NYSE:CMS CMS Energy Q1 2025 Earnings Report $72.93 -0.04 (-0.05%) Closing price 05/2/2025 03:59 PM EasternExtended Trading$72.63 -0.30 (-0.41%) As of 05/2/2025 05:51 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast CMS Energy EPS ResultsActual EPS$1.02Consensus EPS $1.05Beat/MissMissed by -$0.03One Year Ago EPS$0.97CMS Energy Revenue ResultsActual Revenue$2.45 billionExpected Revenue$2.32 billionBeat/MissBeat by +$129.32 millionYoY Revenue Growth+12.50%CMS Energy Announcement DetailsQuarterQ1 2025Date4/24/2025TimeBefore Market OpensConference Call DateThursday, April 24, 2025Conference Call Time9:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by CMS Energy Q1 2025 Earnings Call TranscriptProvided by QuartrApril 24, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Good morning, everyone, and welcome to the CMS Energy twenty twenty five First Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section. This call is being recorded. After the presentation, we will conduct a question and answer session. Instructions will be provided at that time. Operator00:00:25Just a reminder, there will be a rebroadcast of this conference call today beginning at twelve m. Eastern Time running through May 1. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section. At this time, I'd like to turn the call over to Mr. Jason Shaw, Treasurer and Vice President of Investor Relations. Jason ShoreTreasurer & VP of Investor Relations at CMS Energy00:00:47Thank you, Harry. Good morning, everyone, and thank you for joining us today. With me are Derek Roshow, President and Chief Executive Officer and Reggie Hayes, Executive Vice President and Chief Financial Officer. This presentation contains forward looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially. Jason ShoreTreasurer & VP of Investor Relations at CMS Energy00:01:20This presentation also includes non GAAP measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website. And now I'll turn the Jason ShoreTreasurer & VP of Investor Relations at CMS Energy00:01:34call over to Garik. Garrick RochowPresident and CEO at CMS Energy00:01:36Thank you, Jason, and thank you everyone for joining us today. CMS Energy, consistent, predictable, dependable. Twenty two years of steady hands at the wheel. It's what you expect and it's what we deliver. Garrick RochowPresident and CEO at CMS Energy00:01:53And even more important in these times of broader economic uncertainty. It starts with our investment thesis, which is based on conservative planning paired with disciplined execution, a commitment to excellence across our electric and gas businesses, constructive legislation and regulation and driving growth across the state with a robust economic development pipeline. Our customers can count on us deliver safe, reliable, affordable, clean and equitable energy under all conditions and our investment thesis is what keeps us on track. It's our focus. It's what you count on us for every year. Garrick RochowPresident and CEO at CMS Energy00:02:40In fact, I'd like to take a moment to shine a spotlight on our recent storm response, which included company crews, dispatchers, call centers, coworkers, contractors and volunteers who were committed to delivering excellence for our customers during the recent historic storms that impacted Michigan in late March and early April. These storms packed it all in, 14 tornadoes, nearly 100 mile per hour winds and in northern locations over 1.5 inches of ice. The team executed well. We were prepared and ready to dispatch prior to the first wave of weather with 500 crews pre staged and 900 total crews dispatched. Fighting storms on two fronts, we restored customers safely and quickly, then continue to serve supporting local co op utility customers in their restoration efforts. Garrick RochowPresident and CEO at CMS Energy00:03:40We saw favorable customer and positive policymaker support because of our response. Yes, our investments and process changes are making a difference. I'm extremely proud and thankful for our coworkers and how they showed up in the work they do daily to improve performance for our customers. I want to start today with Michigan's constructive regulatory environment. We are pleased with the recent electric rate order in March, approximately 65% of the revised ask, nearly double the investments included in the investment recovery mechanism and solid support for investments to improve electric reliability for our customers. Garrick RochowPresident and CEO at CMS Energy00:04:28We work hard to ensure our filings are transparent and high quality and we are seeing the results, achieving constructive regulatory outcomes time and time again. We'll continue to work closely with MPSC staff, interveners and the commission on the importance of our investments to bolster our electric and gas systems to ensure we continue to serve customers during sunny days and extreme weather. Given our continued focus on improving electric reliability, you can expect us to file our next electric rate case in Q2. In our gas rate case, we did recently see staff testimony, which we view as a constructive starting position. As we've shown in the past, we're always open to settlement having settled our last four gas cases. Garrick RochowPresident and CEO at CMS Energy00:05:22The dynamics of these gas cases are different than our electric cases and we feel good either way, a settlement or fully adjudicated order. For our longer term filings, we expect an order in our renewable energy plan or REP by mid September. Our REP will help define our clean energy future and feeds into our integrated resource plan or IRP that we'll file next year. Earlier in my prepared remarks, I referenced broader economic uncertainty. As you would expect, we are closely monitoring the landscape, potential changes, shaping as needed and preparing to adjust as necessary. Garrick RochowPresident and CEO at CMS Energy00:06:09Our conservative planning and strong fundamentals as well as our track record of delivering through any event gives me confidence that we are well positioned to effectively navigate any scenario. This confidence is further bolstered by a diversified service territory with minimal exposure to the auto industry or any other large sectors. We're actively monitoring the landscape and have a diverse supply chain, which limits our exposure to tariffs. Our direct and indirect spend is approximately 90% domestically sourced and we continue to shift U. S.-based Vendors to lower our exposure. Garrick RochowPresident and CEO at CMS Energy00:06:52Much of the exposure is related to capital equipment, which means any customer impact would be spread over the life of the asset and our earnings are largely insulated. Nonetheless, we're actively working with all suppliers to manage fluctuations in price and sourcing to keep customer bills affordable as we execute on our plan. In the context of the Inflation Reduction Act or IRA, we've seen good support from Republicans in our individual conversations, the 25 who have signed on in support of continuing tax credits. Our read is that there may be a partial appeal of portions of the IRA. And although we do not expect changes to the renewable tax credits, we continue to safe harbor equipment for projects within our five year plan. Garrick RochowPresident and CEO at CMS Energy00:07:45And as a reminder, we have a supportive energy law in Michigan that mandates renewables and 100% clean energy resources by 2,040. The law shapes our customer investments through our REP and IRP. To the degree there are changes in the IRA, Michigan's law offers us enough flexibility to achieve the intent of the law and ensure resource adequacy and affordability for our customers. As for industry exposure, I'll remind you the auto industry is about 2% of our total gross margin. The heart of our electric service territory is in the Grand Rapids Metropolitan Area, which is diversified with commercial businesses and manufacturing and includes significant jobs and state investment. Garrick RochowPresident and CEO at CMS Energy00:08:34We're also seeing expansion in other industries including defense, aerospace, polysilicon, semiconductors and agriculture. At CMS Energy, our core business is to serve under all conditions. Our mindset of preparedness and conservative planning ensures we are ready for multiple scenarios, calm in the storm and steady at the wheel. I want to talk for a moment about Michigan's exciting growth renaissance and our work to help our service territory in the state thrive and prosper. First and foremost, we see strong progress in the continued construction and work that make up the 2% to 3% load growth within our five year financial plan. Garrick RochowPresident and CEO at CMS Energy00:09:23We have seen one large data center project accelerate their load ramp up by almost a year and another large new manufacturing project has requested to expand service by an additional 10%, all positive indicators. Both we can deliver. Since the beginning of the year, with the elimination of the sales and use taxes for data centers, our pipeline has grown to nine gigawatts, with more of that shift about 65% toward data centers. We're seeing the data center pipeline continue to progress and feel confident some of these projects will materialize into contractual agreements. The data center tariff, which we filed in February with the commission is the next logical step in that process. Garrick RochowPresident and CEO at CMS Energy00:10:16The tariff provides a great opportunity for data centers and protects our existing customers. We'll continue to work through this proceeding with settlement being a possible outcome. As I've shared before, we are also excited about the manufacturing growth in our pipeline that brings with it secondary and tertiary benefits including new and growing commercial business as well as residential load. We're excited about and committed to Michigan's future and we are prepared to serve its growing energy needs. Now on to the financials for the quarter. Garrick RochowPresident and CEO at CMS Energy00:10:54In the first quarter, we reported adjusted earnings per share of $1.2 We remain confident in this year's guidance and long term outlook and are reaffirming all our financial objectives. Our full year guidance remains at $3.54 to $3.6 per share with continued confidence toward the high end. Longer term, we continue to guide toward the high end of our adjusted EPS growth range of 6% to 8%. With that, I'll hand the call over to Reggie. Rejji HayesEVP & CFO at CMS Energy00:11:29Thank you, Guric, and good morning, everyone. On Slide eight, you'll see our standard waterfall chart, which illustrates the key drivers impacting our financial performance for the quarter and our year to go expectations. For clarification purposes, all of the variance analysis herein are in comparison to 2024, both on a first quarter and nine months ago basis. In summary, through the first quarter of twenty twenty five, we delivered adjusted net income of $3.00 $4,000,000 or $1.02 per share, which compares favorably to the comparable period in 2024, largely due to the absence of the mild weather experienced in Q1 of twenty twenty four, coupled with higher rate relief net of investments. These sources of positive variance were partially offset by higher O and M costs at the utility driven by the continued execution of our electric reliability roadmap and the timing of select items at NorthStar like our planned outage at the Dearborn Industrial Generation Facility or DIG among other factors. Rejji HayesEVP & CFO at CMS Energy00:12:34To elaborate on the impact of weather, we experienced a relatively normal winter in Michigan in the first quarter for the first time in a couple of years. As such, we saw zero two six dollars per share of favorable variance, which largely reflects the absence of the mild weather experienced in the first quarter of twenty twenty four. Rate relief net of investment related expenses resulted in $07 per share a positive variance due to constructive outcomes achieved in last year's electric and gas rate orders in addition to the benefits of ongoing renewable projects. Moving on to cost trends. As noted, in accordance with our electric reliability roadmap, we continue to increase the size of our vegetation management program as we glide path to a seven year trim cycle across our low voltage electric distribution system. Rejji HayesEVP & CFO at CMS Energy00:13:24The associated financial impact was the key driver of the $05 per share of negative variance versus the comparable period in 2024. In our catchall category represented by the final bucket in the actual section of the chart, you'll note a negative variance of $0.23 per share, largely driven by a strong 2024 comp at NorthStar due to normalized operations at DIG and the timing of tax benefits from renewable projects. Other notable drivers in this category include the impact of parent financing activities in the quarter and select one time reversals from last year. Looking ahead, we plan for normal weather as always, which equates to $0.12 per share of positive variance for the remaining nine months of the year, primarily due to the absence of the mild temperatures experienced in the fourth quarter of twenty twenty four. From a regulatory perspective, we're assuming $0.16 per share of positive variance, which is largely driven by the constructive electric rate order received from the commission in March, ongoing benefits of renewable projects at the utility and the assumption of a supportive outcome in our pending gas rate case. Rejji HayesEVP & CFO at CMS Energy00:14:34On the cost side, we anticipate higher overall O and M expense at the utility for the remainder of the year, largely driven by the expectation of increased service restoration costs attributable to the large weather system that impacted our service territory in late March extending into early April that Gerrick mentioned. It's worth noting that this storm was the costliest in our company's history at roughly $100,000,000 of operating and maintenance or O and M expense per our preliminary estimates. As you would expect, we're already busy at work identifying and implementing countermeasures such as limiting hiring, reducing our use of consultants and contractors and eliminating other discretionary spending among other potential offsets. And of course, we expect increased productivity from the CE Way, which our workforce has delivered every year since we instituted the lean operating system roughly a decade ago. It is also worth noting that we have sought a deferred accounting order for the financial impacts of the storm given its historic nature, which we filed earlier this week. Rejji HayesEVP & CFO at CMS Energy00:15:40The recalibration of our service restoration expense for the remainder of the year, net of anticipated savings from the aforementioned countermeasures, will drive an estimated net impact of $04 per share of negative variance for the remaining nine months of the year. Lastly, in the penultimate bar on the right hand side, you'll see an estimated range of $03 to $09 per share of negative variance, which incorporates further risk mitigation to the financial headwinds encountered in the first quarter and provides additional contingency should we need it, namely in the form of opportunistic financing activities. Before moving on, I'll just note that our track record of delivering on our financial objectives over the last two decades, irrespective of the circumstances, speaks for itself. That said, we'll always do the worrying so you don't have to, and we remain confident in our ability to deliver on our financial and operational objectives this year to the benefit of all stakeholders. Moving on to credit quality, it is worth noting that Fitch reaffirmed our credit ratings in March as noted at the bottom of the table on Slide nine, and we are currently working through the review process with Moody's. Rejji HayesEVP & CFO at CMS Energy00:16:53Longer term, we continue to target solid investment grade credit ratings and will manage our key credit metrics accordingly as we balance the needs of the business. Slide 10 offers an update to our funding needs in 2025 at the utility and the parent. During the quarter, we issued $1,000,000,000 of junior subordinated notes for hybrids with a 6.5% coupon as parent, which I'll note was identical to rates achieved by some of our much larger peers and had the tightest credit spread achieved for a hybrid in recent memory, which speaks to our credit quality and a strong receptivity to our paper in the market. As you'll note in the table on the left hand side of the page, the hybrid issuance address a good portion of our financing needs at the parent for the year, while offering significant financial flexibility on our remaining needs. We'll look to complete the balance of our financing plan at the parent and utility over the remaining months of the year with a keen focus on maintaining our consolidated credit metrics around the mid teens area from a funds from operation to total debt perspective. Rejji HayesEVP & CFO at CMS Energy00:17:59As always, we remain opportunistic and look to capitalize on market conditions. And with that, I'll hand it back to Gerrick for his final remarks before the Q and A session. Garrick RochowPresident and CEO at CMS Energy00:18:09Thanks, Reggie. As the landscape continues to evolve, I want to remind everyone about our long history of delivering