CMS Energy Corp. Q4 FY2024 earnings call

• Customer reliability: Made progress on the five-year reliability roadmap, with 93% of customers having power restored within 24 hours in 2024, up from 87% in 2023, and average customer outage minutes reduced by 21.
• Renewable energy: Filed a 20-year renewable energy plan with 9 gigawatts of solar and 4 gigawatts of wind over two decades to meet Michigan's 2023 energy law target.
• Gas business: Continues to grow with infrastructure build-out and replacement, proving invaluable during extreme cold in January.
• $20 billion utility customer investment plan: Up $3 billion from prior plan, supporting 8.5% rate-based growth through 2029, with over $20 billion in additional investment opportunities not in the five-year plan for electric distribution, renewables, and integrated resource planning.
• Economic development: Michigan experiencing renaissance with 2% to 3% annual load growth from data centers and manufacturing, allowing coupling of customer investments with affordability.
• Regulatory environment: Supportive energy policy with successful rate cases in 2024 and expected constructive outcomes in 2025 electric rate case and gas rate case.

In 2024, CMS Energy delivered adjusted earnings per share of $3.34, which was at the high end of the guidance range. For 2025, the adjusted EPS guidance is raised from $3.52 to $3.58 to $3.54 to $3.60, representing 6% to 8% growth, with a focus on the high end. The utility is expected to provide $4.01 to $4.05 of adjusted earnings in 2025, driven by normal weather, constructive rate case outcomes, and earned returns. NorthStar Clean Energy is assumed to contribute $0.18 to $0.22 in EPS, incorporating a planned maintenance outage at DIG but offset by ongoing contributions from its clean energy business. The parent segment has financing assumptions with approximately $1.3 billion of new holdco long-term debt and up to $500 million of equity to support the increased capital plan at the utility.

• 2025 adjusted EPS guidance raised to $3.54 to $3.60 from $3.52 to $3.58, representing 6% to 8% growth, with confidence in the high end.
• Dividend policy unchanged, targeting a payout ratio of about 60% over time.
• Parent segment financing assumptions include approximately $1.3 billion of new holdco long-term debt and up to $500 million of equity to support the utility's increased capital plan, with no assumption of liability management transactions in 2025.
• Expectation of select large multiyear economic development projects to begin coming online in 2025, yielding approximately 1% weather-normalized load growth for the year with run-rate assumptions of 2% to 3% in outer years.

• Weather-related headwinds: Significant weather-related financial headwinds in 2024 due to mild winter temperatures, though managed to offset without compromising customer commitments.
• Permitting challenges: While CMS Energy has success with local communities and private lands for renewables, general permitting regime remains a consideration, particularly for federal lands which are not involved in their projects.
• Tariff impacts: Exposure to tariffs in supply chain, with direct and indirect spend from Canada, Mexico, and China making up a small percentage of overall supply chain mix, but actively mitigating through supply stock increase and migration to US-based vendors.

Q: Long-term opportunities outside the five-year plan?

A: $20 billion plus of opportunities outside the five-year plan for electric distribution reliability, renewables to meet energy law, and integrated resource planning, needed for customer reliability, compliance, and supply demand growth.