Cms Energy Corporation · NYSE:CMS
Cms Energy — Barclays Select 2014 Series – U.S. Utility CEO Asia Week
59 slides from Cms Energy's conference presentation, Sep 29, 2014
Slide 1: Barclays Select 2014 Series – U.S. Utility CEO Asia Week
Content • How it Works • Upsides • Partners • Investment • Passion to Improve Barclays Select 2014 Series – U.S. Utility CEO Asia Week September 29 & October 1, 2014 Ludington Pumped Storage Jackson Gas Plant Cross Winds Energy Park Fourth largest in the world Lowest acquisition cost ever #1 in re
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: Content
Content Quick Update Detailed Update 3 CMS Energy at a Glance 17 Consumers Energy 4 Model 18 Model 5 Consumers Energy 19 Catch-Up 6 O&M Cost Control 20 Ten-Year Plan 7 Customer-Focused O&M Reinvestment 21 Customer-Driven Investment 8 Michigan’s Recovery 22 Capacity Opportunities 9 Governor’s Race 23
Slide 4: CMS Energy at a Glance
CMS Energy at a Glance . . . . Consistent Performance EPS a “Real” Growth (No “Resets”) Targeting twelfth year of $2 +7% industry-leading financial +7% performance +5% +7% +6% $15 billion investment plan +7% ahead – self-funded! +7% +8% Strong cost control – a top performer! +12% +12% +4% Target
Slide 5: How It Works -- Model
HOW IT WORKS -- 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” • Self-funded Catalysts Capex >$15 billion PPA’s expi
Slide 6: How It Works -- Consumers Energy
HOW IT WORKS -- Consumers Energy . . . . Territory Overview Fourth largest combination utility in the United States! Electric Utility 1.8 million electric customers Lake Winds Energy Park 8,600 MW of capacity Cross Winds Energy Park Gas Utility 1.7 million gas customers 312 TBtu gas stora
Slide 7: Upsides -- O&M Cost Control
UPSIDES -- Include O&M Cost Control . . . . Average Annual O&M Change Continuous Cost Reductions +6% Peers -3%a Actual/Plan (exc Amount 2013 major storms) (mils) -2%a $1,050 +2% +2% +5% Peers Peers Peers +6% +5% CMS CMS CMS CMS CMS -8% -1% -2% -2%a -2% -8% -3%a Upside? _____ Plan a -8% Before reinve
Slide 8: Upsides -- Customer-Focused O&M Reinvestment
UPSIDES -- Customer-Focused O&M Reinvestment . . . . Icy Late December Adjusted EPS (non-GAAP) O&M B/(W) Than Forecast (mils) 2013 +13¢ • Storm(total $50 M) • Insurance $(37) 16 • Lower contributions 9 2012 Hot • Sales-weather 12 Summer Total $ 0 2013 Cold $1.66 Winter & +7% Cost Savings Reinvested
Slide 9: Upsides -- Michigan's Recovery
UPSIDES -- Michigan’s Recovery . . . . Gross Domestic Product – 2010 through 2013 Grand Rapids 15.3% WA ND Top 10% of All Cities! MT 8.8 54.9 11.6 MN 11.5 Michigan ME SD OR ID 11.3 WI Top 10 VT 1.7 17.3 5.5 WY 7.4 MI state NY 9.8 NH 6.2 4.3 IA NE 11.4 6.5 MA 10.3 13.1 9.8 IL PA NV RI 5.4 IN OH CT UT
Slide 10: 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 11: Partners -- Michigan Energy Law Update
PARTNERS -- Michigan Energy Law Update . . . . • Adaptability • Reliability Update • Affordability • Environmental protection • Gov. signed new • 10% renewables rate design bill by 2015 • Legislative • Energy efficiency workgroups formed standards to study 2015 • File-and-implement Energy Law • Hist
Slide 12: 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 13: Investment -- Capacity Opportunities
INVESTMENT -- Capacity Opportunities . . . . Capacity Growth Over Next Ten Years 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 Palis
Slide 14: Investment -- Capacity Price Increases
INVESTMENT -- 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 15: Passion to Improve -- Includes Lasting
