Cms Energy Corporation · NYSE:CMS
Cms Energy — Investor Presentation (May 2019)
38 slides from Cms Energy's investor presentation, May 2019
Slide 1: Investor Meetings May 2019
Investor Meetings May 2019 FOCUSED ON WORLD CLASS PERFORMANCE
Slide 2: Forward-looking statements and non-GAAP disclosure
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 Overview
CMS ENERGY CMS Overview
Slide 4: CMS Energy Overview
CMS Energy Overview Corporate Structure Key Information CMS Energy 2018 Financial Statistics (NYSE: CMS) Based in Jackson, MI Employees (37% unionized) a Consumers Energy Enterprises EnerBank Revenue 2018 Adjusted net income b Avg. Rate Base 92% of c Operating Growth for past 16 years Income Gas $5.
Slide 5: Consumers Energy
Consumers Energy . . . Overview • 4th largest combination utility (electric and gas) in the country • 2018 revenue = $6.5 billion • 2018 earnings = $703 million Our Service Territory • Electric Utility 1.8 million electric customers 8,261 MW of capacity • Gas Utility 1.8 million gas customers 309 bc
Slide 6: CMS' 2018 Performance Exemplifies
CMS’ 2018 Performance Exemplifies . . . PEOPLE PLANET PROFIT PERFORMANCE a • Rate cases provided • Announced our Clean • 16 years of +7% EPS • Replaced more than tax-related savings to Energy Goal in growth 13,000 vintage gas customers of over February services $160 MM • Raised dividend +7% • Filed
Slide 7: Compelling Investment Thesis
Compelling Investment Thesis . . . Aging Infrastructure Strong Cash Flow & Constructive Regulation Balance Sheet Diversified Service Affordable Prices Territory . . . adaptive to changing conditions. 7
Slide 8: Large and Aging System
Large and Aging System . . . Electric 25 years of distribution main replacement system is through our older than Enhanced Infrastructure peers Replacement Program Age of coal fleet is more ~1,670 miles of gas than transmission pipeline; most 50 years built in the WWII era . . . requires significant
Slide 9: Electric System Investment
Electric System Investment . . . Current Generation Capital Investment (Bn): Plan Existing Fleet Electric Utility $ 5 $1.0 Bn New Utility Renewables 1 PLUS Gas Utility 5 New Renewables $11 $1.0 Bn Total System Reliability & Maintenance ~$2½ Bn New Business & Other $1½ Bn . . . consists of needed and
Slide 10: Gas System Investment
Gas System Investment . . . Current Compression and Storage Capital Investment (Bn): Plan $0.6 Bn Electric Utility $ 5 #1 Underground New Utility Renewables 1 storage Gas Utility 5 Total $11 Pipelines $1 Bn #5 Transmission miles #5 Distribution miles Distribution & Other $3½ Bn U.S. LDC Rank, Source
Slide 11: Our Self-Funding Model
Our Self-Funding Model . . . Plan a EPS Growth 6% - 8% Self-Funding: - Cost management (O&M, fuel, purchased power) 2 - 3 pts - Sales (economic development, energy efficiency) 1 - Other (Enterprises, tax planning, etc.) 2 INVESTMENT SELF-FUNDED 5 - 6 pts Customer Prices “at or below inflation” <2% _
Slide 12: Utility Customer Investment Plan
Utility Customer Investment Plan . . . 5-Year Plan Rate Base Growth Electric Prior Current Gas Capital Investment (Bn): Plan Plan Mix $ 4 $ 5 ~45% $23 Bn Electric Utility >7% CAGR $16 Bn New Utility Renewables 1 1 ~10 60% Gas Utility 5 5 ~45 70% Total $10 $11 100% ~40% ~30% System Need: >$50 Bn 2018
Slide 13: Managing Customer Bills
Managing Customer Bills . . . Residential Bills as % of Wallet Residential Electric Bills b a (Electric & Gas) $106 Flat $106 Flat bills with Down additional $6 Bn Utility Bill Utility Bill of capital 50 bps! ~ 4% ~ 3½% TV & Phone ~ 4% TV & Phone ~ 4% Healthcare ~ 5% Healthcare ~ 9% Food ~ 12% Food
Slide 14: Economic Development is Robust
