Slide 1: Third Quarter 2015 Results & Outlook
Third Quarter 2015 Results & Outlook October 29, 2015 Ludington Pumped Storage Ray Compressor Station Cross Winds Energy Park Fourth largest in the world #1 LDC in gas storage #2 in renewable sales in the Great Lakes area
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: Agenda
Agenda Overview Earnings Update Operational and Legislative Update Capacity Diversity & Portfolio Mix Results & Outlook Third Quarter Performance Sustainable Growth Model Self-fund Rates 2
Slide 4: EPS
EPS . . . . a First Nine Months: • at $1.51, up 9¢ from 2014 2015 Full-Year guidance raised: • to $1.87 - $1.89, up 6% to 7% 2016 Full-Year guidance introduced: • at $1.97 to $2.01, up 5% to 7% Future long-term annual growth: • at 5% to 7% _____ a Adjusted EPS (non-GAAP) . . . . consistent, predicta
Slide 5: EPS Guidance
EPS Guidance . . . . a EPS a $2.01 +7% $2.10 +7% +7% +7% Average growth per year +5% $1.89 $1.77 $1.97 Further $1.87 +5% Growth Upsides $1.66 $1.78 Not in Plan $1.73 +6% $1.66 More renewables $1.55 Capacity for $1.63 $1.85 $1.45 $1.55 “ROA”/“PPAs” $1.52 Gas infrastructure $1.36 $1.44 Original gui
Slide 6: Operational Results
Operational Results . . . . • First quartile customer-satisfaction, residential electric and gas • Leveraging large gas system with decade-low prices • Record-setting performance . . . . – Safest ever – Best reliability ever – Whiting Plant achieved Company record 679-day run • Major projects on sch
Slide 7: Recent Economic Development Announcements
Recent Economic Development Announcements . . . . Arauco • Largest particleboard press in North America • 250 jobs created • $325 million investment • 15 MW . . . . demonstrate attractive business environment in Michigan. 6
Slide 8: Michigan Energy Law
Michigan Energy Law . . . . October November/ December Committee Committee & Governor’s Hearings Full Vote Signature Sen. Nofs Rep. Nesbitt Gov. Snyder Senate and House bills closely align Opportunities Renewables -- Integrated Resource Plan (IRP) Efficiency -- Eliminate waste ROA -- Fair choi
Slide 9: Cleaner Energy Portfolio
Cleaner Energy Portfolio . . . . Apple Blossom Wind Farm Community Solar Gardens • Competitive price • Utility Scale Solar • 100 MW • Grand Valley State University, 3 MW • Western Michigan University, 1 MW • Commercial operation 2016 • Capacity, energy, and renewable credits • PPA with option to pur
Slide 10: Capacity Diversity
Capacity Diversity . . . . Nuclear Oil 8% 6% Coal reduced Renewables by over 40%! 9% Coal 2nd best in U.S. 34% Pumped Storage 2014 11% Nuclear Gas Nuclear Oil 6% 32% 8% 8% Oil Renewables 9% 3% Purchases Coal 1% < 24% Pumped Coal Storage 41% Renewables 11% 2005 11% 2017 Pumped Gas Storage Gas 31% 12%
Slide 11: Clean Power Plan
Clean Power Plan . . . . Tons CO2 (mils) 20 Consumers Energy 2012 Emissions 19 18 Retire State of Michigan Target 17 950 MW (Consumers Energy’s share) coal 16 15 14 13 12 Potential Outlook -- More Renewables Needed -- 11 Not in Plan 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 202
Slide 12: 2015 Nine Months EPS
2015 Nine Months EPS . . . . Results By Business Segment 2015 2014 EPS Better EPS $1.51 $1.42 Actual than Plan Utility $1.65 $0.08 +9¢ Enterprises 0.04 0.01 Interest & other (0.18) 0.02 Weather-normalized $1.39 $1.26 Company $1.51 $0.11 +10% Above Plan +8% Third Quarter EPS 53¢ 37¢ +16¢ First Call 4
Slide 13: 2015 EPS
2015 EPS . . . . a Year-to-Date Three Months To Go +9¢ 1¢ - 3¢ $1.87 - $1.89 _+6% to +7% 13¢ 8¢ (3)¢ - (5)¢ $1.77 (4)¢ (2)¢ +6¢ YTD YTD $1.42 $1.51 2014 Rate Change, Weather Mortality Tables Other O&M Investment Cost 2015 Cost & Other & Disc. Rates & Other O&M _____ a Adjusted EPS (non-GAAP) . . . .
