Attached files
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| 8-K - FORM 8-K - CONSUMERS ENERGY CO | d522882d8k.htm |
Exhibit 99.1
CMS ENERGY
Exhibit 99.1
Investor Meeting
April 17, 2013
Cross Winds® Energy Park
Consumers Smart Energy Program
Gas Combined Cycle Plant
CMS ENERGY
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, as amended, Rule 175 of the Securities Act of 1933, as amended, and relevant legal decisions. The forward-looking statements are subject to risks and uncertainties. They should be read in conjunction with “FORWARD-LOOKING STATEMENTS AND INFORMATION” and “RISK FACTORS” sections of CMS Energy’s and Consumers Energy’s Form 10-K for the year ended December 31 and as updated in subsequent 10-Qs. 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 financial results on both a reported (Generally Accepted Accounting Principles) and adjusted (non-GAAP) basis. Management views adjusted earnings as a key measure of the company’s present operating financial performance, unaffected by discontinued operations, asset sales, impairments, regulatory items from prior years, or other items. Certain of these items have the potential to impact, favorably or unfavorably, the company’s reported earnings in 2013. The company is not able to estimate the impact of these matters and is not providing reported earnings guidance.
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CMS ENERGY
Model Delivers . . . .
Above Average Return
EPSa Growth vs Peers
Future Return
Attractive dividend yield 4%
62% payout ratio
EPS growth rate 5%-7%
Driven by $7 billion
investment in regulated
Utility over next five years
Shareowner return 9%-11%
7%
4%
5%-7%
6%
4%
CMS Peers CMS Peers Ten-Year Growth Future
a Adjusted EPS (non-GAAP)
. . . . good,ood, future return opportunity.
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CMS ENERGY
Near-Term Catalysts . . . .
Catalysts
Progress
1. Constructive regulation
2. Rate cases
3. Sales recovery
4. Capital investment
5. Gas Plant Certificate of Necessity (CON)
6. Credit rating upgrade
7. Growth self-funded
Governor’s energy speech supportive of 2008 Energy Law
Self-implemented $110 million March 19th
Michigan GDP up 3.3% in 2012
Ten-year visibility — $15 billion investment plan
Filing Spring 2013: Order 2014
Parent upgraded to investment grade; Utility upgraded as well NOLs and tax credits avoid need for block equity
. . . . progressrogress made, more opportunities ahead.
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CMS ENERGY
CATALYST #1 – Constructive Regulation . . . .
Regulatory Improvements
Leadership
Governor’s energy speech supportive of 2008 Energy Law No opposition to electric “self-implementation” More efficient and effective processes
John Quackenbush, Chairman Appointed: 9/15/11 Term Ends: 7/2/17 Republican
Orjiakor Isiogu, Commissioner Appointed: 9/9/07 Term Ends: 7/2/13 Democrat
Greg White, Commissioner Appointed: 12/4/09 Term Ends: 7/2/15 Independent
. . . . providesrovides improvements for customers and investors.
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CMS ENERGY
Recent Cost Performance . . . .
2011 over 2006 Electric Non-fuel O&M Cost
Examples of Cost Reductions
Peer Average up 7%
0%
Three voluntary separation programs Pension prefunding Health care sharing Labor agreements SAP efficiencies Productivity up 41%
Source: SNL data service
. . . . bestest in class.
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CMS ENERGY
Strong Customer Focus – O&M Cost Control . . . .
Average Annual Change
Examples of Cost Reductions
7%
Peers
Inflation 2%
-8%
-3%
Consumers Flat%
—2%
-1%
Reinvested
-6%
-6%
2006-2011 2012 2013E 2013-2017E Average
Amount
Past (annual average) (mils)
Western coal $250 Workforce restructuring 70 and benefit plans SAP 40 Productivity 50
Future (2013-2017E)
Small coal plants mothballed $60 Productivity 50 Benefit plans 40 Consumers Smart Energy 60
. . . . holds down rates and allows better system reliability.
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CMS ENERGY
Strong Customer Focus – Declining Gas Customer Rates . . . .
Year-Over-Year Average Gas Customer Rates
(5)%
(7)%
(3)%
(2)%
2012 2013E 2014E 2013-2017E
. providerovide headroom for investment.
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CMS ENERGY
CATALYST #2 – Rate Cases . . . .
