Cms Energy Corporation · NYSE:CMS
Cms Energy — Wolfe Research Power & Gas Leaders Conference 2015
32 slides from Cms Energy's conference presentation, Sep 30, 2015
Slide 1: Wolfe Research Power & Gas Leaders Conference
Wolfe Research Power & Gas Leaders Conference September 30, 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 and non-GAAP measures
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: Why Invest in CMS Energy?
Why Invest in CMS Energy? Our Growth Engine Supported By (2015-2024 Capex) ● UPSIDES -- More growth (Investment, Sales, Cost, & DIG) ● PARTNERS -- Facilitate growth $15.5 Billion (Customers, Regulators, & Policy Makers) ● PASSION to improve for customers AND owners (Value, Reliability, & Environment
Slide 4: Simple, Perhaps Unique CMS Growth Model
Simple, Perhaps Unique CMS Growth Model . . . . 5-Year Upside Plan Opportunity Capital investment (drives long-term growth) 5% - 7% 6% - 8% - O&M cost reductions -2 pts Short-term - Sales growth - ½ ROA return - No “block” equity dilution -1 and/or - Surcharges and other -1½ Long-term INVESTMENT SEL
Slide 5: Investment "Catch-up"
Investment “Catch-up” . . . . Capex (bils) $1.8 One of first with a ten year plan > $1.5 per year “Catch-up” Capex as a Percent of Market Cap a 2005 - 2014 2015 - 2024 CMS Energy CMS 10% 16% Peers Peers 11 15 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Slide 6: Capex Up 45%
Capex Up 45% . . . . 2005-2014 2015-2024 Opportunity $10.7 bil $15.5 bil $20 + bil Opportunity +45% +30% Gas Infrastructure Electric Gas Electric 27% Maintenance Infrastructure Maintenance 37% Electric Environ. Reliability Smart Energy New Generation New Infra Generation Smart Electric Percent of En
Slide 7: 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 8: O&M Cost Performance
O&M Cost Performance . . . . Actual Cost Reduction Future 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 • Mor
Slide 9: Sales Growth
Sales Growth . . . . Our Service Territory Outperforms Annual Electric Sales c a Industrial Total Grand Rapids Michigan U.S 6% Building Permits b +23% +11% +12% GDP 15 11 8 2010 2013 Conservative Population 3 0 2 2011 2014 2% 1% Unemployment 3.3 5.3 5.3 ½% (7/15) 2010-2014 2015 - 2019 Post-Recession
Slide 10: Economic Development Growth
Economic Development Growth . . . . Examples of New Business Industries Electric Gas Combination MW Announcement Auto 80 Announcement General Motors Arauco Flint & Grand Rapids • Largest particleboard Food 15 • Assembly and Components press in North America Plants • 250 jobs created Manufacturing 25
Slide 11: No "Block Equity" Dilution
No “Block Equity” Dilution . . . . Typical utility Model w/o NOLs CMS Model w/ NOLs 6% 6% < 6% < 5% -1% 0 Rate Base Dilution EPS Growth Rate Base Dilution EPS Growth Growth Growth . . . . under CMS growth model. 10
Slide 12: PPAs (2,000 MW) Create Unique Opportunity
PPAs (2,000 MW) Create Unique Opportunity for . . . . PPA vs Owned Capacity Opportunity 2,000 MW 30% $2 Bil Investment Amount (mils) PPAs $(650) New Gas Build 650 Annual Customer Impact zero 10% 5% Peers CMS Today CMS Future . . . . more capacity investment, without increasing bills. 11
Slide 13: ROA (800 MW) Creates Unique Opportunity
ROA (800 MW) Creates Unique Opportunity for . . . . Potential Return Opportunity 800 MW • $150 million subsidy “One-Way Door” Decision • 0.02% of customers on ROA (~300 customers) Build • Could lower rates 4% for Decision everyone if all returned • Build new generation capacity, funded by return Tod
Slide 14: Capacity & Energy Price Increases
