Cms Energy Corporation · NYSE:CMS
Cms Energy — Non-Deal Roadshow (July 2014)
44 slides from Cms Energy's roadshow presentation, Jul 10, 2014
Slide 1: Investor Meetings July 10 & 11, 2014
Investor Meetings July 10 & 11, 2014
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: Mindset drives consistent real EPS growth
Mindset . . . . 2 . . . . drives consistent “real” EPS growth. $0.81 _ _ _ _ _ Adjusted EPS (non-GAAP) excluding MTM in 2004-2006 a $1.25 excluding discontinued Exeter operations and accounting changes related to convertible debt and restricted stock Int’l Sale a 10-Year Actual 7% CAGR Dividend Payo
Slide 4: Overview: fourth largest combination utility in the US
Electric Utility 1.8 million electric customers 8,600 MW of capacity Gas Utility 1.7 million gas customers 309 Bcf gas storage (3rd biggest in US) Consumers Energy . . . . Territory . . . . one of largest investors and employers in Michigan. Lake Winds Energy Park 3 Fourth largest combination utilit
Slide 5: CMS Energy Model
CMS Energy MODEL . . . . Investment Ten year - $15 billion Small, bite size projects None “Bet The Company” Self-funded Upside Catalysts A. Capex >$15 billion B. PPA’s expire = 2,000 MW C. Zone 7 capacity shortfall D. Credit ratings E. Sales F. Capacity price increases G. Continuous cost reductions
Slide 6: A. Visible Investment: Ten-Year Plan
A. Visible Investment: Ten-Year Plan . . . . 5 . . . . reflects needed catch-up to further reduce cost and improve reliability. 2013-2022 10-Year Plan Opportunity Level $15 Billion $20+ Billion Opportunity Amount (bils) Generation capacity PPA replacement $1.7 ROA return Higher renewables .3 Gas con
Slide 7: Visible Investment: Catch-Up
Visible Investment: Catch-Up . . . . 6 2013 Pct of Market Cap Cap Inv OCF Liquidity CMS 21% 20% 24% Peers 18 16 20 21% 20% 24% . . . . creates unique opportunity; with OCF already stronger than peers. Amount (billions) $1.8 CMS Peers _ _ _ _ _ Source: 10K; actual amounts through 2013 smoothed for il
Slide 8: Visible Investment: Customer-Driven
Visible Investment: Customer-Driven . . . . Clean Power $2.3 Billion Reliability $4.2 Billion . . . . ten-year plan small and incremental with no big bets. Renewable energy Jackson gas plant Gas storage Propane switching Gas transmission Gas distribution Electric reliability Consumers Smart Energy E
Slide 9: Visible Investment: Ten-Year Plan
Visible Investment: Ten-Year Plan . . . . . . . . clear for next ten years – needed, not just wanted. Amount (bils) $ Environmental Gas Smart Energy Maintenance $5 $7 $8 New Generation Gas Electric Reliability Renewables 8
Slide 10: B. PPAs Expire and MISO Zone Shortage
B. PPA’s Expire and MISO Zone 7 Shortage . . . . 9 . . . . replacement not yet in plan! Ten-year Capacity Growth ~780 MW 1,240 MW MW PPA 2,600 capacity ~30% ~8,600 MW 540 MW 410 MW Shortfall Owned (6,000) 780 MW 8,600 MW 1,000 MW PPA ~Potential for 3,000 MW of owned capacity 2 GW 11,000 Further Upsi
Slide 11: C. MISO Zone Forecast shortfall
C. MISO Zone 7 Forecast . . . . 10 . . . . expected shortfall of 2.0 GW in 2016. As of June 2, 2014 (in GW) 22.8 3.2 21.6 24.8 Reserves Demand 2.0
Slide 12: New Capacity Opportunities
New Capacity Opportunities . . . . Replace PPA With New Build Full Year Impact Customer Bill Investor (mils) (EPS) 1,000 MW of PPA’s expire - $325 0 ¢ Add 1,000 MW owned capacity + 325 + 5 Impact Flat Incremental Step-up Not in Plan 2 points Build - Thetford Expand - Zeeland Buy - ? LT PPA 11 . . .
