CMS Energy Corporation

Good morning, everyone, and welcome to the CMS Energy fourth quarter 2020 results. The earnings news release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the investor relations section. This call is being recorded. After the presentation, we will conduct a question and answer session. Instructions will be provided at that time. If at any time during the conference you need to reach an operator, please press star followed by zero. Just a reminder, there will be a rebroadcast of this conference call today beginning at 12 p.m. Eastern time running through February 11th. The presentation is also being webcast and is available on CMS Energy's website in the investor relations section. At this time, I would like to turn the call over to Mr. Sri Matipati, Vice President of Treasury and Investor Relations. Please go ahead.

Thank you, Rocco. Good morning, everyone, and thank you for joining us today. With me are Garrick Groeschel, President and Chief Executive Officer, and Reggie Hayes, Executive Vice President and Chief Financial Officer. This presentation contains forward-looking statements which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially. This presentation also includes non-GAAP measures, Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website. Now I'll turn the call over to Derek.

Thank you Sri, and thank you everyone for joining us today. I've had the pleasure of meeting many of you over the past couple months as I've transitioned into the CEO role. I'm excited to be hosting my first earnings call and sharing yet another year of consistent industry leading financial performance. Before I discuss our year-end results and our updated five-year capital investment plan, I want to take a moment to reiterate our simple but powerful investment thesis. While simple to put on paper, it's not easy to replicate, and that is what sets us apart. It starts with our industry-leading commitments to clean energy. Our net zero methane and carbon goals require significant investment as we update our expansive electric and gas systems to achieve decarbonization. These investment opportunities are supported by constructive energy legislation as well as alignment with our commission and the MPSC staff. This strong regulatory and legislative framework is why Michigan is consistently ranked a top tier regulatory jurisdiction. but investment opportunities in a supportive regulatory environment are not enough. Our focus on affordability is critical, so our customers can afford these investments. Now, I've been with the company for 18 years, much of it in operations. Over that time, we've demonstrated our ability to consistently manage costs as we've invested in the safety and reliability of our systems while improving customer service. That ability to manage cost is not driven from the top down, but from the bottom up. It's our 8,500 coworkers who are committed to excellence, delivering the highest value to our customers at the lowest cost possible. This is embedded in our culture and was built in partnership with our union over the last two decades. These unique attributes to the CMS story are what allow us to deliver for our customers and you, our investors. Our adjusted EPS growth of 6% to 8% combined with our dividend provides a premium total shareholder return of 9% to 11%. Our ability to deliver this growth each and every year is something we are uniquely capable of doing. Regardless of whether a global pandemic who is leading our state, our commission, or our company, we have delivered. consistent industry-leading results year in and year out. 2020 proved this. 2021 will be no different. In 2020, we delivered adjusted earnings per share of $2.67, up 7% from 2019, and achieved operating cash flow of almost $2 billion, excluding $700 million of voluntary pension contributions in 2020. Today, we're raising our adjusted EPS guidance for 2021 by a penny to $2.83 to $2.87 with a focus on the midpoint. This reflects annual growth of 6% to 8% from our 2020 results. Last month, we announced our 15th dividend increase in as many years, $1.74 per share, up 7% from the prior year. We continue to target long-term annual earnings and dividend for share growth of 6% to 8%, again, with a focus on the midpoint. Today, we're also increasing our five-year capital plan to $13.2 billion, up $1 billion from our prior plan, 18 consecutive years of industry-leading financial performance. I'll let that sit with you for a moment. I'm pleased with our financial performance, but equally important is our commitment to the triple bottom line. We balance everything we do for our coworkers, customers, and the communities we serve, our planet and our investors, as demonstrated on slide six. 2020 was a tough year for everyone. The global pandemic impacted all of us emotionally, physically, and financially. Through it all, I'm proud of the work done by our coworkers. We were able to provide over $80 million of support to our customers and communities in 2020 through support programs, low-income assistance, donations to foundations, and reinvestments to improve safety and reliability. We focused our efforts on COVID relief for residential and small business customers, payment forgiveness, as well as enhance support in the area of diversity, equity, and inclusion. Despite changing our work practices as a result of the pandemic, we maintained first quartile employee engagement, achieved first quartile customer experience, and