Cms Energy Corporation · NYSE:CMS
Cms Energy — Investor Presentation (November 2016)
29 slides from Cms Energy's investor presentation, Nov 28, 2016
Slide 1: Investor Meetings November 28 – December 1, 2016
Investor Meetings November 28 – December 1, 2016 Ludington Pumped Storage Ray Compressor Station Cross Winds Energy Park Fourth largest in the world #1 LDC in gas storage #2 in renewable sales in the Great Lakes area
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
Slide 3: Who We Are
Who We Are . . . . +6% to +8% earnings growth in 2017 and beyond Industry-leading cost performance Lake Winds Largest coal reduction of any Ludington investor-owned utility Fourth largest pumped storage facility in world Cross Winds Electric service territory Headquarters Natural gas service t
Slide 4: Why Invest in CMS Energy?
Why Invest in CMS Energy? Our Growth Engine Supported By (2016-2025 Capex) ● UPSIDES -- More growth; no big bets (Investment, Sales, Cost, & DIG) ● PARTNERS -- Facilitate growth $17 Billion (Customers, Regulators, & Policy Makers) ● PASSION to improve for customers AND owners bil (Value, Reliability
Slide 5: Michigan Energy Law
Michigan Energy Law . . . . Present Law Propose Legislation Customer Benefits • 10% renewables by 2015 • 15% by 2021; 12½% by 2019 • Ensures electric reliability • Energy efficiency standards • EE & DM incentives • Promotes clean energy and waste reduction • File-and-implement cases • Shortened to 1
Slide 6: The Consumers Energy Way
The Consumers Energy Way . . . . The CE Way Safety Quality Cost Delivery . . . CUSTOMER ENABLED FOCUS EMPLOYEES Safety: Every day is a safe day Quality: We get it right the first time BUSINESS RESULTS Cost: We see and eliminate waste Delivery: We get it done on time CONTINUOUS STANDARDIZED IMPROVEME
Slide 7: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . . 2017+ Plan Capital 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% . . . . cont
Slide 8: Next 10 Years -- $17 Billion Investment
Next 10 Years -- $17 Billion Investment . . . . Electric Dist. Gas Supply Opportunity $6.5 bil $6.2 bil $4.3 bil $3 - $4 bil Maintenance Pipeline Deliverability Environmental Gas Infrastructure Electric Reliability Compression Clean Energy More Renewables Capacity Replacement Opportunity Grid Techno
Slide 9: O&M Cost Performance
O&M Cost Performance . . . . Actual Cost Reduction New Cost Savings (2015 over 2006) 2014 2016 & 2015 & 2017 Good Business Decisions (mils) (mils) • Attrition (VSP) $ - 35 $ - 35 • Productivity (Coal Gas) - 35 - 15 • “Pole Top” Hardening - 20 - 10 • Smart Meters - 5 - 20 “Consumers Energy Way” • Wor
Slide 10: 2016 EPS Outlook
2016 EPS Outlook . . . . Adjusted EPS (non-GAAP) Warm Summer Mild October Non- weather 6¢ Weather +6% to +7% 14¢ Weather & Recovery Storms Pension “Yield Curve” 5¢ Choices Enhanced Capitalization 3 2017 “Pull Aheads” 2¢ ‘15 Pension Contribution 2 Debt Pre-funding 5 Improved “UAs” & Other 3 Foundatio
Slide 11: Managing Work Every Year
Managing Work Every Year . . . . a 2008 2009 2010 2011 2012 2013 2014 2015 EPS Mild $2.00 Summer +18¢ +17¢ Cost +7% productivity above plan $1.80 +7% Offsets Reinvestment +13¢ +7¢ -13¢ Reinvestment Hot +7% Summer Mild RECORD $1.60 Winter Hot WARM Summer +7% Cost -9¢ productivity Reinvestment above p
Slide 12: Operating Cash Flow
Operating Cash Flow . . . . Amount Up $0.7 (bils) Billion Gross operating cash flowa $2.8 $ 2.9 up > $0.1 billion per year $2.7 Up $2.5 $0.8 billion $2.4 since 2009! 2.4 $2.2 Interest, working $2.1 capital and taxes $1.9 1.9 $1.55 1.4 Operating cash flow NOLs avoid 0.9 Investment need for block 0.4
Slide 13: Consistent Growth Through Challenges
Consistent Growth Through . . . . 7% CAGR a EPS Dividend 6% to 8% 6% to 7% 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.
