Slide 1: Second Quarter 2017 Results & Outlook
Second Quarter 2017 Results & Outlook July 28, 2017 PEOPLE PLANET PROFIT CMS Energy: World Class Performance Delivering Hometown Service
Slide 2: Forward-looking statements and non-GAAP measures
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: Agenda
Agenda First Half Results Patti Poppe President & CEO People, Planet, Profit PEOPLE PLANET PROFIT Performance -- Consumers Energy Way Financial Results and Outlook Rejji Hayes Executive VP & CFO 2
Slide 4: First Half Results
First Half Results . . . PROFIT EPS at $1.04 a Same as 2016; up 7% weather-normalized 4¢ ahead of Plan a Reaffirm Full Year EPS guidance: $2.14 to $2.18 +6% to +8% a Long-term Growth: 6% to 8% _____ a Adjusted EPS (non-GAAP) . . . on track for 6% to 8% EPSa growth. 3
Slide 5: Consumers Among Top Employers
Consumers Among Top Employers PEOPLE 4
Slide 6: Regulatory Update
Regulatory Update . . . 2017 PEOPLE 2018 Customer Benefits Energy Law No subsidies 4/20: Energy Law 12/1: SRM June: Capacity effective capacity charge determined charge implemented Gas Rate Case Safety 1/29: Self-impl.; Monday 7/31: $20 MM Final order Electric Rate Case Reliability 2/28: Final order
Slide 7: Reducing Coal Intensity
Reducing Coal Intensity . . . a PLANET a Coal Energy Renewable Energy b 49% Demand from Shut down customers coal c Meets 22% RPS d 15% 15% b 10% 3% 2005 2016 Future 2005 2016 2021 Future _____ _____ a_ _ _ _ _Energy CMS a Consumers Energy b_ Includes _ _ _ _ Classic 7, includes PPA contracts b Inclu
Slide 8: Clean and Lean
Clean and Lean . . . PEOPLE PLANET PROFIT Old Utility Model Clean And Lean Big Build Supply Supply Fully utilize Modular Retirement assets Excess supply Big Excess Build supply Modular Actual Modular Demand Demand EE & DR O&M Excess O&M supply Expected Fuel Demand Fuel Modular Big Bets Investments R
Slide 9: Renewables
Renewables . . . PLANET Wind Proposed New Tariff Solar • Cross Winds II • Large industrial program • Solar Gardens • Expected COD: Jan 2018 • 44 MW • Purchase 20% to 100% of • Residential rooftop energy use solar program • Cross Winds III • Expected COD: Jan 2020 • Fully bundled service • MPSC evalu
Slide 10: Performance
Performance . . . Meter Reading Invoice Reversals Live Calls (MM) (MM) 13 pts 99% 1.1 5.5 36% Improvement Improvement 64% Improvement 86% 3.5 0.4 2015 2017 YE 2015 2017 YE 2015 2017 YE Forecast Forecast Forecast Savings $(MM) (since 2015) $5 $1½ $2½ . . . improving quality of service. 9
Slide 11: Story of the Month
Story of the Month . . . PEOPLE Flint Fueling Pilot • Fueling trucks during off- peak hours (15 - 30 min) • Impacting 450 crews with multiple workers per crew Potential statewide savings: • $3 MM/ yr • 100,000 hours/ yr . . . improving quality of service. 10
Slide 12: Consistent Growth Through Change
Consistent Growth Through . . . 7% CAGR a EPS +6% to +8% Dividend Weather Recession Recession Help _____ Hurt a Adjusted EPS (non-GAAP) Cold 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Feb. Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold Feb. Warm War
Slide 13: First Half 2017 EPS Results By Business Segment
First Half 2017 EPS . . . a Results By Business Segment 2016 2017 Second Quarter First Half EPS EPS $0.45 $0.33 Actual vs Plan Weather-normalized 0.41 0.35 Utility $1.12 $0.01 Enterprises 0.07 0.03 Interest & other (0.15) -- First Half CMS Energy $1.04 $0.04 EPS $1.04 $1.04 Weather-normalized 1.12 1
