Slide 1: Year-End 2015 Results & Outlook
Year-End 2015 Results & Outlook February 4, 2016 Jackson Gas Plant Ray Compressor Compressor station Station Cross Winds Energy Park Among lowest acquisition cost ever #1 LDC in gas storage #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: Agenda
Agenda 2015 Results and 2016 Priorities Future Outlook Capital Investment Customer AND Investor Model Financial Results and Outlook 2
Slide 4: Financial Results & Outlook
Financial Results & Outlook . . . . Up From 2015 Results Amount Prior Year • EPS (at high end) a $1.89 +7% • Operating cash flow $1,640 +$193 M 2016 Guidance • EPS guidance (raised) a $1.99 to $2.02 +5% to +7% • Annual dividend $1.24 +7% • Payout ratio 62% _____ a Adjusted EPS (non-GAAP) . . . . 13t
Slide 5: "Best-in-Class" Operational Results
“Best-in-Class” Operational Results . . . . Safest year in company history, 29% better than prior year Record reliability performance; distribution minutes and plant performance (Whiting Plant achieved company record -- 679-day run!) First quartile residential gas and electric customer satisfa
Slide 6: Michigan Energy Law
Michigan Energy Law . . . . 2008 Law Key Players Updates • 10% renewables by 2015 House • ROA -- Fair choice; no (Currently at 10%) subsidy • Energy efficiency standards Committee Vote • Efficiency -- Eliminate waste (1% per year) Rep. Nesbitt Full vote • Renewables -- Integrated • File-and-implem
Slide 7: 2016 Priorities
2016 Priorities . . . . Improve safety 20%! Continue “best-in-class” operational and cost performance, Continue customer satisfaction improvements, Execute capex plan with future opportunities, Achieve “no regrets” financial objectives, AND . . . . deliver consistent, predictable earnings
Slide 8: EPS Growth
EPS Growth . . . . a Amount 9% 6% - 8% 8 7 7% 5% - 7% 6 5 4 3 20 Ten Year History 2016 2017 + _____ Actual Guidance Guidance a Adjusted EPS (non-GAAP) . . . . the future shines bright. 7
Slide 9: 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 % Possible without base ra
Slide 10: Capex Expanded to $17 bil
Capex Expanded to $17 bil . . . . 2005-2014 2015-2024 2016-2025 $10.7 bil $15.5 bil $17 bil PRIOR NEW +45% +10% Gas Gas Gas Infrastructure & Electric Infrastructure & Electric Infrastructure & Maintenance Electric 27% Maintenance Maintenance Maintenance Maintenance Maintenance 37% 37% Electric Envir
Slide 11: Capex Opportunities Remain
Capex Opportunities Remain . . . . 2005-2014 2016-2025 2016-2025 $10.7 bil $17 bil $20+ bil with Opportunities NEW +20% +59% Gas Infrastructure & Gas Maintenance Infrastructure & Electric Electric 27% Maintenance Maintenance Maintenance 37% Environ. Electric Electric Distribution & Distribution & Re
Slide 12: O&M Cost Performance
O&M Cost Performance . . . . Actual Cost Reduction Further Cost Reductions (2014 over 2006) Two-way communication 25%-50% $5-10 mil reduction savings in calls Grid modernization 1-2 pt Peer Average >5% $25-50 mil line loss savings reduction Work management Consumers Productive $15-25 mil -2.7% truck
Slide 13: Sales Growth
Sales Growth . . . . Annual Electric Sales c Our Service Territory Outperforms a Industrial Total Grand Rapids Michigan U.S Building Permits b +173% +131% +97% Conservative GDP 22 14 10 4% 2010 2014 Population 3 0 2 3% 2011 2014 1%+ 1% Unemployment 3.2 5.1 5.0 (12/15) 2016 2016 - 2020 _____ _____ a
Slide 14: Consistent Growth Through Recessions, Weather, 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) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold winter summer
Slide 15: 2015 Results
2015 Results . . . . Results By Business Segment a 2014 2015 EPS EPS $1.77 $1.89 Actual Utility $2.14 +12¢ Enterprises 0.02 Interest & other (0.27) Weather-normalized $1.59 $1.90 Company $1.89 +20% Fourth Quarter EPS 35¢ 38¢ +3¢ First Call 38¢ _____ a Adjusted EPS (non-GAAP) . . . . substantially st
Slide 16: Historic Warmth
Historic Warmth . . . . Michigan 37% warmer than normal . . . . while delivering the high end of growth. 15
Slide 17: Our Business Model Permitted Top End of Guidance
Our Business Model Permitted . . . . Adjusted EPS (non-GAAP) Fourth Quarter Change 17¢ • Weather (13)¢ • Tax Case Settlement 5 • Donations 2 • Financing, UA, & Other 6 Total 0¢ 13¢ 11¢ $1.89 Up 7% 2015 Guidance December Weather (9)¢ (11)¢ Storms (2)¢ January March 31 June 30 September 30 December .