under all scenarios for all our stakeholders. Remember, our business is preparedness and response. Through uncertainty, recession, bad weather, doesn't matter. We've seen it before, and we've navigated the waters. Garrick RochowPresident and CEO at CMS Energy00:18:31Bottom line, we deliver. Our track record speaks for itself. We focus on what is necessary to deliver for our customers and investors, and we remain confident in our outlook for 2025 and beyond. With that, Harry, please open the lines for Q and Operator00:18:58please do so by pressing the star key followed by the digit one on your touch tone telephone. If you're using a speaker function, please make sure you pick up your headset. We'll proceed in the order you signal us, and we'll take as many questions as time permits. Our first question will be from the line of Durgesh Chopra with Evercore ISI. Please go ahead. Operator00:19:28Your line is open. Garrick RochowPresident and CEO at CMS Energy00:19:31Good morning, Durgesh. Durgesh ChopraManaging Director at Evercore ISI00:19:33Hey, good morning, Garek. Thank you for taking my question. Hey, appreciate all the commentary around tariffs and IRA. I just one question was focusing on North Star. Maybe just can you remind us what percentage of capital I appreciate it's small versus the rest of the company. Durgesh ChopraManaging Director at Evercore ISI00:19:54What percentage of capital is going towards solar storage? And then just given the IRA discussion and repeal risk, do you kind of reprioritize that capital potentially maybe switch that with higher regulated capital? And then your comments around safe harboring, do those apply to North Star as well as you try to kind of secure those tax credits into the future? Thank you. Garrick RochowPresident and CEO at CMS Energy00:20:23Thanks for your question Durgesh. Great question. Again, context is really important here in the context of North Star. So we're talking about 5% of the EPS mix here, so small. And remember, big driver here is DIG or Dearborn Industrial Generation. Garrick RochowPresident and CEO at CMS Energy00:20:37That's the big story in the energy and capacity markets. And so when it comes down to the amount of capital that we're spending on renewables it's small. Reggie will have the numbers here in a bit but there's nothing on storage, zero on storage. And so it's all really renewables and those are again projects that are well laid out for the future. Now how we derisk those projects? Garrick RochowPresident and CEO at CMS Energy00:20:57One, have contracts in place that allow for escalators. That's an important piece. But we've done a lot of great work in terms of securing panels. I've got panels secured through 02/1930 through a variety of vendors through contracts, some already on-site to be able to navigate any implications from a tariff perspective. And then I'm out in 2028 from a safe harbor provision in the main power transformers. Garrick RochowPresident and CEO at CMS Energy00:21:18And so we feel good about the runway there of projects, renewable projects and what we've done to derisk that. But as you know and your question alluded to, there's tons of flexibility. We have plenty of opportunities to invest in the utility itself and so those are decisions we make on a time by a year by year basis and where the needs are for the company and are best suited. But again feel good about NorthStar's ability to deliver not just in the year but also from a long term perspective. Rejji HayesEVP & CFO at CMS Energy00:21:46Yeah, Durgesh I'll just build on Gerrick's comments there. Yeah, we certainly feel good about NorthStar's prospects going forward and have done a lot to derisk renewable projects on both the utility side and the NorthStar side and have done some things in supply chain that further fortify our position going forward. From a capital perspective, we're planning and this is in our 10 ks that we filed last quarter about gross investments a little over $2,500,000,000 I say gross because we have planned to recycle capital largely at North Star through the sell down of common equity stakes. And so that is providing a lot of liquidity to fund their projects. And so the equity infusions from the parent are relatively light, probably about 20% of that or so or $05,000,000,000 So gross capital investments of about $2,500,000,000 to support commercial renewable projects over the next five years. Rejji HayesEVP & CFO at CMS Energy00:22:37And the reality is, if we do see some repeal of the IRA, we will just increase the bar or raise the expected hurdle rate for those renewable projects at NorthStar. And so if we saw the economics of those projects being less attractive, we would certainly allocate more capital to utility. As you know, capital is not an issue at the utility. There's plenty of opportunity. Our current five year plan at $20 of capital investments At utility has another $20,000,000,000 or so on the outside looking in and I think that that's the low end of capital investment opportunities outside of the plan. Rejji HayesEVP & CFO at CMS Energy00:23:13So a lot of flexibility to allocate capital to the utility versus North Star again if we see the economics of those projects start soften over time. So really good flexibility going forward and no concerns with the economic outlook there. Is that helpful? Durgesh ChopraManaging Director at Evercore ISI00:23:29Very helpful. A lot of flexibility there, sounds like. And then just quickly, Reggie, the deferred accounting order on the storm cost, have you guys done that before? Sorry, I should know, but I don't. Maybe just remind us if you have done that before? Durgesh ChopraManaging Director at Evercore ISI00:23:44And if not, like what are sort of Durgesh ChopraManaging Director at Evercore ISI00:23:46the procedural steps here? Durgesh ChopraManaging Director at Evercore ISI00:23:47Is there a time line that the commission is going to sort of rule this on by? Or is this just a one off type event and there's no set procedural schedule here? Thank you. Garrick RochowPresident and CEO at CMS Energy00:23:59And maybe I'll just take your question and do a little bigger picture on it and then we can go down in this process from a storm perspective. As Reggie talked about in his prepared remarks, there is a number of levers and opportunities everything from the CE Way to technology to what Reggie shared in his prepared remarks and how to deliver the year and for both the customers and really investors and really all stakeholders. That's the tools in the toolbox. And what we're doing with this particular storm, this what I would say is historic storm and really extreme weather as I characterized in my remarks is leveraging the Liberty Audit. If you go into Liberty Audit, that's the distribution audit. Garrick RochowPresident and CEO at CMS Energy00:24:38It specifically calls out best practices with jurisdictions and utilities is to have a mechanism for extreme weather. And that's what we filed, and that's really the first time we filed that with the commission in this kind of framework. We've had constructive conversations both with staff and the commissioners on this. And so, again, it's an ex parte filing. The timeline has not been established at this point. Garrick RochowPresident and CEO at CMS Energy00:25:05But, you know, I'm I'm guessing I'm going to go off a little off little off the record here. Like, I'm an old farmer. I grew up on a farm, and so I don't count my chickens before they hatch. And so that's a true thing from a farmer perspective. Like, understand this. Garrick RochowPresident and CEO at CMS Energy00:25:18Like, we're not counting on that. It's important. We think it's needed in Michigan. Again, constructive conversations, but we have a lot of tools in our tool belt to be able to deliver the year. Rejji HayesEVP & CFO at CMS Energy00:25:30Yeah. Durgesh, all I would add, and I wish I had a wish I had a farming analogy as well, Rejji HayesEVP & CFO at CMS Energy00:25:35but I do not, is, Rejji HayesEVP & CFO at CMS Energy00:25:36just a couple of things to Derek's good comments. And so you asked I think specifically about the timing of approval because it's in our ex parte filing. I think that will be at the commission's discretion. Obviously, we're our expectations are tempered, but we would love to see just a fairly quick resolution to the matter. So we just at least know what the outcome is in a timely fashion. Rejji HayesEVP & CFO at CMS Energy00:25:59And in terms of our history around this, we have sought mechanisms like this in the context of rate cases. I can't recall the last time we saw an accounting order like this outside of a rate case, maybe once in the past in my eight years as CFO. So this is fairly atypical, but we think given the historic nature of the storm, it's justified and I believe we've made a strong case in the filing as to why we should get support here. So I just wanted to address those two direct questions you had. Durgesh ChopraManaging Director at Evercore ISI00:26:25Awesome. Thank you. Appreciate the off the record and on the record commentary. Thanks so much. Operator00:26:35The next question today will be from the line of Shah Pourreza with Guggenheim Partners. Please go ahead. Your line is now open. Constantine LednevVice President - Equity Research at Guggenheim Partners00:26:42Good morning. Garrick RochowPresident and CEO at CMS Energy00:26:43Good morning, Shah. Constantine LednevVice President - Equity Research at Guggenheim Partners00:26:43It's actually Constantine here for Shah. Hello. Garrick RochowPresident and CEO at CMS Energy00:26:46Great. Constantine LednevVice President - Equity Research at Guggenheim Partners00:26:46It's actually Constantine. Hey, good morning. Constantine LednevVice President - Equity Research at Guggenheim Partners00:26:50How are you thinking about the execution on the financing plan just given that optically the balance of the equity needs is resolved through the hybrid? Is that is there kind of more execution to come in '25? Or is there some efficient financing that unlocks like a CapEx pull forward or any other opportunity in the near term? Rejji HayesEVP & CFO at CMS Energy00:27:14Constantine, is Reggie. Appreciate the question. Yes, per my prepared remarks, we still have a bit of financing left in the plan for the year. And so, at the parent, just going back to our original guidance, we said we had about $1,000,000,000 to do. So $1.3 of, what I'll just say non equity financing and our working assumption was senior debt assumption senior debt financings and then up to $500,000,000 of equity. Rejji HayesEVP & CFO at CMS Energy00:27:38Obviously, the hybrid transaction that you noted, really took care of a good portion of those needs. And so with the equity credit ascribed to hybrids that creates a lot of financial flexibility. And so we still have about $700,000,000 or so left for the remainder of the year. We're keeping all options on the table. We've seen really attractive execution across a variety of securities offered in the first quarter from some of our peers. Rejji HayesEVP & CFO at CMS Energy00:28:02And so we're keeping all options on the table, but have quite a bit of flexibility. And at the OpCo just to round it out, we've got $1,000,000,000 left and I think the working assumption for those financings will be first mortgage bonds. And so as always we'll look at which securities are priced most attractively at both the parent and the OpCo and we'll be opportunistic as we always are. With respect to pull aheads for capital we've got $3,700,000,000 in the utility per our plan this year. And so we're focused on executing on that. Rejji HayesEVP & CFO at CMS Energy00:28:32And so we'll see what the rest of the year has in store for us. And so we're acutely focused on the current plan for this year and really haven't thought about pull aheads in any respect if that was the spirit of the second part of your question. Constantine LednevVice President - Equity Research at Guggenheim Partners00:28:44Yep, understood. Understood. And maybe a higher level question on in terms of your energy supply needs. How are those evolving especially as you get feedback to the R and D process? Is there more dispatchable generation needs that you see kind of going into the next IRP cycle? Constantine LednevVice President - Equity Research at Guggenheim Partners00:29:01And do you think that there's a better case for kind of like a big buy in into the opco? Garrick RochowPresident and CEO at CMS Energy00:29:09A portion of our energy supply needs are spelled out in the renewable energy plan and that addresses some of the energy needs and the compliance with the 2023 energy law. And so as we've seen the need to get to the 5060% renewable target as well as because of the 2% to 3% low growth that is in our five year plan. You can see and have insight into those both renewable needs as well as storage needs in the future. The broader need for capacity to be able to continue to deliver to the low growth in the pipeline within the state will come together in the integrated resource plan. We'll file that in 2026. Garrick RochowPresident and CEO at CMS Energy00:29:48It will evaluate and look at natural gas plants, the existing natural gas plants we have in the state, the longevity of those plants, considerations for carbon capture and sequestration technology. So that modeling work is still underway as you might imagine for a 2026 filing and will be also based on the renewable energy plan. So that's really all I can share at this point but as you imagine as you're growing the state and you have this pipeline there will be additional needs in the future for supply assets. Constantine LednevVice President - Equity Research at Guggenheim Partners00:30:17Okay, understood. And maybe you're hitting quickly on the Geisha's question around storms again. As you're kind of noting the impact on the offsets in the quarter, do you anticipate those to be recurring or would those potentially unwind with that potential deferral filing? Rejji HayesEVP & CFO at CMS Energy00:30:34Yes. So I would say, Constantine, similar to prior years when we saw significant financial headwinds, we'll look at all opportunities across the cross structure. I'd say it's premature to think about what's recurring and what isn't. But what I have been encouraged to see really, per my prepared remarks over the last ten years is every year we establish a target for how much productivity and cost savings, whether that's a hard cost savings or avoided costs associated with the CE Way. And every year we exceed that target pretty significantly. Rejji HayesEVP & CFO at CMS Energy00:31:07And by definition, the savings generated by the CE Way are recurring savings. And so I'll give you an example. Last year we had in our target we had a target for the CEUA of around $50 or so million. We delivered 110,000,000 of savings, and those are obviously recurring. And so I would say we've exceeded expectations year in and year out on what we expect to achieve from a productivity perspective. Rejji HayesEVP & CFO at CMS Energy00:31:32But we'll also look at one timers. I mentioned we'll look at sort of financing activity. So we may start to take a look at liability management as we had in the past. And we'll also look at other potential cost deferrals which would not be recurring. And so it'll be a good mix of all of the above like we've done in prior years. Garrick RochowPresident and CEO at CMS Energy00:31:51If I can just take a moment to just elaborate on this toolbox of opportunities and Reggie characterized it well. It starts with conservative planning, right? That is part of our mindset, that's part of our approach. You know, we're not redlining the engineer. This is just how we think about different scenarios. Garrick RochowPresident and CEO at CMS Energy00:32:07That's like point one. Reggie, you know, emphasized the CE Way. There's so much opportunity in the CE Way that our coworkers deliver on. And you take and improve a process, you take waste out, coworkers feel better, customers feel better, and you cost fall out. The other one that we've been really highlighting too is in the space of technology. Garrick RochowPresident and CEO at CMS Energy00:32:26The IT team calls it app realization, and I I make fun of them when they talk about it because I'm like, what the hell is that? But the reality is it's looking about all our software, all our hardware, and how are we leveraging to get additional benefit out of it, where there's real savings there as well. And then you apply AI in some places, and we get better predictions, and that takes cost out as well. And then there was all the things that Reggie mentioned in his prepared remarks. And so again, I feel confident in just the ability to leverage these, and a portion of them, a good portion will be sustaining. Garrick RochowPresident and CEO at CMS Energy00:32:55And as Reggie indicated, some will be one time. Constantine LednevVice President - Equity Research at Guggenheim Partners00:33:01Excellent. Appreciate you taking the questions. Garrick RochowPresident and CEO at CMS Energy00:33:06Thanks, Gautam. Operator00:33:06The next question today will be the next question today will be from the line of Jeremy Tonet with JPMorgan. Please go ahead. Your line is open. Garrick RochowPresident and CEO at CMS Energy00:33:16Hi, good Good morning, Jeremy. Jeremy TonetED - Equity Research Analyst at JPMorgan Chase00:33:19I just wanted to pick