Slide 1: First Quarter 2017 Results & Outlook
First Quarter 2017 Results & Outlook May 1, 2017 PEOPLE PLANET PROFIT CMS Energy: World Class Performance Delivering Hometown Service
Slide 2: Forward-looking statements and non-GAAP measures
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: Agenda
Agenda First Quarter Results Patti Poppe President & CEO People, Planet, Profit PEOPLE PLANET PROFIT Performance -- Consumers Energy Way Financial Results and Outlook Tom Webb Executive VP & CFO 2
Slide 4: First Quarter Results
First Quarter Results . . . . PROFIT First Quarter EPS at 71¢ a Up 12¢ from 2016; up 14¢ or 20% weather-normalized Mild weather and storm fully mitigated a Reaffirm Full Year EPS guidance: $2.14 to $2.18 +6% to +8% a Long-term Growth: 6% to 8% _____ a Adjusted EPS (non-GAAP) . . . . on track for 6%
Slide 5: The Triple Bottom Line
The Triple Bottom Line . . . . PEOPLE • PLANET • PROFIT PEOPLE PLANET PROFIT PERFORMANCE . . . . world class performance delivering hometown service. 4
Slide 6: Strong Commission
Strong Commission . . . . Updated Terms Tier 1 State Ranking Tier Sally Talberg (I), Chairman Term Ends: July 2, 2021 Michigan 1 6 Prior: July 2, 2019 Switched 2 9 term-end dates Norm Saari (R) 3 18 Term Ends: July 2, 2019 Prior: July 2, 2021 4 9 Rachael Eubanks (I) Term Ends: July 2, 2023 5 6 Prior
Slide 7: Regulatory Update
Regulatory Update . . . . Jan. 1 2017 PEOPLE 2018 Energy Law 4/20: Energy Law 12/1: SRM Spring: AES effective capacity charge finalized Capacity charge effective Gas Rate Case 1/29: Self-impl.; By 7/31: $20 mil Final Order Electric Rate Case 2/28: Final order; 3/31: File; $173 10/1: Self- By 3/30: $
Slide 8: Customer Satisfaction
Customer Satisfaction . . . . PEOPLE J.D. Power Customer Satisfaction Index Residential Customers Business Customers 757 738 22% 24% 606 613 2010 2016 2010 2016 . . . . steadily improving. 7
Slide 9: Reducing Coal Intensity
Reducing Coal Intensity . . . . PLANET Coal Capacity Coal Energy Renewables a 49% Optimize Wind for Shut down coal gas MCV PPA a 41% c 30% b b 21% 22% c c 15% 15% 15% RPS 10% 3% 2005 2016 Future 2005 2016 Future 2005 2016 Future _____ _____ _____ a Includes Classic 7, includes PPA contracts b Exclud
Slide 10: Future Capex Opportunities
Future Capex Opportunities . . . . PLANET Replacement MCV PPA Opportunities • 1,240 MW • Renewables • Storage • Expires 2025 • Energy efficiency • Demand response Add ~$3 billion renewables . . . . Clean and Lean. 9
Slide 11: Performance: March Wind Storm
Performance: Consumers Energy Way . . . . March Wind Storm Restoring Power to our Customers Photo courtesy of Mlive/Jackson Citizen Patriot • Over 360,000 customers affected • Worst in Michigan’s history • New storm response standard Fast Facts minutes: turn-around time for social media responses hi
Slide 12: Performance: Smart Meters In Action
Performance: Story of the Month . . . . Smart Meters In Action • $750 million customer investment Improve customer experience and reduce costs • 1.8 million meters; to be completed in 2017 • Utilizing cellular connectivity Reduce unnecessary truck rolls Smart meter installations; Allow faster
Slide 13: Consistent Growth Through Changing Conditions
Consistent Growth Through . . . . 7% CAGR a EPS +6% to +8% Dividend Weather Recession Recession Help _____ Hurt a Adjusted EPS (non-GAAP) Cold 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Feb. Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold Feb. Warm W
Slide 14: 2017 First Quarter EPS
2017 First Quarter EPS . . . . a Results By Business Segment 2016 2017 EPS $0.59 $0.71 EPS +12¢ Utility $0.75 +20% Enterprises 0.04 Weather-normalized $0.71 $0.85 Interest & other (0.08) +14¢ +20% CMS Energy $0.71 Fact Set 65¢ _____ a Adjusted EPS (non-GAAP) . . . . impacted by weather. 13
Slide 15: 2017 EPS
2017 EPS . . . . a First Quarter Nine Months To Go 12¢ (Up 20%) 0¢ - 4¢ $2.14 - $2.18 6% - 8% 6¢ 7¢ 4¢ - 8¢ $2.02 8¢ 2¢ (4)¢ (11)¢ Managing Work Our Model Customer base rates <2% First First Quarter Quarter $0.59 $0.71 2016 Weather & Cost Rates & Economy, Absence of Rates & Cost 2017 Storms Savings
Slide 16: 2017 Outlook
2017 Outlook . . . . Adjusted EPS (non-GAAP) Benefits 4¢ Property taxes 4 Total 8¢ Guidance +6% to +8% Recovery Recovery Accelerated Financing 3¢ Weather Enterprises 1 & Storms EE incentives 2 Sales Mix & Other 2 Total 8¢ January March 31 June 30 September 30 December 31 . . . . includes 6% to 8% gr
Slide 17: Managing Work Every Year
Managing Work Every Year . . . . a 2008 2009 2010 2011 2012 2013 2014 2015 2016 EPS Mild $2.20 Summer +7% +18¢ +17¢ Cost +7% productivity above plan Cost $2.00 productivity +7% above plan Reinvestment +13¢ Storms Hot +7¢ -13¢ Mild $1.80 Reinvestment Summer Winter +7% RECORD Hot WARM Offsets Summer +
Slide 18: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . . 2017+ Plan Customer investment (reliability, costs, enviro mandates) 6% - 8% Self Funding: - O&M cost reductions 2 - 3 pts - Sales growth 1 - No “block” equity dilution & other 2 INVESTMENT SELF-FUNDED 5 - 6 pts Rate increase “at or below inflation” < 2% . . . .
