Cms Energy Corporation · NYSE:CMS
Cms Energy — Investor Presentation (December 2020)
60 slides from Cms Energy's investor presentation, December 2020
Slide 1: Investor Meetings December 2020
Investor Meetings December 2020
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: CEO Transition
CMS EVERGY > CEO Transition
Slide 4: CEO Transition
CEO Transition . . . Garrick Rochow Background • CMS Energy 2003 – Present • President and CEO December 1, 2020 • EVP, Electric and Gas Operations 2020 • SVP, Distribution – Electric and Gas 2016 – 2020 (incl. Customer Operations 2016-2017) • Various VP Responsibilities: 2010 – 2016 • Distribution –
Slide 5: Investment Thesis
Investment Thesis . . . Investment Thesis Takeaways Prudent Liquidity Management • 2020 financings largely completed • No pension contributions required in 2020 Aging Operational Excellence and Track Record • Increased productivity driven by the CE Way Infrastructure Clean Energy Constructive • Su
Slide 6: Consistent Growth Through Varying Conditions
Consistent Growth Through . . . a 7% CAGR +6% to +8% EPSa +7% Dividend Weather Recession Recession Help Hurt 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Cold Mild Warm Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold Feb Warm Warm Hot Storms winter su
Slide 7: Investment Thesis
CMS EVERGY > Investment Thesis
Slide 8: Large and Aging System
Large and Aging System . . . Electric distribution Aging coal fleet replaced with system is 6,000 MW of added solar older than by 2040 peers 25 years of main replacement >2,400 miles of gas through our transmission pipeline; most Enhanced Infrastructure built in the WWII era Replacement Program . .
Slide 9: Utility Customer Investment
Utility Customer Investment . . . Investment Plans Increasing Clean Energy Exposure b (Estimated % EPS ) $3 - $6 Bn Capital 2020 ‘20-’24 10-Yr Investment opportunity Investment (Bn): Plan Plan Plan Supported by: PLUS Incentives on PPAs Renewables $0.4 $ 1¾ $ 4 20% EE incentive and Demand Response
Slide 10: Michigan Regulatory Environment
Michigan Regulatory Environment . . . • Bipartisan Energy Law (2016 enhanced 2008 law) • Forward-looking test year (10-month rate case) • Energy efficiency incentive (20% of spend) • Renewable Portfolio Standard (RPS) • Constructive ROEs • Appointed Commissioners with staggered terms • Ranked Tier I
Slide 11: Our Entire Cost Structure
Our Entire Cost Structure . . . Cost Components Residential Bills as % of Walleta 100% (Electric & Gas) Down Utility Bill Utility Bill 100 bps ~4% ~3% Fuel and Power Costs TV & Phone 4% TV & Phone 4% Healthcare 5% Healthcare 8% ~70% Food 12% Food 13% Non-capital related Transportation 15% ~$19 Bn Tr
Slide 12: Financing Plan Largely Completed
Financing Plan Largely Completed . . . Planned 2020 Financing Existing Facilities b Plan YTD (MM) (MM) Consumers Energy: $250 MM First Mortgage Bonds $650 $1,361 (Nov-2021) >$2 Bna of net liquidity Term Loan $300 $300 position with no CP outstanding (as of 9/30/20) CMS Parent: Opportunistic financin
Slide 13: Credit Metrics Maintained
Credit Metrics Maintained . . . Consumers Energy S&P Moody’s Fitch Ratings Drivers Senior Secured A Aa3 A+ • Strong financial Commercial Paper A-2 P-1 F-2 position Outlook Stable Negative Stable • Growing operating cash flow CMS Energy Senior Unsecured BBB Baa1 BBB • Return on regulated investment J
