Cms Energy Corporation · NYSE:CMS
Cms Energy — ESG Presentation (November 2022)
68 slides from Cms Energy's sustainability presentation, November 2022
Slide 1: Leading the Clean Energy Transformation
Leading the CLEAN ENERGY TRANSFORMATION Environmental, Social & Governance November 2022
Slide 2: Enter “so what” if necessary – Century Gothic, Bold, Size 18 or smaller
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 Overview Corporate Structure Key Information CMS Energy 2021 Financial Statistics (NYSE: CMS) Based in Jackson, MI ~8,500 Employees (41% unionized)a Consumers Energy NorthStar Clean Energy $7.3B Revenue 2021 $767M Adjusted net incomeb >95% pro forma Avg. Rate Base 19 years Industry-leadin
Slide 4: Consumers Energy Positioned Well
Consumers Energy Positioned Well . . . 4th Largest Combination Utility Electric Gas Combined • Electric Utility 1.9M electric customers 7,852 MW of capacity • Gas Utility 1.8M gas customers 309 Bcf gas storage • Serving 6.8M Michigan residents Attracted Consumers Energy Planet Goals a >700 MW of new
Slide 5: NorthStar Clean Energy
NorthStar Clean Energy . . . Renewable Platform NorthStar Clean Energy helps companies with sustainability targets decarbonize through customized green energy and decarbonization solutions. Based in Michigan, NorthStar Clean • 373 MW of contracted wind (OH, TX) Energy works alongside its commercial
Slide 6: Over 135 years of Sustainable Business Practices
Over 135 years of Sustainable Business Practices. . . Founded by the Exiting Coal by 2025 and Foote Brothers in 1886 adding 8 GW of solar by 2040 Solar Gardens Cross Winds Energy Park Karn Coal Plant Ludington Pumped Storage . . . now cleaner and leaner than ever before. 6
Slide 7: Our Commitment to Sustainability
Our Commitment to Sustainability . . . TOP QUARTILE FOR DOUBLE A RATED GLOBAL UTILITIES Economic Developmenta 800 ~200 >700 600 105 Megawatts 126 400 Attracted >700 MW of 75 new or expanding 101 businesses to our service 200 territory since 2015 69 Received U.S. Environmental Protection Agency 2022
Slide 8: ESG Disclosures are Transparent
ESG Disclosures are Transparent . . . • CMS Energy & Consumers Energy • DE&I Website Websites • SASB Index (Electric Utilities & Power • SEC Filings (10-K & Proxy) Generation) • Carbon Disclosure Project • SASB Index (Gas Utilities & Distributors) • Report Scope 1, 2 & 3 Emissions • Water • TCFD Ind
Slide 9: Investment Thesis
INVESTMENT THESIS
Slide 10: Investment Thesis
Investment Thesis . . . Industry-leading net zero commitments Clean Energy Leader Diversified Service Infrastructure Excellence through the Territory Renewal a Top-tier regulatory jurisdiction Strong Cash Flow Constructive & Balance Sheet Legislation Affordable Prices Premium total shareholder retur
Slide 11: Approved 2021 IRP
Approved 2021 IRP . . . Key Objectives 2021 IRP 2018 IRP One of the 1st in • Exit Coal Operations the nation By 2025 By 2040 Retire: Karn 1&2 ~60% carbon 2023 2023 emission reduction Campbell 1&2/3 by 2025 a 2025 2031/39 • Reliable, Affordable, Capital Upside Covert $815M / >1 GW No new dispatchable
Slide 12: Needed Infrastructure Renewal
Needed Infrastructure Renewal . . . Electric distribution system Exiting coal by 2025 and is older than peers adding 8 GW of solar by 2040 Goal to improve ≥1K miles annually 25 years of main replacement >$500M of vegetation through our management spend over Enhanced Infrastructure 5 years to improve
Slide 13: Michigan Regulatory Environment
Michigan Regulatory Environment . . . Top-Tier Supportive Energy Law Regulatory Jurisdictiona • Timely recovery of investments Michigan ✓ Forward-looking test years 1 6 2013-present ✓ 10-month rate cases ✓ Earn authorized ROEs 2 11 ✓ Monthly fuel adjustment trackers (PSCR/GCR) 3 17 • Supportive ince
Slide 14: De-risking Inflationary Pressures