Slide 14: Appendix
Appendix
Slide 15: Potential Tax Reform
Potential Tax Reform . . . . Assumptions CMS Impact • Federal tax rate 35% to 15% Utility – Lower rates for customers – Headroom for needed, new organic investment • Net interest expense not deductible Enterprises – Improved earnings & cash flow • 100% asset (investment) expensing Parent – Interest
Slide 16: O&M Cost Performance
O&M Cost Performance . . . . Room to Improve Here’s How (Electric Distribution Cost Per Customer) 2014 2015 $30 mil Build the job as to go until 1st Quartile 1st Quartile designed 2nd Quartile Consumers Accurately schedule ($97) the job Consumers ($100) 3rd Quartile “Field services” project 4th Quar
Slide 17: Capital Investment Grows
Capital Investment Grows . . . . Ten-Year Capital Investment Growth (bils) Details Ops Capex Prior New a (w/o Law) (bils) New vs Prior $20+ Electric reliability $0.4 + $1.5 Gas infrastructure 0.4 $17 Clean power 0.7 $15.5 New $1.5 Ops Replace expiring $2.0 PPAs; generation Reliability & pipes 1.0 Op
Slide 18: 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 New contracts $20 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: • Energy
Slide 19: Structural Capacity Solutions
Structural Capacity Solutions . . . . Proposed Agreement State Option MISO Option Prevailing State Forward Resource Competitive Retail Compensation Mechanism Allocation (FRA) Solution (CRS) (PSCM) • MISO to file with the FERC in November 2016 ROA Providers Own or Contract Capacity • Impacts Zones 4
Slide 20: Michigan
Michigan . . . . Michigan ranked #1 most competitive Midwest state for job creation by Site Selection Magazine Michigan ranked #7 best state to do business by CNBC (improved from #22 in 2015!) Grand Rapids named best city in the U.S. to invest in housing by Forbes Grand Rapids ranked #2 best U.S. ci
Slide 21: Clean Power Plan
Clean Power Plan . . . . Tons CO2 (mils) 20 Consumers Energy 2012 Emissions 19 18 Retire State of Michigan Target 17 950 MW (Consumers Energy’s share) coal 16 15 14 13 12 Positioned well for compliance 11 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 . . . . rec
Slide 22: Liquidity (as of September 2016)
Liquidity (as of September 2016) . . . . Renewal Capacity Availability $1.9 Billion CMS Energy $1.7 Billion Stronger liquidity 5-year revolver May 2021 $550 mils than peers $549 mils Consumers Energy 5-year revolver May 2021 650 Letter of Credit Apr 2018 568 Letter of Credit Aug 2018 68 Letter of Cr
Slide 23: Credit Ratings
Credit Ratings . . . . Scale Balancing Credit S&P / S&P Moody’s Fitch Fitch Moody’s (Dec. ‘15) (Mar. ‘16) (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 • Return on regulated BBB Baa2 CMS Unsecured investme
Slide 24: GAAP Reconciliation
GAAP Reconciliation
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 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 Pretax items: Electric an
Slide 26: Earnings Segment Results GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Segment Results GAAP Reconciliation (Unaudited) Three Months Ended Nine Months Ended September 30 2016 2015 2016 2015 Electric Utility Reported $ 0.69 $ 0.60 $ 1.42 $ 1.24 Downsizing Program 0.03 - 0.03 - Tax Impact (0.01) - (0.01) - Restructuring Costs and Other - -
Slide 27: Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2014 2015 2016 2017 2018 2019 2020 2021 Consumers Operating Income + Depreciation & Amortization $ 1,813 $ 1,866 $ 2,064 $ 2,150 $ 2,356 $ 2,520 $ 2,637 $ 2,783 Enterprises Project Cash Flows 20 20
Slide 28: Clean and Lean Energy Portfolio
CLean AND “Lean” Energy Portfolio . . . . Sustainable Strategy Creates Headroom A) Energy waste elimination/reduction CUSTOMERS – Energy efficiency For: investment in gas – Demand response infrastructure, grid, technology, and B) Fully utilize assets -- upgrades: PPA replacement – Ludington Pumped S
Slide 29: Actual Plan Model
Actual Plan Model 2017+ Plan 7% /year $1.89 $2.02 6% – 8% Capital investment 6% - 8% $1.77 a $1.55 $1.66 $2.00 - O&M cost reductions 2 - 3 pts Adjusted EPS $0.81 $1.21 $1.26 $1.36 $1.45 $1.08 $1.02 $1.08 $1.16 $1.24 - Sales growth 1 $0.90 $0.96 84¢ 96¢ Int’l Sale 50¢ 66¢ - No “block” equity 2 $0.84