CMS Energy Corporation

conduct a question and answer session, and instructions will be provided at that time. If at any time during the conference you need to reach an operator, please press the 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 8th. This 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. Saran Madipati, Treasurer and Vice President of Finance and Investor Relations.

Thank you, Emily. Good morning, everyone, and thank you for joining us today. With me are Garrick Rochelle, 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 risk and uncertainty. Please refer to our SEC filings for more information regarding the risk and other factors that could cause our actual results to differ materially. This presentation also includes non-GAAP measures. Reconciliations of these measures and the most directly comparable GAAP measures are included in the appendix and posted on our website. As some of you may know, this will be my last earnings call as I have transitioned to a new role in the company responsible for our electric supply and the implementation of the new energy law. While I'm excited for my new role and responsibilities, I will miss working with all of you in the investment community so closely. I want to thank you for the support you've all given me and this company. Jason Shore, a 25-year veteran at CMS, has been named Treasurer and VP of Investor Relations. As I hand over the baton, I'm confident in Jason and our very experienced IR team. And now I'll turn the call over to Gary.

Thank you, Sri, and thank you, everyone, for joining us today. Before I get started, I want to thank Sri for his leadership in the finance area, and I look forward to his continued growth and impact as he takes on this important role in electric supply, where he'll lead critical filings like our Renewable Energy Plan, and integrated resource plan, which I will discuss later in this call. We have a deep bench of talent at CMS Energy, and it is critically important that we develop our leaders in key areas of the business, continuing to strengthen the bench, build dexterity, and provide challenging growth opportunities. I know both Sri and Jason will make a big impact in their new roles. I've shared before on these calls, this isn't our first rodeo. The CMS team delivers now 21 years of exceptional performance. I am proud to share with you the highlights of the year, and I am proud of this team. You will see in the numbers and our operational highlights, 2023 was an incredible year. We met and faced challenges that tested our team, and we rose to the occasion. First, let's talk about the weather. The 2022-2023 winter was in the top 10 warmest on record. And then there was summer. While much of the world saw warmer temperatures, our summer, influenced by El Nino conditions, was cooler than normal. And then December 2023, the second warmest December on record. Add to that record storm activity within our service territory. To say the least, it was a challenging year. Despite severe storms and unfavorable weather, we delivered and offset nearly $300 million of weather-related financial headwinds, serving our customers with heat and light and keeping our financial commitments for our investors. This world-class team comes together, and we do what we say we will do year in and year out. No excuses, just results. As I said earlier, I'm proud of the team at CMS Energy. There are a number of great things we delivered in the year, even more than are represented on slide four. In the interest of time, I want to hit on just a few. I want to highlight the Freedom Award from the Secretary of Defense and why this is so special. This is the highest recognition a company can receive for supporting their employees who serve in the Guard and Reserve. The nomination was submitted by one of our employees and demonstrates the commitment of our entire company. This is an important part of our culture to support and care for our people and to honor our coworkers who serve our customers and our country. We continue our focus on leading the clean energy transformation. In 2023, we retired over 500 megawatts of coal, further reducing our carbon footprint. Alongside these retirements, we ensured resource adequacy with the acquisition of the 1.2 gigawatt covert natural gas generating station and brought online our 201 megawatt Portland wind farm. This thoughtful transition ensures customer reliability as we move our portfolio from coal to clean. I also want to give a shout out to our small but important North Star Clean Energy team. They performed well in 2023. exceeding our expectations for the year, completing the new port solar project, and demonstrating strong operational performance at Dearborn Industrial Generation. Dig. Another solid year of execution at CMS Energy across the triple bottom line, delivering industry-leading, sustainable, premium growth. In 2023, Michigan also passed new energy legislation. Charting a course for cleaner energy in Michigan while maintaining resource adequacy, customer affordability, and strengthening our financial plan. This legislation speaks to the constructive nature of Michigan, provides more incentives to grow our clean energy portfolio, furthering investment opportunities with increased certainty of recovery. Now, it's still early days. We're evaluating all aspects of the new law, including the strategic advantage of owning versus contracting supply, the increased incentive on PPAs, and what makes the most sense for us and for our customers. The law provides a lot of flexibility and options, which is important. You'll see this play out in a couple upcoming filings. I want to draw your attention to the renewable energy plan. This is not a new filing. but becomes a more important input in the Integrated Resource Plan. The Renewable Energy Plan will detail our path to meet the 60% renewable portfolio standard by 2035. As you might imagine, this work is underway. We plan to file in the second half of the year. Following our Renewable Energy Plan filing, our next 20-year Integrated Resource Plan is due in 2027. Together, the Renewable Energy Plan and integrated resource plan will align our supply resources to deliver cost competitive, cleaner, and reliable energy as we target net zero. They also provide important transparency and certainty as we advance the business forward with investments in renewables and clean energy. Michigan's energy law continues to support its strong regulatory environment and needed customer investment. While the recent legislation provides opportunities while our updated renewable energy plan regulatory calendar is fairly routine in 2024, our electric rate case continues toward a constructive outcome. We've seen positive indicators with key stakeholder support for recovery of customer investments and important investment mechanisms such as the IRM and our undergrounding pilot. We expect an order from the commission on or before March 1st. We follow a gas rate case in mid-December with an ask of $136 million with a 10.25% ROE and a 51.5% equity ratio. The request aligns with needed investment outlined in our 10-year natural gas delivery plan. We expect an order for the end of the year. On slide seven, we've highlighted our new five-year, $17 billion utility customer investment plan, which supports approximately 7.5% rate-based growth through 2028. You will note that about 40% of our customer investment opportunities support renewable generation, grid modernization, and main and service replacements on our gas systems, which are critical as we lead the clean energy transformation process. The plan also includes an increased investment in the electric distribution system to improve reliability and resiliency for our customers. We also have growth drivers outside of traditional rate base. These include adders built into legislation for incentives in our energy efficiency programs and the financial compensation mechanism we earn on PPA that I mentioned earlier. We also expect incremental earnings provided by our non-utility business, North Star Clean Energy, as they see attractive pricing from capacity and energy sold at DIG. It's important to note that we have a long and robust runway of additional investment opportunities, both within and beyond the five-year window. As an example, we've incorporated a little less than half of the incremental $3 billion of customer investment associated with our electric reliability roadmap. We've also not yet included the customer investments associated with the new energy law, These will be included in our renewable energy plan filing and will provide more opportunities for investment. I feel good about our five-year utility investment plan. It is focused on our customers. It positions business for continued success and delivers for all stakeholders. With that, I'll conclude with the 2023 results and long-term outlook before passing it over to Reggie We'll cover the financials in more detail. 2023, no excuses. Not weather, not storms, just results. We delivered adjusted earnings per share of $3.11 for the high end of our guidance range. I'm also pleased to share that we are raising our 2024 adjusted full-year EPS guidance 2 cents to $3.29 to $3.35. from $3.27 to $3.33 per share, compounding off of 2023 actual results. Let me repeat, compounding off of actuals. That is a differentiator in this sector. We continue to expect to be toward the high end of our 2024 guidance range, which points to our confidence as we start the year. Furthermore, the CMS Energy Board of Directors recently approved a dividend increase $2.06 per share for 2024. Longer term, we continue to guide for the high end of our adjusted EPS growth range of 6% to 8%, which implies and includes 7% up to 8%. Our dividend policy remains unchanged. We continue to grow the dividend. You'll see that we are targeting a dividend payout ratio of about 60% over time. Finally, we remain confident in our plan for 2024 and beyond, given our long-standing ability to manage the work and consistently deliver industry-leading growth. With that, I'll hand the call over to Reggie.