Cms Energy Corporation · NYSE:CMS
Cms Energy — Baird 2014 Zurich Symposium
44 slides from Cms Energy's conference presentation, Jun 6, 2014
Slide 1: Investor Meetings June 9-11, 2014
Investor Meetings June 9-11, 2014
Slide 2: Baird 2014 Zurich Symposium June 12, 2014
Baird 2014 Zurich Symposium June 12, 2014 ;
Slide 3: 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 4: Overview: Fourth largest combination utility in the US
Electric Utility 1.8 million electric customers 8,600 MW of capacity Gas Utility 1.7 million gas customers 312 TBtu gas storage (3rd biggest in US) Consumers Energy . . . . Territory . . . . one of largest investors and employers in Michigan. Lake Winds Energy Park 2 Fourth largest combination utili
Slide 5: CMS Strategy
CMS Strategy . . . . . . . . dynamic, data driven, breakthrough performance. 3 Consistent financial performance Fair and timely regulation Utility investment Customer value Safe, excellent operations
Slide 6: Why CMS Energy: Model
Why CMS Energy CMS Energy MODEL . . . . Investment Ten year - $15 billion Small, bite size projects None “Bet The Company” Self-funded Upside Catalysts A. Capex >$15 billion B. PPA’s expire = 2,000 MW C. Credit ratings D. Sales E. Capacity price increases F. Continuous cost reductions Self-Imposed L
Slide 7: Why CMS Energy: Visible Investment Ten-Year Plan
Why CMS Energy Visible Investment: Ten-Year Plan . . . . 5 . . . . reflects needed catch-up to further reduce cost and improve reliability. 2013-2022 10-Year Plan Opportunity Level $15 Billion $15 Billion $20+ Billion Opportunity Amount (bils) Generation capacity PPA replacement $1.7 ROA return High
Slide 8: Why CMS Energy: Self-Initiated Cost Control
Why CMS Energy Self-Initiated Cost Control . . . . 6 . . . . creates more headroom for capital investment. Average Annual O&M Change +6% Peers -2% CMS Flat -2% Average -3% Plan Conservatively Upside? _ _ _ _ _ a -8% Before reinvestment Peers +2% Peers CMS CMS CMS CMS
Slide 9: Why CMS Energy: Constructive Regulation
Why CMS Energy Constructive Regulation . . . . 7 . . . . strong law on the books supported by a quality commission. Tier 1 State Ranking Barclays Research Michigan John Quackenbush (R), Chairman Term Ends: July 2, 2017 Greg White (I) Term Ends: July 2, 2015 Sally Talberg (I) Term Ends: July 2, 2019
Slide 10: Why CMS Energy: Mindset drives consistent real growth
Why CMS Energy Mindset . . . . . . . . drives consistent “real” growth. $0.81 _ _ _ _ _ Adjusted EPS (non-GAAP) excluding MTM in 2004-2006 b $1.25 excluding discontinued Exeter operations and accounting changes related to convertible debt and restricted stock Int’l Sale b 10-Year Actual 7% CAGR $1.7
Slide 11: Top of Mind: Good Carbon Position
Top of Mind Consumers Appears to be in a Good Carbon Position . . . . 9 . . . . but lots of work to understand new guidelines. Carbon Tonnage Reduction (Preliminary) Million Tons of CO2 U.S. Presidential Target Consumers Energy
Slide 12: Top of Mind: Energy Law Improvements
Top of Mind Energy Law Improvements . . . . 10 . . . . builds on 2008 Law. Outlook Regulatory Support (from the right) Michigan Governor Rick Snyder MPSC Chairman John Quackenbush Michigan Energy Office Director Steve Bakkal Industrial class Energy-intensive $150 million customer opportunity 780 MW
Slide 13: Top of Mind: Michigan Governor's Race
Top of Mind Michigan Governor’s Race . . . . 11 . . . . focus on non-energy issues. Mark Schauer Democrat, Challenger Rick Snyder Republican, Incumbent Campaign Issues Education Jobs Roads Detroit On Energy On ROA 35% 45% As Senate Democratic Leader, Mark played a key role in the successful passage
Slide 14: Top of Mind: Gas Customer Bills down 10%
$? $49M Top of Mind Gas Customer Bills . . . . . . . . down 10% over the last three years! 12 Settled $16M 2012 2013 2014 2015 $0 Investment $0 Stay-out O&M bills down 10%! --
Slide 15: Top of Mind: Electric Residential Bills
