Cms Energy Corporation · NYSE:CMS

Cms Energy — Investor Presentation (February 2017)

28 slides from Cms Energy's investor presentation, Feb 10, 2017

  1. Slide 1: Investor Meetings February 10-14, 2017

    Investor Meetings February 10 -14, 2017  Palisades Replacements Gas Pipelines

  2. 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

  3. Slide 3: EPS growth history and plan

    EPS . . . . a +8% EPS a $2.18 $2.10 +7% Average growth per year +8% $2.02 +6% +7% $2.14 +6% $1.89 $2.01 $1.97 $2.17 $1.77 $1.87 $2.13 $1.85 $1.66 $1.78 $1.55 $1.73 Not Yet in Plan $1.66 $1.63 Customer investment $1.45 $1.55 Opportunities $1.36 $1.52 Original guidance More cost performance $1.44 $1

  4. Slide 4: The Consumers Energy Way

    The Consumers Energy Way . . . . The CE Way Safety . Quality . Cost . Delivery . Morale CUSTOMER ENABLED FOCUS EMPLOYEES BUSINESS RESULTS CONTINUOUS STANDARDIZED IMPROVEMENT PROCESSES . . . . a culture of continuous improvement. 3

  5. Slide 5: 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% . . . . c

  6. Slide 6: Ten-year, $18 bil Customer Investment Plan

    Ten-year, $18 bil Customer Investment Plan . . . . 2018 - 2027 Details Capex $18 billion (bils) Gas Infrastructure & Maintenance $ 8 Supply (incl. renewables) 4 Gas Electric Infrastructure & Electric Distribution 6 Distribution Maintenance Total Customer Investment $18 Future Opportunities: Improve

  7. Slide 7: O&M Cost Performance Helps to Fund Investment

    O&M Cost Performance Helps to Fund . . . . Actual Cost Reduction New Annual Cost Savings (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 - 4 -

  8. Slide 8: 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 +

  9. Slide 9: Operating Cash Flow Funds Investment

    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

  10. Slide 10: Potential Tax Reform

    Potential Tax Reform . . . . Assumptions Impact CMS Impact • Lower federal tax rate at 15% Utility (vs 35%) – More than ample investment “Backfill” • Loss of interest deductibility on Enterprises all debt (may be less/better) – Improved earnings & cash flow Parent • Loss of state income tax – Intere

  11. Slide 11: Tax Policy Reform

    Tax Policy Reform . . . . Scenarios a Non-Regulated Alternative Corporate Tax Rate 15% 20% 25% EnerBank interest income offsets Parent interest expense Series 1 Assumptions Asset Expensing Amount 100% 100% 100% $130 mil Annual Backfill (mils) $100 $200 $300 Loss of Interest Deductions 100% 100% 100%

  12. Slide 12: Another Step Towards Clean & Lean

    Another Step Towards Clean & Lean . . . . Palisades PPA Contract Approach Cost Contract (mils) price-to- 1• Replace above market PPA contract $450 $172 mil Consumers (customer savings) 400 2• Fully utilize existing assets 350 3• Emphasis on no carbon solutions • Energy Efficiency, 300 • Demand Respo

  13. Slide 13: Capacity Diversity

    Capacity Diversity . . . . Nuclear 8% Oil 10% Coal Purchases 21% 3% Renewables 10% 2017 Pumped Storage Gas Nuclear Oil 6% 8% 12% 36% Future Capacity Mix Renewables 3% Pumped Storage Coal • More Renewables; 15% by 2021 41% • Expanded Pumped Storage 11% 2005 • Clean Energy Resources Gas • Terminate nu

  14. Slide 14: New Energy Law

    New Energy Law . . . . Customer Investor What’s New? What is the Impact? • Subsidies addressed • Price competitiveness • ROA reform • Secure capacity • Net metering • Increased energy efficiency & demand • Improved incentives response incentive • RPS -- 15% by end of 2021 • Additional rate base oppo

