Cms Energy Corporation · NYSE:CMS
Cms Energy — Q1 2018 Earnings Presentation
30 slides from Cms Energy's earnings presentation, Apr 26, 2018
Slide 1: 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 2: Agenda
Agenda Business Update Patti Poppe President & CEO Financial Results & Outlook Rejji Hayes First Quarter Results Regulatory Update Executive VP & CFO 2 PROFIT PLANET PEOPLE
Slide 3: First Quarter keeps us on track
First Quarter . . . . . . keeps us on track. Prior Year EPS $0.86 +21% Reaffirm Guidance Full-year EPS $2.30 to $2.34 _ _ _ _ _ a Adjusted EPS (non-GAAP) Long-Term Outlook EPS & DPS growth +6% to +8% a 3 6% to 8% Results Amount Vs. a
Slide 4: The Triple Bottom Line
The Triple Bottom Line . . . 4 . . . world class performance delivering hometown service. PERFORMANCE PEOPLE PLANET PEOPLE • PLANET • PROFIT PROFIT
Slide 5: Clean Energy Goal
5 Clean Energy Goal . . . . . . breakthrough thinking for our planet. By 2040 80% carbon Reduction zero coal 1 Bn gallons of h2o saved 5,000 acres protected Over the Next 5 Years 35% reduction in landfill waste
Slide 6: Gas Long-Term Regulatory Planning
Gas Long-Term Regulatory Planning . . . . . . provides significant customer value and long-term visibility. Electric Regulatory / Policy 6/15: File long-term generation plan (IRP) U-18461 3/29: Final order U-18322 2018 1/1: Gas investment tracker $18 MM U-18124 3/1: Filed 5-Yr electric dist. plan U-
Slide 7: Clean and Lean
7 . . . matches supply with demand in a modular way. Clean and Lean . . . Old Utility Model Clean And Lean Big Build Big Build O&M Fuel Big Bets Modular Fully utilize assets O&M Fuel Lower Risk Results in excess capacity, higher cost Matches supply with demand Excess supply Excess supply Retirement
Slide 8: Consistent Growth Through Recession
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 Adjusted EP
Slide 9: 2018 EPS First Quarter Nine Months To Go
10 2018 EPS . . . First Quarter Nine Months To Go 15¢ (+ 21%) (2)¢ - 2¢ $2.17 . . . in line with guidance. First Quarter $0.86 $2.30 - $2.34 First Quarter $0.71 6% - 8% 5¢ a _ _ _ _ _ a Adjusted EPS (non-GAAP) 7¢ (1)¢ (6)¢ - (2)¢ 1¢ (7)¢ 14¢ 2017 Weather Cost Savings Rates & Investment Economy, Ente
Slide 10: Managing Work Every Year
Managing Work Every Year . . . . . . maximizes benefits for customers AND investors. 2010 2011 2012 2013 2014 2015 Offsets RECORD WARM Mild Summer Cost productivity above plan Reinvestment Hot Summer Mild Winter Hot Summer Storms Hot Summer Cost productivity above plan 0 Cost productivity Reinvestme
Slide 11: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . EPS Growth - Cost reductions - Sales (continued economic development & EE) - Other (Enterprises, tax planning, etc.) INVESTMENT SELF-FUNDED Customer Prices “at or below inflation” Plan 6% - 8% . . . enhanced with tax reform. 2 - 3 pts 1 2 5 - 6 pts < 2% Self Fundin
Slide 12: Needed Customer Investment
Needed Customer Investment . . . . . . potentially pulled forward by tax reform. $21 Bn Rate Base Growth Large and Aging System $15 Bn > $50 Bn System Need $10 Bn 5-Yr Plan Gas Electric 7% CAGR 30% 70% 40% 60% 13 > $18 Bn 10-Yr 2017 2022
Slide 13: Our Entire Cost Structure
Our Entire Cost Structure . . . Cost Components Fuel and Power Costs Taxes Residential Electric Bills Residential Gas Bills $85 100% Capital Investments O&M Costs Cost of Capital . . . provides opportunities to lower costs and create headroom. ~70% 14 Tax Reform Coal to Gas / PPA $100 $106 $62 Down
Slide 14: Credit Metrics Maintained
S&P / Fitch Moody’s S&P (Dec. ‘16) Moody’s (Apr. ‘17) Fitch (Jul. ‘17) 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 FFO / Average Debt . . . at solid investment-grade levels. Credit Met
Slide 15: 2018 Sensitivities
2018 Sensitivities . . . Full Year Impact Sensitivity EPS OCF Sales a Electric (37,477 GWh) Gas (303 Bcf) + 1% + 5 + 6¢ + 9 + $ 20 + 40 Gas prices (NYMEX) + 50¢ 0 55 ROE (planned) Electric (10.1%) Gas (10.1%) + 10 bps + 10 + 1½ + ½ + 6 + 3 Interest rates +100 bps < 1 7 – + . . . reflect strong risk
Slide 16: Utility Driven, Low Risk Growth
Utility Driven, Low Risk Growth . . . CMS Energy Long-Term Growth Plan - Utility - Enterprises - Parent & Other Total EPS Growth 6 - 8% . . . delivers consistent, industry-leading financial performance. 5 - 7% 0 - 1 1 - (1) Segments: _ _ _ _ _ a Adjusted EPS (non-GAAP) a Needed system upgrades / rob
Slide 17: Compelling Investment Thesis
Compelling Investment Thesis 18 Strong Cash Flow & Balance Sheet Aging Infrastructure Diversified Service Territory Affordable Prices Constructive Regulation
Slide 18: Compelling Investment Thesis
Compelling Investment Thesis cus ewera>> s~
Slide 19: Thank You! Q&A
Q&A Thank You!
