Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT - CMS ENERGY CORP | d73582d8k.htm |
Exhibit 99.1
CMS ENERGY
CMS LISTED NYSE®
CMS Autumn Meeting
August 30, 2015
Ludington Pumped Storage
Ray Compressor Station
Cross Winds Energy Park
Future Shines Bright
+7%/year
Peers = 3% /year
Last 7 Years
Next 5 Years
a) Adjusted EPS (non-GAAP)
Fourth largest in the world
#1 LDC in gas storage
#2 in renewable sales in the Great Lakes area
Consistent, Sustainable Growth
CMS ENERGY
CMS LISTED NYSE®
Toronto Investor Meetings
September 2-3, 2015
Ludington Pumped Storage
Ray Compressor Station
Cross Winds Energy Park
Future Shines Bright
+7%/year
Peers = 3% /year
Last 7 Years
Next 5 Years
a) Adjusted EPS (non-GAAP)
Fourth largest in the world
#1 LDC in gas storage
#2 in renewable sales in the Great Lakes area
Consistent, Sustainable Growth
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, 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, 2014 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 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.
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
Top of Mind . . . .
CMS ENERGY
1 • Senator Nofs introduced energy bill
– Improvement to 2008 Law
2 • Representative Nesbitt introduced energy bill
– Restores full regulatory model
3 • PA 169 (cost of service) approved
– Improves industrial rate competitiveness by 4%
4 • MISO Zone 7 capacity shortfall 1,300 MW
– More upside to ten-year $15.5 billion capital investment plan
5 • EPA Clean Power Plan
– CMS positioned well for compliance
. . . . business model is delivering results.
3
Simple, Perhaps Unique CMS Growth Model . . . .
CMS ENERGY
Plan Opportunity
Capital investment (drives EPS growth) 5% - 7% 6% - 8%
- O&M cost reductions -2 pts Short-term
- Sales growth - 1/2 ROA return
- No “block” equity dilution -1 and/or
- Surcharges and other -1 1/2 Long-term
INVESTMENT SELF-FUNDED -5 pts Replace PPAs
Rate increase at or below inflation <2 % <2%
. . . . drives sustainable growth.
4
Capex Up 45%
CMS ENERGY
2005-2014
2015-2024
Opportunity
$10.7 bil
$15.5 bil
$20 + bil
Organic Growth +45%
+30% Opportunity
Gas Infrastructure
Electric Maintenance
27%
New Generation
Environ.
Smart Energy
Electric Reliability
Electric Maintenance
Gas Infrastructure 37%
New Generation
Environmental
Smart Energy
Electric Reliability
Renewables
Generation Capacity
Grid Modernization
Gas Infrastucture
EPS
Growth
– CMS 7%/yr 5% -7% /yr 6% - 8% /yr
– Peers 4 4
. . . . with more opportunity and no “big bets” over ten years!
5
O&M Cost Performance
CMS ENERGY
Electric Annual Growth
(2014 over 2006)
Peer Average >5%
Consumers - 2.7%
Source: SNL, Form 1, Electric Non-fuel O&M
O&M Cost Savings
2014 & 2015 2014 ® 2018
(mils) (mils)
Attrition $-35 $-75
Productivity (Coal®Gas) -35 -50
“Pole Top” Hardening -30 -30
Smart Meters -5 -25
Eliminate Waste (UA’s) -15 -20
Mortality Tables & Discount Rates +50 +50
Service Upgrades +10 +50
Net Savings $-60 $-100
Percent Savings -6% -10%
FAST START! 2% a year!
. . . . better than peers with substantial upside.
6
Sales Growth . . . .
CMS ENERGY
Our Service Territorya Outperforms
Grand Rapids Michigan U.S
Building Permits b +28% +14% +13%
GDP 2010®2013 15 11 8
Population 2011®2014 3 0 2
Unemployment (6/15) 3.7 5.5 5.3
a Grand Rapids
b Annualized numbers thru June
Annual Electric Sales c
Industrial
Total
6%
Conservative
1%
2%
1/2%
2010-2014 Post-Recession 2015 - 2019 Future
c Weather normalized vs. prior year
. . . . planned conservatively.
