First Quarter 2008 Earnings Conference Call
                    May 8, 2008




1
Forward-Looking Statements

  This presentation contains forward-looking statements within the meaning of Section 21E of
 ...
Forward-Looking Statements
    The impact of recent and future federal and state regulatory changes, including legislative...
Non-GAAP Financial Information

Diluted Earnings Per Share Information – Non-GAAP Financial Information

Integrys Energy G...
1Q08 Accomplishments

    Dividend increase paid in March marks the 50th
    consecutive year of increasing our dividend
 ...
Initiatives for 2008

    Peoples Energy merger integration continues
    on target
    Regulated construction projects ad...
Key Drivers – 1Q08 Versus 1Q07
    (All dollars in millions and after tax)

    Income from Continuing Operations, 1Q08   ...
Diluted EPS from Continuing Operations –
        Adjusted
               Actual Quarter Ended March 31, 2008 and 2007
    ...
1Q08 – Regulated Natural Gas Utility Segment

                          Earnings (millions)
            $80
            $7...
1Q08 – Regulated Electric Utility Segment
                               Earnings (millions)
                  $20


     ...
1Q08 – Nonregulated Integrys Energy
                  Services Segment
                              Income from Continuin...
1Q08 – Holding Company/Other
                             Earnings (millions)
                      $3


                 ...
Investing in Capital Projects to Better
        Serve Our Growing Customer Base
        Construction Expenditures by Compa...
Diluted EPS from Continuing Operations –
               Adjusted – Revised Guidance
                                      ...
Other Regulated Natural Gas Segment
       Operations – 1Q08 Accomplishments

     Illinois rate cases – approval granted ...
Other Regulated Natural Gas Segment
     Operations – 2008 Initiatives

      Development of plans to accelerate investmen...
Wisconsin Public Service Operations
     – 1Q08 Accomplishments

     Weston 4
       Initial electrical generation in Mar...
Wisconsin Public Service Operations
      – 2008 Initiatives


     Weston 4 – ensure full commercial
     operation in Ju...
1Q08 – Integrys Energy Services
        Physical Retail Volumes
                                                Retail Nat...
1Q08 – Integrys Energy Services
        Forward Contracted Volumes
                                                 Natura...
2008 Integrys Energy Services
                Value Creation
                                                             ...
Integrys Energy Services
       Mark-to-Market Volatility Adjustment
                                                     ...
Future Integrys Energy Services
              Accounting Recognition


                                                   ...
Integrys Energy Services – 1Q08
        Operational Overview

     Organizational integration and associated
     platform...
Integrys Energy Services – 2008
           Initiatives

     Continue penetration of developed markets in
     United Stat...
Integrys Energy Group, Inc.
      Diluted EPS from Continuing Operations – Adjusted
      Revised Guidance
               ...
Question and Answers




27
Appendix




28
Estimated Synergy Savings and
     External Costs to Achieve


              Updated Merger Cost Savings and External Cost...
Integrys Energy Group, Inc.
           Synergy Potential
     Estimated annual synergies
                                 ...
Integrys Energy Group, Inc.
        Merger Integration Timeline

     On schedule
     Costs to achieve merger synergy sav...
Estimated Utility Depreciation
       Depreciation by Company (Millions)   2008   2009   2010   Total
     W isconsin Publ...
Potential Financings

     Long-Term Debt, 2008
       Integrys Energy Group, $200 million
       Wisconsin Public Service...
Wisconsin Public Service Rate Case
                                     Wisconsin Jurisdiction
     Requested $106.8 milli...
Regulated Utilities Serving Over 2 Million
                 Customers


                                                  ...
Regulated Utilities Regulatory
                 Rate Base and ROE
                                                        ...
Reconciliation of Integrys Energy
                 Services’ Forward Book Value to GAAP
                                  ...
Reconciliation of Integrys Energy
              Services’ Forward Book Value to GAAP
                                     ...
Integrys Energy Services – Margins
      ($ Thousands)
                                                                   ...
Integrys Energy Services – Definitions
                  Related to Margin Exhibit
                                       ...
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.integrysgroup 05/08/2008_earnings slides

