Cms Energy Corporation · NYSE:CMS
Cms Energy — Non-Deal Roadshow (October 2016)
44 slides from Cms Energy's roadshow presentation, Oct 10, 2016
Slide 1: Investor Meetings: Sydney and Tokyo, October 11-13, 2016
Investor Meetings: Sydney and Tokyo October 11 - 13, 2016 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 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: Who We Are
Who We Are . . . . Electric Electric Utility • 1.8 million electric customers • 8,900 MW of capacity Gas Gas Utility • 1.7 million gas customers • 309 bcf gas storage Electric service territory (#1 LDC in the U.S.) Natural gas service territory Headquarters Combined service territory Generating faci
Slide 4: Why Invest in CMS Energy?
Why Invest in CMS Energy? Our Growth Engine Supported By (2016-2025 Capex) ● UPSIDES -- More growth; no big bets (Investment, Sales, Cost, & DIG) ● PARTNERS -- Facilitate growth $17 Billion (Customers, Regulators, & Policy Makers) ● PASSION to improve for customers AND owners (Value, Reliability, &
Slide 5: What's New?
What’s New? When We Last Met -- 2015 2016 a A. 5% - 7% EARNINGS and DIVIDEND growth A. Announced +6% to +8% earnings a growth 2017 and beyond! B. ORGANIC CAPITAL INVESTMENT B. Grew capex to $17 billion over ten at $15.5 billion over ten years years (2016 – 2025) C. O&M COST REDUCTIONS at 2% a year C
Slide 6: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . . 2017+ Plan Capital investment (reliability, costs, enviro mandates) 6% - 8% Self Funding: - O&M cost reductions 2 - 3 pts - Sales growth 1 - No “block” equity dilution & other 2 INVESTMENT SELF-FUNDED 5 - 6 pts Rate increase at or below inflation <2% . . . . cont
Slide 7: Capex $17 Billion Over 10 Years
Capex $17 Billion Over 10 Years . . . . 2015-2024 2016-2025 Prior Now $15.5 billion $17.0 billion Cleaner Energy Electric Gas Enhancing Infrastructure & Infrastructure & Up $1.5 bil Productivity Improving Maintenance Maintenance Service or 10%! Reducing Electric Cost Distribution & New Reliability G
Slide 8: O&M Cost Performance
O&M Cost Performance . . . . Actual Cost Reduction New Cost Savings (2015 over 2006) 2014 2016 & 2015 & 2017 Good Business Decisions (mils) (mils) • Attrition (VSP) $ - 35 $ - 35 • Productivity (Coal Gas) - 35 - 15 • “Pole Top” Hardening - 20 - 10 • Smart Meters - 5 - 20 “Consumers Energy Way” • Eli
Slide 9: Michigan's Recovery
Michigan’s Recovery . . . . Gross Domestic Product – 2010 through 2015 Grand Rapids Top 10% of All Cities! WA ND MT 13.1 55.6 MN 15.5 15.2 Michigan ME SD OR ID 11.6 WI Top 10 0.5 VT NH 10.0 8.6 WY 11.3 MI state! NY 8.1 8.0 -5.1 IA NE 14.4 10.6 MA 13.2 15.9 11.7 IL PA NV RI 7.8 IN OH CT UT CO 10.4 NJ
Slide 10: Growth Faster than Peers
Growth Faster than Peers . . . . CMS Energy “Typical” Utility Consistent, Predictable Amount Amount 12% 12 % 12 % 10 4% 10 Can be 9 erratic 8 8% 3 8 7% 6 6 6 6 4% 3 4 4 3% 2 2 0 a 0 Future EPS Dividend TSR Historic EPS Dividend TSR _____ a Adjusted EPS (non-GAAP) . . . . and sustainable. 9
Slide 11: Consistent Growth Through Recessions, Weather and Policy
Consistent Growth Through . . . . 7% CAGR EPS Dividend b 6% to 8% Weather Recession Recession _____ Help a Adjusted EPS (non-GAAP) b Hurt 2017 and beyond 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Future Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold Feb
Slide 12: Customer Driven $17 Billion Investment
