation to publicly update or revise any forward - looking statements, whether as a result of new information, future events, or otherwise. 

# Condensed Commentary on Forward

- Looking StatementsFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 4 

# Non
- GAAP Financial Information

We prepare financial statements in accordance with accounting principles generally accepted in the United States (GAAP). In addition, we disclose and discuss diluted earnings per share (EPS)
– adjusted and adjusted earnings (loss ), which are non

- GAAP measures . Management uses these measures in its internal performance reporting and for reports to the Board of Directors. We disclose these measures in our quarterly earnings releases, on investor conference calls, and during investor conferences and related events. Management believes that diluted EPS
– adjusted and adjusted earnings (loss) are useful measures for providing investors with additional insight into our operating performance. These 

# measures allow investors to better compare our financial results from period to period, as they eliminate the effects of certain items that are not comparable. This additional information is not meant to be considered in isolation or as a substitute for our results of operations prepared and presented in conformance with GAAP. Tax impacts are calculated using the applicable combined federal and state statutory rate modified for any attributable permanent tax effect and/or tax credit. A reconciliation of non

- GAAP information to GAAP information is included on the slide where the information appears.First Quarter 2014 Earnings Conference Call – May 2, 2014



### 5 

# First Quarter 2014 Financial Results; 2014 

# Guidance; Long

- Term Growth Expectations

 First Quarter 2014 Financial Results

– Consolidated diluted EPS
– adjusted of $1.73 for the three months ended March 31, 2014 versus $1.76 for the same period in 2013



#  2014 Guidance

– Consolidated diluted EPS – adjusted of $3.50 to $3.75



#  Long
- Term Growth Expectations

– Earnings per share growth for Integrys Energy Group consolidated in the range of 4% to 6% on average annualized basis

– Base year: 2013

– Projection does not include any growth from Integrys Energy ServicesFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 6 

# Regulated Natural Gas Utility Segment

 Weather impact

– Coldest in 30 years resulted in record throughput

– Identified areas for investment as a result of system vulnerabilities

– Weather and propane prices/shortages elevated an increased interest in natural gas conversion 

#  Natural Gas Consumer, Safety & Reliability Act (Rider Qualifying Infrastructure Program which is known as Rider QIP)

– 2014 projects underway, including replacement of high pressure system on south side of Chicago



# – Deep frost line delayed construction season

– Additional Rider QIP details in Appendix on Slides 24 to 26 

#  Acquisition of Alliant Energy’s Minnesota natural gas utility assets

– Filed for required approvals on February 4, 2014

– Targeting transaction close by end of 2014 

# Operational UpdateFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 7 

# Regulated Electric Utility Segment

 Columbia environmental upgrade nearing completion

– Scrubber on Unit 2 commenced operation in April 2014



# – Scrubber on Unit 1 expected to be on line in June 2014 

#  Weston 3 environmental upgrade (ReACTTM)
– advanced from site preparation to foundation work
 System Modernization and Reliability Project (SMRP)

– Plan to complete 185 miles of underground installations this year



# – Received permits from Department of Natural Resources, State Historical Preservation Organization, and Army Corps of Engineering

– Easements for 2014 project segments completed

– Construction is underway 

#  Generation strategy

– Fox Energy Center site selected for a combined cycle natural gas turbine power plant of up to 500 megawatts

– Announced plant retirements effective June 2015
• Pulliam Units 5 and 6 (combined 112 megawatts)
• Weston Unit 1 (60 megawatts)



# – Weston Unit 2 (75 megawatts)
– to be run exclusively on natural gas by June 2015 

#  Weather impact on generation; reduced coal deliveries, high natural gas prices 

# Operational Update (continued)First Quarter 2014 Earnings Conference Call – May 2, 2014



### 8 

# Operational Update (continued)
Rate Cases
 Minnesota Energy Resources – revised requested rate 

# increase
 Wisconsin Public Service

– Wisconsin retail jurisdiction rate case filed April 1, 2014

– Expect to file rate case for Wisconsin Public Service’s Michigan retail jurisdiction in third quarter 2014 

