Cms Energy Corporation · NYSE:CMS

Cms Energy — Investor Presentation (July 2016)

30 slides from Cms Energy's investor presentation, Jul 8, 2016

  1. Slide 1: Investor Meetings July 8, 2016

    Investor Meetings July 8, 2016 Jackson Generating Station Ludington Pumped Storage Cross Winds Energy Park Among lowest acquisition cost ever Fourth largest in the world #2 in renewable sales in the Great Lakes area

  2. 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

  3. Slide 3: Consumers Energy Overview

    Consumers Energy . . . . Overview #4 largest combination utility (electric and gas) in the country #403 Fortune 500 company #2 Investor in Michigan Lake Winds  Our Service Territory Energy Park Cross Winds Energy Park • Electric Utility 1.8 million electric customers 8,900 MW of capacity • Gas Uti

  4. Slide 4: Simple, Perhaps Unique Model

    Simple, Perhaps Unique Model . . . . 2017+ Plan Capital investment (reliability, costs, enviro mandates) 6% - 8% - 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% . . . . drives sustainable

  5. Slide 5: Capex $17 Billion Over 10 Years

    Capex $17 Billion Over 10 Years . . . . 2016-2025 2016-2025 Investor AND Customer How this adds value! Cleaner Energy Electric Infrastructure & Gas Enhancing Maintenance Infrastructure & Improving Productivity Maintenance Service New Reducing Generation Electric Cost Distribution & Reliability Envir

  6. Slide 6: Capex $17 Billion Over 10 Years: Customer Benefit Drivers

    Capex $17 Billion Over 10 Years . . . . 2016-2025 Customer Benefit Drivers Customer Electric reliability; digital customer experience Cleaner Energy Smart meters; proactive gas Enhancing infrastructure replacement Productivity Improving Service Gas compression upgrades; field Reducing service techno

  7. Slide 7: O&M Cost Performance

    O&M Cost Performance . . . . Actual Cost Reduction New Cost Savings (2015 over 2006) 2014 2016 & 2015 & 2017 (mils) (mils) • Attrition $ - 35 $ - 35 • Productivity (Coal Gas) - 35 - 15 • “Pole Top” Hardening - 20 - 10 • Smart Meters - 5 - 20 Peer Average ~5% • Eliminate Waste (UAs) - 15 - 10 & Work

  8. Slide 8: O&M Cost Performance: Where We Can Improve More

    O&M Cost Performance . . . . Where We Can Improve More How We Will Do It (Electric Distribution Cost Per Customer) 2014 2015 $30 mil Build the job as to go until 1st Quartile 1st Quartile designed 2nd Quartile Consumers Accurately schedule ($97) the job Consumers ($100) 3rd Quartile “Field services”

  9. Slide 9: The Consumers Energy Way

    The Consumers Energy Way . . . . Vision & Strategy Extraordinary Outcomes Disciplined System for How Operational Performance  Safety  Price competitiveness CUSTOMER ENABLED  Environmental stewardship FOCUS EMPLOYEES  Customer satisfaction Value Creation  Short-term: eliminate waste to fund BUSI

  10. Slide 10: Operating Cash Flow Growth

    Operating Cash Flow Growth . . . . Amount Up $0.8 Billion (bils) Gross operating cash flowa $2.7 $ 2.7 up $0.1 billion per year $2.5 $2.4 $2.2 2.2 $2.0 Interest, working $1.9 capital and taxes $1.8 1.7 $1.6 1.2 0.7 Investment 0.2 (0.3) _____ Cash flow before dividend a Non-GAAP (0.8) 2014 2015 2016

  11. Slide 11: Regulatory Track Record

    Regulatory Track Record . . . . 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 Filed 225 72 . . .

