Cms Energy Corporation · NYSE:CMS
Cms Energy — Investor Presentation (March 2014)
32 slides from Cms Energy's investor presentation, Mar 18, 2014
Slide 1: Investor Meetings
Investor Meetings March 19, 2014 Cross Winds Energy Park Consumers Smart Energy Program Jackson Gas Plant
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 Territory Overview
Consumers Energy Territory Overview 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 one of largest investors and employers in
Slide 4: Mindset
Mindset 10-Year Actual $1.66 Dividend 7% CAGR EPS $1.78 5%- 7% Peers 4% $1.74 $1.55 $1.36 $1.45 $1.26 6% $1.21 a $1.08 6% 5%-7% $1.08 14% $1.02 $0.96 96¢ $0.90 27% 84¢ $0.81 Int’l Sale $0.84 32% 66¢ 39% 50¢ 80% 36¢ 20¢ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Future Dividend Payou
Slide 5: CMS Energy Model
CMS Energy MODEL RESULTS Consistent Predictable Investment Self-Imposed Limits • Ten year-$15 billion • Small, bite size projects • Sustainable base rates < 2% inflation • None “Bet The Company” • Investment “Needed Not Wanted” Upside Catalysts A. Capex >$15 billion B. PPA’s expire = 2,000 MW C. Cre
Slide 6: Model Delivers Above Average Return
Model Delivers Above Average Return EPSa Growth vs Peers Future 7% Return • Attractive dividend yield 4% 5% 5%-7% 6% • 62% payout ratio • EPS growth rate 5%-7% 4% 4% • Driven by $7 billion investment in regulated Utility over next five years Shareowner return 9%-11% CMS Peers CMS Peers - Ten-Year Gr
Slide 7: Visible, 10-Year Investment Plan
A. Visible, 10-Year INVESTMENT Plan 2013-2022 Opportunity Level 10-Year Plan Amount (bils) Generation capacity • PPA replacement $ 1.7 • ROA return Higher renewables .3 Gas conversions & expansion 1.0 Electric reliability & transmission 2.0 Total Opportunities $ 5.0 Rate Base 6% Customer base rates
Slide 8: Visible Investment: Catch-Up
Visible Investment: Catch-Up Amount (bils) $1.8 $1.5 Peers CMS 2013 Pct of Market Cap Cap Inv OCF Liquidity CMS 21% 20% 24% Peers 18 16 20 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: 10K; actual amounts through 2012 smoothed for illustr
Slide 9: Visible Investments: Customer-Driven
Visible Investments: Customer-Driven Clean Power Capacity Reliability Infrastructure $2.5 Billion $1.5 Billion $4.0 Billion $4.5 Billion Environmental New gas acquisition Consumers Smart Energy Gas distribution Renewable energy Pipeline replacements Main replacements Propane switching Ludington Pump
Slide 10: Visible Investment: Gas Infrastructure
Visible Investment: Gas Infrastructure Gas System Investment Amount • #4 largest gas utility(bils) $ 30. $2.6 • 27,000 miles of distribution mains 2.5 $2.3 • 24,000 miles of service pipe 2.0 1.5 $1.4 • 1,700 miles of transmission lines 1.0 • 312 TBtu gas storage 0.5 2008-2012 2013-2017 2018-2022 acc
Slide 11: Visible Investment: Major Generation
Visible Investment: Major Generation Over 6 GWs of Generation Assets Karn/Weadock Generating Complex New Capacity $0.4 B Generation Reliability Ludington Pumped Storage Plant $0.7 B Cross Winds Energy Park Environmental Controls $1.0 B Campbell Generating Plant Jackson Plant Investing over $2 billio
Slide 12: 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 • Commerci
Slide 13: Visible Investment: Rate Base Growth
Visible Investment: Rate Base Growth Amount (bils) Gas Capital Investment “Checklist” $ 20 $19 Electric Add Customer Value $15 $6 15 Reduce O&M Costs $11 $4 Reduce Fuel Costs 10 $3 Mandated by State or $13 Federal Regulators 5 $11 $8 2013 2017 2022 Base Rate Increases <2% <2% drives EPS, cash flow,
Slide 14: Expiring PPAs
B. Expiring PPA’S MW Replace PPA 10,000 contracts with Planned Demand Reductions owned 9,000 generation Capacity Shortfall 8,000 Jackson Plant Classic 7 Provides 7,000 Mothballed (950 MW) incremental Palisades PPA Termination 6,000(778 MW) rate base (and MCV PPA Termination (1,240 MW) earnings 0 201
Slide 15: Credit Ratings
C. Credit RATINGS Scale Reflects S&P / S&P Moody’s Fitch Fitch Moody’s(March)(January)(February) Consistent A+ A1 Performance A A2 A- A3 Consumers BBB+ Baa1 Secured Less Risk BBB Baa2 Customer Focus BBB- Baa3 BB+ Ba1 Constructive BBB Baa2 Regulation BBB- Baa3 CMS Unsecured BB+ Ba1 Good Energy BB Ba2
Slide 16: Consumers Sales Growth
D. Consumers SALES Growth Examples of New Business Economic Indicators Electric Grand Gas Rapids Michigan U.S Combination Unemployment 5.6% 8.4% 6.7% December 2013 GDP (real) 2010 thru 2012 14 11 7 Population 2010 Census 2 0 2 thru July 2012 Eco-Bio Plastics 3 MW Industrial Sales Betz Industries CMS
Slide 17: Capacity Price Market Increases
E. CAPACITY Price Market Increases Today Future Scenarios (mils)(mils) +$50 $55 +$30 $35 $5 Capacity price < $0.50 $4.50 $7.50 ($ kW per month) could add value to the 700 MW “DIG” plant.
