Cms Energy Corporation · NYSE:CMS
Cms Energy — Investor Presentation (September 2014)
47 slides from Cms Energy's investor presentation, Sep 10, 2014
Slide 1: Investor Meetings
Content • How it Works • Upsides • Partners • Investment • Passion to Improve Investor Meetings September 11-12, 2014 Ludington Pumped Storage Jackson Gas Plant Cross Winds Energy Park Fourth largest in the world Lowest acquisition cost ever #1 in renewables 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: Content
Content Quick Update 22 MISO Zone 7 3 CMS Energy at a Glance 23 New Capacity Ops 4 Model 24 Carbon Projections 5 Near Term 25 Capacity Price Increases 6 Regulation & Self-Initiated Steps 26 Michigan’s Recovery 7 O&M Cost Control 27 Sales Growth 8 Customer-Focused Reinvestment 28 Economic Growth 9 Go
Slide 4: CMS Energy at a Glance
CMS Energy at a Glance . . . . Twelfth8%year of consistent financial performance average annual EPS growth over a decade 5% to 7% for next ten years, with upside Ten-year $15 billion investment plan Self-funded $5 billion investment upside! StrongTopcosttiercontrol Conservative planning Upside c
Slide 5: How It Works -- Model
HOW IT WORKS -- Model . . . . RESULTS Consistent Predictable Investment Self-Imposed Limits • Ten year - $15 billion • Small, bite size projects • Sustainable base rates < 2% inflation • None “Bet The Company” • Investment “Needed Not Wanted” • Self-funded Catalysts Capex >$15 billion PPA’s expi
Slide 6: How It Works -- Near Term
HOW IT WORKS -- Near Term . . . . Next Steps EPS a “Real” Growth (No “Resets”) $2 7% A Competitive Rates 7% 5% +7% 6% +7% B Elections +7% +8% +12% C Energy Law Update +12% +4% Target 5% - 7% +7% Actual = 7% +11% D Investment & EPS Growth Ten-year Conservative Plan Big Upsides, not in Plan Target 6%
Slide 7: How It Works -- Regulation & Self-Initiated Steps
HOW IT WORKS -- Regulation & Self-Initiated Steps . . . . Industrial Electric Rate House Bill 5476 (vs Midwest Average) Consumers higher than • Signed into law on June 17th, 2014 Midwest peer avg 30% • Directs MPSC to develop cost of service allocation and rate design methods 20% Self-initiate
Slide 8: Upsides -- Include O&M Cost Control
UPSIDES -- Include O&M Cost Control . . . . Average Annual O&M Change Continuous Cost Reductions +6% Peers -3%a Actual/Plan (exc Amount 2013 major storms) (mils) -2%a $1,050 +2% +2% +5% Peers Peers Peers +6% +5% CMS CMS CMS CMS CMS -8% -1% -2% -2%a -2% -8% -3%a Upside? _____ Plan a -8% Before reinve
Slide 9: Upsides -- Customer-Focused Reinvestment
UPSIDES -- Customer-Focused Reinvestment . . . . Icy Late December Adjusted EPS (non-GAAP) O&M B/(W) Than Forecast (mils) 2013 +13¢ • Storm(total $50 M) • Insurance $(37) 16 • Lower contributions 9 2012 Hot • Sales-weather 12 Summer Total $ 0 2013 Cold $1.66 Winter & +7% Cost Savings Reinvested earl
Slide 10: Partners -- Michigan Governor's Race
PARTNERS -- Michigan Governor’s Race . . . . Rick Snyder Republican, Incumbent Mark Schauer Democrat, Challenger On Energy... Campaign Issues On ROA … • Education As Senate Democratic Leader, • Jobs “Choice creates a lot of Mark played a key role in the challenges and problems, successful passage of
Slide 11: Partners -- Michigan Energy Law Update
PARTNERS -- Michigan Energy Law Update . . . . • Adaptability • Reliability Update • Affordability • Environmental protection • Gov. signed new • 10% renewables rate design bill by 2015 • Senate workgroup • Energy efficiency formed to study standards 2015 Energy Law • File-and-implement improvements
Slide 12: Investment -- Ten-Year Plan Expanding
INVESTMENT -- Ten-Year Plan Expanding . . . . 2013-2022 Opportunity Level 10-Year Plan Amount (bils) Generation capacity • PPA replacement $1.7 $20+ Billion • ROA return $15Billion $15 Billion Higher renewables Gas conversions & expansion .3 1.0 Electric reliability 2.0 Total Opportunities $5.0 Upsi
Slide 13: Investment -- Capacity Opportunities
INVESTMENT -- Capacity Opportunities . . . . Ten-year Capacity Growth Further MW 11,000 Not in plan Upside 10,000 900 PPA’s Expire MW PPA ~8,600 MW 1,240 MW 580 PPA 2,600 780 MW 7,500 capacity Owned ~30% 8,820 ~800 MW 410 MW Owned Shortfall 6,000 540 MW 5,000 Today Jackson Plant ROA Palisades PPA MC
