Exhibit 99.1
Investor Meetings
March 19, 2014
Cross Winds Energy Park Consumers Smart Energy Program
Jackson Gas Plant
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
Consumers Energy
Territory Overview
Fourth largest combination
utility in the United States
1.8 million electric and 1.7
million gas customers
8,600 MW of owned and
purchased generation
capacity
312 TBtu of gas storage
capacity
Premium regulatory
environment
one of largest investors and employers in Michigan.
2
Mindset
10-Year Actual $1.66
Dividend 7% CAGR
EPS $1.78 5%- 7%
Peers 4% $1.74
$1.55
$1.36 $1.45
$1.26 6%
$1.21 a $1.08
6% 5%-7%
$1.08 14% $1.02
$0.96 96¢
$0.90 27% 84¢
$0.81 Int’l Sale $0.84 32% 66¢
39% 50¢
80%
36¢
20¢
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Future
Dividend Payout 0% 25% 30% 40% 49% 58% 62% 62% 60%-70%
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
drives consistent “real” EPS growth.
3
CMS Energy MODEL
RESULTS
Consistent
Predictable
Investment
Self-Imposed Limits • Ten year-$15 billion
• Small, bite size projects
• Sustainable base rates < 2% inflation • None “Bet The Company”
• Investment “Needed Not Wanted”
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
benefits customers AND shareowners.
4
Model Delivers
Above Average Return EPSa Growth vs Peers
Future 7%
Return
• Attractive dividend yield 4% 5% 5%-7% 6%
• 62% payout ratio
• EPS growth rate 5%-7% 4% 4%
• Driven by $7 billion
investment in regulated
Utility over next five years
Shareowner return 9%-11%
CMS Peers CMS Peers
- Ten-Year Growth Future
a Adjusted EPS (non-GAAP)
good, future return opportunity.
5
A. Visible, 10-Year INVESTMENT Plan
2013-2022 Opportunity Level
10-Year Plan
Amount
(bils)
Generation capacity
• PPA replacement $ 1.7
• ROA return
Higher renewables .3
Gas conversions & expansion 1.0
Electric reliability &
transmission 2.0
Total Opportunities $ 5.0
Rate Base 6%
Customer
base rates <2 >4
X
reflects catch-up needed to reduce cost and improve reliability.
6
Visible Investment: Catch-Up
Amount
(bils)
$1.8
$1.5
Peers
CMS
2013 Pct of Market Cap
Cap Inv OCF Liquidity
CMS 21% 20% 24%
Peers 18 16 20
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: 10K; actual amounts through 2012 smoothed for illustration
creates unique opportunity; with OCF already stronger than peers.
7
Visible Investments: Customer-Driven
Clean Power Capacity Reliability Infrastructure
$2.5 Billion $1.5 Billion $4.0 Billion $4.5 Billion
Environmental New gas acquisition Consumers Smart Energy Gas distribution
Renewable energy Pipeline replacements Main replacements Propane switching
Ludington Pumped Storage Gas conversions Electric reliability Electric distribution
small and incremental with no big bets.
8
Visible Investment: Gas Infrastructure
Gas System Investment
Amount
• #4 largest gas utility(bils)
$ 30.
$2.6
• 27,000 miles of distribution mains 2.5 $2.3
• 24,000 miles of service pipe 2.0
1.5 $1.4
• 1,700 miles of transmission lines
1.0
• 312 TBtu gas storage
0.5
0
2008-2012 2013-2017 2018-2022
accelerating investment opportunities.
9
Visible Investment: Major Generation
Over 6 GWs of Generation Assets
Karn/Weadock
Generating Complex
New Capacity
$0.4 B Generation
Reliability Ludington Pumped
Storage Plant
$0.7 B
Cross Winds
Energy Park
Environmental
Controls
$1.0 B Campbell Generating
Plant
Jackson Plant
Investing over $2 billion in generation over the next 5 years.
10
Visible Investment: Renewable Energy
• Michigan energy law requires:
• 10% renewables by 2015
• Purchase 50% and build 50%
• Lake Winds Energy Park
• 100 MW, 56 Vestas turbines
• Commercial operation – November 2012
• $235 million
• Cross Winds Energy Park Phase I
• 105 MW, 62 GE turbines
• Commercial operation – November 2014
• $255 million
Michigan’s largest renewable energy supplier.
