Slide 1: Environmental, Social & Governance
Environmental, Social & Governance October 2021
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: CMS Energy Overview
CMS Energy Overview Corporate Structurea Key Information CMS Energy 2020 Financial Statistics (NYSE: CMS) Based in Jackson, MI ~8,200 Employees (41% unionized)b Consumers Energy Enterprises $6.7 Bn Revenuec 2020 $764 MM Adjusted net incomec Gas >95% pro forma Avg. Rate Base regulated utility $6.8 Bn
Slide 4: Consumers Energy Positioned Well
Consumers Energy Positioned Well . . . 4th Largest Combination Utility • Electric Utility 1.9 MM electric customers 7,927 MW of capacity • Gas Utility 1.8 MM gas customers 309 Bcf gas storage (#1 in the U.S.) Attracted • Serving 6.8 MM Michigan residents >485 MW of new or Consumers Energy Planet Goa
Slide 5: CMS Enterprises Continues to Perform
CMS Enterprises Continues to Perform . . . Renewable Platform DIG & Other • Aviator, 525 MWs[Move to left side] of contracted wind • ~1,000 MWs in MI • 51% cash equity ownership (tax equity utilized) • Funded with cash on hand, no new equity • DIG long-term energy (>95% contracted) & short-term • Of
Slide 6: Building on Our Past
Building on Our Past . . . Sustainability has been part of our …And is critical to leading the culture over the past 135 years… clean energy transformation. Founded by the Foote brothers 1886 . . . for a cleaner tomorrow. 6
Slide 7: Our Track Record for Sustainability
Our Track Record for Sustainability . . . DOUBLE A RATED TOP QUARTILE FOR GLOBAL UTILITIES #1 company in Named a Top U.S. utility Named 2020 Gold-Level Veteran Michigan and Top 20 for economic development by Friendly Employer by the Michigan Best Employers for Women Business Facilities and Veterans
Slide 8: ESG Disclosures
ESG Disclosures . . . • CMS Energy & Consumers Energy • DE&I Website Websites • SASB Index (Electric Utilities & Power • SEC Filings (10-K & Proxy) Generation) • 2020 Carbon Disclosure Project • SASB Index (Gas Utilities & Distributors) • Report Scope 1, 2 & 3 Emissions • Water • TCFD Index • Climat
Slide 9: A Simple Investment Thesis
A Simple Investment Thesis . . . Industry-leading clean energy commitment a Net Zero Carbon (2040) & Net Zero Methane (2030) Excellence through the Top-tier regulatory jurisdictionb Premium total shareholder return Nearly two decades of industry-leading 6% to 8% adjusted EPS growth + ~3% dividend yi
Slide 10: 2021 Integrated Resource Plan (IRP)
2021 Integrated Resource Plan (IRP) . . . Key Outcomes Retires ALL coal by 2025 (depreciated over design life) Adds >$1 Bn of rate base over next 5 years (>95% utility earnings by 2025) Accelerates decarbonization (~60% carbon emissions reduction by 2025 a) Increases renewable resource deployment (~
Slide 11: Infrastructure Renewal
Infrastructure Renewal . . . Electric distribution Exiting coal by 2025 and system is adding 8 GW of solar by 2040 older than peers 25 years of main replacement Largest electric through our a distribution system in U.S. Enhanced Infrastructure Replacement Program Presentation endnotes are included a
Slide 12: Top-Tier Michigan Regulatory Environment
Top-Tier Michigan Regulatory Environment . . . Legislative Strong Top Tier Framework Leadership Regulatory Environmenta Timely investment recovery Michigan − Forward-looking test years 1 7 2013-present − 10-month rate cases 2 9 Supportive Incentives − Constructive ROEs 3 18 − 10.7% ROE for RPS − EE
Slide 13: Our Entire Cost Structure
Our Entire Cost Structure . . . Cost Components Estimated Cost Savings 100% Year Event Savings Fuel and Power Costs 2022 Palisades retirement $90 MM 2023 Karn 1&2 coal unit $30 MM ~70% b Non-capital retirements (adj. O&M savings ) related O&M Costs 2025 MCV contract change >$60 MM Taxes 2025 Campbel
Slide 14: Credit Metrics Maintained