up with the gas Good. How are you? Just wanted to pick up with the gas case in given what's come out so far, the appetite for settlement or just any other thoughts at this point? I know you said you'd be happy going either way, but just wondered any incremental color you could provide. Garrick RochowPresident and CEO at CMS Energy00:33:47I'm going to even pull it back a little bit and just with these words. I am very pleased with our track record of delivering constructive outcomes in Michigan. There's all kinds of data points. Electric, forecast settlements, doesn't matter, electric or gas. We just continue to lever time and time again. Garrick RochowPresident and CEO at CMS Energy00:34:07And in the q four call, what I shared was full throated, a constructive we'd get we'd see a constructive electric order. And how did I know that? One, because the quality and the visibility we put in this case, the constructive legislation we have. And it's not perfect, as I shared, but we continue to work on improving that. And then if you look at the staff, the MPSC staff are professionals. Garrick RochowPresident and CEO at CMS Energy00:34:30And when you have a good staff position or constructive staff position, you get good outcomes. And That's what we did. And that's another data point with this electric freight case. I'm excited about this gas, case as well. It is down the fairway or straightforward. Garrick RochowPresident and CEO at CMS Energy00:34:45We're replacing gas pipe. We're making the system safer. Like, that's important from a gas business perspective. We're ensuring capacity to deliver to customers and growth in the gas business. And when you do all that right, you also reduce carbon emissions. Garrick RochowPresident and CEO at CMS Energy00:34:58It's a trifecta, right? It's a great case the team has built, straightforward. And so I'm excited about staff's position. It is a constructive starting position, within the gas case. And we'll go through the process. Garrick RochowPresident and CEO at CMS Energy00:35:14We'll go through rebuttal as we always do. You know, ROEs, we're going to push on those. This is like, if I look at the external environment, risk has not declined, right? And so we'll push on the ROEs and rebuttal, that'll be important piece for us to lean into, but as I said always, I'm open to settlement, And there's a variety of different points of view and different interveners on that. We'll work through that process. Garrick RochowPresident and CEO at CMS Energy00:35:37If we see that, I would imagine it would be before the PFD. That's expected in August timeframe. But hear my confidence in our ability to go the full distance too and just continue the track record of constructive outcomes in Michigan. Jeremy TonetED - Equity Research Analyst at JPMorgan Chase00:35:57Got it. No, that makes sense. I just want to pivot to a smaller point, if you could, deferral, that's baked into the guide right now. Just want to be clear on the treatment there. Rejji HayesEVP & CFO at CMS Energy00:36:12Jeremy, this is Reggie. We have not presupposed approval of the deferred accounting order. Like I said, I think we've made a very compelling case given the historic nature of the storm and our efforts to restore customers as quickly as possible both inside our service territory and out. So we think we've made a compelling case. But as you know given our conservative nature we have not presupposed approval of that. Jeremy TonetED - Equity Research Analyst at JPMorgan Chase00:36:39Okay. Got it. That's very helpful. Thanks. And just last one if I could. Jeremy TonetED - Equity Research Analyst at JPMorgan Chase00:36:44As it relates to ITC's the unregulated part of the business, what's the magnitude of earnings exposure in your plan here? And really if you could just outline a bit more how tax equity impacts this and any other relevant considerations and how potential tariff risk at the project level could influence growth here? I know you touched on it a bit before, just wondering if you could flush out those points a bit. Rejji HayesEVP & CFO at CMS Energy00:37:09Yes, Jeremy, I'll take this as well. This is Reggie. So I would say in the context of 2025 guidance, in our original guidance, we guided NorthStar at $0.18 to $0.22 Given the planned large outage at DIG, which historically really going forward is the flagship earnings contributor to NorthStar. We are anticipating more contribution from commercial renewables projects and we have two solar projects that are well on their way of delivering constructive outcomes later this year. And so I would say, the exposure from a renewables perspective this year is a little bigger than other years or prior years. Rejji HayesEVP & CFO at CMS Energy00:37:43And so of that $0.18 to $0.22 assume about three quarters of that is delivered by residual benefits from ongoing assets, little bit of North Star, but primarily from two solar projects we have underway. As we look at the outer years of the plan, still anticipation of solid renewable project development over the course of the plan. But again, you should always assume that DIG will be the primary contributor of earnings to NorthStar over the course of the next five years. Let me pause there and see if there are any questions on that. Jeremy TonetED - Equity Research Analyst at JPMorgan Chase00:38:18No, that's helpful. I'll leave it there. Thank you. Operator00:38:27The next question today will be from the line of Nicolas Campanello with Barclays. Please go ahead. Your line is now open. Garrick RochowPresident and CEO at CMS Energy00:38:35Hi, Nick. Operator00:38:40Nicholas Campanella from Barclays. Your line is now open. If you'd like to proceed with your question. Apologies, we're not receiving audio from Nicholas' line there. We're moving on to the next question being from the line of Julien Smith with Jefferies. Operator00:38:58Please go ahead. Your line is now open. Julien Dumoulin-SmithResearch Analyst at Jefferies Financial Group00:39:01Hey, team. Morning and pleasure here. I hope I get as candid response from Gerrick as as earlier here. Just with I I think we're developing a new pattern. Just with with on economic development, I'd just love to understand how you guys are thinking about them. Julien Dumoulin-SmithResearch Analyst at Jefferies Financial Group00:39:18I saw there heard the comments on the call with respect to data center activity and ongoing development year to date subsequent to the legislation. But in parallel, also note the Goshen developments from the County Board here. How are you thinking about what's included in the 900 megawatts of demand in the current plan? Are there puts and takes in that or is it still kind of static pending some more formal updates here? Just to understand how you think about both the positive and the negative accumulated year to date. Garrick RochowPresident and CEO at CMS Energy00:39:48Yeah. And so that 2% to 3% that makes up that 900 megawatts that's a conservative approach and you know that about how we plan. And so there is an economic development there's always that even in the best of times there's some slowdowns in some projects and some speed up in some projects and what's great about that 2% to 3% is we have like line of sight into that work. We're constructing the lines, we're constructing the substation. In many cases, we can see them building their facilities in the long term plans they have for that. Garrick RochowPresident and CEO at CMS Energy00:40:18And so that's exciting. That gives us confidence in that 2% to 3% low growth. And there's always little puts and takes. And as we as I shared one of the data centers that we're constructing right now is actually accelerating their low growth and their ramp up which is a positive sign and the same with the large manufacturing. And so to the degree there's a pause with Goshen, there's also some acceleration with some as well. Garrick RochowPresident and CEO at CMS Energy00:40:41And so that's all kind of in that mix to the 2% to 3%. Now if we go to the nine gigawatts, as I shared in my prepared remarks, but let me offer a little more clarity. There's a lineup of data centers there of 65. Some of them are moving faster and jumping the line and moving to the front of the line in the progress. And so that gives us a lot of confidence that those will materialize. Garrick RochowPresident and CEO at CMS Energy00:41:02But the next logical step in that process is get this tariff complete with the commission. Again, I'm optimistic that settlements an option there to be able to move those forward and for those data centers to take the next logical step. Does that help? Julien Dumoulin-SmithResearch Analyst at Jefferies Financial Group00:41:18Yes. No, absolutely. Thank you for that. Actually just to clarify that last piece since you bring it up. Just with the tariff here you alluded to potential settlement certainly a possibility in other states as well. Julien Dumoulin-SmithResearch Analyst at Jefferies Financial Group00:41:28Could that be paired up with a more formal commercial arrangement? That because would you get the clarity on the tariff would that be sort of the catalyst to announce any larger commitments here? Garrick RochowPresident and CEO at CMS Energy00:41:41Certainly, the data center projects and possibilities want to have clarity on that in the context of that. It's just from a special arrangement perspective, special contract we don't do those. That creates a lot of long term risk particularly for the company and for shareholders. And so this tariff, it really is the best option. And as you might imagine, when they have clarity on what that looks like, that'll be the next logical step in moving some of those projects forward. Julien Dumoulin-SmithResearch Analyst at Jefferies Financial Group00:42:11Awesome, guys. You guys take care. All the best. Thank you so much. Garrick RochowPresident and CEO at CMS Energy00:42:14Yes. Thank you, Julien. Operator00:42:17The next question today will be from the line of Michael Sullivan with Wolfe Research. Please go ahead. Your line is open. Michael SullivanDirector - Equity Research at Wolfe Research00:42:24Hey, good morning. Garrick RochowPresident and CEO at CMS Energy00:42:26Good morning, Michael. Michael SullivanDirector - Equity Research at Wolfe Research00:42:27Hey, Michael SullivanDirector - Equity Research at Wolfe Research00:42:29guys. Just wanted to ask quick on how you're thinking about the risk of transferability potentially going away. Think you've given us some numbers on what you embed there in your plan, but just what that scenario would look like if you were to lose the ability to transfer tax credits? Garrick RochowPresident and CEO at CMS Energy00:42:48Let me offer some high level comments, and Reggie will get into some specific numbers. Again, many of the Republican jurisdictions areas have benefited from the IRA. But what I think is even more important is the conversation that I'm having, part of the team's having, EEI's having with a number of Republican congressmen and women. And that is one support for these PTCs and ITCs as well as the tax monetization or transferability component of it. Because they see in these times the importance of affordability and how that transfers directly to savings for our customers. Garrick RochowPresident and CEO at CMS Energy00:43:24And that's been an important part of the conversation. So that's what gives us, we'll see how legislation takes place and how it all, evolves, but that gives us some certainty, I guess optimism about the ability to maintain PTCs and ITCs in this transferability going forward. But Reggie to offer some additional comments on the dollars. Rejji HayesEVP & CFO at CMS Energy00:43:44Yes. So Michael, appreciate the question and just to talk about potential offsets or countermeasures in the as I still see it in the unlikely event we saw transferability go away. We would look at a variety of financing sources. And I think the good news in this environment and in prior environments is that the capital markets remain broad and deep. And so we would certainly look at more junior subordinated notes as a potential option. Rejji HayesEVP & CFO at CMS Energy00:44:09Clearly, there's quite a bit of capacity in the market there. And based on our even our recent issuance of $1,000,000,000 that I noted in my prepared remarks, we saw in this year alone $2,000,000,000 to $3,000,000,000 of additional junior supported note capacity and that amount of capacity accretes over time as your book capitalization grows through retained earnings. And so a lot of opportunities to potentially look at more junior subordinated notes. Obviously, could look at doing additional equity as well. We feel very comfortable with the equity levels that we're issuing over the course of this five year plan and still think we have capacity to do additional equity to fund this attractive growth opportunity we have at the utility. Rejji HayesEVP & CFO at CMS Energy00:44:46And so incremental equity would also be a potential offset. And it's also important to note just the significant flexibility afforded to us through the energy law and the ability to earn on PPAs as we look to comply with the energy law and the significant renewable opportunities associated there with that creates a lot of balance sheet flexibility as well. And so as we look at subsequent five year plans, we may transfer or shift transfer is probably not the right word there. It's a pun not intended. But we could look to potentially shift our spend mix from instead of investing and owning some of those renewable opportunities, we could potentially contract and earn about a 9% FCM on those, which obviously again creates a lot of balance sheet capacity. Rejji HayesEVP & CFO at CMS Energy00:45:31And so those are all potential countermeasures in the event transferability went away. Michael SullivanDirector - Equity Research at Wolfe Research00:45:38Very helpful. And just to double check, the $700,000,000 plus number from the year end call in terms of what's in the plan is still good? Rejji HayesEVP & CFO at CMS Energy00:45:48That's still the current plan, yes. Michael SullivanDirector - Equity Research at Wolfe Research00:45:50Okay, great. Thank Michael SullivanDirector - Equity Research at Wolfe Research00:45:51you very much. Garrick RochowPresident and CEO at CMS Energy00:45:53Thank you. Operator00:45:56The next question is from the line of David O'Cara with Morgan Stanley. Please go ahead. Your line is now open. Analyst00:46:03This is Alex German for Dave. Good morning. Analyst00:46:08So starting with the storm tracker, could Analyst00:46:10you talk about the strategy going forward to get it approved? Is there any specific changes you plan to make to address the pushbacks? Garrick RochowPresident and CEO at CMS Energy00:46:19In reference just for clarity for those who might be listening to the call, a number of the previous electric rate cases we've proposed a storm tracker or storm recovery mechanism in those. We've heeded some of the comments from both staff as well as commissioners on sharing and greater sharing of that of those mechanisms. Unfortunately, we've not had success in that mechanism but we continue to look at options to be able to offset some of the costs. Again, I'd go back to the Liberty audit which again recommends best practices for jurisdictions and utilities and ultimately for the customer is to have a mechanism in place for extreme weather. The storm recovery mechanism or tracker is one way to go about it. Garrick RochowPresident and CEO at CMS Energy00:47:06Another way that we're obviously filing for here and filed for this week is just through this deferred accounting mechanism for again regulatory treatment of historic or extreme weather. Analyst00:47:23Got it. Thank you. And back to the data centers demand in Michigan, did you see a big change in interest after the state approved the tax exemptions late last year? Garrick RochowPresident and CEO at CMS Energy00:47:35That is correct. Of our pipeline, it was primarily about 65% manufacturing prior to the signing of the sales and use tax and that flipped. The actual pipeline grew to nine gigawatts and a majority of it specifically about 65% of it is data centers as a result and so we attribute to that to in part due to the sales and use tax exemption but also there are other RTOs that are have had some challenges and so MISO continues to be an RTO and frankly we have a nice energy law that supports the ability to put on the supply that's needed and necessary for these important projects. Analyst00:48:22Got it. Very clear. Thank you. Operator00:48:28The next question will be from the line of Travis Miller with Morningstar. Please go ahead. Your line is now open. Travis MillerAnalyst at Morningstar00:48:35Thank you. Good morning, everyone. Garrick RochowPresident and CEO at CMS Energy00:48:38Good morning, Travis. Travis MillerAnalyst at Morningstar00:48:42On the electric rate case, wondering if there were any lessons learned or aside from the headline numbers, anything in the case decision that you'd like to go back for or you hoped to get anything like that? You mentioned the storm tracker, but anything aside from that? Garrick RochowPresident and CEO at CMS Energy00:49:02There's always room for improvement in our cases. I want to be real clear. We've had a successful track record, but we're not perfect. There are a lot of opportunities for us to improve. We get the feedback staff, we get the