Customer Driven $17 Billion Investment . . . . Electric Gas Clean Power Opportunity $8.4 bil $6.2 bil $2.4 bil $3 - $4 bil Maintenance Pipeline expansion Environmental Gas Infrastructure Electric reliability New gas capacity Clean energy More Renewables Capacity Replacement Opportunity Grid Technolo
Slide 13: Capital Investment Grows
Capital Investment Grows . . . . Ten-Year Capital Investment Growth (bils) Details Ops Capex Prior New a (w/o Law) (bils) New vs Prior $20+ Electric reliability $0.4 + $1.5 Gas infrastructure 0.4 $17 Clean power 0.7 $15.5 New $1.5 Ops Replace expiring $2.0 PPAs; generation Reliability & pipes 1.0 Op
Slide 14: New "Incremental" Capex
New “Incremental” Capex . . . . Electric Gas Renewables +$400 mil +$400 mil +$700 mil • 2,900 poles (+60%) • 75 transmission miles • Add 300 MW of new wind • 2.4 HVD miles (+120%) (+35%) to support future • Install more remote compliance • 30 substations (+50%) valves • Improve SAIDI performance • R
Slide 15: Gas Investment
Gas Investment . . . . Capex Large Gas Business Last 10 Next 10 1.7 million customers Years Years (bils) (bils) (adding 10,000 new customers) Gas Infrastructure & $ 3.3 $ 6.2 Maintenance Electric Distribution & 1.7 3.4 29,000 mile natural gas system Reliability Environmental 1.5 0.7 New Generati
Slide 16: CMS Capital Expenditures
CMS Capital Expenditures 2016-2020 2021-2025 2016-2025 2016 2017 2018 2019 2020 Subtotal Subtotal Total (mils) (mils) (mils) (mils) (mils) (mils) (mils) (mils) New Generation (includes Renewables) $ 87 $ 72 $ 59 $ 43 $ 31 $ 292 $ 1,378 $ 1,670 Environmental 122 143 121 178 133 697 2 699 Electric Rel
Slide 17: Cleaner Generation
Cleaner Generation . . . . Diverse Capacity Clean Additions Renewables Clean Coal Solar Gardens • Apple Blossom Wind Farm, 100 MW • Competitive price • Commercial operation by 2018 Karn Generating Lake Winds GVSU & WMU Plant, 508 MW a • Capacity, energy, renewable credits Energy Park 100 MW 4 MW •
Slide 18: Clean Power Plan
Clean Power Plan . . . . Tons CO2 (mils) 20 Consumers Energy 2012 Emissions 19 18 Retire State of Michigan Target 17 950 MW (Consumers Energy’s share) coal 16 15 14 13 12 Positioned well for compliance 11 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 . . . . rec
Slide 19: Air Quality Improvement
Air Quality Improvement . . . . Historical Actual Emissions 30% 20% CO2 10% Hg 0 0% -10% -20% PM -30% -40% BY Y.E. 2016 SO2 -50% SO2 -87% -60% NOx -87% NOx -70% Hg -83% -80% CO2 -28% -90% PM -96% -100 -100% 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 . . . . significant reduction. 18
Slide 20: Reducing Coal Dependence
Reducing Coal Dependence . . . . A Sustainable Strategy Coal Mix • Shut down 950 MW of coal 2005 2016 • Found positions for affected employees Largest reduction of any investor-owned utility • Worked with local communities early on • Reduced our environmental 41% impact <24% Positioned well for carb
Slide 21: Capacity Diversity
Capacity Diversity . . . . Nuclear 8% Oil 10% Coal reduced Coal by over 40%! Purchases <24% 2nd best in U.S. 3% Renewables 10% 2016 Pumped Nuclear Storage Gas Oil 6% 8% 11% 34% Future Capacity Mix Renewables 3% • More Renewables Pumped Coal Storage 41% • Expanded Pumped 11% 2005 Storage Gas • Clean
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¢ 10¢ 10 9¢ Back 6¢ -up 7¢ 6¢ 6¢ 5.5¢ 5¢ 5¢ 5 4¢ 4¢ Back -up Cross Winds 7¢ Big 5 Palisades Zeeland 4¢ 0 Combined Cycle Gas Plant Wind Coal Nuclear Residential
