Cms Energy Corporation · NYSE:CMS
Cms Energy — Evercore ISI Utility CEO Retreat 2017
27 slides from Cms Energy's conference presentation, Jan 12, 2017
Slide 1: Evercore ISI Utility CEO Retreat
Evercore ISI Utility CEO Retreat January 12 – 13, 2017 Palisades Replacements Gas Pipelines
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: 2016 Year in Review
2016 Year in Review . . . . A. Energy Law -- improves reliability, price competitiveness B. Palisades PPA -- terminates in 2018; savings to customers C. Tax reform -- lowers rates for customers; improves headroom D. Raised ten-year capex $15.5 bil to $18 bil -- renewables and gas infrastructure E. C
Slide 4: New Energy Law
New Energy Law . . . . Customer Investor What’s New? What is the Impact? • “ROA” Reform – subsidy addressed • Price competitiveness • Secure capacity • Increased energy efficiency & demand • Incentive outside response incentive authorized ROE • RPS – 15% by end of 2021 • Additional rate base opportu
Slide 5: Early Termination of Palisades PPA
Early Termination of Palisades PPA . . . . PPA Cost (mils) Contract Customer ~$45 mil Key Points $450 price-to- Savings per year Consumers • PPA to terminate in 2018 (vs 2022) 400 • Savings shared with owner, and our 350 customers (50/50) 300 • Contingent on MPSC approval 250 Market • Securitization
Slide 6: Potential Tax Reform
Potential Tax Reform . . . . Assumptions CMS Impact • Federal tax rate 35% to 15% Utility – Lower rates for customers – Headroom for needed, new organic investment • Net interest expense not deductible Enterprises – Improved earnings & cash flow • 100% asset (investment) expensing Parent – Interest
Slide 7: Increasing Capital Investment by $1 billion
Increasing Capital Investment by $1 billion . . . . 2016 - 2025 2018 - 2027 $17 billion $18 billion Incremental Capex • Gas main replacement • Supply replacement Future Opportunities Electric Gas • More gas Infrastructure & Infrastructure & Electric infrastructure Gas Maintenance Maintenance Infrast
Slide 8: EPS
EPS . . . . a a EPS $2.10 +7% Average growth per year $1.89 $1.77 $1.87 $1.85 $1.66 $1.78 $1.73 Not in Plan $1.55 $1.66 $1.45 $1.55 $1.63 Capex Opportunities $1.36 Big Bets $1.52 $1.44 Original guidance $1.35 0 2010 2011 2012 2013 2014 2015 2016 2017 Future _____ a Adjusted EPS (non-GAAP) . . . .
Slide 9: The Consumers Energy Way
The Consumers Energy Way . . . . The CE Way Safety Quality Cost Delivery . . . CUSTOMER ENABLED FOCUS EMPLOYEES Safety: Every day is a safe day Quality: We get it right the first time BUSINESS RESULTS Cost: We see and eliminate waste Delivery: We get it done on time CONTINUOUS STANDARDIZED IMPROVEME
Slide 10: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . . 2017+ Plan Capital investment (reliability, costs, enviro mandates) 6% - 8% Self Funding: - O&M cost reductions 2 - 3 pts - Sales growth 1 - No “block” equity dilution & other 2 INVESTMENT SELF-FUNDED 5 - 6 pts Rate increase at or below inflation <2% . . . . cont
Slide 11: O&M Cost Performance Funds
O&M Cost Performance Funds . . . . Actual Cost Reduction New Cost Savings (2015 over 2006) 2014 2016 & 2015 & 2017 Good Business Decisions (mils) (mils) • Attrition (VSP) $ - 35 $ - 35 • Productivity (Coal Gas) - 35 - 15 • “Pole Top” Hardening - 20 - 10 • Smart Meters - 5 - 20 “Consumers Energy Way”
Slide 12: Operating Cash Flow Funds
Operating Cash Flow Funds . . . . Amount Up $0.7 (bils) Billion Gross operating cash flowa $2.8 $ 2.9 up > $0.1 billion per year $2.7 Up $2.5 $0.8 billion $2.4 since 2009! 2.4 $2.2 Interest, working $2.1 capital and taxes $1.9 1.9 $1.55 1.4 Operating cash flow NOLs avoid 0.9 Investment need for bloc
Slide 13: Consistent Growth Through Changing Conditions
Consistent Growth Through . . . . 7% CAGR a EPS Dividend Weather Recession Recession Help _____ Hurt a Adjusted EPS (non-GAAP) Cold 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Feb. Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold Feb. Warm winter summe
