Cms Energy Corporation · NYSE:CMS
Cms Energy — Investor Presentation (September 2020)
55 slides from Cms Energy's investor presentation, September 2020
Slide 1: Investor Meetings September 2020
Investor Meetings September 2020
Slide 2: Forward-looking statements and non-GAAP disclaimer
This presentation is made as of the date hereof and contains “forward-looking statements” as defined in Rule 3b-6 of the Securities Exchange Act of 1934, Rule 175 of the Securities Act of 1933, and relevant legal decisions. The forward-looking statements are subject to risks and uncertainties. All f
Slide 3: Investment Thesis
CMS ENERGY > Investment Thesis
Slide 4: Investment Thesis Takeaways
Investment Thesis . . . Investment Thesis Takeaways Prudent Liquidity Management • 2020 financings largely completed • No pension contributions required in 2020 Aging Operational Excellence and Track Record Infrastructure • Increased productivity driven by the CE Way Clean Energy Constructive Lead
Slide 5: Large and Aging System
Large and Aging System . . . Electric 25 years of distribution main replacement system is through our older than Enhanced Infrastructure peers Replacement Program Age of coal fleet is more >2,400 miles of gas than transmission pipeline; most 50 years built in the WWII era . . . requires significant
Slide 6: Utility Customer Investment Plan
Utility Customer Investment Plan . . . Investment Plan Rate Base Growth Gas Electric Renewables $24½ 2020 ‘20-’24 +7% Capital Investment (Bn): Plan Plan Renewables $0.4 $ 1¾ $17½ Electric Utility 0.9 5½ Gas Utility 0.9 5 Total $2.2 On Track $12¼ $25 Bn 10-Yr Plana with $3 - $4 Bn of Opportunities 20
Slide 7: Michigan Regulatory Environment
Michigan Regulatory Environment . . . • Bipartisan Energy Law (2016 enhanced 2008 law) • Forward-looking test year (10-month rate case) • Energy efficiency incentive (20% of spend) • Renewable Portfolio Standard (RPS) • Constructive ROEs • Appointed Commissioners with staggered terms • Ranked Tier I
Slide 8: Our Entire Cost Structure
Our Entire Cost Structure . . . Cost Components Residential Bills as % of Walleta 100% (Electric & Gas) Utility Bill Down Utility Bill ~4% 50 bps ~3½% Fuel and Power Costs TV & Phone 4% TV & Phone 4% Healthcare 5% Healthcare 8% ~70% Food 12% Non-capital Food 13% related Transportation 15% ~$17 Bn Tr
Slide 9: Financing Plan Largely Completed
Financing Plan Largely Completed . . . Planned 2020 Financing Existing Facilities Plan YTD (MM) (MM) Consumers Energy: $525 MM $250 MM “lowest ever” (Nov-2021) $3.1Bna of First Mortgage Bonds $650 $1,234 40-yr at net liquidity Term Loan $300 $300 2.50% position with no CP outstanding (as of 6/30/20)
Slide 10: Credit Metrics Maintained
Credit Metrics Maintained . . . Consumers Energy S&P Moody’s Fitch Ratings Drivers Senior Secured A Aa3 A+ • Strong financial Commercial Paper A-2 P-1 F-2 position Outlook Stable Negative Stable • Growing operating cash flow CMS Energy Senior Unsecured BBB Baa1 BBB • Return on regulated investment J
Slide 11: Clean and Lean
Clean and Lean . . . Old Utility Model Clean and Lean Big Build Supply Fully utilize Modular Supply assets Retirement Excess supply Big Excess Build supply Demand Modular Actual Modular Demand EE & DR O&M O&M Excess Economic supply Expected Fuel incentives for Fuel Demand demand side Big Bets resour
Slide 12: Net Zero Plans