feedback from the commissioners, and there's important work to do. Garrick RochowPresident and CEO at CMS Energy00:49:18One of the important pieces that are comments that was made by the commissioners when they provide the order was the mix of capital and O and M. And recall that in that case, the Liberty Auditor, the distribution audit kind of came midway through. And so we had a capital in there and the recommendations on tree trimming and vegetation management were were not in there. And so you can imagine that in this next case that we'll have a greater degree and a greater amount of vegetation management and we'll also match that with the important capital investments because it's both. You have to deliver the reliability and long term resiliency. Garrick RochowPresident and CEO at CMS Energy00:49:55And so I would expect to see filing our reliability roadmap more capital investments but also a much larger investment too in vegetation management to improve our reliability for our customers. And so that's an area of improvement. There was also from the bench a small thing and just following where the dollars went. We got more granular in some of our bucketing so we could see the benefits of that work and there were some feedback that you know you couldn't tick and tie as easily. So we're going to improve that as well and just make a key. Garrick RochowPresident and CEO at CMS Energy00:50:25This is kind of I'm in the I'm in the weeds now, it's just a key to be able to make that clear for interveners as well as the staff and commissioners to follow. So those are ways we're always looking to improve the process. Rejji HayesEVP & CFO at CMS Energy00:50:37And Travis, all I would add, this is Reggie. Aside from a 10.25 ROE, which was on my personal wish list, the other, subtlety or a smaller element of the filing that we, did seek and unfortunately didn't get support for. But over time I do think it would be helpful as we did propose a wildfire risk mitigation plan. And though Michigan is not as susceptible to a lot of states to the west of us to wildfire, we do think you cannot plan soon enough for wildfire risk mitigation. So we had $12,000,000 of capital ascribed to it, dollars 4,000,000 of which was for strategic undergrounding, covered conductors is another bit of the spend and then what I would call strategic vegetation management. Rejji HayesEVP & CFO at CMS Energy00:51:20And so we do think over time we'd like to start to put in place a program because again I don't think you can plan too soon for that. And so that was the other item on the wish list that we'd like to get support for going forward. Travis MillerAnalyst at Morningstar00:51:33Okay. That's great. I think we all have 10.25 on the wish list. REP, when you get that September ruling, what's kind of the next step? Would there be any immediate, I guess, disclosures or changes potentially in the capital plan? Travis MillerAnalyst at Morningstar00:51:54Or is that something that's going to evolve as you do perhaps RFPs or some other type of solicitations along the way? Anything that's going to happen, say, in September or October after the decision? Garrick RochowPresident and CEO at CMS Energy00:52:09Well, gives it certainly gives us more clarity on the clean energy and the a portion of the investments that are in the five year plan. There could be additional investments in that and that again flows into the integrated resource plan. And so you'll see that approval is important to build out the integrated resource plan. So those are the couple of components that you will see and of course, we'll have greater clarity and certainty around what those renewable energy supply assets are. Travis MillerAnalyst at Morningstar00:52:41Great. That's all I had. Thanks a lot. Garrick RochowPresident and CEO at CMS Energy00:52:45Thanks, Travis. Operator00:52:49The next question will be from the line of Greg Orrill with UBS. Please go ahead. Your line is open. Gregg OrrillAnalyst at UBS Group00:52:57Yes. Thanks for taking my question. Garrick RochowPresident and CEO at CMS Energy00:52:58Good morning. Gregg OrrillAnalyst at UBS Group00:53:00Just the I wasn't quite sure I understood what the $04 impact in the balance of the year related to the storm accounting order was? Sorry if I missed that. Rejji HayesEVP & CFO at CMS Energy00:53:18Yes. I'm not sure, Greg, this is Reggie, where you got the $04 impact. But just to walk through the details of the estimated, and I say estimated because we're still doing all of the closing out of contracts and invoices from third parties who helped us. But as you'll see in the regulatory filing we submitted yesterday, the estimates for the storm was about $100,000,000 and so call that $0.25 per share of impact. And as you think about the waterfall I walked through for the bridge of financial performance over the course of the year, we are assuming a good portion of that storm impact will flow through that cost bucket or what we're calling specifically reliability storms including productivity. Rejji HayesEVP & CFO at CMS Energy00:54:09And so, the $04 of negative variance that you see in year to go when you add that to the $05 of negative variance we saw in our year to date actuals, what you see is basically a $0.12 per share swing versus our original guidance. And that basically adds up to about $50,000,000 pretax. And so we've baked into the assumption of additional service restoration expense, productivity in the form of CE Way, the CE Way and all the other cost out items I enumerated in my prepared remarks. And so we're assuming that we're going to have an increase for sure in service restoration expense, but we will also net those down with cost reductions. We've also assumed cost performance as well in that parent financing tax and other bucket. Rejji HayesEVP & CFO at CMS Energy00:54:54And so if you look at the comparison of what we have in our current waterfall versus our original guide, you'll see about zero one one dollars per share or $45,000,000 roughly pretax of improvement versus the original guide. And that's where you see the balance of cost takeout or support to fund the impact of that service restoration expense increase. And that's what gets us to our full year guidance. So it is flowing through the cost associated with the service restoration expense is flowing through that reliability storms including productivity line item and again the countermeasures are flowing through both of those sort of latter two buckets in waterfall. Let me pause there and see if you have any further questions Greg. Gregg OrrillAnalyst at UBS Group00:55:34No, that's great. I appreciate that. Thank you. Operator00:55:40Our next question will be from the line of Andrew Wiesel with Scotiabank. Please go ahead. Your line is now open. Garrick RochowPresident and CEO at CMS Energy00:55:48Hi, Andrew. Andrew WeiselDirector at Scotia Howard Weil00:55:49Hey, good morning, everyone. Good luck settling the gas rate case. If you make a five timers club like Saturday Night Live, I think you get one of those cool black velvet jackets. Garrick RochowPresident and CEO at CMS Energy00:56:01Yeah. I look forward to wearing that jacket. It's good. Andrew WeiselDirector at Scotia Howard Weil00:56:07Just want to clarify. I think you kind of just answered this on the last question. But to clarify, are you already in cost cutting mode after that storm? Or are you just reminding us of your proven ability to do that? Rejji HayesEVP & CFO at CMS Energy00:56:21No, Andrew. We've been we got in the foxhole very early in the first quarter. I'd say once we started to get visibility that a significant storm is underway. And also even earlier in the month we started to see pretty mild temperatures in the month of March. And so we already started to get in the foxhole and start identifying and implementing countermeasures really in the March that are already well underway. Rejji HayesEVP & CFO at CMS Energy00:56:45And so this is beyond hypothetical and academic. We're in implementation mode. And so, still more work to be done, but we are already in implementation mode based on the visibility we got earlier in the month and then as the storm started to materialize. Let me pause there. Andrew WeiselDirector at Scotia Howard Weil00:57:01I guess my question is should this deferral be approved which of course would be a good situation what what would you do then? You know, if you're if you're already cutting costs and then you get the good news of getting this approved, what happens? Rejji HayesEVP & CFO at CMS Energy00:57:20Yes. So it certainly creates additional flexibility in the plan which we like. And I'll remind you that the CE Way will be one of sort of the anchor countermeasures that we'll lean into and we see no downside in overachieving on our CE Way targets year in and year out because it just creates additional headroom going forward and rate reduction opportunities for customers going forward. And so there's no reason to dial back those efforts. We may take a harder look at some of the planned cost deferrals and some of the other measures like I said where we would limit hiring and some of those other sort of flex related items that are more one timers. Rejji HayesEVP & CFO at CMS Energy00:57:56And so it just gives us more flexibility, to potentially turn back on those spigots in the event we get success there. But if we see opportunity to execute on recurring savings opportunities we would obviously carry on with those. Does that make sense Andrew? Andrew WeiselDirector at Scotia Howard Weil00:58:14Yeah. It does. Given the weather challenges, it's been a while since you were in invest mode as opposed to lean mode. But, yeah, that would be a good situation. Okay. Andrew WeiselDirector at Scotia Howard Weil00:58:22And Rejji HayesEVP & CFO at CMS Energy00:58:23then Yeah. One can only drain. Andrew WeiselDirector at Scotia Howard Weil00:58:24Is, I think I had yeah. Kind of like the 10.25. My other question, I think I asked you this after a storm a few years ago. What grade would you give yourselves in terms of reliability from the storm? I know, obviously, it's been a focus and the Liberty audit came out last year, but how would you evaluate the performance after the storm? Garrick RochowPresident and CEO at CMS Energy00:58:49Much, much better. And I would point to customers and policymakers, real positive sentiment with both. We're not seeing what we saw in 2023 was just a lot of aftermath after the storm, and we've improved greatly through process, through investments, and we've got a lot of positive feedback. And so I don't want to be too boastful. And so I'm still kinda gonna grade myself hard. Garrick RochowPresident and CEO at CMS Energy00:59:20So let's say, like, b plus. I still think there's room for improvement, but it's a lot different fact pattern than we had back in '23. Andrew WeiselDirector at Scotia Howard Weil00:59:34Very good. Thank you so much. Garrick RochowPresident and CEO at CMS Energy00:59:38Thanks. Operator00:59:40Our next question is from the line of Sophie Karp with KeyBanc. Please go ahead. Your line is open. Sophie KarpManaging Director & Equity Research Analyst at KeyBanc Capital Markets00:59:47Hi. Good morning, Most of my questions yes, most of my questions have been answered, but maybe I can just ask you a high level question on the economy in Michigan. I guess, we saw the unemployment rate, which was a little elevated for the state. What are you seeing from your customers, if anything, in terms of what are they saying about the activity? Are they adjusting to the new kind of reality with the tariffs? Sophie KarpManaging Director & Equity Research Analyst at KeyBanc Capital Markets01:00:14And if not, Any color would be helpful. Garrick RochowPresident and CEO at CMS Energy01:00:18I still see a lot Garrick RochowPresident and CEO at CMS Energy01:00:20of positive indicators in Michigan. And part of it I talked about in the response to a question in my prepared remarks, particularly in the 2% to 3% low growth. The fact that data centers are accelerating, the fact that manufacturing customers are still moving forward with projects and we can see that construction and then in some cases asking to expand or at least in one case asking to expand are promising indicators. But if I go right down to today, right, and remember, like, we follow the margin and it's in the residential commercial space, we still see solid performance there. And if you look into like and we do this, we look into like, permits and housing starts, and if you look at that Grand Rapids Metropolitan area, permits, starts for single family continue to increase, for multifamily commercial continue to increase. Garrick RochowPresident and CEO at CMS Energy01:01:09And so those are positive indicators. The other one I look at is relocations is what we call it or alterations. Those are customer requested work for changes at their home or their business. And so maybe they need a larger meter to be able to serve, their load. Maybe they need the meters moved because they're putting an addition on their home or their business. Garrick RochowPresident and CEO at CMS Energy01:01:31That, of course, went up in the pandemic as people went home and invested in their homes, and that is still elevated. That's still above pre pandemic levels, which is another good indicator about people investing in businesses and in their homes, particularly in the residential and commercial space. So that gives us a lot of confidence that the sales piece of resi and commercial continue to be and where the margin is continue to be solid. The other thing I want point out is there's always pluses and minuses when you get in the industrial space and I talked about that a little bit with Julian in the Goshen piece. But and I when I look at our mix and how diversified Michigan is, and we surprise people with this number sometime, there are 4,000 businesses in Michigan in the aerospace and defense industry. Garrick RochowPresident and CEO at CMS Energy01:02:164,000, including now Saab in our service territory. And so in this federal administration, you can make a strong bet that defense spending is gonna increase. And so that's a real positive, for Michigan. The other one I like to point to is that we're the second most diverse state from an agriculture perspective. And what we've seen over the last ten to fifteen years is more of that processing of foods move closer to the fields, move closer to the farm. Garrick RochowPresident and CEO at CMS Energy01:02:44And as a result, there's a lot more processing and manufacturing of food and that's growing in this environment. Like even in the worst scenario, even the worst scenario of a recession, people still need food, bread, milk and those dairy products. And so a long winded way of saying, we still see a lot of positive indicators in our service territory which gives us a lot of confidence of Michigan in a forward look. Sophie KarpManaging Director & Equity Research Analyst at KeyBanc Capital Markets01:03:10Thank you. That's all for me. Appreciate the color. Garrick RochowPresident and CEO at CMS Energy01:03:15Thank you. Operator01:03:18Thank you. And that concludes our Q and A. So I'd now like to hand back to Mr. Garik Rochow for closing remarks. Garrick RochowPresident and CEO at CMS Energy01:03:26Thanks, Harry. I'd like to thank you for joining us today. I look forward to seeing you at the upcoming AGA Financial Forum. Take care and stay safe. Operator01:03:39That concludes today's conference. We thank everyone for your participation.Read moreParticipantsExecutivesJason ShoreTreasurer & VP of Investor RelationsGarrick RochowPresident and CEORejji HayesEVP & CFOAnalystsDurgesh ChopraManaging Director at Evercore ISIConstantine LednevVice President - Equity Research at Guggenheim PartnersJeremy TonetED - Equity Research Analyst at JPMorgan ChaseJulien Dumoulin-SmithResearch Analyst at Jefferies Financial GroupMichael SullivanDirector - Equity Research at Wolfe ResearchAnalystTravis MillerAnalyst at MorningstarGregg OrrillAnalyst at UBS GroupAndrew WeiselDirector at Scotia Howard WeilSophie KarpManaging Director & Equity Research Analyst at KeyBanc Capital MarketsPowered by Conference Call Audio Live Call not available Earnings Conference CallCMS Energy Q1 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) CMS Energy Earnings HeadlinesCMS Energy Declares Quarterly Dividend on Cumulative Redeemable Perpetual Preferred Stock | CMS ...May 2 at 3:59 PM | gurufocus.comCMS Energy Declares Quarterly Dividend on Cumulative Redeemable Perpetual Preferred StockMay 2 at 3:30 PM | prnewswire.comElon Set to Shock the World by May 1st ?Tech legend Jeff Brown recently traveled to the industrial zone of South Memphis to investigate what he believes will be Elon’s greatest invention ever… Yes, even bigger than Tesla or SpaceX.May 3, 2025 | Brownstone Research (Ad)Consumers Energy, the Principal Subsidiary of CMS Energy, Declares Quarterly Dividend on ...May 2 at 3:11 PM | gurufocus.comConsumers Energy, the Principal Subsidiary of CMS Energy, Declares Quarterly Dividend on Preferred StockMay 2 at 3:11 PM | investing.comConsumers Energy, the Principal Subsidiary of CMS Energy, Declares Quarterly Dividend on Preferred StockMay 2 at 2:30 PM | prnewswire.comSee More CMS Energy Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like CMS Energy? Sign up for Earnings360's daily newsletter to receive timely earnings updates on CMS Energy and other key companies, straight to your email. Email Address About CMS EnergyCMS Energy (NYSE:CMS) operates as an energy company primarily in Michigan. The company operates through three segments: Electric Utility; Gas Utility; and Enterprises. The Electric Utility segment is involved in the generation, purchase, transmission, distribution, and sale of electricity. This segment generates electricity through coal, wind, gas, renewable energy, oil, and nuclear sources. Its distribution system comprises 208 miles of high-voltage distribution overhead lines; 4 miles of high-voltage distribution underground lines; 4,428 miles of high-voltage distribution overhead lines; 19 miles of high-voltage distribution underground lines; 82,474 miles of electric distribution overhead lines; 9,395 miles of underground distribution lines; 1,093 substations; and 3 battery facilities. The Gas Utility segment engages in the purchase, transmission, storage, distribution, and sale of natural gas, which includes 2,392 miles of transmission lines; 15 gas storage fields; 28,065 miles of distribution mains; and 8 compressor stations. The Enterprises segment is involved in the independent power production and marketing, including the development and operation of renewable generation. It serves 1.9 million electric and 1.8 million gas customers, including residential, commercial, and diversified industrial customers. The company was incorporated in 1987 and is headquartered in Jackson, Michigan.View CMS Energy ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback PlanMicrosoft Crushes Earnings, What’s Next for MSFT Stock?Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of Earnings Upcoming Earnings Palantir Technologies (5/5/2025)Vertex Pharmaceuticals (5/5/2025)Realty Income (5/5/2025)Williams Companies (5/5/2025)CRH (5/5/2025)Advanced Micro Devices (5/6/2025)American Electric Power (5/6/2025)Constellation Energy (5/6/2025)Marriott International (5/6/2025)Energy Transfer (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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PresentationSkip to Participants Operator00:00:00Good morning, everyone, and welcome to the CMS Energy twenty twenty five First Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section. This call is being recorded. After the presentation, we will conduct a question and answer session. Instructions will be provided at that time. Operator00:00:25Just a reminder, there will be a rebroadcast of this conference call today beginning at twelve m. Eastern Time running through May 1. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section. At this time, I'd like to turn the call over to Mr. Jason Shaw, Treasurer and Vice President of Investor Relations. Jason ShoreTreasurer & VP of Investor Relations at CMS Energy00:00:47Thank you, Harry. Good morning, everyone, and thank you for joining us today. With me are Derek Roshow, President and Chief Executive Officer and Reggie Hayes, Executive Vice President and Chief Financial Officer. This presentation contains forward looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially. Jason ShoreTreasurer & VP of Investor Relations at CMS Energy00:01:20This presentation also includes non GAAP measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website. And now I'll turn the Jason ShoreTreasurer & VP of Investor Relations at CMS Energy00:01:34call over to Garik. Garrick RochowPresident and CEO at CMS Energy00:01:36Thank you, Jason, and thank you everyone for joining us today. CMS Energy, consistent, predictable, dependable. Twenty two years of steady hands at the wheel. It's what you expect and it's what we deliver. Garrick RochowPresident and CEO at CMS Energy00:01:53And even more important in these times of broader economic uncertainty. It starts with our investment thesis, which is based on conservative planning paired with disciplined execution, a commitment to excellence across our electric and gas businesses, constructive legislation and regulation and driving growth across the state with a robust economic development pipeline. Our customers can count on us deliver safe, reliable, affordable, clean and equitable energy under all conditions and our investment thesis is what keeps us on track. It's our focus. It's what you count on us for every year. Garrick RochowPresident and CEO at CMS Energy00:02:40In fact, I'd like to take a moment to shine a spotlight on our recent storm response, which included company crews, dispatchers, call centers, coworkers, contractors and volunteers who were committed to delivering excellence for our customers during the recent historic storms that impacted Michigan in late March and early April. These storms packed it all in, 14 tornadoes, nearly 100 mile per hour winds and in northern locations over 1.5 inches of ice. The team executed well. We were prepared and ready to dispatch prior to the first wave of weather with 500 crews pre staged and 900 total crews dispatched. Fighting storms on two fronts, we restored customers safely and quickly, then continue to serve supporting local co op utility customers in their restoration efforts. Garrick RochowPresident and CEO at CMS Energy00:03:40We saw favorable customer and positive policymaker support because of our response. Yes, our investments and process changes are making a difference. I'm extremely proud and thankful for our coworkers and how they showed up in the work they do daily to improve performance for our customers. I want to start today with Michigan's constructive regulatory environment. We are pleased with the recent electric rate order in March, approximately 65% of the revised ask, nearly double the investments included in the investment recovery mechanism and solid support for investments to improve electric reliability for our customers. Garrick RochowPresident and CEO at CMS Energy00:04:28We work hard to ensure our filings are transparent and high quality and we are seeing the results, achieving constructive regulatory outcomes time and time again. We'll continue to work closely with MPSC staff, interveners and the commission on the importance of our investments to bolster our electric and gas systems to ensure we continue to serve customers during sunny days and extreme weather. Given our continued focus on improving electric reliability, you can expect us to file our next electric rate case in Q2. In our gas rate case, we did recently see staff testimony, which we view as a constructive starting position. As we've shown in the past, we're always open to settlement having settled our last four gas cases. Garrick RochowPresident and CEO at CMS Energy00:05:22The dynamics of these gas cases are different than our electric cases and we feel good either way, a settlement or fully adjudicated order. For our longer term filings, we expect an order in our renewable energy plan or REP by mid September. Our REP will help define our clean energy future and feeds into our integrated resource plan or IRP that we'll file next year. Earlier in my prepared remarks, I referenced broader economic uncertainty. As you would expect, we are closely monitoring the landscape, potential changes, shaping as needed and preparing to adjust as necessary. Garrick RochowPresident and CEO at CMS Energy00:06:09Our conservative planning and strong fundamentals as well as our track record of delivering through any event gives me confidence that we are well positioned to effectively navigate any scenario. This confidence is further bolstered by a diversified service territory with minimal exposure to the auto industry or any other large sectors. We're actively monitoring the landscape and have a diverse supply chain, which limits our exposure to tariffs. Our direct and indirect spend is approximately 90% domestically sourced and we continue to shift U. S.-based Vendors to lower our exposure. Garrick RochowPresident and CEO at CMS Energy00:06:52Much of the exposure is related to capital equipment, which means any customer impact would be spread over the life of the asset and our earnings are largely insulated. Nonetheless, we're actively working with all suppliers to manage fluctuations in price and sourcing to keep customer bills affordable as we execute on our plan. In the context of the Inflation Reduction Act or IRA, we've seen good support from Republicans in our individual conversations, the 25 who have signed on in support of continuing tax credits. Our read is that there may be a partial appeal of portions of the IRA. And although we do not expect changes to the renewable tax credits, we continue to safe harbor equipment for projects within our five year plan. Garrick RochowPresident and CEO at CMS Energy00:07:45And as a reminder, we have a supportive energy law in Michigan that mandates renewables and 100% clean energy resources by 2,040. The law shapes our customer investments through our REP and IRP. To the degree there are changes in the IRA, Michigan's law offers us enough flexibility to achieve the intent of the law and ensure resource adequacy and affordability for our customers. As for industry exposure, I'll remind you the auto industry is about 2% of our total gross margin. The heart of our electric service territory is in the Grand Rapids Metropolitan Area, which is diversified with commercial businesses and manufacturing and includes significant jobs and state investment. Garrick RochowPresident and CEO at CMS Energy00:08:34We're also seeing expansion in other industries including defense, aerospace, polysilicon, semiconductors and agriculture. At CMS Energy, our core business is to serve under all conditions. Our mindset of preparedness and conservative planning ensures we are ready for multiple scenarios, calm in the storm and steady at the wheel. I want to talk for a moment about Michigan's exciting growth renaissance and our work to help our service territory in the state thrive and prosper. First and foremost, we see strong progress in the continued construction and work that make up the 2% to 3% load growth within our five year financial plan. Garrick RochowPresident and CEO at CMS Energy00:09:23We have seen one large data center project accelerate their load ramp up by almost a year and another large new manufacturing project has requested to expand service by an additional 10%, all positive indicators. Both we can deliver. Since the beginning of the year, with the elimination of the sales and use taxes for data centers, our pipeline has grown to nine gigawatts, with more of that shift about 65% toward data centers. We're seeing the data center pipeline continue to progress and feel confident some of these projects will materialize into contractual agreements. The data center tariff, which we filed in February with the commission is the next logical step in that process. Garrick RochowPresident and CEO at CMS Energy00:10:16The tariff provides a great opportunity for data centers and protects our existing customers. We'll continue to work through this proceeding with settlement being a possible outcome. As I've shared before, we are also excited about the manufacturing growth in our pipeline that brings with it secondary and tertiary benefits including new and growing commercial business as well as residential load. We're excited about and committed to Michigan's future and we are prepared to serve its growing energy needs. Now on to the financials for the quarter. Garrick RochowPresident and CEO at CMS Energy00:10:54In the first quarter, we reported adjusted earnings per share of $1.2 We remain confident in this year's guidance and long term outlook and are reaffirming all our financial objectives. Our full year guidance remains at $3.54 to $3.6 per share with continued confidence toward the high end. Longer term, we continue to guide toward the high end of our adjusted EPS growth range of 6% to 8%. With that, I'll hand the call over to Reggie. Rejji HayesEVP & CFO at CMS Energy00:11:29Thank you, Guric, and good morning, everyone. On Slide eight, you'll see our standard waterfall chart, which illustrates the key drivers impacting our financial performance for the quarter and our year to go expectations. For clarification purposes, all of the variance analysis herein are in comparison to 2024, both on a first quarter and nine months ago basis. In summary, through the first quarter of twenty twenty five, we delivered adjusted net income of $3.00 $4,000,000 or $1.02 per share, which compares favorably to the comparable period in 2024, largely due to the absence of the mild weather experienced in Q1 of twenty twenty four, coupled with higher rate relief net of investments. These sources of positive variance were partially offset by higher O and M costs at the utility driven by the continued execution of our electric reliability roadmap and the timing of select items at NorthStar like our planned outage at the Dearborn Industrial Generation Facility or DIG among other factors. Rejji HayesEVP & CFO at CMS Energy00:12:34To elaborate on the impact of weather, we experienced a relatively normal winter in Michigan in the first quarter for the first time in a couple of years. As such, we saw zero two six dollars per share of favorable variance, which largely reflects the absence of the mild weather experienced in the first quarter of twenty twenty four. Rate relief net of investment related expenses resulted in $07 per share a positive variance due to constructive outcomes achieved in last year's electric and gas rate orders in addition to the benefits of ongoing renewable projects. Moving on to cost trends. As noted, in accordance with our electric reliability roadmap, we continue to increase the size of our vegetation management program as we glide path to a seven year trim cycle across our low voltage electric distribution system. Rejji HayesEVP & CFO at CMS Energy00:13:24The associated financial impact was the key driver of the $05 per share of negative variance versus the comparable period in 2024. In our catchall category represented by the final bucket in the actual section of the chart, you'll note a negative variance of $0.23 per share, largely driven by a strong 2024 comp at NorthStar due to normalized operations at DIG and the timing of tax benefits from renewable projects. Other notable drivers in this category include the impact of parent financing activities in the quarter and select one time reversals from last year. Looking ahead, we plan for normal weather as always, which equates to $0.12 per share of positive variance for the remaining nine months of the year, primarily due to the absence of the mild temperatures experienced in the fourth quarter of twenty twenty four. From a regulatory perspective, we're assuming $0.16 per share of positive variance, which is largely driven by the constructive electric rate order received from the commission in March, ongoing benefits of renewable projects at the utility and the assumption of a supportive outcome in our pending gas rate case. Rejji HayesEVP & CFO at CMS Energy00:14:34On the cost side, we anticipate higher overall O and M expense at the utility for the remainder of the year, largely driven by the expectation of increased service restoration costs attributable to the large weather system that impacted our service territory in late March extending into early April that Gerrick mentioned. It's worth noting that this storm was the costliest in our company's history at roughly $100,000,000 of operating and maintenance or O and M expense per our preliminary estimates. As you would expect, we're already busy at work identifying and implementing countermeasures such as limiting hiring, reducing our use of consultants and contractors and eliminating other discretionary spending among other potential offsets. And of course, we expect increased productivity from the CE Way, which our workforce has delivered every year since we instituted the lean operating system roughly a decade ago. It is also worth noting that we have sought a deferred accounting order for the financial impacts of the storm given its historic nature, which we filed earlier this week. Rejji HayesEVP & CFO at CMS Energy00:15:40The recalibration of our service restoration expense for the remainder of the year, net of anticipated savings from the aforementioned countermeasures, will drive an estimated net impact of $04 per share of negative variance for the remaining nine months of the year. Lastly, in the penultimate bar on the right hand side, you'll see an estimated range of $03 to $09 per share of negative variance, which incorporates further risk mitigation to the financial headwinds encountered in the first quarter and provides additional contingency should we need it, namely in the form of opportunistic financing activities. Before moving on, I'll just note that our track record of delivering on our financial objectives over the last two decades, irrespective of the circumstances, speaks for itself. That said, we'll always do the worrying so you don't have to, and we remain confident in our ability to deliver on our financial and operational objectives this year to the benefit of all stakeholders. Moving on to credit quality, it is worth noting that Fitch reaffirmed our credit ratings in March as noted at the bottom of the table on Slide nine, and we are currently working through the review process with Moody's. Rejji HayesEVP & CFO at CMS Energy00:16:53Longer term, we continue to target solid investment grade credit ratings and will manage our key credit metrics accordingly as we balance the needs of the business. Slide 10 offers