Electric
Amount
(mils)
Self-implemented 3/19 (ROE @ 10.3%) $110 ROE @ 10.1% $(11) Investment (10) O&M (11) Misc. revenues ( 4) Staff filing $ 74
Proposal for Decision July 9 Final order by September 18
Gas
Amount (mils)
Request $49 Capital Investment (w/o working capital) 120% Memo: Customer gas prices down $(200) 2015 Capex Adjustment Mechanism (18 months) $70
Staff testimony July 2 Self-implementation filing July 12 Self-implementation date August 1 Proposal for decision November 18 Final order by January 31
. . . . focusedocused on capital investment.
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CMS ENERGY
CATALYST #3 – Michigan Economy in 2011 . . . .
Gross Domestic Product Growth: 2011 vs 2010
6th
Best 2.3
WA 2.0
MT
0.0
ORID
4.7
0.6 WY
-1.2
NV UT
CO
1.2 2.0
1.9
CA2.0
NM AZ 02 0.2
1.5th
ND 6
7.6 MN Best
1.2
SD 2.3 ME WI -0.4 VT
0.8
1.1 NHMI 0.5 IA NY 1.5 NE 2.3 MA
1.9 1.1
0.1 2.2 IL PA
RI1.3 IN OH CT
12 . 0.8 KS MO 1.1 1.1 MD NJ 2.0 WV
0.5 0.0 -0.5 KY VA 0.9 DE
4.50.5 0.3 1.6 OK TN DC
NCAR 1.9 1.9
1.0 0.3 1.8 SC
MS 1.2 TX AL GA
LA -0.8 -0.8
3.3 1.7
0.5
FL0.5
U.S. Total = 0.9%
Highest quintile Fourth quintile Third quintile Second quintile Lowest quintile
Source: U.S. Department of Commerce
. . . . outperformed the Midwest and most of U.S.
9
CMS ENERGY
Michigan Economy in 2012 . . . .
Estimated Gross Domestic Product Growth: 2012 vs 2011
WA ND 6th 3.1 MT
1.9 6.8 MN Best 2.6
SD 3.3 ME OR WI 1.7 ID 2.3 VT
4.8 2.6 NH 2.2 WY 2.2 MI 2.8 1.2 IA NY
NE 3.0 3.3 MA 2.5 2.0 3.2 IL PA
RI 2.7 IN OH CT
NV UT 2.6 2.3 CO 3.1 KS MO 2.6 2.5 NJ
2.6 3.1 MD 3.0 WV
2.2 1.9 1.6 KY VA 2.4 DE
4.7 CA 2.2
2.0 2.8 3.1 OK TN DC
NC
AR 3.0 3.1 2.5 2.1 30 .
NM SC AZ 2.0 2.6 MS AL
2.8 TX 1.4 GA 3.9 LA 1.4 2.9 2.2
U.S. Total (est) = 2.4%
Source: U.S. Department of Commerce
Highest quintile Fourth quintile Third quintile Second quintile Lowest quintile
. . . . continued strong performance.
10
CMS ENERGY
CATALYST #4 – Capital Investment Plan . . . .
Major Projects
Capital Investment
700 MW Gas Plant
Ludington Pumped Storage upgrade Consumers Smart Energy Gas transmission and storage upgrades
Amount
(bils)
Capital Investment
Amount
(bils)
$7.0
$7.3
$8.0
New Gas Plant
$6.5
Base Rate Increases
2013-2017
2018-2022
<2%
<2%
. . . . drivesrives EPS and cash flow growth.
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CMS ENERGY
Capital Investment – Propane to Gas Switching . . . .
Invest $160 million next five years 70,000 potential customers Saves customers ~$2,000 per year
Annual Customer Switching . . . . Pace Picking Up
1,345
3,000
5,000
2012
2013E
Future 2013E-2017E
. . . . a better etter energy value.
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CMS ENERGY
Long-Term Capital Investment a . . . .
New Gas Plant and Gas Infrastructure
Amount (bils)
$1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0
$1.5
Peer Average
CMS
Amount
(bils)
First five years $ 7 Next five years 8 Ten years $15 Average ? $1.5
_2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
a Source: 10K; actual amounts through 2012 smoothed for illustration
a Source: 10K; actual amounts through 2012 smoothed for illustration
. . . . drives earnings and cash flow growth.
13
CATALYST #5 – Gas Plant CON
CON Process
PA286 specifies a process for construction of new electric generating investments exceeding $500 million Company must demonstrate need for power through an Integrated Resource Plan File CON with the MPSC in the Second Quarter 2013 Must be approved or denied within 270 days
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CATALYST #6 – Credit Rating Upgrade . . . .
