Prepared remarks
Good morning, everyone, and welcome to the CMS Energy 2025 Year-end 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. Please follow the operator's instructions. Just as a reminder, there will be a recording of this conference call today, beginning at 12:00 p.m. Eastern Time running three February trials. 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, Adam. Good morning, everyone, and thank you for joining us today. With me are Garrick Rochow, President and Chief Executive Officer; and Rejji 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. 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 good morning, everyone. Before we get into the financial results, I'm very proud of the team in 2025, as you see from the slide, and I want to highlight a few of the big wins the CMS Energy team delivered in 2025. First, I'm very pleased with our large load tariff, which was approved in November. Supply of energy for data centers is a national story. In the rush to serve this demand, utility leaders are focused, and I'm proud of the tariff the team worked so hard on this year because it's strategic and thoughtful. It protects our customers and supports growth in the state. This tariff provides certainty for our data centers as we bring new load onto the system, ensuring existing customers don't pay for the investments, and they will see tangible benefits as this new load supports more affordable rates as we grow Michigan. Next, we received approval for our 20-year renewable energy plan, another area the team worked hard on to develop a plan that meets the requirements of our state's energy law. More importantly, this approval highlights the constructive regulatory environment in Michigan and provides visibility and certainty for our long-term investments in solar and wind, offering roughly $14 billion of customer investment opportunity over the next decade. On this last point, we have a saying around here: victory loves preparation, and I want to talk about our gas business. It's been a cold start to the winter, and as always, we have been prepared to serve our customers. That doesn’t happen by luck; it's a deliberate commitment from our team who work every day to buy gas at the lowest price, store it in some of the largest storage fields in the nation, and deliver it safely and reliably to our customers. We're reducing the price of gas when it is needed most by our customers. This reflects our ongoing work to replace this important storage and delivery infrastructure, investing over $1 billion in the year to ensure we are there when our customers expect us. At CMS Energy, we wake up every day committed to serve and deliver value for all our stakeholders, and 2025 marks our 23rd year of industry-leading performance. As we prepare for these calls, we do a lot of work on slides, and we all have our favorites. This next one is mine. It highlights the team's commitment to excellence and what we are able to achieve. It shows results and proof points of the great regulatory construct in Michigan. Our long history of constructive outcomes across multiple years and cases, enhanced by unique mechanisms like incentives on energy waste reduction and PPAs, is built into the energy law. This is an outstanding regulatory construct, and more importantly, we've been successful in obtaining top-tier outcomes that support our long track record of performance, and this year was no different. Two rate orders, electric and gas, both approved with constructive outcomes, delivering significant wins for our customers, supporting critically important work to improve electric reliability and ensure gas safety across our system. Our 20-year renewable energy plan was approved, presenting over $14 billion of customer investment opportunity to achieve the state's energy law by 2040, ensuring visibility and certainty for the recovery of our investments. We also delivered on the first-ever storm deferral mechanism approved in June. Our large load tariff was approved in November, setting the stage for growth. These important outcomes provide visibility and certainty for necessary customer investments in our electric and gas systems, and this track record continues to highlight what the CMS Energy team can achieve, reaffirming Michigan's top-tier regulatory environment. Looking forward, I have confidence in our ongoing electric rate case. Given the reactions to our recent proposal for decision, I must remind the investment community that this is simply a step in the process and is not reflective of our strong track record. The MPSC staff have dedicated significant time to evaluate the testimony and merits of this case. Their position is constructive, and I would argue much closer to the expected rate case outcome. I must also mention that the Commissioners' previous public comments have supported the necessity for improvements in the electric grid. This case is built on the fundamentals of our reliability roadmap, the MPSC Commission’s Liberty distribution audit, and the necessary customer investments to maintain electric reliability while ensuring affordability. I expect positive outcomes for our customers and investors, including an ROE of 9.9% or better. In our recently filed gas rate case, I'm confident in our proposed investments to ensure the gas system remains safe and reliable, and the value to customers of our proposed full gas decoupling. Our residential natural gas rate is currently 28% below the national average, demonstrating the balance we aim for between investment in the system and affordability for our customers. Now, let’s go over the financials. For 2025, we exceeded our adjusted earnings per share guidance and delivered $3.61 per share, reflecting an increase of over 8% from 2024's actual results. This achievement indicates the compounding of earnings you’ve come to expect from CMS Energy. Throughout 2025, we saw strong performance at the utility, largely attributable to constructive regulatory outcomes and robust performance at North Star, which drove full-year results. This success allowed us the opportunity to exceed guidance at year-end, provide better service for our customers, and derisk the business for the coming year. For 2026, we are raising