Cms Energy Corporation · NYSE:CMS
Cms Energy — Investor Presentation (June 2015)
35 slides from Cms Energy's investor presentation, Jun 9, 2015
Slide 1: Investor Meetings June 9 & 10, 2015
Investor Meetings June 9 & 10, 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
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: 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 4: Investment "Catch-up"
Investment “Catch-up” . . . . Amount (billions) $1.8 > $1.5 per year Peers Peer Performance a Consumers Energy Peer Average CMS Capex Liquidity Cash Flow (oper) 20% 16% 15% 14% 15% 12% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 _____
Slide 5: 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 6: Growing the Gas Business
Growing the Gas Business . . . . Capital Investment Gas Service Territory Amount - 1.7 million customers (bils) - 28,854 miles of distribution and transmission $7 - 309 Bcf gas storage capacity Gas service area Transmission line 6 $5.6 Compressor stations +93% Storage fields New Customers Interconne
Slide 7: Gas Infrastructure: What's In, What's Not
Gas Infrastructure . . . . WHAT’S IN Main Replacements Compression New Connections 800 miles 35,000 hp 100,000 customers $1 billion $300 million $550 million Modernization WHAT’S NOT 6 city gates, 7 regulation stations, 24 relief valves More Conversions Replace Transmission Mains 70,000 customers 27
Slide 8: Upside Capacity Opportunities
Upside Capacity Opportunities . . . . Capacity Growth Over Next Ten Years MW 11,000 10,000 PPA’s Expire ~9,400 MW PPA ~8,600 MW 1,240 MW 580 PPA 2,600 780 MW 7,500 capacity Owned ~30% 8,820 ~800 MW 410 MW Lower customer bills Owned Shortfall 6,000 540 MW 5,000 Today Jackson Plant ROA Customers Palis
Slide 9: Capacity & Energy Price Increases
Capacity & Energy Price Increases . . . . Was Now Upside 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 at $6.02 per kWm (4/15) Capacity $40 •Recent Capacity • Long-term > $3.30 $35 • Near-term ≈ $4.50 $15 Upsid
Slide 10: Sales Growth
Sales Growth . . . . Economic Indicators Annual Electric Salesa Industrial Total Grand 8.7% Rapids Michigan U.S Building Permits* +29% +12% +7% 5.0% Conservative 2.8% 3% GDP 2010 2013 15 11 8 2% 1.0% 1% ½% Population 2011 2014 3 0 2 -2.5% Unemployment (4/15) 3.3 5.4 5.4 -5.0% 2008-2009 2010-2013 201
Slide 11: Economic Growth
Economic Growth . . . . Examples of New Business Industries Electric Gas Combination MW Announcement Auto 50 Denso North America Food 7 • Hub for all thermal production in N. America • 100 new jobs Manufacturing 21 • $53.6 million investment • Investments thru 2015 Metal 20 Dicastal Continental Dair
Slide 12: 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 13: O&M Cost Savings
O&M Cost Savings . . . . O&M Trend vs Peers O&M Cost Savings 2014 2014 0 50% & 2015 2018 (mils) (mils) ~6% per year 0 Peers • Attrition $ - 35 $ - 75 0 ~2% per year • Productivity (Coal Gas) - 35 - 50 0 • “Pole Top” Hardening - 30 - 30 Inflation 0 -25% • Smart Meters - 5 - 25 0 • Eliminate Waste (UA
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: Electric Customer Prices
Electric Customer Prices . . . . Residential Bills Industrial Rates Worse Worse 20 % 30 % 26% 21% 20 Rates & 10 Fuel 13% Rates & 10 7% Improving fast Design 3% National Avg Midwest Avg 0 0 Outstanding (5)% -10 Policy or market might -10 (12)% (13)% eliminate gap Rates (14)% -20 Rates & Rates & (19)%
Slide 16: 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 17: Governor Snyder's Leadership On Energy
Governor Snyder’s Leadership 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 envi
Slide 18: 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 19: Experienced Policy Makers
Experienced Policy Makers . . . . Governor Rick Snyder Commission Powering Michigan’s John Quackenbush (R), Comeback Chairman Term Ends: July 2, 2017 Consistent Sally Talberg (I) Term Ends: Energy Committee Chairs Leadership! July 2, 2019 Senator Mike Nofs Greg White (I) Term Ends: July 2, 2015 Hous
Slide 20: Why Invest in CMS Energy?
