Cms Energy Corporation · NYSE:CMS
Cms Energy — KeyBanc Capital Markets Conference 2014
26 slides from Cms Energy's conference presentation, Dec 9, 2014
Slide 1: KeyBanc Capital Markets Conference
Top of Mind • Why Invest? • Investment • Upsides • Partners • Regulatory • Passion to Improve KeyBanc Capital Markets Conference December 9, 2014 Ludington Pumped Storage Ray Compressor Jackson Gas PlantStation Cross Winds Energy Park Fourth largest in the world #1 LDC in gas storage #2 in renewabl
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: Why Invest in CMS?
Why Invest in CMS? . . . . Our Growth Engine Supported By (2015-2024 Capex) ● UPSIDES create headroom (Investment, Sales, Cost, & DIG) ● PARTNERS support good regulation $15.5 Billion (Customers, Regulators, & Policy Makers) 5% - 7% EPS growth ● PASSION to improve for customers and owners (Value, Re
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) 21% 19% 18% 16% 16% 14% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 __
Slide 5: INVESTMENT -- Ten-Year Capex Plan Expanded
INVESTMENT -- Ten-Year Capex Plan Expanded . . . . 2015-2024 Opportunity Level 10-Year Plan Amount (bils) Generation capacity • PPA replacement $3.0 • ROA return • Higher renewables $20+ Billion $15.5 Billion Gas conversions & expansion 1.0 Grid modernization 1.0 Total Opportunities $5.0 Upside? Rat
Slide 6: UPSIDES -- Capacity Opportunities
UPSIDES -- Capacity Opportunities . . . . Further Capacity Growth Over Next Ten Years Upside MW 11,000 Not in plan 10,000 1,200 MW PPA’s Expire 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 Jac
Slide 7: UPSIDES -- Capacity Price Increases
UPSIDES -- Capacity Price Increases . . . . Today Future Scenarios Recent Contracts (mils) (mils) +$50 $55 • Nine-year 250 MW “energy” contract at $4.06 • Capacity to Consumers $35 • 25 MW/2015 at $2.32 +$30 • 50 MW/2016 at $4.36 Upside: Capacity and energy $5 contracts layered in over time Capacity
Slide 8: UPSIDES -- 2014 Reinvestment Helps Customers
UPSIDES -- 2014 Reinvestment Helps Customers . . . . Adjusted EPS (non-GAAP) 2014 +18¢ Third Quarter EPS Weather (Electric) (6)¢ +15¢ Reinvestment (5) Total Change (11)¢ +9¢ Good First Nine Months EPS Choices Weather (Gas) 16¢ +4¢ Cost savings 4 Reinvest & other (16) $1.78 +7%- Total Change + 4¢ $1.
Slide 9: UPSIDES -- Trend of O&M Cost Savings
UPSIDES -- Trend of O&M Cost Savings . . . . O&M Trend vs Peers Future Savings 2018 vs 2013 0 50% (mils) ~6% per year 0 Peers • Fuel mix $ - 25 0 ~2% per year • Benefits - 75 0 • Less Expensive New - 75 0 Inflation -25% Hires & Lower Headcount 00 • Smart Meters - 25 0 -7% -7% • Inflation +100 0 CMS
Slide 10: UPSIDES -- Adding New Customers
UPSIDES -- Adding New Customers . . . . Natural Gas Electric Propane to natural gas switching Focus on Industrial Customers Consumers Energy Territory: NOW Innovative Industrial Rates 250,000 propane users Construction Financing New Economic Development 85,000 potential economic conversions 2.
