CMS Energy Corp Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Shahriar Pourreza - Guggenheim Securities, LLC - Analyst : Hey guys Good morning.

Question: Shahriar Pourreza - Guggenheim Securities, LLC - Analyst : So just, Garrick, on the data center demand, obviously, everyone is mentioning it to kind of the degree, Michigan has obviously started to emerge as a favorable data center environment with some of the hyperscalers doing some land acquisitions there, Grand Rapids to be exact. Do you have sort of existing grid capacity to onboard kind of the new customers with that kind of an interconnection lag? What are you seeing on the ground? And do you need sort of a new tariff structure to move ahead? We've seen some interesting proposals coming out of Ohio, a lot of back and forth there. So a big question, but how do you think about those? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 1:30PM, CMS.N - Q3 2024 CMS Energy Corp Earnings Call

Question: Shahriar Pourreza - Guggenheim Securities, LLC - Analyst : Got it. Any timing on that, Garrick?

Question: Shahriar Pourreza - Guggenheim Securities, LLC - Analyst : Okay. Perfect. And then just lastly, in terms of your takeaways from the storm and resiliency audits this year, is your commitment to cutting outages supported by the current distribution plan? Or would you look to update the DSP to incorporate some recommendations from the audit? Or does it just inform you better to move the $1.5 billion incremental CapEx you're identified into base plan? Thanks.

Question: Shahriar Pourreza - Guggenheim Securities, LLC - Analyst : Fantastic. Thank you guys so much. Remember Garrick guns and roses next time. Thanks. Appreciate.

Question: Jeremy Tonet - JPMorgan Chase & Co - Analyst : Hi, good morning.

Question: Jeremy Tonet - JPMorgan Chase & Co - Analyst : Thanks for taking my questions Garrick. Just wanted to start off, if you could walk us through a bit more, I guess, on DIG, given everything that we're seeing on the generation site meet their capacity needs. Just with contracts rolling off and how you think about, I guess, the trajectory there going forward?

Question: Jeremy Tonet - JPMorgan Chase & Co - Analyst : Right. That makes sense. I don't want to get too far ahead of myself there. But maybe just thinking about growth in general, we're seeing some of your peers talk about higher sales forecast and even some kind of lifting the expected long-term EPS CAGR expectation. And just wondering how you guys think about this given the incremental opportunities you see in front of you. I'm expecting strengthening and lengthening but just wanted to double check there.

Question: Jeremy Tonet - JPMorgan Chase & Co - Analyst : Got it. That makes sense. That's helpful. Thank you.

Question: Ross Fowler - Bank of America - Analyst : Good morning Garrick, Good morning Rejji. How are you. (multiple speakers) Congratulations on the quarter, another solid one as we've all come to expect from CMS. So just a couple of questions. I think you've talked about the 2.5 gigawatts of storage target in the state. How do you think about -- could that change is sort of battery tax credit shift? Or does the cost of that change? Or is there just a lot of support for this at the state level versus what's going on at the federal level potentially after next week, how do you contextualize that investment going forward?

Question: Ross Fowler - Bank of America - Analyst : Yeah. Yes. Just as that -- where can we contextualize that versus the state incentives that are kind of pushing this -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 1:30PM, CMS.N - Q3 2024 CMS Energy Corp Earnings Call

Question: Ross Fowler - Bank of America - Analyst : Yeah. Perfect. Makes sense. Garrick you just need a more coffee this morning. so just grab a couple of those.

Question: Ross Fowler - Bank of America - Analyst : The next question I had, just kind of back to Jeremy's question a little bit on NorthStar and capacity auctions. I mean, MISO has sort of adopted a lot of the PJM changes around the VRR curve. So certainly, it seems like that will also go higher in next year's capacity auction, and at least that would mirror what happen at PJM. So do you sort of hold off on some closing down some of these open positions further out on capacity until you see what that auction clears out, so you have a better idea? Like I'm just trying to figure out the timing of how you work that through.

Question: Ross Fowler - Bank of America - Analyst : Makes complete sense. Ties into the CEA. Thanks guys, another solid quarter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 1:30PM, CMS.N - Q3 2024 CMS Energy Corp Earnings Call

Question: Julien Dumoulin Smith - Jefferies - Analyst : Hey, good morning team guys. Thank you so very much for the time. Appreciate it. Good to chat with you guys. Let's get that coffee going. So to the extent -- let's keep it going. So speaking of which, you guys had this pretty big swing in the cost number in that waterfall slide, you talked about that minus $0.15. Last quarter, that was a plus $0.09. You mentioned in your prepared remarks, insurance and IT. Can you speak a little bit on exactly what's going on? Is there a pull forward going in there as well that's timing intra-year? I mean, is there a wildfire impact that's impacting insurance? I'm just trying to understand what are the big pieces.

Question: Julien Dumoulin Smith - Jefferies - Analyst : Yeah. So basically, said differently, you would have been holding off on funding some of it into 2025, you realize that you have the ability to do so, so you pull them back forward.

Question: Travis Miller - Morningstar Research Services LLC - Analyst : Morning, everyone. Thank you.

