CMS Energy Corporation 5.6% JRSUB NT 78 Q4 FY2024 earnings call

• Customer Reliability: Made progress on the five-year reliability roadmap, with over 93% of customers having power restored within 24 hours in 2024, up from 87% in 2023, and average customer outage minutes reduced by 21. • Renewable Energy: Filed a 20-year renewable energy plan with 9 gigawatts of solar and 4 gigawatts of wind over two decades to meet Michigan's 2023 energy law. • Gas Business: Continues to grow with infrastructure build-out and replacement ensuring safe, reliable, and clean natural gas supply, especially during extreme cold. • $20 Billion Investment Plan: A five-year $20 billion utility customer investment plan, up $3 billion from prior, focused on improving reliability in distribution and supply. • Rate Affordability: Focus on cost reduction through measures like plant closures, PPA renegotiations, digital tech for efficiency, and economic development to keep rates affordable. • Economic Development: Michigan seeing load growth from data centers, manufacturing, etc., with 2% to 3% annual load growth incorporated into the plan, leveraging economic development to spread fixed costs. • Regulatory Environment: Supportive energy policy with constructive outcomes in rate cases, including successful electric rate case in 2024 and gas rate case settlement, with expected constructive outcomes in 2025 rate cases.

In 2024, CMS Energy delivered adjusted earnings per share of $3.34, which was at the high end of the guidance range. For 2025, the company is raising its guidance with adjusted EPS expected to be in the range of $3.54 to $3.60, representing 6% to 8% growth. The utility segment is projected to contribute $4.01 to $4.05 of adjusted earnings in 2025, driven by normal weather, constructive rate case outcomes, and earned returns. NorthStar Clean Energy is expected to contribute an EPS of $0.18 to $0.22 in 2025, with a planned maintenance outage at Dearborn Industrial Generation (DIG) offset by contributions from its clean energy business.

• 2024 adjusted EPS of $3.34 was at the high end of the guidance range. • For 2025, guidance is raised from prior expectations, with adjusted EPS expected to be between $3.54 and $3.60, representing 6% to 8% growth. • Anticipates normal weather in 2025, which is expected to contribute $0.39 per share of positive variance. • Expect constructive outcomes in electric and gas rate cases, with electric rate case expected to be resolved by end of March 2025. • Earnings contributions from renewable investments as projects progress. • Planned debt issuances at the utility of a little over $1.1 billion in 2025, with no assumption of junior subordinated note issuances unless attractive price points arise.

• Weather-related headwinds, such as mild winter temperatures in 2024, which impacted financial performance but were offset without compromising customer commitments. • Permitting challenges for renewable projects, though focus on private lands and working with local communities has been successful. • Tariff impacts on the supply chain, with a small portion of direct and indirect spend from China, Canada, and Mexico, but efforts underway to mitigate through supply stock increases and vendor migration.

Q: Julien Dumoulin-Smith asked about permitting for renewable projects, especially wind, and financials related to load growth in Michigan.

A: Garrick Rochow and Rejji Hayes responded that renewable projects are on private lands, with success in working with local communities and landowners. Load growth in Michigan includes signed or imminently signed projects, diversified across data centers, manufacturing, etc., with support from Michigan's favorable environment including fiber, water, and energy-ready sites.

Q: Jeremy Tonet inquired about the impact of the DIG outage on EPS in 2025.

A: Rejji Hayes stated that the DIG outage will result in a modest reduction in contribution, but it will be offset by contributions from existing operating assets and new renewable projects coming online in the second half of 2025.

Q: Michael Sullivan asked about equity needs related to the $3 billion CapEx increase and tax credit transferability.

A: Rejji Hayes explained that the $3 billion CapEx increase implies additional equity needs, with an expected equity issuance range of $500 million over the next two to three years, and tax credit monetizations expected to step up over the five-year plan to reduce equity needs in outer years.

Q: Andrew Weisel asked about dividend growth prospects.

A: Rejji Hayes stated that the dividend payout ratio is targeted around 60%, with dividend growth expected to be in the low 5% range, focusing on retaining earnings to fund growth and redeploy capital into the utility.

Q: Nicholas Campanella asked about settlement potential in the renewable energy plan and NorthStar's opportunities.

A: Garrick Rochow mentioned looking for settlement opportunities in the renewable energy plan, which is expected to be resolved by late Q3 2025. Rejji Hayes discussed NorthStar's opportunities, noting additional earnings power in the outer years due to attractive contract rates, but with a portion already realized in the current plan.

Q: Durgesh Chopra asked about tariff impacts on supply chain and equipment sourcing.

A: Garrick Rochow and Rejji Hayes responded that direct and indirect spend from China, Canada, and Mexico is small, with efforts to mitigate through supply stock increases and vendor migration. They also noted diversified service territory and hedging strategies to manage potential tariff impacts on natural gas and electric supplies.

Q: David Arcaro asked about Michigan's backdrop for data centers and rate case settlement.

A: Garrick Rochow explained that Michigan's favorable environment supports data centers with transmission and distribution build-out, and efforts to stage load growth. He expressed confidence in a constructive outcome for the electric rate case, either through settlement or final order by March 2025.