Slide 1: Investor Meetings October 2018
Investor Meetings October 2018 FOCUSED ON WORLD CLASS PERFORMANCE
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: CMS Overview
CMS ENERGY CMS Overview
Slide 4: CMS Energy Overview
CMS Energy Overview Corporate Structure Key Information CMS Energy 2017 Financial Statistics (NYSE: CMS) Based in Jackson, MI Employees (40% unionized) Consumers Energy Enterprises EnerBank Revenue 2017 Adjusted net income a Avg. Rate Base 94% of Operating Dividend payout ratio a Income Gas $4.6 Bn
Slide 5: CMS' Performance Exemplifies . . .
CMS’ Performance Exemplifies . . . PEOPLE PLANET PROFIT a • Safest year on record • #1 Company in Michigan in • 15 years of +7% EPS Newsweek’s ‘Green growth • #1 Diverse Utility in the 2017 Rankings’ Nation and #1 Employer for • Raised dividend 7% YOY, Among Diversity in Michigan by • Highest
Slide 6: Consumers Energy . . .
Consumers Energy . . . Overview • 4th largest combination utility (electric and gas) in the country • 2017 revenue = $6.2 billion • 2017 earnings = $630 million Our Service Territory • Electric Utility 1.8 million electric customers 8,455 MW of capacity • Gas Utility 1.8 million gas customers 309 bc
Slide 7: CMS Enterprises . . .
CMS Enterprises . . . DIG & Peakers Renewable Platform • ~1,000 MWs of gas plants in MI • Existing: • Long-term energy tolling • 27 MWs of solar and agreements 64 MWs biomass • Just announced: • Shorter-term bilateral capacity • 105 MWs of wind in Ohio contracts • 15-year PPA with GM • Upside: tight
Slide 8: Compelling Investment Thesis
Compelling Investment Thesis Aging Infrastructure Strong Cash Flow & Balance Sheet Diversified Service Territory Affordable Prices Constructive Regulation 8
Slide 9: Large and Aging System . . .
Large and Aging System . . . Electric Gas distribution distribution system replacement system is plan: 25 years, older than peers 27,000 miles Age of coal fleet is more 1,670 miles of gas than transmission pipeline; most 50 years built in the WWII era . . . requires significant customer investment.
Slide 10: Gas System Investment . . .
Gas System Investment . . . Compression and Storage Electric $½ Bn Dist. Gas $3½ Bn Infra. & Maint. $5 Bn #1 Underground Supply storage $1½ Bn Transmission #5 Transmission $2 Bn #5 Distribution miles miles Distribution $2½ Bn U.S. LDC Rank, Source: DOT . . . has increased more than 60% over the last
Slide 11: Electric System Investment . . .
Electric System Investment . . . Electric Supply Dist. Gas $1½ Bn $3½ Bn Infra. & Maint. $5 Bn Supply $1½ Bn HVD System $½ Bn LVD System $2½ Bn Substations $½ Bn . . . consists of needed and modular projects. 11
Slide 12: Clean and Lean . . .
Clean and Lean . . . Old Utility Model Clean And Lean Big Build Supply Supply Fully utilize Modular Retirement assets Excess supply Big Excess Build supply Modular Actual Modular Demand Demand EE & DR Excess O&M O&M supply Expected Demand Fuel Fuel Big Bets Lower Risk Results in excess capacity, hig
Slide 13: Michigan Offers . . .
Michigan Offers . . . Premium Regulatory Supportive Policy Tier Michigan • Economic growth (tax policies, 1 6 2013 - Present skilled labor, balanced budgets) 2 10 2012 • Forward-looking test year (10-month rate case) 2008 3 19 • Energy efficiency incentive (20% of spend) 4 10 • Attractive renewable
Slide 14: Simple, Perhaps Unique Model . . .