Economic Development is Robust . . . Customer Committed Load Diversified Customer Base Economic Indicators (2018 Electric & Gas Rate Mix) a Grand 2010 thru 2017 Rapids U.S. Auto Other GDP Growth 32 % 17 % Other 2% 2% Population Growth 7% 5% Industrial 2.6 % 3.8 % Target 9% Unemployment* *February 20
Slide 15: CMS Enterprises
CMS Enterprises . . . DIG & Other Renewable Platform • ~1,000 MWs of plants in MI Operating Projects: • 27 MWs of solar • DIG long-term energy (~100% • 64 MWs biomass contracted) & short-term • 105 MWs of wind capacity (>80% contracted) (15-year PPA with GM) • Filer City PPA with the Utility • Nearl
Slide 16: Operating Cash Flow Generation
Operating Cash Flow Generation . . . Amount (Bn) >$9 Bn in aggregate $ 2.2 2.05 1.95 1.85 1.70 1.75 1.7 1.65 1.2 0.7 Investment 0.2 (0.3) Cash flow before dividend (0.8) (1.3) 2018 2019 2020 2021 2022 2023 NOLs & credits $0.4 $0.3 $0.3 $0.4 $0.4 $0.5 . . . remains strong and supports our capital pla
Slide 17: Credit Metrics Maintained
Credit Metrics Maintained . . . S&P / S&P Moody’s Fitch Fitch Moody’s (Dec. ‘18) (Jul. ‘18) (Sep. ‘18) Ratings Drivers AA- Aa3 A+ A1 • Strong financial position Consumers A A2 Secured A- A3 BBB+ Baa1 • Growing operating BBB Baa2 cash flow BBB- Baa3 BB+ Ba1 BBB+ Baa1 BBB Baa2 CMS Unsecured • Return o
Slide 18: Consistent Growth Through Changing Circumstances
Consistent Growth Through . . . 7% CAGR b a EPS +6% to +8% Dividend +7% Weather Recession Recession Help _____ _____ Hurt a Adjusted EPS (non-GAAP) b Non-GAAP Cold 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Feb. Cold Mild Hot Warm Mild Cold Summer- Hot Hot W
Slide 19: Managing Work Every Year
Managing Work Every Year . . . a 2011 2012 2013 2014 2015 2016 2017 2018 2019 EPS $2.60 Reinvestment $2.40 +7% Weather & Storms $2.20 Mild +7% Summer Hot Cost +7% Summer $2.00 productivity above plan +7% Cost productivity $1.80 Reinvestment +7% above plan Cost productivity Hot Mild Storms Summer Win
Slide 20: Utility Driven, Low Risk Growth
Utility Driven, Low Risk Growth . . . CMS Energy Long-Term Growth Plan Segments: 6 - 7% • Needed system upgrades / robust backlog - Utility • Affordable prices driven by cost controls • Largely contracted & utility-like - Enterprises 0 -1 • Contracted generation & renewables • Tax planning - Parent
Slide 21: CMS' Trading Performance
CMS’ Trading Performance . . . Stock Performance Total Shareowner Return a b CMS CMS UTY UTY S&P 500 S&P 500 500% 400% 604% 391% 300% 117% 200% 178% 100% 51% 69% 8% 0% -100% '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 1 Year 3 Year 5 Year 10 Year _____ _____ a 10-year stock performance as of Decembe
Slide 22: Top of Mind
CMS ENERGY Top of Mind
Slide 23: Top of Mind
Top of Mind . . . • IRP Settlement Agreement • Regulatory – Commission & Rate Cases • Michigan Political Landscape • DIG • Financing Plan . . . People, Planet, Profit. 23
Slide 24: IRP Settlement Filing
IRP Settlement Filing . . . Near-Term Additional Details • Financial Compensation Mechanism Energy Efficiency (FCM) for PPAs as an incentive • FCM = PPA payment x Company’s WACC a Demand Response (currently 5.88%) Expiration of Palisades PPA • Includes 525 MW of wind approved in Karn 1&2 closure
Slide 25: Clean and Lean
Clean and Lean . . . 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 Excess O&M O&M supply Expected Demand Fuel Fuel Big Bets Lower Risk Results in excess capacity, hig
Slide 26: Michigan Energy Policy is Supportive
Michigan Energy Policy is Supportive . . . • Bipartisan Energy Law (2016 law enhanced 2008 law) • Forward-looking test year (10-month rate case) • Energy Efficiency incentive (20% of spend) • Renewable Portfolio Standard (RPS) • Constructive ROEs Michigan Public Service Commission Sally Talberg (I),
