FOCUSED ON WORLD CLASS PERFORMANCE · earnings. Similarly, management views the ratio of Funds From...
Transcript of FOCUSED ON WORLD CLASS PERFORMANCE · earnings. Similarly, management views the ratio of Funds From...
FOCUSED ON WORLD CLASS PERFORMANCE
CMS Annual Update
July 9, 2018
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
forward-looking statements should be considered in the context of the risk and other factors detailed from time to time in CMS Energy’s and Consumers
Energy’s Securities and Exchange Commission filings. Forward-looking statements should be read in conjunction with “FORWARD-LOOKING
STATEMENTS AND INFORMATION” and “RISK FACTORS” sections of CMS Energy’s and Consumers Energy’s most recent Form 10-K and as updated
in reports CMS Energy and Consumers Energy file with the Securities and Exchange Commission. CMS Energy’s and Consumers Energy’s
“FORWARD-LOOKING STATEMENTS AND INFORMATION” and “RISK FACTORS” sections are incorporated herein by reference and discuss important
factors that could cause CMS Energy’s and Consumers Energy’s results to differ materially from those anticipated in such statements. CMS Energy and
Consumers Energy undertake no obligation to update any of the information presented herein to reflect facts, events or circumstances after the date
hereof.
The presentation also includes non-GAAP measures when describing CMS Energy’s results of operations and financial performance. A reconciliation of
each of these measures to the most directly comparable GAAP measure is included in the appendix and posted on our website at www.cmsenergy.com.
CMS Energy provides historical financial results on both a reported (GAAP) and adjusted (non-GAAP) basis and provides forward-looking modeling on
an adjusted basis. During an oral presentation, references to “earnings” are on an adjusted basis. Adjustments could include items such as discontinued
operations, asset sales, impairments, restructuring costs, regulatory items from prior years, or other items. Management views adjusted earnings as a
key measure of the company’s present operating financial performance and uses adjusted earnings for external communications w ith analysts and
investors. Internally, the company uses adjusted earnings to measure and assess performance. Because the company is not able to estimate the
impact of specific line items, which have the potential to significantly impact, favorably or unfavorably, the company's reported earnings in future periods,
the company is not providing reported earnings guidance nor is it providing a reconciliation for the comparable future period earnings. The adjusted
earnings should be considered supplemental information to assist in understanding our business results, rather than as a substitute for the reported
earnings. Similarly, management views the ratio of Funds From Operations (FFO)/Average Debt as a key measure of the company’s operating financial
performance and its financial position, and uses the ratio for external communications with analysts and investors. Because the company does not
establish its target FFO/Average Debt ratio based on a specific target numerator and target denominator, the company is unable to provide a
reconciliation to a comparable GAAP financial measure for future periods.
Investors and others should note that CMS Energy routinely posts important information on its website and considers the Investor Relations section,
www.cmsenergy.com/investor-relations, a channel of distribution.
2
Welcome . . .
3
Safety Tailboard
Agenda:
. . . and thank you for your support.
• IRP
• Clean & Lean
• EV & Autonomous Vehicles
Patti
• Commissioner Eubanks Discussion
• Financial Review
• Wrap-up / Q&A
Rejji
Patti & Rejji
PROFIT PLANET PEOPLE
The Triple Bottom Line . . .
4
. . . world class performance delivering hometown service.
PERFORMANCE
PEOPLE PLANET
PEOPLE • PLANET • PROFIT
PROFIT
Filed Integrated Resource Plan “ IRP”. . .
. . . seizing a once in-a-generation opportunity to reshape Michigan's energy future. 5
Overview
File Date: June 15, 2018
Expected Order Date: Q2 2019
Case No.: U-20165
Capital Investment Opportunities:
• No Change to 5-year, $10 Bn Plan
(IRP includes REP* spend of ~$1 Bn)
• $3 Bn opportunity in 10-year Plan
Financial Incentives:
• Energy Efficiency, ~$45 MM
pre-tax annually (vs. $34 MM)
• Demand Response, filed 5/31
Modular
Fully utilize
assets
O&M
Fuel
Lower Risk
Demand
EE & DR
Modular
Modular
Supply
Clean and Lean
No Certificate of
Necessity Required
< 225 MW
_ _ _ _ _
*Renewable Energy Plan
Annual Use of Supply . . .
. . . demonstrates waste in the system . 6
Solar’s Unique Characteristics . . .
