Cms Energy Corporation · NYSE:CMS
Cms Energy — Q2 2019 Earnings Presentation
28 slides from Cms Energy's earnings presentation, Jul 25, 2019
Slide 1: Forward-looking statements and non-GAAP disclaimer
2 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
Slide 2: Agenda
Agenda Outlook & Business Update Patti Poppe President & CEO Financial Results Rejji Hayes Executive VP & CFO 3 PROFIT PLANET PEOPLE
Slide 3: First Half results reaffirm 6% to 8% EPS growth
First Half . . . . . . results reaffirm 6% to 8% EPS growth. First Half 2019 EPS $1.08 Reaffirm Guidance Full-year EPS $2.47 to $2.51 _ _ _ _ _ a Adjusted EPS (non-GAAP) Long-Term Outlook EPS & DPS growth +6% to +8% a 4 Results Amount a a a Commentary 6% to 8% vs. 2018 Bias toward the midpoint On tr
Slide 4: Managing Work Every Year maximizes benefits for customers and investors
Managing Work Every Year . . . . . . maximizes benefits for customers and investors. 2011 2012 2013 2014 2015 Offsets RECORD WARM Mild Summer Cost productivity above plan Reinvestment Hot Summer Mild Winter Hot Summer Storms Cost productivity above plan 0 Reinvestment EPS _ _ _ _ _ a Adjusted EPS (n
Slide 5: IRP Settlement Approved lays groundwork for Clean & Lean energy future
IRP Settlement Approved . . . . . . lays groundwork for Clean & Lean energy future. 6 Energy Efficiency Demand Response Expiration of Palisades PPA Karn 1&2 closure Financial Compensation Mechanism (FCM) for PPAs as an incentive FCM = PPA payment x Company’s WACC (currently 5.88%) Includes 525 MW of
Slide 6: Clean Energy Future
Clean Energy Future . . . Elimination of Coal 7 More Renewable Energy Innovative Energy Solutions . . . embodies the Triple Bottom Line. 11% 20% 31% 11% 9% 2019 Consumers Energy Capacity Mix 10% 42% 10% 14% 8% 6% 10% 12% 2030 2040 22% 20% 56% Earn incentive mechanisms Rate based or earn FCM Renewabl
Slide 7: Story of the Last Half Century supports our Clean Energy Plan
8 Story of the Last Half Century . . . . . . supports our Clean Energy Plan. Ludington Pumped Storage Pre- Post- Megawatts 1,872 2,292 Efficiency 70% 77% Pump Time 14 hours <9 hours Original Construction 1969 – 1973 Current Upgrade 2011 – 2020 Annual customer value of ~$60 MM TBU Upgrade a a _ _ _ _
Slide 8: Michigan Energy Policy is Supportive
9 Michigan Energy Policy is Supportive . . . Michigan Public Service Commission Bipartisan Energy Law (2016 law enhanced 2008 law) Forward-looking test year (10-month rate case) Energy Efficiency incentive (20% of spend) Renewable Portfolio Standard (RPS) Constructive ROEs . . . and built into legis
Slide 9: Consistent Growth Through Recession
+7% Consistent Growth Through . . . Recession Governor (R) Governor (D) Commission (D) Commission (R) Recession 7% CAGR Polar vortex Cold Feb. Mild summer Warm winter Hot summer Hot summer Cold winter Cold winter Summer- “less” Mild summer Mild summer Commission (D) Hurt Help EPS _ _ _ _ _ a Adjuste
Slide 10: First Half 2019 EPS tracking as planned
11 First Half 2019 EPS . . . . . . tracking as planned. By Business Segment $1.14 0.04 (0.10) $1.08 EPS Results $1.35 2018 2019 $1.08 Second Quarter EPS – (GAAP) Adjustment Adjusted (non-GAAP) 49¢ (1) 48¢ 33¢ -- 33¢ EPS – (GAAP) _ _ _ _ _ a Adjusted EPS (non-GAAP) Adjustment Adjusted (non-GAAP) -- $
Slide 11: 2019 EPS weighted toward second half as planned
12 2019 EPS . . . First Half Six Months To Go (26)¢ 40¢ - 44¢ $2.33 . . . weighted toward second half as planned. First Half $1.08 $2.47 - $2.51 First Half $1.34 6% - 8% 12¢ a _ _ _ _ _ a Adjusted EPS (non-GAAP) 7¢ 4¢ 24¢ - 28¢ (9)¢ (15)¢ (9)¢ Weather Storm Costs Rates & Investment Usage, Enterprise
Slide 12: Our Self-Funding Model
Our Self-Funding Model . . . EPS Growth - Cost management (O&M, fuel, purchased power) - Sales (economic development, energy efficiency) - Other (Enterprises, tax planning, etc.) INVESTMENT SELF-FUNDED Customer Prices “at or below inflation” Plan 6% - 8% . . . delivers consistent growth while mainta
Slide 13: Utility Customer Investment Plan focuses on safety and reliability
Utility Customer Investment Plan . . . . . . focuses on safety and reliability for the benefit of customers. $23 Bn Rate Base Growth 5-Year Plan $16 Bn Gas Electric >7% CAGR 70% 60% 14 Prior Plan Current Plan Capital Investment (Bn): Electric Utility New Utility Renewables Gas Utility Total Mix Syst
Slide 14: Managing Customer Bills provides headroom for additional investment
Managing Customer Bills . . . . . . provides headroom for additional customer investment. 15 ~70% a Source: Fred.stlouisfed.org, Bls.gov, Consumers internal bills; percentages may not total 100% due to rounding. Fuel and Power Costs Taxes 100% Capital Investments O&M Costs Cost of Capital ~70% (Elec
Slide 15: Economic Development is Robust
Economic Development is Robust . . . Customer Committed Load . . . and helps drive our model. 16 45 MW 69 MW Residential 59% Commercial 28% Other Industrial 9% Other 2% Diversified Customer Base GDP Growth Population Growth Unemployment* 32 8 2.8 17 6 3.6 Grand Rapids U.S. Economic Indicators: % % (
Slide 16: Credit ratings at solid investment-grade levels
S&P / Fitch Moody’s S&P (Dec. ‘18) Moody’s (Jul. ‘19) Fitch (Jul. ‘19) AA- Aa3 A+ A1 A A2 A- A3 BBB+ Baa1 BBB Baa2 BBB- Baa3 BB+ Ba1 BBB+ Baa1 BBB Baa2 BBB- Baa3 BB+ Ba1 BB Ba2 BB- Ba3 B+ B1 B B2 B- B3 Outlook Stable Stable Stable . . . at solid investment-grade levels. Credit Metrics Maintained . .
