管理層發言
Good morning, everyone, and welcome to the CMS Energy 2025 Third 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. Just a reminder that there will be a rebroadcast of this conference call today beginning at 12:00 p.m. Eastern Time running through to November 6. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section. At this time, I'd like to turn the call over to Mr. Jason Shore, Treasurer and Vice President of Investor Relations.
Thank you, Alex. 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 thank you, everyone, for joining us today. A strong quarter at CMS Energy from an operational, regulatory, and financial perspective. I am very pleased with the results and continue to see us well positioned for the full year and in the long term. Our consistent industry-leading performance is rooted in our investment thesis that delivers for customers, coworkers, and investors. Speaking of strong performance and consistency, throughout the quarter, we delivered key regulatory outcomes, which highlight the positive and constructive regulatory environment in Michigan. We received a final order in our renewable energy plan that approved an additional 8 gigawatts of solar and 2.8 gigawatts of wind through 2035, ensuring we will meet Michigan's clean energy law. A portion of these investments will be woven into our next 5-year plan. This order also provides further certainty and confidence for our long-term customer investments.
As a reminder, this renewable energy plan is a key input into our Integrated Resource Plan that we will file mid-2026. We also received a constructive order in our gas rate case, approving approximately 75% of the final ask and 95% of infrastructure investments for work like domain and vintage service replacements, which are critical to ensuring a safe, affordable, and cleaner natural gas system. Chair Scripps comments from that meeting continue to support thoughtful and deliberate adjustments in ROE and suggested we have reached the floor for ROEs and in his words, driven out any excess. Recently, on the electric side, staff filed their position in our pending rate case, supporting approximately 75% of our revised and approximately 90% of our capital ask. This case includes investments supporting reliability and resiliency, which benefits our customers and are well-aligned with our Reliability Roadmap and MPSC direction.
Again, one of many proof points in our supportive regulatory environment and a strong starting position for a constructive outcome. As shared in previous quarterly calls, we continue to see strong economic growth in Michigan. As I highlighted in the Q2 call, we have an agreement with a data center and continue to see growth with manufacturing as well as a robust pipeline. Year-to-date, we have connected approximately 450 megawatts of the planned 900 megawatts of industrial growth in our 5-year plan. I'm also pleased to share that we've been successful in adding another approximately 100 megawatts of signed contracts year-to-date. This growth is coming from new projects, expansion from existing customers in the areas of food processing, aerospace and defense, and advanced manufacturing. These projects bring jobs and supply chains, home starts, and commercial opportunities to the state and create further visibility to our 2% to 3% forecasted annual sales growth over the next 5 years.
On the slide, we're showing our economic growth pipeline. You'll note we continue to move projects into and along the pipeline, bolstering our confidence in additional growth from data centers and other diverse industries. As I mentioned on our Q2 call, we have an agreement with a data center with up to 1 gigawatt of load planning to come to our service territory beginning in early 2030 and ramping up from there. You'll see that project in the final stage of our process at near final terms and conditions. I expect further progress, specifically contract signature as the large load tariff is finalized in November when we expect an order from the MPSC. You'll also see other large data centers in the final and advanced stages of development, which speaks to the robust nature of our pipeline. I continue to be confident and excited about the growth coming to our service territory. The data center and manufacturing pipeline is robust and advancing, and we are well equipped to serve and meet their needs as they advance.
On the left side of the next slide, you see our current 5-year $20 billion customer investment plan. On the right side, you see the robust and diverse additional investment opportunities we have going forward. Over $25 billion of additional customer investments supported by our Electric Reliability Roadmap, renewable energy plan, and Integrated Resource Plan. As a result of more load growth, we're focused on resource adequacy and the clean energy law, which means more renewables, battery storage, and natural gas generation to meet growing demand. Our recently approved renewable energy plan provides visibility and certainty on our plan for future investments. Our Integrated Resource Plan that we will file in mid-2026 will also detail additional capacity needed to replace retired plants and support existing and future growth we are realizing. As we see that full plan come together, we anticipate needing more battery storage and gas capacity.