our annual guidance by $0.03 to a range of $3.83 to $3.90, representing a growth of 6% to 8% off of 2025's actual results, and we continue to guide toward the high end. Our practice of rebasing higher off of actual results differentiates us in this sector, providing a higher quality of earnings for our investors year in and year out. We reaffirm our long-term guidance range of 6% to 8% with a focus on the high end. Our total shareholder return will continue to grow the dividend, as we have done for over 20 years, targeting a dividend payout ratio of approximately 55% over time. Finally, we confidently manage the business and execute regardless of circumstances, demonstrating consistent industry-leading performance over the past 23 years. On Slide 6, we have identified our 5-year $24 billion utility customer investment plan, which has increased by $4 billion from our prior plan. These investments are necessary to enhance customer service through improved reliability in both distribution and supply. I want to take a moment to connect the dots on why I'm excited and confident in our ability to execute this plan. First, we increased our electric generation investment by approximately $2.5 billion over the previous plan. Most of this investment has already been approved in our renewable energy plan, ensuring visibility and certainty that I mentioned earlier. Another opportunity for customer investment that I shared on previous calls includes the addition of natural gas generation and battery storage. Our integrated resource plan, which we will file in mid-2026, will detail the additional capacity required to replace retired plants, supporting existing and future growth. This opportunity is independent of new data centers but is associated with growth already connected or soon to be connected to our system. We are proactively planning and preparing to operationalize this capacity within the 5-year window. Second, we are integrating more of our electric reliability roadmap into our 5-year plan, increasing our investments by approximately $1.2 billion over the previous plan. This work aligns closely with the Michigan Public Service Commission and the findings of the Liberty distribution audit. We have also received constructive support for our investment recovery mechanism during the rate case process. Lastly, our gas investments have increased by approximately $400 million, supporting our 10-year natural gas delivery plan prompted by increased demand across the gas transmission system for power generation and industrial growth. So when I take a step back and objectively evaluate our 5-year customer investment plan, it is clear there is visibility and certainty surrounding the investments. We have an efficient workforce prepared to execute this work. The work provides significant value to our customers, and I am confident we can do it affordably. This plan supports 10.5% rate base growth through 2030. In addition to our robust customer investment plan, we have identified meaningful growth drivers outside of the traditional rate base that are unique to Michigan and CMS Energy, which are sometimes overlooked. The financial compensation mechanism allows us to earn on PPAs, growing significantly over the 5-year period, offering nearly $50 million of incentives by the end of the decade. There is also approximately $65 million per year of incentives through our energy efficiency programs, enhanced by the 2023 energy law. We anticipate incremental earnings from our nonutility business, North Star Clean Energy, as we continue to see attractive pricing from capacity and energy sold at Dearborn Industrial Generation, or DIG. We make these investments while maintaining a strong focus on customer affordability. We have a proven track record of driving customer savings through the CE Way and digital automation, targeting episodic cost savings and energy waste reductions. This generates capital headroom which sustains affordability while enabling us to make crucial investments in our system. To provide a few examples, in 2025, we achieved significant success leveraging the CE Way, delivering over $100 million in savings. Our energy waste reduction program will save our customers approximately $1.2 billion, lowering their bills because when you use less, you pay less. Our efforts undoubtedly impact our customers. Presently, our customers' utility bills comprise around 3% of their total expenses, referred to as share of wallet, down 150 basis points from a decade ago, despite our $24 billion system investment. I am also pleased to report that our recent electric bill increases rank among the lowest nationally. We are committed to keeping our residential bills below the national average and Midwest average throughout the 5-year planning period. This commitment influences every penny we invest in infrastructure, keeping customer affordability at the forefront. Michigan is witnessing growth, and I remain optimistic about the data center progress discussed during the Q2 call. The large load tariff was an essential milestone that provides clarity for data centers while protecting our existing customers. I'm excited to note considerable progress with data centers showing interest in our service area. Regarding the data center announcement during the Q2 call shown on the slide, we have reached commercial terms on the extraordinary facilities agreement, similar to an ESA or electric service agreement. We are also nearing final terms in our rate agreement. Our agreements outline a path to serve their peak demand, with timelines and incremental supply resources required to meet this load. We anticipate having their data center operational by as early as 2028. This data center is not yet incorporated into our 5-year customer investment plan. Additionally, we are in advanced negotiations with a second data center that has publicly stated its expansion in Michigan and particularly in our service area. While I can't share many details now, rest assured we are actively addressing their requirements, and we look forward to serving this prospective customer. Our growth pipeline in Michigan and our service area remains robust and exciting. I will now hand the call over to Rejji to provide further details.
