10-QPeriod: Q2 FY2018

CMS ENERGY CORP Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 26, 2018For Securities:CMSCMS-PCCMSACMSCCMSD

Summary

CMS Energy Corp. (CMS) reported a strong first half of 2018, with net income available to common stockholders increasing by 30.6% to $380 million, and diluted Earnings Per Share (EPS) rising to $1.35 from $1.04 in the prior year period. This growth was driven by improved performance across its electric utility, gas utility, and enterprises segments, benefiting from rate increases, higher sales, and favorable weather conditions, partially offset by increased depreciation. The company also highlighted significant progress in its environmental stewardship, including substantial reductions in carbon dioxide emissions and the retirement of coal-fueled generation units. CMS Energy's regulated utility subsidiary, Consumers Energy, continues its significant capital investment program focused on infrastructure upgrades and reliability, with a $10.1 billion plan over five years, projecting annual rate-base growth of 6-8%. The company is also actively pursuing renewable energy initiatives, aligning with regulatory mandates and its "clean and lean" energy strategy. The company's financial health remains robust, supported by strong operating cash flows and access to capital markets. CMS Energy successfully navigated regulatory matters, including rate case decisions and the implementation of the Tax Cuts and Jobs Act (TCJA), which resulted in customer rate reductions. Looking ahead, CMS Energy remains focused on its triple bottom line approach – people, planet, and profit – emphasizing continued investment in infrastructure, environmental sustainability, and delivering value to its customers and shareholders.

Financial Highlights

44 data points
Beta

Revenue

$1.49B

Net Income

$140.00M

9.4% Net Margin

EPS (Diluted)

$0.49

Total Assets

$23.31B

Cash & Equivalents

$477.00M

Free Cash Flow

$258.00M

Financial Statements
Beta
Revenue$1.49B
Operating Expenses$1.24B
Operating Income$255.00M
Interest Expense$112.00M
Net Income$140.00M
EPS (Basic)$0.49
EPS (Diluted)$0.49
Shares Outstanding (Diluted)282.60M

Key Highlights

  • 1CMS Energy reported a significant increase in net income available to common stockholders, rising 30.6% to $380 million for the first six months of 2018, compared to $291 million in the same period of 2017.
  • 2Diluted Earnings Per Share (EPS) increased to $1.35 for the six months ended June 30, 2018, up from $1.04 in the prior year.
  • 3The company is executing a robust capital expenditure plan, with Consumers Energy projecting $10.1 billion in capital expenditures from 2018-2022, focused on gas and electric infrastructure upgrades.
  • 4CMS Energy continues its commitment to environmental sustainability, highlighting a 35% reduction in carbon dioxide emissions since 2005 and plans to retire all coal-fueled electricity generation by 2040.
  • 5The Tax Cuts and Jobs Act (TCJA) of 2017 led to regulatory proceedings for rate reductions for customers, with approved reductions of $49 million for gas and $113 million for electricity revenue requirements.
  • 6Regulatory matters are ongoing, with key rate case decisions and filings for both electric and gas utilities; the company is seeking rate increases to recover investments, though outcomes are subject to MPSC approval.
  • 7CMS Energy maintains strong liquidity with substantial availability under its revolving credit facilities and expects continued access to capital markets.

Frequently Asked Questions

The increase in net income was primarily driven by higher sales in both the electric and gas utilities, coupled with approved rate increases. Additionally, favorable weather conditions contributed to higher sales volumes, and changes in other post-employment benefit (OPEB) plan accounting led to a credit. These positive factors were partially offset by higher depreciation expenses due to increased plant in service.

CMS Energy is actively pursuing a 'clean and lean' energy strategy. This includes retiring coal-fueled generation units, reducing carbon dioxide emissions by over 35% since 2005, and setting ambitious goals like eliminating coal use by 2040. The company is also investing in renewable energy projects, such as solar and wind generation, and promoting energy waste reduction programs among its customers.

Consumers Energy filed a gas rate case seeking an annual rate increase. While the company initially sought a significant increase, the requested amount has been reduced multiple times. An administrative law judge recommended a much smaller increase and also proposed disallowing cost recovery for certain historical capital expenditures. If the MPSC adopts these recommendations, Consumers could be required to write off up to $145 million of assets. A final order is expected by the end of August 2018.

The TCJA reduced corporate tax rates, which the MPSC ordered Consumers Energy to pass on to customers through bill credits. The company has already implemented reductions of $49 million for gas and $113 million for electric revenue requirements. Further proceedings are underway to address amounts collected in 2018 and the remeasurement of deferred income taxes. Consumers has recorded a liability for potential customer refunds related to over-collections.