Slide 1: August Investor Meetings
August Investor Meetings August 2018 FOCUSED ON WORLD CLASS PERFORMANCE
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: CMS Overview
CMS ENERGY CMS Overview
Slide 4: Top of Mind
Top of Mind . . . • Regulatory Update - Gas Rate Case Settlement a and Electric Rate Case • Integrated Resource Plan • Renewables Expansion • Michigan Elections • Tax Reform • Q2 Earnings and 2018 . . . People, Planet, Profit. 4
Slide 5: CMS Energy Overview
CMS Energy Overview Corporate Structure Key Information CMS Energy 2017 Financial Statistics (NYSE: CMS) Based in Jackson, MI Employees (40% unionized) Consumers Energy Enterprises EnerBank Revenue 2017 Adjusted net income a Avg. Rate Base 94% of Operating Dividend payout ratio a Income Gas $4.6 Bn
Slide 6: CMS' Performance Exemplifies People, Planet, Profit
CMS’ Performance Exemplifies . . . PEOPLE PLANET PROFIT a • Safest year on record • #1 Company in Michigan in • 15 years of +7% EPS Newsweek’s ‘Green growth • #1 Diverse Utility in the 2017 Rankings’ Nation and #1 Employer for • Raised dividend 7% YOY, Among Diversity in Michigan by • Highest
Slide 7: Consumers Energy
Consumers Energy . . . Overview • 4th largest combination utility (electric and gas) in the country • 2017 revenue = $6.2 billion • 2017 earnings = $630 million Our Service Territory • Electric Utility 1.8 million electric customers 8,455 MW of capacity • Gas Utility 1.8 million gas customers 309 bc
Slide 8: Michigan Offers
Michigan Offers . . . • Economic growth (taxes, skilled labor, balanced budget) • Forward-looking test year (10-month rate case) • Energy efficiency incentive (20% of spend) • Attractive renewable investment framework • Constructive ROEs . . . economic and energy policies that support our business.
Slide 9: Best-in-Class Commission
Best-in-Class Commission . . . MPSC Commissioners Tier 1 Ranking Tier Sally Talberg (I), Chairman Michigan Term Ends: July 2, 2021 2013 - Present 1 6 2 10 2012 2008 Norm Saari (R) 3 19 Term Ends: July 2, 2019 4 10 Rachael Eubanks (I) Term Ends: July 2, 2023 5 6 UBS Research, 2017 state rankings . .
Slide 10: Managing Work Every Year
Managing Work Every Year . . . a 2010 2011 2012 2013 2014 2015 2016 2017 EPS $2.20 Weather & Storms +7% Mild Summer +7% $2.00 Cost +7% productivity above plan Cost Cost $1.80 productivity productivity +7% above plan Reinvestment Storms Hot Mild Reinvestment Summer Winter +7% $1.60 RECORD Hot WARM Of
Slide 11: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . Plan a EPS Growth 6% - 8% Self Funding: - Cost reductions 2 - 3 pts - Sales (continued economic development & EE) 1 - Other (Enterprises, tax planning, etc.) 2 INVESTMENT SELF-FUNDED 5 - 6 pts Customer Prices “at or below inflation” < 2% _____ a Adjusted EPS (non-G
Slide 12: Large and Aging System
Large and Aging System . . . Electric Gas distribution distribution system replacement system is plan: 25 years, older than peers 27,000 miles Age of coal fleet is more 1,670 miles of gas than transmission pipeline; most 50 years built in the WWII era . . . requires significant customer investment.
Slide 13: Customer Investment Plan Evolves
Customer Investment Plan Evolves . . . Large and Aging System Rate Base Growth Electric Gas 7% $21 Bn CAGR $15 Bn 60% 70% 40% 30% 2017 2022 . . . with incremental renewables. 13
Slide 14: Gas System Investment
Gas System Investment . . . Compression and Storage Electric $½ Bn Dist. Gas $3½ Bn Infra. & Maint. $5 Bn #1 Underground Supply storage $1½ Bn Transmission #5 Transmission $2 Bn #5 Distribution miles miles Distribution $2½ Bn U.S. LDC Rank, Source: DOT . . . has increased more than 60% over the last
Slide 15: Electric System Investment
Electric System Investment . . . Electric Supply Dist. Gas $1½ Bn $3½ Bn Infra. & Maint. $5 Bn Supply $1½ Bn HVD System $½ Bn LVD System $2½ Bn Substations $½ Bn . . . consists of needed and modular projects. 15
Slide 16: Clean and Lean
Clean and Lean . . . Old Utility Model Clean And Lean Big Build Supply Supply Fully utilize Modular Retirement assets Excess supply Big Excess Build supply Modular Actual Modular Demand Demand EE & DR Excess O&M O&M supply Expected Demand Fuel Fuel Big Bets Lower Risk Results in excess capacity, hig
Slide 17: Cost Reduction Strategy
Cost Reduction Strategy . . . Capital-Enabled Gas Replacements Pole-top Hardening Clean & Lean Structural/ Technology-Enabled Process Changes Smart Grid Mobility CE Way PPAs Customer Benefits • Safety Digital • Reliability Retirements • Better Service • Affordable Bills . . . largely funds customer
Slide 18: Our Entire Cost Structure