Net Zero Plans . . . Carbon Emissionsa Methane Emissionsb (Electric System) (Gas Delivery System) 2018 2024 2032 2040 2018 2025 2030 Classic Karn Campbell Campbell VSR c Continued Asset 7 retirement 1&2 retirement 1&2 retirement 3 retirement (17)% EIRP VSRc & EIRP retirements Methane Emissions R
Slide 13: Managing Work Every Year
Managing Work Every Year . . . EPSa 2012 2013 2014 2015 2016 2017 2018 2019 $2.60 Reinvestment Cold January +23¢ +7% Weather Cost offsets & storms +7% (9)¢ +7% Storms Hot summer Mild +17¢ summer +7% +18¢ +7% Cost Cost productivity (16)¢ productivity above plan above plan +7% Cost +13¢ (13)¢ Storms p
Slide 14: Consistent Growth Through Changing Circumstances
Consistent Growth Through . . . a 7% CAGR +6% to +8% EPSa +7% Dividend Weather Recession Recession Help Hurt 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Cold Mild Warm Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold Feb Warm Warm Hot Storms winter su
Slide 15: CMS' Trading Performance
CMS’ Trading Performance . . . Stock Performancea Total Shareowner Returnb 350% CMS CMS UTY UTY 300% 301% S&P S&P 468% 250% 200% 190% 150% 100% 110% 98% 50% 65% 0% 30% -50% '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 1-yr 3-yr 5-yr 10-yr a b 10-year stock performance as of December 31, 2019 Dividend
Slide 16: Top of Mind
Top of Mind “us evens
Slide 17: Top of Mind
Top of Mind • Second Quarter Results and Outlook • Regulatory Matters • ESG Focus • Enterprises Enter “so what” if necessary – Century Gothic, Bold, Size 18 or smaller 17
Slide 18: First Half Results
First Half . . . Results Amount Commentary Leveraging best-in-class cost • First half 2020 EPSa $1.35 management Guidance Reaffirmed Expect to fully offset Q1 weather a • Full-year EPS $2.64 - $2.68 and COVID-19 impacts to achieve guidance Long-Term Outlook a Long-term investment • EPS and DPS growt
Slide 19: Triple Bottom Line Focus
Triple Bottom Line Focus . . . People Planet Profit • COVID-19 update: • <15% rate base mix attributable to • 2020 guidancec reaffirmed • Focus on employee safety coala • Supports all customers in creative • Industry-leading Net Zero Plan • 6% to 8% long-term EPSc and DPS and agile ways • Net zero m
Slide 20: Utility Sales Are Recovering
Utility Sales Are Recovering . . . a b Weather-Normalized Electric Deliveries 2019 Electric & Gas Rate Mix YTD Sales by Class (vs. 2019) Auto Other 4% Other 2% 2% c Industrial (7)% (18)% (5)%c 11% Res. Com. Ind. Total Residential Full Year Forecast (vs. 2019) Electric Commercial 39% ~5% 23% (7)%-(12
Slide 21: 2020 EPS
a 2020 EPS . . . First Half Six Months To Go 27¢ (12)¢ - (8)¢ $2.64 - $2.68 16¢ 2¢ 6% to 8% 14¢ $2.49 4¢ (7)¢ (7)¢ - (3)¢ (7)¢ Cost Savings Risks & Opps Benefits 4¢ COVID-19 impacts: Flex (OT, training, etc.) 4 • Sales Flat - (7)¢ Work optimization 5 • Expense (2) Other 6 Total 19¢ Cost offsets: ~10
Slide 22: Regulatory Outlook
Regulatory Outlook . . . 2019 2020 Regulatory / Policy 2016 Energy 4/15: U-20757 Sept./Oct. Expected Law fully COVID-19 order securitization filing implemented for deferred for Karn coal accounting plants Electric 2/27: U-20697 a Dec. Expected Filed $244 MM a final order Updated $230 MM 10.5% RO
Slide 23: Solid Rate Case History
Solid Rate Case History . . . Electric Rate Basea Gas Rate Base (Bn) (Bn) 2013A 2020E 2013A 2020E b b Residential Electric Bill $108 $103 Residential Gas Bill $88 $61 (Weather-normalized) ~(5)% (Weather-normalized) ~(30)% $12.5 $7.4 Request $6.5 $10.7 $10.7 $11.1 2/27/20 Filed for Settlement $5.2 8