Slide 11: PARTNERS -- Michigan Energy Law Update
PARTNERS -- Michigan Energy Law Update . . . . • Adaptability No updates expected until • Reliability early 2015 • Affordability • Environmental protection • 10% renewables by 2015 • Energy efficiency standards • File-and-implement • Historical test • 10% ROA cap year • 12-18 months regulatory lag •
Slide 12: PARTNERS -- Election Results
PARTNERS -- Election Results . . . . Governor’s Race State Senate Democrats Republicans Michigan’s Comeback Continues 38 Governor Rick Snyder (R) 11/-1 27/+1 State House Maintaining Michigan’s Progress Democrats Republicans Detroit Bankruptcy 110 Balanced Budget (2015) Road Funding “No Regrets”
Slide 13: REGULATORY -- Electric Rate Case Investment
REGULATORY -- Electric Rate Case Investment . . . . Overview Key Features Amount (mils) A) New rate design Capital Investment $ 185 Cost & Other - 57 (Big users competitive!) Core Request Jackson Gas Plant $ 128 35 Total Request $ 163 2001 Securitization Offset $ - 80 • 2017-2018 Capex Recovery B)
Slide 14: REGULATORY -- New Electric Rate Design
REGULATORY -- New Electric Rate Design . . . . Residential Commercial Industrial Energy Intensive 2.5% -0.7% -1.3% -3.2% -3.4% -4.7% -5.0% -4.8% -4.8% -9.8% -15.0% -20.0% Base Rate Fuel Recovery Net Reduction . . . . and lower fuel cost have positive impact on average electric rates. 13
Slide 15: REGULATORY -- 2015 Gas Rate Case
REGULATORY -- 2015 Gas Rate Case . . . . Overview Our View Amount (mils) • Constructive base Requested July 1 (ROE @ 10.7%) $ 88 With room to work ROE @ 10.0% vs 10.7% $(17) Investment (12) O&M (28) • Forward test year Misc. revenues/other (16) Supports original request Staff filing $ 15 Self-Imple
Slide 16: PASSION TO IMPROVE -- Distribution Productivity
PASSION TO IMPROVE -- Distribution Productivity . . . . Enhanced Productivity Headquarter Consolidation (Cumulative since 2008) Eliminated 80% Existing 80 74% 70 60 50 40 Examples 30 Elimination of • Headquarter consolidation 13 Headquarters 20 • First time quality 10 • Headcount reduction 10% 0 200
Slide 17: PASSION TO IMPROVE -- CMS Energy
PASSION TO IMPROVE -- CMS Energy . . . . Future Shines Bright Substantial Future Growth $3.50 EPS a +5% to +7% Past Next 5 Dividend Performance Years Capex (bils) $6.3 $7.5 (2009-2014) Capacity Op! +7% O&M Reductions (7)% (10)% (2006-2013) Conservative Sales Growth +1% +½ % (2010-2013) Conservative
Slide 18: Appendix
CUS ENERGY Appendix
Slide 19: Electric Customer Base Diversified
Electric Customer Base Diversified . . . . Top Ten Customers 2013 Electric Gross Margin • Hemlock Semiconductor (zero margin) Residential, 50% Commercial, 32% • General Motors • Nexteer Automotive Corporation • Gerdau Macsteel • Denso International America • Meijer • Packaging Corp of America • Stat
Slide 20: 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 21: 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. 20
Slide 22: 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 23: 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 $2.3 $2.2 $2.1 $2.0 2.0 $1.9 Interest, working $1.8 $1.7 capital and taxes $1.55 1.5 $1.45 Pct of Market Cap (as of June 2014) 1.0 Cap Inv OCF Investment 19% 18% CMS 13% 15% 0.5
Slide 24: GAAP Reconciliation
CMS ENERGY GAAP Reconciliation
Slide 25: Earnings Per Share By Year GAAP Reconciliation
Earnings Per Share By Year GAAP Reconciliation (Unaudited) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 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 After-tax items: Electric and gas utility 0.21 (0.39) - - (0.07) 0.05
Slide 26: Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2013 2014 2015 2016 2017 2018 2019 Consumers Operating Income + Depreciation & Amortization $ 1,740 $ 1,810 $ 1,877 $ 1,959 $ 2,065 $ 2,186 $ 2,308 Enterprises Project Cash Flows 16 20 28 34 52 55