CMS Energy Corporation

Good morning, everyone, and welcome to the CMS Energy 2025 Second Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on the 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 start followed by zero. Just a reminder that there will be a rebroadcast of this conference call today, beginning at 12 p.m. Eastern Time, running through August 7th. 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. Jason Shaw, Treasurer and Vice President of Investor Relations.

Thank you, Seb. Good morning, everyone, and thank you for joining us today. With me are Kerrick 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 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. Reconciliation of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website. And now I'll turn the call over to Gerrick.

Thank you, Jason, and thank you, everyone, for joining us today. Our investment thesis, robust and solid, continuing our track record of industry-leading results. You know this, and you've seen the results it delivers. As I've said before, Michigan is open for business. Today, I'm pleased to announce we have reached an agreement with a new data center, which is expected to add up to one gigawatt of load. This load is incremental to our plan and part of the nine gigawatt pipeline that we have been working to locate in our service area. We expect this load, early ramp, to start to show up in the latter portion of the five-year plan. We continue to see positive momentum with data centers within the nine gigawatt pipeline and expect additional progress once we finalize the data center tariff. In addition to low growth from data centers, Michigan is on the move. Grand Rapids, the heart of our electric service territory, was recently ranked the number one city on the rise in the U.S. by LinkedIn, highlighting their diverse industries from tech, insurance, manufacturing, and healthcare. This area is growing nicely, bringing jobs and people to the state. And once again, CNBC ranked Michigan as the top 10 best state for doing business. And we are seeing it. As I shared in Q1, we continue to see strong housing starts, alterations, as well as upgrades and relocations, all signs of positive growth among residential, and commercial customers. All this drives our long-term annual sales growth estimates of 2 to 3 percent. And remember, this is before this new data center is fully online. We're excited about and committed to Michigan's future prosperity. We are prepared and ready to serve its growing energy needs. On this next slide, I want to connect a few dots, which highlight the investment opportunities we see above and beyond our five-year plan. And specifically, I want to share some early insight into our upcoming integrated resource plan filing. Let me start here. A long runway of customer investments is great, but isn't sustainable if your customers cannot afford them. So I like starting with customer affordability. What we know to be true is that growing demand, like I shared on the previous slide, enables longer-term cost savings for our customers. As our load grows, we can expect or we can spread fixed costs over a larger customer base. A win for all. Add to it our ability to realize savings through the CE way, episodic cost-saving opportunities, and our energy waste reduction program. We have multiple ways to keep bills affordable for our customers. It is our strong focus on these cost-saving opportunities that keep bills affordable, both gas and electric, and allow us to make needed customer investments. And there are many customer investment opportunities, greater than $25 billion, above and beyond our five-year plan. Now, we've talked previously about the investments needed in our electric grid, which drive resiliency and reliability for our customers through our electric reliability roadmap. In addition, we have important investments clearly articulated in our renewable energy plan, or REP, to meet Michigan's clean energy law. And today, I want to highlight our integrated resource plan, or IRP, which we'll file in mid-2026. We are still preparing for this filing, but getting a clearer picture on what will be required for the future. As I mentioned, we are building renewables required by the law and included in the REP, which provide energy but limited capacity. Our IRP will primarily address capacity. When we model a 2% to 3% sales growth that we are realizing, the need to replace plants, existing capacity that will retire over the next five to seven years, and the need to replace a large PPA that will expire in 2030, the model points to additional storage and gas capacity. We anticipate needing to build more storage than the amount required by the 2023 energy law. We currently see this as a mix of owned and PPAs with the financial compensation mechanism. And of course, we'll take advantage of supportive tax credits for storage. We also anticipate new gas capacity at multiple locations, and we are well into the planning and preparations to realize this need. Our first cut looks like an additional $5 billion of opportunity outside the five-year plan. But understand that this is an early number and could be higher. We'll continue to keep you updated as the preparation continues prior to this filing of this important IRP. As I've shared before, CMS has a long history of working effectively with all administrations, and I continue to be proud of our agility as the federal environment continues to evolve. Let's start with the One Big Beautiful Bill Act and how it impacts the utility. As we understand the provisions today, our renewable projects within the five-year financial plan are well positioned to meet timelines and requirements to receive full production and investment tax credits, as well as transferability through 2029. These de-risk $4.5 billion of capital, the renewable portion of the five-year plan, at the utility. It also ensures full transferability of the tax credits, which Reggie will summarize in a moment. This puts us well on track for the 2030 renewable requirement in Michigan's energy law in a way that maintains affordability for our customers. And recall that to the degree we see affordability concerns post-2029, we have options within