  12. Slide 12: Reducing Coal Dependence

    Reducing Coal Dependence . . . . A “Green” Strategy Coal Mix • Largest coal reduction of any investor-owned utility! 2005 2016 • Purchased Jackson Generating Station; lowest Largest reduction of any acquisition cost investor-owned utility (540 MW, $155 mil) • Added new wind farms 41% • Energy effici

  13. Slide 13: 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

  14. Slide 14: Consistent Growth Through Adversity

    Consistent Growth Through . . . . 7% CAGR a EPS 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 winter summe

  15. Slide 15: Appendix

    Appendix

  16. 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

  17. Slide 17: 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¢ 11¢ Back 10¢ 10 -up 8¢ 7¢ 6¢ Back 7¢ 6¢ -up 6¢ 9¢ 5.5¢ 5¢ 5¢ 5 Cross Winds  6¢ Big 5 Palisades Zeeland 0 Combined Cycle Gas Plant Wind Coal Nuclear Residential

  18. Slide 18: 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

  19. Slide 19: 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

  20. Slide 20: 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

  21. Slide 21: Economic Development Growth

    Economic Development Growth . . . . Examples of New Business Industries Electric Gas Combination MW Announcement Announcement Auto 71 Switch General Motors Flint & Grand Rapids • Largest data center in Food 20 eastern U.S. • Assembly and • 1,000 jobs created Components Plants • $5 billion investment

  22. Slide 22: Pension Benefit Weighted Full Yield Curve Adopted

    Pension Benefit Weighted Full Yield Curve Adopted . . . . The Curve Implications PBO Disc. (mils) • Applies each spot rate in the Spot Rate full yield curve to the present $ 180 New Yield Curve 6% value of the cash flow 160 corresponding to that rate 5% 140 Higher Cost • Consistent with how “interes

  23. Slide 23: Bonus Depreciation

    Bonus Depreciation . . . . Summary Improved Plan Bonus Depreciation 10-Year • 6 years already No “Block” Equity Capex • New 5 years! – $600 mil shelter NEW 7 Years $17 bil Capital Investment • Add $1.5 billion – Electric reliability – Gas infrastructure PRIOR – Clean energy 5 Years $15.5 bil NOLs •

  24. Slide 24: Credit Ratings

    Credit Ratings . . . . Scale Reflects S&P / S&P Moody’s Fitch Fitch Moody’s (Dec. ‘15) (Mar. ‘16) (Mar. ‘16) A+ A1 • Consistent A A2 Consumers Performance Secured A- BBB+ A3 Baa1 • Less Risk BBB Baa2 BBB- Baa3 • Customer Focus BB+ Ba1 • Constructive BBB Baa2 CMS Unsecured Regulation BBB- Baa3 BB+ Ba

  25. Slide 25: Electric Customer Base Diversified

    Electric Customer Base Diversified . . . . Top Ten Customers 2015 Electric Gross Margin (2015 Ranked by Deliveries) 1. Hemlock Semiconductor 2. General Motors 3. Nexteer Automotive Corporation Commercial 4. Gerdau 32% 5. Denso International Residential 50% 6. Meijer 7. State of Michigan 8. Spectrum

  26. Slide 26: GAAP Reconciliation

    GAAP Reconciliation

  27. Slide 27: 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 After-tax items: Electric

  28. Slide 28: 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 Consumers Operating Income + Depreciation & Amortization $ 1,813 $ 1,866 $ 2,030 $ 2,161 $ 2,336 $ 2,481 $ 2,613 Enterprises Project Cash Flows 20 20 35 58 58 63

  29. Slide 29: 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

  30. Slide 30: 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 $1.26 $1.36 $1.45 $1.08 $1.21 $1.02 $1.08 $1.16 - O&M cost reductions 2 - 3 pts $0.90 $0.96 84¢ 96¢ 66¢ - Sales growth 1 Int’l Sale $0.84 50¢ Dividend 20¢ 36¢ - No “block” equity 2 dilution

CMS Energy — Investor Presentation (July 2016) on 6ix