Capacity & Energy Price Increases . . . . Was Now Future Scenarios (mils) (mils) (mils) New Business + $25 – $50 $65 •Long-term Energy Energy more • 250 MW at $4.00 per kWm (6/14) $55 • 250 MW ≈ $6.00 per kWm (4/15) Capacity $40 •Recent Capacity • Long-term > $3.30 $35 • Near-term ≈ $4.50 $15 Upside
Slide 15: 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 16: 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 17: CMS Energy EPS Growth Through Conditions
CMS Energy . . . . Future +5% to +7% 7% CAGR a Recession EPS Recession Dividend 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” sum
Slide 18: Michigan Energy Law
Michigan Energy Law . . . . Update: House and Senate bills align Sen. Nofs Gov. Snyder Rep. Nesbitt Keep “cap” Keep “cap” Keep “cap” “Retail Open 3-year capacity 5-year capacity Stricter 5-year Access” requirement requirement capacity “one way door” “Fair choice” requirement No subsidy No subsidy No
Slide 19: 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 20: CMS Energy Consistent Growth
CMS Energy Consistent Growth . . . . Future Shines Bright Sustainable Future Growth a EPS a +5% to +7% Past Next 5 $2.50 Performance Years Investment (bils) $6.4 $7.6 (2010-2014) Capacity Op! +7% /year O&M Reductions (10)% (7)% (2006-2014) Conservative Sales Growth +1% +½ % (2010-2014) Conservative
Slide 21: Appendix
Appendix
Slide 22: Clean Power Plan
Clean Power Plan . . . . Lbs CO2 (per MWh) (Preliminary -- Emission Rate) 2500 2300 Consumers Energy 2005 Baseline 2100 1900 1700 Retire 950 MW 1500 coal State of Michigan Target 1300 1100 900 Projected outlook with 20% renewables -- 700 investment not yet in Plan 5000 2014 2015 2016 2017 2018 2019
Slide 23: Capacity Diversity
Capacity Diversity . . . . Nuclear Oil 8% 6% Coal reduced Renewables by over 40%! 9% Coal 34% Pumped Storage 2014 11% Nuclear Gas Nuclear Oil 6% 32% 8% 8% Oil Renewables 9% 3% Purchases Coal 1% 24% Pumped Coal Storage 41% Renewables 11% 2005 11% 2017 Pumped Gas Storage Gas 31% 12% 35% . . . . evolvi
Slide 24: Rate Base Growth
Rate Base Growth . . . . 10 Years of Growth Investment Rate Base 2015 - 2024 (bils) Amount $ 20 +6% /year (bils) Gas Infrastructure $ 5.8 18 & Maintenance 16 Electric Reliability 2.3 14 Smart Energy 0.4 12 10 Environmental 0.9 8 New Generation 1.1 6 Depreciation 4 Electric Maintenance 5.0 02 Plan In
Slide 25: Growing the Gas Business
Growing the Gas Business . . . . Capital Investment Gas Service Territory Capex Gas service area (bils) Transmission line Compressor stations $6 $5.8 Freedom Pipeline +100% New Customers Storage fields Replacement Interconnects • 6.3 miles • $185 million capex Infrastructure 4 Pipeline Integrity $2.
Slide 26: Rate Cases
Rate Cases . . . . Gas (mils) Electric Track Record $21 $85 Date Step Amount (mils) May 2013 Settlement $ 89 $64 2014 Stay out -- June 2015 Self-implement 110 Dec. 2015 Order expected 2½ years Investment Cost of Capital, Filed 7/17 since last order! Upgrades, & Other . . . . fair and timely. 25
Slide 27: MISO Zone 7 Capacity
MISO Zone 7 Capacity . . . . 2016 Forecasted Shortfall (MW) Impact Annual MISO Survey June June • New capacity to meet 2014 2015 shortfall not assumed • More upside to $15.5 billion capex plan CMS & DTE Purchase IPPs -1,300 New Build • Creates upside pressure Lower in capacity prices -- Demand DIG o
Slide 28: 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¢ 11¢ Back 10¢ 10 -up 8¢ 7¢ 6¢ Back 7¢ 6¢ -up 6¢ 9¢ 5.5¢ 5¢ 5¢ 5 Cross Winds 6¢ Big 5 Palisades Zeeland 0 Combined Cycle Gas Plant Wind Coal Nuclear Residential
Slide 29: 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 30: GAAP Reconciliation
GAAP Reconciliation
Slide 31: 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 32: 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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