De-risking Inflationary Pressures . . . Near-term Risk Mitigation Episodic Cost Savings Global Risks Countermeasures Year Event Savings ✓ Executed 5-yr union contracts in 2020 2022 Palisades retirement >$90M (>40% unionized) Labor ✓ 95% non-union retention ratea 2023 Karn 1&2 coal unit $30M b retire
Slide 15: Credit Metrics Maintained
Credit Metrics Maintained . . . Consumers Energy S&P Moody’s Fitch Ratings Drivers Senior Secured • Strong financial A A1 A+ position Commercial Paper A-2 P-2 F-2 • Growing operating cash flow Outlook Stable Stable Stable CMS Energy • Constructive return on regulated Senior Unsecured BBB Baa2 BBB in
Slide 16: Expansive Economic Development Efforts
Expansive Economic Development Efforts . . . Electric Gas Combined 2022 New Load Gotion New & Expanding Global EV Battery Load YTD 2022 Manufacturer ~200 MW ~$2,400M investment >80 agreements >2,000 jobs Gotion Hemlock Semiconductor Leading Provider of Polysilicon ~$375M investment ~170 jobs SK Silt
Slide 17: Industry-Leading Financial Performance
Industry-Leading Financial Performance . . . Adjusted EPSa +6% to +8% Dividend Weather Recession Recession Help Recession / Hurt Pandemic 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022+ Cold M ild Hot Warm M ild Cold Summer- Hot Hot Warm M ild Pol
Slide 18: Environmental
We follow environmental management best practices that align with ISO 14001 standards to maintain and continually improve our processes. ENVIRONMENTAL
Slide 19: Net Zero Commitments Drive Decarbonization
Net Zero Commitments Drive Decarbonization . . . 2025 Zero coal ~60% carbon emissions reduction a Net zero methane emissions for our gas delivery system and 20% 2030 gas customer emissions reductionb Accelerating vintage main and service replacements Zero coal Renewable natural gas Net zero carbon e
Slide 20: Our Clean Energy Transformation
Our Clean Energy Transformation . . . Exit Coal by 2025… …While Ensuring Reliability a (Coal % PP&E ) <20% • Purchase ~1.2 GW of existing gas Classic 7 capacity (Covert) retirement and Karn 1&2 retirement • RFP 700 MW of PPAs (500 MW of Campbell 1–3 dispatchable resources) retirement; <10% Regulator
Slide 21: Providing a Just Transition Out of Coal
Providing a Just Transition Out of Coal . . . We Have Done This Before ✓ Retired seven coal units in 2016 ✓ Engaged in clear and ongoing communication with affected communities and stakeholders ✓ Cared for our co-workers by providing retention incentives and placement plans for employees ✓ Worked to
Slide 22: Our Clean Energy Transformation
Our Clean Energy Transformation . . . Capacity Mixa 3% 12% 7% 6% 13% 14% 15% 8% 11% 10% 9% 11% 11% 9% 9% 10% • Exits coal by 2025 • Maintains reliability, 19% 26% resilience and 31% affordability • >2x renewable 61% 61% 14% energy capacity 43% 30% 18% Today 2025 2030 2040 Coal Renewables Natural Gas
Slide 23: Our Energy Supply Will Be Cleaner
a Our Energy Supply Will Be Cleaner . . . Current Mix Future Mix (2031) Customer (Post-MCV PPA Expiration) Programs One-Time 12% >50% Dispatchable Solicitation Carbon free Wind, 10% 45% Hydro & Natural Natural other Gas Gas 10% 27% 33% Customer Programs Storage 18% 2% Nuclear 17% Wind, Coal Hydro &
Slide 24: Growing VGP Renewable Programs
a Growing VGP Renewable Programs . . . Large Customer Programs All Other Programs (Available to Residential and Commercial) Large Customer Renewable Energy Program MI Clean Air New • Previously 120 MW with approved 1,000 MW expansion • Open to natural gas and combination customers as demand grows •
Slide 25: Decarbonization of Gas Infrastructure
Decarbonization of Gas Infrastructure . . . Net zero methane by 2030... …with additional opportunities. • ~150 miles/yr main replacement • Largest LDC underground storage in U.S. (309 Bcf) • ~9½K/yr vintage services • 15 gas storage fields, 8 compressor replacement stations and 150K horsepower • Ren
Slide 26: Methane Emissions Reduction
a Net Zero Methane Emissions by 2030 . . . Careful Planning to Reach Goals Methane Emissionsa • 25-year Vintage Service Replacement and (Gas Delivery System) Enhanced Infrastructure Replacement 2016 2021 2030 programs VSR b Asset • Rehabilitating or retiring outdated (14)% (20)% EIRP retirements