  15. Slide 15: Consistent Growth Through Adversity

    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

  16. Slide 16: Appendix

    Appendix

  17. Slide 17: CMS Customer Investment

    CMS Customer Investment 2017-2021 2022-2026 2017-2026 2017 2018 2019 2020 2021 Subtotal Subtotal Total (mils) (mils) (mils) (mils) (mils) (mils) (mils) (mils) Supply Traditional Generation $ 263 $ 312 $ 374 $ 263 $ 236 $ 1,448 $ 1,463 $ 2,911 Clean Power 147 64 70 54 33 368 1,073 1,441 Total Supply

  18. Slide 18: Energy Mix

    Energy Mix . . . . Supply 2015 2016 • Coal 41% 24% a • Gas 18 27 • Renewables 4 4 • Pumped Storage (1) (1) b • PPA (Nuclear and Gas) 38 46 b _____ a Includes 3% from Classic 7 coal plants (shutdown April 2016) b Includes market purchases . . . . significant shift away from coal. 17

  19. Slide 19: 2016 EPS

    2016 EPS . . . . a Adjusted EPS (non-GAAP) Warm Summer Non- weather 6¢ $2.02 Weather Reinvestment +7% 14¢ $1.99 Weather & Recovery Storms Pension “Yield Curve” 5¢ Mild Weather 3¢ Enhanced Capitalization 3 Debt Pre-funding 4 ‘15 Pension Contribution 2 Foundation & Low Income 5 Improved “UAs” & Other

  20. Slide 20: 2017 Financial Targets Updated

    2017 Financial Targets Updated . . . . 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 investmen

  21. Slide 21: 2017 EPS Guidance RAISED

    2017 EPS Guidance RAISED . . . . a Adjusted EPS (non-GAAP) • Utility • Electric $1.63 - $1.65 • Gas 0.67 - 0.69 Total Utility $2.30 - $2.34 • Enterprises 0.09 Prior • Parent and other (0.25) Guidance Total EPS $2.14 - $2.18 $2.13 - $2.17 +6% to +8% • Operating cash flow (GAAP) (mils) $1,650 _____ a

  22. Slide 22: 2017 EPS

    2017 EPS . . . . a $2.14 - $2.18 Customer base rates < 2% +6% to +8% 3¢ – 7¢ Cost down 29¢ $2.02 2%! 4¢ (24)¢ _____ 2016 2016 Customer Investment O&M Cost Savings Sales and Rates Parent & Other 2017 2017 a Adjusted EPS (non-GAAP) . . . . growth up 6% to 8% over 2016. 21

  23. Slide 23: 2017 Sensitivities

    2017 Sensitivities . . . . 2017 Impact Sensitivity EPS OCF (mils) Sales a • Electric (37,704 GWh) + 1% + 5¢ + $ 20 • Gas (302 Bcf) + 5 + 7 + 30 – – 55 Gas prices (NYMEX) + 50¢ + 0 + ROE (planned) • Electric (10.3%) • Gas (10.1%) + 20 bps + 20 + + 3 1  + 15 + 6 Interest Rates +100 bps + < 1 – 7 + Cu

  24. Slide 24: GAAP Reconciliation

    GAAP Reconciliation

  25. Slide 25: 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:

  26. Slide 26: Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities

    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 $ 2,138 $ 2,315 $ 2,547 $ 2,678 $ 2,816 Enterprises Project Cash Flows 20 46 53 54 53 53

  27. Slide 27: Clean and Lean Energy Portfolio

    CLean AND “Lean” Energy Portfolio . . . . Sustainable Strategy Creates Headroom = OUR MODEL; OUR PLAN CUSTOMERS A) Energy waste elimination/reduction Incentives – Energy efficiency For: Palisades – Demand response replacement (saves $45 mil per year), and gas B) Fully utilize assets -- upgrades: – L

  28. Slide 28: Actual Plan Model

    Actual Plan Model +7%/ year 2017+ Plan $1.89 $2.02 6% - 8% $1.77 Capital investment 6% - 8% a $1.55 $1.66 Adjusted EPS $1.21 $1.26 $1.36 $1.45 $0.81 $1.08 $1.02 $1.08 $1.16 $1.33 - O&M cost reductions 2 - 3 pts $0.90 $0.96 84¢ 96¢ 66¢ - Sales growth 1 Int’l Sale $0.84 50¢ Dividend 20¢ 36¢ - No “bloc

CMS Energy — Investor Presentation (February 2017) on 6ix