Cms Energy Corporation · NYSE:CMS
Cms Energy — Investor Presentation (April 2014)
33 slides from Cms Energy's investor presentation, Apr 14, 2014
Slide 1: Investor Meeting April 14, 2014
2.pngCMSCross Winds. Energy Park Jackson Gas Plant Consumers Smart Energy Program Investor Meeting April 14, 2014
Slide 2: Forward-looking statements
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: Consumers Energy
Consumers Energy . . . . 2 •Fourth largest combination utility in the United States •1.8 million electric and 1.7 million gas customers •8,600 MW of owned and purchased generation capacity •312 TBtu of gas storage capacity •Premium regulatory environment Overview Territory . . . . one of largest inv
Slide 4: Mindset drives consistent real EPS growth
Mindset . . . . 3 . . . . drives consistent “real” EPS growth. . . . . $0.81 _ _ _ _ _ Adjusted EPS (non-GAAP) excluding MTM in 2004-2006 a $1.25 excluding discontinued Exeter operations and accounting changes related to convertible debt and restricted stock 20¢ 36¢ 50¢ 66¢ 84¢ 96¢ $1.02 $0.90 $0.96
Slide 5: Model delivers good, future return opportunity
Model Delivers . . . . 5 . . . . good, future return opportunity Above Average Return Average Return EPSa Growth vs Peers _ _ _ _ _ a Adjusted EPS (non-GAAP) Ten-Year Growth Future 7% 4% 5% 4% 5%-7% 6% CMS Peers CMS Peers 5%-7% Future Return •Attractive dividend yield 4% •62% payout ratio •EPS growt
Slide 6: Visible 10-Year Investment Plan
A. Visible, 10-Year INVESTMENT Plan . . . . 6 . . . . reflects catch-up needed to reduce cost and improve reliability. . . . . . 2013-2022 10-Year Plan Opportunity Level Opportunity Level $15 Billion $15 Billion $15 Billion $15 Billion $20 Billion $20 Billion Opportunity Amount (bils) Generation cap
Slide 7: Visible Investment: Catch-Up
Visible Investment: Catch-Up . . . . 7 2013 Pct of Market Cap Cap Inv OCF Liquidity CMS 21% 20% 24% Peers 18 16 20 . . . . . . . . creates unique opportunity; with OCF already stronger than peers. 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Amo
Slide 8: Visible Investments: Customer-Driven
Visible Investments: Customer-Driven . . . . 8 Clean Power $2.5 Billion Reliability $4.0 Billion . . . . . . . . small and incremental with no big bets. Renewable energy New gas acquisition Main replacements Propane switching Pipeline replacements Gas distribution Electric reliability Consumers Smar
Slide 9: Visible Investment: Gas Infrastructure
Visible Investment: Gas Infrastructure . . . . 9 . . . . accelerating investment opportunities. . . . . $1.4 $2.3 $2.6 0.0 0.5 1.0 1.5 2.0 2.5 3.0 2008 - 2012 2013 - 2017 2018 - 2022 •#4 largest gas utility •27,000 miles of distribution mains •24,000 miles of service pipe •1,700 miles of transmissio
Slide 10: Visible Investment: Major Generation
Visible Investment: Major Generation 10 Investing over $2 billion in generation over the next 5 years. Michigan.pngCross Winds Energy Park Jackson Plant Ludington Pumped Storage Plant Campbell Generating Plant Karn/Weadock Generating Complex Ludington.jpgGeneration Reliability $0.7 B Environmental C
Slide 11: Visible Investment: Renewable Energy
Visible Investment: Renewable Energy . . . . •Michigan energy law requires: •10% renewables by 2015 •Purchase 50% and build 50% •Lake Winds®. Energy Park •100 MW, 56 Vestas turbines •Commercial operation – November 2012 •$235 million •Cross Winds®. Energy Park Phase I •105 MW, 62 GE turbines •Commer
Slide 12: Visible Investment: Rate Base Growth
Visible Investment: Rate Base Growth . . . . 12 . . . . drives EPS, cash flow, and dividend growth. . . . . $3 $4 $6 $11 $15 $19 0 5 10 15 $20 2013 2017 2022 Amount (bils) $ Gas Electric Base Rate Increases <2% <2% Capital Investment “Checklist” .Add Customer Value .Reduce O&M Costs .Reduce Fuel Cos
Slide 13: Credit Ratings just upgraded, more ahead?
