Slide 1: First Quarter 2015 Results & Outlook
First Quarter 2015 Results & Outlook April 23, 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 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 John Russell First Quarter Results President & CEO Operational Results Legislative Update Results & Outlook Tom Webb First Quarter EPS Executive VP & CFO Reinvestment Upsides New Contracts Cost Control 2
Slide 4: First Quarter Results
First Quarter Results . . . . First Quarter EPS at 73¢ a Down 2¢ from 2014; up 4¢ weather-normalized, or 7% Up 21¢ from Plan Raised annual dividend 7.4% from $1.08 to $1.16 a Reaffirm full year EPS guidance of $1.86 to $1.89 _____ a Adjusted EPS (non-GAAP) . . . . driven by higher gas sales and stro
Slide 5: Operational Results
Operational Results . . . . Employee safety improved by 58% compared to last year Record gas sales in February Gas system performed well Capital investments working -- electric reliability best in ten years Business electric and gas customer satisfaction increased New five-year union agreeme
Slide 6: Growing the Gas Business
Growing the Gas Business . . . . Capital Investment What’s In the Plan? Amount (bils) • Main replacement $7 (800 miles) • New compression 6 $5.6 (9 new compressors, 35,000 hp) +93% • New customers New Customers 5 (100,000 new connections) Infrastructure 4 Pipeline Integrity What’s NOT in the Plan? 3
Slide 7: Falling Natural Gas Prices
Falling Natural Gas Prices . . . . $/ MCF • Lower commodity prices $7 $6.96 • Optimize storage - 50% 6 6.35 • Purchasing strategy 5 5.26 4.62 4.75 4 3 $3.47 02 2010 2011 2012 2013 2014 2015 2016 - 2019 Average Customer Bill ≈$3.00 ≈$2.00 Flat (per day) . . . . create headroom to invest more into the
Slide 8: Customer Satisfaction
Customer Satisfaction . . . . Electric Gas #2 1st Quartile #3 1st Quartile 2nd Quartile 2nd Quartile #9 #6 3rd Quartile 3rd Quartile 4th Quartile 4th Quartile Present Present 2010 2012 2014 Rank 2016 2010 2012 2014 Rank 2016 Residential Business Residential Business . . . . continues to improve rapi
Slide 9: Michigan Energy Law Update
Michigan Energy Law Update . . . . • Adaptability • Reliability Update • Affordability • Environmental protection • 10% renewables by 2015 Present: 10% cap • Energy efficiency w/o subsidy standards Governor Snyder • File-and-implement SB0247 • Historical test • 10% ROA cap SB0235 year • 12-18 months
Slide 10: Governor Snyder's Special Message On Energy
Governor Snyder’s Special Message On Energy . . . . Governor Snyder’s Four Pillars How We Could Get There Adaptability • IRP process to determine generation mix Reliability • Ensure adequate supply -15% waste Resource planning Affordability • Reduce waste by 15% Environmentally protective • Consider
Slide 11: Governor Snyder's Special Message On Energy
Governor Snyder’s Special Message On Energy . . . . Governor Snyder’s Four Pillars MISO Zone 7 Capacity 2016 Michigan’s Lower Peninsula (GW) 25 3 Adaptability 22 Reserves 3 • IRP process to determine generation mix Demand 22 Reliability • Ensure adequate supply Affordability Resources Requirement Ex
Slide 12: 2015 First Quarter EPS
2015 First Quarter EPS . . . . a Results By Business Segment 2015 2014 EPS EPS $0.73 $0.75 Better Actual than Plan -2¢ Utility $0.78 $0.18 Enterprises 0.02 0.01 Weather-Normalized $0.59 $0.55 Interest & other (0.07) 0.02 +4¢ +7% CMS Energy $0.73 $0.21 Percent Increase +40% _____ a Adjusted EPS (non-
Slide 13: 2015 EPS
2015 EPS . . . . a First Quarter Nine Months To Go (2)¢ 11¢ - 14¢ $1.86 - $1.89 5% - 7% 30¢ - 33¢ $1.77 4¢ (6)¢ + 7% (11)¢ (8)¢ Abs of ’14 (20)¢ 2015 14 Net (6)¢ First Quarter First Quarter $0.75 $0.73 2014 Rate Change, Cost Weather Work Pull Ahead Mortality Tables & Lower Cost & 2015 & Other Discou
Slide 14: "Reinvestment" Helps Customers
“Reinvestment” Helps Customers . . . . Adjusted EPS Increase forestry (non-GAAP) Accelerate “DIG” Outage to 2015 ― $8 mil cost in 2015; $10 mil benefit in 2016 17¢ ― Capacity increase 38 MW 2015 Weather 14¢ 2014 Natural Offsets (1) Cost & Other 4 Total 17¢ $1.77 +7% Guidance January March 31 June 30
Slide 15: Capacity & Energy Price Increases