Slide 14: Passion to Improve -- Includes
PASSION TO IMPROVE -- Includes . . . . Cost Control Customer Satisfaction Employee Engagement Utility O&M Electric 1st 1st 1st Quartile Quartile Quartile 1st Quartile 2nd Quartile 2nd Quartile Down 8% since 2011 3rd Quartile 3rd Quartile 4th Quartile 4th Quartile 2011 2014 2019 2011 2014 2016 2011 2
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Slide 16: Investor Meetings
Content • How it Works • Investment • Upsides • Partners • Passion to Improve Investor Meetings September 11-12, 2014 Ludington Pumped Storage Jackson Gas Plant Cross Winds Energy Park Fourth largest in the world Lowest acquisition cost ever #1 in renewables in the Great Lakes area
Slide 17: How It Works -- Mindset
HOW IT WORKS -- Mindset . . . . 10-Year Actual Dividend EPS 7% CAGR $1.78 $1.66 Peers 4% $1.55 $1.76 $1.45 $1.36 b $1.26 6% $1.21 $1.08 6% 5% - 7% $1.08 14% $1.02 $0.96 96¢ $0.90 27% 84¢ $0.84 32% $0.81 Int’l Sale 66¢ 39% 50¢ 80% 36¢ 20¢ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Fu
Slide 18: How It Works -- Model
HOW IT WORKS -- Model . . . . RESULTS Consistent Predictable Investment Self-Imposed Limits • Ten year - $15 billion • Small, bite size projects • Sustainable base rates < 2% inflation • None “Bet The Company” • Investment “Needed Not Wanted” • Self-funded Catalysts Capex >$15 billion PPA’s expi
Slide 19: Investment -- Catch-Up
INVESTMENT -- “Catch-Up” . . . . Amount (billions) $1.8 $1.5 / year Peers CMS Investment Criteria: Reduces fuel cost Lowers O&M Adds customer value Meets state & federal mandates 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 _____ Source:
Slide 20: Investment -- Ten-Year Plan Expanding
INVESTMENT -- Ten-Year Plan Expanding . . . . 2013-2022 Opportunity Level 10-Year Plan Amount (bils) Generation capacity • PPA replacement $1.7 $20+ Billion • ROA return $15Billion $15 Billion Higher renewables Gas conversions & expansion .3 1.0 Electric reliability 2.0 Total Opportunities $5.0 Upsi
Slide 21: Investment -- Customer-Driven
INVESTMENT -- Customer-Driven . . . . Clean Power Capacity Reliability Infrastructure Opportunity $2.3 Billion $1.6 Billion $4.2 Billion $5.4 Billion $5 Billion Environmental Jackson gas plant Consumers Smart Energy Gas distribution Gas combined cycle Renewable energy Gas transmission Gas storage Pr
Slide 22: Investment -- Capacity Opportunities
INVESTMENT -- Capacity Opportunities . . . . Ten-year Capacity Growth Further MW 11,000 Not in plan Upside 10,000 900 PPA’s Expire MW PPA ~8,600 MW 1,240 MW 580 PPA 2,600 780 MW 7,500 capacity Owned ~30% 8,820 ~800 MW 410 MW Owned Shortfall 6,000 540 MW 5,000 Today Jackson Plant ROA Palisades PPA MC
Slide 23: Investment -- MISO Zone 7 Capacity
INVESTMENT -- MISO Zone 7 Capacity . . . . As of June 2, 2014 MISO Zones (in GW) 24.8 2.0 22.8 Reserves 3.2 7 Demand 21.6 2016 Resources 2016 Resource Expected Shortfall _____ Requirement Source: MISO . . . . shortfall expected to be 2,000 MW in 2016. 22
Slide 24: Investment -- New Capacity Ops
INVESTMENT -- New Capacity Ops . . . . Full Year Impact Replace PPA With New Build Customer Bill Investor (mils) (EPS) Upside: 1,000 MW of Capacity Options PPA’s expire - $325 0¢ Add 1,000 MW + 325 +5 • Build - Thetford owned capacity • Expand - Zeeland Impact Incremental Step-up ≈ Flat + 5¢ • • B
Slide 25: Investment -- Consumers Appears
INVESTMENT -- Consumers Appears . . . . Carbon Tonnage Reduction Million Tons of CO2 (Preliminary) 25 2005 Baseline 23 21 Clean Power Plan 19 “Implied” EPA Target 17 Consumers Energy Projected 15 emission level 13 2014 2020 2025 2029 2030 . . . . to be in a good carbon position. 24
Slide 26: Upsides -- Capacity Price Increases
UPSIDES -- Capacity Price Increases . . . . Today Future Scenarios Recent Contracts (mils) (mils) $55 • DIG “energy” contract +$50 • 9 years • 250 MW @ $4.06 kW per month $35 +$30 Upside: Capacity and energy contracts layered $5 in over time Capacity price < $0.50 $4.50 $7.50 ($ kW per month) . . .
