Slide 1: 2020 Results and Outlook
2020 Results and Outlook Leading the Clean Energy Transition February 4, 2021
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: A Simple Investment Thesis
A Simple Investment Thesis . . . Industry-leading clean energy commitment a Net Zero Carbon (2040) & Net Zero Methane (2030) Clean Energy Leader Diversified Service Territory Aging Excellence through the Infrastructure Top-tier regulatory jurisdictionb Strong Cash Flow Constructive & Balance Sheet L
Slide 4: Consistent Growth Through Changing Circumstances
Consistent Growth Through . . . 7% Adjusted EPS CAGR Adjusted EPS +6% to +8% +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 2021 Cold Mild Warm Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold Feb Warm W
Slide 5: 2020 Financial Results & Outlook
2020 Financial Results & Outlook . . . vs. 2020 Results Amount Prior Year • Adjusted EPS $2.67 Up +7% • Adjusted OCF (MM)a $1,976 Up $226 MM vs. 2020 guidance 2021 Outlook • Adjusted EPS Guidance $2.83 – $2.87 Raised, up 1¢ vs. preliminary 2021 guidance • Annual Dividend $1.74 Up +7% Long-term Outlo
Slide 6: 2020 Successes
2020 Successes . . . People Planet Profit • >$80 MM to customers & • >800 MW of new wind • 18 years of +7%e adjusted EPS communities growth • 300 MW of new solarc • 1st quartile employee (of 1,100 MW by 2024) • Dividend +7% YoY, 15th engagementa & customer increase in as many years b experience • >$
Slide 7: Investing in the Clean Energy Transition
Investing in the Clean Energy Transition . . . Customer Investment Clean Energy Mixc Clean Energy Generation (Estimated Clean Energy % Adjusted EPS) Electric Gas +$1 Bn Delivers: $3 - $6 Bn ~$13¼ Bn Solar Investment ~$12¼ ✓40% investment in Clean Energy Transition a PLUS Bn 18% Incentives on PPAs &
Slide 8: Our Entire Cost Structure
Our Entire Cost Structure . . . Cost Components Estimated Cost Savings 100% Year Event Savings Fuel and Power Costs 2022 Palisades retirement $90 MM 2023 Karn 1&2 coal unit $30 MM ~70% b Non-capital retirements (adj. O&M savings ) related O&M Costs ~$19 Bn 2025 MCV contract change $50 MM Customer in
Slide 9: Excellence Through the Triple Bottom Line
Excellence Through the ... Engaged …Delivers …Outstanding Workforce… Productivity and… Customer Experience. a (Engagement) (Capex/Headcount) (CXi Index ) ($ in thousands) 83% 76 $290 Up Top Up >2x quartile 81% ~2.5x across all industries Top quartile for U.S. utilities 37 since 2011 $120 Bottom quar
Slide 10: Top-Tier Michigan Regulatory Environment
Top-Tier Michigan Regulatory Environment . . . Legislative Strong Top Tier Framework Leadership Regulatory Environmenta Timely investment recovery Michigan − Forward-looking test years 1 7 2013-present − 10-month rate cases Dan Scripps (D), Chair 2 9 Supportive Incentives − Constructive ROEs 3 18 −
Slide 11: Regulatory Outlook
Regulatory Outlook . . . 2020 2021 Regulatory / Policy 12/17 Order: Order for securitization of Karn Q2: File Integrated 1&2 coal plants Resource Plan ~$688 MM Electric 12/17 Order: a U-20697 $126 MM Q1: File next Q4: Expected 9.9% ROE, 51.11% Equity Ratio rate case final order Gas Gas 8/10 Se
Slide 12: 2020 Results
2020 Results . . . Full Year Results By Business Segment 2019 2020 Adjusted Jan. 2020 EPS - (GAAP) $2.39 $2.64 EPS Adj. Guidance a Adjustments 0.10 0.03 Utility $2.91 $2.84 – 2.88 Adjusted (non-GAAP) $2.49 $2.67 Enterprises 0.12 0.08 – 0.10 EnerBank 0.20 0.18 – 0.20 Parent & Other (0.56) (0.46) – (0
Slide 13: 2020 Objectives Achieved