Capacity & Energy Price Increases . . . . Was Now Future Scenarios (mils) (mils) (mils) New Business + $25 – $50 $65 •Long-term Energy Energy more • 250 MW at $4.00 per kWm (6/14) $55 • 250 MW ≈ $5.75 per kWm (4/15) Capacity $40 •Recent Capacity • Long-term > $3.30 $35 • Near-term ≈ $4.50 $15 Upside
Slide 16: Sales Growth
Sales Growth . . . . Economic Indicators Annual Electric Salesa Grand Industrial Rapids Michigan U.S Total 8.7% Building Permits* +32% +4% +7% GDP 2010 2013 15 11 8 5.0% Population 2011 2014 3 0 2 Conservative 2.8% 3% Unemployment (2/15) 3.9 5.9 5.5 2% 1.0% 1% ½% *Annualized numbers thru February 20
Slide 17: Capex Up 45%
Capex Up 45% . . . . 2005-2014 2015-2024 Opportunity $10.7 bil $15.5 bil $20 + bil Opportunity +30% +45% Gas Electric Gas Electric Infrastructure Maintenance Infrastructure Maintenance Electric Environ. Reliability New Smart Generation Environ. Energy New Generation Electric Reliability Smart Energy
Slide 18: Investment Program
Investment Program . . . . Gas Replacement 15% complete Clean Air 85% complete Smart Energy 40% complete New Compressors 50% complete Ludington 45% complete . . . . progressing well. 17
Slide 19: O&M Cost Reductions
O&M Cost Reductions . . . . 2006 2014 2019 Down 10% Down 7% $1.1 bil $1.0 bil $0.9 bil Inflation Inflation ≈2% ≈2% • Coal to Gas Switching (Zeeland) • Coal to Gas Switching (Jackson) • Smarter benefit plans • “Pole Top” Hardening • Productivity/Attrition • Productivity/Smart Energy . . . . provide m
Slide 20: 2015 Sensitivities
2015 Sensitivities . . . . 2015 Impact Status Sensitivity EPS OCF (mils) Sales a • Electric (38,093 GWh) + 1% + $0.05 + $ 20 • Gas (302.6 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 +1
Slide 21: 2015 Financial Targets
2015 Financial Targets . . . . Target Focus Adjusted EPS (non-GAAP) $1.86 - $1.89 +5% 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 d
Slide 22: CMS Energy Consistent Growth
CMS Energy Consistent Growth . . . . Future Shines Bright Sustainable Future Growth a $3.50 +5% to +7% / Past Next 5 year Performance Years Investment (bils) $6.4 $7.6 (2010-2014) Capacity Op! +7% /year O&M Reductions (10)% (7)% (2006-2014) Conservative Sales Growth +1% +½ % (2010-2014) Conservative
Slide 23: Appendix
Appendix
Slide 24: Liquidity (as of March 31, 2015)
Liquidity (as of March 31, 2015) . . . . Renewal Capacity Availability $2.0 Billion CMS Energy $1.9 Billion Stronger liquidity 5-year revolver Dec 2018 $550 mils than peers $446 mils Consumers Energy 5-year revolver Dec 2018 650 640 Letter of Credit Apr 2018 68 Letter of Credit Aug 2018 36 30 Letter
Slide 25: Operating Cash Flow Growth
Operating Cash Flow Growth . . . . Amount Up $0.5 Billion (bils) Gross operating cash flowa $ 2.5 up $0.1 billion per year $2.4 $2.2 $2.1 $2.0 2.0 $1.9 Interest, working $1.8 capital and taxes $1.68 1.5 Pct of Market Cap (as of Dec. 2014) 1.0 Cap Inv OCF Investment 16% CMS 13% 15% 0.5 Peers 14 12 0.
Slide 26: 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 27: 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 $ 355 Cash at year end 2014 $ 71 Enterprises 20 Sources Sources $ 375 Operating (depreciation & amortization $675) $ 1,940 Other working ca
Slide 28: GAAP Reconciliation
GAAP Reconciliation
Slide 29: 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 (loss) 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)
Slide 30: 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 31: Earnings Segment Results GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Segment Results GAAP Reconciliation (Unaudited) Three Months Ended March 31 2015 2014 Electric Utility Reported $ 0.34 $ 0.36 Restructuring Costs and Other - - Adjusted $ 0.34 $ 0.36 Gas Utility Reported $ 0.44 $ 0.44 Restructuring Costs and Other - - Adjusted $ 0.44
Slide 32: 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 33: 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 34: 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 Statements of Cash Flows Other Consumers Equity Consumers CMS
Slide 35: Reconciliation of Gross Operating Cash Flow to GAAP
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2014 2015 2016 2017 2018 2019 Consumers Operating Income + Depreciation & Amortization $ 1,813 $ 1,940 $ 1,955 $ 2,081 $ 2,194 $ 2,358 Enterprises Project Cash Flows 20 20 28 50 52 55 Gross Operati