Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - CONSUMERS ENERGY CO | d448186d8k.htm |
Exhibit 99.1
Investor Meetings
December 4-5, 2012
Foote Hydro 1918
Zeeland 2007
Lake Winds 2012
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 2012. The company is not able to estimate the impact of these matters and is not providing reported earnings guidance.
2
CMS Energy MODEL . . . .
RESULTS –
Consistent
Strong Performance
Risk Profile
Credit Outlook Positive
Investment
Self-Imposed Limits
Base Rates
Enablers
Michigan Energy Law Constructive Regulation Rate Cases Lean O&M Expense Sales Recovery Growth Self Funded (NOLs)
. . . . working well.
3
Model Delivers . . . .
Attractive dividend yield
62% payout ratio
EPS growth rate
Total shareowner return
Future
Return
4%
5—7
9%-11%
Near Term Catalysts
1) Regulatory climate
2) Electric rate case
3) Sales recovery
4) New gas plant
5) Credit rating outlook positive
6) Growth self funded (NOLs)
. . . . good total return opportunity.
4
CATALYST #1—- Constructive Regulation . . . .
2008 Law
Growth
Renewable energy plan Energy optimization
Speed
File and implement ratemaking Forward test year
Risk Mitigation
Retail open access cap Decoupling
Regulation
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
. . . . provides improvements for customers and investors.
5
CATALYST #2— Electric Rate Case . . . .
Drivers
Amount
(mils)
Request $148
Mix of Request:
Capital Investment: 85%
ROE 10.5%: 7
Tree trimming and other: 8
Total: 100%
2014 Capex Adjustment
Mechanism (mils): $83
2012 Rate case mechanisms
Revenue adjustment mechanism
– Capital investment
– Pension and retiree healthcare
– Uncollectible accounts
Capital Investment Mix of Total
94%a 85%
70%
62%
2010 2011 2012 2013E
Excludes depreciation case
. . . . mechanisms may result in less frequent rate cases and lower regulatory risk.
6
2011 Electric Costs . . . .
O&M % Revenue
Peer Average 22%
18%
CMS
Overhead
%
Revenue
Peer Average 5%
2%
CMS
Source: SNL data service
. . . . among the best.
7
Future Cost Performance . . . .
Future O&M Cost
Flat
-6%
2012 2013-2017
Examples of Cost Reductions
• Employee restructuring
• Improved productivity
• Consolidating field offices
• “Classic 7” mothballing
• Smart Energy
• Uncollectible account
improvements
• Lower benefit costs
. . . . continues to provide sustainable EPS growth.
8
CATALYST #3—- Sales Recovery . . . .
Electric Salesa
GWh Up 4%
40,000 2010 to 2012
6% decline
35,000 2007 to 2009
30,000
25,000 Up 9%
1983 & 1984
7% decline
20,000 1979 to 1982
0
1975 1979 1983 1987 1991 1995 1999 2003 2007 2012
a Weather adjusted
Electric Salesa vs Prior Years
Before EO +7%
2.4% 2.4%
+2.1% +2.3%
+1.7%
+1.3% +1.3%
-0.7% +4%
-2.0%
-3.0%
-6%
2006 2007 2008 2009 2010 2011 2012
. . . . third year of continuing load growth.
9
Michigan Economy – GDP Growth . . . .
Gross Domestic Product Growth: 2011 vs 2010
Source: U.S. Department of Commerce
. . . . outperforming the Midwest and most of U.S.
10
CATALYST #4—- Capital Investment . . . .
2013 – 2017 Plan
Opportunity Level
$6.5—$7.3 • Faster smart grid
• Pipe replacements $10 Billion
Billion • Pole replacements
• New gas generation
Customer rates
<2%
>4%
. . . . at sustainable customer “base rate” increases.
Capacity . . . .
Installed Capacity Excl Classic 7 Classic 7
MW Peak Demand with 11% Reserve Margin Peak Demand with 18% Reserve Margin
9,500
9,000
8,500
8,000 Up to 1,500 MW
Shortfall
7,500
7,000
6,500
6,000
5,500
5,000
0
2012 2013 2014 2015 2016 2017
. . . . need looms.
12
Capital Investment . . . .
2013-2017
$6.5—$7.3 Billion
5%
8% 31%
11%
4%
16%
14%
New Gas Plant –
11%
Electric Base Gas Base Generation Environmental Smart Energy Electric Reliability Gas Infrastructure Renewables
2018-2022
$8.0 Billion
Gas 7%
Infrastructure—29%
19%
18% 7%
3% 3% 14%
. . . . provides sustainable long-term EPS and cash flow growth.
13
CATALYST #5 — Liquidity & Credit Outlook . . . .
