Slide 1: Third Quarter 2016 Results & Outlook
Third Quarter 2016 Results & Outlook October 27, 2016 Jackson Generating Station Ludington Pumped Storage Cross Winds Energy Park Among lowest acquisition cost ever Fourth largest in the world #2 in renewable sales in the Great Lakes area
Slide 2: Forward-looking statements 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 Overview Patti Poppe Earnings Update President & CEO The Consumers Energy Way Unique Model Financial Results & Outlook Tom Webb Third Quarter; Full Year Executive VP & CFO Customer Reinvestment Sensitivities and Targets 2
Slide 4: EPS Adjusted Results and Guidance
EPS Adjusted Results and Guidance. . . . a First Nine Months: • at $1.73, up 22¢ from 2015 2016 Full-Year guidance raised: • to $2.00 - $2.02, up 6% to 7% 2017 Full-Year guidance introduced: • at $2.13 to $2.17, up 6% to 8% Future long-term annual growth: • at 6% to 8% _____ a Adjusted EPS (non-GAAP
Slide 5: The Consumers Energy Way
The Consumers Energy Way . . . . The CE Way Safety Quality Cost Delivery . . . CUSTOMER ENABLED FOCUS EMPLOYEES Safety: Every day is a safe day Quality: We get it right the first time BUSINESS RESULTS Cost: We see and eliminate waste Delivery: We get it done on time CONTINUOUS STANDARDIZED IMPROVEME
Slide 6: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . . 2017+ Plan Capital investment (reliability, costs, enviro mandates) 6% - 8% Self Funding: - O&M cost reductions 2 - 3 pts - Sales growth 1 - No “block” equity dilution & other 2 INVESTMENT SELF-FUNDED 5 - 6 pts Base rate increase at or below inflation <2% . . . .
Slide 7: Next 10 Years -- $17 Billion Investment
Next 10 Years -- $17 Billion Investment . . . . Electric Dist. Gas Supply Opportunity $6.5 bil $6.2 bil $4.3 bil $3 - $4 bil Maintenance Pipeline Deliverability Environmental Gas Infrastructure Electric Reliability Compression Clean Energy More Renewables Capacity Replacement Opportunity Grid Techno
Slide 8: O&M Cost Performance
O&M Cost Performance . . . . Actual Cost Reduction New Cost Savings (2015 over 2006) 2014 2016 & 2015 & 2017 Good Business Decisions (mils) (mils) • Attrition (VSP) $ - 35 $ - 35 • Productivity (Coal Gas) - 35 - 15 • “Pole Top” Hardening - 20 - 10 • Smart Meters - 5 - 20 “Consumers Energy Way” • Wor
Slide 9: Michigan
Michigan . . . . Michigan ranked #1 most competitive Midwest state for job creation by Site Selection Magazine Michigan ranked #7 best state to do business by CNBC (improved from #22 in 2015!) Grand Rapids named best city in the U.S. to invest in housing by Forbes Grand Rapids ranked #2 best U.S. ci
Slide 10: Fourth Quarter Outlook
Fourth Quarter Outlook . . . . Maximize customer reinvestments Deliver high end of EPS range Constructive partnerships Performance is Power . . . . focus remains on customers AND investors. 9
Slide 11: 2016 Nine Months Adjusted EPS
2016 Nine Months Adjusted EPS . . . . a Results By Business Segment 2015 2016 EPS EPS -- (GAAP) $1.51 $1.70 Better Actual than Plan Voluntary Separation -- 0.03 Utility $1.81 $0.23 Program Adjustment Enterprises 0.06 0.02 Adjusted (non-GAAP) $1.51 $1.73 Interest & other (0.14) 0.04 +22¢ Company $1.7
Slide 12: 2016 EPS
2016 EPS . . . . a Year-to-Date Three Months To Go +22¢ (11)¢ to (9)¢ $2.00 - $2.02 +6% to +7% 32¢ 13¢ $1.89 (10)¢ (24)¢ - (22)¢ YTD YTD $1.51 $1.73 2015 Cost & Other Weather Normal Weather Reinvestment 2016 Costs & Other _____ a Adjusted EPS (non-GAAP) . . . . now guiding to the high end. 11
Slide 13: 2016 EPS Outlook
2016 EPS Outlook . . . . Adjusted EPS (non-GAAP) Warm Summer Mild October Non- weather 6¢ Weather +6% to +7% 14¢ Weather & Recovery Storms Pension “Yield Curve” 5¢ Choices Enhanced Capitalization 3 2017 “Pull Aheads” 2¢ ‘15 Pension Contribution 2 Debt Pre-funding 5 Improved “UAs” & Other 3 Foundatio
Slide 14: Managing Work Every Year
Managing Work Every Year . . . . a 2008 2009 2010 2011 2012 2013 2014 2015 EPS Mild $2.00 Summer +18¢ +17¢ Cost +7% productivity above plan $1.80 +7% Offsets Reinvestment +13¢ +7¢ -13¢ Reinvestment Hot +7% Summer Mild RECORD $1.60 Winter Hot WARM Summer +7% Cost -9¢ productivity Reinvestment above p
Slide 15: DIG (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . . Pre-Tax Income Opportunities (mils) $ 80 $75 70 Contracts (layering in over time) 60 $55 +$40 50 +$20 40 $35 30 New contracts $20 20 $12 10 Outage pull-ahead 0 2015 2016 2017 Future Capacity ($/kw-mth) ≈ $1.00 ≈ $2.00 ≈ $3.00 $4.50 $7.50 Available: • Energy
Slide 16: 2016 Sensitivities
2016 Sensitivities . . . . 2016 Impact Sensitivity EPS OCF (mils) • Sales a • Electric (37,500 GWh) + 1% + $0.05 + $ 20 • Gas (309 Bcf) + 2 + 0.03 + 15 – • Gas prices (NYMEX) + 50¢ + 0 – 55 + • ROE • Electric (10.3%) + 10 bps + 0.01 + 5 • Gas (10.3%) + 20 + 0.01 + 4 • Interest Rates +100 bps + < 0.0
Slide 17: Financial Targets
Financial Targets . . . . 2016 2017 Adjusted EPS (non-GAAP) $2.00 - $2.02 +6% to +7% $2.13 - $2.17 +6% to +8% Operating cash flow (mils) $1,550 $1,650 Dividend payout ratio Customer price incr./(decr.) > 62% > 62% ~1% ~2% Electric (excl. fuel) Gas ~(10)% ~2% FFO/Average debt 18% 18½% Capit
Slide 18: Consistent Growth Through Challenges
Consistent Growth Through . . . . 7% CAGR a EPS Dividend 6% to 8% 5% to 7% Weather Recession Recession Help _____ Hurt a Adjusted EPS (non-GAAP) Cold 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Feb. Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold Feb.
