Cms Energy Corporation · NYSE:CMS
Cms Energy — Investor Presentation (October 2019)
33 slides from Cms Energy's investor presentation, Oct 9, 2019
Slide 1: Retail Outreach
Retail Outreach October 9, 2019 FOCUSED ON WORLD CLASS PERFORMANCE
Slide 2: Forward-looking statements and non-GAAP 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
Slide 3: Rejji P. Hayes, EVP and CFO
Rejji P. Hayes CMS Energy 2017 EVP and CFO ITC Holdings Corp. 2012 – 2016 - CFO (2014 – 2016) - VP, Finance & Treasurer (2012 – 2014) Exelon Corporation 2009 – 2012 Asst. Treasurer & Dir. Corp. Finance & Financial Strategy Lazard Frères & Co. LLC 2007 – 2009 VP, M&A Banc of America Securities 2003 –
Slide 4: CMS Energy Overview
CMS Energy Overview Corporate Structure Key Information CMS Energy 2018 Financial Statistics (NYSE: CMS) Based in Jackson, MI a Employees (37% unionized) Consumers Energy Enterprises EnerBank Revenue 2018 Adjusted net income b Avg. Rate Base 92% of c Operating Growth for past 16 years Income Gas $5.
Slide 5: Consumers Energy
Consumers Energy . . . 4th Largest Combination Utility • Electric Utility 1.8 million electric customers 8,261 MW of capacity • Gas Utility 1.8 million gas customers 309 bcf gas storage (#1 in the U.S.) • Serving 6.7 million Michigan residents Consumers Energy Planet Goals Next 5 Years By 2040 gallo
Slide 6: The Triple Bottom Line
The Triple Bottom Line . . . PEOPLE • PLANET • PROFIT PEOPLE PLANET PROFIT PERFORMANCE . . . world class performance delivering hometown service. 6
Slide 7: Utility Business Model
Utility Business Model . . . ✓ Supports Equity Debt earnings Rate Base growth ~40% ~40% ~20% Deferred Taxes ✓ a _____ a Adjusted Net Income ($MM), (Non-GAAP) . . . is driven by rate base growth and risk management. 7
Slide 8: Compelling Investment Thesis
Compelling Investment Thesis . . . Aging Infrastructure Clean Energy Leader Constructive Regulation Strong Cash Flow & Affordable Prices Balance Sheet Diversified Service Territory . . . adaptive to changing conditions. 8
Slide 9: Large and Aging System
Large and Aging System . . . Electric 25 years of distribution main replacement system is through our older than Enhanced Infrastructure peers Replacement Program Age of coal fleet is more ~1,670 miles of gas than transmission pipeline; most 50 years built in the WWII era . . . requires significant
Slide 10: Michigan Offers Supportive Policy and Premium Regulatory
Michigan Offers . . . Supportive Policy Premium Regulatory • Economic growth (tax policies, Tier Michigan skilled labor, balanced budgets) 2013 - Present 1 7 • Bipartisan Energy Law 2 10 2012 • Forward-looking test year (10-month rate case) 2008 3 18 • Energy efficiency incentive (20% of spend) 4 9