#  Peoples Gas/North Shore Gas

– Rate increase request filed February 26, 2014

– Schedule set for final decision no later than January 20, 2015 

#  Details included in Appendix (Slides 27 through 31)First Quarter 2014 Earnings Conference Call – May 2, 2014



### 9 

## Proposed Sale of Upper Peninsula Power Company (UPPCO) to Balfour Beatty Infrastructure Partners
 Stock purchase agreement signed: January 17, 2014
 Anticipated closing: End of 3Q14
 Terms of transaction:

– Purchase price: $298.8 million (subject to post

- closing adjustments)

– Expected net after

- tax proceeds: $220 million

– One
- time after

- tax gain expected: $48 million or $0.60 per share

– Excludes UPPCO’s ATC investment (approximately $15 million)

– Includes transition service agreements with Integrys Business 

### Support ranging from 18 to 30 months for such services as accounting and information technology


##  Expected use of proceeds: reduce equity and debt financing for generation and infrastructure investment at other regulated utilities
 Regulatory approvals needed:

– Wisconsin Public Service Commission
– filed March 3, 2014

– Federal Energy Regulatory Commission
– filed March 14, 2014

– Michigan Public Service Commission
– filed March 17, 2014

• Timeline can be found at: http://efile.mpsc.state.mi.us/efile/docs/17564/0020.pdf


##  Balfour Beatty Infrastructure Partners Information

– www.bbip.com

– www.balfourbeatty.com (BBIP sponsor ) 

# Operational Update (continued)

 Established in 1884 (acquired by Integrys Energy Group in 1998)  Regulated electric utility  Operates in 10 of the 15 counties in the Upper Peninsula of Michigan  118 employees  Serves approximately 52,000 electric retail customers in 118 communities  A firm peak demand was reached on August 20, 2013, with a system demand of 101 megawatts  Electric property includes approximately 3,300 miles of electric distribution lines and 57 distribution substations and 50.8 megawatts of generating capacity (based on summer ratings)  Rate base /ROE/equity layer

 $ 161 million/10.15%/56.74% excluding deferred taxes in rate base ► 2013 regulated utility income (excluding ATC earnings): $8.6 millionFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 10 

# Diluted EPS
– Adjusted and Weather ImpactsFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 11 

# Guidance
– 2014 Diluted EPS
– Adjusted

Non
- GAAP Financial Information

Note that the consolidated guidance is narrower than the sum of the segments .



## Data has not changed since the fourth quarter 2013 earnings conference call that took place on February 27, 2014First Quarter 2014 Earnings Conference Call – May 2, 2014



### 12 

#  Execution of our business plan for the regulated utilities remains on track as we

continue to make prudent infrastructure investments for approved projects

 Our asset management strategy allows us to continually review our portfolio of 

# businesses and take advantage of opportunities as they arise, such as the pending sale of Upper Peninsula Power Company

 Our 34% ownership in American Transmission Company continues to contribute to earnings

 2014 guidance range for diluted EPS
– adjusted on a consolidated basis of $3.50 to $3.75

 Expect long

- term earnings per share growth of 4% to 6% on an average annualized basis, with 2013 as a base year, for Integrys Energy Group consolidated and not 

# including any growth from Integrys Energy Services

 Given our solid long

- term business plan, our current dividend is sustainable, and we expect our dividend payout ratio will decline to utility industry norms as our earnings grow over time 

# Key Investment HighlightsAppendix



### 13 First Quarter 2014 Earnings Conference Call – May 2, 2014First Quarter 2014 Earnings Conference Call – May 2, 2014



### 14 

# Estimated Capital Expenditures

Capital expenditure data has not changed since the fourth quarter 2013 earnings conference call that took place on February 27, 2014. American Transmission Company data has been updated.First Quarter 2014 Earnings Conference Call – May 2, 2014



### 15 

# Estimated Utility Depreciation

Data has not changed since the fourth quarter 2013 earnings conference call that took place on February 27, 2014First Quarter 2014 Earnings Conference Call – May 2, 2014



