Slide 1: Year-End 2018 Results and Outlook
Year-End 2018 Results and Outlook January 31, 2019 FOCUSED ON WORLD CLASS PERFORMANCE
Slide 2: Forward-looking statements and non-GAAP 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
Slide 3: Agenda
Agenda Business Update Patti Poppe President & CEO PEOPLE PLANET PROFIT Financial Results & Outlook Rejji Hayes Executive VP & CFO 3
Slide 4: Financial Results & Outlook
Financial Results & Outlook . . . Vs. 2018 Results Amount Prior Year • EPS a $2.33 +7% • Operating cash flow (MM) $1,703 $(2) (Incl. $240 MM pension contr.) (Up $53 MM to budget) 2019 Updates • EPS guidance raised a $2.47 to $2.51 +6% to +8% • Annual dividend $1.53 +7% Long-Term Outlook • EPS & DP
Slide 5: CMS' 2018 Performance Exemplifies People, Planet, Profit, Performance
CMS’ 2018 Performance Exemplifies . . . PEOPLE PLANET PROFIT PERFORMANCE • Rate cases provided • Announced our Clean • 16 years of +7% EPS a • 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 6: 2019 Priorities
2019 Priorities . . . • Maintain safe and reliable operations • Enhance customer experience and value • Drive economic growth for Michigan • Improve Michigan’s land, water, and air quality • Execute world class operating performance • Deliver our financial commitments . . . will enable a 17th year o
Slide 7: 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 3.1 % 3.7 % Target 9% Unemployment* *November 20
Slide 8: Michigan Energy Policy is Supportive
Michigan Energy Policy is Supportive . . . • Bipartisan Energy Law (2016 law enhanced original 2008 law) • Forward-looking test year (10-month rate case) • Energy Efficiency incentive (20% of spend) • Renewable Portfolio Standard (RPS) • Constructive ROEs Michigan Commission Rachael Eubanks Two make
Slide 9: Long-Term Regulatory Planning
Long-Term Regulatory Planning . . . 2018 2019 2020 Regulatory / Policy 6/15: Filed LT generation plan Q2: Expected IRP order Q3: Anticipated final orders on Calc. C & Q2: File updated 5-yr Electric Distribution (IRP) U-20165 U-20165 Demand Response Plan Electric 1/9: Settlement approved Next Ele
Slide 10: 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 11: Consistent Growth Through Changing Circumstances
Consistent Growth Through . . . b 7% CAGR 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 12: 2018 Results
2018 Results . . . Results By Business Segment 2017 2018 EPS -- (GAAP) $1.64 $2.32 EPS Feb. 2018 Adjusted a Guidance a Legacy & other 0.01 0.02 Consumers $2.50 $2.40 – $2.44 Federal tax reform 0.52 (0.01) Enterprises 0.12 0.13 Adjusted (non-GAAP) $2.17 $2.33 Parent and other (0.29) (0.23) +7% CMS
Slide 13: 2018 Financial Targets Achieved
2018 Financial Targets Achieved . . . Target Actual Adjusted EPS (non-GAAP) $2.31 to $2.34 +6% to +8% $2.33 +7% DPS growth In-line w/ earnings +6% to +8% In-line w/ earnings +7% Operating cash flow (MM) $1,650 $1,703 Customer price Electric (1)% 1% Tax Reform Gas (3)% (1)% delays FFO/average d
Slide 14: 2019 Guidance Raised
2019 Guidance Raised . . . Adjusted EPS (non-GAAP) Utility Electric $1.88 – $1.91 Gas 0.75 – 0.76 Total Utility $2.63 – $2.67 Enterprises 0.14 Parent and other (0.30) Total EPS $2.47 – $2.51 +6% to +8% a _____ a Adjusted EPS (non-GAAP) . . . building on strong 2018 performance. 14
Slide 15: 2019 EPS
2019 EPS . . . a Weather $2.47 to $2.51 reinvested 17¢ +6% to +8% $2.33 27¢ Absence of 2018 (3)¢ - 1¢ Absence of 2018 reinvestment (27)¢ Settled cases: Gas (U-18424) $60 MM Absence of reinvestment: Electric (U-20134) $89 MM Operational & other 19¢ Pending case: Debt pre-funding 4 Gas (U-20322)
Slide 16: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . Plan EPS Growth a 6% - 8% Self Funding: - Cost reductions 2 - 3 pts - Sales growth (continued economic development) 1 - Other (Enterprises, tax planning, etc.) 2 INVESTMENT SELF-FUNDED 5 - 6 pts Customer Prices “at or below inflation” <2% _____ a Adjusted EPS (non-
Slide 17: Utility Customer Investment Plan
Utility Customer Investment Plan . . . Updated 5-year Plan Rate Base Growth Electric Gas Old New Capital Investment (Bn): Plan Plan Mix $23 Bn >7% Electric Utility $ 4 $ 5 ~45% CAGR $16 Bn 1 1 ~10 60% New Utility Renewables 70% Gas Utility 5 5 ~45 Total $10 $11 100% ~40% ~30% System Need: >$50 Bn 20