  1. 1. First Quarter 2008 Earnings Conference Call May 8, 2008 1
  2. 2. Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. You can identify these statements by the fact that they do not relate strictly to historical or current facts and often include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” and other similar words. Although we believe we have been prudent in our plans and assumptions, there can be no assurance that indicated results will be realized. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated. Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. We recommend that you consult any further disclosures we make on related subjects in our 10-Q, 8-K, and 10-K reports to the Securities and Exchange Commission. The following is a cautionary list of risks and uncertainties that may affect the assumptions which form the basis of forward-looking statements relevant to our business. These factors, and other factors not listed here, could cause actual results to differ materially from those contained in forward-looking statements. Unexpected costs and/or unexpected liabilities related to the Peoples Energy merger; Integrys Energy Group may be unable to achieve the forecasted synergies in connection with the Peoples Energy merger or it may take longer or cost more than expected to achieve these synergies; Resolution of pending and future rate cases and negotiations (including the recovery of deferred costs) and other regulatory decisions impacting Integrys Energy Group's regulated businesses; 2
  3. 3. Forward-Looking Statements The impact of recent and future federal and state regulatory changes, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric and natural gas utility industries and possible future initiatives to address concerns about global climate change, changes in environmental, tax and other laws and regulations to which Integrys Energy Group and its subsidiaries are subject, as well as changes in application of existing laws and regulations; Current and future litigation, regulatory investigations, proceedings or inquiries, including but not limited to, manufactured gas plant site cleanup and the contested case proceeding regarding the Weston 4 air permit; Resolution of audits or other tax disputes with the Internal Revenue Service and various state, local, and Canadian revenue agencies; The effects, extent, and timing of additional competition or regulation in the markets in which our subsidiaries operate; Available sources and costs of fuels and purchased power; Investment performance of employee benefit plan assets; Advances in technology; Effects of and changes in political and legal developments as well as economic conditions and its impact on customer demand, in the United States and Canada; Potential business strategies, including mergers, acquisitions, and construction or disposition of assets or businesses, which cannot be assured to be completed timely or within budgets; The direct or indirect effects of terrorist incidents, natural disasters, or responses to such events; The impacts of changing financial market conditions, credit ratings, and interest rates on our financing efforts, and the risks associated with changing commodity prices (particularly natural gas and electricity); Weather and other natural phenomena, in particular the effect of weather on natural gas and electricity sales; The effect of accounting pronouncements issued periodically by standard-setting bodies; and Other factors discussed in the 2007 Annual Report on Form 10-K and in other reports filed by us from time to time with the United States Securities and Exchange Commission. 3
  4. 4. Non-GAAP Financial Information Diluted Earnings Per Share Information – Non-GAAP Financial Information Integrys Energy Group, Inc. prepares financial statements in accordance with accounting principles generally accepted in the United States (GAAP). Along with this information, we disclose and discuss “diluted earnings per share (EPS) from continuing operations – adjusted,” “forward book value,” and “managerial gross margin,” which are non-GAAP measures. Management uses these measures in its internal performance reporting and for reports to the Board of Directors. We disclose the diluted EPS from continuing operations – adjusted measure in our quarterly earnings releases, on investor conference calls, and during investor conferences and related events. Management believes that diluted EPS from continuing operations – adjusted is a useful measure for providing investors with additional insight into our operating performance because it eliminates the effects of certain items that are not comparable from one period to the next. Management believes that forward book value and managerial gross margin provide investors with a more complete view of the fair value of the nonregulated contract portfolio and changes therein. Unlike GAAP gross margin, managerial gross margin includes the fair value of contracts that are not currently subject to the derivative accounting rules. Therefore, this measure allows investors to better compare our financial results from period to period. The presentation of 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. A reconciliation of non-GAAP information to GAAP information is included either on the slide where the information appears, in the Supplemental Data Package, or in the Appendix. 4
