Cms Energy Corporation · NYSE:CMS
Cms Energy — EEI Financial Conference 2015
37 slides from Cms Energy's conference presentation, Nov 6, 2015
Slide 1: EEI Financial Conference
EEI Financial Conference November 8 - 11, 2015 Ludington Pumped Storage Ray Compressor Station Cross Winds Energy Park Fourth largest in the world #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: Why Invest in CMS Energy?
Why Invest in CMS Energy? Our Growth Engine Supported By (2015-2024 Capex) ● UPSIDES -- More growth (Investment, Sales, Cost, & DIG) $15.5 Billion ● PARTNERS -- Facilitate growth (Customers, Regulators, & Policy Makers) +5% - +7% EPS Growth ● PASSION to improve for customers AND owners (Value, Relia
Slide 4: EPS Guidance
EPS Guidance . . . . a EPS a $2.01 +7% $2.10 +7% +7% +7% Average growth per year +5% $1.89 $1.77 $1.97 Further $1.87 +5% Growth Upsides $1.66 $1.78 Not in Plan $1.73 +6% $1.66 More renewables $1.55 Capacity for $1.63 $1.85 $1.45 $1.55 “ROA”/“PPAs” $1.52 Gas infrastructure $1.36 $1.44 Original gui
Slide 5: Model -- Simple, Perhaps Unique
MODEL -- Simple, Perhaps Unique . . . . 5-Year Upside Plan Opportunity Capital investment (drives long-term growth) 5% - 7% 6% - 8% - O&M cost reductions 2 pts Short-term - Sales growth ½ ROA return - No “block” equity dilution 1 and/or - Surcharges and other 1½ Long-term INVESTMENT SELF-FUNDED 5 pt
Slide 6: Model -- Capex Up 45%
MODEL -- Capex Up 45% . . . . 2005-2014 2015-2024 Opportunity $10.7 bil $15.5 bil $20 + bil Opportunity +45% +30% Gas Infrastructure Electric Gas Electric 27% Maintenance Infrastructure Maintenance 37% Electric Environ. Reliability Smart Energy New Generation New Infra Generation Smart Electric Envi
Slide 7: Model -- O&M Cost Reductions
MODEL -- 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) • Coal to Gas Switching (Jackson) • Smarter benefit plans • “Pole Top” Hardening • Productivity/Attrition • Productivity/Smart Energy
Slide 8: Model -- O&M Cost Performance
MODEL -- O&M Cost Performance . . . . Actual Cost Reduction Future Cost Savings (2014 over 2006) 2014 2014 & 2015 2018 (mils) (mils) • Attrition $ - 35 $ - 75 • Productivity (Coal Gas) - 35 - 50 • “Pole Top” Hardening - 30 - 30 • Smart Meters - 5 - 25 Peer Average >5% • Eliminate Waste (UA’s) - 15 -
Slide 9: Model -- Other Ideas
MODEL -- Other Ideas . . . . Mobility Productivity Two-way communication/ 25%-50% $5-10 mil connectivity reduction in calls savings Technology Productivity 1-2 pt voltage $25-50 mil Grid modernization reduction savings Quality Productivity Improved work Productive $15-25 mil management truck rolls s
Slide 10: Model -- Customer Satisfaction
MODEL -- Customer Satisfaction . . . . Electric Gas #3 #2 1st Quartile #4 1st Quartile 2nd Quartile 2nd Quartile #9 #6 Moved to first quartile! 3rd Quartile 3rd Quartile 4th Quartile 4th Quartile Present Present 2010 2012 2014 Rank 2016 2010 2012 2014 Rank 2016 Residential Business Residential Busin
Slide 11: Model -- Interest Rates Increases
MODEL -- Interest Rates Increases . . . . Pre-Tax Amount Sensitivities Earnings Impact (bils) (bps) • Interest Expense $1.0 +100 (3)¢ • Benefit Liability (discounted) 3.0 +100 4 Total 1¢ Note: ROE ? . . . . mitigated. 10
Slide 12: Model -- Michigan's Recovery
MODEL -- Michigan’s Recovery . . . . Gross Domestic Product – 2010 through 2014 Grand Rapids 21.5% Top 10% of All Cities! WA ND MT 11.3 50.8 11.6 MN 11.3 Michigan ME SD OR ID 8.0 WI Top 3 1.0 VT NH 12.8 6.6 WY 9.2 MI state! NY 7.4 9.3 -0.9 IA NE 13.9 12.0 MA 10.8 13.8 11.4 IL PA NV RI 6.0 IN OH CT U
