CMS Energy Corporation

Good morning everyone and welcome to the CMS Energy 2026 second quarter 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 that there will be a rebroadcast of this conference call today beginning at 12 p.m. Eastern Time running through August 4th. 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 Shore, Treasurer and Vice President of Investor Relations.

Thank you, Abby. Good morning, everyone, and thank you for joining us today. With me are Garrick Rochow, President and Chief Executive Officer, and Sri Maddipati, 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. And now I'll turn the call over to Garrick.

Thank you, Jason, and thank you everyone for joining us today. Our investment thesis remains consistent, focused, and durable. It is a simple but powerful business model built on more than two decades of consistent performance, deliberate execution, disciplined capital allocation, and industry leading results. With our long capital runway, top tier regulatory environment, and our commitment to affordable customer bills through the CE way plus digital and other cost savings, CMS Energy continues to deliver. This proven model drives a premium total shareholder return made up of 6-8% adjusted EPS growth compounded annually and paired with an approximately 3% dividend yield. For you, our investors, it means predictable earnings growth, a competitive dividend, and long-term shareholder value. Today, I'm going to share with you our plans to further simplify and strengthen our model as we plan to exit non-utility renewables development and focus on what we do best. Following a comprehensive strategic review of Northstar, we are taking a deliberate step to simplify our business model and sharpen our focus on utility investment. We plan to exit non-utility renewable development will retain a portfolio of Michigan-based assets, including Dearborn Industrial Generation or DIG, several small gas peakers, and four commercial solar projects, all of which generate strong cash flow and support our long-term growth strategy. Let me share a little more about how this plan benefits the company and our investors. First, We plan to reallocate capital away from Northstar and exit non-utility renewables development. Our current five-year plan has approximately $1.7 billion dedicated primarily to non-utility renewables. This shift of capital will reduce parent funding needs. Second, the retained assets will not require significant capital investment and they generate strong cash flow. further optimizing parent financing and supporting our large utility capital investment plan. Additionally, as we look to the future, proceeds from the sale of our non-Michigan assets and development projects will further reduce external funding needs at the parent, including equity. Collectively, these three items equate to reduction of over $500 million of funding through 2030 Optimizing Parent Financing Beyond 2027, we expect Northstar's earnings to be driven primarily by DIG and the peakers. On a consolidated basis, this means nearly 100% of our earnings and future growth will be rate-based driven within the utility. Supporting higher quality growth will simplify in strengthening our overall business strategy and outlook. We are targeting the restructuring to be complete by the end of this year and anticipate providing an interim update on future earnings calls as we execute the repositioning of this business. Now, let's talk about our growth in Michigan. We continue to see momentum across multiple sectors of Michigan's economy. On the data center front, we have made meaningful progress and have taken an additional step reaching an agreement under our large load tariff. This includes both the extraordinary facilities agreement and the rate agreement. We have one of the most constructive frameworks in the country for data center growth. Our large load tariff ensures new large load customers bear all costs to serve them, supports economic growth, and protects existing customers. In fact, our average residential electric customer could see approximately $7.50 per month of bill benefit with every gigawatt of new large load. Clear evidence of how disciplined growth supports customer affordability. The next step in the process is for the customer to receive local zoning approval, and we will incorporate the low growth associated with the agreement into our integrated resource plan, or IRP, which will file in September. I continue to be confident in the progress we see here and the future benefit realized for all our customers. In addition to the large load growth we're seeing, year to date, we've also contracted roughly 135 megawatts of manufacturing and industrial load. This consistent momentum is a reflection of Michigan's economic growth and Y. Michigan for the fourth year in a row was ranked number six in CNBC's top states for business. We continue to see strong interest from technology, advanced manufacturing and supply chain companies looking to expand in Michigan. These opportunities create new jobs, strengthen our communities and continue to create long-term value for our customers and shareholders. Looking at our regulatory calendar in June, we filed our electric rate case requesting a $456 million revenue increase, a 10.25% ROE and a 51.75% equity ratio. We've also requested two year investment recovery mechanism or IRM as we make needed customer investments to harden and strengthen our electric grid. In our gas business, In June, we revised our revenue request in our gas rate case to $232 million while aligned with staff's position on our distribution spend. We also increased our equity ratio to 51.75% to align with our electric rate case and reflect the need for a higher equity ratio to support affordability and efficient financing. These investments are outlined with clear and deliberate plans focused on continuing to deliver safe, reliable, and affordable energy for our customers. As I previously highlighted, we have moved our IRP filing to September to reflect the recent data center agreement and ensure we are putting the best plan forward for Michigan. Now, onto the financials. For the first half, We are reaffirming our full-year 2026 guidance of $3.83 to $3.90 per share with continued confidence toward the high end. We also have a clearer line of sight on our 2027 guidance given the change in strategy at Northstar. and are introducing full-year 2027 guidance of $4.08 to $4.17, which maintains growth within our long-term guidance range of 6% to 8% off of 2025 actuals. This guidance reinforces and demonstrates our confidence in the continued growth and earnings power of our business post Northstar Structuring. Longer term, we continue to guide toward the high end of our adjusted EPS growth range of 6% to 8%.