PASSION TO IMPROVE -- Includes Lasting . . . . Cost Control Customer Satisfaction Employee Engagement Utility O&M Residential +15% 1st 1st First Quartile Quartile 1st Quartile Second Second Down 5% Third Third Down 10% Fourth 2014-2018 Fourth 2011 2013 2018 2011 2014 2016 2011 2012 2013 . . . . prem
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Slide 17: Barclays Select 2014 Series – Detailed Update
Content • How it Works • Investment • Upsides • Partners • Passion to Improve Barclays Select 2014 Series – U.S. Utility CEO Asia Week September 29 & October 1, 2014 Ludington Pumped Storage Jackson Gas Plant Cross Winds Energy Park Fourth largest in the world Lowest acquisition cost ever #1 in re
Slide 18: How It Works -- Consumers Energy
HOW IT WORKS -- Consumers Energy . . . . Territory Overview Fourth largest combination utility in the United States! Electric Utility 1.8 million electric customers Lake Winds Energy Park 8,600 MW of capacity Cross Winds Energy Park Gas Utility 1.7 million gas customers 312 TBtu gas stora
Slide 19: How It Works -- Model
HOW IT WORKS -- 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” • Self-funded Catalysts Capex >$15 billion PPA’s expi
Slide 20: Investment -- Catch-Up
INVESTMENT -- “Catch-Up” . . . . Amount (billions) $1.8 $1.5 per 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 _____ Sourc
Slide 21: 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 22: 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 23: Investment -- Capacity Opportunities
INVESTMENT -- Capacity Opportunities . . . . Capacity Growth Over Next Ten Years 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 Palis
Slide 24: Investment -- New Capacity Ops
INVESTMENT -- New Capacity Ops . . . . Full Year Impact Replace PPA With New Build Customer Bill Investor (mils) (EPS) Upside: 1,000 MW of Capacity Options PPA’s expire - $325 0¢ Add 1,000 MW + 325 +5 • Build - Thetford owned capacity • Expand - Zeeland Impact Incremental Step-up ≈ Flat + 5¢ • • B
Slide 25: 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. 24
Slide 26: Upsides -- Michigan's Recovery
UPSIDES -- Michigan’s Recovery . . . . Gross Domestic Product – 2010 through 2013 Grand Rapids 15.3% WA ND Top 10% of All Cities! MT 8.8 54.9 11.6 MN 11.5 Michigan ME SD OR ID 11.3 WI Top 10 VT 1.7 17.3 5.5 WY 7.4 MI state NY 9.8 NH 6.2 4.3 IA NE 11.4 6.5 MA 10.3 13.1 9.8 IL PA NV RI 5.4 IN OH CT UT
Slide 27: Upsides -- Sales Growth
UPSIDES -- Sales Growth . . . . Economic Indicators Annual Electric Salesa Grand Rapids Michigan U.S Growth 2.5% Upside? Building Permits* +42% +18% +9% 1.7% GDP (real) 2010 thru 2013 15.3 11.4 8.4 1.3% Population 2010 Census 3 0 2 thru July 2013 0.7% <1/2% 0.3%b Unemployment July 2014 5.3 7.7 6.2 *
Slide 28: Upsides -- Economic Growth
UPSIDES -- Economic Growth . . . . Examples of New Business Top Ten (MW) Electric Gas Combination Brembo 24 MW Recent Annoucement Recent Annoucement Enbridge Energy 19 Plasan Carbon Composites Dicastal North America, Inc. GM Assembly 10 • High performance auto • World’s largest maker of body parts a
Slide 29: Upsides -- O&M Cost Control
UPSIDES -- O&M Cost Control . . . . Average Annual O&M Change Continuous Cost Reductions +6% Peers -3%a Actual/Plan (exc Amount 2013 major storms) (mils) -2%a $1,050 +2% +2% +5% Peers Peers Peers +6% +5% CMS CMS CMS CMS CMS -8% -1% -2% -2%a -2% -8% -3%a Upside? _____ Plan a -8% Before reinvestment 2
Slide 30: Upsides -- O&M Cost Control
