Cms Energy Corporation · NYSE:CMS
Cms Energy — Investor Presentation (February 2022)
53 slides from Cms Energy's investor presentation, February 2022
Slide 1: Investor Meetings: Leading the Clean Energy Transformation
Investor Meetings Leading the Clean Energy Transformation February 2022
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: Overview
Overview “severe?
Slide 4: CMS Energy Overview
CMS Energy Overview Corporate Structure Key Information CMS Energy 2021 Financial Statistics (NYSE: CMS) Based in Jackson, MI ~8,500 Employees (41% unionized)a Consumers Energy Enterprises $7.3B Revenue 2021 $767M Adjusted net incomeb >95% pro forma Avg. Rate Base 19 years Industry-leading financial
Slide 5: Consumers Energy Positioned Well
Consumers Energy Positioned Well . . . 4th Largest Combination Utility • Electric Utility 1.9M electric customers 7,852 MW of capacity • Gas Utility 1.8M gas customers 309 Bcf gas storage (#1 in the U.S.) Attracted • Serving 6.8M Michigan residents >500 MW of new or Consumers Energy Planet Goals exp
Slide 6: 2021 Successes
2021 Successes . . . People Planet Profit • #1 utility in the U.S. for America’s Best • Transformational Clean Energy Plan (IRP) • 7% adjusted EPS growth Employers for Women and America’s filed – exit coal & achieve ~60% carbon Best Employers for Diversity by Forbes® emissions reduction by 2025 • An
Slide 7: Investment Thesis
Investment Thesis “severe?
Slide 8: Simple Investment Thesis
Simple Investment Thesis . . . Industry-leading clean energy commitment a Net Zero Carbon (2040) & Net Zero Methane (2030) Clean Energy Leader Diversified Service Infrastructure Excellence through the Territory Renewal Top-tier regulatory jurisdictionb Strong Cash Flow Constructive & Balance Sheet L
Slide 9: Integrated Resource Plan (IRP)
Integrated Resource Plan (IRP) . . . Key Outcomes Retires ALL coal by 2025 (depreciated over design life) Adds >$1B of rate base over next 5 years (>95% utility earnings by 2025) Accelerates decarbonization (~60% carbon emissions reduction by 2025 a) Increases renewable resource deployment (~8 GW of
Slide 10: Infrastructure Renewal
Infrastructure Renewal . . . Electric distribution Exiting coal by 2025 and system is adding 8 GW of solar by 2040 older than peers 25 years of main replacement Largest electric through our a distribution system in U.S. Enhanced Infrastructure Replacement Program Presentation endnotes are included a
Slide 11: Top-Tier Michigan Regulatory Environment
Top-Tier Michigan Regulatory Environment . . . Legislative Strong Top Tier Framework Leadership Regulatory Environmenta Timely investment recovery Michigan − Forward-looking test years 1 7 2013-present − 10-month rate cases 2 9 Supportive Incentives − Constructive ROEs 3 18 − 10.7% ROE for RPS − EE
Slide 12: Our Entire Cost Structure
Our Entire Cost Structure . . . Cost Components Estimated Cost Savings 100% Year Event Savings Fuel and Power Costs 2022 Palisades retirement >$90M 2023 Karn 1&2 coal unit $30M ~70% Non-capital retirements (adj. O&M savingsb) related O&M Costs 2025 MCV contract change >$60M Taxes 2025 Campbell coal
Slide 13: Credit Metrics Maintained
Credit Metrics Maintained . . . Consumers Energy S&P Moody’s Fitch Ratings Drivers Senior Secured • Strong financial A A1 A+ position Commercial Paper A-2 P-2 F-2 • Growing operating Outlook Stable Stable Stable cash flow CMS Energy • Return on regulated investment Senior Unsecured BBB Baa2 BBB Juni
Slide 14: Utility Sales Continue to Recover
Utility Sales Continue to Recover . . . a Weather-Normalized Electric Deliveries Economic Development (2021 vs. 2020) Legislative Support • $1B of state incentives 105 MW b • New energy intensive 126 MW 5.7% economic development 3.3% rate 75 MW b 1.2% 101 MW 69 MW Attracted >500 MW of new 45 MW or e