Slide 27: Energy Waste Reduction Programs
Energy Waste Reduction Programs . . . Energy Efficiency Programs Electric ✓ $4.7B of customer savings on energy bills since • >2% annually 2009 • Next 5 years: ✓ >5,000 GWh of reduced usage since 2009 • Spend ~$196 MM/yr – equivalent to ~1 power planta • Pre-tax incentive ~$39MM/yr ✓ >25K/yr applian
Slide 28: Goal to Power >1M EVs by 2030
Goal to Power >1M EVs by 2030 . . . PowerMIDrive Bring Your Own Charger PowerMIFleet • 21K EVs in Consumers Energy territory today • >80% of customers charge off-peak 1M EVs by 2030 • 36 EV fast chargers installed will add ~5% to ~10% • 6x the usage from prior year growth to electric • Plans to inst
Slide 29: Protecting Our Land & Water
Protecting Our Land & Water . . . Total Landfill Water Space Avoided Intensity (Total Tons) (Gal/MWh) 1,626,809 32,102 23,351 530,338 3x more landfill saved (27)% reduction in water usage 1992 - 2015 2021 2012 2015 2021 2014 . . . through near-term planet commitments. 29
Slide 30: Social
We prioritize the safety, security, and well-being of our co-workers, customers, and the communities we serve. SOCIAL
Slide 31: Our Actions are Driven by Our Values
Our Actions are Driven by Our Values . . . • Employee and customer safety • Emotional • Physical • Cyber • Financial • Diversity, equity and inclusion (DE&I) • Embedded in our culture, the workplace and within our supply chain • Workforce Development • Electric and gas training programs • Working wi
Slide 32: Employee & Customer Safety
EMPLOYEE & CUSTOMER SAFETY 32
Slide 33: Committed to Safety
Committed to Safety . . . Safety Performance • A safety culture established in partnership with our union (Recordable Safety Incidents) • Proactive, risk-based program in partnership with EEI 355 and other utilities • Employee driven safety teams at every office and in Down the field (62)% • Safety
Slide 34: Employee Wellness Programs
Employee Wellness Programs . . . Program Focus & Approach Physical • 6 months paid leave for maternal birth parent and 4 months paid leave for paternal or non- birthing parent • In 2023, we will introduce inclusive domestic partner benefits for all employees Emotional • Celebration of mental health
Slide 35: Integrated Cyber and Physical Security Program
Integrated Cyber and Physical Security Program . . . Program Focus & Approach Robust Corporate Governance • Protect critical infrastructure, customer data and • Board oversight of security risks including cyber and employee safety physical security, compliance and privacy • Information sharing with
Slide 36: Diversity, Equity & Inclusion
DIVERSITY, EQUITY& INCLUSION 36
Slide 37: DE&I is Embedded in Everything We Do
DE&I is Embedded in Everything We Do. . . Diversity by the Numbers PoC Female 27% Board of 36% Directors Male White 64% 73% 100% unconscious bias and DE&I- related training for our workforce PoC Female 22% Garrick Rochow, President & CEO Executive 33% President and CEO, Garrick Rochow, continues to
Slide 38: Employee Resource Groups
Employee Resource Groups . . . New! Interfaith Supports employees of all religions and those with no religious affiliation. Women’s Advisory Panel Supports the retention, development and success of women. (WAP) Minority Advisory Panel Promotes a culture of diversity and inclusion through education,
Slide 39: Supplier Diversity Initiatives
Supplier Diversity Initiatives . . . Focus & Approach • Exceeded 2021 diverse spend target and on track to exceed 2022 target • Expanding diverse supplier network • Met with >150 diverse suppliers • >50% of diverse suppliers registered to conduct business with us • Enhanced Tier II reporting • 40% o
Slide 40: Workforce Development
TBU WORKFORCE DEVELOPMENT 40
Slide 41: Securing a Workforce for the Future