Slide 14: 2017 EPS
2017 EPS . . . a First Half Six Months To Go Flat 12¢ - 16¢ $2.14 - $2.18 6% - 8% 12¢ - 16¢ $2.02 4¢ 7¢ 4¢ 3¢ (11)¢ (7)¢ Managing Work Our Model Customer base Second Half 2016 Discretionary Activities: rates <2% Debt Pre-funding 4¢ Foundation & Low Income 5 Other 5 SubTotal 14¢ First 2017 Cost Savin
Slide 15: 2017 Outlook
2017 Outlook . . . Adjusted EPS (non-GAAP) Second Half 2016 Reinvestment: 2016 Debt Pre-funding 4¢ Foundation & Low Income 5 Benefits 4¢ Other 5 Property taxes 4 Total 14¢ Total 8¢ Weather & Storms Reinvestment last year Guidance +6% to +8% Recovery Recovery Accelerated Financing 3¢ Enterprises 1 EE
Slide 16: Managing Work Every Year
Managing Work Every Year . . . a 2008 2009 2010 2011 2012 2013 2014 2015 2016 EPS Mild $2.20 Summer +7% +18¢ +17¢ Cost +7% productivity above plan Cost $2.00 productivity +7% above plan Reinvestment +13¢ Storms Hot +7¢ -13¢ Mild $1.80 Reinvestment Summer Winter +7% RECORD Hot WARM Offsets Summer +7%
Slide 17: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . 2017+ Plan Customer 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 18: Ten-year Customer Investment Plan
Ten-year Customer Investment Plan . . . Gas Electric Infrastructure & Distribution Maintenance $18 billion Supply . . . with opportunities to expand to $21 - $25 billion. 17
Slide 19: Modular Customer Investment Plan
Modular Customer Investment Plan . . . Last 10 Years Next 10 Years $13 Bn $18 Bn Up 40% Gas Electric Gas Distribution 41% 29% Electric Distribution Supply Supply % of projects <$200 MM a ~75% >90% _____ a Plan assumes a modular renewable build-out with individual projects less than $200 million. . .
Slide 20: O&M Cost Performance Helps to Fund Investments
O&M Cost Performance Helps to Fund . . . Actual Cost Reduction New Annual Cost Savings (Peers 2016 over 2006) Three-Year Avg 2014 2017 - 2016 - 2019 Good Business Decisions (MM) (MM) • Attrition $ - 16 $ - 16 • Productivity (Coal Gas) - 20 - 5 • Enhanced capitalization - 10 - 4 • Smart Meters - 4 -
Slide 21: Operating Cash Flow Funds Investments
Operating Cash Flow Funds . . . Amount Up $0.8 (Bn) billion Gross operating cash flowa $2.9 $ 2.9 up > $0.1 billion per year $2.7 Up $2.6 $1.8 billion since 2004! 2.4 $2.3 Interest, working $2.2 capital and taxes $2.1 $1.9 1.9 $1.63 $1.65 1.4 Operating cash flow NOLs avoid 0.9 Investment need for bl
Slide 22: 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 +319% +225% +103% Royal Technologies Zeeland Farm Services Ottawa Ithaca • Manufactures plastic • Products a
Slide 23: "DIG" (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . Pre-Tax Income Opportunities (MM) $ 80 $75 70 Contracts (layering in over time) 60 $55 +$40 50 +$20 40 $35 $30 30 Better Performance 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 24: 2017 Sensitivities
2017 Sensitivities . . . Full Year Impact Sensitivity EPS OCF (MM) Sales a • Electric (37,031 GWh) + 1% + 5¢ + $ 20 • Gas (307 Bcf) + 5 + 7 + 30 – – 55 Gas prices (NYMEX) + 50¢ + 0 + ROE (planned) • Electric (10.1%) + 10 bps + 1½ + 7 • Gas (10.1%) + 10 + ½ + 3 Interest Rates +100 bps – < 1 – 7 + + E
Slide 25: 2017 Financial Targets
2017 Financial Targets . . . 2017 Adjusted EPS (non-GAAP) $2.14 - $2.18 +6% to +8% Operating cash flow (MM) $1,650 Dividend payout ratio ~ 62% Customer price (excl. fuel) Electric ~2% Gas ~2% FFO/Average debt (non-GAAP) 18½% Customer investment (Bn) $1.8 . . . 15th year of transparent, co
Slide 26: Q&A