7
No “Block Equity” Dilution
CMS ENERGY
Typical utility Model w/o NOLs
< 6%
< 5%
-1%
Rate Base Growth Dilution EPS Growth
CMS Model w/ NOLs
6% 6%
0
Rate Base Growth Dilution EPS Growth
. . . . under CMS growth model for five years!
8
Electric Customer Prices . . . .
CMS ENERGY
Residential Bills
20 %
Worse
National Avg
Residential bills well below U.S. average
Better (13)% (13)%
Rates Rates & Act 169
Rates & Fuel
(17)%
-20
2013 2014 2015 2016 Plus
Industrial Rates
30 % 26%
Rates
Worse Rates & Fuel
Industrial rates improving rapidly Rates & Act 169 4%
Midwest Avg Flat
Better Policy could eliminate gap (8)%
-30
2013 2014 2015 2016 Plus
. . . . affordable for residential and improving for industrial customers.
9
Michigan Energy Law . . . .
CMS ENERGY
Sen. Nofs Gov. Snyder Rep. Nesbitt
“Retail Open Access” Keep “cap” Keep “cap” End “ROA”
3-year capacity requirement, “one way door” No subsidy 5-year capacity requirement “Fair choice” No subsidy Fully regulated
Efficiency 1% yr waste reduction through 2018 Eliminate 15% energy waste Repeal present program
Renewables IRP process
. . . . builds off the 2008 law, adding growth opportunities.
10
CMS Energy . . . .
CMS Energy
7% CAGR
+5% to +7%/year
Recession Recession
Help
Hurt
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Future
We work with anyone and in any condition
Cold winter Mild summer Hot summer Warm winter Mild summer Cold winter Summer- “less” Hot summer Hot summer Warm winter Mild summer Polar vortex Cold Feb.
Governor (D) Governor (R)
Commission (D) New Commission (D) Commission (R)
. . . . consistent growth through recession, adverse weather, changing policy leaders . . . .
11
Why Invest in CMS Energy? CMS ENERGY
Future Shines Bright a
Sustainable Future Growth
EPS a $2.50 +5% to +7% / year
+7% /year
Last 7 Years Next 5 Years
a Adjusted EPS (non-GAAP)
Past Performance Next 5 Years
Investment (bils) (2010-2014) $6.4 $7.6
Capacity Op!
O&M Reduction (2006-2014) (10)% (7)%
Conservative
Sales Growth (2010-2014) +1% + 1/2 %
Conservative
Energy Policy 2008 Law Improved Law
. . . . next 10 years even brighter than last 10 year record!
12
Appendix
Constructive Regulation . . . .
CMS ENERGY
Commission
John Quackenbush (R),
Chairman
Term Ends: July 2, 2017
Sally Talberg (I)
Term Ends:
July 2, 2019
Norm Saari (R)
Term Ends: July 2, 2021
Newly appointed!
Tier 1 State Ranking
1 6 Michigan ranked #1
2 8
3 20
4 9
5 6
Barclays Research, 2015 state rankings
. . . . is supported by a quality Commission and a strong Law.
14
Capacity Diversity. . . .
CMS ENERGY
Nuclear 8%
Oil 6% Coal 34%
Renewables 9%
Pumped Storage 11% 2014
Nuclear 8% Gas 32% Oil 6% Nuclear 8%
Oil 6% Purchases 3%
Renewables 3% Coal 41% Renewables 10% 2017 Coal 24%
Pumped Storage 11% 2005 Pumped Storage 12%
Gas 31% Gas 37%
. . . . evolving to cleaner generation while becoming more cost competitive.