Slide 19: Q&A
Q&A See you at EEI 18
Slide 20: Appendix
Appendix
Slide 21: Operating Cash Flow
Operating Cash Flow . . . . Amount Up $0.7 (bils) Billion Gross operating cash flowa $2.8 $ 2.9 up > $0.1 billion per year $2.7 $2.5 $2.4 2.4 $2.2 Interest, working $2.1 capital and taxes $1.9 1.9 $1.55 1.4 Operating cash flow 0.9 Investment 0.4 (0.2) _____ Cash flow before dividend a Non-GAAP (0.7)
Slide 22: Liquidity (as of September 2016)
Liquidity (as of September 2016) . . . . Renewal Capacity Availability $1.9 Billion CMS Energy $1.7 Billion Stronger liquidity 5-year revolver May 2021 $550 mils than peers $549 mils Consumers Energy 5-year revolver May 2021 650 Letter of Credit Apr 2018 568 Letter of Credit Aug 2018 68 Letter of Cr
Slide 23: 2016 Cash Flow Forecast (non-GAAP)
2016 Cash Flow Forecast (non-GAAP) CMS Energy Parent Consumers Energy Cash at year end 2015 $ 159 Amount (mils) Sources Consumers Energy dividend and tax sharing $ 503 Cash at year end 2015 $ 50 Enterprises 38 Sources Sources $ 541 Operating (depreciation & amortization $800) $ 2,064 Other working c
Slide 24: GAAP Reconciliation
GAAP Reconciliation
Slide 25: 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 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 Pretax items: Electric an
Slide 26: Earnings Segment Results GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Segment Results GAAP Reconciliation (Unaudited) Three Months Ended Nine Months Ended September 30 2016 2015 2016 2015 Electric Utility Reported $ 0.69 $ 0.60 $ 1.42 $ 1.24 Downsizing Program 0.03 - 0.03 - Tax Impact (0.01) - (0.01) - Restructuring Costs and Other - -
Slide 27: CMS Energy EBITDA GAAP Reconciliation
CMS ENERGY CORPORATION EBITDA GAAP Reconciliation 12 Months Ended (Unaudited) In Millions 09/30/16 12/31/15 09/30/15 Reported earnings - GAAP $ 580 $ 523 $ 513 Interest on long-term debt 404 386 387 Other interest expense 16 14 25 Allowance for borrowed funds used during construction (5) (4) (3) Inc
Slide 28: Consumers Energy EBITDA GAAP Reconciliation
CONSUMERS ENERGY COMPANY EBITDA GAAP Reconciliation 12 Months Ended (Unaudited) In Millions 9/30/2016 12/31/15 9/30/2015 Reported earnings - GAAP $ 632 $ 592 $ 575 Interest on long-term debt 259 252 251 Other interest expense - 2 13 Allowance for borrowed funds used during construction (5) (4) (3) I
Slide 29: Consumers Energy 2016 Forecasted Cash Flow GAAP Reconciliation
Consumers Energy 2016 Forecasted Cash Flow GAAP Reconciliation (in millions) (unaudited) Reclassifications From Sources and Uses to Statement of Cash Flows Interest/ Capital Presentation Sources and Uses Tax Other Financing Lease Pymts Securitization Common Consolidated Statements of Cash Flows non-
Slide 30: CMS Energy Parent 2016 Forecasted Cash Flow GAAP Reconciliation
CMS Energy Parent 2016 Forecasted Cash Flow GAAP Reconciliation (in millions) (unaudited) Reclassifications From Sources and Uses to Statement of Cash Flows Presentation Sources and Uses Non Equity Consolidated Statements of Cash Flows non-GAAP Uses GAAP Description Amount as Operating Other Amount
Slide 31: Consolidated CMS Energy 2016 Forecasted Cash Flow
Consolidated CMS Energy 2016 Forecasted Consolidation of Consumers Energy and CMS Energy Parent Statements of Cash Flow (in millions) (unaudited) Eliminations/Reclassifications/Consolidation to Arrive at the Consolidated Statement of Cash Flows Statements of Cash Flows Other Consumers Equity Consume
Slide 32: Reconciliation of Gross Operating Cash Flow to GAAP
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2014 2015 2016 2017 2018 2019 2020 2021 Consumers Operating Income + Depreciation & Amortization $ 1,813 $ 1,866 $ 2,064 $ 2,150 $ 2,356 $ 2,520 $ 2,637 $ 2,783 Enterprises Project Cash Flows 20 20