As a side note, you can expect further growth from capital-light mechanisms like our financial compensation mechanism on PPAs and our energy waste reduction program. On our distribution system, we see a significant need for investment in pole replacement, undergrounding, and system hardening as we work to significantly improve customer reliability and resiliency. And again, well aligned with our Reliability Roadmap and MPSC direction. A robust and growing capital plan will continue to provide investment opportunities to serve customers and deliver value for investors. Now this long runway of customer investments must be balanced with affordability. We have demonstrated our excellence in reducing cost, and we do this better than most through the CE Way, digital and automation, episodic cost-saving opportunities, low growth, and energy waste reduction. This is a significant advantage for us to maintain affordability as we make needed investments in our system.
Today, our customers' utility bill remains roughly 3% of their total expenses or what is often referred to as share of wallet. This is down 150 basis points from a decade ago while investing significantly in our system to the tune of $20 billion. Our residential bills are solidly below the national average and continue to be over the 5-year plan period as we continue to make thoughtful customer investments across the system. Affordability is an area where we will continue to focus and deliver cost savings for customers, keeping customer rates at or below inflation and bills below the national average. I am proud of the work we have done to develop excellence in this area. We have built strong cost management muscle across the company, and it continues to benefit customers today and well into the future. As I shared in my opening, a strong quarter. For the first 9 months, we reported adjusted earnings per share of $2.66, up $0.19 versus the same period in 2024, largely driven by the constructive outcomes in our electric and gas rate cases and a return to more normal weather.
Given our confidence in the year, we're raising the bottom end of this year's guidance range to $3.56 to $3.60 per share from $3.54 to $3.60 per share with continued confidence toward the high end. We are initiating our full year guidance for 2026 at $3.80 to $3.87 per share, reflecting 6% to 8% growth from the midpoint of this year's revised range, and we are well positioned to be toward the high end of that range. It is important to remember, we always rebase guidance off our actuals on the Q4 call, compounding our growth. Like we've done in previous years, we'll provide a refresh of our 5-year capital and financial plans on the Q4 call. With that, I'll hand the call over to Rejji.
Thank you, Garrick, and good morning, everyone. On Slide 9, you'll see our standard waterfall chart, which illustrates the key drivers impacting our financial performance for the first 9 months of 2025 and our year-to-go expectations. For clarification purposes, all of the variance analyses herein are in comparison to 2024, both on a year-to-date and a year-to-go basis. In summary, for the third quarter, we delivered adjusted net income of $797 million or $2.66 per share, which compares favorably to the first 9 months of 2024, largely due to higher rate relief net of investment costs and favorable weather-related sales. With respect to the latter, we experienced a warm summer in Michigan, which in part drove the $0.37 per share of positive variance on a year-to-date basis. Rate relief net of investment costs resulted in $0.28 per share of positive variance due to constructive outcomes achieved in our electric rate order received in March and the residual benefits of last year's gas rate case settlement.
From a cost perspective, you'll notice in the third bar on the left-hand side of the chart, $0.04 per share of negative variance versus the comparable period in 2024. Our year-to-date cost performance was largely driven by increased vegetation management expense due to higher spending levels approved in our March electric rate order and in accordance with our Electric Reliability Roadmap. Before we leave the cost bucket, I'd be remiss if I didn't mention that given our strong financial performance to date, we put several operational pull aheads in motion across the business over the course of the quarter. These discretionary measures provided additional funding for gas system projects, electric reliability, and programs catered to our most vulnerable customers. A portion of these costs were incurred during the quarter, while the balance will flow through our forecasted year-to-go operating expenses, delivering incremental value for customers while derisking our financial plan and the product year to the benefit of investors.
