Slide 1: Third Quarter 2018 Results and Outlook
Third Quarter 2018 Results and Outlook October 25, 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: Agenda
Agenda Business Update Patti Poppe President & CEO PEOPLE PLANET PROFIT Financial Results & Outlook Rejji Hayes Executive VP & CFO 3
Slide 4: EPS Results and Guidance
EPS Results and Guidance . . . a First nine months 2018: at $1.93 up 16% from 2017 2018 Full-year guidance raised: • to $2.31 - $2.34, up 6% to 8% 2019 Full-year guidance introduced: • at $2.46 - $2.50, up 6% to 8% Future long-term annual growth: • at 6% to 8% _____ a Adjusted EPS (non-GAAP) . . . u
Slide 5: Managing Work Every Year
Managing Work Every Year . . . a 2010 2011 2012 2013 2014 2015 2016 2017 EPS $2.20 Weather & Storms +7% Mild $2.00 Summer +7% Cost +7% productivity above plan Cost Cost $1.80 +7% productivity productivity above plan Reinvestment Storms Hot Mild Reinvestment Summer Winter +7% $1.60 RECORD Hot WARM Of
Slide 6: The Triple Bottom Line
The Triple Bottom Line . . . PEOPLE • PLANET • PROFIT PEOPLE PLANET PROFIT PERFORMANCE . . . world class performance delivering hometown service. 6
Slide 7: Consistent Growth Through Recessions and Weather
Consistent Growth Through . . . b 7% CAGR a EPS +6% to +8% +6% to +8% 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. 2019 Cold Mild Hot Warm Mild Cold Summer- Ho
Slide 8: 2018 YTD Performance
2018 YTD Performance . . . Results By Business Segment 2017 2018 b Year-to-Date EPS – (GAAP) $1.65 $1.94 EPS a Adjustment 0.01 (0.01) Utility $2.02 Adjusted (non-GAAP) $1.66 $1.93 Enterprises 0.11 16% Interest & other (0.20) a Weather-normalized $1.84 $1.73 CMS Energy $1.93 Third Quarter EPS – (GAAP
Slide 9: 2018 EPS
2018 EPS . . . a First Nine Months Three Months To Go +27¢ (13)¢ - (10)¢ 6¢ $2.31 - $2.34 3¢ 6% - 8% $2.17 42¢ Absent (24)¢ (6)¢ 1¢ 2017 (8)¢-(5)¢ Reinvestments: Safety 3¢ Reliability 7 Employee/ customer 4 Debt pre-funding 4 Other 6 Total 24¢ YTD YTD $1.93 $1.66 2017 Weather Cost Savings Rates and
Slide 10: Long-Term Regulatory Planning
Long-Term Regulatory Planning . . . 2018 Today 2019 Regulatory / Policy order 2/22: Tax reform 6/15: Filed long-term generation plan (IRP) U-20165 6/28: Credit A order for 7/24: Credit A order for Electric Q2: Expected IRP order U-18494 Gas Utility Utility $113 MM U-20165 $49 MM Electric
Slide 11: Gas Investment Needs
Gas Investment Needs . . . Upcoming Gas Projects Benefits ~ 140 ~ 950 Miles Safety Miles Main Replacements Pipeline Integrity Customer Experience ~ 60 Leak Reduction Miles 25,000 Saginaw Trail Vintage Service Lines Increased Capacity . . . prioritize safety, reliability and affordability. 11
Slide 12: Customer Investment Plan Skewed Towards Gas Investments
Customer Investment Plan Skewed . . . Large and Aging System Rate Base Growth Electric Gas 7% $21 Bn CAGR $15 Bn 60% 70% 40% 30% 2017 2022 . . . towards gas investments. 12
Slide 13: Our Entire Cost Structure
Our Entire Cost Structure . . . Cost Components Residential Electric Bills a (current dollars) 100% 100% $106 $100 90% Coal to 80% Gas / PPA Down 6% Fuel and Power Costs 70% ~70% 60% ~70% 2013 2018E $10½ Bn Customer Residential Gas Bills a 50% O&M Costs Investment 40% (2013-2018E) (current dollars)
Slide 14: Utility Driven, Low Risk Growth
Utility Driven, Low Risk Growth . . . CMS Energy Long-Term Growth Plan Segments: • Needed system upgrades / robust backlog - Utility 5 - 7% • Affordable prices driven by cost controls 0-1 • Largely contracted & utility-like - Enterprises • Contracted generation & renewables • Refinancing high coupon
