Cms Energy Corporation · NYSE:CMS
Cms Energy — Barclays Select 2014 Series – U.S. Utility CEO Asia Week
61 slides from Cms Energy's conference presentation, Sep 26, 2014
Slide 1: Barclays Select 2014 Series – U.S. Utility CEO Asia Week
Barclays Select 2014 Series – U.S. Utility CEO Asia Week September 29, 2014 Content How it Works Upsides Partners Investment Passion to Improve
Slide 2: Barclays Select 2014 Series – U.S. Utility CEO Asia Week
Barclays Select 2014 Series – U.S. Utility CEO Asia Week October 1, 2014 Content How it Works Upsides Partners Investment Passion to Improve
Slide 3: Forward-looking statements
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 4: Content
2 Content 3 CMS Energy at a Glance 4 Model 5 Consumers Energy 6 O&M Cost Control 7 Customer-Focused O&M Reinvestment 8 Michigan’s Recovery 9 Governor’s Race 10 Energy Law 11 Ten-Year Plan 12 Capacity Opportunities 13 Capacity Price Increases 14 Passion to Improve Detailed Update Quick Update 17 Cons
Slide 5: CMS Energy at a Glance
Targeting twelfth year of industry-leading financial performance $15 billion investment plan ahead – self-funded! Strong cost control – a top performer! Conservative planning – upsides not in plan Supportive regulation – top tier 2008 visionary Energy Law – improvements in 2014/2015 3 CMS Energy at
Slide 6: How It Works -- Model
4 HOW IT WORKS -- Model . . . . Investment Ten year - $15 billion Small, bite size projects None “Bet The Company” Self-funded Catalysts Capex >$15 billion PPA’s expire = 2,000 MW Zone 7 capacity shortfall Capacity price increases Conservative sales planning Continuous cost reductions Self-Imposed L
Slide 7: How It Works -- Consumers Energy
5 HOW IT WORKS -- Consumers Energy . . . . Electric Utility 1.8 million electric customers 8,600 MW of capacity Gas Utility 1.7 million gas customers 312 TBtu gas storage (3rd biggest in US) Territory . . . . one of largest investors and employers in Michigan. Lake Winds Energy Park Fourth largest c
Slide 8: Upsides -- O&M Cost Control
UPSIDES -- Include O&M Cost Control . . . . . . . . which allows us to make customer-focused investments. Average Annual O&M Change +6% -2% -2% _ _ _ _ _ a -8% Before reinvestment +2% CMS CMS CMS CMS CMS -1% Upside? _ _ _ _ _ a O&M change excluding 2013 major storms Amount (mils) 2012 2013 2014 Cost
Slide 9: Upsides -- Customer-Focused O&M Reinvestment
7 UPSIDES -- Customer-Focused O&M Reinvestment . . . . Adjusted EPS (non-GAAP) . . . . maximizes benefit for customers AND investors. 2013 2013 Cold Winter & Cost Savings $1.66 +7% 2012 Warm Winter 2012 Cost Saving +13¢ 2012 Hot Summer Reinvested earlier -13¢ 2012 Icy Late December O&M B/(W) Than Fo
Slide 10: Upsides -- Michigan's Recovery
8 UPSIDES -- Michigan’s Recovery . . . . . . . . among the best in the nation. Gross Domestic Product – 2010 through 2013 Source: U.S. Department of Commerce – bea.gov, real GDP 2009 chained dollars, 2013 advance and 2009 – 2012 revised, 6/12/14 Highest quintile Fourth quintile Third quintile Second
Slide 11: Partners -- Michigan Governor's Race
9 PARTNERS -- Michigan Governor’s Race . . . . . . . . focus on non-energy issues. Mark Schauer Democrat, Challenger Rick Snyder Republican, Incumbent Campaign Issues Education Jobs Roads Detroit On Energy On ROA As Senate Democratic Leader, Mark played a key role in the successful passage of the 20
Slide 12: Partners -- Michigan Energy Law Update
PARTNERS -- Michigan Energy Law Update . . . . Historical test year 12-18 months regulatory lag No cap on ROA 10% renewables by 2015 Energy efficiency standards File-and-implement 10% ROA cap Adaptability Reliability Affordability Environmental protection Before 2008 TODAY 2015 Improvements . . . .