an update to our funding needs in 2025 at the utility and the parent. During the quarter, we issued $1,000,000,000 of junior subordinated notes for hybrids with a 6.5% coupon as parent, which I'll note was identical to rates achieved by some of our much larger peers and had the tightest credit spread achieved for a hybrid in recent memory, which speaks to our credit quality and a strong receptivity to our paper in the market. As you'll note in the table on the left hand side of the page, the hybrid issuance address a good portion of our financing needs at the parent for the year, while offering significant financial flexibility on our remaining needs. We'll look to complete the balance of our financing plan at the parent and utility over the remaining months of the year with a keen focus on maintaining our consolidated credit metrics around the mid teens area from a funds from operation to total debt perspective. Rejji HayesEVP & CFO at CMS Energy00:17:59As always, we remain opportunistic and look to capitalize on market conditions. And with that, I'll hand it back to Gerrick for his final remarks before the Q and A session. Garrick RochowPresident and CEO at CMS Energy00:18:09Thanks, Reggie. As the landscape continues to evolve, I want to remind everyone about our long history of delivering under all scenarios for all our stakeholders. Remember, our business is preparedness and response. Through uncertainty, recession, bad weather, doesn't matter. We've seen it before, and we've navigated the waters. Garrick RochowPresident and CEO at CMS Energy00:18:31Bottom line, we deliver. Our track record speaks for itself. We focus on what is necessary to deliver for our customers and investors, and we remain confident in our outlook for 2025 and beyond. With that, Harry, please open the lines for Q and Operator00:18:58please do so by pressing the star key followed by the digit one on your touch tone telephone. If you're using a speaker function, please make sure you pick up your headset. We'll proceed in the order you signal us, and we'll take as many questions as time permits. Our first question will be from the line of Durgesh Chopra with Evercore ISI. Please go ahead. Operator00:19:28Your line is open. Garrick RochowPresident and CEO at CMS Energy00:19:31Good morning, Durgesh. Durgesh ChopraManaging Director at Evercore ISI00:19:33Hey, good morning, Garek. Thank you for taking my question. Hey, appreciate all the commentary around tariffs and IRA. I just one question was focusing on North Star. Maybe just can you remind us what percentage of capital I appreciate it's small versus the rest of the company. Durgesh ChopraManaging Director at Evercore ISI00:19:54What percentage of capital is going towards solar storage? And then just given the IRA discussion and repeal risk, do you kind of reprioritize that capital potentially maybe switch that with higher regulated capital? And then your comments around safe harboring, do those apply to North Star as well as you try to kind of secure those tax credits into the future? Thank you. Garrick RochowPresident and CEO at CMS Energy00:20:23Thanks for your question Durgesh. Great question. Again, context is really important here in the context of North Star. So we're talking about 5% of the EPS mix here, so small. And remember, big driver here is DIG or Dearborn Industrial Generation. Garrick RochowPresident and CEO at CMS Energy00:20:37That's the big story in the energy and capacity markets. And so when it comes down to the amount of capital that we're spending on renewables it's small. Reggie will have the numbers here in a bit but there's nothing on storage, zero on storage. And so it's all really renewables and those are again projects that are well laid out for the future. Now how we derisk those projects? Garrick RochowPresident and CEO at CMS Energy00:20:57One, have contracts in place that allow for escalators. That's an important piece. But we've done a lot of great work in terms of securing panels. I've got panels secured through 02/1930 through a variety of vendors through contracts, some already on-site to be able to navigate any implications from a tariff perspective. And then I'm out in 2028 from a safe harbor provision in the main power transformers. Garrick RochowPresident and CEO at CMS Energy00:21:18And so we feel good about the runway there of projects, renewable projects and what we've done to derisk that. But as you know and your question alluded to, there's tons of flexibility. We have plenty of opportunities to invest in the utility itself and so those are decisions we make on a time by a year by year basis and where the needs are for the company and are best suited. But again feel good about NorthStar's ability to deliver not just in the year but also from a long term perspective. Rejji HayesEVP & CFO at CMS Energy00:21:46Yeah, Durgesh I'll just build on Gerrick's comments there. Yeah, we certainly feel good about NorthStar's prospects going forward and have done a lot to derisk renewable projects on both the utility side and the NorthStar side and have done some things in supply chain that further fortify our position going forward. From a capital perspective, we're planning and this is in our 10 ks that we filed last quarter about gross investments a little over $2,500,000,000 I say gross because we have planned to recycle capital largely at North Star through the sell down of common equity stakes. And so that is providing a lot of liquidity to fund their projects. And so the equity infusions from the parent are relatively light, probably about 20% of that or so or $05,000,000,000 So gross capital investments of about $2,500,000,000 to support commercial renewable projects over the next five years. Rejji HayesEVP & CFO at CMS Energy00:22:37And the reality is, if we do see some repeal of the IRA, we will just increase the bar or raise the expected hurdle rate for those renewable projects at NorthStar. And so if we saw the economics of those projects being less attractive, we would certainly allocate more capital to utility. As you know, capital is not an issue at the utility. There's plenty of opportunity. Our current five year plan at $20 of capital investments At utility has another $20,000,000,000 or so on the outside looking in and I think that that's the low end of capital investment opportunities outside of the plan. Rejji HayesEVP & CFO at CMS Energy00:23:13So a lot of flexibility to allocate capital to the utility versus North Star again if we see the economics of those projects start soften over time. So really good flexibility going forward and no concerns with the economic outlook there. Is that helpful? Durgesh ChopraManaging Director at Evercore ISI00:23:29Very helpful. A lot of flexibility there, sounds like. And then just quickly, Reggie, the deferred accounting order on the storm cost, have you guys done that before? Sorry, I should know, but I don't. Maybe just remind us if you have done that before? Durgesh ChopraManaging Director at Evercore ISI00:23:44And if not, like what are sort of Durgesh ChopraManaging Director at Evercore ISI00:23:46the procedural steps here? Durgesh ChopraManaging Director at Evercore ISI00:23:47Is there a time line that the commission is going to sort of rule this on by? Or is this just a one off type event and there's no set procedural schedule here? Thank you. Garrick RochowPresident and CEO at CMS Energy00:23:59And maybe I'll just take your question and do a little bigger picture on it and then we can go down in this process from a storm perspective. As Reggie talked about in his prepared remarks, there is a number of levers and opportunities everything from the CE Way to technology to what Reggie shared in his prepared remarks and how to deliver the year and for both the customers and really investors and really all stakeholders. That's the tools in the toolbox. And what we're doing with this particular storm, this what I would say is historic storm and really extreme weather as I characterized in my remarks is leveraging the Liberty Audit. If you go into Liberty Audit, that's the distribution audit. Garrick RochowPresident and CEO at CMS Energy00:24:38It specifically calls out best practices with jurisdictions and utilities is to have a mechanism for extreme weather. And that's what we filed, and that's really the first time we filed that with the commission in this kind of framework. We've had constructive conversations both with staff and the commissioners on this. And so, again, it's an ex parte filing. The timeline has not been established at this point. Garrick RochowPresident and CEO at CMS Energy00:25:05But, you know, I'm I'm guessing I'm going to go off a little off little off the record here. Like, I'm an old farmer. I grew up on a farm, and so I don't count my chickens before they hatch. And so that's a true thing from a farmer perspective. Like, understand this. Garrick RochowPresident and CEO at CMS Energy00:25:18Like, we're not counting on that. It's important. We think it's needed in Michigan. Again, constructive conversations, but we have a lot of tools in our tool belt to be able to deliver the year. Rejji HayesEVP & CFO at CMS Energy00:25:30Yeah. Durgesh, all I would add, and I wish I had a wish I had a farming analogy as well, Rejji HayesEVP & CFO at CMS Energy00:25:35but I do not, is, Rejji HayesEVP & CFO at CMS Energy00:25:36just a couple of things to Derek's good comments. And so you asked I think specifically about the timing of approval because it's in our ex parte filing. I think that will be at the commission's discretion. Obviously, we're our expectations are tempered, but we would love to see just a fairly quick resolution to the matter. So we just at least know what the outcome is in a timely fashion. Rejji HayesEVP & CFO at CMS Energy00:25:59And in terms of our history around this, we have sought mechanisms like this in the context of rate cases. I can't recall the last time we saw an accounting order like this outside of a rate case, maybe once in the past in my eight years as CFO. So this is fairly atypical, but we think given the historic nature of the storm, it's justified and I believe we've made a strong case in the filing as to why we should get support here. So I just wanted to address those two direct questions you had. Durgesh ChopraManaging Director at Evercore ISI00:26:25Awesome. Thank you. Appreciate the off the record and on the record commentary. Thanks so much. Operator00:26:35The next question today will be from the line of Shah Pourreza with Guggenheim Partners. Please go ahead. Your line is now open. Constantine LednevVice President - Equity Research at Guggenheim Partners00:26:42Good morning. Garrick RochowPresident and CEO at CMS Energy00:26:43Good morning, Shah. Constantine LednevVice President - Equity Research at Guggenheim Partners00:26:43It's actually Constantine here for Shah. Hello. Garrick RochowPresident and CEO at CMS Energy00:26:46Great. Constantine LednevVice President - Equity Research at Guggenheim Partners00:26:46It's actually Constantine. Hey, good morning. Constantine LednevVice President - Equity Research at Guggenheim Partners00:26:50How are you thinking about the execution on the financing plan just given that optically the balance of the equity needs is resolved through the hybrid? Is that is there kind of more execution to come in '25? Or is there some efficient financing that unlocks like a CapEx pull forward or any other opportunity in the near term? Rejji HayesEVP & CFO at CMS Energy00:27:14Constantine, is Reggie. Appreciate the question. Yes, per my prepared remarks, we still have a bit of financing left in the plan for the year. And so, at the parent, just going back to our original guidance, we said we had about $1,000,000,000 to do. So $1.3 of, what I'll just say non equity financing and our working assumption was senior debt assumption senior debt financings and then up to $500,000,000 of equity. Rejji HayesEVP & CFO at CMS Energy00:27:38Obviously, the hybrid transaction that you noted, really took care of a good portion of those needs. And so with the equity credit ascribed to hybrids that creates a lot of financial flexibility. And so we still have about $700,000,000 or so left for the remainder of the year. We're keeping all options on the table. We've seen really attractive execution across a variety of securities offered in the first quarter from some of our peers. Rejji HayesEVP & CFO at CMS Energy00:28:02And so we're keeping all options on the table, but have quite a bit of flexibility. And at the OpCo just to round it out, we've got $1,000,000,000 left and I think the working assumption for those financings will be first mortgage bonds. And so as always we'll look at which securities are priced most attractively at both the parent and the OpCo and we'll be opportunistic as we always are. With respect to pull aheads for capital we've got $3,700,000,000 in the utility per our plan this year. And so we're focused on executing on that. Rejji HayesEVP & CFO at CMS Energy00:28:32And so we'll see what the rest of the year has in store for us. And so we're acutely focused on the current plan for this year and really haven't thought about pull aheads in any respect if that was the spirit of the second part of your question. Constantine LednevVice President - Equity Research at Guggenheim Partners00:28:44Yep, understood. Understood. And maybe a higher level question on in terms of your energy supply needs. How are those evolving especially as you get feedback to the R and D process? Is there more dispatchable generation needs that you see kind of going into the next IRP cycle? Constantine LednevVice President - Equity Research at Guggenheim Partners00:29:01And do you think that there's a better case for kind of like a big buy in into the opco? Garrick RochowPresident and CEO at CMS Energy00:29:09A portion of our energy supply needs are spelled out in the renewable energy plan and that addresses some of the energy needs and the compliance with the 2023 energy law. And so as we've seen the need to get to the 5060% renewable target as well as because of the 2% to 3% low growth that is in our five year plan. You can see and have insight into those both renewable needs as well as storage needs in the future. The broader need for capacity to be able to continue to deliver to the low growth in the pipeline within the state will come together in the integrated resource plan. We'll file that in 2026. Garrick RochowPresident and CEO at CMS Energy00:29:48It will evaluate and look at natural gas plants, the existing natural gas plants we have in the state, the longevity of those plants, considerations for carbon capture and sequestration technology. So that modeling work is still underway as you might imagine for a 2026 filing and will be also based on the renewable energy plan. So that's really all I can share at this point but as you imagine as you're growing the state and you have this pipeline there will be additional needs in the future for supply assets. Constantine LednevVice President - Equity Research at Guggenheim Partners00:30:17Okay, understood. And maybe you're hitting quickly on the Geisha's question around storms again. As you're kind of noting the impact on the offsets in the quarter, do you anticipate those to be recurring or would those potentially unwind with that potential deferral filing? Rejji HayesEVP & CFO at CMS Energy00:30:34Yes. So I would say, Constantine, similar to prior years when we saw significant financial headwinds, we'll look at all opportunities across the cross structure. I'd say it's premature to think about what's recurring and what isn't. But what I have been encouraged to see really, per my prepared remarks over the last ten years is every year we establish a target for how much productivity and cost savings, whether that's a hard cost savings or avoided costs associated with the CE Way. And every year we exceed that target pretty significantly. Rejji HayesEVP & CFO at CMS Energy00:31:07And by definition, the savings generated by the CE Way are recurring savings. And so I'll give you an example. Last year we had in our target we had a target for the CEUA of around $50 or so million. We delivered 110,000,000 of savings, and those are obviously recurring. And so I would say we've exceeded expectations year in and year out on what we expect to achieve from a productivity perspective. Rejji HayesEVP & CFO at CMS Energy00:31:32But we'll also look at one timers. I mentioned we'll look at sort of financing activity. So we may start to take a look at liability management as we had in the past. And we'll also look at other potential cost deferrals which would not be recurring. And so it'll be a good mix of all of the above like we've done in prior years. Garrick RochowPresident and CEO at CMS Energy00:31:51If I can just take a moment to just elaborate on this toolbox of opportunities and Reggie characterized it well. It starts with conservative planning, right? That is part of our mindset, that's part of our approach. You know, we're not redlining the engineer. This is just how we think about different scenarios. Garrick RochowPresident and CEO at CMS Energy00:32:07That's like point one. Reggie, you know, emphasized the CE Way. There's so much opportunity in the CE Way that our coworkers deliver on. And you take and improve a process, you take waste out, coworkers feel better, customers feel better, and you cost fall out. The other one that we've been really highlighting too is in the space of