Q&A See you at our September 25 th Investor Day! 25
Slide 27: Appendix
Appendix
Slide 28: Credit Ratings
Credit Ratings . . . Scale Ratings Drivers S&P / S&P Moody’s Fitch Fitch AA- Moody’s Aa3 (Dec. ‘15) (Apr. ‘17) (Jul. ‘17) • Strong financial position A+ A1 Consumers A A2 Secured A- A3 • Growing operating BBB+ Baa1 cash flow BBB Baa2 BBB- Baa3 BB+ Ba1 BBB+ Baa1 • Return on regulated BBB Baa2 CMS Uns
Slide 29: GAAP Reconciliation
GAAP Reconciliation
Slide 30: 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 2016 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 $1.98 Pretax items:
Slide 31: Earnings By Quarter and Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings By Quarter and Year GAAP Reconciliation (Unaudited) (In Millions, Except Per Share Amounts) 2016 1Q 2Q 3Q 4Q YTD Dec Reported net income - GAAP $164 $124 $186 $77 $551 Pretax items: Electric and gas utility - - 11 * 11 Tax impact - - (4) (*) (4) Enterprises * * * 1 1
Slide 32: CMS Energy EBITDA GAAP Reconciliation
CMS ENERGY CORPORATION EBITDA GAAP Reconciliation (Unaudited) In Millions Twelve Months Ended 06/30/17 12/31/16 06/30/16 Reported earnings - GAAP $ 554 $ 551 $ 542 Interest on long-term debt 411 411 396 Other interest expense 31 29 15 Allowance for borrowed funds used during construction (4) (5) (5)
Slide 33: Consumers Energy EBITDA GAAP Reconciliation
CONSUMERS ENERGY COMPANY EBITDA GAAP Reconciliation (Unaudited) In Millions Twelve Months Ended 06/30/17 12/31/16 06/30/16 Reported earnings - GAAP $ 625 $ 614 $ 597 Interest on long-term debt 263 261 256 Other interest expense 13 12 1 Allowance for borrowed funds used during construction (4) (5) (5
Slide 34: Reconciliation of Gross Operating Cash Flow to GAAP
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2015 2016 2017 2018 2019 2020 2021 Consumers Operating Income + Depreciation & Amortization $ 1,866 $ 2,037 $ 2,134 $ 2,246 $ 2,547 $ 2,678 $ 2,816 Enterprises Project Cash Flows 20 46 58 58 53 53
Slide 35: Consumers Energy 2017 Cash Flow Forecast GAAP Reconciliation
Consumers Energy 2017 Cash Flow Forecast GAAP Reconciliation (in millions) (unaudited) Reclassifications From Sources and Uses to Statement of Cash Flows Interest/ Capital Presentation Sources and Uses Tax Other Financing Other Working Accts/Rec Lease Pymts Securitization Common Consolidated Stateme
Slide 36: CMS Energy Parent 2017 Cash Flow Forecast GAAP Reconciliation
CMS Energy Parent 2017 Cash Flow Forecast GAAP Reconciliation (in millions) (unaudited) Reclassifications From Sources and Uses to Statement of Cash Flows Presentation Sources and Uses Non Equity Consolidated Statements of Cash Flows non-GAAP Uses GAAP Description Amount as Operating Other Amount De
Slide 37: Consolidated CMS Energy 2017 Forecasted Cash Flow
Consolidated CMS Energy 2017 Forecasted Consolidation of Consumers Energy and CMS Energy Parent Statements of Cash Flow (in millions) (unaudited) Eliminations/Reclassifications/Consolidation to Arrive at the Consolidated Statement of Cash Flows Statements of Cash Flows Other Consumers Equity Consume
Slide 38: Reconciliations of GAAP Net Income to Non-GAAP Adjusted Net Income
CMS Energy Corporation Reconciliations of GAAP Net Income to Non-GAAP Adjusted Net Income (Unaudited) In Millions, Except Per Share Amounts Three Months Ended Six Months Ended June 30 2017 2016 2017 2016 Net Income Available to Common Stockholders $ 92 $ 124 $ 291 $ 288 Reconciling Items: Discontinu