Slide 15: IRP
IRP 15 15
Slide 16: Proposed IRP Objectives
Proposed IRP Objectives . . . Key Objectives Current Plan 2021 IRP ~(60)% carbon • Accelerates Decarbonization Exit coal Exit coal emissions by 2040 by 2025 reduction Retire by 2025a Karn 3&4 (oil) 2031 2023 Campbell 1&2 / Campbell 3 2031/2039 2025 No new Purchase >2 GW • Ensures Reliability, Resili
Slide 17: Increasing Renewables & Customer Programs
Increasing Renewables & Customer Programs . . . 2018 IRP 2021 IRP Future IRP Key Benefits ✓Capex approved 50% PPA / 50% Filed for approval of first 3 years Long-term alignment, approval in future IRP • Modular build-out; riding the cost- owned >50% owned curve down Opportunity +1,500 MW • Total of ~
Slide 18: Our Clean Energy Transformation
Our Clean Energy Transformation . . . Capacity Mixa 12% 15% 15% 15% 8% 10% 10% 12% 11% 10% 11% • Exits coal by 2025 28% 40% • Ensures reliability, 26% resilience and affordability • >3x renewable 63% 63% 14% energy capacity 47% 35% 18% Today 2025 2030 2040 Coal Renewables Natural Gas Storage Peaking
Slide 19: Our Energy Supply Will Be Cleaner
a Our Energy Supply Will Be Cleaner . . . Current Mix Future Mix (2031) Customer >50% (Post-MCV PPA Expiration) Programs Carbon free Future 2% opportunities Wind, Storage Hydro & 3% Customer other Wind, Programs 10% Hydro & 17% other 10% Natural Natural Gas Gas 46% Nuclear 39% 42% 19% Storage 2% Net
Slide 20: ESG
ESG 20 20
Slide 21: ESG Disclosures
ESG Disclosures . . . • CMS Energy & Consumers Energy • DE&I Website Websites • SASB Index (Electric Utilities & Power • SEC Filings (10-K & Proxy) Generation) • Carbon Disclosure Project • SASB Index (Gas Utilities & Distributors) • Report Scope 1, 2 & 3 Emissions • Water • TCFD Index • Climate Ass
Slide 22: Growing Utility Renewables
Growing Utility Renewables . . . Renewable Portfolio Standard 2018 Integrated Resource Plan Project Treatment COD Investment Capacity Project Treatment COD Investment Capacity ($M) (MW) ($M) (MW) Lake Winds 10.7% ROE 2012 100 Mustang Mile Solar Prevailing ROE, BTA ’23/’24 $260 150 Cross Winds I 10.7
Slide 23: Exiting Coal Completely by 2025
Exiting Coal Completely by 2025 . . . Coal % of PP&Ea Growing Utility Renewables (Estimated % Adj. EPS) <20% 8 GW of investment opportunity 2016 Classic 7 PLUS retirement and Incentives on PPAs and 2023 Karn 1&2 Demand Response retirement ~13% <10% 2025 ~9½% Campbell 1–3 retirement ~1½% 0% Campbell
Slide 24: Methane Emissions Reduction
a Net Zero Methane Emissions by 2030 . . . Careful Planning to Reach Goals Methane Emissionsa • Accelerating completion of Vintage Service (Gas Delivery System) Replacement (VSR) and Enhanced Infrastructure 2018 2025 2030 Replacement Program (EIRP) by 2030 VSR b Continued Asset • Continued energy e
Slide 25: Cyber and Physical Security Program
Cyber and Physical Security Program . . . Program Focus & Approach • Physical and cyber security are integrated Robust corporate governance of security • Protect critical infrastructure, customer data and • Board oversight of safety programs employee safety • Company-wide phishing tests & department
Slide 26: DE&I is Embedded in Our Company Culture
DE&I is Embedded in Our Company Culture . . . Diversity by the Numbers PoC Female 27% Board of 36% Unconscious bias Directors Male White 64% 73% training for all leaders in 2021 and 100% of workforce in 2022 PoC Executive Female 27% Leadership 35% Garrick Rochow, President & CEO Consumers Male White
Slide 27: Supplier Diversity Initiatives
Supplier Diversity Initiatives . . . Focus & Approach • Expanding diverse supplier network, validating certification of diverse vendors and Enhanced Tier II reporting for suppliers of our suppliers • Actively engaging with diverse-supplier organizations nationally and in Michigan • Supporting and de