Slide 27: Regulatory Outlook
Regulatory Outlook . . . 2019 Regulatory / Policy 2/7: REP approved for 3/23: Filed settlement 6/10: Expected IRP settlement order Q3: Anticipated final orders 525 MW of agreement for on Calc. C & wind IRP U-20165 Demand Response Electric 1/9: Settlement approved Next Electric Order 2020 U-201
Slide 28: Solid Rate Case History
Solid Rate Case History . . . Electric Rate Base a Gas Rate Base (Bn) (Bn) 2013A 2019E 2013A 2019E b b Residential Electric Bill $106 $106 Residential Gas Bill $87 $60 (Weather-normalized) Flat (Weather-normalized) (31)% $11.1 $6.5 $10.7 $10.7 $9.8 Settled $5.2 Request Stay $4.1 $4.3 out $8.5 $3.1
Slide 29: Gas Investment Needs
Gas Investment Needs . . . Upcoming Gas Projects Benefits ~ 140 ~ 950 Miles Safety Miles Main Replacements Pipeline Integrity Customer Experience ~ 60 Leak Reduction Miles 25,000 Saginaw Trail Vintage Service Lines Increased Capacity . . . prioritize safety, reliability and affordability. 29
Slide 30: Michigan Election Results
Michigan Election Results . . . Governor State Senate Gretchen Whitmer 16 38 22 Democrat 2018 Election: Democrats +5 seats 4-year terms, concurrent with Governor’s term, 2-term limit Energy policy is State House not a key issue Key Issues: 52 110 58 • Infrastructure • Health Care • Education 2018 El
Slide 31: DIG (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . Pre-Tax Income Opportunities (MM) $ 100 2019/20 MISO Zone 7 Auction $95 • Capacity ~$0.70/kw-month 2019 Through 2022 90 • Surplus of only 252 ZRCs Contracted 80 • DIG largely contracted Capacity >80% $7.50 b 70 (~$2.00/kw-month) 60 Energy >90% 50 $45 $45 40 30
Slide 32: 2019 Financing Plan
2019 Financing Plan . . . 2019 (MM) New Issuances: Consumers Energy: First Mortgage Bonds $600 • Supports Utility investment of $2.2 Bn CMS Parent: Term Loan (drawn) Long-term Debt $300 630 • Provides short-term liquidity • Senior unsecured & hybrids Planned Equity 70 All priced • Maintains heal
Slide 33: GAAP Reconciliation
GAAP Reconciliation
Slide 34: 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 Twelve Months Ended 12/31/18 12/31/17 12/31/18 12/31/17 Net Income (Loss) Available to Common Stockholders $ 108 $ (3) $ 657 $ 460 Reconcilin
Slide 35: Earnings Per Share By Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Per Share By Year GAAP Reconciliation (Unaudited) GAAP GAAP 2018 over 2018 over 2003 2017 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CAGR Growth Reported earnings (loss) per share - GAAP ($0.30) $0.64 ($0.44) ($0.41) ($1.02) $1.20
Slide 36: Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income by Quarter
CMS ENERGY CORPORATION Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income by Quarter (Unaudited) In Millions, Except Per Share Amounts 2019 1Q Net Income Available to Common Stockholders $ 213 Reconciling items: Electric utility and gas utility - Tax impact - Enterprises (*) Tax impac
Slide 37: Reconciliation of GAAP EPS to Non-GAAP Adjusted EPS by Segment
CMS ENERGY CORPORATION Reconciliation of GAAP EPS to Non-GAAP Adjusted EPS by Segment (Unaudited) In Millions, Except Per Share Amounts Three Months Ended 3/31/19 3/31/18 Electric Utility Reported net income per share $ 0.37 $ 0.49 Reconciling items: Other exclusions from adjusted earnings - - Adjus
Slide 38: Weather Impact on Year Over Year Earnings
CMS ENERGY CORPORATION Weather Impact on Year Over Year Earnings (Unaudited) In Millions, Except Per Share Amounts Three Months Ended 3/31/2019 3/31/2018 Change Net Income Available to Common Stockholders $ 213 $ 241 $ (28) Reconciling items: Other exclusions from adjusted earnings (*) * * Tax impac