Slide 1: Second Quarter 2016 Results & Outlook
Second Quarter 2016 Results & Outlook July 28, 2016 Jackson Generating Station Ludington Pumped Storage Cross Winds Energy Park Among lowest acquisition cost ever Fourth largest in the world #2 in renewable sales in the Great Lakes area
Slide 2: 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 3: Agenda
Agenda Overview Patti Poppe Second Quarter Results President & CEO First Half Checklist Consumers Energy Way Financial Results & Outlook Tom Webb Second Quarter; Full Year Executive VP & CFO Unique Model Brexit Impact 2
Slide 4: Second Quarter EPS Results
Second Quarter EPS Results . . . . a Second Quarter at 45¢ Up 20¢ from 2015; up 14¢ (52%) weather-normalized Reaffirm Full Year Guidance: $1.99 to $2.02 +5% to +7% 2017 & Beyond +6% to +8% growth _____ a Adjusted EPS (non-GAAP) . . . . support full year guidance. 3
Slide 5: First Half Checklist
First Half Checklist . . . . A. Fully offset first quarter weather Consistent & predictable B. Appointment of Commissioner Eubanks Constructive regulation C. Routine and regular rate cases Recover investment D. Reduce coal capacity to <25% Transition to cleaner fuels E. Launched Consumers En
Slide 6: Constructive Regulation
Constructive Regulation . . . . Commission Tier 1 State Ranking Sally Talberg (I) Chairman 1 6 Michigan Term Ends: July 2, 2019 2 9 Norm Saari (R) Term Ends: July 2, 2021 3 18 4 9 Rachael Eubanks (I) Term Ends: July 2, 2017 5 6 Newly appointed! Barclays Research, 2016 state rankings . . . . is suppo
Slide 7: Rate Cases
Rate Cases . . . . Electric U-17990 Gas (mils) Amount (mils) $6 $90 Self-implementation (ROE @ 10.3%) $170 $84 ROE & Cost of Capital (38) O&M (22) Other (18) Staff filing $ 92 Self-implementation September 1, 2016 Final order by February 28, 2017 New Investment Cost of Capital File 8/1 and Other . .
Slide 8: Reducing Coal Dependence
Reducing Coal Dependence . . . . A Sustainable Strategy Coal Mix • Shut down 950 MW of coal 2005 2016 • Found positions for affected employees Largest reduction of any investor-owned utility • Worked with local communities early on • Reduced our environmental 41% impact <24% Positioned well for carb
Slide 9: The Consumers Energy Way
The Consumers Energy Way . . . . Strategy Customers AND Investors Safety: • On the road to zero incidents Every day is a safe day 81% improvement past ten years Quality: • Consistent & predictable growth We get it right the first time +6% to +8% Cost: • O&M cost reductions We see and eliminate
Slide 10: 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 11: CMS Energy -- A Vision for the Future
CMS Energy -- A Vision for the Future . . . . Extraordinary outcomes The Consumers Energy Way +6% to +8% Continuous a Earnings Growth Improvement Value Operational Creation Performance Improved service Customer price & with new offerings satisfaction _____ a Adjusted EPS (non-GAAP) . . . . quality d
Slide 12: 2016 Second Quarter EPS
2016 Second Quarter EPS . . . . a Results By Business Segment 2015 2016 First Half EPS Better Second EPS Quarter $0.25 $0.45 Actual than Plan Utility $1.09 $0.05 +20¢ Enterprises 0.04 0.02 Interest & other (0.09) 0.03 Weather-normalized $0.27 $0.41 Company $1.04 $0.10 +14¢ +52% Above Plan +11% First
Slide 13: 2016 EPS
2016 EPS . . . . a First Half Second Half +6¢ 4¢ - 7¢ $1.99 - $2.02 First Quarter Second Quarter 5% - 7% 13¢ $1.89 20¢ (6)¢ - (9)¢ (14)¢ Weather (’15 2¢, ‘16 4¢) 6¢ Rates, Inv, & Other 2 Use tax settlement 3 O&M (Benefits 3¢, UA 2¢, Other 4¢) 9 Total 20¢ First Half First Half $1.04 $0.98 2015 Primar
Slide 14: 2016 EPS Outlook
2016 EPS Outlook . . . . Adjusted EPS (non-GAAP) Flex Items • O&M choices • Low cost financing • Plant outages • Contributions Weather & +7% other Guidance to Weather & +5% Recovery Storms Offsets Pension “Yield Curve” 5¢ Enhanced Capitalization 3 ‘15 Pension Contribution 2 Improved “UAs” & Other 3
Slide 15: Managing Work Every Year
Managing Work Every Year . . . . Adjusted 2011 2012 2013 2014 2015 EPS Cost $2.10 productivity above plan Cost Mild productivity +17¢ $2.00 above plan Summer +7% +18¢ $1.90 Cost Offsets $1.80 productivity Reinvestment -13¢ Cost above plan +7% productivity Cold RECORD above WARM $1.70 plan +13¢ +7¢ W
Slide 16: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . . 2017+ Plan Capital investment (reliability, costs, enviro mandates) 6% - 8% - 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% . . . . drives sustainable
Slide 17: Capex $17 Billion Over 10 Years
Capex $17 Billion Over 10 Years . . . . 2016-2025 2016-2025 Investor AND Customer How this adds value! Cleaner Energy Electric Infrastructure & Gas Enhancing Maintenance Infrastructure & Improving Productivity Maintenance Service New Reducing Generation Electric Cost Distribution & Reliability Envir
Slide 18: O&M Cost Performance
O&M Cost Performance . . . . Actual Cost Reduction New Cost Savings (2015 over 2006) 2014 2016 & 2015 & 2017 (mils) (mils) • Attrition $ - 35 $ - 35 • Productivity (Coal Gas) - 35 - 15 • “Pole Top” Hardening - 20 - 10 • Smart Meters - 5 - 20 Peer Average ~5% • Eliminate Waste (UAs) - 15 - 10 & Work
Slide 19: 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 20: 2016 Sensitivities
2016 Sensitivities . . . . 2016 Impact Sensitivity EPS OCF (mils) Sales a • Electric (37,500 GWh) + 1% + $0.05 + $ 20 • Gas (309 Bcf) + 2 + 0.03 + 15 – – 55 Gas prices (NYMEX) + 50¢ + 0 + ROE (authorized) • Electric (10.3%) + 10 bps + 0.01 + 5 • Gas (10.3%) + 20 + 0.01 + 4 Interest Rates +100 bps +
Slide 21: Brexit
Brexit . . . . What it Means for CMS Strong Liquidity (Pct of market cap) 16% 15.5% • Uncertainty for banks 2 points 15 better! – CMS liquidity strong – $1.2 billion of revolvers 14 13.5% extended in May 13 12 Peers CMS Interest Rates (bps) 30-Year Treasury 10-Year Treasury • Record low interest rat
Slide 22: Financial Targets
Financial Targets . . . . 2016 Adjusted EPS (non-GAAP) $1.99 - $2.02 +5% to +7% Operating cash flow (mils) $1,550 Dividend payout ratio Customer price incr./(decr.) > 62% ~1% Electric (excl. fuel) Gas ~(10)% FFO/Average debt 18% Capital investment (bils) $1.7 . . . . fourteenth year of t
Slide 23: Consistent Growth Through Recessions, Weather and Policy
Consistent Growth Through . . . . 7% CAGR a EPS Dividend 6% to 8% 5% 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 24: Q&A
Q&A
Slide 25: Appendix
Appendix
Slide 26: 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 $2.5 $2.4 2.4 $2.2 Interest, working $2.1 capital and taxes $1.9 1.9 $1.55 1.4 Operating cash flow 0.9 Investment 0.4 (0.2) _____ Cash flow before dividend a Non-GAAP (0.7)
Slide 27: Liquidity (as of June 2016)
Liquidity (as of June 2016) . . . . Renewal Capacity Availability $2.0 Billion $1.8 Billion CMS Energy $550 mils Stronger liquidity 5-year revolver May 2021 than peers $549 mils Consumers Energy 5-year revolver May 2021 650 643 Letter of Credit Apr 2018 Letter of Credit Aug 2018 68 36 Letter of Cred
Slide 28: 2016 Cash Flow Forecast (non-GAAP)
2016 Cash Flow Forecast (non-GAAP) CMS Energy Parent Consumers Energy Cash at year end 2015 $ 159 Amount (mils) Sources Consumers Energy dividend and tax sharing $ 501 Cash at year end 2015 $ 50 Enterprises 35 Sources Sources $ 536 Operating (depreciation & amortization $798) $ 2,056 Other working c
Slide 29: GAAP Reconciliation
GAAP Reconciliation
Slide 30: 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 After-tax items: Electric
Slide 31: Earnings Per Share By Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Per Share By Year GAAP Reconciliation (Unaudited) 2011 2012 2013 2014 2015 Reported earnings (loss) per share - GAAP $1.58 $1.42 $1.66 $1.74 $1.89 Pretax items: Electric and gas utility - 0.27 - - - Tax impact - (0.10) - - - Enterprises * (0.01) * 0.05 * Tax impact (0
Slide 32: Earnings By Quarter and Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings By Quarter and Year GAAP Reconciliation (Unaudited) (In Millions, Except Per Share Amounts) 2015 1Q 2Q 3Q 4Q YTD Dec Reported net income - GAAP $202 $67 $148 $106 $523 After-tax items: Electric and gas utility - - - - - Enterprises * * * * * Corporate interest and oth
Slide 33: Earnings Segment Results GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Segment Results GAAP Reconciliation (Unaudited) Three Months Ended Six Months Ended June 30 2016 2015 2016 2015 Electric Utility Reported $ 0.40 $ 0.30 $ 0.73 $ 0.64 Restructuring Costs and Other - - - - Adjusted $ 0.40 $ 0.30 $ 0.73 $ 0.64 Gas Utility Reported $ 0.07
Slide 34: Consumers Energy 2016 Forecasted Cash Flow GAAP Reconciliation
Consumers Energy 2016 Forecasted Cash Flow GAAP Reconciliation (in millions) (unaudited) Reclassifications From Sources and Uses to Statement of Cash Flows Interest/ Capital Presentation Sources and Uses Tax Other Financing Lease Pymts Securitization Common Consolidated Statements of Cash Flows non-
Slide 35: CMS Energy Parent 2016 Forecasted Cash Flow GAAP Reconciliation
CMS Energy Parent 2016 Forecasted Cash Flow GAAP Reconciliation (in millions) (unaudited) Reclassifications From Sources and Uses to Statement of Cash Flows Presentation Sources and Uses Non Equity Consolidated Statements of Cash Flows non-GAAP Uses GAAP Description Amount as Operating Other Amount
Slide 36: Consolidated CMS Energy 2016 Forecasted Cash Flow
Consolidated CMS Energy 2016 Forecasted Consolidation of Consumers Energy and CMS Energy Parent Statements of Cash Flow (in millions) (unaudited) Eliminations/Reclassifications/Consolidation to Arrive at the Consolidated Statement of Cash Flows Statements of Cash Flows Other Consumers Equity Consume
Slide 37: Reconciliation of Gross Operating Cash Flow to GAAP
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 $ 2,056 $ 2,139 $ 2,243 $ 2,390 $ 2,518 $ 2,621 Enterprises Project Cash Flows 20 20