CMS Energy Corporation (CMS) Earnings

Management highlights

### Strategic Restructuring of Northstar - Following a comprehensive strategic review, CMS Energy plans to exit non-utility renewable development at Northstar, retaining only cash-generating Michigan-based assets (Dearborn Industrial Generation, small gas peakers, four commercial solar projects) and selling all non-Michigan and non-retained development assets. - This move simplifies the business model, sharpens focus on regulated utility investment, and will reduce total parent funding needs by more than $500 million through 2030 by reallocating $1.7 billion of planned Northstar capital to the utility and using proceeds from asset sales to cut external financing requirements. - After 2027, nearly 100% of consolidated earnings and growth will come from rate-based regulated utility operations, a higher-quality earnings stream for investors. - The restructuring is targeted for completion by the end of 2026, with interim updates provided on future earnings calls. ### Business Growth in Michigan - CMS Energy secured a full agreement under its large load tariff for a major data center project, including both an extraordinary facilities agreement and finalized rate terms. - The large load tariff structure requires new large customers to cover all their own service costs, delivering an estimated $7.50 per month in bill benefits for the average residential customer for every gigawatt of new large load, protecting existing customers while supporting economic growth. - Final local zoning approval for the data center project is still pending, and the associated load growth will be incorporated into the upcoming September integrated resource plan (IRP) filing. - Year-to-date, CMS Energy has also contracted 135 megawatts of new manufacturing and industrial load, with strong ongoing interest from technology, advanced manufacturing, and supply chain companies expanding in Michigan, ranked 6th best state for business by CNBC for the fourth consecutive year. ### Regulatory Updates - In June 2026, the company filed an electric rate case requesting a $456 million revenue increase, a 10.25% return on equity, and a 51.75% equity ratio, alongside a two-year investment recovery mechanism for grid hardening investments. - The gas rate case revenue request was revised to $232 million to align with staff distribution spend guidance, and the equity ratio was also increased to 51.75% to align with the electric rate case and support lower-cost financing. - The IRP filing was moved from its original date to September 2026 to incorporate the new data center agreement and develop the most comprehensive long-term resource plan for Michigan. ### Capital and Financing Plan - CMS Energy has a $24 billion five-year utility capital investment plan that supports 10.5% compound annual rate base growth, with $3 billion of incremental upside opportunity: $2 billion for utility renewables under the already approved Renewable Energy Plan, and $1 billion for electric distribution reliability improvements. - The current five-year plan assumes $3.75 billion in total new equity issuance, with $700 million planned for 2026 and approximately $500 million already completed at attractive prices. The Northstar restructuring will reduce planned equity issuance by at least $330 million over the remainder of the plan, with an updated financing plan to be released in the Q4 2026 earnings call. ### Long-Term Business Model - The company's proven model delivers 6-8% annual adjusted EPS growth paired with a ~3% dividend yield, while keeping customer bill growth at or below inflation. - Investments in generation, storage, and reliability reduce long-term customer costs and improve resiliency, while the CE Way lean operating system drives ongoing cost efficiency through waste reduction and automation. - Constructive state regulatory and legislative frameworks allow for efficient long-term financing that lowers customer costs, and growing load spreads fixed costs across a broader customer base to further reduce average customer bills.

Guidance

- Full-year 2026 adjusted EPS guidance is reaffirmed at $3.83 to $3.90 per share, with management maintaining confidence in results trending toward the high end of the range. - New full-year 2027 adjusted EPS guidance is introduced at $4.08 to $4.17 per share, which maintains the company's long-term target of 6-8% annual adjusted EPS growth off 2025 actual results, incorporating the full impact of the Northstar restructuring. - Long-term adjusted EPS growth guidance remains unchanged at 6-8%, with management reiterating confidence in trending toward the high end of this range. - After the Northstar restructuring, all future growth will be overwhelmingly driven by high-quality rate-based regulated utility investment, with unchanged long-term growth trajectory and more efficient financing.