### 16 

# Projected Average Rate Base 2013
– 2016

* Excludes Upper Peninsula Power Company 

## $- $1.0 $2.0 

## $3.0 $4.0 $5.0 $6.0

2013 2014 2015 * 2016 * Fox Energy Center Electric not yet approved/not in rates Electric approved not yet in rates Electric in rates Natural Gas not yet approved/not in rates Natural Gas approved not yet in rates Natural Gas in rates 35% Growth 

## BillionsFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 17 

# Supporting Data for Projected Average Rate Base 2013 – 2016First Quarter 2014 Earnings Conference Call – May 2, 2014



### 18 

#  Provide adequate capital levels at a reasonable cost and maintain current credit ratings; see Slide 20 for 

# credit rating details
 Transactions expected in 2014

– Long
- term debt

• Integrys Energy Group – 7.27%, $100 million, matures on June 1, 2014

• Peoples Gas
– approximately $150 million late in 2014

• Opportunities to call, reprice, or remarket existing long

- term debt transactions are also evaluated



# – Equity

• No new equity required in 2014

• Shares needed for stock investment, dividend reinvestment, and equity compensation plans to be purchased in open market 

# Financing SummaryFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 19 

# $0

$100 $200 

# $300

2014 2015 2016 2017 2018 2019 2020 Other NSG PGL WPS PEC TEG Millions 

# Integrys Long
- Term Debt Maturities

NOTE: 2016 maturities exclude approximately $270 million of Integrys Energy Group hybrid debt securities which convert in that year to a floating rate and are callable at par. Integrys Energy Group has the option to retire the hybrids and reissue securities of similar equity content or allow them to remain outstanding until final maturity in 2066.



## Data has not changed since the fourth quarter 2013 earnings 

## conference call that took place on February 27, 2014First Quarter 2014 Earnings Conference Call – May 2, 2014



### 20 Standard & Poor’s Moody’s (Upgrades for utilities effective January 31, 2014) Integrys Energy Group Issuer credit rating Senior unsecured debt Commercial paper Junior subordinated notes A
BBB+ A
- 2 BBB N/A Baa1 P
- 2 Baa2 Wisconsin Public Service Issuer credit rating * First mortgage bonds * Senior secured debt * Preferred stock * Commercial paper A
N/A A BBB A
- 2 A1 Aa2 Aa2 A3 P
- 1 Peoples Gas Issuer credit rating * Senior secured debt * Commercial paper * A
A A
- 2 A2 Aa3 P
- 1 North Shore Gas Issuer credit rating * Senior secured debt * A
A A2 Aa3 

# Integrys Credit Ratings

N/A = Not Applicable * Upgraded by Moody’s effective January 31, 2014. 

## Data has not changed since the fourth quarter 2013 earnings conference call that took place on February 27, 2014First Quarter 2014 Earnings Conference Call – May 2, 2014



### 21 

# Economic Drivers in Regulated Utility Service 

# TerritoriesFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 22 

# Regulated Utilities
– Regulatory 

# Rate Base and Return on Equity

Notes: (1) The MGU rate case was settled with no stated rate base value. $210 million corresponds to MGU's filed amount with deferred taxes included in the capital structure. Rate base would be $ 177 million, and the common equity ratio would be 50.12%, with deferred taxes in rate base. (2) The UPPCO rate case was settled with no stated rate base value. $221 million corresponds to UPPCO’s filed amount, with defer red taxes included in the capital structure. Rate base would be $161 million, and the common equity ratio would be 56.74%, with deferred taxes in rate base. (3) Wisconsin includes working capital. (4) Service provided under FERC Tariff and Market

- Based Rate Contracts, each of which is formula based. (5) Primarily Distribution Service served under the Joint Tariff for the Sales of Ancillary Services (“JAST”).

Data has not changed since the fourth quarter 2013 earnings conference call that took place on February 27, 2014First Quarter 2014 Earnings Conference Call – May 2, 2014



### 23 

# Regulated Utilities
– Statistics

* Rate base includes working capital as the Wisconsin Commission handles it differently.