Slide 28: Exceptional Governance
Exceptional Governance . . . 11 Members 91% Independent . . . led by an independent Chair and highly skilled, diverse Board. 28
Slide 29: Diverse, Engaged and Experienced Board
Diverse, Engaged and Experienced Board . . . Diversity Experience 61 Average age Senior Leadership Financing Accounting or Fin. Reporting 100% 100% Compared to Regulatory Environment & Governmental Affairs 100% 36% Female 26% for the S&P 500a Risk Management 82% Compared to Customer Experience 82% 1
Slide 30: Year-End 2021 Earnings Call
Year-End 2021 Earnings Call 30 30
Slide 31: 2021 Financial Results & Outlook
2021 Financial Results & Outlook . . . 2021 Results Amount Commentary Adjusted EPS $2.65 High end of guidance Adjusted OCF ($M) $1,843 Up >$80M vs. Plana 2022 Full-Year Adjusted EPS Guidance $2.85 – $2.89 Raised guidance Annual Dividend Per Share $1.84 Up 10¢ Long-Term Adjusted EPS Growth +6% to +8%
Slide 32: Updated Customer Investment Plan
Updated Customer Investment Plan . . . New Utility Investment Plan Rate Base Growth Upside Potential Opps: Amount ($B) 7%/yra ~$29½B 19% IRP ~$1.3 VGP ~ 1.0 55% Electric utility Electric ~ 1 – 1½ investment ~$21B ’22 – ’26 Gas ~ 1 – 1½ 45% $14.3B ~$4B - $5B 36% 2021 2026 Clean Energy Generation Elec
Slide 33: Utility Customer Investment Plan
Utility Customer Investment Plan 5-Year Plan ($B) 2022 2023 2024 2025 2026 Total Clean Energy Generation $0.7 $0.6 $0.6 $0.5 $0.4 $2.8 Electric Distribution & Other 0.8 1.1 1.1 1.0 1.1 5.1 Gas Utility 1.1 1.2 1.3 1.4 1.4 6.4 Total $2.6 $2.9 $3.0 $2.9 $2.9 $14.3 Depreciation & Amortization $1.1 $1.1
Slide 34: Michigan's Strong Regulatory Construct
Michigan’s Strong Regulatory Construct . . . 2021 2022 Integrated Resource Plan ✓Jun. 30 : th Filed Integrated Apr.: Jun.: Initial order Final order Resource Plan (IRP) U-21090 Electric ✓ Dec. 22 : nd Final order $54M a Early Q2: Q1 2023: File next Expected U-20963 rate case final order 9.9% ROE Gas
Slide 35: 2021 Results
2021 Results . . . Full Year Adj. EPS by Segment 2020 2021 2021 Reported EPS $2.64 $4.66 Utility $3.07 Adjustmentsa (0.17) (2.01) Enterprises 0.08 Adjusted EPSa $2.47 [5XX5 $2.65 EnerBank Disc. Ops. Fourth Quarter 2020 2021 Parent and Other (0.50) Reported EPS $0.55 $2.20 Total Adjusted EPS $2.65 a
Slide 36: 2021 Adjusted EPS
2021 Adjusted EPS . . . 54¢ $2.65 $2.47 5¢ (39)¢ (2)¢ 2020 Weather Rates & Customer Usage, 2021 Investment Initiatives & Cost Enterprises, Savings Tax & Other . . . managing through COVID-19 risks. . . . up 7% vs. prior year. 36
Slide 37: 2021 Objectives Achieved
2021 Objectives Achieved . . . Objectives Actual Adjusted EPS $2.61 – $2.65 $2.65✓ DPS growth In-line w/ earnings $1.84 ✓ Adjusted OCF ($M) $1,760 $1,843 ✓ Target credit ratings Solid investment grade Solid ✓ investment grade FFO/Debt Target: Mid-teensa FFO/Debt Target: Mid-teensa Utility investment
Slide 38: 2022 Guidance Offers Continued Growth
2022 Guidance Offers Continued Growth . . . Adjusted EPS Utility $3.29 – $3.32 Enterprises 0.12 – 0.14 Parent and Other (0.56) – (0.57) Consolidated EPS $2.85 – $2.89 Premium Growth . . . off 2021’s actual performance. 38
Slide 39: 2022 Adjusted EPS
2022 Adjusted EPS . . . $2.85 – $2.89 21¢ $2.65 1¢ 5¢ (3)¢ – (7)¢ 2021 Normal Rates & Cost Savings & Usage, 2022 Weather Investment Normalized Enterprises, Storms Tax & Other . . . managing through COVID-19 risks. . . . reflects another year of premium growth. 39
Slide 40: Near- and Long-Term Objectives
Near- and Long-Term Objectives . . . 2022 Long-Term Plan Adjusted EPS guidance $2.85 – $2.89 +6% to +8% Toward the high end DPS growth guidance +6% to +8% +6% to +8% Target credit ratings Solid Solid investment grade investment grade FFO/Debt Target: Mid-teensa FFO/Debt Target: Mid-teensa Utility in
Slide 41: Operating Cash Flow
