Cms Energy Corporation · NYSE:CMS

Cms Energy — Wolfe Research Power & Gas Leaders Conference 2016

27 slides from Cms Energy's conference presentation, Sep 28, 2016

  1. Slide 1: Wolfe Research Power & Gas Leaders Conference

    Wolfe Research Power & Gas Leaders Conference September 28, 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

  2. 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

  3. Slide 3: The Future Shines Bright

    The Future Shines Bright . . . .  The Consumers Energy Way  Regulated organic investment (up 7%) strategy remains, more in gas  Michigan’s economy continues to grow  Ability to self-fund investments, maintain price increases below inflation (2%)  2008 Energy Law and supportive, constructive Com

  4. Slide 4: Launched Consumers Energy Way

    Launched Consumers Energy Way . . . . Strategy Customers AND Investors  Safety: • On the road to zero incidents Every day is a safe day 81% improvement past ten years  Quality: • Consistent & predictable growth We get it right the first time +6% to +8%  Cost: • O&M cost reductions We see and elim

  5. Slide 5: Gas Investment

    Gas Investment . . . . Capex Large Gas Business Last 10 Next 10  1.7 million customers Years Years (bils) (bils) (adding 10,000 new customers) Gas Infrastructure & $ 3.3 $ 6.2 Maintenance Electric Distribution & 1.7 3.4  29,000 mile natural gas system Reliability Environmental 1.5 0.7 New Generati

  6. Slide 6: Capex $17 Billion Over 10 Years

    Capex $17 Billion Over 10 Years . . . . 2016-2025 2016-2025 Investor AND Customer How this adds value! Cleaner Energy Electric Infrastructure & Gas Enhancing Maintenance Infrastructure & Improving Productivity Maintenance Service New Reducing Generation Electric Cost Distribution & Reliability Envir

  7. Slide 7: 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 Rate increase at or below inflation <2% . . . . cont

  8. Slide 8: O&M Cost Performance

    O&M Cost Performance . . . . Actual Cost Reduction New Cost Savings (2015 over 2006) 2014 2016 & 2015 & 2017 (mils) (mils) • Attrition (VSP) $ - 35 $ - 35 • Productivity (Coal Gas) - 35 - 15 • “Pole Top” Hardening - 20 - 10 • Smart Meters - 5 - 20 Peer Average ~5% • Eliminate Waste (UAs) - 15 - 10 &

  9. Slide 9: O&M Cost Performance: Room to Improve

    O&M Cost Performance . . . . Room to Improve Here’s How (Electric Distribution Cost Per Customer) 2014 2015 $30 mil Build the job as to go until 1st Quartile 1st Quartile designed 2nd Quartile Consumers Accurately schedule ($97) the job Consumers ($100) 3rd Quartile “Field services” project 4th Quar

  10. Slide 10: Economic Development Growth

    Economic Development Growth . . . . Our Service Territory Outperforms Examples of New Business a Electric Gas Combination Grand Announcement Announcement Rapids Michigan U.S C3 Ventures Inteva Products Building Permits b +224% +205% +96% Flint Adrian • Eco-friendly injection • Auto-supply maker to m

  11. Slide 11: Strong Commission

    Strong Commission . . . . Commission Tier 1 State Ranking Sally Talberg (I) Chairman 1 6 Michigan Term Ends: July 2, 2019 2 9 Norm Saari (R) Term Ends: July 2, 2021 3 18 4 9 Rachael Eubanks (I) Term Ends: July 2, 2017 5 6 Newly appointed! Barclays Research, 2016 state rankings . . . . constructive r

  12. Slide 12: Consistent Growth Through Recessions, Weather and Policy

    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.

  13. Slide 13: Appendix

    Appendix

  14. Slide 14: 2016 EPS Outlook

    2016 EPS Outlook . . . . Adjusted EPS (non-GAAP) Flex Items • O&M choices • Low cost financing • Plant outages • Contributions Weather & +7% other Guidance to Weather & +5% Recovery Storms Offsets Pension “Yield Curve” 5¢ Enhanced Capitalization 3 ‘15 Pension Contribution 2 Improved “UAs” & Other 3

  15. Slide 15: Routine and Regular Rate Cases

    Routine and Regular Rate Cases . . . . Gas Rate Cases Electric Rate Cases Year Step Amount Capex ROE Step Amount Capex (mils) (mils) 2012 Settled $16 188% Order $118 110% 2013 Stay-out  10.3% Settled 89 127 2014 Stay-out  Stay-out  2015 Settled 45 200 Order 126 137 2016 Settled 40 158 Self-impl.