Simple, Perhaps Unique Model . . . Plan a EPS Growth 6% - 8% Self Funding: - Cost reductions 2 - 3 pts - Sales (continued economic development & EE) 1 - Other (Enterprises, tax planning, etc.) 2 INVESTMENT SELF-FUNDED 5 - 6 pts Customer Prices “at or below inflation” < 2% _____ a Adjusted EPS (non-G
Slide 15: Customer Investment Plan Evolves . . .
Customer Investment Plan Evolves . . . Large and Aging System Rate Base Growth Electric Gas 7% $21 Bn CAGR $15 Bn 60% 70% 40% 30% 2017 2022 . . . with incremental renewables. 15
Slide 16: Cost Reduction Strategy . . .
Cost Reduction Strategy . . . Capital-Enabled Gas Replacements Pole-top Hardening Clean & Lean Structural/ Technology-Enabled Process Changes Smart Grid Mobility CE Way PPAs Customer Benefits • Safety Digital • Reliability Retirements • Better Service • Affordable Bills . . . largely funds customer
Slide 17: Our Entire Cost Structure . . .
Our Entire Cost Structure . . . Cost Components Residential Electric Bills a (current dollars) 100% 100% $106 $100 90% Coal to 80% Down 6% Gas / PPA Fuel and Power Costs 70% 60% ~70% 2013 2018E Residential Gas Bills 50% a O&M Costs 40% (current dollars) $85 Tax 30% Reform Taxes $62 20% Capital Inves
Slide 18: Economic Development Efforts . . .
Economic Development Efforts . . . Our Service Territory Outperforms a New Load Grand 6% of Sales Rapids Michigan U.S. ~2,000 Gwh Building permits b +217% +168% +122% Near-Term GDP Growth 32 21 17 Pipeline 2010 2017 2018 (est) Population Growth 7 1 5 2010 2017 2017 Unemployment 2.7 4.3 3.9 (July 201
Slide 19: Credit Metrics Maintained . . .
Credit Metrics Maintained . . . S&P / S&P Moody’s Fitch FFO / Average Debt a Fitch Moody’s (Dec. ‘16) (Jun. ‘18) (Jul. ‘18) AA- Aa3 A+ A1 19% Consumers A A2 Secured ~18% A- A3 BBB+ Baa1 BBB Baa2 17% BBB- Baa3 < 30% HoldCo Debt BB+ Ba1 BBB+ Baa1 BBB Baa2 CMS Unsecured BBB- Baa3 BB+ Ba1 BB Ba2 Present
Slide 20: Consistent Growth Through . . .
Consistent Growth Through . . . b 7% CAGR a EPS Dividend 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 Feb. Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold
Slide 21: Managing Work Every Year . . .
Managing Work Every Year . . . a 2010 2011 2012 2013 2014 2015 2016 2017 EPS $2.20 Weather & Storms +7% Mild Summer +7% $2.00 Cost +7% productivity above plan Cost Cost $1.80 productivity productivity +7% above plan Reinvestment Storms Hot Mild Reinvestment Summer Winter +7% $1.60 RECORD Hot WARM Of
Slide 22: CMS' Trading Performance . . .
CMS’ Trading Performance . . . b Stock Performance a Total Shareowner Return CMS CMS UTY UTY S&P 500 S&P 500 200% 150% 172% 289% 100% 82% 129% 50% 19% 0% 49% -50% 17% -100% '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 ‘17 1 Year 3 Year 5 Year 10 Year _____ _____ a 10-year stock performance as of December
Slide 23: Top of Mind
CMS ENERGY Top of Mind
Slide 24: Top of Mind . . .
Top of Mind . . . • Regulatory Update - Gas Rate Case Settlement and Electric Rate Case • Michigan Elections • Integrated Resource Plan • Renewables Expansion • Tax Reform • Q2 Earnings and 2018 . . . People, Planet, Profit. 24
Slide 25: Long-Term Regulatory Planning . . .
