Slide 1: First Quarter 2018 Results & Outlook
First Quarter 2018 Results & Outlook April 26, 2018 FOCUSED ON WORLD CLASS PERFORMANCE
Slide 2: Forward-looking statements and non-GAAP measures
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 First Quarter Results President & CEO Regulatory Update PEOPLE PLANET PROFIT Financial Results & Outlook Rejji Hayes Executive VP & CFO 2
Slide 4: First Quarter Results
First Quarter . . . Vs. Results Amount Prior Year • EPS $0.86 +21% Reaffirm Guidance • Full-year EPS a $2.30 to $2.34 6% to 8% Long-Term Outlook • EPS & DPS growth a +6% to +8% _____ a Adjusted EPS (non-GAAP) . . . keeps us on track. 3
Slide 5: The Triple Bottom Line: People, Planet, Profit
The Triple Bottom Line . . . PEOPLE • PLANET • PROFIT PEOPLE PLANET PROFIT PERFORMANCE . . . world class performance delivering hometown service. 4
Slide 6: Clean Energy Goal
Clean Energy Goal . . . By 2040 Over the Next 5 Years . . . breakthrough thinking for our planet. 5
Slide 7: Long-Term Regulatory Planning
Long-Term Regulatory Planning . . . 2018 Regulatory / Policy 1/19: CE submitted initial tax reform estimates 2/22: Tax reform order U-18494 a 6/15: File long-term generation plan (IRP) U-18461 U-18494 Electric 3/1: Filed 5-Yr electric dist. plan 3/29: Final order U-18322 Q2: File next electr
Slide 8: 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 9: Consistent Growth Through Recessions and Weather
Consistent Growth Through . . . b 7% CAGR a EPS +6% to +8% Dividend 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 Feb. Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild
Slide 10: 2018 First Quarter EPS Results By Business Segment
2018 First Quarter EPS . . . Results By Business Segment 2017 2018 EPS $0.71 $0.86 EPS +15¢ Utility $0.86 +21% Enterprises 0.05 Parent & Other (0.05) a $0.85 b Weather-normalized $0.89 CMS Energy $0.86 +4¢ +5% _____ a Adjusted EPS (non-GAAP) b Reflects prior tax rate . . . solid start to the year.
Slide 11: 2018 EPS
2018 EPS . . . a First Quarter Nine Months To Go 15¢ (+ 21%) (2)¢ - 2¢ $2.30 - $2.34 6% - 8% 14¢ 7¢ 1¢ 5¢ $2.17 (7)¢ (1)¢ (6)¢ - (2)¢ First First Quarter Quarter $0.71 $0.86 2017 Weather Cost Rates & Economy, Absence of Rates & Cost 2018 Savings Investment Enterprises 2017 Investment Savings & & Oth
Slide 12: Managing Work Every Year
Managing Work Every Year . . . a 2010 2011 2012 2013 2014 2015 2016 2017 EPS $2.20 Weather & Storms +7% Mild Summer +7% $2.00 Cost +7% productivity above plan Cost Cost $1.80 productivity productivity +7% above plan Reinvestment Storms Hot Mild Reinvestment Summer Winter +7% $1.60 RECORD Hot WARM Of
Slide 13: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . Plan a EPS Growth 6% - 8% Self Funding: - Cost reductions 2 - 3 pts - Sales (continued economic development & EE) 1 - Other (Enterprises, tax planning, etc.) 2 INVESTMENT SELF-FUNDED 5 - 6 pts Customer Prices “at or below inflation” < 2% _____ a Adjusted EPS (non-G
Slide 14: Needed Customer Investment
Needed Customer Investment . . . Large and Aging System Rate Base Growth > $50 Bn Electric Gas 10-Yr 7% $21 Bn CAGR $15 Bn 60% $10 Bn 5-Yr Plan 70% 40% 30% > $18 Bn System Need 2017 2022 . . . potentially pulled forward by tax reform. 13
Slide 15: Our Entire Cost Structure
Our Entire Cost Structure . . . Cost Components Residential Electric Bills a (current dollars) 100% 100% $106 $100 90% Coal to 80% Down 6% Gas / PPA Fuel and Power Costs 70% 2013 2018E 60% ~70% Residential Gas Bills 50% a O&M Costs 40% (current dollars) $85 Tax 30% Reform Taxes $62 20% Capital Inves
Slide 16: Credit Metrics Maintained