15
Capacity & Energy Price Increases. . . . CMS ENERGY
Was (mils) Now (mils) Future Scenarios (mils)
+ $25 – $50 more $65
Energy $55
Capacity
$40
$35
$15
$5
Capacity price ($ kW per month) < $0.50 (Prior) = $2.00 (Forecast) $4.50 $7.50 (CONE)
New Business
Long-term Energy
250 MW at $4.00 per kWm (6/14)
250 MW = $5.75 per kWm (4/15)
Recent Capacity
Long-term > $3.30
Near-term = $4.50
Upside: Capacity and energy contracts layered in over time
. . . . adding value to our “DIG” plant.
16
PPAs (2,000 MW) Create Unique Opportunity for. . . . CMS ENERGY
PPA vs Owned Capacity
30%
10%
5%
Peers CMS Today CMS Future
Opportunity 2,000 MW
$2 Bil Investment
Amount (mils)
PPAs $(650)
New Gas Build 650
Annual Customer Impact zero
. . . . more capacity investment, without increasing bills.
17
ROA (800 MW) Creates Unique Opportunity for. . . . CMS ENERGY
Potential Return
800 MW
“One-Way Door” Decision
Build Decision
Today Future
Opportunity
$150 million subsidy
0.02% of customers on ROA
(~300 customers)
Could lower rates 4% for everyone if all returned
Build new generation capacity, funded by return
. . . . more capacity investment, without increasing bills; 10% return worth five years of growth.
18
Clean Power Plan. . . . CMS ENERGY
Lbs CO2 (per MWh) 2500 (Preliminary -- Emission Rate)
Consumers Energy 2005 Baseline
Retire 950 MW coal
State of Michigan Target
Projected outlook with 20% renewables -- investment not yet in Plan
0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
. . . . positioned well for compliance.
19
Rate Cases. . . . CMS ENERGY
Gas (mils)
$21 $85
$64
Investment Cost of Capital, Upgrades, & Other Filed 7/17
Electric Track Record
Date Step Amount
(mils)
May 2013 Settlement $89
2014 Stay out --
June 2015 Self-implement 110
Dec. 2015 Order expected
2 1/2 years since last order!
. . . . fair and timely.
20
Customer Satisfaction . . . .
CMS ENERGY
Electric
1st Quartile #4
2nd Quartile #6
3rd Quartile
4th Quartile
2010 2012 2014 Present Rank 2016
Residential Business
Gas
#3 1st Quartile
2nd Quartile #9
3rd Quartile
4th Quartile
2010 2012 2014 Present Rank 2016
Residential Business
. . . . continues to improve rapidly. 21
Investment “Catch-up” . . . .
CMS ENERGY
Capex (bils) $1.8 One of first with a ten year plan
> $1.5 per year
“Catch-up” Capex as a Percent of Market Capa
2005 - 2014 2015 - 2024
CMS Energy CMS 10% 16%
Peers Peers 11 15
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
-----
a Based on December 31, 2014 information percent of market cap
Source: 10K; actual amounts through 2014 smoothed for illustration
. . . . creating an opportunity for the next ten years. 22
Rate Base Growth . . . . CMS ENERGY
10 Years of Growth
Rate Base (bils) $20
+6% /year
Depreciation
0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Investment
2015 - 2024 Amount (bils)
Gas Infrastructure & Maintenance $5.8
Electric Reliability 2.3
Smart Energy 0.4
Environmental 0.9
New Generation 1.1
Electric Maintenance 5.0
Plan Investment $15.5
. . . . drives EPS growth 5% - 7% a year. 23
O&M “Reinvestment” Helps CUSTOMERS . . . . CMS ENERGY
Adjusted EPS (non-GAAP)
2015 O&M Reinvestment (mils) 2016 Savings (mils)
2014 17¢
DIG outage $(8) $10
Forestry (5) 5
Donations & other (5) 5
Total $(18) $20
13¢
Weather 12¢
Natural Offsets (4)
Cost & Other 5
Total 13¢
2015
Flex Items
O&M choices
Alt. financing