Thank you, Garrick, and good morning, everyone. To delve deeper into our financial performance in 2025, on Slide 9, you'll note that we met or exceeded all our key financial objectives for the year, primarily our adjusted earnings per share. To avoid redundancy, I’ll just mention that we successfully invested $3.8 billion, largely in line with our original guidance to enhance the safety, reliability, and cleanliness of our electric and gas systems for our 3 million utility customers. We achieved this while funding the business cost-effectively through operational cash flow, well-priced bond and equity financings, and tax credit transfers. This prudent funding strategy has enabled us to maintain solid investment-grade credit metrics and ratings as affirmed by each of the rating agencies over the course of the year, most recently by S&P for our parent company, CMS Energy in December. Moving on to our 2026 EPS guidance on Slide 10, you'll note the rebasing of the range higher off of our 2025 adjusted EPS actuals per our historical practice. Our 2026 adjusted EPS guidance range has increased by $0.03 on both ends to $3.83 to $3.90 per share. This increased EPS guidance implies 6% to 8% growth with continued confidence toward the high end of the range, effectively 7% to 8% based on our historical performance. The EPS will primarily be driven by the utility, contributing $4.28 to $4.33 of adjusted earnings as we anticipate normal weather, constructive regulatory outcomes, and the ability to earn returns at or near authorized levels. At North Star, we estimate an EPS contribution of $0.25 to $0.30, this accounting for normalized operations at DIG, taking advantage of favorable capacity contract mix, and completion of select renewable projects. Lastly, our financing assumptions remain conservative at the parent segment, including expected equity issuances of approximately $700 million to support the increased capital plan at the utility. Additionally, our guidance for the parent segment accounts for the full year of interest expense stemming from the successful convertible debt offering last year in the fourth quarter and anticipates no significant liability management transactions. As we detail the glide path to achieving our 2026 adjusted EPS guidance range, you’ll find the usual waterfall chart on Slide 11. For clarity, all variance analyses here are presented on a full-year basis and are related to 2025. Starting from the left, we plan for normal weather, accounting for a $0.22 per share negative variance given the absence of favorable temperatures experienced in 2025, primarily impacting our electric business. Furthermore, we expect a $0.37 per share uptick, driven by rate relief fostered by the lasting benefits of last year's gas and electric rate cases alongside anticipated productive outcomes in our pending electric and gas rate cases. Outside the general rate cases, we also foresee earnings contributions from our investments in renewable generation assets, as per our approved renewable energy plan. All rate relief figures are stated net of investment-related costs like depreciation, property taxes, and utility interest expense. As we look at the cost structure in 2026, you'll note a $0.12 per share positive variance due to continued operational productivity led by the CE Way and more normalized storm activity within our operational territory. Moreover, our projected operating expenses account for the benefits accrued through operational efficiencies executed in 2025. We will, of course, adjust our cost expectations according to rate case outcomes, given the inherent financial flexibility in the forward-looking test year. Lastly, on the penultimate bar to the right, you can see a modest variance, largely attributed to growth at North Star per my earlier comments. This segment also comprises the roll-off of 2025 liability management transactions along with typical conservative assumptions about parent financing costs and taxes, among other considerations. Collectively, these assumptions indicate a variance that could be negative $0.05 to positive $0.02 per share. As always, we plan to adapt to changing conditions throughout the year to leverage opportunities and mitigate risks in pursuit of our operational and financial objectives to advantage both our customers and investors. On Slide 12, we summarize our near and long-term financial goals. As Garrick noted, regarding our dividend policy, we are targeting a payout ratio of approximately 60% in 2026 and about 55% throughout our 5-year plan. Given the current elevated capital costs environment and the expansive opportunity for customer investments ahead, we believe it prudent to retain more earnings to fuel growth. In terms of maintaining a solid balance sheet, we’ll continue to strive for strong investment-grade credit ratings and manage our key credit metrics appropriately, balancing the business's needs. Therefore, we intend to continue our