Cms Energy Corporation · NYSE:CMS
Cms Energy — Q1 2019 Earnings Presentation
33 slides from Cms Energy's earnings presentation, Apr 25, 2019
Slide 1: First Quarter 2019 Results and Outlook
First Quarter 2019 Results and Outlook April 25, 2019 FOCUSED ON WORLD CLASS PERFORMANCE
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
Agentia @Business Update & SS] P PROFIT Patti Poppe President & CEO @Financial Results & Outlook Rejji Hayes Executive VP & CFO
Slide 4: First Quarter Results
First Quarter . . . Results Amount Commentary • EPS $0.75 Up 1¢ vs. Plan (11)¢ vs. Q1 2018 Reaffirm Guidance • Full-year EPS a $2.47 to $2.51 6% to 8% vs. 2018 Long-Term Outlook • EPS & DPS growth a +6% to +8% Bias toward the midpoint _____ a Adjusted EPS (non-GAAP) . . . keeps us on track. 4
Slide 5: Performance: The Triple Bottom Line
The Triple Bottom Line . . . PEOPLE • PLANET • PROFIT PEOPLE PLANET PROFIT PERFORMANCE . . . world class performance delivering hometown service. 5
Slide 6: IRP Settlement Filing
IRP Settlement Filing . . . Near-Term Additional Details • Financial Compensation Mechanism Energy Efficiency (FCM) for PPAs as an incentive • FCM = PPA payment x Company’s WACC a Demand Response (currently 5.88%) Expiration of Palisades PPA • Includes 525 MW of wind approved in Karn 1&2 closure
Slide 7: Regulatory Outlook
Regulatory Outlook . . . 2019 Regulatory / Policy 2/7: REP approved for 3/23: Filed settlement 6/10: Expected IRP settlement order Q3: Anticipated final orders 525 MW of agreement for on Calc. C & wind IRP U-20165 Demand Response Electric 1/9: Settlement approved Next Electric Order 2020 U-201
Slide 8: Electric Reliability Investment
Electric Reliability Investment . . . Approved Investment Improved System Reliability ~$200 MM Settled electric rate case Enhanced reliability spend Deferred accounting for emergent work ~$105 MM ~$85 MM a Aug. 2017 Sep. 2018 Dec. 2019 U-17990 U-18322 U-20134 _____ a Test Year Ending (x-axis) . .
Slide 9: Our Self-Funding Model
Our Self-Funding Model . . . Plan a EPS Growth 6% - 8% Self-Funding: - Cost management (O&M, fuel, purchased power) 2 - 3 pts - Sales (economic development, energy efficiency) 1 - Other (Enterprises, tax planning, etc.) 2 INVESTMENT SELF-FUNDED 5 - 6 pts Customer Prices “at or below inflation” <2% _
Slide 10: Consistent Growth Through Changing Circumstances
Consistent Growth Through . . . 7% CAGR b a EPS +6% to +8% Dividend +7% 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 2019 Feb. Cold Mild Hot Warm Mild Cold Summer- Hot Hot W
Slide 11: 2019 First Quarter EPS Results By Business Segment
2019 First Quarter EPS . . . Results By Business Segment 2018 2019 EPS $0.86 $0.75 EPS Weather-normalized a $0.89 $0.70 Utility $0.80 Enterprises 0.00 Parent & Other (0.05) CMS Energy $0.75 _____ a Adjusted EPS (non-GAAP) . . . ahead of Plan despite significant storm activity. 11
Slide 12: 2019 EPS
2019 EPS . . . a First Quarter Nine Months To Go (11)¢ 25¢ - 29¢ $2.47 - $2.51 6% - 8% 18¢ - 22¢ $2.33 8¢ 3¢ 14¢ (10)¢ (12)¢ (7)¢ Absent 2018: Weather (30)¢ Reinvestment 23 ( 7)¢ First First Quarter Quarter $0.86 $0.75 2018 Weather Storm Costs Rates & Usage, Absence of Rates & Usage, 2019 Investment
Slide 13: Managing Work Every Year
Managing Work Every Year . . . a 2011 2012 2013 2014 2015 2016 2017 2018 2019 EPS $2.60 Reinvestment $2.40 +7% Weather & Storms $2.20 Mild +7% Summer Hot Cost +7% Summer $2.00 productivity above plan +7% Cost productivity $1.80 Reinvestment +7% above plan Cost productivity Hot Mild Storms Summer Win
Slide 14: Utility Customer Investment Plan
Utility Customer Investment Plan . . . 5-Year Plan Rate Base Growth Electric Prior Current Gas Capital Investment (Bn): Plan Plan Mix $ 4 $ 5 ~45% $23 Bn Electric Utility >7% CAGR $16 Bn New Utility Renewables 1 1 ~10 60% Gas Utility 5 5 ~45 70% Total $10 $11 100% ~40% ~30% System Need: >$50 Bn 2018
Slide 15: Our Entire Cost Structure
Our Entire Cost Structure . . . Cost Components Residential Bills as % of Wallet a 100% 100% (Electric & Gas) Utility Bill Down 90% 50 bps! Utility Bill ~ 4% ~ 3½% 80% Fuel and Power Costs TV & Phone ~ 4% TV & Phone ~ 4% Healthcare ~ 5% Healthcare ~ 9% 70% Food ~ 12% ~70% Food ~ 13% 60% ~70% Transpo
Slide 16: Economic Development is Robust
Economic Development is Robust . . . Customer Committed Load Diversified Customer Base Economic Indicators (2018 Electric & Gas Rate Mix) a Grand 2010 thru 2017 Rapids U.S. Auto Other GDP Growth 32 % 17 % Other 2% 2% Population Growth 7% 5% Industrial 2.6 % 3.8 % Target 9% Unemployment* *February 20
Slide 17: 2019 Financing Plan
2019 Financing Plan . . . 2019 (MM) New Issuances: Consumers Energy: First Mortgage Bonds $600 • Supports Utility investment of $2.2 Bn CMS Parent: Term Loan (drawn) Long-term Debt $300 630 • Provides short-term liquidity • Senior unsecured & hybrids Planned Equity 70 All priced • Maintains heal
Slide 18: 2019 Sensitivities
2019 Sensitivities . . . Full Year Impact a Sensitivity EPS OCF (MM) Sales b • Electric (37,789 GWh) + 1% + 6¢ + $ 25 • Gas (303 Bcf) + 5 + 9 + 35 – – 55 Gas prices (NYMEX) + 50¢ + 0 + Utility ROE (planned) Settled • Electric (10.0%) + 10 bps + 1½ + 6 order Marginal 1/9 • Gas (10.0%) + 10 + < ½ risk
Slide 19: Compelling Investment Thesis
Compelling Investment Thesis . . . Aging Infrastructure Strong Cash Flow & Constructive Regulation Balance Sheet Diversified Service Affordable Prices Territory . . . adaptive to changing conditions. 19
Slide 20: Q&A Thank You!
