Slide 1: Investor Meetings August 31 – September 6, 2017
Investor Meetings August 31 – September 6, 2017
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: Consistent Growth Through Recessions, Weather and Leadership Changes
Consistent Growth Through . . . 7% CAGR a EPS +6% to +8% Dividend Weather Recession Recession Help _____ Hurt a Adjusted EPS (non-GAAP) Cold 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Feb. Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold Feb. Warm War
Slide 4: Clean and Lean
Clean and Lean . . . PEOPLE PLANET PROFIT 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 O&M Excess O&M supply Expected Fuel Demand Fuel Modular Big Bets Investments R
Slide 5: CMS Energy Coal Reduction
CMS Energy Coal Reduction Future Opportunities Wind, Filer City, & Pre - Classic 7 Post - Classic 7 Potential Coal Shutdown Gwh % Coal Gwh % Coal Gwh % Coal Coal 10,245 8,851 6,181 Other 12,417 12,417 15,207 Total 22,662 45% 21,268 42% 21,388 29% PPAs* 19,495 (21) 19,495 (20) 19,495 (14) Total 42,15
Slide 6: The Consumers Energy Way
The Consumers Energy Way . . . The CE Way Safety . Quality . Cost . Delivery . Morale CUSTOMER ENABLED FOCUS EMPLOYEES BUSINESS RESULTS CONTINUOUS STANDARDIZED IMPROVEMENT PROCESSES . . . a culture of continuous improvement. 6
Slide 7: Performance
Performance . . . Meter Reading Invoice Reversals Live Calls (MM) (MM) 13 pts 99% 1.1 5.5 36% Improvement Improvement 64% Improvement 86% 3.5 0.4 2015 2017 YE 2015 2017 YE 2015 2017 YE Forecast Forecast Forecast Savings $(MM) (since 2015) $5 $1½ $2½ . . . improving quality of service. 7
Slide 8: Fifteen Years of Growth
Fifteen Years of Growth . . . 7% CAGR Opportunities More Gas Renewables Grid Infra. Modernization PPA Replacements Future LAW +6% to +8% Plan Ops NEW ENERGY a EPS • Customer Investment (bils) $18 $25 • O&M Reductions (10)% (15)% • Coal Capacity 21 % 15 % Recession Recession People Planet Profit 2003
Slide 9: Simple, Perhaps Unique Model
Simple, Perhaps Unique Model . . . 2017+ Plan Customer investment (reliability, costs, enviro mandates) 6% - 8% Self Funding: - 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% . . . cont
Slide 10: Ten-year Customer Investment Plan
Ten-year Customer Investment Plan . . . Gas Electric Infrastructure & Distribution Maintenance $18 billion Supply . . . with opportunities to expand to $21 - $25 billion. 10
Slide 11: O&M Cost Performance Helps to Fund Needed Customer Investments
O&M Cost Performance Helps to Fund . . . Actual Cost Reduction New Annual Cost Savings (Peers 2016 over 2006) Three-Year Avg 2014 2017 - 2016 - 2019 Good Business Decisions (MM) (MM) • Attrition $ - 16 $ - 16 • Productivity (Coal Gas) - 20 - 5 • Enhanced capitalization - 10 - 4 • Smart Meters - 4 -
Slide 12: Operating Cash Flow Funds Investments
Operating Cash Flow Funds . . . Amount Up $0.8 (Bn) billion Gross operating cash flowa $2.9 $ 2.9 up > $0.1 billion per year $2.7 Up $2.6 $1.8 billion since 2004! 2.4 $2.3 Interest, working $2.2 capital and taxes $2.1 $1.9 1.9 $1.63 $1.65 1.4 Operating cash flow NOLs avoid 0.9 Investment need for bl
Slide 13: Managing Work Every Year
Managing Work Every Year . . . a 2008 2009 2010 2011 2012 2013 2014 2015 2016 EPS Mild $2.20 Summer +7% +18¢ +17¢ Cost +7% productivity above plan Cost $2.00 productivity +7% above plan Reinvestment +13¢ Storms Hot +7¢ -13¢ Mild $1.80 Reinvestment Summer Winter +7% RECORD Hot WARM Offsets Summer +7%
Slide 14: Slide 14
Slide 15: Renewables