  5. 5. 1Q08 Accomplishments Dividend increase paid in March marks the 50th consecutive year of increasing our dividend Wisconsin Public Service Corporation Weston 4 began start-up operations in March Received rate increase for increased fuel and purchased power costs Filed for a general rate increase to be effective in January 2009 Peoples Gas/North Shore Gas – rate case decision received; includes decoupling Integrys Energy Services – integration complete Excellent earnings from our investment in ATC 5
  6. 6. Initiatives for 2008 Peoples Energy merger integration continues on target Regulated construction projects advancing Rate cases to be filed in Minnesota and Michigan Integrys Energy Services – moving forward on long-term target to grow core earnings* 10 to 15 percent on an average annualized basis * Core earnings exclude asset divestiture impacts, synthetic fuel contributions, mark-to-market volatility, and merger costs. 6
  7. 7. Key Drivers – 1Q08 Versus 1Q07 (All dollars in millions and after tax) Income from Continuing Operations, 1Q08 $ 136.6 Income from Continuing Operations, 1Q07 117.2 Quarter-over-Quarter Change $ 19.4 Key Drivers 1Q08 1Q07 Change Explanation Continuing Operations Peoples/North Shore Gas $ 41.2 $ 7.4 $ 33.8 Accounting/Operations Integrys Energy Services' electric margin 76.3 42.6 33.7 Accounting/Operations Wisconsin Public Service's natural gas utility earnings (weather) 22.0 15.9 6.1 Operations Integrys Energy Services' operating expenses (24.2) (19.0) (5.2) Operations Wisconsin Public Service's electric utility earnings (higher purchased power/fuel costs) 6.3 14.3 (8.0) Operations (timing) Synfuel activity, including mark-to-market gain/losses 0.8 19.0 (18.2) Expiration of Section 29 tax credits Integrys Energy Services' natural gas margin 2.2 22.1 (19.9) Accounting/Operations Other (2.9) Subtotal, income from continuing operations $ 19.4 Discontinued operations Sale of Niagara and earnings from oil and natural gas production subsidiary - 23.0 (23.0) Asset Management External cost to achieve merger synergies and transition costs included in earnings: 1Q08 1Q07 Change Peoples Energy $ 3.3 $ 1.0 $ 2.3 Minnesota Energy Resources/Michigan Gas Utilities - 0.5 (0.5) Total $ 3.3 $ 1.5 $ 1.8 Note: For the quarter ended March 31, 2008, diluted earnings per share were impacted by a 19.0 million share (32.9%) increase in the weighted average number of outstanding shares of Integrys Energy Group common stock compared with the same quarter in 2007. Integrys Energy Group issued 31.9 million shares of common stock on February 21, 2007, in conjunction with the Peoples Energy merger. Accordingly, these shares were considered outstanding for purposes of computing diluted earnings per share for the entire first quarter of 2008, but were only considered outstanding for that portion of the 2007 first quarter subsequent to the Peoples Energy merger. Additional shares were also issued under the Integrys Energy Group Stock Investment Plan and certain stock-based employee benefit plans. 7
  8. 8. Diluted EPS from Continuing Operations – Adjusted Actual Quarter Ended March 31, 2008 and 2007 Non-GAAP Financial Information Three Months Ended March 31 2008 2007 Diluted EPS from continuing operations $1.77 $2.01 Diluted EPS from discontinued operations - 0.40 Total Diluted EPS $1.77 $2.41 Average Shares of Common Stock – Diluted 76.8 57.8 Information on Special Items: Diluted earnings per share from continuing operations, as adjusted for special items and their financial impact on operations for the three months ended March 31, 2008 and 2007 are as follows: Diluted EPS from continuing operations $1.77 $2.01 Adjustments (net of taxes): Synfuel – realized and unrealized oil option gains/losses, tax credits, production costs, premium amortization, deferred gain recognition, and royalties (0.01) (0.33) External transition costs related to Michigan Gas and Minnesota Energy acquisitions - 0.01 Integrys Energy Services power contract in Maine liquidated in 2005 - 0.01 External transition costs related to Peoples Energy merger 0.03 0.01 Impacts of purchase accounting adjustments due to Peoples Energy merger 0.07 0.03 $1.86 $1.74 Diluted EPS from continuing operations – adjusted Weather impact – regulated utilities (as compared to normal) Electric impact – favorable/(unfavorable) $0.01 ($0.01) Gas impact – favorable/(unfavorable) 0.10 (0.06) $0.11 ($0.07) Total weather impact 8
  9. 9. 1Q08 – Regulated Natural Gas Utility Segment Earnings (millions) $80 $70 $75.6 $60 $50 $40 $35.2 $30 $20 $10 $- 1Q07 1Q08 Key Drivers (after tax): • (+) $ 30.3 million – Peoples Gas addition and rate increase effective mid-Feb. • (+) $ 3.5 million – North Shore Gas addition • (+) $ 6.1 million – Wisconsin Public Service, weather/throughput volumes • (+) $ 0.5 million – Other 9