Q&A Thank You! 20
Slide 21: Appendix
Appendix
Slide 22: 2019 and Long-Term Financial Targets
2019 and Long-Term Financial Targets . . . 22
Slide 23: Utility Investment Plan
Utility Investment Plan Updated 5-year Plan (Bn) 2019 2020 2021 2022 2023 Total Electric Utility $ 1.2 $ 1.3 $ 1.3 $ 1.1 $ 1.2 $6.1 New Renewables (incl. above) 0.2 0.4 0.4 0 0 1.0 Gas Utility 1.0 1.1 0.9 1.1 1.0 5.1 Total $2.2 $2.4 $2.2 $2.2 $2.2 $11.2 Depreciation & Amortization $1.0 $1.0 $1.1 $1.
Slide 24: Michigan Energy Policy is Supportive
Michigan Energy Policy is Supportive . . . • Bipartisan Energy Law (2016 law enhanced 2008 law) • Forward-looking test year (10-month rate case) • Energy Efficiency incentive (20% of spend) • Renewable Portfolio Standard (RPS) • Constructive ROEs Michigan Public Service Commission Sally Talberg (I),
Slide 25: Operating Cash Flow Generation
Operating Cash Flow Generation . . . Amount (Bn) >$9 Bn in aggregate $ 2.2 2.05 1.95 1.85 1.70 1.75 1.7 1.65 1.2 0.7 Investment 0.2 (0.3) Cash flow before dividend (0.8) (1.3) 2018 2019 2020 2021 2022 2023 NOLs & credits $0.4 $0.3 $0.3 $0.4 $0.4 $0.5 . . . remains strong and supports our capital pla
Slide 26: Credit Metrics Maintained
Credit Metrics Maintained . . . S&P / S&P Moody’s Fitch Fitch Moody’s (Dec. ‘18) (Jul. ‘18) (Sep. ‘18) Ratings Drivers AA- Aa3 A+ A1 • Strong financial position Consumers A A2 Secured A- A3 BBB+ Baa1 • Growing operating BBB Baa2 cash flow BBB- Baa3 BB+ Ba1 BBB+ Baa1 BBB Baa2 CMS Unsecured • Return o
Slide 27: DIG (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . Pre-Tax Income Opportunities (MM) $ 100 2019/20 MISO Zone 7 Auction $95 • Capacity ~$0.70/kw-month 2019 Through 2022 90 • Surplus of only 252 ZRCs Contracted 80 • DIG largely contracted Capacity >80% $7.50 b 70 (~$2.00/kw-month) 60 Energy >90% 50 $45 $45 40 30
Slide 28: Utility Driven, Low Risk Growth
Utility Driven, Low Risk Growth . . . CMS Energy Long-Term Growth Plan Segments: 6 - 7% • Needed system upgrades / robust backlog - Utility • Affordable prices driven by cost controls • Largely contracted & utility-like - Enterprises 0 -1 • Contracted generation & renewables • Tax planning - Parent
Slide 29: GAAP Reconciliation
GAAP Reconciliation
Slide 30: Earnings Per Share By Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Per Share By Year GAAP Reconciliation (Unaudited) GAAP GAAP 2018 over 2018 over 2003 2017 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CAGR Growth Reported earnings (loss) per share - GAAP ($0.30) $0.64 ($0.44) ($0.41) ($1.02) $1.20
Slide 31: 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 2019 1Q Net Income Available to Common Stockholders $ 213 Reconciling items: Electric utility and gas utility - Tax impact - Enterprises (*) Tax impac
Slide 32: 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 3/31/19 3/31/18 Electric Utility Reported net income per share $ 0.37 $ 0.49 Reconciling items: Other exclusions from adjusted earnings - - Adjus
Slide 33: Weather Impact on Year Over Year Earnings
CMS ENERGY CORPORATION Weather Impact on Year Over Year Earnings (Unaudited) In Millions, Except Per Share Amounts Three Months Ended 3/31/2019 3/31/2018 Change Net Income Available to Common Stockholders $ 213 $ 241 $ (28) Reconciling items: Other exclusions from adjusted earnings (*) * * Tax impac