Rounding out the first 9 months of the year, you'll note the $0.42 per share of negative variance highlighted in the catch-all bucket in the middle of the chart. The primary drivers of the negative variance were related to the planned outage of our Dearborn Industrial Generation facility earlier in the year and the timing of select renewable projects at NorthStar, which I'll note remain on track, coupled with higher parent financing costs. Looking ahead, as always, we plan for normal weather, which equates to $0.15 per share of positive variance for the remaining 3 months of the year, given the roll-off of mild temperatures experienced in the last 3 months of 2024. From a regulatory perspective, we'll realize $0.03 per share of positive variance, driven in large part by the constructive outcome achieved in our gas rate order in September, which will go into effect on November 1. On the cost side, we anticipate $0.06 per share of negative variance for the remaining 3 months of 2025 due to our ongoing vegetation management efforts as well as the aforementioned supplemental spending on operational and customer initiatives at the utility.
Closing out the glide path for the remainder of the year in the penultimate bar on the right-hand side, you'll note an estimated range of $0.05 to $0.09 per share of negative variance, which largely consists of the absence of select one-time countermeasures from last year, partially offset by nonutility performance fueled by achievement of key economic milestones on select renewable projects, among other items. As Garrick highlighted, we are well positioned to deliver on our financial objectives for the year and are establishing a solid foundation for 2026 through prudent contingency deployment as we head into the final 2 months of the year. Moving on to the balance sheet on Slide 10, I'll note our recently reaffirmed credit ratings at the utility from S&P in September, and we anticipate a reaffirmation of the parent's credit ratings in the coming weeks. From a financial planning perspective, we continue to target mid-teens FFO to debt on a consolidated basis to preserve our solid investment-grade credit ratings as per long-standing guidance from the rating agencies.
As always, we remain focused on maintaining a strong financial position, which, coupled with a supportive rate construct and predictable cash flow generation, minimizes our funding costs to the benefit of our customers and investors. Slide 11 offers an update to our funding needs in 2025 at the utility and at the parent. I am pleased to report that we have completed virtually all of our planned financings for 2025, the latest tranche of which was our settlement of approximately $500 million of forward equity contracts at share price levels favorable to our plan. Given the attractive market conditions, we'll continue to evaluate potential pull-ahead opportunities for some of our 2026 financing needs at the parent. As I've said before, our approach to our financing plan is similar to how we run the business. We plan conservatively and capitalize on opportunities as they arise. This approach has been tried and true year in and year out and has enabled us to deliver on our operational and financial objectives, irrespective of the circumstances to the benefit of our customers and investors, and this year is no different. 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 a strong first 9 months of the year and are well positioned for the full year. Our strong pipeline of new and expanding load bolsters our confidence in our growth and provides us with the opportunity to invest in infrastructure across both our gas and electric businesses to serve customers with safe, affordable, reliable, and clean energy. It is an exciting time in this industry, and CMS Energy is well positioned. With that, Alex, please open the lines for Q&A.
分析師問答
Our first question today comes from Julien Dumoulin-Smith of Jefferies.
Nicely done, continued progress here. If I can, team, can you elaborate a little bit on just what the timing is on the large load tariff? Just again, I suspect that this is more mundane in process than anything else. But just elaborate there. And then more importantly, can you speak to the opportunity that exists behind this, right? Clearly, this is something of a gating item just to deal with process. What are those conversations looking like to the extent to which that something were to manifest itself here in the next couple of months?
Julien, it's great to hear from you. There are 3 large data centers in the final stages. That's up to 2 gigawatts of opportunity there. We've talked in Q2 about one of those. You can see that at the bottom of that pipeline or at the bottom of that funnel, and we're really at final terms and conditions. It's important to get this gating item done, the tariff, the large load tariff. We expect that on November 7. That will be important. That looks through the terms, other terms and conditions, the length of the contract, minimum demands, and those types of things. I would expect that, that one at the bottom of the funnel, the one we talked about in Q2, will move through that funnel and pipeline in short order after that tariff is in place. The other 2 large ones, I would also expect to move forward within that pipeline. Just to give you some clarity on those projects, they have land, they have zoning. We've worked through the red lines and some of the basic terms and conditions, continuing to see good progress there. It's also important, this gating item on the tariffs. I expect them to move forward further in the pipeline. Hopefully, that helps, Julien. It's an exciting pipeline. It's an exciting time in this industry.