Top of Mind Electric Residential Bills Competitive . . . . 13 O&M Tax Cross Winds Self-initiated Rate design, regulatory ROA Policy, Legislator Consumers higher than Midwest peer avg Below Midwest peers . . . . industrial rates improving through cooperative steps. Electric Rate Case Avoided Industri
Slide 16: CMS Energy Model
CMS Energy MODEL . . . . Investment Ten year - $15 billion Small, bite size projects None “Bet The Company” Self-funded Upside Catalysts A. Capex >$15 billion B. PPA’s expire = 2,000 MW C. Credit ratings D. Sales E. Capacity price increases F. Continuous cost reductions Self-Imposed Limits Sustainab
Slide 17: A. Visible Investment: Ten-Year Plan
A. Visible Investment: Ten-Year Plan . . . . . . . . clear for next ten years – needed, not just wanted. Amount (bils) $ Environmental Gas Smart Energy Maintenance $5 $7 $8 New Generation Gas Electric Reliability 15 Renewables
Slide 18: Visible Investment: Catch-Up
Visible Investment: Catch-Up . . . . 16 2013 Pct of Market Cap Cap Inv OCF Liquidity CMS 21% 20% 24% Peers 18 16 20 21% 20% 24% . . . . creates unique opportunity; with OCF already stronger than peers. Amount (billions) $1.8 CMS Peers _ _ _ _ _ Source: 10K; actual amounts through 2012 smoothed for i
Slide 19: Visible Investment: Customer-Driven
Visible Investment: Customer-Driven . . . . Clean Power $2.3 Billion Reliability $4.2 Billion . . . . ten-year plan small and incremental with no big bets. Renewable energy Jackson gas plant Gas storage Propane switching Gas transmission Gas distribution Electric reliability Consumers Smart Energy E
Slide 20: Visible Investment: Gas
Visible Investment: Gas Investment . . . . 18 . . . . growing as a mix of total. Base Rate Increases <2% <2% Capital Investment “Checklist” Add Customer Value Reduce O&M Costs Reduce Fuel Costs Mandated by State or Federal Regulators $8 $11 $13 Upside: Creates headroom for more investments Rate Base
Slide 21: Visible Investment: Gas Distribution
Visible Investment: Gas Distribution . . . . 19 . . . . investing $2 billion over the next 5 years. New Customers Inspection Storage Compression Transmission 50,000 New customers $200 Million 1,700 Miles $100 Million 23 Wells $100 Million 800 Miles $450 Million 19,000 + Horsepower $400 Million 32 Mi
Slide 22: Visible Investment: Electric Distribution
20 Demand $ 1.0 Billion . . . . investing $2 billion over the next 5 years. Visible Investment: Electric Distribution . . . . Reliability $ 0.7 Billion Capacity $ 0.3 Billion Total $ 2.0 Billion Circuits In service 2,253 Upgrade 603 Transformers In service 663,044 Replace 16,175 Poles In service 1,5
Slide 23: Visible Investment: Generation
Visible Investment: Generation . . . . . . . . plan to achieve the President’s 2030 CO2 reduction target. Cross Winds Energy Park, 105 MW Jackson Plant, 540 MW Ludington Pumped Storage Plant 1,872 MW Campbell Generating Plant, 1,455 MW Karn Generating Plant, 515 MW 21 Investment 2014-2018 Capacity b
Slide 24: Visible Investment: Renewable Energy
Visible Investment: Renewable Energy . . . . 22 10% 40% 25 15 Biomass Landfill & other 10% renewables by 2015 Purchase 50% and build 50% Renewables by 2015 8% already in place! . . . . Michigan’s largest renewable energy supplier. Michigan Energy Law Requires Hydro Cross Winds under construction 105
Slide 25: B. PPAs Expire
B. PPA’s Expire . . . . 23 . . . . replacement not yet in plan! Ten-year Capacity Growth ~780 MW 1,240 MW ~Potential for 3,000 MW of owned capacity MW PPA 2,600 capacity ~30% ~8,600 MW 540 MW 410 MW Shortfall Owned (6,000) 780 MW 8,600 MW Owned (8,020) PPA 580
Slide 26: New Capacity Opportunities
New Capacity Opportunities . . . . Replace PPA With New Build Full Year Impact Customer Bill Investor (EPS) (mils) 1,000 MW of PPA’s expire - $325 0 ¢ Add 1,000 MW owned capacity + 325 + 5 Impact Flat Incremental Step-up Not in Plan 2 points Build - Thetford Expand - Zeeland Buy - ? LT PPA 24 . . .