Slide 13: Investment -- Ten-Year Plan
INVESTMENT -- Ten-Year Plan Expanding . . . . . . . . driving long-term, organic growth, while keeping base rates below inflation. 2013-2022 10-Year Plan Opportunity Level $15 Billion $15 Billion X Rate Base up 5% to 7% Customer base rates <2 >4 $20+ Billion Opportunity Amount (bils) Generation capa
Slide 14: Investment -- Capacity Opportunities
INVESTMENT -- Capacity Opportunities . . . . . . . . emerging with replacement not yet in plan. Capacity Growth Over Next Ten Years ~800 MW 1,240 MW MW PPA 2,600 capacity ~30% ~8,600 MW 540 MW 410 MW Shortfall Owned 6,000 780 MW 900 MW Potential for ~3,000 MW of owned capacity 2,000 MW 11,000 Furthe
Slide 15: Investment -- Capacity Price Increases
13 INVESTMENT -- Capacity Price Increases . . . . . . . . could add value to the 700 MW “DIG” plant. Capacity price ($ kW per month) Today (mils) Future Scenarios (mils) $55 $35 +$50 Opportunity Recent Contracts DIG “energy” contract 9 years 250 MW @ $4.06 kW per month < +$30 $5 Upside: Capacity and
Slide 16: Passion to Improve
14 PASSION TO IMPROVE -- Includes Lasting . . . . . . . . premier cost control, customer satisfaction, and employee engagement. Customer Satisfaction Employee Engagement Residential First Second Fourth 2011 2014 2016 Cost Control Utility O&M 2011 2013 2018 Second Third Fourth 1st Quartile 2011 2012
Slide 17: 15
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Slide 18: Content (Detailed Update)
September 29, 2014 Content How it Works Investment Upsides Partners Passion to Improve Barclays Select 2014 Series – U.S. Utility CEO Asia Week
Slide 19: Content (Detailed Update)
October 1, 2014 Content How it Works Investment Upsides Partners Passion to Improve Barclays Select 2014 Series – U.S. Utility CEO Asia Week
Slide 20: How It Works -- Consumers Energy
17 HOW IT WORKS -- Consumers Energy . . . . Electric Utility 1.8 million electric customers 8,600 MW of capacity Gas Utility 1.7 million gas customers 312 TBtu gas storage (3rd biggest in US) Territory . . . . one of largest investors and employers in Michigan. Lake Winds Energy Park Fourth largest
Slide 21: How It Works -- Model
18 HOW IT WORKS -- Model . . . . Investment Ten year - $15 billion Small, bite size projects None “Bet The Company” Self-funded Catalysts Capex >$15 billion PPA’s expire = 2,000 MW Zone 7 capacity shortfall Capacity price increases Conservative sales planning Continuous cost reductions Self-Imposed
Slide 22: Investment -- Catch-Up
19 INVESTMENT -- “Catch-Up” . . . . . . . . creating an opportunity for the next ten years. Amount (billions) $1.8 CMS Peers _ _ _ _ _ Source: 10K; actual amounts through 2013 smoothed for illustration Restructuring Catch-Up $1.5 per year Investment Criteria: Reduces fuel cost Lowers O&M Adds custom
Slide 23: Investment -- Ten-Year Plan
INVESTMENT -- Ten-Year Plan Expanding . . . . . . . . driving long-term, organic growth, while keeping base rates below inflation. 2013-2022 10-Year Plan Opportunity Level $15 Billion $15 Billion X Rate Base up 5% to 7% Customer base rates <2 >4 $20+ Billion Opportunity Amount (bils) Generation capa
Slide 24: Investment -- Customer-Driven
21 INVESTMENT -- Customer-Driven . . . . Clean Power $2.3 Billion Reliability $4.2 Billion . . . . remains small and incremental, with no big bets. Renewable energy Jackson gas plant Gas storage Propane switching Gas transmission Gas distribution Electric reliability Consumers Smart Energy Electric
Slide 25: Investment -- Capacity Opportunities
22 INVESTMENT -- Capacity Opportunities . . . . . . . . emerging with replacements not yet in plan! ~800 MW 1,240 MW MW PPA 2,600 capacity ~30% ~8,600 MW 540 MW 410 MW Shortfall Owned 6,000 780 MW 900 MW Potential for ~3,000 MW of owned capacity 2,000 MW 11,000 Further Upside PPA’s Expire Owned 8,82
Slide 26: Investment -- New Capacity Ops
23 INVESTMENT -- New Capacity Ops . . . . Replace PPA With New Build Full Year Impact Customer Bill Investor (mils) (EPS) 1,000 MW of PPA’s expire - $325 0 ¢ Add 1,000 MW owned capacity + 325 + 5 Impact Flat Incremental Step-up Not in Plan 2 points Build - Thetford Expand - Zeeland Buy - ? LT PPA .