Absolutely. So it sounds like you could potentially see developments on all 3 here shortly after that were resolved on November 7 or again focus first on the initial contract shortly thereafter and then in coming months on the others?
We like the direction of all 3. Certainly, there’s one further in the funnel like we shared at the Q2 call. Again, plenty of opportunities for data centers here. I'd also point to the funnel that has semiconductors; it has manufacturing, and we continue to land those as well. Those bring with it, as we've talked in the past, a number of benefits. A really robust pipeline of opportunity here in Michigan and across our service territory.
Excellent. And maybe a little bit more of a strategic question if I can clarify this. I mean, obviously, having this level of confidence potentially gives you more latitude within the plan in the 5 years. When and how do you think about being able to leverage that and reflect it in the plan? What I'm getting at is potentially maybe there's some upside even within the 6% to 8% or above the 6% to 8%? Or would you be thinking more about, again, doing something that would be more offensive in as much as you guys transacted on EnerBank earlier to improve the overall quality of your earnings? Could you do something similar to that again?
We've got a 5-year plan right now, $20 billion, with $25 billion plus knocking at the door, just wanting to get into that plan. You can imagine that $25 billion growing. That's a great opportunity as we land these data centers, incremental to the plan from a capital perspective, and from a sales perspective as well. We're delivering. CMS Energy delivers. We've seen industry-leading financial performance, where others have been at 4% to 6% and 5% to 7%. I'm glad they're finally catching up with us. We've been at 6% to 8%. We've been at the high end of that, and we're compounding off that. Compounding off actuals is pretty unique in this industry, and we do that. That’s a higher quality of earnings that our investors see. We really play the long game here. We have confidence in our guidance. We're competitive, and we look at our capital plan, affordability, and the ability to achieve that capital plan. You'll hear more about that capital plan and further data center advancements in our Q4 call.
Our next question comes from Jeremy Tonet of JPMorgan.
I was just wondering if I could pick up with that $25 billion of CapEx knocking on the door. Just wondering how quickly could the door be opened here? Over what type of timeline do you think that could be folded in given all these opportunities?
First of all, it's $25 plus billion knocking at the door. So it’s even better than the $20 billion. You're going to see more in electric reliability. We're already foreshadowing that in our current electric rate case. That's important to improve service for all our customers. We've shared that. It's lined up with the Liberty audit report and MPSC direction. You'll see more in that plan in the electric distribution space. We have the approved renewable energy plan of additional 8 gigawatts of solar and 2.8 gigawatts of wind that has been approved through 2035. You can imagine we're going to want to take advantage of tax credits and the safe harboring. That 5-year plan is going to be healthy with those types of investments. You've got to start stacking that plan to build the capacity that you need. I would anticipate battery storage and natural gas capacity will start to filter into that 5-year plan. So really across all 3. Hopefully, that's helpful, Jeremy.
Got it. And just want to pick up, I guess, with the gas plant, as you mentioned there, the potential for that. Would that be simple or combined? Or any other thoughts there, especially with regards to turbine slots?
When we look at what we need in this next Integrated Resource Plan, it's both battery capacity and natural gas capacity for retiring facilities and existing load growth. The more we add in terms of data centers, that will continue to grow. We're evaluating what that mix looks like from a simple cycle and combined cycle perspective. But you can expect that we’re well planned, well prepared, moving along in that direction.
Our next question comes from Shar Pourreza of Wells Fargo.
Just a follow-up on the prior two questions. I guess the $25 billion you have there, does any of that $25 billion plus of upside, does any of that kind of overlap before the '29 time frame?
Yes. The short answer to that is yes. You'll see in our next 5-year plan some of that $25 billion move into the next 5 years.
This is Rejji. If I could add to Garrick's comments, I'd be surprised in this next vintage of the 5-year plan that we'll roll out in our fourth quarter call early next year if we're not dipping into each of those 3 components of that $25 billion for our continuous reliability and resiliency-related work, embedding our electric distribution. We will continue to chip away at the renewable energy targets embedded in the clean energy law. We have an upcoming milestone of 50% renewables by 2030. We will definitely be dipping into that 8 gigawatts of solar and 2.8 gigawatts of wind in the plan.