Slide 27: C. Credit Ratings
C. Credit Ratings . . . . . . . . just upgraded, more ahead? Consistent Performance Less Risk Customer Focus Constructive Regulation Good Energy Policy Reflects Present Prior 2002 Scale S&P / Fitch Moody’s S&P (March) Moody’s (January) Fitch (February) A+ A1 A A2 Consumers Secured A- A3 BBB+ Baa1 BB
Slide 28: D. Sales Growth
D. Sales Growth . . . . . . . . even after Energy Efficiency. Annual Electric Salesa Economic Indicators Annual Industrial Sales Grand Rapids Michigan U.S Building Permits* + 36% +17% +13% GDP (real) 2010 thru 2012 14 11 7 Population 2010 Census thru July 2013 3 0 2 Unemployment April 2014 5.1% 7.4%
Slide 29: Michigan's Economic Turnaround
Michigan’s Economic Turnaround . . . . . . . . continues to improve, GDP 5th best in the nation. 27 2007 2008 2009 2010 2011 2012 2013 2014 Jobs in Millions + 250,000 Jobs Structural Improvements Jobs Recovery Unemployment dropped nearly 50%! Source: Business Leaders for Michigan
Slide 30: Michigan's Economic Results
Michigan’s Economic Results . . . . 28 . . . . the comeback state, economy at a 10-year high. Strong Economic Results Dramatic Business Climate Improvements Healthier Finances More than 250,000 jobs added since December 2010 Unemployment down from 14.2% in 2009 to 7.4% in 2014 Reduced state business
Slide 31: Michigan Economy Performance
Michigan Economy Performance . . . . . . . . among the best in the nation. Gross Domestic Product – 2010 through 2012 Source: U.S. Department of Commerce – bea.gov, real GDP 2005 chained dollars, 2012 advance and 2009 – 2011 revised, 6/6/13 Highest quintile Fourth quintile Third quintile Second quin
Slide 32: E. Capacity Price Market
E. Capacity Price Market Increases . . . . 30 . . . . could add value to the 700 MW “DIG” plant. Capacity price < ($ kW per month) Today (mils) Future Scenarios (mils) $5 +$30 $55 $35 +$50 Opportunity Upside: Conditions improving
Slide 33: F. Continuous O&M Cost Reductions
F. Continuous O&M Cost Reductions . . . . 31 . . . . holds down rates and allows better system reliability. _ _ _ _ _ a O&M Change excluding major storms Amount (mils) $
Slide 34: Continuous Cost Reduction
Continuous Cost Reduction . . . . . . . . a way of life at CMS. Past Progress $100k Each $60k Each Future Examples Fuel Mix Benefits MW Employees 2016 Retire Coal - 900 - 300 2016 Add GCC + 540 + 20 Total -360 - 280 Future Savings (mils) $25 People Productivity = $64 million Headcount Future Annual
Slide 35: Key Takeaways
Key Takeaways . . . . 33 . . . . distinguish CMS favorably with customers and owners. _ _ _ _ _ a Adjusted EPS (non-GAAP) excluding MTM in 2004-2006 EPS a “Real” Growth (No “Resets”) $2.00 Core Fundamentals 10-Year Visible Investment Among Best In Cost Control Conservative Planning Supportive Regula
Slide 36: Appendix
Appendix
Slide 37: Capacity Diversity
Capacity Diversity . . . . 35 . . . . evolving to cleaner generation while becoming more cost competitive. 2005 2017 2013
Slide 38: Generation Strategy: New Supply Sources
36 Generation Strategy: New Supply Sources . . . . . . . . combined cycle gas is the most attractive new source of supply. Levelized cost of new build ¢/kWh Gas price= $3.00 $4.50 $6.00 W/ tax credit W/o tax credit W/ emission controls Today $3.00 per watt 5¢ 6¢ 7¢ 6¢ 9¢ 10¢ 12¢ 22¢ 8¢ Back-up 11¢ B
Slide 39: Electric Customer Base Diversified
Electric Customer Base Diversified . . . . 37 . . . . “autos” 5% of 2013 electric gross margin. Hemlock Semiconductor (zero margin) General Motors Nexteer Automotive Corporation Gerdau Macsteel Denso International America Meijer Packaging Corp of America State of Michigan Spectrum Health AT&T Top Te
Slide 40: Operating Cash Flow Growth
Operating Cash Flow Growth . . . . Amount (bils) $ Investment Cash flow before dividend _ _ _ _ _ a Non-GAAP NOLs & Credits $0.7 $0.6 $0.4 $0.5 $0.4 $0.2 $0.1 Gross operating cash flowa up $0.1 billion per year . . . . self-funds investment and strategy. Up $0.5 Billion $2.1 Interest Working capital
Slide 41: Capital Expenditures
Capital Expenditures 39 (mils)
Slide 42: GAAP Reconciliation
CT GAAP Reconciliation
Slide 43: Reconciliation of reported to adjusted EPS
41 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 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 After-tax items: Electric and gas utility 0.21 (0.39) - - (0.07) 0.05 0.33 0.03 - 0.17 - Enterprises 0.74 0.62 0.04 (0.02) 1.2
Slide 44: Reconciliation of Gross Operating Cash Flow to GAAP
42 2012 2013 2014 2015 2016 2017 2018 Consumers Operating Income + Depreciation & Amortization 1,635 $ (a) 1,740 $ 1,820 $ 1,876 $ 1,952 $ 2,054 $ 2,162 $ Enterprises Project Cash Flows 17 16 25 30 28 35 36 Gross Operating Cash Flow 1,652 $ 1,756 $ 1,845 $ 1,906 $ 1,980 $ 2,089 $ 2,198 $ (411) (335)