Slide 14: O&M Reinvestment Helps Customers
O&M “Reinvestment” Helps CUSTOMERS . . . . Adjusted EPS 2015 O&M 2016 (non-GAAP) Reinvestment Savings (mils) (mils) DIG outage $ (8) $10 2014 Reliability (10) -- 17¢ Donations & other (5) 5 Total $(23) $15 13¢ 2015 Weather 12¢ 11¢ Natural Offsets (4) Cost & Other 3 Total 11¢ +6% - +7% Guidance Janua
Slide 15: DIG Capacity & Energy Price Increases
“DIG” Capacity & Energy Price Increases . . . . Outage . . . . Upside 2016 Future Scenarios • . . . . Pull-ahead takes (mils) (mils) advantage of customer reinvestment. Energy + $20 – $40 $60 Capacity more • . . . . Eliminates 2016 $50 planned outage when MISO Zone 7 is expected $40 $35 to be short
Slide 16: Capex Up 45%
Capex Up 45% . . . . 2005-2014 2015-2024 Opportunity $10.7 bil $15.5 bil $20 + bil Opportunity +45% +30% Gas Infrastructure Electric Gas Electric 27% Maintenance Infrastructure Maintenance 37% Electric Environ. Reliability Smart Energy New Generation New Infra Generation Smart Electric Environmental
Slide 17: Simple, Perhaps Unique CMS Growth Model
Simple, Perhaps Unique CMS Growth Model . . . . 5-Year Upside Plan Opportunity Capital investment (drives long-term growth) 5% - 7% 6% - 8% - O&M cost reductions 2 pts Short-term - Sales growth ½ ROA return - No “block” equity dilution 1 and/or - Surcharges and other 1½ Long-term INVESTMENT SELF-FUN
Slide 18: O&M Cost Performance
O&M Cost Performance . . . . Actual Cost Reduction Future Cost Savings (2014 over 2006) 2014 2014 & 2015 2018 (mils) (mils) • Attrition $ - 35 $ - 75 • Productivity (Coal Gas) - 35 - 50 • “Pole Top” Hardening - 30 - 30 • Smart Meters - 5 - 25 Peer Average >5% • Eliminate Waste (UA’s) - 15 - 20 • Mor
Slide 19: Other Ideas
Other Ideas . . . . Mobility Productivity Two-way communication/ 25%-50% $5-10 mil connectivity reduction in calls savings Technology Productivity 1-2 pt line loss $25-50 mil Grid modernization reduction savings Quality Productivity Improved work Productive $15-25 mil management truck rolls savings
Slide 20: Michigan's Recovery
Michigan’s Recovery . . . . Gross Domestic Product – 2010 through 2014 Grand Rapids 21.5% Top 10% of All Cities! WA ND MT 11.3 50.8 11.6 MN 11.3 Michigan ME SD OR ID 8.0 WI Top 3 1.0 VT NH 12.8 6.6 WY 9.2 MI state! NY 7.4 9.3 -0.9 IA NE 13.9 12.0 MA 10.8 13.8 11.4 IL PA NV RI 6.0 IN OH CT UT CO 7.5
Slide 21: Sales Growth
Sales Growth . . . . Annual Electric Sales c Our Service Territory Outperforms a Industrial Total Grand Rapids Michigan U.S 6% Building Permits b +18% +13% +13% GDP 22 14 10 2010 2014 Conservative Population 3 0 2 2011 2014 2% 1% Unemployment 3.5 5.0 5.1 ½% (9/15) 2010-2014 2015 - 2019 Post-Recessio
Slide 22: CMS Energy
CMS Energy . . . . Future +5% to +7% 7% CAGR a EPS Dividend Further Growth Upsides Not in Plan More renewables Weather Capacity for Recession Help Recession “ROA”/“PPAs” Gas infrastructure Hurt 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Future Cold Mild Hot Warm Mild Cold Su
Slide 23: Sensitivities
Sensitivities . . . . 2015 Impact Status Sensitivity EPS OCF (mils) Sales a • Electric (37,485 GWh) + 1% + $0.05 + $ 20 • Gas (301.8 Bcf) + 5 + 0.07 + 30 Gas prices (NYMEX) + 50¢ – 0 – 55 + + ROE (authorized) • Electric (10.3%) + 10 bps + 0.01 + 5 • Gas (10.3%) + 20 + 0.01 + 4 Interest Rates +100 bp
Slide 24: Interest Rates Increases
Interest Rates Increases . . . . Pre-Tax Amount Sensitivities Earnings Impact (bils) (bps) • Interest Expense $1.0 +100 (3)¢ • Benefit Liability (discounted) 3.0 +100 4 Total 1¢ Note: ROE ? . . . . have up and downsides! 23
Slide 25: 2015 Financial Targets