Slide 18: 2015 Financial Targets
2015 Financial Targets . . . . Target Actual Adjusted EPS (non-GAAP) $1.87 - $1.89 +6% to +7% $1.89 +7% Operating cash flow (mils) $1,550 $1,640 Dividend payout ratio Customer price decreases > 62% > 62% Electric ≈(3)% ≈(3)% Gas ≈(3)% ≈(6)% FFO/Average debt 18% 18% Capital investment (bi
Slide 19: 2016 EPS Guidance Raised
2016 EPS Guidance Raised . . . . Adjusted EPS (non-GAAP) • Utility • Electric $1.52 - $1.54 • Gas 0.65 - 0.66 Total Utility $2.17 - $2.20 • Enterprises 0.06 Prior • Parent and other (0.24) Guidance Total EPS $1.99 - $2.02 $1.97 - $2.01 +5% to +7% • Operating cash flow (GAAP) (mils) $1,550 . . . . bu
Slide 20: 2016 EPS
2016 EPS . . . . a 35¢ $1.99 - $2.02 +5% to +7% 10¢ Self- implemented 5¢ – 8¢ 16¢ $1.89 1¢ approved (31)¢ _____ 2015 2015 Absence of 2015 Weather Rate Changes Investment Costs Cost Savings and Other 2016 2016 a Adjusted EPS (non-GAAP) . . . . growth up 5% to 7% over 2015. 19
Slide 21: "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 22: 2016 Sensitivities
2016 Sensitivities . . . . 2016 Impact Sensitivity EPS OCF Status (mils) Sales a • Electric (38,043 GWh) + 1% + $0.05 + $ 20 • Gas (303 Bcf) + 5 + 0.07 + 30 – – 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
Slide 23: Capital Investment Grows
Capital Investment Grows . . . . Ten-Year Capital Investment Growth (bils) Details Ops Capex Prior New (w/o Law) (bils) New vs Prior $20+ Electric reliability $0.4 + $1.5 Gas infrastructure 0.4 $17 Clean energy 0.7 $15.5 New $1.5 Ops Replace expiring $2.0 PPAs; generation Reliability & pipes 1.0 Ops
Slide 24: Operating Cash Flow Growth
Operating Cash Flow Growth . . . . Amount Up $0.8 Billion (bils) Gross operating cash flowa $2.7 $ 2.7 up $0.1 billion per year $2.5 $2.4 $2.2 2.2 $2.0 Interest, working $1.9 capital and taxes $1.8 1.7 $1.6 1.2 0.7 Investment 0.2 (0.3) _____ Cash flow before dividend a Non-GAAP (0.8) 2014 2015 2016
Slide 25: Bonus Depreciation
Bonus Depreciation . . . . Summary Improved Plan 2017+ Bonus Depreciation 10-Year EPS • 6 years already No “Block” Equity Capex Growth • New 5 years! – $600 mil shelter NEW 7 Years $17 bil 6% - 8% Capital Investment • Add $1.5 billion – Electric reliability – Gas infrastructure PRIOR – Clean energy
Slide 26: New Bonus Depreciation
New Bonus Depreciation . . . . 2016 – 2020 2021 – 2025 (bils) (bils) Rate Base Growth • Add $1.5 billion $0.8 $0.7 $1.5 • Jackson Plant Backfill 0.2 (gas and electric infrastructure) • Pension 0.2 Increase (gross) $1.2 $0.7 • New Bonus Depreciation 0.6 Increase (net) $0.6 $0.7 • Annual EPS Lift 2¢ 2
Slide 27: Financial Targets
Financial Targets . . . . 2016 2017 Adjusted EPS (non-GAAP) $1.99 - $2.02 +5% to +7% +6% to +8% Operating cash flow (mils) $1,550 $1,650 Dividend payout ratio > 62% > 62% Customer price incr./(decr.) Electric (excl. fuel) ~1% ~2% Gas ~(10)% ~(2)% FFO/Average debt 18% 19% Capital investment (bils) $1
Slide 28: Our Investor AND Customer Model
Our Investor AND Customer Model . . . . Five-Year Average Growth How Future 7% (points) • O&M Cost Reductions 2-3 “Self-Fund” 5 Pts • Conservative sales 1 growth • Other incl. taxes, avoid 2 dilution Inflation 2% Self Funding 5-6 EPS Growth Base Rates . . . . makes our growth sustainable. 27
Slide 29: Q&A
Q&A
Slide 30: Appendix
Appendix
Slide 31: Electric Customer Prices
Electric Customer Prices . . . . Residential Bills Industrial Rates 20% 30 % 26% 15 20 Rates & Worse Worse Fuel 5 10 Rates & 5% National Avg Act 169 Midwest Avg 0 -5 Flat Residential bills well below U.S. average -10 Policy could (7)% Better Better -15 (13)% Rates (18)% eliminate gap Rates & Fuel Ra
Slide 32: Capacity Diversity
Capacity Diversity . . . . Nuclear 8% Oil 10% Coal reduced Coal by over 40%! Purchases <24% 2nd best in U.S. 3% Renewables 10% 2016 Pumped Nuclear Storage Gas Oil 6% 8% 11% 34% Future Capacity Mix Renewables 3% • More Renewables Pumped Coal Storage 41% • Expanded Pumped 11% 2005 Storage Gas • Clean