  10. 10. 1Q08 – Regulated Electric Utility Segment Earnings (millions) $20 $15 $16.5 $10 $5 $6.8 $- 1Q07 1Q08 Key Drivers (after tax): • (+) $ 2.5 million – Operations/maintenance expenses (fewer planned outages) • (+) $ 1.2 million – Weather • (--) $ 0.2 million – Other • (--) $13.2 million – Higher purchased power/fuel costs (expect $9 million to be recovered through the remainder of the year) 10
  11. 11. 1Q08 – Nonregulated Integrys Energy Services Segment Income from Continuing Operations (millions) $70 $60 $64.9 $50 $51.6 $40 $30 $20 $10 $- 1Q07 1Q08 Key Drivers (after tax): • (+) $ 33.7 million – Increase in electric margin • (+) $25.1 million mark-to-market gains • (+) $11.5 million realized retail electric margin • (--) $ 2.9 million other • (--) $ 5.2 million – Increased operating and maintenance expenses • (--) $18.2 million – Mostly due to synthetic fuel production earnings in 1Q07 • (--) $19.9 million – Decrease in natural gas margin • (+) $ 2.4 million realized natural gas margin • (--) $22.3 million mark-to-market losses • (--) $ 3.7 million - Other 11
  12. 12. 1Q08 – Holding Company/Other Earnings (millions) $3 $2 $1.8 $1 $- $- 1Q07 1Q08 Key Drivers (after tax): • (+) $ 2.2 million – Reduced interest expense • (+) $ 1.7 million – Increased earnings from ATC • (+) $ 1.1 million – Integrys Business Support earnings • (+) $ 0.8 million – Increased interest income recognized related to transmission facilities Wisconsin Public Service funded on ATC’s behalf • (+) $ 0.7 million – Other • (--) $ 4.7 million – Reallocation of external costs to achieve in 2007 12
  13. 13. Investing in Capital Projects to Better Serve Our Growing Customer Base Construction Expenditures by Company (Millions) 2008 2009 2010 Total W isconsin Public Service 344 358 236 938 Peoples Gas Light * 114 117 160 391 Upper Peninsula Power 14 52 13 79 Minnesota Energy Resources 18 16 16 50 North Shore Gas 10 10 11 31 Michigan Gas Utilities 8 7 7 22 Subtotal for Utilities 508 560 443 1,511 Integrys Energy Services 34 3 4 41 Integrys Business Support 37 30 13 80 Total Anticipated Capital Expenditures 579 593 460 1,632 American Transmission Company (equity contribution) 35 14 0 49 * Includes accelerated cast iron main replacement program in 2010. 13
  14. 14. Diluted EPS from Continuing Operations – Adjusted – Revised Guidance Diluted Earnings Per Share Information - Non-GAAP Financial Information Potential 2008 Diluted Actual 2007 with 2008 Forecasts EPS Ranges Low High Actual 2007 Scenario Scenario Diluted EPS from continuing operations $ 2.48 $ 3.37 $ 3.82 Diluted EPS from discontinued operations 1.02 - - Total Diluted EPS $ 3.50 $ 3.37 $ 3.82 71.8 76.9 76.9 Average Shares of Common Stock - Diluted (millions) Information on Special Items: Diluted earnings per share from continuing operations, as adjusted for special items and their financial impact on the actual 2007 diluted earnings per share from continuing operations and 2008 diluted earnings per share from continuing operations guidance are as follows: Diluted EPS from continuing operations $ 2.48 $ 3.37 $ 3.82 Adjustments (net of taxes): Synfuel - realized and unrealized oil option gains/losses, tax credits, (0.24) - - production costs, premium amortization, deferred gain recognition, and royalties Gains on asset sales (0.02) - - Integrys Energy Services' power contact in Maine liquidated in 2005 0.01 - - Impacts of purchase accounting adjustments due to Peoples Energy 0.14 0.09 0.09 merger External transition costs related to Peoples Energy merger 0.15 0.14 0.14 Diluted EPS from continuing operations - adjusted $ 2.52 $ 3.60 $ 4.05 Weather impact - regulated utilities (as compared to normal) Electric - favorable/(unfavorable) 0.03 0.01 0.01 Natural gas - favorable/(unfavorable) (0.16) 0.10 0.10 Total weather impact $ (0.13) $ 0.11 $ 0.11 Key Assumptions for 2008: • Normal weather for the remainder of the year • Continued availability of generating units • Impacts of purchase accounting/transition costs related to merger • Anticipated merger synergy savings • Rate relief for our utilities as recently approved by regulators • Excludes any impact of mark-to-market volatility in 2008 (such mark-to-market volatility is expected to include about $20 million of net mark-to-market after-tax losses in 2008 relating to contracts terminating in 2008 that had net mark-to-market after-tax gains recognized in 2007) 14
  15. 15. Other Regulated Natural Gas Segment Operations – 1Q08 Accomplishments Illinois rate cases – approval granted February 5, 2008 New rates effective February 14, 2008 Rate increase of $71.2 million for Peoples Gas Rate Base/Investment: $1,212,274,000 Return On Equity: 10.19% Equity Component: 56% Rate decrease of $213 thousand for North Shore Gas Rate Base/Investment: $182,033,000 Return On Equity: 9.99% Equity Component: 56% Decoupling/Energy Efficiency Riders – approved for both companies Infrastructure Rider – disallowed for Peoples Gas, but key criteria set forth for future consideration Bad Debt Riders – disallowed for both companies Requests for rehearing on substantive issues denied by ICC Reached agreement on collective bargaining agreement with union representing many of the Peoples Gas employees 15