Plant outage
Contributions
+7% -
+5%
Guidance
January March 31 June 30 September 30 December
. . . . AND provides sustainable, premium growth for INVESTORS. 24
O&M Cost Reductions . . . . CMS ENERGY
2006 2014 2018
$1.1 bil Down 10%
$1.0 bil Inflation =2%
Down 7% or 2%/yr
$0.9 bil Inflation =2%
Coal to Gas Switching (Zeeland)
Smarter benefit plans
Productivity/Attrition
Coal to Gas Switching (Jackson)
“Pole Top” Hardening
Productivity/Smart Energy
. . . . provide more “headroom” for more capital investment. 25
MISO Zone 7 Capacity . . . . CMS ENERGY
2016 Forecasted Shortfall (MW)
Annual MISO Survey
June 2014 -3,000
June 2015 -1,300
CMS & DTE Purchase IPPs
New Build
Lower Demand
-----
Source: MISO
Impact
New capacity to meet shortfall not assumed
More upside to $15.5 billion capex plan
Creates upside pressure in capacity prices -- DIG opportunity
. . . . shortfall expected to be 1,300 MW. 26
Operating Cash Flow Growth . . . . CMS ENERGY
Amount (bils)
$2.6
2.1
1.6
1.1
0.6
0.1
(0.4)
(0.9)
Up $0.6 Billion
Gross operating cash flowa up $0.1 billion per year
$1.8 $1.9 $2.1 $2.2 $2.3 $2.5 $2.6
$1.55 Interest, working capital and taxes
Investment
Cash flow before dividend
-----
a Non-GAAP
2014 2015 2016 2017 2018 2019 2020
NOLs & Credits $0.7
$0.7 $0.7 $0.5 $0.3 $0.2 $0.1
. . . . up $0.6 billion or 30% over five years! 27
Generation Strategy: New Supply Sources . . . . CMS ENERGY
Levelized cost of new build (¢/kWh)
25
New Build
Consumers Energy Sources
5¢ 6¢ 5¢ 7¢ 8¢ 6¢ 11¢ 10¢ 7¢ 12¢ 5.5¢ 22¢ 15¢
Zeeland
Back -up 6¢ Cross Winds 9¢ Big 5 Palisades
Back -up 6¢
0
Combined Cycle Gas Plant Wind Coal Nuclear Residential Solar
Gas price= $3.00 $4.50 $6.00 W/ tax credit W/o tax credit W/ emission controls Today $3.00 per watt Future $2.00 per watt?
. . . . combined cycle gas is the most attractive new source of supply. 28
GAAP Reconciliation
CMS ENERGY
CMS ENERGY CORPORATION
Earnings Per Share By Year GAAP Reconciliation
(Unaudited)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
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
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) * 0.03
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 $1.77
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 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.
30
CMS ENERGY
CMS Energy
Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
(unaudited)
(mils)
| 2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 | ||||||||
| Consumers Operating Income + Depreciation & Amortization |
$1,813 |
$1,920 |
$2,027 |
$2,145 |
$2,266 |
$2,401 |
$2,515 | |||||||
| Enterprises Project Cash Flows |
20 |
20 |
40 |
58 |
62 |
67 |
71 | |||||||
| Gross Operating Cash Flow |
$1,833 |
$1,940 |
$2,067 |
$2,203 |
$2,328 |
$2,468 |
$2,586 | |||||||
| Other operating activities including taxes, interest payments and working capital |
(386) |
(390) |
(567) |
(603) |
(628) |
(668) |
(686) | |||||||
| Net cash provided by operating activities |
$1,447 |
$1,550 |
$1,500 |
$1,600 |
$1,700 |
$1,800 |
$1,900 |
31
Customer Satisfaction . . . . CMS ENERGY
Electric Gas
1st Quartile #4 1st Quartile #3
2nd Quartile #6 2nd Quartile #9
CUSTOMERS
3rd Quartile 3rd Quartile
4th Quartile 4th Quartile
2010 2012 2014 Present Rank 2016
2010 2012 2014 Present Rank 2016
Residential Business
…. continues to improve rapidly.
