CMS Energy Corp. Q3 FY2024 earnings call

Garrick Rochow highlighted Michigan's clean energy law which provides certainty for renewable energy investments, allows flexibility in asset ownership or power purchase agreements, and includes financial compensation mechanisms and requirements for battery storage and energy efficiency. He also discussed the $7 billion electric reliability roadmap to improve customer reliability, including undergrounding distribution wires, replacing poles, and investing in grid technology. Additionally, there's a tailwind of economic development in Michigan, with manufacturing growth such as Corning, Saab, and others, and over 6 gigawatts of load looking to move to or expand in the state. The regulatory calendar was discussed, with financial-related outcomes known for the year, and plans for future gas rate cases and electric rate cases.

No detailed breakdown of product segment financial performance with revenue contribution percentages provided in the transcript.

Reaffirmed 2024 full year guidance range of $3.29 to $3.35 per share with confidence toward the high end. Initiated full year guidance for 2025 at $3.52 to $3.58 per share, reflecting 6% to 8% growth off the midpoint of 2024's range. Anticipated normal weather to provide $0.14 per share of positive variance for the remaining three months of 2024, and regulatory outcomes to realize $0.09 per share of positive variance, but expected $0.15 per share of negative variance for remaining three months due to additional funding support for certain cost categories.

Regulatory uncertainties such as potential need for fully adjudicated orders in electric rate cases. Uncertainty around tax credits, including potential repeal of the IRA and its implications on renewable energy investments. Storm-related operational challenges and the need to manage costs associated with service restoration.

Q: On data center demand in Michigan, how does CMS Energy think about existing grid capacity, tariff structure, and timing?

A: Michigan has the electric infrastructure to serve data centers, works closely with them to meet timelines, has filed ex-parte filings to move data centers to the GPD rate, and expects progress over the next six months to a year.

Q: Walk through DIG and capacity auctions?

A: NorthStar business performs well, DIG has strength in capacity and energy markets, with reverse inquiry at levels well in excess of historical, driven by supply reduction and upward demand pressure.

Q: Thoughts on 2.5 gigawatts of storage target and tax credits?

A: Storage will play out in 2026 integrated resource plan, with legislation providing certainty, and potential for more storage than referenced in the law. Uncertainty around IRA repeal, but low probability, and still need to comply with Michigan law.

Q: Liberty audit and regulatory performance mechanism?

A: Anticipate weaving Liberty audit findings into five-year reliability plan, enhancing it and providing opportunities for additional capital investments, with performance-based ratemaking focused on reliability work potentially woven in.

Q: Load growth in REP and IRP?

A: REP will reflect base from 2021 integrated resource plan and additional renewables due to economic development, with visibility on sales growth from data centers and manufacturing. Load growth assumptions will show upward pressure in REP and IRP.

Q: Electric case and storm mechanism?

A: Likely to adjudicate electric case due to storm mechanism, staff has a constructive starting position, but some distribution investments left on the table, with proposal for storm restoration tracker to align incentives between investors and customers.

Q: CapEx update and financing?

A: CapEx will have upward pressure from REP, IRP, reliability, and demand growth, with pacing depending on commission review and load materialization. Equity needs per dollar of CapEx around $0.35 to $0.40, with tax credits and cash flow generation helping fund CapEx.

Q: Supply capacity for industrial and data center customers?

A: CMS Energy is long and can accommodate large loads, working closely with customers to match ramp-up schedules, as seen with examples like Switch and Corning.

Q: Load growth disclosure and tax credits transferability?

A: Load growth will be updated in REP and five-year plan, with upward pressure on current estimates. Tax credits transferability embedded in five-year plan at over $0.5 billion, expected to increase over time.