at-the-market equity issuance program, targeting around $700 million in 2026, as previously mentioned. Throughout the five-year plan, our total equity needs will align with our historical ratio of $0.40 of equity for every additional dollar of incremental CapEx, amounting to an average of roughly $750 million per year, considering our increased customer investment plan. Although there remains some capacity in our current ATM program, anticipate us filing a new prospectus supplement later this year to address our updated needs. Furthermore, we foresee select large multiyear economic development projects beginning to ramp up in 2026, yielding approximate 3% weather-normalized load growth for the year with run-rate estimates of 2% to 3% in the outer years of our plan. Slide 13 provides further specificity on the funding requirements for 2026 within the utility and the parent. For the utility, we plan to raise around $1.7 billion in total. For the parent, you'll note that our debt financing needs were advanced in November 2025, resulting in the previously mentioned equity issuance needs of roughly $700 million. As always, we remain alert to market conditions throughout the year to identify attractive issuance opportunities. On Slide 14, we've updated our sensitivity analysis on key variables for your planning considerations. With reasonable planning assumptions and our proven risk mitigation track record, the likelihood of substantial variances from our plan is minimized. Our model has served, and will continue to serve, all stakeholders well. Our customers receive safe, reliable, and clean energy at affordable prices, our dedicated and experienced workforce remains committed to our purpose-driven organization, and our investors benefit from consistent industry-leading financial performance. With that, I’ll pass it back to Garrick for his closing comments before the Q&A session.
Thanks, Rejji. At CMS Energy, we deliver. For 23 years, we have demonstrated consistent industry-leading performance regardless of changing circumstances, year after year. You can rely on CMS Energy to deliver for all stakeholders. With that, Adam, please open the lines for Q&A.
Questions and answers
Please follow the operator's instructions for the Q&A session. Our first question comes from Julien Dumoulin-Smith from Jefferies.
As always, I appreciate the infectious energy you convey on these calls. If I can kick it off with a question about the data center opportunity you alluded to here, obviously, you're in advanced talks as you characterize it here. Can you provide a bit more insight into the status of data centers in Michigan? There has been significant discussion on the state's broader plans, not exclusively for the second site. But how do you perceive this opportunity? How would you establish timelines? I recognize you can't provide too many details, but at least from a financial perspective and in terms of forecasting your overall plan, you've made substantial progress in securing the 10.5% rate base CAGR. I’d like to understand how you'd synchronize any timelines for a second data center against your broader financial roadmap.
I'm very pleased with the progress from a data center perspective. If you examine the entire funnel, it has actually grown. In just the last month, two additional data centers have entered the pipeline. They remain at the top of the funnel, so they haven't made their way through yet. In terms of broader economic development, there are also two large manufacturing clients now in that funnel. Michigan's economic development story looks very strong from my perspective. The data center tariff is essential because it provides clarity on terms and conditions for these clients. Having the facilities extraordinary agreement finalized was a significant win, and we are close to finalizing the rate contract. This will lead to a quick process given our pre-approvals. Everything is progressing positively, which instills confidence in our capability to secure one or even a couple of data centers, with a particular focus on the one where we are closest to finalizing contract terms and conditions. Did that provide enough clarity, Julien?
Absolutely. And perhaps secondly, you provided a substantial update on the plan. I'd love to scrutinize it a little further since it maintains considerable flexibility within the framework. Therefore, I would like to understand what inclusions or exclusions exist in the plan and your thoughts on these components. You mentioned a 10.5% against the 6% to 8%; additionally, you referenced a $50 million pretax FCM and $65 million derived from energy efficiency incentives. Further, in your comments, you noted growth regarding North Star DIG recontracting. How do you assess the 6% to 8% range? What’s contained and what’s excluded from the formal plan at this point, while being mindful that a large portion of the data center discussions we've had are not explicitly reflected?
