EX-99.1 2 d673635dex991.htm EX-99.1

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