Slide 13: Consumers in a Good Carbon Position
Consumers Appears to be in a Good Carbon Position . . . . 12 . . . . but lots of work to understand new guidelines. Carbon Tonnage Reduction (Preliminary) Million Tons of CO2 U.S. Presidential Target Consumers Energy On 2014 2030 2019 2024 2029 target
Slide 14: D. Credit Ratings
D. Credit Ratings . . . . . . . . recently upgraded, more ahead? Consistent Performance Less Risk Customer Focus Constructive Regulation Good Energy Policy Reflects Present Prior 2002 Scale S&P / Fitch Moody’s S&P (March) Moody’s (January) Fitch (February) A+ A1 A A2 Consumers Secured A- A3 BBB+ Baa
Slide 15: E. Sales Growth planned conservatively
E. Sales Growth . . . . . . . . planned conservatively. Annual Electric Salesa Economic Indicators Annual Industrial Sales Grand Rapids Michigan U.S Building Permits* +23% +18% +9% GDP (real) 2010 thru 2012 14 11 7 Population 2010 Census thru July 2013 3 0 2 Unemployment May 2014 5.4% 7.5% 6.3% *Ann
Slide 16: Michigan Economy among the best
Michigan Economy . . . . . . . . among the best in the nation. Gross Domestic Product – 2010 through 2013 Source: U.S. Department of Commerce – bea.gov, real GDP 2009 chained dollars, 2013 advance and 2009 – 2012 revised, 6/12/14 Highest quintile Fourth quintile Third quintile Second quintile Lowest
Slide 17: F. Capacity Price Market Increases
F. Capacity Price Market Increases . . . . 16 . . . . could add value to the 700 MW “DIG” plant. Capacity price ($ kW per month) Today (mils) Future Scenarios (mils) $55 $35 +$50 Opportunity Recent Contracts DIG “energy” contract 9 years 250 MW @ $4.06 kW per month < +$30 $5 Upside: Capacity and ene
Slide 18: G. Continuous O&M Cost Reductions
G. Continuous O&M Cost Reductions . . . . 17 . . . . holds down rates and allows better system reliability. _ _ _ _ _ a O&M Change excluding major storms Amount (mils) $
Slide 19: O&M Cost Control
O&M Cost Control . . . . 18 Average Annual O&M Change +6% Peers -2% -2% Average -3% Plan Conservatively Upside? _ _ _ _ _ a -8% Before reinvestment Peers +2% Peers CMS Future Examples Fuel Mix Benefits MW Employees 2016 Retire Coal - 900 - 300 2016 Add GCC + 540 + 20 Total -360 - 280 Future Savings
Slide 20: CMS Manages its Work
CMS Manages its Work . . . . 19 Adjusted EPS (non-GAAP) -13¢ $1.55 Hot Summer . . . . delivering the high side of performance for customers and owners. +13¢ Customer Reinvestment Hot Summer Reinvestment Customer reinvestment 8¢ Low income and Foundation 2 “25x25” Lobby & other 3 Total reinvestment 1
Slide 21: Adjusted EPS deliver for customers and investors
Adjusted EPS (non-GAAP) . . . . deliver for customers AND investors. CMS Mindset . . . . 2013 2013 Cold Winter & Cost Savings $1.66 +7% 20 Guidance 2012 Warm Winter 2012 Cost Saving +13¢ 2012 Hot Summer Reinvested earlier -13¢ 2012 Icy Late December O&M B/(W) Than Forecast (mils) Storm(total $50 M)
Slide 22: Constructive Regulation
Constructive Regulation . . . . 21 . . . . strong law on the books supported by a quality commission. Tier 1 State Ranking Barclays Research Michigan John Quackenbush (R), Chairman Term Ends: July 2, 2017 Greg White (I) Term Ends: July 2, 2015 Sally Talberg (I) Term Ends: July 2, 2019 Commission
Slide 23: Energy Law Improvements
Energy Law Improvements . . . . 22 . . . . builds on 2008 Law. Outlook Regulatory Support (from the right) Michigan Governor Rick Snyder MPSC Chairman John Quackenbush Michigan Energy Office Director Steve Bakkal Industrial class Energy-intensive $150 million customer opportunity (“ROA”) 780 MW capa
Slide 24: Michigan Governor's Race
Michigan Governor’s Race . . . . 23 . . . . focus on non-energy issues. Mark Schauer Democrat, Challenger Rick Snyder Republican, Incumbent Campaign Issues Education Jobs Roads Detroit On Energy On ROA As Senate Democratic Leader, Mark played a key role in the successful passage of the 2008 Energy L
Slide 25: Gas Customer Bills down 10%
$49M Gas Customer Bills . . . . . . . . down 10% over the last three years! 24 Settled $16M 2012 2013 2014 2015 $0 Investment $0 Stay-out Cost BILLS DOWN 10%! -- $88M
Slide 26: Gas Rate Case Overview
Gas Rate Case . . . . 25 Overview Rate Base (bils) XX ROE XX Equity - Regulatory XX Equity - Financial XX Residential Gas Customer Cost . . . . recovers capital investment offset partially by lower costs. Amount (Mils) Capital Investment $ Cost & Other (56) Request $ 88 2016-2017 Investment Recovery
Slide 27: Key Takeaways