Slide 18: Retail Open Access Policy
F. Retail Open Access Policy (ROA) 0.02% 310 “ROA” Electric Governor wants affordable Customers residential bills and competitive industrial rates Eliminating ROA could: Lower industrial rates by 10% or all customers by 4% 1.8 Million Consumers Energy Policy has big impact on Customers = 99.98% comp
Slide 19: Michigan's Energy Future
Michigan’s Energy Future Governor’s 2025 Energy Goals Regulatory Support Adaptability Eliminate energy waste Reduce coal, replace with renewables and gas Reliability Top quartile performance (SAIFI) Top half performance (SAIDI) Affordability Residential bills below U.S. average Competitive industria
Slide 20: The Governor on Retail Open Access
The Governor on Retail Open Access. Question: “You seem to agree with utilities’ argument on choice. Does that mean you will eliminate shopping altogether or keep the 10% cap in place?” “Choice creates a lot of challenges and problems so I wouldn’t jump to say increasing choice is the answer. I’m co
Slide 21: Self-Initiated Cost Control
G. Self-Initiated COST Control Average Annual O&M Change +6% +2% +1% Peers Major CMS Flat Storms -2% -3% -2% Peers 2013 -6% Reinvestment w/o Storm Changes Major 2013 Actual/Plan -8% Storms -10% Average -3.7% Plan Conservatively 2006-2012 2012 2013 2014 2014-2018 holds down rates and allows better sy
Slide 22: Continuous Cost Reduction
G. Continuous COST Reduction Past Progress Future Examples Headcount Fuel Mix MW Employees 7,600 2016 Retire Coal -900 -300 2016 Add GCC + 540 + 20 $100k Each 7,200 Total -360 -280 Future Savings (mils) $25 1,000 $60k Benefits Future Savings Annual Each (mils) 2002-2012 Actions completed $25 2013 EG
Slide 23: Constructive Regulation
Constructive Regulation Commission Tier 1 State Ranking 1 5 Michigan 2 10 John Quackenbush (R), Chairman Term Ends: July 2, 2017 3 18 4 10 5 6 Sally Talberg (I) Greg White (I) Term Ends: July 2, 2019 Term Ends: July 2, 2015 Barclays Research strong law on the books supported by a quality commission.
Slide 24: Customer Rates
Customer Rates – Working With MPSC To Be.... 2013-2017 Cost Reductions Annual Average Base Rate Increasesa Eliminate 2014 base rate 2% Inflation increases: • Electric • Gas ~1% ~1% Eliminated renewable surcharge Eliminated rate skewing Electric Gas Lowered summer block a Includes surcharges rates ..
Slide 25: Mindset
CMS Mindset.... Icy Late December O&M B/(W) Than Forecast (mils) Storm(total $50 M) $(37) Insurance 16 2014 Cold Lower contributions 9 Winter 2012 Hot Sales-weather 12 Summer Total $ 0 2013 Cold $1.66 Winter & Reinvested +7% Cost Savings earlier 2013 Mild Guidance Summer 2012 2012 Reinvestment (Janu
Slide 26: Operating Cash Flow Growth
Operating Cash Flow Growth.... Amount (bils) Gross operating cash flowa Up $0.5 Billion $ 2.5 up $0.1 billion per year $2.2 $2.1 2.0 $1.9 $2.0 $1.7 $1.8 $1.6 $1.5 1.5 Interest $1.4 $1.45 Working capital and taxes Investment 1.0 0.5 (0.5) a Non-GAAP Cash flow before dividend 2013 2014 2015 2016 2017
Slide 27: Key Takeaways
Key Takeaways.... EPS a “Real” Growth $2.00 7% Core Fundamentals 7% 5% +7% 5% Visible Investment +7% +8% +7% Cost Controls +12% +12% +4% Target 5% - 7% Plan Conservatively +7% Actual = 7% +11% Supportive Regulatory Catalysts Upside Target 6% - 8% Actual EPS = 8% 2003 2004 2005 2006 2007 2008 2009 20
Slide 28: Appendix
Appendix
Slide 29: Capital Expenditures 2014-2018 Plan
Capital Expenditures 2014-2018 Plan 2013 2014 2015 2016 2017 2018 Total (mils)(mils)(mils)(mils)(mils)(mils)(mils) Electric Distribution $ 199 $ 190 $ 197 $ 202 $ 211 $ 208 $ 1,008 Generation 89 96 93 88 60 155 492 New Customers 48 47 38 39 38 34 196 Other 96 102 81 82 84 61 410 Electric Base Capita
Slide 30: GAAP Reconciliation
GAAP Reconciliation
Slide 31: 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 0.33
Slide 32: Reconciliation of Gross Operating Cash Flow to GAAP
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2012 2013 2014 2015 2016 2017 2018 Consumers Operating Income + Depreciation & Amortization $ 1,635 (a) $ 1,740 $ 1,800 $ 1,876 $ 1,952 $ 2,054 $ 2,162 Enterprises Project Cash Flows 17 16 25 30 28