Renewables . . . PLANET Wind Proposed New Tariff Solar • Cross Winds II • Large industrial program • Solar Gardens • Expected COD: Jan 2018 • 44 MW • Purchase 20% to 100% of • Residential rooftop energy use solar program • Cross Winds III • Expected COD: Jan 2020 • Fully bundled service • MPSC evalu
Slide 16: Reducing Coal Intensity
Reducing Coal Intensity . . . a PLANET a Coal Energy Renewable Energy b 49% Demand from Shut down customers coal c Meets 22% RPS d 15% 15% b 10% 3% 2005 2016 Future 2005 2016 2021 Future _____ _____ a_ _ _ _ _Energy CMS a Consumers Energy b_ Includes _ _ _ _ Classic 7, includes PPA contracts b Inclu
Slide 17: Clean and Lean Energy Portfolio
CLean AND “Lean” Energy Portfolio . . . . Sustainable Strategy Creates Headroom A) Energy waste elimination/reduction – Energy efficiency = Incentives For: Palisades replacement (saves $45 – Demand response mil per year), and gas B) Fully utilize assets -- upgrades: – Ludington Pumped Storage: = Rat
Slide 18: First Half 2017 EPS
First Half 2017 EPS . . . a Results By Business Segment 2016 2017 First Half EPS Second Quarter Actual vs Plan EPS $0.45 $0.33 Utility $1.12 $0.01 Enterprises 0.07 0.03 Weather-normalized 0.41 0.35 Interest & other (0.15) -- CMS Energy $1.04 $0.04 First Half EPS $1.04 $1.04 a Weather-normalized 1.12
Slide 19: 2017 EPS
2017 EPS . . . a First Half Six Months To Go Flat 12¢ - 16¢ $2.14 - $2.18 6% - 8% 12¢ - 16¢ $2.02 4¢ 7¢ 4¢ 3¢ (11)¢ (7)¢ Managing Work Our Model Customer base Second Half 2016 Discretionary Activities: rates <2% Debt Pre-funding 4¢ Foundation & Low Income 5 Other 5 SubTotal 14¢ First 2017 Cost Savin
Slide 20: 2017 Outlook
2017 Outlook . . . Adjusted EPS (non-GAAP) Second Half 2016 Reinvestment: 2016 Debt Pre-funding 4¢ Foundation & Low Income 5 Benefits 4¢ Other 5 Property taxes 4 Total 14¢ Total 8¢ Weather & Storms Reinvestment last year Guidance +6% to +8% Recovery Recovery Accelerated Financing 3¢ Enterprises 1 EE
Slide 21: 2017 Sensitivities
2017 Sensitivities . . . Full Year Impact Sensitivity EPS OCF (MM) Sales a • Electric (37,031 GWh) + 1% + 5¢ + $ 20 • Gas (307 Bcf) + 5 + 7 + 30 – – 55 Gas prices (NYMEX) + 50¢ + 0 + ROE (planned) • Electric (10.1%) + 10 bps + 1½ + 7 • Gas (10.1%) + 10 + ½ + 3 Interest Rates +100 bps – < 1 – 7 + + E
Slide 22: 2017 Financial Targets
2017 Financial Targets . . . 2017 Adjusted EPS (non-GAAP) $2.14 - $2.18 +6% to +8% Operating cash flow (MM) $1,650 Dividend payout ratio ~ 62% Customer price (excl. fuel) Electric ~2% Gas ~2% FFO/Average debt (non-GAAP) 18½% Customer investment (Bn) $1.8 . . . 15th year of transparent, co
Slide 23: Credit Ratings
Credit Ratings . . . Scale Ratings Drivers S&P / S&P Moody’s Fitch Fitch AA- Moody’s Aa3 (Dec. ‘16) (Apr. ‘17) (Jul. ‘17) • Strong financial position A+ A1 Consumers A A2 Secured A- A3 • Growing operating BBB+ Baa1 cash flow BBB Baa2 BBB- Baa3 BB+ Ba1 BBB+ Baa1 • Return on regulated BBB Baa2 CMS Uns
Slide 24: New Energy Law
New Energy Law . . . Customer Investor What’s New? What is the Impact? • Subsidies addressed • Price competitiveness • ROA reform • Secure capacity • Net metering • Increased energy efficiency & demand • Improved incentives response incentive • RPS -- 15% by end of 2021 • Additional rate base opport
Slide 25: Regulatory Update
Regulatory Update . . . 2017 PEOPLE 2018 Customer Benefits Energy Law No subsidies 4/20: Energy Law 12/1: SRM June: Capacity effective capacity charge determined charge implemented Gas Rate Case Safety 1/29: Self-impl.; Monday 7/31: $20 MM Final order; $29 MM Electric Rate Case Reliability 2/28: Fin