UPSIDES -- O&M Cost Control . . . . Average Annual O&M Change Future Examples +6% Peers Fuel Mix MW Employees Actual/Plan (exc 2013 major storms) 2016 Retire Coal - 950 - 300 2016 Add GCC + 540 + 20 +2% +2% Total -410 - 280 Peers Peers Peers Future Savings (mils) $25 2014 - 2018 CMS CMS CMS CMS CMS
Slide 31: Upsides -- Customer-Focused O&M Reinvestment
UPSIDES -- Customer-Focused O&M Reinvestment . . . . Icy Late December Adjusted EPS (non-GAAP) O&M B/(W) Than Forecast (mils) 2013 +13¢ • Storm(total $50 M) • Insurance $(37) 16 • Lower contributions 9 2012 Hot • Sales-weather 12 Summer Total $ 0 2013 Cold $1.66 Winter & +7% Cost Savings Reinvested
Slide 32: 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 33: Partners -- Michigan Energy Law Update
PARTNERS -- Michigan Energy Law Update . . . . • Adaptability • Reliability Update • Affordability • Environmental protection • Gov. signed new • 10% renewables rate design bill by 2015 • Legislative • Energy efficiency workgroups formed standards to study 2015 • File-and-implement Energy Law • Hist
Slide 34: 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 35: 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 36: Passion to Improve -- Customer Satisfaction
PASSION TO IMPROVE -- Customer Satisfaction . . . . JD Power Survey - 2014 Results by Category Points Gas Residential Customers 950 Consumers 2014 666 +33 2014 Improvement 1st Quartile! 744 742 1st Quartile! 1st +46 Quartile! +23 634 625 589 +37 +31 Consumers 2013 633 +31 2014 Midwest Customer Comm-
Slide 37: Passion to Improve -- Sustainability
PASSION TO IMPROVE -- Sustainability . . . . Sustainalytics Overall Score Recent Performance Points • Ranked 14th out of 226 energy 80 80.0 providers worldwide 78 78.0 76.0 20% Improvement • Improvement in all categories: 74.0 72.0 Social +12 70 70.0 68.0 Environment +10 66.0 65 2013 64.0 Averag
Slide 38: Passion to Improve -- Includes Lasting
PASSION TO IMPROVE -- Includes Lasting . . . . Cost Control Customer Satisfaction Employee Engagement Utility O&M Residential +15% 1st 1st First Quartile Quartile 1st Quartile Second Second Down 5% Third Third Down 10% Fourth 2014-2018 Fourth 2011 2013 2018 2011 2014 2016 2011 2012 2013 . . . . prem
Slide 39: Mindset
Mindset . . . . 10-Year Actual Dividend EPS 7% CAGR 5% - 7% Peers 4% $1.66 $1.55 $1.45 $1.36 a $1.26 $1.21 5% - 7% 6% $1.08 $1.02 14% $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 Future Future Dividend Payout 0% 25%
Slide 40: Appendix
Appendix
Slide 41: Environmental Agreement with EPA
Environmental Agreement with EPA . . . . Environmental Strategy Agreement • CMS is moving towards a balanced Settlement generation portfolio with more gas • Spending $2 billion in upgrades at and renewables, reducing our power plants carbon footprint • Invest $7.7 million in environmental mitigation
Slide 42: 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 43: Regulation & Self-Initiated Steps
Regulation & Self-Initiated Steps . . . . Industrial Electric Rate House Bill 5476 (vs Midwest Average) Consumers higher than • Signed into law on June 17th, 2014 Midwest peer avg 30% • Directs MPSC to develop cost of service allocation and rate design methods 20% Self-initiated Rate design, r
Slide 44: Consumers Appears to Be in a Good Carbon Position
Consumers Appears . . . . Carbon Tonnage Reduction Million Tons of CO2 (Preliminary) 25 2005 Baseline 23 21 Clean Power Plan 19 “Implied” EPA Target 17 Consumers Energy Projected 15 emission level 13 2014 2020 2025 2029 2030 . . . . to be in a good carbon position. 43