Credit Metrics Maintained . . . S&P / S&P Moody’s Fitch FFO / Average Debt a Fitch Moody’s (Dec. ‘16) (Apr. ‘17) (Jul. ‘17) AA- Aa3 A+ A1 19% Consumers A A2 Secured ~18% A- A3 BBB+ Baa1 BBB Baa2 17% BBB- Baa3 < 30% HoldCo Debt BB+ Ba1 BBB+ Baa1 BBB Baa2 CMS Unsecured BBB- Baa3 BB+ Ba1 BB Ba2 Present
Slide 17: 2018 Sensitivities
2018 Sensitivities . . . Full Year Impact Sensitivity EPS OCF (MM) Sales a • Electric (37,477 GWh) + 1% + 6¢ + $ 20 • Gas (303 Bcf) + 5 + 9 + 40 – – 55 Gas prices (NYMEX) + 50¢ + 0 + ROE (planned) Order • Electric (10.1%) + 10 bps + 1½ + 6 Received • Gas (10.1%) + 10 + ½ + 3 3/29 Interest rates +100
Slide 18: Utility Driven, Low Risk Growth
Utility Driven, Low Risk Growth . . . CMS Energy Long-Term Growth Plan Segments: • Needed system upgrades / robust backlog - Utility 5 - 7% • Affordable prices driven by cost controls 0-1 • Largely contracted & utility-like - Enterprises • Contracted generation & renewables • Refinancing high coupon
Slide 19: Compelling Investment Thesis
Compelling Investment Thesis Aging Infrastructure Strong Cash Flow & Balance Sheet Diversified Service Territory Affordable Prices Constructive Regulation 18
Slide 20: Q&A Thank You!
Q&A Thank You! 19
Slide 21: Appendix
Appendix
Slide 22: Tax Reform – Three Step Approach
Tax Reform – Three Step Approach . . . Step 1: (Credit A) • To be filed to determine forward-looking customer credit to adjust for tax reform • Gas Utility by Mar. 30th • Electric Utility by Apr. 30th • MPSC approval within 90 days of all filings Step 2: (Credit B) • To be filed to determine catch-u
Slide 23: Tax Reform Impact
Tax Reform Impact . . . Impacts Takeaway Utility • Lower customer rates create Facilitates self-funding capex headroom (up to 4%) strategy Enterprises & • Lower tax rate improves Offers modest EnerBank earnings diversification Parent interest • Largely offset by EnerBank Unique tax shield inte
Slide 24: Operating Cash Flow Generation
Operating Cash Flow Generation . . . Amount (Bn) ~$9 Bn in aggregate $ 2.2 1.95 1.85 1.7 1.75 1.7 1.65 1.65 1.2 0.7 Investment 0.2 (0.3) Cash flow before dividend (0.8) 2017 2018 2019 2020 2021 2022 NOLs & credits $0.6 $0.4 $0.3 $0.3 $0.3 $0.2 . . . remains strong and supports our capital plan. 23
Slide 25: DIG (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . Pre-Tax Income Opportunities (MM) $ 80 $75 70 Contracts (layering in over time) 60 $55 +$40 50 $45 Better +$20 40 Performance $35 $30 30 Better Performance 20 $12 10 Outage Pull-ahead 0 2015 2016 2017 2018 Future Capacity ($/kW-mth) ≈ $1.00 ≈ $2.00 ≈ $3.00 < $
Slide 26: GAAP Reconciliation
GAAP Reconciliation
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 2016 2017 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 $1.98 $1.64 Pre
Slide 28: 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 2018 1Q Net Income Available to Common Stockholders $ 241 Reconciling items: Electric utility and gas utility - Tax impact - Enterprises * Tax impact
Slide 29: 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 3/31/18 3/31/17 Electric Utility Reported net income per share $ 0.49 $ 0.44 Reconciling items: Restructuring costs and other - - Adjusted net in
Slide 30: Weather Impacts on Year Over Year Earnings
CMS ENERGY CORPORATION Weather Impacts on Year Over Year Earnings (Unaudited) (Unaudited) In Millions, Except Per Share Amounts Three Months Ended 3/31/2018 3/31/2017 Change Adjusted Net Income $ 241 $ 200 $ 41 Non-Normal Weather Impact 12 62 (50) Tax Impact (3) (24) 21 Non-Normal Weather Impact (Ne
Slide 31: 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 12/31/17 Net Cash Provided by Operating Activities $ 1,705 Reconciling item: Securitization amortization and other 10 Funds From Operations (FFO) – Non-GAAP $ 1,715 AV