CMS Energy held a conference call and news release to discuss their 2023 Second Quarter Results. Sri Maddipati and Rejji Hayes were present, along with Garrick Rochow, President and Chief Executive Officer. The call was recorded and will be available for rebroadcast. The presentation includes forward-looking statements and non-GAAP measures. Garrick Rochow thanked everyone for joining and emphasized that CMS Energy delivers on their promises.

CMS Energy is continuing to make industry-leading progress on the transformation to clean energy, operating in a top-tier regulatory environment in Michigan, and making strong progress in cost management and the CE Way. These efforts are part of their investment thesis which has worked for more than 20 years to deliver operational and financial results across the triple bottom line. They have set ambitious net-zero targets for both their gas and electric systems and have already taken steps to reduce their carbon profile, such as retiring their Karn units one and two.

The author recognizes the service of individuals at Karn who dedicated their careers to providing energy for customers. They have also assumed ownership of the Covert generating plant and have been included in the MSCI ESG Leaders Index. They have also signed more contracts in their Voluntary Green Pricing program and received grants for RNG facilities. They are leading the clean energy transformation and have received a constructive regulatory environment in Michigan.

The Michigan regulatory environment is one of the best in the country and has been further strengthened by the re-appointment of Chair Scripps and the appointment of Commissioner Carreon. The gas rate case has been settled and electric rate case is awaiting staff's position by the end of August and a final order by March of next year. The company reported $0.75 adjusted earnings per share for the second quarter, driven by operational and financial performance. The company is also requesting approval for a small undergrounding pilot and plans to underground over 400 miles annually.

The company is reaffirming their financial objectives for the year, including full-year guidance of $3.6 to $3.12 per share and a long-term adjusted earnings per share growth of 6% to 8%. The team has done a remarkable job of mitigating the gap left from a warm winter and a large ice storm. Year-to-date, the company is on track with adjusted EPS of $1.45 per share, but weather has been a significant headwind to their financial performance in the first half of the year, driving a $0.37 per share of negative variance.

In the first half of the year, rate relief and cost-reduction initiatives have resulted in a $0.18 per share positive variance versus the first half of 2022. The majority of the variance was due to financing efficiencies, such as pre-funding future parent company financing needs at favorable deposit rates due to the inverted yield curve. O&M expenses were also higher due to storm restoration costs in the first quarter, but operational O&M expenses trended favorably in the second quarter.

This paragraph discusses the company's plans for the remainder of the year. They have used the proceeds from a convert offering to de-leverage their balance sheet and are expecting rate relief and cost-reduction initiatives to offset the negative weather variance of $0.06 per share. They anticipate lower overall O&M expenses and modest growth at NorthStar, which will result in a positive variance of $0.17 to $0.23 per share compared to the same period in 2022. The company will continue to plan conservatively and execute as usual.

Rejji highlights the company's reaffirmed credit ratings from Moody's and their target of mid-teens FFO-to-debt. He then goes on to discuss the financing plan for 2023, which includes debt issuances at the utility and the delayed settlement of the equity forwards. He emphasizes the company's conservative approach to financing, which has enabled them to deliver on operational and financial objectives. Garrick then concludes the presentation with remarks about the company's consistent track record of delivering results.

Garrick Rochow explains that the company has a lot of experience with undergrounding, especially in Michigan subdivisions, and that they are starting a pilot program with the Public Service Commission to demonstrate their capabilities. The cost of undergrounding in Michigan is almost at parity with above-ground construction, making it affordable for customers. The pilot program will involve 10 miles of six counties, with 400 miles being added annually. The Public Service Commission will be on-site to observe the process.

Garrick Rochow provides an update on the electric system's hardening and resiliency efforts in Michigan in response to recent storms. He explains that the company is making considerable investments in the system and that it has performed well, with only 20,000 customers out after a storm with 65 mph winds. He also mentions that the company is filing a five-year infrastructure plan in September and that an audit is underway to ensure the right investments are made to improve reliability and resiliency.

Garrick Rochow congratulated the DTE team on their successful IRP settlement and discussed how the Inflation Reduction Act and Infrastructure and Jobs Act will shape the industry. He anticipates the next IRP process will start in 2024 and be filed in 2025/2026. He then went on to discuss the MPSC investigation into natural gas meters and service delays, stating they take every inquiry seriously and plan to address and improve the issues.

The company was in the process of upgrading their meters to 4G and 5G technology, however they ran into supply chain issues due to the pandemic. This caused around 190,000 meters to stop communicating, which created the potential for estimated reads. The company has been working to close the gap, and they expect to resolve the issue by August. They are also factoring in the potential penalties from the Public Service Commission and do not see a capital opportunity here.

Rejji Hayes answered a question from Michael Sullivan about the delay in the draw on the forward equity. He stated that it will likely be settled in the back half of the year, and that the convert transaction was credit-neutral, maybe modestly accretive. He also noted that the delay of the equity settle will still be credit-neutral, and that the company will remain in the mid-teens area and in alignment with the expectations of the credit rating agencies to maintain their investment-grade ratings.

Garrick Rochow thanked everyone for joining the conference call and asked them to stay safe. The operator then concluded the call, thanking everyone for participating and asking them to disconnect their lines.

This summary was generated with AI and may contain some inaccuracies.