C. Credit RATINGS . . . . 14 . . . . just upgraded, more ahead? . . . . •Consistent Performance •Less Risk •Customer Focus •Constructive Regulation •Good Energy Policy Reflects Present Prior 2002 Scale S&P / Fitch Moody’s S&P (March) Moody’s (January) Fitch (February) A+ A1 A A2 Consumers Secured A-
Slide 14: Consumers Sales Growth
D. Consumers SALES Growth . . . . 15 . . . . best economic indicators in State. . . . . Economic Indicators Electric Gas Combination Dart Container 2 MW Enbridge 28 MW Secant 7 MW Norplas 5 MW MACI 6 MW Examples of New Business Industrial Sales -5% 6% <1% -6% 2% 2008-2009 Recession 2010-2012 Recover
Slide 15: Capacity Price Market Increases
E. CAPACITY Price Market Increases . . . . 16 . . . . could add value to the 700 MW “DIG” plant. . . . . $0.50 $4.50 $7.50 Capacity price < ($ kW per month) Today (mils) Future Scenarios (mils) $5 +$30 $55 $35 +$50 Opportunity
Slide 16: Retail Open Access Policy (ROA)
F. Retail Open Access Policy (ROA) . . . . •Governor wants affordable residential bills and competitive industrial rates •Eliminating ROA could: •Lower industrial rates by 10% or all customers by 4% •Policy has big impact on competitiveness •$150 million cost opportunity 17 . . . . change could allo
Slide 17: The Governor on Retail Open Access
The Governor on Retail Open Access. . . . 19 “Choice creates a lot of challenges and problems so I wouldn’t jump to say increasing choice is the answer. I’m concerned about people bouncing back and forth depending on what’s going on with rates, essentially trying to arbitrage markets.” Governor Rick
Slide 18: Self-Initiated Cost Control
G. Self-Initiated COST Control . . . . 20 . . . . . holds down rates and allows better system reliability. . . . . . Average Annual O&M Change -2% +2% -10% +1% 2006-2012 2012 2013 2014 2014-2018 Peers w/o Storm Changes Actual/Plan +6% Peers 2013 Reinvestment -8% -2% Major Storms -6% -3% Major 2013 S
Slide 19: Continuous Cost Reduction
G. Continuous COST Reduction . . . . 21 . . . . . a way of life at CMS. Past Progress $100k Each $60k Each 7,600 1,000 600 7,200 2010 2012 Future Examples Future Examples Fuel Mix Benefits MW Employees 2016 Retire Coal - 900 - 300 2016 Add GCC + 540 + 20 Total -360 - 280 Future Savings (mils) $25 Pe
Slide 20: Michigan Energy Law
Michigan Energy Law . . . . . Pre-2008 2008 Energy Law 2015 Improvements •Historical test year •No cap choice •12-18 months regulatory lag •10% renewables by 2015 •Energy efficiency standards •10% ROA cap •File-and- implement •Higher renewables •Continues energy efficiency •Additional regulatory imp
Slide 21: Constructive Regulation
6 10 18 10 5 5 4 3 2 1 Constructive Regulation . . . . 23 . . . . strong law on the books supported by a quality commission. . . . . Commission John Quackenbush (R), Chairman Term Ends: July 2, 2017 Sally Talberg (I) Term Ends: July 2, 2019 Greg White (I) Term Ends: July 2, 2015 Tier 1 State Ranking
Slide 22: Customer Rates – Working With MPSC
Customer Rates – Working With MPSC To Be . . . . 24 . . . . affordable and sustainable. . . . . ~1% ~1% Electric Gas 2% Inflation a Includes surcharges 2013-2017 Annual Average Base Rate Increasesa Cost Reductions Eliminate 2014 base rate increases: •Electric •Gas .Eliminated renewable surcharge .El
Slide 23: CMS Mindset: deliver for customers AND investors
CMS Mindset . . . . 25 . . . . deliver for customers AND investors. . . . . 2013 Cold Winter & Cost Savings $1.66 +7% Guidance 2012 Warm Winter 2012 Cost Saving 2012 Hot Summer Reinvested earlier 2014 Cold Winter 2013 Mild Summer Icy Late December O&M B/(W) Than Forecast (mils) •Storm(total $50 M) $
Slide 24: Operating Cash Flow Growth
Operating Cash Flow Growth . . . . 26 (0.5) 0.0 0.5 1.0 1.5 2.0 2.5 2012 2013 2014 2015 2016 2017 2018 Amount (bils) $ Investment Cash flow before dividend Wide upward diagonal_ _ _ _ _ a Non-GAAP NOLs & Credits $0.7 $0.6 $0.4 $0.5 $0.4 $0.2 $0.1 Wide upward diagonalGross operating cash flowa up $0.