Scale
S&P / Fitch Moody’s S&P Moody’s Fitch
A A-BBB+ BBB BBB-BB+
BBB-BB+ BB BB-B+ B B-
A2 A3 Baa1 Baa2 Baa3 Ba1
Baa3 Ba1 Ba2 Ba3 B1 B2 B3
Consumers Secured
CMS Unsecured
Outlook
Stable
Stable
Present Prior 2002
. . . . Parent investment grade first time in history of the Company.
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CATALYST #7 – EPS Growth . . . .
Net NOLs and Credits
$0.8
$0.7
$0.7
$0.4
$0.4
$0.2
$0.1
Gross NOLs (bils)
2011 2012 2013E 2014E 2015E 2016E 2017E $1.5 $1.2 $1.1 $0.3 $0.2 $0 $0
[Graphic Appears Here]
a Maintain existing DRIP and continuous equity program
. . . . selfelf-funded.
16
EPS a and Dividend Growth . . . .
EPS
Dividend in Place
7%
$1.55 5%
$1.45
$1.36
$1.26
$1.21 b
$1.08
$0.96
$0.90
$0.84
$0.81
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E Future
a Adjusted EPS (non-GAAP) excluding MTM in 2004-2006 b $1.25 excluding discontinued Exeter operations and accounting changes related to convertible debt and restricted stock
6% 1.02
14% 96¢
84¢
27%
32% 66¢
39% 50¢
80% 36¢
20¢
0
2006 2007 2008 2009 2010 2011 2012 2013
Payout 0% 25% 30% 40% 49% 58% 62% 62%
. . . . provides for strong TSR.
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Five Key Takeaways . . .
EPS a Growth
$1.70
7%
+7% 5%
+7%
+8%
+12%
+4%
+12%
+7% Target 5%—7%
+11% Actual = 7%
Target 6%—8%
Actual = 8%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Strong customer focus Visible, investment-driven EPS growth Constructive regulation 6th Best GDP growth in nation Consistent strong financial performance
a Adjusted EPS (non-GAAP) excluding MTM in 2004-2006
. . . . distinguishistinguish CMS from our peers.
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APPENDIX
CMS ENERGY
Capital Expenditures
2013-2017 Plan
2012 2013 2014 2015 2016 2017 Total
(mils) (mils) (mils) (mils) (mils) (mils) (mils)
Electric
Distribution $ 214 $ 198 $ 196 $ 195 $ 205 $ 181 $ 975
Generation 99 54 86 122 135 104 501
New Customers 36 36 55 46 48 45 230
Other 86 99 88 78 75 85 425
Base Capital $ 435 $ 387 $ 425 $ 441 $ 463 $ 415 $ 2,131
Gas
Distribution $ 129 $ 153 $ 143 $ 125 $ 122 $ 139 $ 682
New Customers 50 37 36 36 36 37 182
Other 60 58 56 38 41 44 237
Base Capital $ 239 $ 248 $ 235 $ 199 $ 199 $ 220 $ 1,101
Total base capital $ 674 $ 635 $ 660 $ 640 $ 662 $ 635 $ 3,232
Investment Choices
Environmental $ 170 $ 331 $ 314 $ 247 $ 154 $ 97 $ 1,143
Reliability 135 163 134 106 100 159 662
Gas Infrastructure 110 142 154 133 116 118 663
Thetford Gas Plant — 6 112 346 237 49 750
Renewables 183 31 77 153 5 1 267
Consumers Smart Energy 49 66 61 45 53 98 323
Total Choices $ 647 $ 739 $ 852 $ 1,030 $ 665 $ 522 $ 3,808
Total Utility $ 1,321 $ 1,374 $ 1,512 $ 1,670 $ 1,327 $ 1,157 $ 7,040
20
CMS ENERGY
Operating Cash Flow Growth
Amount
(bils)
$ 2.5
Gross operating cash flowa
up $0.1 billion per year $2.2
2.0
$1.8
$1.6 $1.7
1.5 Interest $1.4 $1.5 king capital
$1.3 taxes
1.0
Base Investment
0.5 Investment choices
0
Cash flow before dividend
(0.5)
2011 2012 2013E 2014E 2015E 2016E 2017E
NOLs & Credits $0.8 $0.7 $0.7 $0.4 $0.4 $0.2 $0.1
a Non-GAAP
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CMS ENERGY
2013 Sensitivities . . . .
Annual Impact
Sensitivity EPS OCF
(mils)
Sales a
Electric (37,578 Gwh) + 1% + $0.05 + $20
Gas (287.9 Bcf) + 5 + 0.07 + 30
Gas prices (NYMEX) + $1.00 + – 0.01 + – 60
ROE (authorized)
Electric (10.3%) + 25 bps + 0.03 + 12
Gas (10.3%) + 25 + 0.01 + 5
. . . . on strong performance.