Key Takeaways . . . . 26 . . . . distinguish CMS favorably with customers and owners. _ _ _ _ _ a Adjusted EPS (non-GAAP) excluding MTM in 2004-2006 EPS a “Real” Growth (No “Resets”) $2.00 Core Fundamentals Ten-Year Visible Investment Strong Cost Control Conservative Planning Supportive Regulatory C
Slide 28: Appendix
Appendix
Slide 29: Capital Expenditures
Capital Expenditures 28 (mils) 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 1,4
Slide 30: Operating Cash Flow Growth
Operating Cash Flow Growth . . . . Amount (bils) $ Investment Cash flow before dividend a Non-GAAP NOLs & Credits $0.7 $0.6 $0.4 $0.5 $0.4 $0.2 $0.1 Gross operating cash flowa up $0.1 billion per year . . . . self-funds investment and strategy. Up $0.5 Billion $2.1 Interest Working capital and taxes
Slide 31: Electric Customer Base Diversified
Electric Customer Base Diversified . . . . 30 . . . . “autos” 5% of 2013 electric gross margin. Hemlock Semiconductor (zero margin) General Motors Nexteer Automotive Corporation Gerdau Macsteel Denso International America Meijer Packaging Corp of America State of Michigan Spectrum Health AT&T Top Te
Slide 32: Generation Strategy: New Supply Sources
31 Generation Strategy: New Supply Sources . . . . . . . . combined cycle gas is the most attractive new source of supply. Levelized cost of new build (¢/kWh) Gas price= $3.00 $4.50 $6.00 W/ tax credit W/o tax credit W/ emission controls Today $3.00 per watt 5¢ 6¢ 7¢ 6¢ 9¢ 10¢ 12¢ 22¢ 8¢ Back -up 11
Slide 33: Capacity Diversity
Capacity Diversity . . . . 32 . . . . evolving to cleaner generation while becoming more cost competitive. 2005 2017 2014
Slide 34: Visible Investment: Gas Distribution
Visible Investment: Gas Distribution . . . . 33 . . . . investing $2 billion over the next 5 years. New Customers Inspection Storage Compression Transmission 50,000 New customers $200 Million 1,700 Miles $100 Million 23 Wells $100 Million 800 Miles $450 Million 19,000 + Horsepower $400 Million 32 Mi
Slide 35: Visible Investment: Electric Distribution
34 Demand $ 1.0 Billion . . . . investing $2 billion over the next 5 years. Visible Investment: Electric Distribution . . . . Reliability $ 0.7 Billion Capacity $ 0.3 Billion Total $ 2.0 Billion Circuits In service 2,253 Upgrade 603 Transformers In service 663,044 Replace 16,175 Poles In service 1,5
Slide 36: Visible Investment: Renewable Energy
Visible Investment: Renewable Energy . . . . 35 10% 40% 25 15 Biomass Landfill & other 10% renewables by 2015 Purchase 50% and build 50% Renewables by 2015 8% already in place! . . . . Michigan’s largest renewable energy supplier. Michigan Energy Law Requires Hydro Cross Winds under construction 105
Slide 37: Electric Utility Financial & Operating Statistics
36 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 $1,319 $1,785 $1,678 $1,614 $1,387 $1,414 Commercial 1,301 1,228 1,197 1,166 1,099 1,129 Industrial 772 78
Slide 38: Electric Utility Financial & Operating Statistics
37 Electric Utility Financial & Operating Statistics Consumers Energy Count on Us Years Ended December 31 2013 2012 2011 2010 2009 2008 FUEL COST ($ per MMBtu) Coal 2.90 2.98 2.94 2.51 2.37 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
Slide 39: Gas Utility Financial & Operating Statistics
38 Gas Utility Financial & Operating Statistics Consumers Energy CountonUs Years Ended December 31 2013 2012 2011 2010 2009 2008 GAS REVENUE AND COST OF GAS ($ Millions) Residential Commercial Industrial Other $1,515 399 69 2 $1,415 351 65 2 $1,655 438 89 3 $1,677 449 88 3 $1,808 511 101 3 $1,971 59
Slide 40: Gas Rate Case U-17643
39 GAS RATE CASE U-17643* On July 1, 2014, Consumers Energy filed an application with the Michigan Public Service Commission seeking an increase in its gas delivery and transportation rates based on a 12 months ending December 2015 test year. The request seeks authority to recover new investment in
Slide 41: Enterprises independent power production
40 Enterprises As of December 31, 2013 Independent Power Production Plant Primary Fuel Ownership Interest Gross Capacity In-Service Year Capacity Under LT Contract State Craven Wood 50% 50 1990 100% NC DIG Natural Gas 100 710 2001 61 MI Filer City Coal 50 73 1990 100 MI Genesee Wood 50 40 1996 100 M
Slide 42: GAAP Reconciliation
CT GAAP Reconciliation
Slide 43: Reported to adjusted EPS reconciliation
42 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 0.33 0.03 - 0.17 - Enterprises 0.74 0.62 0.04 (0.02) 1.2
Slide 44: Gross operating cash flow reconciliation
43 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 35 36 Gross Operating Cash Flow 1,652 $ 1,756 $ 1,845 $ 1,906 $ 1,980 $ 2,089 $ 2,198 $ (411) (335)