11
Visible Investment: Rate Base Growth
Amount
(bils) Gas Capital Investment “Checklist”
$ 20 $19
Electric
Add Customer Value
$15 $6
15 Reduce O&M Costs
$11 $4 Reduce Fuel Costs
10 $3 Mandated by State or
$13 Federal Regulators
5 $11
$8
0
2013 2017 2022
Base Rate Increases <2% <2%
drives EPS, cash flow, and dividend growth.
12
B. Expiring PPA’S
MW Replace PPA
10,000 contracts with
Planned Demand Reductions owned
9,000 generation
Capacity Shortfall
8,000 Jackson Plant
Classic 7 Provides
7,000 Mothballed
(950 MW) incremental
Palisades PPA
Termination
6,000(778 MW) rate base (and
MCV PPA
Termination
(1,240 MW) earnings
0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2025 potential) with
CE Portfolio Jackson Plant no impact to
Capacity Shortfall Smart Energy, EO, Interruptibles customer rates
Net Peak Demand Plus Reserves Total Peak Demand Plus Reserves
will provide investment headroom.
13
C. Credit RATINGS
Scale Reflects
S&P / S&P Moody’s Fitch
Fitch Moody’s(March)(January)(February) Consistent
A+ A1 Performance
A A2
A- A3 Consumers
BBB+ Baa1 Secured Less Risk
BBB Baa2 Customer Focus
BBB- Baa3
BB+ Ba1 Constructive
BBB Baa2 Regulation
BBB- Baa3 CMS
Unsecured
BB+ Ba1 Good Energy
BB Ba2 Present Policy
BB- Ba3 Prior
B+ B1 2002
B B2
B- B3
Outlook Positive Stable Stable
just upgraded, more ahead?
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D. Consumers SALES Growth
Examples of New Business Economic Indicators
Electric Grand
Gas Rapids Michigan U.S
Combination
Unemployment 5.6% 8.4% 6.7%
December 2013
GDP (real) 2010 thru 2012 14 11 7
Population 2010 Census 2 0 2
thru July 2012
Eco-Bio Plastics
3 MW Industrial Sales
Betz Industries CMS 6%
8 MW Plan Conservatively
Enbridge U.S. Utilities 2%
28 MW <1%
Dart Container
Magna-Cosma 2 MW
Casting
4 MW Norplas -5%
5 MW -6%
2008-2009 2010-2012 2013-17 Plan
Secant MACI Recession Recovery Assumptions
7 MW 6 MW
best economic indicators in State.
15
E. CAPACITY Price Market Increases
Today Future Scenarios
(mils)(mils)
+$50 $55
+$30 $35
$5
Capacity price < $0.50 $4.50 $7.50
($ kW per month)
could add value to the 700 MW “DIG” plant.
16
F. Retail Open Access Policy (ROA)
0.02%
310 “ROA” Electric Governor wants affordable
Customers residential bills and
competitive industrial rates
Eliminating ROA could:
Lower industrial rates by 10%
or all customers by 4%
1.8 Million Consumers Energy Policy has big impact on
Customers = 99.98% competitiveness
$150 million cost opportunity
change could allow for lower industrial rates.
17
Michigan’s Energy Future
Governor’s 2025 Energy Goals Regulatory Support
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 (from the right)
Michigan Governor Rick Snyder
Reduce mercury, acid rain, particulates MPSC Chairman John Quackenbush
Increase renewables Michigan Energy Office Director Steve Bakkal
will continue to strengthen with sound policy and strong leadership.
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The Governor on Retail Open Access.
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 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
The Jackson City Council voted unanimously to pass a resolution opposing
House Bill 5184.
choice is not the solution to industrial competitiveness.
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G. Self-Initiated COST Control
Average Annual O&M Change
+6%
+2%
+1%
Peers
Major
CMS Flat Storms
-2% -3% -2%
Peers 2013 -6%
Reinvestment
w/o Storm Changes Major 2013
Actual/Plan -8% Storms
-10%
Average -3.7% Plan Conservatively
2006-2012 2012 2013 2014 2014-2018
holds down rates and allows better system reliability.
20
G. Continuous COST Reduction
Past Progress Future Examples
Headcount Fuel Mix MW Employees
7,600 2016 Retire Coal -900 -300
2016 Add GCC + 540 + 20
$100k
Each 7,200 Total -360 -280
Future Savings (mils) $25
600
1,000 $60k Benefits Future Savings Annual
Each (mils)
2002-2012 Actions completed $25
2013 EGWP, OPEB & other 50
Future savings $75
2010 2012
People Productivity = $64 million Fuel and Benefits $100
a way of life at CMS.
