Cms Energy Corporation · NYSE:CMS
Cms Energy — Wells Fargo 2013 Energy Symposium
29 slides from Cms Energy's conference presentation, Dec 10, 2013
Slide 1: Wells Fargo 2013 Energy Symposium
Wells Fargo 2013 Energy Symposium December 11, 2013 Cross Winds® Energy Park Consumers Smart Energy Program Gas Combined Cycle Plant
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: CMS Energy Strategy
CMS Energy Strategy . . . . Raised 2013 guidance, introduced 2014 Capital investment in utility $15 billion Competitive payout ratio (60%-70%) Continuous cost improvement Base rates at or below the “rate of inflation” Constructive regulatory environment Consistent financial performance Fair and time
Slide 4: CMS Energy Model and Results
CMS Energy MODEL . . . . RESULTS Consistent Predictable Self-Imposed Limits Sustainable Base Rates < 2% Inflation Investment “Needed Not Wanted” Investment Ten Year—$15 Billion Small, bite size projects None “bet the company” Catalysts Capex >$15 billion PPA’s expire = 2,000 MW Credit rating Sales <
Slide 5: Catalysts
Catalysts .. . . . Capex > $15 Billion PPA’s Expire 2,000 MW Credit Ratings Stable Sales < 1% Capacity Prices Increase ROA Elimination 10% 0% Potential Outcomes Opportunities provide flexibility for more capital investment Build or buy generation; earns return to rate base; customer rate neutral On
Slide 6: Catalyst: Visible, 10-Year Investment Plan
CATALYST: Visible, 10-Year Investment Plan . . . . 2013-2022 Opportunity Level 10-Year Plan $15 Billion $18 BillionNew generation capacity PPA replacement ROA customer return Post-2015 renewables More gas storage More gas conversions Transmission Faster pole & pipe replacement Customer base rates <2
Slide 7: Investment Supports Growth
Investment Supports Growth . . . . Renewables Amount (bils) $1.8 $5 $7 $8 1.6 New Generation: 1.4 PPA’s Expire New Generation 1.2 Environmental Gas 1.0 Gas 0.8 Smart Energy Electric Reliability 0.6 0.4 Maintenance 0.2 2008—2012 2013—2017 2018—2022 . . .. . for next ten years – needed, eeded, not jus
Slide 8: Gas Infrastructure
Gas Infrastructure . . . . Gas System #4 largest gas utility 50,000 miles of main & pipe 1,700 miles of transmission lines 300 bcf gas storage 3.5% of all gas storage in U.S. Investment Amount (bils) $ 2.5 $2.4 $2.2 2.0 1.5 $1.4 1.0 0.5 2008—2012 2013—2017 2018—2022 . . .. . provides investment oppo
Slide 9: Transmission Opportunity
Transmission Opportunity . . . . Exited transmission in 2002 Opportunity to reclassify and register as transmission owner / operator 2013 2014 2015 2016 Notified ReliabilityFirst Corporation Plan to file reclassification cases Opportunity to register of plans to register as owner / at MPSC and FERC
Slide 10: Visible Investment: Future Opportunities
Visible Investment: Future Oppurtunities…. MW 10,000 9,000 8,000 7,000 6,000 2013 2015 2017 2019 2021 2023 2025 2016 Classic 7 coal plants suspend operations 2017 Gas plant to be added 2022 Palisades PPA terminates 2025 MCV PPA terminates CE Portfolio Total Peak Demand Plus Reserves Smart Energy, EO
Slide 11: Catalyst: Expiring PPAs
CATALYST: Expiring PPAs . . . . Benefits Power Supply Cost Palisades (bils) MCV $1.2 All Other Palisades expiration $1.0 1.0 $0.4 0.8 $0.8 MCV expiration $0.6 $0.6 0.6 $0.3 0.4 $0.4 $0.3 0.2 2021 2022 2023 2024 2025 2026 Opportunities Replace PPA contracts with owned generation Provides incremental
Slide 12: Catalyst: Credit Rating
CATALYST: Credit Rating . . . . Scale S&P / Fitch Moody’s S&P Moody’s Fitch A A2 Consumers A- A3 Secured BBB+ Baa1 BBB Baa2 BBB- Baa3 BB+ Ba1 BBB- Baa3 CMS BB+ Ba1 Unsecured BB Ba2 Present BB- Ba3 Prior B+ B1 B B2 B- B3 Outlook Stable Review for Positive Upgrade Impact New Cost Savings 2013 Total Co
Slide 13: Catalyst: Economic Growth
CATALYST: Economic Growth . . . . Examples of New Business Electric Gas Combination Eco-Bio Plastics 3 MW Betz Industries 8 MW Enbridge 28 MW Dart Container Magna-Cosma 2 MW Casting 4 MW Norplas 5 MW Secant MACI 7 MW 6 MW Economic Indicators Grand Rapids Michigan U.S Unemployment 6% 9% 7% August 201
Slide 14: Catalyst: Capacity Price Increases
CATALYST: Capacity Price Increases . . . . Today Future Scenarios (mils) (mils) +$50 $55 $35 +$30 $5 Capacity price $0.50 $4.50 $7.50 ($1 kw per month) . . . . could add value to the 700 MW “DIG” plant.
