Cms Energy Corporation · NYSE:CMS
Cms Energy — Credit Suisse Global Energy Summit 2015
31 slides from Cms Energy's conference presentation, Feb 24, 2015
Slide 1: Credit Suisse Global Energy Summit
Top of Mind • Why invest in CMS? • What’s in the Plan?; What’s not? • How do we do it? • What makes us different? Credit Suisse Global Energy Summit February 23 & 24, 2015 Ludington Pumped Storage Ray Compressor Station Cross Winds Energy Park Fourth largest in the world #1 LDC in gas storage #2 in
Slide 2: Forward-looking statements
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 create headroom (Investment, Sales, Cost, & DIG) ● PARTNERS in progress $15.5 Billion (Customers, Regulators, & Policy Makers) 5% - 7% EPS growth ● PASSION to improve for customers AND owners (Value, Reliability, &
Slide 4: Investment "Catch-Up"
What’s in the Plan? INVESTMENT “CATCH-UP” . . . . Amount (billions) $1.8 > $1.5 per year Peers Peer Performance a Consumers Energy Peer Average CMS Capex Liquidity Cash Flow (oper) 20% 16% 15% 14% 15% 12% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Slide 5: Visible Capex
What’s in the Plan? VISIBLE CAPEX . . . . 2005-2014 2015-2024 $10.7B $15.5B Up +83% Gas Gas Electric Infrastructure Infrastructure Maintenance Electric Maintenance Electric Reliability New Smart Energy New Generation Generation Up +168% Environmental Environmental Electric Reliability Smart Energy .
Slide 6: Sustainable Earnings Growth
What’s in the Plan? SUSTAINABLE EARNINGS GROWTH . . . . a +5% to +7% EPS Growth +7% Annual Growth $2.00 $1.75 $1.50 $1.25 $1.00 $0.75 $0.50 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Future 2017 2018 2019 _____ a Adjusted EPS (non-GAAP) excluding MTM in 2004 - 2006 . . . .
Slide 7: Upside Investment Opportunities
What’s NOT in the Plan? UPSIDE INVESTMENT OPPORTUNITIES . . . . 2015-2024 Opportunity Level 10-Year Plan Amount (bils) Generation capacity $3.0 Gas conversions & expansion 1.0 Grid modernization 1.0 $20+ Billion $15.5 Billion Total Opportunities $5.0 Upside? Rate Base up 5% to 7% Customer base rates
Slide 8: Upside Capacity Opportunities
What’s NOT in the Plan? UPSIDE CAPACITY OPPORTUNITIES . . . . Capacity Growth Over Next Ten Years MW 11,000 10,000 PPA’s Expire ~9,400 MW PPA ~8,600 MW 1,240 MW 580 PPA 2,600 780 MW 7,500 capacity Owned ~30% 8,820 ~800 MW 410 MW Lower customer bills Owned Shortfall 6,000 540 MW 5,000 Today Jackson P
Slide 9: Upside Capacity Price Increases
What’s NOT in the Plan? UPSIDE CAPACITY PRICE INCREASES . . . . Was Now Future Scenarios (mils) (mils) (mils) +$40 $55 +$20 $35 $15 $5 Capacity price < $0.50 ≈ $2.00 $4.50 $7.50 ($ kW per (Market) (Market) (CONE) month) . . . . could add value to the 700 MW “DIG” plant. 8
Slide 10: Sales Growth
What’s NOT in the Plan? SALES GROWTH . . . . In the News Annual Electric Salesa Industrial Total “Kent County [Grand Rapids] leads nation’s 8.7% largest counties in post-recession employment gains” -- Grand Rapids Press 5.0% Conservative 2.8% 3.0% “Kent County [Grand Rapids] unemployment 2.0% 1.0% 1
Slide 11: How Do We Do It?
How Do We Do It? . . . . • Capital investment catch-up No “big bets” Organic growth Self-funded • Premier cost reductions and “reinvestment” • Strong Energy Law; Constructive rate making • Conservative planning • Customer passion . . . . it’s a way of life at CMS. 10
Slide 12: O&M Cost Control
How Do We Do It? O&M COST CONTROL . . . . Average Annual O&M Change +6% Peers PeersActual/Plan Actual/Plan +2% +2% Peers Peers Peers CMS +1% CMS CMS CMS Excluding CMS CMS Catastrophic December -1% Storm -2% -3% -3% -3% 2006-2013 2012 2013 2014 2015 . . . . at peer leading pace. 11
Slide 13: O&M Cost Savings
How Do We Do It? O&M COST SAVINGS . . . . O&M Trend vs Peers O&M Cost Savings 2014 2014 0 50% & 2015 2018 (mils) (mils) ~6% per year 0 Peers • Attrition $ - 35 $ - 75 0 ~2% per year • Productivity (Coal Gas) - 35 - 50 0 • “Pole Top” Hardening - 30 - 30 Inflation 0 -25% • Smart Meters - 5 - 25 0 • El
Slide 14: O&M Cost Reductions
How Do We Do It? O&M COST REDUCTIONS . . . . -3% -3% Amount 1,080 +5% (mils) 1,060 $1060 1,040 +9% 1,020 1,000 980 -8% 960 940 920 -12% 900 880 860 840 2013 Cost Reinvestment 2014 "Benefits" Cost 2015 Reductions Reductions . . . . providing more headroom for customer benefits. 13
Slide 15: "Reinvestment" Helps Customers