## Data has not changed since the fourth quarter 2013 earnings conference call that took place on February 27, 2014First Quarter 2014 Earnings Conference Call – May 2, 2014



### 24 

# Rider QIP Background Information

 Effective January 1, 2014


#  Qualifying property

– Main and service pipe replacement, movement of inside meters to outside

– Pipeline integrity


#  Rider QIP cumulative annual increase capped at 4% per year of base rates

– i.e., maximum Rider QIP recovery in year 1 is 4%, year 2 is 8%, etc.



# – Maximum 5.5% increase in any given year

– Filed third monthly surcharge with ICC in mid

- April


#  Reconciliation, including prudence review, in the following 

# year
 Sunset after 2023First Quarter 2014 Earnings Conference Call – May 2, 2014



### 25 

# Costs Recovered Through Rider QIP

 Return of investment, i.e., depreciation


#  Return on investment based on:

– Cost of capital from most recent rate case

– Multiplied by:

• Plant placed in service

• Less accumulated depreciation and accumulated deferred taxes on Rider QIP plant



# • Less “minimum spend”

– Minimum spend will usually be met by non

- QIP capital expendituresFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 26 

# Rider QIP Recovery Mechanism

 One month cash flow lag, recovery recorded immediately.

– Example:

• Recovery of costs for property placed in service in January 2014 begins March 1, 2014.

• For accounting purposes, March revenue is accrued in January


#  Half year problem from traditional rate cases avoided

– Due to averaging convention, traditional rate case only recovers half of costs from additions in the test year, creating regulatory lag until the next rate case

– In a test year, current year additions are recovered through Rider QIP , so no regulatory lag between rate casesFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 27 

##  Filed on September 30, 2013 (Docket No. 13

- 617)



##  Requested:

– $14.2 million, 5.52% increase in retail natural gas rates

– Rate base
– $198.3 million retail natural gas

– Return on Equity – 10.75% with equity component of 50.31%



##  Key reasons for rate increase request:

– Inflation $2.0 million

– Return on equity $0.9 million

– Labor costs $0.9 million

– Conservation Improvement Program amortization $0.8 million

– Integrys Business Support customer relations system upgrade $0.7 million

– Property taxes $0.7 million



### – Rate case expense $0.4 million

– Employee benefits $(0.5 million)

– Executive/non

- executive incentives $(0.7 million)

– Depreciation $(1.1 million)



##  Key Dates:

– Interim rates effective: January 1, 2014



### – Final order expected: October 2014



##  Website: https://www.edockets.state.mn.us/EFiling/edockets/searchDocuments.do?method=eDocketsResult&userType=public 

# Minnesota Energy Resources – 

# 2013 General Rate Case
– As FiledFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 28 

# Minnesota Energy Resources Rate Case – Positions of Department of Commerce (DOC) and Office of Attorney General (OAG)

n/a = not applicable 

### * These items should have no net income impact because of offset to expenses.First Quarter 2014 Earnings Conference Call – May 2, 2014



### 29 

##  Filed on April 1, 2014 for new rates effective January 2015 (Docket No. 6690

- UR
- 123)



##  Requested for Wisconsin jurisdiction:

– $76.8 million (8.0%) increase in retail electric rates

– $1.6 million (0.5%) decrease in retail natural gas rates

– Rate base
– $1,900 million Wisconsin electric retail and $360 million Wisconsin natural gas retail

– Return on Equity – 10.6% with equity component of 50.51%



##  Reasons for rate increase request: 

# Wisconsin Public Service
– 

# 2014 General Rate Case
– As Filed

n/a = not applicableFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 30 

# Wisconsin Public Service
– Residential Electric
– 

# 2009 – 2014 Average Annual Customer Bill ChangeFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 31 

# Peoples Gas and North Shore Gas
– 2014 

# General Rate Cases
– As FiledFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 32 

# State Regulatory Commissions in Jurisdictions 

# Served by Integrys Energy Group

Commissioner Party Affiliation Appointed By Initial Date Appointed Confirmed Term Expires Illinois
– 5
- year terms, party split required, appointment by governor, confirmation by State Senate http://www.icc.illinois.gov/cc/

Doug Scott, Chair Miguel Del Valle Sherina Maye Ann McCabe John Colgan Democrat Democrat Independent Republican Democrat Governor Quinn