Just to confirm, the data center investments are not included in the plan; they would represent incremental investments. As for navigating the math behind the 6% to 8%, I’ll pass it to Rejji for some clarification on that.
Julien, we anticipated this question within the first few inquiries, so you're right on the mark. The components are as you've outlined: the plan projects a 10.5% rate base CAGR over this 5-year period. Adding to that are the North Star opportunities and the FCM, which have both enhanced from prior iterations, contributing about another point above that 10.5%. While there are a few factors we want to discuss offline, all in all, this would suggest a low double-digit CAGR, given those factors. The factors bridging to our guidance of 6% to 8% are due to funding costs, as we expect to issue more equity for this plan compared to previous versions. We quantified that as contributing roughly 3.5% given our market cap today and the amount of equity to be issued. Likewise, the approximately $1.7 billion of parent refinancings over this 5-year plan is worth noting. Unlike the previous 15 years, money is no longer free, meaning refinancing those parent bonds will occur at higher issuance levels. This contributes to a subtle negative arbitrage that everyone in the sector will face. Thus, what brings us down from a low double-digit CAGR to 6% to 8%, closer to 7.5% to 8%, hinges on both the equity demands and the refinancing. Additionally, even if various calculations suggest a modest upward adjustment to about 8.5%, it’s crucial to compound from actuals each year to ensure sound year-on-year earnings quality, as we've maintained for the past 23 years. Not having full decoupling on gas or electric also implies we need to buffer for in-progress storm activities. Hence we are content with our guidance today and how we bridge from the high teens or, more accurately, the low double-digit CAGR down to the 6% to 8%, realistically aiming at 7.5% to 8%. Did that clarify things for you?
I’d like to add some clarity to Rejji’s remarks. Reflecting on 2025, constructive regulatory outcomes and outperformance at North Star enabled us to reinvest back into the business. As Rejji noted, we enhanced customer service this year through additional tree trimming efforts for the gas system and derisked future years. This has thus provided upside, enabling us to pass on added benefits to investors and instilling confidence in our compounding approach while also allowing us to append $0.03 to our guidance. This speaks volumes about our robust plan and underlying confidence.
The next question comes from Nick Campanella from Barclays.
Thanks for clarifying the rate base to earnings walk; that was hugely beneficial. A significant component of the plan is the authorized returns. I hear the comments about expecting something around 9.9%, yet the ALJ report pertains to an 8% and change ROE significantly below the national average. This doesn’t adequately represent the capital cost environment you've referenced. Could you share the stakeholder feedback since the report has been released? What’s your outlook as we approach March and the anticipated decision?
I'm not worried about the ALJ PFD at all. Just to clarify, the CMS Energy team has delivered for a while now, and I credit this to our capable team and a constructive regulatory environment. As I shared, we expect a positive outcome with an ROE of 9.9% or better. That 8.2% is an outlier, not well supported, and it does not align with the current environment; thus, it will likely be discounted in this investigation. If we take the revenue deficiency proposed by the ALJ, which stands at $168 million, and apply a prevailing ROE of 9.9%, the numbers align more closely with our expected approaches. This provides justification for capital investment among O&M and tree trimming initiatives. The staff's position is indeed constructive, and as stated, revenue deficiency estimates often reflect the merits of the case. The commission’s statements publicly suggest a need for improved electric grid performance, which supports our call for productive capital allocation in Michigan. That truly reassures me about our capability to secure a successful outcome in this rate case, along with an expected ROE of 9.9% or better.
I appreciate that. Additionally, concerning the IRP, could you discuss how the 1 to 2 gigawatts you have in final stages affects capacity needs? What’s the long-term capacity outlook into the early 2030s? Furthermore, when do you foresee incorporating the 1 to 2 gigawatts, and would it purely serve as incremental to the 10.5% CAGR you outlined today, given that the large load tariff is intended to shield customers from rates?