21
Constructive Regulation
Commission Tier 1 State Ranking
1 5 Michigan
2 10
John Quackenbush (R), Chairman
Term Ends: July 2, 2017
3 18
4 10
5 6
Sally Talberg (I) Greg White (I)
Term Ends: July 2, 2019 Term Ends: July 2, 2015
Barclays Research
strong law on the books supported by a quality commission.
22
Customer Rates – Working With MPSC To Be....
2013-2017 Cost Reductions
Annual Average Base Rate Increasesa
Eliminate 2014 base rate
2% Inflation increases:
• Electric
• Gas
~1% ~1%
Eliminated renewable
surcharge
Eliminated rate skewing
Electric Gas Lowered summer block
a Includes surcharges rates
....affordable and sustainable.
23
CMS Mindset....
Icy Late December
O&M B/(W)
Than Forecast
(mils)
Storm(total $50 M) $(37)
Insurance 16
2014 Cold Lower contributions 9
Winter 2012 Hot Sales-weather 12
Summer Total $ 0
2013 Cold $1.66
Winter & Reinvested +7%
Cost Savings earlier 2013 Mild
Guidance Summer
2012 2012 Reinvestment (January-October) Amount
Warm Cost(mils)
Winter Saving Improve gas reliability $16
Improve electric reliability 14
Accelerate generation maintenance 7
Prefund pension & storm response 21
Total $58
....deliver for customers AND investors.
24
Operating Cash Flow Growth....
Amount
(bils) Gross operating cash flowa Up $0.5
Billion
$ 2.5 up $0.1 billion per year
$2.2
$2.1
2.0 $1.9 $2.0
$1.7 $1.8
$1.6
$1.5
1.5 Interest $1.4 $1.45 Working capital
and taxes
Investment
1.0
0.5
0
(0.5) a Non-GAAP Cash flow before dividend
2012 2013 2014 2015 2016 2017 2018
NOLs & Credits $0.7 $0.6 $0.4 $0.5 $0.4 $0.2 $0.1
....self-funds investment and strategy.
25
Key Takeaways....
EPS a “Real” Growth
$2.00 7%
Core Fundamentals
7% 5%
+7% 5% Visible Investment
+7%
+8% +7% Cost Controls
+12%
+12% +4% Target 5% - 7% Plan Conservatively
+7% Actual = 7%
+11% Supportive Regulatory
Catalysts Upside
Target 6% - 8% Actual EPS = 8%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Beyond
a Adjusted EPS (non-GAAP) excluding MTM in 2004-2006
....distinguishi CMS favorably with customers and owners.
26
Appendix
Capital Expenditures
2014-2018 Plan
2013 2014 2015 2016 2017 2018 Total
(mils)(mils)(mils)(mils)(mils)(mils)(mils)
Electric
Distribution $ 199 $ 190 $ 197 $ 202 $ 211 $ 208 $ 1,008
Generation 89 96 93 88 60 155 492
New Customers 48 47 38 39 38 34 196
Other 96 102 81 82 84 61 410
Electric Base Capital $ 432 $ 435 $ 409 $ 411 $ 393 $ 458 $ 2,106
Gas
Distribution $ 177 $ 152 $ 181 $ 177 $ 193 $ 212 $ 915
New Customers 45 45 40 36 36 35 192
Other 88 60 53 53 49 44 259
Gas Base Capital $ 310 $ 257 $ 274 $ 266 $ 278 $ 291 $ 1,366
Total Base Capital $ 742 $ 692 $ 683 $ 677 $ 671 $ 749 $ 3,472
Investment Choices
Environmental $ 292 $ 280 $ 200 $ 122 $ 114 $ 111 $ 827
Electric Reliability 102 156 208 108 129 133 734
Gas Infrastructure 117 182 198 178 202 211 971
New Gas Plant Capacity - - - 155 10 100 265
Renewables 83 163 9 - - - 172
Consumers Smart Energy 66 84 134 175 120 - 513
Ludington Hydro & other 62 90 55 58 56 145 404
Total Choices $ 722 $ 955 $ 804 $ 796 $ 631 $ 700 $ 3,886
Total Utility $ 1,464 $ 1,647 $ 1,487 $ 1,473 $ 1,302 $ 1,449 $ 7,358
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GAAP Reconciliation
Earnings Per Share By Year GAAP Reconciliation
(Unaudited)
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-GAA $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-GAA 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.
30
CMS Energy
Reconciliation of Gross Operating Cash Flow to GAAP Operating Activities
(unaudited)
(mils)
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
Other operating activities including taxes, interest payments and
working capital(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 |
31 |
|