Securing a Workforce for the Future . . . STEM & Robotics • Hometown, statewide and national focus • Middle & high school education levels • Partnered with Center for Energy Workforce Development (CEWD) • Energy industry fundamentals curriculum School-to-Work Program (STW) (for electric line workers
Slide 42: Flint "Gas City" Provides Hands On Learning
Flint “Gas City” Provides Hands On Learning . . . • Training site covers 1.4 acres and is located in Flint, MI supports the next generation of Consumers Energy gas workers through training and real-world experience • Innovative new approach to training and career development utilizing experiential l
Slide 43: Recruiting and Reskilling a Diverse Workforce
Recruiting and Reskilling a Diverse Workforce . . . Training Trust Agreement (with Power for America) • Delivers technical and safety training • >25,000 student hours delivered in 2021 and 2022 • First two cohorts of Renewable Specialist Apprentices are now DOL certified Journey workers Utility Mili
Slide 44: Union Relationships at the Utility
Union Relationships at the Utility . . . Michigan State Utility Workers Council (MSUWC) • ~3,400 employees represent 41% electric and gas workforce unionized • >250 employees represent call centers • Subsidiary of Utility Workers Union of America (UWUA) • Contracts through 2025 . . . remain strong a
Slide 45: Advancing Labor Rights
Advancing Labor Rights . . . • Complying with all applicable U.S. federal, state and local laws and regulations concerning our co-workers and labor issues • Informed approach based on standards, including those found in the International Labor Organization (ILO) 87 and 98 • Annual audits to ensure o
Slide 46: Community & Customer Support
COMMUNITY & CUSTOMER SUPPORT
Slide 47: Protecting Human Rights
Protecting Human Rights . . . • Committed to prohibiting the use of child labor, forced labor, human trafficking and all forms of modern slavery; and being transparent in our efforts, successes and challenges • Protecting the rights of all – including women, minorities, LGBTQIA+ persons and veterans
Slide 48: Continued Corporate Giving
Continued Corporate Giving . . . Charitable Organizationsa CE Foundation Donations $8.6M in donations to $160M nonprofits in 2021 $150M since 2009 ✓ $4.3M to help end poverty in Cumulative Donations the state ✓ $1.3M to protect Michigan’s land, water and air ✓ $3.0M to help Michigan businesses & com
Slide 49: $1.5M in Signature Grants in 2021
$1.5M in Signature Grants in 2021 . . . PEOPLE PLANET PROSPERITY • $238K to the Foundation for Muskegon • $200K to Huron Pines Resource • $250K to City of Cadillac to replace Community College to support the Conservation and Development Council overgrown and blighted areas with creation of a STEM la
Slide 50: Supporting Customers in Need
Supporting Customers in Need . . . ✓ $1M investment in the city of Flint, MI – to support economically vulnerable communities by working with community agencies to provide energy waste reduction intervention to customers struggling to pay energy bills and identify those who may need to defer payment
Slide 51: Active Community Engagement Teams
Community Engagement Teams . . . 22 Community Affairs Managers >350 local community events are attended each year >100 boards served on Active in the community . . . thoughtfully positioned across the state. 51
Slide 52: Helping Michigan Thrive
Helping Michigan Thrive . . . Competitive Advantages in the State New and Expanding Load ✓ $1B of state incentives 2022 ✓ New energy intensive a economic development rate 2021 >700 MW since 2015 ✓ 2022, 2021, 2020, 2019 & 2018 2020 Editor’s Choice Top Utility - Business Facilities 2019 2018 In 2021,
Slide 53: J.D. Power Scores
J.D. Power Scores . . . Residential Business 825 792 773 745 Up Up Up Up 153 pts 179 pts 129 pts 148 pts 639 646 616 625 2012 2021 2012 2021 2012 2021 2012 2021 Electric Gas Electric Gas . . . highlight our commitment to continuous improvement for our customers. 53
Slide 54: Governance