Slide 19: Ten-year Customer Investment Plan
Ten-year Customer Investment Plan . . . . Gas Electric Infrastructure & Distribution Maintenance $18 billion Supply . . . . with opportunities to expand to $21 - $25 billion. 18
Slide 20: Ten-year Customer Investment Plan
Ten-year Customer Investment Plan . . . . Gas Electric Infrastructure & Distribution Maintenance $18 billion Supply . . . . with opportunities to expand to $21 - $25 billion. 19
Slide 21: Ten-year Customer Investment Plan
Ten-year Customer Investment Plan . . . . Gas Electric Infrastructure & Distribution Maintenance $18 billion Supply . . . . with opportunities to expand to $21 - $25 billion. 20
Slide 22: O&M Cost Performance Helps to Fund Investments
O&M Cost Performance Helps to Fund . . . . Actual Cost Reduction New Annual Cost Savings (Peers 2015 over 2006) Three-Year Avg 2014 2017 - 2016 - 2019 Good Business Decisions (mils) (mils) • Attrition $ - 16 $ - 16 • Productivity (Coal Gas) - 20 - 5 • Enhanced capitalization - 10 - 4 • Smart Meters
Slide 23: Operating Cash Flow Funds Investments
Operating Cash Flow Funds . . . . Amount Up $0.8 (bils) Billion Gross operating cash flowa $2.9 $ 2.9 up > $0.1 billion per year $2.7 Up $2.6 $1.8 billion $2.4 since 2004! 2.4 $2.2 Interest, working $2.1 capital and taxes $1.9 1.9 $1.63 $1.65 1.4 Operating cash flow NOLs avoid 0.9 Investment need fo
Slide 24: Electric Business Customers
Electric Business Customers . . . . Rates Customer Satisfaction Index Scores Room to (points) Improve 30% 26% 850 1,000 20 Rates & 800 Worse Fuel Rates & 746 746 10 Act 169 750 a 5% Up 22%! Midwest Avg 700 0 650 (3)% -10 Better 600 610 -20 550 _____ a 24% all business customers -30 5000 2013 2014 20
Slide 25: DIG (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . . Pre-Tax Income Opportunities (mils) $ 80 $75 70 Contracts (layering in over time) 60 $55 +$40 50 +$20 40 $35 $30 30 Better Performance 20 $12 10 Outage pull-ahead 0 2015 2016 2017 Future Capacity ($/kw-mth) ≈ $1.00 ≈ $2.00 ≈ $3.00 $4.50 $7.50 Available: • En
Slide 26: 2017 Sensitivities
2017 Sensitivities . . . . 2017 Impact Sensitivity EPS OCF (mils) Sales a • Electric (37,634 GWh) + 1% + 5¢ + $ 20 • Gas (307 Bcf) + 5 + 7 + 30 – – 55 Gas prices (NYMEX) + 50¢ + 0 + ROE (planned) • Electric (10.1%) + 20 bps + 3 + 15 • Gas (10.1%) + 20 + 1 + 6 Interest Rates +100 bps – < 1 – 7 + + Cu
Slide 27: Credit Ratings
Credit Ratings . . . . Scale Ratings Drivers S&P / S&P Moody’s Fitch Fitch AA- Moody’s Aa3 (Dec. ‘15) (Apr. ‘17) (Mar. ‘16) • Strong financial position A+ A1 Consumers A A2 Secured A- A3 • Growing operating BBB+ Baa1 cash flow BBB Baa2 BBB- Baa3 BB+ Ba1 BBB+ Baa1 • Return on regulated BBB Baa2 CMS U
Slide 28: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . . 14 Years Future 6% - 8% 7% a EPS Up $100 mil annually Up $100 mil / yr $2.1 $0.9 OCF (bil) Self-Funded O&M (bil) $0.6 Down 2% - 3% Elec. Non-fuel $0.8 Down 3% / yr annually _____ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Future 2016 Future
Slide 29: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . . 14 Years Future 6% - 8% 7% $46.17 2016 High! Stock price up EPS a over 1,000% since 2003! Up $100 mil annually Stock $3.49 Up $100 mil / yr $2.1 Price 2003 Low $0.9 OCF (bil) Self-Funded O&M (bil) $0.6 Down 2% - 3% Elec. Non-fuel $0.8 Down 3% / yr annually _____
Slide 30: 2017 Financial Targets