To clarify all of this, the data centers are not included in the plan. Growth from the data centers within that funnel is also excluded from our customer investment plan. Regarding the integrated resource plan, I’ve discussed this in previous conversations; we have a renewable energy law in place, and much has already been authorized in our renewable energy plan. You could incorporate clean energy, yet ultimately need to close gaps when the sun isn't shining or the wind isn’t blowing. This needs to be fulfilled through batteries and natural gas. If we project forward, we have registered load growth in the state, separate from funnel activities, with 450 megawatts of connected load last year, as indicated on our slide last quarter. We forecast a 3% load growth next year alone and anticipate 2% to 3% throughout the 5-year plan. We need to ensure we can deliver on this as well. Looking ahead, we have plants set to retire, roughly a gigawatt that will be out of commission within that timeframe. Therefore, those capacity needs will be represented in the upcoming IRP, included in the $24 billion customer investment plan.
Nick, I would like to add to Garrick's comments while taking the opportunity to share prior sensitivities. Generally, every gigawatt of additional load introduced to the system could create about $2.5 billion to $5 billion in investments required, comprising distribution-related resources to integrate load opportunities and necessary supply. This illustrates our plan's differentiation and underscores the increasing CapEx backlog we’re laying out today; the $24 billion figure does not depend on successfully landing those large load opportunities. Therefore, landing one of these could elevate our rate base CAGR.
The next question comes from Shar Pourreza from Wells Fargo.
This is Marcelo Petrin on behalf of Shar. You highlighted growth compared to the national average and the share of wallet, along with potential savings from the 1 gigawatt addition for data centers. Recent state elections have focused heavily on rates. How do you view affordability heading into an election year?
Marcelo, it’s a thoughtful question. Fortunately, we've been dedicated to affordability and cost savings for a long time. This is not merely a Michigan issue but a broader national concern. As you've noted with a K-shaped economy, the President will encounter challenges in this midterm election season. If we survey the national landscape, particularly scrutinizing energy costs, the issues stand out most prominently in PJM territories. Keep in mind, we are MISO, where costs are managed differently because we are a regulated utility with generation ownership. We can hedge costs. In 2025 alone, we saved our customers $250 million through in-house generation using our units rather than purchasing from the volatile market. That previous figure over the years has remained consistent. Our approach to affordability also extends to the gas sector; we secure gas in the summer, harnessing the largest storage fields in the world to deliver low-cost gas in the winter while keeping supply costs low. We've been thorough and well-structured in this affordability matrix. I detailed in my remarks earlier that our energy waste reduction has saved our customers about $1.2 billion; every time a customer uses less, they pay less. Our metrics indicate that our utility bills currently account for about 3% of total expenses — a point that's decreased by 150 basis points over the past decade, illustrating how we invested around $24 billion. I’m proud that our electric bill increases rank among the lowest nationally. We're committed to keeping our residential bills below the national average and the Midwest average throughout the 5-year plan, which is a critical undertaking. Each investment we make into infrastructure is anchored on customer affordability. Michigan is on an upward trajectory, and I remain highly optimistic regarding the data center advancements discussed in Q2. The large load tariff was pivotal, ensuring clarity for data centers while safeguarding our existing customers from rate hikes. I’m excited to share great progress with data centers considering setting up in our service area. Addressing the data center reference mentioned on the Q2 call, as highlighted on the slide, we established commercial terms on the extraordinary facilities agreement, akin to an ESA or electric service agreement. We're nearing completion on the rate agreement, presenting a clear path for their peak demand and the defined timeline regarding incremental resources required. Each prospective data center is projected to be operational by 2028, notwithstanding its exclusion from our 5-year investment plan. Furthermore, we are engaged in advanced discussions with a second data center publicly discussing its expansion in Michigan, particularly within our service area. Although I can’t elaborate, we are diligently aligning our plans to serve this possible client. Our growth pipeline in Michigan and our service area remains intense and promising. That leads us back to you, Garrick.
I'll now turn the call over to Rejji to offer additional details.
