Cms Energy Corporation · NYSE:CMS
Cms Energy — Hilliard Lyons Investor Meeting (July 2015)
27 slides from Cms Energy's conference presentation, Jul 29, 2015
Slide 1: Hilliard Lyons July 29, 2015
Hilliard Lyons July 29, 2015 Ludington Pumped Storage Ray Compressor Station Cross Winds Energy Park Fourth largest in the world #1 LDC in gas storage #2 in renewable sales in the Great Lakes area
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 . . . . Electric service territory Overview Natural gas service territory Combined service territory #4 Combination utility (electric and Generating facility gas) in the country #383 Fortune 500 company #2 Investor in Michigan Our Service Territory • Electric Utility 1.8 million electric
Slide 4: Electric Customer Base Diversified
Electric Customer Base Diversified . . . . Top Ten Customers 2014 Electric Gross Margin (2014 Ranked by Deliveries) • Hemlock Semiconductor • General Motors • Nexteer Automotive Corporation Commercial • Gerdau MacSteel 33% • Denso International Residential 50% • Packaging Corporation of America • Me
Slide 5: Our Mindset
Our Mindset . . . . 10-Year Actual $1.89 7% CAGR a $1.77 EPS $1.66 $1.86 Dividend Peers 4% $1.55 $1.45 $1.36 b $1.26 7% $1.21 6% $1.16 $1.08 6% $1.08 14% $1.02 $0.96 96¢ $0.90 27% 84¢ $0.84 32% $0.81 Int’l Sale 66¢ 39% 50¢ 80% 36¢ 20¢ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Slide 6: Growing Faster than Peers
Growing Faster than Peers . . . . CMS Energy “Average” Utility Amount Amount 12 % +11 12 % +4 10 10 + 9 +4 +8 8 8 +7 +7 6 6 +5 +4 4 4 +3 2 2 0 0 EPS Dividend TSR EPS Dividend TSR . . . . with ten years worth of sustainable, organic growth. 5
Slide 7: Total Shareowner Return
Total Shareowner Return . . . . 500 % 400 CMS +421% 300 200 S&P 500 Utilities +188% S&P 500 +141% 100 0 -100 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 July 22, 2015 ----- Source: Bloomberg . . . . CMS outperforms peers. 6
Slide 8: CMS Energy Business Model
CMS Energy Business Model . . . . Investment Invest $15.5 billion over next ten years Results Cost Reductions 5% to 7% annual Reduce costs ~2% EPS and dividend per year Customer Keep prices low, increase satisfaction & reliability . . . . simple, perhaps unique. 7
Slide 9: Capex Up 45%
Capex Up 45% . . . . Electric Capex Criteria Gas Opportunity +30% Add customer value $20 + Organic growth +45% $15.5 Reduce O&M Balance fuel $10.7 Mandated by regulations No “big bets” 2005 - 2014 2015 - 2024 Opportunity . . . . with more opportunity and no “big bets” over ten years! 8
Slide 10: Investment "Catch-up"
Investment “Catch-up” . . . . Amount (bils) $1.8 One of first with a ten year plan > $1.5 per year “Catch-up” Capex as a Percent of Market Cap 2005 - 2014 2015 - 2024 CMS Energy CMS 10% 16% Peers Peers 11 15 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20
Slide 11: Customer Driven Investment
Customer Driven Investment . . . . Clean Power Capacity Reliability Infrastructure Opportunity $1.5 Billion $2.2 Billion $2.4 Billion $4.1 Billion $5 Billion Environmental Jackson gas plant Consumers Smart Energy Gas distribution Gas combined cycle Renewable energy Gas expansion Gas storage Propane
Slide 12: O&M Cost Reductions
O&M Cost Reductions . . . . 2006 2014 2018 Down 7% Down 10% or 2%/yr $1.1 bil $1.0 bil $0.9 bil Inflation Inflation ≈2% ≈2% • Coal to Gas Switching (Zeeland) • Coal to Gas Switching (Jackson) • Smarter benefit plans • “Pole Top” Hardening • Productivity/Attrition • Productivity/Smart Energy . . . .