Slide 24: Michigan Legislative Environment
Michigan Legislative Environment . . . Governor State Senate Gretchen Whitmer 16 38 22 Democrat 2018 Election: Democrats +5 seats 4-year terms, concurrent with Governor’s term, 2-term limit State House Key Issues: 58 Energy policy is not a key issue 52 110 • Infrastructure • Health Care • Education
Slide 25: ESG Disclosures
ESG Disclosures . . . Corporate Responsibility People • CMS Energy & Consumers Energy Websites • SEC Filings (10-K & Proxy) • 2019 Carbon Disclosure Project Planet • Report Scope 1, 2 & 3 Emissions • Water • Climate Assessment Report • Considers TCFD Guidelines Profit • EEI & AGA ESG Templates • Sus
Slide 26: Declining Exposure to Coal
Declining Exposure to Coal . . . Coal % of Rate Basea Growing Utility Renewables b 20% 2016 (Estimated % EPS ) $3 - $6 Bn Classic 7 Investment retirement opportunity PLUS Incentives on PPAs 2023 and Demand <15% Karn 1&2 Response retirement <10% <10% ~9½% 2031 Campbell Campbell (4)% 1&2 1&2 2039 ~4%
Slide 27: Breathing Easier
Breathing Easier . . . Air Emissions Reduction Net Zero (2005-2019) Carbon Emissions by 2040 93% 86% 91% 96% 37% Added emission control equipment Shut down Classic 7 & added Jackson Gas Plant Sulfer Nitrogen Mercurya Particulate Matter Carbon Dioxide a Tracking began 2007 . . . doing our part to cle
Slide 28: Energy Efficiency
Energy Efficiency . . . Energy Efficiency Programs Electric Saved customers over $3 Bn on their energy bills since 2009 • From 1½% to 2% annually (by 2021) Equivalent to • Next 5 years: Reduced usage by ~4,500 GWh since 2009 power1plant! a • Spend ~$160 MM/yr a • Pre-tax incentive ~$33 MM/yr Recy
Slide 29: Exceptional Governance
Exceptional Governance . . . Board of Directors JOHN G. RUSSELL PATRICIA K. POPPE JON E. BARFIELD DEBORAH H. BUTLER with Diverse Backgrounds Independent Chair KURT L. DARROW WILLIAM D. HARVEY MYRNA M. SOTO JOHN G. SZNEWAJS By the Numbers 11 Members LAURA H. WRIGHT SUZANNE F. SHANK ~6 RONALD J. TANSK
Slide 30: Safety in the Workplace
Safety in the Workplace . . . Safety Performance 2019 Successes (Recordable Safety • Zero fatalities Incidents) • Ranked top quartile by EEI utility standards in 355 safety performance Down • Partnered with EEI to develop a new risk-based (70)% safety model with focus on proactively avoiding serious
Slide 31: Utility Renewables
Utility Renewables . . . Renewable Portfolio Standard Integrated Resource Plan (15% RPS) (20-Year IRP) • 525 MWs of wind • 1,100 MWs of solar • 550 MWs rate base, ~$600 MM • $1 Bn of capital investmenta • 550 MWs PPA, earn WACC (5.88% x PPA price) • Approved in the REP filing • $600 MM of capital in
Slide 32: CMS Enterprises Continues to Perform
CMS Enterprises Continues to Perform . . . DIG & Other Renewable Platform • ~1,000 MWs in MI • Aviator, 525 MWs of contracted wind • 51% cash equity ownership (tax equity utilized) • DIG long-term energy (>95% contracted) & short-term • Funded with cash on hand, no new equity capacity (100% contract
Slide 33: DIG (750 MW) & Peakers (200 MW)
DIG (750 MW) & Peakers (200 MW) . . . Pre-Tax Income Planning Year (MISO) Opportunities a (MM) 2020 Through 2023 (MM) $100 Contracted Capacity 100% ~$90 $90 (~$2.00/kw-month) $80 Energy >95% $70 $7.50 b • LCR upheld by MI Supreme Court $60 • MISO Zone 7 PY ’20/’21 cleared $50 $45 at CONE ~$45 $40 $3
