Slide 1: Second Quarter 2019 Results and Outlook
Second Quarter 2019 Results and Outlook July 25, 2019 FOCUSED ON WORLD CLASS PERFORMANCE
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: Agenda
Agenda Outlook & Business Update Patti Poppe President & CEO PEOPLE PLANET PROFIT Financial Results Rejji Hayes Executive VP & CFO 3
Slide 4: First Half Results and Guidance
First Half . . . Results Amount Commentary a • First Half 2019 EPS $1.08 On track and managing the work Reaffirm Guidance a • Full-year EPS $2.47 to $2.51 6% to 8% vs. 2018 Long-Term Outlook • EPS & DPS growth a +6% to +8% Bias toward the midpoint _____ a Adjusted EPS (non-GAAP) a . . . results reaf
Slide 5: Managing Work Every Year
Managing Work Every Year . . . a 2011 2012 2013 2014 2015 2016 2017 2018 2019 EPS $2.60 Reinvestment $2.40 +7% Weather & Storms $2.20 Mild +7% Summer Hot Cost +7% Summer $2.00 productivity above plan +7% Cost productivity $1.80 Reinvestment +7% above plan Cost productivity Hot Mild Storms Summer Win
Slide 6: IRP Settlement Approved
IRP Settlement Approved . . . Near-Term Additional Details • Financial Compensation Mechanism Energy Efficiency (FCM) for PPAs as an incentive • FCM = PPA payment x Company’s WACC a Demand Response (currently 5.88%) Expiration of Palisades PPA • Includes 525 MW of wind approved in Karn 1&2 closu
Slide 7: Clean Energy Future
Clean Energy Future . . . Elimination of Coal More Renewable Energy Innovative Energy Solutions Consumers Energy Capacity Mix Earn incentive mechanisms 10% 20% 8% 22% 9% 6% 8% 12% 11% 14% 10% Rate based 31% 10% or earn FCM 56% 20% 42% 11% 2019 2030 2040 a Renewables Coal Natural Gas Storage Pe
Slide 8: Story of the Last Half Century
Story of the Last Half Century . . . Ludington Pumped Storage FERC License renewed for 50 yrs TBU b Upgrade Pre- Post- Megawatts 1,872 2,292 Efficiency 70% 77% Pump Time 14 hours <9 hours Original Construction 1969 – 1973 Annual customer Current Upgrade 2011 – 2020 a value of ~$60 MM _____ _____ a b
Slide 9: Michigan Energy Policy is Supportive
Michigan Energy Policy is Supportive . . . • Bipartisan Energy Law (2016 law enhanced 2008 law) • Forward-looking test year (10-month rate case) • Energy Efficiency incentive (20% of spend) • Renewable Portfolio Standard (RPS) • Constructive ROEs Michigan Public Service Commission Effective Sept. 9t
Slide 10: Consistent Growth Through Changing Circumstances
Consistent Growth Through . . . 7% CAGR b a EPS +6% to +8% Dividend +7% Weather Recession Recession Help _____ _____ Hurt a Adjusted EPS (non-GAAP) b Non-GAAP Cold 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Feb. Cold Mild Hot Warm Mild Cold Summer- Hot Hot W
Slide 11: First Half 2019 EPS
First Half 2019 EPS . . . Results By Business Segment Year-to-Date 2018 2019 a EPS EPS – (GAAP) $1.35 $1.08 Utility $1.14 Adjustment (0.01) -- Enterprises 0.04 a Adjusted (non-GAAP) $1.34 $1.08 Parent & Other (0.10) CMS Energy $1.08 Second Quarter EPS – (GAAP) 49¢ 33¢ Adjustment (1) -- Adjusted (non
Slide 12: 2019 EPS
2019 EPS . . . a First Half Six Months To Go (26)¢ 40¢ - 44¢ $2.47 - $2.51 24¢ - 28¢ 6% - 8% $2.33 Absent ‘18 (8)¢ 7¢ 12¢ (9)¢ 4¢ (9)¢ (15)¢ Absent 2018: Weather (19)¢ Reinvestment 23 4¢ H2 ‘19 Tailwinds: Cost savings 6-9¢ Sales mix 6-8 Enterprises 8 July sales 4 First First Half Half $1.34 $1.08 We
Slide 13: Our Self-Funding Model
Our Self-Funding Model . . . Plan a EPS Growth 6% - 8% Self-Funding: - Cost management (O&M, fuel, purchased power) 2 - 3 pts - Sales (economic development, energy efficiency) 1 - Other (Enterprises, tax planning, etc.) 2 INVESTMENT SELF-FUNDED 5 - 6 pts Customer Prices “at or below inflation” <2% _
Slide 14: Utility Customer Investment Plan
Utility Customer Investment Plan . . . 5-Year Plan Rate Base Growth Electric Prior Current Gas Capital Investment (Bn): Plan Plan Mix $ 4 $ 5 ~45% $23 Bn Electric Utility >7% CAGR $16 Bn New Utility Renewables 1 1 ~10 60% Gas Utility 5 5 ~45 70% Total $10 $11 100% ~40% ~30% System Need: >$50 Bn 2018
