Form 8-K CMS ENERGY CORP For: Aug 10
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 10, 2015
| Commission File Number |
Registrant; State of Incorporation; Address; and Telephone Number |
IRS Employer Identification No. | ||
| 1-9513 | CMS ENERGY CORPORATION (A Michigan Corporation) One Energy Plaza Jackson, Michigan 49201 (517) 788-0550 |
38-2726431 | ||
| 1-5611 | CONSUMERS ENERGY COMPANY (A Michigan Corporation) One Energy Plaza Jackson, Michigan 49201 (517) 788-0550 |
38-0442310 | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01. | Regulation FD Disclosure. |
On August 10-11, 2015, CMS Energy Corporation’s (“CMS Energy”) management will be meeting with investors. A copy of the CMS Energy handout to be used at these meetings is furnished as Exhibit 99.1 to this report.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.
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.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| 99.1 | CMS Energy handout dated August 11, 2015 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.
| CMS ENERGY CORPORATION | ||||||
| Dated: August 10, 2015 | By: | /s/ Thomas J. Webb | ||||
| Thomas J. Webb | ||||||
| Executive Vice President and | ||||||
| Chief Financial Officer | ||||||
| CONSUMERS ENERGY COMPANY | ||||||
| Dated: August 10, 2015 | By: | /s/ Thomas J. Webb | ||||
| Thomas J. Webb | ||||||
| Executive Vice President and | ||||||
| Chief Financial Officer | ||||||
Exhibit Index
| 99.1 | CMS Energy handout dated August 11, 2015 | |
Exhibit 99.1
CMS ENERGY
CMS
LISTED
NYSE
Goldman Sachs Power & Utility Conference
August 11, 2015
Ludington Pumped Storage
Ray Compressor Station
Cross Winds ®Energy Park
Fourth largest in the world
#1 LDC in gas storage
#2 in renewable sales in the Great Lakes area
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.
1
Why Invest in CMS Energy?
CMS ENERGY
Our Growth Engine
(2015-2024 Capex)
$15.5 Billion
5%- 7% EPS a growth
More “upside”
$5 bil NOT yet in Plan!
Supported By
UPSIDES create headroom
(Investment, Sales, Cost, & DIG)
PARTNERS in progress
(Customers, Regulators, & Policy Makers)
PASSION to improve for
customers AND owners
(Value, Reliability, & Environment)
SELF-FUNDED!
a Adjusted EPS (non-GAAP)
. . . . next 10 years even brighter than last 10 year record!
2
Simple, Perhaps Unique CMS Growth Model . . . .
CMS ENERGY
Plan
Capital investment (drives EPS growth) 5% - 7%
- O&M cost reductions -2 pts
- Sales growth - 1/2
- No “block” equity dilution -1
- Surcharges and other -11/2
Investment self-funded -5 pts
Rate increase at or below inflation <2 %
. . . . drives sustainable growth.
3
Investment “Catch-up” . . . .
CMS ENERGY
Capex
(bils)
One of first with a ten year plan
$1.8
> $1.5 per year
“Catch-up”Capex as a Percent of Market Cap a
2005 - 2014 2015 - 2024
- CMS 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.
4
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.
5
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 27%
Electric Maintenance
Gas Infrastructure 37%
Electric Maintenance
Electric Reliability
Environ.
Smart Energy
New Generation
New Generation
Smart Energy
Electric Reliability
Percent of Mkt Cap
Environmental
– CMS 10% 16% 21%
– Peers 11 15
Renewables
Generation Capacity
Gas Infrastructure
Grid Modernization
. . . . with more opportunity and no “big bets” over ten years!
6
Growing the Gas Business . . . . CMS ENERGY
Capital Investment
Capex
(bils)
$ 6
$5.8
+100%
New Customers
Infrastructure
$2.9 Pipeline Integrity
Capacity & Deliverability
Civic Improvement
Compression & Storage
Smart Energy & Other
0
Last 10 Next 10
Gas Service Territory
Gas service area
Transmission line
Compressor stations
Storage fields
Freedom Pipeline Replacement
Interconnects 6.3 miles
$185 million capex
. . . . expanding one of the largest systems in the country.