Governor Quinn Governor Quinn Governor Quinn Governor Quinn 03
- 11
- 2011 02
- 08
- 2013 02
- 25
- 2013 03
- 16
- 2012 11
- 15
- 2009 No

Yes Yes Yes Yes TBD

01
- 15
- 2018 01
- 15
- 2018 03
- 16
- 2017 01
- 19
- 2015 Michigan
– Staggered 6

- year terms, party split required, appointment by governor, confirmation by State Senate http://www.michigan.gov/mpsc/0,1607,7

- 159
- 16400
- 40504
-- ,00.html

John Quackenbush, Chair Sally Talberg Greg White Republican Independent Independent Governor Snyder

Governor Snyder Governor Granholm 09
- 15
- 2011 06
- 26
- 2013 12
- 04
- 2009 Yes

Yes Yes 07
- 02
- 2017

07
- 02
- 2019 07
- 02
- 2015 Minnesota – Staggered 6

- year terms, party split required, appointment by governor, confirmation by State Senate http://www.puc.state.mn.us/PUC/aboutus/commissioners/index.html

Beverly Jones Heydinger, Chair Dr. David Boyd Nancy Lange Dan Lipschultz Betsy Wergin Democrat Republican Democrat Republican Republican Governor Dayton

Governor Pawlenty Governor Dayton Governor Dayton Governor Pawlenty 07
- 02
- 2012 07
- 10
- 2007 02
- 11
- 2013 01
- 07
- 2014 08
- 01
- 2008 Yes

Yes Yes No Yes 01
- 02
- 2017

01
- 05
- 2015 01
- 07
- 2019 01
- 06
- 2020 01
- 04
- 2016 Wisconsin – Staggered 6

- year terms, appointment by governor, confirmation by State Senate http://psc.wi.gov/aboutUs/organization/commissioners.htm

Phil Montgomery, Chair Eric Callisto Ellen Nowak Republican Democrat Republican Governor Walker

Governor Doyle Governor Walker 04
- 04
- 2011 05
- 27
- 2008 07
- 05
- 2011 Yes

Yes Yes 03
- 01
- 2017

03
- 01
- 2015 03
- 01
- 2019First Quarter 2014 Earnings Conference Call – May 2, 2014



### 33 

#  1Q14 weather impact
– adverse but within revised expectations
 Margin recognition timing impact will to reverse by end of year
 Contract with Chicago repriced
– includes both demand and commodity charge
 Status of aggregation program
– over 80% of eligible renewal volume has been completed, with others still pending


#  Energy marketing business
– 2014

– Realized retail gross margins (see Slide 35)

• 1Q14 vs. 1Q13: Natural gas up 29%, electric down 61%



# – Unit margins – continued competitive pressures and weather

• 1Q14 vs
. 1Q13: Natural gas down 16% and electric down 72% (see Slide 36)



# – Delivered volumes higher

• 1Q14 vs. 1Q13: Electric up 47%, natural gas up 73% (see Slide 34) 

#  Energy marketing business
– 2014 and beyond

– 1Q14 contracted forward volumes up versus 1Q13
• Natural gas up 76% and electric up 13% based upon estimated volumes (see Slide 37 for distribution by region) 

# Nonregulated Operational UpdateFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 34 

# Integrys Energy Services – Delivered and Estimated Contracted Volumes

183.6* 240 - 265**

0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 200.0 220.0 240.0 260.0 280.0 300.0

2013 2014 Billion Cubic Feet 

# Retail Natural Gas

Estimated 2014 Volumes Incremental to Contracted Volumes as of March 31, 2014 Estimated Contracted Volumes as of March 31, 2014 Actual Delivered Volumes Actual 2013* and Estimated 2014** Annual Delivered Volumes 21.3* 26.0 - 30.5 **

0.0 4.0 8.0 12.0 16.0 20.0 24.0 28.0 32.0 36.0

2013 2014 Million Megawatt Hours 

# Retail Electric

Estimated 2014 Volumes Incremental to Contracted Volumes as of March 31, 2014 Estimated Contracted Volumes as of March 31, 2014 Actual Delivered Volumes Actual 2013* and Estimated 2014** Annual Delivered VolumesFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 35 