2020 Objectives Achieved . . . Objectives Actual Adjusted EPS (non-GAAP) $2.64 – $2.68 $2.67 ✓ DPS growth In-line w/ earnings +7% ✓ $1,976 ✓ a Adjusted OCF (MM) $1,750 FFO/average debtb (non-GAAP) ~17% 17½% ✓ Utility investment (Bn) $2.2 $2.3 ✓ Planned equity issuance (MM) Up to $250 ~$250 ✓ Present
Slide 14: 2021 Guidance Offers 6% to 8% Growth
2021 Guidance Offers 6% to 8% Growth . . . Adjusted EPS Utility $3.03 – $3.07 Enterprises 0.12 – 0.13 EnerBank 0.20 – 0.22 Parent and Other (0.52) – (0.55) Consolidated EPS $2.83 – $2.87 +6% to +8% . . . compounding on 2020’s actual performance. 14
Slide 15: 2021 Adjusted EPS
2021 Adjusted EPS . . . 41¢ ✓ $2.83 – $2.87 Safety, reliability & +6% to +8% clean energy support $2.67 6¢ Waste elimination (27)¢ 0¢ – (4)¢ 2021 sales Approved roughly flat ✓ERC U-20697 Order $126 MM (effective 1/21) ✓GRC U-20650 Order $144 MM (effective 10/20) ✓Amortization of a ~$35 MM gas tax be
Slide 16: Managing Work Every Year
Managing Work Every Year . . . 2012 2013 2014 2015 2016 2017 2018 2019 2020 Adjusted Reinvestment EPS & customer support Reinvestment Cold +7% +23¢ January Weather +7% & storms +7% (9)¢ Cost productivity (CE Way) & Mild +7% weather summer Storms +17¢ Hot summer +18¢ +7% Cost Weather productivity +7%
Slide 17: Near- and Long-Term Objectives
Near- and Long-Term Objectives . . . 2021 Long-Term Plan Adjusted EPS (non-GAAP) $2.83 – $2.87 +6% to +8% DPS growth In-line w/ earnings In-line w/ earnings Operating cash flow (MM) $1,850 >$10 Bn (cumulative, over 5 years) Solid Solid Target credit ratings investment grade investment grade FFO/Debt
Slide 18: 2021 Sensitivities
2021 Sensitivities . . . Full-Year Impact Sensitivity Adj. EPS OCF 2021 Adj. EPS Sensitivities (1% Full Year in Volume) Salesa (¢) ($MM) Electric Gas Electric (~35,200 GWh) + 1% +7 + 27 Residential 4¢ 2¢ Commercial 2½ ½ Gas (~303 Bcf) +1 +3 + 13 Industrial ½ ½ Gas Prices + 50¢ +0 + 60 Utility Earn
Slide 19: A Simple Investment Thesis
A Simple Investment Thesis . . . Industry-leading clean energy commitment a Net Zero Carbon (2040) & Net Zero Methane (2030) Clean Energy Leader Diversified Service Territory Aging Excellence through the Infrastructure Top-tier regulatory jurisdictionb Strong Cash Flow Constructive & Balance Sheet L
Slide 20: Q&A Thank You
Q&A Thank You 2020
Slide 21: Appendix
Appendix 2121
Slide 22: Utility Customer Investment Plan
Utility Customer Investment Plan 5-Year Plan ($ Bn) 2021 2022 2023 2024 2025 Total Clean Energy Generation $0.3 $0.6 $0.5 $0.5 $0.5 $2.4 Electric Utility 1.1 1.2 1.1 1.0 1.1 5.5 Gas Utility 1.1 1.2 1.1 1.0 0.9 5.3 Total $2.5 $3.0 $2.7 $2.5 $2.5 $13.2 Depreciation & Amortization $1.1 $1.1 $1.2 $1.2 $
Slide 23: Rate Base Growth
Rate Base Growth . . . Rate Base ROE Enhancements Clean Energy Generation Electric Gas >7%/yr a ~$28 Bn ✓ 20% EE incentive ~$45 MM/yr in 5-yr plan ~$21½ Bn ✓ PPA incentives (FCM) PPA payment x WACC ✓ 10.7% ROE on RPS investments ~$1.2 Bn rate base in 5-yr plan 2021 2025 Presentation endnotes are inc
Slide 24: Declining Exposure to Coal
Declining Exposure to Coal . . . Coal % of Rate Basea Clean Energy Mixb 2016 (Estimated Clean Energy % Adjusted EPS) 20% Classic 7 retirement $3 - $6 Bn Solar Investment PLUS <15% 2023 Incentives on PPAs Karn 1&2 and Demand retirement Response ~12% <10% <10% 2031 Campbell Campbell (4)% 1&2 1&2 2039
Slide 25: Operating Cash Flow Generation
Operating Cash Flow Generation . . . Amount ~$10¼ Bn in aggregate (Bn) $2.3 $2.25 Adj. $2.15 $1.95 $2.05 $1.98a $1.85 Investment Cash flow before dividend (1.1) 2020 2021 2022 2023 2024 2025 b NOLs & Credits $0.6 $0.5 $0.6 $0.6 $0.5 $0.4 Presentation endnotes are included after the appendix. . . . r