Credit Metrics Maintained . . . Consumers Energy S&P Moody’s Fitch Ratings Drivers Senior Secured • Strong financial A A1 A+ position Commercial Paper A-2 P-2 F-2 • Growing operating Outlook Stable Stable Stable cash flow CMS Energy • Return on regulated investment Senior Unsecured BBB Baa2 BBB Juni
Slide 15: Diverse Service Territory
Diverse Service Territory . . . Economic Indicatorsa “Governor Gretchen Whitmer announces leading storage products manufacturer Speedrack Products creating 164 new jobs in West Michigan...investment of $64.5 MM” Grand – Michigan Economic Development Rapids MI U.S. Corporation (MEDC), June 2021 Build
Slide 16: Sustainability Track Record & Trading Performance
Sustainability Track Record & Trading Performance . . . Stock Performancea Total Shareowner Returnb 300% CMS CMS UTY UTY 250% S&P S&P 228% 200% 199% 358% 150% 100% 95% 95% 50% 40% 0% -50% '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 3-yr 5-yr 10-yr Presentation endnotes are included after the appendi
Slide 17: Environmental
ENVIRONMENTAL
Slide 18: Electric and Gas Decarbonization
Electric and Gas Decarbonization . . . Actionable Clean Energy Targets • Michigan’s largest energy provider – providing critical services while delivering on our decarbonization goals: • Net zero carbon emissions by 2040 company-widea • Includes scopes 1, 2 and certain 3 (including purchased power)
Slide 19: Proposed IRP Objectives
Proposed IRP Objectives . . . Key Objectives Current Plan 2021 IRP ~(60)% carbon • Accelerates Decarbonization Exit coal Exit coal emissions by 2040 by 2025 reduction Retire by 2025a Karn 3&4 (oil) 2031 2023 Campbell 1&2 / Campbell 3 2031/2039 2025 No new Purchase >2 GW • Ensures Reliability, Resili
Slide 20: Net Zero Carbon Emissions by 2040
Net Zero Carbon Emissions by 2040 . . . Coal Retirements Key Benefits Carbon • Reduces carbon emissions ~60%a by 2025 Emission ~(33)% ~(40)% ~(60)% (100)% Reductiona 2.7 0.9 • Exceeds scientific targets / policy goals Additional decarb efforts: (1.5° and 2° scenarios) 10% • CCS Capacity in GW • H2 0
Slide 21: Exiting Coal Completely by 2025
Exiting Coal Completely by 2025 . . . Coal % of Rate Basea Growing Utility Renewables b 20% 2016 (Estimated % EPS ) 8 GW of Classic 7 investment retirement opportunity PLUS Incentives on PPAs 2023 and Demand <15% Karn 1&2 Response retirement <10% <10% ~12% Campbell Campbell 2025 ~9% 1&2 1&2 Campbell
Slide 22: Increasing Renewables & Customer Programs
Increasing Renewables & Customer Programs . . . 2018 IRP 2021 IRP Future IRP Key Benefits ✓Capex approved 50% PPA / 50% Filed for approval of first 3 years Long-term alignment, approval in future IRP • Modular build-out; riding the cost- owned >50% owned curve down Opportunity +1,500 MW • Total of ~
Slide 23: Our Clean Energy Transformation
Our Clean Energy Transformation . . . Capacity Mixa 12% 15% 15% 15% 8% 10% 10% 12% 8% 11% 10% • Exits coal by 2025 28% 40% • Ensures reliability, 31% resilience and affordability • >3x renewable 63% 63% 11% energy capacity 47% 35% 19% Today 2025 2030 2040 Coal Renewables Natural Gas Storage Peaking
Slide 24: Our Energy Supply Will Be Cleaner
a Our Energy Supply Will Be Cleaner . . . Current Mix Future Mix (2031) Customer >50% (Post-MCV PPA Expiration) Programs Carbon free Future 2% opportunities Wind, Storage Hydro & 3% Customer other Wind, Programs 10% Hydro & 17% other 10% Natural Natural Gas Gas 46% Nuclear 39% 42% 19% Storage 2% Net
Slide 25: Providing a Just Transition
Providing a Just Transition . . . We Have Done This Before Proof Points • Retired seven coal units in 2016 with Karn 1&2 scheduled ✓ Hampton Township to retire in 2023 ✓ Completed environmental abatement, dismantlement and demolition of the former • Caring for our co-workers and working to redevelop
Slide 26: Decarbonization of Gas Infrastructure