Slide 23: 2016 Presidential Election
2016 Presidential Election . . . . Donald Trump Republican Hillary Clinton Democrat Clinton Issues Trump • Less supportive • Coal • More supportive • More regulation • Environmental • Less regulation • Less supportive • Domestic Energy • More supportive • More supportive • Renewables • Less supporti
Slide 24: Michigan Energy Law
Michigan Energy Law . . . . Present Law Updates Plan • 10% renewables by 2015 • Energy efficiency standards 6% - 8% • File-and-implement Nothing happens growth in 2017 and beyond • 10% ROA cap • Reliability • Fair process Customer • Security Upside • IRP Process . . . . process continues. 23
Slide 25: Strong Commission
Strong Commission . . . . Commission Tier 1 State Ranking Sally Talberg (I) Chairman 1 6 Michigan Term Ends: July 2, 2019 2 9 Norm Saari (R) Term Ends: July 2, 2021 3 18 4 9 Rachael Eubanks (I) Term Ends: July 2, 2017 5 6 Newly appointed! Barclays Research, 2016 state rankings . . . . constructive r
Slide 26: Economic Development Growth
Economic Development Growth . . . . Our Service Territory Outperforms Examples of New Business a Grand Electric Gas Combination Rapids Michigan U.S Announcement Announcement Building Permits b +242% +205% +97% C3 Ventures Inteva Products Flint Adrian • Eco-friendly injection • Auto-supply maker to G
Slide 27: Spotlight on Grand Rapids
Spotlight on Grand Rapids . . . . Grand Rapids named best city in the U.S. to invest in housing by Forbes Grand Rapids ranked #2 best U.S. city to start a business in 2015 by Bplans.com Grand Rapids ranked #2 most affordable Grand Rapids city in America by PureWow.com Grand Rapids ranked third best
Slide 28: Routine and Regular Rate Cases
Routine and Regular Rate Cases . . . . Gas Rate Cases Electric Rate Cases Year Step Amount Capex ROE Step Amount Capex (mils) (mils) 2012 Settled $16 188% Order $118 110% 2013 Stay-out 10.3% Settled 89 127 2014 Stay-out Stay-out 2015 Settled 45 200 Order 126 137 2016 Settled 40 158 Self-impl.
Slide 29: Rate Cases
Rate Cases . . . . Electric U-17990 Gas (mils) Amount (mils) $6 $90 Self-implementation (ROE @ 10.3%) $170 $84 ROE & Cost of Capital (38) O&M (22) Other (18) Staff filing $ 92 Self-implementation September 1, 2016 Final order by February 28, 2017 New Investment Cost of Capital Filed 8/1 and Other .
Slide 30: "DIG" (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . . Pre-Tax Income Opportunities (mils) $ 80 $75 70 Contracts (layering in over time) 60 $55 +$40 50 +$20 40 $35 30 New contracts $20 20 $12 10 Outage pull-ahead 0 2015 2016 2017 Future Capacity ($/kw-mth) ≈ $1.00 ≈ $2.00 ≈ $3.00 $4.50 $7.50 Available: • Energy
Slide 31: How We've Grown
How We’ve Grown . . . . TSR Growth 400% CMS +390% 350 300 250 200 Peers +184% 150 UTY +129% 100 S&P 500 +105% 50 0 -50 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Data ended June 30, 2016 . . . . consistently outperform peers and the S&P 500. 30
Slide 32: 2016 EPS Outlook
2016 EPS Outlook . . . . Adjusted EPS (non-GAAP) Flex Items • O&M choices • Low cost financing • Plant outages • Contributions Weather & other Guidance Weather & Recovery Storms Offsets Pension “Yield Curve” 5¢ Enhanced Capitalization 3 ‘15 Pension Contribution 2 Improved “UAs” & Other 3 Offsets 13¢
Slide 33: Managing Work Every Year