Slide 33: Clean Power Plan
Clean Power Plan . . . . Tons CO2 (mils) 20 Consumers Energy 2012 Emissions 19 18 Retire State of Michigan Target 17 950 MW (Consumers Energy’s share) coal 16 15 14 13 12 Potential Outlook -- 11 More Renewables Needed 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 203
Slide 34: CMS Capital Expenditures
CMS Capital Expenditures 2016-2020 2021-2025 2016-2025 2016 2017 2018 2019 2020 Subtotal Subtotal Total (mils) (mils) (mils) (mils) (mils) (mils) (mils) (mils) New Generation (includes Renewables) $ 87 $ 72 $ 59 $ 43 $ 31 $ 292 $ 1,378 $ 1,670 Environmental 122 143 121 178 133 697 2 699 Electric Rel
Slide 35: 2015 EPS
2015 EPS . . . . a $1.89 +7% 19¢ $1.77 27¢ Electric 17¢ (19)¢ Gas 10¢ (15)¢ Abs of ’14 (18)¢ 2015 (1) (19)¢ 2014 Weather Investment Costs Rate Changes Cost Savings and 2015 _____ 2014 Other 2015 a Adjusted EPS (non-GAAP) . . . . growth +7% over 2014, high end of guidance. 34
Slide 36: Liquidity (as of December 2015)
Liquidity (as of December 2015) . . . . Renewal Capacity Availability $1.9 Billion $550 mils CMS Energy Stronger liquidity 5-year revolver May 2020 $1.6 Billion than peers $549 mils Consumers Energy 5-year revolver May 2020 650 Letter of Credit Apr 2018 392 Letter of Credit Aug 2018 68 Letter of Cre
Slide 37: 2015 Cash Flow Forecast (non-GAAP)
2015 Cash Flow Forecast (non-GAAP) CMS Energy Parent Consumers Energy Cash at year end 2014 $ 95 Amount (mils) Sources Consumers Energy dividend and tax sharing $ 377 Cash at year end 2014 $ 71 Enterprises 20 Sources Sources $ 397 Operating (depreciation & amortization $744) $ 1,866 Other working ca
Slide 38: 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 $ 485 Cash at year end 2015 $ 50 Enterprises 35 Sources Sources $ 520 Operating (depreciation & amortization $805) $ 2,015 Other working c
Slide 39: GAAP Reconciliation
GAAP Reconciliation
Slide 40: 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 41: Earnings By Quarter and Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings By Quarter and Year GAAP Reconciliation (Unaudited) (In Millions, Except Per Share Amounts) 2014 1Q 2Q 3Q 4Q YTD Dec Reported net income - GAAP $204 $83 $94 $96 $477 After-tax items: Electric and gas utility - - - - - Enterprises - * 9 * 9 Corporate interest and other
Slide 42: Earnings Segment Results GAAP Reconciliation
CMS ENERGY CORPORATION Earnings Segment Results GAAP Reconciliation (Unaudited) Three Months Ended Twelve Months Ended December 31 2015 2014 2015 2014 Electric Utility Reported $ 0.34 $ 0.21 $ 1.58 $ 1.40 Restructuring Costs and Other - - - - Adjusted $ 0.34 $ 0.21 $ 1.58 $ 1.40 Gas Utility Reported
Slide 43: Consumers Energy 2015 Cash Flow GAAP Reconciliation
Consumers Energy 2015 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 Other Working Lease Pymts Securitization Common Consolidated Statements of Cash Flows n
Slide 44: CMS Energy Parent 2015 Cash Flow GAAP Reconciliation
CMS Energy Parent 2015 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 Description
Slide 45: Consolidated CMS Energy 2015 Cash Flow Statements
Consolidated CMS Energy 2015 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 Consumers CMS Pare
Slide 46: Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
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 $ 1,866 $ 2,012 $ 2,161 $ 2,336 $ 2,481 $ 2,613 Enterprises Project Cash Flows 20 20 37 58 58 63
Slide 47: 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 Other Working Lease Pymts Securitization Common Consolidated Statements of C
Slide 48: 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 49: Consolidated CMS Energy 2016 Forecasted Cash Flow Statements
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