. . . offer the best approach to replace future retirements over time. 7
5:00 p.m. 6:00 a.m. 6:00 a.m.
EV Overnight Charging
9,000
(MW)
Economic
Development
Solar matches peak
system load; 50%
capacity credit
(Zonal Resource Credits)
Solar
Existing Load
Potential New Load
EE & DR Programs
Shave the Peak
Average Daily
Load
8
Industry-Leading Climate Goals . . .
. . . breakthrough thinking for our planet.
Protecting Michigan’s Environment . . .
. . . for future generations.
Reducing Carbon Intensity
-100
-50
0Today 2024 2032 2040
Karn
1 & 2
Retirement
(2023)
Campbell
1 & 2
Retirement
(2031)
Campbell
3
Retirement
(2039)
38%
~45%
~70%
> 90% 0%
25%
50%
'18 '21 '24 '27 '30 '33 '36 '39
Adding Renewable Energy
cv
2020 2040 2030
43%
Renewables
(Since 2005)
%
15% RPS
By 2022
9
Future Capacity Resources . . .
. . . reshapes our generation fleet. 10
Retirements Replacements
Demand
Response
Filer City
Conversion
Energy
Efficiency
Wind
Retirements Replacements
Solar
Demand
Response
Palisades
(2022)
Karn 1 & 2
(2023) Solar
Near-Term Plan Long-Term Plan
MCV
(2030)
Campbell 1 & 2
(2031)
Karn 3 & 4
(2031)
Campbell 3
(2039)
Battery
1,500
(ZRC)
5,000
(ZRC)
6,000 MWs
Energy
Efficiency
Existing
Surplus
Other Small
PPAs and
Load Growth
Lower
Price
Customer Savings
~$30 MM
REP
Plan
_ _ _ _ _
a Karn 1&2 O&M Savings
a
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Consumers Energy EV Program . . .
. . . that we call PowerMiDrive.
• Three-year program of initial infrastructure
investment with estimated program costs of
$7.5 million
• Run as rebate programs, with rebate
terms dictating maintenance, equipment
choice, and utility data/demand response
access
• Streamlined rate structure, including a
new three-period time-of-use rate that
encourages home EV charging during off-
peak and super off-peak hours
Overview
Residential Charging Rebate up to $500; no limit on number of rebates 1
Public / Workplace Charging Rebate up to $5,000 per charger;
200 rebates 2
DC Fast Charging Rebate up to $70,000 per charger; limit of 24
rebates 3
Education and Outreach Resources to recruit customers/site hosts and
educate customers 4
Technology Development Development of the IT system underpinning EV
network; two FTE 5
Five Components
The Triple Bottom Line . . .
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. . . world class performance delivering hometown service.
PERFORMANCE
PEOPLE PLANET
PEOPLE • PLANET • PROFIT
PROFIT
Commissioner Eubanks Discussion
Simple, Perhaps Unique Model . . .
EPS Growth
- Cost reductions
- Sales (continued economic development & EE)
- Other (Enterprises, tax planning, etc.)
INVESTMENT SELF-FUNDED
Customer Prices “at or below inflation”
Plan
6% - 8%
. . . enhanced with tax reform.
2 - 3 pts
1
2
5 - 6 pts
< 2%
Self Funding:
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_ _ _ _ _
a Adjusted EPS (non-GAAP)
a
Customer Investment Plan Evolves. . .
. . . with incremental renewables.
2017 2022
$21 Bn
Rate Base Growth Large and Aging System
$15 Bn
Gas
Electric
7%
CAGR
30%
70%
40%
60%
15
2013 2018E
Our Entire Cost Structure . . . Cost Components
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Fuel and Power Costs
Taxes
Residential Electric Bills
Residential Gas Bills
2013 2018E
$85
100%
Capital Investments
O&M Costs
Cost of Capital
. . . provides opportunities to lower costs and create headroom.
~70%
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Tax
Reform
Coal to
Gas / PPA
$100 $106
$62
Down 6%
Down 27%
(current dollars)
(current dollars)
a
a
a
Source: bls.gov for historical data, Bloomberg for 2018 estimate
S&P /
Fitch Moody’s
S&P
(Dec. ‘16)
Moody’s
(Jun.‘18)
Fitch
(Jul. ‘17)
AA- Aa3
A+ A1
A A2
A- A3
BBB+ Baa1
BBB Baa2
BBB- Baa3
BB+ Ba1
BBB+ Baa1
BBB Baa2
BBB- Baa3
BB+ Ba1
BB Ba2
BB- Ba3
B+ B1
B B2
B- B3
Outlook Stable Stable Stable
FFO / Average Debt
. . . at solid investment-grade levels.