2017 Financial Targets . . . . 2017 Next 5 Years Adjusted EPS (non-GAAP) $2.14 - $2.18 +6% to +8% +6% to +8% Operating cash flow (mils) $1,650 Up $100/year Dividend payout ratio ~ 62% ~ 62% Customer price (excl. fuel) Electric ~2% ~2% Gas ~2% ~3% FFO/Average debt 18½% ~18% Customer investme
Slide 31: Performance Delivering Hometown Service
PERFORMANGE \ DELIVERING HOMETOWIN 30
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Slide 33: Q&A
Q&A 32
Slide 34: GAAP Reconciliation
GAAP Reconciliation
Slide 35: 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 2015 2016 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 $1.89 $1.98 Pretax items:
Slide 36: Earnings By Quarter and Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings By Quarter and Year GAAP Reconciliation (Unaudited) (In Millions, Except Per Share Amounts) 2016 1Q 2Q 3Q 4Q YTD Dec Reported net income - GAAP $164 $124 $186 $77 $551 Pretax items: Electric and gas utility - - 11 * 11 Tax impact - - (4) (*) (4) Enterprises * * * 1 1
Slide 37: CMS Energy EBITDA GAAP Reconciliation
CMS ENERGY CORPORATION EBITDA GAAP Reconciliation (Unaudited) In Millions Twelve Months Ended 03/31/17 12/31/16 03/31/16 Reported earnings - GAAP $ 586 $ 551 $ 485 Interest on long-term debt 411 411 390 Other interest expense 30 29 15 Allowance for borrowed funds used during construction (5) (5) (4)
Slide 38: Consumers Energy EBITDA GAAP Reconciliation
CONSUMERS ENERGY COMPANY EBITDA GAAP Reconciliation (Unaudited) In Millions Twelve Months Ended 3/31/2017 12/31/16 3/31/2016 Reported earnings - GAAP $ 653 $ 614 $ 549 Interest on long-term debt 262 261 254 Other interest expense 12 12 2 Allowance for borrowed funds used during construction (5) (5)
Slide 39: Reconciliation of Gross Operating Cash Flow to GAAP
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2015 2016 2017 2018 2019 2020 2021 Consumers Operating Income + Depreciation & Amortization $ 1,866 $ 2,037 $ 2,135 $ 2,292 $ 2,547 $ 2,678 $ 2,816 Enterprises Project Cash Flows 20 46 56 54 53 53
Slide 40: Consumers Energy 2017 Cash Flow Forecast GAAP Reconciliation
Consumers Energy 2017 Cash Flow Forecast GAAP Reconciliation (in millions) (unaudited) Reclassifications From Sources and Uses to Statement of Cash Flows Interest/ Capital Presentation Sources and Uses Tax Other Financing Other Working Accts/Rec Lease Pymts Securitization Common Consolidated Stateme
Slide 41: CMS Energy Parent 2017 Cash Flow Forecast GAAP Reconciliation
CMS Energy Parent 2017 Cash Flow Forecast GAAP Reconciliation (in millions) (unaudited) Reclassifications From Sources and Uses to Statement of Cash Flows Presentation Sources and Uses Non Equity Consolidated Statements of Cash Flows non-GAAP Uses GAAP Description Amount as Operating Other Amount De
Slide 42: Consolidated CMS Energy 2017 Forecasted Cash Flow
Consolidated CMS Energy 2017 Forecasted Consolidation of Consumers Energy and CMS Energy Parent Statements of Cash Flow (in millions) (unaudited) Eliminations/Reclassifications/Consolidation to Arrive at the Consolidated Statement of Cash Flows Statements of Cash Flows Other Consumers Equity Consume
Slide 43: Summary of Consolidated Earnings: GAAP to Non-GAAP
CMS Energy Corporation SUMMARY OF CONSOLIDATED EARNINGS Reconciliations of GAAP Net Income to Non-GAAP Adjusted Net Income (In Millions, Except Per Share Amounts) First Quarter (Unaudited) 2017 2016 Net Income Available to Common Stockholders $ 199 $ 164 Reconciling Items: Discontinued Operations Lo