the law to mitigate costs, including -of-state PPAs, where capacity factors may be higher, or an extension to the compliance period. At a minimum, we're seeing cost savings on self-build projects through good, lean engineering, the CE way, to further take costs out for our customers. Now, let me address North Star. Again, this business makes up approximately 5% of the earnings mix, so it is small, with the majority of the growth at Dearborn Industrial Generation, or DIG, with energy and capacity sales. The renewables portion of the business is very small. We typically complete one to two solar projects a year, with utility-like returns are better. At North Star, our renewable projects are safe harbor through 2027, with some options in 2028. Many of these projects are already contracted with off-takers, materials secured, and a solid plan to execute, including strong contractual language. As we move forward, we'll continue to evaluate the needs for capital across the business, as we always do. We'll be mindful of the return on those investments. In light of the passage of the One Big Beautiful Bill in subsequent executive order, we're using a sharp pencil in the five-year planning process, which is well underway. This includes growing value at DIG and re-contracting both energy and capacity, as both markets continue to be strong, and the ability and willingness to shift capital to utility investments that benefit our customers. Shifting to the Federal Power Act 90-day emergency order, in May, we were ordered by the Department of Energy, or DOE, to continue to operate our J.H. Campbell Coal Facility. We are complying with that order and dispatching into MISO. We are also currently reviewing our maintenance and investment plans for the facility, should we see a push for longer-term use. Keep in mind, the DOE's order provides for cost recovery. We have filed a request with FERC for recovery from all MISO North and Central customers who are served and benefit from this supply resource. We expect a positive outcome from this proceeding that will be good for all stakeholders. Finally, our minimal exposure to the auto industry, diverse supply chain, and continued focus on moving to U.S.-based suppliers further limits potential tariff impacts. Recall, much of the exposure is related to capital equipment, which means any impact would be spread over the life of the asset, with minimal impact to earnings and customer rates. To date, we've only experienced about $250,000 in increases. Again, I appreciate the team's efforts on multiple fronts to continue to position CMS Energy for success in what is a dynamic federal environment. I want to take a moment to highlight Michigan's constructive regulatory environment. Last month, the Commission approved the first-ever storm referral at the utility, a new precedent for Michigan. It speaks to our performance during the March and April ice storms and the constructive nature of this commission. While this is a unique aspect in the utility sector, it was noted as a best practice by Liberty Consulting in the third-party distribution audit and was approved by the Commission in a timely fashion. This is a great step to strengthen an strong regulatory environment in the state. We continue to be supportive of the Liberty audit of our distribution system. It was commissioned by the MPSC, and the results point directly to the important investment needed to improve reliability for our customers and bolsters the game plan we laid out in our reliability roadmap. We will continue to weave the audit findings into future rate cases. Now jumping to the rate cases, on the electric side, our current rate case filing is larger than what you've seen from us in the past at a $460 million revenue increase and is well aligned to significantly improve reliability for our customers through additional capital investments and O&M, including vegetation management. To frame this case from an affordability perspective, if we were to achieve 100% of the rate case ask, our residential electric bills will continue to be below the national average. In our gas case, we saw a very constructive recommendation from the staff supporting approximately 80% of our revised ask and about 95% of our capital. And while we're always open to settlement, we're confident in the investments we need to make in the quality of our case and comfortable going the distance to a fully adjudicated order. For our longer term filings, we expect an order in our renewable energy plan, or REP, by mid-September. Our REP will further define our renewable investments and feeds into our integrated resource plan that we'll file in mid-2026. We are making important investments for our customers in the future of our growing state, and we continue to see constructive outcomes time and time again. Finally, I'd like to take a moment to welcome our new commissioner, Shaquille Myers, who was appointed earlier this month by the governor. Commissioner Myers has an impressive background. She was a member of the governor's senior leadership team and previously led speaker of the house, Joe Tate's office, as his chief of staff. She understands the importance of economic development to bring good paying jobs to Michigan and played an instrumental role in the development of the 2023 energy law. We look forward to working with Commissioner Myers and the rest of the commission and staff as we have in the past to reach constructive regulatory outcomes. Okay. Now, onto the financials for the quarter. We are in a strong position heading into the second half of the year. For the first half, we reported adjusted earnings per share of $1.73, well ahead of our budget and where we had planned to be according to our full year guidance. The team has delivered strong performance, particularly in Q2, on all fronts, regulatory, operations, and financial. Therefore, we remain confident in this year's guidance and long-term outlook and are reaffirming all our financial objectives. Our full year guidance remains at $3.54 to $3.60 per share with continued confidence toward the high end. Longer term, we continue guide toward the high end our adjusted EPS growth range of 6 to 8%. With that, I'll hand the call over to Reggie.