Slide 14: Clean and Lean
Clean and Lean . . . Old Utility Model Clean and Lean Big Build Supply Fully utilize Modular Supply assets Retirement Excess supply Big Excess Build supply Demand Modular Actual Modular Demand EE & DR O&M O&M Excess Economic supply Expected Fuel incentives for Fuel Demand demand side Big Bets resour
Slide 15: Clean Energy Future
Clean Energy Future . . . Elimination of coal More renewable energy Innovative energy solutions Earn incentive Consumers Energy Capacity Mix mechanisms 11% 20% 22% 8% 12% 6% 8% 12% 11% 10% 14% Rate based or 10% earn FCM 28% 56% 56% 20% 42% 10% Today 2030 2040 a Renewables Coal Natural Gas Storage
Slide 16: Net Zero Plans
Net Zero Plans . . . Carbon Emissionsa Methane Emissionsb (Electric System) (Gas Delivery System) 2018 2024 2032 2040 2018 2025 2030 Classic Karn Campbell Campbell VSR c Continued Asset 7 retirement 1&2 retirement 1&2 retirement 3 retirement (17)% EIRP c VSR & EIRP retirements Methane Emissions
Slide 17: Managing Work Every Year
Managing Work Every Year . . . 2012 2013 2014 2015 2016 2017 2018 2019 2020 EPSa $100 MM+ Reinvestment Cold savings January +23¢ +7% Weather Actively being & storms +7% reinvested (9)¢ +7% Storms Hot summer Mild +17¢ summer +7% +18¢ +7% Cost Cost productivity (16)¢ productivity above plan above plan
Slide 18: Consistent Growth Through Varying Conditions
Consistent Growth Through . . . a 7% CAGR +6% to +8% EPSa +7% Dividend Weather Recession Recession Help Hurt 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Cold Mild Warm Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold Feb Warm Warm Hot Storms winter su
Slide 19: CMS' Trading Performance
CMS’ Trading Performance . . . Stock Performancea Total Shareowner Returnb 350% CMS CMS UTY UTY 300% 301% S&P S&P 468% 250% 200% 190% 150% 100% 110% 98% 50% 65% 0% 30% -50% '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 1-yr 3-yr 5-yr 10-yr a b 10-year stock performance as of December 31, 2019 Dividend
Slide 20: Top of Mind
CMS EVERGY > Top of Mind
Slide 21: CEO Transition
CEO Transition . . . Garrick Rochow Background • CMS Energy 2003 – Present • President and CEO December 1, 2020 • EVP, Electric and Gas Operations 2020 • SVP, Distribution – Electric and Gas 2016 – 2020 (incl. Customer Operations 2016-2017) • Various VP Responsibilities: 2010 – 2016 • Distribution –
Slide 22: Triple Bottom Line Focus
Triple Bottom Line Focus . . . People Planet Profit Caring for Our Co-workers, Customers & …Protecting Our Planet with Our Clean & …And Delivering on Our Commitment Communities We Serve… Lean Energy Strategy… to Our Investors. Continued focus on employee and Today: 2020 guidanceb reaffirmed publ
Slide 23: 2020 On Track and 2021 Outlook Strong
2020 On Track and 2021 Outlook Strong . . . Results Amount Commentary Demonstrating best-in-class cost • YTD 2020 EPSa $2.11 management Guidance Focusing on reinvestment with • 2020 Full-year EPSa $2.64 - $2.68 three months to go a Up 6% to 8% from midpoint of • 2021 Full-year EPS $2.82 - $2.86 2020
Slide 24: 2020 YTD Performance