Slide 17: Compelling Investment Thesis adaptive to changing conditions
Compelling Investment Thesis . . . 18 . . . adaptive to changing conditions. Aging Infrastructure Constructive Regulation Strong Cash Flow & Balance Sheet Diversified Service Territory Affordable Prices Clean Energy Leader
Slide 18: Thank You! Q&A
Q&A Thank You!
Slide 19: Regulatory Outlook
Regulatory Outlook . . . Electric Regulatory / Policy 2019 21 3/23: Filed settlement agreement for IRP . . . builds on recent momentum and provides long-term visibility. 6/7: IRP settlement order approved U-20165 Q3: Expected order Filed $229 MM U-20322 Next Electric Order 1/9: Settlement approved U
Slide 20: Solid Rate Case History
Solid Rate Case History . . . 22 $11.1 $5.2 $4.3 $4.1 $6.5 $10.7 $10.7 $9.8 Electric Rate Base (Bn) Gas Rate Base (Bn) Settled Settled Settled Request $8.5 Settled Settled $3.6 . . . demonstrates our ability to prioritize customers and investors. $3.1 Settled 2013A 2019E $106 $106 Residential Electr
Slide 21: Operating Cash Flow Generation remains strong
Operating Cash Flow Generation . . . . . . remains strong and supports our capital plan. Amount (Bn) $ Investment Cash flow before dividend NOLs & credits $0.4 $0.3 $0.3 $0.4 $0.4 $0.5 23 >$9 Bn in aggregate 1.70 1.65 1.75 1.85 1.95 2.05 (1.3) (0.8) (0.3) 0.2 0.7 1.2 1.7 2.2 2018 2019 2020 2021 2022
Slide 22: DIG and Peakers offer risk mitigation to Plan
“DIG” (750 MW) & Peakers (200 MW) . . . . . . offers risk mitigation to Plan with future upside opportunities. Pre-Tax Income (MM) $30 $45 $38 Opportunities $ $3.00 $7.50 $95 $35 24 _ _ _ _ _ Beyond Plan assumes 100% capacity available at $3.00 and $7.50/ kw-month a $45 Better Performance Better Per
Slide 23: 2019 and Long-Term Financial Targets
2019 and Long-Term Financial Targets . . . 25
Slide 24: 2019 and Long-Term Financial Targets
2019 and Long-Term Financial Targets... us v-rev> 2019 Long-Term Plan Adjusted EPS (non-GAAP) $2.47 to $2.51 +6% to +8% DPS growth In-line w/ earnings |_| In-line w/ earnings Operating cash flow (MM) $1,650 Up $100” Customer bills” Electric 2% Arar Gas (4% Inflation FFO/average debt (non-GAAP) _ ~ 1
Slide 25: Reconciliation of GAAP EPS to Non-GAAP Adjusted EPS by Segment
27 CMS ENERGY CORPORATION Reconciliation of GAAP EPS to Non-GAAP Adjusted EPS by Segment (Unaudited) In Millions, Except Per Share Amounts Three Months Ended Six Months Ended 6/30/19 6/30/18 6/30/19 6/30/18 Electric Utility Reported net income per share $ 0.32 $ 0.46 $ 0.69 $ 0.95 Reconciling items:
Slide 26: Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income by Quarter
28 CMS ENERGY CORPORATION Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income by Quarter (Unaudited) In Millions, Except Per Share Amounts 2019 1Q 2Q Net Income Available to Common Stockholders $ 213 $ 93 Reconciling items: Electric utility and gas utility - - Tax impact - - Enterprise
Slide 27: Earnings Per Share By Year GAAP Reconciliation
29 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.
Slide 28: Consumers Energy Reconciliation of Annual O&M Expense
30 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