Operating Cash Flow . . . Adjusted Operating Cash Flow NOLsa & Credits Year Amount ~$2.1B ($B) ~$1.8B 2021 $0.4 2022 $0.4 ~$9.0B in ~$10.7B in aggregate aggregate 2023 $0.5 2024 $0.6 2025 $0.5 2026 $0.5 2017 - 2021 2022 - 2026 Plan Average Average Presentation endnotes are included after the appendi
Slide 42: 2022 Planned Financings
2022 Planned Financings . . . Financings Existing Facilities 2022 Plan ($M) $250M Consumers Energy: (Nov-2023) First Mortgage Bonds $800 a $2.0B of net liquidity CMS Energy: position with no CP outstanding Hybrid / Continuous Preferred None (as of 12/31/21) Planned Equity -- $56M contracted $850M (J
Slide 43: 2022 Sensitivities
2022 Sensitivities . . . Full-Year Impact Sensitivity Adj. EPS OCF 2022 Adj. EPS Sensitivities (1% Full Year in Volume) Salesa (¢) ($M) Electric Gas Electric (~37,000 GWh) + 1% +7 + 27 Residential 4¢ 2½¢ Gas (~304 Bcf) +1 +3 + 13 Commercial 2½ ½ Industrial ½ ½ Gas Prices + 50¢ +0 + 60 Utility Earn
Slide 44: Appendix
Appendix 44 44
Slide 45: Endnotes
Endnotes “severe?
Slide 46: Presentation Endnotes
Presentation Endnotes: Slide 4: aExcludes seasonal and contract workers bAdjusted, (non-GAAP) cDividend per share a Slide 5: Methane emissions from our natural gas delivery system and carbon emissions for our electric business Slide 6: aBy CultureIQ, top quartile for U.S. utilities bSource: Data fro
Slide 47: Presentation Endnotes
Presentation Endnotes: Slide 24: aMethane emissions from our natural gas delivery system since 2012 bVintage service replacement a Slide 27: 5-year program ending 2023 Slide 29: aSpencer Stuart - Institutional Investor Focus 2020: Board Composition; people of color (PoC) universe includes top 200 pu
Slide 48: GAAP Reconciliation
CMS Energy provides historical financial results on both a reported (GAAP) and adjusted (non-GAAP) basis and provides forward-looking guidance on an adjusted basis. During an oral presentation, references to “earnings” are on an adjusted basis. All references to net income refer to net income availa
Slide 49: Earnings Per Share By Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Per Share By Year GAAP Reconciliation (Unaudited) 2008 2015 2021 Reported earnings (loss) per share - GAAP $1.20 $1.89 $4.66 Pretax items: Electric and gas utility 0.08 - 0.10 Tax impact (0.03) - (0.03) Enterprises (0.02) * (*) Tax impact * (*) * Corporate interest an
Slide 50: Reconciliation of Operating Cash Flows
CMS ENERGY CORPORATION Reconciliation of GAAP Cash Flows from Operating Activities to Non-GAAP Adjusted Cash Flows from Operating Activities (Unaudited) In Millions 2017 2018 2019 2020 2021 Cash Flows from Operating Activities $ 1,705 $ 1,703 $ 1,790 $ 1,276 $ 1,819 Adjustments - Discretionary Pensi
Slide 51: Reconciliation of GAAP EPS to Adjusted EPS by Segment
CMS ENERGY CORPORATION Reconciliation of GAAP EPS to Non-GAAP Adjusted EPS by Segment (Unaudited) In Millions, Except Per Share Amounts Three Months Ended Twelve Months Ended 12/31/21 12/31/20 12/31/21 12/31/20 Electric Utility Reported net income per share available to common stockholders $ 0.21 $
Slide 52: Reconciliation of GAAP Net Income to Adjusted Net Income
CMS ENERGY CORPORATION Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income (Unaudited) In Millions, Except Per Share Amounts Three Months Ended Twelve Months Ended 12/31/21 12/31/20 12/31/21 12/31/20 Net Income Available to Common Stockholders $ 637 $ 158 $ 1,348 $ 755 Reconciling item
Slide 53: Reconciliation of Net Income by Quarter
CMS ENERGY CORPORATION Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income by Quarter (Unaudited) In Millions, Except Per Share Amounts 2021 1Q 2Q 3Q 4Q Net Income Available to Common Stockholders $ 349 $ 176 $ 186 $ 637 Reconciling items: Electric utility and gas utility - - - 29 Tax