Cms Energy Corporation · NYSE:CMS
Cms Energy — H1 2017 Earnings Presentation
38 slides from Cms Energy's earnings presentation, Jul 28, 2017
Slide 1: 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 2: Agenda
2 Agenda First Half Results People, Planet, Profit Performance -- Consumers Energy Way Financial Results and Outlook Patti Poppe President & CEO Rejji Hayes Executive VP & CFO PEOPLE PLANET PROFIT
Slide 3: First Half Results
3 First Half Results . . . EPS at $1.04 Reaffirm Full Year EPS guidance: Long-term Growth: 6% to 8% . . . on track for 6% to 8% EPS growth. a a _ _ _ _ _ a Adjusted EPS (non-GAAP) Same as 2016; up 7% weather-normalized 4¢ ahead of Plan $2.14 to $2.18 +6% to +8% a PROFIT a
Slide 4: Consumers Among Top Employers
Consumers Among Top Employers Consumers Energy ranked Michigan’s TOP EMPLOYER by Forbes PEOPLE Consumers Energy named a “Most Trusted Brand” by Market Strategies International 4
Slide 5: Regulatory Update
2/10: Filed securitization; $172 MM 5 Regulatory Update . . . . . . robust agenda providing customer value. Gas Rate Case Electric Rate Case 3/31: File; $173 MM; 10.5% ROE 10/1: Self-implement Energy Law Palisades 12/1: SRM capacity charge determined June: Capacity charge implemented 4/20: Energy La
Slide 6: Reducing Coal Intensity
6 Reducing Coal Intensity . . . PLANET . . . AND adding more clean renewables. Coal Energy Renewable Energy 22% 15% 10% 15% c d _ _ _ _ _ c Excludes Classic 7, includes PPA contracts _ _ _ d Based on ten-year plan with opportunities 49% _ _ _ _ _ a CMS Energy b Shut down coal Demand from customers M
Slide 7: Clean and Lean
7 . . . matching supply with demand reduces costs. Clean and Lean . . . Old Utility Model Clean And Lean Big Build Big Build O&M Fuel Big Bets Modular Fully utilize assets O&M Fuel Modular Investments Results in excess capacity, higher cost Matches supply with demand Excess supply Excess supply Reti
Slide 8: Renewables
8 Renewables . . . PLANET . . . building a clean future for our state. Wind Proposed New Tariff Solar Solar Gardens Residential rooftop solar program MPSC evaluating net metering Cross Winds II Expected COD: Jan 2018 44 MW Cross Winds III Expected COD: Jan 2020 76 MW Large industrial program Purchas
Slide 9: Performance
9 Performance . . . Meter Reading Invoice Reversals (MM) Live Calls (MM) Savings $(MM) (since 2015) $5 $1½ $2½ . . . improving quality of service. 1.1 0.4 5.5 3.5 36% Improvement 64% Improvement 99% 13 pts Improvement 2015 2017 YE Forecast 2015 2017 YE Forecast 86% 2015 2017 YE Forecast
Slide 10: Story of the Month
10 Story of the Month . . . . . . improving quality of service. Flint Fueling Pilot Fueling trucks during off-peak hours (15 - 30 min) Impacting 450 crews with multiple workers per crew Potential statewide savings: $3 MM/ yr 100,000 hours/ yr PEOPLE
Slide 11: Consistent Growth Through Recession
Consistent Growth Through . . . Recession Governor (R) Governor (D) Commission (D) Commission (R) Recession 7% CAGR Polar vortex Cold Feb. Mild summer Warm winter Hot summer Hot summer Cold winter Cold winter Summer- “less” Mild summer Mild summer Commission (D) Hurt Help EPS _ _ _ _ _ a Adjusted EP
Slide 12: First Half 2017 EPS ahead of plan
12 First Half 2017 EPS . . . . . . ahead of plan. By Business Segment Results $1.12 0.07 (0.15) $1.04 First Half EPS a _ _ _ _ _ a Adjusted EPS (non-GAAP) $0.45 2016 2017 0.41 0.35 $0.33 +8¢ +7% $1.04 First Half Weather-normalized 1.12 1.20 vs Plan $0.01 0.03 -- $0.04 Weather-normalized EPS EPS Seco
Slide 13: 2017 EPS guidance reaffirmed
13 2017 EPS . . . First Half Six Months To Go Flat 12¢ - 16¢ $2.02 . . . guidance reaffirmed. First Half $1.04 $2.14 - $2.18 First Half $1.04 6% - 8% 7¢ a _ _ _ _ _ a Adjusted EPS (non-GAAP) 4¢ (7)¢ 12¢ - 16¢ Managing Work Our Model Customer base rates <2% Second Half 2016 Discretionary Activities:
Slide 14: 2017 Outlook includes 6% to 8% growth
2017 Outlook . . . . . . includes 6% to 8% growth despite early challenges. Adjusted EPS (non-GAAP) January March 31 June 30 September 30 December 31 Recovery Guidance +6% to +8% Benefits Property taxes Total 4¢ 4 8¢ 14 Reinvestment last year 2016 Accelerated Financing Enterprises EE incentives O&M
Slide 15: Managing Work Every Year
Managing Work Every Year . . . . . . maximizes benefits for customers AND investors. 15 2008 2009 2010 2011 2012 2013 2014 2015 +7% +7% +7% +7% +7% +7% +7% Offsets RECORD WARM -13¢ +17¢ +18¢ -9¢ +13¢ -13¢ Mild Summer Cost productivity above plan +7¢ Reinvestment Hot Summer Mild Winter Hot Summer Sto
Slide 16: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . Customer investment (reliability, costs, enviro mandates) - O&M cost reductions - Sales growth - No “block” equity dilution & other INVESTMENT SELF-FUNDED Rate increase “at or below inflation” 2017+ Plan 6% - 8% . . . continues to drive sustainable growth, with ups
Slide 17: $18 Billion Ten-year Customer Investment Plan
17 Electric Distribution Gas Infrastructure & Maintenance Supply $18 billion Ten-year Customer Investment Plan . . . . . . with opportunities to expand to $21 - $25 billion.