Slide 20: Tax Reform – Three Step Approach
Tax Reform – Three Step Approach . . . . . . for returning benefits to customers. Tax Credit Timeline 3/30: Filed forward-looking Credit A for Gas Utility Step 1: (Credit A) To be filed to determine forward-looking customer credit to adjust for tax reform Gas Utility by Mar. 30th Electric Utility by
Slide 21: Tax Reform Impact
Tax Reform Impact . . . . . . is accretive to our long-term plan. Impacts Takeaway Utility Lower customer rates create capex headroom (up to 4%) Facilitates self-funding strategy Enterprises & EnerBank Lower tax rate improves earnings Offers modest diversification Parent interest Corporate expense L
Slide 22: Operating Cash Flow Generation
Operating Cash Flow Generation . . . . . . remains strong and supports our capital plan. Amount (Bn) $ Investment Cash flow before dividend NOLs & credits $0.6 $0.4 $0.3 $0.3 $0.3 $0.2 23 ~$9 Bn in aggregate 1.7 1.65 1.65 1.75 1.85 1.95 (0.8) (0.3) 0.2 0.7 1.2 1.7 2.2 2017 2018 2019 2020 2021 2022
Slide 23: DIG & Peakers offers risk mitigation to Plan
“DIG” (750 MW) & Peakers (200 MW) . . . . . . offers risk mitigation to Plan. Pre-Tax Income (MM) $12 $30 $45 Outage Pull-ahead Better Performance Future Opportunities Capacity ($/kW-mth) ≈ $1.00 ≈ $2.00 ≈ $3.00 $4.50 $7.50 Available: Energy Capacity 0% 0% 25% 0 0 0 $ +$20 +$40 Contracts (layering i
Slide 24: DIG & Peakers
IG” (730 MW) & Peakers (200 MW) Pre-Tax Income cs vena > Opportunities ' (MM) $80 1 $75 Contracts ' (layering in over time) 1 1 ! 1 { 40 H $30 ' | Performanc 1 $12 H ! 1 0 1 2015 2016 2017 2018 Future man ($/kW-mth) = $1.00 =$2.00 =$3.00 < $3.00 $4.50 $7.50 + Energy 0% 0% 0% 0% + Capacity 0 0 0 <5 o
Slide 25: Earnings Per Share By Year GAAP Reconciliation
26 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 2017 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 $1.64
Slide 26: Reconciliation of GAAP Net Income to Non-GAAP by Quarter
27 CMS ENERGY CORPORATION Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income by Quarter (Unaudited) In Millions, Except Per Share Amounts 2018 1Q Net Income Available to Common Stockholders $ 241 Reconciling items: Electric utility and gas utility - Tax impact - Enterprises * Tax impa
Slide 27: Reconciliation of GAAP EPS to Non-GAAP by Segment
28 CMS ENERGY CORPORATION Reconciliation of GAAP EPS to Non-GAAP Adjusted EPS by Segment (Unaudited) In Millions, Except Per Share Amounts Three Months Ended 3/31/18 3/31/17 Electric Utility Reported net income per share $ 0.49 $ 0.44 Reconciling items: Restructuring costs and other - - Adjusted net
Slide 28: Weather Impacts on Year Over Year Earnings
29 CMS ENERGY CORPORATION Weather Impacts on Year Over Year Earnings (Unaudited) CMS ENERGY CORPORATION Weather Impact on Year Over Year Earnings (Unaudited) In Millions, Except Per Share Amounts Three Months Ended 3/31/2018 3/31/2017 Change Adjusted Net Income $ 241 $ 200 $ 41 Non-Normal Weather Im
Slide 29: Reconciliation of Non-GAAP FFO to Average Debt Ratio
30 CMS ENERGY CORPORATION Reconciliation of Non-GAAP FFO to Average Debt Ratio (Unaudited) FUNDS FROM OPERATIONS In Millions Year Ended 12/31/17 Net Cash Provided by Operating Activities $ 1,705 Reconciling item: Securitization amortization and other 10 Funds From Operations (FFO) – Non-GAAP $ 1,715
Slide 30: Reconciliation of Non-GAAP FFO to Average Debt Ratio
‘(CMS ENERGY CORPORATION Reconciliation of Non-GAAP FFO to Average Debt Ratio (Unaudited) Hs EWR [etch Prete Operating Atte rans From Operation F70)-Non GAP Icing roms |e Now GAAP ssn rm fom open FFO)- on GAA jee dtm aa? 30