Got it. And then just, Rejji, maybe just help me bridge, I guess, because you're getting a lot of questions around the CAGR this morning and it's just the way the math works given the base plan already grows at the higher end. I guess, what is the offsetting factor on this CapEx being put into the plan potentially before '29 and it doesn't move the trajectory or accretive to this trajectory?
Great question. Let me just start with how we build the plan. We talk about the governors of our capital and financial plan. We have to ensure that our rates grow commensurate with inflation. There's hard work that goes into that. We'll lean heavily into the CE Way. There's continued opportunity for us to reduce costs. We must fund the plan as cost efficiently as possible. We'll be focused on workforce planning and productivity to execute the capital plan thoughtfully. That just speaks to the confidence of our ability to weave in more capital investment into our plan. When we say 6% to 8% towards the high end, we do take achieving that quite seriously, and it's where we add a little conservatism. We also have to bake in some margin or contingency due to uncertainty around weather, which seems to intensify year-over-year, and those must be acknowledged when thinking about offsets for higher growth.
Our next question comes from Andrew Weisel of Scotiabank.
First, I just want to clarify something. The IRP-related spending opportunity of $5 billion, am I right that that won't be included in the February update for CapEx, right? I think that's what you said in the past given the timing of the regulatory approval. But the way you're talking about it this morning, I'm a little unsure. Is that still how you're thinking about it?
There has to be, just like what it takes to put a turbine in the ground and the longer-term items like that in terms of EPC contracts as well as MISO queue, you have to start investing right now to deliver over that 5 years. A portion of that will filter into this 5-year plan on the IRP, particularly in the tail end of it.
Okay. Great to hear, and that's helpful. Regarding economic growth, you currently have 450 megawatts out of the planned 900 megawatts, which seems conservative. I'll leave that as a comment. My question is, what is your current excess capacity to meet that load? With a couple of gigawatts potentially coming soon, how much slack do you have in the system compared to what you would need to match megawatt for megawatt?
That's connected load. So that's not to be delivered or on the way. We have the capacity to serve that today, and there's a bit of excess capacity. I'll just remind everyone that we continue to build out as a result of the clean energy law, additionally, more capacity. We're upwards of 1 gigawatt of renewables we're building this year. It will be a similar pattern next year, with a number of battery storage projects already underway, both self-build and with power purchase agreements. So that capacity profile is expanding as we speak.
Okay. Very good. Then lastly, if I can, a question on Campbell. I know you haven't made any final decisions, but there have been some conversations about the plant potentially continuing to run maybe as long as the duration of President Trump's administration. So can you just kind of explain what kind of shape is the plant in? What kind of maintenance might be required if it were to run through 2028? And how does the accounting work for the economics? I believe you're booking all the costs on the balance sheet, but maybe just kind of walk us through from a MISO perspective, from a tariff perspective, how does all that work in terms of cash and earnings impact for investors and for customers?
Great question, Andrew. I'll start and then hand it over to Rejji. The team out there has been amazing. You’re thinking about retirement in the plant in your next role, some going to retirement. We just had a very flexible workforce that is committed to the success of that plant and following through with this order through the Department of Energy. We continue to see orders from the Department of Energy through the Federal Power Act. We expect those to continue for the long term, and we're prepared to operate the plant and comply with those orders. I want to remind everybody that we proposed those costs be shared because the benefits go to MISO and not just to our customers. Those costs are spread across 9 MISO states, and the order has laid out a clear path to cost recovery. We have confidence in our ability to recover. We'll continue to invest in the plant thoughtfully, and those costs would be incurred and recovered through that process. Rejji, do you want to add more?
Thank you, Garrick. We're currently treating all the costs associated with operating the Campbell units as a regulatory asset. Operating and maintenance expense has minimum capital investment. If we incur capital investments, that would flow through regulatory asset line item, which we've established. Regarding the recovery, once we have started receiving recovery of the investments and spend from MISO North and Central customers based on the construct we outlined and that was approved, we would refund Michigan customers for their share that they've already contributed.