  16. Slide 16: Electric Customer Prices

    Electric Customer Prices . . . . Residential Bills Industrial Rates 20% 30 % 26% 15 20 Rates & Worse Worse Fuel 5 10 Rates & 5% National Avg Act 169 Midwest Avg 0 -5 Flat Residential bills well below U.S. average -10 Policy could (7)% Better Better -15 (13)% Rates (18)% eliminate gap Rates & Fuel Ra

  17. Slide 17: 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 Up $2.5 $0.8 billion $2.4 since 2009! 2.4 $2.2 Interest, working $2.1 capital and taxes $1.9 1.9 $1.55 1.4 Operating cash flow NOLs avoid 0.9 Investment need for block 0.4

  18. Slide 18: 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

  19. Slide 19: Generation Strategy: New Supply Sources

    Generation Strategy: New Supply Sources . . . . Levelized cost of new build (¢/kWh) New Build 25 Consumers Energy Sources 22¢ 20 15¢ 15 12¢ 10¢ 10 9¢ Back 6¢ -up 7¢ 6¢ 6¢ 5.5¢ 5¢ 5¢ 5 4¢ 4¢ Back -up Cross Winds  7¢ Big 5 Palisades Zeeland 4¢ 0 Combined Cycle Gas Plant Wind Coal Nuclear Residential

  20. Slide 20: CMS Capital Expenditures

    CMS Capital Expenditures 2016-2020 2021-2025 2016-2025 2016 2017 2018 2019 2020 Subtotal Subtotal Total (mils) (mils) (mils) (mils) (mils) (mils) (mils) (mils) New Generation (includes Renewables) $ 87 $ 72 $ 59 $ 43 $ 31 $ 292 $ 1,378 $ 1,670 Environmental 122 143 121 178 133 697 2 699 Electric Rel

  21. Slide 21: Diverse Customer Base

    Diverse Customer Base . . . . Top Ten Customers 2015 Gross Margin (2015 Ranked by Revenue) 1. Hemlock Semiconductor 2. General Motors 3. State of Michigan Commercial 4. Meijer 27% 5. Nexteer Automotive Corporation Residential 55% 6. AT&T 7. Gerdau 8. Spectrum Health 9. Packaging Corp. of America Ind

  22. Slide 22: Capacity Diversity

    Capacity Diversity . . . . Nuclear 8% Oil 10% Coal reduced Coal by over 40%! Purchases <24% 2nd best in U.S. 3% Renewables 10% 2016 Pumped Nuclear Storage Gas Oil 6% 8% 11% 34% Future Capacity Mix Renewables 3% • More Renewables Pumped Coal Storage 41% • Expanded Pumped 11% 2005 Storage Gas • Clean

  23. Slide 23: GAAP Reconciliation

    GAAP Reconciliation

  24. Slide 24: 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

  25. Slide 25: 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 2021 Consumers Operating Income + Depreciation & Amortization $ 1,813 $ 1,866 $ 2,056 $ 2,139 $ 2,243 $ 2,390 $ 2,518 $ 2,621 Enterprises Project Cash Flows 20 20

  26. Slide 26: Customers and Investors: Our Model, Our Plan

    Electric Customer Prices . . . . Residential Bills Industrial Rates CUSTOMERS 20% 30 % 26% 15 20 Rates & Worse Worse Fuel 5 10 Rates & 5% OUR MODEL; OUR PLAN National Avg Act 169 Midwest Avg 0 -5 Flat Residential bills well below U.S. average -10 Policy could (7)% Better (18)% Better -15 (13)% Rates

  27. Slide 27: Actual Plan Model

    Actual Plan Model 7% /year 2017+ Plan $1.89 $2.02 6% – 8% $1.55 $1.66 $1.77 Capital investment 6% - 8% $1.99 a Adjusted EPS $0.81 $1.36 $1.45 $1.08 $1.21 $1.26 $1.02 $1.08 $1.16 $1.24 - O&M cost reductions 2 - 3 pts A $0.90 $0.96 96¢ 66¢ 84¢ - Sales growth 1 B Int’l Sale $0.84 50¢ Dividend 20¢ 36¢ -

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