Slide 13: Model -- Sales Growth
MODEL -- Sales Growth . . . . Annual Electric Sales c Our Service Territory Outperforms a Industrial Total Grand Rapids Michigan U.S 6% Building Permits b +18% +13% +13% GDP 22 14 10 2010 2014 Conservative Population 3 0 2 2011 2014 2% 1% Unemployment 3.4 5.0 5.1 ½% (9/15) 2010-2014 2015 - 2019 Post
Slide 14: Model -- Economic Development Growth
MODEL -- Economic Development Growth . . . . Examples of New Business Industries Electric Gas Combination MW Announcement Auto 80 Announcement General Motors Arauco Flint & Grand Rapids • Largest particleboard Food 15 • Assembly and Components press in North America Plants • 250 jobs created Manufac
Slide 15: Clean Power -- Energy Portfolio
CLEAN POWER -- Energy Portfolio . . . . Apple Blossom Wind Farm Community Solar Gardens • Competitive price • Utility Scale Solar • 100 MW • Grand Valley State University, 3 MW • Western Michigan University, 1 MW • Commercial operation 2016 • Capacity, energy, and renewable credits • PPA with option
Slide 16: Clean Power -- Capacity Diversity
CLEAN POWER -- Capacity Diversity . . . . Nuclear Oil 8% 6% Coal reduced Renewables by over 40%! 9% Coal 2nd best in U.S. 34% Pumped Storage 2014 11% Nuclear Gas Nuclear Oil 6% 32% 8% 8% Oil Renewables 9% 3% Purchases Coal 1% < 24% Pumped Coal Storage 41% Renewables 11% 2005 11% 2017 Pumped Gas Stor
Slide 17: 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 -- More Renewables Needed -- 11 Not in Plan 100 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Slide 18: Upsides -- DIG (750 MW) & Peakers (200 MW)
UPSIDES --“DIG” (750 MW) & Peakers (200 MW) . . . . Pre-Tax Income Opportunities (mils) $ 80 $75 70 Signed Contracts (layering in over time) 60 $55 +$40 50 +$20 40 $35 30 New contracts $20 20 $15 Outage 10 pull ahead 0 2015 2016 2017 Future Capacity ($/kw-mth) ≈ $1.00 ≈ $2.00 ≈ $3.00 $4.50 $7.50 Ava
Slide 19: Upsides -- Michigan Energy Law
UPSIDES -- Michigan Energy Law . . . . October November/ December Committee Committee & Governor’s Hearings Full Vote Signature Sen. Nofs Rep. Nesbitt Gov. Snyder Senate and House bills closely align Opportunities Renewables -- Integrated Resource Plan (IRP) Efficiency -- Eliminate waste ROA
Slide 20: Stability -- CMS Energy
STABILITY -- CMS Energy . . . . Future +5% to +7% 7% CAGR a EPS Dividend Further Growth Upsides Not in Plan More renewables Weather Capacity for Recession Help Recession “ROA”/“PPAs” Gas infrastructure Hurt We work 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Future Cold Mild
Slide 21: Happy 50th Anniversary, EEI! Q&A
Happy 50 th Anniversary, EEI! Q&A 20
Slide 22: Appendix
Appendix
Slide 23: Rate Cases
Rate Cases . . . . Gas (mils) Electric Track Record $21 $85 Date Step Amount (mils) May 2013 Settlement $ 89 $64 2014 Stay out -- June 2015 Self-implement 110 Dec. 2015 Order expected 2½ years Investment Cost of Capital, Filed 7/17 since last order! Upgrades, & Other . . . . fair and timely. 22
Slide 24: Constructive Regulation
Constructive Regulation . . . . Commission Tier 1 State Ranking John Quackenbush (R), Chairman 1 6 Michigan Term Ends: July 2, 2017 ranked #1 2 8 Sally Talberg (I) Term Ends: July 2, 2019 3 20 4 9 Norm Saari (R) Term Ends: July 2, 2021 5 6 Newly appointed! Barclays Research, 2015 state rankings . .