Slide 27: Investment -- MISO Zone 7
24 INVESTMENT -- MISO Zone 7 Capacity . . . . . . . . shortfall expected to be 2,000 MW in 2016. As of June 2, 2014 (in GW) 22.8 3.2 21.6 24.8 Reserves Demand 2.0 _ _ _ _ _ Source: MISO MISO Zones 7
Slide 28: Upsides -- Michigan's Recovery
25 UPSIDES -- Michigan’s Recovery . . . . . . . . among the best in the nation. Gross Domestic Product – 2010 through 2013 Source: U.S. Department of Commerce – bea.gov, real GDP 2009 chained dollars, 2013 advance and 2009 – 2012 revised, 6/12/14 Highest quintile Fourth quintile Third quintile Secon
Slide 29: Upsides -- Sales Growth
26 UPSIDES -- Sales Growth . . . . . . . . planned conservatively. Annual Electric Salesa Economic Indicators Grand Rapids Michigan U.S Building Permits* +42% +18% +9% GDP (real) 2010 thru 2013 15.3 11.4 8.4 Population 2010 Census thru July 2013 3 0 2 Unemployment July 2014 5.3 7.7 6.2 *Annualized n
Slide 30: Upsides -- Economic Growth
27 UPSIDES -- Economic Growth . . . . . . . . almost 2% of sales growth, layered in over time. Electric Gas Combination Brembo 24 MW Enbridge Energy 19 GM Assembly 10 MSU FRIB 9 WKW Roof Rack Systems 8 Betz Industries 8 Dart Container 5 MACI 5 Magna-Cosma Casting 4 Durolast Roofing 4 Betz MSU FRIB T
Slide 31: Upsides -- O&M Cost Control
28 UPSIDES -- O&M Cost Control . . . . . . . . allows us to make customer-focused investments. Average Annual O&M Change +6% -2% -2% _ _ _ _ _ a -8% Before reinvestment +2% CMS CMS CMS CMS CMS -1% Upside? _ _ _ _ _ a O&M change excluding 2013 major storms Amount (mils) 2012 2013 2014 Cost reduction
Slide 32: Upsides -- O&M Cost Control
29 UPSIDES -- O&M Cost Control . . . . Average Annual O&M Change +6% -2% -2% Plan Conservatively Upside? _ _ _ _ _ a -8% Before reinvestment +2% CMS CMS CMS CMS CMS Future Examples Fuel Mix Benefits MW Employees 2016 Retire Coal - 950 - 300 2016 Add GCC + 540 + 20 Total -410 - 280 Future Savings (mi
Slide 33: Upsides -- Customer-Focused O&M Reinvestment
30 UPSIDES -- Customer-Focused O&M Reinvestment . . . . Adjusted EPS (non-GAAP) . . . . maximizes benefit for customers AND investors. 2013 2013 Cold Winter & Cost Savings $1.66 +7% 2012 Warm Winter 2012 Cost Saving +13¢ 2012 Hot Summer Reinvested earlier -13¢ 2012 Icy Late December O&M B/(W) Than F
Slide 34: Upsides -- Customer-Focused O&M Reinvestment
31 UPSIDES -- Customer-Focused O&M Reinvestment . . . . . . . . delivers for both customers AND owners. 2014 2013 Adjusted EPS (non-GAAP) Guidance January March 31 June 30 December +9¢ +14¢ +18¢ +9¢ +15¢ 2nd QTR 7%- 6% Good choices ahead (3)¢ O&M Reinvestment: Reliability (2) Parent debt prefunding
Slide 35: Partners -- Michigan Energy Law Update
32 PARTNERS -- Michigan Energy Law Update . . . . Historical test year 12-18 months regulatory lag No cap on ROA 10% renewables by 2015 Energy efficiency standards File-and-implement 10% ROA cap Adaptability Reliability Affordability Environmental protection Before 2008 TODAY 2015 Improvements . . .