Managing Work Every Year . . . . Adjusted 2011 2012 2013 2014 2015 EPS Cost $2.10 productivity above plan Cost Mild productivity +17¢ $2.00 above plan Summer +7% +18¢ $1.90 Cost Offsets $1.80 productivity Reinvestment -13¢ Cost above plan +7% productivity Cold RECORD above WARM $1.70 plan +13¢ +7¢ W
Slide 34: Dividend Increases Every Year
Dividend Increases Every Year . . . . Dividend Growth $ 1.35 7% 1.30 7% $1.24 $1.24 1.25 1.20 6% $1.16 Grow in line with earnings 1.15 6% $1.08 1.10 14% $1.02 1.05 1.00 $0.96 0.95 27% 0.90 $0.84 0.85 0.80 32% 0.75 0.70 $0.66 0.65 39% 0.60 0.55 $0.50 0.50 80% 0.45 0.40 $0.36 0.35 0.30 0.25 $0.20 0.20
Slide 35: Operating Cash Flow
Operating Cash Flow . . . . Amount Up $0.7 (bils) Billion Gross operating cash flowa $2.8 $ 2.9 up > $0.1 billion per year $2.7 Up $2.5 $0.8 billion $2.4 since 2009! 2.4 $2.2 Interest, working $2.1 capital and taxes $1.9 1.9 $1.55 1.4 Operating cash flow NOLs avoid 0.9 Investment need for block 0.4
Slide 36: Liquidity (as of June 2016)
Liquidity (as of June 2016) . . . . Renewal Capacity Availability $2.0 Billion $1.8 Billion CMS Energy $550 mils Stronger liquidity 5-year revolver May 2021 than peers $549 mils Consumers Energy 5-year revolver May 2021 650 643 Letter of Credit Apr 2018 Letter of Credit Aug 2018 68 36 Letter of Cred
Slide 37: 2016 Sensitivities
2016 Sensitivities . . . . 2016 Impact Sensitivity EPS OCF (mils) Sales a • Electric (37,500 GWh) + 1% + $0.05 + $ 20 • Gas (309 Bcf) + 2 + 0.03 + 15 – – 55 Gas prices (NYMEX) + 50¢ + 0 + ROE (authorized) • Electric (10.3%) + 10 bps + 0.01 + 5 • Gas (10.3%) + 20 + 0.01 + 4 Interest Rates +100 bps +
Slide 38: Diverse Customer Base
Diverse Customer Base . . . . Top Ten Customers 2015 Gross Margin (2015 Ranked by Revenue) 1. Hemlock Semiconductor 2. General Motors 3. State of Michigan Commercial 4. Meijer 27% 5. Nexteer Automotive Corporation Residential 55% 6. AT&T 7. Gerdau 8. Spectrum Health 9. Packaging Corp. of America Ind
Slide 39: Electric Customer Prices
Electric Customer Prices . . . . Residential Bills Industrial Rates 20% 30 % 26% 15 20 Rates & Worse Worse Fuel 5 10 Rates & 5% National Avg Act 169 Midwest Avg 0 -5 Flat Residential bills well below U.S. average -10 Policy could (7)% Better Better -15 (13)% Rates (18)% eliminate gap Rates & Fuel Ra
Slide 40: GAAP Reconciliation
GAAP Reconciliation
Slide 41: 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 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 Pretax items: Electric an
Slide 42: 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 2020 2021 Consumers Operating Income + Depreciation & Amortization $ 1,813 $ 1,866 $ 2,056 $ 2,139 $ 2,243 $ 2,390 $ 2,518 $ 2,621 Enterprises Project Cash Flows 20 20
Slide 43: Customers and Investors: Our Model, Our Plan
Electric Customer Prices . . . . Residential Bills Industrial Rates CUSTOMERS 20% 30 % 26% 15 20 Rates & Worse Worse Fuel 5 10 Rates & 5% OUR MODEL; OUR PLAN National Avg Act 169 Midwest Avg 0 -5 Flat Residential bills well below U.S. average -10 Policy could (7)% Better (18)% Better -15 (13)% Rates
Slide 44: Actual Plan Model
Actual Plan Model 7% /year 2017+ Plan $1.89 Capital investment a $1.55 $1.66 $1.77 6% - 8% Adjusted EPS $0.81 $1.36 $1.45 $1.08 $1.21 $1.26 $1.02 $1.08 $1.16 - O&M cost reductions 2 - 3 pts A $0.90 $0.96 96¢ 66¢ 84¢ - Sales growth 1 B Int’l Sale $0.84 50¢ Dividend 20¢ 36¢ - No “block” equity 2 C dil