CMS Energy (CMSD): Powering Michigan's Resurgence with Consistent Performance

Published on March 14, 2025 | Ticker: CMSD

Introduction

CMS Energy, the parent company of Consumers Energy, has long been a stalwart in Michigan's energy landscape, providing safe, reliable, and affordable power to its 3 million customers. With a steadfast commitment to operational excellence and a focus on sustainable growth, CMS Energy has consistently delivered industry-leading financial performance, year after year.

Company History

The company's roots trace back to 1886 when Consumers Energy was founded to serve Michigan's growing demands. CMS Energy Corporation itself was formed as a corporation in Michigan in 1987, serving as the parent holding company of several subsidiaries, including Consumers Energy and NorthStar Clean Energy, primarily a domestic independent power producer and marketer. Consumers Energy, incorporated in Maine in 1910 and becoming a Michigan corporation in 1968, owns and operates electric generation and distribution facilities as well as gas transmission, storage, and distribution facilities. It provides electricity and/or natural gas to 6.8 million of Michigan's 10 million residents.

Challenges and Milestones

Throughout its history, CMS Energy and its subsidiaries have faced various challenges and milestones. In 2002, CMS Land, a subsidiary of CMS Energy, sold its interest in the Bay Harbor residential-commercial real estate area but retained environmental remediation obligations for the collection and treatment of leachate at the site. This resulted in CMS Energy having to record a liability for its remaining environmental remediation obligations.

Consumers Energy has also had to navigate complex regulatory matters, with the Michigan Attorney General, ABATE, the MPSC Staff, residential customer advocacy groups, environmental organizations, and other parties often participating in MPSC proceedings. These parties have frequently challenged various aspects of Consumers' policies and practices, seeking cost disallowances and other relief in rate cases and power supply cost recovery and gas cost recovery processes.

Despite these challenges, CMS Energy and Consumers Energy have continued to invest in upgrading their electric and gas infrastructure. This includes the retirement of coal-fired generating units and the acquisition of natural gas-fired and renewable generation facilities, all aimed at providing safe, reliable, and affordable energy to their customers in Michigan.

Financial Performance

In 2024, CMS Energy reported consolidated operating revenue of $7.51 billion, net income available to common stockholders of $993 million, and diluted earnings per share of $3.33. The company delivered adjusted earnings per share of $3.34 for 2024, which was at the high end of their guidance range. The electric utility segment generated $5.06 billion in operating revenue, accounting for over two-thirds of CMS Energy's total revenue, while the gas utility segment generated $2.14 billion.

Strategic Investments

One of the key drivers behind CMS Energy's success has been its strategic focus on customer-centric investments. The company's five-year, $20 billion utility investment plan, a $3 billion increase from its previous blueprint, is designed to enhance reliability, expand renewable energy sources, and modernize its electric and gas distribution systems. This comprehensive approach has yielded tangible results, with Consumers Energy restoring power to over 93% of affected customers within 24 hours in 2024, compared to 87% in the prior year.

Environmental Commitment

CMS Energy's commitment to environmental stewardship is equally impressive. The company has set an ambitious goal of achieving 60% renewable energy by 2035 and 100% clean energy by 2040, in line with Michigan's 2023 energy law. This transition is being facilitated through the addition of up to 9 GW of solar capacity and 4 GW of wind power over the next two decades, solidifying CMS Energy's position as a leader in the clean energy revolution.

Financials and Liquidity

Financially, CMS Energy has maintained a strong balance sheet, with a consolidated debt-to-capital ratio of 0.58 as of December 31, 2024. The company's liquidity position remains robust, with $519 million available under its revolving credit facility and $65 million in commercial paper outstanding. CMS Energy's credit ratings have been affirmed by the major rating agencies, reflecting the market's confidence in the company's ability to navigate the evolving energy landscape.

The company has access to ample liquidity through revolving credit facilities, commercial paper programs, and capital markets transactions to fund its robust capital investment plan, which totaled $4.30 billion in 2024 across its business segments.

Segment Performance

CMS Energy's electric utility segment, Consumers Energy, delivered 37 billion kWh of electricity to customers in 2024, including 4 billion kWh sold under the Retail Open Access program. Peak electric demand was 8.03 GW, including 603 MW of ROA demand. In 2024, 42% of electricity was generated from natural gas, 22% from coal, and the remaining 36% from renewable and other sources.

The gas utility segment, also operated by Consumers Energy, delivered 362 Bcf of natural gas in 2024, including 27 Bcf sold under the Gas Customer Choice program. Consumers Energy has an extensive transmission and distribution network, including 2,340 miles of transmission lines and 15 gas storage fields with a total capacity of 309 Bcf.

The non-utility segment, NorthStar Clean Energy, generated $316 million in operating revenue in 2024. It owns and operates a portfolio of independent power plants with a total gross capacity of 2,020 MW, including natural gas, solar, wind, and biomass facilities.

Future Outlook

Looking ahead, CMS Energy's guidance for 2025 reflects its continued commitment to consistent performance. The company is projecting adjusted earnings per share in the range of $3.54 to $3.60, representing growth of 6% to 8% over the 2024 results. This guidance is underpinned by the company's successful electric and gas rate case outcomes, the growing contribution from its renewable energy investments, and ongoing cost optimization initiatives.

Key drivers of the 2025 EPS guidance include:

Expecting normal weather in 2025 after experiencing mild winter temperatures in 2024, providing $0.39 per share of positive variance.
Anticipating $0.21 of EPS from rate relief, including the benefits of their 2024 gas rate case settlement and expected constructive outcomes in their pending electric and gas rate cases.
Expecting $0.03 per share of positive variance from continued productivity driven by the CE Way.
Anticipating a significant $0.37 to $0.43 per share of negative variance, largely from the reversal of select 2024 countermeasures and expected capital costs associated with parent company financing.

Longer-term, CMS Energy continues to guide toward the high end of their adjusted EPS growth range of 6% to 8%, which implies 7% up to 8% growth. The company's dividend policy remains unchanged, targeting a dividend payout ratio of about 60% over time.

Conclusion

CMS Energy's track record of delivering on its promises to shareholders, customers, and the communities it serves is truly remarkable. The company's unwavering focus on operational excellence, strategic investments, and environmental sustainability has positioned it as a reliable and trusted partner in Michigan's energy future. With its strong financial performance, robust investment plans, and commitment to clean energy transition, CMS Energy is well-positioned to continue its growth trajectory and create value for all stakeholders in the years to come.

CMS Energy: Powering Michigan's Clean Energy Future

CMS Energy Corporation (CMS) is a leading energy company operating primarily in the state of Michigan. Established in 1987, the company has grown to become the state's largest utility provider, serving 6.8 million of Michigan's 10 million residents across all 68 counties in the Lower Peninsula. CMS Energy's success is rooted in its unwavering commitment to delivering safe, reliable, and affordable energy to its customers, while also leading the charge in the state's transition to a cleaner energy future.

CMS Energy Corporation (CMS): A Utility Leader Driving Michigan's Clean Energy Transition

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