Slide 36: Partners -- Michigan Governor's Race
33 PARTNERS -- Michigan Governor’s Race . . . . . . . . focus on non-energy issues. Mark Schauer Democrat, Challenger Rick Snyder Republican, Incumbent Campaign Issues Education Jobs Roads Detroit On Energy On ROA As Senate Democratic Leader, Mark played a key role in the successful passage of the 2
Slide 37: Partners -- Constructive Regulation
34 PARTNERS -- Constructive Regulation . . . . . . . . is supported by a quality Commission and a strong Law. Tier 1 State Ranking Barclays Research Michigan John Quackenbush (R), Chairman Term Ends: July 2, 2017 Greg White (I) Term Ends: July 2, 2015 Sally Talberg (I) Term Ends: July 2, 2019 Commis
Slide 38: Passion to Improve -- Customer Satisfaction
PASSION TO IMPROVE -- Customer Satisfaction . . . . . . . . the most improved gas utility in the U.S.! Consumers 2014 JD Power Survey - 2014 Results by Category 2014 Midwest Average +33 744 634 625 589 742 1st Quartile! 1st Quartile! 1st Quartile! 2014 Improvement Comm- unication 950 +46 +37 +31 +31
Slide 39: Passion to Improve -- Sustainability
PASSION TO IMPROVE -- Sustainability . . . . 36 . . . . Consumers Energy ranks among top energy providers in the world. Sustainalytics Overall Score 20% Improvement 80 Recent Performance Ranked 14th out of 226 energy providers worldwide Improvement in all categories: Social Environment Governance +1
Slide 40: Passion to Improve
37 PASSION TO IMPROVE -- Includes Lasting . . . . . . . . premier cost control, customer satisfaction, and employee engagement. Customer Satisfaction Employee Engagement Residential First Second Third Fourth 2011 2014 2016 Cost Control Utility O&M 2011 2013 2018 Second Third Fourth 1st Quartile 2011
Slide 41: Mindset
38 Mindset . . . . . . . . drives consistent “no excuse” growth, without resets. $0.81 _ _ _ _ _ Adjusted EPS (non-GAAP) excluding MTM in 2004-2006 a $1.25 excluding discontinued Exeter operations and accounting changes related to convertible debt and restricted stock Int’l Sale a 10-Year Actual 7%
Slide 42: Appendix
Appendix
Slide 43: Environmental Agreement with EPA
40 Environmental Agreement with EPA . . . . . . . . keeping our promise to make it better than we found it. Environmental Strategy Agreement CMS is moving towards a balanced generation portfolio with more gas and renewables, reducing our carbon footprint Plan to have full controls on all five larger
Slide 44: 2015 Gas Rate Case
41 2015 Gas Rate Case . . . . Overview Rate Base (bils) XX ROE XX Equity - Regulatory XX Equity - Financial XX Residential Gas Customer Cost . . . . supports capital investment offset partially by lower costs. Amount (Mils) Capital Investment $ Cost & Other (56) Request $ 88 2016-2017 Investment Rec
Slide 45: Regulation & Self-Initiated Steps
42 Regulation & Self-Initiated Steps . . . . Self-initiated Rate design, regulatory ROA Policy, legislation Consumers higher than Midwest peer avg Below Midwest peers . . . . being taken to maintain competitive bills & improve industrial rates. House Bill 5476 Industrial Electric Rate (vs Midwest Av
Slide 46: Consumers Carbon Position
43 Consumers Appears . . . . . . . . to be in a good carbon position. Carbon Tonnage Reduction (Preliminary) Million Tons of CO2 Consumers Energy 2014 2030 2020 2025 2029 Clean Power Plan Projected emission level “Implied” EPA Target
Slide 47: Capacity Diversity
44 Capacity Diversity . . . . . . . . evolving to cleaner generation while becoming more cost competitive. 2005 2017 2014
Slide 48: Generation Strategy: New Supply Sources
45 Generation Strategy: New Supply Sources . . . . . . . . combined cycle gas is the most attractive new source of supply. Levelized cost of new build (¢/kWh) Gas price= $3.00 $4.50 $6.00 W/ tax credit W/o tax credit W/ emission controls Today $3.00 per watt 5¢ 6¢ 7¢ 6¢ 9¢ 10¢ 12¢ 22¢ 8¢ Back -up 11