Decarbonization of Gas Infrastructure . . . Net zero methane by 2030... …with additional opportunities. • ~250 miles/yr main • Largest LDC underground storage in U.S. replacement (309 Bcf) ~$400 MM/yr • 15 gas storage fields, 8 compressor • ~14½K/yr vintage service in leak reduction stations and 167
Slide 27: Net Zero Methane Emissions by 2030
a Net Zero Methane Emissions by 2030 . . . Careful Planning to Reach Goals Methane Emissionsa • Accelerating Vintage Service Replacement (Gas Delivery System) and 25-year EIRP for completion by 2030 2018 2025 2030 • Continued energy efficiency of up to 1% VSR b Continued Asset (17)% EIRP b VSR & E
Slide 28: Natural Gas is Critical
Natural Gas is Critical . . . Michigan’s weather and size… …make electrification challenging. (Population of 10 Coldest Statesa) CE Electric Peak Capacity ~10 MM Summer Winter Avg. Winter Weathera (Fahrenheit) MI 23° Today 3x annual CA 45° load TX 49° 1 Bcf = ~300 GWh London 37° Consumers Energy 6.7
Slide 29: Land & Water Usage
Land & Water Usage . . . Total Landfill Water 5-yr Space Avoided Intensity Planet Goals (Total Tons) (Gal/MWh) (2018-2022) Target Completed 1,518,679 32,102 H2O saved (gallons) 1 Bn >1 Bn 22,202 Michigan land 5,000 >5,000 enhanced (acres) Reduction of Waste 530,338 to Landfills 35% >50% (percentage)
Slide 30: Energy Waste Reduction Programs
Energy Waste Reduction Programs . . . Energy Efficiency Programs Electric ✓ $3.9 Bn saved for customers on their energy bills since 2009 • >2% annually • Next 5 years: ✓ 5,000 GWh of reduced usage since 2009 Equivalent to • Spend ~$191 MM/yr ~1 power plant! a • Pre-tax incentive ~$38MM/yr ✓ >20K app
Slide 31: EV Programs
EV Programs . . . PowerMIDrive • $10 MM, 3-yr program (began in 2019) • Offered ~800 rebates and incentives for home, business and public charging stations in the last two years • Makes EV savings simple by providing time of use rates as • 30 fast charging stations an incentive to charge off-peak in
Slide 32: Social
SOCIAL
Slide 33: Our Values Drive Our Actions
Our Values Drive Our Actions . . . • Focusing on employee and customer safety • Physical • Cyber • Emotional • Financial • Embedding diversity, equity and inclusion (DEI) in everything we do • Our culture, the workplace and within our supply chain • Developing our workforce • Electric and gas traini
Slide 34: Employee and Customer Safety
Focusing on Employee and Customer Safety 34
Slide 35: Committed to Safety
Committed to Safety . . . Safety Performance (Recordable Safety Incidents) Linked to 355 employee incentives Down (72)% 101 • A safety culture established in partnership with our union • Employee driven safety teams at every office and in the field • Safety performance included in executive and empl
Slide 36: CMS Employee Wellness Programs
CMS Employee Wellness Programs . . . Program Focus & Approach Physical • Paid leave for 6 months for maternal birth parent and 4 months paid leave for paternal or non-birth parent • Promote annual health visits and group physical activities Emotional • Celebration of mental health awareness month •
Slide 37: Cyber and Physical Security Program
Cyber and Physical Security Program . . . Program Focus & Approach • Physical and cyber security are integrated Robust corporate governance of security • Protect critical infrastructure, customer data and • Board oversight of safety programs employee safety • Company-wide phishing tests & department
Slide 38: Embedding DE&I in Everything We Do
Embedding DE&I in Everything We Do 38
Slide 39: DE&I is Embedded in Our Company Culture
DE&I is Embedded in Our Company Culture . . . Diversity by the Numbers PoC Female 27% Board of 36% Unconscious bias Directors Male White 64% 73% training for all leaders by 2021 and 100% of workforce by 2022 PoC Female 23% Executive 33% Garrick Rochow, President & CEO Leadership Male White 67% 77% “