attracted 126 megawatts of new load to our state, which brings with it significant investment in over 4,000 new jobs. From a planet perspective, We continue to lead the clean energy transition. We added over 800 megawatts of new wind and are executing on 300 megawatts of new solar, the first tranche of our integrated resource plan. Furthering our commitment, over $700 million of investments were made to advance our clean energy transition. Additionally, our demand response and energy efficiency programs continue to save our customers money, reduce carbon, and earn an incentive. And last, but certainly not least, we finished the year with more than $100 million in cost savings driven by the CEUA. Many of you have asked about my commitment to the CEUA. The light blue arrow at the bottom of the slide and my experience leading this operating system over the past five years should be a strong signal I'll tell you this, we are positioned well, but there is still more opportunity. Through the CE Way, we will continue to improve reliability, reduce waste, and deliver better customer service. And that is just the tip of the iceberg. There are opportunities in every corner of the company to achieve excellence through the CE Way. My coworkers and I remain committed. We will continue to lead the clean energy transition with support from our new five-year $13.2 billion capital investment plan, which translates to over 7% annual rate-based growth and focuses on enhancing the safety and reliability of our system as we move toward net zero carbon and methane emissions. In fact, 40% of our plan directly supports our clean energy transition, and includes our renewable generation, electric distribution investments to support this generation, grid modernization, as well as programs like our main invented service replacement programs, which reduce methane emissions. In addition to our traditional rate-based returns, our wind investments, renewable PPAs, and demand-signed resources are supported by regulatory incentives above and beyond our ROE. These incremental earnings mechanisms enhance our earned returns, and combined with our investments in clean energy, are a growing percentage of our earnings mix. Our customers' ability to afford the investments in our system is complemented by our continued focus on cost savings. Over the last decade, we have reduced the utility bill as a percentage of the customer's wallet, and we continue to see further opportunity to reduce costs in the future. We have unique cost-saving opportunities relative to Pierce and two above-market PPAs, Palisades and MCV, which will generate nearly $140 million of power supply cost recovery savings. This, coupled with the future retirement of our remaining coal facilities, provides over $200 million, or 5% cost savings for our customers. These structural cost savings combined with the productivity we'll deliver through the CE way will ensure we deliver on our capital plan and keep customer bills affordable. Now the great thing, the great thing about the CE way is it delivers more than cost savings. What makes us unique is our engaged coworkers. We value our best-in-sector employee engagement and our 8,500 coworkers who work every day to deliver the best value for our customers. This engaged workforce has doubled productivity, which has enabled us to consistently increase our capital plan without significantly increasing our workforce. Furthermore, we have never served our customers better as we've moved from the bottom quartile to top quartile. not just in the utility industry, but across all industries. Slide 9 serves as an excellent example of how our team leverages the CE way to deliver on our triple bottom line. Our ability to deliver this level of excellence for our customers and investors is supported by Michigan's constructive regulatory environment. We benefit from a legislative and regulatory construct that supports our rate case proceeding and a statute that allows for financial incentives above and beyond for an authorized ROE. Michigan's regulatory jurisdiction has been ranked in the top tier since 2013. That's not by accident. It's a reflection of the hard work my coworkers do every day to earn the trust of our customers, policymakers, environmental groups, and the MPSC staff. We are proud to have a Commission that demonstrates strong leadership with diverse backgrounds, which was enhanced with the appointment of Commissioner Paratyk. We welcome Commissioner Paratyk and look forward to working with her in the future. Turning to slide 11, you note we have a light regulatory docket with no financially significant regulatory outcomes in 2021. With the approval of our current securitization and electric rate case in December of last year, we'll file our next electric rate case in the first quarter and our gas rate case in December of this year. Notably, we'll file our second iteration of our integrated resource plan in June I'm sure many of you would like a sneak peek, but it's too early. We're in the midst of the modeling phase. You can be confident that this next iteration will continue to build on our industry-leading clean energy commitments, and we'll find ways to get cleaner faster and incorporate storage and customer-driven solutions as they become more cost-effective. Beyond that, we'll ask you to stay tuned until our second quarter earnings call, where we'll provide more information after we've filed. With that, I'll turn the call over to Reggie.