Slide 26: 2021 Planned Financings
2021 Planned Financings . . . Financings Existing Facilities 2020 2021 Plan (MM) (MM) Consumers Energy: $250 MM First Mortgage Bonds $1,661 $665 (Nov-2022) >$1.6 Bna of Term Loan $300 -- net liquidity Opportunistic position with no CP CMS Energy: financings create outstanding customer benefits (as o
Slide 27: 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 28: 2020 Adjusted EPS
2020 Adjusted EPS . . . $2.67 31¢ +7% $2.49 20¢ (21)¢ (12)¢ 2019 Weather Rates & Costs Usage, Tax 2020 Investment Savings & Other . . . managing through COVID-19 risks. . . . up 7% from prior year. 28
Slide 29: Utility Sales Continue to Recover
Utility Sales Continue to Recover . . . a b Weather-Normalized Electric Deliveries 2020 Electric & Gas Rate Mix (2020 vs. 2019) Other Auto Other Industrial 2% 1% 8% 5% Residential Electric 36% c Commercial (2)% 28% (6)% Combined Residential Residential (10)%c Gas >60% 25% Res. Com. Ind. Total Presen
Slide 30: Endnotes
Endnotes “cus evens?
Slide 31: Presentation Endnotes (pg 1)
Presentation Endnotes (pg 1) Slide 3: aMethane emissions from our natural gas delivery system and carbon emissions company-wide bUBS Research, 2020 state rankings and D.C. Slide 5: aAdjusted operating cash flow (non-GAAP), excludes $700 MM discretionary pension contributions in 2020 (non-GAAP) Slide
Slide 32: Presentation Endnotes (pg 2)
Presentation Endnotes (pg 2) Slide 15: aRate relief equivalent Slide 17: aReflects rating agency adjustments Slide 18: aReflects 2021 sales forecast; weather-normalized bEnergy Efficiency a b Slide 19: Methane emissions from our natural gas delivery system and carbon emissions company-wide UBS Resea
Slide 33: GAAP Reconciliation
GAAP Reconciliation 3333
Slide 34: 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 Twelve Months Ended 12/31/20 12/31/19 12/31/20 12/31/19 Electric Utility Reported net income per share $ 0.32 $ 0.32 $ 1.94 $ 1.79 Reconciling it
Slide 35: Reconciliation of GAAP Net Income to 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 3Q 4Q Net Income Available to Common Stockholders $ 243 $ 136 $ 218 $ 158 Reconciling items: Electric utility and gas utility 15 4 4 2 Tax
Slide 36: 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 Twelve Months Ended 12/31/20 12/31/19 12/31/20 12/31/19 Net Income Available to Common Stockholders $ 158 $ 167 $ 755 $ 680 Reconciling items:
Slide 37: Earnings Per Share By Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Per Share By Year GAAP Reconciliation (Unaudited) GAAP GAAP 2020 over 2020 over 2003 2019 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 CAGR Growth Reported earnings (loss) per share - GAAP ($0.30) $0.64 ($0.44) ($0.41) ($1.
Slide 38: Reconciliation of GAAP to Non-GAAP Operating Activities
CMS ENERGY CORPORATION Reconciliation of GAAP Operating Activities to Non-GAAP Operating Activities (Unaudited) (MM) 2020 GAAP Net cash provided by operating activities $ 1,276 Add back discretionary pension contribution 700 Non-GAAP Net cash provided by operating activities $ 1,976 38
Slide 39: Reconciliation of Non-GAAP FFO to Average Debt Ratio
CMS ENERGY CORPORATION Reconciliation of Non-GAAP FFO to Average Debt Ratio (Unaudited) FUNDS FROM OPERATIONS In Millions Year Ended 12/31/20 Net Cash Provided by Operating Activities $ 1,276 Reconciling items: Pension contributions 700 Net Working changes capital in assets and liabilities (working