Slide 15: Catalyst: Retail Open Access
CATALYST: Retail Open Access . . . . 0.02% 310 Alternate Electric Customers 1.8 Million Consumers Energy Customers = 99.98% $150 million cost shift Could lower industrial rates by 10% or all customers by 4% 700 MW of additional capacity needed Creates additional opportunities to invest in generation
Slide 16: Trend of O&M Cost Savings
Trend of O&M Cost Savings . . . . Percent Change 25% Inflation -21% Cost Reductions Prior Plan -9% Accelerated Cost -6% Reductions New Plan -15% -25% 2006 2007 2008 2009 2010 2011 2012 2013 2014 Lines smoothed for illustrative purposes . . . . . accelerated; funding investment and reducing risk.
Slide 17: Continuous Cost Reduction
Continuous Cost Reduction . . . . Future Savings 2017 vs 2012 (mils) Fuel mix $25 Benefits 75 Less Expensive New 75 Hires & Lower Headcount Consumers Smart Meter 20 Inflation (100) Performance Excellence 30+ 2017 vs 2012 $125 How – Two Examples Fuel Mix MW Employees 2016 Retire Coal-900-300 2016 Add
Slide 18: CMS Mindset
CMS Mindset . . . . Adjusted EPS (non-GAAP) +13¢ 2012 Hot Summer +7% Guidance 2012 2012 Warm Cost Winter Saving -13¢ . . . . deliver for customers AND investors.
Slide 19: CMS Mindset
CMS Mindset . . . . Adjusted EPS (non-GAAP) 2013 +13¢ 2012 Hot Summer 2013 Cold +7% Winter & Reinvested Cost Savings earlier Guidance 2012 2012 Warm Cost Winter Saving -13¢ . . . . deliver for customers AND investors.
Slide 20: Mindset: Consistent Growth and Dividend Payout
Mindset . .. . . 10-Year Actual $1.65-$1.66 7% CAGR $1.78 5%—7% Peers 4% $1.73 $1.45 $1.55 $1.36 $1.26 $1.21b 6% $1.02 5%—7% $1.08 $0.96 14% 96¢ $0.90 27% 84¢ $0.84 32% 66¢ $0.81 Int’l Sale 39% 50¢ 80% 36¢ 20¢ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Future Dividend Payout 0% 25%
Slide 21: Appendix
APPENDIX
Slide 22: Michigan Economy Performance
Michigan Economy Performance . . . . Gross Domestic Product – 2010 through 2012 WA 5th MT ND 8.1 31.0 Best 6.7 MN 8.2 ME SD 11% OR WI 2.7 ID 4.7 13.8 VT NH 2.1 WY 5.9 MI NY 8.2 IA 6.1 (3.5) NE 6.6 MA 11.0 6.6 7.4 7.9 IL PA NV RI 5.9 IN OH CT UT CO 5.9 NJ 2.9 KS 2.4 12.3 7.3 1.0 8.7 6.2 MO MD 3.1 7.3
Slide 23: Continuous Cost Reduction
Continuous Cost Reduction . . . . 2012 over 2006 Electric Non-fuel O&M Cost Peer Average up 6% -0.4% Consumers Source: SNL data service How – One Example Headcount 7,600 7,200 $100k Each $60k 1,000 Each 2010 2012 People Productivity = $64 Million . . . . . part of CMS mindset.
Slide 24: Maturity Schedule of Long-Term Debt
MATURITY SCHEDULE OF CMS AND CECO LONG-TERM DEBT AS OF 10/31/2013 Reflects quarterly securitization bond payment 10/20/13; no other changes from 09/30/13 Maturity Amount F/V S/U or Call Date (000’s) DEBT/ CO SHORT-TERM DEBT: FU SHORT-TERM $172,498 $172,498 5.5% Convertible Sr Notes (Next Put Date 06
Slide 25: Operating Cash Flow Grows $0.5 Billion
Operating Cash Flow Grows $0.5 Billion . . . . Amount (bils) Up $0.5 Gross operating cash flowa Billion $ 2.5 up $0.1 billion per year $2.2 $2.0 $2.1 2.0 $1.9 $1.7 $1.8 $1.6 1.5 Interest $1.5 Working capital $1.4 $1.3 and taxes 1.0 Investment 0.5 .0 a Non-GAAP Cash flow before dividend (0.5) 2012 20
Slide 26: Capital Expenditures
Capital Expenditures Total 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013-2022 (mils)(mils)(mils)(mils)(mils)(mils)(mils)(mils)(mils)(mils)(mils) Renewables $ 85 $ 164 $ 9 $—$—$—$—$—$—$—$ 258 New Generation 68 189 396 288 21 130 250 365 305 355 2,367 Environmental 314 239 169 122 114 110 105
Slide 27: GAAP Reconciliation
GAAP RECONCILIATION
Slide 28: 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 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 After-tax items: Electric and gas utility 0.21(0.39) - - (0.07
Slide 29: Reconciliation of Gross Operating Cash Flow to GAAP
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2012 2013 2014 2015 2016 2017 2018 Consumers Operating Income + Depreciation & Amortization $ 1,635 $ 1,729 $ 1,775 $ 1,830 $ 1,925 $ 2,020 $ 2,165 Enterprises Project Cash Flows 17 20 29 36 31 39