# Integrys Energy Services – MarginsFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 36 

# Integrys Energy Services – Volumes, Unit Margins, 

# and Definitions Related to Margins SlideFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 37 

# Nonregulated Estimated Contracted Retail Volumes at March 31, 2014 by Region

Wisconsin 28.1% Illinois 19.3% Mid Atlantic 2.5% Michigan 

### 9.0% Ohio 7.4% Compass (Mid Atlantic & Ohio) 33.7% 

## Retail Natural Gas

Illinois 40.3% Mid Atlantic 11.9% New York 

### 8.3% New England 15.0% 

### Michigan/Ohio

24.5% 

## Retail ElectricFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 38 

# Nonregulated Retail Services OfferedFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 39 

# Special Items by Segment
– Adjusted 

# Earnings (Loss)
– First Quarters 2014 and 2013

Non
- GAAP Financial InformationFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 40 

# Special Items by Segment
– Diluted EPS
– Adjusted
– 

# First Quarters 2014 and 2013

Non
- GAAP Financial InformationFirst Quarter 2014 Earnings Conference Call – May 2, 2014



### 41 

# Adjusted Earnings Drivers
– Regulated Natural Gas Utility Segment
– First Quarter 2014 vs. 2013
$ in millions

A – Utility rate impacts B – Tax impacts/other, which includes the impact of variances in weather - normalized sales volumes on utility margins, changes in interest expense, and other miscellaneous items C – Weather, net of decoupling D – Decoupling reserve reversal in the first quarter 2013 when Peoples Gas and North Shore Gas reversed reserves that had been recorded in 2012 against decoupling amounts E – Operating expense impacts, driven by an increase in natural gas distribution costs at Peoples Gas as well as an increase in depreciation and amortization expense $9.5



## Non
- GAAP Financial Information $99.1 $17.5 ($2.0)

$7.6 ($12.5)

Note: All amounts are shown net of tax. Certain variances have been adjusted to exclude amounts that have no impact on net income, including certain utility riders. $89.6 $6.8 ($9.9)First Quarter 2014 Earnings Conference Call – May 2, 2014



### 42 

# Adjusted Earnings Drivers
– Regulated Electric Utility Segment
– First Quarter 2014 vs. 2013 $ in millions

A – Utility rate impacts (includes the impact of the Fox Energy Center purchase) B – Weather, net of decoupling C – Tax impacts/other, which includes the impact of variances in weather - normalized sales volumes on utility margins, changes in interest expense, and other miscellaneous items D – Operating expense impacts , driven by increased maintenance costs at Wisconsin Public Service’s Pulliam generation plant and the purchase of the Fox Energy Center at the end of the first quarter of 2013 $2.5

$28.6 $8.9 $1.4



## Non
- GAAP Financial Information $31.1 ($1.3) ($10.8)



## Note: All amounts are shown net of tax. $5.7First Quarter 2014 Earnings Conference Call – May 2, 2014



### 43 

# Adjusted Earnings Drivers
– Electric Transmission Investment Segment – First Quarter 2014 vs. 2013

A – Tax impacts/other 

### $0.3 $ in millions



### $13.4 

### $13.7 $0.3



## Non
- GAAP Financial Information Note: All amounts are shown net of tax.First Quarter 2014 Earnings Conference Call – May 2, 2014



### 44 

# Adjusted Earnings Drivers
– Nonregulated Integrys Energy Services Segment – First Quarter 2014 vs. 2013

$ in millions

A – Operating e xpense impacts B – Weather C – Other nonregulated margins D – Tax impacts/other, which includes changes in interest expense and other miscellaneous items 

## Non
- GAAP Financial Information $9.9 $1.8

$9.9

($1.9)

($2.4)
($3.0) ($1.1) ($2.6)



## Note: All amounts are shown net of tax. ($3.0)
($3.4) ($11.8)First Quarter 2014 Earnings Conference Call – May 2, 2014