Availability
$1.6 Billion
CMS Energy
5-year revolver—2016 $548 mils
32%
Market Cap a
Consumers Energy
5-year revolver—2016 498
5-year revolver—2017 150
A/R Facility—2012 250
Cash 128
Credit Ratings
Scale
S&P/ Moody’s S&P Moody’s Fitch
Fitch
Consumers
A- A3 Secured
BBB+
BB+ Ba1 CMS
Unsecured
Outlook: Positive Positive Stable
. . . . strong.
a As of 6/30/12, comparing 18% for peers
14
CATALYST #6—- EPS Growth . . . .
Net NOLs and Credits
$0.8 $0.8
$0.5 $0.5
$0.3
$0.2
$0.1
2011 2012 2013 2014 2015 2016 2017
Gross NOLs (bils) $1.5 $1.3 $0.7 $0.5 $0 $0 $0
“Block” Equity 0 0 0 0 0 0 0
. . . . self funded.
15
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
Working capita
1.0 Base Invest
0.5
Investment choices
0
Cash flow before dividend
(0.5)
2011 2012 2013 2014 2015 2016 2017
NOLs & Credits $0.8 $0.8 $0.5 $0.5 $0.3 $0.2 $0.1
a Non-GAAP
16
EPSa and Dividend Growth . . . .
EPS
8% CAGR 5%—7%
(Peer Average = 4% Growth)
$1.45
$1.36
$1.26
$1.21 b
$1.08
$0.96
$0.90
$0.84
$0.81
Int’l sale
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 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
Dividend
14% 96¢
84¢
27%
32% 66¢
39% 50¢
36¢
80%
20¢
0
2006 2007 2008 2009 2010 2011 2012
Payout 0% 25% 30% 40% 49% 58% 62%
. . . . providerovide for strong TSR.
17
Key Takeaways . . . .
Future – Annual Growth
9%—11%
Dividend Yield
EPS Growth
Catalysts
1) Regulatory climate
2) Michigan economy continues improvement
3) Electric rate case mechanisms may lower risk
4) Transparent Utility investment plan benefits customers and shareowners
5) Credit ratings outlook positive
6) EPS growth self funded
Predictability
On track for 10th consecutive year of consistent, attractive financial performance
. . . . attractive total shareholder return.
18
APPENDIX
MATURITY SCHEDULE OF CMS AND CECo LONG-TERM DEBT
AS OF 10/31/12
Maturity Amount
F/V S/U or Call Date(000’s) DEBT/ CO
SHORT-TERM DEBT:
V U 03/23/13 $ 350,000 $350MM Term Loan (CECo)
F U SHORT-TERM 172,500 5.5% Convertible Sr Notes (Next Put Date 06/15/14) (CMS)
$ 522,500
LONG-TERM DEBT:
F S 02/15/14 $ 200,000 6% FMBs (CECo)
F U 05/15/14 250,000 2.75% Sr Notes (CMS)
$ 450,000
F S 03/15/15 225,000 5% FMBs Series N (CECo)
F U 09/30/15 250,000 4.25% Sr Notes (CMS)
F S 10/15/15 50,000 2.60% FMBs (CECo)
F U 12/15/15 125,000 6.875% Sr Notes (CMS)
$ 650,000
V S 03/31/16 $—Barclay Revolver (CMS)
F S 08/15/16 350,000 5.5% Series M FMBs (CECo)
V U 12/15/16 180,000 $180MM Term Loan (CMS)
$ 530,000
F S 02/15/17 $ 250,000 5.15% FMBs (CECo)
F U 07/17/17 250,000 6.55% Sr Notes (CMS)
F S 10/15/17 100,000 3.21% FMBs (CECo)
F U 02/15/18 250,000 5.05% Sr Notes (CMS)
F S 03/01/18 180,000 6.875% Sr Notes (CECo)
V S 04/15/18 67,700 VRDBs to replace PCRBs (CECo)
F S 09/15/18 250,000 5.65% FMBs (CECo)
F S 03/15/19 350,000 6.125% FMBs (CECo)
F U 06/15/19 300,000 8.75% Sr Notes (CMS)
F S 09/15/19 500,000 6.70% FMBs (CECo)
F U 02/01/20 300,000 6.25% Sr Notes (CMS)
F S 04/15/20 300,000 5.65% FMBs (CECo)
F S 10/15/20 100,000 3.77% FMBs (CECo)
F U 03/15/22 300,000 5.05% Sr Notes (CMS)
F S 05/15/22 375,000 2.85% FMBs (CECo)
F S 09/01/22 250,000 5.30% FMBs (CECo)
V S 04/01/35 35,000 PCRBs (CECo)
F S 09/15/35 175,000 5.80% FMBs (CECo)
F S 09/01/40 50,000 6.17% FMBs (CECO)
F S 10/15/40 50,000 4.97% FMBs (CECo)
$ 4,432,700
$ 6,585,200 TOTAL
Various Maturity Dates/No Maturity Date Available:
$ 132,640 CECo Securitization Bonds after 10/20/12 payment
176,921 CECo Capital lease rental commitments as of 09/30/12
