Integrys Energy Group

Annual Shareholders Meeting - May 19, 2005

"Energy to Believe In"

by Larry L. Weyers
Chairman, President, and Chief Executive Officer

Many years ago a good friend and mentor told me that the finest legacy we can leave for our children is a good name. By that, he meant a family name that is respected for the integrity, honesty, fairness, actions, and contributions made by those bearing the name.

The same standard is equally appropriate for companies. As stewards of WPS Resources, the finest legacy we can leave is a good name…a good corporate name that is respected in the community by shareholders, customers, and employees. A good name that is respected for honesty, integrity, and fairness. A good name that is respected for actions and contributions to our society. A good name that generations to come can trust and believe in. A good name that provides you, "Energy to Believe In." Let's look more closely at the legacy WPS Resources Corporation provides.

Judging from our performance, our legacy should be solid. In 2004, WPS Resources provided investors an overall return on their investment of 13.2 percent for shareholders who reinvested their dividends and held their stock for the entire year.

During the past five years, WPS has provided a 21 percent average annual return to investors, which according to the Wall Street Journal, is the 6th best performance in our industry. They also reported that the average annual return of 13 percent provided by WPS Resources during the past ten years is the 9th best return in our industry.

In 2004, WPS also provided shareholders with the 46th consecutive year of dividend increases.

This financial performance was complemented by award-winning service to customers. J.D. Powers identified Wisconsin Public Service as one in an elite group of companies that ranked in the top quartile for customer satisfaction based on a six-year performance average.

WPS Energy Services' customers rated us 7th in overall customer satisfaction and 6th by industrial customers in a 2004 national survey. Since we first appeared in the Mastio rankings in 1999, customers have consistently ranked WPS Energy Services among the top 10 energy marketers in North America.

During 2004 we continued to be recognized in the communities we serve as a solid and respected corporate citizen that contributes to community success through volunteerism, financial support, and good jobs. We provide challenging employment and attractive career paths for nearly 3,000 employees and the families they support. We provide jobs, benefits, and opportunities such as our new health and wellness initiative designed to help employees and their families lead healthier life styles.

Internally, we continued our progress in efforts to create a corporate culture that supports the company of the future. We asked our employees for feedback in how we are doing and we measured employee attitudes and workplace effectiveness again this year using a survey instrument that compares us to several hundred companies in a variety of industries. While there is always work to be done in this area, we advanced in every measure.

So, judging by both recent and historical performance with regard to shareholders, customers, communities, and employees, our legacy appears secure. We leave a "good name" for WPS Resources.

But, as stewards of WPS Resources, we must also leave a legacy for the future. A legacy that generations yet to come will respect. A legacy that our grandchildren can enjoy as a product of our decisions today. I'm pleased to say we are pursuing many initiatives today to ensure that legacy. Let's examine a few of these initiatives.

We continue to invest in the company to provide for its ongoing success. We are committed to building Weston 4 at a projected cost of 752 million dollars. That amount gets close to one billion dollars when you include the associated transmission needs. I'm pleased to report that Weston 4 is on track for completion in 2008. And, we've announced plans to build a second baseload plant with completion expected in 2011.

We also support construction of the Wausau, Wisconsin, to Duluth, Minnesota transmission line. Our support includes the financial resources for nearly all the required equity—about 200 million dollars—as well as the physical resources—the people and equipment to actually build the line.

The new plants and the new transmission line will ensure that our customers have the energy they need, where they need it, and when they need it.

Looking beyond construction projects, we are creating job opportunities here in Wisconsin and in neighboring states. WPS Energy Services combined with WPS Power Development, has increased employment from a handful of people in Wisconsin in 1995 to 130 jobs at its Ashwaubenon office and 384 jobs overall. The talented people in these positions and the investments in new infrastructure provide the building blocks for our future success.

We are also creating a positive legacy with respect to our stewardship of the environment and the resources entrusted to us. Our compliance record with environmental regulation is enviable, but we go beyond compliance. For example, our emissions rate in Wisconsin for sulfur dioxide and particulates is only about 50 percent of the allowed limits. Emissions of nitrogen oxides are about 90 percent of the allowed limits. The Weston 4 facility will lower our emissions rate even more for sulfur dioxide, nitrogen oxides, mercury, particulates, and carbon dioxide.

WPS Power Development is also contributing to our environmental stewardship. The Westwood generating facility located in Pennsylvania is helping to restore land damaged by past mining practices. Last week the Pennsylvania Department of Environmental Protection commemorated the removal of the 100 millionth ton of waste coal and the restoration of several hundred acres of land. Our Westwood facility has used enough of the waste coal to accommodate the restoration of nearly 100 acres of land in Pennsylvania.

As part of our environmental stewardship, we also transferred control of more than 12,000 acres of our hydro lands to the state of Wisconsin. Those lands are now part of a new state park and a new state forest, where they can be protected for use by future generations.

Our efforts at environmental stewardship have produced good results, but we recognize that we must do more. Our use of resources must balance the environmental impact, resource availability, and the economy. To that end, we are increasing our knowledge of and investment in new technologies such as coal gasification, carbon sequestration, and sorbents that extract mercury from our emissions. We are assessing our use of carbon-based fuels such as coal and natural gas to better understand the impact and the options available. We continue to support the market development and demand for renewable resources. We provide all customers the opportunity to purchase as much renewable energy as they want. In fact, we recently signed a contract for 70 megawatts of new wind power. Wisconsin Public Service is also collaborating with paper mills to produce electricity using waste products from the paper making process. This initiative provides benefits for the environment, the paper industry, and our customers.