Slide 11: Our Self-Funding Model
Our Self-Funding Model . . . Plan a EPS Growth 6% - 8% Self-Funding: - Cost management (O&M, fuel, purchased power) 2 - 3 pts - Sales (economic development, energy efficiency) 1 - Other (Enterprises, tax planning, etc.) 2 INVESTMENT SELF-FUNDED 5 - 6 pts Customer Prices “at or below inflation” <2% _
Slide 12: Managing Customer Bills
Managing Customer Bills . . . Cost Components Residential Bills as % of Wallet a 100% 100% (Electric & Gas) Utility Bill Down 90% 50 bps! Utility Bill ~ 4% ~ 3½% 80% Fuel and Power Costs TV & Phone ~ 4% TV & Phone ~ 4% Healthcare ~ 5% Healthcare ~ 9% 70% Food ~ 12% ~70% Food ~ 13% 60% ~70% Transport
Slide 13: Economic Development is Robust
Economic Development is Robust . . . Customer Committed Load Diversified Customer Base Economic Grand (2018 Electric & Gas Rate Mix) a Indicators: Rapids U.S. GDP Growth 32 % 17 % 20102017 Population Growth 8% 6% Auto Other 20102018 Other 2% 2% Unemployment* 2.9 % 3.7 % Industrial *July 2019 Unemp
Slide 14: Operating Cash Flow Generation
Operating Cash Flow Generation . . . Amount (Bn) >$9 Bn in aggregate $ 2.2 2.05 1.95 1.85 1.70 1.75 1.7 1.65 1.2 0.7 Investment 0.2 (0.3) Cash flow before dividend (0.8) (1.3) 2018 2019 2020 2021 2022 2023 NOLs & credits $0.4 $0.3 $0.3 $0.4 $0.4 $0.5 . . . remains strong and supports our capital pla
Slide 15: Credit Metrics Maintained
Credit Metrics Maintained . . . S&P / S&P Moody’s Fitch Fitch Moody’s (Dec. ‘18) (Jul. ‘19) (Jul. ‘19) Ratings Drivers AA- Aa3 A+ A1 • Strong financial position Consumers A A2 Secured A- A3 BBB+ Baa1 • Growing operating BBB Baa2 cash flow BBB- Baa3 BB+ Ba1 BBB+ Baa1 BBB Baa2 CMS Unsecured • Return o
Slide 16: Clean Energy Future
Clean Energy Future . . . Elimination of Coal More Renewable Energy Innovative Energy Solutions Consumers Energy Capacity Mix Earn incentive mechanisms 10% 20% 8% 22% 9% 6% 8% 12% 11% 14% 10% Rate based 31% 10% or earn FCM 56% 20% 42% 11% 2019 2030 2040 a Renewables Coal Natural Gas Storage Pe
Slide 17: Consistent Growth Through Changing Circumstances
Consistent Growth Through . . . 7% CAGR b a EPS Dividend +7% Weather Recession Recession Help _____ _____ Hurt a Adjusted EPS (non-GAAP) b Non-GAAP Cold 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Feb. Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild Po
Slide 18: CMS' Trading Performance
CMS’ Trading Performance . . . Stock Performance Total Shareowner Return a b CMS CMS UTY UTY S&P 500 S&P 500 500% 400% 604% 391% 300% 117% 200% 178% 100% 51% 69% 8% 0% -100% '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 1 Year 3 Year 5 Year 10 Year _____ _____ a 10-year stock performance as of Decembe
Slide 19: Q&A Thank You!
Q&A Thank You!
