Attached files
| file | filename |
|---|---|
| 8-K - 8-K - CMS ENERGY CORP | d673635d8k.htm |
   Cross
Winds Energy Park
Jackson Gas Plant
Consumers Smart Energy Program
2014 Credit Suisse Energy Summit
February 11, 2014
Exhibit 99.1 |
 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 Form 10-K for the year
ended December
31,
2013.
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 (Generally Accepted Accounting Principles) and adjusted
(non-GAAP)
basis
and
provides
forward-looking
guidance
on
an
adjusted
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. These items have the potential to impact, favorably or unfavorably,
the company's reported earnings in future periods.
Because the company is not able to estimate the impact of these
matters, the
company is not providing a reconciliation to the comparable future period reported
earnings. 1 |
 2
.
.
.
.
at
the
very
high
end
of
all
peers.
.
.
.
.
at
the
very
high
end
of
all
peers.
_ _ _ _ _
Source: Bloomberg, periods ending 12/31/2013. Consensus used for companies
that haven’t reported. One
Year
Three
Year
Five
Year
Ten
Year
Future
Annual
Growth
CMS
Energy
7%
22%
37%
105%
5%-7%
Note:
Dividend
Growth
6
29
116
na
5-7
Peer Group
3
9
15
45
?
CMS EPS Cumulative Growth . . . . |
 Purchase
of Jackson Gas Plant .
.
.
.
Asset:
540 MW gas plant located in
Jackson, Michigan
Price:
$155 million ($286/kW)
Technology:
Combined cycle
Heat rate –
8,800 Btu/kWh
3
.
.
.
.
provides
substantial
savings
to
customers.
.
.
.
.
provides
substantial
savings
to
customers.
The Transaction
The Transaction
Connecting The “Dots”
Connecting The “Dots”
•
Retire small coal plants
•
Recover through
securitization; lower rates
•
Replace with cleaner,
inexpensive gas plant
purchase
•
Suspend CON; Thetford on
hold
•
Close late 2015 when
needed
•
Creates headroom for other
needed investments |
 New Gas
Plant .
.
.
.
4
.
.
.
.
adds
capacity
and
makes
room
for
more
investment.
.
.
.
.
adds
capacity
and
makes
room
for
more
investment.
•
Customers benefit:
•
Lower rates
•
Better timing
•
Investors benefit:
•
Lower risk
•
Investment backfill
•
EPS & OCF growth
more certain
•
No block equity
Electric Reliability
$200 Million
Accelerate Smart Energy &
Other
$180 Million
Gas Infrastructure
$165 Million
Other Needed Investments -
Other Needed Investments -
$545 Million
$545 Million |
 Regulatory
Update .
.
.
.
5
Amount
(mils)
•Savings
from purchase of Jackson Plant; $545
replacing build
•Securitize
Classic 7 $390
•
MPSC Order complete
•
No appeals
•Avoid
rate cases until 2015 test year $150
•New
investment self-funded
.
.
.
.
new
investment
self-funded,
improving
rates.
.
.
.
.
new
investment
self-funded,
improving
rates. |
 6
.
.
.
.
good
for
customers
(prices)
and
investors
(no
ROE
risk).
.
.
.
.
good
for
customers
(prices)
and
investors
(no
ROE
risk).
Electric Rate Case Avoided
Gas Rate Case Avoided
Rate Cases Eliminated! .
. . . |
 CMS Energy
MODEL .
.
.
.
Investment
•
Ten year -
$15 billion
•
Small, bite size projects
•
None “Bet The Company”
Upside Catalysts
A. Capex >$15 billion
B. PPA’s expire = 2,000 MW
C. Credit rating
D. Sales
E. Capacity price increases
F. ROA elimination
G.
Continuous cost reductions
Self-Imposed Limits
•
Sustainable base rates < 2% inflation
•
Investment “Needed Not Wanted”
RESULTS
Consistent
Predictable
.
.
.
.
benefits
customers
AND
shareowners.
.
.
.
.
benefits
customers
AND
shareowners.
7 |
 .
.
.
.
reflects
catch-up
needed
to
reduce
cost
and
improve
reliability.
.
.
.
.
reflects
catch-up
needed
to
reduce
cost
and
improve
reliability.