2020 YTD Performance . . . Year to Date Results By Business Segment 2019 2020 YTD EPS b EPS - (GAAP) $1.81 $2.09 Utility $2.24 Adjustments a -- 0.02 Enterprises 0.11 Adjusted (non-GAAP) $1.81 $2.11 EnerBank 0.12 Parent & other (0.36) CMS Energy $2.11 Third Quarter 2019 2020 EPS - (GAAP) 73¢ 76¢ a Ad
Slide 25: 2020 EPS on Track
a 2020 EPS on Track . . . First Nine Months Three Months To Go 30¢ (11)¢ - (15)¢ 16¢ 7¢ $2.64 - $2.68 13¢ 6% to 8% $2.49 (2)¢ 5¢ (16)¢ - (20)¢ (4)¢ Cost Savings Reinvestment opportunity to benefit Benefits 4¢ customers and de-risk Operations 14 2021 beyond Other 10 Total 28¢ YTD YTD $1.81 COVID-19 e
Slide 26: Utility Sales Continue to Recover
Utility Sales Continue to Recover . . . a b Weather-Normalized Electric Deliveries 2019 Electric & Gas Rate Mix (3Q20 vs. 3Q19) Auto Other Other 6% 2% 2% Industrial 11% ~½%c Residential Electric Commercial 39% 23% c (4)% (3½)% Combined Residential Residential Gas >60% 23% Res. Com. Ind. Total a b c
Slide 27: Regulatory Outlook
Regulatory Outlook . . . 2020 2021 Regulatory / Policy 4/15: U-20757 9/18: Filed for securitization COVID-19 order for deferred of Karn 1&2 coal plants accounting ~$703 MM Electric 2/27: U-20697 a Dec. Expected Q1: File next Filed $244 MM a final order rate case Updated $230 MM 10.5% ROE Gas G
Slide 28: Solid Rate Case History
Solid Rate Case History . . . Electric Rate Basea Gas Rate Base (Bn) (Bn) 2013A 2020E 2013A 2020E b b Residential Electric Bill $108 $103 Residential Gas Bill $88 $61 (Weather-normalized) ~(5)% (Weather-normalized) ~(30)% $12.5 $7.4 Request $6.5 $10.7 $10.7 $11.1 2/27/20 Settled $5.2 $9.8 Settled
Slide 29: Michigan Legislative Environment
Michigan Legislative Environment . . . Governor State House Gretchen Whitmer 52 110 58 Democrat 2020 Election: Republican majority maintained 2-year terms, even numbered years, 3-term limit State Senate Key Issues: 16 38 22 • Pandemic/Health Care 2 Republican seats up for • Infrastructure Energy pol
Slide 30: Utility Renewables
Utility Renewables . . . Renewable Portfolio Standard Integrated Resource Plan b (15% RPS) (20-Year IRP) • 525 MWs of wind • 1,100 MWs of solar • 550 MWs rate base, ~$600 MM • $1 Bn of capital investmenta • 550 MWs PPA, earn WACC (5.88% x PPA price) • Approved in the REP filing • $600 MM of capital
Slide 31: CMS Enterprises Continues to Perform
CMS Enterprises Continues to Perform . . . DIG & Other Renewable Platform • ~1,000 MWs in MI • Aviator, 525 MWs of contracted wind • 51% cash equity ownership (tax equity utilized) • DIG long-term energy (>95% contracted) & short-term • Funded with cash on hand, no new equity capacity (100% contract
Slide 32: DIG (750 MW) & Peakers (200 MW)
DIG (750 MW) & Peakers (200 MW) . . . Pre-Tax Income Planning Year (MISO) Opportunities a (MM) 2020 Through 2023 (MM) $100 Contracted Capacity 100% ~$90 $90 (~$2.00/kw-month) $80 Energy >95% $70 $7.50 b • LCR upheld by MI Supreme Court $60 • MISO Zone 7 PY ’20/’21 cleared $50 $45 at CONE ~$45 ~30 MW
Slide 33: ESG
CMS EVERGY >
Slide 34: Our Commitment to ESG
Our Commitment to ESG . . . Named the #1 Michigan Received 2019 Energy Star® Company for Diversity in 2019 Partner of the Year Sustained PEOPLE PLANET PROFIT by Forbes® Magazine Excellence Award PERFORMANCE Ranked Top Quartile by Named a Top U.S. utility for Ranked #1 overall in the Midwest EEI Util
Slide 35: Safety in the Workplace