  16. 16. Other Regulated Natural Gas Segment Operations – 2008 Initiatives Development of plans to accelerate investment for replacement of cast iron main in Chicago Seek traditional ratemaking treatment for recovery of incremental capital expenditures Seek reconsideration of infrastructure rider Move forward with retail regulated natural gas rate case filings for Minnesota Energy Resources and Michigan Gas Utilities Bad debt issues have been addressed Last approved rate increases authorized in 2003 Both jurisdictions allow for interim rate relief, subject to refund, dependent upon final decision Continued diligence relating to collection of customer receivables 16
  17. 17. Wisconsin Public Service Operations – 1Q08 Accomplishments Weston 4 Initial electrical generation in March 2008 Full commercial operation expected in June 2008 Regulatory Update Received retail electric rate increase of $29.7 million in March for higher purchased power/fuel costs Filed for general rate increase expected to be effective in 2009 – expect to amend to include 99-megawatt Iowa wind project (see Slide 34 in Appendix) 17
  18. 18. Wisconsin Public Service Operations – 2008 Initiatives Weston 4 – ensure full commercial operation in June 2008 Move forward to acquire a wind farm project – 150 megawatts in Minnesota Continue construction of natural gas pipeline laterals connecting to the Guardian II pipeline - $75 million project expected to be completed by year-end 2008 18
  19. 19. 1Q08 – Integrys Energy Services Physical Retail Volumes Retail Natural Gas Bcf 120 100 107.6 91.5 80 Key Drivers in 1Q08: 60 40 20 Peoples Energy merger 0 Increased sales staff 1Q07 1Q08 Continued market expansion Illinois KWH Retail Electric (Millions) Wisconsin 4,000 Michigan 3,953 3,000 Texas 2,439 2,000 1,000 0 1Q07 1Q08 19
  20. 20. 1Q08 – Integrys Energy Services Forward Contracted Volumes Natural Gas Bcf 600 500 535.7 510.1 400 Key Drivers in 1Q08: 300 200 100 Higher energy prices 0 More month-to-month 1Q07 1Q08 purchases than long-term contracts MWH Electric (Millions) Illinois renewals 100 96.3 80 60 74.6 40 20 0 1Q07 1Q08 20
  21. 21. 2008 Integrys Energy Services Value Creation Integrys Energy Services Managerial Gross Margin Summary Year-to-Date March 2008 (Pretax dollars in millions) Total Natural Natural Gas Electric and Other Gas and Wholesale Retail Wholesale Retail Total Total Electric MANAGERIAL GROSS MARGIN (1) Forward Book Value (a non-GAAP financial measure) As of March 31, 2008 $ 28.5 $ 35.0 $ 63.5 $ 52.5 $ 60.6 $ 113.1 $ 176.6 As of December 31, 2007 41.2 37.0 78.2 58.5 48.4 106.9 185.1 (12.7) (2.0) (14.7) (6.0) 12.2 6.2 (8.5) Change in Forward Book Value (2) 29.6 18.0 47.6 17.4 10.8 28.2 75.8 Total Realized Gross Margin $ 16.9 $ 16.0 $ 32.9 $ 11.4 $ 23.0 $ 34.4 $ 67.3 Year-to-Date March 2008 Managerial Gross Margin $ 32.8 $ 4.0 $ 36.8 $ 32.3 $ 19.9 $ 52.2 $ 89.0 Year-to-Date March 2007 Managerial Gross Margin (3) $ (15.9) $ 12.0 $ (3.9) $(20.9) $ 3.1 $ (17.8) $ (21.7) Change from Prior Year Refer to the appendix for a reconciliation of the non-GAAP financial metrics to the GAAP financial statements. (1) Forward Book Value – Represents the estimated value that will be realized upon settlement of the contract portfolio based on industry standard valuation approaches and assumptions. Derivative and non-derivative contracts are included in managerial gross margin. (2) Realized Gross Margin – This is a GAAP-based measure that represents physical sales, net of physical purchases and the cash settlement of financial contracts (i.e., forwards, futures, options, and swaps). Realized margins associated with the nonregulated generation fleet are included herein, although the change in value of the physical plants is not included in the forward book value section. Purchase accounting amortization has been excluded from this line item. (3) The 2007 Managerial Gross Margin includes $27.2 million of value acquired as part of the Peoples merger. 21
  22. 22. Integrys Energy Services Mark-to-Market Volatility Adjustment 1st Quarter 1st Quarter 2008 2007 Variance (Dollars in millions) GAAP Gross Margin $ 130.8 $ 108.7 $ 22.1 Add: Adjustments (1) 9.6 3.3 6.3 Subtotal 140.4 112.0 28.4 Less: Managerial Gross Margin 67.3 89.0 (21.7) Mark-to-Market Volatility Adjustment - Pretax (2) 73.1 23.0 50.1 Mark-to-Market Volatility Adjustment - Net of tax (2) $ 43.9 $ 13.8 $ 30.1 (1) The impacts of synfuel activity, 2005 Maine contract liquidation and purchase accounting impact are removed in this analysis (see detail below). 1st Quarter 1st Quarter 2008 2007 Gross Margin Purchase accounting (9.6) (3.6) Synfuel activity included in gross margin - 1.0 Power contract in Maine liquidated in 2005 - (0.7) Total (9.6) (3.3) (2) Represents the estimated impact of derivative accounting mismatches that create earnings volatility and is not reflective of the economic substance of the underlying commercial activity. 22
