Slide 1: Investor Meeting
Content Investor Meeting • How it Works • Investment August 26, 2014 • Upsides • Partners • Passion to Improve Cross Winds Energy Park Consumers Smart Energy Program Jackson Gas Plant
Slide 2: Forward-looking statements 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: How It Works -- "Growing Forward" Strategy
HOW IT WORKS --“Growing Forward” Strategy . . . . Consistent financial performance Fair and timely regulation Utility Customer investment value Safe, excellent operations . . . . drives consistent, predictable year-over-year growth. 2
Slide 4: How It Works -- Sustainable EPS Growth
HOW IT WORKS -- Sustainable EPS a Growth . . . . EPS $2 +7% $1.78 $1.66 $1.76 +6% $1.55 $1.66 $1.78 $1.73 $1.45 $1.55 $1.63 $1.52 $1.36 $1.44 Original guidance $1.35 0 2010 2011 2012 2013 2014 _____ a Adjusted EPS (non-GAAP) . . . . 5% to 7% each year without “resets”. 3
Slide 5: How It Works -- Near Term
HOW IT WORKS -- Near Term . . . . A A Competitive Rates B Elections B C C Energy Law Update D Investment & EPS Growth Ten-year Conservative Plan D Big Upsides, not in plan . . . . steps ahead. 4
Slide 6: Investment -- "Catch-Up"
INVESTMENT --“Catch-Up” . . . . Amount (billions) $1.8 $1.5 / year Peers CMS Investment Criteria: Reduces fuel cost Lowers O&M Adds customer value Meets state & federal mandates 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 _____ Source:
Slide 7: Investment -- Ten-Year Plan Expanding
INVESTMENT -- Ten-Year Plan Expanding . . . . 2013-2022 Opportunity Level 10-Year Plan Amount (bils) Generation capacity • PPA replacement $1.7 $20+ Billion • ROA return $15Billion $15 Billion Higher renewables Gas conversions & expansion .3 1.0 Electric reliability 2.0 Total Opportunities $5.0 Upsi
Slide 8: Investment -- Customer-Driven
INVESTMENT -- Customer-Driven . . . . Clean Power Capacity Reliability Infrastructure Opportunity $2.3 Billion $1.6 Billion $4.2 Billion $5.4 Billion $5 Billion Environmental Jackson gas plant Consumers Smart Energy Gas distribution Gas combined cycle Renewable energy Gas transmission Gas storage Pr
Slide 9: Investment -- Capacity Opportunities
INVESTMENT -- Capacity Opportunities . . . . Ten-year Capacity Growth Further MW 11,000 Not in plan Upside 10,000 900 PPA’s Expire MW PPA ~8,600 MW 1,240 MW 580 PPA 2,600 780 MW 7,500 capacity Owned ~30% 8,820 ~800 MW 410 MW Owned Shortfall 6,000 540 MW 5,000 Today Jackson Plant ROA Palisades PPA MC
Slide 10: Investment -- MISO Zone 7 Capacity
INVESTMENT -- MISO Zone 7 Capacity . . . . As of June 2, 2014 MISO Zones (in GW) 24.8 2.0 22.8 Reserves 3.2 7 Demand 21.6 2016 Resources 2016 Resource Expected Shortfall _____ Requirement Source: MISO . . . . shortfall expected to be 2,000 MW in 2016. 9
Slide 11: Upsides -- Capacity Price Increases
UPSIDES -- Capacity Price Increases . . . . Today Future Scenarios Recent Contracts (mils) (mils) $55 • DIG “energy” contract +$50 • 9 years • 250 MW @ $4.06 kW per month $35 +$30 Upside: Capacity and energy contracts layered $5 in over time Capacity price < $0.50 $4.50 $7.50 ($ kW per month) . . .