2013-2022
2013-2022
10-Year Plan
10-Year Plan
Opportunity Level
Opportunity Level
8
A. Visible, 10 - Year I NVESTMENT Plan . . . . |
 Capital
Investment Visibility .
.
.
.
9
Amount
(bils)
$
.
.
.
.
clear
for
next
ten
years
–
needed,
not
just
wanted.
.
.
.
.
clear
for
next
ten
years
–
needed,
not
just
wanted. |
 10
.
.
.
.
creates
unique
opportunity;
lagging
for
peers.
.
.
.
.
creates
unique
opportunity;
lagging
for
peers.
Amount
(bils)
$1.8
_ _ _ _ _
Source: 10K; actual amounts through 2012 smoothed for illustration
Catch
Investment
-Up .
.
.
. |
 . .
. . will provide investment headroom. . . . . will provide investment
headroom. 11
•
Replace PPA
contracts with
owned
generation
•
Provides
incremental
rate base (and
earnings
potential) with
no impact to
customer rates
Opportunities
Opportunities
Capacity Need
Capacity Need
B. Expiring PPA’S . . . . |
 C.
Credit RATINGS .
.
.
.
.
.
.
.
just
upgraded.
.
.
.
.
just
upgraded.
12
•
Consistent
Performance
•
Less Risk
•
Customer Focus
•
Constructive
Regulation
•
Good Energy
Policy
Reflects
Reflects
Present
Prior
2002
Scale
S&P /
Fitch
Moody’s
S&P
Moody’s
Fitch
A+
A1
A
A2
Consumers
Secured
A-
A3
BBB+
Baa1
BBB
Baa2
BBB-
Baa3
BB+
Ba1
CMS
Unsecured
BBB
Baa2
BBB-
Baa3
BB+
Ba1
BB
Ba2
BB-
Ba3
B+
B1
B
B2
B-
B3
Outlook
Stable
Stable
Positive |
 D. SALES Growth
.
.
.
.
13
.
.
.
.
best
in
Midwest.
.
.
.
.
best
in
Midwest.
Economic Indicators
Economic Indicators
Grand
Rapids
Michigan
U.S
Unemployment
December 2013
5.6%
8.4%
6.7%
GDP
(real)
2010
thru
2012
14
11
7
Population
2010
Census
thru July 2012
2
0
2 |
 E.
CAPACITY
Price
Market
Increases
.
.
.
.
14
.
.
.
.
could
add
value
to
the
700
MW
“DIG”
plant.
.
.
.
.
could
add
value
to
the
700
MW
“DIG”
plant.
Capacity price <
($ kW per month)
Today
(mils)
Future Scenarios
(mils)
$5
+$30
$55
$35
+$50 |
 F.
Retail
Open
Access
Policy
(ROA)
.
.
.
.
15
.
.
.
.
change
could
allow
for
lower
industrial
rates.
.
.
.
.
change
could
allow
for
lower
industrial
rates.
1.8 Million Consumers Energy
1.8 Million Consumers Energy
Customers = 99.98%
Customers = 99.98%
0.02%
•
Governor wants affordable
residential bills and
competitive industrial rates
•
Eliminating ROA could:
•
Lower industrial rates by 10%
or all customers by 4%
•
Policy has big impact on
competitiveness
•
$150 million cost opportunity |
 Michigan's Energy Future
.
.
.
.
Governor’s 2025 Energy Goals
Governor’s 2025 Energy Goals
•
Adaptability
•
Eliminate energy waste
•
Reduce coal, replace with renewables
and gas
•
Reliability
•
Top quartile performance (SAIFI)
•
Top half performance (SAIDI)
•
Affordability
•
Residential bills below U.S. average
•
Competitive industrial rates
•
Environmental Protection
•
Reduce mercury, acid rain, particulates
•
Increase renewables
16
.
.
.
.
will
continue
to
strengthen
with
sound
policy
and
strong
leadership.
.
.
.
.
will
continue
to
strengthen
with
sound
policy
and
strong
leadership.
Regulatory Support
Regulatory Support
(from the right)
Michigan Governor Rick Snyder
MPSC Chairman John Quackenbush
Michigan Energy Office Director Steve Bakkal |
 “Choice creates a lot of challenges and problems so I wouldn’t jump to
say increasing choice is the answer. I’m concerned about people
bouncing back and forth depending on what’s going on with rates,
essentially trying to arbitrage markets.”