technology. Garrick RochowPresident and CEO at CMS Energy00:32:26The IT team calls it app realization, and I I make fun of them when they talk about it because I'm like, what the hell is that? But the reality is it's looking about all our software, all our hardware, and how are we leveraging to get additional benefit out of it, where there's real savings there as well. And then you apply AI in some places, and we get better predictions, and that takes cost out as well. And then there was all the things that Reggie mentioned in his prepared remarks. And so again, I feel confident in just the ability to leverage these, and a portion of them, a good portion will be sustaining. Garrick RochowPresident and CEO at CMS Energy00:32:55And as Reggie indicated, some will be one time. Constantine LednevVice President - Equity Research at Guggenheim Partners00:33:01Excellent. Appreciate you taking the questions. Garrick RochowPresident and CEO at CMS Energy00:33:06Thanks, Gautam. Operator00:33:06The next question today will be the next question today will be from the line of Jeremy Tonet with JPMorgan. Please go ahead. Your line is open. Garrick RochowPresident and CEO at CMS Energy00:33:16Hi, good Good morning, Jeremy. Jeremy TonetED - Equity Research Analyst at JPMorgan Chase00:33:19I just wanted to pick up with the gas Good. How are you? Just wanted to pick up with the gas case in given what's come out so far, the appetite for settlement or just any other thoughts at this point? I know you said you'd be happy going either way, but just wondered any incremental color you could provide. Garrick RochowPresident and CEO at CMS Energy00:33:47I'm going to even pull it back a little bit and just with these words. I am very pleased with our track record of delivering constructive outcomes in Michigan. There's all kinds of data points. Electric, forecast settlements, doesn't matter, electric or gas. We just continue to lever time and time again. Garrick RochowPresident and CEO at CMS Energy00:34:07And in the q four call, what I shared was full throated, a constructive we'd get we'd see a constructive electric order. And how did I know that? One, because the quality and the visibility we put in this case, the constructive legislation we have. And it's not perfect, as I shared, but we continue to work on improving that. And then if you look at the staff, the MPSC staff are professionals. Garrick RochowPresident and CEO at CMS Energy00:34:30And when you have a good staff position or constructive staff position, you get good outcomes. And That's what we did. And that's another data point with this electric freight case. I'm excited about this gas, case as well. It is down the fairway or straightforward. Garrick RochowPresident and CEO at CMS Energy00:34:45We're replacing gas pipe. We're making the system safer. Like, that's important from a gas business perspective. We're ensuring capacity to deliver to customers and growth in the gas business. And when you do all that right, you also reduce carbon emissions. Garrick RochowPresident and CEO at CMS Energy00:34:58It's a trifecta, right? It's a great case the team has built, straightforward. And so I'm excited about staff's position. It is a constructive starting position, within the gas case. And we'll go through the process. Garrick RochowPresident and CEO at CMS Energy00:35:14We'll go through rebuttal as we always do. You know, ROEs, we're going to push on those. This is like, if I look at the external environment, risk has not declined, right? And so we'll push on the ROEs and rebuttal, that'll be important piece for us to lean into, but as I said always, I'm open to settlement, And there's a variety of different points of view and different interveners on that. We'll work through that process. Garrick RochowPresident and CEO at CMS Energy00:35:37If we see that, I would imagine it would be before the PFD. That's expected in August timeframe. But hear my confidence in our ability to go the full distance too and just continue the track record of constructive outcomes in Michigan. Jeremy TonetED - Equity Research Analyst at JPMorgan Chase00:35:57Got it. No, that makes sense. I just want to pivot to a smaller point, if you could, deferral, that's baked into the guide right now. Just want to be clear on the treatment there. Rejji HayesEVP & CFO at CMS Energy00:36:12Jeremy, this is Reggie. We have not presupposed approval of the deferred accounting order. Like I said, I think we've made a very compelling case given the historic nature of the storm and our efforts to restore customers as quickly as possible both inside our service territory and out. So we think we've made a compelling case. But as you know given our conservative nature we have not presupposed approval of that. Jeremy TonetED - Equity Research Analyst at JPMorgan Chase00:36:39Okay. Got it. That's very helpful. Thanks. And just last one if I could. Jeremy TonetED - Equity Research Analyst at JPMorgan Chase00:36:44As it relates to ITC's the unregulated part of the business, what's the magnitude of earnings exposure in your plan here? And really if you could just outline a bit more how tax equity impacts this and any other relevant considerations and how potential tariff risk at the project level could influence growth here? I know you touched on it a bit before, just wondering if you could flush out those points a bit. Rejji HayesEVP & CFO at CMS Energy00:37:09Yes, Jeremy, I'll take this as well. This is Reggie. So I would say in the context of 2025 guidance, in our original guidance, we guided NorthStar at $0.18 to $0.22 Given the planned large outage at DIG, which historically really going forward is the flagship earnings contributor to NorthStar. We are anticipating more contribution from commercial renewables projects and we have two solar projects that are well on their way of delivering constructive outcomes later this year. And so I would say, the exposure from a renewables perspective this year is a little bigger than other years or prior years. Rejji HayesEVP & CFO at CMS Energy00:37:43And so of that $0.18 to $0.22 assume about three quarters of that is delivered by residual benefits from ongoing assets, little bit of North Star, but primarily from two solar projects we have underway. As we look at the outer years of the plan, still anticipation of solid renewable project development over the course of the plan. But again, you should always assume that DIG will be the primary contributor of earnings to NorthStar over the course of the next five years. Let me pause there and see if there are any questions on that. Jeremy TonetED - Equity Research Analyst at JPMorgan Chase00:38:18No, that's helpful. I'll leave it there. Thank you. Operator00:38:27The next question today will be from the line of Nicolas Campanello with Barclays. Please go ahead. Your line is now open. Garrick RochowPresident and CEO at CMS Energy00:38:35Hi, Nick. Operator00:38:40Nicholas Campanella from Barclays. Your line is now open. If you'd like to proceed with your question. Apologies, we're not receiving audio from Nicholas' line there. We're moving on to the next question being from the line of Julien Smith with Jefferies. Operator00:38:58Please go ahead. Your line is now open. Julien Dumoulin-SmithResearch Analyst at Jefferies Financial Group00:39:01Hey, team. Morning and pleasure here. I hope I get as candid response from Gerrick as as earlier here. Just with I I think we're developing a new pattern. Just with with on economic development, I'd just love to understand how you guys are thinking about them. Julien Dumoulin-SmithResearch Analyst at Jefferies Financial Group00:39:18I saw there heard the comments on the call with respect to data center activity and ongoing development year to date subsequent to the legislation. But in parallel, also note the Goshen developments from the County Board here. How are you thinking about what's included in the 900 megawatts of demand in the current plan? Are there puts and takes in that or is it still kind of static pending some more formal updates here? Just to understand how you think about both the positive and the negative accumulated year to date. Garrick RochowPresident and CEO at CMS Energy00:39:48Yeah. And so that 2% to 3% that makes up that 900 megawatts that's a conservative approach and you know that about how we plan. And so there is an economic development there's always that even in the best of times there's some slowdowns in some projects and some speed up in some projects and what's great about that 2% to 3% is we have like line of sight into that work. We're constructing the lines, we're constructing the substation. In many cases, we can see them building their facilities in the long term plans they have for that. Garrick RochowPresident and CEO at CMS Energy00:40:18And so that's exciting. That gives us confidence in that 2% to 3% low growth. And there's always little puts and takes. And as we as I shared one of the data centers that we're constructing right now is actually accelerating their low growth and their ramp up which is a positive sign and the same with the large manufacturing. And so to the degree there's a pause with Goshen, there's also some acceleration with some as well. Garrick RochowPresident and CEO at CMS Energy00:40:41And so that's all kind of in that mix to the 2% to 3%. Now if we go to the nine gigawatts, as I shared in my prepared remarks, but let me offer a little more clarity. There's a lineup of data centers there of 65. Some of them are moving faster and jumping the line and moving to the front of the line in the progress. And so that gives us a lot of confidence that those will materialize. Garrick RochowPresident and CEO at CMS Energy00:41:02But the next logical step in that process is get this tariff complete with the commission. Again, I'm optimistic that settlements an option there to be able to move those forward and for those data centers to take the next logical step. Does that help? Julien Dumoulin-SmithResearch Analyst at Jefferies Financial Group00:41:18Yes. No, absolutely. Thank you for that. Actually just to clarify that last piece since you bring it up. Just with the tariff here you alluded to potential settlement certainly a possibility in other states as well. Julien Dumoulin-SmithResearch Analyst at Jefferies Financial Group00:41:28Could that be paired up with a more formal commercial arrangement? That because would you get the clarity on the tariff would that be sort of the catalyst to announce any larger commitments here? Garrick RochowPresident and CEO at CMS Energy00:41:41Certainly, the data center projects and possibilities want to have clarity on that in the context of that. It's just from a special arrangement perspective, special contract we don't do those. That creates a lot of long term risk particularly for the company and for shareholders. And so this tariff, it really is the best option. And as you might imagine, when they have clarity on what that looks like, that'll be the next logical step in moving some of those projects forward. Julien Dumoulin-SmithResearch Analyst at Jefferies Financial Group00:42:11Awesome, guys. You guys take care. All the best. Thank you so much. Garrick RochowPresident and CEO at CMS Energy00:42:14Yes. Thank you, Julien. Operator00:42:17The next question today will be from the line of Michael Sullivan with Wolfe Research. Please go ahead. Your line is open. Michael SullivanDirector - Equity Research at Wolfe Research00:42:24Hey, good morning. Garrick RochowPresident and CEO at CMS Energy00:42:26Good morning, Michael. Michael SullivanDirector - Equity Research at Wolfe Research00:42:27Hey, Michael SullivanDirector - Equity Research at Wolfe Research00:42:29guys. Just wanted to ask quick on how you're thinking about the risk of transferability potentially going away. Think you've given us some numbers on what you embed there in your plan, but just what that scenario would look like if you were to lose the ability to transfer tax credits? Garrick RochowPresident and CEO at CMS Energy00:42:48Let me offer some high level comments, and Reggie will get into some specific numbers. Again, many of the Republican jurisdictions areas have benefited from the IRA. But what I think is even more important is the conversation that I'm having, part of the team's having, EEI's having with a number of Republican congressmen and women. And that is one support for these PTCs and ITCs as well as the tax monetization or transferability component of it. Because they see in these times the importance of affordability and how that transfers directly to savings for our customers. Garrick RochowPresident and CEO at CMS Energy00:43:24And that's been an important part of the conversation. So that's what gives us, we'll see how legislation takes place and how it all, evolves, but that gives us some certainty, I guess optimism about the ability to maintain PTCs and ITCs in this transferability going forward. But Reggie to offer some additional comments on the dollars. Rejji HayesEVP & CFO at CMS Energy00:43:44Yes. So Michael, appreciate the question and just to talk about potential offsets or countermeasures in the as I still see it in the unlikely event we saw transferability go away. We would look at a variety of financing sources. And I think the good news in this environment and in prior environments is that the capital markets remain broad and deep. And so we would certainly look at more junior subordinated notes as a potential option. Rejji HayesEVP & CFO at CMS Energy00:44:09Clearly, there's quite a bit of capacity in the market there. And based on our even our recent issuance of $1,000,000,000 that I noted in my prepared remarks, we saw in this year alone $2,000,000,000 to $3,000,000,000 of additional junior supported note capacity and that amount of capacity accretes over time as your book capitalization grows through retained earnings. And so a lot of opportunities to potentially look at more junior subordinated notes. Obviously, could look at doing additional equity as well. We feel very comfortable with the equity levels that we're issuing over the course of this five year plan and still think we have capacity to do additional equity to fund this attractive growth opportunity we have at the utility. Rejji HayesEVP & CFO at CMS Energy00:44:46And so incremental equity would also be a potential offset. And it's also important to note just the significant flexibility afforded to us through the energy law and the ability to earn on PPAs as we look to comply with the energy law and the significant renewable opportunities associated there with that creates a lot of balance sheet flexibility as well. And so as we look at subsequent five year plans, we may transfer or shift transfer is probably not the right word there. It's a pun not intended. But we could look to potentially shift our spend mix from instead of investing and owning some of those renewable opportunities, we could potentially contract and earn about a 9% FCM on those, which obviously again creates a lot of balance sheet capacity. Rejji HayesEVP & CFO at CMS Energy00:45:31And so those are all potential countermeasures in the event transferability went away. Michael SullivanDirector - Equity Research at Wolfe Research00:45:38Very helpful. And just to double check, the $700,000,000 plus number from the year end call in terms of what's in the plan is still good? Rejji HayesEVP & CFO at CMS Energy00:45:48That's still the current plan, yes. Michael SullivanDirector - Equity Research at Wolfe Research00:45:50Okay, great. Thank Michael SullivanDirector - Equity Research at Wolfe Research00:45:51you very much. Garrick RochowPresident and CEO at CMS Energy00:45:53Thank you. Operator00:45:56The next question is from the line of David O'Cara with Morgan Stanley. Please go ahead. Your line is now open. Analyst00:46:03This is Alex German for Dave. Good morning. Analyst00:46:08So starting with the storm tracker, could Analyst00:46:10you talk about the strategy going forward to get it approved? Is there any specific changes you plan to make to address the pushbacks? Garrick RochowPresident and CEO at CMS Energy00:46:19In reference just for clarity for those who might be listening to the call, a number of the previous electric rate cases we've proposed a storm tracker or storm recovery mechanism in those. We've heeded some of the comments from both staff as well as commissioners on sharing and greater sharing of that of those mechanisms. Unfortunately, we've not had success in that mechanism but we continue to look at options to be able to offset some of the costs. Again, I'd go back to the Liberty audit which again recommends best practices for jurisdictions and utilities and ultimately for the customer is to have a mechanism in place for extreme weather. The storm recovery mechanism or tracker is one way to go about it. Garrick RochowPresident and CEO at CMS Energy00:47:06Another way that we're obviously filing for here and filed for this week is just through this deferred accounting mechanism for again regulatory treatment of historic or extreme weather. Analyst00:47:23Got it. Thank you. And back to the data centers demand in Michigan, did you see a big change in interest after the state approved the tax exemptions late last year? Garrick RochowPresident and CEO at CMS Energy00:47:35That is correct. Of our pipeline, it was primarily about 65% manufacturing prior to the signing of the sales and use tax and that flipped. The actual pipeline grew to nine gigawatts and a majority