Slide 40: Our Employee Resource Groups
Our Employee Resource Groups . . . Women’s Advisory Panel Supports the retention, development and success of women at our company. (WAP) Minority Promotes a culture of diversity and inclusion among all racial and ethnic minorities Advisory Panel through education, leadership, development and network
Slide 41: Supplier Diversity Initiatives
Supplier Diversity Initiatives . . . Focus & Approach • Expanding diverse supplier network, validating certification of diverse vendors and Enhanced Tier II reporting for suppliers of our suppliers • Actively engaging with diverse-supplier organizations nationally and in Michigan • Supporting and de
Slide 42: Developing Our Workforce
Developing Our Workforce 42
Slide 43: Building the Next Generation
Building the Next Generation . . . STEM & Robotics School-to-Work Program (STW) • Hometown, statewide and national focus (for electric line workers) • Middle & high school education levels • Partnered with Center for Energy Workforce • Collaboration with community colleges Development (CEWD) • Energ
Slide 44: Flint “Gas City”
Flint “Gas City” . . . • Training site is located in Flint, MI and provides a holistic experience and real world feel • Innovative new approach to training and career development • Educates and prepares gas operations co-workers for various scenarios such as constructing pipes in slippery or uneven
Slide 45: Working with Our Communities
Working with Our Communities . . . Gas Boot Camp Training Trust Agreement • 3-week training including physical assessment (with Power for America) and safety culture course • Delivers technical and safety training • Successful candidates offered full-time • >25,000 student hours delivered in 2021 po
Slide 46: Union Relationships at the Utility
Union Relationships at the Utility . . . Michigan State Utility Workers Council (MSUWC) 41% • ~3,600 employees represent unionized electric and gas workforce • >250 employees represent call centers • Subsidiary of Utility Workers Union of America (UWUA) • Contracts through 2025 . . . continue to rem
Slide 47: Providing Community and Customer Support
Providing Community and Customer Support
Slide 48: Continued Corporate Giving
Continued Corporate Giving . . . Charitable Organizationsa CE Foundation Donations In 2020, the CE Foundation $140 MM donated ~$9.7 MM to Michigan >$130 MM non-profits statewide since 2009 Cumulative Donations >50% of CE Foundation donations were in support of COVID relief including >$1.8 MM to prov
Slide 49: Signature Grants
Signature Grants . . . ✓ $500,000 in Planet Awards $200,000 to Huron Pines Resource Conservation & Development Council in Gaylord, MI Plus The Protect Wild Places Project will restore 5,000 acres of wildlife habitat and recreational land, and 150 miles of waterways and Great Lakes shoreline across 1
Slide 50: Our Expanding Community Engagement Team
Our Expanding Community Engagement Team . . . 21 Community Affairs Managers >350 Active local community events are attended in the community each year >100 boards served on . . . is uniquely positioned across the state. 50
Slide 51: Supporting Michigan’s Economic Development
Supporting Michigan’s Economic Development . . . Recognized as a Leader New and Expanding Load 2021, 2020 & 2019 Top 20 2021a >485 MW a Utilities in Economic Development since 2015 - Site Selection Magazine 2020 2020 Michigan Entrepreneur Resilience Fund 2019 2020 - Michigan Women Forward >$2.7 Bn M
Slide 52: J.D. Power Scores
J.D. Power Scores . . . Residential Business 818 773 780 757 Up Up Up Up 141 pts 172 pts 141 pts 148 pts 639 646 616 625 2012 2020 2012 2020 2012 2020 2012 2020 Electric Gas Electric Gas . . . reflect our commitment to continuous improvement for our customers. 52
Slide 53: Governance
GOVERNANCE
Slide 54: Exceptional Governance