We integrate oversight by the board, an enterprise risk management (ERM) program and robust strategic and business planning processes when addressing ESG and sustainability matters. GOVERNANCE
Slide 55: Exceptional Board Governance
Exceptional Board Governance . . . 11 Members 91% Independent . . . led by an independent Chair and highly skilled, diverse Board. 55
Slide 56: Diverse, Engaged and Experienced Board
Diverse, Engaged and Experienced Board . . . Diversity Experience 62 Average age Senior Leadership Financing Accounting or Fin. Reporting 100% 100% Compared to Regulatory Environment & Governmental Affairs 100% 36% Female 32% for the S&P 500a Risk Management 100% Compared to Customer Experience 82%
Slide 57: Committee Membership
Committee Membership . . . Political contributions >$10K need Member 100% Board approval Chairperson Independent Governance, Compensation & Sustainability, & Name Audit Human Resources Executive Finance Public Responsibility Jon E. Barfield Deborah H. Butler Kurt L. Darrow Willia
Slide 58: Committee Responsibilities
Committee Responsibilities • Oversees: Audit • Integrity of financial statements & information • Compliance with legal & regulatory requirements • Risk management policies, controls & exposures • Reviews: • Performance of internal audit function Compensation & • Review & Approve: • Executive compens
Slide 59: CEO Compensation
CEO Compensation . . . Compensation Mix for CEO Operational Goals • Employee Safety • Employee Empowerment Index ~17% tenure- • Customer Experience Index PEOPLE based 18% • Distribution Reliability Annual • Generation Customer Value incentive 67% Long-term • Gas Flow Deliverability Based on EPS (70%
Slide 60: Risks are Carefully Considered
Risks are Carefully Considered . . . Risks Mitigation Efforts • Participation in legislative and regulatory policy Regulatory Environment development Climate • Retired 7 coal plants with plans to retire remaining 5 plants in Carbon Emissions fleet by 2025 (Regulation) • Energy Efficiency, Demand Res
Slide 61: Political Giving
Political Giving . . . Political Giving Focus Enhanced Disclosures • Meeting Michigan’s energy needs • Publishing annually on the company’s website: • Expenditures made to influence the outcome • Helping the state’s communities thrive of ballot initiatives • Providing safe, reliable, affordable and
Slide 62: Appendix
APPENDIX 62 62
Slide 63: Key IRP Components
a Key IRP Components . . . Renewables & Storage Delivering Across the Solar 4.5 GW by 2030, ~8.0 GW by 2040 Triple Bottom Line Battery >0.5 GW by 2040 (75 MW beginning in 2024) Wind ~0.8 GW pre-2025 (approved via RPS) ✓ Accelerate Customer Programs By 2030 decarbonization Energy Efficiency ~1.1 GW D
Slide 64: Endnotes
ENDNOTES 64 64
Slide 65: Presentation Endnotes (pg 1 of 2)
Presentation Endnotes (pg 1 of 2) a b c Slide 3: Excludes seasonal and contract workers Adjusted, (non-GAAP) Dividend per share a Slide 4: Net zero methane emissions for our gas delivery system, net zero carbon emissions for our electric business (includes PPAs and MISO market b purchases), Net zero
Slide 66: Presentation Endnotes (pg 2 of 2)
Presentation Endnotes (pg 2 of 2) a Slide 23: Utility-owned, PPAs and MISO market purchases a Slide 24: Voluntary Green Pricing Program a b Slide 26: Methane emissions from our natural gas delivery system since 2012 Vintage service replacement a Slide 27: Assumes roughly 880 MW saved (5,000 GWh ÷ (6
Slide 67: GAAP Reconciliation
CMS Energy provides historical financial results on both a reported (GAAP) and adjusted (non-GAAP) basis and provides forward-looking modeling on an adjusted basis. During an oral presentation, references to “earnings” are on an adjusted basis. All references to net income refer to net income availa
Slide 68: 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 Twelve Months Ended 12/31/21 12/31/20 12/31/21 12/31/20 Net Income Available to Common Stockholders $ 637 $ 158 $ 1,348 $ 755 Reconciling item