Slide 34: CMS Overview
CMS Overview “us evens
Slide 35: CMS Energy Overview
CMS Energy Overview Corporate Structure Key Information CMS Energy 2019 Financial Statistics (NYSE: CMS) Based in Jackson, MI a ~8,100 Employees (37% unionized) Consumers Enterprises EnerBank Energy $6.8 Bn Revenue 2019 b Avg. Rate Base $708 MM Adjusted net income 91% of Gas $6.1 Bn c Operating 7% E
Slide 36: Consumers Energy
Consumers Energy . . . 4th Largest Combination Utility • Electric Utility 1.8 MM electric customers 8,241 MWs of capacity • Gas Utility 1.8 MM gas customers 309 bcf gas storage (#1 in the U.S.) • Serving 6.7 MM Michigan residents Consumers Energy Planet Goals Near-Term By 2040 1 Bn Net zero gallons
Slide 37: Large and Aging System
Large and Aging System . . . Electric 25 years of distribution main replacement system is through our older than Enhanced Infrastructure peers Replacement Program Age of coal fleet is more >2,400 miles of gas than transmission pipeline; most 50 years built in the WWII era . . . requires significant
Slide 38: Utility Customer Investment Plan
Utility Customer Investment Plan . . . Investment Plan Rate Base Growth Gas Electric Renewables $24½ 2020 ‘20-’24 +7% Capital Investment (Bn): Plan Plan Renewables $0.4 $ 1¾ $17½ Electric Utility 0.9 5½ Gas Utility 0.9 5 Total $2.2 On Track $12¼ $25 Bn 10-Yr Plana with $3 - $4 Bn of Opportunities 20
Slide 39: Electric System Investment
Electric System Investment . . . Capital Generation Capital Investment (Bn): Plan Electric Utility $ 5½ Existing Fleet $1 Bn New Utility Renewables 1¾ Gas Utility 5 AND Total $12¼ New Renewables $1¾ Bn System Reliability & Maintenance New Business & Supporta ~$2¾ Bn $1¾ Bn a Support includes IT, Fle
Slide 40: Gas System Investment
Gas System Investment . . . Capital Capital Investment (Bn): Plan #1 Compression & Storage Underground storage $½ Bn Electric Utility $ 5½ New Utility Renewables 1¾ Storage field Compressor station Gas Utility 5 Total $12¼ City gate Pipelines Medium pressure regulator station ~$1 Bn #5 #5 Distributi
Slide 41: Clean Energy Future
Clean Energy Future . . . Elimination of coal More renewable energy Innovative energy solutions Earn incentive Consumers Energy Capacity Mix mechanisms 11% 20% 22% 8% 12% 6% 8% 12% 11% 10% 14% Rate based or 10% earn FCM 28% 56% 56% 20% 42% 10% Today 2030 2040 a Renewables Coal Natural Gas Storage
Slide 42: CMS Performance
CMS Performance . . . Total Shareholder Returna EPSc Performance b Guidance Actual YoY EPS Growth Dividend Yield ~8½% to 11½% 2019 $2.46 - $2.50 $2.49 +7% 2018 $2.29 - $2.33 $2.33 +7% >10% 6% to 8% 2017 $2.13 - $2.17 $2.17 +7% 2016 $1.97 - $2.01 $2.02 +7% 7.0% 2015 $1.85 - $1.89 $1.89 +7% 2014
Slide 43: CMS' Trading Performance
CMS’ Trading Performance . . . Stock Performancea Total Shareowner Returnb 350% CMS CMS UTY UTY 300% 301% S&P S&P 468% 250% 200% 190% 150% 100% 110% 98% 50% 65% 0% 30% -50% '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 1-yr 3-yr 5-yr 10-yr a b 10-year stock performance as of December 31, 2019 Dividend
Slide 44: Appendix
Appendix 44
Slide 45: First Half 2020 EPS
First Half 2020 EPS . . . Year to Date Results By Business Segment 2019 2020 YTD EPS a EPS - (GAAP) $1.08 $1.33 Utility $1.43 Adjustments b -- 0.02 Enterprises 0.06 Adjusted (non-GAAP) $1.08 $1.35 EnerBank 0.08 Parent & other (0.22) CMS Energy $1.35 Second Quarter 2019 2020 EPS - (GAAP) 33¢ 48¢ b Ad