Exceptional Governance . . . 11 Members 91% Independent . . . led by an independent Chair and highly skilled, diverse Board. 54
Slide 55: Diverse, Engaged and Experienced Board
Diverse, Engaged and Experienced Board . . . Diversity Experience 61 Average age Senior Leadership Financing Accounting or Fin. Reporting 100% 100% Compared to Regulatory Environment & Governmental Affairs 100% 36% Female 26% for the S&P 500a Risk Management 82% Compared to Customer Experience 82% 1
Slide 56: Committee Membership Makeup
Committee Membership Makeup . . . Political contributions >$10K need Member 100% Board approval Chairperson Independent Governance, Compensation & Sustainability, & Name Audit Human Resources Executive Finance Public Responsibility Jon E. Barfield Deborah H. Butler Kurt L. Darrow
Slide 57: Committee Responsibilities
Committee Responsibilities • Oversees: Audit Integrity of financial statements & information Compliance with legal & regulatory requirements Risk management policies, controls & exposures • Reviews: Performance of internal audit function Compensation & • Review & Approve: Executive compensation stru
Slide 58: CEO Compensation
CEO Compensation . . . Compensation Mix for CEO 2021 Operational Goals • Customer Experience Index (CXi) • Generation Customer Value 12% tenure- • Employee Safety PEOPLE based Annual Incentive • Eliminate Vintage Services 22% Long-term • Distribution Reliability Incentive • Employee Empowerment Inde
Slide 59: Board Carefully Considers Risks
Board Carefully Considers Risks . . . Risks Mitigation Efforts • Participation in legislative and regulatory policy Regulatory Environment development Climate • Retired 7 coal plants with plans to retire remaining 5 plants in Carbon Emissions fleet by 2025 (Regulation) • Energy Efficiency, Demand Re
Slide 60: Political Giving
Political Giving . . . Political Giving Focus Enhanced Disclosures • Meeting Michigan’s energy needs • Publishing annually on the company’s website: • Expenditures made to influence the outcome • Helping the state’s communities thrive of ballot initiatives • Providing safe, reliable, affordable and
Slide 61: Endnotes
Endnotes “severe?
Slide 62: Presentation Endnotes (pg 1 of 2)
Presentation Endnotes (pg 1 of 2) a b c d Slide 3: Reflects continuing operations Excludes seasonal workers Adjusted (non-GAAP), includes EnerBank Adjusted (non-GAAP) CAGR, includes EnerBank a Slide 4: Methane emissions from our natural gas delivery system and carbon emissions company-wide a Slide 7
Slide 63: Presentation Endnotes (pg 2 of 2)
Presentation Endnotes (pg 2 of 2) a b c Slide 21: Coal rate base based on calendar year; total rate base based on a 13-month average Adjusted (non-GAAP) Includes wind, solar, hydro and energy efficiency; 2008: (~$100 MM hydro rate base x 10.7% ROE x 42.1% equity ratio) ÷ 235 MM O/S ÷ $1.21 EPS = ~1½
Slide 64: GAAP Reconciliation
CMS Energy provides historical financial results on both a reported (GAAP) and adjusted (non-GAAP) basis and provides forward-looking modeling on an adjusted basis. During an oral presentation, references to “earnings” are on an adjusted basis. All references to net income refer to net income availa
Slide 65: Earnings Per Share By Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Per Share By Year GAAP Reconciliation (Unaudited) GAAP GAAP 2020 over 2020 over 2003 2019 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 CAGR Growth Reported earnings (loss) per share - GAAP ($0.30) $0.64 ($0.44) ($0.41) ($1.
Slide 66: Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income
CMS ENERGY CORPORATION Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income (Unaudited) In Millions, Except Per Share Amounts Three Months Ended Twelve Months Ended 12/31/20 12/31/19 12/31/20 12/31/19 Net Income Available to Common Stockholders $ 158 $ 167 $ 755 $ 680 Reconciling items: