Cms Energy Corporation · NYSE:CMS
Cms Energy — Kohler Midwest Utilities Conference 2015
36 slides from Cms Energy's conference presentation, Aug 19, 2015
Slide 1: Kohler Midwest Utilities Conference
Kohler Midwest Utilities Conference August 21, 2015 Ludington Pumped Storage Fourth largest in the world Ray Compressor Station #1 LDC in gas storage Cross Winds ?Energy Park #2 in renewable sales in the Great Lakes area
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: Why Invest in CMS Energy?
Why Invest in CMS Energy? Our Growth Engineti (2015-2024 Capex) $15.5 Billion 5%—7% EPS a growth More “upside” $5 bil NOT yet in Plan! a Adjusted EPS (non-GAAP) Supported By SIDES create headroom (Investment, Sales, Cost, & DIG) PARTNERS in progress (Customers, Regulators, & Policy Makers) PASSION t
Slide 4: Simple, Perhaps Unique CMS Growth Model
Simple, Perhaps Unique CMS Growth Model . . . . Plan Capital investment (drives EPS growth) 5%—7% - O&M cost reductions -2 pts - Sales growth— 1 / 2 - No “block” equity dilution -1 - Surcharges and other -1 1 / 2 Investment self-funded -5 pts Rate increase at or below inflation <2 % . . . . drives s
Slide 5: Investment
Investment “Catch-up” . . . . Capex (bils) $1.8 “Catch-up” One of first with a ten year plan > $1.5 per year Capex as a Percent of Market Capa 2005—2014 2015—2024 CMS 10% 16% Peers 15 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 a Base
Slide 6: Capex Up 45%
Capex Up 45% . . . . 2005-2014 2015-2024 $10.7 bil $15.5 bil +45% Gas Infrastructure Electric Gas Electric 27% Maintenance Infrastructure Maintenance 37% Electric Environ. Reliability Smart Energy New Generation New Generation Percent of Energy Smart Reliability Electric Mkt Cap Environmental – CMS
Slide 7: O&M Cost Reductions
O&M Cost Reductions . . . . 2006 2014 2018 Down 7% Down 10% or 2%/yr $1.1 bil $1.0 bil $0.9 bil Inflation Inflation ?2% ?2% Coal to Gas Switching (Zeeland) Smarter benefit plans Productivity/Attrition Coal to Gas Switching (Jackson) “Pole Top” Hardening Productivity/Smart Energy . . . . provide more
Slide 8: O&M Cost Performance
O&M Cost Performance . . . . Electric Annual Growth (2014 over 2006) Peer Average >5% Consumers—2.7% Source: SNL, Form 1, Electric Non-fuel O&M O&M Cost Savings 2014 2014 & 2015 2018 (mils) (mils) Attrition $—35 $—75 Productivity (Coal Gas)—35—50 “Pole Top” Hardening—30—30 Smart Meters—5—25 Eliminat
Slide 9: Sales Growth
Sales Growth . . . . Our Service Territorya Outperforms a Grand Rapids b Annualized numbers thru June Annual Electric Sales c Industrial Total 6% Conservative 2% 1% 1 / 2 % 2010-2014 2015—2019 Post-Recession Future c Weather normalized vs. prior year . . . . planned conservatively.
Slide 10: Economic Growth
Economic Growth . . . . Examples of New Business Electric Gas Combination Announcement Bayer CropScience One of the world’s leading crop science companies Secures 70 jobs $50 million investment Dicastal Durolast Roofing Continental Dairy Betz GM Assembly Plasan Enbridge Magna-Cosma Dart Post MSU FRI
Slide 11: No "Block Equity" Dilution
No “Block Equity” Dilution . Typical utility Model w/o NOLs < 6% < 5% -1% Rate Base Dilution EPS Growth Growth CMS Model w/ NOLs 6% 6% 0 Rate Base Dilution EPS Growth Growth . . . . under CMS growth model.
Slide 12: Simple, Perhaps Unique CMS Growth Model Plan Opportunity
Simple, Perhaps Unique CMS Growth Model . . . . Plan Opportunity Capital investment (drives EPS growth) 5%—7% 6%—8% - O&M cost reductions -2 pts Short-term - Sales growth— 1 / 2 ROA return - No “block” equity dilution -1 and/or - Surcharges and other -1 1 / 2 Long-term Investment self-funded -5 pts
Slide 13: PPAs Create Unique Opportunity
PPAs (2,000 MW) Create Unique Opportunity for . . . . PPA vs Owned Capacity 30% 10% 5% Peers CMS Today CMS Future Opportunity 2,000 MW $2 Bil Investment Amount (mils) PPAs $(650) New Gas Build 650 Annual Customer Impact zero . more capacity investment, without increasing bills.