Slide 25: Key Takeaways
Key Takeaways . . . . 27 . . . . distinguish CMS favorably with customers and owners. . . . . distinguish CMS favorably with customers and owners. _ _ _ _ _ a Adjusted EPS (non-GAAP) excluding MTM in 2004-2006 EPS a “Real” Growth $2.00 Core Fundamentals .Visible Investment .Cost Controls .Plan Conse
Slide 26: Guidance
Guidance’ Late December TTT 2014 Cold 7 » 4 Reinvestment (January-October) | Amount (mils) Improve gas reliability $16 Improve electric reliability 14 Accelerate generation maintenance 7 Prefund pension & storm response 21 Total G8) .... deliver for customers AND
Slide 27: Capital Expenditures
Capital Expenditures 29 201320142015201620172018Total(mils)(mils)(mils)(mils)(mils)(mils)(mils) ElectricDistribution199$ 190$ 197$ 202$ 211$ 208$ 1,008$ Generation89 96 93 88 60 155 492 New Customers48 47 38 39 38 34 196 Other96 102 81 82 84 61 410 Electric Base Capital432$ 435$ 409$ 411$ 393$ 458$
Slide 28: Reported to adjusted EPS
20032004200520062007200820092010201120122013Reported earnings (loss) per share - GAAP($0.30)$0.64($0.44)($0.41)($1.02)$1.20$0.91$1.28$1.58$1.42$tax items: Electric and gas utility0.21(0.39)- - (0.07)0.050.330.03- 0.17- Enterprises0.740.620.04(0.02)1.25(0.02)0.09(0.03)(0.11)(0.01)* Corporate interest
Slide 29: Appendix
Appendix
Slide 30: Capital Expenditures
Capital Expenditures 29 201320142015201620172018Total(mils)(mils)(mils)(mils)(mils)(mils)(mils) ElectricDistribution199$ 190$ 197$ 202$ 211$ 208$ 1,008$ Generation89 96 93 88 60 155 492 New Customers48 47 38 39 38 34 196 Other96 102 81 82 84 61 410 Electric Base Capital432$ 435$ 409$ 411$ 393$ 458$
Slide 31: GAAP Reconciliation
GAAP Reconciliation
Slide 32: GAAP EPS Reconciliation
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$1.66 After tax items: Electric and gas utility0.21(0.39)- - (0.07)0.050.330.03- 0.17- Enterprises0.740.620.04(0.02)1.25(0.02)0.09(0.03)(0.11)(0.0
Slide 33: Gross Operating Cash Flow Reconciliation
2012201320142015201620172018Consumers Operating Income + Depreciation & Amortization1,635$ (a)1,740$ 1,800$ 1,876$ Enterprises Project Cash Flows17 16 25 30 Gross Operating Cash Flow1,652$ 1,756$ 1,825$ 1,906$ (411) (335) (375) (356) Net cash provided by operating activities1,241$ 1,421$ 1,450$ 1,55