Cms Energy Corporation · NYSE:CMS
Cms Energy — Investor Presentation (April 2019)
35 slides from Cms Energy's investor presentation, Apr 11, 2019
Slide 1: Discussion Materials
Discussion Materials April 11, 2019 FOCUSED ON WORLD CLASS PERFORMANCE
Slide 2: Forward-looking statements 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: CMS Energy Overview
CMS Energy Overview Corporate Structure Key Information CMS Energy 2018 Financial Statistics (NYSE: CMS) Based in Jackson, MI Employees (37% unionized) a Consumers Energy Enterprises EnerBank Revenue 2018 Adjusted net income b Avg. Rate Base 92% of c Operating Growth for past 16 years Income Gas $5.
Slide 4: Consumers Energy Overview
Consumers Energy . . . Overview • 4th largest combination utility (electric and gas) in the country • 2018 revenue = $6.5 billion • 2018 earnings = $703 million Our Service Territory • Electric Utility 1.8 million electric customers 8,261 MW of capacity • Gas Utility 1.8 million gas customers 309 bc
Slide 5: The Triple Bottom Line
The Triple Bottom Line . . . PEOPLE • PLANET • PROFIT PEOPLE PLANET PROFIT PERFORMANCE . . . world class performance delivering hometown service. 5
Slide 6: Utility Business Model
Utility Business Model . . . ✓ Supports Equity Debt earnings Rate Base growth ~40% ~40% ~20% Deferred Taxes ✓ a _____ a Adjusted Net Income ($MM), (Non-GAAP) . . . is driven by rate base growth and risk management. 6
Slide 7: Compelling Investment Thesis
Compelling Investment Thesis . . . Aging Infrastructure Strong Cash Flow & Constructive Regulation Balance Sheet Diversified Service Affordable Prices Territory . . . adaptive to changing conditions. 7
Slide 8: Large and Aging System
Large and Aging System . . . Electric 25 years of distribution main replacement system is through our older than Enhanced Infrastructure peers Replacement Program Age of coal fleet is more ~1,670 miles of gas than transmission pipeline; most 50 years built in the WWII era . . . requires significant
Slide 9: Electric System Investment
Electric System Investment . . . New Generation Capital Investment (Bn): Plan Existing Fleet Electric Utility $ 5 $1.0 Bn New Utility Renewables 1 PLUS Gas Utility 5 New Renewables $11 $1.0 Bn Total System Reliability & Maintenance ~$2½ Bn New Business & Other $1½ Bn . . . consists of needed and mod
Slide 10: Gas System Investment
Gas System Investment . . . New Compression and Storage Capital Investment (Bn): Plan $0.6 Bn Electric Utility $ 5 #1 Underground New Utility Renewables 1 storage Gas Utility 5 Total $11 Pipelines $1 Bn #5 Transmission miles #5 Distribution miles Distribution & Other $3½ Bn U.S. LDC Rank, Source: DO
Slide 11: Michigan Offers Supportive Policy
Michigan Offers . . . Supportive Policy Premium Regulatory • Economic growth (tax policies, Tier Michigan skilled labor, balanced budgets) 2013 - Present 1 7 • Bipartisan Energy Law 2 10 2012 • Forward-looking test year (10-month rate case) 2008 3 18 • Energy efficiency incentive (20% of spend) 4 9
Slide 12: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . Plan EPS Growth a 6% - 8% Self Funding: - Cost reductions 2 - 3 pts - Sales growth (continued economic development) 1 - Other (Enterprises, tax planning, etc.) 2 INVESTMENT SELF-FUNDED 5 - 6 pts Customer Prices “at or below inflation” <2% _____ a Adjusted EPS (non-
Slide 13: Utility Customer Investment Plan
Utility Customer Investment Plan . . . Updated 5-year Plan Rate Base Growth Electric Gas Old New Capital Investment (Bn): Plan Plan Mix $23 Bn >7% Electric Utility $ 4 $ 5 ~45% CAGR $16 Bn 1 1 ~10 60% New Utility Renewables 70% Gas Utility 5 5 ~45 Total $10 $11 100% ~40% ~30% System Need: >$50 Bn 20
Slide 14: Our Entire Cost Structure
Our Entire Cost Structure . . . 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% Transpo
Slide 15: Economic Development is Robust
Economic Development is Robust . . . Customer Committed Load Diversified Customer Base Economic Indicators (2018 Electric & Gas Rate Mix) a Grand 2010 thru 2017 Rapids U.S. Auto Other GDP Growth 32 % 17 % Other 2% 2% Population Growth 7% 5% Industrial 2.9 % 4.0 % Target 9% Unemployment* *January 201
Slide 16: 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 17: Credit Metrics Maintained
Credit Metrics Maintained . . . S&P / S&P Moody’s Fitch Fitch Moody’s (Dec. ‘18) (Jul. ‘18) (Sep. ‘18) 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: CMS Enterprises
CMS Enterprises . . . DIG & Other Renewable Platform • ~1,000 MWs of plants in MI Operating Projects: • 27 MWs of solar • DIG long-term energy (~100% • 64 MWs biomass contracted) & short-term • 105 MWs of wind capacity (>80% contracted) (15-year PPA with GM) • Filer City PPA with the Utility • Nearl
Slide 19: Utility Driven, Low Risk Growth
Utility Driven, Low Risk Growth . . . CMS Energy Long-Term Growth Plan Segments: 6 - 7% • Needed system upgrades / robust backlog - Utility • Affordable prices driven by cost controls • Largely contracted & utility-like - Enterprises 0 -1 • Contracted generation & renewables • Tax planning - Parent
Slide 20: Consistent Growth Through Changing Circumstances
Consistent Growth Through . . . 7% CAGR b a EPS 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 Warm Mild Po
Slide 21: CMS' Trading Performance
CMS’ Trading Performance . . . Stock Performance Total Shareowner Return a b CMS CMS UTY UTY S&P 500 S&P 500 500% 400% 604% 391% 300% 117% 200% 178% 100% 51% 69% 8% 0% -100% '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 1 Year 3 Year 5 Year 10 Year _____ _____ a 10-year stock performance as of Decembe
Slide 22: Q&A Thank You!