Slide 18: Our Entire Cost Structure
Our Entire Cost Structure . . . Cost Components Residential Bills as % of Wallet a 100% 100% (Electric & Gas) Utility Bill Down 90% 50 bps! Utility Bill ~ 4% ~ 3½% 80% Fuel and Power Costs TV & Phone ~ 4% TV & Phone ~ 4% Healthcare ~ 5% Healthcare ~ 9% 70% Food ~ 12% ~70% Food ~ 13% 60% ~70% Transpo
Slide 19: 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 20: DIG (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . Pre-Tax Income Opportunities (MM) $ 100 $95 2019 Through 2022 90 Contracted 80 Capacity >80% b 70 (~$2.00/kw-month) $7.50 60 Energy >90% 50 $45 $45 40 30 $30 Better Better Performance $38 Better Performance $35 $3.00 b Contracted Performance Capacity 20 Cont
Slide 21: 2019 and Long-Term Financial Targets
2019 and Long-Term Financial Targets . . . 2019 Long-Term Plan Adjusted EPS (non-GAAP) $2.47 to $2.51 +6% to +8% +6% to +8% DPS growth In-line w/ earnings In-line w/ earnings a Operating cash flow (MM) $1,650 Up $100 Customer bills b Electric 2% < Inflation Gas (4)% FFO/average debt (non-GAAP) ~ 17%
Slide 22: 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 23: Compelling Investment Thesis
Compelling Investment Thesis . . . Aging Infrastructure Strong Cash Flow & Balance Sheet Diversified Service Territory Affordable Prices Constructive Regulation . . . adaptive to changing conditions. 23
Slide 24: Appendix
Appendix
Slide 25: 2019 Sensitivities
2019 Sensitivities . . . Full Year Impact a Sensitivity EPS OCF (MM) Sales b • Electric (37,789 GWh) + 1% + 6¢ + $ 25 • Gas (303 Bcf) + 5 + 9 + 35 – – 55 Gas prices (NYMEX) + 50¢ + 0 + Utility ROE (planned) Settled • Electric (10.0%) + 10 bps + 1½ + 6 order Marginal 1/9 • Gas (10.0%) + 10 + < ½ risk
Slide 26: 2018 EPS
2018 EPS . . . a 43¢ 9¢ $2.33 $2.17 Absence of 2017 (13)¢ (23)¢ Reinvestment: Safety (2)¢ Reliability (6) Employee/customer (6) Debt pre-funding (4) Other (5) Total (23)¢ 2017 2017 Weather Cost Savings/ Rates & Usage, 2018 2018 (Reinvestment) Investment Enterprises, Tax & Other _____ a Adjusted
Slide 27: 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 28: Utility Investment Plan
Utility Investment Plan Updated 5-year Plan (Bn) 2019 2020 2021 2022 2023 Total Electric Utility $ 1.2 $ 1.3 $ 1.3 $ 1.1 $ 1.2 $6.1 New Renewables (incl. above) 0.2 0.4 0.4 0 0 1.0 Gas Utility 1.0 1.1 0.9 1.1 1.0 5.1 Total $2.2 $2.4 $2.2 $2.2 $2.2 $11.2 Depreciation & Amortization $1.0 $1.0 $1.1 $1.
Slide 29: 2019 Pension & OPEB Impacts
2019 Pension & OPEB Impacts . . . Pension/OPEB Amount (MM) 2018 Credit $63 • Closed pension plan Asset Performance (43) • 7% expected returns • Balanced asset allocation Actuarial Assumptions 32 (Including interest rates) 2018 Contributions 17 $6 MM 2019 Credit $69 Better Funded Status: 2018 Pension
Slide 30: 2019 Financing Assumptions
2019 Financing Assumptions 2019 (MM) New Issuances: Consumers Energy: First Mortgage Bonds $600 • Supports Utility investment of $2.2 Bn CMS Parent: Term Loan (drawn) $300 • Provides short-term liquidity Long-term Debt 630 • Senior unsecured & hybrids Planned Equity 70 • Maintains healthy balance sh
Slide 31: GAAP Reconciliation
GAAP Reconciliation
Slide 32: 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 33: 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 GAAP 2018 4Q18 over 1Q 2Q 3Q 4Q 4Q17 Growth Net Income Available to Common Stockholders $ 241 $ 139 $ 169 $ 108 NM Reconciling items: Electric utility
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: 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 Twelve Months Ended 12/31/18 12/31/17 12/31/18 12/31/17 Electric Utility Reported net income per share $ 0.24 $ 0.22 $ 1.89 $ 1.62 Reconciling it
Slide 36: Reconciliation of Non-GAAP FFO to Average Debt Ratio
CMS ENERGY CORPORATION Reconciliation of Non-GAAP FFO to Average Debt Ratio (Unaudited) FUNDS FROM OPERATIONS In Millions Year Ended 12/31/18 Net Cash Provided by Operating Activities $ 1,703 Reconciling items: None Pension Required contribution 240 Working capital (105) Other (135) Funds From Opera