The paragraph is from a CMS Energy conference call discussing the company's 2024 year-end financial results. The call includes key figures like Jason Shore, Treasurer and VP of Investor Relations, and Garrick Rochow, President and CEO, who highlights CMS Energy's consistent financial performance over the past 22 years. The presentation, available on the company's website, contains forward-looking statements subject to risks and provides non-GAAP measures with reconciliations to GAAP. The call is recorded and will be rebroadcast later in the day.

CMS Energy is committed to service excellence and has made significant progress in 2024. They improved customer reliability, restoring power to over 93% of customers within 24 hours and reducing outage minutes. CMS Energy filed a 20-year renewable energy plan with the commission, outlining a shift towards a diversified energy mix, including nine gigawatts of solar and four gigawatts of wind. The plan aligns with Michigan's 2023 energy law, emphasizing clean and affordable energy. Additionally, their gas business continues to grow, focusing on safe and reliable infrastructure, crucial during extreme cold events in January.

The paragraph outlines CMS Energy's strategic investment and growth plans. The company has increased its five-year investment plan to $20 billion, focusing on improving customer service through enhancing reliability and expanding its renewable energy pipeline. This plan aims for an 8.5% growth in the rate base by 2029. Additionally, CMS Energy highlights growth opportunities beyond the traditional rate base, such as earning through PPAs, energy efficiency incentives, and revenue from its non-utility business NorthStar Clean Energy. The paragraph emphasizes the company's long-term investment runway and confidence in ongoing financial and growth performance.

The paragraph outlines significant investments in the electric distribution system aimed at improving reliability and increasing renewable energy use, with over $20 billion in opportunities not included in the current five-year plan. The goal is to achieve 60% renewables by 2035, with plans to enhance energy storage and manage renewable intermittency. Although these investments are substantial, the company is focused on keeping customer rates affordable by reducing costs, optimizing operations, and leveraging digital technologies. The paragraph also highlights economic growth in Michigan, with annual load growth of 2% to 3% expected, driven by developments such as data centers and manufacturing facilities.

The paragraph discusses the growth in manufacturing in Michigan, which has led to increased jobs, supply chains, and residential growth, allowing for customer investments by spreading fixed costs over a larger base. The company is committed to growing Michigan and highlights its nine-gigawatt pipeline of opportunities along with a supportive regulatory environment that aids investment recovery. It reports successful outcomes in recent electric and gas rate cases and anticipates positive results for upcoming cases. The renewable energy plan outcome is expected in late 2025 to meet rising demand. Financially, the company delivered adjusted earnings per share of $3.34, raised its 2025 guidance to $3.54 to $3.60, representing 6% to 8% growth, and aims for the high end of its guidance range.

The company maintained its tradition of providing high-quality earnings and guided towards the upper end of its EPS growth range of 6% to 8%, with a steady dividend payout target around 60%. In 2024, it achieved strong financial results with adjusted net income of $998 million or $3.34 per share, driven by favorable regulatory outcomes, performance improvements at NorthStar, cost efficiencies, and non-operational measures that countered challenges, including weather-related impacts from a warm winter. Despite these challenges, the company met all key financial objectives and invested $3.3 billion to enhance the safety, reliability, and cleanliness of its electric and gas systems for its three million customers.

The paragraph discusses the company's funding strategy, which includes operating cash flow, well-priced bonds, and tax credit transfers, allowing it to maintain solid credit ratings. For 2025, the company has adjusted its earnings per share (EPS) guidance to reflect a $0.02 increase based on 2024 results, projecting 6% to 8% growth. The EPS growth is primarily driven by the utility segment, with expected earnings of $4.01 to $4.05, and contributions from NorthStar's clean energy business. Financing plans involve $1.3 billion in new long-term debt and up to $500 million in equity. The guidance assumes no liability management transactions and outlines the growth trajectory with a watermarked analysis relative to 2024.