Question: Travis Miller - Morningstar Research Services LLC - Analyst : Hey, so on the REP, you've touched on this a couple of times, but the -- anticipating that sales growth number going up. As you were going through that process, not to front run this too much for the next couple of weeks, but as you're going through that process, did you have enough visibility in terms of sales growth from data centers and what you mentioned on manufacturing some of those kind of 24/7 type loads to be able to incorporate, again, some of the stuff you touched on in terms of storage and perhaps other renewable energy technologies. Can we -- will we see that in this REP or is that something to look more for in the IRP?

Question: Travis Miller - Morningstar Research Services LLC - Analyst : Okay. That's great. I appreciate all that detail. Then one more for me on different subject, the liberty audit, would you anticipate on the regulatory side, the potential for putting in regulators to put in some kind of performance mechanism or some kind of metrics to meet before you get approval for the additional CapEx or operating costs?

Question: Travis Miller - Morningstar Research Services LLC - Analyst : Okay, great. That's very helpful. Thanks so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 1:30PM, CMS.N - Q3 2024 CMS Energy Corp Earnings Call

Question: Michael Sullivan - Wolfe Research LLC - Analyst : Hey everyone, good morning. I think it's been asked a couple of times now, but just to level set us for load growth and what's coming in the REP. My recollection is you have historically talked about 2%, less 2% energy efficiency and you're kind of flat is kind of your base case today? And then it sounds like you're excited about all this kind of new load growth, but what's actually going to be reflected in the REP is going to be pretty conservative and not some big shift change? Is that a fair characterization?

Question: Michael Sullivan - Wolfe Research LLC - Analyst : Okay. So significant upward pressure, but conservative. I got it. And then just shifting over to the electric case, I also just kind of wanted to level set there. So it sounds like you are going to probably adjudicate this mainly because of the storm mechanism because this is kind of a first go around for that? And what specifically are you asking for? And where is staff on that with respect to the storm specifically?

Question: Michael Sullivan - Wolfe Research LLC - Analyst : Okay. That's great color. Just real quick, staff on the storm specifically though, are they outright against it? Or they're just looking for a different structure than what you just said I --

Question: Michael Sullivan - Wolfe Research LLC - Analyst : Okay, thank thanks for sending me through all that. Appreciate it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 1:30PM, CMS.N - Q3 2024 CMS Energy Corp Earnings Call

Question: Andrew Weisel - Scotiabank - Analyst : Hey good morning Garrick. I was also going to ask about settlement. I guess I appreciate the detail there. I guess if there were to be a deal to be made, what would be the window for that? Or is it a relevant to this is not going to happens --

Question: Andrew Weisel - Scotiabank - Analyst : Yes. Understood. New tools are often a policy question. So I understand that completely. The other question I wanted to ask about the CapEx update. I understand we'll have to be patient on the numbers. But the two things I wanted to ask about. Number one, just qualitatively, it sounds like there's going to be a lot of things going into that. There's always a business as usual update, but you've got spending around the REP. You got spending around the Liberty reliability audit, you've got the electric reliability roadmap with stuff going in there, plus you've got sort of a step change in demand growth from data centers and manufacturing. What I'm getting at is, should this be a meaningfully bigger increase than what we've seen in recent years? And if so, how should we think about financing that? You previously talked about up to a $350 million per year of equity in '25 and beyond. I'm guessing there might be an upside bias to that given all the pieces that I just mentioned. How should we think about a rule of thumb about incremental equity needs per incremental dollar of CapEx?

Question: Andrew Weisel - Scotiabank - Analyst : Okay. That's extremely helpful details there. Thank you very much. So just to be clear on the CapEx numbers, though, so we should not expect numbers related to the REP or IRP, but we should expect upside to CapEx related to reliability and the demand and economic development. Is that maybe a fair way to put it?

Question: Andrew Weisel - Scotiabank - Analyst : Okay? I appreciate you clarifying. I guess maybe I needed some coffee this morning as well or some early Halloween candy perhaps. Thank you guys.

Question: Angie Storozynski - Seaport Global Holdings LLC - Analyst : Thank you. Thanks for squeezing in. So I just have one question. So when I look at your current supply stack on the system, I mean, how much of it is imports from like self-generation versus the imports from the grid. And I understand that the MISO dispatches assets, et cetera. But I'm just debating how much of spare capacity that you have of your own right now? I mean, if I were to be an industrial customer or hyperscaler, how much could you offer me in megawatts right now?

Question: Angie Storozynski - Seaport Global Holdings LLC - Analyst : But again, I'm just -- again, I'm debating it myself, if I were to cite like a big industrial facility or data center, I would probably care about the speed to power, right? So this initial availability of megawatts would probably matter to me. So you're saying you are long tower even right now. So even, say, the next, say, 24 months, there is a spare capacity that you could allocate to such a user?

Question: Angie Storozynski - Seaport Global Holdings LLC - Analyst : And what if there is like a very big site, let's say, a gig of eventual capacity? I mean, is this something that you feel comfortable accommodating? I mean, it is -- obviously, that would probably require a large -- well, two large combined cycle gas plants to be built. How do you think about those sort of very big projects? Would you prefer to have smaller sites? Or is there, from like a risk perspective, do you think comfortable accommodating the big loads like that?

Question: Angie Storozynski - Seaport Global Holdings LLC - Analyst : And just to make sure. And how do you, for example, ensure that this load actually materializes? Like when we look at power companies, like they

Question: Angie Storozynski - Seaport Global Holdings LLC - Analyst : Very good. Thank you.