Long-Term Regulatory Planning . . . 2018 2019 Regulatory / Policy order U-18494 2/22: Tax reform 6/15: Filed long-term generation plan (IRP) U-20165 order for 6/28: Credit A 7/24: Credit A order for Electric Utility $113 MM Q2: Expected IRP order Gas Utility U-20165 $49 MM Electric 3/1: Fi
Slide 26: Best-in-Class Commission . . .
Best-in-Class Commission . . . MPSC Commissioners Backdrop • Appointed by the Governor Sally Talberg (I), Chair (not elected) Term Ends: July 2, 2021 • Chair selected by the Governor Norm Saari (R) Term Ends: July 2, 2019 • Staggered six year terms, spaced two years apart Rachael Eubanks (I) Term En
Slide 27: Michigan Politics . . .
Michigan Politics . . . Gubernatorial Election Senate Democrats: 10 Vacant Seat: 1 Republicans: 27 Democrat Republican 38 4-year terms, concurrent with Governor’s term, 2-term limit Gretchen Whitmer Bill Schuette House of Representatives Democrats: 47 Republicans: 63 Key Issues: Energy policy is 110
Slide 28: Filed Integrated Resource Plan "IRP"
Filed Integrated Resource Plan “IRP”. . . Clean and Lean Overview No Certificate of File Date: June 15, 2018 Necessity Required Supply Expected Order Date: Q2 2019 < 225 MW Modular Case No.: U-20165 Fully utilize assets Capital Investment Opportunities: • No Change to 5-year, $10 Bn Plan (IRP includ
Slide 29: Modeling Scenarios . . .
Modeling Scenarios . . . Business as Environmental Emerging Usual Policy Technologies • Sustained low natural • Stringent carbon • Technological gas prices and regulations advancements and Model electric demand economies of scale Selection • No carbon regulation Always Energy Efficiency Solar an
Slide 30: Industry-Leading Climate Goals . . .
Industry-Leading Climate Goals . . . . . . breakthrough thinking for our planet. 30
Slide 31: Protecting Michigan's Environment . . .
Protecting Michigan’s Environment . . . Reducing Carbon Emissions Adding Renewable Energy (Since 2005) 43% Today 2024 2032 2040 50% 0 Renewables Karn Campbell Campbell 1&2 1&2 3 Retirement Retirement Retirement (2023) (2031) (2039) 38% cv 25% -50 ~45% 15% RPS By 2022 ~70% > 90% 0% -100 % '21 '24 '27
Slide 32: Future Capacity Resources . . .
Future Capacity Resources . . . Near-Term Plan Long-Term Plan 1,500 5,000 (ZRC) Customer Savings (ZRC) a ~$30 MM Other Small Battery Existing PPAs and Surplus Load Growth Karn 1 & 2 Solar REP (2023) Plan Campbell 3 Wind (2039) Energy Solar 6,000 MWs Efficiency Karn 3 & 4 (2031) Filer City Conversion
Slide 33: Expanding Our Renewable Portfolio . . .
Expanding Our Renewable Portfolio . . . New Utility Wind Renewable Tariff Enterprises Gratiot Farms Wind Cross Winds® II Northwest Ohio Wind • 150 MW • 35 MW • 105 MW • In Service: 2020 • Fully subscribed by • 15-yr PPA with GM • Helps achieve 15% Switch & GM with • Largely contracted RPS by 2022 co
Slide 34: Tax Reform – Three Step Approach . . .
Tax Reform – Three Step Approach . . . Step 1: (Credit A) • Filed to determine forward-looking customer credit to adjust for tax reform • Gas Utility filed Mar. 30th • Electric Utility filed Apr. 30th • MPSC approval within 90 days of all filings Step 2: (Credit B) • To be filed to determine catch-u
Slide 35: GAAP Reconciliation
GAAP Reconciliation
Slide 36: 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 2016 2017 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 $1.98 $1.64 Pre
Slide 37: 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 12/31/17 Net Cash Provided by Operating Activities $ 1,705 Reconciling item: Securitization amortization and other 10 Funds From Operations (FFO) – Non-GAAP $ 1,715 AV