Slide 49: Electric Distribution
46 Electric Distribution . . . . Demand $ 1.0 Billion . . . . investing $2 billion over the next 5 years. Reliability $ 0.7 Billion Capacity $ 0.3 Billion Total $ 2.0 Billion Circuits In service 2,253 Upgrade 603 Transformers In service 663,044 Replace 16,175 Poles In service 1,554,309 40 years old
Slide 50: Cleaner Generation
47 Cleaner Generation . . . . . . . . puts us in a good position to meet carbon regulations. Cross Winds Energy Park 105 MW Jackson Plant, 540 MW Ludington Pumped Storage Plant 1,872 MW Campbell Generating Plant, 1,455 MW Karn Generating Plant, 515 MW Diverse Capacity Balanced Portfolio Renewables L
Slide 51: Credit Ratings
48 Credit Ratings . . . . . . . . just upgraded, more ahead? Consistent Performance Less Risk Customer Focus Constructive Regulation Good Energy Policy Reflects Present Prior 2002 Scale S&P / Fitch Moody’s S&P (March) Moody’s (January) Fitch (February) A+ A1 A A2 Consumers Secured A- A3 BBB+ Baa1 BB
Slide 52: Operating Cash Flow Growth
49 Operating Cash Flow Growth . . . . Amount (bils) $ Investment Cash flow before dividend _ _ _ _ _ a Non-GAAP NOLs & Credits $0.7 $0.6 $0.4 $0.5 $0.4 $0.2 $0.1 Gross operating cash flowa up $0.1 billion per year . . . . self-funds investment and strategy. Up $0.5 Billion $2.1 Interest Working capi
Slide 53: Electric Customer Base Diversified
50 Electric Customer Base Diversified . . . . . . . . “autos” 5% of 2013 electric gross margin. Hemlock Semiconductor (zero margin) General Motors Nexteer Automotive Corporation Gerdau Macsteel Denso International America Meijer Packaging Corp of America State of Michigan Spectrum Health AT&T Top Te
Slide 54: Capital Expenditures
51 Capital Expenditures 2013-2017 2018-2022 Total 2013 2014 2015 2016 2017 Subtotal Subtotal 2013-2022 (mils) (mils) (mils) (mils) (mils) (mils) (mils) (mils) New Generation (includes Renewables) $136 $222 $61 $213 $44 $676 $1,105 $1,781 Environmental 314 280 201 122 114 1,031 420 1,451 Gas 172 227
Slide 55: Electric Utility Financial & Operating Statistics
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Slide 56: Electric Utility Financial & Operating Statistics
Electric Utility Financial & Operating Statistics Years Ended December 31 PUBL COST ($ per MBX) Goat o Gos _Wechted average for aoe UBL COST FOR GEEERATION (2) Goat o os Nex atowances. POWER GENERATED (ilions of Ks) ‘cou o Gos Renew ate energy hyo, wind '12) a " ere Parchasa an ean ‘Nomtity generato
Slide 57: Gas Utility Financial & Operating Statistics
Gas Utility Financial & Operating Statistics Years Ended December 31 2012 stais (One Eneray Plaza, Jackson, Ml 49201. 517-7882590 _www.emsonetay.com
Slide 58: Enterprises
Enterprises As of December 31, 2013 Independent Power Production Capacity Primary Ownership Gross In-Service Under LT Plant Fuel Interest Capacity Year Contract State Craven Wood 50% 50 1990 © 100% © NC DIG Natural Gas 100 710 2001 61 MI Coal 50 73 1990 © 100 Mt Wood 50 40 1996 = 100 MI Grayling Woo
Slide 59: GAAP Reconciliation
GAAP Reconciliation ons VERE
Slide 60: Adjusted earnings per share reconciliation
57 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 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 After-tax items: Electric and gas utility 0.21 (0.39) - - (0.07) 0.05 0.33 0.03 - 0.17 - Enterprises 0.74 0.62 0.04 (0.02) 1.2
Slide 61: Gross Operating Cash Flow Reconciliation
58 2012 2013 2014 2015 2016 2017 2018 Consumers Operating Income + Depreciation & Amortization 1,635 $ (a) 1,740 $ 1,820 $ 1,876 $ 1,952 $ 2,054 $ 2,162 $ Enterprises Project Cash Flows 17 16 25 30 28 35 36 Gross Operating Cash Flow 1,652 $ 1,756 $ 1,845 $ 1,906 $ 1,980 $ 2,089 $ 2,198 $ (411) (335)
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