Slide 15: Compelling Investment Thesis
Compelling Investment Thesis . . . Aging Infrastructure Strong Cash Flow & Balance Sheet Diversified Service Territory Affordable Prices Constructive Regulation . . . adaptive to changing conditions. 15
Slide 16: Q&A Thank You
Q&A Thank You! See you at EEI 16
Slide 17: Appendix
Appendix
Slide 18: Michigan Political Environment
Michigan Political Environment 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
Slide 19: 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 20: 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 21: 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) • Filed to determine catch-up cust
Slide 22: DIG (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . Pre-Tax Income Opportunities (MM) $ 80 $75 70 Contracts (layering in over time) 60 $55 +$40 50 $45 Better +$20 40 Performance $35 $30 30 Better Performance 20 $12 10 Outage Pull-ahead 0 2015 2016 2017 2018 Future Capacity ($/kW-mth) ≈ $1.00 ≈ $2.00 ≈ $3.00 < $
Slide 23: Operating Cash Flow Generation
Operating Cash Flow Generation . . . Amount (Bn) ~$9 Bn in aggregate $ 2.2 1.95 1.85 1.7 1.75 1.7 1.65 1.65 $3.3 Bn Aggregate 1.2 despite timing of tax benefits 0.7 Investment 0.2 (0.3) Cash flow before dividend (0.8) 2017 2018 2019 2020 2021 2022 NOLs & credits $0.6 $0.4 $0.3 $0.3 $0.3 $0.2 . . . r
Slide 24: 2018 Financial Targets
2018 Financial Targets . . . 2018 Long-Term Plan Adjusted EPS (non-GAAP) $2.31 to $2.34 +6% to +8% +6% to +8% Operating cash flow (MM) $1,650 Up $100/yr a Dividend payout ratio (non-GAAP) ~ 62% ~ 62% Customer price Electric (1)% ~ 2% Gas (3)% ~ 2% FFO/average debt (non-GAAP) ~18% ~17% - 19% Customer
Slide 25: 2018 Sensitivities
2018 Sensitivities . . . Full Year Impact Sensitivity EPS OCF (MM) Sales a • Electric (37,477 GWh) + 1% + 6¢ + $ 20 • Gas (303 Bcf) + 5 + 9 + 40 Gas prices (NYMEX) + 50¢ – 0 – 55 + + Order Utility ROE (planned) received • Electric (10.1%) + 10 bps + 1½ + 6 3/29 • Gas (10.1%) + 10 + ½ + 3 Order on se
Slide 26: GAAP Reconciliation
GAAP Reconciliation
Slide 27: 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 Nine Months Ended 9/30/18 9/30/17 9/30/18 9/30/17 Electric Utility Reported net income per share $ 0.70 $ 0.63 $ 1.65 $ 1.40 Reconciling items: R
Slide 28: 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 Nine Months Ended 9/30/18 9/30/17 9/30/18 9/30/17 Net Income Available to Common Stockholders $ 169 $ 172 $ 549 $ 463 Reconciling items: Disco
Slide 29: Reconciliation of GAAP Net Income to Non-GAAP 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 2018 1Q 2Q 3Q Net Income Available to Common Stockholders $ 241 $ 139 $ 169 Reconciling items: Electric utility and gas utility - - - Tax impact - - -
Slide 30: 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 31: Weather Impact on Year Over Year Earnings (Nine Months)
CMS ENERGY CORPORATION Weather Impact on Year Over Year Earnings (Unaudited) In Millions, Except Per Share Amounts Nine Months Ended 9/30/2018 9/30/2017 Change Net Income Available to Common Stockholders $ 549 $ 463 $ 86 Reconciling items: Restructuring costs and other 1 3 (2) Tax impact (*) (1) 1 G
Slide 32: Weather Impact on Year Over Year Earnings (Three Months)
CMS ENERGY CORPORATION Weather Impact on Year Over Year Earnings (Unaudited) In Millions, Except Per Share Amounts Three Months Ended 9/30/2018 9/30/2017 Change Net Income Available to Common Stockholders $ 169 $ 172 $ (3) Reconciling items: Restructuring costs and other * 1 (1) Tax impact (*) (*) (