Slide 46: 2020 Sensitivities
2020 Sensitivities . . . Full-Year Impact a Sensitivity EPS OCF Salesb (¢) ($MM) Electric (~36,500 GWh) + 1% +6 + 25 Gas (~300 Bcf) +5 + 13 + 50 Gas Prices + 50¢ +0 + 55 Utility Earned ROE Electric + 10 bps + 1½ +6 Gas + 10 +1 +4 Interest Rates + 25 bps + <1 + 2 Effective Tax Rate (16%) + 100 bps +
Slide 47: Utility Customer Investment Plan
Utility Customer Investment Plan 5-Year Plan 2020 2021 2022 2023 2024 Total Renewables $0.4 $0.4 $0.3 $0.3 $0.4 $1.8 Electric Utility 0.9 1.2 1.1 1.1 1.1 5.4 Gas Utility 0.9 1.1 0.9 1.1 1.0 5.0 Total $2.2 $2.7 $2.3 $2.5 $2.5 $12.2 Depreciation & Amortization $1.0 $1.1 $1.1 $1.2 $1.2 $5.6 Enter “so w
Slide 48: Operating Cash Flow Generation
Operating Cash Flow Generation . . . Amount ~$10 Bn in aggregate (Bn) $2.2 $2.15 $2.05 a $1.85 $1.95 $1.79 $1.75 Investment Cash flow before dividend (1.1) 2019 2020 2021 2022 2023 2024 NOLs & Credits $0.2 $0.3 $0.5 $0.5 $0.6 $0.7 a Excludes $531 MM discretionary pension contributions in January 202
Slide 49: GAAP Reconciliation
GAAP Reconciliation 49
Slide 50: Reconciliation of GAAP EPS to Non-GAAP Adjusted EPS by Segment
CMS ENERGY CORPORATION Reconciliation of GAAP EPS to Non-GAAP Adjusted EPS by Segment (Unaudited) In Millions, Except Per Share Amounts Three Months Ended Six Months Ended 6/30/20 6/30/19 6/30/20 6/30/19 Electric Utility Reported net income per share $ 0.42 $ 0.32 $ 0.83 $ 0.69 Reconciling items: Ot
Slide 51: Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income by Quarter
CMS ENERGY CORPORATION Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income by Quarter (Unaudited) In Millions, Except Per Share Amounts 2020 1Q 2Q Net Income Available to Common Stockholders $ 243 $ 136 Reconciling items: Electric utility and gas utility 15 4 Tax impact (4) (1) Enterpr
Slide 52: Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income
CMS ENERGY CORPORATION Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income (Unaudited) In Millions, Except Per Share Amounts Three Months Ended Six Months Ended 6/30/20 6/30/19 6/30/20 6/30/19 Net Income Available to Common Stockholders $ 136 $ 93 $ 379 $ 306 Reconciling items: Other e
Slide 53: Reconciliations of GAAP Net Income to Non-GAAP Adjusted Net Income
CMS ENERGY CORPORATION Reconciliations of GAAP Net Income to Non-GAAP Adjusted Net Income (Unaudited) In Millions, Except Per Share Amounts Three Months Ended Twelve Months Ended 12/31/19 12/31/18 12/31/19 12/31/18 Net Income Available to Common Stockholders $ 167 $ 108 $ 680 $ 657 Reconciling items
Slide 54: Earnings Per Share By Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Per Share By Year GAAP Reconciliation (Unaudited) GAAP GAA 2019 over 2019 o 2003 201 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 CAGR Grow Reported earnings (loss) per share - GAAP ($0.30) $0.64 ($0.44) ($0.41) ($1.02) $1.20 $0
Slide 55: Reconciliation of GAAP Operating Activities to Non-GAAP
CMS ENERGY CORPORATION Reconciliation of GAAP Operating Activities to Non-GAAP Operating Activities (Unaudited) (mils) 2020 GAAP Net cash provided by operating activities $ 1,219 Add back discretionary pension contribution 531 Non-GAAP Net cash provided by operating activities $ 1,750 55