COMMON EQUITY

Stock-Based Compensation Plans

The following table summarizes our pre-tax stock-based compensation expense and the related tax benefit for the years ended December 31:



(in millions)	2016		2015		2014
Stock options	$	3.5	$	3.3	$	3.7
Restricted stock	5.8		7.0		2.8
Performance units	8.7		13.0		15.4
Stock-based compensation expense	$	18.0	$	23.3	$	21.9
Related tax benefit	$	7.2	$	9.3	$	8.8

Stock-based compensation costs capitalized during 2016, 2015, and 2014 were not significant.

Stock Options

The following is a summary of our stock option activity during 2016:



Stock Options	Number of Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in millions)
Outstanding as of January 1, 2016	5,984,664		$	33.47
Granted	794,764		$	52.15
Exercised	(1,644,353	)	$	25.30
Forfeited	(12,300	)	$	52.98
Outstanding as of December 31, 2016	5,122,775		$	38.95	6.0	$	100.9
Exercisable as of December 31, 2016	3,710,836		$	35.38	5.2	$	86.4

The aggregate intrinsic value of outstanding and exercisable options in the above table represents the total pre-tax intrinsic value that would have been received by the option holders had they exercised all of their options on December 31, 2016. This is calculated as the difference between our closing stock price on December 31, 2016, and the option exercise price, multiplied by the number of in-the-money stock options. The intrinsic value of options exercised during the years ended December 31, 2016, 2015, and 2014 was $55.4 million, $36.1 million, and $50.5 million, respectively. The actual tax benefit realized for the tax deductions from option exercises for the same periods was approximately $22.2 million, $14.5 million, and $19.9 million, respectively.

As of December 31, 2016, the total unrecognized compensation cost related to unvested stock options was not significant.

During the first quarter of 2017, the Compensation Committee awarded 552,215 non-qualified stock options with a weighted-average exercise price of $58.31 and a weighted-average grant date fair value of $7.45 per option to certain of our officers and other key employees under its normal schedule of awarding long-term incentive compensation.

Restricted Shares

The following restricted stock activity occurred during 2016:



Restricted Shares	Number of Shares		Weighted-Average Grant Date Fair Value
Outstanding as of January 1, 2016	229,018		$	46.78
Granted	146,941		$	53.69
Released	(141,224	)	$	46.14
Forfeited	(14,689	)	$	54.39
Outstanding as of December 31, 2016	220,046		$	51.30

The intrinsic value of restricted stock released was $7.7 million, $3.7 million, and $2.7 million for the years ended December 31, 2016, 2015, and 2014, respectively. The actual tax benefit realized for the tax deductions from released restricted shares for the same years was $3.1 million, $1.3 million, and $1.0 million, respectively.

As of December 31, 2016, approximately $5.1 million of unrecognized compensation cost related to restricted stock was expected to be recognized over the next 1.9 years on a weighted-average basis.

During the first quarter of 2017, the Compensation Committee awarded 82,622 restricted shares to certain of our directors, officers, and other key employees under its normal schedule of awarding long-term incentive compensation. The grant date fair value of these awards was $58.10 per share.

Performance Units

In 2016, 2015, and 2014, the Compensation Committee awarded 297,305; 195,365; and 233,735 performance units, respectively, to officers and other key employees under the WEC Energy Group Performance Unit Plan.

Performance units with an intrinsic value of $19.1 million, $13.2 million, and $14.8 million were settled during 2016, 2015, and 2014, respectively. The actual tax benefit realized for the tax deductions from the distribution of performance units for the same years was approximately $6.8 million, $4.8 million, and $5.3 million, respectively.

As of December 31, 2016, approximately $10.2 million of unrecognized compensation cost related to performance units was expected to be recognized over the next 1.4 years on a weighted-average basis.

During the first quarter of 2017, we settled performance units with an intrinsic value of $6.1 million. The actual tax benefit realized from the distribution of these awards was $1.8 million. In January 2017, the Compensation Committee also awarded 237,650 performance units to certain of our officers and other key employees under its normal schedule of awarding long-term incentive compensation.