The paragraph discusses financial projections and factors influencing these projections for the company. It mentions an expected positive variance of $0.39 per share due to normal weather conditions, $0.21 from rate relief following past successful settlements, and earnings from renewable investments. There are also anticipated productivity gains for 2025, offset by closure costs of coal units and increased costs for vegetation management and electric reliability. A significant negative variance of $0.37 to $0.43 per share is expected due to reversals of previous measures and capital costs for financing. The company aims to mitigate risks and achieve financial objectives for the benefit of customers and investors. Slide fourteen provides a summary of the financial goals.

The paragraph outlines the company's strategic financial plans over a five-year period, emphasizing a target payout ratio of 60% to retain earnings for growth due to high capital costs and numerous investment opportunities. It aims to maintain solid investment-grade credit ratings and plans to resume its $500 million ATM acquisitions program in 2025, with equity issuance expected to decline as its tax credit transfer program expands. The company anticipates 1% load growth in 2025 from major projects, with run-rate growth increasing to 2-3% in subsequent years. It remains optimistic about opportunities in the bilateral market for its NorthStar DIG facility and plans to manage funding needs at both the utility and parent levels in 2025.

The paragraph discusses the company's financing plans for the year, specifically mentioning planned debt issuances at a utility expected to be over $1.1 billion, and no current plans for issuing junior subordinated notes, though they remain open to opportunities in the market. It highlights a refreshed sensitivity analysis to minimize large variances from their plan, emphasizing their track record in risk mitigation. The company aims to provide safe, reliable, and affordable energy while supporting employees and investors with consistent financial performance. Garrick Rochow then expresses confidence in their financial performance and strong outlook, before transitioning to a Q&A session.

The paragraph outlines a Q&A session during a call, where Julien Dumoulin-Smith from Jefferies begins by asking about the company's ability to execute renewable energy projects, particularly in the context of permitting challenges. Garrick Rochow responds by highlighting the successful completion of a wind project and the progress of two major solar projects in Michigan. He mentions a Muskegon solar project with a capacity of 250 megawatts and another 360-megawatt project in Southwest Michigan, emphasizing the ongoing efforts and strong project pipeline in the renewable sector.

The paragraph features a discussion on the approach to permitting and executing wind energy projects, emphasizing engagement with local communities and landowners as key to their success. The focus is on projects on private lands rather than federal lands or offshore. The speaker is optimistic about future opportunities, particularly through repowering existing parks and pursuing new projects. They highlight the adaptability of their renewable energy plan, noting that adjustments can be made as needed to ensure continued success. Julien Dumoulin-Smith seeks clarification on how recent state legislation affects growth prospects in the range of 2% to 3%, asking for specifics about the contributing factors.

In the paragraph, Garrick Rochow discusses the anticipated 2% to 3% sales growth tied to renewable energy projects within a five-year plan, emphasizing it's based on firm commitments rather than hypothetical scenarios. Rochow mentions that this growth is supported by infrastructure projects like substations, with load growth starting in 2025 and extending to 2029. He notes that about 65% of the current project pipeline is focused on data centers, a shift influenced by recent legislation on sales and use tax, signed by the governor. Interest from companies like Microsoft and other large tech firms, along with a semiconductor project in Genesee County, is cited as contributing factors. Rejji Hayes adds that the growth forecast stems from multiple diversified projects, including several larger ones, with data centers being a significant component.

The paragraph discusses the attractiveness of Michigan for non-data center activities, highlighting competitive rates, a good fiber network, access to fresh water, and energy-ready sites as key advantages. It mentions that Michigan is well-prepared to welcome new opportunities, with projects in their five-year plan already signed or close to being finalized, minimizing uncertainty. The conversation touches on permitting issues, noting that all current projects are on private lands, avoiding federal regulations concerning wetlands. Rejji Hayes expresses confidence in their understanding and handling of permitting-related challenges. The conversation ends with a transition to a new question regarding the regulatory environment in Michigan.