Segment performance

The call does not break out separate financial performance metrics for individual product segments on a consolidated basis. All earnings will be nearly 100% rate-based from the regulated utility segment following the planned exit of non-utility renewable development at Northstar by the end of 2026. The retained non-utility Northstar assets (Dearborn Industrial Generation, small Michigan gas peakers, four Michigan commercial solar projects) require minimal incremental capital and generate consistent cash flow to support parent financing and utility capital investment. Through the first half of 2026, the company reported adjusted net income of $464 million, or $1.50 per diluted share, representing a $0.23 year-over-year decrease driven primarily by 2025 first half liability management benefits that were already incorporated into 2026 planning. Key year-to-date variances include an 8 cent unfavorable impact from weaker-than-normal weather, a 20 cent positive benefit from new rates net of investment costs, a 19 cent unfavorable O&M variance from storm activity, and a 16 cent unfavorable variance from parent and other items, all of which are already planned for in full-year guidance.

Risks & headwinds

- Storms created year-to-date operational and earnings headwinds, and additional summer storms could create further unplanned costs, though management has identified potential offsets including a pending storm cost recovery referral to regulators, and plans to wait for further seasonal outcomes before pursuing additional recovery if needed. - The proposed large data center project is still subject to local zoning approval, and zoning delays or failure could eliminate the associated near-term load growth and customer bill benefits. - The outcome of pending electric and gas rate cases, including the requested revenue increase, ROE, and equity ratio, is uncertain, and unfavorable regulatory outcomes could pressure earnings and financing costs. - The sale of non-retained Northstar assets is subject to market conditions, and sale proceeds could differ from current expectations, impacting planned funding reductions. - Forward-looking statements about growth, restructuring, and regulatory outcomes are subject to material uncertainties that could cause actual results to differ from projected results.

Analyst Q&A

• Q: Why is CMS exiting non-utility renewable development at Northstar now, and what is the strategic impact? /

  A: Management regularly reviews capital allocation to maximize value for all stakeholders. This decision simplifies the business, improves overall financial strength, and refocuses the company on its core regulated utility, which delivers high-quality, predictable growth that investors expect. The restructuring allows for more efficient financing of the $24 billion utility capital plan, reduces parent funding needs, and increases balance sheet flexibility, while retained assets generate steady cash flow with minimal capital requirements.

• Q: What is the status of the data center agreement, what remaining steps are needed, and is there upside to capital plans from this opportunity? /

  A: The rate agreement and extraordinary facilities agreement are fully finalized under CMS's existing large load tariff. The only remaining major step is local zoning approval, which the customer is currently progressing through, and the tariff is flexible to apply to any location within CMS's service territory if the customer pursues alternative sites. The current capital plan does not yet reflect this load growth, so it represents upside opportunity that will be incorporated into the September IRP filing and future capital plans. Average residential customers will see ~$7.50 per month in bill benefits for every gigawatt of new load, as fixed costs are spread across a larger base and new customers cover all incremental costs.

• Q: What can you tell us about accretion from the Northstar restructuring by 2030, and how has the long-term growth trajectory changed? /

  A: The long-term 6-8% annual adjusted EPS growth trajectory has not changed. The restructuring only changes the composition of growth, reallocating capital away from Northstar non-utility development to utility investment, which is higher-quality growth. More efficient financing from reduced parent funding needs strengthens the plan over time, but the overall growth outlook remains unchanged from prior guidance.

• Q: Why retain Dearborn Industrial Generation (DIG) instead of selling it as part of the Northstar restructuring? /

  A: DIG is a well-understood core asset that generates significant steady cash flow with minimal required incremental capital. This cash flow directly helps offset parent financing costs, and DIG also provides valuable capacity and energy benefits for the broader portfolio. Management would only sell DIG for a very high valuation that exceeds the value of retaining it for ongoing cash flow, so retaining it is the current optimal decision.