Slide 14: ROA Create Unique Opportunity
ROA (800 MW) Create Unique Opportunity for. . . Potential Return 800 MW “One-Way Door” Decision Build Decision Today Future Opportunity $150 million subsidy 0.02% of customers on ROA (~300 customers) Could lower rates 4% for everyone if all returned Build new generation capacity, funded by return .
Slide 15: Capacity & Energy Price Increases
Capacity & Energy Price Increases . . . . Was Now Future Scenarios (mils) (mils) (mils) + $25 – $50 $65 Energy more Capacity $55 $40 $35 $15 $5 Capacity price < $0.50 ? $2.00 $4.50 $7.50 ($ kW per (Prior) (Forecast) (CONE) month) New Business Long-term Energy 250 MW at $4.00 per kWm (6/14) 250 MW ?
Slide 16: Electric Customer Prices
Electric Customer Prices . . . . Residential Bills 20 % Worse National Avg Residential bills well below U.S. average Better (13)% (13)% Rates Rates & Rates & Act 169 Fuel (17)% -20 2013 2014 2015 2016 Plus Industrial Rates 30 % 26% Worse 4% Midwest Avg Flat Policy could (8)% Better eliminate gap -30
Slide 17: Customer Satisfaction
Customer Satisfaction . . . . Electric 1st Quartile #4 2nd Quartile #6 3rd Quartile 4th Quartile Present 2010 2012 2014 Rank 2016 Residential Business Gas #3 1st Quartile 2nd Quartile #9 3rd Quartile 4th Quartile Present 2010 2012 2014 Rank 2016 Residential Business . . . . continues to improve rapi
Slide 18: CMS Energy consistent growth
CMS Energy .. . . . +5% to +7% /year 7% CAGR Recession Recession Help Hurt We work with anyone and in any condition 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Future Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold winter summer summer winter summer winter “les
Slide 19: Michigan Energy Law
Michigan Energy Law . . . . “Retail Open Access” Efficiency Renewables IRP process . builds off the 2008 law, adding growth opportunities.
Slide 20: Constructive Regulation
Constructive Regulation . . . . Commission John Quackenbush (R), Chairman Term Ends: July 2, 2017 Sally Talberg (I) Term Ends: July 2, 2019 Norm Saari (R) Term Ends: July 2, 2021 Newly appointed! Tier 1 State Ranking . . . is supported by a quality Commission and a strong Law.
Slide 21: CMS Energy Consistent Growth, Future Shines Bright
CMS Energy Consistent Growth . . . . Future Shines Bright a EPS a +5% to +7% / $2.50 year +7% /year Last 7 Years Next 5 Years a Adjusted EPS (non-GAAP) Sustainable Future Growth Past Next 5 Performance Years Investment (bils) $6.4 $7.6 (2010-2014) Capacity Opl O&M Reductions (10)% (7)% (2006-2014) C
Slide 22: Appendix
Appendix
Slide 23: Clean Power Plan
Clean Power Plan Lbs CO (per MWh) 2 (Preliminary — Emission Rate) 2500 Consumers Energy 2005 Baseline Retire 950 MW coal State of Michigan Target Projected outlook with 20% renewables —investment not yet in Plan 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 .