  23. 23. Future Integrys Energy Services Accounting Recognition As of March 31, 2008 (Pre-tax dollars in millions) Amount Amount Yet To Be Purchase Recognized Recognized Accounting GAAP Forward To Date In In GAAP Amortization Gross Margin Book GAAP Gross Margin To Be Recognized To Be Recognized Settlement Years Value Gross Margin In Future Periods In Future Periods In Future Periods A B C=A-B D E =C+D 2008 $ 57.3 $ 92.2 $ (34.9) $ (8.2) $ (43.1) 2009 57.4 44.5 12.9 2.9 15.8 2010 25.7 25.6 0.1 2.7 2.8 2011 13.3 11.8 1.5 2.0 3.5 2012 and Beyond 22.9 16.4 6.5 0.2 6.7 $ 176.6 $ 190.5 $ (13.9) $ (0.4) $ (14.3) Refer to the Appendix for a reconciliation of the non-GAAP financial metrics to the GAAP financial statements. 23
  24. 24. Integrys Energy Services – 1Q08 Operational Overview Organizational integration and associated platforms are in place Transaction liquidity has been reduced slightly due to financial sector crisis, but wholesale customer-based business continues to grow Retail customer default rate increasing – bad debt increased slightly – but manageable during this challenging financial environment Created new “renewable energy” business group 24
  25. 25. Integrys Energy Services – 2008 Initiatives Continue penetration of developed markets in United States and Canada Continuing to build out our origination capability Plan to introduce new product for environmentally aware customers Continue to invest in portfolio of physical assets Platform set for core earnings growth* of 10% to 15% on an average annual basis using 2008 as the base * Core earnings excludes asset divestiture impacts, synthetic fuel contributions, mark-to-market volatility, and merger costs. 25
  26. 26. Integrys Energy Group, Inc. Diluted EPS from Continuing Operations – Adjusted Revised Guidance EPS Non-GAAP Financial Information Low High $4.10 $4.00 $4.05 $3.90 $3.80 $3.70 $3.60 $3.60 $3.50 $3.40 $3.30 2008 Key Assumptions: • Normal weather for remainder of 2008 • Continued availability of generating units • Impacts of purchase accounting/transition costs related to merger • Anticipated synergy savings • Rate relief for our utilities as recently approved by regulators • Excludes the impact of any mark-to-market volatility from Integrys Energy Services (see Slide 14 for more information) 26
  27. 27. Question and Answers 27
  28. 28. Appendix 28
  29. 29. Estimated Synergy Savings and External Costs to Achieve Updated Merger Cost Savings and External Costs to Achieve (Pre-tax Dollars in Millions) 2006A 2007A 2008E 2009E 2010E 2011E Total Total Estimated Synergy Savings – 38 73 89 100 106 406 Total Estimated Costs to Achieve (20) * (91) ** (35) *** (9) – – (155) Approximate Costs to Achieve Percentage by Year 13% 59% 22% 6% – – 100% * Includes $18.2 million incurred by Peoples Energy. ** Includes $13.1 million of system write-offs, all of which were capitalized. Overall $54.6 million was capitalized. *** Anticipate that $6.8 million will be capitalized. 29
  30. 30. Integrys Energy Group, Inc. Synergy Potential Estimated annual synergies Information Technology Procurement Chain 14% 8% Corporate and Nonregulated 6% 39% Administrative Programs 33% Staffing Estimated annual steady-state synergies of approximately $106 million (pre-tax) in 2011 30
  31. 31. Integrys Energy Group, Inc. Merger Integration Timeline On schedule Costs to achieve merger synergy savings of approximately $155 million pre-tax IT integration and upgrades Severance and relocation Transaction costs Regulatory process Integration and facility costs Communication and insurance costs 31
  32. 32. Estimated Utility Depreciation Depreciation by Company (Millions) 2008 2009 2010 Total W isconsin Public Service $110 $122 $129 $361 Peoples Gas Light and Coke 62 65 73 200 Upper Peninsula Power 6 6 7 19 Minnesota Energy Resources 11 10 11 32 North Shore Gas 6 6 7 19 Michigan Gas Utilities 7 10 11 28 Total for Utilities $202 $219 $238 $659 32
  33. 33. Potential Financings Long-Term Debt, 2008 Integrys Energy Group, $200 million Wisconsin Public Service, $100 million Peoples Gas, $50 million North Shore Gas, $5 million Long-Term Debt, 2009 Wisconsin Public Service, $100 million Equity No new issuance planned through 2009 33
  34. 34. Wisconsin Public Service Rate Case Wisconsin Jurisdiction Requested $106.8 million, 7.75%, increase in retail electric rates for 2009 and 0.33%, plus an adjustment for fuel related costs, in 2010. Rate Base/Investment: $1,272,936,000 Return on Equity: 11.5% Equity Component: 58% Will amend to include a 99-megawatt wind project in Iowa after written order is received. Requested $11.7 million, 2.16%, increase in retail natural gas rates in 2009 and no increase in 2010. Rate Base/Investment: $414,047,000 Return on Equity: 11.5% Equity Component: 58% • Filed: April 1, 2008 • Audit: April through June, 2008 • Hearings: September or October 2008 • Written decision anticipated: December 2008 • Docket number: 6690-UR-119 • Web site: http://psc.wi.gov/apps/erf_search/content/result.aspx 34