Slide 14: Appendix
Appendix
Slide 15: Managing Work Every Year
Managing Work Every Year . . . . a 2008 2009 2010 2011 2012 2013 2014 2015 EPS Mild $2.00 Summer +18¢ +17¢ Cost +7% productivity above plan $1.80 +7% Offsets Reinvestment +13¢ +7¢ -13¢ Reinvestment Hot +7% Summer Mild RECORD $1.60 Winter Hot WARM Summer +7% Cost -9¢ productivity Reinvestment above p
Slide 16: Economic Development Growth
Economic Development Growth . . . . Our Service Territory Outperforms Examples of New Business a Grand Electric Gas Combination Rapids Michigan U.S Announcement Announcement Building Permits b +325% +191% +102% C3 Ventures Inteva Products Flint Adrian • Eco-friendly injection • Auto-supply maker to
Slide 17: O&M Cost Performance
O&M Cost Performance . . . . Room to Improve Here’s How (Electric Distribution Cost Per Customer) 2014 2015 $30 mil Build the job as to go until 1st Quartile 1st Quartile designed 2nd Quartile Consumers Accurately schedule ($97) the job Consumers ($100) 3rd Quartile “Field services” project 4th Quar
Slide 18: DIG (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . . Pre-Tax Income Opportunities (mils) $ 80 $75 70 Contracts (layering in over time) 60 $55 +$40 50 +$20 40 $35 30 New contracts $20 20 $12 10 Outage pull-ahead 0 2015 2016 2017 Future Capacity ($/kw-mth) ≈ $1.00 ≈ $2.00 ≈ $3.00 $4.50 $7.50 Available: • Energy
Slide 19: Clean Power Plan
Clean Power Plan . . . . Tons CO2 (mils) 20 Consumers Energy 2012 Emissions 19 18 Retire State of Michigan Target 17 950 MW (Consumers Energy’s share) coal 16 15 14 13 12 Positioned well for compliance 11 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 . . . . rec
Slide 20: Capacity Diversity
Capacity Diversity . . . . Nuclear 8% Oil 10% Coal reduced Coal by over 40%! Purchases <24% 2nd best in U.S. 3% Renewables 10% 2016 Pumped Nuclear Storage Gas Oil 6% 8% 11% 34% Future Capacity Mix Renewables 3% Pumped Storage Coal • More Renewables; 15% by 2021 41% • Expanded Pumped Storage 11% 2005
Slide 21: Credit Ratings
Credit Ratings . . . . Scale Strategy S&P / S&P Moody’s Fitch Fitch Moody’s (Dec. ‘15) (Mar. ‘16) (Mar. ‘16) • Strong financial position A+ A1 Consumers A A2 Secured A- A3 • Growing operating BBB+ Baa1 cash flow BBB Baa2 BBB- Baa3 BB+ Ba1 • Return on regulated BBB Baa2 CMS Unsecured investment BBB-
Slide 22: GAAP Reconciliation
GAAP Reconciliation
Slide 23: 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 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 Pretax items: Electric an
Slide 24: Earnings Segment Results GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Segment Results GAAP Reconciliation (Unaudited) Three Months Ended Nine Months Ended September 30 2016 2015 2016 2015 Electric Utility Reported $ 0.69 $ 0.60 $ 1.42 $ 1.24 Downsizing Program 0.03 - 0.03 - Tax Impact (0.01) - (0.01) - Restructuring Costs and Other - -
Slide 25: Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2014 2015 2016 2017 2018 2019 2020 2021 Consumers Operating Income + Depreciation & Amortization $ 1,813 $ 1,866 $ 2,064 $ 2,150 $ 2,356 $ 2,520 $ 2,637 $ 2,783 Enterprises Project Cash Flows 20 20
Slide 26: Clean and Lean Energy Portfolio
CLean AND “Lean” Energy Portfolio . . . . Sustainable Strategy Creates Headroom = CUSTOMERS A) Energy waste elimination/reduction Incentives – Energy efficiency For: Palisades replacement (saves $45 OUR MODEL; OUR PLAN – Demand response mil per year), and gas B) Fully utilize assets -- upgrades: – L
Slide 27: Actual Plan Model
Actual Plan Model +7%/ year 2017+ Plan $1.77 $1.89 a $1.55 $1.66 Capital investment 6% - 8% Adjusted EPS $1.21 $1.26 $1.36 $1.45 $0.81 $1.08 $1.02 $1.08 $1.16 - O&M cost reductions 2 - 3 pts $0.90 $0.96 84¢ 96¢ 66¢ - Sales growth 1 Int’l Sale $0.84 50¢ Dividend 20¢ 36¢ - No “block” equity 2 dilution