7
O&M Cost Reductions . . . .
CMS ENERGY
2006 2014 2018
Down 7% or 2%/yr
Down 10%
$1.1 bil $1.0 bil $0.9 bil
Inflation Inflation
2% 2%
Coal to Gas Switching (Zeeland) Coal to Gas Switching (Jackson)
Smarter benefit plans “Pole Top” Hardening
Productivity/Attrition Productivity/Smart Energy
. . . . provide more “headroom” for more capital investment.
| 8 |
|
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 2014
& 2015 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%
2% a year!
FAST START!
. . . . better than peers with substantial upside.
9
Sales Growth . . . .
CMS ENERGY
Our Service Territorya Outperforms
Grand Rapids Michigan U.S
Building Permits b +28% +14% +13%
GDP 15 11 8
2010 2013
Population 3 0 2
2011 2014
Unemployment 3.7 5.5 5.3
(6/15)
a Grand Rapids
b Annualized numbers thru June
Annual Electric Sales c
Industrial
Total
6%
Conservative
2%
1%
1/2%
2010-2014 2015 - 2019
Post-Recession Future
c Weather normalized vs. prior year
. . . . planned conservatively.
10
Economic Growth . . . .
CMS ENERGY
Examples of New Business
Electric Gas Combination
Announcement
Bayer CropScience
• One of the world’s leading crop science companies
• Secures 70 jobs
• $50 million investment
Dicastal
Durolast Roofing
Continental Dairy Betz
GM Assembly
Plasan Enbridge
Magna-Cosma Dart
Post MSU FRIB
WKW MACI
Denso Brembo
Industries
MW
Auto 50
Food 15
Manufacturing 25
Metal 20
Petroleum 19
Plastics 19
Others 20
Total Up 168
. . . . almost 3% of additional sales growth.
11
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.
12
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.
13
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.
14
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.
15
Capacity & Energy Price Increases . . . .
CMS ENERGY
Was Now Future Scenarios
(mils) (mils) (mils)
+ $25 – $50 $65
Energy more
Capacity $55
$40
$35
$15
$5
Capacity price < $0.50 $2.00 $4.50 $7.50
($ kW per month) (Prior) (Forecast) (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
Rate Cases . . . .
CMS ENERGY
Gas (mils)
$21 $85
$64
Investment Cost of Capital, Filed 7/17
Upgrades, &
Other
Electric Track Record
Date Step Amount
(mils)
May 2013 Settlement $ 89
2014 Stay Out --
June 2015 Self-implement
Dec. 2015 Order expected 110
2 1/2 years
since last order!
. . . . fair and timely.
17
Electric Customer Prices . . . .
CMS ENERGY
Residential Bills
20%
Worse
National Avg
Residential bills well below U.S. average
Better (13)% (13)%
Rates Rates & Fuel (17)%
Rates & Act 169
-20
2013 2014 2015 2016 Plus
Industrial Rates
30% 26%
Worse Rates
Rates & Fuel
Midwest Avg 4%
Industrial rates improving rapidly Flat
Policy could eliminate gap (8)%
Better
-30
2013 2014 2015 2016 Plus
. . . . affordable for residential and improving for industrial customers.
18
Customer Satisfaction . . . .
CMS ENERGY
Electric
1st Quartile #4
2nd Quartile
#6
3rd Quartile
4th Quartile
Present
2010 2012 2014 Rank 2016
Residential Business
Gas
#3
1st Quartile
2nd Quartile
#9
3rd Quartile
4th Quartile
Present
2010 2012 2014 Rank 2016
Residential Business
. . . . continues to improve rapidly.
19
CMS Energy . . . .
CMS ENERGY
7% CAGR
+5% to +7% /year
Recession
Recession
Help
Hurt
We work
with anyone
and in any
condition
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Future
Cold Mild Hot Warm Mild Cold Summer- Hot Hot Warm Mild Polar Cold
winter summer summer winter summer winter “less” summer summer winter summer vortex Feb.