Slide 18: Modular Customer Investment Plan
Modular Customer Investment Plan . . . 18 Last 10 Years Next 10 Years $13 Bn $18 Bn % of projects <$200 MM ~75% >90% Gas Supply Electric Distribution Electric Distribution Gas Supply Up 40% 41% 29% . . . is robust and highly achievable. a _ _ _ _ _ a Plan assumes a modular renewable build-out with i
Slide 19: O&M Cost Performance Helps to Fund Investment
O&M Cost Performance Helps to Fund . . . Actual Cost Reduction Consumers - - - - - Source: SNL, Form 1, Electric Non-fuel O&M, Consumers Internal Peer Average ~4½% (Peers 2016 over 2006) New Annual Cost Savings Attrition $ - 16 $ - 16 Productivity (Coal Gas) - 20 - 5 Enhanced capitalization - 10 - 4
Slide 20: Operating Cash Flow Funds Investments
Operating Cash Flow Funds . . . . . . investments with no block equity. Amount (Bn) $ Investment Cash flow before dividend _ _ _ _ _ a Non-GAAP NOLs & Credits $0.7 $0.9 $0.9 $0.8 $0.6 $0.5 $0.2 $2.6 Interest, working capital and taxes $1.9 $2.9 $1.63 $2.3 $2.7 Up $0.8 billion Operating cash flow Gro
Slide 21: Economic Development Growth
Economic Development Growth . . . Examples of New Business Electric Gas Combination Enbridge Brembo Denso Post Magna-Cosma Dicastal Continental Dairy Arauco Betz Knauf . . . is strong and diversified. GM Assembly _ _ _ _ _ a Grand Rapids b Annualized numbers May 2010 May 2017 Our Service Territory O
Slide 22: DIG and Peakers capacity contracted for 2017
“DIG” (750 MW) & Peakers (200 MW) . . . 22 . . . capacity contracted for 2017. Pre-Tax Income (MM) $12 $30 $35 Outage pull-ahead Better Performance Future Opportunities Capacity ($/kw-mth) $1.00 $2.00 $3.00 $4.50 $7.50 Available: Energy Capacity 0% 0% 25% 0 0 0 $ +$20 +$40 Contracts (layering in ove
Slide 23: 2017 Sensitivities
23 2017 Sensitivities . . . Full Year Impact Sensitivity EPS OCF Sales a Electric (37,031 GWh) Gas (307 Bcf) + 1% + 5 + 5¢ + 7 + $ 20 + 30 Gas prices (NYMEX) + 50¢ 0 55 ROE (planned) Electric (10.1%) Gas (10.1%) + 10 bps + 10 + 1½ + ½ + 7 + 3 Interest Rates Energy Waste Reduction b +100 bps + ½% < 1
Slide 24: 2017 Financial Targets
24 2017 Financial Targets . . . Adjusted EPS (non-GAAP) Operating cash flow (MM) Dividend payout ratio Customer price (excl. fuel) Electric Gas FFO/Average debt (non-GAAP) Customer investment (Bn) . . . 15th year of transparent, consistent, strong performance. 2017 $2.14 - $2.18 +6% to +8% $1,650 ~2
Slide 25: Q & A
Q & A 25 See you at our September 25th Investor Day!
Slide 26: Q&A: See you at our September 25th Investor Day
Q&A See you at our September 25% Investor Day!
