Leases

12 Months Ended

Dec. 31, 2024

Obligations Under Operating Leases

We have recorded right of use assets and lease liabilities primarily associated with the following operating leases:

•Leases of office space, primarily related to several floors we are leasing in the Aon Center office building in Chicago, Illinois, through April 2029.

•Land we are leasing related to our Rothschild biomass plant through June 2051.

•Rail cars we are leasing to transport coal to various generating facilities through June 2027.

•Land we are leasing related to our utility and non-utility solar generation projects through December 2074.

The operating leases generally require us to pay property taxes, insurance premiums, and operating and maintenance costs associated with the leased property. Certain of our leases contain options for early termination or to renew past the initial term, as set forth in the lease agreements. These options are included in our calculation of the lease obligations if it is reasonably certain that they will be exercised.

Obligations Under Finance Leases

In accordance with ASC Subtopic 980-842, Regulated Operations – Leases (Subtopic 980-842), the timing of expense recognition associated with our finance leases is modified to conform to the rate treatment. Amortization of the right-of-use asset is modified so that the total of the imputed interest and amortization costs equals the lease expense that is allowed for rate-making purposes. The difference between this lease expense and the sum of imputed interest and unadjusted amortization costs calculated under Topic 842 is deferred as a regulatory asset on our balance sheets in accordance with Subtopic 980-842.

Land Leases – Utility Solar Generation

We have various land leases related to our investments in utility solar generation. Each lease has an initial term and one or more optional extensions. We expect the optional extensions to be exercised, and, as a result, all of the land leases are being amortized over an extended term of approximately 50 years. Once a solar project achieves commercial operation, the lease liability is remeasured to reflect the final total acres being leased. Our payments related to these leases are being recovered through rates.

Power Purchase Commitment

In 1997, WE entered into a 25-year PPA with LSP-Whitewater Limited Partnership. The contract, for 236.5 MWs of firm capacity from a natural gas-fired cogeneration facility, included zero minimum energy requirements. The PPA expired on May 31, 2022; however, in November 2021, WE entered into a tolling agreement with LSP-Whitewater Limited Partnership that commenced on June 1, 2022. Concurrent with the execution of the tolling agreement, WE and WPS entered into an asset purchase agreement to acquire the natural gas-fired cogeneration facility and the acquisition closed effective January 1, 2023. See Note 2, Acquisitions, for more information. Both the PPA and the tolling agreement were accounted for as a finance lease prior to the acquisition.

Land Leases – Non-Utility Energy Infrastructure Solar Generation

We have various land leases related to our investments in non-utility solar generation. Each lease has an initial term and one or more optional extensions. We expect the optional extensions to be exercised, and, as a result, all of the land leases are being amortized over an extended term of approximately 50 years.

Amounts Recognized in the Financial Statements and Other Information

The components of lease expense and supplemental cash flow information related to our leases for the years ended December 31 are as follows:


(in millions)	2024			2023			2022
Finance lease expense
Amortization of right of use assets (1)	$	0.2		$	—		$	6.0
Interest on lease liabilities (2)	1.8			0.8			0.9
Operating lease expense (3)	5.2			4.7			6.1
Short-term lease expense (3)	0.6			1.2			0.9
Total lease expense	$	7.8		$	6.7		$	13.9

Other information

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	1.8		$	0.8		$	0.9
Operating cash flows from operating leases	7.1			6.8			5.7
Financing cash flows from finance leases	—			—			6.0

Non-cash activities:
Right of use assets obtained in exchange for finance lease liabilities (4)	$	153.2		$	32.8		$	57.6
Right of use assets obtained in exchange for operating lease liabilities	2.6			18.3			—

Weighted-average remaining lease term – finance leases	50.2 years			49.4 years			30.0 years
Weighted-average remaining lease term – operating leases	25.1 years			22.4 years			12.0 years

Weighted-average discount rate – finance lease (5)	5.9		%	5.3		%	3.9		%
Weighted average discount rate – operating leases (5)	5.9		%	5.8		%	3.4		%

(1) Amortization of right of use assets was included as a component of depreciation and amortization expense.

(2) Interest on lease liabilities was included as a component of interest expense.

(3) Operating and short-term lease expense were included as a component of other operation and maintenance expense.

(4) Amounts are net of any reductions to right of use assets and finance lease liabilities resulting from remeasurements.

(5) Because our leases do not provide an implicit rate of return, we used an estimate of the fully collateralized incremental borrowing rates based upon information available for similarly rated companies in determining the present value of lease payments.

The following table summarizes our finance and operating lease right of use assets and obligations at December 31:


(in millions)	2024		2023		Balance Sheet Location
Right of use assets
Operating lease right of use assets, net	$	32.1	$	32.0	Other long-term assets
Finance lease right of use assets, net
Land leases – utility solar generation	$	235.8	$	132.7
Land leases –non-utility energy infrastructure solar generation	43.5		—
Other	2.0		1.1
Total finance lease right of use assets, net (1)	$	281.3	$	133.8	Property, plant, and equipment, net

Lease obligations
Current operating lease liabilities	$	4.3	$	4.7	Other current liabilities
Long-term operating lease liabilities	$	37.5	$	38.8	Other long-term liabilities
Current finance lease liabilities
Other	$	0.2	$	—	Other current liabilities
Long-term finance lease liabilities
Land leases – utility solar generation	$	257.9	$	144.8
Land leases –non-utility energy infrastructure solar generation	43.8		—
Other	1.6		1.1
Total long-term finance lease liabilities	$	303.3	$	145.9	Finance lease obligations

(1) Amounts are net of accumulated amortization of $10.0 million and $6.1 million at December 31, 2024 and 2023, respectively.

Future minimum lease payments under our operating and finance leases and the present value of our net minimum lease payments as of December 31, 2024, were as follows:


(in millions)	Total Operating Leases		Land Leases - Utility Solar Generation		Land Leases - Non-Utility Energy Infrastructure Solar Generation		Other		Total Finance Leases
2025	$	6.0	$	7.3	$	3.3	$	0.3	$	10.9
2026	5.9		8.1		2.3		0.3		10.7
2027	5.8		12.2		2.3		0.3		14.8
2028	5.7		12.4		2.3		0.1		14.8
2029	2.9		12.7		2.4		0.1		15.2
Thereafter	75.9		954.4		159.7		2.6		1,116.7
Total minimum lease payments	102.2		1,007.1		172.3		3.7		1,183.1
Less: Interest	(60.4)		(749.2)		(128.5)		(1.9)		(879.6)
Present value of minimum lease payments	41.8		257.9		43.8		1.8		303.5
Less: Short-term lease liabilities	(4.3)		—		—		(0.2)		(0.2)
Long-term lease liabilities	$	37.5	$	257.9	$	43.8	$	1.6	$	303.3

On February 11, 2025, WECI closed on its acquisition of a 90% ownership interest in Hardin III, a solar generating facility. As a result of this asset acquisition, we acquired various land leases. We are currently evaluating the impact these leases will have on our financial statements and related disclosures. See Note 2, Acquisitions, for more information.