Slide 25: O&M Reinvestment Helps Customers
O&M “Reinvestment” Helps CUSTOMERS . . . . Adjusted EPS 2015 O&M 2016 (non-GAAP) Reinvestment Savings (mils) (mils) DIG outage $ (8) $10 2014 Reliability (10) -- 17¢ Donations & other (5) 5 Total $(23) $15 13¢ 2015 Weather 12¢ 11¢ Natural Offsets (4) Cost & Other 3 Total 11¢ +6% - +7% Guidance Janua
Slide 26: Managing the Work Every Year
Managing the Work Every Year . . . . 2011 2012 2013 2014 Adjusted EPS +14% +18¢ $1.90 $1.80 +7% $1.70 +13¢ +7¢ Reinvestment +7% Polar Vortex $1.60 Cost Savings Reinvestment Mild +7% Hot Winter Cold Peers +3½% Summer Winter $1.50 +1¢ Reinvestment +7% Hot Summer $1.40 Taxes Refinancing Storms -13¢ $1.
Slide 27: 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 28: Electric Customer Prices
Electric Customer Prices . . . . Residential Bills Industrial Rates 20 % 30 % 26% 20 Rates & Worse 10 Worse Fuel 10 Rates & 4% Act 169 National Avg Midwest Avg 0 0 Flat Residential bills well below U.S. average -10 Policy could (8)% Better -10 (13)% (13)% Better eliminate gap Rates Rates & -20 Rates
Slide 29: 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 $ 2.6 $2.5 $2.3 $2.2 $2.1 Interest, working 2.1 $2.0 $1.8 capital and taxes 1.6 $1.55 1.1 0.6 Investment 0.1 (0.4) Cash flow before dividend _____ a Non-GAAP (0.9) 2014 2015 2016
Slide 30: 2015 Sensitivities
2015 Sensitivities . . . . 2015 Impact Status Sensitivity EPS OCF (mils) Sales a • Electric (37,485 GWh) + 1% + $0.05 + $ 20 • Gas (301.8 Bcf) + 5 + 0.07 + 30 Gas prices (NYMEX) + 50¢ – 0 – 55 + + ROE (authorized) • Electric (10.3%) + 10 bps + 0.01 + 5 • Gas (10.3%) + 20 + 0.01 + 4 Interest Rates +1
Slide 31: 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 $ 375 Cash at year end 2014 $ 71 Enterprises 20 Sources Sources $ 395 Operating (depreciation & amortization $745) $ 1,930 Other working ca
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) 2008 2009 2010 2011 2012 2013 2014 Reported earnings per share - GAAP $1.20 $0.91 $1.28 $1.58 $1.42 $1.66 $1.74 After-tax items: Electric and gas utility 0.05 0.33 0.03 - 0.17 - - Enterprises (0.02) 0.09 (0.03) (0.11)
Slide 34: Consumers Energy 2015 Forecasted Cash Flow GAAP Reconciliation
Consumers Energy 2015 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 35: CMS Energy Parent 2015 Forecasted Cash Flow GAAP Reconciliation
CMS Energy Parent 2015 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 2015 Forecasted Cash Flow Statements
Consolidated CMS Energy 2015 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 Consumers Operating Income + Depreciation & Amortization $ 1,813 $ 1,930 $ 2,027 $ 2,145 $ 2,266 $ 2,401 $ 2,515 Enterprises Project Cash Flows 20 20 40 58 62 67