Safety in the Workplace . . . Safety Performance 2019 Successes (Recordable Safety • Zero fatalities Incidents) • Ranked top quartile by EEI utility standards in 355 safety performance Down • Partnered with EEI to develop a new risk-based (70)% safety model with focus on proactively avoiding serious
Slide 36: Diversity, Equity & Inclusion
Diversity, Equity & Inclusion . . . Angela Thompkins #1 Utility company in Michigan & Top 50 Best Employers for #1 utility for Best Employers for Diversity 2020 Women 2020 by by Forbes® Magazine Forbes® Magazine >20% of employees are Vice President involved in one or more and Chief Diversity Employe
Slide 37: Declining Exposure to Coal
Declining Exposure to Coal . . . Coal % of Rate Basea Increasing Clean Energy Exposure b 20% 2016 (Estimated % EPS ) $3 - $6 Bn Classic 7 Investment retirement opportunity PLUS Incentives on PPAs 2023 and Demand <15% Karn 1&2 Response retirement <10% <10% ~9½% 2031 Campbell Campbell (4)% 1&2 1&2 203
Slide 38: Clean Energy Future
Clean Energy Future . . . Elimination of coal More renewable energy Innovative energy solutions Earn incentive Consumers Energy Capacity Mix mechanisms 11% 20% 22% 8% 12% 6% 8% 12% 11% 10% 14% Rate based or 10% earn FCM 28% 56% 56% 20% 42% 10% Today 2030 2040 a Renewables Coal Natural Gas Storage
Slide 39: Energy Efficiency
Energy Efficiency . . . Energy Efficiency Programs Electric Saved customers over $3 Bn on their energy bills since 2009 • From 1½% to 2% annually (by 2021) Equivalent to Next 5 years: Reduced usage by ~4,500 GWh since 2009 power1plant! a • • Spend ~$160 MM/yr a • Pre-tax incentive ~$33 MM/yr Recy
Slide 40: Exceptional Governance
Exceptional Governance . . . Board of Directors JOHN G. RUSSELL Garrick J. Rochow JON E. BARFIELD DEBORAH H. BUTLER with Diverse Backgrounds Independent Chair KURT L. DARROW WILLIAM D. HARVEY MYRNA M. SOTO JOHN G. SZNEWAJS By the Numbers 11 Members LAURA H. WRIGHT SUZANNE F. SHANK RONALD J. TANSKI 9
Slide 41: ESG Disclosures
ESG Disclosures . . . Corporate Responsibility People • CMS Energy & Consumers Energy Websites • SEC Filings (10-K & Proxy) • 2019 Carbon Disclosure Project • Report Scope 1, 2 & 3 Emissions Planet • Water • Climate Assessment Report • Considers TCFD Guidelines • EEI & AGA ESG Templates Profit • Sus
Slide 42: CMS Overview
CMS EVERGY > CMS Overview
Slide 43: CMS Energy Overview
CMS Energy Overview Corporate Structure Key Information CMS Energy 2019 Financial Statistics (NYSE: CMS) Based in Jackson, MI a ~8,100 Employees (37% unionized) Consumers Enterprises EnerBank Energy $6.8 Bn Revenue 2019 b Avg. Rate Base $708 MM Adjusted net income 91% of Gas $6.1 Bn c Operating 7% E
Slide 44: Consumers Energy
Consumers Energy . . . 4th Largest Combination Utility • Electric Utility 1.8 MM electric customers 8,241 MWs of capacity • Gas Utility 1.8 MM gas customers 309 bcf gas storage (#1 in the U.S.) • Serving 6.7 MM Michigan residents Consumers Energy Planet Goals Near-Term By 2040 1 Bn Net zero gallons
Slide 45: Large and Aging System
Large and Aging System . . . Electric distribution Aging coal fleet replaced with system is 6,000 MW of added solar older than by 2040 peers 25 years of main replacement >2,400 miles of gas through our transmission pipeline; most Enhanced Infrastructure built in the WWII era Replacement Program . .