  35. 35. Regulated Utilities Serving Over 2 Million Customers PGL NSG MERC MGUC WPSC UPPCO As of 12/31/2007 Electric Customers 433,000 52,000 Natural Gas Customers 830,000 158,000 207,000 165,000 314,000 Generation capacity (megawatts) 1,757.4 58.9 Natural gas storage (Bcf) 47.3 6.9* 3.6* 5.1 8.1* For the period ending 12/31/2007 Annual electric volumes (million megawatt-hours) 14.8 1.2 Annual natural gas throughput (Bcf) 124.1 25.8 70.5 31.1 78.8 Retail as of 12/31/2007 Natural Gas Natural Gas Natural Gas Natural Gas Natural Gas Electric Electric Estimated rate base/investment ($ millions), IL 1,345 205 Estimated rate base/investment ($ millions), WI 338 1,288 Estimated rate base/investment ($ millions), MI 3 15 84.5 Estimated rate base/investment ($ millions), MN 186 Wholesale as of 12/31/07 Estimated rate base/investment ($ millions) 174 7.5 * Represents contracted storage. Note: Estimated rate base/investment dollars for all companies as of December 31, 2007. Most regulatory authorities use 13-month averages to determine authorized rate base/investments in rate proceedings. 35
  36. 36. Regulated Utilities Regulatory Rate Base and ROE PGL NSG MERC MGUC WPSC UPPCO Natural Gas Natural Gas Natural Gas Natural Gas Natural Gas Electric Electric Retail last authorized, IL/MN Rate base/investment ($ millions) 1,212 182 125 Allowed ROE 10.19% 9.99% 11.71% Authorized regulatory equity % 56.00% 56.00% 50.00% Date of decision 2/5/2008 2/5/2008 7/29/2003 Retail last authorized, MI (2) Rate base/investment ($ millions) 170 2 14 87.3 Allowed ROE 11.40% 14.25% 10.60% 10.75% Authorized regulatory equity % 44.89% 42.40% 56.39% 54.93% Date of decision 3/12/2003 6/7/1983 12/4/2007 4/27/2006 Retail last authorized, WI (1) Rate base/investment ($ millions) 352 1,241 Allowed ROE 10.90% 10.90% Authorized regulatory equity % 57.46% 57.46% Date of decision 1/11/2007 1/11/2007 Wholesale last authorized Rate base/investment ($ millions) 168 7.7 Allowed ROE 11.00% (3) Authorized regulatory equity % 57.46% Date of decision 11/19/2004 Notes: (1) - Authorized rate base includes $475 million of construction work-in-progress. (2) - MGUC's last rate case was settled by previous owner, with no value stated for rate base/investment (12/31/07 estimated value represented here). (3) - Authorized regulatory equity percent is equal to retail actual equity percent. - All rates are based on individual contracts with customers, consequently no allowed ROE, and authorized equity percent applies. 36
  37. 37. Reconciliation of Integrys Energy Services’ Forward Book Value to GAAP As of December 2007 (Pre-tax dollars in millions) Total Natural Gas Electric and Other Natural Gas Retail Wholesale Total Retail Wholesale Total and Electric Forward Book Value (a Non-GAAP financial measure) $ 41.2 $ 37.0 $ 78.2 $ 58.5 $ 48.4 $ 106.9 $ 185.1 As of December 31, 2007 Fair value of oil options, including unamortized premiums (1) - - - - (0.2) (0.2) (0.2) Unamortized electric and gas option premiums (2) 1.1 0.1 1.2 1.3 0.7 2.0 3.2 Fair value of nonderivative contracts, derivative contracts designated as normal purchase and sales, as well as portfolio valuation reserves (3) (1.3) 11.4 10.1 (43.6) (17.1) (60.7) (50.6) Net Risk Management Assets and Liabilities per GAAP $ 137.5 Balance Sheet $ 41.0 $ 48.5 $ 89.5 $ 16.2 $ 31.8 $ 48.0 (1) These contracts were used to mitigate the risk of a tax credit phaseout associated with rising oil prices. Since the synfuel production facility is not part of the core marketing and trading business, the oil contracts have been excluded from Forward Book Value included in the calculation of Managerial Gross Margin. (2) Option premiums are included in the GAAP balance sheet until expiration of the associated options. The Forward Book Value line item of Managerial Gross Margin only includes the net difference between the premium and the fair value of the option. Upon option expiration, premium amortization is included in the Total Realized Gross Margin line in the Managerial Gross Margin Analysis. (3) Represents the estimated fair value of contracts that either do not meet the criteria for derivative accounting treatment under SFAS 133 or contracts that have been excluded from mark-to-market accounting under the normal purchase and sale exception. Contract types include full requirements sales contracts, natural gas storage and transport capacity contracts, among others. 37