Governor Rick Snyder
17
Question:
“You
seem
to
agree
with
utilities’
argument on choice. Does that mean you will
eliminate shopping altogether or keep the 10% cap in
place?”
.
.
.
.
choice
is
not
the
solution
to
industrial
competitiveness.
.
.
.
.
choice
is
not
the
solution
to
industrial
competitiveness.
The Jackson City Council voted unanimously to pass a resolution opposing
House Bill 5184.
The Governor on Retail Open Access . . . . |
 .
.
.
.
.
holds
down
rates
and
allows
better
system
reliability.
.
.
.
.
.
holds
down
rates
and
allows
better
system
reliability.
18
Average Annual O&M Change
+6%
Peers
2013
Reinvestment
-8%
-2%
Major
Storms
-6%
-3%
Major 2013
Storms
CMS Flat
-2%
G.
Self-Initiated Control . . . .
COST |
 G.
Continuous COST Reduction
.
.
.
.
. . . . . a way of life at CMS.
. . . . . a way of life at CMS.
Past Progress
Past Progress
19
Future Examples
Future Examples
Fuel Mix
Benefits
MW
Employees
2016
Retire Coal
-
900
-
300
2016
Add GCC
+ 540
+ 20
Total
-360
-
280
Future Savings (mils)
$25
Future Annual
Savings
(mils)
2002-2012
Actions completed
$25
2013
EGWP, OPEB & other
50
Future savings
$75 |
  CMS
Mindset .
.
.
.
20
.
.
.
.
deliver
for
customers
AND
investors.
.
.
.
.
deliver
for
customers
AND
investors.
2013 Cold
2013 Cold
Winter &
Winter &
Cost Savings
Cost Savings
$1.66
+7%
Guidance
2012
Warm
Winter
2012
Cost
Saving
2012 Hot
Summer
Reinvested
earlier
2014 Cold
Winter
2013 Mild
Summer
Icy Late December
O&M
B/(W)
Than
Forecast
(mils)
•
$(37)
•
16
•
9
•
12
$
0
Reinvestment (January-October)
Amount (mils)
Improve
gas
reliability
$16
Improve
electric
reliability
14
Accelerate
generation
maintenance
7
Prefund
pension
&
storm
response
21
Total
$58
Storm(total
$50
M)
Insurance
Lower
contributions
Sales-weather
Total |
 Operating
Cash Flow Growth .
.
.
.
Amount
(bils)
$
Investment
Cash flow before dividend
NOLs & Credits
$0.7
$0.6
$0.4
$0.5
$0.4
$0.2
$0.1
Gross operating cash flow
a
up $0.1 billion per year
.
.
.
.
self-funds
investment
and
strategy.
.
.
.
.
self-funds
investment
and
strategy.
Up $0.5
Billion
21
Working capital
and taxes |
 Mindset
.
.
.
.
22
.
.
.
.
drives
consistent
“real”
growth.
.
.
.
.
drives
consistent
“real”
growth.
_ _ _ _ _
Adjusted EPS (non-GAAP) excluding MTM in 2004-2006
a
$1.25 excluding discontinued Exeter operations and accounting changes related to
convertible debt and restricted stock $1.66 |
 Growth
Growth
•
•
5%-7% EPS growth
5%-7% EPS growth
•
•
Dividend growth premium (like earnings)
Dividend growth premium (like earnings)
Transparent
Transparent
•
•
Ten-year, $15 billion investment plan
Ten-year, $15 billion investment plan
•
•
Constructive regulatory climate
Constructive regulatory climate
•
•
Continuous cost reductions
Continuous cost reductions
Predictable
Predictable
On
On
track
track
for
for
12
consecutive
consecutive
year
year
of
of
consistent,
consistent,
sector-leading
sector-leading
Catalysts not in plan!
Catalysts not in plan!
.
.
.
.
attractive
future
total
shareowner
return.
.
.
.
.
attractive
future
total
shareowner
return.
Key Takeaways . . . . th
financial performance
financial performance |
| Appendix
Appendix
*
*
*
*
*
*
*
*
*
*
*
*************************************** |
 2014
Adjusted EPS (non-GAAP)
.
.
.
.
Enterprises and Parent
Enterprises and Parent
.
.
.
.
growth
up
5%
to
7%
over
2013.
.
.
.
.
.
