Cms Energy Corporation · NYSE:CMS

Cms Energy — BMO 10th Annual Utilities & Pipeline Conference 2014

22 slides from Cms Energy's conference presentation, Dec 2, 2014

  1. Slide 1: BMO 10th Annual Utilities & Pipeline Conference

    Top of Mind • Why Invest? • Investment • Upsides • Partners • Regulatory • Passion to Improve BMO 10th Annual Utilities & Pipeline Conference December 2, 2014 Ludington Pumped Storage Ray Compressor Jackson Gas PlantStation Cross Winds Energy Park Fourth largest in the world #1 LDC in gas storage #

  2. 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

  3. Slide 3: Why Invest?

    Why Invest? . . . . Our Growth Engine Supported By (2015-2024 Capex) ● UPSIDES create headroom (Investment, Sales, Cost, & DIG) ● PARTNERS support good regulation $15.5 Billion (Customers, Regulators, & Policy Makers) 5% - 7% EPS growth ● PASSION to improve for customers and owners (Value, Reliabili

  4. Slide 4: INVESTMENT -- "Catch-Up"

    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) 21% 19% 18% 16% 16% 14% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 __

  5. Slide 5: INVESTMENT -- Ten-Year Capex Plan Expanded

    INVESTMENT -- Ten-Year Capex Plan Expanded . . . . 2015-2024 Opportunity Level 10-Year Plan Amount (bils) Generation capacity • PPA replacement $3.0 • ROA return • Higher renewables $20+ Billion $15.5 Billion Gas conversions & expansion 1.0 Grid modernization 1.0 Total Opportunities $5.0 Upside? Rat

  6. Slide 6: UPSIDES -- Capacity Opportunities

    UPSIDES -- Capacity Opportunities . . . . Further Capacity Growth Over Next Ten Years Upside MW 11,000 Not in plan 10,000 1,200 MW PPA’s Expire 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 Jac

  7. Slide 7: UPSIDES -- Capacity Price Increases

    UPSIDES -- Capacity Price Increases . . . . Today Future Scenarios Recent Contracts (mils) (mils) +$50 $55 • Nine-year 250 MW “energy” contract at $4.06 • Capacity to Consumers $35 • 25 MW/2015 at $2.32 +$30 • 50 MW/2016 at $4.36 Upside: Capacity and energy $5 contracts layered in over time Capacity

  8. Slide 8: UPSIDES -- 2014 Reinvestment Helps Customers

    UPSIDES -- 2014 Reinvestment Helps Customers . . . . Adjusted EPS (non-GAAP) 2014 +18¢ Third Quarter EPS Weather (Electric) (6)¢ +15¢ Reinvestment (5) Total Change (11)¢ +9¢ Good First Nine Months EPS Choices Weather (Gas) 16¢ +4¢ Cost savings 4 Reinvest & other (16) $1.78 +7%- Total Change + 4¢ $1.

  9. Slide 9: UPSIDES -- Trend of O&M Cost Savings

    UPSIDES -- Trend of O&M Cost Savings . . . . O&M Trend vs Peers Future Savings 2018 vs 2013 0 50% (mils) ~6% per year 0 Peers • Fuel mix $ - 25 0 ~2% per year • Benefits - 75 0 • Less Expensive New - 75 0 Inflation -25% Hires & Lower Headcount 00 • Smart Meters - 25 0 -7% -7% • Inflation +100 0 CMS

  10. Slide 10: PARTNERS -- Michigan Energy Law Update

    PARTNERS -- Michigan Energy Law Update . . . . • Adaptability No updates expected until • Reliability early 2015 • Affordability • Environmental protection • 10% renewables by 2015 • Energy efficiency standards • File-and-implement • Historical test • 10% ROA cap year • 12-18 months regulatory lag •

  11. Slide 11: PARTNERS -- Election Results

    PARTNERS -- Election Results . . . . Governor’s Race State Senate Democrats Republicans Michigan’s Comeback Continues 38 Governor Rick Snyder (R) 11/-1 27/+1 State House • Eliminated state deficit; balanced four budgets a Democrats Republicans • More than 250,000 jobs since 2010; best b 110 recovery

  12. Slide 12: REGULATORY -- Electric Rate Case Investment

    REGULATORY -- Electric Rate Case Investment . . . . “Win-Win” Rate Case Key Features New A) New rate design Investment Offsets Jackson (Big users competitive!) Plant Cost of Removal Service 2001 Smart Energy Improvements Request Securitization Distribution (incl. forestry) B) Jackson Plant in rate b

  13. Slide 13: REGULATORY -- New Electric Rate Design

    REGULATORY -- New Electric Rate Design . . . . Residential Commercial Industrial Energy Intensive 2.5% -0.7% -1.3% -3.2% -3.4% -4.7% -5.0% -4.8% -4.8% -9.8% -15.0% -20.0% Base Rate Fuel Recovery Net Reduction . . . . and lower fuel cost have positive impact on average electric rates. 12

  14. Slide 14: PASSION TO IMPROVE -- CMS Energy

    PASSION TO IMPROVE -- CMS Energy . . . . Future Shines Bright Substantial Future Growth $3.50 EPS a +5% to +7% Past Next 5 Dividend Performance Years Capex (bils) $6.3 $7.5 (2009-2014) Capacity Op! +7% O&M Reductions (7)% (10)% (2006-2013) Conservative Sales Growth +1% +½ % (2010-2013) Conservative

  15. Slide 15: Appendix

    CUS ENERGY Appendix

  16. Slide 16: 2015 Gas Rate Case

    2015 Gas Rate Case . . . . Overview Residential Gas Customer Cost Amount Amount (per day) (Mils) $3.00 Projected 9% Capital Investment $ 144  decrease! Cost & Other (56) $2.44 Request $ 88 $2.24 2016-2017 Investment 2.00 Recovery Mechanism $ 92 GCR 1.40 1.12 Existing Request (2012) (2015) 1.00 Rate

  17. Slide 17: Consumers Appears to be in a good carbon position

    Consumers Appears . . . . Carbon Tonnage Reduction Million Tons of CO2 (Preliminary) 25 2005 Baseline 23 21 Clean Power Plan 19 “Implied” EPA Target 17 Consumers Energy Projected 15 emission level 13 2014 2020 2025 2029 2030 . . . . to be in a good carbon position. 16

  18. Slide 18: 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

  19. Slide 19: 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 $2.3 $2.2 $2.1 $2.0 2.0 $1.9 Interest, working $1.8 $1.7 capital and taxes $1.55 1.5 $1.45 Pct of Market Cap (as of June 2014) 1.0 Cap Inv OCF Investment 19% 18% CMS 13% 15% 0.5

  20. Slide 20: GAAP Reconciliation

    CMS ENERGY GAAP Reconciliation

  21. Slide 21: Earnings Per Share By Year GAAP Reconciliation

    Earnings Per Share By Year GAAP Reconciliation (Unaudited) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 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 After-tax items: Electric and gas utility 0.21 (0.39) - - (0.07) 0.05

  22. Slide 22: Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities

    CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2013 2014 2015 2016 2017 2018 2019 Consumers Operating Income + Depreciation & Amortization $ 1,740 $ 1,810 $ 1,877 $ 1,959 $ 2,065 $ 2,186 $ 2,308 Enterprises Project Cash Flows 16 20 28 34 52 55

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