  38. 38. Reconciliation of Integrys Energy Services’ Forward Book Value to GAAP Year-to-Date March 2008 (Pre-tax dollars in millions) Total Natural Gas Electric and Other Natural Gas Retail Wholesale Total Retail Wholesale Total and Electric Forward Book Value (a Non-GAAP financial measure) $ 28.5 $ 35.0 $ 63.5 $ 52.5 $ 60.6 $ 113.1 $ 176.6 As of March 31, 2008 Unamortized electric and gas option premiums (1) 0.4 (0.8) (0.4) 2.6 4.7 7.3 6.9 Fair value of nonderivative contracts, derivative contracts designated as normal purchases and sales, portfolio valuation reserves, and eliminations (2) (48.0) (30.0) (78.0) 27.6 26.6 54.2 (23.8) Net Risk Management Assets and Liabilities per GAAP $ 159.7 Balance Sheet $ (19.1) $ 4.2 $ (14.9) $ 82.7 $ 91.9 $ 174.6 (1) Option premiums are included in the GAAP balance sheet until expiration of the associated options. The Forward Book Value line item of Managerial Gross Margin only includes the net difference between the premium and the fair value of the option. Upon option expiration, premium amortization is included in the Total Realized Gross Margin line in the Managerial Gross Margin Analysis. (2) Represents the estimated fair value of contracts that either do not meet the criteria for derivative accounting treatment under SFAS 133 or contracts that have been excluded from mark-to-market accounting under the normal purchase and sale exception. Contract types include full requirements sales contracts, natural gas storage and transport capacity contracts, among others. 38
  39. 39. Integrys Energy Services – Margins ($ Thousands) 3 Months Ended March 31 2008 2007 Change Natural Gas Retail Realized margins (1) $ 29.6 $ 27.6 $ 2.0 Unrealized gain/(loss) (2) (14.1) (21.0) 6.9 Effect of purchase accounting on realized margins (3) (3.9) (3.1) (0.8) Effect of purchase accounting on unrealized margins (3) (0.6) 1.8 (2.4) 11.0 5.3 5.7 W holesale Realized margins (1) 18.0 13.7 4.3 Unrealized gain/(loss) (2) (21.8) 17.2 (39.0) Effect of purchase accounting on realized margins (3) (1.0) 0.5 (1.5) Effect of purchase accounting on unrealized margins (3) (2.5) 0.1 (2.6) (7.3) 31.5 (38.8) Total Natural Gas Margins 3.7 36.8 (33.1) Electric and Other Retail Realized margins (1) 17.4 1.9 15.5 Unrealized gain/(loss) (2) 55.1 40.4 14.7 Effect of purchase accounting on realized margins (3) (0.1) (3.7) 3.6 Effect of purchase accounting on unrealized margins (3) (1.5) 0.8 (2.3) 70.9 39.4 31.5 W holesale Trading and Structured Origination (4) Realized margins (1) 10.8 15.5 (4.7) Unrealized gain/(loss) (2) 45.4 16.0 29.4 56.2 31.5 24.7 Oil option activity Realized gain - - - Unrealized gain/(loss) - 1.0 (1.0) - 1.0 (1.0) Total Electric and Other Margins 127.1 71.9 55.2 Total Gross Margin $ 130.8 $ 108.7 $ 22.1 Realized margins (1) 75.8 58.7 17.1 Unrealized gain/(loss) (2) 64.6 53.6 11.0 Effect of purchase accounting on realized margins (3) (5.0) (6.3) 1.3 Effect of purchase accounting on unrealized margins (3) (4.6) 2.7 (7.3) Total Gross Margin $ 130.8 $ 108.7 $ 22.1 39 (Note - Pre-tax dollars in millions, except for per-unit margins; definitions are listed on next slide)
  40. 40. Integrys Energy Services – Definitions Related to Margin Exhibit 2008 2007 Change Volumes Delivered (includes only transactions settled physically for the periods shown) Retail Natural Gas (in billion cubic feet) 107.6 91.5 16.1 Realized per unit margins ($ per dekatherm) $ 0.28 $ 0.30 $ (0.02) Retail Electric (in kilowatt-hours) 3,952.70 2,439.40 1,513.30 Realized per unit margins ($ per megawatt-hour) $ 4.40 $ 0.78 $ 3.62 Definitions (These definitions should be used in conjunction with the previous slide.) (1) Realized margins - Represents physical sales, net of physical purchases and the cash settlement of financial contracts (i.e., forwards, futures, and swaps, etc.). (2) Unrealized gain/(loss) - Represents the non-cash change in fair value of the portfolio of contracts deemed to be derivative instruments as defined by Financial Accounting Standards Board Statement No. 133 quot;Accounting for Derivative Instruments.quot; In addition to the change in the value of currently outstanding contracts, this amount is impacted when contracts are settled. The value is taken out of unrealized gain/loss and the actual settlement gain/loss and the actual settlement amount are reflected in realized margins. (3) Effect of purchase accounting - Represents the attribution of purchase price related to the contracts acquired via the Peoples Energy merger. The value of the the contracts (calculated as of the merger date) is reversed through gross margin in the month of settlement. A portion of this impact runs through unrealized gains and losses and another portion runs through realized margins. Both are noncash impacts that are broken out above in order to help reconcile to the year-over-year variance discussion within Item 2 of the Form 10-Q, Management's Discussion and Analysis of the Financial Condition and Results of Operations. This schedule excludes the amortization of intangibles identified as part of the merger (i.e., customer list) which is included in operating expenses. (4) Wholesale Trading and Structured Origination - Captures our proprietary trading activity, structured origination activity and optimization of our plants and customer load. Variance explanations are captured in three line items in the Form 10-Q: (1) Realized gains on structured origination contracts, (2) Liquidation of an electric supply contract in 2005, and (3) All other wholesale electric operations. 40

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