Slide 27: Upsides -- Michigan's Recovery
UPSIDES -- Michigan’s Recovery . . . . Gross Domestic Product – 2010 through 2013 WA ND Top MT 8.8 11.6 54.9 MN 10 11.5 ME OR ID SD WI 11.4% 1.7 11.3 VT 17.3 7.4 NH 5.5 WY NY 9.8 MI 6.2 4.3 IA NE 11.4 6.5 MA 10.3 13.1 9.8 IL PA NV RI 5.4 IN OH CT UT CO 5.7 NJ 5.0 3.2 KS 12.1 10.5 1.7 14.5 10.3 MO WV
Slide 28: Upsides -- Sales Growth
UPSIDES -- Sales Growth . . . . Economic Indicators Annual Electric Salesa Grand Rapids Michigan U.S Growth 2.5% Upside? Building Permits* +42% +18% +9% 1.7% GDP (real) 2010 thru 2012 14 11 7 1.3% Population 2010 Census 3 0 2 thru July 2013 0.7% <1/2% 0.3%b Unemployment July 2014 5.3% 7.7% 6.2% *Ann
Slide 29: Upsides -- Economic Growth
UPSIDES -- Economic Growth . . . . Examples of New Business Top Ten (MW) Electric Gas Combination Brembo 24 MW Enbridge Energy 19 GM Assembly 10 GM Assembly Durolast Roofing 10 MW 4 MW MSU FRIB 9 Betz Industries 8 MW Enbridge 19 MW WKW Roof Rack Systems 8 Continental Dairy 2 MW Betz Industries 8 Dar
Slide 30: Upsides -- Include O&M Cost Control
UPSIDES -- Include O&M Cost Control . . . . Average Annual O&M Change Continuous Cost Reductions +6% Peers -3%a Actual/Plan (exc Amount 2013 major storms) (mils) -2%a $1,050 +2% +2% +5% Peers Peers Peers +6% +5% CMS CMS CMS CMS CMS -8% -1% -2% -2%a -2% -8% -3%a Upside? _____ Plan a -8% Before reinve
Slide 31: Upsides -- O&M Cost Control
UPSIDES -- O&M Cost Control . . . . Average Annual O&M Change Future Examples +6% Peers Fuel Mix MW Employees Actual/Plan (exc 2013 major storms) 2016 Retire Coal - 950 - 300 2016 Add GCC + 540 + 20 +2% +2% Total -410 - 280 Peers Peers Peers Future Savings (mils) $25 2014 - 2018 CMS CMS CMS CMS CMS
Slide 32: Upsides -- Customer-Focused Reinvestment
UPSIDES -- Customer-Focused Reinvestment . . . . Icy Late December Adjusted EPS (non-GAAP) O&M B/(W) Than Forecast (mils) 2013 +13¢ • Storm(total $50 M) • Insurance $(37) 16 • Lower contributions 9 2012 Hot • Sales-weather 12 Summer Total $ 0 2013 Cold $1.66 Winter & +7% Cost Savings Reinvested earl
Slide 33: Upsides -- Customer-Focused O&M Reinvestment
UPSIDES -- Customer-Focused O&M Reinvestment . . . . • Sales & other 2¢ Adjusted EPS O&M Reinvestment: (non-GAAP) (3)¢ • Reliability (3) • Parent debt prefunding (2) 2014 +18¢ +15¢ +14¢ +9¢ +9¢ Good choices ahead Weather 22¢ Cost savings 4 Reinvest & other (11) Total 15¢ 7%- 2013 6% Guidance January
Slide 34: Partners -- Michigan Energy Law Update
PARTNERS -- Michigan Energy Law Update . . . . • Adaptability • Reliability Update • Affordability • Environmental protection • Gov. signed new • 10% renewables rate design bill by 2015 • Senate workgroup • Energy efficiency formed to study standards 2015 Energy Law • File-and-implement improvements
Slide 35: Partners -- Michigan Governor's Race
PARTNERS -- Michigan Governor’s Race . . . . Rick Snyder Republican, Incumbent Mark Schauer Democrat, Challenger On Energy... Campaign Issues On ROA … • Education As Senate Democratic Leader, • Jobs “Choice creates a lot of Mark played a key role in the challenges and problems, successful passage of