487,165 EnerBank Discount Brokered CDs as of 09/30/12 (CMS)
(13,866) CMS Net unamortized discount as of 09/30/12
(2,800) CECo Net unamortized discount as of 09/30/12
$ 7,365,261 GRAND TOTAL
Status Codes: F-Fixed rate; V-Variable rate; S-Secured; U-Unsecured
20
Capital Expenditures
2013-2017 Plan
2012 2013 2014 2015 2016 2017 Total
(mils)(mils)(mils)(mils)(mils)(mils)(mils)
Electric
Distribution201$ $ 205 $ 193 $ 195 $ 205 $ 181 $ 979
Generation 110 103 141 78 135 103 560
New customers 35 37 44 46 48 45 220
Other 94 87 86 78 75 85 411
Base capital $ 440 $ 432 $ 464 $ 397 $ 463 $ 414 $ 2,170
Gas
Distribution $ 126 $ 142 $ 123 $ 125 $ 122 $ 139 $ 651
New customers $ 34 $ 18 $ 19 $ 21 $ 21 $ 22 101
Other 61 54 52 39 40 44 229
Base capital $ 221 $ 214 $ 194 $ 185 $ 183 $ 205 $ 981
Total base capital $ 661 $ 646 $ 658 $ 582 $ 646 $ 619 $ 3,151
Investment choices:
Environmental $ 256 $ 352 $ 348 $ 267 $ 120 $ 97 $ 1,184
Reliability 262 237 288 291 282 344 1,442
Renewables 188 28 112 228 7 1 376
Smart Energy 57 64 59 45 53 97 318
Total choices $ 763 $ 681 $ 807 $ 831 $ 462 $ 539 $ 3,320
Total Utility $ 1,424 $ 1,327 $ 1,465 $ 1,413 $ 1,108 $ 1,158 $ 6,471
21
Balanced Generation – Capacity Fuel Mix
Present 2016
Renewables Renewables
Pumped 6% 10%
Storage
11% Pumped Coal
Storage 23%
Coal 11%
Oil 35%
7%
Oil
7%
Nuclear
9%
Nuclear
8% Gas
Gas 41%
32%
22
2012 and 2013 Sensitivities . . . .
Annual Impact
Sensitivity EPS OCF
(mils)
Sales a
• Electric (37,806 Gwh) + 1% + $0.05 + $20
• Gas (283 Bcf) + 1 + 0.01 + 5
Gas prices (NYMEX) + $ 1.00* + – 60
Uncollectible accounts (mils) + $ 5 + – 0.01*
ROE (authorized)
• Electric (10.3%) + 20 bps + 0.02 + 10
• Gas (10.3%) + 20 + 0.01 + 4
. . . . onn strong performance.
* Less than 0.5? or $500,000 a Reflect 2012 sales forecast; weather adjusted
23
GAAP RECONCILIATION
CMS ENERGY CORPORATION
Earnings Per Share By Year GAAP Reconciliation
(Unaudited)
| 2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
||||||||||||||||||||||||||||
| Reported earnings (loss) per share - GAAP |
($ | 0.30 | ) | $ | 0.64 | ($ | 0.44 | ) | ($ | 0.41 | ) | ($ | 1.02 | ) | $ | 1.20 | $ | 0.91 | $ | 1.28 | $ | 1.58 | ||||||||||||||
| After-tax items: |
||||||||||||||||||||||||||||||||||||
| Electric and gas utility |
0.21 | (0.39 | ) | — | — | (0.07 | ) | 0.05 | 0.33 | 0.03 | 0.00 | |||||||||||||||||||||||||
| Enterprises |
0.74 | 0.62 | 0.04 | (0.02 | ) | 1.25 | (0.02 | ) | 0.09 | (0.03 | ) | (0.11 | ) | |||||||||||||||||||||||
| 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 | ) | ||||||||||||||||||||||
| 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 | |||||||||||||||||
| 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 | ||||||||||||||||||||||||
| * | 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. |
2003-2011 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 |
$ | 1,527 | $ | 1,655 | $ | 1,729 | $ | 1,839 | $ | 1,951 | $ | 2,007 | $ | 2,100 | ||||||||||||||
| Enterprises Project Cash Flows |
24 | 15 | 25 | 33 | 38 | 44 | 56 | |||||||||||||||||||||
| Gross Operating Cash Flow |
$ | 1,551 | $ | 1,670 | $ | 1,754 | $ | 1,872 | $ | 1,989 | $ | 2,051 | $ | 2,156 | ||||||||||||||
| Other operating activities including taxes, |
(382 | ) | (409 | ) | (404 | ) | (422 | ) | (439 | ) | (801 | ) | (806 | ) | ||||||||||||||
| Net cash provided by operating activities |
$ | 1,169 | $ | 1,261 | $ | 1,350 | $ | 1,450 | $ | 1,550 | $ | 1,250 | $ | 1,350 | ||||||||||||||
OCF 2011-17