Slide 20: Appendix
Appendix
Slide 21: Utility Customer Investment Plan
Utility Customer Investment Plan . . . 5-Year Plan Rate Base Growth Electric Prior Current Gas Capital Investment (Bn): Plan Plan Mix $ 4 $ 5 ~45% $23 Bn Electric Utility >7% CAGR $16 Bn New Utility Renewables 1 1 ~10 60% Gas Utility 5 5 ~45 70% Total $10 $11 100% ~40% ~30% System Need: >$50 Bn 2018
Slide 22: Regulatory Outlook
Regulatory Outlook . . . 2019 Regulatory / Policy 2/7: REP approved for 3/23: Filed settlement 6/7: IRP settlement 7/18: Demand Response 9/26: Calc. C 525 MW of agreement for order approved order order wind IRP U-20165 U-20164 U-20309 Electric 1/9: Settlement approved Next Electric Filing
Slide 23: Solid Rate Case History
Solid Rate Case History . . . Electric Rate Base a Gas Rate Base (Bn) (Bn) 2013A 2019E 2013A 2019E b b Residential Electric Bill $106 $106 Residential Gas Bill $87 $60 (Weather-normalized) Flat (Weather-normalized) (31)% $11.1 $6.4 $10.7 $10.7 $9.8 Settled $5.2 Order 9/26 Stay $4.1 $4.3 out $8.5 $
Slide 24: Managing Work Every Year
Managing Work Every Year . . . a 2011 2012 2013 2014 2015 2016 2017 2018 2019 EPS $2.60 Reinvestment $2.40 +7% Weather & Storms $2.20 Mild +7% Summer Hot Cost +7% Summer $2.00 productivity above plan +7% Cost productivity $1.80 Reinvestment +7% above plan Cost productivity Hot Mild Storms Summer Win
Slide 25: IRP Settlement Approved
IRP Settlement Approved . . . Near-Term Additional Details • Financial Compensation Mechanism Energy Efficiency (FCM) for PPAs as an incentive • FCM = PPA payment x Company’s WACC a Demand Response (currently 5.88%) Expiration of Palisades PPA • Includes 525 MW of wind approved in Karn 1&2 closu
Slide 26: Clean and Lean
Clean and Lean . . . Old Utility Model Clean And Lean Big Build Supply Supply Fully utilize Modular Retirement assets Excess supply Big Excess Build supply Modular Actual Modular Demand Demand EE & DR Excess O&M O&M supply Expected Demand Fuel Fuel Big Bets Lower Risk Results in excess capacity, hig
Slide 27: Michigan Election Results
Michigan Election Results . . . Governor State Senate Gretchen Whitmer 16 38 22 Democrat 2018 Election: Democrats +5 seats 4-year terms, concurrent with Governor’s term, 2-term limit Energy policy is State House not a key issue Key Issues: 52 110 58 • Infrastructure • Health Care • Education 2018 El
Slide 28: Electric System Investment
Electric System Investment . . . Current Generation Capital Investment (Bn): Plan Existing Fleet Electric Utility $ 5 $1.0 Bn New Utility Renewables 1 PLUS Gas Utility 5 New Renewables $11 $1.0 Bn Total System Reliability & Maintenance ~$2½ Bn New Business & Other $1½ Bn . . . consists of needed and
Slide 29: Gas System Investment
Gas System Investment . . . Current Compression and Storage Capital Investment (Bn): Plan $0.6 Bn Electric Utility $ 5 #1 Underground New Utility Renewables 1 storage Gas Utility 5 Total $11 Pipelines $1 Bn #5 Transmission miles #5 Distribution miles Distribution & Other $3½ Bn U.S. LDC Rank, Source
Slide 30: GAAP Reconciliation
GAAP Reconciliation
Slide 31: Reconciliations of GAAP Net Income to Non-GAAP Adjusted Net Income
CMS ENERGY CORPORATION Reconciliations of GAAP Net Income to Non-GAAP Adjusted Net Income (Unaudited) In Millions, Except Per Share Amounts Three Months Ended Twelve Months Ended 12/31/18 12/31/17 12/31/18 12/31/17 Net Income (Loss) Available to Common Stockholders $ 108 $ (3) $ 657 $ 460 Reconcilin
Slide 32: Earnings Per Share By Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Per Share By Year GAAP Reconciliation (Unaudited) GAAP GAAP 2018 over 2018 over 2003 2017 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CAGR Growth Reported earnings (loss) per share - GAAP ($0.30) $0.64 ($0.44) ($0.41) ($1.02) $1.20
Slide 33: Reconciliation of Annual O&M Expense
Consumers Energy Reconciliation of Annual O&M Expense (Unaudited) In Millions 12/31/2017 12/31/2018 Maintenance & Other Operating Expenses (GAAP) $ 1,113 $ 1,287 Less: Energy Waste Reduction Spending 128 185 Job Work & Other 12 9 Maintenance & Other Operating Expenses (Non-GAAP) $ 973 $ 1,093 33