Cms Energy Corporation · NYSE:CMS
Cms Energy — Q2 2020 Earnings Presentation
31 slides from Cms Energy's earnings presentation, Aug 3, 2020
Slide 1: Second Quarter 2020 Results and Outlook
Second Quarter 2020 Results and Outlook August 3, 2020
Slide 2: Forward-looking statements and non-GAAP measures
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 Business Update and Long-Term Outlook Patti Poppe President & CEO PEOPLE PLANET PROFIT Financial Results Rejji Hayes Executive VP & CFO Enter “so what” if necessary – Century Gothic, Bold, Size 18 or smaller 33
Slide 4: 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 5: 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 6: 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 7: Regulatory Outlook
Regulatory Outlook . . . 2019 2020 Regulatory / Policy 2016 Energy 4/15: U-20757 Law fully COVID-19 order implemented for deferred accounting Electric 2/27: U-20697 a Dec. Expected Filed $244 MM a final order Updated $230 MM 10.5% ROE Gas Gas 9/26: b U-20322 12/16: U-20650 Oct. Expected Dec.
Slide 8: 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 9: 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 10: First Half 2020 EPS
First Half 2020 EPS . . . Year to Date Results By Business Segment 2019 2020 YTD EPS b EPS - (GAAP) $1.08 $1.33 Utility $1.43 Adjustments a -- 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¢ a Ad
Slide 11: 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 12: 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 13: 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 14: 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 15: 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 16: Investment Thesis
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 17: Q&A Thank You
Q&A Thank You 1717
Slide 18: Appendix
CMS EVERGY Appendix 18
Slide 19: 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 $5.6 Enter
Slide 20: 2020 Sensitivities
2020 Sensitivities . . . Full-Year Impact a Sensitivity EPS OCF Salesb (¢) ($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 21: 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 22: 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 23: 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 24: Declining Exposure to Coal
Declining Exposure to Coal . . . Coal % of Rate Basea Renewables % of Rate Base 20% 2016 $3 - $6 Bn Classic 7 Investment retirement opportunities <15% 2023 Karn 1&2 retirement <10% <10% 2031 Campbell Campbell (4)% 1&2 1&2 2039 5% Campbell Campbell (5½)% 3% 3 3 0% Campbell 1&2 2016 Today 2023 2040 20
Slide 25: 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 Michigan Public
Slide 26: GAAP Reconciliation
GAAP Reconciliation 26
Slide 27: 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 28: 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 29: 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 30: 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 31: Reconciliation of GAAP to Non-GAAP Operating Activities
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 31