Credit Metrics Maintained . . .
Target Range 2018 (w/ TaxReform)
~18%
19%
17%
Present
Prior
2002
Consumers Secured
CMS Unsecured
_ _ _ _ _
a Non-GAAP
a
< 30% HoldCo Debt
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Utility Driven, Low Risk Growth . . .
CMS Energy Long-Term Growth Plan
- Utility
- Enterprises
- Parent & Other
Total EPS Growth 6 - 8%
. . . delivers consistent, industry-leading financial performance.
5 - 7%
0 - 1
1 - (1)
Segments:
_ _ _ _ _
a Adjusted EPS (non-GAAP)
a
• Needed system upgrades / robust backlog
• Affordable prices driven by cost controls
• Largely contracted & utility-like
• Contracted generation & renewables
• Refinancing high coupon debt
• Tax planning
• Supportive EnerBank contribution & tax shield
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Consistent Growth Through . . .
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Recession
Governor (R) Governor (D)
Commission (D) Commission (R)
Recession
7% CAGR
Polar
vortex
Cold
Feb.
Mild
summer
Warm
winter
Hot
summer
Hot
summer Cold
winter
Cold
winter
Summer-
“less” Mild
summer
Mild
summer
Commission (D)
Hurt
Help
EPS
_ _ _ _ _
a Adjusted EPS (non-GAAP)
a
Warm
winter
Hot
summer
Dividend
Weather
. . . recessions and adverse weather.
Commission (I)
Cold Feb.
Warm Dec.
Warm
Winter
Warm
Winter
19
b
_ _ _ _ _
b Non-GAAP
Compelling Investment Thesis
Strong Cash Flow & Balance Sheet
Aging Infrastructure
Diversified Service Territory
Affordable Prices Constructive Regulation 20
GAAP Reconciliation
22
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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 $1.64
Pretax items:
Electric and gas utility 0.32 (0.60) - - (0.06) 0.08 0.55 0.05 - 0.27 - - - 0.04 -
Tax impact (0.11) 0.21 - - (0.01) (0.03) (0.22) (0.02) - (0.10) - - - (0.01) 0.12
Enterprises 0.93 0.97 0.06 (0.12) 1.67 (0.02) 0.14 (0.05) * (0.01) * 0.05 * * *
Tax impact (0.19) (0.35) (0.02) 0.10 (0.42) * (0.05) 0.02 (0.11) * (*) (0.02) (*) (*) 0.20
Corporate interest and other 0.25 (0.06) 0.06 0.45 0.17 0.01 0.01 * - * * * * 0.02 0.01
Tax impact (0.09) 0.03 (0.02) (0.18) (0.49) (0.03) (*) (*) (0.01) (*) (*) (*) (*) (0.01) 0.20
Discontinued operations (income) loss, net (0.16) 0.02 (0.07) (0.03) 0.40 (*) (0.08) 0.08 (0.01) (0.03) * (*) (*) * *
Asset impairment charges - - 2.80 1.07 0.93 - - - - - - - - - -
Tax impact - - (0.98) (0.31) (0.33) - - - - - - - - - -
Cumulative accounting changes 0.25 0.02 - - - - - - - - - - - - -
Tax impact (0.09) (0.01) - - - - - - - - - - - - -
Adjusted earnings per share, including MTM - non-GAAP $0.81 $0.87 $1.39 $0.57 $0.84 $1.21 (a) $1.26 $1.36 $1.45 $1.55 $1.66 $1.77 $1.89 $2.02 $2.17
Mark-to-market 0.04 (0.65) 0.80
Tax impact (0.01) 0.22 (0.29)
Adjusted earnings per share, excluding MTM - non-GAAP NA $0.90 $0.96 $1.08 NA NA NA NA NA NA NA NA NA NA NA
* Less than $0.01 per share.
(a) $1.25 excluding discontinued Exeter operations and accounting changes related to convertible debt and restricted stock.
CMS ENERGY CORPORATION
Earnings Per Share By Year GAAP Reconciliation
(Unaudited)