Thank you, Garrick, and good morning everyone. To elaborate on our financial performance in 2025, on Slide 9, you'll note that we met or exceeded all of our key financial objectives for the year, most notably our adjusted earnings per share. To avoid being repetitive, I'll just note that we successfully invested $3.8 billion, largely in line with our original guidance to make our electric and gas systems safer, more reliable and cleaner on behalf of our 3 million customers at the utility. We managed to do this while funding the business in a cost-efficient manner, largely through operating cash flow, well-priced bond and equity financings and tax credit transfers. This prudent funding strategy enabled us to maintain our solid investment-grade credit metrics and associated ratings as affirmed by each of the rating agencies over the course of the year, most recently by S&P for our parent company, CMS Energy in December. Moving on to our 2026 EPS guidance on Slide 10, you'll note the rebasing of the range higher off of our 2025 adjusted EPS actuals as per our historical practice. More specifically, our 2026 adjusted EPS guidance range has increased by $0.03 per share on both ends of the range to $3.83 to $3.90 per share. Our increased 2026 EPS guidance implies 6% to 8% growth with continued confidence toward the high end of the range, as Garrick, which is effectively 7% to 8% given our historical performance. As you can see in the segment details, our EPS will primarily be driven by the utility, providing $4.28 to $4.33 of adjusted earnings as we plan for normal weather, constructive regulatory outcomes and earn returns at or near authorized levels. At North Star, we're assuming an EPS contribution of $0.25 to $0.30, which incorporates normalized operations at DIG, benefiting from an increasingly favorable mix of capacity contracts and the completion of select renewable projects. Lastly, our financing assumptions remain conservative at the parent segment with expected equity issuances of approximately $700 million to support the increased capital plan at the utility. Our guidance in the parent segment also includes a full year of interest expense from last year's successful convertible debt offering in the fourth quarter and assumes the absence of liability management transactions. To elaborate on the glide path to achieve our 2026 adjusted EPS guidance range, you'll see the usual waterfall chart on Slide 11. For clarification purposes, all of the variance analysis herein are measured on a full year basis and are relative to 2025. From left to right, we plan for normal weather, which, in this case, amounts to $0.22 per share of negative variance given the absence of favorable temperatures experienced in 2025, largely in our electric business. Additionally, we anticipate $0.37 per share of pickup attributable to rate relief driven by the residual benefits of last year's gas and electric rate cases and the expectation of constructive outcomes in our pending electric and gas rate cases. Outside of the general rate cases, we also expect to see earnings contributions from our investments in renewable generation assets in accordance with our recently approved renewable energy plan. As always, our rate relief figures are stated net of investment-related costs, such as depreciation, property taxes and utility interest expense. As we turn to the cost structure in 2026, you'll note $0.12 per share of positive variance due to the anticipation of continued productivity driven by the CE Way and more normalized storm activity in our service territory. It is also worth noting that our projected operating expenses reflect the benefits of operational pull aheads executed in 2025. And as always, we will adjust our cost assumptions in accordance with rate case outcomes given the financial flexibility inherent in the forward-looking test year. Lastly, in the penultimate bar on the right-hand side, you'll note a modest variance, which largely consists of growth at North Star per my earlier comments. This bucket also includes the roll-off of 2025 liability management transactions and the usual conservative assumptions around parent financing costs and taxes, among other items. In aggregate, these assumptions equate to a variance of negative $0.05 to positive $0.02 per share. As always, we'll adapt to changing conditions throughout the year to capitalize on opportunities and mitigate risks to deliver on our operational and financial objectives to the benefit of customers and investors. On Slide 12, we have a summary of our near and long-term financial objectives. As Garrick noted, from a dividend policy perspective, we're targeting a payout ratio of approximately 60% in 2026 and roughly 55% over the course of our 5-year plan. Given the elevated cost of capital environment and the breadth and depth of customer investment opportunities before us, we continue to believe that it is prudent to retain more earnings to fund growth. From a balance sheet perspective, we continue to target solid investment-grade credit ratings, and we'll continue to manage our key credit metrics accordingly as we balance the needs of the business. As such, we intend to continue our at-the-market or ATM equity issuance program in the amount of approximately $700 million in 2026, as mentioned earlier. Over the course of the 5-year plan, our aggregate equity needs will be consistent with our historical ratio of $0.40 of equity for every dollar of incremental CapEx, and equates to an average of approximately $750 million per year given the substantial increase in our 5-year customer investment plan. And while we do have some capacity remaining with our existing ATM program, you can expect us to file a new prospectus supplement to reflect our updated needs later this year. Lastly, we also expect select large multiyear economic development projects to begin ramping up in 2026, yielding approximately 3% weather-normalized load growth for the year with run rate assumptions of 2% to 3% in the outer years of our plan. Slide 13 offers more specificity on the funding needs in 2026 at the utility and the parent. At the utility, we're planning to issue a little over $1.7 billion in aggregate. And at the parent, you'll note that our debt financing needs were pulled ahead in November of 2025, which leaves the aforementioned equity issuance needs of roughly $700 million. Needless to say, we'll remain opportunistic throughout the year, and we'll continue to monitor the market for attractive issuance windows. On Slide 14, we have refreshed our sensitivity analysis on key variables for your planning assumptions. As you'll note, with reasonable planning assumptions and our track record of risk mitigation, the probability of large variances from our plan is minimized. Our model has served and will continue to serve all stakeholders well. Our customers receive safe, reliable and clean energy at affordable prices, our diverse and battle-tested workforce remains committed to our purpose-driven organization, and our investors benefit from consistent industry-leading financial performance. And with that, I'll hand it back to Garrick for his final remarks before the Q&A session.