Slide 36: Partners -- Constructive Regulation
PARTNERS -- Constructive Regulation . . . . Commission Tier 1 State Ranking John Quackenbush (R), 1 5 Michigan Chairman Term Ends: July 2, 2017 2 10 Sally Talberg (I) 3 18 Term Ends: July 2, 2019 4 10 Greg White (I) Term Ends: July 2, 2015 5 6 Barclays Research . . . . is supported by a quality Comm
Slide 37: Passion to Improve -- Regulation & Self-Initiated Steps
PASSION TO IMPROVE -- Regulation & Self-Initiated Steps . . . . Industrial Electric Rate House Bill 5476 (vs Midwest Average) Consumers higher than • Signed into law on June 17th, 2014 Midwest peer avg 30% • Directs MPSC to develop cost of service allocation and rate design methods 20% Self-in
Slide 38: Passion to Improve -- 2015 Gas Rate Case
PASSION TO IMPROVE -- 2015 Gas Rate Case . . . . Overview Residential Gas Customer Cost Amount Amount (per day) (Mils) $3.00 Projected 9% Capital Investment $ 144 decrease! Cost & Other (56) $2.44 Request $ 88 $2.24 2016-2017 Investment 2.00 Recovery Mechanism $ 92 GCR 1.40 1.12 Existing Request (
Slide 39: Passion to Improve -- Includes
PASSION TO IMPROVE -- Includes . . . . Cost Control Customer Satisfaction Employee Engagement Utility O&M Electric 1st 1st 1st Quartile Quartile Quartile 1st Quartile 2nd Quartile 2nd Quartile Down 8% since 2011 3rd Quartile 3rd Quartile 4th Quartile 4th Quartile 2011 2014 2019 2011 2014 2016 2011 2
Slide 40: Key Takeaways
Key Takeaways . . . . EPS a “Real” Growth (No “Resets”) $2 7% Core Fundamentals 7% 5% Ten-Year Visible, Organic, +7% 6% Investment +7% (Self-funded) +7% +8% Strong Cost Control +12% (Among best) +12% +4% Conservative Planning Target 5% - 7% (Upside) +7% Actual = 7% +11% Supportive Regulatory
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Slide 42: Appendix
Appendix
Slide 43: Capital Expenditures
Capital Expenditures 2013-2017 2018-2022 Total 2013 2014 2015 2016 2017 Subtotal Subtotal 2013-2022 (mils) (mils) (mils) (mils) (mils) (mils) (mils) (mils) New Generation (includes Renewables) $ 136 $ 222 $ 61 $ 213 $ 44 $ 676 $ 1,105 $ 1,781 Environmental 314 280 201 122 114 1,031 420 1,451 Gas 172
Slide 44: Capacity Diversity
Capacity Diversity . . . . Nuclear Oil 8% 6% Renewables 9% Coal 34% Pumped Storage 2014 11% Nuclear Gas Nuclear Oil 6% 10% 32% 8% Oil 6% Renewables Purchases 3% 3% Coal 24% Coal Renewables Pumped 41% 10% Storage 11% 2005 2017 Pumped Gas Storage Gas 29% 12% 37% . . . . evolving to cleaner generation
Slide 45: Generation Strategy: New Supply Sources
Generation Strategy: New Supply Sources . . . . Levelized cost of new build (¢/kWh) New Build 25 Consumers Energy Sources 22¢ 20 15¢ 15 12¢ 11¢ Back 10¢ 10 -up 8¢ 7¢ 6¢ Back 7¢ 6¢ -up 6¢ 9¢ 5.5¢ 5¢ 5¢ 5 Cross Winds 6¢ Big 5 Palisades Zeeland 0 Combined Cycle Gas Plant Wind Coal Nuclear Residential
Slide 46: GAAP Reconciliation
CMS ENERGY GAAP Reconciliation
Slide 47: Earnings Per Share By Year GAAP Reconciliation
Earnings Per Share By Year GAAP Reconciliation (Unaudited) 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