Our next question comes from Travis Miller of Morningstar.
Now that you have that REP, could you explain your thoughts on the timing and balance between self-building and PPAs? Please walk me through how the $10 billion figure translates into your construction plans and the PPA mix.
We're very pleased with the outcome from that renewable energy plan. Additional 8 gigawatts of solar and 2.8 gigawatts of wind. Given the safe harbor provisions, we want that in the first 5 years. We've got those assets and projects laid out. We have safe harbor out to 2029. That will be the plan. It will be competitively bid, and we've been doing that for a long time. Most times, we win the competitive bid because of our familiarity with Michigan. There will be a good portion of self-build in that mix, but I'm not opposed to a PPA either because that is a capital-light way of earning. We'll take the offtake of that, and it will be a mix. So when I say we're building about a gigawatt now, and we’ll have a gigawatt next year, we'll be building. It will be a mix of self-build and developers.
All I would add to the underlying assumptions that support the $10 billion is we're assuming 50-50 owned versus PPA for analytical purposes. That $10 billion assumes 50% of the solar opportunity, so think about that 8 gigawatts. We're assuming half of that we would own. For wind, the 2.8 gigawatts, the assumption is closer to 100%, but I don't want to split hairs here. If we end up owning more of that solar opportunity, there could be upward pressure in that $10 billion estimate. If we end up PPA more through a competitive bid structure, then there could be downward pressure on that.
Okay, perfect. You answered my follow-up question. So I appreciate that. I'll throw one more other follow-up question, a different subject, but the manufacturing growth, the new customers you're seeing there and the new pipeline customers, can you characterize that, not just industry, but are these expansion of existing? Are these brand-new customers coming from somewhere else? Are they onshoring, reshoring, however you want to say that?
It's all of the above. There are over 4,000 businesses in the aerospace and defense industry in Michigan, an example of where we're seeing new customers and existing customers grow in Michigan. We're seeing advanced manufacturing and food processing. One unique fact about Michigan is the second most diverse state for agriculture, and there’s been a trend with food processing to move closer to the fields and farms. We're seeing everything from dairy products to baked goods continuing to grow in the state, creating jobs, supply chains, home starts, and opportunities.
Our next question comes from Michael Sullivan of Wolfe Research.
Circling back on the data center or large load customer pipeline. Can we just get more of a feel for the timeline of the ramp for some of these? I think you had said on the last call, the 1 gigawatt was like a '29, '30 type timeframe, but maybe the rest of that final stage bucket, what sort of ramp timeline are we looking at?
You're correct in what we shared on the Q2 one, the one at the bottom of the funnel, which is late 2029, early 2030 for the first electrons and ramp up thereafter. The other 2 that are referenced are earlier in the process in the 5-year window, and we're able to deliver on those from a supply perspective and infrastructure perspective as well.
Michael, just a follow-up question about how to think about how much incremental equity comes with each dollar of incremental CapEx as you get ready to refresh all that? Is there anything in the low tariff that's pending here that maybe helps with some of that in terms of cash recovery?
The historical sensitivity between CapEx and common equity is still a good working assumption. For every dollar of CapEx that's incremental to our plan, assume about $0.40 of common equity would need to be issued. We always try to put downward pressure on that. After the Inflation Reduction Act, we've been monetizing tax credits, which has been a helpful vehicle for financing. We have strong cash flow generation. I tend not to need quite as much equity for CapEx. These other mechanisms, we'll likely be looking at for every dollar of CapEx, a rough assumption of needing about $0.40 of equity and hybrids offering opportunities. There could be downward pressure on equity needs, especially with select data centers, but for now, just assume $0.40 for every dollar of CapEx.
We currently have no further questions. So I'll turn the call back over to Mr. Garrick Rochow for any further remarks.
Thanks, Alex. I'd like to thank you for joining us today. I look forward to seeing you at EEI. Take care. Stay safe.
This concludes today's conference. We thank everyone for your participation. You may now disconnect.