Restrictions

Our ability as a holding company to pay common stock dividends primarily depends on the availability of funds received from our utility subsidiaries and our non-utility subsidiary, We Power. Various financing arrangements and regulatory requirements impose certain restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans, or advances. All of our utility subsidiaries, with the exception of MGU, are prohibited from loaning funds to us, either directly or indirectly.

In accordance with their most recent rate orders, WE, WG, and WPS may not pay common dividends above the test year forecasted amounts reflected in their respective rate cases, if it would cause their average common equity ratio, on a financial basis, to fall below their authorized levels of 51%, 49.5%, and 51%, respectively. A return of capital in excess of the test year amount can be paid by each company at the end of the year provided that their respective average common equity ratios do not fall below the authorized levels.

WE may not pay common dividends to us under WE's Restated Articles of Incorporation if any dividends on its outstanding preferred stock have not been paid. In addition, pursuant to the terms of WE's 3.60% Serial Preferred Stock, WE's ability to declare common dividends would be limited to 75% or 50% of net income during a twelve month period if its common stock equity to total capitalization, as defined in the preferred stock designation, is less than 25% and 20%, respectively.

NSG's long-term debt obligations contain provisions and covenants restricting the payment of cash dividends and the purchase or redemption of its capital stock.

WEC Energy Group and Integrys have the option to defer interest payments on their junior subordinated notes, from time to time, for one or more periods of up to 10 consecutive years per period. During any period in which they defer interest payments, they may not declare or pay any dividends or distributions on, or redeem, repurchase or acquire, their respective common stock.

See Note 13, Short-Term Debt and Lines of Credit, for discussion of certain financial covenants related to short-term debt obligations.

As of December 31, 2016, the restricted net assets of consolidated and unconsolidated subsidiaries and our equity in undistributed earnings of investees accounted for by the equity method totaled approximately $6.3 billion. This amount exceeds 25% of our consolidated net assets as of December 31, 2016.

We do not believe that these restrictions will materially affect our operations or limit any dividend payments in the foreseeable future.

Share Repurchase Program

We have instructed our independent agents to purchase shares on the open market to fulfill obligations under various stock-based employee benefit and compensations plans and to provide shares to participants in our dividend reinvestment and stock purchase plan. As a result, no new shares of common stock were issued in 2016, 2015, or 2014, other than for the Integrys acquisition. See Note 2, Acquisitions, for more information.

In December 2013, our Board of Directors authorized a share repurchase program for the purchase of up to $300.0 million of our common stock through open market purchases or privately negotiated transactions from January 1, 2014, through the end of 2017. On June 22, 2014, in connection with entering into the Merger Agreement, the Board of Directors terminated this share repurchase program. The following table identifies shares purchased during the year ended December 31:



	2016			2015			2014
(in millions)	Shares	Cost		Shares	Cost		Shares		Cost
Under share repurchase programs	—	$	—	—	$	—	0.4		$	18.6
To fulfill exercised stock options and restricted stock awards	1.8	108.0		1.5	74.7		2.3		104.6
Total	1.8	$	108.0	1.5	$	74.7	$	2.7	$	123.2

Common Stock Dividends

During the year ended December 31, 2016, our Board of Directors declared common stock dividends which are summarized below:



Date Declared	Date Payable	Per Share	Period
January 21, 2016	March 1, 2016	$0.4950	First quarter
April 21, 2016	June 1, 2016	$0.4950	Second quarter
July 21, 2016	September 1, 2016	$0.4950	Third quarter
October 20, 2016	December 1, 2016	$0.4950	Fourth quarter

On January 19, 2017, our Board of Directors increased our quarterly dividend to $0.52 per share effective with the first quarter of 2017 dividend payment, which equates to an annual dividend of $2.08 per share. In addition, the Board of Directors affirmed our dividend policy that continues to target a dividend payout ratio of 65-70% of earnings.