a Reflect 2013 sales forecast; weather adjusted
22
GAAP Reconciliation
CMS ENERGY CORPORATION
Earnings Per Share By Year GAAP Reconciliation
(Unaudited)
| 2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
|||||||||||||||||||||||||||||||
| Reported earnings (loss) per share - GAAP |
($ | 0.30 | ) | $ | 0.64 | ($ | 0.44 | ) | ($ | 0.41 | ) | ($ | 1.02 | ) | $ | 1.20 | $ | 0.91 | $ | 1.28 | $ | 1.58 | $ | 1.42 | ||||||||||||||||
| After-tax items: |
||||||||||||||||||||||||||||||||||||||||
| Electric and gas utility |
0.21 | (0.39 | ) | — | — | (0.07 | ) | 0.05 | 0.33 | 0.03 | 0.00 | 0.17 | ||||||||||||||||||||||||||||
| Enterprises |
0.74 | 0.62 | 0.04 | (0.02 | ) | 1.25 | (0.02 | ) | 0.09 | (0.03 | ) | (0.11 | ) | (0.01 | ) | |||||||||||||||||||||||||
| Corporate interest and other |
0.16 | (0.03 | ) | 0.04 | 0.27 | (0.32 | ) | (0.02 | ) | 0.01 | * | (0.01 | ) | * | ||||||||||||||||||||||||||
| Discontinued operations (income) loss |
(0.16 | ) | 0.02 | (0.07 | ) | (0.03 | ) | 0.40 | ( | *) | (0.08 | ) | 0.08 | (0.01 | ) | (0.03 | ) | |||||||||||||||||||||||
| Asset impairment charges, net |
— | — | 1.82 | 0.76 | 0.60 | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Cumulative accounting changes |
0.16 | 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 | |||||||||||||||||||
| Mark-to-market impacts |
0.03 | (0.43 | ) | 0.51 | ||||||||||||||||||||||||||||||||||||
| Adjusted earnings per share, excluding MTM - non-GAAP |
NA | $ | 0.90 | $ | 0.96 | $ | 1.08 | NA | NA | NA | NA | NA | NA | |||||||||||||||||||||||||||
| * | Less than $500 thousand or $0.01 per share. |
| (a) | $1.25 excluding discontinued Exeter operations and accounting changes related to convertible debt and restricted stock. |
2003-12 EPS
CMS Energy
Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
(unaudited)
(mils)
| 2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
||||||||||||||||||||||
| Consumers Operating Income + Depreciation & Amortization |
$ | 1,527 | $ | 1,635 | $ | 1,735 | $ | 1,821 | $ | 1,948 | $ | 2,011 | $ | 2,113 | ||||||||||||||
| Enterprises Project Cash Flows |
24 | 17 | 20 | 29 | 37 | 44 | 56 | |||||||||||||||||||||
| Gross Operating Cash Flow |
$ | 1,551 | $ | 1,652 | $ | 1,755 | $ | 1,850 | $ | 1,985 | $ | 2,055 | $ | 2,169 | ||||||||||||||
| Other operating activities including taxes, interest payments and working capital |
(382 | ) | (411 | ) | (405 | ) | (400 | ) | (435 | ) | (805 | ) | (819 | ) | ||||||||||||||
| Net cash provided by operating activities |
$ | 1,169 | $ | 1,241 | $ | 1,350 | $ | 1,450 | $ | 1,550 | $ | 1,250 | $ | 1,350 | ||||||||||||||
2011-17 OCF
CMS Energy
2012 Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
(unaudited)
(mils)
| 2012 |
||||
| Consumers Operating Income + Depreciation & Amortization |
$ | 1,635 | (a) | |
| Enterprises Project Cash Flows |
17 | |||
| Gross Operating Cash Flow |
$ | 1,652 | ||
| Other operating activities including taxes, interest payments and working capital |
(411 | ) | ||
| Net cash provided by operating activities |
$ | 1,241 | ||
| (a) | Excludes impact of $59 million electric decoupling write off |
2012 OCF