Thanks, Rejji. At CMS Energy, we deliver. 23 years of consistent industry-leading performance regardless of changing circumstances, year in and year out. You can count on CMS Energy to deliver for all its stakeholders. With that, Adam, please open the lines for Q&A.
Please follow the operator's instructions. Our first question comes from Julien Dumoulin-Smith from Jefferies.
Thank you for the great updates. My first inquiry pertains to the data center opportunities, where you seem to have made considerable progress. Could you provide clarity on the potential timing for the second center? While I understand you cannot divulge specifics, I want to get a sense of how that fits within your broader financial strategy and expectations.
Regarding your inquiry on data centers, our progress has indeed been notable. The full pipeline shows growth, and we've had two more data centers added in the past month. Evaluating the situation, I'm pleased with how these progress through the funnel, especially the one we announced in Q2 with an agreement in the works. The tariff has been essential in providing clarity on the terms and conditions. Approval of the extraordinary facilities agreement has set the groundwork, and we are close to finalizing a rate contract that would facilitate rapid movement through the approval process. Thus far, the timeline looks promising, and I'm confident in maintaining our focus on these developments and serving our customers adequately.
The next question comes from Nick Campanella from Barclays.
Thank you for providing that insight on the data center timeline. My next question is related to the regulatory challenges, specifically concerning ALJ PFD's assertion regarding authorized returns typically being below the national average. Can you discuss the current stakeholder feedback since the ALJ verdict came out, and what do you perceive as a possible resolution moving forward?
The ALJ’s PFD does not concern me. I have confidence in our established track record and the regulatory environment supporting our vision. Our class acts are making a compelling argument for support as we press for reasonable returns. While the ALJ's report mentioned an ROE significantly below our target, I’m confident the wider context will lead to a better outcome given the strong evidence we presented.
The next question comes from Shar Pourreza from Wells Fargo.
This is Marcelo Petrin on behalf of Shar. I wanted to address concerns regarding rising energy costs, particularly during this tight economic climate. How does CMS plan to navigate these issues over the next couple of years?
Thank you for your question. As a company, CMS has always prioritized affordability, and we will continue to advocate for our customers while addressing demand, especially as we head into a challenging economy. Our approach toward cost savings has historically granted us a strong reputation for delivering affordable energy solutions for our clients. We will remain committed to these principles as the landscape evolves.
I’ll add to Garrick's insights with respect to CMS’s strategic initiatives. We are actively refining our cost structures, whereas our capabilities with energy efficiency programs have allowed us to extend savings across our customers’ utility bills significantly. Our stance remains focused on enhancing customer affordability alongside navigating macroeconomic challenges.
With that, we are resolute in bridging for clarity and maintaining affordability. CMS is positioned to adapt with a perspective of optimizing our offerings for our stakeholders.
This concludes today's Q&A session. I will hand the call back to Mr. Garrick Rochow for any closing comments.
Thank you for joining us today. I'm excited about our future and the progress we are making in serving our customers and advancing our business strategy. I look forward to connecting with you on the conference circuit soon. Take care and stay safe.
This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.