In the paragraph, Garrick Rochow discusses concerns in the marketplace related to the Michigan regulatory environment, using the analogy of making sausage to describe the complicated process. Despite the challenges, Rochow emphasizes that they consistently achieve constructive outcomes, particularly in electric rate cases and gas settlements. He reassures investors that their approach, which involves meticulous attention to detail, results in predictable and reliable outcomes. Jeremy Tonet understands the analogy and then shifts the discussion to the impact of a specific outage on earnings per share (EPS) for the year, asking for quantification of this headwind.

In the paragraph, Garrick Rochow and Rejji Hayes discuss the impacts of scheduled outages on their operations, which occur every seven to eight years. Despite losing over 50% of DIG's contribution, they expect this loss to be offset by existing and new operating assets, including a thermal generation fleet and renewable projects like the Aviator Project. Rejji Hayes mentions they anticipate growth in subsequent years despite the modest performance this year due to the outages. Jeremy Tonet acknowledges the explanation, and Michael Sullivan humorously comments on his hunger during the conversation, to which Garrick Rochow responds lightheartedly about eating habits.

Michael Sullivan inquires about the financing strategy behind a $3 billion CapEx increase, specifically addressing equity needs and tax credit transferability. Rejji Hayes explains that for every dollar of capital investment, around thirty-five to forty cents come from common equity. With the new five-year plan, an additional $120 million in equity is needed, totaling around $500 million in equity issuance over the next two to three years. This is expected to average about $450 million in the long term. Additionally, they anticipate $85 million in tax credit monetizations this year, with an expected $700 million in tax credit transfers over the five-year period, exceeding the previous plan's estimates.

The paragraph discusses the company's strategy for managing liabilities and reducing equity needs within their financial plan. Rejji Hayes explains that the ramp-up of tax credits is helping decrease equity needs in the plan's later years. For liability management, tools used in 2023 and 2024 could be employed again if necessary, depending on weather conditions and interest rate trends. High interest rates currently favor liability management strategies. The company remains conservative by not including hybrid issuances in their plan but acknowledges these tools for flexibility.

The paragraph discusses the company's approach to cost management and financial strategy. It emphasizes a non-discriminatory approach to examining their cost structure, focusing on tax planning, operational flags, and risk management to identify opportunities. The company remains committed to this strategy for future success. It also touches on the potential of issuing hybrid securities as part of their financial planning, noting recent market interest and capacity for such instruments. This financial tool is positioned as a flexible option to optimize credit and earnings per share (EPS). The paragraph concludes with a brief exchange between speakers, transitioning to a question from Andrew Weisel of Scotiabank.

In the paragraph, Rejji Hayes addresses a question about future dividend growth, particularly beyond 2025. He explains that after selling EnerBank in 2021, the company increased their dividend growth rate and aimed to decouple dividend growth from EPS growth to manage a high payout ratio. The company has since been adjusting dividend per share (DPS) growth to align closer to a 60% payout ratio, currently targeting an annual growth in the low 5% range. This strategy is to retain more earnings for utility and rate-based growth. Hayes anticipates maintaining a payout ratio in the low sixties to high fifties in the coming years.

The paragraph features a discussion between Rejji Hayes, Andrew Weisel, and Nicholas Campanella about the company's capital deployment strategy. Hayes emphasizes the company's intent to retain and redeploy capital into the business rather than seeking external funding, considering it a prudent approach given their significant CapEx backlog. Weisel agrees with Hayes' strategy of operating within the high fifties to around 60% retention. Hayes also addresses Campanella's question regarding potential opportunities related to NorthStar and explains that additional opportunities will serve to strengthen and extend their existing plan, particularly with a 25% open margin that might offer attractive contracts due to tightening conditions in zone seven.