Governor (D) Governor (R)
Commission (D) Commission New (D) Commission (R)
. . . . consistent growth through recession, adverse weather, changing policy leaders . . . .
20
Michigan Energy Law . . . .
CMS ENERGY
“Retail Open Access”
Efficiency
Renewables
Sen. Nofs
Keep “cap”
3-year capacity requirement, “one way door” No subsidy
1%/yr waste reduction through 2018
Gov. Snyder
Keep “cap”
5-year capacity requirement “Fair choice” No subsidy
Eliminate 15% energy waste
Rep. Nesbitt
End “ROA”
Fully regulated
Repeal present program
IRP process
. . . . builds off the 2008 law, adding growth opportunities.
21
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
2
3
4
5
6
8
20
9
6
Michigan ranked #1
Barclays Research, 2015 state rankings
. . . . is supported by a quality Commission and a strong Law.
22
CMS Energy Consistent Growth . . . .
CMS ENERGY
Future Shines Bright a
EPS a
$2.50
+5% to +7% / year
+7% /year
Last 7 Years
Next 5 Years
a Adjusted EPS (non-GAAP)
Sustainable Future Growth
Past Performance Next 5 Years
Investment (bils) (2010-2014) $6.4 $7.6 Capacity Op!
O&M Reductions (2006-2014) (10)% (7)% Conservative
Sales Growth (2010-2014) +1% + 1/2 % Conservative
Energy Policy 2008 Law Improved Law
. . . . even easier, with lots of upsides.
23
Appendix
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.
25
Capacity Diversity . . . .
CMS ENERGY
Oil 6%
Nuclear 8%
Renewables 9%
Pumped Storage 11%
2014
Coal 34%
Gas 32%
| Oil 6% |
Nuclear |
|||||
| Renewables 3% |
||||||
| Pumped Storage 11% |
2005 |
Coal | ||||
| Gas |
| Oil 6% |
Nuclear |
|||
| Purchases 3% Renewables 10% |
Coal | |||
| 2017 |
||||
| Pumped Storage 12% |
Gas |
. . . . evolving to cleaner generation while becoming more cost competitive.
26
MISO Zone 7 Capacity . . . .
CMS ENERGY
2016 Forecasted Shortfall (MW)
Annual MISO Survey
| June 2014 |
June | |||
| CMS & |
||||
| New |
||||
| Lower |
||||
| -3,000 |
-1,300 |
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.
27
Generation Strategy: New Supply Sources . . . .
CMS ENERGY
Levelized cost
of new build
(¢/kWh)
25
New Build
Consumers Energy Sources
| 22¢ |
||||||||||||||||||||||||||
| 15¢ | ||||||||||||||||||||||||||
| 12¢ |
||||||||||||||||||||||||||
| 11¢ |
||||||||||||||||||||||||||
| Back-up |
10¢ |
|||||||||||||||||||||||||
| 7¢ |
6¢ |
8¢ |
7¢ |
|||||||||||||||||||||||
| 5¢ |
6¢ |
5¢ |
Back-up |
6¢ |
9¢ |
5.5¢ |
||||||||||||||||||||
| Zeeland |
6¢ |
Cross |
Big |
Palisades |
||||||||||||||||||||||
| 0 |
| Combined Cycle Gas Plant |
Wind |
Coal |
Nuclear |
Residential Solar | ||||||||||||||
| Gas price= |
$3.00 |
$4.50 |
$6.00 |
W/ |
W/o |
W/ |
Today |
Future | ||||||||||
. . . . combined cycle gas is the most attractive new source of supply.
28
Operating Cash Flow Growth . . . .
Amount
(bils)
Gross operating cash flowa up $0.1 billion per year
Up $0.6
Billion
$ 2.6
2.1
1.6
1.1
0.6
0.1
(0.4)
(0.9)
$1.8
$1.9
$2.1
$2.2
$2.3
$2.5
$2.6
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!
29
O&M “Reinvestment” Helps CUSTOMERS . . . .
CMS ENERGY
Adjusted EPS
(non-GAAP)
2014
17¢
| 2015 O&M |
2016 | |||
| 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.
30
GAAP Reconciliation
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 |
32
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