2015 Financial Targets . . . . Target Focus Adjusted EPS (non-GAAP) $1.87 - $1.89 +6% to +7% Consistent, high- end performance Operating cash flow (mils) $1,550 No “big bets” Dividend payout ratio Customer price decreases > 62% Competitive Electric ≈(3)% Good value Gas ≈(3)% FFO/Average de
Slide 26: Q&A
Q&A See you at EEI 25
Slide 27: Appendix
Appendix
Slide 28: Liquidity (as of September 2015)
Liquidity (as of September 2015) . . . . Renewal Capacity Availability $1.6 Billion CMS Energy Stronger $1.5 Billion liquidity 5-year revolver May 2020 $550 mils than peers $547 mils Consumers Energy 5-year revolver May 2020 650 Letter of Credit Apr 2018 Letter of Credit Aug 2018 573 Letter of Credi
Slide 29: Operating Cash Flow Growth
Operating Cash Flow Growth . . . . Amount Up $0.6 Billion (bils) Gross operating cash flowa up $0.1 billion per year $2.6 $ 2.6 $2.5 $2.3 $2.2 $2.1 Interest, working 2.1 $2.0 $1.8 capital and taxes 1.6 $1.55 1.1 0.6 Investment 0.1 (0.4) Cash flow before dividend _____ a Non-GAAP (0.9) 2014 2015 2016
Slide 30: Credit Ratings
Credit Ratings . . . . Scale Reflects S&P Moody’s S&P Moody’s (Dec. ‘14) (Mar. ‘15) A+ A1 • Consistent A A2 Consumers Performance Secured A- A3 BBB+ Baa1 • Less Risk BBB Baa2 BBB- Baa3 • Customer Focus BB+ Ba1 CMS • Constructive BBB BBB- Baa2 Baa3 Unsecured Regulation BB+ BB Ba1 Ba2 Present • Good E
Slide 31: 2015 Cash Flow Forecast (non-GAAP)
2015 Cash Flow Forecast (non-GAAP) CMS Energy Parent Consumers Energy Cash at year end 2014 $ 95 Amount (mils) Sources Consumers Energy dividend and tax sharing $ 375 Cash at year end 2014 $ 71 Enterprises 20 Sources Sources $ 395 Operating (depreciation & amortization $745) $ 1,930 Other working ca
Slide 32: GAAP Reconciliation
GAAP Reconciliation
Slide 33: Earnings Per Share By Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Per Share By Year GAAP Reconciliation (Unaudited) 2008 2009 2010 2011 2012 2013 2014 Reported earnings per share - GAAP $1.20 $0.91 $1.28 $1.58 $1.42 $1.66 $1.74 After-tax items: Electric and gas utility 0.05 0.33 0.03 - 0.17 - - Enterprises (0.02) 0.09 (0.03) (0.11)
Slide 34: Earnings By Quarter and Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings By Quarter and Year GAAP Reconciliation (Unaudited) (In Millions, Except Per Share Amounts) 2014 1Q 2Q 3Q 4Q YTD Dec Reported net income - GAAP $204 $83 $94 $96 $477 After-tax items: Electric and gas utility - - - - - Enterprises - * 9 * 9 Corporate interest and other
Slide 35: Earnings Segment Results GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Segment Results GAAP Reconciliation (Unaudited) Three Months Ended Nine Months Ended September 30 2015 2014 2015 2014 Electric Utility Reported $ 0.60 $ 0.47 $ 1.24 $ 1.19 Restructuring Costs and Other - - - - Adjusted $ 0.60 $ 0.47 $ 1.24 $ 1.19 Gas Utility Reported
Slide 36: Consumers Energy 2015 Forecasted Cash Flow GAAP Reconciliation
Consumers Energy 2015 Forecasted Cash Flow 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 Lease Pymts Securitization Common Consolidated Statements of C
Slide 37: CMS Energy Parent 2015 Forecasted Cash Flow GAAP Reconciliation
CMS Energy Parent 2015 Forecasted Cash Flow 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 38: Consolidated CMS Energy 2015 Forecasted Cash Flow
Consolidated CMS Energy 2015 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 Consume
Slide 39: Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2014 2015 2016 2017 2018 2019 2020 Consumers Operating Income + Depreciation & Amortization $ 1,813 $ 1,930 $ 2,027 $ 2,145 $ 2,266 $ 2,401 $ 2,515 Enterprises Project Cash Flows 20 20 40 58 62 67