Slide 24: Capacity Diversity
Capacity Diversity . . . . Nuclear Oil 8% 6% Renewables 9% Coal 34% Pumped Storage 2014 11% Gas 32% Oil 6% Nuclear 8% Renewables 3% Pumped Coal Storage 41% 11% 2005 Gas 31% Nuclear Oil 8% Purchases 6% 3% Coal 24% Renewables 10% 2017 Pumped Storage Gas 12% 37% . . . . evolving to cleaner generation w
Slide 25: Rate Base Growth
Rate Base Growth . . . . 10 Years of Growth Rate Base (bils) $20 +6% /year Depreciation 0 Investment 2015—2024 Amount (bils) Gas Infrastructure $ 5.8 & Maintenance Electric Reliability 2.3 Smart Energy 0.4 Environmental 0.9 New Generation 1.1 Electric Maintenance 5.0 Plan Investment $ 15.5 . . . . d
Slide 26: Growing the Gas Business
Growing the Gas Business . . . Capital Investment Capex (bils) $ 6 $5.8 +100%New Customers infrastructure $2.9 Pipeline Integrity Capacity & Deliverability Civic Improvement Compression & Storage Smart Energy 0 & Other Last 10 Next 10 Gas Service Territory Gas service area Transmission line Compress
Slide 27: Rate Cases
Rate Cases .. . . . Gas (mils) $21 $85 $64 Investment Cost of Capital, Filed 7/17 Upgrades, & Other Electric Track Record Date Step Amount (mils) May 2013 Settlement $ 89 2014 Stay out June 2015 Self-implement 110 Dec. 2015 Order expected 2 1 / 2 years since last order! . . . fair and timely.
Slide 28: MISO Zone Capacity
MISO Zone 7 Capacity . . . . 2016 Forecasted Shortfall (MW) June June 2014 2015 CMS & DTE Purchase IPPs New Build Lower Demand -3,000 Source: MISO Impact New capacity to meet shortfall not assumed More upside to $15.5 billion capex plan Creates upside pressure in capacity prices — DIG opportunity .
Slide 29: Generation Strategy: New Supply Sources
Generation Strategy: New Supply Sources . . . . Levelized cost of new build (¢/kWh) 25 New Build Consumers Energy Sources 22¢ 15¢ 12¢ 11¢ Back 10¢ -up 7¢ 6¢ 8¢ 7¢ 5¢ 6¢ 5¢ Back -up 6¢ 9¢ 5.5¢ ? 6¢ 5 Zeeland Cross Winds Big Palisades 0 Combined Cycle Gas Plant Wind Coal Nuclear Residential Solar Gas
Slide 30: Operating Cash Flow Growth
Operating Cash Flow Growth . . . . Amount Up $0.6 Billion (bils) Gross operating cash flowa up $0.1 billion per year $ 2.6 $2.5 2.1 $1.8 $1.9 1.6 $1.55 1.1 0.6 Investment 0.1 Cash flow before dividend (0.4) (0.9) a Non-GAAP 2014 2015 2016 2017 2018 2019 2020 NOLs & Credits $0.7 $0.7 $0.7 $0.5 $0.3 $
Slide 31: "Reinvestment" Helps Customers
O&M “Reinvestment” Helps CUSTOMERS . . . . Adjusted EPS (non-GAAP) 2014 17¢ 2015 O&M 2016 Reinvestment Savings (mils) (mils) DIG outage $ (8) $ 10 Forestry (5) 5 Donations & other (5) 5 Total $ (18) $ 20 13¢ Weather 12¢ Natural Offsets (4) 2015 Cost & Other 5 Flex Items Total 13¢ • O&M choices +7% -
Slide 32: GAAP Reconciliation
GAAP Reconciliation
Slide 33: 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 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 After-tax items: Electric and gas util
Slide 34: Reconciliation of Gross Operating Cash Flow
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2014 2015 2016 2017 2018 2019 2020 Consumers Operating Income + Depreciation & Amortization $ 1,813 $ 1,920 $ 2,027 $ 2,145 $ 2,266 $ 2,401 $ 2,515 Enterprises Project Cash Flows 20 20 40 58 62 67
Slide 35: Customers and Investors
CUSTOMERS Customer Satisfaction . . . . Electric 1st Quartile #4 2nd Quartile #6 3rd Quartile 4th Quartile Present 2010 2012 2014 Rank 2016 Residential Business Gas #3 1st Quartile 2nd Quartile #9 3rd Quartile 4th Quartile Present 2010 2012 2014 Rank 2016 Residential Business . . . . continues to im
Slide 36: Actual, Plan and Upsides
Actual Plan Upsides NOT in Plan 7% /year $1.89 a $1.21 $1.26 $1.36 $1.45 $1.55 $1.66 $1.86 $1 bil capex = Adjusted EPS $ $1.08 96¢ $1.02 $1.08 $1.16 $0.81 $0.90 0.96 84¢ Sale $0.84 50¢ 66¢ Dividend Int’l 20¢ 36¢ +$100 mil +10¢ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Future G
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