Why Invest in CMS Energy? Our Growth Engine Supported By (2015-2024 Capex) ● UPSIDES create headroom (Investment, Sales, Cost, & DIG) ● PARTNERS in progress $15.5 Billion (Customers, Regulators, & Policy Makers) a 5% - 7% EPS growth ● PASSION to improve for customers AND owners (Value, Reliability,
Slide 21: Appendix
Appendix
Slide 22: Customer Focus: Excellent Operations
Customer Focus: Excellent Operations . . . . $10 million in savings +15% 71% per year 56% +54% U.S. Productivity 11% a 11% 2% 2007 2014 Target 2017 _____ a Source: United State Dept. of Labor Bureau of Labor Statistics; U.S. Nonfarm . . . . enhance productivity and reduce costs. 21
Slide 23: Customer Focus: Excellent Operations
Customer Focus: Excellent Operations . . . . Employee Engagement Most Admired Companies First Quartile! • First quartile Best Places to Work 78% performance 75% 63% • Engagement scores at levels higher than most admired companies • Target to maintain high level of Peers High Performers CMS Energy en
Slide 24: Carbon Tonnage Reduction
Consumers Appears . . . . Carbon Tonnage Reduction Million Tons of CO2 (Preliminary) 25 2005 Baseline 23 21 Clean Power Plan 19 “Implied” EPA Target 17 Consumers Energy Projected 15 emission level 13 2014 2020 2025 2029 2030 . . . . to be in a good carbon position. 23
Slide 25: Generation Strategy: New Supply Sources
Generation Strategy: New Supply Sources . . . . Levelized cost of new build (¢/kWh) New Build 25 Consumers Energy Sources 22¢ 20 15¢ 15 12¢ 11¢ Back 10¢ 10 -up 8¢ 7¢ 6¢ Back 7¢ 6¢ -up 6¢ 9¢ 5.5¢ 5¢ 5¢ 5 Cross Winds 6¢ Big 5 Palisades Zeeland 0 Combined Cycle Gas Plant Wind Coal Nuclear Residential
Slide 26: Capital Expenditures
Capital Expenditures 2015-2019 2020-2024 2015-2024 2015 2016 2017 2018 2019 Subtotal Subtotal Total (mils) (mils) (mils) (mils) (mils) (mils) (mils) (mils) New Generation (includes Renewables) $ 70 $ 224 $ 52 $ 64 $ 134 $ 544 $ 612 $ 1,156 Environmental 254 98 136 153 212 853 139 992 Gas Infrastruct
Slide 27: Capacity Diversity
Capacity Diversity . . . . Nuclear Oil 8% 6% Renewables 9% Coal 34% Pumped Storage 2014 11% Nuclear Gas Nuclear Oil 6% 32% 8% 8% Oil 6% Renewables Purchases 3% 3% Coal 24% Pumped Coal Renewables Storage 41% 10% 11% 2005 2017 Pumped Gas Storage Gas 31% 12% 37% . . . . evolving to cleaner generation w
Slide 28: 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 29: 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 30: 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 31: Electric Customer Base Diversified
Electric Customer Base Diversified . . . . Top Ten Customers 2014 Electric Gross Margin (2014 Ranked by Deliveries) • Hemlock Semiconductor • General Motors • Nexteer Automotive Corporation Commercial • Gerdau MacSteel 33% • Denso International Residential 50% • Packaging Corporation of America • Me
Slide 32: 2015 Gas And Electric Rate Cases
2015 Gas And Electric Rate Cases . . . . 2014 2015 2016 Our View GAS Filed $88 M 7/01 Settled $45 M A) Settled $45 million B) 10.3% ROE A) A) Jackson Plant in Jackson Plant Classic 7 Self- Decommissioned rate base implement B) Final Securitization Filed $110 M Surcharge Ends Order B) Investment re
Slide 33: GAAP Reconciliation
GAAP Reconciliation
Slide 34: 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 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 After-tax items: Electric and gas ut
Slide 35: 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 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