Slide 27: Credit Ratings
27 Strong financial position Growing operating cash flow Return on regulated investment Supportive regulatory environment Ratings Drivers Present Prior 2002 Consumers Secured CMS Unsecured . . . upgraded by Moody’s. Credit Ratings . . . Scale S&P / Fitch Moody’s S&P (Dec. ‘15) Moody’s (Apr. ‘17) Fit
Slide 28: Credit Ratings
Credit Rating: Scale S&P/ Fitch Moody's (Dec. ‘15) ‘AA Aa3 SaP Moody's AM W LA Gs Fitch Consumers Secured A a3 BBB+ Bat BBB Baal BBB Bas) Lae = ae) BBB+ Baal @ |< cms Unsecured cus evener> Ratings Drivers * Strong financial position * Growing operating cash flow * Return on regulated investment * Su
Slide 29: Earnings Per Share By Year GAAP Reconciliation
29 CMS ENERGY CORPORATION Earnings Per Share By Year GAAP Reconciliation (Unaudited) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Reported earnings (loss) per share - GAAP ($0.30) $0.64 ($0.44) ($0.41) ($1.02) $1.20 $0.91 $1.28 $1.58 $1.42 $1.66 $1.74 $1.89 $1.98 Pretax item
Slide 30: 2016 Quarterly GAAP Reconciliation
30 (In Millions, Except Per Share Amounts) 2016 1Q 2Q 3Q 4Q YTD Dec Reported net income - GAAP $164 $124 $186 $77 $551 Pretax items: Electric and gas utility - - 11 * 11 Tax impact - - (4) (*) (4) Enterprises * * * 1 1 Tax impact (*) (*) (*) (*) (*) Corporate interest and other * * 2 5 7 Tax impact
Slide 31: EBIT, EBITDA and Debt Reconciliation
31 In Millions Twelve Months Ended 03/31/17 12/31/16 03/31/16 EBIT (1) Adjusted Non-GAAP Consolidated $ 1,339 $ 1,280 $ 1,133 Consumers Energy 1,274 1,215 1,077 Depreciation/Amortization Consolidated $ 835 $ 811 $ 766 Consumers Energy 826 803 761 EBITDA (1) Adjusted Non-GAAP Consolidated $ 2,174 $ 2
Slide 32: EBIT, EBITDA and Debt Reconciliation
32 In Millions Twelve Months Ended 03/31/17 12/31/16 03/31/16 EBIT (1) Adjusted Non-GAAP Consolidated $ 1,339 $ 1,280 $ 1,133 Consumers Energy 1,274 1,215 1,077 Depreciation/Amortization Consolidated $ 835 $ 811 $ 766 Consumers Energy 826 803 761 EBITDA (1) Adjusted Non-GAAP Consolidated $ 2,174 $ 2
Slide 33: Gross Operating Cash Flow Reconciliation
33 CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2015 2016 2017 2018 2019 2020 2021 Consumers Operating Income + Depreciation & Amortization $ 1,866 $ 2,037 $ 2,134 $ 2,246 $ 2,547 $ 2,678 $ 2,816 Enterprises Project Cash Flows 20 46 58 58 53
Slide 34: Consumers Energy 2017 Cash Flow Forecast Reconciliation
34 Consumers Energy 2017 Cash Flow Forecast GAAP Reconciliation (in millions) (unaudited) Reclassifications From Sources and Uses to Statement of Cash Flows Interest/ Capital Presentation Sources and Uses Tax Other Financing Other Working Accts/Rec Lease Pymts Securitization Common Consolidated Stat
Slide 35: CMS Energy Parent 2017 Cash Flow Forecast Reconciliation
35 CMS Energy Parent 2017 Cash Flow Forecast GAAP Reconciliation (in millions) (unaudited) Reclassifications From Sources and Uses to Statement of Cash Flows Presentation Sources and Uses Non Equity Consolidated Statements of Cash Flows non-GAAP Uses GAAP Description Amount as Operating Other Amount
Slide 36: Consolidated CMS Energy 2017 Forecasted Cash Flow
36 Consolidated CMS Energy 2017 Forecasted Consolidation of Consumers Energy and CMS Energy Parent Statements of Cash Flow (in millions) (unaudited) Eliminations/Reclassifications/Consolidation to Arrive at the Consolidated Statement of Cash Flows Statements of Cash Flows Other Consumers Equity Cons
Slide 37: June 2017 Net Income and EPS Reconciliation
37 June 30 2017 2016 2017 2016 Net Income Available to Common Stockholders 92 $ 124 $ 291 $ 288 $ Reconciling Items: Discontinued Operations Loss * * * * Restructuring Costs and Other 1 * 2 * Tax Impact (1) (*) (1) (*) Adjusted Net Income - Non-GAAP Basis 92 $ 124 $ 292 $ 288 $ Non-Normal Weather Im
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