Slide 45: 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 46: 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
Slide 47: Electric Distribution
Electric Distribution . . . . Demand $ 1.0 Billion Circuits In service 2,253 Upgrade 603 Reliability $ 0.7 Billion Transformers In service 663,044 Capacity Replace 16,175 $ 0.3 Billion Total Poles $ 2.0 Billion Meters In service 1,554,309 In service 2,039,283 40 years old 761,711 Replace 1,732,393 R
Slide 48: Cleaner Generation
Cleaner Generation . . . . Diverse Capacity Balanced Portfolio Renewables Clean Coal 2005 Capacity % Gas 10% Renewables 6% 29% Karn Generating Coal Lake Winds Energy Park Plant, 515 MW 11% Pumped Storage 100 MW Oil Renewables 3% Pumped Storage Nuclear 41% Purchases Cross Winds Energy Park 2017 Lud
Slide 49: Credit Ratings
Credit Ratings . . . . Scale Reflects S&P / S&P Moody’s Fitch Fitch Moody’s (March) (January) (February) A+ A1 • Consistent A A2 Performance Consumers A- BBB+ A3 Baa1 Secured • Less Risk BBB Baa2 BBB- Baa3 • Customer Focus BB+ Ba1 • Constructive BBB Baa2 CMS Regulation BBB- Baa3 Unsecured BB+ Ba1 Pr
Slide 50: Operating Cash Flow Growth
Operating Cash Flow Growth . . . . Amount (bils) Up $0.5 Gross operating cash flowa 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 0.0 _____ a Non-GAAP (0.5) Cash flow before dividend 2012 2013 2
Slide 51: Electric Customer Base Diversified
Electric Customer Base Diversified . . . . Top Ten Customers 2013 Electric Gross Margin • Hemlock Semiconductor (zero margin) Residential, 50% Commercial, 32% • General Motors • Nexteer Automotive Corporation • Gerdau Macsteel • Denso International America • Meijer • Packaging Corp of America • Stat
Slide 52: 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 53: Electric Utility — Financial & Operating Statistics
Electric Utility — Financial & Operating Statistics Consumers Energy > Count on Us Years Ended December 31 2013 2012 2011 2010 2009 2008 ELECTRIC REVENUE AND POWER COSTS (§ Millions) Residential $1,819 $1,785 $1,678 $1,614 $1,387 $1,414 Commercial 4,301 1,228 1,197 1,166 1,099 1,129 Industrial 772 7
Slide 54: Electric Utility — Financial & Operating Statistics
Electric Utility Financial & Operating Statistics a Count on Us Years Ended December 31 2013 2012 2011 2010 2009 2008 FUEL COST ($ per MMBtu) Coal 2.90 2.98 2.94 251 237 2.01 Oil 19.47 19.08 18.55 10.98 9.59 11.54 Gas 4.68 3.16 4.95 5.57 6.57 10.94 Weighted average for all fuels 3.07 3.05 3.18 271 2
Slide 55: Gas Utility — Financial & Operating Statistics
54 Gas Utility —= Financial & Operating Statistics Consumers Eneray > Count on Us Years Ended December 31 2013 2012 2011 2010 2009 2008 GAS REVENUE AND COST OF GAS ($ Millions) Residential $1,515 $1,415 $1,655 $1,677 $1,808 $1,971 Commercial 399 351 438 449 511 598 Industrial 69 65 89 88 101 124 Oth
Slide 56: Enterprises
Enterprises As of December 31, 2013 = Independent Power Production ; Capacity Primary Ownership Gross _ In-Service Under LT Plant Fuel Interest Capacity Year Contract State Craven Wood 50% 50 1990 100% NC DIG Natural Gas 100 710 2001 61 MI Filer City Coal 50 73 1990 100 Ml Genesee Wood 50 40 1996 10
Slide 57: GAAP Reconciliation
CMS ENERGY GAAP Reconciliation
Slide 58: 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
Slide 59: Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
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 $ 1,820 $ 1,876 $ 1,952 $ 2,054 $ 2,162 Enterprises Project Cash Flows 17 16 25 30 28
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