O&M “Reinvestment” Helps CUSTOMERS . . . . CMS ENERGY
Adjusted EPS (non-GAAP)
2015 O&M Reinvestment (mils)
2016 Savings (mils)
2014 17¢
DIG outage $(8) $10
Forestry (5) 5
Donations & other (5) 5
Total $(18) $20
13¢
Weather 12¢
Natural Offsets (4)
Cost & Other 5
Total 13¢
2015
INVESTORS
Flex Items
O&M choices
Alt. financing
Plant outage
Contributions
+7% - +5%
Guidance January March 31 June 30 September 30 December
…. AND provides sustainable, premium growth for INVESTORS.
INVESTOR INFORMATION
CMS Energy Corporation
Investor Relations Department
One Energy Plaza, Jackson, MI 49201
Phil McAndrews (517) 788-1464
Travis Uphaus (517)768-3114
www.cmsenergy.com
CMS ENERGY
OUR MODEL; OUR PLAN
OUTPERFORMED FOR A DECADE: NEXT DECADE EVEN BRIGHTER
12 year track record (EPS and dividend growth)
Capex -- 100% organic (no “big bets”)
Self-funded -- No block equity dilution! (5 years!)
World-class cost performance
Conservative sales planning (under promise/over deliver)
World-class regulation and law
Fall 2015
CMS Energy
Actual Plan Upsides NOT in Plan
7% /year $1.89 +5% - +7%
$1.21 $1.26 $1.36 $1.45 $1.55 $1.66 $1.77 $1.86
Adjusted EPS a $0.81 $0.90 $0.96 $1.08 $1.02 $1.08 $1.16 $1 bil capex =
Int’l Sale $0.84 50¢ 66¢ 84¢ 96¢
20¢ 36¢ +$100 mil +10¢
Dividend 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Future
Gross OCF a (bils) $1.3 + $0.5 $1.8 + $0.8 $2.6
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 OCF EPS
Self-funded (No block equity dilution)
Gas Infrastructure 2005 - 2014 2015 - 2024
Electric Reliability $10.7 B $15.5 B +30% Opportunity
CapEx Smart Energy Organic Growth +45% Upside
Environmental $20 + B Generation capacity
New Generation Opportunity Gas infrastructure
% of Mkt Cap Electric Maintenance $16.5 + B Grid modernization
-CMS No “Big Bets” Renewables
-Peers 10% 16% 21%
Base Rates
11 15
< 2% < 2% > 2%
2006 2014 2018 Residential Bills Industrial Rates
O&M Cost (bils) Down 10% Down 7% 20% 30%
$1.1 Peers up 42% $1.0 $0.9 National Avg Midwest Avg
5% 1% 8.7% 2.8% 2% 1/2% Policy could create an advantage
Electric Sales -5% -2.5% Conservative 2013 2014 2015 2016 2013 2014 2015 2016
(Ind. /Total) 2008 – 2009 Recession 2010 - 2013 Recovery 2014 2015 - 2019 Future b +1% sales = $20 mil OCF = 5¢ EPS
2008 Law 2015 Update New capacity
Energy efficiency standards Sen. Nofs Gov. Snyder Rep. Nesbitt - Gas combined cycle -- $700 million
- Renewables -- $1 billion
File and implement ROA
Keep “cap” 3-year capacity requirement; “one way door”; No subsidy
Keep “cap” 5-year capacity requirement; “Fair choice”; No subsidy
End “ROA” Fully regulated
New Energy Efficiency
Energy Policy 10% renewables by 2015
Efficiency 1%/yr waste reduction through 2018 Eliminate 15% energy waste
Repeal present program
- Incentive/ rate base - Decoupling
10% ROA cap Renewables IRP Process Eliminate ROA subsidy = $150 million
This placemat contains “forward-looking statements”; please refer to our SEC filings for information regarding the risks and uncertainties that could cause our results to differ materially. It also contains non-GAAP measures. Reconciliations to most directly comparable GAAP measures are found in the accompanying handout or on our website at www.cmsenergy.com
a Non-GAAP b As of June 30, 2015