Our Entire Cost Structure . . . Cost Components Residential Electric Bills a (current dollars) 100% 100% $106 $100 90% Coal to 80% Down 6% Gas / PPA Fuel and Power Costs 70% 60% ~70% 2013 2018E Residential Gas Bills 50% a O&M Costs 40% (current dollars) $85 Tax 30% Reform Taxes $62 20% Capital Inves
Slide 19: Economic Development Efforts
Economic Development Efforts . . . Our Service Territory Outperforms Examples of New Business a Electric Michigan ranked #11 top pro-business state Grand Gas by CNBC’s Top States for Business 2018 Rapids Michigan U.S. Combination Building permits b +236% +202% +120% GDP Growth 29 19 14 2010 2016 Pop
Slide 20: Operating Cash Flow Generation
Operating Cash Flow Generation . . . Amount (Bn) ~$9 Bn in aggregate $ 2.2 1.95 1.85 1.7 1.75 1.7 1.65 1.65 1.2 0.7 Investment 0.2 (0.3) Cash flow before dividend (0.8) 2017 2018 2019 2020 2021 2022 NOLs & credits $0.6 $0.4 $0.3 $0.3 $0.3 $0.2 . . . remains strong and supports our capital plan. 20
Slide 21: Credit Metrics Maintained
Credit Metrics Maintained . . . S&P / S&P Moody’s Fitch FFO / Average Debt a Fitch Moody’s (Dec. ‘16) (Jun. ‘18) (Jul. ‘18) AA- Aa3 A+ A1 19% Consumers A A2 Secured ~18% A- A3 BBB+ Baa1 BBB Baa2 17% BBB- Baa3 < 30% HoldCo Debt BB+ Ba1 BBB+ Baa1 BBB Baa2 CMS Unsecured BBB- Baa3 BB+ Ba1 BB Ba2 Present
Slide 22: Compelling Investment Thesis
Compelling Investment Thesis Aging Infrastructure Strong Cash Flow & Balance Sheet Diversified Service Territory Affordable Prices Constructive Regulation 22
Slide 23: Consistent Growth Through Recessions and Adverse Weather
Consistent Growth Through . . . b 7% CAGR a EPS +6% to +8% Dividend Weather Recession Recession Help _____ _____ Hurt a Adjusted EPS (non-GAAP) b Non-GAAP Cold 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Feb. Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild
Slide 24: CMS' Trading Performance
CMS’ Trading Performance . . . b Stock Performance a Total Shareowner Return CMS CMS UTY UTY S&P 500 S&P 500 200% 150% 172% 289% 100% 82% 129% 50% 19% 0% 49% -50% 17% -100% '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 ‘17 1 Year 3 Year 5 Year 10 Year _____ _____ a 10-year stock performance as of December
Slide 25: Appendix
CMS ENERGY Appendix
Slide 26: Long-Term Regulatory Planning
Long-Term Regulatory Planning . . . 2018 2019 Regulatory / Policy 2/22: Tax reform order U-18494 6/15: Filed long-term generation plan (IRP) U-20165 6/28: Credit A order for 7/24: Credit A order for Electric Utility $113 MM Q2: Expected IRP order Gas Utility U-20165 $49 MM Electric 3/1: Fi
Slide 27: Tax Reform – Three Step Approach
Tax Reform – Three Step Approach . . . Step 1: (Credit A) • Filed to determine forward-looking customer credit to adjust for tax reform • Gas Utility filed Mar. 30th • Electric Utility filed Apr. 30th • MPSC approval within 90 days of all filings Step 2: (Credit B) • To be filed to determine catch-u
Slide 28: 2018 Financial Targets
2018 Financial Targets . . . 2018 Long-Term Plan Adjusted EPS (non-GAAP) $2.30 to $2.34 +6% to +8% +6% to +8% Operating cash flow (MM) $1,650 Up $100/yr a Dividend payout ratio (non-GAAP) ~ 62% ~ 62% Customer price Electric (1)% ~ 2% Gas (3)% ~ 2% FFO/average debt (non-GAAP) ~18% ~17% - 19% Customer
Slide 29: 2018 Sensitivities
2018 Sensitivities . . . Full Year Impact Sensitivity EPS OCF (MM) Sales a • Electric (37,477 GWh) + 1% + 6¢ + $ 20 • Gas (303 Bcf) + 5 + 9 + 40 – – 55 Gas prices (NYMEX) + 50¢ + 0 + ROE (planned) Order • Electric (10.1%) + 10 bps + 1½ + 6 Received • Gas (10.1%) + 10 + ½ + 3 3/29 Interest rates +100
Slide 30: DIG (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . Pre-Tax Income Opportunities (MM) $ 80 $75 70 Contracts (layering in over time) 60 $55 +$40 50 $45 Better +$20 40 Performance $35 $30 30 Better Performance 20 $12 10 Outage Pull-ahead 0 2015 2016 2017 2018 Future Capacity ($/kW-mth) ≈ $1.00 ≈ $2.00 ≈ $3.00 < $
Slide 31: Annual Use of Supply
Annual Use of Supply . . . . . . demonstrates waste in the system . 31
Slide 32: Solar's Unique Characteristics
Solar’s Unique Characteristics . . . 9,000 Solar matches peak (MW) system load; 50% EE & DR Programs capacity credit Shave the Peak (Zonal Resource Credits) Potential New Load Economic Development EV Overnight Charging Existing Load Solar 6:00 a.m. 5:00 p.m. 6:00 a.m. . . . offer the best approach t
Slide 33: GAAP Reconciliation
GAAP Reconciliation
Slide 34: Earnings Per Share By Year GAAP Reconciliation
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 2017 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 $1.64 Pre