.
.
.
growth
growth
up
up
5%
5%
to
to
7%
7%
over
over
2013.
2013.
Utility
Utility
25 |
 CMS
Energy Parent CMS Energy Parent
Cash at year end 2013
116
$
Sources
Consumers Energy dividend and tax sharing
670
$
Enterprises
25
Sources
695
$
Uses
Interest and preferred dividend
(135)
$
Overhead and Federal tax payments
(10)
Equity infusion
(350)
Pension contribution
0
Uses
a
(495)
$
Cash flow
200
$
Financing and Dividend
New issues
250
$
Retirements
(250)
DRP, continuous equity
45
Net short-term financing & other
(10)
Common dividend
(290)
Financing
(255)
$
Cash at year end 2014
61
$
Bank Facility ($550) available
548
$
Amount
(mils)
Consumers Energy
Consumers Energy
_ _ _ _ _
a
Includes other
_ _ _ _ _
b
Includes
cost
of
removal
and
capital
leases
Cash at year end 2013
18
$
Sources
Operating (depreciation & amortization $679)
1,800
$
Other working capital
(125)
Sources
1,675
$
Uses
Interest and preferred dividend
(225)
$
Capital expenditures
b
(1,645)
Dividend and tax sharing $(225) to CMS
(670)
Pension contribution
0
Uses
(2,540)
$
Cash flow
(865)
$
Financing
Equity
350
$
New issues (includes securitization bonds)
850
Retirements
(200)
Net short-term financing & other
(128)
Financing
872
$
Cash at year end 2014
25
$
Bank Facility ($650) available
650
$
AR Facility ($250) available
180
$
Amount
(mils)
26
2014 Cash Flow Forecast (non
-
GAAP) |
| GAAP Reconciliation
GAAP Reconciliation
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
********************************* |
 2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
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
After-tax items:
Electric and gas utility
0.21
(0.39)
-
-
(0.07)
0.05
0.33
0.03
-
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
$1.66
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
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. Earnings Per Share
By Year GAAP Reconciliation (Unaudited)
28 |
 2012
2013
2014
2015
2016
2017
2018
Consumers Operating Income + Depreciation & Amortization
1,635
$
(a)
1,740
$
1,800
$
1,876
$
1,952
$
2,054
$
2,162
$
Enterprises Project Cash Flows
17
16
25
30
28
35
36
Gross Operating Cash Flow
1,652
$
1,756
$
1,825
$
1,906
$
1,980
$
2,089
$
2,198
$
(411)
(335)
(375)
(356)
(730)
(739)
(748)
Net cash provided by operating activities
1,241
$
1,421
$
1,450
$
1,550
$
1,250
$
1,350
$
1,450
$
(a) excludes $(59) million 2012 disallowance related to electric decoupling
CMS Energy
Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
(unaudited)
(mils)
Other operating activities including taxes, interest payments and
working capital
29 |
 30
Consumers Energy
2014
Forecasted
Cash
Flow
GAAP
Reconciliation
(in
millions)
(unaudited) |
 31
CMS Energy Parent
2014 Forecasted Cash Flow GAAP Reconciliation (in millions) (unaudited)
|
 32
Other
Consumers
Equity
Consumers
CMS Parent
Consolidated
Common Dividend
Infusions to
Consolidated Statements of Cash Flows
Description
Amount
Amount
Entities
as Financing
Consumers
Amount
Description
Cash at year end 2013
18
$
-
$
154
$
-
$
-
$
172
$
Cash at year end 2013
Net cash provided by
1,328
$
527
$
40
$
(445)
$
-
$
1,450
$
Net cash provided by
operating activities
operating activities
Net cash provided by
(1,684)
(350)
(114)
-
350
(1,798)
Net cash used in
investing activities
investing activities
Cash flow from
(356)
$
177
$
(74)
$
(445)
$
350
$
(348)
$
Cash flow from
operating and
operating and
investing activities
investing activities
Net cash provided by
363
$
(177)
$
18
$
445
$
(350)
$
299
$
Net cash provided by
financing activities
financing activities
Net change in cash
7
$
-
$
(56)
$
-
$
-
$
(49)
$
Net change in cash
Cash at year end 2014
25
$
-
$
98
$
-
$
-
$
123
$
Cash at year end 2014
Consolidated CMS Energy
2014 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 |