The paragraph is part of a discussion during a conference call, featuring speakers Nicholas Campanella and Garrick Rochow, regarding their company's financial strategy and future plans. Garrick Rochow discusses the importance of compounding off actuals and the challenges it presents as it becomes harder each year. He mentions that the company has increased its earnings potential significantly for the years 2026 through 2029 by securing attractive contracts, while still having additional opportunities available. Nicholas Campanella asks about the Renewable Energy Plan (REP) and whether it will be fully implemented or settled early. Garrick Rochow explains that they are open to settlement opportunities and likens the REP to the integrated resource plan, which has had successful settlements in the past. He expresses confidence in the plan's potential to follow through to completion if necessary. Durgesh Chopra from Evercore then joins the call, mentioning that his earlier questions have been addressed.

The speaker, Garrick Rochow, discusses the impact of tariffs on their supply chain, particularly in relation to China, Canada, and Mexico. Around 10% to 12% of their supply chain involves these countries, either directly or indirectly. To mitigate tariff impacts, they've increased their supply stock and are transitioning to US-based vendors. Despite these challenges, they remain confident in executing their capital plan and keeping costs affordable for customers. Additionally, in the electric and natural gas sectors, being part of MISO and having efficient natural gas plants provides a cost advantage, saving customers a significant amount of money this year.

The paragraph discusses the company's strategies to manage fluctuations in energy prices and tariff impacts. It highlights that they are well-positioned to handle volatility in electricity and have diversified gas sources with multiple interconnects to mitigate risks, including those from Canadian gas. The impact of tariffs on the automotive industry, significant in Michigan, is minimal, as only about 2% of the company's gross margin is from automotive services. Additionally, Rejji Hayes clarifies that the company does not directly source materials from China, although there may be indirect exposure, and emphasizes the use of their CE Way approach with vendors.

The paragraph discusses the company's proactive efforts in managing supply chain risks related to tariffs by working closely with vendors to ensure risk transfer or sharing in contracts. They maintain visibility on vendors' manufacturing strategies. When asked about the domestic versus international sourcing of equipment, the response indicates that although some materials are sourced internationally, most are sourced domestically, giving the company confidence in executing their plans.

The paragraph discusses strategies for maintaining a diversified vendor base in solar energy, emphasizing sourcing from domestic and Southeast Asian suppliers to mitigate risks. It transitions to discussing Michigan's supportive role in accommodating data centers, highlighting the cooperation with regional and state economic organizations. It mentions the challenges and advantages related to transmission capacity, and the efforts of their economic development team to strategically place data centers and manufacturing facilities, sometimes necessitating transmission build-out.

The paragraph discusses the company's efforts to manage distribution expansion and supply needs in line with renewable energy plans and anticipated sales growth. They feel confident about their supply mix, leveraging a surplus from the last Integrated Resource Plan (IRP) to attract businesses to Michigan. The company stages loads incrementally and coordinates with companies like data centers to ensure timely availability of resources. For instance, they aim to meet a specific data center's full load demand by 2026. The discussion also touches on a rate case, with Garrick Rochow expressing openness to settlement negotiations, despite time constraints and current procedural developments.

The paragraph is a discussion between Garrick Rochow, David Arcaro, and other speakers about confidence in reaching a constructive outcome, potentially through a final order by March, which will benefit all stakeholders. There is mention of long-term opportunities and investments, specifically $20 billion outside the current five-year plan, aimed at enhancing the reliability and resiliency of the electric distribution system in response to climate challenges and customer expectations. This reflects a beneficial investment from both investor and customer perspectives.

The paragraph discusses the necessity of investing in renewable energy, aiming for 60% by 2035, to ensure cleaner air and meet state supply demand. It also highlights important investments in the natural gas system for safety. Despite 2% to 3% anticipated electric growth, Garrick Rochow emphasizes the importance of maintaining annual rate case reviews to ensure effective collaboration with the commission and achieve successful outcomes for customers. He expresses confidence in the growth projections, citing specific investments and projects. Durgesh Chopra acknowledges the detailed response and the operator concludes the call.

Garrick Rochow expresses gratitude to Harry for joining the conference, looks forward to future meetings, wishes him well, and the operator concludes the conference by thanking all participants.

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