### 45 

# Adjusted Earnings Drivers
– Holding Company and Other Segment
– First Quarter 2014 vs. 2013

A – Nonregulated margins B – Operating expense impacts C – Tax impacts/other, which includes changes in interest expense and other miscellaneous expense $ in millions
$0.2

($2.3) ($0.7)



## Non
- GAAP Financial Information

($1.6) $1.7 ($2.6)



## Note: All amounts are shown net of tax. ($0.7)First Quarter 2014 Earnings Conference Call – May 2, 2014



### 46 In this presentation, we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, and futu re events or performance. These statements are “forward

- looking

statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward

- looking statements are not guarantees of future results and conditions. Although we believe that these forward

- looking statements and the underlying assumptions are reasonable, we cannot provide assurance that su ch statements will prove correct. Forward

- looking statements involve a number of risks and uncertainties. Some risks and uncertainties that could cause actual res ults to differ materially from those expressed or implied in forward

looking statements include those described in Item 1A of our Annual Report on Form 10

- K for the year ended December 31, 2013, as may be amended or supplemented in Part II, Item 1A of our subsequently filed Quarterly Reports on Form 10
- Q, a nd those identified below:

 The timing and resolution of rate cases and related negotiations, including recovery of deferred and current costs and the ab ili ty to earn a reasonable return on investment, and other regulatory decisions impacting our regulated businesses;
 F ederal and state legislative and regulatory changes, including deregulation and restructuring of the electric and natural gas utilit y i ndustries, financial reform, health care reform, energy efficiency mandates, reliability standards, pipeline integrity and safety standards, and changes in tax and other laws and regulations t o w hich we and our subsidiaries are subject;
 The risk of terrorism or cyber security attacks, including the associated costs to protect our assets and respond to such eve nts ;
 The risk of failure to maintain the security of personally identifiable information, including the associated costs to notify af fected persons and to mitigate their information security concerns;
 Federal and state legislative and regulatory changes relating to the environment, including climate change and other environm ent al regulations impacting generation facilities and renewable energy standards;
 Costs and effects of litigation and administrative proceedings, settlements, investigations, and claims;
 The ability to retain market

- based rate authority;
 The effects, extent, and timing of competition or additional regulation in the markets in which our subsidiaries operate;
 Changes in credit ratings and interest rates caused by volatility in the financial markets and actions of rating agencies and their i mpa ct on our and our subsidiaries’ liquidity and financing efforts;
 The risk of financial loss, including increases in bad debt expense, associated with the inability of our and our subsidiarie s’ counterparties, affiliates, and customers to meet their obligations;
 The effects of political developments, as well as changes in economic conditions and the related impact on customer energy use , customer growth, and our ability to adequately forecast energy use for our customers;
 The ability to use tax credit and loss carryforwards ;
 The investment performance of employee benefit plan assets and related actuarial assumptions, which impact future funding req uir ements;
 The risk associated with the value of goodwill or other intangible assets and their possible impairment;
 The timely completion of capital projects within estimates, as well as the recovery of those costs through established mechan ism s ;
 Potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be com pleted timely or within budgets;
 The risks associated with changing commodity prices, particularly natural gas and electricity, and the available sources of f uel , natural gas, and purchased power, including their impact on margins, working capital, and liquidity requirements;
 Changes in technology, particularly with respect to new, developing, or alternative sources of generation;
 Unusual weather and other natural phenomena, including related economic, operational, and/or other ancillary effects of any s uch events;
 The impact of unplanned facility outages;
 The financial performance of American Transmission Company and its corresponding contribution to our earnings;
 The timing and outcome of any audits, disputes, and other proceedings related to taxes;
 The effectiveness of risk management strategies, the use of financial and derivative instruments, and the related recovery of th ese costs from customers in rates;
 The effect of accounting pronouncements issued periodically by standard

- setting bodies; and
 Other factors discussed in reports we file with the United States Securities and Exchange Commission. Except to the extent required by the federal securities laws, we undertake no obligation to publicly update or revise any for war d - looking statements, whether as a result of new information, future events, or otherwise. 

# Disclosure of Full Forward

- Looking Statements