Slide 12: Upsides -- Economic Growth
UPSIDES -- Economic Growth . . . . Examples of New Business Top Ten (MW) Electric Gas Combination Brembo 24 MW Enbridge Energy 19 Automotive customer 10 Durolast Roofing 4 MW MSU FRIB 9 Betz Industries 8 MW Enbridge 19 MW WKW Roof Rack Systems 8 Continental Dairy 2 MW Betz Industries 8 Dart Containe
Slide 13: Upsides -- Grand Rapids Economic Results
UPSIDES -- Grand Rapids Economic Results . . . . Economy Performance Manpower Employment Survey Best labor (Third Quarter Outlook) market in nation % Increase staffing 32% 29% 3rd best state! 22% #1 City to raise a family #2 Metro job growth since 2010 #3 Best midsize city for jobs in 2014 #4 Best c
Slide 14: Upsides -- O&M Cost Control
UPSIDES -- O&M Cost Control . . . . Electric Non-fuel O&M Cost Average Annual O&M Change +6% 2013 over 2006 Peers Actual/Plan (exc 2013 major storms) +2% +2% Peers Peers Peers Peer Average up +6% CMS CMS CMS CMS CMS -1% -2% -2%a -2% -3%a Upside? -1% CMS _____ Plan a -8% Before reinvestment Conservat
Slide 15: Upsides -- Customer-Focused O&M Reinvestment
UPSIDES -- Customer-Focused O&M Reinvestment . . . . • Sales & other 2¢ Adjusted EPS O&M Reinvestment: (non-GAAP) (3)¢ • Reliability (3) • Parent debt prefunding (2) 2014 +18¢ +15¢ +14¢ +9¢ +9¢ Good choices ahead Weather 22¢ Cost savings 4 Reinvest & other (11) Total 15¢ 7%- 2013 6% Guidance January
Slide 16: Partners -- Michigan Energy Law
PARTNERS -- Michigan Energy Law . . . . • Adaptability • Reliability Update • Affordability • Environmental protection • Gov. signed new • 10% renewables rate design bill by 2015 • Senate workgroup • Energy efficiency formed to study standards 2015 Energy Law • File-and-implement improvements • Hist
Slide 17: Partners -- Michigan Governor's Race
PARTNERS -- Michigan Governor’s Race . . . . Rick Snyder Republican, Incumbent Mark Schauer Democrat, Challenger On Energy... Campaign Issues On ROA … • Education As Senate Democratic Leader, • Jobs “Choice creates a lot of Mark played a key role in the challenges and problems, successful passage of
Slide 18: Partners -- Constructive Regulation
PARTNERS -- Constructive Regulation . . . . Commission Tier 1 State Ranking John Quackenbush (R), 1 5 Michigan Chairman Term Ends: July 2, 2017 2 10 Sally Talberg (I) 3 18 Term Ends: July 2, 2019 4 10 Greg White (I) Term Ends: July 2, 2015 5 6 Barclays Research . . . . is supported by a quality Comm
Slide 19: Key Takeaways
Key Takeaways . . . . EPS a “Real” Growth (No “Resets”) $2.00 7% Core Fundamentals 7% 5% +7% +7% 5% Ten-Year Visible Investment (Self-funded) +7% +8% Strong Cost Control +12% (Among best) +12% +4% Target 5% - 7% Conservative Planning (Upside) +7% Actual = 7% +11% Supportive Regulatory Cataly
Slide 20: Appendix
Appendix
Slide 21: Capital Expenditures
Capital Expenditures 2013-2017 2018-2022 Total 2013 2014 2015 2016 2017 Subtotal Subtotal 2013-2022 (mils) (mils) (mils) (mils) (mils) (mils) (mils) (mils) New Generation (includes Renewables) $ 136 $ 222 $ 61 $ 213 $ 44 $ 676 $ 1,105 $ 1,781 Environmental 314 280 201 122 114 1,031 420 1,451 Gas 172
Slide 22: 2015 Gas Rate Case
2015 Gas Rate Case . . . . Overview Residential Gas Customer Cost Amount Amount (per day) (Mils) $3.00 Projected 9% Capital Investment $ 144 decrease! Cost & Other (56) $2.44 Request $ 88 $2.24 2016-2017 Investment 2.00 Recovery Mechanism $ 92 GCR 1.40 1.12 Existing Request (2012) (2015) 1.00 Rate
Slide 23: Capacity Diversity
Capacity Diversity . . . . Nuclear Oil 8% 6% Renewables 9% Coal 34% Pumped Storage 2014 11% Nuclear Gas Nuclear Oil 6% 10% 32% 8% Oil 6% Renewables Purchases 3% 3% Coal 24% Coal Renewables Pumped 41% 10% Storage 11% 2005 2017 Pumped Gas Storage Gas 29% 12% 37% . . . . evolving to cleaner generation
Slide 24: GAAP Reconciliation
CUS 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