We are managing all our assets to provide for the future success of WPS Resources. Our strategy is to have the right combination of assets in our portfolio. Those assets that do not perform or that present greater risk than necessary must improve or be divested. If different assets are required, we must acquire them.

Consistent with this philosophy, we are transferring ownership of the Kewaunee Nuclear Power Plant to a new owner. This is a bittersweet decision because Kewaunee has always performed well. It has been a flagship in the United States and in the worldwide fleet of nuclear plants. For that, I want to thank the employees at Kewaunee—both past and present employees. I also want to thank the Nuclear Management Company. They stepped in to manage Kewaunee at a difficult time and they brought about the changes needed to secure Kewaunee's future.

Our asset management initiatives also resulted in a refocusing of our Sunbury asset. Performance from this asset had lagged because of changing market conditions, but the team at WPS Energy Services and WPS Power Development has created new and innovative ways to deal with those conditions and Sunbury's economic performance has improved.

We are also operating our assets differently. Effective April 1, 2005, we began to dispatch our generating units differently than we have for the past 100 years. Today, the Midwest Independent System Operator located in Carmel, Indiana, determines how a significant number of our units will dispatch within a 10-state area and parts of Canada. We believe this will ultimately lower the cost of energy for our customers.

We are also investing in technology that will enable us to serve customers even better. Installation of our new automated meter reading system is essentially complete, and we are already reaping the benefits. For example, the number of customers who receive estimated bills decreased from nearly 30,000 one year ago to about 1,000 today. Another good example comes to us through a note that I received a few weeks ago from a customer in Chicago who has a second home in northern Wisconsin. He thanked us for our vision and the technology that saved his water pipes from freezing, bursting, and causing damage to his vacation home. Our operators, using the new automated meter reading system noticed a change in gas consumption and alerted him that no gas was flowing to his second home. Upon investigation, he found that his heating system had failed and his pipes were about to freeze.

Another application of technology will be complete in a few weeks when we deploy a new customer information system, one that will provide us with greater flexibility to serve customers for many years to come. This system will be a state-of-the-art information system that was developed jointly with an outside firm and in-house participation. When combined with our new software that provides location maps of our facilities, our new Customer Relationship Management System, our new Distribution Work Management System, a new Outage Management System, and our new Automated Meter Reading System, we will have the capability to serve customers more efficiently and with greater functionality.

We are also using the Internet to serve customers more efficiently. The business section of our utility Web site, wisconsinpublicservice.com, has been designated a "Best-in-Class" business Web site based on overall functionality, ease of use, and relevant content. Wisconsin Public Service recently received this recognition from E-Source, a research and consulting firm specializing in energy services. According to E-Source, leading Web sites were identified as those that "balance customer needs and expectations … on platforms that are easy to understand."

This past year we also completed construction of the Service Center Annex. This facility, located in Ashwaubenon, provides additional safeguards and disaster recovery capability. This provides customers additional assurances that their energy supply will not be disrupted at a critical time—like when the temperature is below zero in Wisconsin or Michigan.

Our investments in infrastructure have required price increases for our utility customers in recent years. We are sensitive to our customer's concerns over rising prices and are investing resources to lower costs for our customers. This year we are embarking on an ambitious initiative to make our processes and systems as effective and efficient as they can be. We describe this as Competitive Excellence, and our goal is to reduce our operating expenses significantly through the deployment of more effective systems and processes. This will occur across our entire enterprise.

We are also taking steps to make sure we have project management skills and systems in place that are second to none in the industry. We expect all of our projects, both large and small, to be managed so they are completed safely, on time, on budget, and functioning as expected or better.

The legacy we leave is inherent in the example we set. WPS Resources is known for its integrity, reliability, collaboration, caring, stewardship, value, and vision. Our legacy will be a good name and energy to believe in.

Part of the faith in any company is based on its openness and transparency. Many of you submitted questions or concerns when you returned your proxies, so I would like to address a few of these at this time.

Several shareholders expressed concern about the level of compensation provided to our employees and, in particular, to our executive group and board members. Our compensation policy is quite simple. We believe that every employee should be able to earn compensation commensurate with the market value for the job they perform. If we pay less than market value, we will lose employees with critical skills. If we pay more than market value, we will not be as competitive as we could be.

Each year we engage the services of a nationally recognized consulting firm to review compensation trends and provide recommendations for compensation levels for the coming year. This information is provided to the Compensation Committee of the Board of Directors whose members are all independent, non-management directors. They provide recommendations to the full Board and they set the authorized compensation level for executives. A similar process is followed by Human Resources for non-executive positions. We are sensitive to our shareholders' concerns and we are confident our compensation system is appropriate in today's environment.

Several shareholders have suggested that we should consider a stock split and have asked when we plan to do this. We currently have no plans to split our stock. However, we are cognizant of the pros and cons of stock splits and will continue to assess the options as our shareholder value changes.

I want to thank the Board of Directors, my staff, and all the employees at WPS Resources for a very successful year in 2004. I began this presentation by talking about bearing a good name. As corporate scandals continue to make front pages, I can assure you that the Board, our management team, and every employee, safeguards the good name of WPS Resources. We have continued our tradition of corporate governance by adding a Governance Committee to our Board structure. We are now ranked in the top quartile for corporate governance in our industry.

I also want to thank you, our shareholders, for your investment in WPS Resources Corporation and for the trust you place in us. We will work diligently to protect your investment, provide you with good returns, and continue to earn your trust. For over a century, for today, and for future generations, we provide a good name and "Energy to Believe In". Thank you.