How Do We Do It? “REINVESTMENT” HELPS CUSTOMERS . . . . Adjusted EPS (non-GAAP) 2014 2015 $1.77 +7% Guidance January March 31 June 30 September 30 December . . . . AND provides sustainable growth for INVESTORS. 14
Slide 16: 2015 Gas and Electric Rate Cases
How Do We Do It? 2015 GAS AND ELECTRIC RATE CASES . . . . 2014 2015 2016 Our View GAS Filed $88 M 7/01 Settled $45 M A) Settled $45 million B) 10.3% ROE A) A) Jackson Plant in Jackson Plant Classic 7 Decommissioned rate base B) Final Securitization Filed Self- implement Surcharge Ends Order B) Inv
Slide 17: Experienced Policy Makers
How Do We Do It? EXPERIENCED POLICY MAKERS . . . . Governor Rick Snyder Commission Powering Michigan’s John Quackenbush (R), Comeback Chairman Term Ends: July 2, 2017 Consistent Sally Talberg (I) Term Ends: Energy Committee Chairs Leadership! July 2, 2019 Senator Mike Nofs Greg White (I) Term Ends:
Slide 18: 2015 Michigan Energy Law
How Do We Do It? 2015 MICHIGAN ENERGY LAW . . . . • Adaptability • Reliability Upside • RPS Expansion? • Affordability • ROA Elimination? • Environmental protection • 10% renewables by 2015 • Energy efficiency 2015 Energy Timeline standards • Governor Snyder names • File-and-implement energy a top p
Slide 19: Electric Customer Prices
How Do We Do It? ELECTRIC CUSTOMER PRICES . . . . Residential Bills Industrial Rates Worse Worse 20 % 30 % 26% 21% 20 Rates & 10 Fuel 13% Rates & 10 Design 7% 3% National Avg Midwest Avg 0 0 (5)% -10 Policy or market might -10 (12)% (13)% eliminate gap Rates (14)% -20 Rates & Rates & (19)% Design Fu
Slide 20: With a Passion for Customer Satisfaction
How Do We Do It? WITH A PASSION FOR CUSTOMER SATISFACTION . . . . Electric Gas #2 1st Quartile #3 1st Quartile 2nd Quartile 2nd Quartile #6 #9 3rd Quartile 3rd Quartile 4th Quartile 4th Quartile Present Present 2010 2012 2014 Rank 2016 2010 2012 2014 Rank 2016 Residential Business Residential Busine
Slide 21: A Passion for Customers AND Investors
What Makes Us Different? A Passion for Customers AND Investors . . . . Future Shines Bright Sustainable Future Growth $3.50 EPS a Past Next 5 Dividend +5% to +7% Performance Years Investment (bils) $6.4 $7.6 (2010-2014) Capacity Op! +7% O&M Reductions (7)% (10)% ~ +4% yield (2006-2013) Conservative
Slide 22: Appendix
Appendix
Slide 23: Operating Cash Flow Growth
Operating Cash Flow Growth . . . . Amount Up $0.5 Billion (bils) Gross operating cash flowa $ 2.5 up $0.1 billion per year $2.4 $2.2 $2.1 $2.0 2.0 $1.9 Interest, working $1.8 capital and taxes $1.55 1.5 Pct of Market Cap (as of Dec. 2014) 1.0 Cap Inv OCF Investment 16% CMS 13% 15% 0.5 Peers 14 12 0.
Slide 24: Plan
Plan . . . . 10-Year Actual $1.77 $1.89 7% CAGR a EPS $1.66 $1.86 Dividend Peers 4% $1.55 $1.45 $1.36 b $1.26 7% $1.21 $1.16 6% $1.08 6% $1.08 14% $1.02 $0.96 96¢ $0.90 27% 84¢ $0.84 32% $0.81 Int’l Sale 66¢ 39% 50¢ 80% 36¢ 20¢ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Future
Slide 25: Credit Ratings
Credit Ratings . . . . Scale Reflects S&P / S&P Moody’s Fitch Fitch Moody’s (Dec. ‘14) (Jan. ‘14) (Feb. ‘14) A+ A1 • Consistent A A2 Consumers Performance Secured A- BBB+ A3 Baa1 • Less Risk BBB Baa2 BBB- Baa3 • Customer Focus BB+ Ba1 • Constructive BBB Baa2 CMS Unsecured Regulation BBB- Baa3 BB+ Ba
Slide 26: 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 27: 2015 Sensitivities
2015 Sensitivities . . . . 2015 Impact Status Sensitivity EPS OCF (mils) Sales a • Electric (37,847 GWh) + 1% + $0.05 + $ 20 • Gas (294.1 Bcf) + 5 + 0.07 + 30 Gas prices (NYMEX) + 50¢ – 0 – 55 + + ROE (authorized) • Electric (10.3%) + 10 bps + 0.01 + 5 • Gas (10.3%) + 10 + < 0.01 + 2 Interest Rates
Slide 28: 2015 Guidance
2015 Guidance . . . . Adjusted EPS (non-GAAP) • Utility • Electric $1.50 - $1.52 • Gas 0.59 - 0.60 Total Utility $2.09 - $2.12 • Enterprises 0.04 • Parent and other (0.27) Total EPS $1.86 - $1.89 +5% to +7% • Operating cash flow (GAAP) (mils) $1,550 . . . . building on high end, actual 2014 performa
Slide 29: GAAP Reconciliation
GAAP Reconciliation
Slide 30: 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 31: 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 Consumers Operating Income + Depreciation & Amortization $ 1,813 $ 1,885 $ 1,955 $ 2,081 $ 2,194 $ 2,358 Enterprises Project Cash Flows 20 25 29 50 52 55 Gross Operati