of it specifically about 65% of it is data centers as a result and so we attribute to that to in part due to the sales and use tax exemption but also there are other RTOs that are have had some challenges and so MISO continues to be an RTO and frankly we have a nice energy law that supports the ability to put on the supply that's needed and necessary for these important projects. Analyst00:48:22Got it. Very clear. Thank you. Operator00:48:28The next question will be from the line of Travis Miller with Morningstar. Please go ahead. Your line is now open. Travis MillerAnalyst at Morningstar00:48:35Thank you. Good morning, everyone. Garrick RochowPresident and CEO at CMS Energy00:48:38Good morning, Travis. Travis MillerAnalyst at Morningstar00:48:42On the electric rate case, wondering if there were any lessons learned or aside from the headline numbers, anything in the case decision that you'd like to go back for or you hoped to get anything like that? You mentioned the storm tracker, but anything aside from that? Garrick RochowPresident and CEO at CMS Energy00:49:02There's always room for improvement in our cases. I want to be real clear. We've had a successful track record, but we're not perfect. There are a lot of opportunities for us to improve. We get the feedback staff, we get the feedback from the commissioners, and there's important work to do. Garrick RochowPresident and CEO at CMS Energy00:49:18One of the important pieces that are comments that was made by the commissioners when they provide the order was the mix of capital and O and M. And recall that in that case, the Liberty Auditor, the distribution audit kind of came midway through. And so we had a capital in there and the recommendations on tree trimming and vegetation management were were not in there. And so you can imagine that in this next case that we'll have a greater degree and a greater amount of vegetation management and we'll also match that with the important capital investments because it's both. You have to deliver the reliability and long term resiliency. Garrick RochowPresident and CEO at CMS Energy00:49:55And so I would expect to see filing our reliability roadmap more capital investments but also a much larger investment too in vegetation management to improve our reliability for our customers. And so that's an area of improvement. There was also from the bench a small thing and just following where the dollars went. We got more granular in some of our bucketing so we could see the benefits of that work and there were some feedback that you know you couldn't tick and tie as easily. So we're going to improve that as well and just make a key. Garrick RochowPresident and CEO at CMS Energy00:50:25This is kind of I'm in the I'm in the weeds now, it's just a key to be able to make that clear for interveners as well as the staff and commissioners to follow. So those are ways we're always looking to improve the process. Rejji HayesEVP & CFO at CMS Energy00:50:37And Travis, all I would add, this is Reggie. Aside from a 10.25 ROE, which was on my personal wish list, the other, subtlety or a smaller element of the filing that we, did seek and unfortunately didn't get support for. But over time I do think it would be helpful as we did propose a wildfire risk mitigation plan. And though Michigan is not as susceptible to a lot of states to the west of us to wildfire, we do think you cannot plan soon enough for wildfire risk mitigation. So we had $12,000,000 of capital ascribed to it, dollars 4,000,000 of which was for strategic undergrounding, covered conductors is another bit of the spend and then what I would call strategic vegetation management. Rejji HayesEVP & CFO at CMS Energy00:51:20And so we do think over time we'd like to start to put in place a program because again I don't think you can plan too soon for that. And so that was the other item on the wish list that we'd like to get support for going forward. Travis MillerAnalyst at Morningstar00:51:33Okay. That's great. I think we all have 10.25 on the wish list. REP, when you get that September ruling, what's kind of the next step? Would there be any immediate, I guess, disclosures or changes potentially in the capital plan? Travis MillerAnalyst at Morningstar00:51:54Or is that something that's going to evolve as you do perhaps RFPs or some other type of solicitations along the way? Anything that's going to happen, say, in September or October after the decision? Garrick RochowPresident and CEO at CMS Energy00:52:09Well, gives it certainly gives us more clarity on the clean energy and the a portion of the investments that are in the five year plan. There could be additional investments in that and that again flows into the integrated resource plan. And so you'll see that approval is important to build out the integrated resource plan. So those are the couple of components that you will see and of course, we'll have greater clarity and certainty around what those renewable energy supply assets are. Travis MillerAnalyst at Morningstar00:52:41Great. That's all I had. Thanks a lot. Garrick RochowPresident and CEO at CMS Energy00:52:45Thanks, Travis. Operator00:52:49The next question will be from the line of Greg Orrill with UBS. Please go ahead. Your line is open. Gregg OrrillAnalyst at UBS Group00:52:57Yes. Thanks for taking my question. Garrick RochowPresident and CEO at CMS Energy00:52:58Good morning. Gregg OrrillAnalyst at UBS Group00:53:00Just the I wasn't quite sure I understood what the $04 impact in the balance of the year related to the storm accounting order was? Sorry if I missed that. Rejji HayesEVP & CFO at CMS Energy00:53:18Yes. I'm not sure, Greg, this is Reggie, where you got the $04 impact. But just to walk through the details of the estimated, and I say estimated because we're still doing all of the closing out of contracts and invoices from third parties who helped us. But as you'll see in the regulatory filing we submitted yesterday, the estimates for the storm was about $100,000,000 and so call that $0.25 per share of impact. And as you think about the waterfall I walked through for the bridge of financial performance over the course of the year, we are assuming a good portion of that storm impact will flow through that cost bucket or what we're calling specifically reliability storms including productivity. Rejji HayesEVP & CFO at CMS Energy00:54:09And so, the $04 of negative variance that you see in year to go when you add that to the $05 of negative variance we saw in our year to date actuals, what you see is basically a $0.12 per share swing versus our original guidance. And that basically adds up to about $50,000,000 pretax. And so we've baked into the assumption of additional service restoration expense, productivity in the form of CE Way, the CE Way and all the other cost out items I enumerated in my prepared remarks. And so we're assuming that we're going to have an increase for sure in service restoration expense, but we will also net those down with cost reductions. We've also assumed cost performance as well in that parent financing tax and other bucket. Rejji HayesEVP & CFO at CMS Energy00:54:54And so if you look at the comparison of what we have in our current waterfall versus our original guide, you'll see about zero one one dollars per share or $45,000,000 roughly pretax of improvement versus the original guide. And that's where you see the balance of cost takeout or support to fund the impact of that service restoration expense increase. And that's what gets us to our full year guidance. So it is flowing through the cost associated with the service restoration expense is flowing through that reliability storms including productivity line item and again the countermeasures are flowing through both of those sort of latter two buckets in waterfall. Let me pause there and see if you have any further questions Greg. Gregg OrrillAnalyst at UBS Group00:55:34No, that's great. I appreciate that. Thank you. Operator00:55:40Our next question will be from the line of Andrew Wiesel with Scotiabank. Please go ahead. Your line is now open. Garrick RochowPresident and CEO at CMS Energy00:55:48Hi, Andrew. Andrew WeiselDirector at Scotia Howard Weil00:55:49Hey, good morning, everyone. Good luck settling the gas rate case. If you make a five timers club like Saturday Night Live, I think you get one of those cool black velvet jackets. Garrick RochowPresident and CEO at CMS Energy00:56:01Yeah. I look forward to wearing that jacket. It's good. Andrew WeiselDirector at Scotia Howard Weil00:56:07Just want to clarify. I think you kind of just answered this on the last question. But to clarify, are you already in cost cutting mode after that storm? Or are you just reminding us of your proven ability to do that? Rejji HayesEVP & CFO at CMS Energy00:56:21No, Andrew. We've been we got in the foxhole very early in the first quarter. I'd say once we started to get visibility that a significant storm is underway. And also even earlier in the month we started to see pretty mild temperatures in the month of March. And so we already started to get in the foxhole and start identifying and implementing countermeasures really in the March that are already well underway. Rejji HayesEVP & CFO at CMS Energy00:56:45And so this is beyond hypothetical and academic. We're in implementation mode. And so, still more work to be done, but we are already in implementation mode based on the visibility we got earlier in the month and then as the storm started to materialize. Let me pause there. Andrew WeiselDirector at Scotia Howard Weil00:57:01I guess my question is should this deferral be approved which of course would be a good situation what what would you do then? You know, if you're if you're already cutting costs and then you get the good news of getting this approved, what happens? Rejji HayesEVP & CFO at CMS Energy00:57:20Yes. So it certainly creates additional flexibility in the plan which we like. And I'll remind you that the CE Way will be one of sort of the anchor countermeasures that we'll lean into and we see no downside in overachieving on our CE Way targets year in and year out because it just creates additional headroom going forward and rate reduction opportunities for customers going forward. And so there's no reason to dial back those efforts. We may take a harder look at some of the planned cost deferrals and some of the other measures like I said where we would limit hiring and some of those other sort of flex related items that are more one timers. Rejji HayesEVP & CFO at CMS Energy00:57:56And so it just gives us more flexibility, to potentially turn back on those spigots in the event we get success there. But if we see opportunity to execute on recurring savings opportunities we would obviously carry on with those. Does that make sense Andrew? Andrew WeiselDirector at Scotia Howard Weil00:58:14Yeah. It does. Given the weather challenges, it's been a while since you were in invest mode as opposed to lean mode. But, yeah, that would be a good situation. Okay. Andrew WeiselDirector at Scotia Howard Weil00:58:22And Rejji HayesEVP & CFO at CMS Energy00:58:23then Yeah. One can only drain. Andrew WeiselDirector at Scotia Howard Weil00:58:24Is, I think I had yeah. Kind of like the 10.25. My other question, I think I asked you this after a storm a few years ago. What grade would you give yourselves in terms of reliability from the storm? I know, obviously, it's been a focus and the Liberty audit came out last year, but how would you evaluate the performance after the storm? Garrick RochowPresident and CEO at CMS Energy00:58:49Much, much better. And I would point to customers and policymakers, real positive sentiment with both. We're not seeing what we saw in 2023 was just a lot of aftermath after the storm, and we've improved greatly through process, through investments, and we've got a lot of positive feedback. And so I don't want to be too boastful. And so I'm still kinda gonna grade myself hard. Garrick RochowPresident and CEO at CMS Energy00:59:20So let's say, like, b plus. I still think there's room for improvement, but it's a lot different fact pattern than we had back in '23. Andrew WeiselDirector at Scotia Howard Weil00:59:34Very good. Thank you so much. Garrick RochowPresident and CEO at CMS Energy00:59:38Thanks. Operator00:59:40Our next question is from the line of Sophie Karp with KeyBanc. Please go ahead. Your line is open. Sophie KarpManaging Director & Equity Research Analyst at KeyBanc Capital Markets00:59:47Hi. Good morning, Most of my questions yes, most of my questions have been answered, but maybe I can just ask you a high level question on the economy in Michigan. I guess, we saw the unemployment rate, which was a little elevated for the state. What are you seeing from your customers, if anything, in terms of what are they saying about the activity? Are they adjusting to the new kind of reality with the tariffs? Sophie KarpManaging Director & Equity Research Analyst at KeyBanc Capital Markets01:00:14And if not, Any color would be helpful. Garrick RochowPresident and CEO at CMS Energy01:00:18I still see a lot Garrick RochowPresident and CEO at CMS Energy01:00:20of positive indicators in Michigan. And part of it I talked about in the response to a question in my prepared remarks, particularly in the 2% to 3% low growth. The fact that data centers are accelerating, the fact that manufacturing customers are still moving forward with projects and we can see that construction and then in some cases asking to expand or at least in one case asking to expand are promising indicators. But if I go right down to today, right, and remember, like, we follow the margin and it's in the residential commercial space, we still see solid performance there. And if you look into like and we do this, we look into like, permits and housing starts, and if you look at that Grand Rapids Metropolitan area, permits, starts for single family continue to increase, for multifamily commercial continue to increase. Garrick RochowPresident and CEO at CMS Energy01:01:09And so those are positive indicators. The other one I look at is relocations is what we call it or alterations. Those are customer requested work for changes at their home or their business. And so maybe they need a larger meter to be able to serve, their load. Maybe they need the meters moved because they're putting an addition on their home or their business. Garrick RochowPresident and CEO at CMS Energy01:01:31That, of course, went up in the pandemic as people went home and invested in their homes, and that is still elevated. That's still above pre pandemic levels, which is another good indicator about people investing in businesses and in their homes, particularly in the residential and commercial space. So that gives us a lot of confidence that the sales piece of resi and commercial continue to be and where the margin is continue to be solid. The other thing I want point out is there's always pluses and minuses when you get in the industrial space and I talked about that a little bit with Julian in the Goshen piece. But and I when I look at our mix and how diversified Michigan is, and we surprise people with this number sometime, there are 4,000 businesses in Michigan in the aerospace and defense industry. Garrick RochowPresident and CEO at CMS Energy01:02:164,000, including now Saab in our service territory. And so in this federal administration, you can make a strong bet that defense spending is gonna increase. And so that's a real positive, for Michigan. The other one I like to point to is that we're the second most diverse state from an agriculture perspective. And what we've seen over the last ten to fifteen years is more of that processing of foods move closer to the fields, move closer to the farm. Garrick RochowPresident and CEO at CMS Energy01:02:44And as a result, there's a lot more processing and manufacturing of food and that's growing in this environment. Like even in the worst scenario, even the worst scenario of a recession, people still need food, bread, milk and those dairy products. And so a long winded way of saying, we still see a lot of positive indicators in our service territory which gives us a lot of confidence of Michigan in a forward look. Sophie KarpManaging Director & Equity Research Analyst at KeyBanc Capital Markets01:03:10Thank you. That's all for me. Appreciate the color. Garrick RochowPresident and CEO at CMS Energy01:03:15Thank you. Operator01:03:18Thank you. And that concludes our Q and A. So I'd now like to hand back to Mr. Garik Rochow for closing remarks. Garrick RochowPresident and CEO at CMS Energy01:03:26Thanks, Harry. I'd like to thank you for joining us today. I look forward to seeing you at the upcoming AGA Financial Forum. Take care and stay safe. Operator01:03:39That concludes today's conference. We thank everyone for your participation.Read moreParticipantsExecutivesJason ShoreTreasurer & VP of Investor RelationsGarrick RochowPresident and CEORejji HayesEVP & CFOAnalystsDurgesh ChopraManaging Director at Evercore ISIConstantine LednevVice President - Equity Research at Guggenheim PartnersJeremy TonetED - Equity Research Analyst at JPMorgan ChaseJulien Dumoulin-SmithResearch Analyst at Jefferies Financial GroupMichael SullivanDirector - Equity Research at Wolfe ResearchAnalystTravis MillerAnalyst at MorningstarGregg OrrillAnalyst at UBS GroupAndrew WeiselDirector at Scotia Howard WeilSophie KarpManaging Director & Equity Research Analyst at KeyBanc Capital MarketsPowered by