Slide 15: Managing Customer Bills
Managing Customer Bills . . . Cost Components Residential Bills as % of Wallet a 100% 100% (Electric & Gas) Utility Bill Down 90% 50 bps! Utility Bill ~ 4% ~ 3½% 80% Fuel and Power Costs TV & Phone ~ 4% TV & Phone ~ 4% Healthcare ~ 5% Healthcare ~ 9% 70% Food ~ 12% ~70% Food ~ 13% 60% ~70% Transport
Slide 16: Economic Development is Robust
Economic Development is Robust . . . Customer Committed Load Diversified Customer Base Economic Grand (2018 Electric & Gas Rate Mix) a Indicators: Rapids U.S. GDP Growth 32 % 17 % 20102017 Population Growth 8% 6% Auto Other 20102018 Other 2% 2% Unemployment* 2.8 % 3.6 % Industrial *May 2019 Unempl
Slide 17: Credit Metrics Maintained
Credit Metrics Maintained . . . S&P / S&P Moody’s Fitch Fitch Moody’s (Dec. ‘18) (Jul. ‘19) (Jul. ‘19) Ratings Drivers AA- Aa3 A+ A1 • Strong financial position Consumers A A2 Secured A- A3 BBB+ Baa1 • Growing operating BBB Baa2 cash flow BBB- Baa3 BB+ Ba1 BBB+ Baa1 BBB Baa2 CMS Unsecured • Return o
Slide 18: Compelling Investment Thesis
Compelling Investment Thesis . . . Aging Infrastructure Clean Energy Leader Constructive Regulation Strong Cash Flow & Affordable Prices Balance Sheet Diversified Service Territory . . . adaptive to changing conditions. 18
Slide 19: Q&A Thank You!
Q&A Thank You!
Slide 20: Appendix
Appendix
Slide 21: Regulatory Outlook
Regulatory Outlook . . . 2019 Regulatory / Policy 2/7: REP approved for 3/23: Filed settlement 6/7: IRP settlement 7/18: Demand Response Q3: Calc. C 525 MW of agreement for order approved final order final order wind IRP U-20165 U-20164 Electric 1/9: Settlement approved Next Electric Order
Slide 22: Solid Rate Case History
Solid Rate Case History . . . Electric Rate Base a Gas Rate Base (Bn) (Bn) 2013A 2019E 2013A 2019E b b Residential Electric Bill $106 $106 Residential Gas Bill $87 $60 (Weather-normalized) Flat (Weather-normalized) (31)% $11.1 $6.5 $10.7 $10.7 $9.8 Settled $5.2 Request Stay $4.1 $4.3 out $8.5 $3.1
Slide 23: Operating Cash Flow Generation
Operating Cash Flow Generation . . . Amount (Bn) >$9 Bn in aggregate $ 2.2 2.05 1.95 1.85 1.70 1.75 1.7 1.65 1.2 0.7 Investment 0.2 (0.3) Cash flow before dividend (0.8) (1.3) 2018 2019 2020 2021 2022 2023 NOLs & credits $0.4 $0.3 $0.3 $0.4 $0.4 $0.5 . . . remains strong and supports our capital pla
Slide 24: DIG (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . Pre-Tax Income Opportunities (MM) $ 100 2019/20 MISO Zone 7 Auction $95 • Capacity ~$0.70/kw-month 2019 Through 2022 90 • Surplus of only 252 ZRCs Contracted 80 • DIG largely contracted Capacity >80% $7.50 b 70 (~$2.00/kw-month) 60 Energy >90% 50 $45 $45 40 30
Slide 25: 2019 and Long-Term Financial Targets
2019 and Long-Term Financial Targets . . . 25
Slide 26: GAAP Reconciliation
GAAP Reconciliation
Slide 27: Reconciliation of GAAP EPS to Non-GAAP 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 Six Months Ended 6/30/19 6/30/18 6/30/19 6/30/18 Electric Utility Reported net income per share $ 0.32 $ 0.46 $ 0.69 $ 0.95 Reconciling items: Ot
Slide 28: Reconciliation of GAAP Net Income to Non-GAAP Adjusted 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 2019 1Q 2Q Net Income Available to Common Stockholders $ 213 $ 93 Reconciling items: Electric utility and gas utility - - Tax impact - - Enterprises (
Slide 29: Earnings Per Share By Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Per Share By Year GAAP Reconciliation (Unaudited) GAAP GAAP 2018 over 2018 over 2003 2017 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CAGR Growth Reported earnings (loss) per share - GAAP ($0.30) $0.64 ($0.44) ($0.41) ($1.02) $1.20
Slide 30: Reconciliation of Annual O&M Expense
Consumers Energy Reconciliation of Annual O&M Expense (Unaudited) In Millions 12/31/2017 12/31/2018 Maintenance & Other Operating Expenses (GAAP) $ 1,113 $ 1,287 Less: Energy Waste Reduction Spending 128 185 Job Work & Other 12 9 Maintenance & Other Operating Expenses (Non-GAAP) $ 973 $ 1,093 30