Slide 46: Utility Customer Investment Plan
Utility Customer Investment Plan . . . Investment Plan Rate Base Growth Gas Electric Renewables $24½ 2020 ‘20-’24 +7% Capital Investment (Bn): Plan Plan Renewables $0.4 $ 1¾ $17½ Electric Utility 0.9 5½ Gas Utility 0.9 5 Total $2.2 On Track $12¼ $25 Bn 10-Yr Plana with $3 - $4 Bn of Opportunities 20
Slide 47: Electric System Investment
Electric System Investment . . . Capital Generation Capital Investment (Bn): Plan Electric Utility $ 5½ Existing Fleet $1 Bn New Utility Renewables 1¾ Gas Utility 5 AND Total $12¼ New Renewables $1¾ Bn System Reliability & Maintenance New Business & Support a ~$2¾ Bn $1¾ Bn a Support includes IT, Fl
Slide 48: Gas System Investment
Gas System Investment . . . Capital Capital Investment (Bn): Plan #1 Compression & Storage Underground storage $½ Bn Electric Utility $ 5½ New Utility Renewables 1¾ Storage field Compressor station Gas Utility 5 Total $12¼ City gate Pipelines Medium pressure regulator station ~$1 Bn #5 #5 Distributi
Slide 49: Clean Energy Future
Clean Energy Future . . . Elimination of coal More renewable energy Innovative energy solutions Earn incentive Consumers Energy Capacity Mix mechanisms 11% 20% 22% 8% 12% 6% 8% 12% 11% 10% 14% Rate based or 10% earn FCM 28% 56% 56% 20% 42% 10% Today 2030 2040 a Renewables Coal Natural Gas Storage
Slide 50: CMS Performance
CMS Performance . . . Total Shareholder Returna EPSc Performance b Guidance Actual YoY EPS Growth Dividend Yield ~8½% to 11½% 2019 $2.46 - $2.50 $2.49 +7% 2018 $2.29 - $2.33 $2.33 +7% >10% 2017 $2.13 - $2.17 $2.17 +7% 6% to 8% 2016 $1.97 - $2.01 $2.02 +7% 7.0% 2015 $1.85 - $1.89 $1.89 +7% 2014
Slide 51: Appendix
CMS EVERGY > Appendix
Slide 52: Utility Customer Investment Plan
Utility Customer Investment Plan 5-Year Plan 2020 2021 2022 2023 2024 Total Renewables $0.4 $0.4 $0.3 $0.3 $0.4 $1.8 Electric Utility 0.9 1.2 1.1 1.1 1.1 5.4 Gas Utility 0.9 1.1 0.9 1.1 1.0 5.0 Total $2.2 $2.7 $2.3 $2.5 $2.5 $12.2 Depreciation & Amortization $1.0 $1.1 $1.1 $1.2 $1.2 $5.6 Enter “so w
Slide 53: Operating Cash Flow Generation
Operating Cash Flow Generation . . . Amount ~$10 Bn in aggregate (Bn) $2.2 $2.15 $2.05 a $1.85 $1.95 $1.79 $1.75 Investment Cash flow before dividend (1.1) 2019 2020 2021 2022 2023 2024 b NOLs & Credits $0.2 $0.3 $0.5 $0.5 $0.6 $0.7 a b Excludes $531 MM discretionary pension contributions in January
Slide 54: GAAP Reconciliation
CMS EVERGY > GAAPRec onciliation
Slide 55: 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 Nine Months Ended 9/30/20 9/30/19 9/30/20 9/30/19 Electric Utility Reported net income per share $ 0.79 $ 0.78 $ 1.62 $ 1.47 Reconciling items: O
Slide 56: 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 2020 1Q 2Q 3Q Net Income Available to Common Stockholders $ 243 $ 136 $ 218 Reconciling items: Electric utility and gas utility 15 4 4 Tax impact (4)
Slide 57: Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income
CMS ENERGY CORPORATION Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income (Unaudited) In Millions, Except Per Share Amounts Three Months Ended Nine Months Ended 9/30/20 9/30/19 9/30/20 9/30/19 Net Income Available to Common Stockholders $ 218 $ 207 $ 597 $ 513 Reconciling items: Other
Slide 58: Earnings Per Share By Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Per Share By Year GAAP Reconciliation (Unaudited) GAAP 2019 over 2003 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 CAGR Reported earnings (loss) per share - GAAP ($0.30) $0.64 ($0.44) ($0.41) ($1.02) $1.20 $0.91 $1.28 $1.58 $1.4
Slide 59: Reconciliation of GAAP Operating Activities to Non-GAAP
CMS ENERGY CORPORATION Reconciliation of GAAP Operating Activities to Non-GAAP Operating Activities (Unaudited) (mils) 2020 GAAP Net cash provided by operating activities $ 1,219 Add back discretionary pension contribution 531 Non-GAAP Net cash provided by operating activities $ 1,750 59
Slide 60: 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 12/31/19 12/31/18 12/31/19 12/31/18 Net Income Available to Common Stockholders $ 167 $ 108 $ 680 $ 657 Reconciling items