Slide 26: Another Step Towards Clean & Lean
Another Step Towards Clean & Lean . . . Palisades PPA Contract Approach Cost Contract (mils) price-to- 1• Replace above market PPA contract $450 $172 mil Consumers (customer savings) 400 2• Fully utilize existing assets 350 3• Match capacity with demand • Energy Efficiency, 300 • Demand Response, an
Slide 27: Potential Tax Reform
Potential Tax Reform . . . Assumptions Impact CMS Better Than Today • Lower federal tax rate at 15% Utility (vs 35%) – More than ample investment “Backfill” • Loss of interest deductibility on all debt (may be less/better) Enterprises – Improved earnings & cash flow • Loss of state income tax Parent
Slide 28: DIG (750 MW) & Peakers (200 MW)
“DIG” (750 MW) & Peakers (200 MW) . . . Pre-Tax Income Opportunities (MM) $ 80 $75 70 Contracts (layering in over time) 60 $55 +$40 50 +$20 40 $35 $30 30 Better Performance 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 29: Appendix
Appendix
Slide 30: Modular Customer Investment Plan
Modular Customer Investment Plan . . . Last 10 Years Next 10 Years $13 Bn $18 Bn Up 40% Gas Electric Gas Distribution 41% 29% Electric Distribution Supply Supply % of projects <$200 MM a ~75% >90% _____ a Plan assumes a modular renewable build-out with individual projects less than $200 million. . .
Slide 31: Economic Development Growth
Economic Development Growth . . . Our Service Territory Outperforms Examples of New Business a Grand Electric Gas Combination Rapids Michigan U.S. Announcement Announcement Building Permits b +290% +214% +106% Stryker Corporation Zeeland Farm Services Portage Ithaca • Global leader in medical • Prod
Slide 32: 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 33: GAAP Reconciliation
GAAP Reconciliation
Slide 34: 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 2016 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 $1.98 Pretax items:
Slide 35: Earnings By Quarter and Year GAAP Reconciliation
CMS ENERGY CORPORATION Earnings By Quarter and Year GAAP Reconciliation (Unaudited) (In Millions, Except Per Share Amounts) 2016 1Q 2Q 3Q 4Q YTD Dec Reported net income - GAAP $164 $124 $186 $77 $551 Pretax items: Electric and gas utility - - 11 * 11 Tax impact - - (4) (*) (4) Enterprises * * * 1 1
Slide 36: Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
CMS Energy Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities (unaudited) (mils) 2015 2016 2017 2018 2019 2020 2021 Consumers Operating Income + Depreciation & Amortization $ 1,866 $ 2,037 $ 2,134 $ 2,246 $ 2,547 $ 2,678 $ 2,816 Enterprises Project Cash Flows 20 46 58 58 53 53
Slide 37: 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 Six Months Ended June 30 2017 2016 2017 2016 Net Income Available to Common Stockholders $ 92 $ 124 $ 291 $ 288 Reconciling Items: Discontinu
Slide 38: Clean and Lean: Our Model; Our Plan
Reduced Coal Dependency Retired Nuclear 950 MW of Nuclear Oil 8% Oil 6% 8% coal capacity 10% Coal Renewables Coal Purchases 21% 3% 41% 3% Renewables Pumped Storage 2005 Gas 10% Pumped 2017 Gas OUR MODEL; OUR PLAN Lean 11% 31% 36% Storage 12% OUTPERFORMED FOR A DECADE: NEXT DECADE EVEN BRIGHTER O
Slide 39: Actual Plan Adjusted EPS
Actual Plan Simple, Perhaps Unique Model +7%/ year $2.18 2017+ Plan $1.77 $1.89 $2.02 $2.14 a $1.55 $1.66 6% - 8% Customer investment 6% - 8% Adjusted EPS $1.21 $1.26 $1.36 $1.45 $0.81 $1.08 $1.02 $1.08 $1.16 $1.24 $1.33 - O&M cost reductions 2 - 3 pts $0.90 $0.96 84¢ 96¢ 66¢ - Sales growth 1 Int’l