Slide 13: O&M Cost Performance
O&M Cost Performance . . . . Electric Annual Growth O&M Cost Savings (2014 over 2006) 2014 2014 & 2015 2018 (mils) (mils) • Attrition $ - 35 $ - 75 • Productivity (Coal Gas) - 35 - 50 • “Pole Top” Hardening - 30 - 30 • Smart Meters - 5 - 25 Peer Average >5% • Eliminate Waste (UA’s) - 15 - 20 • Morta
Slide 14: Electric Customer Prices
Electric Customer Prices . . . . Residential Bills Industrial Rates 20 % 30 % 26% 20 Rates & Worse 10 Worse Fuel 10 Rates & 4% Act 169 National Avg Midwest Avg 0 0 Flat Residential bills well below U.S. average -10 Policy could (8)% Better -10 (13)% (13)% Better eliminate gap Rates Rates & -20 Rates
Slide 15: Customer Satisfaction
Customer Satisfaction . . . . Electric Gas #3 1st Quartile #4 1st Quartile 2nd Quartile 2nd Quartile #9 #6 3rd Quartile 3rd Quartile 4th Quartile 4th Quartile Present Present 2010 2012 2014 Rank 2016 2010 2012 2014 Rank 2016 Residential Business Residential Business . . . . continues to improve rapi
Slide 16: Our Service Territory Performing Well
Our Service Territory Performing Well . . . . a Examples of New Business Electric Gas Combination Grand Announcement Rapids Michigan U.S Bayer CropScience Building Permits b +28% +14% +13% • One of the world’s leading crop science companies GDP 15 11 8 • Secures 70 jobs 2010 2013 • $50 million inves
Slide 17: Constructive Regulation
Constructive Regulation . . . . Commission Tier 1 State Ranking John Quackenbush (R), Chairman 1 6 Michigan Term Ends: July 2, 2017 ranked #1 2 8 Sally Talberg (I) Term Ends: July 2, 2019 3 20 4 9 Norm Saari (R) Term Ends: July 2, 2021 5 6 Newly appointed! Barclays Research, 2015 state rankings . .
Slide 18: Michigan Energy Law
Michigan Energy Law . . . . Sen. Nofs Gov. Snyder Rep. Nesbitt Keep “cap” Keep “cap” End “ROA” “Retail Open 3-year capacity 5-year capacity Access” requirement, requirement Fully regulated “one way door” “Fair choice” No subsidy No subsidy 1%/yr waste reduction Eliminate 15% Repeal present Efficienc
Slide 19: CMS Energy consistent growth
CMS Energy . . . . +5% to +7% /year 7% CAGR Recession Recession Help Hurt 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Future We work Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold with anyone winter summer summer winter summer winter “less” summer summer winte
Slide 20: CMS Energy is Rated "Buy"
CMS Energy is Rated “Buy” . . . . Analyst Recommendations Top Pick CMS Peers Ratings Percent Average Percent Buy 9 56% 5 36% Fortune Magazine rated CMS top utility and 9th best Fortune 500 stock to buy. Hold 7 44 8 57 June 26, 2015 Sell -- -- 1 7 “Analyst David Burks at Hilliard Lyons, for example,
Slide 21: Wrap-up
Wrap-up . . . . Sustainable business model: Predictable future growth Ludington Pumped Storage Opportunities to invest: Improves customer satisfaction Gas Infrastructure & reliability; grows EPS and cash flow Top-tier regulation: Supporting economic growth Investing in our state . . . . more t
Slide 22: Appendix
Appendix
Slide 23: Capacity Diversity
Capacity Diversity . . . . Nuclear Oil 8% 6% Renewables 9% Coal 34% Pumped Storage 2014 11% Nuclear Gas Nuclear Oil 6% 32% 8% 8% Oil 6% Renewables Purchases 3% 3% Coal 24% Pumped Coal Renewables Storage 41% 10% 11% 2005 2017 Pumped Gas Storage Gas 31% 12% 37% . . . . evolving to cleaner generation w
Slide 24: Operating Cash Flow Growth
Operating Cash Flow Growth . . . . Amount Up $0.6 Billion (bils) Gross operating cash flowa up $0.1 billion per year $2.6 $ 2.6 $2.5 $2.3 $2.2 $2.1 Interest, working 2.1 $1.9 $1.8 capital and taxes 1.6 $1.55 1.1 0.6 Investment 0.1 (0.4) Cash flow before dividend _____ a Non-GAAP (0.9) 2014 2015 2016
Slide 25: GAAP Reconciliation
GAAP Reconciliation
Slide 26: 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 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 After-tax items: Electric and gas ut
Slide 27: Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2014 2015 2016 2017 2018 2019 2020 Consumers Operating Income + Depreciation & Amortization $ 1,813 $ 1,920 $ 2,027 $ 2,145 $ 2,266 $ 2,401 $ 2,515 Enterprises Project Cash Flows 20 20 40 58 62 67
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