Q&A Thank You!
Slide 23: Appendix
Appendix
Slide 24: Top of Mind
Top of Mind . . . • IRP Settlement Agreement • Regulatory -- Commission, REP & Rate Case • Michigan Political Landscape • 5-year Capital Plan • DIG • Financing Plan . . . People, Planet, Profit. 24
Slide 25: Long-Term Regulatory Planning
Long-Term Regulatory Planning . . . 2018 2019 2020 Regulatory / Policy 6/15: Filed LT generation plan 2/7: REP approved for 3/23: Filed settlement Q3: Anticipated final orders Q2: File updated 5-yr (IRP) 525 MWs of agreement for on Calc. C & Electric Distribution U-20165 wind IRP Demand Respon
Slide 26: IRP Settlement Filing
IRP Settlement Filing . . . Near-Term Additional Details Energy Efficiency • Financial Compensation Mechanism (FCM) for PPAs as an incentive Demand Response • FCM = PPA payment x Company’s WACC (currently 5.88%) a End of Palisades PPA Karn 1&2 closure • Includes already approved REP wind of 525
Slide 27: Clean and Lean
Clean and Lean . . . Old Utility Model Clean And Lean Big Build Supply Supply Fully utilize Modular Retirement assets Excess supply Big Excess Build supply Modular Actual Modular Demand Demand EE & DR Excess O&M O&M supply Expected Demand Fuel Fuel Big Bets Lower Risk Results in excess capacity, hig
Slide 28: Michigan Political Environment
Michigan Political Environment . . . Governor State Senate Gretchen Whitmer 16 38 22 Democrat 2018 Election: Democrats +5 seats 4-year terms, concurrent with Governor’s term, 2-term limit Energy policy is State House not a key issue Key Issues: 52 110 58 • Infrastructure • Health Care • Education 20
Slide 29: 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 30: Rejji P. Hayes
Rejji P. Hayes CMS Energy 2017 EVP and CFO ITC Holdings Corp. 2012 – 2016 - CFO (2014 – 2016) - VP, Finance & Treasurer (2012 – 2014) Exelon Corporation 2009 – 2012 Asst. Treasurer & Dir. Corp. Finance & Financial Strategy Lazard Frères & Co. LLC 2007 – 2009 VP, M&A Banc of America Securities 2003 –
Slide 31: GAAP Reconciliation
GAAP Reconciliation
Slide 32: 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 33: Reconciliations of GAAP Net Income to Non-GAAP Adjusted Net Income
CMS ENERGY CORPORATION Reconciliations of GAAP Net Income to Non-GAAP Adjusted Net Income (Unaudited) In Millions, Except Per Share Amounts Three Months Ended Twelve Months Ended 12/31/18 12/31/17 12/31/18 12/31/17 Net Income (Loss) Available to Common Stockholders $ 108 $ (3) $ 657 $ 460 Reconcilin
Slide 34: People Planet Profit - Underpinned by Performance
CMS Energy People Planet Profit - Underpinned by Performance CMS Energy Overview Consumers Energy . . . Corporate Structure Key Information Overview CMS Energy 2018 Financial Statistics (NYSE: CMS) Based in Jackson, MI • 4th largest combination utility (electric Employees (37% unionized) a and gas)
Slide 35: World Class Performance Delivering Hometown Service
CMS Energy World Class Performance Delivering Hometown Service Economic Development is Robust . . . Credit Metrics Maintained . . . Customer Committed Load Diversified Customer Base S&P / S&P Moody’s Fitch Economic Indicators (2018 Electric & Gas Rate Mix) a Fitch Moody’s (Dec. ‘18) (Jul. ‘18) (Sep.