The operator welcomes everyone to the CMS Energy 2024 Second Quarter Results conference call and introduces the presenters. The call is being recorded and a rebroadcast will be available. The presentation contains forward-looking statements and non-GAAP measures, and the presenter will focus on the company's proven investment thesis of 6-8% adjusted earnings growth and affordable bills for customers, with a strong regulatory environment in Michigan being a key factor.

The article discusses the strong regulatory framework in Michigan for energy companies, which supports investments in safer, more reliable, and cleaner energy systems while keeping customer bills affordable. The company has had a successful start to the year with constructive orders and settlements in their electric and gas rate cases, and they plan to file their upcoming renewable energy plan later in the year.

The company is committed to delivering affordable and clean energy for customers through necessary investments. They plan to balance these investments with cost-saving measures, such as renegotiating contracts and capitalizing on economic opportunities. The company has reported positive earnings and is confident in their financial outlook for the year.

In the first six months of 2024, the company reported adjusted net income of $485 million or $1.63 per share, which was higher than the same period in 2023. This was mainly due to rate relief and net investment-related expenses. However, weather conditions, including a warm winter and heavy storm activity, had a negative impact on the company's financial performance. Overall, the company maintained its full year guidance and expects to see growth in adjusted EPS in the range of 6% to 8%.

In the first six months of the year, there was a positive variance of $0.13 per share due to strong operational performance and higher electric sales. For the remaining half of the year, a positive variance of $0.20 per share is expected due to normal weather. The company also anticipates a positive variance of $0.12 per share from regulatory factors. Lower O&M expenses and cost reduction initiatives are expected to drive a positive variance of $0.09 per share. However, there is a significant negative variance of $0.35 to $0.41 per share due to the absence of one-time countermeasures from last year and conservative assumptions. Despite these challenges, the company is confident in meeting its 2024 financial objectives and discusses their financing plan.

The speaker discusses the specifics of their planned funding needs in 2024, including a modest increase in planned financing for the utility. They also mention completing planned tax credit sales and remaining opportunistic for cost-efficient financing opportunities. The company's approach to financing is conservative and has been successful in delivering operational and financial objectives. The speaker expresses confidence in the company's strong outlook and investment thesis, focused on making necessary investments while maintaining customer affordability. The call is then opened for questions.

In this paragraph, Garrick Rochow and Rejji Hayes discuss the current state of CMS and its outlook for the future. They mention that upward pressure in energy and capacity markets continues to be a good opportunity, and they have been able to secure contracts above their plan. They also mention that the weather outlook for Q3 looks good, but they remain cautious and focused on cost management. They have had success in managing costs in the past and will continue to do so in Q3. They also mention that it is too early to start thinking about pull aheads for 2025.

The company is not considering any derisking mechanisms until later in the year, and the CEO mentions their confidence in executing their plan and achieving cost savings. They are also conservative in discussing potential opportunities, such as servicing data centers, until they are finalized.

The speaker discusses the potential for growth in manufacturing and data centers in the state, despite ongoing legislative discussions. They also mention the upcoming renewable energy plan filing in November and how it will impact future capital plans and financials.

The company will file an integrated resource plan in 2026, which will address reliability and capacity issues. The impact of this plan and the financial compensation mechanism will be seen in the company's financials in 2026-2028. Economic growth in the state will also contribute to potential capital growth. The rate case filing on the electric side is expected to be less complex and may have an opportunity for settlement, but the team is prepared to go to full distance if needed. Electric cases are more complex than gas cases.

The speaker discusses the number of intervenors in their gas and electric cases, noting that there are more in the electric case due to its complexity. They also mention the importance of understanding the positions of staff and the Attorney General in the case, and express confidence in the case's focus on electric reliability. They mention important investments and work being done in the case, as well as their plans to leverage certain mechanisms. The speaker then briefly touches on rate design, mentioning that data centers are currently on an industrial rate but there is interest in creating a specific rate for them. In the meantime, the GDP rate is seen as a good proxy.

The speaker discusses the progress of data center legislation and clarifies that a previous statement about a 230-megawatt data center being contingent on the legislation was incorrect. He emphasizes that data centers are more concerned with the speed of transmission and supply rather than the progress of the legislation. The conversation on the legislation will continue in the fall, but it may be delayed due to ongoing elections.

The conversation about new load coming onto the system will continue in the state, but it will not stop progress. The timeline for new load to come on varies depending on location and other factors, but typically it takes two to three years. There is no indication of legislation coming up to change the current 10-month rate case timeline and energy efficiency incentives set by law in Michigan. There is a constructive dialogue with the commission and staff to potentially make changes in the future.

The speaker gives an example of a successful process for energy planning and suggests applying it to the distribution system to streamline the rate case process. They also mention the possibility of staying out for a period of time and exploring opportunities in Michigan's regulatory environment. The questioner asks about the decrease in C&I weather-adjusted volumes and the speaker responds, noting the difficulty in accurately predicting sales and mentioning a slight increase in residential sales.

The company saw a slight decrease in sales in the commercial and industrial sectors, but overall, their performance has exceeded their conservative expectations. They have also achieved a 2% reduction in energy waste across all customer classes. The company remains pleased with their results and believes that conditions in Michigan are still favorable. The company also noted that they have been affected by heavy storm activity in the quarter and were asked to rate their restoration efforts.

Garrick Rochow, in discussing reliability, gives his company a B for their efforts in improving reliability. He mentions investments made and future plans to further improve. He also talks about their focus on reducing the size of outages and the success they have seen in that area. He mentions the recent storms and how they were able to respond and restore customers within a 24-hour window. While there is still work to be done, he is pleased with the progress they have made.

In the paragraph, Garrick Rochow and Rejji Hayes discuss the operational and financial aspects of an electric rate case, highlighting the use of the CE Way to reduce unit costs and avoid significant expenses. They also mention their focus on efficiently restoring service after storms and mention the possibility of Rochow becoming a VP.

Rejji Hayes responds to Julian's question about the company's outperformance, clarifying that they plan to issue $675 million in debt at the utility and that rate relief and strong performance from NorthStar have contributed to their success in the first half of the year. They also plan to execute the financing efficiently and consider the maturity profile.

In the first half of 2023, the company had a soft comp due to a back-end loaded plan and outages at DIG. However, this year they have performed well, with DIG up $0.05 year-over-year and residual benefits from solar projects. This is a result of rate relief, outperformance at NorthStar, and cost performance, offset by mild weather and storms. The outperformance at NorthStar was partly expected, but DIG's performance was a pleasant surprise due to operational efficiency and lower unit costs.

The speaker is discussing the progress of a performance-based ratemaking policy in Michigan. They mention that there has been constructive dialogue and the policy will likely be implemented over the course of several rate cases, possibly in 2025 or 2026. The policy will include both potential earnings uplift and penalties for certain metrics, with a downside opportunity of around $10 million.

The speaker discusses the potential for increased electric demand and renewable energy in the future, citing economic development and the construction of substations and transmission lines. They also mention the progress being made on the Palisades plant and the existing PPA for the offtake from that facility.

The speaker, Rejji Hayes, responds to a question about financing and potentially pulling things forward from 2025. He clarifies that they will not be issuing equity in 2024, but they are considering various debt financing options such as senior notes and hybrids. They have $250 million coming due next year and will take advantage of favorable market conditions if they arise.

The speaker states that the equity need will remain at $350 million next year and there are no plans to change it. They thank everyone for joining the call and look forward to meeting them in person soon. The call is now concluded.

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